Virtus Investment Partners, Inc. · NYSE:VRTS
Virtus Investment Partners — Q4 2021 Earnings Presentation
45 slides from Virtus Investment Partners's earnings presentation, Feb 4, 2022
Slide 1: Fourth Quarter Earnings Presentation
FOURTH QUARTER EARNINGS PRESENTATION February 4, 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: Fourth Quarter 2021 Overview
FOURTH QUARTER 2021 OVERVIEW Assets and Flows ■ Assets under management (AUM) grew 6% to $187.2 billion due to market performance and the addition of assets managed by Westchester Capital Management, which was acquired on October 1, 2021 ■ Sales increased 14% to $8.7 billion with growth in all produ
Slide 6: Results
INVESTMENT PARTNERS RESULTS
Slide 7: Assets Under Management
ASSETS UNDER MANAGEMENT HIGHER DUE TO MARKET AND NEW AFFILIATE ■ AUM of $187.2 billion increased 6% due to: – $6.3 billion of market performance – $5.1 billion from Westchester Capital ■ Assets diversified across product types: – Open-end funds: 41% – Institutional: 26% – Retail separate accounts: 2
Slide 8: Asset Flows
ASSET FLOWS INCREASED SALES IN ALL PRODUCT CATEGORIES ■ Net flows essentially breakeven: – Retail separate accounts: $1.1 billion – Institutional: $0.5 billion – ETFs: $0.1 billion – Open-end funds: ($1.7) billion ■ Sales of $8.7 billion, up 14% – Open-end funds sales of $4.1 billion, up 14% due to
Slide 9: Investment Management Fees, as Adjusted
INVESTMENT MANAGEMENT FEES, AS ADJUSTED HIGHER AVERAGE ASSETS ■ Investment management fees, as adjusted, increased by $13.4 million, or 7%, due to 3% growth in average AUM – Performance-related fees of $0.7 million compared with $0.6 million ■ Average fee rate on total assets of 43.7 bps increased f
Slide 10: Employment Expenses, as Adjusted
EMPLOYMENT EXPENSES, AS ADJUSTED REFLECTS VARIABLE COMPENSATION ■ Employment expenses, as adjusted, of $92.0 million increased 6% – Higher variable profit- and sales-based incentive compensation – Addition of new affiliate ■ As a percentage of revenues, employment expenses, as adjusted, were 39.6%,
Slide 11: Other Operating Expenses, as Adjusted
OTHER OPERATING EXPENSES, AS ADJUSTED GROWTH OF THE BUSINESS AND INCREASED TRAVEL ■ Other operating expenses, as adjusted, of $22.9 million increased $2.7 million, or 13%, due to: – Growth of the business, including the addition of Westchester Capital – Increase in travel and related expenses ■ Othe
Slide 12: Non-GAAP Results
NON-GAAP RESULTS HIGHEST LEVEL OF EPS, AS ADJUSTED ■ Operating margin, as adjusted, of 50.2% Operating Income, As Adjusted compared with 50.6% in the prior quarter Diluted earnings per share, as adjusted and increased from 40.3% in the prior- year period ■ Diluted EPS, as adjusted, of $10.36 increas
Slide 13: Capital and Select Balance Sheet
CAPITAL AND SELECT BALANCE SHEET INCREASED RETURN OF CAPITAL ■ Working capital of $219.8 million Select Balance Sheet Items: 12/31/20 3/31/21 6/30/21 9/30/21 12/31/21 decreased sequentially from $345.5 Cash and cash equivalents $247 $228 $275 $437 $379 million primarily due to $155.0 million Seed ca
