Virtus Investment Partners, Inc. · NYSE:VRTS
Virtus Investment Partners — Q2 2016 Earnings Presentation
39 slides from Virtus Investment Partners's earnings presentation, Jul 29, 2016
Slide 1: Second Quarter 2016 Earnings Presentation
Second Quarter 2016 Earnings Presentation July 29, 2016 George R. Aylward President and Chief Executive Officer Michael A. Angerthal Executive Vice President and Chief Financial Officer
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
Slide 3: Agenda
AGENDA Overview of Second Quarter Second Quarter Results Q & A Session 3
Slide 4: Overview of Second Quarter
_VIRTUS | INVESTMENT PARTNERS OVERVIEW OF SECOND QUARTER
Slide 5: Overview of Second Quarter
OVERVIEW OF SECOND QUARTER Assets and Flows Assets under management decreased 1% sequentially to $45.2 billion Total sales of $2.4 billion decreased $0.4 billion, or 16%, from sequential quarter as lower mutual fund sales were partially offset by higher institutional and separately managed accou
Slide 6: Second Quarter Results
_VIRTUS | INVESTMENT PARTNERS SECOND QUARTER RESULTS
Slide 7: Assets Under Management
ASSETS UNDER MANAGEMENT Quarterly Trends Commentary Trend reflects impact of net flows and market performance $52.4 $47.9 $47.4 Sequential decrease of $0.5 billion, or $45.7 $45.2 1% primarily reflects net flows of ($2.2) billion, partially offset by market appreciation of $1.8 billion Sequentia
Slide 8: Asset Flows
ASSET FLOWS Inflows/Outflows Commentary Flows reflect market trends, product breadth and investment performance $7.0 $5.2 Sales of $2.4 billion represent 16% $3.3 $3.2 sequential decrease due to lower open-end $2.5 $2.8 $2.4 fund sales partially offset by higher institutional sales Q2 15 Q3 15 Q4
Slide 9: Investment Management Fees, As Adjusted
INVESTMENT MANAGEMENT FEES, AS ADJUSTED Quarterly Results Year to Date Commentary Investment management fees reflect changes in average assets and net fee rate $141.1 Sequential increase of $0.4 million, or $115.8 1%, due to higher average fee rate $70.3 $65.2 $60.9 $57.7 $58.1 − Net fee rate incr
Slide 10: Employment Expenses, As Adjusted
EMPLOYMENT EXPENSES, AS ADJUSTED Quarterly Results Year to Date Commentary Trend reflects staffing levels and variable incentive plans Decrease of $2.9 million, or 8% over $69.2 $69.0 prior quarter reflects $2.2 million of lower payroll taxes and lower variable incentive $36.0 compensation $33.6 $
Slide 11: Other Operating Expenses, As Adjusted
OTHER OPERATING EXPENSES, AS ADJUSTED Quarterly Results Year to Date Commentary Results reflect timing of product, distribution, and operational initiatives $22.8 $22.5 The current quarter included the following discrete items: $11.6 $12.0 $12.1 $11.3 $10.4 − Annual director grant of $0.6 million
Slide 12: Non-GAAP Results
NON-GAAP RESULTS Quarterly Results Year to Date Commentary Profitability impacted by net flows, market Operating Income, As Adjusted performance and leveragability of the Diluted earnings per share, as adjusted business $63.6 Diluted EPS, as adjusted, of $1.24 increased 11% from prior quarter due
Slide 13: Capital Position
CAPITAL POSITION Select Non-GAAP Balance Sheet Items Commentary 6/30/15 9/30/15 12/31/15 3/31/16 6/30/16 Strong capital position reflects cash Cash and cash equivalents $194 $127 $88 $50 $156 generated from the business and capital Seed capital investments 1 $239 $277 $274 $281 $174 activities 2 Inv
Slide 14: Appendix
