Virtus Investment Partners (VRTS) 26 Apr 242024 Q1 Earnings call transcript

Good morning. My name is Dede, and I will be your conference operator today. I would like to welcome everyone to the Virtus Investment Partners quarterly conference call. The slide presentation for this call is available in the Investor Relations section of the Virtus website, www.virtus.com. This call is being recorded and will be available for replay on the Virtus website. Instructions] [Operator

turn your now Sean conference the will host, to Rourke. I

discussion everyone. Dede, to of the XXXX. and and quarter you, the On results welcome our for financial good to like Thank of I'd morning, behalf first operating Partners, Virtus you of Investment

Chief today speakers Angerthal, Aylward, CEO; and President Our Officer. and George Mike are Financial

their remarks, we'll prepared have Following a Q&A period.

within risks unknown Certain risks may begin, Page actual results uncertainties Private Reform X slide differ are statements presentation. and on contain news the limited note call in may of materially but subject not this disclosures to today's in discussed matters meaning from the to, These those release please and on Securities Before known Act we our the and and uncertainties set discussed of of to the forward-looking in as the Litigation statements. forth and cause factors XXXX discussed those including, filings. SEC such

presented basis, In financial to to we results. a our measures non-GAAP results evaluate addition certain have on GAAP

non-GAAP measures news supplement, substitutes are measures financial the be available GAAP our and should non-GAAP in included with for in financial of to measures not conjunction Our results read financial them. website. applicable GAAP release Reconciliations are and today's are financial these on which

Now call turn over the I'd to like to George. George?

it then turn with of the more overview I'll an results little to Sean, you, start provide this everyone. good and morning, reported will Thank detail. Mike a and I morning, we to over

our net asset of saw institutional and in our $XXX diversity rates, compelling leading and performance the sales increases despite assets investor strategies the in over interest of classes the effective retail and path inflation quarter first strength given growth to meaningful and across offerings, improved distribution. billion. under product management into investment flows and ongoing continued Market We to uncertainty

XXXX top this as which were the our identified investment X- also earlier of a longer-term recognition including X the for for periods. under well all XX-year with Barron periods fund year performance as year, review, We as of pleased and family us in the

the separate growth the sales with performance continued margin, For retail and quarter attractive excluding product increase of our expenses, and strong global accounts, in dividend repurchases, categories, leverage. strategies XX% growth operating all and through net ETFs a investment we positive and earnings net seasonal share with return flows of and funds, included quarter, in across in in reasonable our the ended highlights levels capital settlements

institutional, under in increased billion, and increased Turning favorable highs. in began to primarily offset some now of positive accounts, billion outflows equity $X.X as market partly open-end XX% XX% and product categories, $XXX net XX% new to in net to funds. in to growth Sales retail assets management XX% over work double-digit with increase X% Total separate including put separate to to by due retail as institutional cash results. performance markets in the addition accounts sales open-end in to in funds flows reach a all investors solely back

growth several institutional with years billion over market redemptions an most the net the from the net sequential $X.X retail X equity the improvement strong account were appreciation outflows billion, X in separate across given in prior X Net By included sales past level quarters. billion, highest quarter. the product, accounts improvement a $X.X the $X.X in by from outflows $X.X outflows billion, the of rebalancing and our reached years. sales were strategies fund of Open-end our highest

$X.X to positive over complement those continue highest X net positive and to $X.X level for outflows best and XXXX strong, a Mid-Cap, strategies and has the $X.X is in though variable Mid-Cap strategies. billion, net most of equity flows years. separate Institutional to since improved Retail Open-end broad-based been in our SMID see were quarter continue better the to inherently billion strategies quarterly in from interest we we generated basis, global income. and quarter on in accounts introduce flows flows net additional drive of in offerings the fixed and time. second their growth level billion of at fourth fund with Demand

flow fundings quarter In as terms have solid and trends the in many activity to both second so first. institutional, In well we're we retail certain of strategies quarter similarly seeing levels as based accounts the high April, in geographies what strategies. far generally trends separate ETFs, first across and momentum known have including strength of of is retail of similar in the continued, tracking fund pockets redemptions, are on and that with

results financial employment managed in expenses. impact expenses, as quarter we improvements achieved absent income higher closely and seasonally higher which the reflected margin generated first Our operating both of revenues we sequential and

to seasonal expenses. the the fourth expenses, fourth Earnings as adjusted lower expenses. per $X.XX $X.XX from operating due XX.X%, declined XX employment Excluding basis higher the and the revenues due to seasonal was of of operating quarter up points other from quarter share margin

increased those sequentially. Excluding adjusted as X% EPS expenses,

as On comparable increased basis, a year-over-year more earnings adjusted per share XX%.

