Name: VIRTUS INVESTMENT PARTNERS, INC. Q3 2025 Earnings Call
Start: 2025-10-24T14:00:00.000Z

Executive Summary

Q3 revenue beat but EPS missed: GAAP revenues were $216.4M vs S&P Global consensus $197.2M*; GAAP diluted EPS was $4.65 and adjusted EPS $6.69 vs consensus $6.77*, with the miss driven by $1.54/share investment losses and a higher 29% effective tax rate .
Mix positive: sequential growth in revenues and adjusted margin (33.0%, +170 bps q/q) on higher average AUM; ETFs delivered record $0.9B sales and $0.9B net inflows, but company-level net outflows remained ($3.9B) as quality-oriented equities faced momentum headwinds .
Balance sheet strengthened: completed refinancing (new $400M term loan, $250M revolver), doubled working capital, raised dividend 7% to $2.40; net debt $29.4M (~0.1x EBITDA) supports flexibility for buybacks and inorganic opportunities .
Near-term catalyst lens: continued ETF access expansion and product launches, improved fee capture on higher average AUM, and potential M&A are tailwinds; sustained equity outflows tied to quality vs momentum factor headwinds remain the key overhang .

What Went Well and What Went Wrong

What Went Well
- Record ETF momentum: ETF sales and net flows each $0.9B, highest quarterly level; ETF AUM reached $4.7B (+79% y/y), with 77% of ETF AUM beating benchmarks over 3 years and 85% outperforming peers; management: “ETF sales and flows reached their highest quarterly level at $0.9 billion each” .
- Operating leverage and margin: Revenues, as adjusted, +3% q/q to $196.7M; adjusted operating margin rose to 33.0% from 31.3% on stable opex; adjusted EPS up 7% q/q to $6.69, despite $0.11/share discrete initiative costs .
- Capital and liquidity: Refinanced debt (SOFR+225 bps), added cash, ended with net debt ~$29M (~0.1x EBITDA); dividend raised 7% to $2.40; management reiterated balanced capital return and M&A flexibility .
What Went Wrong
- Equity outflows persisted: Total net flows ($3.9B), unchanged q/q, as outflows in quality-tilted equity strategies offset positive ETFs, fixed income, and alternatives; institutional net outflows improved to ($1.5B) from ($2.2B) but remained negative .
- EPS miss vs consensus: Adjusted EPS $6.69 vs $6.77*; GAAP EPS $4.65 included ($1.54) of realized/unrealized investment losses and a higher 29% effective tax rate vs 22% in Q2 .
- AUM drifted down: Ending AUM $169.3B (-1% q/q, -8% y/y), with quality vs momentum factor headwinds continuing to pressure equity flows; management highlighted unusually stark two-year underperformance of quality factors vs momentum as the core driver .

Financial Results

Metric	Q1 2025	Q2 2025	Q3 2025
Revenue (GAAP, $M)	$217.9	$210.5	$216.4
Revenues, as adjusted ($M)	$197.6	$191.0	$196.7
Diluted EPS (GAAP, $)	$4.05	$6.12	$4.65
Diluted EPS, as adjusted ($)	$5.73	$6.25	$6.69
Operating margin (GAAP)	16.8%	21.5%	21.7%
Operating margin (as adjusted)	27.6%	31.3%	33.0%

Q3 2025 Actual vs S&P Global Consensus	Revenue	EPS
Actual	$216.4M	$6.69 (adj)
Consensus	$197.2M*	$6.77*
Surprise	+$19.2M (≈+9.7%)*	-$0.08 (≈-1.2%)*

Values marked with * are from S&P Global consensus estimates.

Revenue Composition (GAAP, $M)

Revenue Line	Q1 2025	Q2 2025	Q3 2025
Investment management fees	$186.1	$179.5	$183.8
Distribution & service fees	$12.8	$12.0	$12.5
Admin & shareholder service fees	$18.0	$18.0	$18.9
Other income & fees	$1.1	$1.0	$1.2
Total revenues	$217.9	$210.5	$216.4

KPIs and Flows

KPI	Q1 2025	Q2 2025	Q3 2025
Ending AUM ($B)	$167.5	$170.7	$169.3
Average AUM ($B)	$173.6	$167.0	$170.3
Total sales ($B)	$6.2	$5.6	$6.3
Net flows ($B)	($3.0)	($3.9)	($3.9)
Dividend/share ($)	$2.25	$2.25	$2.40
ETF sales ($B)	$0.4	$0.4	$0.9
ETF net flows ($B)	$0.3	$0.2	$0.9

Context and drivers

Sequential revenue increase and margin expansion were driven by higher average AUM and stable opex; adjusted results exclude discrete items ($1.0M in business initiative expenses; ~$0.11/share) .
GAAP EPS was pressured by ($1.54)/share investment losses and a higher GAAP effective tax rate of 29% .
AUM declined y/y (-8%) as equity outflows persisted; fixed income and alternatives were positive, ETFs strongly positive .

