VIRTUS INVESTMENT PARTNERS, INC. Q1 FY2025 earnings call

• Market performance volatility was challenging in Q1, leading to lower AUM and net outflows but solid financial and operating results. • Key highlights included higher EPS vs prior year, increased sales in fixed income strategies, positive net flows in ETFs, strong investment performance through volatility, higher share repurchases, and a solid balance sheet. • In equity, managers use high conviction/quality orientations for strong performance and downside protection. • Fixed income offers multiple strategies across credit quality and duration. • 70% of equity strategies beat benchmarks in Q1, and 74% of equity assets met benchmarks over 10 years. • Recognized by Barron's as top fund family. • Active in product development: ETFs, global funds, retail separate accounts; several strategies under development, including first interval product; structural steps taken for fixed income retail separate accounts; expanding wealth management business. • Used $26 million to repurchase/net settle ~146,000 shares during the quarter, reducing shares outstanding by 3% net over past year; made a $23 million revenue participation payment reducing contingent liability to $40 million; final stage equity purchase of majority-owned affiliate in Q3 of this year.

Total assets under management were $167.5 billion at March 31st. By product, institutional is the largest category at 34% of AUM, retail separate accounts including wealth management at 28%, U.S. retail mutual funds at 27%, and the remaining 11% comprises closed-end funds, global funds, and ETFs. Total sales were $6.2 billion, with total net outflows of $3 billion. Earnings per share as adjusted was $5.73, up 6% year-over-year. Assets under management by product: institutional (34%), retail separate accounts including wealth management (28%), U.S. retail mutual funds (27%), and others (11%). ETF assets reached $3.4 billion with strong positive net flows of $0.3 billion over the quarter, and over the past year, ETFs had an organic growth rate of 73%.

• Markets in Q2 continue with uncertainty and volatility, an environment where active managers can show value. • Equity strategies with high conviction/quality orientations aim for strong performance and downside protection. • Fixed income offers diverse strategies across credit quality and duration attractive in various rate environments. • Expect to launch several ETF and global fund strategies in next few quarters, including first interval product. • Continue balanced capital management, investing in growth, returning capital to shareholders, and maintaining appropriate leverage.

• Market performance volatility can lead to lower AUM and net outflows. • Uncertainty and volatility in markets may impact flows and investment performance. • Leverage and cash flow generation factors can affect capital management and ability to invest in the business.

Q: Could you provide more color on fee rate going forward as we get into April and touch on fee rate changes in the quarter?

A: Fee rate impacted by many factors including market. Fee rate differential on sales vs redemptions. Open-end funds fee rate change due to mix of assets, from higher fee on equity to slightly lower on fixed income. Still targeting incremental margins in 50%-55% range, and current range of 41-42 basis points is reasonable for modeling.

Q: On capital allocation side, appetite for share repurchases given recent share performance and market backdrop?

A: Evaluate alternative uses of capital each quarter, including relative perspective on stock trading. Did increase repurchases compared to prior quarters, and will continue to factor in stock trading when deciding repurchase levels. Currently, low leverage, strong cash flow, and return of capital is critical, with perspective on stock trading influencing decisions.

Q: Latest thinking on transitioning to lower effective tax rate to affect adjusted earnings?

A: Referring to tax attributes, it's about providing transparency as there's real value from tax benefits. NPV of tax asset is ~$112 million or $16 per share. Evaluate and ensure transparency to show the value, with it coming out to ~$2.50 per share on an EPS basis, continuing to provide transparency on the value from tax benefits.