• Assets Under Management (AUM): $167.5 billion as of March 31st, 2025.
• Total Sales: $6.2 billion, compared to $6.4 billion in the previous quarter.
• Net Outflows: $3 billion, improved from $4.8 billion in the prior quarter.
• Earnings Per Share (EPS) as Adjusted: $5.73, a 6% increase year-over-year.
• Operating Margin as Adjusted: 32.7%, excluding seasonal employment expenses.
• Share Repurchases: $26 million used to repurchase approximately 146,000 shares.
• Revenue Participation Payment: $23 million, reducing contingent liability to $40 million.
• Investment Management Fees as Adjusted: $178.5 million, a 7% decrease due to lower average AUM.
• Employment Expenses as Adjusted: $109.4 million, increased 5% sequentially due to seasonal factors.
• Net Debt Position: $100 million, or 0.3 times EBITDA.
• Gross Debt to EBITDA: 0.7 times, unchanged from December 31st.
• Cash and Equivalents: $135.4 million as of March 31st.
• Seed Capital Investments: $143 million.
• Other Investments: $132.8 million, primarily in managed CLOs.

• Warning! GuruFocus has detected 4 Warning Signs with VRTS.

Release Date: April 25, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Virtus Investment Partners Inc (NYSE:VRTS) reported higher earnings per share compared to the prior year period.
• The company experienced increased sales in fixed income strategies across products.
• Positive net flows were recorded in ETFs, with an organic growth rate of 73% over the past year.
• Over 70% of equity strategies outperformed their benchmarks in the first quarter, showcasing strong investment performance.
• Virtus Investment Partners Inc (NYSE:VRTS) was recognized by Barron's as the number two fund family for the 10-year period and third in the taxable bond category for 2024.

Negative Points

• The company faced market performance volatility, leading to lower assets under management and net outflows.
• Total net outflows were $3 billion, although improved from $4.8 billion in the previous quarter.
• Retail separate accounts experienced net outflows, largely due to the soft closing of a mid-cap core equity model offering.
• Open-end fund net outflows of $1.1 billion were unchanged sequentially, driven by equity strategies.
• The operating margin as adjusted decreased to 27.6% from 35.1% in the fourth quarter, impacted by seasonal employment expenses.

Q & A Highlights

Q: Can you provide more color on the fee rate changes observed in the quarter, particularly for US retail funds and ETFs? A: Michael Angerthal, CFO: The fee rate is influenced by market conditions and the mix of assets. The change in open-end funds was due to a shift from higher fee equity assets to slightly lower fee fixed income assets. Despite these changes, we are still targeting incremental margins in the 50% to 55% range, and the current fee rate range remains appropriate for modeling.

Q: What is your approach to capital allocation, especially in light of recent share repurchases? A: George Aylward, CEO: We evaluate capital allocation quarterly, considering our stock's trading perspective. We increased share repurchases this quarter due to favorable conditions. Our low leverage and strong cash flow allow us to invest in the business and return capital to shareholders, with share repurchases being a key component.

Q: Regarding SMAs, which have been a growth driver, what led to the negative flows this quarter, and are there any capacity constraints? A: George Aylward, CEO: The negative flows were due to the soft closing of a successful strategy amid market challenges. We encourage investors to consider alternative strategies, and we have expanded our fixed income SMA offerings. Michael Angerthal, CFO: We feel good about capacity and have no specific constraints. We've seen success in moving up capitalization, particularly in mid-cap strategies, which have significant capacity and are expected to contribute to growth.

Q: What is your latest thinking on monetizing the deferred tax asset to potentially lower the effective tax rate? A: George Aylward, CEO: It's more about reporting than monetizing. We achieve economic benefits from tax attributes, valued at approximately $16 per share on an NPV basis. We continue to evaluate reporting practices to ensure transparency and that investors recognize the value, which equates to about $2.50 per share annually.

Q: How do you view the current market environment and its impact on your business? A: George Aylward, CEO: The current market volatility and uncertainty present opportunities for active managers to demonstrate value. Our equity strategies, particularly those with high conviction and quality orientations, have performed well, providing downside protection. We continue to see interest in our institutional offerings and are expanding our product development efforts in ETFs, global funds, and retail separate accounts.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.