Virtus Investment Partners — Q3 2026 Earnings Summary

Financial Performance:

• GAAP revenues were $197.6 million, a 9% decrease year-over-year and a 2% decrease sequentially from $201.4 million.
• Adjusted revenues were $180.8 million, an 8% decrease year-over-year and a 2% decrease sequentially from $183.6 million.
• GAAP operating expenses were $163.2 million, a 4% decrease year-over-year and a 6% decrease sequentially from $174.0 million.
• Adjusted operating expenses were $128.9 million, a 2% decrease year-over-year and a 5% decrease sequentially from $135.7 million.
• GAAP operating income was $34.3 million, a 27% decrease year-over-year and a 26% increase sequentially from $27.3 million.
• Adjusted operating income was $51.8 million, a 20% decrease year-over-year and an 8% increase sequentially from $47.9 million.
• GAAP operating margin was 17.4%, compared to 21.7% year-over-year and 13.6% sequentially.
• Adjusted operating margin was 28.7%, compared to 33.0% year-over-year and 26.1% sequentially.
• GAAP net income attributable to Virtus Investment Partners, Inc. was $22.1 million, a 31% decrease year-over-year and a 51% decrease sequentially from $45.3 million.
• Adjusted net income attributable to Virtus Investment Partners, Inc. was $39.7 million, a 21% decrease year-over-year and a 6% increase sequentially from $37.6 million.
• GAAP diluted earnings per share (EPS) were $3.26, a 30% decrease year-over-year and a 51% decrease sequentially from $6.68.
• Adjusted diluted EPS were $5.86, a 20% decrease year-over-year and a 6% increase sequentially from $5.54.
• GAAP effective tax rate was 34%, compared to 16% in the prior quarter.
• Adjusted effective tax rate was 14%, compared to 13% in the prior quarter.
• Cash and cash equivalents were $187.2 million as of September 30, 2026.
• Gross debt was $411.0 million as of September 30, 2026.
• Net debt was $223.8 million as of September 30, 2026, representing 0.9x EBITDA.

Guidance and Future Outlook:

• The release contains forward-looking statements regarding expectations for assets under management, net asset inflows and outflows, operating cash flows, and business plans, but does not provide specific numerical guidance for future periods.

Business Segments and Product Lines:

• Total sales were $4.3 billion, a 32% decrease year-over-year and a 29% decrease sequentially from $6.1 billion.
• Net flows were ($6.1) billion, compared to ($3.9) billion year-over-year and ($5.6) billion sequentially.
• Ending total assets under management (AUM) were $141.4 billion, a 16% decrease year-over-year and a 7% decrease sequentially from $152.2 billion.
• Average total AUM were $149.5 billion, a 12% decrease year-over-year and a 3% decrease sequentially from $153.3 billion.
• Institutional sales were $1.1 billion, including a $0.4 billion issuance of a collateralized loan obligation.
• Retail separate account sales were $1.0 billion, declining from $1.2 billion in the prior quarter.
• Open-end fund sales decreased 18% to $2.2 billion, including $0.4 billion of ETF sales.
• Net outflows remained concentrated in quality-oriented equity strategies.
• ETFs and tender offer funds generated positive net flows.
• Institutional net flows were ($2.2) billion, a change from ($0.7) billion in the prior quarter primarily due to lower sales.
• Retail separate account net flows were ($2.6) billion, improving from ($3.1) billion due to lower redemptions.
• Open-end fund net flows were ($1.3) billion, improving from ($1.8) billion, with outflows primarily in equity funds partially offset by positive flows in fixed income funds.
• Average management fees earned were 43.0 basis points for all products, compared to 43.1 basis points in the prior quarter.

Market and Competitive Landscape:

• The company noted that lower investment management fees contributed to the decrease in revenues.
• The decrease in revenues was primarily due to lower average assets under management, as the average fee rate was essentially unchanged.
• The company provides services to $1.6 billion of other fee-earning assets not included in AUM.

Risks and Challenges:

• Risks include reduction in assets under management, financial or business risks from strategic transactions, withdrawal or termination of investment management agreements, and damage to reputation.
• Risks include inability to satisfy financial debt covenants, lack of sufficient capital, inability to attract and retain key personnel, and challenges from competition.
• Risks include adverse developments related to unaffiliated subadvisers, negative changes in distribution relationships, technology system failures, and losses on investments.
• Risks include adverse regulatory and legal developments, failure to comply with investment guidelines, civil litigation, unfavorable tax law changes, and impairment of goodwill or intangible assets.

Management Commentary and Tone:

• Management stated that the non-GAAP financial measures reflect operating results from providing investment management and related services and are used to evaluate financial performance.
• The decrease in operating expenses was primarily due to lower employment expenses reflecting the impact of a discrete employment expense item in the prior quarter.
• The GAAP effective tax rate increase reflected a meaningful sequential change to unrealized losses from unrealized gains in the prior quarter.
• Adjusted net income per diluted share increased primarily reflecting higher operating income, partially offset by lower interest and dividend income.

Other Key Points:

• During the quarter, the company repurchased 64,666 shares for $10.0 million.
• The company increased its quarterly dividend by 2% to $2.45 per share.
• Gross debt decreased from $427 million primarily due to a $15 million repayment of the amount drawn on the company's revolving credit facility.
• Working capital was $44.5 million as of September 30, 2026.
• Contingent consideration increased to $116.0 million from $37.4 million year-over-year.
• Manager noncontrolling interests liability increased to $140.4 million from $17.0 million year-over-year.
• Redeemable noncontrolling interests increased to $118.7 million from $38.7 million year-over-year.
• Total equity excluding noncontrolling interests was $946.9 million as of September 30, 2026.
• GAAP net income included $0.74 of fair value adjustments to contingent consideration and $0.45 of fair value adjustments to minority interests, partially offset by ($1.08) of realized and unrealized losses on investments and ($0.24) of restructuring.
• The prior quarter's GAAP net income included $2.65 of realized and unrealized gains on investments, $0.50 of fair value adjustments to minority interests, and $0.49 of fair value adjustments to contingent consideration, partially offset by ($0.09) of restructuring.