VRTS - Earnings call 3 2023 | Virtus Investment Partners, Inc.

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Operator

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

Sean Rourke

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

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

the 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 use on GAAP

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

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

George Aylward

to turning over start overview the of it reported to details. an today everyone. with Thank you, Good before I'll morning, Sean. results we provide earlier Mike the

products, flows of sales increased and to of net in our results quarter global a in sixth margin, consecutive and sheet in volatile net and affiliate, highlights environment well-positioned we including positive ending performance the and year-to-date modest our separate ETFs, of In attractive higher business, and investments investment operating and increase, growth accounts, CLO with the retail the higher net across third operate including the return earnings in retail continued challenging capital, strategies a long and funds annual repayment quarter, both term debt, leverage. in the and included key and a an and of dividend balance

results, market outflows to So X% to a $X.X institutional, addition review turning assets to impacts due to than of XX% under retail decreased more a mandate large in the billion, billion by $XXX total funds. Sales in primarily offset increase net now prior retail management a in with in quarter. decline which had were sales, in the the

significantly retail sales open-end alternative account sales sequentially increased were XX% In due to in income strength separate with retail, higher, higher equity fixed domestic X% up and fund and SMID-cap.

Net outflows $X.X had last quarter, compared outflows down billion, $X.X of institutional which large quarter. billion from last product, of inflows $X.X net net were a with billion breakeven included By generated of on mandate. strategies geographies. year-to-date each organic in last has basis is with and business X inherently but the quarterly This across calendar affiliates, and years a variable growth contributions

the generated separate accounts flows of for net Retail billion were period. year-to-date positive and $X.X positive

where meaningful continue We opportunities. in additional build continue separate strategies capabilities and we to to retail see growth accounts, out

trend from and net strong and since flows positive flows, strategies improved second joined in billion generated mid-cap $X.X favorable net we quarter in they $X.X fund in Open-end billion again. particularly April. us with generating net equities net are across in of notably a flow AlphaSimplex with outflows SMID-cap traction positive again the alternatives and most global seeing

fixed and as additional as to income generated actively funds, flows, open-end ETFs product strategies. distinctive managed well opportunities the net to Within we lineup positive funds see broaden again other further continue with

product We set. to where also positive continue saw funds, flows net we in that global expand

open-end October, in to what the of funds trend similar retail terms quarter. for remain the In seeing we're third

strong pipeline the known mandates funded redemptions. but not remains exceeding one with institutional, For

to predict we be are funding difficult timing of the in lumpy volatile though, in quarter-to-quarter, especially from always longer As and fundings cycle. a this which is can very seeing institutional redemptions market and

higher higher and management a issued costs. margin. sequentially and expenses financial management was leverageability to as levels quarter XX% largely XX.X% income, the The to the This incremental third by a share quarter of Earnings $X.XX higher due reflected stable XX% in higher Our our the second as as from average interest unchanged results from well fees operating AUM CLO due as in we illustrated demonstrates XXXX. per relatively increased also was adjusted margin $X.XX investment and ongoing business related of the to of revenues XX.X%, up expenses.

to now Turning capital.

growth announced quarter a the we which as in and $XX shares -- our the were from the In for invested increase quarterly in debt repurchases increased repaid we valuation. million given annually in we capital also quarter, raised return. the years, have XX,XXX XX% for over prior of the repurchased X business, up $XX we million, During consecutive August, attractive dividend,

facilitate shareholders. to modest the issued million succession. generate growth net of our of cash ongoing sponsor providing continue including $XX We capital CLO in million SGA, of we business, new We in to ended purchases Sykes flow, business, part equity facility, increase in credit ownership the after were invest invest of significant repaying million growth to original that to transaction and intended by to also $XX the a our continue opportunities reflecting return debt to the quarter position and in $XX a to the the

turn that, to Mike? call the With I'll over Mike.

Michael Angerthal

everyone. assets Starting Slide under Thank results management. on Good our with morning, X, you, George.

