Virtus Investment Partners, Inc. · NYSE:VRTS
Virtus Investment Partners — Q3 2023 Earnings Presentation
45 slides from Virtus Investment Partners's earnings presentation, Oct 27, 2023
Slide 1: Third Quarter Earnings Presentation
THIRD QUARTER EARNINGS PRESENTATION October 27, 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: Third Quarter 2023 Overview
THIRD QUARTER 2023 OVERVIEW Assets and Flows ■ Assets under management (AUM) of $162.5 billion decreased from $168.3 billion primarily due to market performance and open-end fund net outflows ■ Sales of $5.8 billion declined due to institutional, which had a large mandate in the prior quarter; highe
Slide 6: Results
INVESTMENT PARTNERS. RESULTS
Slide 7: Assets Under Management
ASSETS UNDER MANAGEMENT BROADLY DIVERSIFIED Institutional Accounts Closed-End Funds ■ AUM of $162.5 billion decreased from $168.3 U.S. Retail Funds Retail Separate Accounts billion due to: Global Funds, ETFs, and Variable Insurance Funds – ($3.6) billion of market performance – ($1.5) billion of net
Slide 8: Asset Flows
ASSET FLOWS HIGHER RETAIL SALES ■ Sales of $5.8 billion declined from $7.6 billion – Institutional sales of $1.3 billion decreased due to large prior-quarter mandate – Retail separate account sales of $1.8 billion increased 37% due to strong small/mid cap sales – Open-end fund sales of $2.7 billion
Slide 9: Investment Management Fees, As Adjusted
INVESTMENT MANAGEMENT FEES, AS ADJUSTED INCREASED AVERAGE ASSETS ■ Investment management fees, as adjusted, increased by $6.3 million, or 4%, due to: – Higher average AUM – Stable average fee rate ■ Average fee rate of 42.0 bps compared with 42.2 bps ■ Average fee rate by product: – Institutional: 3
Slide 10: Employment Expenses, As Adjusted
EMPLOYMENT EXPENSES, AS ADJUSTED RATIO STABLE SEQUENTIALLY ■ Employment expenses, as adjusted, increased by $3.0 million to $98.8 million primarily due to higher: – Profit-based affiliate incentive compensation – Stock-based performance-related incentive compensation – Sales-based incentive compensa
Slide 11: Other Operating Expenses, As Adjusted
OTHER OPERATING EXPENSES, AS ADJUSTED REFLECTS EXPENSE MANAGEMENT ■ Other operating expenses, as adjusted, of $30.1 million decreased $1.6 million, or 5%, primarily due to: – Prior-quarter annual equity grants to Board of Directors – Continued close management of all discretionary expenditures ■ Oth
Slide 12: Non-GAAP Results
NON-GAAP RESULTS HIGHER EARNINGS AND MARGIN ■ Operating margin, as adjusted, of 33.9% Operating Income, as Adjusted compared with 32.3% due to higher Diluted earnings per share, as adjusted revenues and stable operating expenses ■ Interest income increased primarily due to interest on the CLO issued
Slide 13: Capital and Select Balance Sheet
CAPITAL AND SELECT BALANCE SHEET RETURNED CAPITAL AND REPAID DEBT ■ Working capital of $73.4 million Select Balance Sheet Items: 9/30/22 12/31/22 3/31/23 6/30/23 9/30/23 compared with $124.0 million; cash Cash and cash equivalents $309 $338 $213 $201 $195 earnings were more than offset by: Investmen
Slide 14: Financial Supplement
INVESTMENT PARTNERS FINANCIAL SUPPLEMENT
Slide 15: Non-GAAP Information: Income Statement
NON-GAAP INFORMATION INCOME STATEMENT1 (UNAUDITED) Q3:22 Q4:22 Q1:23 Q2:23 Q3:23 YTD:22 YTD:23 Revenues, As Adjusted Investment management fees, as adjusted $163,997 $156,121 $157,636 $171,097 $177,387 $536,182 $506,120 Administration and shareholder service fees, as adjusted 20,587 19,005 18,389 18
Slide 16: Non-GAAP Information: Income Statement (Continued)
NON-GAAP INFORMATION INCOME STATEMENT1 (CONTINUED) (UNAUDITED) Q3:22 Q4:22 Q1:23 Q2:23 Q3:23 YTD:22 YTD:23 Other Income (Expense), As Adjusted Realized and unrealized gain (loss) on investments, net, as adjusted ($782) $572 ($60) ($220) ($297) ($3,941) ($577) Other income, net, as adjusted (659) (35
Slide 17: Non-GAAP Information: Balance Sheet
