Virtus Investment Partners, Inc. · NYSE:VRTS
Virtus Investment Partners — Q4 2017 Earnings Presentation
43 slides from Virtus Investment Partners's earnings presentation, Feb 2, 2018
Slide 1: Fourth Quarter 2017 Earnings Presentation
Fourth Quarter 2017 Earnings Presentation February 2, 2018 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 Fourth Quarter Fourth Quarter Results Agreement with Sustainable Growth Advisers (SGA) Q & A Session 3
Slide 4: Overview of Fourth Quarter
_VIRTUS | INVESTMENT PARTNERS OVERVIEW OF FOURTH QUARTER
Slide 5: Overview of Fourth Quarter
OVERVIEW OF FOURTH QUARTER Assets and Flows Long-term assets under management increased $1.7 billion, or 1.9%, sequentially to $88.8 billion reflecting market appreciation partially offset by net outflows Total sales of $4.1 billion decreased $0.5 billion, or 10%, from the third quarter; prior q
Slide 6: Fourth Quarter Results
_VIRTUS | INVESTMENT PARTNERS FOURTH QUARTER RESULTS
Slide 7: Assets Under Management
ASSETS UNDER MANAGEMENT Quarterly Trends Commentary Long-Term Sequential increase in long-term assets $88.6 $90.6 $91.0 Liquidity of $1.7 billion, or 1.9%, primarily due to $87.1 $88.8 $85.0 market performance partially offset by net outflows $45.4 $48.0 Change in long-term assets from prior yea
Slide 8: Asset Flows
ASSET FLOWS Inflows / (Outflows) $15.4 Commentary Net flows $10.9 Sales decreased $0.5 billion, or 10%, sequentially; prior quarter included $0.5 $4.6 $3.3 $3.5 $4.1 billion CLO issuance $2.6 Net flows of ($0.8) billion included: Q4 16 Q1 17 Q2 17 1 Q3 17 Q4 17 TY 16 TY 17 − Open-end mutual fund
Slide 9: Investment Management Fees, As Adjusted
INVESTMENT MANAGEMENT FEES, AS ADJUSTED Quarterly Results Total Year Commentary $334.3 Sequential increase of $3.7 million, or 4%, reflects higher average AUM and $235.7 average fee rate $102.1 Open-end fund fee rate of 50.1 bps $98.4 reflects both lower fund expense $74.3 reimbursements and the
Slide 10: Employment Expenses, As Adjusted
EMPLOYMENT EXPENSES, AS ADJUSTED Quarterly Results Total Year Commentary $185.0 Increased $0.7 million, or 1%, primarily due to higher profit-based incentive $135.6 compensation Employment expense ratio decreased $51.9 $52.6 sequentially by 170 bps to 48% $39.6 $40.9 $33.5 Q4 16 Q1 17 Q2 17 Q3 1
Slide 11: Other Operating Expenses, As Adjusted
OTHER OPERATING EXPENSES, AS ADJUSTED Quarterly Results Total Year Commentary $58.0 SGA Transaction Costs Current quarter included $0.9 million of $45.1 transaction costs attributable to the SGA agreement $16.1 $16.7 Other operating expenses, as adjusted, $14.2 $15.8 as a percentage of revenues,
Slide 12: Non-GAAP Results
NON-GAAP RESULTS Quarterly Results Total Year Commentary Operating Income, As Adjusted $110.4 Diluted EPS, as adjusted, of $2.60 increased 13% sequentially Diluted earnings per share, as adjusted Operating income, as adjusted, increased 11% and 115% from prior quarter and $70.4 prior year, respe
Slide 13: Capital Position
CAPITAL POSITION Select Non-GAAP Balance Sheet Items Commentary 12/31/16 3/31/17 6/30/17 9/30/17 12/31/17 Made $51.7 million contingent Cash and cash equivalents $65 $236 $128 $165 $132 consideration payment 1 Seed capital investments $180 $175 $104 $109 $118 Investments - other 2 $29 $31 $92 $93
