Company Announcements

• Earnings Per Share - Diluted of $4.05; Earnings Per Share - Diluted, as Adjusted, of $5.73

• Total Sales of $6.2B; Net Flows of ($3.0B); Assets Under Management of $167.5B

HARTFORD, Conn.--(BUSINESS WIRE)--Apr. 25, 2025-- Virtus Investment Partners, Inc. (NYSE: VRTS) today reported financial results for the three months ended March 31, 2025.

Financial Highlights (Unaudited)
(in millions, except per share data or as noted)

Earnings Summary

The company presents U.S. GAAP and non-GAAP earnings information in this release. Management believes that the non-GAAP financial measures presented reflect the company’s operating results from providing investment management and related services to individuals and institutions and uses these measures to evaluate financial performance. Non-GAAP financial measures have material limitations and should not be viewed in isolation or as a substitute for U.S. GAAP measures. Non-GAAP information and reconciliations to the most comparable U.S. GAAP measures can be found beginning on page 10 of this earnings release.

Assets Under Management and Asset Flows
(in billions)

Total assets under management of $167.5 billion at March 31, 2025 decreased sequentially from $175.0 billion due to market performance and net outflows in U.S. retail funds, institutional accounts, and retail separate accounts, partially offset by positive net flows in exchange-traded funds (ETFs). In addition, the company provided services to $2.1 billion of other fee-earning assets that are not included in assets under management.

Total sales of $6.2 billion compared with $6.4 billion in the prior quarter. Institutional sales of $1.5 billion compared with $1.6 billion as higher fixed income sales were offset by lower sales of alternative and equity strategies. Retail separate account sales of $1.7 billion compared with $1.8 billion as higher sales of small- and large-cap equity strategies were offset by lower small/mid-cap equity. Open-end fund sales of $3.0 billion were essentially unchanged.

Net flows of ($3.0) billion improved from ($4.8) billion in the prior quarter. Institutional net flows of ($1.2) billion compared with ($3.8) billion in the fourth quarter, which included a large partial redemption. Retail separate account net flows of ($0.7) billion compared with $0.1 billion primarily due to small/mid-cap strategies. Open-end fund net flows of ($1.1) billion were essentially unchanged from the prior quarter and included positive fixed income net flows.

GAAP Results

Operating income of $36.6 million decreased from $50.7 million in the prior quarter reflecting a 7% decline in revenues due to lower average assets under management, partially offset by a 1% reduction in operating expenses. Lower operating expenses were primarily due to decreases in operating expenses of consolidated investment products, change in fair value of contingent consideration, and distribution and other asset-based expenses, partially offset by higher employment expenses as a result of seasonal employment items.

Net income attributable to Virtus Investment Partners, Inc. of $4.05 per diluted share included ($0.94) of realized and unrealized losses on investments partially offset by $0.35 of fair value adjustments to minority interests. Net income per diluted share of $4.66 in the prior quarter included ($0.72) of fair value adjustments to minority interests, ($0.41) of realized and unrealized losses on investments, ($0.27) of collateralized loan obligation expenses, and ($0.17) of fair value adjustments to contingent consideration.

The effective tax rate of 31% decreased from 33% in the prior quarter, primarily reflecting a decrease in income tax valuation allowances for net unrealized and realized losses compared to the prior quarter.

Non-GAAP Results

Revenues, as adjusted, of $197.6 million decreased 7% from $212.0 million in the prior quarter primarily due to a 5% decrease in average assets under management and lower performance fees.

Employment expenses, as adjusted, of $109.4 million increased from $104.3 million in the prior quarter due to $10.0 million of seasonal expenses, primarily payroll taxes and benefits related to the timing of annual incentive payments, partially offset by lower variable incentive compensation. Other operating expenses, as adjusted, of $31.3 million were essentially unchanged from the prior quarter.

Operating income, as adjusted, of $54.6 million and the related margin of 27.6% decreased from $74.5 million and 35.1%, respectively, in the prior quarter primarily due to the seasonal employment expenses and lower investment management fees.

Net income attributable to Virtus Investment Partners, Inc., as adjusted, per diluted share of $5.73 compared with $7.50 in the prior quarter primarily reflecting $1.01 per share of seasonal expenses and lower investment management fees.

The effective tax rate, as adjusted, of 26% was essentially unchanged from the prior quarter.

Select Balance Sheet Items and Metrics (Unaudited)
(in millions)

Working capital of $137.2 million at March 31, 2025 increased from $134.5 million at December 31, 2024, as cash earnings more than offset return of capital and a $23.1 million contingent consideration payment.

During the quarter, the company repurchased 111,200 shares for $20.0 million and net settled 35,178 shares for $6.1 million.

Gross debt at March 31, 2025 was $235.4 million. Net debt was $100.0 million, or 0.3x EBITDA.

Conference Call and Investor Presentation

Management will host an investor conference call and webcast on Friday, April 25, 2025, at 10 a.m. Eastern to discuss these financial results and related matters. The presentation that will accompany the conference call is available in the Investor Relations section of virtus.com. A replay of the call will be available in the Investor Relations section for at least one year. We routinely post important information for investors on the Investor Relations section of our website and may use this website as a means of disclosing material, non-public information and for complying with our disclosure obligations under Regulation FD. Accordingly, investors should monitor our website, in addition to following our press releases, SEC filings, public conference calls, presentations and webcasts. We may also use social media channels to communicate with our investors and the public about our company, our products and other matters, and those communications could be deemed to be material information. The information contained on, or that may be accessed through, our website or social media channels are not incorporated by reference into, and are not a part of, this document.

