Virtus Investment Partners, Inc. · NYSE:VRTS

Virtus Investment Partners — Q1 2020 Earnings Presentation

46 slides from Virtus Investment Partners's earnings presentation, May 1, 2020

1. Slide 1: First Quarter Earnings Presentation

   FIRST QUARTER EARNINGS PRESENTATION MAY 1, 2020 George R. Aylward President and Chief Executive Officer Michael A. Angerthal Executive Vice President and Chief Financial Officer

2. Slide 2: Important Disclosures

   IMPORTANT DISCLOSURES This presentation contains statements that are, or may be considered to be, forward-looking statements. All statements that are not historical facts, including statements about our beliefs or expectations, are “forward-looking statements” within the meaning of the Private Secur

3. Slide 3: Agenda

   AGENDA  Overview of Quarter  Results  Q & A Session 3

4. Slide 4: Overview of Quarter

   INVESTMENT PARTNERS OVERVIEW OF QUARTER

5. Slide 5: First Quarter 2020 Overview

   FIRST QUARTER 2020 OVERVIEW Assets and Flows  Long-term assets under management decreased 17% sequentially to $89.5 billion primarily due to market depreciation  Total sales of $7.0 billion increased $2.3 billion, or 47%, sequentially due to growth in open-end funds, institutional, retail separate

6. Slide 6: Results

   INVESTMENT PARTNERS RESULTS

7. Slide 7: Assets Under Management

   ASSETS UNDER MANAGEMENT DECREASED DUE TO MARKET DECLINE  Long-term assets declined by $18.2 billion, or Long-Term Liquidity 17%, primarily due to $16.6 billion of market depreciation $108.9 $101.7 $105.0 $104.1 $107.7 $103.3 $102.8 $90.7 $99.9  Domestic equity assets of $43.0 billion balanced $89.

8. Slide 8: Asset Flows

   ASSET FLOWS OUTFLOWS ELEVATED DUE TO MARCH REDEMPTIONS  Net flows of ($1.3) billion driven by elevated Net flows $7.0 $7.0 redemptions related to challenging market in $5.5 $5.5 $5.1 March $4.8 $4.8 – Positive net flows of $1.0 billion through February – Elevated outflows in March largely in more c

9. Slide 9: Investment Management Fees, As Adjusted

   INVESTMENT MANAGEMENT FEES, AS ADJUSTED ESSENTIALLY FLAT SEQUENTIALLY  Investment management fees, as adjusted, decreased sequentially by $0.7 million, or 1%, due to lower performance-related fees $111.6 $113.0 $112.3 $112.3 – Performance-related fees of $0.6 million $105.7 $97.9 compared with $1.1

10. Slide 10: Employment Expenses, As Adjusted

    EMPLOYMENT EXPENSES, AS ADJUSTED REFLECT SEASONAL EXPENSES AND HIGHER SALES  Employment expenses, as adjusted, of $66.9 million included $7.7 million of seasonally higher expenses: $66.9 $66.9 – $4.2 million of payroll taxes due to timing of $59.4 $59.4 $60.1 $58.8 annual incentive payments $57.0 –

11. Slide 11: Other Operating Expenses, As Adjusted

    OTHER OPERATING EXPENSES, AS ADJUSTED DECLINED FROM PRIOR YEAR AS A PERCENTAGE OF REVENUES  Other operating expenses, as adjusted, of $18.9 million, compared with $18.2 million in the prior quarter, include higher product-related costs $18.5 $19.1 $18.9 $18.5 $18.9 $18.1 $18.2  Other operating exp

12. Slide 12: Non-GAAP Results

    NON-GAAP RESULTS SEQUENTIAL EPS DECLINE DUE TO SEASONAL ITEMS  Diluted EPS, as adjusted, of $3.32 declined Operating Income, As Adjusted sequentially by $1.00, or 23% Diluted earnings per share, as adjusted – Included seasonal employment expenses of $0.69 per diluted share – Diluted EPS, as adjuste

