Virtus Investment Partners (VRTS) Q3 2024 earnings summary

Executive summary

• Assets under management (AUM) rose 6% sequentially and 13% year-over-year to $183.7 billion, driven by $12.6 billion in market performance and improved net flows in retail separate accounts, ETFs, and global funds.

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

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

• Net flows improved to ($1.7B) from ($2.6B) in Q2, with positive flows in retail separate accounts, ETFs, and global funds, though overall net flows remained negative.

• Capital returns continued with increased share buybacks and an 18% dividend hike, while new ETF launches and a new CLO issuance supported growth.

Financial highlights

• Adjusted revenues reached $205.1 million, up from $203.0 million in the prior quarter; GAAP revenues were $227.0 million, up 4% year-over-year.

• Adjusted operating income was $70.5 million, up 7% sequentially; GAAP operating income was $55.3 million, up 23.1% year-over-year.

• Adjusted operating margin improved to 34.4%, the highest in two years; GAAP operating margin was 24.3%.

• Adjusted net income was $49.6 million, up from $47.3 million in Q2; GAAP net income attributable to Virtus was $41.0 million.

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

Outlook and guidance

• Positive net flows expected to continue in retail separate accounts, ETFs, and global funds; fixed income net flows remain positive.

• Other operating expenses as adjusted are expected to remain around $30 million in the near term, with ongoing cost streamlining initiatives.

• Employment expenses projected to stay within 49%-51% of revenues.

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

• No material changes to risk factors or critical accounting policies were noted for the quarter.