Good morning. My name is Deedee, 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. After the speech 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 Roark. Thanks, Didi, and good morning,

everyone. Welcome to Virtus Investment Partners' discussion of our fourth quarter 2025 financial and operating results. Joining me today are George Elward, our President and CEO, and Mike Angerthal. After their prepared remarks, we will open the call for questions. Before we begin, I'll refer you to the disclosures on slide two. Today's comments may include forward-looking statements which involved risks and uncertainties described in our news release and SEC filings. Actual results may differ materially. We will also refer, we also reference certain non-GAAP financial measures. Reconciliations to the most directly comparable GAAP measures are available in today's news release and financial supplement on our website. Now I'd like to turn the call

over to George. George? Thank you, Sean, and good morning everyone. I'll start with an overview of The results were reported this morning, and then Mike will provide more detail. The fourth quarter reflected a challenging environment for us, given that quality-oriented equity strategies, which represent half of our AUM, remained out of favor, resulting in an increased level of net outflows. As we have previously noted, our quality-oriented equity strategies have delivered strong long-term performance across cycles and have previously been our largest drivers of growth when in However, the market backdrop continued to favor more momentum-driven stocks, resulting in near-term underperformance. Importantly, the impact from our quality equity strategies has overshadowed areas of strength across the business, which in the quarter include positive net flows and strategies from several managers, including in growth equity, emerging markets debt, listed real assets, and event-driven, continued strong positive net flows in ETFs, product introductions of differentiated actively managed ETFs, expansion into private markets with two strategic investments, solid long-term investment performance with fixed income and alternatives also having strong near-term performance, continued return of capital with $10 million of share buybacks in the quarter, and a solid balance sheet, meaningful liquidity, and a minimum net leverage at year-end. We continue to execute our strategic priorities in the quarter, including broadening our product offerings with several ETF introductions and expansion into the private markets. For ETFs, we launched three new actively managed funds in the quarter, including a growth opportunities ETF from Sylvent and U.S. and international dividend strategies from our systematic team. We expect several additional active ETF launches over the next two quarters across managers, including Stone Harbor, Duff & Phelps, and Sylvan. We now have 25 ETFs, spanning a range of strategies and continue to focus on broadening access to them in distribution channels. In addition, we have several other new offerings in process or filing, including interval funds and additional retail separate account strategies. And as mentioned, we also have expanded into private markets with the previously announced pending acquisition of a majority interest in Keystone National Group, an asset-centric private credit manager, and a minority investment in Crescent Cove, a venture growth manager. I will discuss both in more detail shortly. Looking at our fourth quarter results, asset center management were $159 billion at $1231, down from $169 billion due to net outflows and the impact of market performance. Total sales of $5.3 billion compared with $6.3 billion in the third quarter, which included a $4 billion CLO issuance. Total net outflows were $8.1 billion, and across products, the outflows were almost entirely driven by equities. Looking at flows across asset classes, the equity net outflows largely reflected the continued-style headwind for quality-oriented strategies. We had several meaningful institutional partial redemptions in such strategies, as well as some seasonal tax loss harvesting open-end funds. Fixed-income net flows were modestly negative at $0.1 billion for the quarter, and we saw positive net flows in certain fixed-income strategies, including multi-sector and emerging market debt. Alternative strategies were essentially break-even for the quarter and positive for the trailing 12 months. In terms of what we're seeing early in the first quarter, our U.S. retail funds continue to face headwinds, though there have been encouraging signs in the market of broadening investor ascendant, and January sales were at the highest level since June, and net flows at the best level since September, and fixed income net flows were positive. For ETFs, sales and net flows continue to be strong. Within retail separate accounts, while for the month we have seen an increase in sales, there was a large redemption from a client that rebalanced a lower-fee, model-only mandate to a passive strategy. On the institutional side, trends are similar to the fourth quarter, with known redemptions exceeding known wins. Turning now to our financial results, earnings in the operating margin declined modestly, reflecting lower average AUM, partially offset by lower operating expenses. The operating margin was 32.4%, which compared with 33% last quarter. Earnings per share suggested of $6.50 compared with $6.69 in the third quarter. Turning to investment performance, recent performance reflects our overweight to quality equity, while long-term performance demonstrates we've generated solid performance over market cycles. For the three-year period, while 39% of AUM outperformed benchmarks due to challenging equity performance, fixed income and alternative strategies performed very well, with 76% and 60% of AUM, respectively, outperforming benchmarks. Over the 10-year period, 62% of our equity assets, 77% of our fixed income assets, and 71% of alternative assets beat their benchmarks. For just mutual funds, 65% of equity funds and 87% of fixed income funds outperformed their peer median for the 10-year period. I would also note that 84% of our rated retail fund assets were in three four- and five-star funds, and 23% of our retail funds are rated four- and five-stars. As it relates to equities, despite the style headwind, our quality-focused managers continue to invest with high-conviction businesses with durable fundamentals and long-term potential. Their disciplined approach has delivered excellent returns over cycles, and we remain confident that as companies with quality characteristics come back in favor, these strategies are well positioned. With the environment year-to-date, we are pleased that although it's a short period, several of these strategies have generated very compelling performance. In terms of our balance sheet in capital, we continue to have financial flexibility to balance our capital priorities of investing in the business, returning capital shareholders, and the appropriate leverage. During the quarter, we repurchased approximately 60,000 shares for $10 million. The full year, we used $60 million to repurchase over 347,000 shares, representing 5% of beginning shares. We ended the quarter with significant liquidity, including $386 million of cash and equivalents, and an undrawn $250 million revolver, positioning us for the upcoming first quarter obligations, including the closing payment for Keystone National. Before turning the call over to Mike to review our financial results in more detail, I would like to provide some highlights on the Keystone National and Crescent Cove transactions, which will allow us to provide private market offerings and differentiated strategies with strong track records. We will acquire a 56% majority interest in Keystone, a boutique private credit manager specializing in asset-based lending, with approximately $2.5 billion in assets across a tender offer fund and two private REITs. Keystone's approach differs from traditional direct lending. Its financings are secured by specific collateral, are self-amortizing with regular payments of principal and interest, have shorter durations, and are structured with robust covenants and triggers. This collateral-backed, covenant-rich design provides meaningful downside protection for investors who are underexposed to private markets and serves as a differentiated complement for those already invested in traditional private credit. We see significant growth opportunities for Keystone across both retail and institutional channels. Their strategies are already available in an at-scale tender offer fund used by an established base of wealth management firms, and we believe we can expand that meaningfully. In addition, over time, we also expect to introduce their capabilities to U.S. and non-U.S. institutional clients. We're excited to welcome Keystone's Salt Lake City-based team to Virtus and expect to close the transaction during the first quarter. With regard to Crescent Cove, a private investment firm that focuses on providing flexible capital solutions to high-growth, middle-market technology companies, we completed a 35% minority investment. Crescent Cove has built a strong track record, growing to over $1 billion in AUM across multiple private funds with a diversified client base. Their venture debt strategy offers a compelling, risk-managed way for investors to gain exposure to private technology companies. We see long-term growth potential for Crencer Cove, including extensions into other products for broader client usage, and we're excited to be partnering with their team. With that, I'll turn the call over to Mike to provide some more details on the financials. Mike?

