Virtus Investment Partners, Inc. · NYSE:VRTS
Virtus Investment Partners — Q3 2015 Earnings Presentation
40 slides from Virtus Investment Partners's earnings presentation, Oct 30, 2015
Slide 1: Third Quarter 2015 Earnings Presentation
Third Quarter 2015 Earnings Presentation October 30, 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 Third Quarter Third Quarter Results Q & A Session 3
Slide 4: Overview of Third Quarter
_VIRTUS | INVESTMENT PARTNERS OVERVIEW OF THIRD QUARTER
Slide 5: Overview of Third Quarter: Assets and Flows
OVERVIEW OF THIRD QUARTER Assets and Flows Assets under management of $47.9 billion, a decrease of 9% sequentially; $2.7 billion of market depreciation in the quarter due to challenging market conditions Total sales of $2.5 billion declined from $3.3 billion in the prior quarter Net flows were
Slide 6: Overview of Third Quarter: Capital Activities
OVERVIEW OF THIRD QUARTER Capital Activities Return of capital of $21.2 million representing 136% of net income, as adjusted Share repurchases of 156,000 shares are highest quarterly level to date; basic shares outstanding have declined 4.3% from September 30, 2014 Increased the share repurcha
Slide 7: Third Quarter Results
_VIRTUS | INVESTMENT PARTNERS THIRD QUARTER RESULTS
Slide 8: Assets Under Management
ASSETS UNDER MANAGEMENT Quarterly Trends Commentary Trend reflects impact of net flows and $59.6 $56.7 market performance $54.8 $52.4 $47.9 Assets1 decreased $11.7 billion or 20% from prior year − Reflects open-end net outflows, market performance and changes in leverage − Institutional assets inc
Slide 9: Asset Flows
ASSET FLOWS Inflows/Outflows Commentary Flows reflective of market trends, product $11.8 breadth and investment performance $9.5 Net flows of ($1.6) billion includes ($0.9) $3.5 $3.7 $3.4 $3.3 billion from former AlphaSector funds $2.5 Mutual fund flows by asset class: Q3 14 Q4 14 Q1 15 Q2 15 Q3
Slide 10: 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 $225.2 $206.3 Sequential decrease of $5.1 million, or $78.8 $75.9 7%, due to 7% lower average assets and $70.8 $70.3 $65.2 lower fee rate
Slide 11: Employment Expenses, As Adjusted
EMPLOYMENT EXPENSES, AS ADJUSTED Quarterly Results Year-to-Date Commentary Trend reflects staffing levels and variable incentive plans Decrease of $1.7 million, or 5%, over $104.4 $102.7 prior year primarily reflects lower variable incentive compensation partially offset by $35.2 $35.6 higher staf
Slide 12: 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 $34.3 $34.2 Decrease of $0.3 million, or 3%, over prior quarter primarily reflects $0.7 million $11.2 $11.6 $11.3 of annual board grants in t
Slide 13: 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 $111.3 Diluted EPS, as adjusted, declined 21% $88.9 $41.6 $39.2 due to lower p
Slide 14: Capital Position
CAPITAL POSITION Select Balance Sheet Items Commentary 9/30/14 12/31/14 3/31/15 6/30/15 9/30/15 Strong capital position reflects cash Cash and cash equivalents $173 $203 $166 $194 $127 generated from the business and capital Seed capital investments 1 $239 $238 $242 $239 $277 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 Q3:14 Q4:14 Q1:15 Q2:15 Q3:15 YTD:14 YTD:15 Revenues, As Adjusted Investment management fees, as adjusted $78,849 $75,866 $70,801 $70,321 $65,193 $225,193 $206,315 Distribution and service fees, as adjusted 23,681 21,919 19,618 17,658 15,614
Slide 17: Non-GAAP Income Statement (continued)
NON-GAAP INCOME STATEMENT Quarterly Trend and Year-to-Date (continued) Q3:14 Q4:14 Q1:15 Q2:15 Q3:15 YTD:14 YTD:15 Other Income (Expense), as adjusted Realized and unrealized (loss) gain on investments, net, as (326) (282) 119 224 (159) (67) 183 adjusted Other income, net, as adjusted 233 318 435 24
Slide 18: U.S. GAAP Income Statement
