Virtus Investment Partners Announces Financial Results for Fourth Quarter 2024

Published: 2025-01-31 07:02:03 ET VRTS

Earnings Per Share - Diluted of $4.66; Earnings Per Share - Diluted, as Adjusted, of $7.50 Total Sales of $6.4B; Net Flows of ($4.8B); Assets Under Management of $175.0B

Virtus Investment Partners, Inc. (NYSE: VRTS) today reported financial results for the three months ended December 31, 2024.

Financial Highlights (Unaudited)

(in millions, except per share data or as noted)

Three Months Ended

12/31/2024

12/31/2023

Change

9/30/2024

Change

U.S. GAAP Financial Measures

Revenues

233.5

214.6

227.0

Operating expenses

182.8

175.6

171.8

Operating income (loss)

50.7

39.0

55.3

Operating margin

21.7

18.2

24.3

Net income (loss) attributable to Virtus Investment Partners, Inc.

33.3

30.8

41.0

(19

Earnings (loss) per share - diluted

4.66

4.21

5.71

(18

Weighted average shares outstanding - diluted

7.139

7.320

7.176

Non-GAAP Financial Measures (1)

Revenues, as adjusted

212.0

193.4

205.1

Operating expenses, as adjusted

137.6

129.5

134.7

Operating income (loss), as adjusted

74.5

63.9

70.5

Operating margin, as adjusted

35.1

33.0

34.4

Net income (loss) attributable to Virtus Investment Partners, Inc., as adjusted

53.5

44.8

49.6

Earnings (loss) per share - diluted, as adjusted

7.50

6.11

6.92

(1) See the information beginning on page 10 for reconciliations to the most directly comparable U.S. GAAP measures and other important disclosures

Earnings Summary

The company presents U.S. GAAP and non-GAAP earnings information in this release. Management believes that the non-GAAP financial measures presented reflect the company’s operating results from providing investment management and related services to individuals and institutions and uses these measures to evaluate financial performance. Non-GAAP financial measures have material limitations and should not be viewed in isolation or as a substitute for U.S. GAAP measures. Non-GAAP information and reconciliations to the most comparable U.S. GAAP measures can be found beginning on page 10 of this earnings release.

Assets Under Management and Asset Flows

(in billions)

Three Months Ended

12/31/2024

12/31/2023

Change

9/30/2024

Change

Ending total assets under management

175.0

172.3

183.7

Average total assets under management

182.1

162.7

176.0

Total sales

6.4

6.2

6.6

Net flows

(4.8

)

(3.8

)

(1.7

)

181

Total assets under management of $175.0 billion at December 31, 2024 decreased sequentially from $183.7 billion due to net outflows in institutional accounts and U.S. retail funds as well as negative market performance, partially offset by positive net flows in exchange-traded funds (ETFs), global funds, and retail separate accounts. In addition, the company provided services to $2.3 billion of other fee-earning assets that are not included in assets under management.

Total sales of $6.4 billion compared with $6.6 billion in the prior quarter, as higher institutional sales were offset by lower sales of retail separate accounts. Institutional sales of $1.6 billion increased from $1.2 billion due to higher sales of global equity and alternative strategies. Retail separate account sales of $1.8 billion decreased from $2.3 billion due to lower sales in intermediary sold, primarily small/mid-cap strategies, partially offset by higher sales in wealth management. Open-end fund sales of $3.0 billion were essentially unchanged, as higher ETF sales were offset by lower sales of U.S. retail funds.

Net flows of ($4.8) billion compared with ($1.7) billion in the prior quarter and included the previously disclosed $3.3 billion lower-fee partial redemption of an institutional mandate. Institutional net flows of ($3.8) billion were primarily driven by the partial redemption and compared with ($1.1) billion in the prior quarter. Retail separate account net flows of $0.1 billion compared with $0.4 billion, with positive net flows in both the intermediary sold channel and in the wealth management business. Open-end fund net flows of ($1.1) billion compared with ($1.0) billion in the prior quarter and included positive net flows in fixed income and small/mid-cap strategies.

GAAP Results

Operating income of $50.7 million decreased 8% from $55.3 million in the prior quarter due to a 6% increase in operating expenses, partially offset by a 3% increase in revenues, reflecting higher average assets under management. The increase in operating expenses was primarily due to an increase in the fair value of contingent consideration, higher operating expenses of consolidated investment products and other operating expenses, which included higher facilities costs and increased travel and marketing activities. Employment expenses of $106.2 million were essentially flat with the prior quarter level.

