Q4 2023 Virtus Investment Partners Inc Earnings Call
Dede: Good morning. My name is Dede, and I will be your conference operator today. I would like to welcome everyone to the Virtus Investment Partners quarterly conference call. The slide presentation for this call is available in the Investor Relations section of the Virtus website, www.virtus.com. This call is being recorded and will be available for replay on the Virtus website. At this time, all participants are in a listen-only mode.
Okay.
D D: Good morning, My name is D D and I will be your conference operator today.
D D: I would like to welcome everyone to the Virtus investment partners quarterly conference call.
The slide presentation for this call is available in the Investor Relations section of the Virtus website Www dot for just dotcom.
D D: This call is being recorded and will be available for replay on the Virtus website.
D D: At this time all participants are in a listen only mode.
Operator: After the speaker's remarks, there will be a question and answer period, and instructions will follow at that time. I will now turn the conference to your host, Sean Rourke. Thank you, Dede, and good morning, everyone.
D D: After the Speakers' remarks, there will be a question and answer period and instructions will follow at that time.
D D: I'll now turn the conference to your host Sean Rourke.
Sean P. Rourke: Thank you T D and good morning, everyone on behalf of Virtus investment partners I would like to welcome you to the discussion of our operating and financial results for the fourth quarter of 2023.
Sean P. Rourke: On behalf of Virtus Investment Partners, I'd like to welcome you to the discussion of our operating and financial results for the fourth quarter of 2020. Our speakers today are George Aylward, President and CEO, and Mike. Following their prepared remarks, we'll have a Q&A. Before we begin, please note the disclosures on page. Certain matters discussed on this call may contain forward-looking statements within the meaning of the Private Securities Litigation. And as such, are subject to known and unknown risks, and uncertainties, including but not limited to. www.virtus.edu.au. In addition to results presented on a GAAP basis, we have certain non-GAAP measures to evaluate. These non-GAAP financial measures are not substitutes, and should be read in conjunction. Go to www.vrtusinvestmentpartners.com to learn more. All measures to the applicable gap measures are included in today's news release, which is available on our website. Now, I'd like to turn the call over to George.
Sean P. Rourke: Today, our Georgia, Aylward, President and CEO, and Mike angle Chief Financial Officer.
Following their prepared remarks, we will have a Q&A period.
Before we begin please note disclosures on page two.
Sean P. Rourke: The slide presentation.
Sean P. Rourke: Matters discussed on this call may contain forward looking statements within the meaning of the private Securities Litigation Reform Act.
Sean P. Rourke: 1995, as such are subject to known and unknown risks.
Sean P. Rourke: And uncertainties, including but not limited to those factors set forth in today's news release and discussed in our SEC filings.
Sean P. Rourke: These risks and uncertainties may cause actual results to differ materially from those discussed in the statements.
Sean P. Rourke: In addition to results presented on a GAAP basis, we use certain non-GAAP measures to evaluate our financial results.
Sean P. Rourke: GAAP financial measures are not substitutes for GAAP financial results should.
Sean P. Rourke: It should be read in conjunction with them.
Sean P. Rourke: Reconciliations of these non-GAAP financial measures to the applicable GAAP measures are included in today's news release and financial supplement which are available on our website.
Speaker Change: Now I'd like to turn the call over to George George Thank.
George Robert Aylward: Thank you, Sean. Good morning, everyone. So I'll start with an overview of the results reported this morning before turning it over to Mike to provide some more detail. Though still volatile, markets trended more favorably in the fourth quarter on views of inflation and interest rate expectations, leading to an increase in assets under management. And while we had net outflows driven by open-end funds consistent with the industry, as well as specific institutional accounts, we also had strong retail sales, including the highest retail separate account sales in two years. Positive Net Flow and Retail Separate Accounts and ETFs, each of which had organic growth for the full year. Lower total operating expenses for the quarter, with other operating expenses essentially flat for the full year.
Thank you Sean good morning, everyone.
George Robert Aylward: So I'll start with an overview of the results reported this morning before turning it over to Mike to provide some more detail.
Speaker Change: They'll still volatile market is trending more favorably in the fourth quarter on views of inflation and interest rate expectations, leading to an increase in assets under management.
Mike: While we had net outflows driven by open end funds consistent with the industry as well as specific institutional accounts. We also had strong retail sales, including the highest retail separate account sales in two years.
Mike: Positive net flows in retail separate accounts and Etfs, each of which had organic growth for the full year.
Mike: Lower total operating expenses for the quarter with other operating expenses essentially flat for the full year.
George Robert Aylward: Increased return of capital, including $20 million of share buyback. Attractive investment performance across strategies both long-term and for the one-year period, and repayment of debt, ending the quarter with low net leverage and a well-positioned balance. Turning now to a review of the results, total assets under management increased 6% to $172 billion, primarily due to favorable market impact in addition to positive net flows in retail separate. Sales increased 7% to $6.2 billion due to a 12% increase in retail sales, with particularly strong growth in retail separate accounts, which grew 15%, led by private clients.
Mike: Increased return of capital, including $20 million of share buybacks attractive investment performance core strategies, both long term and for the one year period and repayment of debt ending the quarter with low net leverage and a well positioned balance sheet.
Yes.
Mike: Turning now to a review of the results total assets under management increased 6% to 172 billion, primarily due to favorable market impact. In addition to positive net flows in retail separate accounts.
Mike: Sales increased 7% to $6 2 billion due to a 12% increase in retail sales with particularly strong growth in retail separate accounts, which grew 15% led by private client.
George Robert Aylward: Open unfunded sales increased 9% with sequentially higher sales of domestic equity, fixed income, and alternative strategies. Net outflows were $3.8 billion, compared with net outflows of $1.5 billion last quarter. So by product, Institutional had net outflows of $2.2 billion, compared with net outflows of $0.4 billion last quarter, and these included redemptions related to repositioning by several retirement plan mandates. The institutional business is inherently variable on a quarterly basis, but it's generated organic growth in three of the last four years with contributions across affiliates, strategies, and jackpots. Retail separate accounts generated positive net flows of $0.4 billion and were positive for the full year.
Mike: Open end fund sales increased 9% with sequentially higher sales of domestic equity fixed income and alternative strategies.
Mike: Net outflows were $3 8 billion compared with net outflows of $1 5 billion last quarter. So by product institutional had net outflows of $2 2 billion compared with net outflows of <unk> 4 billion last quarter and include the redemptions related to repositioning by several retirement plan mandates.
Mike: The institutional business is inherently variable on a quarterly basis, but as generate organic growth in three of the last four years with contributions across affiliates strategies and geographies.