Thank you, George. Good to be with you all this morning. Starting with our results on slide 10, assets under management at December 31st were $159.5 billion, and average assets declined 3% to $165.2 billion. It continues to be well-diversified. Institutional accounts were 33% of AUM, including wealth management, represented 27%, and U.S. retail funds represented 26%. 14% consisted of closed-end funds, global funds, and ETFs. Within open-end funds, ETF AUM increased to $5.2 billion, consequentially, on continued strong net flows and up 72% year-over-year. Also well-diversified by broad representation across domestic and international equities, including mid, small, and large-cap strategies, fixed-income platforms, duration, credit quality. Turning to slide 11, asset flows with $6.3 billion in the third quarter. Reviewing by product, institutional sales were $1.4 billion versus $2 billion last quarter, which included the issuance of a $0.4 billion CLO, $1.2 billion, $2.8 billion consistent with the prior quarter and included $0.8 billion of ETF sales. Outflows were $8.1 billion compared with $3.9 billion last quarter. Reviewing by product, institutional net outflows of $3 billion were primarily due to redemptions of quality domestic and global large-cap growth. Outflows in the quarter, 75% were part-time. Outflows had net outflows of $2.5 billion driven by quality small and mid-cap equity. Outflows of $2.5 billion compared with $1.1 billion last quarter. also driven by quality-oriented equity strategies, which more than offset positive ETF flows. ETFs continue to deliver strong momentum, generating $0.6 billion of positive net flows and sustaining a strong double-digit organic growth rate. I would note that outlook commentary that I provide beyond the first quarter, full quarter impact, Investment management fees as adjusted were $168.9 million, down 4% due to lower average AUM and a modestly lower average 40.6 basis with 41.1 basis points. An average fee rate of 41 to 42 basis points is reasonable for modeling purposes. Looking beyond the first quarter, we anticipate the average fee rate will be in the range of 43 to 45 basis. The fee rate will be impacted by markets and the mix of assets. 13 shows the five-quarter trend in employment expenses. Total employment expenses as adjusted of $95.8 million decreased 3% due to lower variable incentive. whose employment expenses as adjusted were 50.7% and within our range of 49% to 51%. Reminder, the first quarter will include seasonal employment expenses, which are incremental to this range. Looking beyond the first quarter, we anticipate that employment expenses as a percentage of revenues will be in a range of 50% to 52%, as the benefit from the addition of Keystone is more than offset by the decline in equity AUM. As always, it will be variable based on market performance in particular, operating expenses as adjusted, worth $30.2 million, down from $31.1 million due to discrete M&A-related costs within our $30 to $32 million quarterly range for several years. this remains appropriate for the first quarter. Looking beyond the first quarter, we believe a quarterly range of $31 to $33 million, as adjusted of $61.1 million, compared with $65 million in the third quarter, with the decline due to lower average assets, partially offset by low. The operating margin, as adjusted of 32.4%, decreased 60 basis points, with respect to non-operating Controlling interests of $1.5 million due to the increase in ownership of our majority-owned managers. Beyond the first quarter, we believe that a reasonable range for non-controlling interests will be $5 to $6 million, which factors in the keystone minority ownership of 25.3% was lowered by 70 basis points sequentially due to an update to our blended state tax rate for modeling purposes. In the second quarter, we anticipate an effective tax rate of 23% to 24% due to the addition of keys. Income as adjusted of $6.50 per diluted share declined 3% from $6.69, the trend of our capital liquidity and select balance sheet items, $386 million. In addition, we had $306 million, including seed capital. $20 million decline in outstanding debt reflected the quarterly required amortization payment. Debt to EBITDA was 1.3 times, and we ended the quarter with $13 million of net. Purchased 60,292 shares of common stock. Other uses of capital during the quarter included the $40 million closing payment for Crescent Cove that is included in the $61 million of investments equity method row, which also includes our minority investment in Zevenbergen, as well as $9 million for an increase in equity of our majority-owned manager, which was the last of the scheduled equity purchase. Cash usage will include our annual incentive payments, typically our highest operating cash outlay of the year, and the annual revenue participation payment, which we expect to approximate $22 million, which represents most of the remaining obligation. And as previously mentioned, we will make the $200 million payment for Keystone National upon closing the transaction. Taking into account that payment and other first-quarter activity, we would anticipate net leverage at March 31st of 1.2 times EBITDA. With that, let me turn the call back over to you.

