Virtus Investment Partners, Inc. · NYSE:VRTS
Virtus Investment Partners — Q1 2023 Earnings Presentation
45 slides from Virtus Investment Partners's earnings presentation, Apr 28, 2023
Slide 1: First Quarter Earnings Presentation
FIRST QUARTER EARNINGS PRESENTATION April 28, 2023 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: First Quarter 2023 Overview
FIRST QUARTER 2023 OVERVIEW Assets and Flows ■ Assets under management (AUM) increased to $154.8 billion from $149.4 billion due to market appreciation, partially offset by net outflows ■ Sales of $6.2 billion compared with $7.3 billion, which included a large institutional funding and CLO issuance
Slide 6: Results
INVESTMENT PARTNERS RESULTS
Slide 7: Assets Under Management
ASSETS UNDER MANAGEMENT MARKET APPRECIATION ACROSS ASSET CLASSES U.S. Retail Funds Closed-End Funds ■ AUM of $154.8 billion increased from Institutional Accounts Retail Separate Accounts $149.4 billion due to: Global Funds, ETFs, and Variable Insurance Funds – $7.8 billion of market appreciation, pa
Slide 8: Asset Flows
ASSET FLOWS IMPROVED RETAIL FLOWS ■ Sales of $6.2 billion declined from $7.3 billion, reflecting large prior-quarter institutional fundings – Open-end fund sales of $3.0 billion unchanged as 44% increase in equity sales offset by lower fixed income and alternatives – Retail separate account sales in
Slide 9: Investment Management Fees, As Adjusted
INVESTMENT MANAGEMENT FEES, AS ADJUSTED HIGHER AVERAGE ASSETS AND FEE RATE ■ Investment management fees, as adjusted, increased by $1.5 million, or 1%, due to higher average AUM and fee rate, offset by fewer days in quarter ■ Average fee rate of 42.0 bps compared with 41.7 bps ■ Average fee rate by
Slide 10: Employment Expenses, As Adjusted
EMPLOYMENT EXPENSES, AS ADJUSTED SEASONALLY HIGHER ■ Employment expenses, as adjusted, of $98.6 million included $11.4 million of seasonally higher items ■ Employment expenses, as adjusted, as a percentage of revenues were 55.8% – Increased 570 bps due to seasonal items, partially offset by lower va
Slide 11: Other Operating Expenses, As Adjusted
OTHER OPERATING EXPENSES, AS ADJUSTED MODESTLY LOWER ■ Other operating expenses, as adjusted, of $29.8 million compared with $30.8 million ■ The sequential decrease largely reflected lower professional fees and seasonally lower travel and related expenses ■ Other operating expenses, as adjusted, as
Slide 12: Non-GAAP Results
NON-GAAP RESULTS REFLECTS SEASONAL ITEMS ■ Operating margin, as adjusted, of 26.8% compared with 31.8% Operating Income, As Adjusted Diluted earnings per share, as adjusted – Excluding seasonal items, operating margin was 33.2% ■ Diluted EPS, as adjusted, of $4.20 compared with $5.17 – Included seas
Slide 13: Capital and Select Balance Sheet
CAPITAL AND SELECT BALANCE SHEET BALANCED CAPITAL MANAGEMENT ■ Working capital of $184.4 million Select Balance Sheet Items: 3/31/22 6/30/22 9/30/22 12/31/22 3/31/23 compared with $180.6 million Cash and cash equivalents $225 $251 $309 $338 $213 Seed capital investments1 $138 $125 $120 $128 $128 ■ C
Slide 14: Financial Supplement
INVESTMENT PARTNERS FINANCIAL SUPPLEMENT
Slide 15: Non-GAAP Information: Income Statement
NON-GAAP INFORMATION INCOME STATEMENT1 (UNAUDITED) Q1:22 Q2:22 Q3:22 Q4:22 Q1:23 YTD:22 YTD:23 Revenues, As Adjusted Investment management fees, as adjusted $196,289 $175,896 $163,997 $156,121 $157,636 $196,289 $157,636 Administration and shareholder service fees, as adjusted 24,387 21,987 20,587 19
Slide 16: Non-GAAP Information: Income Statement (Continued)
NON-GAAP INFORMATION INCOME STATEMENT1 (CONTINUED) (UNAUDITED) Q1:22 Q2:22 Q3:22 Q4:22 Q1:23 YTD:22 YTD:23 Other Income (Expense), As Adjusted Realized and unrealized gain (loss) on investments, net, as adjusted ($455) ($2,704) ($782) $572 ($60) ($455) ($60) Other income, net, as adjusted 287 571 (6
Slide 17: Non-GAAP Information: Balance Sheet
NON-GAAP INFORMATION BALANCE SHEET1 (UNAUDITED) 3/31/2022 6/30/2022 9/30/2022 12/31/2022 3/31/2023 Assets: Cash and cash equivalents $225,217 $250,530 $309,248 $338,234 $213,424 Investments – seed capital 137,835 125,409 119,818 128,038 127,707 Investments – other 90,139 75,673 72,547 95,493 104,767
Slide 18: Non-GAAP Information: Balance Sheet (Continued)
NON-GAAP INFORMATION BALANCE SHEET1 (CONTINUED) (UNAUDITED) 3/31/2022 6/30/2022 9/30/2022 12/31/2022 3/31/2023 Liabilities and Equity Liabilities: Accrued compensation and benefits $70,646 $105,106 $145,361 $181,805 $69,103 Accounts payable and accrued liabilities 62,335 40,800 37,758 33,200 38,564
Slide 19: U.S. GAAP Information: Income Statement
U.S. GAAP INFORMATION INCOME STATEMENT (UNAUDITED) Q1:22 Q2:22 Q3:22 Q4:22 Q1:23 YTD:22 YTD:23 Revenues Investment management fees $206,817 $185,024 $172,850 $163,648 $164,478 $206,817 $164,478 Distribution and service fees 20,007 17,159 15,746 14,606 14,153 20,007 14,153 Administration and sharehol
Slide 20: U.S. GAAP Information: Income Statement (Continued)
U.S. GAAP INFORMATION INCOME STATEMENT (CONTINUED) (UNAUDITED) Q1:22 Q2:22 Q3:22 Q4:22 Q1:23 YTD:22 YTD:23 Other Income (Expense) Realized and unrealized gain (loss) on investments, net ($2,982) ($10,543) ($2,493) $3,529 $2,670 ($2,982) $2,670 Realized and unrealized gain (loss) of CIP1, net (13,344
Slide 21: Assets Under Management by Product, Asset Class and Region
ASSETS UNDER MANAGEMENT BY PRODUCT, ASSET CLASS AND REGION 3/31/2022 6/30/2022 9/30/2022 12/31/2022 3/31/2023 Assets by Product U.S. Retail Funds $66,554 $53,838 $49,164 $47,494 $48,111 Global Funds 4,089 3,483 3,216 3,443 3,615 Exchange Traded Funds 1,448 1,287 1,262 1,226 1,275 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 3/31/2023 Equity: Domestic Equity $19,023 $— $28,377 $21,853 $69,253 International Equity 4,286 — 85 1,305 5,676 Global Equity 1,330 — 346 7,337 9,013 Specia
Slide 23: Asset Flows: Total
ASSET FLOWS TOTAL 3/31/2022 6/30/2022 9/30/2022 12/31/2022 3/31/2023 YTD:22 YTD:23 Total Beginning balance $187,186 $183,342 $155,420 $144,974 $149,376 $187,186 $149,376 Inflows 9,435 7,884 5,723 7,251 6,234 9,435 6,234 Outflows (11,395) (12,652) (9,037) (10,652) (8,127) (11,395) (8,127) Net Flows (
Slide 24: Asset Flows by Product