Mike: Retail separate accounts generated positive net flows of <unk> 4 billion and were positive for the full year.
George Robert Aylward: As we previously said, we continue to see retail separate accounts as a key growth area as we expand offerings with additional strategies to complement our strength in small, mid-, and mid-cap equity. Open-end net outflows of $2 billion compared with $1.5 billion in the third quarter due to a higher level of redemptions across strategies, though SMIT cap and global equities continue to generate organic growth. ETS again generated positive net flows and for the full year delivered 14% organic growth as we've continued to broaden the product lineup with additional distinctive active strategies. In terms of what we saw in January for flows, retail and institutional net flows were each improved meaningfully. On the retail side, while it was just one month, January was the best month for net flows and open-end funds since September of 2021, with net outflows of approximately $150 million. That represents less than 25% of the average monthly net outflow in the fourth quarter with improvement across asset classes, including breakeven net flows in domestic equity and positive net flows in alternatives. I would also note that earlier this week, we reopened two capacity-constrained small cap strategies that For Institutional, we had a large funding round early in January that had been delayed from the fourth quarter.
As we previously said we continue to see retail separate accounts is a key growth area as we expand offerings with additional strategies to complement our strength in small smid and mid cap equities.
Mike: Open end net outflows of 2 billion compared with $1 five in the third quarter due to a higher level of redemptions across strategies, the smid cap and global equities continue to generate organic growth.
Etfs again generated positive net flows for the full year delivered 14% organic growth as we've continued to broaden our product lineup with additional distinctive active strategies.
Mike: In terms of what we saw in January for flows retail and institutional net flows were each improved meaningfully.
Mike: On the retail side well. It was just one month January was the best month for net flows in open end funds since September of 2021 with net outflows of approximately $150 million.
That represents less than 25% of the average monthly net outflow in the fourth quarter with improvement across asset classes, including including breakeven net flows in domestic equity and positive net flows in alternatives.
Mike: I would also note that earlier this week, we reopened two capacity constrained small cap strategies that have been closed since 2018 and have already seen a meaningful level of interest for them.
Mike: For institutional we had a large funding early in January that had been delayed from the fourth quarter.
George Robert Aylward: All else being equal, Institutional is generally trending towards flat net flows for the first quarter based on known and expected upcoming funding and redemption activities. This business can fluctuate in the short term, and we have seen a more prolonged funding cycle. However, the pipeline continues to be strong in terms of size and with broad representation across affiliates, strategies, and geographies. Our fourth quarter financial results reflected lower average AUM largely due to the timing of market performance and net outflows, partially offset by lower total operating expenses. The operating margin was 33%, down sequentially from 33.9 due to lower investment management fees and was up 120 basis points from the prior year period. Earnings per share is adjusted for $6.11 compared with $6.21 in the prior quarter, and we're up 18% from $5.17 in the fourth quarter. 2022.
Mike: All else being equal institutional is generally trending towards flat net flows for the first quarter based on known and expected upcoming funding in redemption activity. This business can fluctuate in the short term and we have seen a more prolonged funding cycle. However, the pipeline continues to be strong in terms of size and with broad representation across affiliate.
Mike: Its strategies and geographies.
Our fourth quarter financial results reflected lower average AUM largely due to the timing of market performance and net outflows, partially offset by lower total operating expenses.
Mike: The operating margin was 33% down sequentially from $33 nine due to lower investment management fees and was up 120 basis points from the prior year period.
Mike: Earnings per share as adjusted of $6 11, compared with $6 21 in the prior quarter and were up 18% from $5 17 in the fourth quarter of 2022.
George Robert Aylward: Turning now to capital, during the quarter, we continued to take a balanced approach to capital management. We repurchased approximately 98,000 shares for $20 million, up from $15 million in the prior quarter. For the full year, we repurchased approximately 224,000 shares and reduced outstanding shares by 1%.
Mike: Turning now to capital during the quarter, we continued to take a balanced approach to capital management, we repurchased approximately 90000 shares for $20 million up from $15 million in the prior quarter for the full year, we repurchased approximately 224000 shares and reduced outstanding shares by 1%.
Mike: In 2023, we will increase our quarterly dividend by 15%, our sixth consecutive annual increase in our dividend. We also repaid the remaining $20 million outstanding on our revolving credit facility and ended the quarter in a modest net debt position and gross debt below one times EBITDA. We continue to generate significant cash flow, providing ongoing opportunities to invest in the growth of the business and return capital to shareholders. With that, I'll turn the call over to Mike.
Mike: In 2023, we increased our quarterly dividend by 15% our sixth consecutive annual increase in our dividend.
Mike: We also repaid the remaining 20 million outstanding on our revolving credit facility and ended the quarter in modest net debt position and gross debt below one times EBITDA.
Mike: We continue to generate significant cash flow, providing ongoing opportunities to invest in the growth of the business and return capital to shareholders with that I'll turn the call over to Mike Mike.
Mike: Thank you George good to be with you all this morning.
Mike: Starting with our results on slide seven assets under management.
Mike: Thank you, George. Good to be with you all this morning, starting with our results. Slide 7, Assets Under Management. At December 31st, assets under management were $172.3 billion, up 6% from $100,000, due to $14.3 billion of favorable market performance, although partially offset by net output.
At December 31 assets under management were $172 3 billion.
Mike: Up 6% from $162 5 billion at September 30th.
Mike: Due to $14 3 billion a favorable market performance.
Mike: Partially offset by net outflows of $3 8 billion.
Mike: Average assets under management in the quarter decreased 3% to $162 7 billion.
Mike: Average assets under management in the quarter decreased 3% to $100 million, ending at 6% above the quarter's average. Our assets under management represented a broad range of products and assets. Institutional, our largest product category, was $37 million. Retail Separate Accounts has delivered, and OrganicGrowth.com and is at 25% of assets, up from 16% five. We also remained well diversified among and within Alternatives and Multi-asset, which we had a limited presence for several years totaled over 20% of our AUM. Reflecting the results of our strategic plan and Capabilities Particularly, www.virtusinvestmentpartners.com. In addition, on a geographic basis, non-U.S. clients were 18% of AUM and generated 10% organically. We also continue to have compelling long-term relative investment performance across products and strategies. As of December 31st, approximately 69% of institutional, 86% of retail separate account assets, www.virtusinvestmentpartners.com For mutual funds, 71% outperformed the median of their peers. In addition, 69% of rated fund assets had four or five stars; 90% were in three, four, or five. We had 38 funds that were rated 4 or 5 stars, including 11.
