Virtus Investment Partners, Inc. · NYSE:VRTS
Virtus Investment Partners — Q2 2015 Earnings Presentation
40 slides from Virtus Investment Partners's earnings presentation, Jul 31, 2015
Slide 1: Second Quarter 2015 Earnings Presentation
Second Quarter 2015 Earnings Presentation July 31,2015 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 of $52.4 billion, a decrease of 4% sequentially Total sales of $3.3 billion declined from $3.7 billion sequentially Net flows were ($1.3) billion, an improvement from ($2.2) billion sequentially Excluding the former AlphaSec
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 $60.1 $59.6 market performance $56.7 $54.8 $52.4 Assets1 decreased $7.7 billion or 13% from prior year − Reflects open-end net outflows, market performance and changes in leverage − Institutional assets incr
Slide 8: Asset Flows
ASSET FLOWS Inflows/Outflows Commentary Flows reflective of market trends, product $8.3 breadth and investment performance $7.0 $4.0 Net flows of ($1.3) billion, includes ($2.1) $3.5 $3.4 $3.7 $3.3 billion of former AlphaSector fund flows Mutual fund flows by asset class: Q2 14 Q3 14 Q4 14 Q1 15
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 $146.3 $141.1 Sequential decrease of $0.5 million, or $78.8 $75.9 1%, due to decline in average assets $74.6 $70.8 $70.3 Decrease of $4.
Slide 10: Employment Expenses, As Adjusted
EMPLOYMENT EXPENSES, AS ADJUSTED Quarterly Results Year-to-Date Commentary Trend reflects initiatives and variable incentive plans Decrease of $2.0 million, or 6%, $69.1 $69.2 sequentially primarily due to timing of payroll taxes in the first quarter $34.6 $35.2 $34.1 $35.6 $33.6 Decrease of $1.
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 $23.2 $22.8 Increase of $0.4 million, or 4%, over prior quarter primarily reflects $0.7 million of $12.7 annual board grants $11.2 $11.6 $11.
Slide 12: Non-GAAP Results
NON-GAAP RESULTS Quarterly Results Year-to-Date Commentary Profitability driven by net flows, market Operating Income, As Adjusted performance and leveragability of the Earnings per share, as adjusted – diluted business $69.7 $63.6 Diluted EPS, as adjusted, consistent with $41.6 $39.2 sequential q
Slide 13: GAAP Reconciliation
GAAP RECONCILIATION Q2 2015 Diluted EPS Commentary Non-GAAP measures reflect operating $2.21 ($0.13) results from core business of managing ($0.06) ($0.94) assets Exclude returns generated from seed capital investments $1.08 Exclude non-cash amortization of intangible assets attributable to acqu
Slide 14: Capital Position
CAPITAL POSITION Select Balance Sheet Items Commentary 6/30/14 9/30/14 12/31/14 3/31/15 6/30/15 Strong capital position reflects cash Cash and cash equivalents $170 $173 $203 $166 $194 generated from the business and capital Seed capital investments 1 $224 $239 $238 $242 $239 activities 2 Investment
Slide 15: Appendix
_VIRTIUS | INVESTMENT PARTNERS Appendix
Slide 16: Non-GAAP Income Statement
NON-GAAP INCOME STATEMENT Quarterly Trend and Year-to-Date Q2:14 Q3:14 Q4:14 Q1:15 Q2:15 YTD:14 YTD:15 Revenues, As Adjusted Investment management fees, as adjusted $74,600 $78,849 $75,866 $70,801 $70,321 $146,344 $141,122 Distribution and service fees, as adjusted 23,947 23,681 21,919 19,618 17,658
Slide 17: Non-GAAP Income Statement (continued)
NON-GAAP INCOME STATEMENT Quarterly Trend and Year-to-Date (continued) Q2:14 Q3:14 Q4:14 Q1:15 Q2:15 YTD:14 YTD:15 Other Income (Expense), as adjusted Realized and unrealized (loss) gain on investments, net, as 153 (326) (282) 119 224 259 343 adjusted Other income, net, as adjusted 189 233 318 435 2
Slide 18: U.S. GAAP Income Statement