ASSET FLOWS BY PRODUCT 3/31/2022 6/30/2022 9/30/2022 12/31/2022 3/31/2023 YTD:22 YTD:23 U.S. Retail Funds Beginning balance $74,616 $66,554 $53,838 $49,164 $47,494 $74,616 $47,494 Inflows 4,739 2,797 2,494 2,716 2,805 4,739 2,805 Outflows (7,858) (7,254) (5,310) (6,317) (4,562) (7,858) (4,562) Net F
Slide 25: Asset Flows by Product (Continued)
ASSET FLOWS BY PRODUCT (CONTINUED) 3/31/2022 6/30/2022 9/30/2022 12/31/2022 3/31/2023 YTD:22 YTD:23 Exchange Traded Funds Beginning balance $1,479 $1,448 $1,287 $1,262 $1,226 $1,479 $1,226 Inflows 126 136 91 98 137 126 137 Outflows (151) (116) (63) (163) (119) (151) (119) Net Flows (25) 20 28 (65) 1
Slide 26: Asset Flows by Product (Continued)
ASSET FLOWS BY PRODUCT (CONTINUED) 3/31/2022 6/30/2022 9/30/2022 12/31/2022 3/31/2023 YTD:22 YTD:23 Closed-End Funds Beginning balance $12,068 $12,060 $10,645 $10,146 $10,361 $12,068 $10,361 Inflows 8 24 157 2 4 8 4 Outflows — — — — — — — Net Flows 8 24 157 2 4 8 4 Market performance (196) (1,250) (
Slide 27: Asset Flows by Product (Continued)
ASSET FLOWS BY PRODUCT (CONTINUED) 3/31/2022 6/30/2022 9/30/2022 12/31/2022 3/31/2023 YTD:22 YTD:23 Intermediary Sold Managed Accounts Beginning balance $37,621 $34,347 $29,425 $27,648 $29,160 $37,621 $29,160 Inflows 1,771 1,093 886 889 1,021 1,771 1,021 Outflows (1,221) (1,784) (1,252) (1,404) (1,1
Slide 28: Asset Flows by Product (Continued)
ASSET FLOWS BY PRODUCT (CONTINUED) 3/31/2022 6/30/2022 9/30/2022 12/31/2022 3/31/2023 YTD:22 YTD:23 Institutional Separate Accounts Beginning balance $48,140 $53,658 $46,440 $43,444 $46,908 $48,140 $46,908 Inflows 2,449 3,452 1,507 2,724 1,852 2,449 1,852 Outflows (1,623) (3,032) (1,930) (2,162) (2,
Slide 29: Asset Flows by Asset Class
ASSET FLOWS BY ASSET CLASS 3/31/2022 6/30/2022 9/30/2022 12/31/2022 3/31/2023 YTD:22 YTD:23 Domestic Equity Beginning balance $87,889 $78,504 $65,797 $61,537 $64,948 $87,889 $64,948 Inflows 4,279 2,942 1,871 3,090 2,988 4,279 2,988 Outflows (4,343) (4,268) (3,019) (4,024) (3,141) (4,343) (3,141) Net
Slide 30: Asset Flows by Asset Class (Continued)
ASSET FLOWS BY ASSET CLASS (CONTINUED) 3/31/2022 6/30/2022 9/30/2022 12/31/2022 3/31/2023 YTD:22 YTD:23 Global Equity Beginning balance $11,658 $10,580 $8,701 $7,519 $8,292 $11,658 $8,292 Inflows 214 1,154 156 604 419 214 419 Outflows (230) (1,011) (868) (462) (438) (230) (438) Net Flows (16) 143 (7
Slide 31: Asset Flows by Asset Class (Continued)
ASSET FLOWS BY ASSET CLASS (CONTINUED) 3/31/2022 6/30/2022 9/30/2022 12/31/2022 3/31/2023 YTD:22 YTD:23 Leveraged Finance Beginning balance $12,069 $12,213 $10,816 $10,363 $10,196 $12,069 $10,196 Inflows 982 491 370 666 253 982 253 Outflows (846) (1,219) (620) (792) (470) (846) (470) Net Flows 136 (
Slide 32: Asset Flows by Asset Class (Continued)
ASSET FLOWS BY ASSET CLASS (CONTINUED) 3/31/2022 6/30/2022 9/30/2022 12/31/2022 3/31/2023 YTD:22 YTD:23 Investment Grade Beginning balance $7,177 $7,475 $6,865 $6,649 $7,029 $7,177 $7,029 Inflows 164 137 372 584 222 164 222 Outflows (545) (479) (331) (289) (347) (545) (347) Net Flows (381) (342) 41
Slide 33: Asset Flows by Asset Class (Continued)
ASSET FLOWS BY ASSET CLASS (CONTINUED) 3/31/2022 6/30/2022 9/30/2022 12/31/2022 3/31/2023 YTD:22 YTD:23 Multi-Asset1 Beginning balance $24,853 $23,415 $20,261 $19,364 $19,937 $24,853 $19,937 Inflows 577 383 599 413 480 577 480 Outflows (597) (703) (515) (693) (462) (597) (462) Net Flows (20) (320) 8
Slide 34: Investment Management Fees: Average Assets by Product
INVESTMENT MANAGEMENT FEES AVERAGE ASSETS1 BY PRODUCT Q1:22 Q2:22 Q3:22 Q4:22 Q1:23 YTD:22 YTD:23 U.S. Retail Funds $69,133 $59,799 $54,563 $49,752 $48,747 $69,133 $48,747 Global Funds 3,902 3,444 3,355 3,032 3,210 3,902 3,210 Exchange Traded Funds 1,422 1,401 1,371 1,243 1,316 1,422 1,316 Variable
Slide 35: Investment Management Fees: Average Fees Earned by Product
INVESTMENT MANAGEMENT FEES AVERAGE MANAGEMENT FEES EARNED1 BY PRODUCT (IN BASIS POINTS) Q1:22 Q2:22 Q3:22 Q4:22 Q1:23 YTD:22 YTD:23 U.S. Retail Funds 47.8 47.4 49.0 48.7 49.2 47.8 49.2 Global Funds 33.5 37.8 25.8 39.3 38.4 33.5 38.4 Exchange Traded Funds 10.0 11.1 8.6 5.2 8.4 10.0 8.4 Variable Insur
Slide 36: 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 37: Reconciliation: U.S. GAAP to Non-GAAP, Q4 2022
RECONCILIATION: U.S. GAAP TO NON-GAAP Q4 2022 (UNAUDITED) Reclassification Other adjustments Consolidated Amortization of Seed capital and U.S. GAAP investment intangible CLO Acquisition and Non-GAAP Basis products Revenue related assets investments integration Other Basis Revenues Investment manage
Slide 38: Reconciliation: U.S. GAAP to Non-GAAP, Q3 2022
RECONCILIATION: U.S. GAAP TO NON-GAAP Q3 2022 (UNAUDITED) Reclassification Other adjustments Consolidated Amortization of Seed capital U.S. GAAP investment Restructuring intangible and CLO Non-GAAP Basis products Revenue related expense assets investments Other Basis Revenues Investment management f
Slide 39: Reconciliation: U.S. GAAP to Non-GAAP, Q2 2022
RECONCILIATION: U.S. GAAP TO NON-GAAP Q2 2022 (UNAUDITED) Reclassification Other adjustments Consolidated Amortization of Seed capital U.S. GAAP investment Revenue intangible and CLO Acquisition and Non-GAAP Basis products related assets investments integration Other Basis Revenues Investment manage
Slide 40: Reconciliation: U.S. GAAP to Non-GAAP, Q1 2022
RECONCILIATION: U.S. GAAP TO NON-GAAP Q1 2022 (UNAUDITED) Reclassification Other adjustments Consolidated Amortization of Seed capital and U.S. GAAP investment intangible CLO Acquisition and Non-GAAP Basis products Revenue related assets investments integration Other Basis Revenues Investment manage
Slide 41: Reconciliation: U.S. GAAP to Non-GAAP, YTD 2023
RECONCILIATION: U.S. GAAP TO NON-GAAP YTD 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 int
Slide 42: Reconciliation: U.S. GAAP to Non-GAAP, YTD 2022
RECONCILIATION: U.S. GAAP TO NON-GAAP YTD 2022 (UNAUDITED) Reclassification Other adjustments Consolidated Amortization of Seed capital U.S. GAAP investment Revenue intangible and CLO Acquisition and Non-GAAP Basis products related assets investments integration Other Basis Revenues Investment manag
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: Q1 2022 Q2 2022 Q3 2022 Q4 2022 Q1 2023 YTD:22 YTD:23 Acquisition and Integration Expenses Employment expenses $4,282 $260 $— $— $— $4,282 $— Other operating ex
Slide 45: Investment Partners
INVESTMENT PARTNERS
Virtus Investment Partners — Q1 2023 Earnings Presentation on 6ix