Mike: With ending assets.
Mike: 6% above the quarter's average.
Mike: Our assets under management represented a broad range of products and asset classes.
Mike: Institutional our largest product category was 37% of AUM.
Mike: Retail separate accounts has delivered consistent organic growth.
Mike: And is that 25% of assets up from 16% five years ago.
Mike: We also remained well diversified among and within asset classes.
Mike: Alternatives and multi asset and which we had limited presence several years ago.
Mike: Totaled over 20% of our AUM, reflecting.
Mike: The results of our strategic efforts to expand capabilities, particularly.
Mike: And less correlated strategies.
In addition on a geographic basis non U S clients were 18% of AUM and.
<unk>, 10% organic growth.
In 2023.
We also continued to have compelling long term relative investment performance across products and strategies.
Mike: As of December 31, approximately 69% of institutional assets.
Mike: 86% of retail separate account assets and.
Mike: 62% of rated mutual fund assets were outperforming their benchmarks over five years.
Mike: For mutual funds, 71% outperformed the median of their peer groups over the five year period. In addition, 69% of rated fund assets had four or five stars.
Mike: And 90% were in three four or five star funds.
Mike: Yes, 38 funds that were rated four or five stars including 11.
Mike: AUM of 1 billion. I would also note that our managers performed well for the full year. 58% and 90, www.virtus.io, Benchmark, while 55% of mutual fund AUM to be benchmarked. 70% out.
Mike: With AUM of $1 billion or more.
Mike: I would also note that our managers performed well for the full year 2023, with 58% to 90% of institutional separate accounts AUM.
Mike: AUM, respectively, beating benchmarks for the period.
Mike: While 55% of mutual fund AUM.
Mike: <unk> marks and 70% outperformed the median performance of your peer group.
Mike: Turning to slide 8, I, Total sales of $6.2 billion increased 7% from $5.8 billion due to growth in both retail separates, by Prada, institutional sales of $1.2 billion, compared with $1.3 billion in the prior quarter, which included the issuance of a $300 million. Retail separate account sales of 2.1 from 1.8, led by meaningful growth in private. Open end fund sales of $2.9, 9% from $2.7, primarily due to higher sales in mid-cap. Good Bye.
Mike: Turning to slide eight asset flows.
Mike: Total sales of $6 2 billion increased 7% from $5 8 billion due to growth in both retail separate accounts and open end funds.
Byproduct.
Mike: Institutional sales of $1 2 billion.
Mike: Compared with $1 3 billion in the prior quarter, which included the issuance of the $300 million CLO.
Mike: Retail separate account sales of $2 1 billion increased 15% from $1 8 billion led by meaningful growth in private client sales.
Mike: Open end fund sales of $2 9 billion increased 9% from $2 7 billion.
Mike: Merrily due to higher sales and mid cap.
Mike: Smid cap.
Mike: Total net outflows were 3.8, www.virtusinvestmentpartners.com reviewing by product, institutional net outflows of 2.2, which included approximately one billion in redemptions from several long, These accounts, each of which were in different investment strata, repositioning their risk allocation due to the plan's level. As always, institutional flows will fluctuate depending on the timing. In retail separate accounts, positive net flows of $0.4 billion, $1.3 billion in the prior, And both intermediaries sold and private clients continued to generate positive results with a full year of retail separate accounts generated. For open-end funds, net outflows were $2 billion, compared with $1.5 billion in the past, due to higher redemptions across strategies and Retail Funds, both SMIDCAP and Global Equity, and others. Thank you. ETFs were again positive, and on a full year basis, they generated 15. Global funds were essentially break-even for the quarter. 9% of the food is organic.
Mike: In bank loan strategies.
Mike: Total net outflows were $3 8 billion, which compared with $1 5 billion of net outflows in the prior quarter.
Reviewing byproduct institutional net outflows of $2 2 billion.
Mike: Included approximately $1 billion of redemptions from several longstanding retirement plan mandates.
Mike: These accounts each of which were in different investment strategies reposition their risk allocation due to the planned level of funding.
Mike: As always institutional flows will fluctuate depending on the timing of client actions.
Mike: In retail separate accounts positive net flows of <unk> 4 billion increase from <unk> 3 billion in the prior quarter.
Mike: And both intermediary sold and private client continued to generate positive net flows.
Mike: For the full year retail separate accounts generated 2% organic growth.
Mike: For open end funds net outflows were $2 billion.
Mike: Third with $1 5 billion in the third quarter due to higher redemptions across strategies.
And retail funds, both smid cap and global equity continued to generate positive net flows.
Mike: Etfs were again positive and then a full year basis generated 15% organic growth.
Mike: Global funds were essentially breakeven for the quarter.
Mike: With 9% organic growth for the full year.
Mike: Turning to slide nine, investment management. 174.4, a decrease of 2.9 million or two, reflecting the sequential decline in average assets under partially offset by higher performance. 3.3 million, up from 0.6 million last year. The full year performance fees were $4.5 million, which compared with 1.8 million in the prior year.
Mike: Turning to slide nine investment management fees as adjusted of $174 4 million.
Mike: Creased, $2 9 million or 2%.
Mike: Reflecting the sequential decline in average assets under management, partially offset by higher performance fees, which were $3 3 million up from $2 6 million last quarter.
Mike: For the full year performance fees were $4 5 million, which compared with $1 8 million in the prior year and $2 6 million in 2021.
Mike: 2.6, based on our institutional accounts with performance-based fee structures, which are highly dependent on those strategies' investment performance relative to benchmarks. We would expect performance fees to be in a range of $3 million to $5 million, with an average fee rate of $42.
Mike: Based on our institutional accounts with performance based fee structures, which are highly dependent on those strategies investment performance relative to benchmarks.
We would expect performance fees to be in a range of 3 million to $5 million per year.
Mike: The average fee rate of $42 six basis points increased from 42 basis points in the prior quarter and included <unk> eight basis points from the performance fees.
Mike: Including 0.8 base, excluding performance fees from both periods, the average fee rate was flat at $41,000. Looking ahead, we continue to expect the average fee rate to be toward the low end of our 42 to 44 basis point range, which is modestly above the normalized fourth quarter level. As always, the fee rate will be impacted by the market. Slide 10 shows the five-quarter Total Employment. 96.7, decreased 2% sequentially, primarily reflecting lower volatility www.virtusinvestmentpartners.com www.virtus.io, 50.1% last year. Looking ahead, it would be reasonable to expect it to be in a range of 49. 51% As always, it will be a variable based on market performance, in particular, as well as profit. For modeling purposes, the first quarter will also include seasonal employment expenses, which are incremental.