Net income attributable to Virtus Investment Partners, Inc. of $4.66 per diluted share included ($0.72) of fair value adjustments to minority interests, ($0.41) of realized and unrealized losses on investments, ($0.27) of collateralized loan obligation (CLO) expenses, ($0.17) of fair value adjustments to contingent consideration, and ($0.09) of acquisition and integration costs. Net income per diluted share of $5.71 in the prior quarter included ($0.64) of fair value adjustments to minority interests and ($0.10) of acquisition and integration costs, partially offset by $0.41 of fair value adjustments to contingent consideration.

The effective tax rate of 33% increased from 24% in the prior quarter, primarily reflecting an increase in income tax valuation allowances for net unrealized and realized losses compared with gains in the prior quarter.

Non-GAAP Results

Revenues, as adjusted, of $212.0 million increased 3% from $205.1 million in the prior quarter due to a 3% increase in average assets under management.

Employment expenses, as adjusted, of $104.3 million compared with $102.5 million in the prior quarter largely due to higher profit-based variable incentive compensation. Other operating expenses, as adjusted, of $31.0 million increased from $29.8 million primarily due to increased facilities costs and seasonally higher distribution related travel activity.

Operating income, as adjusted, of $74.5 million and the related margin of 35.1% increased from $70.5 million and 34.4%, respectively, in the prior quarter due to higher investment management fees that exceeded the modest increase in operating expenses.

Net income attributable to Virtus Investment Partners, Inc., as adjusted, per diluted share was $7.50, an increase of 8% from $6.92 in the prior quarter. The increase primarily reflected higher investment management fees.

The effective tax rate, as adjusted, of 27% was unchanged from the prior quarter.

Select Balance Sheet Items and Metrics (Unaudited)

(in millions)

As of

Select Balance Sheet Items

12/31/2024

12/31/2023

Change

9/30/2024

Change

Cash and cash equivalents

265.9

239.6

11%

195.5

36%

Gross debt (1)

236.1

258.8

(9%)

241.8

(2%)

Contingent consideration (2)

63.5

90.9

(30%)

59.4

Redeemable noncontrolling interests (3)

61.6

74.2

(17%)

59.0

Total equity exc. noncontrolling interests

897.5

864.0

889.1

Other Metrics

Working capital (4)

134.5

109.1

23%

108.5

24%

Net debt (cash) (5)

(29.8

)

19.2

N/M

46.2

N/M

N/M - Not Meaningful

(1) Excludes deferred financing costs of $3.9 million, $5.4 million, and $4.3 million, as of December 31, 2024, December 31, 2023, and September 30, 2024, respectively

(2) Represents estimated revenue participation and other contingent payments

(3) Excludes redeemable noncontrolling interests of consolidated investment products of $45.7 million, $30.6 million, and $39.1 million as of December 31, 2024, December 31, 2023, and September 30, 2024, respectively

(4) Defined as cash and cash equivalents plus accounts receivable, net, and deferred compensation related investments less accrued compensation and benefits excluding affiliate minority interests, accounts payable and accrued liabilities, dividends payable, debt principal payments due over next 12 months and revenue participation obligations due within 12 months

Working capital of $134.5 million at December 31, 2024 increased from $108.5 million at September 30, 2024, as cash earnings more than offset return of capital and debt repayment.

During the quarter, the company repurchased 52,176 shares for $12.5 million and repaid $5.7 million of debt.

Gross debt at December 31, 2024 was $236.1 million, down 2% sequentially. The company ended the year in a net cash position of $29.8 million.

Conference Call and Investor Presentation

Management will host an investor conference call and webcast on Friday, January 31, 2025, at 10 a.m. Eastern to discuss these financial results and related matters. The presentation that will accompany the conference call is available in the Investor Relations section of virtus.com. A replay of the call will be available in the Investor Relations section for at least one year. We routinely post important information for investors on the Investor Relations section of our website and may use this website as a means of disclosing material, non-public information and for complying with our disclosure obligations under Regulation FD. Accordingly, investors should monitor our website, in addition to following our press releases, SEC filings, public conference calls, presentations and webcasts. We may also use social media channels to communicate with our investors and the public about our company, our products and other matters, and those communications could be deemed to be material information. The information contained on, or that may be accessed through, our website or social media channels are not incorporated by reference into, and are not a part of, this document.

About Virtus Investment Partners, Inc.

Virtus Investment Partners (NYSE: VRTS) is a distinctive partnership of boutique investment managers singularly committed to the long-term success of individual and institutional investors. We provide investment management products and services from our affiliated managers, each with a distinct investment style and autonomous investment process, as well as select subadvisers. Investment solutions are available across multiple disciplines and product types to meet a wide array of investor needs. Additional information about our firm, investment partners, and strategies is available at virtus.com.

