Virtus Investment Partners, Inc. · NYSE:VRTS
Virtus Investment Partners — Q4 2022 Earnings Presentation
45 slides from Virtus Investment Partners's earnings presentation, Feb 3, 2023
Slide 1: Fourth Quarter Earnings Presentation
FOURTH QUARTER EARNINGS PRESENTATION February 3, 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: Fourth Quarter 2022 Overview
FOURTH QUARTER 2022 OVERVIEW Assets and Flows ■ Assets under management (AUM) increased to $149.4 billion from $145.0 billion at September 30 due to market appreciation and institutional net inflows, partially offset by net outflows in other products ■ Sales of $7.3 billion increased from $5.7 billi
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 $149.4 billion increased from Institutional Accounts Retail Separate Accounts $145.0 billion due to: Global Funds, ETFs, and Variable Insurance Funds – $8.8 billion of market appreciation, pa
Slide 8: Asset Flows
ASSET FLOWS SALES INCREASED ACROSS ALL PRODUCTS ■ Sales increased 27% to $7.3 billion – Institutional doubled to $3 billion reflecting additional funding into a domestic growth equity mandate and a CLO issuance – Open-end funds increased 5% due to higher sales of equity, fixed income, and alternativ
Slide 9: Investment Management Fees, As Adjusted
INVESTMENT MANAGEMENT FEES, AS ADJUSTED STABLE AVERAGE FEE RATE ■ Investment management fees, as adjusted, decreased by $7.9 million, or 5%, due to lower average AUM ■ Average fee rate of 41.7 bps compared with 41.5 bps ■ Average fee rate by product: – Open-end funds: 47.2 bps, up 0.4 bps – Retail s
Slide 10: Employment Expenses, As Adjusted
EMPLOYMENT EXPENSES, AS ADJUSTED LOWER VARIABLE COMPENSATION ■ Employment expenses, as adjusted, of $88.3 million included: – Lower profit- and sales-based compensation, partially offset by – Increase in estimates of investment performance-related compensation ■ Employment expenses, as adjusted, as
Slide 11: Other Operating Expenses, As Adjusted
OTHER OPERATING EXPENSES, AS ADJUSTED SEQUENTIALLY FLAT ■ Other operating expenses, as adjusted, of $30.8 million compared with $31.1 Transaction Costs million, which included $1.0 million of $31.1 transaction costs ■ Excluding transaction costs, the sequential increase reflected higher sales and ma
Slide 12: Non-GAAP Results
NON-GAAP RESULTS REFLECTS LOWER AVERAGE AUM ■ Operating margin, as adjusted, of 31.8% Operating Income, As Adjusted compared with 35.0% Diluted earnings per share, as adjusted – Lower primarily due to revenue decline ■ Diluted EPS, as adjusted, of $5.17 compared with $5.76 – Decrease in operating in
Slide 13: Capital and Select Balance Sheet
CAPITAL AND SELECT BALANCE SHEET BALANCED CAPITAL MANAGEMENT ■ Working capital of $180.6 million Select Balance Sheet Items: 12/31/21 3/31/22 6/30/22 9/30/22 12/31/22 compared with $195.2 million as Cash and cash equivalents $379 $225 $251 $309 $338 investment in a newly issued CLO and Seed capital
Slide 14: Financial Supplement
INVESTMENT PARTNERS FINANCIAL SUPPLEMENT
Slide 15: Non-GAAP Information: Income Statement
NON-GAAP INFORMATION INCOME STATEMENT 1 (UNAUDITED) Q4:21 Q1:22 Q2:22 Q3:22 Q4:22 TY:21 TY:22 Revenues, As Adjusted Investment management fees, as adjusted $203,429 $196,289 $175,896 $163,997 $156,121 $740,623 $692,303 Administration and shareholder service fees, as adjusted 27,665 24,387 21,987 20,
Slide 16: Non-GAAP Information: Income Statement (Continued)
NON-GAAP INFORMATION INCOME STATEMENT 1 (CONTINUED) (UNAUDITED) Q4:21 Q1:22 Q2:22 Q3:22 Q4:22 TY:21 TY:22 Other Income (Expense), As Adjusted Realized and unrealized gain (loss) on investments, net, as adjusted ($145) ($455) ($2,704) ($782) $572 $282 ($3,369) Other income, net, as adjusted 632 287 5
Slide 17: Non-GAAP Information: Balance Sheet