Mike: Excluding performance fees from both periods. The average fee rate was flat at 41 eight basis points.
Looking ahead, we continue to expect the average fee rate to be toward the low end of our 42 to 44 basis point range, which is modestly above the normalized fourth quarter level.
Mike: As always the fee rate will be impacted by markets.
Mike: And the mix of assets.
Slide 10 shows the five quarter trend in employment expenses total employment expenses as adjusted of $96 7 million.
Decreased 2% sequentially, primarily reflecting lower variable incentive compensation.
Mike: As a percentage of revenues employment expenses were 50% relatively unchanged from 51% last quarter.
Mike: Looking ahead, it would be reasonable to anticipate employment expenses to continue to be in a range of 49% to 51% of revenues.
Mike: As always it will be variable based on market performance in particular as well as profits and sales.
Mike: For modeling purposes. The first quarter will also include seasonal employment expenses, which are incremental to this outlook.
Mike: Turning to slide 11, other operating, www.virtusinvestmentpartners.com up 1.1 million or 3%, and the Sequential Increase largely reflected higher travel and related activity as well as the impact of COVID-19. I would note that on a full year basis, other operating, We're centrally flat compared to the prior year, even with the addition of a new affiliate. Looking ahead, the quarterly range of 30 to 32 million for other operating, www.virtusinvestmentpartners.com Slide 12 illustrates the trend in Operating Income As Adjusted. Suma Thind, Michael Carrier, George Aylward, Michael Angerthal, Sean Rourke, Andrew Disdier, Sumeet Mody, Ari Ghosh, Jeremy Campbell, Andrew Disdier, Sean Rourke due to the lower average assets under management. Partially offset, www.vrts.com; The operating margin has been adjusted to 33% compared with 33.9, with respect to non-operating. Other income, as adjusted, increased by 0.5%. For more information, Thank you. Total net interest income decreased modestly from the prior quarter, which included a higher level of CLOs and reflected lower gross, and net income as adjusted of $6.11 per diluted share. Virtus.com
Mike: Turning to slide 11, other operating expenses as adjusted were $31 2 million.
Mike: Up $1 1 million or 3% from the third quarter.
Mike: The sequential increase largely reflected higher travel and related activity as well as the impact of increases in market data costs.
Mike: I would note that on a full year basis. Other operating expenses of $122 8 million were essentially flat with the prior year, even with the addition of a new affiliate in April.
Mike: Looking ahead, the quarterly range of 30% to $32 million for other operating expenses as adjusted remains reasonable.
Mike: Slide 12 illustrates the trend in earnings.
Operating income as adjusted of $63 9 million decreased by $3 1 million or 5% sequentially.
Mike: Due to the lower average assets under management, partially offset by lower total operating expenses.
The operating margin as adjusted of 33% compared with 33, 9% in the third quarter.
With respect to non operating items.
Mike: Other income as adjusted increased by <unk> 5 million reflect a higher earnings on equity method investments.
Mike: Total net interest income decreased modestly from the prior quarter, which included a higher level of CLO interest income from our recent issuance.
Mike: And reflected lower gross debt.
Mike: Net income as adjusted of $6 11 per diluted share declined 2% from $6 21 in the third quarter.
Mike: Terms of Gap, an income per share of $4.21 $4.19 per share in the third quarter and included $0.71 expense.
Mike: In terms of GAAP results.
Mike: Net income per share of $4 21, compared with $4 19 per share in the third quarter and.
Mike: And included 71 expense.
Mike: Fair Value Adjustments to Affiliate Non-Controlling Interests, $0.36 of CLO issued, $0.18 of acquisition and integration costs, and Fair Value Adjustment. Thank you for your consideration, partially offset by 35 cents of realized and Unrealized Games. Slide 13 shows Capital Liquidity. Select. We ended 2023 with appropriate levels of working capital and modesty, providing meaningful financial flexibility. During the quarter, we repaid the remaining $20 million balance on our revolving credit facility.
Mike: Fair value adjustments to affiliate Noncontrolling interests.
<unk> 36, a CLO issuance expenses.
Mike: 18th of acquisition and integration costs and 13th.
Mike: Our fair value adjustments to contingent consideration, partially offset by 35 of realized and unrealized gains on investments.
Mike: Slide 13 shows the trend of our capital liquidity and select balance sheet items.
We ended 2023 with appropriate levels of working capital and modest leverage providing meaningful financial flexibility to invest in the business.
Mike: Capital and repay debt.
Mike: During the quarter, we repaid the remaining $20 million balance on our revolving credit facility.
George Robert Aylward: ... ... ... ... ... ... ... .., representing Net Leverage of Point, We also repurchased $97,000, up from 50, prior, for the full year 2020. 223,807 shares. $45 million and reduced the share count by 1.3%. I would also note, as a reminder, that our intangible assets.., provide a cash tax. At current tax rates, we estimate the tax, www.virtusinvestmentpartners.com of approximately $19 million per year, over the next. And with that, let me turn the call back over to George. George.
Mike: It ended the year with net debt of $19 million, representing net leverage at <unk>, One times EBITDA.
Mike: We also repurchased 97952 shares during the quarter for $20 million.
Mike: Up from $15 million in the prior quarter.
Mike: For the full year 2023, we repurchased 223807 shares for $45 million and reduced the share count by one 3%.
Mike: I would also note as a reminder, that our intangible assets continued to provide a cash tax benefit.
Mike: At current tax rates, we estimate the tax attributes could provide a cash tax benefit.
Mike: Of approximately $19 million per year over the next 10 years.
Mike: And with that let me turn the call back over to George George Thanks, Mike. Okay. So we will now take your questions DB would you open up the lines. Please certainly.
George Robert Aylward: Thanks, Mike. OK, so we'll now take your questions. DeeDee, would you open up the lines, please?
Operator: Certainly. As a reminder to ask a question, please press star one one on your telephone and wait for your name to be announced. To withdraw your question, please press star one one again.
As a reminder to ask a question. Please press star one one on your telephone and wait for your name to be announced to withdraw. Your question. Please press star one again, please standby, while we compile our Q&A roster one moment for our first question.
Crispin Love: Please stand by while we compile our Q&A roster. One moment for our first question, and our first question comes from Crispin Love of Piper Sandler. Thanks. Good morning, everyone.
Mike: Yeah.
Mike: And our first question comes from Crispin Love of Piper Sandler.
Crispin Love: Thanks, Brian Good morning, everyone. Appreciate you taking my questions just first on the institutional side, you mentioned that the outflows in the quarter were driven by some of the repositioning some of the large requirement.