U.S. GAAP Condensed Consolidated Statements of Operations (Unaudited)

(in thousands, except per share data)

Three Months Ended

Twelve Months Ended

12/31/2024

12/31/2023

Change

9/30/2024

Change

12/31/2024

12/31/2023

Change

Revenues

Investment management fees

199,975

182,149

10%

193,843

773,830

711,475

Distribution and service fees

13,685

13,535

13,567

54,692

56,153

(3%)

Administration and shareholder service fees

18,748

18,189

18,560

74,294

73,857

Other income and fees

1,086

714

52%

1,059

4,133

3,783

Total revenues

233,494

214,587

227,029

906,949

845,268

Operating Expenses

Employment expenses

106,202

99,847

105,555

432,587

404,742

Distribution and other asset-based expenses

24,005

23,470

24,175

(1%)

96,223

96,802

(1%)

Other operating expenses

32,738

31,164

30,363

127,526

125,871

Operating expenses of consolidate investment products

2,923

2,611

12%

465

N/M

6,987

4,224

65%

Restructuring expense

—

133

(100%)

—

N/M

1,487

824

80%

Change in fair value of contingent consideration

1,692

1,290

31%

(4,000

)

N/M

(5,608

)

(5,510

)

Depreciation expense

2,330

1,670

40%

2,330

—%

8,958

5,804

54%

Amortization expense

12,883

15,446

(17%)

12,883

—%

56,299

61,027

(8%)

Total operating expenses

182,773

175,631

171,771

724,459

693,784

Operating Income (Loss)

50,721

38,956

30%

55,258

(8%)

182,490

151,484

20%

Other Income (Expense)

Realized and unrealized gain (loss) on investments, net

(2,501

)

4,056

N/M

4,552

N/M

3,914

6,525

(40%)

Realized and unrealized gain (loss) of consolidated investment products, net

2,069

449

361%

(5,128

)

N/M

(14,460

)

(2,404

)

N/M

Other income (expense), net

341

622

(45%)

548

(38%)

2,036

(440

)

N/M

Total other income (expense), net

(91

)

5,127

N/M

(28

)

225%

(8,510

)

3,681

N/M

Interest Income (Expense)

Interest expense

(5,033

)

(5,987

)

(16%)

(5,807

)

(13%)

(22,132

)

(23,431

)

(6%)

Interest and dividend income

3,463

3,673

(6%)

2,913

19%

12,488

12,458

—%

Interest and dividend income of investments of consolidated investment products

50,604

53,206

(5%)

50,628

—%

204,732

197,707

Interest expense of consolidated investment products

(41,157

)

(43,182

)

(5%)

(38,063

)

(161,192

)

(155,335

)

Total interest income (expense), net

7,877

7,710

9,671

(19%)

33,896

31,399

Income (Loss) Before Income Taxes

58,507

51,793

13%

64,901

(10%)

207,876

186,564

11%

Income tax expense (benefit)

19,047

13,294

43%

15,797

21%

55,423

45,088

23%

Net Income (Loss)

39,460

38,499

49,104

(20%)

152,453

141,476

Noncontrolling interests

(6,166

)

(7,665

)

(20%)

(8,124

)

(24%)

(30,707

)

(10,855

)

183%

Net Income (Loss) Attributable to Virtus Investment Partners, Inc.

33,294

30,834

40,980

(19%)

121,746

130,621

(7%)

Earnings (Loss) Per Share - Basic

4.75

4.30

10%

5.80

(18%)

17.19

18.02

(5%)

Earnings (Loss) Per Share - Diluted

4.66

4.21

11%

5.71

(18%)

16.89

17.71

(5%)

Cash Dividends Declared Per Common Share

2.25

1.90

18%

2.25

—%

8.30

7.10

17%

Weighted Average Shares Outstanding - Basic

7,012

7,178

(2%)

7,071

(1%)

7,082

7,249

(2%)

Weighted Average Shares Outstanding - Diluted

7,139

7,320

(2%)

7,176

(1%)

7,210

7,375

(2%)

N/M - Not Meaningful

Assets Under Management - Product and Asset Class

(in millions)

Three Months Ended

12/31/2023

3/31/2024

6/30/2024

9/30/2024

12/31/2024

By Product (period end):

Open-End Funds (1)

56,062

57,818

55,852

58,100

56,073

Closed-End Funds

10,026

10,064

9,915

10,432

10,225

Retail Separate Accounts (2)

43,202

46,816

45,672

50,610

49,536

Institutional Accounts (3)