capital. to now Turning

quarter, the settled net or million. for approximately we repurchased XX,XXX During shares $XX

returning approach capital to and shareholders appropriate leverage. capital levels our continue We a management take by to investing of balanced to in maintaining growth,

and settled $XX our product our raised a quarterly on leverage past million and capabilities net X%, of the X.Xx. below reduced that have shares XX%, repurchased our we by net increased or by XXX,XXX maintain shares outstanding strategic dividend year, close acquisition for Over

revenue incentives modest of with quarter the and quarter the debt represents first a as the our position cash of ended highest payment. quarter timing We given participation net annual utilization

of cash business to growth opportunities We to shareholders. the ongoing flow, significant to and providing the in capital return invest generate continue

over Mike. that, like to I'd turn call the to with And Mike?

quarter assets by $X.X outflows offset all were XX, you, assets increased up X% to Good Average Thank under ending management George. performance, billion be assets under favorable Slide management. At from with billion, $XXX.X above the on X% X, market with March our Starting you partially $XXX.X of billion, the with to XX $X.X net assets this billion. December $XXX.X to quarter's average. X% due in management billion morning. of at results under

ETFs, assets under range accounts, Institutional was assets. Global small a separate while broad a the Our and was year our is of growth Funds has asset Retail portion organic and of AUM up combined continue at XX% to XX% products. period. delivered of had and classes organic growth represent relatively have prior which consistent of AUM consistent X% XX% over at a AUM. management their combined

to continue across performance also products strategies. investment compelling have We relative long-term and

fund X years. institutional their outperforming and were over assets separate As retail assets of of XX% benchmarks XX% XX, March account ,XX% of rated approximately mutual of assets

median funds, X-year over mutual the their groups of outperformed For peer the XX% period.

In X-star stars, assets had addition, in X were X XX% or or of X X, funds. XX% rated fund and

X XX were X have rated or including rated that X X we ETFs We of as $X X And well. or with funds stars, more. that XX billion had were stars AUM or

asset to growth fund improvement categories. Turning net sales from $X.X outflows outflows to increased in where closed. sales due sales $X.X with prior XX% net small Total billion $X.X billion $X.X billion Slide Institutional all of had increased in the across recently billion marked to from billion account in of $X.X $X.X most of sales cap $X.X with X, billion from in been flows. X Open-end we Retail product quarter. billion growth billion. XX% increased were billion $X.X strong separate from Total $X.X reopened from prior $X.X that of growth increased due investment of strategies the strategies XX% soft quarter. billion

in $X.X of net Institutional billion outflows product. billion from $X.X by the improved quarter. Reviewing fourth

separate As positive Both always, net and X the sold $X.X accounts, flows retail continued timing years. billion net on In generate the flows private of institutional intermediary client increased and $X.X fluctuate in from prior client quarter flows to flows. will positive actions. billion net our highest in depending represented of

fixed quarter For in open-end with net were cap, XX% redemptions the to and sales global outflows net billion past for in Global lower XX% positive organic positive net over generated past and the also with fourth and rate compared were billion and year. organic equity included have due growth a higher again $X flows income. ETFs of growth year. small were $X.X funds, Fund flows the positive

increased as in assets performance was X%, were average or with XX.X X. the million lower Turning by compared basis elevated prior to million offset of points Slide $XXX.X of basis performance that in partially rate Investment the increase of which quarter. adjusted points X% management quarter, the management, under fees, XX.X The which fees. prior average basis reflecting in fee points fees X.X included $X.X

basis fees, unfavorably in first fee XX that for Normalizing well of the of average the was rate. modestly fund as basis points basis fee points X.X XX.X was normalized basis rate the costs points, X.X quarter reimbursement fee than higher average impacted by The fourth quarter points. as rate average quarter performance discrete

average purposes. believe for we Looking rate is ahead, quarter first reasonable fee the normalized modeling

and by always, As assets. the markets the impacted rate mix fee will be of

XX and in $XX.X expenses Slide the the employment of timing annual million adjusted sequentially, employment of shows X-quarter expenses. related primarily benefits. Total reflecting incentives, payroll trend of million expenses $XXX.X to XX% increased as seasonal incremental employment taxes

by due prior And XX.X%, XX.X% Employment as due to sales-based items, expenses variable compensation. variable the XX% of seasonal level the Excluding were incentive revenue were higher X% higher employment slightly excluding expenses they seasonal adjusted. items, sequentially the increased of to quarter and profit above incentives.