U.S. GAAP INCOME STATEMENT Quarterly Trend and Year-to-Date Q2:14 Q3:14 Q4:14 Q1:15 Q2:15 YTD:14 YTD:15 Revenues Investment management fees $74,537 $78,960 $75,374 $70,496 $68,867 $146,329 $139,363 Distribution and service fees 23,940 23,671 21,901 19,598 17,635 46,378 37,233 Administration and tran
Slide 19: U.S. GAAP Income Statement (continued)
U.S. GAAP INCOME STATEMENT Quarterly Trend and Year-to-Date (continued) Q2:14 Q3:14 Q4:14 Q1:15 Q2:15 YTD:14 YTD:15 Other Income (Expense) Realized and unrealized gain (loss) on investments, net 905 (1,039) (798) 545 343 2,751 888 Realized and unrealized gain (loss) on investments of 6,444 (5,330) (
Slide 20: Condensed Balance Sheet
CONDENSED BALANCE SHEET Quarter-end Trend 6/30/14 9/30/14 12/31/14 3/31/15 6/30/15 Assets: Cash and cash equivalents $170,367 $172,709 $202,847 $166,031 $194,334 Cash of consolidated sponsored investment products 361 1,055 457 2,058 1,372 Cash pledged or on deposit of consolidated sponsored 11,958 1
Slide 21: Condensed Balance Sheet (continued)
CONDENSED BALANCE SHEET Quarter-end Trend (continued) 6/30/14 9/30/14 12/31/14 3/31/15 6/30/15 Liabilities and Equity Liabilities: Accrued compensation and benefits $29,784 $42,924 $54,815 $17,343 $27,134 Accounts payable and accrued liabilities 33,131 33,389 31,627 32,627 43,456 Dividends payable 4
Slide 22: AUM and Average Net Management Fees Earned
AUM AND AVERAGE NET MANAGEMENT FEES EARNED Quarterly Trend and Year-to-Date Q2:14 Q3:14 Q4:14 Q1:15 Q2:15 YTD:14 YTD:15 By Product (period end) Open-End Funds $39,819.1 $39,838.8 $36,292.3 $34,120.5 $32,211.0 $39,819.1 $32,211.0 Variable Insurance Funds 1,305.5 1,237.5 1,221.9 1,197.3 1,134.3 1,305.
Slide 23: AUM and Average Net Management Fees Earned
AUM AND AVERAGE NET MANAGEMENT FEES EARNED Quarterly Trend and Year-to-Date Q2:14 Q3:14 Q4:14 Q1:15 Q2:15 YTD:14 YTD:15 Average Net Management Fees Earned (1) (In basis points, annualized) Open-End Funds 51.6 50.8 50.6 49.9 49.1 51.9 49.5 Variable Insurance Funds 51.0 51.7 48.0 51.4 51.2 52.0 51.3 S
Slide 24: Assets Under Management
ASSETS UNDER MANAGEMENT Quarterly Trend and Year-to-Date: All Product Flows and AUM By Asset Class Q2:14 Q3:14 Q4:14 Q1:15 Q2:15 YTD:14 YTD:15 All Product Flows Beginning balance $58,011.2 $61,394.3 $60,877.6 $56,702.4 $54,773.0 $57,739.6 $56,702.4 Inflows 4,018.3 3,514.3 3,429.8 3,710.8 3,267.8 8,2
Slide 25: Assets Under Management: Asset Flows by Product
ASSETS UNDER MANAGEMENT Asset Flows – By Product Q2:14 Q3:14 Q4:14 Q1:15 Q2:15 YTD:14 YTD:15 Open-End Funds Beginning balance $37,347.0 $39,819.1 $39,838.8 $36,292.3 $34,120.5 $36,367.7 $36,292.3 Inflows 3,148.5 3,034.5 2,841.3 2,999.9 2,611.3 6,789.8 5,611.2 Outflows (2,398.0) (2,382.9) (5,028.5) (
Slide 26: Assets Under Management: Asset Flows by Product (continued)
ASSETS UNDER MANAGEMENT Asset Flows – By Product (continued) Q2:14 Q3:14 Q4:14 Q1:15 Q2:15 YTD:14 YTD:15 Closed-End Funds Beginning balance $6,690.7 $7,530.6 $7,568.1 $7,581.4 $7,288.0 $6,499.6 $7,581.4 Inflows 463.3 30.5 - - - 463.3 - Outflows - - - - - - - Net Flows 463.3 30.5 - - - 463.3 - Market
Slide 27: Assets Under Management: Asset Flows by Product (continued)
ASSETS UNDER MANAGEMENT Asset Flows – By Product (continued) Q2:14 Q3:14 Q4:14 Q1:15 Q2:15 YTD:14 YTD:15 Intermediary Sold Managed Accounts Beginning balance $4,409.4 $4,328.2 $4,030.2 $4,188.7 $4,250.3 $5,095.8 $4,188.7 Inflows 136.8 100.1 106.5 176.7 151.4 414.5 328.1 Outflows (315.3) (217.6) (231
Slide 28: Assets Under Management: Institutional Accounts
ASSETS UNDER MANAGEMENT Asset Flows – By Product (continued) Q2:14 Q3:14 Q4:14 Q1:15 Q2:15 YTD:14 YTD:15 Institutional Accounts Beginning balance $4,530.5 $4,565.0 $4,348.3 $4,722.0 $5,036.2 $4,570.8 $4,722.0 Inflows 106.8 109.4 309.9 368.1 214.1 231.2 582.2 Outflows (137.9) (236.5) (132.1) (147.2)