62,969

64,613

62,146

64,600

59,167

Total

172,259

179,311

173,585

183,742

175,001

By Product (average) (4)

Open-End Funds (1)

54,132

56,828

56,692

56,731

57,905

Closed-End Funds

9,591

9,862

9,894

10,159

10,452

Retail Separate Accounts (2)

38,665

43,202

46,816

45,672

50,610

Institutional Accounts (3)

60,319

63,466

61,773

63,428

63,121

Total

162,707

173,358

175,175

175,990

182,088

By Asset Class (period end):

Equity

96,703

103,501

99,224

106,784

100,792

Fixed Income

37,192

37,037

36,970

39,014

37,696

Multi-Asset (5)

21,411

21,975

21,060

21,619

21,174

Alternatives (6)

16,953

16,798

16,331

16,325

15,339

Total

172,259

179,311

173,585

183,742

175,001

Assets Under Management - Average Management Fees Earned (7)

(in basis points)

Three Months Ended

12/31/2023

3/31/2024

6/30/2024

9/30/2024

12/31/2024

By Product:

Open-End Funds (1)

49.7

49.9

50.9

49.7

49.5

Closed-End Funds

58.4

58.7

58.6

58.5

58.8

Retail Separate Accounts (2)

43.3

43.9

43.3

43.7

42.6

Institutional Accounts (3)(8)

33.2

30.8

30.7

31.0

31.9

All Products (8)

42.6

41.9

42.2

41.9

42.0

(1) Represents assets under management of U.S. retail funds, global funds, exchange-traded funds, and variable insurance funds

(2) Includes investment models provided to managed account sponsors

(3) Represents assets under management of institutional separate and commingled accounts including structured products

(4) Averages are calculated as follows:

- Funds - average daily or weekly balances

- Retail Separate Accounts - prior-quarter ending balance

- Institutional Accounts - average of month-end balances in quarter

(5) Consists of multi-asset offerings not included in equity, fixed income, and alternatives

(6) Consists of managed futures, event-driven, real estate securities, infrastructure, long/short, and other strategies

(7) Represents investment management fees, as adjusted, divided by average assets. Investment management fees, as adjusted, exclude the impact of consolidated investment products and are net of revenue-related adjustments. Revenue-related adjustments are based on specific agreements and reflect the portion of investment management fees passed through to third-party client intermediaries for services to investors in sponsored investment products

(8) Includes performance-related fees, in basis points, earned during the three months ended as follows:

12/31/2023

3/31/2024

6/30/2024

9/30/2024

12/31/2024

Institutional Accounts

2.2

0.3

0.4

1.0

All Products

0.8

0.1

0.3

Assets Under Management - Asset Flows by Product

(in millions)

Three Months Ended

Twelve Months Ended

12/31/2023

3/31/2024

6/30/2024

9/30/2024

12/31/2024

12/31/2023

12/31/2024

Open-End Funds (1)

Beginning balance

54,145

56,062

57,818

55,852

58,100

53,000

56,062

Inflows

2,940

3,476

2,777

3,118

3,049

11,188

12,420

Outflows

(4,905

)

(4,104

)

(4,120

)

(4,143

)

(4,165

)

(18,526

)

(16,532

)

Net flows

(1,965

)

(628

)

(1,343

)

(1,025

)

(1,116

)

(7,338

)

(4,112

)

Market performance

4,260

2,560

(480

)

3,410

(541

)

8,160

4,949

Other (2)

(378

)

(176

)

(143

)

(137

)

(370

)

2,240

(826

)

Ending balance

56,062

57,818

55,852

58,100

56,073

56,062

56,073

Closed-End Funds

Beginning balance

9,472

10,026

10,064

9,915

10,432

10,361

10,026

Inflows

—

Outflows

—

(41

)

—

(41

)

Net flows

—

(41

)

—

(40

)

Market performance

753

239

845

(55

)

453

1,112

Other (2)

(199

)

(201

)

(191

)

(328

)

(153

)

(812

)

(873

)

Ending balance

10,026

10,064

9,915

10,432

10,225

10,026

10,225

Retail Separate Accounts (3)

Beginning balance

38,665

43,202

46,816

45,672

50,610

35,352

43,202

Inflows

2,118

2,373

2,172

2,260

1,816

6,680

8,621

Outflows

(1,726

)

(1,695

)

(1,688

)

(1,829

)

(1,745

)

(5,972

)

(6,957

)

Net flows

392

678

484

431

708

1,664

Market performance

4,144

2,936

(1,631

)

4,507

(1,145

)

7,141

4,667

Other (2)