_VIRTIUS | INVESTMENT PARTNERS Appendix
Slide 15: Non-GAAP Income Statement Information
NON-GAAP INCOME STATEMENT INFORMATION Quarterly Trend and Total Year Q2:15 Q3:15 Q4:15 Q1:16 Q2:16 YTD:15 YTD:16 Revenues, As Adjusted Investment management fees, as adjusted $70,321 $65,193 $60,853 $57,735 $58,104 $141,122 $115,839 Distribution and service fees, as adjusted 17,658 15,614 14,272 12,
Slide 16: Non-GAAP Income Statement Information (continued)
NON-GAAP INCOME STATEMENT INFORMATION Quarterly Trend and Total Year (continued) Q2:15 Q3:15 Q4:15 Q1:16 Q2:16 YTD:15 YTD:16 Other Income (Expense), As Adjusted Realized and unrealized gain (loss) on investments, net, as $224 ($159) ($202) ($5) $94 $343 $89 adjusted Other income, net, as adjusted 24
Slide 17: U.S. GAAP Income Statement
U.S. GAAP INCOME STATEMENT Quarterly Trend and Total Year Q2:15 Q3:15 Q4:15 Q1:16 Q2:16 YTD:15 YTD:16 Revenues Investment management fees $68,867 $64,891 $60,611 $57,644 $58,192 $139,363 $115,836 Distribution and service fees 17,635 15,587 14,246 12,478 12,167 37,233 24,645 Administration and transf
Slide 18: U.S. GAAP Income Statement (continued)
U.S. GAAP INCOME STATEMENT Quarterly Trend and Total Year (continued) Q2:15 Q3:15 Q4:15 Q1:16 Q2:16 YTD:15 YTD:16 Other Income (Expense) Realized and unrealized gain (loss) on investments, net $343 ($2,082) $332 ($658) $3,281 $888 $2,623 Realized and unrealized gain (loss) on investments of (3,242)
Slide 19: Condensed Non-GAAP Balance Sheet
1 CONDENSED NON-GAAP BALANCE SHEET Quarter-end Trend 6/30/15 9/30/15 12/30/15 3/31/16 6/30/16 Assets: Cash and cash equivalents $194,334 $126,470 $87,574 $50,402 $155,532 Investments – seed capital 238,862 276,806 273,679 280,929 174,130 Investments – other 22,338 41,409 60,225 51,136 38,362 Total c
Slide 20: Condensed Non-GAAP Balance Sheet (continued)
1 CONDENSED NON-GAAP BALANCE SHEET Quarter-end Trend (continued) 6/30/15 9/30/15 12/30/15 3/31/16 6/30/16 Liabilities and Equity Liabilities: Accrued compensation and benefits $27,134 $38,206 $49,617 $15,035 $26,242 Accounts payable and accrued liabilities 43,456 39,739 23,036 20,563 20,448 Dividend
Slide 21: Assets Under Management
ASSETS UNDER MANAGEMENT Quarterly Trend and Total Year Q2:15 Q3:15 Q4:15 Q1:16 Q2:16 YTD:15 YTD:16 Ending Assets by Product Open-End Funds $32,211.0 $28,717.1 $27,865.8 $25,560.3 $23,854.9 $32,211.0 $23,854.9 Variable Insurance Funds $1,134.3 $999.3 $1,016.3 $975.7 $958.9 $1,134.3 $958.9 Total – Ope
Slide 22: Average Net Fees and Assets
AVERAGE NET FEES AND ASSETS Quarterly Trend and Total Year Q2:15 Q3:15 Q4:15 Q1:16 Q2:16 YTD:15 YTD:16 Average Net Management Fees (1) (In basis points, annualized) Open-End Funds 49.1 47.2 45.9 47.1 49.2 49.5 48.1 Variable Insurance Funds 51.2 48.7 48.6 53.2 55.4 51.3 54.3 Total Open-End Funds 49.2
Slide 23: Asset Flow Detail
ASSET FLOW DETAIL Quarterly Trend and Total Year: All Product Flows and AUM By Asset Class Q2:15 Q3:15 Q4:15 Q1:16 Q2:16 YTD:15 YTD:16 All Product Flows Beginning balance $54,773.0 $52,401.0 $47,937.7 $47,385.3 $45,651.2 $56,702.4 $47,385.3 Inflows 3,267.8 2,547.2 3,164.0 2,841.1 2,390.1 6,978.6 5,2
Slide 24: Asset Flow Detail
ASSET FLOW DETAIL Asset Flows – By Product Q2:15 Q3:15 Q4:15 Q1:16 Q2:16 YTD:15 YTD:16 Open-End Funds Beginning balance $34,120.5 $32,211.0 $28,717.1 $27,865.8 $25,560.3 $36,292.3 $27,865.8 Inflows 2,611.3 1,857.8 2,540.4 2,186.4 1,344.5 5,611.2 3,530.9 Outflows (4,120.1) (3,684.5) (3,662.6) (4,748.
