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    VIRTUS INVESTMENT PARTNERS (VRTS)

    VRTS Q3 2024: OpEx below guidance at $30M supports margin outlook

    Reported on Jun 8, 2025 (Before Market Open)
    Pre-Earnings Price$212.95Last close (Oct 24, 2024)
    Post-Earnings Price$223.61Open (Oct 25, 2024)
    Price Change
    $10.66(+5.01%)
    • Robust Product Pipeline & Diversification: The company continues to expand its offerings—particularly in the active ETF space—and is successfully leveraging retail separate accounts, ETFs, and global funds to drive strong sales momentum.
    • Disciplined Cost Management: The recent discussion highlighted that adjusted operating expenses came in below guidance as a result of effective streamlining and rationalization initiatives, providing a solid foundation for sustainable margins.
    • Strong Capital Allocation & Shareholder Returns: With a track record of seven consecutive dividend increases and active share repurchases, the firm demonstrates a disciplined approach to capital allocation that supports long-term growth and shareholder value.
    • End-of-year volatility: The Q&A highlighted that flows in November and December could be highly volatile due to tax considerations and the election cycle, creating uncertainty for near-term performance.
    • Institutional flow headwinds: Management noted that most institutional outflows were due to reallocations and rebalancings rather than mandate terminations, suggesting persistent headwinds in attracting or retaining institutional assets.
    • Dividend sustainability concerns: The discussion on capital allocation raised questions about balancing high dividend growth with EPS growth. The increased payout ratios, which have moved from teens to low-thirties over the past years, could eventually constrain growth if earnings do not keep pace.
    1. Net Flows
      Q: What are Q4 flow trends?
      A: Management expects continued positive flows in retail separate accounts, ETFs, and global funds into October, though caution that November and December may be volatile due to tax and election factors.

    2. Cost Guidance
      Q: Is adjusted OpEx around $30M?
      A: They believe the run rate of $30 million for adjusted other operating expenses is sustainable in the near term, supported by ongoing cost streamlining despite inflationary pressures.

    3. Institutional Flows
      Q: Why are institutional flows lagging?
      A: Institutional outflows have largely been the result of client rebalancing rather than mandate terminations, indicating a cautious allocation adjustment rather than fundamental performance issues.

    4. Dividend Policy
      Q: How will dividends evolve?
      A: Management plans to continue a steady, double-digit dividend increase regime while balancing buybacks, reflecting a commitment to consistent shareholder returns.

    5. ETF Pipeline
      Q: What are ETF product plans?
      A: They are enthusiastic about launching additional active ETFs and expect expanded distribution as recent products gain scale, reinforcing the robust pipeline for growth.

    6. M&A Strategy
      Q: How are M&A opportunities evaluated?
      A: The focus is on strategic, less correlated acquisitions to enhance capabilities, though growth will primarily be driven by organic initiatives.

    7. Affiliate Step-Up
      Q: What is the affiliate step-up impact?
      A: The step-up increased ownership to about 80% in the quarter, modestly reducing non-controlling interests with further staged equity adjustments anticipated next year.

    Research analysts covering VIRTUS INVESTMENT PARTNERS.