—

Ending balance

43,202

46,816

45,672

50,610

49,536

43,202

49,536

Institutional Accounts (4)

Beginning balance

60,257

62,969

64,613

62,146

64,600

50,663

62,969

Inflows

1,179

1,734

1,188

1,219

1,574

7,965

5,715

Outflows

(3,406

)

(3,022

)

(2,913

)

(2,349

)

(5,376

)

(8,579

)

(13,660

)

Net flows

(2,227

)

(1,288

)

(1,725

)

(1,130

)

(3,802

)

(614

)

(7,945

)

Market performance

5,165

3,001

(549

)

3,790

(1,141

)

9,077

5,101

Other (2)

(226

)

(69

)

(193

)

(206

)

(490

)

3,843

(958

)

Ending balance

62,969

64,613

62,146

64,600

59,167

62,969

59,167

Total

Beginning balance

162,539

172,259

179,311

173,585

183,742

149,376

172,259

Inflows

6,237

7,583

6,137

6,597

6,440

25,857

26,757

Outflows

(10,037

)

(8,821

)

(8,762

)

(8,321

)

(11,286

)

(33,077

)

(37,190

)

Net flows

(3,800

)

(1,238

)

(2,625

)

(1,724

)

(4,846

)

(7,220

)

(10,433

)

Market performance

14,322

8,736

(2,577

)

12,552

(2,882

)

24,831

15,829

Other (2)

(802

)

(446

)

(524

)

(671

)

(1,013

)

5,272

(2,654

)

Ending balance

172,259

179,311

173,585

183,742

175,001

172,259

175,001

(1) Represents assets under management of U.S. retail funds, global funds, exchange-traded funds, and variable insurance funds

(2) Represents open-end and closed-end fund distributions net of reinvestments, the net change in assets from cash management strategies, and the impact of non-sales related activities such as asset acquisitions/(dispositions), seed capital investments/(withdrawals), current income or capital returned by structured products and the use of leverage

(3) Includes investment models provided to managed account sponsors

(4) Represents assets under management of institutional separate and commingled accounts including structured products

Non-GAAP Information and Reconciliations (in thousands except per share data)

The non-GAAP financial measures included in this release differ from financial measures determined in accordance with U.S. GAAP as a result of the reclassification of certain income statement items, as well as the exclusion of certain expenses and other items that are not reflective of the earnings generated from providing investment management and related services. Management uses these measures to evaluate the company’s financial performance and operational decision-making. Management believes that these non-GAAP financial measures, when presented together with directly comparable U.S. GAAP measures, are useful to investors and other interested parties to provide additional insight, promote transparency and allow for a more comprehensive understanding of the information used by management. Please see the Notes to Reconciliations on page 12 for additional information on how these measures reflect the company’s operating results. Non-GAAP financial measures have material limitations and should not be viewed in isolation or as a substitute for U.S. GAAP measures. Also, the non-GAAP financial measures referenced in this release may not be comparable to the similarly titled measures used by other companies.

The following are reconciliations and related notes of the most directly comparable U.S. GAAP measure to each non-GAAP measure:

Three Months Ended

Revenues

12/31/2024

12/31/2023

9/30/2024

Total revenues, GAAP

233,494

214,587

227,029

Consolidated investment products revenues (1)

2,524

2,258

2,271

Investment management fees (2)

(10,317)

(9,933)

(10,606)

Distribution and service fees (2)

(13,688)

(13,537)

(13,569)

Total revenues, as adjusted

212,013

193,375

205,125

Operating Expenses

Total operating expenses, GAAP

182,773

175,631

171,771

Consolidated investment products expenses (1)

(2,923)

(2,611)

(465)

Distribution and other asset-based expenses (3)

(24,005)

(23,470)

(24,175)

Amortization of intangible assets (4)

(12,883)

(15,446)

(12,883)

Restructuring expense (5)

—

(133)

—

Deferred compensation and related investments (6)

(925)

(937)

Acquisition and integration expenses (7)

(2,553)

(3,050)

3,044

Other (8)

(2,914)

(472)

(1,698)

Total operating expenses, as adjusted

137,560

129,524

134,657

Operating Income (Loss)

Operating income (loss), GAAP

50,721

38,956

55,258

Consolidated investment products (earnings) losses (1)

5,447

4,869

2,736

Amortization of intangible assets (4)

12,883

15,446

12,883

Restructuring expense (5)

—

133

—

Deferred compensation and related investments (6)

(65)

925

937

Acquisition and integration expenses (7)

2,553

3,050

(3,044)

Other (8)