George Robert Aylward: I appreciate you taking my questions. First, on the institutional flow side, you mentioned that the outflows in the quarter were driven by some of the repositioning by some of the large retirement plan mandates. Can you just provide a little more detail there? I heard some of the more constructive color on January in the first quarter, but is repositioning of retirement mandates something that you would expect to see more of in 2024 through the year, or can institutional flows here just be lumpy based on the quarter and could trend closer to more recent levels? Yeah, a couple of comments and then I can add to that. So, you know, every retirement plan and pension plan has different attributes and is at different points in terms of funding cycles, right?
Crispin Love: Mandates can you just provide a little more detail the rights hurt some of the more constructive color on January one in the first quarter, but its repositioning on retiring mandates something Bob you would expect to see more of in 2024 through the year or just the institutional flows have just been lumpy based on the quarter it could trend closer to more <unk>.
Isn't levels.
Speaker Change: Okay, Yes couple of comments and then Mike can add to that so.
Every retirement plan pension plan has.
Speaker Change: Different attributes and is that different points in terms of funding cycles right. So again I think.
George Robert Aylward: So, again, I think, you know, what was unusual for us was that multiple plans, each with different clients, different strategies, you know, reaching a level of funding and giving the strength of the ending of the market year, it's not unusual for a plan or any client to then kind of reposition their risk profile and kind of lock in where they are in terms of funding. So, it wasn't usual to have that number of different clients from different regions and different areas do it at the same time.
Speaker Change: What was unusual for us is that multiple plans each of with different clients different strategies.
Speaker Change: Reaching a level of funding and given the strength of the ending of the market's year. It's done it's not unusual to then for a plan or any client actually kind of reposition their risk profile and kind of lock in where they are in terms of funding. So it was unusual to have that.
Speaker Change: Number of different clients from different regions and different areas do it at the same time. So again, we would normally you would normally would see over the lifecycle, depending on how markets youre doing when youre talking specifically about pension plans or retirement plans.
George Robert Aylward: So, again, you normally would see over the life cycle, depending on how markets are doing, when you're talking specifically about pension plans or retirement plans, as they achieve certain of their funding requirements or if they achieve full funding, you know, they're going to immediately, they should immediately, lock in whatever those returns are. The general business institutional category is variable in nature because the other thing that we would normally see, and I wouldn't be surprised if it emerged more this year, is even if you're not in a retirement plan and you're not locking in funding, you're changing your outlook for going forward, right? So plans that might be overweight in fixed income may decide to take more risk spectrum on the equity side, which creates opportunities or vice versa. So it'll be very related to the individual. Mike, any other color on the retirement plans themselves? No, I think you have touched on it.
Speaker Change: They achieve certain of their funding requirements or if they achieve full funding theyre going to immediately they should immediately lock in whatever those returns are.
Speaker Change: The general business institutional is variable in nature, because the other thing that we would normally see and that wouldn't be surprised if it emerges more this year.
Speaker Change: It is even if youre not in a retirement plan that youre not locking in funding you're changing your outlook for going forward right. So plans that might be overweight fixed income may decide to take more risk spectrum on the equity side that creates opportunities or vice versa. So there'll be very related to individual Mike any other color on the REIT.
Speaker Change: <unk> plans themselves no I think I think you touched on it I think.
Speaker Change: From our perspective.
Speaker Change: Yes.
Speaker Change: Redemption levels were sort of at the fee rate of our blended fee rate so nothing.
George Robert Aylward: From our perspective, you know, those multiple plans, all rebalanced, relatively short, which is unusual thinking of kind of what happened at the end of the year in the markets, right? So, you were in that environment where there was a nice pop in equity. Okay, great.
Unusual other than.
Speaker Change: For multiple plans to all rebalancing in this relatively short period of time, which is not unusual thinking of kind of what happened at the end of the year in the markets right. So you were in that environment, where there was a nice pop in equities. So.
Crispin Love: And then just Michael, just on the institutional fee rate, increased by about three bits in the quarter and is a higher level than we've seen for several quarters. Is that the mix of assets or anything to call out there? Does that have anything to do with the redemption? No.
Speaker Change: Okay, Great and then just Michael just Amit.
Speaker Change: You're right.
Speaker Change: Increased by about three bps in the quarter and is that higher level than what we've seen for several quarters is that mix of assets or anything to call out there or does that have anything to do with the redemptions.
Mike: The performance fees in the quarter were $3.3 million, which ticked up a bit and really was driven by institutional accounts. So we try to normalize that in our disclosures. And looking ahead, I think 42 to 44 for our blended fee rate remains appropriate for modeling, as we go forward, looking at the adjusted fee rate on a normalized basis. Yeah, so we disclose the impact of the performance fees on the institutional, so it's always good to look at it with and without to kind of look at the trend of the underlying account. Perfect. That makes sense.
Amit: No the performance fees in the quarter.
Amit: Were $3 3 million, which ticked up a bit and really was.
Amit: Driven by institutional accounts. So we tried to normalize that in our disclosures and looking ahead I think 42 to 44 for our blended fee rate remains appropriate for modeling.
Amit: As we go forward so.
Amit: Looking at the adjusted fee rate on a normalized basis is a good way to think about it going forward, so and we disclosed the impact of the performance fees on the institutional so it's always good to look at it with them without just kind of look at the trend of the underlying accounts.
Amit: Perfect.
Crispin Love: And then just one last question for me, just on the non-controlling interest on the adjusted income statement, the dollar value here was at the lowest level for a few years. Can you discuss kind of why that was the case in the quarter and just some of the adjustments there, the gaps and non-gaps? Yeah, the non-controlling interest really relates to the portion of Sustainable Growth Advisors that the company does not own.
Speaker Change: And then just one last question for me just on the Noncontrolling interest on the adjusted income statement. The dollar value here was the lowest level for a few years can you discuss kind of why that was the case in the quarter and just some of the adjustments.
Speaker Change: The GAAP to non-GAAP.
Speaker Change: Yes, the <unk>.
Speaker Change: Non controlling interest early relates to the portion of sustainable growth advisors that the company does not own and you may recall.
Mike: And you may recall last year we did increase our ownership from 70 to about 75% in the third quarter. So really, the change primarily reflects the change in ownership. So as we look forward, I think a good way to model the non-controlling line is taking an average, really, of those two quarters, third quarter and fourth quarter. It's a good benchmark.
Speaker Change: Last year, we did increase our ownership from 70 to about 75% in the third quarter. So really the change primarily reflects the change in ownership.
