Virtus Investment Partners, Inc. · NYSE:VRTS
Virtus Investment Partners — Q2 2022 Earnings Presentation
45 slides from Virtus Investment Partners's earnings presentation, Jul 29, 2022
Slide 1: Second Quarter Earnings Presentation
SECOND QUARTER EARNINGS PRESENTATION July 29, 2022 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 Quarter ■ Results ■ Q & A Session 3
Slide 4: Overview of Quarter
INVESTMENT PARTNERS. OVERVIEW OF QUARTER
Slide 5: Second Quarter 2022 Overview
SECOND QUARTER 2022 OVERVIEW Assets and Flows ■ Assets under management (AUM) of $155.4 billion compared with $183.3 billion at March 31, reflecting market depreciation and net outflows ■ Sales of $7.9 billion compared with $9.4 billion in the prior quarter due to lower sales of open-end funds and r
Slide 6: Results
INVESTMENT PARTNERS. RESULTS
Slide 7: Assets Under Management
ASSETS UNDER MANAGEMENT SIGNIFICANT MARKET DECLINE U.S. Retail Funds Closed-End Funds ■ AUM of $155.4 billion compared with Institutional Accounts Retail Separate Accounts $183.3 billion due to: Global Funds, ETFs, and Variable Insurance Funds – ($22.8) billion of market depreciation; and – ($4.8) b
Slide 8: Asset Flows
ASSET FLOWS LOWER RETAIL SALES ■ Sales of $7.9 billion declined from $9.4 billion – Retail sales declined 37%, reflecting industry trends and investor sentiment – Institutional sales increased 41% to their highest quarterly level ■ Net outflows of $4.8 billion impacted by market trends and retail in
Slide 9: Investment Management Fees, As Adjusted
INVESTMENT MANAGEMENT FEES, AS ADJUSTED DECLINE IN AVERAGE AUM ■ Investment management fees, as adjusted, decreased by $20.4 million, or 10%, due to lower average AUM ■ Average fee rate of 41.2 bps compared with 41.9 bps, reflecting lower equity AUM Metrics Revenues, as adjusted $210.3 $217.7 $232.6
Slide 10: Employment Expenses, As Adjusted
EMPLOYMENT EXPENSES, AS ADJUSTED LOWER VARIABLE COMPENSATION ■ Employment expenses, as adjusted, of $89.1 million decreased $12.5 million – Reflects $9.7 million of seasonally higher expenses in the prior quarter and lower variable incentive compensation ■ As a percentage of revenues, as adjusted, e
Slide 11: Other Operating Expenses, As Adjusted
OTHER OPERATING EXPENSES, AS ADJUSTED INCREASED TRAVEL AND RELATED EXPENSES ■ Other operating expenses, as adjusted, of $31.0 million increased $1.6 million, or 6%, primarily due to: $31.0 – Higher travel and related expenses – Annual equity grants to Board of Directors of $0.8 million ■ Other opera
Slide 12: Non-GAAP Results
NON-GAAP RESULTS REFLECTS LOWER AUM ■ Operating margin, as adjusted, of 39.2% Operating Income, As Adjusted compared with 40.6% Diluted earnings per share, as adjusted – Lower primarily due to market-driven revenue declines ■ Diluted EPS, as adjusted, of $6.86 compared with $7.87 – 10% decline in av
Slide 13: Capital and Select Balance Sheet
CAPITAL AND SELECT BALANCE SHEET INCREASED RETURN OF CAPITAL ■ Working capital of $185.4 million Select Balance Sheet Items: 6/30/21 9/30/21 12/31/21 3/31/22 6/30/22 decreased from $196.1 million Cash and cash equivalents $275 $437 $379 $225 $251 primarily due to return of capital and Seed capital i