Thank you, Mike. We will now take your questions. DeeDee, will you open up the lines, please?

Yes. As a reminder, to ask a question, please press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. Please stand by while we compile the Q&A roster. And our first question comes from Ben Budish of Barclays. Your line is open.

Hi, good morning, and thank you for taking the question. Maybe first, just on the fee rate, you know, Mike, you gave some color on the quarter and the year. Just curious if you could flesh that out a little bit more. What was the driver of the fee rate compression in the quarter? I assume Q1 guidance is kind of based on what you're seeing year to date, and the full year is going to be benefited from Keystone. but just any more color on the underlying dynamics would be helpful.

Yeah, as you know, we've operated our fee rate in a relatively narrow range for quite some time. I think if you normalize the 40.6 basis points in the first quarter, you get to about 40.9, just under 41 basis points as we had some discrete expenses, especially on the ETF side. So normalizing that, you have a kind of flat profile quarter over quarter. So we've been able to maintain that. And looking off of that 40.9, we gave the range in the first quarter 41 to 42. So you have that level. and we're anticipating one month of impact from Keystone as we're on target for closing on March 1st, as we've talked about. So when you factor in one month of Keystone in addition to where we ended the fourth quarter, we think we're for modeling and represents our ability to keep our fee rate in that narrow range.

Okay, helpful. And then maybe just a strategic question. And I know you just did a transaction, so I apologize that we're already asking you about the next one. But, you know, George, in your prepared remarks, you talked about, you know, market-wide headwinds, especially to kind of value-oriented strategies where you over-index. I'm just curious, you know, I understand over the last few years the line of questioning has probably been more around private markets, private credit. But just as you're thinking about, you know, future transactions, do you see that as an avenue for additional diversification? And diversification, you know, does it make sense to, you know, broaden your kind of growth equity footprint? And perhaps could you remind us today, you know, how much of the AUM is more kind of growth versus value oriented?