$X.X management net $XXX.X X% the in ending lower than impact billion, September assets assets under at average. outflows under unfavorable X% down with management X% were quarter's of billion June At the $X.X increased to $XXX.X $XXX.X assets quarter to from Average XX market due XX, of billion. billion, and billion

retail AUM, and XX%, and separate accounts funds ago institutional continue up institutional U.S. XX% from represented assets a AUM, Our represent assets under XX% a of range our at separate while product, retail of By a accounts with of now of grow XX% from product XX% AUM, management broad and XX%. retail to down as asset percentage from of year classes. up

We represented within well also classes. are asset

mid- among diversified and small, large across In and nearly and and international geography. quality split well strategies and equities domestic between credit duration, income evenly cap domestic fixed within

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

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

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

the X XX AUM XX% of of had funds. quarter up In performed rated rated markets XX% addition, separate XX challenging XX% X-star $X of in last We including meeting XX% X more. institutional approximately funds XX% or the billion or stars, X performance that assets the with or with XX% funds X I and AUM X in group. fund period would retail well also and had note that and mutual peer and AUM, of managers X, respectively, accounts year-to-date stars, for were median outperforming were of our from or benchmarks

from with from multi-asset. Fund in equity increased billion Retail from $X.X X, to of last down sales large Slide of XX% billion sales included due product, Total mandate $X.X largely $X.X asset while CLO XX%. SMID-cap. quarter. sales increased institutional to higher X% last were billion, fixed $X.X and due from sales quarter, Turning flows. alternatives, million sales billion billion which included retail $X.X separate issuance increased a declined account the of of $X.X billion sales income, and billion $XXX of By $X.X a to institutional, billion $X.X domestic

quarter, billion Total net largely with outflows quarter flows as billion $X.X prior positive with compared outflows flows product, were outflows funds. on compared $X.X the net billion, prior net fluctuate in by U.S. of with breakeven timing Institutional retail which the will flows of net $X.X depending client by actions. the net of driven Reviewing in

prior well affiliates, accounts, with and net from In strategies Over institutional growth net quarters, and across retail positive X flows. X% private the organic channels intermediary of diversified generated sold flows past modest billion net quarter and generated a separate the in client has outflows both positive $X.X geographies. improved rate the flows

funds billion For improved outflows continued billion due open-end global $X.X quarter. net net $X.X U.S. ETFs the and generate The to as outflows retail second primarily funds were net to flows. in both positive funds, from to

open-end Within domestic equity alternatives, strategies. income net and flows equity improved generated and in global funds, positive net SMID-cap both fixed flows and

rate. as in prior A average funding $X.X or in assets average in fund reflecting from X. the higher reflected quarter of modest million management. impact X%, the increase Investment mostly Slide quarter. fees open-end fee average XX.X% rate increased a unchanged, relatively full large adjusted The fee declining XX points the of to Turning decline offset quarter, by $XXX.X the the slightly under institutional of second million sequential was management basis

to fee we quarter. Performance low the fourth of fees to And in the in expect million the be average current range rate of a XX environment, compared the quarter. given XX in to basis be million looking with expect in $X.X the $X.X second range ahead, at points, though to we continue quarter of would end the the

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

employment the affiliate retail in to adjusted Slide stock and increased compensation profitability, XX X-quarter sales shows incentive $XX.X sequentially. The expenses. reflected performance-based modest Total increase as higher X% of employment trend million due expenses compensation. higher noncash stronger

of were revenues expenses percentage XX.X% modestly XX.X%, As revenues, from last of a quarter. down employment

fourth to the to ahead, XX% expect quarter, of levels. the the high of we at Looking market be current continue end revenues, expenses in the albeit for employment to of XX% range given range

well as profits based will be sales. as it performance, particular and in on always, As variable market

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

continued of Excluding operating expenses reflecting sequentially, the expenditures. the annual management declined quarter, other million X% of discretionary in $X.X prior Board grants

that modestly other a of quarterly Looking the adjusted, operating previous range. $XX will be ahead, as to down expenses, million, anticipate would $XX we range million from in