always, of sales. XX% a as be will and is to believe as variable it on performance, a we Though, percentage expenses XX% market in employment in reasonable. profits ahead, as as well Looking particular revenues range based of

were million from operating Turning quarter. XX. to expenses, Other Slide fourth $X million, the or down as X% $XX.X adjusted,

discretionary over We addition reflecting and have within our new limiting years range expenses despite of by narrow contractual a spending. maintained of X operating year, pressure last affiliate of longer-term some and the other past management expenses a inflationary the

range for expenses the other ahead, remains operating million million adjusted Looking to $XX quarterly as reasonable. of $XX

grants keep mind Board second purposes, the occur modeling annual our Directors' in equity For in of quarter. that

to illustrates $XX.X declined Operating income million as XX sequentially the XX% in Slide million due or earnings. employment of the seasonal expenses. $X.X adjusted trend

Excluding income operating X%. those increased items,

increased period, Looking at adjusted XX%. comparable XX.X% income operating as compared the year-over-year of The with fourth in quarter. margin more the operating XX%

the points XX.X%, XXX seasonal an with XX year-over-year points. incremental XX%. a basis margin operating was improved by margin basis operating On the Excluding an of basis, margin improvement approximately employment of expenses, the

fourth as decreased growth line the Noncontrolling share, $X compared respect increased of nonoperating gross to quarter fourth our the in in due affiliate earnings. quarter. million prior with $X.XX the over expense XX% lower year interest increased of X% seasonal $X.XX sequentially, income by and by interest to credit which reflecting in repayment revolving expenses diluted per the adjusted $X.XX of items, Net debt With included period. reflecting

integration of $X.XX of included fourth and value costs. results, minority $X.XX share per income to quarter of terms the compared and interests unfavorable $X.XX of with affiliate share In GAAP and per $X.XX fair acquisition net in adjustments

equivalents shows the to XX trend than was Working offset XX, from Slide liquidity declined the net capital settlements. from December more of quarter revenue participation return $XXX.X XX. million million through utilization included capital shareholders and sheet share items. select business sequentially shareholders. capital capital well the $XXX.X $XXX.X our million annual the balance generated the sequentially incentives at of as the million March and up of payment and to repurchases and return as to in at Cash as by $XXX.X Cash dividend, cash

years million consideration liability As the of payment point of a million. paid a The $XX.X majority to the that during X the $XX.X by contingent over participation low was will represents annually quarter the reduced next be liability first first our the quarter. typically reminder, The in year. cash revenue

as gross $XX XX. million due of debt the $XXX.X XX, sequentially to March was at down EBITDA. up or XX prior same EBITDA to level. quarter, year XX% level X.Xx seasonal was December EBITDA in At X.Xx, We the employment but March items, Net debt first generated the million from

additional we $X.X XX,XXX for $X quarter, million to tax obligations. employee million common an net XX,XXX settled satisfy stock of the shares During for and shares repurchased

Over have reduced past we the shares year, by X.X%. total

call to let that, me George? turn over With George. the back

Mike. Thanks,

So we please? will now open take your lines, you up the questions. Dede, would

Love And Sandler. our of from Crispin first question [Operator Instructions] comes Piper

similar shaping up looking then seems on forward sustainable date that be -- pretty April on just the to given first think fair. Based that's this to April backdrop? in far to else just and call is flows. the like you first in quarter, it to your of have Just line, do -- And volatility to And this that out anything so been seen we've product be pleased great. with flows would markets rates? you in And if enabled those date there's the some

Yes.

So a funds for bit. -- for talk about

did over of in we've what's think is, weeks. obviously, trending indicate had the of conditions So that at and the similar, is similar very weakness and the not to interesting, market this seeing strategies quarter, the is the market, sense. the they're interest we the continued volatility I March more few end We last some some you what the difference are generally -- total SMID less seeing the why Mid, were in in of pockets that to and some which strength makes you're actually you're volatility referred in correlated given some

And little saw If lot the see very a people quarter. now, in of in was but a the difference decisions where allocations. quarter and with the a taking of similar it be saw are composition about the the accounts we bit trajectory you did the to bit think may looking markets, the We people are that, continue correlation -- whereas continues for of fixed rebalancing, a may see is their trends just ETFs equity what things for really it second we what similar first very the income I in retail way the different highs to quarter first advantage lower or in even they first the a that little terms of of making the in quarter. separate more

kind just where lot in then potential and potential to could just managers? start be or makes thoughts April. views XXXX. strategy more you of add one last picking question kind most of And And activity in? year, could the give of environment stalling But kind latest that what and the are see then helpful, interested with just me. less a managers? an in been of correlated have That's to affiliated for areas light your we the the on And conversations us additional M&A was sense for some here. you where stable pretty up, entering you're new Can