Sure. And so a couple of things. So I think as we think about diversification, in addition to diversifying our offerings, right, so our goal is to provide, you know, the building blocks for well-diversified portfolio, so we continue to build those out. But the other area of diversification we also think about a lot is where our clients are and what channels we're in. So I think when we previously talked about M&A, we've obviously talked about adding compelling differentiated strategies. We've also said areas of interest to us would include those things that would either broaden our distribution footprint, particularly outside the U.S., as well as in other channels where we think there's more opportunity for us to garner penetration. In terms of overall strategies, again, a lot of dialogues around private markets, and we do agree that private markets have an important place in a portfolio, but that's not the 100% of the portfolio. So we do continue to think about the other elements of the traditional managers. Right now, as we're living through an overweight towards what I would define as quality-oriented strategies, which include both core value and growth, but of a quality nature, we do have other managers who are more growth equity. They've been our smaller managers, but I think as we said on a previous call last quarter as well, we've actually seen growth there. They're just unfortunately smaller than our largest managers that have more of that quality orientation. So a lot of the ETFs and SMAs that we've been launching over the last quarter or two have been in those other kind of growth equity managers, And particularly where we see areas outside of the traditional U.S. basis, so some non-U.S. strategies as well as that. So we've been focusing in on like Sylvain, which is not a quality-oriented manager. It's more style agnostic. That has been an area of growth for us, and we've created several ETFs that have already launched, several are in filing. So we continue to work on those strategies. And even within some of our value managers or classic value managers, some of them have actually had very strong, compelling performance in the recent quarters, and we look for opportunities to grow those. So we'll continue to evaluate other things that we can add through M&A, but again, it wouldn't only be limited to those things which provide another investment strategy. It could be things that have other strategic elements to help just overall drive growth on the long term.

All right, great. Thank you both.

Thank you.

Thank you. And our next question comes from Crispin Love of Piper Sandler. Your line is open.

Thank you, Gimari. I appreciate you taking my question. First, can you share what your software exposure is across your AUM and then relatedly just exposure at Crescent Code Advisors given their focus in technology and just overall thoughts just given the news that's been permeating the headlines this week?

So in terms of overall just technology and software exposure?

Yes.

Yeah. I mean, you know, one of the things that has been a drag on the performance of some of our quality-oriented equities is they are just generally, as a rule, underweight areas of technology. So that's why this recent period, you know, in particular yesterday, was actually very good for many of our managers. um you know so generally i i think as a complex we are underweight exposure to technology but again not all technology is created equal right so there are some that will actually meet the definition of some of our managers and and some will not and in terms of crescent cove i mean they're in a different part of the market as it relates to uh the the venture part and the earlier growth opportunities. So, again, that is an area of focus for them. And, again, I think long-term, that continues to be a compelling area of investment. Mike, any other anecdotes you would

add? I would just say at Crescent, they don't have specificity that are at risk of being disintermediated by A. You highlighted the key point in the existing portfolio for Virtus. We're

well underweight. Great, thank you. That's what I thought, but just wanted to make sure in all very helpful color there. And then let's dig into the flow picture from the fourth quarter, and then as you look forward, just fourth quarter was very challenging across open-end, SMAs, institutional. Can you just discuss a little bit what drove the acceleration in negative flows quarter to quarter? The storyline seemed to be roughly similar from the third quarter commentary, and then just as you look at the fourth quarter moving to the first and kind of the longer-term outlook, just how you feel about the flows.

Yeah, and as you said and as we said in our remarks, it was definitely a challenging quarter, right? So we're overweight, half of our AUMs in quality-oriented equity strategies. They've had the longest period of underperformance versus more momentum types of strategies in decades. That has been quite a challenge. As that culminated in the fourth quarter, again, fourth quarter, a lot of time will there be either traditional just tax loss harvesting or other repositionings of portfolios for year end. So it was a higher level of outflows than we have seen previously. But what that means going forward, it's hard to know. It all depends on what does that market environment look like. If the market environment that we've seen in the last month and five days were to continue, as I alluded to, that's actually been an incredibly strong environment for some of those same strategies. And I think, as I said on an earlier call, generally when there's an inflection in the cycle is usually when you have some of the strongest performance from some of these strategies. It's still way too early. No one knows what that's going to look like, which goes to an earlier question that I had is why we continue to focus not only on, you know, the opportunity for when these strategies return to favor, but to continue to look for opportunities to grow our other strategies that don't have the same quality equity kind of orientation. So, you know, our hope is that the long-term value of the quality oriented equity strategies will demonstrate itself and people will again, you know, avail themselves of those strategies. But in the meantime, we're looking to grow other areas

of the business. Great. Thank you. And appreciate you taking the question.