Speaker Change: So as we look forward I think a good way to model.
Speaker Change: The Noncontrolling line is taking an average really of those two quarters third quarter and fourth quarter.
Speaker Change: As a good benchmark looking forward.
George Robert Aylward: I'm looking forward to it. Perfect. Thank you. I appreciate you taking the time to answer my question. Thank you. Thank you.
Speaker Change: Perfect. Thank you I appreciate you taking my questions.
Thank you.
Operator: One moment for our next question, and our next question comes from Bradley Haydes of TD Callen. Hi, good morning. It's Bradley Hazelon on behalf of Bill Katz.
Thank you one moment for our next question.
Speaker Change: And our next question comes from Bradley hit of TB Cowen.
Bradley Hit: Hi, Good morning, it's probably here is on for Bill Katz.
Bradley Haydes: How are recent pick-up multiples impacting the way you're thinking about deal opportunities, as well as what you're seeing in the market? So, in terms of, I'm sorry, you said, with the impact of which multiple, take-out multiples? I didn't hear that. That broke up a little bit.
Bradley Hit: Recently <unk> got multiple impacting the way you are thinking about deal opportunities as well as what youre seeing in the market.
Speaker Change: So in terms of I am sorry, you said would be in.
Speaker Change: Packed which multiple take out multiples.
George Robert Aylward: Yeah. We continue to evaluate the opportunities that are currently out there, and multiples will sort of ebb and flow based upon, you know, the asset class and the specific opportunity set. It kind of relates to that.
Speaker Change: That broke up a little bit yes, yes.
Speaker Change: We continue to evaluate the opportunities that are currently out there and multiples.
Speaker Change: We will sort of ebb and flow debate based upon.
The asset class in this specific opportunity set.
George Robert Aylward: So there has been some, you know, pullback of some of those multiples. But when you're dealing with, there are different ranges of multiples that would be reasonable depending on whether you're talking about a traditional opportunity versus that which is in the more private or non-correlated kind of a section. But so we stay cognizant of those and factor those in as we think about our opportunity. Okay, as your net debt to EBITDA sits quite low, how does this play into or change your thoughts around the cadence of capital return or deployment? Yeah, in terms of capital, again, as you're pointing out, our level of leverage or encumbrance is relatively modest, and we generate a good level of cash flow.
Kind of relates to that so there has been some pull in of some of those multiples, but when youre dealing with there's different ranges of multiples that would be reasonable depending on whether youre talking about a traditional opportunity versus that which is in the more private or or non correlated kind of his section but.
So when we say cognizant of those and factor those in as we think about our opportunities.
Speaker Change: Okay.
Speaker Change: As your net debt to EBITDA.
Speaker Change: Right low.
Speaker Change: Does this play into or change your thoughts around the cadence the capital return deployment.
Speaker Change: Yes in terms of capital again, we're currently as Youre pointing out our level of leverage our incumbency is relatively modest we generate a good level of cash flow.
George Robert Aylward: You know, we continually evaluate how we best deploy that, including growing the business, which is, you know, fundamental to generating long-term shareholder value, keeping the debt at reasonable and modest levels. And then again, the stock buybacks, which, again, we've consistently done, generally, maybe sometimes with some changes in terms of priorities within an individual quarter. So to us, they're all important. And again, they'll generally vary based on relative attractiveness, i.e.
Speaker Change: We continually to evaluate how do we best deploy that including in growing the business, which is fundamental to generating long term shareholder value.
Speaker Change: Keeping the debt at reasonable and modest levels, and then again the stock buybacks, which again, we've consistently done generally maybe sometimes with some changes in terms of priorities within an individual quarter. So to us. They are all important and again they'll generally vary based upon relative attractiveness I E. How is our stock.
George Robert Aylward: How is our stock trading at a certain period, or, you know, what's happening with interest rates as it relates to debt. So we feel good that we're very well positioned, and we have that flexibility to really avail ourselves of different opportunities. And those do include the M&A transactions, which, while not fundamental to our strategy for long-term growth, is something, as you know, we've consistently done over a period of, Okay, great. Thank you. And then there was just one more question.
Speaker Change: Trading in a certain period or whats happening with interest rates as it relates to that so we feel good that we're very well positioned and we have that flexibility to really avail ourselves of different opportunities and those do include the M&A transactions, which while not fundamental to our strategy for long term growth is something.
Speaker Change: As you know we've consistently done over a period of time.
Speaker Change: Okay, great. Thank you and then just one more question.
George Robert Aylward: Um, where do you see the best potential for flows, perhaps either specific asset classes or funds you're feeling particularly strong about? Yeah, it's a great question. I mean, the areas of opportunities we do think about on the, you know, if we go through The Pendulum, right? So I think on the retail side, and we said in our prepared comments, you know, retail separate accounts continue to be a great area of growth, as do ETFs. And a lot of our product development and introduction is really focused on those areas. And we do continue to see opportunities in the retail separate accounts, as well as in the ETFs, particularly actively managed ETFs. So that's been in a lot of areas. So we continue to see that great.
Speaker Change: Where do you see the best potential for flows perhaps either specific asset classes or funds or feeling particularly strong about.
Speaker Change: Yes, we see it's a great question I mean, the areas of opportunities. We do think on the if we go through the the pendulum right. So I think on the retail side. We continue as we said in our prepared comments retail separate accounts continues to be great area of growth as as Etfs.
Speaker Change: And a lot of our product development and introduction is really focusing on those areas and we do continue to see opportunities on the retail separate accounts as well as on the Etfs, particularly actively managed Etfs.
Speaker Change: So that's been a lot of area. So we continue to see that great but for us institutional in spite of the lumpiness that you're seeing in this quarter.
George Robert Aylward: But for us, institutional, you know, in spite of the lumpiness that you're seeing in this quarter, where, you know, the outflows were elevated, and again, we had a late deposit in January that would have, should have occurred in the fourth quarter. We see that as a good opportunity, particularly for non-US companies, right? And we've highlighted that before, where many of our managers and capabilities are not as well known, and we put a lot of our resources and efforts in terms of doing that, and that's why we think we've seen some growth in the non-U.S. client base, I think Mike cited 18%, and we continue to have strong growth there. So I definitely think those are two areas that we've highlighted and will continue to highlight as areas of growth.
Speaker Change: Whereas the outflows were elevated and again, we had a lead to positive in January that that would have you should have occurred in the fourth quarter, we see that as a good opportunity, particularly non U S. REIT and we've highlighted that before where is many of our managers and capabilities are not as well known and we put a lot of our resources and efforts in <unk>.