Slide 14: Financial Supplement
INVESTMENT PARTNERS FINANCIAL SUPPLEMENT
Slide 15: Non-GAAP Information: Income Statement
NON-GAAP INFORMATION INCOME STATEMENT 1 (UNAUDITED) Q4:20 Q1:21 Q2:21 Q3:21 Q4:21 TY:20 TY:21 Revenues, As Adjusted Investment management fees, as adjusted $136,824 $163,935 $183,230 $190,029 $203,429 $476,004 $740,623 Administration and shareholder service fees, as adjusted 16,472 22,621 25,926 26,
Slide 16: Non-GAAP Information: Income Statement (Continued)
NON-GAAP INFORMATION INCOME STATEMENT 1 (CONTINUED) (UNAUDITED) Q4:20 Q1:21 Q2:21 Q3:21 Q4:21 TY:20 TY:21 Other Income (Expense), As Adjusted Realized and unrealized gain (loss) on investments, net, as adjusted $147 ($73) $476 $24 ($145) ($593) $282 Other income, net, as adjusted 1,070 1,771 826 1,0
Slide 17: Non-GAAP Information: Balance Sheet
NON-GAAP INFORMATION BALANCE SHEET 1 (UNAUDITED) 12/31/2020 3/31/2021 6/30/2021 9/30/2021 12/31/2021 Assets: Cash and cash equivalents $246,511 $228,260 $275,439 $437,242 $378,921 Investments – seed capital 135,418 121,690 140,679 144,476 144,660 Investments – other 69,032 66,909 73,723 78,643 86,56
Slide 18: Non-GAAP Information: Balance Sheet (Continued)
NON-GAAP INFORMATION BALANCE SHEET 1 (CONTINUED) (UNAUDITED) 12/31/2020 3/31/2021 6/30/2021 9/30/2021 12/31/2021 Liabilities and Equity Liabilities: Accrued compensation and benefits $122,514 $62,335 $96,509 $139,106 $187,449 Accounts payable and accrued liabilities 25,357 55,153 45,755 41,716 48,49
Slide 19: U.S. GAAP Information: Income Statement
U.S. GAAP INFORMATION INCOME STATEMENT (UNAUDITED) Q4:20 Q1:21 Q2:21 Q3:21 Q4:21 TY:20 TY:21 Revenues Investment management fees $144,715 $173,269 $193,510 $201,133 $213,673 $505,338 $781,585 Distribution and service fees 10,279 20,348 23,450 23,293 23,464 38,425 90,555 Administration and shareholde
Slide 20: U.S. GAAP Information: Income Statement (Continued)
U.S. GAAP INFORMATION INCOME STATEMENT (CONTINUED) (UNAUDITED) Q4:20 Q1:21 Q2:21 Q3:21 Q4:21 TY:20 TY:21 Other Income (Expense) Realized and unrealized gain (loss) on investments, net $5,071 $891 $2,494 ($504) $1,026 $7,139 $3,907 Realized and unrealized gain (loss) of CIP 1, net 10,768 (4,687) 2,74
Slide 21: Assets Under Management by Product and Asset Class
ASSETS UNDER MANAGEMENT BY PRODUCT AND ASSET CLASS 12/31/2020 3/31/2021 6/30/2021 9/30/2021 12/31/2021 Assets by Product U.S. Retail Funds $48,492 $69,730 $72,746 $70,526 $74,616 Offshore Funds 1,173 1,343 1,456 1,399 1,418 Variable Insurance Funds 1,106 1,091 1,131 1,119 1,193 Total – Open-End Fund
Slide 22: Assets Under Management by Product and Asset Class
ASSETS UNDER MANAGEMENT BY PRODUCT AND ASSET CLASS Open-End Closed-End Exchange Retail Separate Institutional Structured Total as of Funds Funds Traded Funds Accounts Accounts Products 12/31/2021 Equity: Domestic Equity $29,046 $— $142 $34,410 $24,291 $— $87,889 International Equity 9,194 — 7 129 1,
