Virtus Investment Partners, Inc. · NYSE:VRTS
Virtus Investment Partners — Q3 2016 Earnings Presentation
40 slides from Virtus Investment Partners's earnings presentation, Oct 28, 2016
Slide 1: Third Quarter 2016 Earnings Presentation
Third Quarter 2016 Earnings Presentation October 28, 2016 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 Share Purchase Agreement 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
OVERVIEW OF THIRD QUARTER Assets and Flows Assets under management increased 3% sequentially to $46.5 billion Total sales of $3.1 billion increased $0.7 billion, or 29%, from sequential quarter with higher sales in all product categories Positive net flows of $0.5 billion compared to net outfl
Slide 6: Stock Purchase Agreement
STOCK PURCHASE AGREEMENT Purchase of Shares Held By Bank of Montreal On October 27, 2016 entered into a Stock Purchase Agreement to purchase all shares held by Bank of Montreal Purchased 1.7 million shares for $161.5 million or $93.50 per share, representing a 4.0% and 4.5% discount compared to
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 market performance $47.9 $47.4 Sequential increase of $1.3 billion, or $45.7 $46.5 $45.2 3%, reflects market appreciation of $0.9 billion and net flows of $0.5 billion Sequential changes by product categor
Slide 9: Asset Flows
ASSET FLOWS Inflows/ (Outflows) Commentary Net flows Flows reflect market trends, product breadth and investment performance $9.5 $8.3 Sales increased $0.7 billion, or 29%, $3.2 $2.8 $3.1 sequentially due to higher sales in all $2.5 $2.4 product categories Redemptions declined $2.0 billion, or 4
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 $206.3 Sequential increase of $2.5 million, or $176.4 4%, due to higher average assets under $65.2 management and incentive fees $60.9 $58
Slide 11: Employment Expenses, As Adjusted
EMPLOYMENT EXPENSES, AS ADJUSTED Quarterly Results Year to Date Commentary Trend reflects staffing levels and variable incentive plans Employment expenses, as adjusted $102.7 $102.2 unchanged from prior quarter − Decrease of $1.0 million in base salary $34.4 $36.0 $33.5 $33.1 $33.1 and benefits pr
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 $34.2 $33.4 Decrease of $1.2 million, or 10%, sequentially primarily reflects $0.6 million $11.3 $12.0 $12.1 $10.9 of annual board grants and
Slide 13: Non-GAAP Results
NON-GAAP RESULTS Quarterly Results Year to Date Commentary Profitability impacted by net flows, market Operating Income, As Adjusted performance and leveragability of the Diluted earnings per share, as adjusted business Diluted EPS, as adjusted, of $1.64 $88.9 increased 32% from prior quarter prim
Slide 14: Capital Position
CAPITAL POSITION Select Non-GAAP Balance Sheet Items Commentary 9/30/15 12/31/15 3/31/16 6/30/16 9/30/16 9/30 PF Cash and cash equivalents $127 $88 $50 $156 $165 $41 Capital position reflects share repurchases Seed capital investments 1 $277 $274 $281 $174 $179 $179 and cash generated from the busin
Slide 15: Appendix
_VIRTIUS | INVESTMENT PARTNERS Appendix
Slide 16: Non-GAAP Income Statement Information
NON-GAAP INCOME STATEMENT INFORMATION Quarterly Trend and Total Year Q3:15 Q4:15 Q1:16 Q2:16 Q3:16 YTD:15 YTD:16 Revenues, As Adjusted Investment management fees, as adjusted $65,193 $60,853 $57,735 $58,104 $60,551 $206,315 $176,390 Distribution and service fees, as adjusted 15,614 14,272 12,502 12,
Slide 17: Non-GAAP Income Statement Information (continued)
NON-GAAP INCOME STATEMENT INFORMATION Quarterly Trend and Total Year (continued) Q3:15 Q4:15 Q1:16 Q2:16 Q3:16 YTD:15 YTD:16 Other Income (Expense), As Adjusted Realized and unrealized gain (loss) on investments, net, as ($159) ($202) ($5) $94 $51 $183 $140 adjusted Other income, net, as adjusted 14
Slide 18: U.S. GAAP Income Statement
U.S. GAAP INCOME STATEMENT Quarterly Trend and Total Year Q3:15 Q4:15 Q1:16 Q2:16 Q3:16 YTD:15 YTD:16 Revenues Investment management fees $64,891 $60,611 $57,644 $58,192 $60,398 $204,254 $176,234 Distribution and service fees 15,587 14,246 12,478 12,167 12,116 52,820 36,761 Administration and transf
Slide 19: U.S. GAAP Income Statement (continued)
U.S. GAAP INCOME STATEMENT Quarterly Trend and Total Year (continued) Q3:15 Q4:15 Q1:16 Q2:16 Q3:16 YTD:15 YTD:16 Other Income (Expense) Realized and unrealized gain (loss) on investments, net ($2,082) $332 ($658) $3,281 $961 ($1,194) $3,584 Realized and unrealized gain (loss) on investments of (17,
Slide 20: Condensed Non-GAAP Balance Sheet
1 CONDENSED NON-GAAP BALANCE SHEET Quarter-end Trend 9/30/15 12/30/15 3/31/16 6/30/16 9/30/16 Assets: Cash and cash equivalents $126,470 $87,574 $50,402 $155,532 $165,421 Investments – seed capital 276,806 273,679 280,929 174,130 179,105 Investments – other 41,409 60,225 51,136 38,362 38,385 Total c
Slide 21: Condensed Non-GAAP Balance Sheet (continued)
1 CONDENSED NON-GAAP BALANCE SHEET Quarter-end Trend (continued) 9/30/15 12/30/15 3/31/16 6/30/16 9/30/16 Liabilities and Equity Liabilities: Accrued compensation and benefits $38,206 $49,617 $15,035 $26,242 $37,813 Accounts payable and accrued liabilities 39,739 23,036 20,563 20,448 21,429 Dividend
Slide 22: Assets Under Management
ASSETS UNDER MANAGEMENT Quarterly Trend and Total Year Q3:15 Q4:15 Q1:16 Q2:16 Q3:16 YTD:15 YTD:16 Ending Assets by Product Open-End Funds $28,717.1 $27,865.8 $25,560.3 $23,854.9 $24,302.7 $28,717.1 $24,302.7 Variable Insurance Funds $999.3 $1,016.3 $975.7 $958.9 $963.7 $999.3 $963.7 Total – Open-En
Slide 23: Average Net Fees and Assets
AVERAGE NET FEES AND ASSETS Quarterly Trend and Total Year Q3:15 Q4:15 Q1:16 Q2:16 Q3:16 YTD:15 YTD:16 Average Net Management Fees (1) (In basis points, annualized) Open-End Funds 47.2 45.9 47.1 49.2 49.7 49.8 48.6 Variable Insurance Funds 48.7 48.6 53.2 55.4 61.8 51.3 56.9 Total Open-End Funds 47.3
Slide 24: Asset Flow Detail
ASSET FLOW DETAIL Quarterly Trend and Total Year: All Product Flows and AUM By Asset Class Q3:15 Q4:15 Q1:16 Q2:16 Q3:16 YTD:15 YTD:16 All Product Flows Beginning balance $52,401.0 $47,937.7 $47,385.3 $45,651.2 $45,169.7 $56,702.4 $47,385.3 Inflows 2,547.2 3,164.0 2,841.1 2,390.1 3,078.0 9,525.8 8,3
Slide 25: Asset Flow Detail
ASSET FLOW DETAIL Asset Flows – By Product Q3:15 Q4:15 Q1:16 Q2:16 Q3:16 YTD:15 YTD:16 Open-End Funds Beginning balance $32,211.0 $28,717.1 $27,865.8 $25,560.3 $23,854.9 $36,292.3 $27,865.8 Inflows 1,857.8 2,540.4 2,186.4 1,344.5 1,869.3 7,469.0 5,400.2 Outflows (3,684.5) (3,662.6) (4,748.2) (3,756.
Slide 26: Asset Flow Detail
ASSET FLOW DETAIL Asset Flows – By Product (continued) Q3:15 Q4:15 Q1:16 Q2:16 Q3:16 YTD:15 YTD:16 Closed-End Funds Beginning balance $6,901.0 $6,349.8 $6,222.3 $6,543.6 $6,959.6 $7,581.4 $6,222.3 Inflows - - - - - - - Outflows - - - (103.3) - - (103.3) Net Flows - - - (103.3) - - (103.3) Market per
Slide 27: Asset Flow Detail
ASSET FLOW DETAIL Asset Flows – By Product (continued) Q3:15 Q4:15 Q1:16 Q2:16 Q3:16 YTD:15 YTD:16 Intermediary Sold Managed Accounts Beginning balance $4,180.6 $3,853.5 $3,985.7 $4,151.5 $4,462.7 $4,188.7 $3,985.7 Inflows 132.9 193.1 295.9 337.5 418.0 460.0 1,051.4 Outflows (176.3) (255.2) (235.0)
Slide 28: Asset Flow Detail
ASSET FLOW DETAIL Asset Flows – By Product (continued) Q3:15 Q4:15 Q1:16 Q2:16 Q3:16 YTD:15 YTD:16 Institutional Accounts Beginning balance $4,665.1 $4,638.7 $4,799.7 $4,848.3 $4,920.0 $4,296.5 $4,799.7 Inflows 199.5 226.6 186.2 224.9 612.5 781.7 1,023.6 Outflows (110.3) (181.3) (276.6) (292.0) (207
Slide 29: Asset Flow Detail: Open-End Flows by Asset Class
ASSET FLOW DETAIL Open-End Asset Flows – By Asset Class Q3:15 Q4:15 Q1:16 Q2:16 Q3:16 YTD:15 YTD:16 Domestic Equity Funds Beginning balance $6,019.7 $4,785.3 $4,349.0 $4,213.5 $3,985.1 $10,389.7 $4,349.0 Inflows 107.6 108.0 120.6 227.3 244.1 582.9 592.0 Outflows (968.9) (679.6) (576.6) (525.5) (391.
Slide 30: Asset Flow Detail: Open-End Flows by Asset Class (continued)
ASSET FLOW DETAIL Open-End Asset Flows – By Asset Class (continued) Q3:15 Q4:15 Q1:16 Q2:16 Q3:16 YTD:15 YTD:16 Taxable Bond Funds Beginning balance $9,960.9 $9,446.0 $8,990.8 $8,752.3 $8,736.5 $10,600.4 $8,990.8 Inflows 419.4 536.2 518.6 418.3 473.7 1,548.8 1,410.6 Outflows (818.1) (905.1) (843.6)
Slide 31: U.S. GAAP to Non-GAAP Reconciliation – Q3 2016
U.S. GAAP TO NON-GAAP RECONCILIATION – Q3 2016 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 Basis Revenues Inve
Slide 32: U.S. GAAP to Non-GAAP Reconciliation – Q2 2016
U.S. GAAP TO NON-GAAP RECONCILIATION – Q2 2016 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 Basis Revenues Inve
Slide 33: U.S. GAAP to Non-GAAP Reconciliation – Q1 2016
U.S. GAAP TO NON-GAAP RECONCILIATION – Q1 2016 Reclassifications Adjustments Distribution and Consolidated Amortization U.S. GAAP other asset- investment of intangible Seed capital and Non-GAAP Basis based expenses products assets CLO investments Other Basis Revenues Investment management fees $ 57,
Slide 34: U.S. GAAP to Non-GAAP Reconciliation – Q4 2015
U.S. GAAP TO NON-GAAP RECONCILIATION – Q4 2015 Reclassifications Adjustments Distribution and Consolidated Amortization U.S. GAAP other asset- investment of intangible Seed capital and Non-GAAP Basis based expenses products assets CLO investments Other Basis Revenues Investment management fees $ 60,
Slide 35: U.S. GAAP to Non-GAAP Reconciliation – Q3 2015
U.S. GAAP TO NON-GAAP RECONCILIATION – Q3 2015 Reclassifications Adjustments Distribution and Consolidated Amortization U.S. GAAP other asset- investment of intangible Seed capital and Non-GAAP Basis based expenses products assets CLO investments Other Basis Revenues Investment management fees $ 64,
Slide 36: U.S. GAAP to Non-GAAP Reconciliation – YTD Sept 2016
U.S. GAAP TO NON-GAAP RECONCILIATION – YTD SEPT 2016 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 Basis Revenue
Slide 37: U.S. GAAP to Non-GAAP Reconciliation – YTD Sept 2015
U.S. GAAP TO NON-GAAP RECONCILIATION – YTD SEPT 2015 Reclassifications Adjustments Distribution and Consolidated Amortization U.S. GAAP other asset- investment of intangible Seed capital and Non-GAAP Basis based expenses products assets CLO investments Other Basis Revenues Investment management fees
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 Components of Other for the respective periods are shown in the table below: Q3:15 Q4:15 Q1:16 Q2:16 Q3:16 YTD:15 YTD:16 Other ($ in thousands) Loss contingency $- $- $- $- $- $16,500 $- Tax impact of loss contingency - - - - - ($5,507) - Transition related revenues - - - - - $1,166 - Tax
Slide 40: Virtus Investment Partners
VIRTIUS | INVESTMENT PARTNERS
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