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Average fee rate ex performance fees	Q3 modeling → Q4 modeling	41.1 bps seen reasonable for next-q modeling	41.1 bps seen reasonable for Q4 modeling	Maintained
Employment expenses (% of revenues, as adjusted)	Ongoing	49–51% range; trend toward midpoint	49–51% range remains appropriate	Maintained
Other operating expenses (as adjusted)	Quarterly run-rate	$30–$32M; low end with office consolidation	$30–$32M remains appropriate	Maintained
Interest & dividend income	Q3 → Q4	~$4.3M expected in Q3	Higher in Q4 given larger cash post-refi; partly offset by lower CLO income	Raised vs run-rate
Interest expense	Q3 → Q4	Not specifically guided	Expected to increase in Q4 given higher debt level	Raised
Non-controlling interests	Q3 → Q4	Q2 a reasonable run-rate	Approx. $2M run-rate in Q4	Updated
Dividend	Ongoing	$2.25 per quarter	$2.40 per quarter (+7%)	Raised

Earnings Call Themes & Trends

Topic	Q1 2025 (prior-2)	Q2 2025 (prior-1)	Q3 2025 (current)	Trend
ETFs growth & access	Positive net flows; building track records; expanding filings and channel availability	Strong growth (AUM $3.7–$3.9B); sales $0.4B; focus on model access and availability	Record sales/flows $0.9B; 79% y/y AUM growth; pushing wirehouse/model access; more active ETFs in pipeline	Accelerating
Flows: quality vs momentum	Quality orientation under pressure; equity outflows	Equity outflows persisted; fixed income improved into June	Equity outflows continue; ETFs, fixed income, alts positive; unusually stark quality vs momentum differential highlighted	Still headwind
Inorganic pipeline	Attractive environment across private markets and traditional; disciplined approach	Pipeline at highest level; broad structures; balanced capital uses	“Very active” evaluating opportunities; $1M discrete inorganic-related expenses	Active
Expense discipline/office consolidation	Other opex $30–$32M range; office space reductions to save ~$1M/quarter starting Q3	Other opex in range; seasonality noted	Run-rate at low end ex discrete items; consolidation now reflected	Improving
Fee rate outlook	41–42 bps reasonable; ex perf fees	41.1 bps ex perf fees; Q3 modeling	41.1 bps ex perf fees; Q4 modeling	Stable
CLO issuance	N/A	Anticipated new $400M CLO in H2	Issued $0.4B CLO; aided institutional sales	Executed

Management Commentary

Strategy and results: “We delivered solid financial results… higher earnings per share and operating margin… strong growth in ETF assets with our highest level of quarterly sales and net flows… and we completed a debt refinancing” .
On ETFs and distribution: “ETF sales and flows reached their highest quarterly level at $0.9 billion each… we continue to focus on broadening access… including wirehouses, RIAs, and model providers” .
On factor headwind: “Quality has significantly underperformed momentum… unusually stark underperformance… when it inverts, we will be well positioned” .
Capital allocation: “Buybacks remain an important component… we intend to continue to balance return of capital with investments in the business, including inorganic opportunities” .
Balance sheet: “Refinanced… $400 million term loan and $250 million revolver… added $158 million of cash… net debt ~0.1x EBITDA” .

Q&A Highlights

ETF distribution/access: Management is working to gain broader access across wirehouses, RIAs, and models; scale thresholds matter, and the firm has filings for ETF share class relief in process .
Inorganic pipeline and spend: Discrete $1M costs tied to inorganic activities; environment remains active across private markets and differentiated traditional capabilities; flexible structures (JV/minority/majority) under evaluation .
Flows outlook: October trending similar to Q3—ETF strength, fixed income positive, institutional mixed with known redemptions > wins; emerging market debt and REITs seeing interest, particularly non-U.S. .
Cost run-rate clarity: Office consolidation now in run-rate; other opex expected in $30–$32M range; employment expenses as % of revenues within 49–51% .
Capital returns: No specific buyback update this quarter; management emphasized ongoing role of buybacks within a balanced capital strategy .

Estimates Context

Q3 2025 vs S&P Global consensus: Revenue $216.4M vs $197.2M* (beat); Adjusted EPS $6.69 vs $6.77* (miss). Prior quarters beat on both revenue and EPS: Q2 revenue $210.5M vs $193.2M*, EPS $6.25 vs $6.21*; Q1 revenue $217.9M vs $201.4M*, EPS $5.73 vs $5.41* .
Implications: Despite better-than-expected fee revenue (higher average AUM; stable fee rate), non-operating items (investment losses, higher tax rate) drove the EPS shortfall; Street models may lift revenue outlook but trim non-operating/tax assumptions near term .