U.S. GAAP INCOME STATEMENT Quarterly Trend and Year-to-Date Q3:14 Q4:14 Q1:15 Q2:15 Q3:15 YTD:14 YTD:15 Revenues Investment management fees $78,960 $75,374 $70,496 $68,867 $64,891 $225,289 $204,254 Distribution and service fees 23,671 21,901 19,598 17,635 15,587 70,049 52,820 Administration and tran
Slide 19: U.S. GAAP Income Statement (continued)
U.S. GAAP INCOME STATEMENT Quarterly Trend and Year-to-Date (continued) Q3:14 Q4:14 Q1:15 Q2:15 Q3:15 YTD:14 YTD:15 Other Income (Expense) Realized and unrealized gain (loss) on investments, net (1,039) (798) 545 343 (2,082) 1,712 (1,194) Realized and unrealized gain (loss) on investments of (5,330)
Slide 20: Condensed Balance Sheet
CONDENSED BALANCE SHEET Quarter-end Trend 9/30/14 12/31/14 3/31/15 6/30/15 9/30/15 Assets: Cash and cash equivalents $172,709 $202,847 $166,031 $194,334 $126,470 Investments 63,659 63,448 56,995 59,301 55,225 Accounts receivable, net 53,045 49,721 52,792 43,488 40,107 Assets of consolidated sponsore
Slide 21: Condensed Balance Sheet (continued)
CONDENSED BALANCE SHEET Quarter-end Trend (continued) 9/30/14 12/31/14 3/31/15 6/30/15 9/30/15 Liabilities and Equity Liabilities: Accrued compensation and benefits $42,924 $54,815 $17,343 $27,134 $38,206 Accounts payable and accrued liabilities 33,389 31,627 32,627 43,456 39,739 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 Q3:14 Q4:14 Q1:15 Q2:15 Q3:15 YTD:14 YTD:15 By Product (period end) Open-End Funds $39,838.8 $36,292.3 $34,120.5 $32,211.0 $28,717.1 $39,838.8 $28,717.1 Variable Insurance Funds 1,237.5 1,221.9 1,197.3 1,134.3 999.3 1,237.5
Slide 23: AUM and Average Net Management Fees Earned
AUM AND AVERAGE NET MANAGEMENT FEES EARNED Quarterly Trend and Year-to-Date Q3:14 Q4:14 Q1:15 Q2:15 Q3:15 YTD:14 YTD:15 Average Net Management Fees Earned (1) (In basis points, annualized) Open-End Funds 50.8 50.6 49.9 49.1 47.2 51.5 49.8 Variable Insurance Funds 51.7 48.0 51.4 51.2 48.7 51.9 51.3 S
Slide 24: Assets Under Management: All Product Flows
ASSETS UNDER MANAGEMENT Quarterly Trend and Year-to-Date: All Product Flows and AUM By Asset Class Q3:14 Q4:14 Q1:15 Q2:15 Q3:15 YTD:14 YTD:15 All Product Flows Beginning balance $61,394.3 $60,877.6 $56,702.4 $54,773.0 $52,401.0 $57,739.6 $56,702.4 Inflows 3,514.3 3,429.8 3,710.8 3,267.8 2,547.2 11,
Slide 25: Asset Flows by Product
ASSETS UNDER MANAGEMENT Asset Flows – By Product Q3:14 Q4:14 Q1:15 Q2:15 Q3:15 YTD:14 YTD:15 Open-End Funds Beginning balance $39,819.1 $39,838.8 $36,292.3 $34,120.5 $32,211.0 $36,367.7 $36,292.3 Inflows 3,034.5 2,841.3 2,999.9 2,611.3 1,857.8 9,824.3 7,469.0 Outflows (2,382.9) (5,028.5) (5,329.3) (
Slide 26: Asset Flows by Product (continued)
ASSETS UNDER MANAGEMENT Asset Flows – By Product (continued) Q3:14 Q4:14 Q1:15 Q2:15 Q3:15 YTD:14 YTD:15 Closed-End Funds Beginning balance $7,530.6 $7,568.1 $7,581.4 $7,288.0 $6,901.0 $6,499.6 $7,581.4 Inflows 30.5 - - - - 493.8 - Outflows - - - - - - - Net Flows 30.5 - - - - 493.8 - Market perform
Slide 27: Asset Flows by Product (continued)
ASSETS UNDER MANAGEMENT Asset Flows – By Product (continued) Q3:14 Q4:14 Q1:15 Q2:15 Q3:15 YTD:14 YTD:15 Intermediary Sold Managed Accounts Beginning balance $4,328.2 $4,030.2 $4,188.7 $4,250.3 $4,180.6 $5,095.8 $4,188.7 Inflows 100.1 106.5 176.7 150.4 132.9 514.6 460.0 Outflows (217.6) (231.4) (219
Slide 28: Asset Flows by Product (continued)
ASSETS UNDER MANAGEMENT Asset Flows – By Product (continued) Q3:14 Q4:14 Q1:15 Q2:15 Q3:15 YTD:14 YTD:15 Institutional Accounts Beginning balance $4,081.9 $3,900.4 $4,296.5 $4,620.6 $4,665.1 $4,003.7 $4,296.5 Inflows 109.4 309.9 368.1 214.1 199.5 340.6 781.7 Outflows (236.5) (132.1) (147.2) (87.3) (
Slide 29: Open-End Asset Flows by Asset Class
ASSETS UNDER MANAGEMENT Open-End Asset Flows – By Asset Class Q3:14 Q4:14 Q1:15 Q2:15 Q3:15 YTD:14 YTD:15 Domestic Equity Funds Beginning balance $12,189.5 $12,080.5 $10,389.7 $7,934.4 $6,019.7 $11,092.1 $10,389.7 Inflows 813.8 754.0 340.6 134.7 107.6 2,882.4 582.9 Outflows (721.1) (2,197.8) (2,574.
