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VI

VIRTUS INVESTMENT PARTNERS, INC. (VRTS)·Q2 2025 Earnings Summary

Executive Summary

  • Q2 2025 delivered higher margins and EPS on seasonal expense normalization, with GAAP revenue $210.5M and adjusted EPS $6.25; adjusted operating margin rose to 31.3% from 27.6% QoQ .
  • Results vs consensus: adjusted EPS modest beat (+$0.04*) and GAAP revenue strong beat (+$17.3M*), while EBITDA missed (-$9.3M*) as per S&P Global; net flows remained negative at ($3.9)B, though AUM rose to $170.7B on market performance .
  • Management signaled modeling guardrails: average fee rate normalized (~41.3 bps), employment expenses trending to the mid-point of 49–51% of revenues, other opex in the $30–32M range, and interest & dividend income guided to ~$4.3M next quarter .
  • Capital return and pipeline: $30M buybacks (175,872 shares) in Q2, net debt 0.2x EBITDA; pipeline for inorganic expansion (private markets, differentiated strategies) and a new ~$400M CLO expected in Q3 .

What Went Well and What Went Wrong

What Went Well

  • Adjusted operating margin expanded to 31.3% (from 27.6% QoQ), driven by lower seasonal employment expenses; adjusted EPS rose to $6.25 (+9% QoQ) .
  • ETFs continued positive net flows and organic growth; ETF AUM reached ~$3.7B with a 74% TTM organic growth rate (and ~3.9B as of the day before the call), with strong sales and broadening access initiatives underway .
  • Strong capital return and balance sheet flexibility: $30M repurchases at $171 average price, working capital $144.0M, net debt $62.5M (0.2x EBITDA) and undrawn $175M revolver provide optionality .

What Went Wrong

  • Net outflows worsened to ($3.9)B from ($3.0)B QoQ, led by institutional large-cap growth redemptions and retail separate accounts, while open-end equity continued outflows .
  • Fee rate compression: average fee rate declined to 41.3 bps (41.1 bps ex performance fees) vs 41.7 bps in Q1, reflecting mix shift toward fixed income within retail funds .
  • Year-over-year declines: GAAP revenues fell 6% and adjusted revenues fell 6% YoY, reflecting lower average AUM and product mix headwinds .

Financial Results

Core P&L and Margins (chronological: Q2 2024 → Q1 2025 → Q2 2025)

MetricQ2 2024Q1 2025Q2 2025
Revenues (GAAP, $M)224.4 217.9 210.5
Revenues, as adjusted ($M)203.0 197.6 191.0
EPS Diluted (GAAP, $)2.43 4.05 6.12
EPS Diluted, as adjusted ($)6.53 5.73 6.25
Operating Margin (GAAP, %)19.7% 16.8% 21.5%
Operating Margin, as adjusted (%)32.5% 27.6% 31.3%

Q2 2025 vs Consensus (S&P Global)

MetricQ2 2025 ActualQ2 2025 ConsensusSurprise
EPS Diluted, as adjusted ($)6.25 6.210*+$0.04*
Revenues (GAAP, $M)210.525 193.202*+$17.323M*
EBITDA ($M)57.971*67.287*-$9.316M*

Values retrieved from S&P Global.*

AUM and Flows by Product (period end, $B)

ProductQ1 2025Q2 2025
Open-End Funds53.608 55.653
Closed-End Funds10.273 10.481
Retail Separate Accounts46.920 47.445
Institutional Accounts56.662 57.131
Total AUM167.463 170.710

KPIs and Operating Drivers

KPIQ1 2025Q2 2025
Total Sales ($B)6.2 5.6
Net Flows ($B)(3.0) (3.9)
Average Fee Rate (bps, ex perf.)41.7 41.1
Employment Expenses, as adj. ($M)109.390 97.236
Other Operating Expenses, as adj. ($M)31.286 31.972
Operating Income, as adj. ($M)54.590 59.771
Cash & Equivalents ($M)135.4 172.2
Net Debt ($M)100.0 62.5
Share Repurchases (shares / $M)111,200 / $20.0 175,872 / $30.0

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Average fee rate (bps)Q3 2025 modeling41–42 bps reasonable; perf. fees $3–5M per year 41.3 bps (41.1 ex perf.) in Q2; “normalized Q2 rate reasonable for modeling” Maintained framework
Employment expenses (% of revenues, as adj.)H2 2025 modelingAt high end of 49–51% if markets flat “Trend toward middle of 49–51% range” Lowered bias
Other operating expenses ($M, as adj.)Q3+ 2025Maintain $30–32M per quarter; $1M/q savings from office reductions starting Q3 $32.0M in Q2 due to Board grants; maintain $30–32M run-rate Maintained
Interest & dividend income ($M)Q3 2025—~$4.3M guided New
Effective tax rate (as adj.)Ongoing~26–27% historically ~26% unchanged Maintained
Capital usesQ3 2025Final SGA minority interest purchase in Q3 (~$30M) noted in Q1 New CLO targeted ~$400M AUM (company commitment ~$30M); SGA final purchase ~$30M Confirmed / new
Dividend per shareQ3 2025$2.25 declared in Q2 Increased to $2.40 (+7%) for Q3 2025 Raised