Slide 14: Agreement with SGA
AGREEMENT WITH SGA About SGA Distinctive growth equity manager founded in 2003 with $11.6B1 of AUM Manages U.S., global, and international portfolios primarily for institutional clients High conviction, benchmark agnostic approach well positioned vs passive Strategic Rationale Expands invest
Slide 15: Financial Supplement
_VIRTUS | INVESTMENT PARTNERS Financial Supplement
Slide 16: Non-GAAP Information: Income Statement
NON-GAAP INFORMATION Income Statement1 (Unaudited) Q4:16 Q1:17 Q2:17 Q3:17 Q4:17 TY:16 TY:17 Revenues, As Adjusted Investment management fees, as adjusted $59,279 $59,513 $74,272 $98,402 $102,114 $235,669 $334,301 Distribution and service fees, as adjusted 11,500 10,793 10,446 11,486 11,623 48,303 4
Slide 17: Non-GAAP Information: Income Statement (continued)
NON-GAAP INFORMATION Income Statement1 (continued) (Unaudited) Q4:16 Q1:17 Q2:17 Q3:17 Q4:17 TY:16 TY:17 Other Income (Expense), As Adjusted Realized and unrealized gain (loss) on investments, net, as $1 $- $- $- $- $141 $- adjusted Other income, net, as adjusted 626 646 46 436 506 1,089 1,634 Total
Slide 18: Non-GAAP Information: Balance Sheet
NON-GAAP INFORMATION Balance Sheet1 (Unaudited) 12/31/16 03/31/17 06/30/17 09/30/17 12/31/17 Assets: Cash and cash equivalents $64,588 $235,930 $127,571 $164,867 $132,150 Investments – seed capital 180,085 174,810 104,076 108,511 118,443 Investments – other 29,083 30,714 91,739 92,676 112,105 Invest
Slide 19: Non-GAAP Information: Balance Sheet (continued)
NON-GAAP INFORMATION Balance Sheet1 (continued) (Unaudited) 12/31/16 03/31/17 06/30/17 09/30/17 12/31/17 Liabilities and Equity Liabilities: Accrued compensation and benefits $47,885 $16,519 $51,978 $69,833 $86,658 Accounts payable and accrued liabilities 25,176 30,365 29,167 31,677 29,607 Dividends
Slide 20: U.S. GAAP Information: Income Statement
U.S. GAAP INFORMATION Income Statement (Unaudited) Q4:16 Q1:17 Q2:17 Q3:17 Q4:17 TY:16 TY:17 Revenues Investment management fees $58,996 $59,271 $74,062 $97,295 $100,447 $235,230 $331,075 Distribution and service fees 11,489 10,783 10,439 11,482 11,618 48,250 44,322 Administration and transfer agent
Slide 21: U.S. GAAP Information: Income Statement (continued)
U.S. GAAP INFORMATION Income Statement (continued) (Unaudited) Q4:16 Q1:17 Q2:17 Q3:17 Q4:17 TY:16 TY:17 Other Income (Expense) Realized and unrealized gain (loss) on investments, net $1,398 $297 $1,287 $1,367 $22 $4,982 $2,973 Realized and unrealized gain (loss) of consolidated (7,140) 4,444 (1,424
Slide 22: Assets Under Management: Product and Asset Class
ASSETS UNDER MANAGEMENT Assets: Product and Asset Class 12/31/16 03/31/17 06/30/17 09/30/17 12/31/17 Assets by Product Retail Funds $22,452.1 $23,710.4 $40,421.0 $41,325.4 $41,949.9 1 UCITS 48.9 57.6 66.6 79.4 122.3 Variable Insurance Funds 931.8 948.8 965.2 992.9 1,005.4 Total – Open-End Funds $23,
Slide 23: Assets Under Management: Asset Flows Total/Long-term
ASSETS UNDER MANAGEMENT Asset Flows: Total/Long-term Q4:16 Q1:17 Q2:17 Q3:17 Q4:17 TY:16 TY:17 All Product Flows - Total Beginning balance $46,539.5 $45,366.3 $48,019.8 $88,589.4 $90,567.9 $47,385.3 $45,366.3 Inflows 2,630.8 3,265.3 3,452.3 4,565.2 4,115.7 10,940.0 15,398.5 Outflows (3,005.9) (2,745