Slide 30: Open-End Asset Flows by Asset Class (continued)
ASSETS UNDER MANAGEMENT Open-End Asset Flows – By Asset Class (continued) Q3:14 Q4:14 Q1:15 Q2:15 Q3:15 YTD:14 YTD:15 Taxable Bond Funds Beginning balance $11,003.2 $11,039.3 $10,600.4 $10,308.7 $9,960.9 $10,425.1 $10,600.4 Inflows 905.3 814.8 656.4 473.0 419.4 2,909.7 1,548.8 Outflows (775.0) (1,20
Slide 31: U.S. GAAP to Non-GAAP Reconciliation – Q3 2015
U.S. GAAP TO NON-GAAP RECONCILIATION – Q3 2015 Reclassifications Adjustments U.S. GAAP Distribution and other Consolidated investment Amortization of Seed capital and CLO Non-GAAP Basis asset-based expenses products intangible assets investments impact Other Basis Revenues Investment management fees
Slide 32: U.S. GAAP to Non-GAAP Reconciliation – Q2 2015
U.S. GAAP TO NON-GAAP RECONCILIATION – Q2 2015 Reclassifications Adjustments U.S. GAAP Distribution and other Consolidated investment Amortization of Seed capital and CLO Non-GAAP Basis asset-based expenses products intangible assets investments impact Other Basis Revenues Investment management fees
Slide 33: U.S. GAAP to Non-GAAP Reconciliation – Q1 2015
U.S. GAAP TO NON-GAAP RECONCILIATION – Q1 2015 Reclassifications Adjustments U.S. GAAP Distribution and other Consolidated investment Amortization of Seed capital and CLO Non-GAAP Basis asset-based expenses products intangible assets investments impact Other Basis Revenues Investment management fees
Slide 34: U.S. GAAP to Non-GAAP Reconciliation – Q4 2014
U.S. GAAP TO NON-GAAP RECONCILIATION – Q4 2014 Reclassifications Adjustments U.S. GAAP Distribution and other Consolidated investment Amortization of Seed capital and CLO Non-GAAP Basis asset-based expenses products intangible assets investments impact Other Basis Revenues Investment management fees
Slide 35: U.S. GAAP to Non-GAAP Reconciliation – Q3 2014
U.S. GAAP TO NON-GAAP RECONCILIATION – Q3 2014 Reclassifications Adjustments U.S. GAAP Distribution and other Consolidated investment Amortization of Seed capital and CLO Non-GAAP Basis asset-based expenses products intangible assets investments impact Other Basis Revenues Investment management fees
Slide 36: U.S. GAAP to Non-GAAP Reconciliation – YTD 2015
U.S. GAAP TO NON-GAAP RECONCILIATION – YTD 2015 Reclassifications Adjustments U.S. GAAP Distribution and other Consolidated Amortization of Seed capital and CLO 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 2014
U.S. GAAP TO NON-GAAP RECONCILIATION – YTD 2014 Reclassifications Adjustments U.S. GAAP Distribution and other Consolidated Closed-end fund Amortization of Seed capital and CLO 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: Q3:14 Q4:14 Q1:15 Q2:15 Q3:15 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: Virtus Investment Partners
VIRTIUS | INVESTMENT PARTNERS
Virtus Investment Partners — Q3 2015 Earnings Presentation on 6ix