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Introduction & Market Context
Virtus Investment Partners (NYSE:VRTS) released its third quarter 2025 earnings presentation on October 24, highlighting mixed results that included strong revenue growth but challenges in equity asset flows. The company’s shares initially fell 5.81% following the earnings announcement but showed signs of recovery with a 1.58% increase in pre-market trading to $180.24.
The asset management firm reported earnings per share of $6.69, which represented a 7% sequential increase but fell short of analyst expectations of $6.83. However, revenue exceeded forecasts at $216.4 million compared to the anticipated $198.82 million, reflecting an 8.84% positive surprise.
Quarterly Performance Highlights
Virtus reported assets under management (AUM) of $169.3 billion, with average AUM up 2% to $170.3 billion. The company achieved sales of $6.3 billion, representing a 12% increase primarily driven by institutional accounts and ETFs. However, net outflows of $3.9 billion, primarily from equity strategies, partially offset these gains.
As shown in the following comprehensive overview of the quarter’s performance:
Operating income, as adjusted, increased 9% to $65.0 million, while operating margin expanded 170 basis points to 33.0%. This margin improvement demonstrates the company’s ability to control costs while growing revenue. Earnings per diluted share, as adjusted, grew 7% to $6.69, though this figure included $0.11 of discrete business initiative expenses.
The following chart illustrates the company’s improving operating income and earnings per share trends:
Asset Management Trends
A key bright spot in Virtus’ performance was the continued growth in ETF assets, which increased 29% to $4.7 billion. This growth aligns with the broader industry shift toward lower-cost, passive investment vehicles. The company’s AUM remains well-diversified across product types, with institutional accounts representing 33%, retail separate accounts 28%, and U.S. retail funds 27%.
The following breakdown shows the company’s AUM distribution across various product types and asset classes:
Despite the overall positive sales momentum, Virtus faced challenges with net flows, particularly in equity strategies. The company reported net outflows of $3.9 billion, with positive flows in fixed income and alternatives being offset by equity outflows. This trend reflects broader market dynamics where investors have been reallocating from active equity strategies.
The following chart details the company’s asset flow trends:
Investment management fees, as adjusted, increased 3% primarily due to higher average AUM. The company maintained a steady average fee rate of 41.2 basis points, with institutional accounts generating 31.6 bps, retail separate accounts 41.8 bps, and open-end funds 47.0 bps.
As illustrated in the following fee analysis:
Capital Position and Shareholder Returns
Virtus demonstrated financial strength with cash and investments of $671 million and low net leverage of 0.1x EBITDA. The company refinanced its credit agreement with a new $400 million term loan and $250 million revolving credit facility, extending maturities to 2030 and 2032, respectively.
The following chart provides an overview of the company’s strong balance sheet position:
In a move that underscores confidence in its financial outlook, Virtus increased its quarterly dividend by 7% to $2.40 per share. This increase aligns with the company’s commitment to returning capital to shareholders, as highlighted in the earnings call by CEO George Aylward, who emphasized that capital return remains "a critical part of Virtus’ strategy."
Investment Performance
Virtus’ investment performance showed mixed results across different time horizons. The company tracks performance relative to benchmarks and peers, with varying success rates depending on the asset class and time period.
The following chart illustrates the company’s investment performance metrics:
Forward-Looking Statements
Looking ahead, Virtus continues to focus on expanding its ETF offerings and exploring growth opportunities. According to the earnings call, the company plans to launch new ETFs, including growth equity and real estate income funds, while enhancing international client access.
The company faces several challenges, including market volatility that could impact asset performance and management fees, increasing competition in the ETF space, and potential economic downturns that might affect investor sentiment and asset flows.
Despite these challenges, Virtus’ strong balance sheet, diversified product offerings, and focus on operational efficiency position it to navigate the evolving asset management landscape. With a market capitalization of $1.13 billion and a dividend yield of 5.22%, VRTS continues to offer value to shareholders while working to address the challenges in equity flows.
Full presentation:
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