Slide 23: Asset Flows: Total
ASSET FLOWS TOTAL 12/31/2020 3/31/2021 6/30/2021 9/30/2021 12/31/2021 TY:20 TY:21 Total Beginning balance $116,487 $132,194 $168,880 $178,638 $177,305 $108,904 $132,194 Inflows 8,941 10,611 9,550 7,623 8,712 33,428 36,496 Outflows (6,249) (8,178) (8,214) (8,195) (8,777) (28,075) (33,364) Net Flows 2
Slide 24: Asset Flows by Product
ASSET FLOWS BY PRODUCT 12/31/2020 3/31/2021 6/30/2021 9/30/2021 12/31/2021 TY:20 TY:21 U.S. Retail Funds Beginning balance $42,650 $48,492 $69,730 $72,746 $70,526 $42,412 $48,492 Inflows 4,049 5,652 4,591 3,555 4,029 16,111 17,827 Outflows (3,408) (5,157) (4,864) (4,964) (5,744) (16,335) (20,729) Ne
Slide 25: Asset Flows by Product (Continued)
ASSET FLOWS BY PRODUCT (CONTINUED) 12/31/2020 3/31/2021 6/30/2021 9/30/2021 12/31/2021 TY:20 TY:21 Variable Insurance Funds Beginning balance $998 $1,106 $1,091 $1,131 $1,119 $949 $1,106 Inflows 10 10 13 14 23 40 60 Outflows (29) (40) (40) (34) (52) (128) (166) Net Flows (19) (30) (27) (20) (29) (88
Slide 26: Asset Flows by Product (Continued)
ASSET FLOWS BY PRODUCT (CONTINUED) 12/31/2020 3/31/2021 6/30/2021 9/30/2021 12/31/2021 TY:20 TY:21 Closed-End Funds Beginning balance $5,629 $5,914 $11,664 $11,993 $11,721 $6,748 $5,914 Inflows 5 — — 3 19 25 22 Outflows — — — — — — — Net Flows 5 — — 3 19 25 22 Market performance 364 105 514 (114) 71
Slide 27: Asset Flows by Product (Continued)
ASSET FLOWS BY PRODUCT (CONTINUED) 12/31/2020 3/31/2021 6/30/2021 9/30/2021 12/31/2021 TY:20 TY:21 Intermediary Sold Managed Accounts Beginning balance $19,456 $23,852 $31,133 $34,125 $34,974 $15,592 $23,852 Inflows 1,990 2,494 2,066 1,726 2,045 5,759 8,331 Outflows (810) (791) (700) (1,103) (999) (
Slide 28: Asset Flows by Product (Continued)
ASSET FLOWS BY PRODUCT (CONTINUED) 12/31/2020 3/31/2021 6/30/2021 9/30/2021 12/31/2021 TY:20 TY:21 Institutional Accounts Beginning balance $36,851 $40,861 $42,802 $45,604 $45,882 $32,859 $40,861 Inflows 2,252 1,884 2,302 1,808 2,099 8,967 8,093 Outflows (1,687) (1,868) (2,184) (1,727) (1,625) (7,51
Slide 29: Asset Flows by Asset Class
ASSET FLOWS BY ASSET CLASS 12/31/2020 3/31/2021 6/30/2021 9/30/2021 12/31/2021 TY:20 TY:21 Domestic Equity Beginning balance $53,621 $63,680 $77,155 $82,819 $83,331 $44,976 $63,680 Inflows 4,767 4,896 4,467 3,445 3,596 16,828 16,404 Outflows (3,079) (3,818) (3,634) (3,344) (3,013) (11,273) (13,809)
Slide 30: Asset Flows by Asset Class (Continued)
ASSET FLOWS BY ASSET CLASS (CONTINUED) 12/31/2020 3/31/2021 6/30/2021 9/30/2021 12/31/2021 TY:20 TY:21 Global Equity Beginning balance $8,299 $9,512 $9,681 $10,623 $11,009 $6,422 $9,512 Inflows 731 501 669 732 1,231 2,640 3,133 Outflows (232) (617) (404) (308) (298) (1,500) (1,627) Net Flows 499 (11
Slide 31: Asset Flows by Asset Class (Continued)
ASSET FLOWS BY ASSET CLASS (CONTINUED) 12/31/2020 3/31/2021 6/30/2021 9/30/2021 12/31/2021 TY:20 TY:21 Leveraged Finance Beginning balance $10,529 $10,730 $11,981 $12,270 $12,210 $12,288 $10,730 Inflows 466 847 684 577 666 2,392 2,774 Outflows (534) (529) (552) (692) (839) (3,938) (2,612) Net Flows
Slide 32: Asset Flows by Asset Class (Continued)
ASSET FLOWS BY ASSET CLASS (CONTINUED) 12/31/2020 3/31/2021 6/30/2021 9/30/2021 12/31/2021 TY:20 TY:21 Investment Grade Beginning balance $8,778 $8,883 $8,509 $8,245 $7,924 $7,891 $8,883 Inflows 515 427 337 274 229 2,309 1,267 Outflows (445) (366) (601) (572) (933) (1,863) (2,472) Net Flows 70 61 (2
Slide 33: Asset Flows by Asset Class (Continued)
ASSET FLOWS BY ASSET CLASS (CONTINUED) 12/31/2020 3/31/2021 6/30/2021 9/30/2021 12/31/2021 TY:20 TY:21 Multi-Asset 1 Beginning balance $11,105 $12,201 $22,498 $23,668 $23,641 $11,487 $12,201 Inflows 211 561 674 672 583 812 2,490 Outflows (132) (329) (488) (392) (397) (617) (1,606) Net Flows 79 232 1
Slide 34: Investment Management Fees: Average Assets by Product
INVESTMENT MANAGEMENT FEES AVERAGE ASSETS 1 BY PRODUCT Q4:20 Q1:21 Q2:21 Q3:21 Q4:21 TY:20 TY:21 U.S. Retail Funds $45,675 $63,872 $71,599 $72,476 $76,288 $41,204 $71,059 Offshore Funds 1,049 1,265 1,411 1,453 1,426 731 1,389 Variable Insurance Funds 1,058 1,110 1,116 1,144 1,202 955 1,143 Total – O
Slide 35: Average Management Fees Earned by Product (Basis Points)
INVESTMENT MANAGEMENT FEES AVERAGE MANAGEMENT FEES EARNED 1 BY PRODUCT (IN BASIS POINTS) Q4:20 Q1:21 Q2:21 Q3:21 Q4:21 TY:20 TY:21 Total Open-End Funds 59.1 54.2 52.2 52.2 54.5 57.8 53.3 Revenue related adjustments (7.3) (6.2) (5.8) (5.9) (5.2) (7.7) (5.8) Total Open-End Funds, Net 51.8 48.0 46.4 46
Slide 36: 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 37: 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 managem
Slide 38: 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 39: Reconciliation: U.S. GAAP to Non-GAAP, Q1 2021
RECONCILIATION: U.S. GAAP TO NON-GAAP Q1 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, Q4 2020
RECONCILIATION: U.S. GAAP TO NON-GAAP Q4 2020 (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, TY 2021
RECONCILIATION: U.S. GAAP TO NON-GAAP TY 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 42: Reconciliation: U.S. GAAP to Non-GAAP, TY 2020
RECONCILIATION: U.S. GAAP TO NON-GAAP TY 2020 (UNAUDITED) Reclassification Other adjustments Consolidated Amortization Seed capital Acquisition U.S. GAAP investment Revenue Restructuring of intangible and CLO and Non-GAAP Basis products related and Severance assets investments integration Other Basi
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: Q4 2020 Q1 2021 Q2 2021 Q3 2021 Q4 2021 TY:20 TY:21 Acquisition and Integration Expenses Employment expenses $(515) $867 $615 $429 $(846) $655 $1,065 Other oper
Slide 45: Investment Partners
INVESTMENT PARTNERS
Virtus Investment Partners — Q4 2021 Earnings Presentation on 6ix