Slide 14: Financial Supplement
INVESTMENT PARTNERS FINANCIAL SUPPLEMENT
Slide 15: Non-GAAP Information: Income Statement
NON-GAAP INFORMATION INCOME STATEMENT 1 (UNAUDITED) Q2:21 Q3:21 Q4:21 Q1:22 Q2:22 YTD:21 YTD:22 Revenues, As Adjusted Investment management fees, as adjusted $183,230 $190,029 $203,429 $196,289 $175,896 $347,165 $372,185 Administration and shareholder service fees, as adjusted 25,926 26,482 27,665 2
Slide 16: Non-GAAP Information: Income Statement (Continued)
NON-GAAP INFORMATION INCOME STATEMENT 1 (CONTINUED) (UNAUDITED) Q2:21 Q3:21 Q4:21 Q1:22 Q2:22 YTD:21 YTD:22 Other Income (Expense), As Adjusted Realized and unrealized gain (loss) on investments, net, as adjusted $476 $24 ($145) ($455) ($2,704) $403 ($3,159) Other income, net, as adjusted 826 1,001
Slide 17: Non-GAAP Information: Balance Sheet
NON-GAAP INFORMATION BALANCE SHEET 1 (UNAUDITED) 6/30/2021 9/30/2021 12/31/2021 3/31/2022 6/30/2022 Assets: Cash and cash equivalents $275,439 $437,242 $378,921 $225,217 $250,530 Investments – seed capital 140,679 144,476 144,660 137,835 125,409 Investments – other 73,723 78,643 86,569 90,139 75,673
Slide 18: Non-GAAP Information: Balance Sheet (Continued)
NON-GAAP INFORMATION BALANCE SHEET 1 (CONTINUED) (UNAUDITED) 6/30/2021 9/30/2021 12/31/2021 3/31/2022 6/30/2022 Liabilities and Equity Liabilities: Accrued compensation and benefits $96,509 $139,106 $187,449 $70,646 $105,106 Accounts payable and accrued liabilities 45,755 41,774 48,496 62,335 40,800
Slide 19: U.S. GAAP Information: Income Statement
U.S. GAAP INFORMATION INCOME STATEMENT (UNAUDITED) Q2:21 Q3:21 Q4:21 Q1:22 Q2:22 YTD:21 YTD:22 Revenues Investment management fees $193,510 $201,133 $213,673 $206,817 $185,024 $366,779 $391,841 Distribution and service fees 23,450 23,293 23,464 20,007 17,159 43,798 37,166 Administration and sharehol
Slide 20: U.S. GAAP Information: Income Statement (Continued)
U.S. GAAP INFORMATION INCOME STATEMENT (CONTINUED) (UNAUDITED) Q2:21 Q3:21 Q4:21 Q1:22 Q2:22 YTD:21 YTD:22 Other Income (Expense) Realized and unrealized gain (loss) on investments, net $2,494 ($504) $1,026 ($2,982) ($10,543) $3,385 ($13,525) Realized and unrealized gain (loss) of CIP 1, net 2,747 (
Slide 21: Assets Under Management by Product, Asset Class and Region
ASSETS UNDER MANAGEMENT BY PRODUCT, ASSET CLASS AND REGION 6/30/2021 9/30/2021 12/31/2021 3/31/2022 6/30/2022 Assets by Product U.S. Retail Funds $72,746 $70,526 $74,616 $66,554 $53,838 Global Funds 1,456 1,399 1,418 4,089 3,483 Exchange Traded Funds 1,260 1,321 1,479 1,448 1,287 Variable Insurance
Slide 22: Assets Under Management by Product and Asset Class
ASSETS UNDER MANAGEMENT BY PRODUCT AND ASSET CLASS Open-End Closed-End Retail Separate Institutional Total as of Funds Funds Accounts Accounts 6/30/2022 Equity: Domestic Equity $19,686 $— $26,931 $19,180 $65,797 International Equity 5,321 — 99 1,036 6,456 Global Equity 1,240 — 415 7,046 8,701 Specia