Yes.

mean, always I overall, continued. have So conversations

in it's by others, but the than other. each of and announcements low, is a recent probably there's little perspective, ongoing shared been different think my a been looking and activity view to and industry, I with ways other my maybe conversations firms about couple So dialogues bit the it's on partner

I doing think that the in remained. interest has

I more opposed are about ways the in think of the terms have maybe more they're think more traditional ways again, that. some the conversation. been they creative of as getting nature the people I And thoughtful of to generally of doing that partnering

conversations. as So we've always we in continue as just been to active remain our

of for distribution certain scale. only capability, either relative it access us, if or us, it sense For makes our meets strategic fits terms in product

look really terms So bit growth, our of last more that something But interesting, just we those evaluate. they be. is the could again, few were what to liquid little be opportunities. what We focus in in always focused alternatives. continue types first may on you on organic but know that less at of we And our transactions, correlated do never a

generally, pretty areas the to noncorrelated be That's there. and opportunity areas of But long-only for in continue less interesting couldn't that less the as well be expansion categories. something We liquid interest. see say the would traditional as an not we're that there further to that's represented --

question Cyprys Morgan next our of from Michael And Stanley. comes

the talk institutional how distribution the efforts. coming I that is you how could today? how talk much all in of to broadly, on together. And flows team pipeline. that's the international more that was could Maybe and just contributing about you update us hoping AUM is then the And on about progress and expansion progressing,

the and If strengths maybe and subchannels between elaborate bit broader the some different more that you within puts institutional the a takes on could just different seeing of you're channel. strategies

Yes.

to I'll ask thoughts, quick couple to of a add that. and Mike So then

of capabilities of very our We've we've access in to front across quarters our that institutional few some to, have mandates us So had and on beginning where non-U.S. U.S. And several the of and resources didn't we not had the continue of we the consultants very terms about then otherwise outside from been in on might presence potential our we've newer with pleased optimistic by significant we the years, clients embracing effective the highlighted given opportunities strategies. being be previously side. have very over the getting last

a think cap growth had I one equity. large we think quarter I when

think one U.S. a I outside have and we all quarter, in REIT, the fixed all we income, global a have

previously. we of commented activity. So We've those continue levels to see

We decision as that optimistic of But good for some have for opportunity we see area to seen lengthening the a continue be that. period and Mike? that in us.

Yes.

I think we across on well. the all about types, talked sales certainly, all we that -- as increase sequentially institutional product saw

affiliates pipeline. see managers we that see as that are several inherently of fundings actual the across seeing we're we in as and across up. geographies. is talked tick We've pleased The lumpy. what our So well our before contribution to in about And business across

We sequentially. across pipeline, that look meaningful to higher -- includes and marked geographies, improvement And improvement had managers that our levels and and activities is the when from there of contribution outflows are RFPs are we net across that that ongoing. strong on And is pleased geographies includes multiple meetings, the continued we and activity. activity

with forecast we're the seeing the So flows, difficult teams. pleased that we're activities to but across

a Great. some you seeing year-on-year follow-up out. the ETF And that called just strength side, question there had on

could hoping is to on of strategies, To ETF sort of Just extent broadly, managers some and update conversions mutual broadening more other appetite active out appetite you the strategy. offering sort for there more too? as what overall us broadly ETFs? fund from on seeing ETF we're ETF active any of doing your for What's the

question. great No, Yes.

it of sort actively lower-cost managed choice is utilizing to a in beta, ETF specific how strategies. of terms that to there evolution but on I perspective to terms of utilization more investment think strategies. utilization want of is that refinement an the of certain access of further in I financial and leading using by they And the instead vehicle as the continues as think ETFs, for be our advisers purely not

particularly in you that think fixed I see income.

and more introducing have we think for ETFs fixed a reason I it's preferred become vehicle the others income been that. for that

is that I think continuing.

recent ETF -- been expand allowing introductions to development side of be the clients really on access because the have vehicles. been different make ETF potential of will strategies I product things those have managers think most has available a in and to through goal lot it's our to it and again, that we offerings. And and our our currently always

on the the see growth still fund. account access on demand increasingly want the people the may set obviously we as side. So open-end some in via it traditional retail the seen separate opportunity you We've right ETFs, managed maybe fixed little a than for types the that side also more And and see correlated, actively the strategy. so equity for noncorrelated of more income now less on

