VRTS · Virtus Investment Partners, Inc.

Virtus Investment Partners reported a challenging first quarter of 2026, with GAAP diluted EPS of $1.05 plummeting 74% year-over-year and 80% sequentially, while adjusted diluted EPS of $5.38 fell 16% and 25%, respectively. The sharp decline in GAAP earnings was driven by a 58% drop in operating income to $15.4 million, as revenues fell 8% to $199.5 million due to lower average assets under management, and operating expenses rose 2% (9% sequentially) from seasonal employment costs and the inclusion of Keystone National Group. The GAAP operating margin contracted to 7.7% from 16.8% a year ago. On an adjusted basis, operating income fell 20% to $43.8 million, with margin declining to 24.0% from 27.6%, reflecting $11.4 million in seasonal employment expenses and lower investment management fees. Net outflows totaled $8.4 billion, driven by quality-oriented equity strategies facing style headwinds, with retail separate accounts experiencing a large rebalancing of a lower-fee mandate. However, ETFs and global funds saw positive net flows, and total sales increased 8% sequentially to $5.8 billion. The company completed its $200 million majority investment in Keystone on March 1, 2026, contributing one month of results. Gross debt rose to $448.0 million, including $50 million drawn on the credit facility, and net debt stood at $311.4 million (1.1x EBITDA). The effective tax rate spiked to 54% from 28% due to higher valuation allowances. Management highlighted the seasonal expense headwind and ongoing style headwinds in equity strategies, but noted strength in ETF and global fund flows and the strategic addition of Keystone's private credit capabilities.