Virtus Investment Partners, Inc. · NYSE:VRTS
Virtus Investment Partners — Q2 2018 Earnings Presentation
42 slides from Virtus Investment Partners's earnings presentation, Jul 27, 2018
Slide 1: Second Quarter 2018 Earnings Presentation
Second Quarter 2018 Earnings Presentation July 27, 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 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 Long-term assets under management increased $2.4 billion, or 2.7%, sequentially to $89.8 billion reflecting net inflows and market appreciation Total sales of $6.6 billion increased $1.2 billion, or 22%, sequentially; institutional and mutual fund sale
Slide 6: Second Quarter Results
_VIRTUS | INVESTMENT PARTNERS SECOND QUARTER RESULTS
Slide 7: Assets Under Management
ASSETS UNDER MANAGEMENT Quarterly Trends Commentary Long-Term Sequential increase in long-term assets Liquidity of $2.4 billion, or 2.7%, primarily due to $90.6 $91.0 $89.1 $91.6 market appreciation and net inflows $88.6 $88.8 $89.8 $85.0 $87.1 $87.4 Increase in long-term assets from prior year
Slide 8: Asset Flows
ASSET FLOWS Inflows / (Outflows) Year to Date Commentary $12.1 Sales increased $1.2 billion, or 22%, Net flows sequentially $6.6 $6.7 $4.6 $5.4 − Institutional increased $1.0 billion $4.1 $3.5 reflecting domestic equity mandates − Mutual funds increased $0.6 billion Q2 17 Q3 17 Q4 17 Q1 18 Q2 18 Y
Slide 9: Investment Management Fees, As Adjusted
INVESTMENT MANAGEMENT FEES, AS ADJUSTED Quarterly Results Year to Date Commentary $206.6 Investment management fees increased $2.6 million, or 2.6%, sequentially due $133.8 primarily to higher average fee rate $98.4 $102.1 $102.0 $104.6 Average long-term fee rate increased sequentially due to po
Slide 10: Employment Expenses, As Adjusted
EMPLOYMENT EXPENSES, AS ADJUSTED Quarterly Results Year to Date Commentary Employment expenses, as adjusted, $112.5 decreased $5.1 million, or 8.7%, sequentially due to: − $6.8 million of seasonally higher $80.6 employment expenses in the prior quarter $58.8 $51.9 $52.6 $53.7 − Partially offset by
Slide 11: Other Operating Expenses, As Adjusted
OTHER OPERATING EXPENSES, AS ADJUSTED Quarterly Results Year to Date Commentary Other operating expenses, as adjusted, $33.9 increased $2.5 million, or 16%, from prior quarter due primarily to: $25.2 − $1.2 million of higher sales and marketing costs $18.2 $16.1 $16.7 $15.7 − $0.8 million of annua
Slide 12: Non-GAAP Results
NON-GAAP RESULTS Quarterly Results Year to Date Commentary Operating Income, As Adjusted Diluted EPS, as adjusted, of $2.97 increased by $0.38, or 14.7%, Diluted earnings per share, as adjusted $70.5 sequentially and $1.36, or 84%, from the prior year ‾ Excludes $4.6 million, or $0.39 per $39.1 $3
Slide 13: Capital Position
CAPITAL POSITION Select Non-GAAP Balance Sheet Items Commentary 6/30/17 9/30/17 12/31/17 3/31/18 6/30/18 Repurchased 60,622 shares for $7.5 Cash and cash equivalents $128 $165 $132 $81 $139 million, representing of 0.8% outstanding Seed capital investments 1 $104 $109 $118 $116 $107 Investments -
Slide 14: Financial Supplement
_VIRTUS | INVESTMENT PARTNERS Financial Supplement
Slide 15: Non-GAAP Information: Income Statement
NON-GAAP INFORMATION Income Statement1 (Unaudited) Q2:17 Q3:17 Q4:17 Q1:18 Q2:18 YTD:17 YTD:18 Revenues, As Adjusted Investment management fees, as adjusted $74,272 $98,402 $102,114 $102,047 $104,559 $133,785 $206,606 Distribution and service fees, as adjusted 10,446 11,486 11,623 12,611 13,553 21,2
Slide 16: Non-GAAP Information: Income Statement (continued)
NON-GAAP INFORMATION Income Statement1 (continued) (Unaudited) Q2:17 Q3:17 Q4:17 Q1:18 Q2:18 YTD:17 YTD:18 Other Income (Expense), As Adjusted Realized and unrealized gain (loss) on investments, net, as $- $- $- ($198) $137 $- ($61) adjusted Other income, net, as adjusted 46 436 506 1,319 455 692 1,