Slide 24: Asset Flows: Product
ASSETS UNDER MANAGEMENT Asset Flows: Product Q4:16 Q1:17 Q2:17 Q3:17 Q4:17 TY:16 TY:17 Retail Funds Beginning balance $24,255.6 $22,452.1 $23,710.4 $40,421.0 $41,325.4 $27,829.5 $22,452.1 Inflows 1,630.4 2,016.3 2,217.3 2,821.5 2,619.0 7,016.3 9,674.1 Outflows (2,341.1) (2,095.0) (2,236.0) (2,836.9)
Slide 25: Asset Flows: Product
ASSETS UNDER MANAGEMENT Asset Flows: Product Q4:16 Q1:17 Q2:17 Q3:17 Q4:17 TY:16 TY:17 Variable Insurance Funds Beginning balance $963.7 $931.8 $948.8 $965.2 $992.9 $1,016.3 $931.8 Inflows 7.0 6.8 13.4 7.5 6.9 34.6 34.6 Outflows (40.0) (38.1) (40.7) (33.6) (33.4) (174.9) (145.8) Net Flows (33.0) (31
Slide 26: Asset Flows: Product (continued)
ASSETS UNDER MANAGEMENT Asset Flows: Product (continued) Q4:16 Q1:17 Q2:17 Q3:17 Q4:17 TY:16 TY:17 Closed-End Funds Beginning balance $6,887.3 $6,757.4 $6,814.3 $6,707.2 $6,735.4 $6,222.3 $6,757.4 Inflows - - - - - - - Outflows - (81.6) (31.2) - - (103.3) (112.8) Net Flows - (81.6) (31.2) - - (103.3
Slide 27: Asset Flows: Product (continued)
ASSETS UNDER MANAGEMENT Asset Flows: Product (continued) Q4:16 Q1:17 Q2:17 Q3:17 Q4:17 TY:16 TY:17 Intermediary Sold Managed Accounts Beginning balance $4,888.9 $5,403.5 $6,035.2 $9,045.2 $9,577.7 $3,985.7 $5,403.5 Inflows 348.7 480.9 500.3 541.5 551.5 1,400.1 2,074.2 Outflows (183.7) (164.0) (214.0
Slide 28: Asset Flows: Product (continued)
ASSETS UNDER MANAGEMENT Asset Flows: Product (continued) Q4:16 Q1:17 Q2:17 Q3:17 Q4:17 TY:16 TY:17 Institutional Accounts Beginning balance $5,376.6 $5,492.7 $5,711.3 $20,639.1 $20,630.5 $4,799.7 $5,492.7 Inflows 321.7 277.7 357.1 439.9 609.7 1,345.3 1,684.4 Outflows (263.5) (191.9) (612.1) (893.7)
Slide 29: Asset Flows: Open-End Funds by Asset Class
ASSETS UNDER MANAGEMENT Asset Flows: Open-End Funds1 by Asset Class Q4:16 Q1:17 Q2:17 Q3:17 Q4:17 TY:16 TY:17 Domestic Equity Funds Beginning balance $4,459.1 $4,335.4 $4,574.5 $11,164.9 $11,513.3 $4,349.0 $4,335.4 Inflows 257.1 375.4 458.5 815.1 764.6 846.0 2,413.6 Outflows (454.5) (403.2) (469.0)
Slide 30: Asset Flows: Open-End Funds by Asset Class (continued)
ASSETS UNDER MANAGEMENT Asset Flows: Open-End Funds1 by Asset Class (continued) Q4:16 Q1:17 Q2:17 Q3:17 Q4:17 TY:16 TY:17 2 Taxable Bond Funds Beginning balance $9,083.1 $8,918.8 $9,138.2 $17,518.3 $17,754.4 $8,990.8 $8,918.8 Inflows 571.4 725.6 834.2 1,238.8 1,160.1 1,975.2 3,958.7 Outflows (679.6)
Slide 31: Asset Flows: Open-End Funds by Asset Class (continued)
ASSETS UNDER MANAGEMENT Asset Flows: Open-End Funds1 by Asset Class (continued) Q4:16 Q1:17 Q2:17 Q3:17 Q4:17 TY:16 TY:17 Alternative Funds Beginning balance $1,857.8 $1,682.2 $1,610.3 $1,603.0 $1,536.1 $2,295.9 $1,682.2 Inflows 102.3 133.1 122.4 73.8 65.2 515.3 394.5 Outflows (215.5) (212.0) (140.2
Slide 32: Average Net Fees and AUM
ASSETS UNDER MANAGEMENT Average Net Fees and AUM (Unaudited) Q4:16 Q1:17 Q2:17 Q3:17 Q4:17 TY:16 TY:17 Average Net Management Fees 1 (in basis points, annualized) Retail Funds 50.1 50.2 50.5 47.7 49.8 49.1 49.5 2 UCITS 1.0 10.3 15.4 27.9 - - 9.1 Variable Insurance Funds 62.4 61.2 60.1 59.0 65.8 58.2