13. Slide 13: Capital Position

    CAPITAL POSITION BALANCED CAPITAL MANAGEMENT  Working capital modestly decreased by Select Balance Sheet Items: 3/31/19 6/30/19 9/30/19 12/31/19 3/31/20 $5 million sequentially due to debt Cash and cash equivalents $142 $166 $196 $222 $158 1 Seed capital investments $89 $96 $101 $107 $91 repayments

14. Slide 14: Financial Supplement

    SéVIRTUS INVESTMENT PARTNERS FINANCIAL SUPPLEMENT

15. Slide 15: Non-GAAP Information: Income Statement

    NON-GAAP INFORMATION INCOME STATEMENT1 (UNAUDITED) Q1:19 Q2:19 Q3:19 Q4:19 Q1:20 YTD:19 YTD:20 Revenues, As Adjusted Investment management fees, as adjusted $97,874 $105,726 $111,599 $112,960 $112,252 $97,874 $112,252 Administration and shareholder service fees, as adjusted 14,440 15,081 15,329 15,1

16. Slide 16: Non-GAAP Information: Income Statement (Continued)

    NON-GAAP INFORMATION INCOME STATEMENT1 (CONTINUED) (UNAUDITED) Q1:19 Q2:19 Q3:19 Q4:19 Q1:20 YTD:19 YTD:20 Other Income (Expense), As Adjusted Realized and unrealized gain (loss) on investments, net, as adjusted $359 $102 $289 ($29) ($883) $359 ($883) Other income, net, as adjusted 450 696 746 519 6

17. Slide 17: Non-GAAP Information: Balance Sheet

    NON-GAAP INFORMATION BALANCE SHEET1 (UNAUDITED) 3/31/2019 6/30/2019 9/30/2019 12/31/2019 3/31/2020 Assets: Cash and cash equivalents $142,344 $166,026 $195,870 $221,781 $158,456 Investments – seed capital 88,594 95,765 100,520 107,225 90,562 Investments – other 88,558 87,885 84,621 87,657 80,715 Inv

18. Slide 18: Non-GAAP Information: Balance Sheet (Continued)

    NON-GAAP INFORMATION BALANCE SHEET1 (CONTINUED) (UNAUDITED) 3/31/2019 6/30/2019 9/30/2019 12/31/2019 3/31/2020 Liabilities and Equity Liabilities: Accrued compensation and benefits $31,105 $52,675 $78,073 $101,377 $36,641 Accounts payable and accrued liabilities 27,723 24,757 23,310 23,308 23,594 Di

19. Slide 19: U.S. GAAP Information: Income Statement

    U.S. GAAP INFORMATION INCOME STATEMENT (UNAUDITED) Q1:19 Q2:19 Q3:19 Q4:19 Q1:20 YTD:19 YTD:20 Revenues Investment management fees $105,918 $114,591 $120,023 $120,945 $120,288 $105,918 $120,288 Distribution and service fees 10,063 10,617 10,442 9,776 9,460 10,063 9,460 Administration and shareholder

20. Slide 20: U.S. GAAP Information: Income Statement (Continued)

    U.S. GAAP INFORMATION INCOME STATEMENT (CONTINUED) (UNAUDITED) Q1:19 Q2:19 Q3:19 Q4:19 Q1:20 YTD:19 YTD:20 Other Income (Expense) Realized and unrealized gain (loss) on investments, net $3,433 $2,039 $2 $1,570 ($7,544) $3,433 ($7,544) Realized and unrealized gain (loss) of CIP1, net (1,921) 9,720 (5

21. Slide 21: Assets Under Management by Product and Asset Class

    ASSETS UNDER MANAGEMENT BY PRODUCT AND ASSET CLASS 3/31/2019 6/30/2019 9/30/2019 12/31/2019 3/31/2020 Assets by Product U.S. Retail Funds $39,588 $40,151 $39,886 $41,458 $32,281 Offshore Funds1 126 140 401 463 445 Variable Insurance Funds 919 932 903 949 772 Total – Open-End Funds $40,633 $41,223 $4

