Virtus Investment Partners Reports Strong Q3 Performance

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Virtus Investment Partners Reports Strong Q3 Performance

Virtus Investment Partners (VRTS) demonstrated strong performance in the third quarter of 2024. Assets under management (AUM) increased by 6% to reach $183.7 billion. This growth was primarily driven by market performance and positive net fund flows in certain segments.

Despite general net outflows, the company's sales rose by 7%, and new products were launched, including an actively managed ETF. The operating margin reached its highest level in two years, while earnings per share (EPS) increased by 6%. The company also emphasized its commitment to dividend growth and share repurchase programs.

Key Highlights

  • AUM increased to $183.7 billion, up 6% due to market performance and positive net fund flows.
  • Operating margin reached a two-year high at 34.4%.
  • EPS rose to $6.92, the highest level since Q1 2022.
  • New products were launched, including an actively managed mid-cap stock ETF.
  • Virtus Investment Partners remains cautious about potential volatility in net fund flows.

Company Outlook Virtus Investment Partners expects continued positive net flows in fixed-income products. The company is cautious about potential volatility in net fund flows due to external factors such as market dynamics, tax considerations, and upcoming elections.

Negative Aspects

  • Despite demonstrating improvement from the previous quarter, the company reported $1.7 billion in overall net outflows.

Positive Aspects

  • Sales increased by 7%, with September recording the highest sales figures since January.
  • Positive investment performance across strategies, with 62% of assets outperforming peers in Q3.
  • Retail separate accounts experienced $0.4 billion in positive net fund flows.

Points Falling Short of Expectations

  • Open-end funds experienced $1 billion in net outflows primarily due to fixed-income strategies.

Q&A Section Highlights CEO George Aylward discussed the importance of mergers and acquisitions for organic growth strategies, corporate growth, and talent enhancement. Management highlighted increasing interest in actively managed fixed-income ETFs and outlined plans for new ETFs across various investment areas. The company focuses on developing solution-oriented products, including managed model portfolios.

From a financial health perspective, Virtus Investment Partners maintained a modest net debt position, increased share repurchases to $15 million, and raised dividends for the seventh consecutive year. The adjusted operating margin reached its highest level since Q3 2022 at 34.4%, and adjusted EPS increased from $6.53 in the previous quarter to $6.92.

During the discussion, Aylward also emphasized the company's strategic focus on expanding offerings aligned with growth trends in ETFs and global funds. He confirmed the company's commitment to dividend growth while balancing EPS growth expectations with dividend increases.

The management team of Virtus Investment Partners concluded the earnings discussion with an optimistic perspective regarding ETF plans for 2025 and an invitation for further questions. While focusing on providing stable returns to investors through strategic dividend growth and share repurchases, they continue to explore new product developments to enhance market capabilities.

InvestingPro Forecasts The strong performance of Virtus Investment Partners (VRTS) in Q3 2024 is supported by recent InvestingPro data and insights. The company's 7.12% revenue growth over the last twelve months is consistent with the 7% sales increase noted in the earnings discussion. This growth trend is complemented by a robust 13.4% increase in EBITDA during the same period, indicating improved operational efficiency.

One InvestingPro Insight highlights that Virtus has increased dividends for seven consecutive years, aligning with the company's commitment to dividend growth noted in the earnings report. This is further strengthened by an impressive 18.42% dividend growth over the last twelve months. With a current dividend yield of 4.21%, Virtus presents an attractive offering for income-focused investors.

The company's profitability is underscored by a price-to-earnings ratio (P/E) of 13, suggesting that the stock may be undervalued relative to its earnings. This aligns with positive earnings outlooks discussed in the earnings call, particularly in light of InvestingPro's insights indicating that analysts expect the company to be profitable this year.

Another InvestingPro Insight reflects Virtus's strong returns over the last five years, mirrored in an impressive 27.25% one-year total price return. This performance illustrates that the company’s strategic initiatives and product developments have been positively received by investors.

For readers seeking a more comprehensive analysis, InvestingPro offers additional insights and forecasts that can provide a deeper understanding of Virtus Investment Partners' financial health and market position.