Slide 33: Average Net Fees and AUM (continued)
ASSETS UNDER MANAGEMENT Average Net Fees and AUM (continued) (Unaudited) Q4:16 Q1:17 Q2:17 Q3:17 Q4:17 TY:16 TY:17 1 Average Assets by Product Retail Funds $23,236.4 $23,150.7 $29,625.3 $41,027.8 $41,744.8 $24,550.4 $33,887.2 2 UCITS 47.6 53.8 59.1 72.0 93.0 42.5 $69.4 Variable Insurance Funds 939.1
Slide 34: U.S. GAAP to Non-GAAP Reconciliation Q4 2017
U.S. GAAP TO NON-GAAP RECONCILIATION Q4 2017 Reclassifications Adjustments Distribution and Consolidated Amortization Acquisition and (Unaudited) U.S. GAAP other asset- investment of intangible Seed capital and integration Non-GAAP Basis based expenses products assets CLO investments expenses Other
Slide 35: U.S. GAAP to Non-GAAP Reconciliation Q3 2017
U.S. GAAP TO NON-GAAP RECONCILIATION Q3 2017 Reclassifications Distribution and Consolidated Amortization Adjustments Acquisition and U.S. GAAP other asset- investment of intangible Restructuring Seed capital and integration Non-GAAP (Unaudited) Basis based expenses products assets and severance CLO
Slide 36: U.S. GAAP to Non-GAAP Reconciliation Q2 2017
U.S. GAAP TO NON-GAAP RECONCILIATION Q2 2017 Reclassifications Adjustments Distribution and Consolidated Amortization Acquisition and (Unaudited) U.S. GAAP other asset- investment of intangible Restructuring Seed capital and integration Non-GAAP Basis based expenses products assets and severance CLO
Slide 37: U.S. GAAP to Non-GAAP Reconciliation Q1 2017
U.S. GAAP TO NON-GAAP RECONCILIATION Reclassifications Adjustments Q1 2017 Distribution and Consolidated Amortization Acquisition and U.S. GAAP other asset- investment of intangible Seed capital and integration Non-GAAP (Unaudited) Basis based expenses products assets CLO investments expenses Other
Slide 38: U.S. GAAP to Non-GAAP Reconciliation Q4 2016
U.S. GAAP TO NON-GAAP RECONCILIATION Q4 2016 Reclassifications Distribution and Consolidated Amortization Adjustments Acquisition and U.S. GAAP other asset- investment of intangible Seed capital and integration Non-GAAP (Unaudited) Basis based expenses products assets CLO investments expenses Other
Slide 39: U.S. GAAP to Non-GAAP Reconciliation – Full Year 2017
U.S. GAAP TO NON-GAAP RECONCILIATION – FULL YEAR 2017 (Unaudited) Reclassifications Adjustments Distribution and Consolidated Amortization of Acquisition and U.S. GAAP other asset- investment intangible Restructuring Seed capital and integration Non-GAAP Basis based expenses vehicles assets and seve
Slide 40: U.S. GAAP to Non-GAAP Reconciliation – Full Year 2016
U.S. GAAP TO NON-GAAP RECONCILIATION – FULL YEAR 2016 (Unaudited) 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
Slide 41: Footnotes
FOOTNOTES Non-GAAP financial information differ 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 fro
Slide 42: Footnotes
FOOTNOTES Components of Acquisition and integration expense and Other for the respective periods are shown in the table below: (Unaudited) Q4:16 Q1:17 Q2:17 Q3:17 Q4:17 TY:16 TY:17 Acquisition and Integration Expenses Employment expenses $- $- $2,059 $2,275 $2,009 $- $6,343 Restructuring and severan
Slide 43: Virtus Investment Partners
VIRTIUS | INVESTMENT PARTNERS
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