Virtus Investment Partners (VRTS) Q2 2024 earnings summary

Executive summary

• Assets under management (AUM) at June 30, 2024, were $173.6 billion, down 3% sequentially but up 3.1% year-over-year, with net outflows of $2.6 billion primarily from U.S. retail funds and institutional accounts; retail separate accounts, ETFs, and global funds saw positive net flows.

• Adjusted diluted EPS was $6.53, up 21% sequentially and 20% year-over-year, while reported GAAP EPS was $2.43, down 40.7% year-over-year due to realized/unrealized investment losses and higher expenses.

• Operating margin and adjusted operating income improved both sequentially and year-over-year, reflecting higher average AUM and lower expenses.

• The ETF platform surpassed $2 billion in AUM, with 45% organic growth over the past year and positive net flows each quarter.

• Continued return of capital through share repurchases and dividends, with a strong balance sheet and modest leverage.

Financial highlights

• Adjusted operating income was $66 million, up 17% sequentially and 7% year-over-year; GAAP operating income was $44.2 million, up 13.2% year-over-year.

• Adjusted EPS was $6.53, up from $5.41 in the prior quarter and up 20% year-over-year; GAAP net income per share was $2.43, down from $4.10 in the prior quarter.

• Adjusted operating margin was 32.5%, up from 28.2% in the first quarter and up 20 basis points year-over-year; GAAP operating margin was 19.7%.

• Total revenues were $224.4 million, up 5.1% year-over-year; adjusted revenues were $203.0 million, up 1% sequentially.

• Employment expenses as adjusted were $103.5 million, down 7% sequentially, representing 51% of revenues.

Outlook and guidance

• Management highlights ongoing risks including AUM reductions, competition, regulatory changes, and market volatility, with no specific quantitative guidance provided.

• Positive net flow trends in July for retail separate accounts, ETFs, and global funds, with U.S. retail funds showing improved fixed income inflows.

• Known institutional wins expected to fund over the next few quarters exceed known redemptions, though timing is uncertain.

• Fee rate expected to remain stable, with product mix and market performance as key variables.

• Employment and other operating expenses expected to remain within guided ranges, subject to market and business performance.