NON-GAAP INFORMATION BALANCE SHEET1 (UNAUDITED) 9/30/2022 12/31/2022 3/31/2023 6/30/2023 9/30/2023 Assets: Cash and cash equivalents $309,248 $338,234 $213,424 $201,462 $195,403 Investments – seed capital 119,818 128,038 127,707 126,119 126,017 Investments – other 72,547 95,493 104,767 117,265 145,4
Slide 18: Non-GAAP Information: Balance Sheet (Continued)
NON-GAAP INFORMATION BALANCE SHEET1 (CONTINUED) (UNAUDITED) 9/30/2022 12/31/2022 3/31/2023 6/30/2023 9/30/2023 Liabilities and Equity Liabilities: Accrued compensation and benefits $145,361 $181,805 $69,103 $117,681 $161,745 Accounts payable and accrued liabilities 37,758 33,200 38,564 39,375 32,740
Slide 19: U.S. GAAP Information: Income Statement
U.S. GAAP INFORMATION INCOME STATEMENT (UNAUDITED) Q3:22 Q4:22 Q1:23 Q2:23 Q3:23 YTD:22 YTD:23 Revenues Investment management fees $172,850 $163,648 $164,478 $179,979 $184,869 $564,691 $529,326 Distribution and service fees 15,746 14,606 14,153 14,132 14,333 52,912 42,618 Administration and sharehol
Slide 20: U.S. GAAP Information: Income Statement (Continued)
U.S. GAAP INFORMATION INCOME STATEMENT (CONTINUED) (UNAUDITED) Q3:22 Q4:22 Q1:23 Q2:23 Q3:23 YTD:22 YTD:23 Other Income (Expense) Realized and unrealized gain (loss) on investments, net ($2,493) $3,529 $2,670 $1,717 ($1,918) ($16,018) $2,469 Realized and unrealized gain (loss) of CIP1, net (8,440) 4
Slide 21: Assets Under Management by Product, Asset Class and Region
ASSETS UNDER MANAGEMENT BY PRODUCT, ASSET CLASS AND REGION 9/30/2022 12/31/2022 3/31/2023 6/30/2023 9/30/2023 Assets by Product U.S. Retail Funds $49,164 $47,494 $48,111 $50,429 $47,776 Global Funds 3,216 3,443 3,615 4,184 4,140 Exchange Traded Funds 1,262 1,226 1,275 1,337 1,404 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 9/30/2023 Equity: Domestic Equity $18,602 $— $29,446 $21,930 $69,978 International Equity 3,511 — 78 1,433 5,022 Global Equity 1,685 — 387 7,406 9,478 Specia
Slide 23: Asset Flows: Total
ASSET FLOWS TOTAL 9/30/2022 12/31/2022 3/31/2023 6/30/2023 9/30/2023 YTD:22 YTD:23 Total Beginning balance $155,420 $144,974 $149,376 $154,849 $168,316 $187,186 $149,376 Inflows 5,723 7,251 6,234 7,576 5,810 23,042 19,620 Outflows (9,037) (10,652) (8,127) (7,604) (7,309) (33,084) (23,040) Net Flows
Slide 24: Asset Flows by Product
ASSET FLOWS BY PRODUCT 9/30/2022 12/31/2022 3/31/2023 6/30/2023 9/30/2023 YTD:22 YTD:23 U.S. Retail Funds Beginning balance $53,838 $49,164 $47,494 $48,111 $50,429 $74,616 $47,494 Inflows 2,494 2,716 2,805 2,128 2,382 10,030 7,315 Outflows (5,310) (6,317) (4,562) (4,547) (3,954) (20,422) (13,063) Ne
Slide 25: Asset Flows by Product (Continued)
ASSET FLOWS BY PRODUCT (CONTINUED) 12/31/2022 12/31/2022 3/31/2023 6/30/2023 9/30/2023 YTD:22 YTD:23 Exchange Traded Funds Beginning balance $1,287 $1,262 $1,226 $1,275 $1,337 $1,479 $1,226 Inflows 91 98 137 70 124 353 331 Outflows (63) (163) (119) (41) (52) (330) (212) Net Flows 28 (65) 18 29 72 23
Slide 26: Asset Flows by Product (Continued)
ASSET FLOWS BY PRODUCT (CONTINUED) 9/30/2022 12/31/2022 3/31/2023 6/30/2023 9/30/2023 YTD:22 YTD:23 Closed-End Funds Beginning balance $10,645 $10,146 $10,361 $10,358 $10,166 $12,068 $10,361 Inflows 157 2 4 20 — 189 24 Outflows — — — — — — — Net Flows 157 2 4 20 — 189 24 Market performance (531) 631
Slide 27: Asset Flows by Product (Continued)
ASSET FLOWS BY PRODUCT (CONTINUED) 9/30/2022 12/31/2022 3/31/2023 6/30/2023 9/30/2023 YTD:22 YTD:23 Intermediary Sold Managed Accounts Beginning balance $29,425 $27,648 $29,160 $30,675 $31,878 $37,621 $29,160 Inflows 886 889 1,021 1,065 1,661 3,750 3,747 Outflows (1,252) (1,404) (1,159) (1,268) (1,3
Slide 28: Asset Flows by Product (Continued)
ASSET FLOWS BY PRODUCT (CONTINUED) 9/30/2022 12/31/2022 3/31/2023 6/30/2023 9/30/2023 YTD:22 YTD:23 Institutional Separate Accounts Beginning balance $46,440 $43,444 $46,908 $49,528 $58,780 $48,140 $46,908 Inflows 1,507 2,724 1,852 3,660 1,002 7,408 6,514 Outflows (1,930) (2,162) (2,047) (1,478) (1,
Slide 29: Asset Flows by Asset Class
ASSET FLOWS BY ASSET CLASS 9/30/2022 12/31/2022 3/31/2023 6/30/2023 9/30/2023 YTD:22 YTD:23 Domestic Equity Beginning balance $65,797 $61,537 $64,948 $69,253 $71,984 $87,889 $64,948 Inflows 1,871 3,090 2,988 2,066 2,731 9,092 7,785 Outflows (3,019) (4,024) (3,141) (3,103) (3,109) (11,630) (9,353) Ne
Slide 30: Asset Flows by Asset Class (Continued)
ASSET FLOWS BY ASSET CLASS (CONTINUED) 9/30/2022 12/31/2022 3/31/2023 6/30/2023 9/30/2023 YTD:22 YTD:23 Global Equity Beginning balance $8,701 $7,519 $8,292 $9,013 $9,835 $11,658 $8,292 Inflows 156 604 419 415 182 1,524 1,016 Outflows (868) (462) (438) (249) (367) (2,109) (1,054) Net Flows (712) 142
Slide 31: Asset Flows by Asset Class (Continued)
ASSET FLOWS BY ASSET CLASS (CONTINUED) 9/30/2022 12/31/2022 3/31/2023 6/30/2023 9/30/2023 YTD:22 YTD:23 Leveraged Finance Beginning balance $10,816 $10,363 $10,196 $9,836 $9,247 $12,069 $10,196 Inflows 397 700 278 238 544 1,870 1,060 Outflows (809) (1,020) (758) (765) (366) (2,878) (1,889) Net Flows
Slide 32: Asset Flows by Asset Class (Continued)
ASSET FLOWS BY ASSET CLASS (CONTINUED) 9/30/2022 12/31/2022 3/31/2023 6/30/2023 9/30/2023 YTD:22 YTD:23 Investment Grade Beginning balance $6,865 $6,649 $7,029 $7,041 $9,827 $7,177 $7,029 Inflows 372 584 222 2,295 191 673 2,708 Outflows (331) (289) (347) (208) (229) (1,355) (784) Net Flows 41 295 (1
Slide 33: Asset Flows by Asset Class (Continued)
ASSET FLOWS BY ASSET CLASS (CONTINUED) 9/30/2022 12/31/2022 3/31/2023 6/30/2023 9/30/2023 YTD:22 YTD:23 Multi-Asset1 Beginning balance $20,261 $19,364 $19,937 $20,597 $20,914 $24,853 $19,937 Inflows 599 413 480 301 319 1,559 1,100 Outflows (515) (693) (462) (461) (412) (1,815) (1,335) Net Flows 84 (
Slide 34: Investment Management Fees: Average Assets by Product
INVESTMENT MANAGEMENT FEES AVERAGE ASSETS1 BY PRODUCT Q3:22 Q4:22 Q1:23 Q2:23 Q3:23 YTD:22 YTD:23 U.S. Retail Funds $54,563 $49,752 $48,747 $50,048 $50,000 $61,165 $49,598 Global Funds 3,355 3,032 3,210 3,939 4,261 3,567 3,804 Exchange Traded Funds 1,371 1,243 1,316 1,278 1,382 1,398 1,325 Variable
Slide 35: Investment Management Fees: Average Fees Earned by Product
INVESTMENT MANAGEMENT FEES AVERAGE MANAGEMENT FEES EARNED1 BY PRODUCT (IN BASIS POINTS) Q3:22 Q4:22 Q1:23 Q2:23 Q3:23 YTD:22 YTD:23 U.S. Retail Funds 49.0 48.7 49.2 51.8 53.2 48.0 51.4 Global Funds 25.8 39.3 38.4 30.3 40.8 32.4 36.5 Exchange Traded Funds 8.6 5.2 8.4 9.5 10.1 9.9 9.4 Variable Insuran
Slide 36: 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 37: 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 38: Reconciliation: U.S. GAAP to Non-GAAP, Q1 2023
RECONCILIATION: U.S. GAAP TO NON-GAAP Q1 2023 (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 39: 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 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, Q3 2022
RECONCILIATION: U.S. GAAP TO NON-GAAP Q3 2022 (UNAUDITED) Reclassification Other adjustments Consolidated Amortization Seed capital U.S. GAAP investment Revenue of intangible Restructuring and CLO Non-GAAP Basis products related assets expense investments Other Basis Revenues Investment management f
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 Restructuring and CLO and related and Non-GAAP Basis products related assets expense inves
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 Restructuring and CLO and Non-GAAP Basis products related assets expense investments integration Other Basis Rev
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: Q3 2022 Q4 2022 Q1 2023 Q2 2023 Q3 2023 YTD:22 YTD:23 Acquisition and Integration Expenses Employment expenses $— $— $— $8,183 $2,642 $4,542 $10,825 Other opera
Slide 45: Virtus Investment Partners
3éVIRTUS INVESTM! ENT PARTNERS
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