2,914

472

1,698

Operating income (loss), as adjusted

74,453

63,851

70,468

Operating margin, GAAP

21.7 %

18.2 %

24.3 %

Operating margin, as adjusted

35.1 %

33.0 %

34.4 %

Three Months Ended

Income (Loss) Before Taxes

12/31/2024

12/31/2023

9/30/2024

Income (loss) before taxes, GAAP

58,507

51,793

64,901

Consolidated investment products (earnings) losses (1)

(235)

(1,316)

(2,251)

Amortization of intangible assets (4)

12,883

15,446

12,883

Restructuring expense (5)

—

133

—

Deferred compensation and related investments (6)

501

(783)

(512)

Acquisition and integration expenses (7)

2,553

3,050

(3,044)

Other (8)

2,914

472

1,698

Seed capital and CLO investments (gains) losses (9)

(1,966)

(5,078)

(3,074)

Income (loss) before taxes, as adjusted

75,157

63,717

70,601

Income Tax Expense (Benefit)

Income tax expense (benefit), GAAP

19,047

13,294

15,797

Tax impact of:

Amortization of intangible assets (4)

3,423

4,202

3,434

Restructuring expense (5)

—

Deferred compensation and related investments (6)

133

(213)

(136)

Acquisition and integration expenses (7)

678

830

(811)

Other (8)

(124)

(11)

(135)

Seed capital and CLO investments (gains) losses (9)

(3,185)

(801)

668

Income tax expense (benefit), as adjusted

19,972

17,337

18,817

Effective tax rate, GAAPA

32.6%

25.7%

24.3%

Effective tax rate, as adjustedB

26.6%

27.2%

26.7%

A Reflects income tax expense (benefit), GAAP, divided by income (loss) before taxes, GAAP

B Reflects income tax expense (benefit), as adjusted, divided by income (loss) before taxes, as adjusted

Net income (loss) attributable to Virtus Investment Partners, Inc.

33,294

30,834

40,980

Amortization of intangible assets, net of tax (4)

9,433

10,764

9,419

Restructuring expense, net of tax (5)

—

Deferred compensation and related investments (6)

368

(570)

(376)

Acquisition and integration expenses, net of tax (7)

1,875

2,220

(2,233)

Other, net of tax (8)

7,330

5,689

5,595

Seed capital and CLO investments (gains) losses, net of tax (9)

1,219

(4,277)

(3,742)

Net income (loss) attributable to Virtus Investment Partners, Inc., as adjusted

53,519

44,757

49,643

Weighted average shares outstanding - diluted

7,139

7,320

7,176

Earnings (loss) per share - diluted, GAAP

4.66

4.21

5.71

Earnings (loss) per share - diluted, as adjusted

7.50

6.11

6.92

Three Months Ended

Administration and Shareholder Services Fees

12/31/2024

12/31/2023

9/30/2024

Administration and shareholder service fees, GAAP

18,748

18,189

18,560

Consolidated investment products fees (1)

Administration and shareholder service fees, as adjusted

18,751

18,213

18,579

Employment Expenses

Employment expenses, GAAP

106,202

99,847

105,555

Deferred compensation and related investments (6)

(925)

(937)

Acquisition and integration expenses (7)

(861)

(1,760)

(956)

Other (8)

(1,141)

(472)

(1,144)

Employment expenses, as adjusted

104,265

96,690

102,518

Other Operating Expenses

Other operating expenses, GAAP

32,738

31,164

30,363

Other (8)

(1,773)

—

(554)

Other operating expenses, as adjusted

30,965

31,164

29,809

Total Other Income (Expense), Net

Total other income (expense), net GAAP

(91)

5,127

(28)

Consolidated investment products (1)

1,197

1,681

5,729

Deferred compensation and related investments (6)

812

(1,397)

(1,423)

Seed capital and CLO investments (gains) losses (9)

(1,966)

(5,078)

(3,074)

Total other income (expense), net as adjusted

(48)

333

1,204

Interest and Dividend Income

Interest and dividend income, GAAP

3,463

3,673

2,913

Consolidated investment products (1)

2,568

2,158

1,849

Deferred compensation and related investments (6)

(246)

(311)

(26)

Interest and dividend income, as adjusted

5,785

5,520

4,736

Total Noncontrolling Interests

Total noncontrolling interests, GAAP

(6,166)

(7,665)

(8,124)

Consolidated investment products (1)

235

1,316

2,251

Amortization of intangible assets (4)

(27)

(480)

(30)

Other (8)

4,292

5,206

3,762

Total noncontrolling interests, as adjusted

(1,666)

(1,623)

(2,141)

Notes to Reconciliations:

Reclassifications:

1. Consolidated investment products - Revenues and expenses generated by operating activities of mutual funds and CLOs that are consolidated in the financial statements. Management believes that excluding these operating activities to reflect net revenues and expenses of the company prior to the consolidation of these products is consistent with the approach of reflecting its operating results from managing third-party client assets.