Slide 17: Non-GAAP Information: Balance Sheet
NON-GAAP INFORMATION Balance Sheet1 (Unaudited) 06/30/17 09/30/17 12/31/17 03/31/18 06/30/18 Assets: Cash and cash equivalents $127,571 $164,867 $132,150 $80,765 $138,827 Investments – seed capital 104,076 108,511 118,443 115,848 107,217 Investments – other 91,739 92,676 112,105 136,821 107,030 Inve
Slide 18: Non-GAAP Information: Balance Sheet (continued)
NON-GAAP INFORMATION Balance Sheet1 (continued) (Unaudited) 06/30/17 09/30/17 12/31/17 03/31/18 06/30/18 Liabilities and Equity Liabilities: Accrued compensation and benefits $51,978 $69,833 $86,658 $27,471 $45,187 Accounts payable and accrued liabilities 29,167 31,677 29,607 28,214 25,805 Dividends
Slide 19: U.S. GAAP Information: Income Statement
U.S. GAAP INFORMATION Income Statement (Unaudited) Q2:17 Q3:17 Q4:17 Q1:18 Q2:18 YTD:17 YTD:18 Revenues Investment management fees $74,062 $97,295 $100,447 $100,476 $103,168 $133,333 $203,644 Distribution and service fees 10,439 11,482 11,618 12,607 13,549 21,222 26,156 Administration and shareholde
Slide 20: U.S. GAAP Information: Income Statement (continued)
U.S. GAAP INFORMATION Income Statement (continued) (Unaudited) Q2:17 Q3:17 Q4:17 Q1:18 Q2:18 YTD:17 YTD:18 Other Income (Expense) Realized and unrealized gain (loss) on investments, net $1,287 $1,367 $22 $438 $960 $1,584 $1,398 Realized and unrealized gain (loss) of consolidated (1,424) 13,465 (2,93
Slide 21: Assets Under Management: Product and Asset Class
ASSETS UNDER MANAGEMENT Assets: Product and Asset Class 06/30/17 09/30/17 12/31/17 03/31/18 06/30/18 Assets by Product Retail Funds $40,421.0 $41,325.4 $41,949.9 $42,092.7 $43,322.6 1 UCITS 66.6 79.4 122.3 127.2 115.7 Variable Insurance Funds 965.2 992.9 1,005.4 982.6 981.0 Total – Open-End Funds $4
Slide 22: Assets Under Management: Asset Flows Total/Long-term
ASSETS UNDER MANAGEMENT Asset Flows: Total/Long-term Q2:17 Q3:17 Q4:17 Q1:18 Q2:18 YTD:17 YTD:18 Long-term Beginning balance $48,019.8 $85,018.8 $87,136.5 $88,834.5 $87,443.5 $45,366.3 $88,834.5 Inflows 3,452.3 4,565.2 4,115.7 5,431.0 6,643.1 6,717.6 12,074.1 Outflows (3,652.9) (4,331.0) (4,886.8) (
Slide 23: Asset Flows: Product
ASSETS UNDER MANAGEMENT Asset Flows: Product Q2:17 Q3:17 Q4:17 Q1:18 Q2:18 YTD:17 YTD:18 Retail Funds Beginning balance $23,710.4 $40,421.0 $41,325.4 $41,949.9 $42,092.7 $22,452.1 $41,949.9 Inflows 2,217.3 2,821.5 2,619.0 3,754.2 4,335.6 4,233.6 8,089.8 Outflows (2,236.0) (2,836.9) (3,236.6) (3,617.
Slide 24: Asset Flows: Product
ASSETS UNDER MANAGEMENT Asset Flows: Product Q2:17 Q3:17 Q4:17 Q1:18 Q2:18 YTD:17 YTD:18 Variable Insurance Funds Beginning balance $948.8 $965.2 $992.9 $1,005.4 $982.6 $931.8 $1,005.4 Inflows 13.4 7.5 6.9 10.1 6.9 20.2 17.0 Outflows (40.7) (33.6) (33.4) (37.8) (36.2) (78.8) (74.0) Net Flows (27.3)
Slide 25: Asset Flows: Product (continued)
ASSETS UNDER MANAGEMENT Asset Flows: Product (continued) Q2:17 Q3:17 Q4:17 Q1:18 Q2:18 YTD:17 YTD:18 Closed-End Funds Beginning balance $6,814.3 $6,707.2 $6,735.4 $6,666.2 $6,132.7 $6,757.4 $6,666.2 Inflows - - - - 0.5 - 0.5 Outflows (31.2) - - - - (112.8) - Net Flows (31.2) - - - 0.5 (112.8) 0.5 Ma
Slide 26: Asset Flows: Product (continued)
ASSETS UNDER MANAGEMENT Asset Flows: Product (continued) Q2:17 Q3:17 Q4:17 Q1:18 Q2:18 YTD:17 YTD:18 Intermediary Sold Managed Accounts Beginning balance $6,035.2 $9,045.2 $9,577.7 $10,260.7 $10,535.2 $5,403.5 $10,260.7 Inflows 500.3 541.5 551.5 576.3 632.3 981.2 1,208.6 Outflows (214.0) (409.7) (45
Slide 27: Asset Flows: Product (continued)
ASSETS UNDER MANAGEMENT Asset Flows: Product (continued) Q2:17 Q3:17 Q4:17 Q1:18 Q2:18 YTD:17 YTD:18 Institutional Accounts Beginning balance $5,711.3 $20,639.1 $20,630.5 $20,815.9 $19,411.2 $5,492.7 $20,815.9 Inflows 357.1 439.9 609.7 423.0 1,425.0 634.8 1,848.0 Outflows (612.1) (893.7) (1,000.4) (