Speaker Change: Terms of doing that and that's why we think we've seen some growth in.
Speaker Change: In the non U S client base.
Speaker Change: Excited 18% and continuing to have strong growth. There. So I definitely think those are two areas that we've highlighted and we'll continue to highlight as areas of growth in terms of strategies, we offer a broad array because you could have certainly we're seeing clients on the retail side.
George Robert Aylward: In terms of strategies, you know, we offer a broad array because you could have, you know, certain clients on the retail side going to that nice January we saw, and it was really nice to see a strong January as we did, where certain people that were hoarding cash in the fourth quarter were finally redeploying into equity, but simultaneously, we saw strength and alternatives for people looking for non-correlated. So the reason that we try to focus on having diversity of different asset classes and strategies is because of the diversity of client needs. So, you know, for us, and having, you know, 38 funds that are in the high star category, they'll each have opportunities depending on different clients. Okay, perfect. Thank you very much.
Speaker Change: Going to that nice January we saw and it was really nice to see a strong January as we did where certain people that were hoarding cash in the fourth quarter. We're finally redeploying into equity, but simultaneously we saw strength in alternatives for people looking for non correlated. So the reason that we we try to focus.
Speaker Change: On having diversity of different asset classes and strategies is because of the diversity in the client needs so for us in having.
38 funds that are in the high star category, they will each have opportunities depending upon different client.
Speaker Change: Okay perfect. Thank you very much thank.
Michael J. Cyprys: Thank you. Thank you. One moment for our next question, and our next question comes from Michael Cyprys of Morgan Stanley. Great, thanks. Good morning. Morning.
Speaker Change: Thank you.
Speaker Change: Thank you one moment for our next question.
Speaker Change: Okay.
Speaker Change: And our next question comes from Michael Cyprus with Morgan Stanley.
Michael J. Cyprys: Great. Thanks, Good morning, good morning, good morning.
George Robert Aylward: Hoping we could maybe start off on the retail separate accounts; maybe you could just elaborate on some of the areas that are driving the improving strength that you guys are seeing on the separate account side; maybe you could elaborate on some of the underlying strategies that are helping lift that higher on a gross sales basis. And then on the private client business, maybe you could talk about the opportunity set that you see over time to further expand that part of the business. Sure, sure. On the first piece, and then Michael will add additional color.
Michael J. Cyprys: We're hopeful.
Hoping we could maybe start off on the retail separate accounts, maybe you could just elaborate on some of the areas. That's driving the improving strength that you guys are seeing on the separate account side, maybe you can elaborate on what some of the underlying strategies that are helping lift that higher on a gross sales basis and then on the private client business, maybe you could talk about the opportunity set that you see.
Michael J. Cyprys: Over time to further expand that part of the business.
Speaker Change: Sure sure on the first piece and then Mike will have some additional color. So retail separate accounts had been consistently strong for us. So we actually had a pretty much <unk>.
George Robert Aylward: So retail separate accounts have been consistently strong for us, so we actually had pretty much a nonstop series of quarters of inflows until a little bit of breakage in the doldrums of the market. So we've consistently had growth, and I think, as Mike has pointed out, it's gone from about 16% of our assets five years ago to a quarter of our assets today. So it's always been a growth area for us. Our greatest strength has been in the small caps, the mids, and the mid-sized companies. That's still a good opportunity,
Speaker Change: Non stop series of quarters of inflows until a little bit of breakage.
In the doldrums of the market. So we've consistently had growth and I think as Mike has pointed it has gone from about 16% of our assets five years ago to a quarter of our assets today. So it's always been a growth area for us our greatest strength has been in this small caps the smid and the mids that's still a good opportunity.
George Robert Aylward: We're actually seeing that as well in July and January in terms of what people are looking for. We also know about the reopening of some of our small cap strategies as well. What we're also looking to expand, so we have other offerings in the fixed income space, and we're continuing to develop some additional ones. So, what our hope is is to continue to have the strength and the continued positive flows with our existing strategies, which are probably overweight equity, but really trying to expand that offering set from some of our fixed income strategies that don't have full availability in the HPV areas yet. So we're kind of very optimistic about where we think the opportunity set there is. So Mike, do you want to comment on that?
Speaker Change: Entity, we're actually seeing that as well in July and.
In January in terms of what people are looking to we also noted the reopening of some of our small cap strategies as well.
Speaker Change: We're also then looking to expand so we have other offerings on the fixed income space and we're continuing to develop some additional ones. So what our hope is to continue to have the strength and the continued positive flows with our existing strategies, which will probably overweight equity, but really trying to expand that offering set from some of.
Speaker Change: Our.
Speaker Change: Fixed income strategies that don't have full availability at the intermediaries, yet and continue to build that out. So we're kind of very optimistic about where we think the opportunity set there.
Speaker Change: So Michael when I come out of that and then private client.
Mike: Yeah, and you know, I would just add that, To reiterate, the small and the mid-cap has been a consistent area of growth and on private client, really expanded that, had some good traction on that part of the business from Kane Anderson and Rudnick, as well as some fixed income flows that we saw from our team at Sykes. So you're seeing it across affiliates, and it's been a consistent area of growth for us. www.virtus.edu.au selectively added resources, has expanded its contribution to our AUM, and is an important part of the growth. Great, and just in terms of capital allocation, how should we be thinking about, as we're updating our models, buy back, debt pay down, how are you guys thinking about this, about that, and maybe you could just remind us of any potential earn out payments that will be the use of cash flow in the coming years? Yeah, so in terms of capital, you know, in terms of capital, we are currently at low levels of leverage.
Speaker Change: Yes.
Just add.
Speaker Change: That.
To reiterate the small and smid cap has been a consistent area of.
Speaker Change: Of growth.
Speaker Change: <unk>.
Private client.
Speaker Change: <unk> really expanded that had some good traction on that part of the business from Kayne Anderson Rudnick as well as some fixed income flows that we saw.
Speaker Change: From our team at site. So are you seeing it across affiliates and it's been a consistent area of growth for us.
It's an area, we've invested in and selectively added resources.
Speaker Change: Has expanded its contribution to our AUM and is an important part of the growth that we see going forward.
Speaker Change: Yes.
Speaker Change: Great and just in terms of capital allocation, how should we be thinking about to grow updating our models buybacks debt pay down how are you guys thinking about that about that and maybe you could just remind us of any potential earn out payments that will be a use of cash flow in the coming years.
Speaker Change: Yes, so in terms in terms of the capital again lay out currently at low levels of leverage we generate significant cash flows and as we look at in the quarter, we sort of do evaluate all the categories. One thing to highlight as Mike had noted earlier first quarter is one of our biggest cash utilization quarters.