22. Slide 22: Assets Under Management by Asset Class

    ASSETS UNDER MANAGEMENT BY ASSET CLASS 3/31/2019 6/30/2019 9/30/2019 12/31/2019 3/31/2020 Domestic Equity: Large Cap $18,975 $19,459 $19,684 $20,823 $17,130 Mid Cap 8,067 9,129 9,798 11,139 9,180 Small Cap 19,000 19,938 19,964 21,071 16,700 Total Domestic Equity $46,042 $48,526 $49,446 $53,033 $43,0

23. Slide 23: Assets Under Management by Product and Asset Class

    ASSETS UNDER MANAGEMENT BY PRODUCT AND ASSET CLASS Exchange Retail Open-end Closed-end traded separate Structured Total as of funds funds funds accounts Institutional products 3/31/2020 Domestic Equity: Large Cap $2,763 $3,173 — $2,417 $8,777 — $17,130 Mid Cap 3,891 — — 4,446 843 — 9,180 Small Cap 6

24. Slide 24: Asset Flows: Total/Long-Term

    ASSET FLOWS TOTAL/LONG-TERM 3/31/2019 6/30/2019 9/30/2019 12/31/2019 3/31/2020 YTD:19 YTD:20 Long-term Beginning balance $90,417 $99,923 $103,254 $102,846 $107,726 $90,417 $107,726 Inflows 5,501 5,119 4,760 4,764 7,016 5,501 7,016 Outflows (5,555) (5,058) (5,885) (4,418) (8,298) (5,555) (8,298) Net

25. Slide 25: Asset Flows by Product

    ASSET FLOWS BY PRODUCT 3/31/2019 6/30/2019 9/30/2019 12/31/2019 3/31/2020 YTD:19 YTD:20 U.S. Retail Funds Beginning balance $36,778 $39,588 $40,151 $39,886 $41,458 $36,778 $41,458 Inflows 2,970 2,484 2,946 2,278 3,772 2,970 3,772 Outflows (3,821) (3,175) (3,117) (2,734) (5,396) (3,821) (5,396) Net F

26. Slide 26: Asset Flows by Product (Continued)

    ASSET FLOWS BY PRODUCT (CONTINUED) 3/31/2019 6/30/2019 9/30/2019 12/31/2019 3/31/2020 YTD:19 YTD:20 Variable Insurance Funds Beginning balance $824 $919 $932 $903 $949 $824 $949 Inflows 7 5 9 9 13 7 13 Outflows (32) (30) (32) (32) (37) (32) (37) Net Flows (25) (25) (23) (23) (24) (25) (24) Market pe

27. Slide 27: Asset Flows by Product (Continued)

    ASSET FLOWS BY PRODUCT (CONTINUED) 3/31/2019 6/30/2019 9/30/2019 12/31/2019 3/31/2020 YTD:19 YTD:20 Closed-End Funds Beginning balance $5,956 $6,553 $6,653 $6,816 $6,748 $5,956 $6,748 Inflows 11 9 14 10 5 11 5 Outflows — — — — — — — Net Flows 11 9 14 10 5 11 5 Market performance 662 182 246 26 (1,18

28. Slide 28: Asset Flows by Product (Continued)

    ASSET FLOWS BY PRODUCT (CONTINUED) 3/31/2019 6/30/2019 9/30/2019 12/31/2019 3/31/2020 YTD:19 YTD:20 Intermediary Sold Managed Accounts Beginning balance $11,275 $12,975 $13,909 $14,390 $15,592 $11,275 $15,592 Inflows 588 608 635 763 907 588 907 Outflows (377) (385) (348) (352) (688) (377) (688) Net

