Virtus Investment Partners, Inc. · NYSE:VRTS
Virtus Investment Partners — Q2 2023 Earnings Presentation
45 slides from Virtus Investment Partners's earnings presentation, Jul 28, 2023
Slide 1: Second Quarter Earnings Presentation
SECOND QUARTER EARNINGS PRESENTATION July 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: Second Quarter 2023 Overview
SECOND QUARTER 2023 OVERVIEW Assets and Flows ■ Assets under management (AUM) increased to $168.3 billion from $154.8 billion due to the addition of AlphaSimplex and market performance ■ Sales of $7.6 billion increased 22% due to institutional ■ Net flows breakeven, an improvement from ($1.9) billio
Slide 6: Results
INVESTMENT PARTNERS. RESULTS
Slide 7: Assets Under Management
ASSETS UNDER MANAGEMENT DIVERSIFIED BY PRODUCT AND ASSET CLASS Institutional Accounts Closed-End Funds ■ AUM of $168.3 billion increased from $154.8 U.S. Retail Funds Retail Separate Accounts billion due to: Global Funds, ETFs, and Variable Insurance Funds – $7.8 billion of assets from the acquisiti
Slide 8: Asset Flows
ASSET FLOWS STRONG INSTITUTIONAL SALES ■ Sales of $7.6 billion increased 22% – Institutional sales of $3.7 billion increased from $1.9 billion and included a large new mandate and meaningful contributions to existing accounts – Open-end fund sales of $2.6 billion decreased from $3.0 billion primaril
Slide 9: Investment Management Fees, As Adjusted
INVESTMENT MANAGEMENT FEES, AS ADJUSTED HIGHER AVERAGE ASSETS ■ Investment management fees, as adjusted, increased by $13.5 million, or 9%, due to higher average AUM that included AlphaSimplex ■ Average fee rate of 42.2 bps compared with 42.0 bps – Discrete item unfavorably impacted average fee rate
Slide 10: Employment Expenses, As Adjusted
EMPLOYMENT EXPENSES, AS ADJUSTED REFLECTS NEW AFFILIATE AND SEASONALITY ■ Employment expenses, as adjusted, declined by $2.8 million to $95.8 million due to: – Impact of prior quarter seasonal items, largely offset by – Addition of AlphaSimplex ■ Employment expenses, as adjusted, as a percentage of
Slide 11: Other Operating Expenses, As Adjusted
OTHER OPERATING EXPENSES, AS ADJUSTED HIGHER DUE TO NEW AFFILIATE ■ Other operating expenses, as adjusted, of $31.7 million increased $1.9 million, or 7%, primarily due to: – Addition of AlphaSimplex – Annual equity grants to Board of Directors of $0.9 million ■ Other operating expenses, as adjusted
Slide 12: Non-GAAP Results
NON-GAAP RESULTS SEQUENTIALLY HIGHER EARNINGS AND MARGIN ■ Operating margin, as adjusted, of 32.3% compared with 26.8%, which included Operating Income, as Adjusted Diluted earnings per share, as adjusted seasonal items ■ Interest expense, as adjusted, increased by $1.2 million to $6.2 million, refl
Slide 13: Capital and Select Balance Sheet
CAPITAL AND SELECT BALANCE SHEET CLOSED ON ACQUISITION AND RETURNED CAPITAL ■ Acquired AlphaSimplex for cash Select Balance Sheet Items: 6/30/22 9/30/22 12/31/22 3/31/23 6/30/23 consideration of $113.4 million, Cash and cash equivalents $251 $309 $338 $213 $201 which included $50.0 million drawn Inv
Slide 14: Financial Supplement
FINANCIAL SUPPLEMENT
Slide 15: Non-GAAP Information: Income Statement
NON-GAAP INFORMATION INCOME STATEMENT1 (UNAUDITED) Q2:22 Q3:22 Q4:22 Q1:23 Q2:23 YTD:22 YTD:23 Revenues, As Adjusted Investment management fees, as adjusted $175,896 $163,997 $156,121 $157,636 $171,097 $372,185 $328,733 Administration and shareholder service fees, as adjusted 21,987 20,587 19,005 18
Slide 16: Non-GAAP Information: Income Statement (Continued)
NON-GAAP INFORMATION INCOME STATEMENT1 (CONTINUED) (UNAUDITED) Q2:22 Q3:22 Q4:22 Q1:23 Q2:23 YTD:22 YTD:23 Other Income (Expense), As Adjusted Realized and unrealized gain (loss) on investments, net, as adjusted ($2,704) ($782) $572 ($60) ($220) ($3,159) ($280) Other income, net, as adjusted 571 (65
