Virtus Investment Partners, Inc. · NYSE:VRTS
Virtus Investment Partners — Q4 2019 Earnings Presentation
46 slides from Virtus Investment Partners's earnings presentation, Jan 31, 2020
Slide 1: Fourth Quarter Earnings Presentation
FOURTH QUARTER EARNINGS PRESENTATION JANUARY 31, 2020 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 2019 Overview
FOURTH QUARTER 2019 OVERVIEW Assets and Flows Long-term assets under management increased 5% sequentially to $107.7 billion due to market appreciation and positive net flows Total sales of $4.8 billion included growth in retail separate accounts, institutional, and exchange traded funds (ETFs)
Slide 6: Results
VIRTUS RESULTS
Slide 7: Assets Under Management
ASSETS UNDER MANAGEMENT INCREASED DUE TO MARKET AND FLOWS Long-term assets increased 5% sequentially Long-Term Liquidity due to market appreciation and positive net $108.9 flows in both domestic and international equity $101.7 $105.0 $104.1 $107.7 $92.0 $103.3 $102.8 $99.9 Domestic equity assets
Slide 8: Asset Flows
ASSET FLOWS POSITIVE NET FLOWS Positive net flows of $0.3 billion due to retail Net flows $22.8 $20.1 separate accounts, institutional, and ETFs, $5.5 $5.1 partially offset by open-end fund net outflows $4.4 $4.8 $4.8 – Positive net flows in mutual fund domestic and international equity more than
Slide 9: Investment Management Fees, As Adjusted
INVESTMENT MANAGEMENT FEES, AS ADJUSTED HIGHER AVERAGE ASSETS AND FEE RATE Investment management fees, as adjusted, $428.2 $401.5 increased sequentially by $1.4 million, or 1%, due to: $111.6 $113.0 $103.0 $105.7 – Increase of 1% in long-term average assets $97.9 – Modestly higher average fee rate
Slide 10: Employment Expenses, As Adjusted
EMPLOYMENT EXPENSES, AS ADJUSTED LOWER RATIO REFLECTS MARKET-DRIVEN REVENUE GROWTH Employment expenses, as adjusted, $232.2 $235.2 decreased sequentially by $1.3 million, or $60.1 $58.1 $59.4 $58.8 2%, primarily due to lower variable $57.0 incentive compensation Employment expenses, as adjusted,
Slide 11: Other Operating Expenses, As Adjusted
OTHER OPERATING EXPENSES, AS ADJUSTED EXPENSES STABLE Other operating expenses, as adjusted, $73.9 of $18.2 million, relatively flat compared $69.1 with the prior quarter $18.5 $19.1 $17.8 $18.1 $18.2 Other operating expenses, as adjusted, as a percentage of revenues, as adjusted, were essential
Slide 12: Non-GAAP Results
NON-GAAP RESULTS CONTINUED PROFITABLE GROWTH Diluted EPS, as adjusted, of $4.32 Operating Income, As Adjusted increased sequentially by $0.29, or 7%, Diluted earnings per share, as adjusted $175.0 $160.1 primarily due to higher revenues and lower employment expenses $50.1 $47.7 $43.7 Operating m
Slide 13: Capital Position
CAPITAL POSITION BALANCED CAPITAL MANAGEMENT Working capital up $2 million sequentially Select Balance Sheet Items: 12/31/18 3/31/19 6/30/19 9/30/19 12/31/19 as cash generation more than offset debt Cash and cash equivalents $202 $142 $166 $196 $222 1 $93 $89 $96 $101 $107 repayments and share rep
Slide 14: Financial Supplement
SéVIRTUS INVESTMENT PARTNERS FINANCIAL SUPPLEMENT
Slide 15: Non-GAAP Information: Income Statement
NON-GAAP INFORMATION INCOME STATEMENT1 (UNAUDITED) Q4:18 Q1:19 Q2:19 Q3:19 Q4:19 TY:18 TY:19 Revenues, As Adjusted Investment management fees, as adjusted $103,041 $97,874 $105,726 $111,599 $112,960 $401,526 $428,158 Administration and shareholder service fees, as adjusted 15,366 14,440 15,081 15,32
Slide 16: Non-GAAP Information: Income Statement (Continued)
NON-GAAP INFORMATION INCOME STATEMENT1 (CONTINUED) (UNAUDITED) Q4:18 Q1:19 Q2:19 Q3:19 Q4:19 TY:18 TY:19 Other Income (Expense), As Adjusted Realized and unrealized gain (loss) on investments, net, as adjusted ($244) $359 $102 $289 ($29) ($296) $719 Other income, net, as adjusted 1,272 450 696 746 5
Slide 17: Non-GAAP Information: Balance Sheet
NON-GAAP INFORMATION BALANCE SHEET1 (UNAUDITED) 12/31/2018 3/31/2019 6/30/2019 9/30/2019 12/31/2019 Assets: Cash and cash equivalents $201,705 $142,344 $166,026 $195,870 $221,781 Investments – seed capital 92,846 88,594 95,765 100,520 107,225 Investments – other 93,636 88,558 87,885 84,621 87,657 In
Slide 18: Non-GAAP Information: Balance Sheet (Continued)
NON-GAAP INFORMATION BALANCE SHEET1 (CONTINUED) (UNAUDITED) 12/31/2018 3/31/2019 6/30/2019 9/30/2019 12/31/2019 Liabilities and Equity Liabilities: Accrued compensation and benefits $93,339 $31,105 $52,675 $78,073 $101,377 Accounts payable and accrued liabilities 27,926 27,723 24,757 23,310 23,308 D
Slide 19: U.S. GAAP Information: Income Statement
U.S. GAAP INFORMATION INCOME STATEMENT (UNAUDITED) Q4:18 Q1:19 Q2:19 Q3:19 Q4:19 TY:18 TY:19 Revenues Investment management fees $111,664 $105,918 $114,591 $120,023 $120,945 $437,021 $461,477 Distribution and service fees 10,829 10,063 10,617 10,442 9,776 50,715 40,898 Administration and shareholder
Slide 20: U.S. GAAP Information: Income Statement (Continued)
U.S. GAAP INFORMATION INCOME STATEMENT (CONTINUED) (UNAUDITED) Q4:18 Q1:19 Q2:19 Q3:19 Q4:19 TY:18 TY:19 Other Income (Expense) Realized and unrealized gain (loss) on investments, net ($6,241) $3,433 $2,039 $2 $1,570 ($5,217) $7,044 Realized and unrealized gain (loss) of CIP1, net (16,997) (1,921) 9
Slide 21: Assets Under Management by Product and Asset Class
ASSETS UNDER MANAGEMENT BY PRODUCT AND ASSET CLASS 12/31/2018 3/31/2019 6/30/2019 9/30/2019 12/31/2019 Assets by Product U.S. Retail Funds $36,778 $39,588 $40,151 $39,886 $41,458 Offshore Funds1 108 126 140 401 463 Variable Insurance Funds 824 919 932 903 949 Total – Open-End Funds $37,710 $40,633 $
Slide 22: Assets Under Management by Asset Class
ASSETS UNDER MANAGEMENT BY ASSET CLASS 12/31/2018 3/31/2019 6/30/2019 9/30/2019 12/31/2019 Domestic Equity: Large Cap $16,923 $18,975 $19,459 $19,684 $20,823 Mid Cap 6,707 8,067 9,129 9,798 11,139 Small Cap 16,224 19,000 19,938 19,964 21,071 Total Domestic Equity $39,854 $46,042 $48,526 $49,446 $53,
Slide 23: Assets Under Management by Product and Asset Class
ASSETS UNDER MANAGEMENT BY PRODUCT AND ASSET CLASS Exchange Retail Open-end Closed-end traded separate Structured Total as of funds funds funds accounts Institutional products 12/31/2019 Domestic Equity: Large Cap $3,589 $3,980 — $2,790 $10,464 — $20,823 Mid Cap 5,026 — — 4,890 1,223 — 11,139 Small
Slide 24: Asset Flows: Total/Long-Term
ASSET FLOWS TOTAL/LONG-TERM 12/31/2018 3/31/2019 6/30/2019 9/30/2019 12/31/2019 TY:18 TY:19 Long-term Beginning balance $103,923 $90,417 $99,923 $103,254 $102,846 $88,834 $90,417 Inflows 4,438 5,501 5,119 4,760 4,764 22,774 20,144 Outflows (9,211) (5,555) (5,058) (5,885) (4,418) (26,494) (20,916) Ne
Slide 25: Asset Flows by Product
ASSET FLOWS BY PRODUCT 12/31/2018 3/31/2019 6/30/2019 9/30/2019 12/31/2019 TY:18 TY:19 U.S. Retail Funds Beginning balance $44,075 $36,778 $39,588 $40,151 $39,886 $41,951 $36,778 Inflows 2,874 2,970 2,484 2,946 2,278 14,754 10,678 Outflows (6,710) (3,821) (3,175) (3,117) (2,734) (16,900) (12,847) Ne
Slide 26: Asset Flows by Product (Continued)
ASSET FLOWS BY PRODUCT (CONTINUED) 12/31/2018 3/31/2019 6/30/2019 9/30/2019 12/31/2019 TY:18 TY:19 Variable Insurance Funds Beginning balance $985 $824 $919 $932 $903 $1,005 $824 Inflows 4 7 5 9 9 27 30 Outflows (27) (32) (30) (32) (32) (135) (126) Net Flows (23) (25) (25) (23) (23) (108) (96) Marke
Slide 27: Asset Flows by Product (Continued)
ASSET FLOWS BY PRODUCT (CONTINUED) 12/31/2018 3/31/2019 6/30/2019 9/30/2019 12/31/2019 TY:18 TY:19 Closed-End Funds Beginning balance $6,342 $5,956 $6,553 $6,653 $6,816 $6,666 $5,956 Inflows 8 11 9 14 10 22 44 Outflows — — — — — — — Net Flows 8 11 9 14 10 22 44 Market performance (257) 662 182 246 2
Slide 28: Asset Flows by Product (Continued)
ASSET FLOWS BY PRODUCT (CONTINUED) 12/31/2018 3/31/2019 6/30/2019 9/30/2019 12/31/2019 TY:18 TY:19 Intermediary Sold Managed Accounts Beginning balance $12,757 $11,275 $12,975 $13,909 $14,390 $10,261 $11,275 Inflows 580 588 608 635 763 2,560 2,594 Outflows (390) (377) (385) (348) (352) (1,908) (1,46
Slide 29: Asset Flows by Product (Continued)
ASSET FLOWS BY PRODUCT (CONTINUED) 12/31/2018 3/31/2019 6/30/2019 9/30/2019 12/31/2019 TY:18 TY:19 Institutional Accounts Beginning balance $30,961 $27,445 $30,514 $32,056 $30,951 $20,815 $27,445 Inflows 811 954 1,737 851 1,235 4,144 4,777 Outflows (1,822) (1,154) (1,259) (2,216) (1,091) (6,543) (5,
Slide 30: Asset Flows: Open-End Funds by Asset Class
ASSET FLOWS OPEN-END FUNDS1 BY ASSET CLASS 12/31/2018 3/31/2019 6/30/2019 9/30/2019 12/31/2019 TY:18 TY:19 Domestic Equity Funds Beginning balance $15,979 $12,778 $14,856 $15,773 $15,827 $12,023 $12,778 Inflows 922 1,071 1,011 1,123 934 6,663 4,139 Outflows (1,838) (1,184) (934) (1,107) (875) (4,929
Slide 31: Asset Flows: Open-End Funds by Asset Class (Continued)
ASSET FLOWS OPEN-END FUNDS1 BY ASSET CLASS (CONTINUED) 12/31/2018 3/31/2019 6/30/2019 9/30/2019 12/31/2019 TY:18 TY:19 Taxable Bond Funds2 Beginning balance $16,914 $14,507 $14,142 $13,541 $13,117 $17,363 $14,507 Inflows 1,078 952 721 774 668 4,621 3,115 Outflows (3,074) (1,764) (1,453) (1,256) (1,3
Slide 32: Asset Flows: Open-End Funds by Asset Class (Continued)
ASSET FLOWS OPEN-END FUNDS1 BY ASSET CLASS (CONTINUED) 12/31/2018 3/31/2019 6/30/2019 9/30/2019 12/31/2019 TY:18 TY:19 Alternative Funds2 Beginning balance $1,258 $1,031 $1,062 $1,061 $1,117 $1,462 $1,031 Inflows 49 76 62 80 89 257 307 Outflows (176) (112) (86) (89) (104) (599) (391) Net Flows (127)
Slide 33: Average Management Fees Earned by Product
INVESTMENT MANAGEMENT FEES AVERAGE MANAGEMENT FEES EARNED1 BY PRODUCT (IN BASIS POINTS) Q4:18 Q1:19 Q2:19 Q3:19 Q4:19 TY:18 TY:19 (annualized) U.S. Retail Funds 54.2 54.5 55.8 56.6 57.3 52.9 56.1 Offshore Funds2 29.6 23.9 0.0 40.2 51.9 15.8 35.3 Variable Insurance Funds 62.8 63.4 64.1 62.7 62.9 64.3
Slide 34: Average Net Management Fees Earned by Product
INVESTMENT MANAGEMENT FEES AVERAGE NET MANAGEMENT FEES EARNED1 BY PRODUCT (IN BASIS POINTS) Q4:18 Q1:19 Q2:19 Q3:19 Q4:19 TY:18 TY:19 (annualized) Total Open-End Funds 54.4 54.6 55.7 56.6 57.4 53.0 56.1 Revenue related adjustments (9.0) (9.0) (9.3) (9.0) (8.5) (8.7) (8.9) Total Open-End Funds, Net 4
Slide 35: Average Assets by Product
INVESTMENT MANAGEMENT FEES AVERAGE ASSETS1 BY PRODUCT Q4:18 Q1:19 Q2:19 Q3:19 Q4:19 TY:18 TY:19 U.S. Retail Funds $40,597 $38,521 $39,899 $40,224 $40,376 $42,531 $39,755 Offshore Funds2 114 119 133 312 424 118 247 Variable Insurance Funds 891 892 929 921 918 974 915 Total – Open-End Funds $41,602 $3