Slide 25: Asset Flow Detail
ASSET FLOW DETAIL Asset Flows – By Product (continued) Q2:15 Q3:15 Q4:15 Q1:16 Q2:16 YTD:15 YTD:16 Closed-End Funds Beginning balance $7,288.0 $6,901.0 $6,349.8 $6,222.3 $6,543.6 $7,581.4 $6,222.3 Inflows - - - - - - - Outflows - - - - (103.3) - (103.3) Net Flows - - - - (103.3) - (103.3) Market per
Slide 26: Asset Flow Detail
ASSET FLOW DETAIL Asset Flows – By Product (continued) Q2:15 Q3:15 Q4:15 Q1:16 Q2:16 YTD:15 YTD:16 Intermediary Sold Managed Accounts Beginning balance $4,250.3 $4,180.6 $3,853.5 $3,985.7 $4,151.5 $4,188.7 $3,985.7 Inflows 150.4 132.9 193.1 295.9 337.5 328.1 633.4 Outflows (185.7) (176.3) (255.2) (2
Slide 27: Asset Flow Detail
ASSET FLOW DETAIL Asset Flows – By Product (continued) Q2:15 Q3:15 Q4:15 Q1:16 Q2:16 YTD:15 YTD:16 Institutional Accounts Beginning balance $4,620.6 $4,665.1 $4,638.7 $4,799.7 $4,848.3 $4,296.5 $4,799.7 Inflows 214.1 199.5 226.6 186.2 224.9 582.2 411.1 Outflows (87.3) (110.3) (181.3) (276.6) (292.0)
Slide 28: Asset Flow Detail: Open-End by Asset Class
ASSET FLOW DETAIL Open-End Asset Flows – By Asset Class Q2:15 Q3:15 Q4:15 Q1:16 Q2:16 YTD:15 YTD:16 Domestic Equity Funds Beginning balance $7,934.4 $6,019.7 $4,785.3 $4,349.0 $4,213.5 $10,389.7 $4,349.0 Inflows 134.7 107.6 108.0 120.6 227.3 475.3 347.9 Outflows (1,926.4) (968.9) (679.6) (576.6) (52
Slide 29: Asset Flow Detail: Open-End by Asset Class (continued)
ASSET FLOW DETAIL Open-End Asset Flows – By Asset Class (continued) Q2:15 Q3:15 Q4:15 Q1:16 Q2:16 YTD:15 YTD:16 Taxable Bond Funds Beginning balance $10,308.7 $9,960.9 $9,446.0 $8,990.8 $8,752.3 $10,600.4 $8,990.8 Inflows 473.0 419.4 536.2 518.6 418.3 1,129.4 936.9 Outflows (860.6) (818.1) (905.1) (
Slide 30: U.S. GAAP to Non-GAAP Reconciliation – Q2 2016
U.S. GAAP TO NON-GAAP RECONCILIATION – Q2 2016 Reclassifications Adjustments Distribution and Consolidated Amortization U.S. GAAP other asset- investment of intangible Restructuring Seed capital and Non-GAAP Basis based expenses products assets and severance CLO investments Other Basis Revenues Inve
Slide 31: U.S. GAAP to Non-GAAP Reconciliation – Q1 2016
U.S. GAAP TO NON-GAAP RECONCILIATION – Q1 2016 Reclassifications Adjustments Distribution and Consolidated Amortization U.S. GAAP other asset- investment of intangible Seed capital and Non-GAAP Basis based expenses products assets CLO investments Other Basis Revenues Investment management fees $ 57,
Slide 32: U.S. GAAP to Non-GAAP Reconciliation – Q4 2015
U.S. GAAP TO NON-GAAP RECONCILIATION – Q4 2015 Reclassifications Adjustments Distribution and Consolidated Amortization U.S. GAAP other asset- investment of intangible Seed capital and Non-GAAP Basis based expenses products assets CLO investments Other Basis Revenues Investment management fees $ 60,
Slide 33: U.S. GAAP to Non-GAAP Reconciliation – Q3 2015
U.S. GAAP TO NON-GAAP RECONCILIATION – Q3 2015 Reclassifications Adjustments Distribution and Consolidated Amortization U.S. GAAP other asset- investment of intangible Seed capital and Non-GAAP Basis based expenses products assets CLO investments Other Basis Revenues Investment management fees $ 64,
Slide 34: U.S. GAAP to Non-GAAP Reconciliation – Q2 2015
U.S. GAAP TO NON-GAAP RECONCILIATION – Q2 2015 Reclassifications Adjustments Distribution and Consolidated Amortization U.S. GAAP other asset- investment of intangible Seed capital and Non-GAAP Basis based expenses products assets CLO investments Other Basis Revenues Investment management fees $ 68,
Slide 35: U.S. GAAP to Non-GAAP Reconciliation – YTD June 2016
U.S. GAAP TO NON-GAAP RECONCILIATION – YTD JUNE 2016 Reclassifications Adjustments Distribution and Consolidated Amortization U.S. GAAP other asset- investment of intangible Restructuring Seed capital and Non-GAAP Basis based expenses products assets and severance CLO investments Other Basis Revenue
Slide 36: U.S. GAAP to Non-GAAP Reconciliation – YTD June 2015
U.S. GAAP TO NON-GAAP RECONCILIATION – YTD JUNE 2015 Reclassifications Adjustments Distribution and Consolidated Amortization U.S. GAAP other asset- investment of intangible Seed capital and Non-GAAP Basis based expenses products assets CLO investments Other Basis Revenues Investment management fees
Slide 37: Footnotes
FOOTNOTES Non-GAAP financial measures differ from financial measures determined in accordance with U.S. GAAP as a result of the reclassification of certain income statement items, as well as the adjustment of certain expenses and other items that are not reflective of the earnings generated from pro
Slide 38: Footnotes
FOOTNOTES Components of Other for the respective periods are shown in the table below: Q2:15 Q3:15 Q4:15 Q1:16 Q2:16 YTD:15 YTD:16 Other ($ in thousands) Loss contingency $11,300 $- $- $- $- $16,500 $- Tax impact of loss contingency (3,907) - - - - (5,507) - Transition related revenues 1,166 - - - -
Slide 39: Virtus Investment Partners
VIRTIUS | INVESTMENT PARTNERS
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