Slide 17: Non-GAAP Information: Balance Sheet
NON-GAAP INFORMATION BALANCE SHEET1 (UNAUDITED) 6/30/2022 9/30/2022 12/31/2022 3/31/2023 6/30/2023 Assets: Cash and cash equivalents $250,530 $309,248 $338,234 $213,424 $201,462 Investments – seed capital 125,409 119,818 128,038 127,707 126,119 Investments – other 75,673 72,547 95,493 104,767 117,26
Slide 18: Non-GAAP Information: Balance Sheet (Continued)
NON-GAAP INFORMATION BALANCE SHEET1 (CONTINUED) (UNAUDITED) 6/30/2022 9/30/2022 12/31/2022 3/31/2023 6/30/2023 Liabilities and Equity Liabilities: Accrued compensation and benefits $105,106 $145,361 $181,805 $69,103 $117,681 Accounts payable and accrued liabilities 40,800 37,758 33,200 38,564 39,375
Slide 19: U.S. GAAP Information: Income Statement
U.S. GAAP INFORMATION INCOME STATEMENT (UNAUDITED) Q2:22 Q3:22 Q4:22 Q1:23 Q2:23 YTD:22 YTD:23 Revenues Investment management fees $185,024 $172,850 $163,648 $164,478 $179,979 $391,841 $344,457 Distribution and service fees 17,159 15,746 14,606 14,153 14,132 37,166 28,285 Administration and sharehol
Slide 20: U.S. GAAP Information: Income Statement (Continued)
U.S. GAAP INFORMATION INCOME STATEMENT (CONTINUED) (UNAUDITED) Q2:22 Q3:22 Q4:22 Q1:23 Q2:23 YTD:22 YTD:23 Other Income (Expense) Realized and unrealized gain (loss) on investments, net ($10,543) ($2,493) $3,529 $2,670 $1,717 ($13,525) $4,387 Realized and unrealized gain (loss) of CIP1, net (21,659)
Slide 21: Assets Under Management by Product, Asset Class and Region
ASSETS UNDER MANAGEMENT BY PRODUCT, ASSET CLASS AND REGION 6/30/2022 9/30/2022 12/31/2022 3/31/2023 6/30/2023 Assets by Product U.S. Retail Funds $53,838 $49,164 $47,494 $48,111 $50,429 Global Funds 3,483 3,216 3,443 3,615 4,184 Exchange Traded Funds 1,287 1,262 1,226 1,275 1,337 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 6/30/2023 Equity: Domestic Equity $19,423 $— $29,576 $22,985 $71,984 International Equity 4,143 — 83 1,364 5,590 Global Equity 1,687 — 352 7,796 9,835 Specia
Slide 23: Asset Flows: Total
ASSET FLOWS TOTAL 6/30/2022 9/30/2022 12/31/2022 3/31/2023 6/30/2023 YTD:22 YTD:23 Total Beginning balance $183,342 $155,420 $144,974 $149,376 $154,849 $187,186 $149,376 Inflows 7,884 5,723 7,251 6,234 7,576 17,319 13,810 Outflows (12,652) (9,037) (10,652) (8,127) (7,604) (24,047) (15,731) Net Flows
Slide 24: Asset Flows by Product
ASSET FLOWS BY PRODUCT 6/30/2022 9/30/2022 12/31/2022 3/31/2023 6/30/2023 YTD:22 YTD:23 U.S. Retail Funds Beginning balance $66,554 $53,838 $49,164 $47,494 $48,111 $74,616 $47,494 Inflows 2,797 2,494 2,716 2,805 2,128 7,536 4,933 Outflows (7,254) (5,310) (6,317) (4,562) (4,547) (15,112) (9,109) Net
Slide 25: Asset Flows by Product (Continued)
ASSET FLOWS BY PRODUCT (CONTINUED) 6/30/2022 9/30/2022 12/31/2022 3/31/2023 6/30/2023 YTD:22 YTD:23 Exchange Traded Funds Beginning balance $1,448 $1,287 $1,262 $1,226 $1,275 $1,479 $1,226 Inflows 136 91 98 137 70 262 207 Outflows (116) (63) (163) (119) (41) (267) (160) Net Flows 20 28 (65) 18 29 (5
Slide 26: Asset Flows by Product (Continued)
ASSET FLOWS BY PRODUCT (CONTINUED) 6/30/2022 9/30/2022 12/31/2022 3/31/2023 6/30/2023 YTD:22 YTD:23 Closed-End Funds Beginning balance $12,060 $10,645 $10,146 $10,361 $10,358 $12,068 $10,361 Inflows 24 157 2 4 20 32 24 Outflows — — — — — — — Net Flows 24 157 2 4 20 32 24 Market performance (1,250) (
Slide 27: Asset Flows by Product (Continued)
ASSET FLOWS BY PRODUCT (CONTINUED) 6/30/2022 9/30/2022 12/31/2022 3/31/2023 6/30/2023 YTD:22 YTD:23 Intermediary Sold Managed Accounts Beginning balance $34,347 $29,425 $27,648 $29,160 $30,675 $37,621 $29,160 Inflows 1,093 886 889 1,021 1,065 2,864 2,086 Outflows (1,784) (1,252) (1,404) (1,159) (1,2
Slide 28: Asset Flows by Product (Continued)