About Virtus Investment Partners, Inc.

Virtus Investment Partners (NYSE: VRTS) is a distinctive partnership of boutique investment managers singularly committed to the long-term success of individual and institutional investors. We provide investment management products and services from our investment managers, each with a distinct investment style and autonomous investment process, as well as select subadvisers. Investment solutions are available across multiple disciplines and product types to meet a wide array of investor needs. Additional information about our firm, investment partners, and strategies is available at virtus.com.

U.S. GAAP Condensed Consolidated Statements of Operations (Unaudited)
(in thousands, except per share data)

Assets Under Management - Product and Asset Class
(in millions)

Assets Under Management - Average Management Fees Earned (7)
(in basis points)

Assets Under Management - Asset Flows by Product
(in millions)

Non-GAAP Information and Reconciliations
(in thousands except per share data)

The non-GAAP financial measures included in this release differ from financial measures determined in accordance with U.S. GAAP as a result of the reclassification of certain income statement items, as well as the exclusion of certain expenses and other items that are not reflective of the earnings generated from providing investment management and related services. Management uses these measures to evaluate the company’s financial performance and operational decision-making. Management believes that these non-GAAP financial measures, when presented together with directly comparable U.S. GAAP measures, are useful to investors and other interested parties to provide additional insight, promote transparency and allow for a more comprehensive understanding of the information used by management. Please see the Notes to Reconciliations on page 13 for additional information on how these measures reflect the company’s operating results. Non-GAAP financial measures have material limitations and should not be viewed in isolation or as a substitute for U.S. GAAP measures. Also, the non-GAAP financial measures referenced in this release may not be comparable to the similarly titled measures used by other companies.

The following are reconciliations and related notes of the most directly comparable U.S. GAAP measure to each non-GAAP measure:

Notes to Reconciliations:

1. Consolidated investment products- Revenues and expenses generated by operating activities of mutual funds and CLOs that are consolidated in the financial statements. Management believes that excluding these operating activities to reflect net revenues and expenses of the company prior to the consolidation of these products is consistent with the approach of reflecting its operating results from managing third-party client assets.

Revenue Related

2. Investment management/Distribution and service fees- Each of these revenue line items is reduced to exclude fees passed through to third-party client intermediaries who own the retail client relationship and are responsible for distributing company sponsored investment products and servicing the client. The amount of fees fluctuates each period, based on a predetermined percentage of the value of assets under management, and varies based on the type of investment product. The specific adjustments are as follows:

Investment management fees - Based on specific agreements, the portion of investment management fees passed through to third-party intermediaries for services to investors in sponsored investment products.

Distribution and service fees - Based on distinct arrangements, fees collected by the company then passed through to third-party client intermediaries for services to investors in sponsored investment products. The adjustment represents all of the company's distribution and service fees that are recorded as a separate line item on the condensed consolidated statements of operations.

Management believes that making these adjustments aids in comparing the company's operating results with other asset management firms that do not utilize third-party client intermediaries.

Expense Related

3. Distributions to minority interests- Earnings allocated and paid to certain limited partners of a majority owned manager are recorded as employment expenses in the financial statements. Management believes reclassifying these earnings distributions to noncontrolling interests to reflect these payments as non-operating earnings distributions aids in comparing the company's operating results with other asset managers that do not have majority-owned managers.

4. Distribution and other asset-based expenses - Primarily payments to third-party client intermediaries for providing services to investors in sponsored investment products. Management believes that making this adjustment aids in comparing the company’s operating results with other asset management firms that do not utilize third-party client intermediaries.

5. Amortization of intangible assets - Non-cash amortization expense or impairment expense, if any, attributable to acquisition-related intangible assets, including any portion that is allocated to noncontrolling interests. Management believes that making this adjustment aids in comparing the company’s operating results with other asset management firms that have not engaged in acquisitions.

6. Restructuring expense - Certain non-recurring expenses associated with restructuring the business, including lease abandonment-related expenses and severance costs associated with staff reductions that are not reflective of ongoing earnings generation of the business.

7. Deferred compensation and related investments - Compensation expense, gains and losses (realized and unrealized), and interest and dividend income related to market performance of deferred compensation and related balance sheet investments. Market performance of deferred compensation plans and related investments can vary significantly from period to period. Management believes that making this adjustment aids in comparing the Company's operating results with prior periods.

8. Acquisition and integration expenses - Expenses that are directly related to acquisition and integration activities. Acquisition expenses include certain transaction related employment expenses, transaction closing costs, change in fair value of contingent consideration, certain professional fees, and financing fees. Integration expenses include costs incurred that are directly attributable to combining businesses, including compensation, restructuring and severance charges, professional fees, consulting fees, and other expenses. Management believes that making these adjustments aids in comparing the company’s operating results with other asset management firms that have not engaged in acquisitions.

Components of Acquisition and Integration Expenses for the respective periods are shown below:

9. Other - Certain expenses that are not reflective of the ongoing earnings generation of the business. Employment expenses and noncontrolling interests are adjusted to exclude fair value measurements of manager minority interest. Other operating expenses are adjusted for amortization of lease termination fees and transition related expense (benefit). Interest expense is adjusted to remove gains on early extinguishment of debt and the write-off of previously capitalized costs associated with the modification of debt. Income tax expense (benefit) items are adjusted for uncertain tax positions, changes in tax law, valuation allowances, and other unusual or infrequent items not related to current operating results to reflect a normalized effective rate. Management believes that making these adjustments aids in comparing the company’s operating results with prior periods.

Components of Other for the respective periods are shown below: