Virtus Investment Partners, Inc. · NYSE:VRTS
Virtus Investment Partners — Q4 2023 Earnings Presentation
45 slides from Virtus Investment Partners's earnings presentation, Feb 2, 2024
Slide 1: Fourth Quarter Earnings Presentation
FOURTH QUARTER EARNINGS PRESENTATION February 2, 2024 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 2023 Overview
FOURTH QUARTER 2023 OVERVIEW Assets and Flows ■ Assets under management (AUM) increased 6% to $172.3 billion primarily due to market performance; average AUM declined 3% to $162.7 billion ■ Sales increased 7% to $6.2 billion with higher sales in retail separate accounts and open-end funds ■ Net flow
Slide 6: Results
INVESTMENT PARTNERS RESULTS
Slide 7: Assets Under Management
ASSETS UNDER MANAGEMENT BROADLY DIVERSIFIED Institutional Accounts Closed-End Funds ■ AUM of $172.3 billion increased from $162.5 U.S. Retail Funds Retail Separate Accounts billion due to: Global Funds, ETFs, and Variable Insurance Funds – $14.3 billion of market performance – ($3.8) billion of net
Slide 8: Asset Flows
ASSET FLOWS HIGHER RETAIL SALES ■ Sales of $6.2 billion increased 7% from $5.8 billion – Institutional sales of $1.2 billion compared with $1.3 billion – Retail separate account sales of $2.1 billion increased 15%; strongest quarter since Q4 21 – Open-end fund sales of $2.9 billion increased 9% prim
Slide 9: Investment Management Fees, as Adjusted
INVESTMENT MANAGEMENT FEES, AS ADJUSTED LOWER AVERAGE ASSETS ■ Investment management fees, as adjusted, decreased by 2% due to 3% lower average assets under management partially offset by higher performance fees ■ Average fee rate of 42.6 bps compared with 42.0 bps – Excluding performance fees, aver
Slide 10: Employment Expenses, as Adjusted
EMPLOYMENT EXPENSES, AS ADJUSTED RATIO REMAINS FLAT ■ Employment expenses, as adjusted, decreased by $2.1 million, or 2%, to $96.7 million primarily due to lower variable incentive compensation ■ Employment expenses, as adjusted, as a percentage of revenues, as adjusted, of 50.0% compared with 50.1%
Slide 11: Other Operating Expenses, as Adjusted
OTHER OPERATING EXPENSES, AS ADJUSTED REMAIN WITHIN NARROW RANGE ■ Other operating expenses, as adjusted, of $31.2 million increased $1.1 million, or 3%, primarily due to higher: – Travel and related expenses – Market data expenses ■ Other operating expenses, as adjusted, as a percentage of revenues
Slide 12: Non-GAAP Results
NON-GAAP RESULTS REFLECT LOWER AVERAGE AUM ■ Operating margin, as adjusted, of 33.0% Operating Income, as Adjusted compared with 33.9% due to lower Diluted earnings per share, as adjusted revenues partially offset by lower total operating expenses ■ Diluted EPS, as adjusted, of $6.11 compared with $
Slide 13: Capital and Select Balance Sheet
CAPITAL AND SELECT BALANCE SHEET RETURNED CAPITAL AND REPAID DEBT ■ Working capital of $100.6 million Select Balance Sheet Items: 12/31/22 3/31/23 6/30/23 9/30/23 12/31/23 compared with $105.6 million as Cash and cash equivalents $338 $213 $201 $195 $240 capital return and debt repayment Investments
Slide 14: Financial Supplement
INVESTMENT PARTNERS FINANCIAL SUPPLEMENT
Slide 15: Non-GAAP Information: Income Statement
NON-GAAP INFORMATION INCOME STATEMENT1 (UNAUDITED) Q4:22 Q1:23 Q2:23 Q3:23 Q4:23 YTD:22 YTD:23 Revenues, As Adjusted Investment management fees, as adjusted $156,121 $157,636 $171,097 $177,387 $174,448 $692,303 $680,568 Administration and shareholder service fees, as adjusted 19,005 18,389 18,273 19
Slide 16: Non-GAAP Information: Income Statement (Continued)
NON-GAAP INFORMATION INCOME STATEMENT1 (CONTINUED) (UNAUDITED) Q4:22 Q1:23 Q2:23 Q3:23 Q4:23 YTD:22 YTD:23 Other Income (Expense), As Adjusted Realized and unrealized gain (loss) on investments, net, as adjusted $572 ($60) ($220) ($297) ($289) ($3,369) ($866) Other income, net, as adjusted (352) (34
Slide 17: Non-GAAP Information: Balance Sheet
NON-GAAP INFORMATION BALANCE SHEET1 (UNAUDITED) 12/31/2022 3/31/2023 6/30/2023 9/30/2023 12/31/2023 Assets: Cash and cash equivalents $338,234 $213,424 $201,462 $195,403 $239,602 Investments – seed capital 128,038 127,707 126,119 126,017 144,351 Investments – other 95,493 104,767 117,265 145,449 131
Slide 18: Non-GAAP Information: Balance Sheet (Continued)
NON-GAAP INFORMATION BALANCE SHEET1 (CONTINUED) (UNAUDITED) 12/31/2022 3/31/2023 6/30/2023 9/30/2023 12/31/2023 Liabilities and Equity Liabilities: Accrued compensation and benefits $181,805 $69,103 $117,681 $161,745 $200,837 Accounts payable and accrued liabilities 33,200 38,564 39,375 32,740 38,75
Slide 19: U.S. GAAP Information: Income Statement
U.S. GAAP INFORMATION INCOME STATEMENT (UNAUDITED) Q4:22 Q1:23 Q2:23 Q3:23 Q4:23 YTD:22 YTD:23 Revenues Investment management fees $163,648 $164,478 $179,979 $184,869 $182,149 $728,339 $711,475 Distribution and service fees 14,606 14,153 14,132 14,333 13,535 67,518 56,153 Administration and sharehol
Slide 20: U.S. GAAP Information: Income Statement (Continued)
U.S. GAAP INFORMATION INCOME STATEMENT (CONTINUED) (UNAUDITED) Q4:22 Q1:23 Q2:23 Q3:23 Q4:23 YTD:22 YTD:23 Other Income (Expense) Realized and unrealized gain (loss) on investments, net $3,529 $2,670 $1,717 ($1,918) $4,056 ($12,489) $6,525 Realized and unrealized gain (loss) of CIP1, net 4,147 2,596
Slide 21: Assets Under Management by Product, Asset Class and Region
ASSETS UNDER MANAGEMENT BY PRODUCT, ASSET CLASS AND REGION 12/31/2022 3/31/2023 6/30/2023 9/30/2023 12/31/2023 Assets by Product U.S. Retail Funds $47,494 $48,111 $50,429 $47,776 $49,064 Global Funds 3,443 3,615 4,184 4,140 4,560 Exchange Traded Funds 1,226 1,275 1,337 1,404 1,545 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 12/31/2023 Equity: Domestic Equity $20,159 $— $33,134 $23,970 $77,263 International Equity 3,364 — 81 1,610 5,055 Global Equity 1,915 — 366 8,271 10,552 Spec
Slide 23: Asset Flows: Total
ASSET FLOWS TOTAL 12/31/2022 3/31/2023 6/30/2023 9/30/2023 12/31/2023 TY:22 TY:23 Total Beginning balance $144,974 $149,376 $154,849 $168,316 $162,539 $187,186 $149,376 Inflows 7,251 6,234 7,576 5,810 6,237 30,293 25,857 Outflows (10,652) (8,127) (7,604) (7,309) (10,037) (43,736) (33,077) Net Flows
Slide 24: Asset Flows by Product
ASSET FLOWS BY PRODUCT 12/31/2022 3/31/2023 6/30/2023 9/30/2023 12/31/2023 TY:22 TY:23 U.S. Retail Funds Beginning balance $49,164 $47,494 $48,111 $50,429 $47,776 $74,616 $47,494 Inflows 2,716 2,805 2,128 2,382 2,629 12,746 9,944 Outflows (6,317) (4,562) (4,547) (3,954) (4,628) (26,739) (17,691) Net
Slide 25: Asset Flows by Product (Continued)
ASSET FLOWS BY PRODUCT (CONTINUED) 12/31/2022 3/31/2023 6/30/2023 9/30/2023 12/31/2023 TY:22 TY:23 Exchange-Traded Funds Beginning balance $1,262 $1,226 $1,275 $1,337 $1,404 $1,479 $1,226 Inflows 98 137 70 124 105 451 436 Outflows (163) (119) (41) (52) (46) (493) (258) Net Flows (65) 18 29 72 59 (42
Slide 26: Asset Flows by Product (Continued)
ASSET FLOWS BY PRODUCT (CONTINUED) 12/31/2022 3/31/2023 6/30/2023 9/30/2023 12/31/2023 TY:22 TY:23 Closed-End Funds Beginning balance $10,146 $10,361 $10,358 $10,166 $9,472 $12,068 $10,361 Inflows 2 4 20 — — 191 24 Outflows — — — — — — — Net Flows 2 4 20 — — 191 24 Market performance 631 205 (1) (50
Slide 27: Asset Flows by Product (Continued)
ASSET FLOWS BY PRODUCT (CONTINUED) 12/31/2022 3/31/2023 6/30/2023 9/30/2023 12/31/2023 TY:22 TY:23 Intermediary Sold Managed Accounts Beginning balance $27,648 $29,160 $30,675 $31,878 $31,708 $37,621 $29,160 Inflows 889 1,021 1,065 1,661 1,741 4,639 5,488 Outflows (1,404) (1,159) (1,268) (1,353) (1,
Slide 28: Asset Flows by Product (Continued)
ASSET FLOWS BY PRODUCT (CONTINUED) 12/31/2022 3/31/2023 6/30/2023 9/30/2023 12/31/2023 TY:22 TY:23 Institutional Separate Accounts Beginning balance $43,444 $46,908 $49,528 $58,780 $56,613 $48,140 $46,908 Inflows 2,724 1,852 3,660 1,002 1,179 10,132 7,693 Outflows (2,162) (2,047) (1,478) (1,648) (3,
Slide 29: Asset Flows by Asset Class
ASSET FLOWS BY ASSET CLASS 12/31/2022 3/31/2023 6/30/2023 9/30/2023 12/31/2023 TY:22 TY:23 Domestic Equity Beginning balance $61,537 $64,948 $69,253 $71,984 $69,978 $87,889 $64,948 Inflows 3,090 2,988 2,066 2,731 3,023 12,182 10,808 Outflows (4,024) (3,141) (3,103) (3,109) (3,704) (15,654) (13,057)
Slide 30: Asset Flows by Asset Class (Continued)
ASSET FLOWS BY ASSET CLASS (CONTINUED) 12/31/2022 3/31/2023 6/30/2023 9/30/2023 12/31/2023 TY:22 TY:23 Global Equity Beginning balance $7,519 $8,292 $9,013 $9,835 $9,478 $11,658 $8,292 Inflows 604 419 415 182 477 2,128 1,493 Outflows (462) (438) (249) (367) (407) (2,571) (1,461) Net Flows 142 (19) 1
Slide 31: Asset Flows by Asset Class (Continued)
ASSET FLOWS BY ASSET CLASS (CONTINUED) 12/31/2022 3/31/2023 6/30/2023 9/30/2023 12/31/2023 TY:22 TY:23 Leveraged Finance Beginning balance $10,363 $10,196 $9,836 $9,247 $9,306 $12,069 $10,196 Inflows 700 278 238 544 345 2,570 1,405 Outflows (1,020) (758) (765) (366) (571) (3,898) (2,460) Net Flows (
Slide 32: Asset Flows by Asset Class (Continued)
ASSET FLOWS BY ASSET CLASS (CONTINUED) 12/31/2022 3/31/2023 6/30/2023 9/30/2023 12/31/2023 TY:22 TY:23 Investment Grade Beginning balance $6,649 $7,029 $7,041 $9,827 $9,440 $7,177 $7,029 Inflows 584 222 2,295 191 194 1,257 2,902 Outflows (289) (347) (208) (229) (232) (1,644) (1,016) Net Flows 295 (1
Slide 33: Asset Flows by Asset Class (Continued)
ASSET FLOWS BY ASSET CLASS (CONTINUED) 12/31/2022 3/31/2023 6/30/2023 9/30/2023 12/31/2023 TY:22 TY:23 Multi-Asset1 Beginning balance $19,364 $19,937 $20,597 $20,914 $19,937 $24,853 $19,937 Inflows 413 480 301 319 431 1,972 1,531 Outflows (693) (462) (461) (412) (613) (2,508) (1,948) Net Flows (280)
Slide 34: Investment Management Fees: Average Assets by Product
INVESTMENT MANAGEMENT FEES AVERAGE ASSETS1 BY PRODUCT Q4:22 Q1:23 Q2:23 Q3:23 Q4:23 TY:22 TY:23 U.S. Retail Funds $49,752 $48,747 $50,048 $50,000 $47,602 $58,312 $49,099 Global Funds 3,032 3,210 3,939 4,261 4,262 3,433 3,918 Exchange Traded Funds 1,243 1,316 1,278 1,382 1,431 1,359 1,352 Variable In
Slide 35: Investment Management Fees: Average Fees Earned by Product
INVESTMENT MANAGEMENT FEES AVERAGE MANAGEMENT FEES EARNED1 BY PRODUCT (IN BASIS POINTS) Q4:22 Q1:23 Q2:23 Q3:23 Q4:23 TY:22 TY:23 U.S. Retail Funds 48.7 49.2 51.8 53.2 52.9 48.1 51.8 Global Funds 39.3 38.4 30.3 40.8 30.5 33.9 34.9 Exchange Traded Funds 5.2 8.4 9.5 10.1 4.3 8.8 8.0 Variable Insurance
Slide 36: Reconciliation: U.S. GAAP to Non-GAAP, Q4 2023
RECONCILIATION: U.S. GAAP TO NON-GAAP Q4 2023 (UNAUDITED) Reclassification Other adjustments Deferred Consolidated Amortization Seed capital compensation Acquisition U.S. GAAP investment Revenue of intangible Restructuring and CLO and related and Non-GAAP Basis products related assets expense invest
Slide 37: Reconciliation: U.S. GAAP to Non-GAAP, Q3 2023
RECONCILIATION: U.S. GAAP TO NON-GAAP Q3 2023 (UNAUDITED) Reclassification Other adjustments Deferred Consolidated Amortization Seed capital compensation Acquisition U.S. GAAP investment Revenue of intangible Restructuring and CLO and related and Non-GAAP Basis products related assets expense invest
Slide 38: Reconciliation: U.S. GAAP to Non-GAAP, Q2 2023
RECONCILIATION: U.S. GAAP TO NON-GAAP Q2 2023 (UNAUDITED) Reclassification Other adjustments Deferred Consolidated Amortization Seed capital compensation Acquisition U.S. GAAP investment Revenue of intangible and CLO and related and Non-GAAP Basis products related assets investments investments inte
Slide 39: Reconciliation: U.S. GAAP to Non-GAAP, Q1 2023
RECONCILIATION: U.S. GAAP TO NON-GAAP Q1 2023 (UNAUDITED) Reclassification Other adjustments Deferred Consolidated Amortization Seed capital compensation Acquisition U.S. GAAP investment Revenue of intangible and CLO and related and Non-GAAP Basis products related assets investments investments inte
Slide 40: Reconciliation: U.S. GAAP to Non-GAAP, Q4 2022
RECONCILIATION: U.S. GAAP TO NON-GAAP Q4 2022 (UNAUDITED) Reclassification Other adjustments Consolidated Amortization Seed capital Acquisition U.S. GAAP investment of intangible and CLO and Non-GAAP Basis products Revenue related assets investments integration Other Basis Revenues Investment manage
Slide 41: Reconciliation: U.S. GAAP to Non-GAAP, TY 2023
RECONCILIATION: U.S. GAAP TO NON-GAAP TY 2023 (UNAUDITED) Reclassification Other adjustments Deferred Consolidated Amortization Seed capital compensation Acquisition U.S. GAAP investment Revenue of intangible Restructuring and CLO and related and Non-GAAP Basis products related assets expense invest
Slide 42: Reconciliation: U.S. GAAP to Non-GAAP, TY 2022
RECONCILIATION: U.S. GAAP TO NON-GAAP TY 2022 (UNAUDITED) Reclassification Other adjustments Consolidated Amortization Seed capital Acquisition U.S. GAAP investment Revenue of intangible Restructuring and CLO and Non-GAAP Basis products related assets expense investments integration Other Basis Reve
Slide 43: Reconciliation: Footnotes
RECONCILIATION: 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 earni
Slide 44: Reconciliation: Footnotes
RECONCILIATION: FOOTNOTES (UNAUDITED) Components of Acquisition and Integration Expenses and Other for the respective periods are shown in the table below: Q4 2022 Q1 2023 Q2 2023 Q3 2023 Q4 2023 YTD:22 YTD:23 Acquisition and Integration Expenses Employment expenses $— $— $8,183 $2,642 $1,760 $4,542
Slide 45: Investment Partners
INVESTMENT PARTNERS
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