Other Adjustments:

Revenue Related

2. Investment management/Distribution and service fees - Each of these revenue line items is reduced to exclude fees passed through to third-party client intermediaries who own the retail client relationship and are responsible for distributing company sponsored investment products and servicing the client. The amount of fees fluctuates each period, based on a predetermined percentage of the value of assets under management, and varies based on the type of investment product. The specific adjustments are as follows:

Investment management fees - Based on specific agreements, the portion of investment management fees passed through to third-party intermediaries for services to investors in sponsored investment products.

Distribution and service fees - Based on distinct arrangements, fees collected by the company then passed through to third-party client intermediaries for services to investors in sponsored investment products. The adjustment represents all of the company's distribution and service fees that are recorded as a separate line item on the condensed consolidated statements of operations.

Management believes that making these adjustments aids in comparing the company's operating results with other asset management firms that do not utilize third-party client intermediaries.

Expense Related

3. Distribution and other asset-based expenses - Primarily payments to third-party client intermediaries for providing services to investors in sponsored investment products. Management believes that making this adjustment aids in comparing the company’s operating results with other asset management firms that do not utilize third-party client intermediaries.

4. Amortization of intangible assets - Non-cash amortization expense or impairment expense, if any, attributable to acquisition-related intangible assets, including any portion that is allocated to noncontrolling interests. Management believes that making this adjustment aids in comparing the company’s operating results with other asset management firms that have not engaged in acquisitions.

5.Restructuring expense - Certain non-recurring expenses associated with restructuring the business, including lease abandonment-related expenses and severance costs associated with staff reductions that are not reflective of ongoing earnings generation of the business.

6. Deferred compensation and related investments - Compensation expense, gains and losses (realized and unrealized), and interest and dividend income related to market performance of deferred compensation and related balance sheet investments. Market performance of deferred compensation plans and related investments can vary significantly from period to period. Management believes that making this adjustment aids in comparing the Company's operating results with prior periods.

7. Acquisition and integration expenses - Expenses that are directly related to acquisition and integration activities. Acquisition expenses include certain transaction related employment expenses, transaction closing costs, change in fair value of contingent consideration, certain professional fees, and financing fees. Integration expenses include costs incurred that are directly attributable to combining businesses, including compensation, restructuring and severance charges, professional fees, consulting fees, and other expenses. Management believes that making these adjustments aids in comparing the company’s operating results with other asset management firms that have not engaged in acquisitions.

Components of Acquisition and Integration Expenses for the respective periods are shown below:

Three Months Ended

Acquisition and Integration Expenses

12/31/2024

12/31/2023

9/30/2024

Employment expenses

861

1,760

956

Change in fair value of contingent consideration

1,692

1,290

(4,000)

Total Acquisition and Integration Expenses

2,553

3,050

(3,044)

8. Other - Certain expenses that are not reflective of the ongoing earnings generation of the business. Employment expenses and noncontrolling interests are adjusted for fair value measurements of affiliate minority interests. Other operating expenses are adjusted for amortization of lease termination fees and transition related expense (benefit). Interest expense is adjusted to remove gains on early extinguishment of debt and the write-off of previously capitalized costs associated with the modification of debt. Income tax expense (benefit) items are adjusted for uncertain tax positions, changes in tax law, valuation allowances, and other unusual or infrequent items not related to current operating results to reflect a normalized effective rate. Management believes that making these adjustments aids in comparing the company’s operating results with prior periods.

Components of Other for the respective periods are shown below:

Three Months Ended

Other

12/31/2024

12/31/2023

9/30/2024

Employment expense fair value adjustments

1,141

472

1,144

Amortization of lease termination fees

1,773

—

1,773

Transition related expense (benefit)

—

(1,219)

Tax impact of adjustments

(774)

(128)

(453)

Other discrete tax adjustments

898

139

588

Affiliate minority interest fair value adjustments

4,292

5,206

3,762

Total Other

7,330

5,689

5,595

Seed Capital and CLO Related

9. Seed capital and CLO investments (gains) losses - Gains and losses (realized and unrealized) of seed capital and CLO investments. Gains and losses (realized and unrealized) generated by investments in seed capital and CLO investments can vary significantly from period to period and do not reflect the company’s operating results from providing investment management and related services. Management believes that making this adjustment aids in comparing the company’s operating results with prior periods and with other asset management firms that do not have meaningful seed capital and CLO investments.