Slide 28: Asset Flows: Open-End Funds by Asset Class
ASSETS UNDER MANAGEMENT Asset Flows: Open-End Funds1 by Asset Class Q2:17 Q3:17 Q4:17 Q1:18 Q2:18 YTD:17 YTD:18 Domestic Equity Funds Beginning balance $4,574.5 $11,164.9 $11,513.3 $12,023.3 $12,516.4 $4,335.4 $12,023.3 Inflows 458.5 815.1 764.6 1,386.9 2,320.4 833.9 3,707.3 Outflows (469.0) (863.1)
Slide 29: Asset Flows: Open-End Funds by Asset Class (continued)
ASSETS UNDER MANAGEMENT Asset Flows: Open-End Funds1 by Asset Class (continued) Q2:17 Q3:17 Q4:17 Q1:18 Q2:18 YTD:17 YTD:18 Taxable Bond Funds2 Beginning balance $9,138.2 $17,518.3 $17,754.4 $17,363.0 $17,241.8 $8,918.8 $17,363.0 Inflows 834.2 1,238.8 1,160.1 1,418.6 1,197.5 1,559.8 2,616.1 Outflows
Slide 30: Asset Flows: Open-End Funds by Asset Class (continued)
ASSETS UNDER MANAGEMENT Asset Flows: Open-End Funds1 by Asset Class (continued) Q2:17 Q3:17 Q4:17 Q1:18 Q2:18 YTD:17 YTD:18 2 Alternative Funds Beginning balance $1,610.3 $1,603.0 $1,536.1 $1,461.8 $1,290.3 $1,682.2 $1,461.8 Inflows 122.4 73.8 65.2 71.5 74.2 255.5 145.7 Outflows (140.2) (164.6) (157
Slide 31: Average Net Fees and AUM
ASSETS UNDER MANAGEMENT Average Net Fees and AUM (Unaudited) Q2:17 Q3:17 Q4:17 Q1:18 Q2:18 YTD:17 YTD:18 1 Average Net Management Fees (in basis points, annualized) Retail Funds 50.5 47.7 49.8 50.2 51.6 50.4 50.9 UCITS2 15.4 27.9 - - 33.8 13.0 - Variable Insurance Funds 60.1 59.0 65.8 65.3 63.7 60.6
Slide 32: Average Net Fees and AUM (continued)
ASSETS UNDER MANAGEMENT Average Net Fees and AUM (continued) (Unaudited) Q2:17 Q3:17 Q4:17 Q1:18 Q2:18 YTD:17 YTD:18 1 Average Assets by Product Retail Funds $29,625.3 $41,027.9 $41,744.8 $42,607.8 $42,889.1 $26,388.0 $42,748.4 2 UCITS 59.1 72.0 93.0 128.1 118.4 56.5 123.2 Variable Insurance Funds 9
Slide 33: U.S. GAAP to Non-GAAP Reconciliation: Q2 2018
U.S. GAAP TO NON-GAAP RECONCILIATION Q2 2018 Reclassifications Adjustments Distribution and Consolidated Amortization Acquisition and (Unaudited) U.S. GAAP other asset- investment of intangible Seed capital and integration related Non-GAAP Basis based expenses products assets CLO investments expense
Slide 34: U.S. GAAP to Non-GAAP Reconciliation: Q1 2018
U.S. GAAP TO NON-GAAP RECONCILIATION Q1 2018 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: 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 36: U.S. GAAP to Non-GAAP Reconciliation: Q3 2017
U.S. GAAP TO NON-GAAP RECONCILIATION Q3 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: Q2 2017
U.S. GAAP TO NON-GAAP RECONCILIATION Reclassifications Adjustments Q2 2017 Distribution and Consolidated Amortization 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 38: U.S. GAAP to Non-GAAP Reconciliation: YTD 2018
U.S. GAAP TO NON-GAAP RECONCILIATION YTD 2018 Reclassifications Adjustments Distribution and Consolidated Amortization Acquisition and (Unaudited) U.S. GAAP other asset- investment of intangible Seed capital and integration related Non-GAAP Basis based expenses products assets CLO investments expens
Slide 39: U.S. GAAP to Non-GAAP Reconciliation: YTD 2017
U.S. GAAP TO NON-GAAP RECONCILIATION Reclassifications Adjustments YTD 2017 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 CL
Slide 40: 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 41: Footnotes
FOOTNOTES Components of Acquisition and Integration Expenses and Other for the respective periods are shown in the table below: (Unaudited) Q2:17 Q3:17 Q4:17 Q1:18 Q2:18 YTD:17 YTD:18 Acquisition and Integration Expenses Employment expenses $2,059 $2,275 $2,009 $1,903 $1,208 $2,059 $3,111 Restructur
Slide 42: Virtus Investment Partners
VIRTIUS | INVESTMENT PARTNERS
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