How did VRTS manage to increase operating profit in Q4 2024 despite rising expenses?

Virtus Investment Partners (VRTS) managed to increase operating profit in Q4 2024 despite rising expenses through a combination of strategic initiatives and financial management techniques. Here are the key factors that contributed to this outcome:

1. **Revenue Growth**: VRTS's total revenue for the period was $233.49 million. This revenue growth is a critical factor in increasing operating profit. Revenue growth can lead to higher operating income as a percentage of total revenue, even with rising expenses.

|code|Ticker|Name|Date|Operating Income|Total Revenue|Net Income|market_code|
|---|---|---|---|---|---|---|---|
|VRTS|VRTS.N|Virtus Investment Partners|2024 Q1|4.1197E7|2.22042E8|3.7867E7|169|
|VRTS|VRTS.N|Virtus Investment Partners|2024 Q2|5.1662E7|2.24384E8|2.6022E7|169|
|VRTS|VRTS.N|Virtus Investment Partners|2024 Q3|6.4929E7|2.27029E8|4.9104E7|169|
|VRTS|VRTS.N|Virtus Investment Partners|2024 Q4|5.8598E7|2.33494E8|3.946E7|169|

|code|Ticker|Name|Date|Diluted EPS|market_code|
|---|---|---|---|---|---|
|VRTS|VRTS.N|Virtus Investment Partners|2024 Q1|4.1|169|
|VRTS|VRTS.N|Virtus Investment Partners|2024 Q2|2.43|169|
|VRTS|VRTS.N|Virtus Investment Partners|2024 Q3|5.71|169|

2. **Expense Management**: The company's operating expenses were not provided in the detailed breakdown. However, the expense ratio for related ETFs ranged from 0.09% to 0.95%. The fact that VRTS operates multiple ETFs with varying expense ratios suggests a diversified approach to managing expenses. A lower expense ratio for some funds indicates effective cost control measures.

3. **Non-GAAP Adjustments**: VRTS does not adjust for tax attributes in its non-GAAP measures. This suggests that the company may be making conscious decisions about how it reports its financial results, which could include managing expenses in a way that enhances profitability as reported.
4. **Strategic Investments**: VRTS has been involved in strategic transactions, such as the acquisitions of AllianzGI, Westchester Capital, and Stone Harbor. These acquisitions have added complementary and differentiated investment strategies, increased scale, and enhanced distribution capabilities, which can lead to increased operating profit over time.
5. **Market Conditions**: The market conditions during Q4 2024 were challenging, leading to lower assets under management for some companies. However, VRTS continued to deliver solid financial and operating results, indicating effective management in difficult market conditions.

In conclusion, VRTS's ability to increase operating profit despite rising expenses can be attributed to a combination of revenue growth, effective expense management, strategic investments, and strong financial performance in challenging market conditions.