Slide 23: Asset Flows: Total
ASSET FLOWS TOTAL 6/30/2021 9/30/2021 12/31/2021 3/31/2022 6/30/2022 YTD:21 YTD:22 Total Beginning balance $168,880 $178,638 $177,305 $187,186 $183,342 $132,194 $187,186 Inflows 9,550 7,623 8,712 9,435 7,884 20,161 17,319 Outflows (8,096) (8,126) (8,693) (11,395) (12,652) (16,195) (24,047) Net Flows
Slide 24: Asset Flows by Product
ASSET FLOWS BY PRODUCT 6/30/2021 9/30/2021 12/31/2021 3/31/2022 6/30/2022 YTD:21 YTD:22 U.S. Retail Funds Beginning balance $69,730 $72,746 $70,526 $74,616 $66,554 $48,492 $74,616 Inflows 4,591 3,555 4,029 4,739 2,797 10,243 7,536 Outflows (4,864) (4,964) (5,744) (7,858) (7,254) (10,021) (15,112) Ne
Slide 25: Asset Flows by Product (Continued)
ASSET FLOWS BY PRODUCT (CONTINUED) 6/30/2021 9/30/2021 12/31/2021 3/31/2022 6/30/2022 YTD:21 YTD:22 Exchange Traded Funds Beginning balance $1,021 $1,260 $1,321 $1,479 $1,448 $837 $1,479 Inflows 232 174 211 126 136 407 262 Outflows (92) (65) (73) (151) (116) (169) (267) Net Flows 140 109 138 (25) 20
Slide 26: Asset Flows by Product (Continued)
ASSET FLOWS BY PRODUCT (CONTINUED) 6/30/2021 9/30/2021 12/31/2021 3/31/2022 6/30/2022 YTD:21 YTD:22 Closed-End Funds Beginning balance $11,664 $11,993 $11,721 $12,068 $12,060 $5,914 $12,068 Inflows — 3 19 8 24 — 32 Outflows — — — — — — — Net Flows — 3 19 8 24 — 32 Market performance 514 (114) 718 (1
Slide 27: Asset Flows by Product (Continued)
ASSET FLOWS BY PRODUCT (CONTINUED) 6/30/2021 9/30/2021 12/31/2021 3/31/2022 6/30/2022 YTD:21 YTD:22 Intermediary Sold Managed Accounts Beginning balance $31,133 $34,125 $34,974 $37,621 $34,347 $23,852 $37,621 Inflows 2,066 1,726 2,045 1,771 1,093 4,560 2,864 Outflows (700) (1,103) (999) (1,221) (1,7
Slide 28: Asset Flows by Product (Continued)
ASSET FLOWS BY PRODUCT (CONTINUED) 6/30/2021 9/30/2021 12/31/2021 3/31/2022 6/30/2022 YTD:21 YTD:22 Institutional ex. Structured Products Beginning balance $42,802 $45,604 $45,882 $48,140 $53,658 $40,861 $48,140 Inflows 2,302 1,808 2,099 2,449 3,452 4,186 5,901 Outflows (2,184) (1,727) (1,625) (1,62
Slide 29: Asset Flows by Asset Class
ASSET FLOWS BY ASSET CLASS 6/30/2021 9/30/2021 12/31/2021 3/31/2022 6/30/2022 YTD:21 YTD:22 Domestic Equity Beginning balance $77,155 $82,819 $83,331 $87,889 $78,504 $63,680 $87,889 Inflows 4,467 3,445 3,596 4,279 2,942 9,363 7,221 Outflows (3,634) (3,344) (3,013) (4,343) (4,268) (7,452) (8,611) Net
Slide 30: Asset Flows by Asset Class (Continued)
ASSET FLOWS BY ASSET CLASS (CONTINUED) 6/30/2021 9/30/2021 12/31/2021 3/31/2022 6/30/2022 YTD:21 YTD:22 Global Equity Beginning balance $9,681 $10,623 $11,009 $11,658 $10,580 $9,512 $11,658 Inflows 669 732 1,231 214 1,154 1,170 1,368 Outflows (404) (308) (298) (230) (1,011) (1,021) (1,241) Net Flows
Slide 31: Asset Flows by Asset Class (Continued)
ASSET FLOWS BY ASSET CLASS (CONTINUED) 6/30/2021 9/30/2021 12/31/2021 3/31/2022 6/30/2022 YTD:21 YTD:22 Leveraged Finance Beginning balance $11,981 $12,270 $12,210 $12,069 $12,213 $10,730 $12,069 Inflows 684 577 666 981 491 1,531 1,472 Outflows (434) (623) (755) (847) (1,219) (884) (2,066) Net Flows