No, thank you. Thank you. And our next question comes from Bill Katz of TD Cal and your line is

open. Great. Excuse me. Thank you very much for taking the questions. So first question is just Just in terms of the Keystone transaction, now they've had a little more time to interact with the management team post the announcement from a few weeks ago. Can you talk a little bit about maybe any kind of refined go-to-market opportunity? I think you spoke to potentially leveraging through your distribution channel and or institutional, which makes a ton of sense. But just where do you see the greatest opportunity for that growth by channel, by geography? I'd love to hear your perspective on that.

Yeah, no, great, great question. And we've had lots of conversations with management prior to and post-transaction, and I think one of the joint goals is the excitement that we all have about the opportunity to leverage what they currently have and have been very successful with in the wealth management channel with our broader distribution resources. So our sales teams have spent multiple sessions being trained and prepped, and they're all very excited and very eager to introduce those capabilities to not only our existing relationships, but as well as other relationships that we can more easily develop now that we have access to this. So we think there's a great opportunity set going forward. We do think the approach that they take on the private credit side, which is asset based in nature, as opposed to the direct lending, is a very differentiated approach. Their main vehicle does not utilize the higher level of leverage that some of the competitors do. So we think there's a great opportunity. The fund they have is already retail ready. It's already being utilized by wealth management firms. As I said in the prepared remarks, we believe we can accelerate that meaningfully. So that does create what would logically be the earliest opportunity set, right, is to leverage what they've already built. It is already attractive in the wealth management space, but just through the more extensive resources that we currently have. But as I also mentioned, we think there's some really interesting opportunities on the institutional side where this strategy, again, as a complement to other types of private credit, could be very compelling. So overall, we entered into this transaction because we thought there was a great combination that could create some long-term growth. The teams that are responsible for driving that growth are all very excited about this opportunity. So, we're going to continue to refine that. And as Mike alluded to, we're on target for our closing transaction date. And we're getting everything prepared in advance of that. So, our sales team, we're not waiting to close to get educated and do our planning, but all of the plans are in place and the material and everything, so we're very excited and look forward to closing on the transaction.

Okay, thank you. And just a follow-up and a clarification. On the follow-up, I was wondering if you could speak a little bit to maybe the capital deployment priorities and how that might be shifting given you have Keystone and Crescent sort of in the wings here versus how the stock has been behaving. I appreciate the buyback. But any sort of shift in your allocation thought process? And then on the deal pipeline, sorry not to say what you've done for me lately, but how does that pipeline look today, net of the Keystone and Crescent transactions?

In terms of priorities, again, we always take a balanced approach. And in different periods, we'll either overemphasize repurchases, we'll overemphasize investments in organic growth, and we always look to maintain a reasonable level of leverage. So I wouldn't say, you know, right now having just completed two transactions, Mike has spoken to our upcoming obligations, which we will need to satisfy, but we will continue to place an emphasis on other areas such as repurchases, which generally we have a long history of continued stock repurchase program with periodic pauses when we have other capital needs, as well as a dividend. We do think the dividend is an important element of return to shareholders. I believe we've had eight annual dividend increases, so that will continue to be something that we prioritize. And as we've always said for M&A, that really is related to only when we have an opportunity that we truly believe is of strategic value to build long-term shareholder value relative to our other alternatives. In terms of that pipeline, and again, having just completed two, which I assume you understand took a lot of our time, there are still opportunities that are out there. We still continue to evaluate and consider, but as always, we'll only evaluate and move forward with something if we truly believe it's additive in terms of the capability, it's additive in terms of broadening our distribution footprint, or in other areas such as increases in scale. This is a scale business, so that is something that we also consider as much.

okay just one clarification for Mike just in terms of the guidance I think I picked them all up I may have just not heard or it didn't come out for the first quarter how should we think about the comp ratio I appreciate the seasonal dynamic but any sense in the ratio just give them some of the moving parts

between the top line and the comp line yeah as you know the seasonal items do come forward at 49 to 51 percent range keystone sorry if I missed it thank you

for taking the questions. Thank you. That concludes our question and answer session. I would like to turn the conference back over to Mr. Aylward. Okay. Well, I want to thank everyone

again, as always, for joining us and certainly encourage you to reach out if there's any other

further questions. Thank you very much. That concludes today's call. Thank you for participating and you may now just connect.