$X.X by and income $X.XX income compared adjusted million, of year. the illustrates adjusted by diluted share from to second items, of on XX.X% the Total other under operating X% of the operating certain reflecting higher as net to income XX second improved quarter. trend or on margin $X.XX primarily With $X.X flat last $X.X earnings. million average as interest in CLO adjusted nonoperating by XX.X% million the assets management $XX reflecting XX% increased expense Operating increased quarter. investments. income respect per increased issued due expenses. sequentially unrealized lower adjusted million, interest as losses Net as in in The with Slide late

the in $X.XX share share of $X.XX and adjustments of second integration GAAP Regarding expense costs. fair a net quarter income included acquisition, interests, results, for and with noncontrolling to and affiliate compared restructuring $X.XX $X.XX per value per

liquidity Slide shows capital our leverage select quarter $XX net with representing net of of trend million, the We balance XX X.Xx. sheet items. of and the debt ended

$XX a return during growth a the sheet in investment Our management quarter increase in continued in strong CLO to quarter, growth, $XX as well in new of repayment. as to SGA investments capital supported XX%. including Investments included debt million sponsor capital balanced the balance million to ownership our and

August, increased XX% years, In announced past our $X.XX in per we over over we a dividend the increase X have dividend XXX%. share. And by the to quarterly

repurchased also the during quarter from $XX shares prior XX,XXX We in million, for quarter. million the $XX up

our quarter. repaying We continue $XX million credit down the to in pay facility revolving

modest to working meaningful the of levels business return invest adequate debt, financial have capital We in repay and leverage, capital. flexibility providing and

a I that back a George? which reminder, assets note, the of of our earlier years. the million ownership call over tax benefit, cash tax tax with also cash benefit our With year increase grew estimate SGA. as provide attributes would that, in we and At rates, XX turn George. with tax per provide a over of could AlphaSimplex this year let next $XX the the me intangible continue the acquisition to approximately current to

George Aylward

Thanks, Mike.

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

Operator

from Stanley. of first our Cyprys Morgan comes Michael Instructions]and [Operator question

Michael Cyprys

distribution terms that's how I was you about Maybe the just how on much of you AUM flows. is progressing. contributing can international hoping in efforts, and that elaborate could talk already

quarter. if pipeline, out the seeing characterize XX on about institutional as versus efforts? to you do there? the a now next you're the months respect wouldn't with the question other you mind or would look more bit And So around How maybe like taking just you What little so it talk color pipeline. be steps last just giving anticipate then some international the distribution you of over

George Aylward

Sure, sure.

some so capabilities they've from with non-U.S. early our pleased we've institutional beginning, first, quickly all starting of the great said done create of the On very before, we're on the a traction familiar job very with distribution very the team. very in and And that had the really outcomes we've getting from and terms to as opportunities.

As outside a relatively think number is we've is reason unknown great ago, opportunity for us we really management a before, the U.S. the growth few because of said our non-U.S. the a years until large

lot a we for be XX% And continues a U.S. over part seen the had non-U.S. to it AUM. a I years. we affiliates think about we've a outside client traction in But our active been pipeline, very a we've the So or and to split to activity. we've from how we've between client actually as few generally, that of is lot U.S. XX% strategies, right? increased has few years It's as commented few the base various opportunities. obviously opposed broadly and coming of amount our been now the as It that grown the think what more have of quarters, well pleased of is last base

And a the more pipeline, little bit talk to distribution. Mike the to dovetail then into that ask I'll about non-U.S.

of the terms reason diversity the terms dollars -- we In pipeline the in of like what of not in terms the of the but about is that. necessarily always sheer pipeline,

a to that strategies. has continue pipeline strategies, diversity strategies, of of income equity we see fixed non-correlated So of

So starting to cetera. did in is et did this little I challenging. institutional terms when are nature see make just little in a that of we in as we comment on institutional of out, rebalance we to particularly a comes think unusual comments the a to a we looking kind cycle. And funding money it their predictability just it's of of but market, more -- Mike, always lumpy bit are that portfolios, the makes type are team? longer some money more don't of and and clients be when goes We either that's comments great. think its going in

Michael Angerthal

Yes.

long from I laid the look team, affiliates those we comprised global can X we're across and months quarter out in different trailing significant over from Europe, across getting of that the well but look results. us expansion and of is of think each at have have certainly we as it's last in the the in do term. And only fundings gives team the the pipeline international pipeline well. and contributions confidence geographies. those the opportunities certainly and George year-to-date. the pretty Asia and we When areas, and team from recent those business, it as contributions of strong and Singapore teams when But XX the each Any at not years