29. Slide 29: Asset Flows by Product (Continued)

    ASSET FLOWS BY PRODUCT (CONTINUED) 3/31/2019 6/30/2019 9/30/2019 12/31/2019 3/31/2020 YTD:19 YTD:20 Institutional Accounts Beginning balance $27,445 $30,514 $32,056 $30,951 $32,635 $27,445 $32,635 Inflows 954 1,737 851 1,235 1,499 954 1,499 Outflows (1,154) (1,259) (2,216) (1,091) (1,777) (1,154) (1

30. Slide 30: Asset Flows: Open-End Funds by Asset Class

    ASSET FLOWS OPEN-END FUNDS1 BY ASSET CLASS 3/31/2019 6/30/2019 9/30/2019 12/31/2019 3/31/2020 YTD:19 YTD:20 Domestic Equity Funds Beginning balance $12,778 $14,856 $15,773 $15,827 $17,145 $12,778 $17,145 Inflows 1,071 1,011 1,123 934 1,644 1,071 1,644 Outflows (1,184) (934) (1,107) (875) (1,649) (1,

31. Slide 31: Asset Flows: Open-End Funds by Asset Class (Continued)

    ASSET FLOWS OPEN-END FUNDS1 BY ASSET CLASS (CONTINUED) 3/31/2019 6/30/2019 9/30/2019 12/31/2019 3/31/2020 YTD:19 YTD:20 Taxable Bond Funds2 Beginning balance $14,507 $14,142 $13,541 $13,117 $12,563 $14,507 $12,563 Inflows 952 721 774 668 994 952 994 Outflows (1,764) (1,453) (1,256) (1,308) (2,414) (

32. Slide 32: Asset Flows: Open-End Funds by Asset Class (Continued)

    ASSET FLOWS OPEN-END FUNDS1 BY ASSET CLASS (CONTINUED) 3/31/2019 6/30/2019 9/30/2019 12/31/2019 3/31/2020 YTD:19 YTD:20 Alternative Funds2 Beginning balance $1,031 $1,062 $1,061 $1,117 $1,106 $1,031 $1,106 Inflows 76 62 80 89 145 76 145 Outflows (112) (86) (89) (104) (112) (112) (112) Net Flows (36)

33. Slide 33: Investment Management Fees: Average Assets by Product

    INVESTMENT MANAGEMENT FEES AVERAGE ASSETS1 BY PRODUCT Q1:19 Q2:19 Q3:19 Q4:19 Q1:20 YTD:19 YTD:20 U.S. Retail Funds $38,521 $39,899 $40,224 $40,376 $39,668 $38,521 $39,668 Offshore Funds2 119 133 312 424 481 119 481 Variable Insurance Funds 892 929 921 918 911 892 911 Total – Open-End Funds $39,532

34. Slide 34: Average Management Fees Earned by Product

    INVESTMENT MANAGEMENT FEES AVERAGE MANAGEMENT FEES EARNED1 BY PRODUCT (IN BASIS POINTS) Q1:19 Q2:19 Q3:19 Q4:19 Q1:20 YTD:19 YTD:20 U.S. Retail Funds 54.5 55.8 56.6 57.3 57.7 54.5 57.7 Offshore Funds2 23.9 0.0 40.2 51.9 60.0 23.9 60.0 Variable Insurance Funds 63.4 64.1 62.7 62.9 63.1 63.4 63.1 Total

35. Slide 35: Average Net Management Fees Earned by Product

    INVESTMENT MANAGEMENT FEES AVERAGE NET MANAGEMENT FEES EARNED1 BY PRODUCT (IN BASIS POINTS) Q1:19 Q2:19 Q3:19 Q4:19 Q1:20 YTD:19 YTD:20 Total Open-End Funds 54.6 55.7 56.6 57.4 57.8 54.6 57.8 Revenue related adjustments (9.0) (9.3) (9.0) (8.5) (8.5) (9.0) (8.5) Total Open-End Funds, Net 45.6 46.4 47

36. Slide 36: Reconciliation: U.S. GAAP to Non-GAAP, Q1 2020

    RECONCILIATION: U.S. GAAP TO NON-GAAP Q1 2020 (UNAUDITED) Reclassification Other adjustments Consolidated Amortization Seed capital Acquisition U.S. GAAP investment Revenue of intangible and CLO and Non-GAAP Basis products related assets investments integration Other Basis Revenues Investment manage