Slide 29: Open-End Asset Flows by Asset Class
ASSETS UNDER MANAGEMENT Open-End Asset Flows – By Asset Class Q2:14 Q3:14 Q4:14 Q1:15 Q2:15 YTD:14 YTD:15 Domestic Equity Funds Beginning balance $11,575.7 $12,189.5 $12,080.5 $10,389.7 $7,934.4 $11,092.1 $10,389.7 Inflows 907.7 813.8 754.0 340.6 134.7 2,068.6 475.3 Outflows (806.0) (721.1) (2,197.8
Slide 30: Open-End Asset Flows by Asset Class (continued)
ASSETS UNDER MANAGEMENT Open-End Asset Flows – By Asset Class (continued) Q2:14 Q3:14 Q4:14 Q1:15 Q2:15 YTD:14 YTD:15 Taxable Bond Funds Beginning balance $10,646.1 $11,003.2 $11,039.3 $10,600.4 $10,308.7 $10,425.1 $10,600.4 Inflows 1,013.2 905.3 814.8 656.4 473.0 2,004.4 1,129.4 Outflows (763.0) (7
Slide 31: U.S. GAAP to Non-GAAP Reconciliation – Q2:15
U.S. GAAP TO NON-GAAP RECONCILIATION – Q2:15 Reclassifications Adjustments U.S. GAAP Distribution and other Consolidated sponsored Amortization of Seed capital Non-GAAP Basis asset-based expenses investment products intangible assets investments impact Other Basis Revenues Investment management fees
Slide 32: U.S. GAAP to Non-GAAP Reconciliation – Q1:15
U.S. GAAP TO NON-GAAP RECONCILIATION – Q1:15 Reclassifications Adjustments U.S. GAAP Distribution and other Consolidated sponsored Amortization of Seed capital Non-GAAP Basis asset-based expenses investment products intangible assets investments impact Other Basis Revenues Investment management fees
Slide 33: U.S. GAAP to Non-GAAP Reconciliation – Q4:14
U.S. GAAP TO NON-GAAP RECONCILIATION – Q4:14 Reclassifications Adjustments U.S. GAAP Distribution and other Consolidated sponsored Amortization of Seed capital Non-GAAP Basis asset-based expenses investment products intangible assets investments impact Other Basis Revenues Investment management fees
Slide 34: U.S. GAAP to Non-GAAP Reconciliation – Q3:14
U.S. GAAP TO NON-GAAP RECONCILIATION – Q3:14 Reclassifications Adjustments U.S. GAAP Distribution and other Consolidated sponsored Amortization of Seed capital Non-GAAP Basis asset-based expenses investment products intangible assets investments impact Other Basis Revenues Investment management fees
Slide 35: U.S. GAAP to Non-GAAP Reconciliation – Q2:14
U.S. GAAP TO NON-GAAP RECONCILIATION – Q2:14 Reclassifications Adjustments U.S. GAAP Distribution and other Consolidated sponsored Closed-end fund Amortization of Seed capital Non-GAAP Basis asset-based expenses investment products launch costs intangible assets investments impact Other Basis Revenu
Slide 36: U.S. GAAP to Non-GAAP Reconciliation – YTD:15
U.S. GAAP TO NON-GAAP RECONCILIATION – YTD:15 Reclassifications Adjustments U.S. GAAP Distribution and other Consolidated sponsored Amortization of Seed capital Non-GAAP Basis asset-based expenses investment products intangible assets investments impact Other Basis Revenues Investment management fee
Slide 37: U.S. GAAP to Non-GAAP Reconciliation – YTD:14
U.S. GAAP TO NON-GAAP RECONCILIATION – YTD:14 Reclassifications Adjustments U.S. GAAP Distribution and other Consolidated sponsored Closed-end fund Amortization of Seed capital Non-GAAP Basis asset-based expenses investment products launch costs intangible assets investments impact Other Basis Reven
Slide 38: 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 39: Footnotes
FOOTNOTES See components of other in the table below: Q2:14 Q3:14 Q4:14 Q1:15 Q2:15 YTD:14 YTD:15 Other ($ in thousands) Loss contingency $- $- $- $5,200 $11,300 $- $16,500 Tax impact of loss contingency - - - (1,600) (3,907) - (5,507) Transition related revenues - - - - 1,166 - 1,166 Tax impact of
Slide 40: VIRTIUS |
VIRTIUS | INVESTMENT PARTNERS
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