So we continue of area to that see growth. an as

conversions, the In there's I ETFs, ability to around to know, people share funds to we your Again, keep open-end utilize do terms have our opportunity of and also conversions. structure. mind open ability ability the think those. and around the have to have as We do the we your questions you activity considering cash theoretically also to the do

recent of the I to has X I conversions, in where really or seeing conversions was remember think limited lot in terms of I think been that. article, in the success some the a and there X firms

So that we us, that's to again, but we have something would an think for filing is consider don't anything related it, in if opportunity we that.

could point, that follow on the conversion. I up if on Just

that? that evolve or think curious is from leads the what of your stepping what marketplace. holds of where And sort in you what that drives you point on you sort to Just views into happening success back

So convert to they're the client conversions between is the terms ultimately, think through the ultimate or I to -- what for -- just connection the choice to introduce in right different they make it that access, think people trying is either Well, the to of the vehicle to for to there's do and logical gets wrapper. a reasons decision think right? I

So it's specific. I think very

I the that think them specific you advisers vehicles well type to nature your that the of as in. the financial it's channel of utilize as sell

with they to the that would in specific the or which have they're those align So their adviser made strategy very available. the channel easily of conversions, group some utilized that in firms

in factor So make things would all we kind of decision. we those were things would if to that be that

question from comes Hays TD of Cowen. next And Bradley our

Hays should priorities sheet. how to cetera? It's on balance? the the that, cash should And about debt think for Katz. we buyback, think about Bill on balance for the the of et Bradley related paydown, deployment Starting How we between M&A, cadence rebuilding

Yes. Bradley, Angerthal. it's Mike

cited $XX quarter. annual I us first cash first for the think use had just occur incentives third of period payment million the quarter highest the in cash the of is with balance participation revenue as the for our and we we payment

So then typically generated through you'll just those part of year rebuild the of remainder lowest from as business cash you'll it's see the naturally the of of the the cadence and payments, QX year. the the

just typical the in saw highest year, for was quarter the capital fourth the business. cash build the you last year. that and of as for So seasonal cash point the It's

terms capital of priorities, approach about I think we talked balanced management. our in to capital

meaningful back while new we of XXXX, included think that. is of bought I consecutive for XXXX of the and one closed the which affiliates in used capital in quarter We that third launch business, continuing a acquisition during to in supported year invest depiction in April amount the good strategic the with CLO. our year and a raised of of the seeding the our strategies connection with sixth dividend shares

debt down are all and of management. strategic returning then priorities meaningful So business for approach to our investing paying capital and business, in the investments to the shareholders representative in capital

I of explore Is know one announcement you similar? peers. saw the partnership your something strategic to appetite from probably any there

specific potentially our the that in approach I ways my that But that other of that. as I kind we sort an good a transactions. shareholders. create partnering, doing example I do partnering. earlier types made in other of any of of people traditional be would of to way for Yes. We think long-term value in to, on comment we comments, is terms don't continues could less view evaluate there of be And again, ways evolution reference think believe

it fit shareholders. there was creator was for evaluate would of if we different strategic any we and a thought again, a that type So value structure

there's more. Okay. for And one if then time

sub-asset given or in? fixed at in to seeing you there your Is focus push are classes, increasingly opportunistic anything longer for strategies environment, active how thinking various there? develop more ourselves higher income, the we're about greater strategies, Looking a

duration, Well, income interesting fixed the X strategy we between strategies So have capabilities is we shorter particular, in of managers the were Stone is favor now have their And spectrum, really debt. -- less much what's they that separately our in then alone as with the Yes. have of in which at the well Newfleet, from probably we market the in emerging right? have which are sites, then being -- across the kind intermediate we with has stronger. in the high-yield the as capabilities Harbor

fixed So investors there's encourage of opportunities we sales on. tried lots not be of diversify avail to some currently we to loan And the income as we would are, are in different sort stream, where several the little of relying given flows. and in but things one we there and themselves. that other of we saw a everyone else think is that's our ways they But that that totally focused fund to their is, strength treasuries force that compelling actually in do as on environment, managers think income of the bit have that

I Mr. question-and-answer over turn now back would the This Aylward. concludes our session. to to conference like

out you further if much. so Thank everyone any just And other encourage And have to you Great. reach Thank joining we us. obviously, today want as you. for to thank you questions. always, I

may participating, disconnect. you today's concludes for and Thank you now call. That