ASSET FLOWS BY PRODUCT (CONTINUED) 6/30/2022 9/30/2022 12/31/2022 3/31/2023 6/30/2023 YTD:22 YTD:23 Institutional Separate Accounts Beginning balance $53,658 $46,440 $43,444 $46,908 $49,528 $48,140 $46,908 Inflows 3,452 1,507 2,724 1,852 3,660 5,901 5,512 Outflows (3,032) (1,930) (2,162) (2,047) (1,
Slide 29: Asset Flows by Asset Class
ASSET FLOWS BY ASSET CLASS 6/30/2022 9/30/2022 12/31/2022 3/31/2023 6/30/2023 YTD:22 YTD:23 Domestic Equity Beginning balance $78,504 $65,797 $61,537 $64,948 $69,253 $87,889 $64,948 Inflows 2,942 1,871 3,090 2,988 2,066 7,221 5,054 Outflows (4,268) (3,019) (4,024) (3,141) (3,103) (8,611) (6,244) Net
Slide 30: Asset Flows by Asset Class (Continued)
ASSET FLOWS BY ASSET CLASS (CONTINUED) 6/30/2022 9/30/2022 12/31/2022 3/31/2023 6/30/2023 YTD:22 YTD:23 Global Equity Beginning balance $10,580 $8,701 $7,519 $8,292 $9,013 $11,658 $8,292 Inflows 1,154 156 604 419 415 1,368 834 Outflows (1,011) (868) (462) (438) (249) (1,241) (687) Net Flows 143 (712
Slide 31: Asset Flows by Asset Class (Continued)
ASSET FLOWS BY ASSET CLASS (CONTINUED) 6/30/2022 9/30/2022 12/31/2022 3/31/2023 6/30/2023 YTD:22 YTD:23 Leveraged Finance Beginning balance $12,213 $10,816 $10,363 $10,196 $9,836 $12,069 $10,196 Inflows 491 397 700 278 238 1,473 516 Outflows (1,219) (809) (1,020) (758) (765) (2,065) (1,523) Net Flow
Slide 32: Asset Flows by Asset Class (Continued)
ASSET FLOWS BY ASSET CLASS (CONTINUED) 6/30/2022 9/30/2022 12/31/2022 3/31/2023 6/30/2023 YTD:22 YTD:23 Investment Grade Beginning balance $7,475 $6,865 $6,649 $7,029 $7,041 $7,177 $7,029 Inflows 137 372 584 222 2,295 301 2,517 Outflows (479) (331) (289) (347) (208) (1,024) (555) Net Flows (342) 41
Slide 33: Asset Flows by Asset Class (Continued)
ASSET FLOWS BY ASSET CLASS (CONTINUED) 6/30/2022 9/30/2022 12/31/2022 3/31/2023 6/30/2023 YTD:22 YTD:23 Multi-Asset1 Beginning balance $23,415 $20,261 $19,364 $19,937 $20,597 $24,853 $19,937 Inflows 383 599 413 480 301 960 781 Outflows (703) (515) (693) (462) (461) (1,300) (923) Net Flows (320) 84 (
Slide 34: Investment Management Fees: Average Assets by Product
INVESTMENT MANAGEMENT FEES AVERAGE ASSETS1 BY PRODUCT Q2:22 Q3:22 Q4:22 Q1:23 Q2:23 YTD:22 YTD:23 U.S. Retail Funds $59,799 $54,563 $49,752 $48,747 $50,048 $64,466 $49,398 Global Funds 3,444 3,355 3,032 3,210 3,939 3,673 3,575 Exchange Traded Funds 1,401 1,371 1,243 1,316 1,278 1,411 1,297 Variable
Slide 35: Investment Management Fees: Average Fees Earned by Product
INVESTMENT MANAGEMENT FEES AVERAGE MANAGEMENT FEES EARNED1 BY PRODUCT (IN BASIS POINTS) Q2:22 Q3:22 Q4:22 Q1:23 Q2:23 YTD:22 YTD:23 U.S. Retail Funds 47.4 49.0 48.7 49.2 51.8 47.6 50.5 Global Funds 37.8 25.8 39.3 38.4 30.3 35.5 33.9 Exchange Traded Funds 11.1 8.6 5.2 8.4 9.5 10.5 8.9 Variable Insura
Slide 36: 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 37: 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 38: 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 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, Q3 2022
RECONCILIATION: U.S. GAAP TO NON-GAAP Q3 2022 (UNAUDITED) Reclassification Other adjustments Consolidated Amortization Seed capital U.S. GAAP investment Revenue Restructuring of intangible and CLO Non-GAAP Basis products related expense assets investments Other Basis Revenues Investment management f
Slide 40: Reconciliation: U.S. GAAP to Non-GAAP, Q2 2022
RECONCILIATION: U.S. GAAP TO NON-GAAP Q2 2022 (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, 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 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 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: Q2 2022 Q3 2022 Q4 2022 Q1 2023 Q2 2023 YTD:22 YTD:23 Acquisition and Integration Expenses Employment expenses $260 $— $— $— $8,183 $4,542 $8,183 Other operatin
Slide 45: Virtus
“VIRTUS
Virtus Investment Partners — Q2 2023 Earnings Presentation on 6ix