Definitions:

Revenues, as adjusted, comprise the fee revenues paid by clients for investment management and related services. Revenues, as adjusted, for purposes of calculating net income attributable to Virtus Investment Partners, Inc., as adjusted, differ from U.S. GAAP, namely in excluding the impact of operating activities of consolidated investment products and reduced to exclude fees passed through to third-party client intermediaries who own the retail client relationship and are responsible for distributing the product and servicing the client.

Operating expenses, as adjusted, is calculated to reflect expenses from ongoing continuing operations. Operating expenses, as adjusted, for purposes of calculating net income attributable to Virtus Investment Partners, Inc., as adjusted, differ from U.S. GAAP expenses in that they exclude amortization or impairment, if any, of intangible assets, restructuring and severance, the effect of consolidated investment products, acquisition and integration-related expenses and certain other expenses that do not reflect the ongoing earnings generation of the business.

Operating margin, as adjusted, is a metric used to evaluate efficiency represented by operating income, as adjusted, divided by revenues, as adjusted.

Earnings (loss) per share, as adjusted, represent net income (loss) attributable to Virtus Investment Partners, Inc., as adjusted, divided by weighted average shares outstanding, as adjusted, on either a basic or diluted basis.

Forward-Looking Information

This press release contains statements that are, or may be considered to be, forward-looking statements. All statements that are not historical facts, including statements about our beliefs or expectations, are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, as amended, Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These statements may be identified by such forward-looking terminology as “expect,” “estimate,” “intent,” “plan,” “intend,” “believe,” “anticipate,” “may,” “will,” “should,” “could,” “continue,” “project,” “opportunity,” “predict,” “would,” “potential,” “future,” “forecast,” “guarantee,” “assume,” “likely,” “target” or similar statements or variations of such terms.

Our forward-looking statements are based on a series of expectations, assumptions and projections about the company and the markets in which we operate, are not guarantees of future results or performance, and involve substantial risks and uncertainty including assumptions and projections concerning our assets under management, net asset inflows and outflows, operating cash flows, business plans, and ability to borrow, for all future periods. All forward-looking statements are as of the date of this release only. The company can give no assurance that such expectations or forward-looking statements will prove to be correct. Actual results may differ materially.

Our business and our forward-looking statements involve substantial known and unknown risks and uncertainties, including those discussed under "Risk Factors" and "Management’s Discussion and Analysis of Financial Condition and Results of Operations" in our 2023 Annual Report on Form 10-K, as supplemented by our periodic filings with the Securities and Exchange Commission (the "SEC"), as well as the following risks and uncertainties resulting from: (i) any reduction in our assets under management; (ii) inability to achieve expected benefits of strategic transactions; (iii) withdrawal, renegotiation or termination of investment management agreements; (iv) damage to our reputation; (v) inability to satisfy financial debt covenants and required payments; (vi) inability to attract and retain key personnel; (vii) challenges from competition; (viii) adverse developments related to unaffiliated subadvisers; (ix) negative changes in key distribution relationships; (x) interruptions, breaches, or failures of technology systems; (xi) loss on our investments; (xii) lack of sufficient capital on satisfactory terms; (xiii) adverse regulatory and legal developments; (xiv) failure to comply with investment guidelines or other contractual requirements; (xv) adverse civil litigation, government investigations, or proceedings; (xvi) unfavorable changes in tax laws or limitations; (xvii) inability to make common stock dividend payments; (xviii) impediments from certain corporate governance provisions; (xix) losses or costs not covered by insurance; (xx) impairment of goodwill or other intangible assets; and other risks and uncertainties. Any occurrence of, or any material adverse change in, one or more risk factors or risks and uncertainties referred to above, in our 2023 Annual Report on Form 10-K, and our other periodic reports filed with the SEC could materially and adversely affect our operations, financial results, cash flows, prospects and liquidity.

Certain other factors that may impact our continuing operations, prospects, financial results and liquidity, or that may cause actual results to differ from such forward-looking statements, are discussed or included in the company’s periodic reports filed with the SEC and are available on our website at virtus.com under “Investor Relations.” You are urged to carefully consider all such factors.

The company does not undertake or plan to update or revise any such forward-looking statements to reflect actual results, changes in plans, assumptions, estimates or projections, or other circumstances occurring after the date of this release, even if such results, changes or circumstances make it clear that any forward-looking information will not be realized. If there are any future public statements or disclosures by us that modify or affect any of the forward-looking statements contained in or accompanying this release, such statements or disclosures will be deemed to modify or supersede such statements in this release.

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