George Robert Aylward: We generate significant cash flows, and as we look at them in the quarter, we sort of do evaluate all the categories. One thing to highlight, as Mike noted earlier, the first quarter is one of our biggest cash utilization quarters. So if you look historically, in terms of how we've deployed cash in the first quarter, you will generally kind of see that because so much cash is used for the annual incentives, which is our largest expense, that will then have an impact on how much we might avail ourselves of other things, though, but we do view share buybacks as, you know, So I can't give you any specifics, but it will be in the context of where we are in terms of our cash and needs. Yeah. And just specifically, Michael.
If you look historically in terms of how we've deployed cash in the first quarter, you will generally kind of see that.
Speaker Change: Because so much cash is used for the annual incentives, which is our largest expense.
Speaker Change: That will then have an impact then on how much we might avail ourselves and other things they will but we do view share buybacks as a great use of of our capital and continue to have that as a priority. So I can't give you any specifics, but it will be in the context of <unk>.
Speaker Change: Where we are in terms of our cash needs.
Speaker Change: Yes.
Speaker Change: Specifically Michael.
Mike: As you recall, the first quarter also includes revenue participation payment annually. It's been around the $25 million mark. It'll last several first quarters, so I'd expect somewhere around that level.
Speaker Change: As you recall the first quarter also does include a.
Speaker Change: Revenue participation payments annually.
Speaker Change: It's been.
Speaker Change: Around the $25 million market last several first quarter, so I'd expect it to be.
Speaker Change: Somewhere in that level.
Mike: So in addition to annual incentive and other cash needs in the first quarter, we will make that. And then I would note, in addition to the buybacks, we've obviously raised the dividend for six consecutive years and have had a nice growth rate of the dividend of close to 30% in that period of time. And while we've done that, we've also reduced the share count probably close to about 12 or 13% over that six-year period. So that balanced approach to capital management, you're seeing it growing the dividend consistently and reducing the share count.
Speaker Change: So in addition to annual incentive and other cash needs in the first quarter, we will.
Speaker Change: Do you expect them to make that payment.
Speaker Change: And then.
Speaker Change: I would note in addition to the buybacks, we've obviously raised the dividend six consecutive.
Years and have had a nice.
Speaker Change: Growth rate of the dividend of close to 30% in that period of time and while we've done that we've also reduced the share count probably close to about 12 or 13% over that six year period, so that balanced approach to capital management and Youre seeing it.
Growing the dividend consistently and reducing the share count consistently over time, and we think all of that as ways to create value to shareholders.
George Robert Aylward: I'm All of that is ways to create value to share. Great. Just a final question for me on M&A. I was hoping maybe you could elaborate a bit on the M&A pipeline and the conversations that you're having with prospective candidates in the marketplace. How would you sort of characterize those conversations today versus maybe six or 12 months ago? What are some of the properties that are coming across your desk, and where do you see some of the biggest opportunities for M&A at this point? Yeah, I think in terms of the conversations, again, the number of conversations and the frequency, you know, remains pretty consistent.
Speaker Change: Great and just final question for me on M&A I was hoping maybe you could elaborate a bit on the M&A pipeline and conversations that youre, having with prospective candidates in the marketplace. How would you sort of characterize those conversations today versus maybe six or 12 months ago. What are some of the properties that are coming across your desk and where do you see some of the biggest opera.
Speaker Change: <unk> at this point for <unk>.
Speaker Change: Yes, I think in terms of the conversations again, the number of conversations and the frequency remains pretty consistent I mean, there are a lot of conversations going on and but I do think they really become much more in terms of <unk>.
George Robert Aylward: I mean, there are a lot of conversations going on, but I do think they've really become much more in terms of conversations and strategic fit and alignment of interest and much less in terms of just, you know, auction processes. So, we continue to be interested in many of the conversations that we're having, but again, I think they are more in terms of trying to make sure it's a good strategic fit. Specific areas where I think we've kind of alluded to where we and others have an interest are in some of those areas that are less of the traditional and more of the alternative types of strategies. Our last two transactions were on the liquid alt side in terms of the Alpha Simplex as well as the Venturibon at Westchester.
Speaker Change: Conversations and strategic fit and.
Speaker Change: And alignment of interests and much less in terms of just.
Speaker Change: Auction processes. So we are and continue to be interested in many of the conversations that we're having.
Speaker Change: And but again I think they are more in terms of trying to make sure. It's a good strategic fit specific areas, where I think we've kind of alluded to where we we and others have interest in is in some of those areas that are less of the traditional and more of the alternative types of strategies. Our last two transactions were on the lip.
Speaker Change: We'd all side in terms of the alpha simplex as well as the vent driven in Westchester, we continue to see that as an area to expand our offerings because I believe we're very well represented on the equity and fixed income spectrum. So that that is an area.
George Robert Aylward: We continue to see that as an area to expand our offerings because I believe we're very well represented on the equity and fixed income spectrum. So, that is an area that we're interested in, but we consider different alternatives and different opportunities, you know, as they arise. As I said before, for us, it's always important that our long-term growth strategy does not require M&A to be successful. So, we do focus on the organic side, but we're very excited about the number of opportunities that we think could ultimately be out there, but only if they make sense for us and only if they are the right use of, you know, our capital at a certain point.
That we're interested in but we consider different alternatives and different opportunities as they arise as I said before for US. It's always important that our long term growth strategy does not require M&A to be successful. So we do focus on the organic side, but we're very excited about the number of opportunities that we do think could ultimately be.
Speaker Change: Out there, but only if they make sense for us and if and only if there are the right use of our capital at a point in time.
Michael J. Cyprys: Great. Thanks so much. Thank you. This concludes our question and answer session. I would like to turn the conference back over to Mr. Aylward.
Speaker Change: Great. Thanks, so much.
Speaker Change: Thank you.
Speaker Change: This concludes our question and answer session I would like to turn the conference back over to Mr. Al word.
George Robert Aylward: Great, thank you. So, I want to just thank everyone for joining us today. And, as always, we certainly encourage you to give us a call if you have any further questions or need information. Thank you all. Have a great day. That concludes today's call. Thank you for participating, and you may now disconnect, www.virtusinvestmentpartners.com www.virtusinvestmentpartners.com
al: Great. Thank you. So I wanted to just thank everyone for joining us today and as always we certainly encourage you to give us a call. If you have any other further questions or information. Thank you all have a great day.
Speaker Change: That concludes today's call. Thank you for participating and you may now disconnect.
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