Slide 32: Asset Flows by Asset Class (Continued)
ASSET FLOWS BY ASSET CLASS (CONTINUED) 6/30/2021 9/30/2021 12/31/2021 3/31/2022 6/30/2022 YTD:21 YTD:22 Investment Grade Beginning balance $8,509 $8,245 $7,924 $7,177 $7,475 $8,883 $7,177 Inflows 337 274 229 164 137 764 301 Outflows (601) (572) (933) (545) (479) (967) (1,024) Net Flows (264) (298) (
Slide 33: Asset Flows by Asset Class (Continued)
ASSET FLOWS BY ASSET CLASS (CONTINUED) 6/30/2021 9/30/2021 12/31/2021 3/31/2022 6/30/2022 YTD:21 YTD:22 Multi-Asset 1 Beginning balance $22,498 $23,668 $23,641 $24,853 $23,415 $12,201 $24,853 Inflows 674 672 583 577 383 1,235 960 Outflows (488) (392) (397) (597) (703) (817) (1,300) Net Flows 186 280
Slide 34: Investment Management Fees: Average Assets by Product
INVESTMENT MANAGEMENT FEES AVERAGE ASSETS1 BY PRODUCT Q2:21 Q3:21 Q4:21 Q1:22 Q2:22 YTD:21 YTD:22 U.S. Retail Funds $71,599 $72,476 $76,288 $69,133 $59,799 $67,736 $64,466 Global Funds 1,411 1,453 1,426 3,902 3,444 1,338 3,673 Exchange Traded Funds 1,159 1,295 1,387 1,422 1,401 1,024 1,411 Variable
Slide 35: Investment Management Fees: Average Fees Earned by Product
INVESTMENT MANAGEMENT FEES AVERAGE MANAGEMENT FEES EARNED1 BY PRODUCT (IN BASIS POINTS) Q2:21 Q3:21 Q4:21 Q1:22 Q2:22 YTD:21 YTD:22 U.S. Retail Funds 46.2 46.1 49.3 47.8 47.4 47.0 47.6 Global Funds 54.4 52.8 43.5 33.5 37.8 50.1 35.5 Exchange Traded Funds 14.0 10.4 6.5 10.0 11.1 10.8 10.5 Variable In
Slide 36: Reconciliation: U.S. GAAP to Non-GAAP Q2 2022
RECONCILIATION: U.S. GAAP TO NON-GAAP Q2 2022 (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
Slide 37: Reconciliation: U.S. GAAP to Non-GAAP Q1 2022
RECONCILIATION: U.S. GAAP TO NON-GAAP Q1 2022(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 managem
Slide 38: Reconciliation: U.S. GAAP to Non-GAAP Q4 2021
RECONCILIATION: U.S. GAAP TO NON-GAAP Q4 2021 (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
Slide 39: Reconciliation: U.S. GAAP to Non-GAAP Q3 2021
RECONCILIATION: U.S. GAAP TO NON-GAAP Q3 2021 (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
Slide 40: Reconciliation: U.S. GAAP to Non-GAAP Q2 2021
RECONCILIATION: U.S. GAAP TO NON-GAAP Q2 2021 (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
Slide 41: Reconciliation: U.S. GAAP to Non-GAAP YTD 2022
RECONCILIATION: U.S. GAAP TO NON-GAAP YTD 2022 (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 manag
Slide 42: Reconciliation: U.S. GAAP to Non-GAAP YTD 2021
RECONCILIATION: U.S. GAAP TO NON-GAAP YTD 2021 (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 manag
Slide 43: 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
Slide 44: Footnotes
FOOTNOTES (UNAUDITED) Components of Acquisition and Integration Expenses and Other for the respective periods are shown in the table below: Q2 2021 Q3 2021 Q4 2021 Q1 2022 Q2 2022 YTD:21 YTD:22 Acquisition and Integration Expenses Employment expenses $615 $429 $(846) $4,282 $260 $1,482 $4,542 Other
Slide 45: Virtus Investment Partners
3éVIRTUS INVESTM! ENT PARTNERS
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