Slide 36: Reconciliation: U.S. GAAP to Non-GAAP, Q4 2019
RECONCILIATION: U.S. GAAP TO NON-GAAP Q4 2019 (UNAUDITED) Reclassifications Other adjustments Consolidated Restructuring Amortization Seed capital Acquisition Non- U.S. GAAP investment Revenue and of intangible and CLO and GAAP Basis products related Severance assets investments integration Other Ba
Slide 37: Reconciliation: U.S. GAAP to Non-GAAP, Q3 2019
RECONCILIATION: U.S. GAAP TO NON-GAAP Q3 2019 (UNAUDITED) Reclassification Other adjustments Consolidated Restructuring Amortization Seed capital Acquisition Non- U.S. GAAP investment Revenue and of intangible and CLO and GAAP Basis products related Severance assets investments integration Other Bas
Slide 38: Reconciliation: U.S. GAAP to Non-GAAP, Q2 2019
RECONCILIATION: U.S. GAAP TO NON-GAAP Q2 2019 (UNAUDITED) Reclassification Other adjustments Consolidated Restructuring Amortization Seed capital Acquisition Non- U.S. GAAP investment Revenue and of intangible and CLO and GAAP Basis products related Severance assets investments integration Other Bas
Slide 39: Reconciliation: U.S. GAAP to Non-GAAP, Q1 2019
RECONCILIATION: U.S. GAAP TO NON-GAAP Q1 2019 (UNAUDITED) Reclassification Other adjustments Consolidated Restructuring Amortization Seed capital Acquisition Non- U.S. GAAP investment Revenue and of intangible and CLO and GAAP Basis products related Severance assets investments integration Other Bas
Slide 40: Reconciliation: U.S. GAAP to Non-GAAP, Q4 2018
RECONCILIATION: U.S. GAAP TO NON-GAAP Q4 2018 (UNAUDITED) Reclassification Other adjustments Consolidated Restructuring Amortization Seed capital Acquisition Non- U.S. GAAP investment Revenue and of intangible and CLO and GAAP Basis products related Severance assets investments integration Other Bas
Slide 41: Reconciliation: U.S. GAAP to Non-GAAP, 2019
RECONCILIATION: U.S. GAAP TO NON-GAAP 2019 (UNAUDITED) Reclassification Other adjustments Consolidated Restructuring Amortization Seed capital Acquisition Non- U.S. GAAP investment Revenue and of intangible and CLO and GAAP Basis products related Severance assets investments integration Other Basis
Slide 42: Reconciliation: U.S. GAAP to Non-GAAP, 2018
RECONCILIATION: U.S. GAAP TO NON-GAAP 2018 (UNAUDITED) Reclassification Other adjustments Consolidated Restructuring Amortization Seed capital Acquisition Non- U.S. GAAP investment Revenue and of intangible and CLO and GAAP Basis products related Severance assets investments integration Other Basis
Slide 43: Reconciliation: U.S. GAAP to Non-GAAP (Unaudited)
RECONCILIATION: U.S. GAAP to NON-GAAP (UNAUDITED) Q4:18 Q1:19 Q2:19 Q3:19 Q4:19 TY:18 TY:19 Weighted average shares outstanding - diluted Weighted average shares outstanding - diluted, GAAP 7,382 8,322 8,252 8,157 8,084 8,527 8,149 Preferred stock1 1,047 — — — — — — Weighted average shares outstandi
Slide 44: 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 45: Footnotes (Unaudited)
Footnotes (UNAUDITED) Components of Acquisition and Integration Expenses and Other for the respective periods are shown in the table below: Q4:18 Q1:19 Q2:19 Q3:19 Q4:19 TY:18 TY:19 Acquisition and Integration Expenses Employment expenses $1,595 $1,433 $1,115 $1,223 $1,193 $6,267 $4,964 Restructurin
Slide 46: Investment Partners
INVESTMENT PARTNERS
Virtus Investment Partners — Q4 2019 Earnings Presentation on 6ix