We they contributing excited affiliates. upcoming the with continue and that of and team many is pipeline to the activities opportunities that our be about about have what of

Michael Cyprys

your ETF industry. ETF I Any to start that to then we've And active you with speak launching the are thoughts around be Great. new to was able as just for to a hoping question to fund seen some guys on success about as you platform. how well as might thinking ETFs continuing scope conversions across out? build have others mutual some that

George Aylward

retail it is really move our And to Obviously, when the separate terms has is accounts the apparently definitely retail product as Open-end want need where we cash. funding in Yes. the money preferred growth at of of increasingly we how investors currently sort as source in you in access its -- in trajectory and look capabilities. is to funds terms to of the category ETFs. be challenges a into various of going

ETFs, in our So side. we had We've putting again, ETFs. thoughtfully on the capabilities positive been out flows ETF

to So it your also I is our And focus in we managed in offerings. strategies definitely it's and prepared actively fixed but it's the think, of a specific a where have our it remarks, expanding for we're we of new part particular. growing. income our small lot comment, referenced of process in business, And our

those expect several of that -- as had in capabilities strategies. expand well other some we've -- expand as noncorrelated we've to our So actually and

generally us, the it of relate differentiated will tax managed, we we're So increasingly, more lot be are products wrapper, that at look of reasons. those efficiency and actively lot the ETF space seeing reasons of that. really those a of in for that to attractive a which attractive for And as is the

retail an of which separate success, business, of of of to very our as to kind been expand our of sort similar which area continue has think has to see what a part we again, market. separate area that's strong I a the retail So types a in we accounts, that been again, overweight equity launch because, very the accounts access develop types point lot growth what of of they're continue and other retail for seeing we're of to capabilities, attractive and the

Michael Cyprys

Great. if And I the just one question could more just expense squeeze in side. on here,

need about end on Just comp non-comp, see curious that G&A range. enabled below a what you you you that talk to range that low of would would below What that as about the taking forward. some the on of XX% multiyear how you you you side, are bring look and take actions it out the basis? growth just down pace to going could that bring guys think just for to maybe And of happen ratio the then to the just

George Aylward

comments, of to Mike couple A add and will that.

the of a kinds Because employment terms as generally, have expense -- the other most of is sales, vary, to actually stated, costs, driver in high of opposed the in they'll impact. in profitability, of terms as of employment and in Mike variable impact of terms So revenue expense the metrics. of biggest ratio, percentage terms we

a of the line. And lot was ratio had driven really was about expense be in is by going about trajectory It where -- the going strong not market you revenue metric really really was that a then we times, there to see the period it down. line. and volatility was So actually that just the

impacted and and to will do to continue deployment So are comment want you be on upon Mike, think benefit have to it that. a we the then... that variable based expenses

Michael Angerthal

Yes.

road, quarter this leverageable, XX%. and that emerged then pleased margins margins amount were will George said to there's the think employment biggest we as see in side, expense the based on incremental those driver you all we that speaking vary market. have is and in Really compensation the the generally just profitability above business on think quarter, be incremental the a said, of this And I on which variability structure, certainly, significant sales. will I

lower to we'll to information something So if get that in provide the end that's range we continue environment. market that below on the or

systems on from that been have really from to maintain for operating, providers think focused on vendors. the range. we've the year, in discretionary other and to that offset X.X operating pretty tight our service our consolidated the seen I and significant middle pressure years, last a office we've platforms inflationary other expenditures impacts us enabled We've trying

I modestly a for growth. range. to provide quarters in drive in expenses operating think focus a platform X strong we'll row, efficiency continue that to increase we leverageability reduced on and And the our ways to

Operator

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

George Aylward

questions. And as want us encourage for to other are again, there joining further Thank you and give today, if certainly you very any Great. you. to a everyone Thank always, thank call much. us I I

Operator

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

Virtus Investment Partners (VRTS) 27 Oct 232023 Q3 Earnings call transcript