37. Slide 37: Reconciliation: U.S. GAAP to Non-GAAP, Q4 2019

    RECONCILIATION: U.S. GAAP TO NON-GAAP Q4 2019 (UNAUDITED) Reclassification Other adjustments Consolidated Restructuring Amortization Seed capital Acquisition Non- U.S. GAAP investment Revenue and of intangible and CLO and GAAP Basis products related Severance assets investments integration Other Bas

38. Slide 38: Reconciliation: U.S. GAAP to Non-GAAP, Q3 2019

    RECONCILIATION: U.S. GAAP TO NON-GAAP Q3 2019 (UNAUDITED) Reclassification Other adjustments Consolidated Restructuring Amortization Seed capital Acquisition Non- U.S. GAAP investment Revenue and of intangible and CLO and GAAP Basis products related Severance assets investments integration Other Bas

39. Slide 39: Reconciliation: U.S. GAAP to Non-GAAP, Q2 2019

    RECONCILIATION: U.S. GAAP TO NON-GAAP Q2 2019 (UNAUDITED) Reclassification Other adjustments Consolidated Restructuring Amortization Seed capital Acquisition Non- U.S. GAAP investment Revenue and of intangible and CLO and GAAP Basis products related Severance assets investments integration Other Bas

40. Slide 40: Reconciliation: U.S. GAAP to Non-GAAP, Q1 2019

    RECONCILIATION: U.S. GAAP TO NON-GAAP Q1 2019 (UNAUDITED) Reclassification Other adjustments Consolidated Restructuring Amortization Seed capital Acquisition Non- U.S. GAAP investment Revenue and of intangible and CLO and GAAP Basis products related Severance assets investments integration Other Bas

41. Slide 41: Reconciliation: U.S. GAAP to Non-GAAP, 2020 YTD

    RECONCILIATION: U.S. GAAP TO NON-GAAP 2020 YTD (UNAUDITED) Reclassification Other adjustments Consolidated Amortization of Seed capital Acquisition U.S. GAAP investment Revenue intangible and CLO and Non-GAAP Basis products related assets investments integration Other Basis Revenues Investment manag

42. Slide 42: Reconciliation: U.S. GAAP to Non-GAAP, 2019 YTD

    RECONCILIATION: U.S. GAAP TO NON-GAAP 2019 YTD (UNAUDITED) Reclassification Other adjustments Consolidated Restructuring Amortization Seed capital Acquisition Non- U.S. GAAP investment Revenue and of intangible and CLO and GAAP Basis products related Severance assets investments integration Other Ba

43. Slide 43: Reconciliation: U.S. GAAP to Non-GAAP, Weighted Average Shares

    RECONCILIATION: U.S. GAAP to NON-GAAP (UNAUDITED) Q1:19 Q2:19 Q3:19 Q4:19 Q1:20 Weighted average shares outstanding - diluted Weighted average shares outstanding - diluted, GAAP 8,322 8,252 8,157 8,084 7,422 Dilutive impact of restricted stock units and stock options — — — — 232 Preferred stock1 — —

44. Slide 44: Footnotes

    FOOTNOTES Non-GAAP financial information differs from financial information determined in accordance with U.S. GAAP as a result of the reclassification of certain income statement items, as well as the exclusion of certain expenses and other items that are not reflective of the earnings generated fr

45. Slide 45: Footnotes

    FOOTNOTES (UNAUDITED) Components of Acquisition and Integration Expenses and Other for the respective periods are shown in the table below: Q1 2019 Q2 2019 Q3 2019 Q4 2019 Q1 2020 2019 YTD 2020 YTD Acquisition and Integration Expenses Employment expenses $1,433 $1,115 $1,223 $1,193 $(781) $1,433 $(7

46. Slide 46: STMENT PARTNERS,

    STMENT PARTNERS,

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