Virtus Investment Partners (VRTS) Q3 2024 earnings summary

Executive summary

• Achieved strong operating and financial performance in Q3 2024, with AUM rising 6% sequentially to $183.7B, driven by $12.6B in market appreciation and improved net flows, especially in retail separate accounts, ETFs, and global funds.

• Adjusted EPS reached $6.92, up 6% sequentially and 11% year-over-year; GAAP EPS was $5.71, up 36.3% year-over-year.

• Operating margin reached a two-year high, supported by disciplined expense management and higher investment management fees.

• Increased return of capital to shareholders, including a seventh consecutive annual dividend increase to $2.25/share and expanded share buybacks.

• Investments made in new product launches, a $0.3B CLO issuance, and increased equity in an affiliate, while maintaining modest net leverage.

Financial highlights

• Total AUM rose 6% sequentially to $183.7B, with adjusted revenues at $205.1M and GAAP revenues at $227.0M, both up sequentially.

• Adjusted operating income increased 7% sequentially to $70.5M; adjusted operating margin rose to 34.4% from 32.5%, the highest in two years.

• EBITDA for Q3 was $84M, up 2% sequentially and 3% year-over-year.

• Net outflows improved to $1.7B from $2.6B in Q2, with positive net flows in retail separate accounts, ETFs, and global funds.

• Adjusted employment expenses declined 1% to $102.5M, representing 50.0% of adjusted revenues.

Outlook and guidance

• Positive net flows expected to continue in retail separate accounts, global funds, and ETFs into October.

• Institutional outflows in Q4 expected to be offset by lower fee mandates, resulting in neutral revenue impact.

• Other operating expenses as adjusted expected to remain around $30M per quarter in the near term, with ongoing cost streamlining.

• Employment expenses projected to remain in the 49%-51% range of revenues.

• Management expects continued exposure to market risk from interest rates and securities prices.