Earnings Call Themes & Trends

TopicQ4 2024 (Prior-2)Q1 2025 (Prior-1)Q2 2025 (Current)Trend
ETF growth & accessHigher ETF sales offset retail fund declines; positive ETF net flows ETF AUM $3.4B; +$0.3B net flows; 73% organic growth Continued positive net flows; AUM ~$3.7B; 74% organic growth; expanding offerings/access Improving
Fee rate & mixAll-products fee ~42.0 bps 41.7 bps; ex perf. unchanged; shift to fixed income 41.3 bps; 41.1 ex perf.; mix reflecting fixed income strength Slight compression
Employment & other opex disciplineAdjusted opex up modestly Seasonal employment items (+$10M); other opex $31.3M; savings initiative Employment as % to mid-range; other opex $32.0M with Board grants; maintain $30–32M Stable to improving
Flows (Institutional/Large-cap quality)Large partial institutional redemption drove net outflows Inst. net outflows improved; broad wins; caution in April Larger inst. redemptions in large-cap quality; June break-even in funds; July fixed income improving Mixed
Inorganic pipeline & private markets—Active product development; interval fund under consideration Pipeline at highest level; focus on private markets and differentiated strategies; flexible structures (JV/majority/etc.) Accelerating
CLO issuance—Managed CLO investments highlighted New CLO expected in Q3 (~$400M AUM) New initiative
Capital returns & leverageNet cash at YE 2024; repaid $5.7M debt $20M buybacks; net debt 0.3x EBITDA $30M buybacks; net debt 0.2x EBITDA; undrawn $175M revolver Strengthening

Management Commentary

  • “Key highlights of the quarter included higher earnings per share and operating margin, continued positive net flows in ETF… our highest level of share repurchases in three years, and low net leverage and meaningful liquidity...” — George Aylward, CEO .
  • “Operating income as adjusted of $59.8M increased 10% sequentially due to prior quarter seasonal expenses… average fee rate was 41.3 bps (41.1 ex performance fees)… interest & dividend income would be reasonable to anticipate at approximately $4.3M in Q3.” — Mike Angerthal, CFO .
  • “We anticipate launching multiple products over the coming quarters… we remain optimistic about [inorganic] opportunities, particularly in private markets and differentiated traditional strategies… pipeline is at its highest level.” — George Aylward, CEO .

Q&A Highlights

  • Capital allocation: $50M YTD buybacks, payout over 100%; balanced approach across repurchases, dividends, growth investment, and inorganic opportunities .
  • Compensation and opex guidance: employment expenses targeted toward mid-point of 49–51% of revenues; other opex maintained at $30–32M per quarter (with Board grant seasonality) .
  • Flows outlook: June break-even in open-end funds; July strength in fixed income and ETFs; institutional redemptions concentrated in quality large-cap; wins in EM debt and REITs .
  • ETFs strategy: focus on actively managed offerings, scaling funds to improve channel access; wholesaler incentives aligned to advisors’ preferred vehicles (ETF, fund, SMA) .
  • Inorganic strategy: preference for differentiated capabilities; flexible structures (minority/majority/JV) for private markets to align interests and manage integration complexity .

Estimates Context

  • Q2 2025 actuals vs consensus: adjusted EPS $6.25 vs $6.21* (beat), GAAP revenue $210.5M vs $193.2M* (beat), EBITDA $57.97M* vs $67.29M* (miss). Model updates likely include slightly higher revenue run-rate and sustained mid-30% adjusted operating margin sensitivity under normalized opex; EBITDA consensus may need adjustment given seasonal items and reported margin mix .
    Values retrieved from S&P Global.*

Key Takeaways for Investors

  • Margin and EPS momentum driven by seasonal normalization should persist with employment expenses targeting mid of 49–51% and other opex held at $30–32M, supporting incremental margins going forward .
  • Revenue beat alongside fee-rate normalization points to resilient fee base; mix shift to fixed income lowers fee rate but does not necessarily impair profitability given opex discipline .
  • Net flows remain a watch item; institutional quality equity redemptions were the headwind, but fixed income and ETFs show improving traction (June/July trends) .
  • Capital return is robust (Q2 buybacks $30M) with modest leverage (0.2x EBITDA) and ample liquidity; subsequent dividend increase to $2.40 (+7%) underscores cash generation .
  • Pipeline for product launches and private-market/differentiated inorganic opportunities is the medium-term growth catalyst; watch for new CLO (~$400M) in Q3 and potential transactions .
  • Taxes: adjusted ETR ~26% steady; long-dated tax attributes provide cash flow benefits not reflected in adjusted EPS — a valuation consideration .
  • Near-term trading: focus on flows updates (monthly AUM/flows), fee-rate trajectory, and any inorganic announcements; mid-term thesis hinges on ETF scaling, diversified product expansion, and disciplined opex driving sustained margins .

Additional Data References

  • Q2 2025 press release and 8-K (Item 2.02): full financials, AUM, flows, reconciliations .
  • Q2 2025 earnings call transcript: prepared remarks and Q&A detail .
  • Prior quarters: Q1 2025 press release/call and Q4 2024 press release for trend analysis .