NON-GAAP INFORMATION BALANCE SHEET 1 (UNAUDITED) 12/31/2021 3/31/2022 6/30/2022 9/30/2022 12/31/2022 Assets: Cash and cash equivalents $378,921 $225,217 $250,530 $309,248 $338,234 Investments – seed capital 144,660 137,835 125,409 119,818 128,038 Investments – other 86,569 90,139 75,673 72,547 95,49
Slide 18: Non-GAAP Information: Balance Sheet (Continued)
NON-GAAP INFORMATION BALANCE SHEET 1 (CONTINUED) (UNAUDITED) 12/31/2021 3/31/2022 6/30/2022 9/30/2022 12/31/2022 Liabilities and Equity Liabilities: Accrued compensation and benefits $187,449 $70,646 $105,106 $145,361 $181,805 Accounts payable and accrued liabilities 48,496 62,335 40,800 37,758 33,2
Slide 19: U.S. GAAP Information: Income Statement
U.S. GAAP INFORMATION INCOME STATEMENT (UNAUDITED) Q4:21 Q1:22 Q2:22 Q3:22 Q4:22 TY:21 TY:22 Revenues Investment management fees $213,673 $206,817 $185,024 $172,850 $163,648 $781,585 $728,339 Distribution and service fees 23,464 20,007 17,159 15,746 14,606 90,555 67,518 Administration and shareholde
Slide 20: U.S. GAAP Information: Income Statement (Continued)
U.S. GAAP INFORMATION INCOME STATEMENT (CONTINUED) (UNAUDITED) Q4:21 Q1:22 Q2:22 Q3:22 Q4:22 TY:21 TY:22 Other Income (Expense) Realized and unrealized gain (loss) on investments, net $1,026 ($2,982) ($10,543) ($2,493) $3,529 $3,907 ($12,489) Realized and unrealized gain (loss) of CIP 1, net 2,980 (
Slide 21: Assets Under Management by Product, Asset Class and Region
ASSETS UNDER MANAGEMENT BY PRODUCT, ASSET CLASS AND REGION 12/31/2021 3/31/2022 6/30/2022 9/30/2022 12/31/2022 Assets by Product U.S. Retail Funds $74,616 $66,554 $53,838 $49,164 $47,494 Global Funds 1,418 4,089 3,483 3,216 3,443 Exchange Traded Funds 1,479 1,448 1,287 1,262 1,226 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 12/31/2022 Equity: Domestic Equity $18,021 $— $26,814 $20,113 $64,948 International Equity 4,077 — 82 1,241 5,400 Global Equity 1,232 — 357 6,703 8,292 Speci
Slide 23: Asset Flows: Total
ASSET FLOWS TOTAL 12/31/2021 3/31/2022 6/30/2022 9/30/2022 12/31/2022 TY:21 TY:22 Total Beginning balance $177,305 $187,186 $183,342 $155,420 $144,974 $132,194 $187,186 Inflows 8,712 9,435 7,884 5,723 7,251 36,496 30,293 Outflows (8,693) (11,395) (12,652) (9,037) (10,652) (33,014) (43,736) Net Flows
Slide 24: Asset Flows by Product
ASSET FLOWS BY PRODUCT 12/31/2021 3/31/2022 6/30/2022 9/30/2022 12/31/2022 TY:21 TY:22 U.S. Retail Funds Beginning balance $70,526 $74,616 $66,554 $53,838 $49,164 $48,492 $74,616 Inflows 4,029 4,739 2,797 2,494 2,716 17,827 12,746 Outflows (5,744) (7,858) (7,254) (5,310) (6,317) (20,729) (26,739) Ne
Slide 25: Asset Flows by Product (Continued)
ASSET FLOWS BY PRODUCT (CONTINUED) 12/31/2021 3/31/2022 6/30/2022 9/30/2022 12/31/2022 TY:21 TY:22 Exchange Traded Funds Beginning balance $1,321 $1,479 $1,448 $1,287 $1,262 $837 $1,479 Inflows 211 126 136 91 98 792 451 Outflows (73) (151) (116) (63) (163) (307) (493) Net Flows 138 (25) 20 28 (65) 4
Slide 26: Asset Flows by Product (Continued)
ASSET FLOWS BY PRODUCT (CONTINUED) 12/31/2021 3/31/2022 6/30/2022 9/30/2022 12/31/2022 TY:21 TY:22 Closed-End Funds Beginning balance $11,721 $12,068 $12,060 $10,645 $10,146 $5,914 $12,068 Inflows 19 8 24 157 2 22 191 Outflows — — — — — — — Net Flows 19 8 24 157 2 22 191 Market performance 718 (196)
Slide 27: Asset Flows by Product (Continued)
ASSET FLOWS BY PRODUCT (CONTINUED) 12/31/2021 3/31/2022 6/30/2022 9/30/2022 12/31/2022 TY:21 TY:22 Intermediary Sold Managed Accounts Beginning balance $34,974 $37,621 $34,347 $29,425 $27,648 $23,852 $37,621 Inflows 2,045 1,771 1,093 886 889 8,331 4,639 Outflows (999) (1,221) (1,784) (1,252) (1,404)
Slide 28: Asset Flows by Product (Continued)
ASSET FLOWS BY PRODUCT (CONTINUED) 12/31/2021 3/31/2022 6/30/2022 9/30/2022 12/31/2022 TY:21 TY:22 Institutional Separate Accounts Beginning balance $45,882 $48,140 $53,658 $46,440 $43,444 $40,861 $48,140 Inflows 2,099 2,449 3,452 1,507 2,724 8,093 10,132 Outflows (1,625) (1,623) (3,032) (1,930) (2,
Slide 29: Asset Flows by Asset Class
ASSET FLOWS BY ASSET CLASS 12/31/2021 3/31/2022 6/30/2022 9/30/2022 12/31/2022 TY:21 TY:22 Domestic Equity Beginning balance $83,331 $87,889 $78,504 $65,797 $61,537 $63,680 $87,889 Inflows 3,596 4,279 2,942 1,871 3,090 16,404 12,182 Outflows (3,013) (4,343) (4,268) (3,019) (4,024) (13,809) (15,654)
Slide 30: Asset Flows by Asset Class (Continued)
ASSET FLOWS BY ASSET CLASS (CONTINUED) 12/31/2021 3/31/2022 6/30/2022 9/30/2022 12/31/2022 TY:21 TY:22 Global Equity Beginning balance $11,009 $11,658 $10,580 $8,701 $7,519 $9,512 $11,658 Inflows 1,231 214 1,154 156 604 3,133 2,128 Outflows (298) (230) (1,011) (868) (462) (1,627) (2,571) Net Flows 9
Slide 31: Asset Flows by Asset Class (Continued)
ASSET FLOWS BY ASSET CLASS (CONTINUED) 12/31/2021 3/31/2022 6/30/2022 9/30/2022 12/31/2022 TY:21 TY:22 Leveraged Finance Beginning balance $12,210 $12,069 $12,213 $10,816 $10,363 $10,730 $12,069 Inflows 666 981 491 370 666 2,774 2,508 Outflows (755) (847) (1,219) (620) (792) (2,262) (3,478) Net Flow
Slide 32: Asset Flows by Asset Class (Continued)
ASSET FLOWS BY ASSET CLASS (CONTINUED) 12/31/2021 3/31/2022 6/30/2022 9/30/2022 12/31/2022 TY:21 TY:22 Investment Grade Beginning balance $7,924 $7,177 $7,475 $6,865 $6,649 $8,883 $7,177 Inflows 229 164 137 372 584 1,267 1,257 Outflows (933) (545) (479) (331) (289) (2,472) (1,644) Net Flows (704) (3
Slide 33: Asset Flows by Asset Class (Continued)
ASSET FLOWS BY ASSET CLASS (CONTINUED) 12/31/2021 3/31/2022 6/30/2022 9/30/2022 12/31/2022 TY:21 TY:22 Multi-Asset 1 Beginning balance $23,641 $24,853 $23,415 $20,261 $19,364 $12,201 $23,415 Inflows 583 577 383 599 413 2,490 1,972 Outflows (397) (597) (703) (515) (693) (1,606) (2,508) Net Flows 186
Slide 34: Investment Management Fees: Average Assets by Product
INVESTMENT MANAGEMENT FEES AVERAGE ASSETS 1 BY PRODUCT Q4:21 Q1:22 Q2:22 Q3:22 Q4:22 TY:21 TY:22 U.S. Retail Funds $76,288 $69,133 $59,799 $54,563 $49,752 $71,059 $58,312 Global Funds 1,426 3,902 3,444 3,355 3,032 1,389 3,433 Exchange Traded Funds 1,387 1,422 1,401 1,371 1,243 1,183 1,359 Variable I
Slide 35: Average Management Fees Earned by Product
INVESTMENT MANAGEMENT FEES AVERAGE MANAGEMENT FEES EARNED 1 BY PRODUCT (IN BASIS POINTS) Q4:21 Q1:22 Q2:22 Q3:22 Q4:22 TY:21 TY:22 U.S. Retail Funds 49.3 47.8 47.4 49.0 48.7 47.4 48.1 Global Funds 43.5 33.5 37.8 25.8 39.3 49.1 33.9 Exchange Traded Funds 6.5 10.0 11.1 8.6 5.2 9.4 8.8 Variable Insuran
Slide 36: 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 37: 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 38: 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 39: Reconciliation: U.S. GAAP to Non-GAAP, Q1 2022
RECONCILIATION: U.S. GAAP TO NON-GAAP Q1 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 40: Reconciliation: U.S. GAAP to Non-GAAP, Q4 2021
RECONCILIATION: U.S. GAAP TO NON-GAAP Q4 2021 (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, 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 Restructuring of intangible and CLO and Non-GAAP Basis products related expense assets investments integration Other Basis Reve
Slide 42: Reconciliation: U.S. GAAP to Non-GAAP, TY 2021
RECONCILIATION: U.S. GAAP TO NON-GAAP TY 2021 (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 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: Q4 2021 Q1 2022 Q2 2022 Q3 2022 Q4 2022 TY:21 TY:22 Acquisition and Integration Expenses Employment expenses $(846) $4,282 $260 $— $— $1,065 $4,542 Other operat
Slide 45: Investment Partners
INVESTMENT PARTNERS
Virtus Investment Partners — Q4 2022 Earnings Presentation on 6ix