Virtus Investment Partners, Inc. · NYSE:VRTS
Virtus Investment Partners — Q4 2015 Earnings Presentation
39 slides from Virtus Investment Partners's earnings presentation, Jan 29, 2016
Slide 1: Fourth Quarter 2015 Earnings Presentation
Fourth Quarter 2015 Earnings Presentation January 29, 2016 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 Fourth Quarter Fourth Quarter Results Q & A Session 3
Slide 4: Overview of Fourth Quarter
_VIRTUS | INVESTMENT PARTNERS OVERVIEW OF FOURTH QUARTER
Slide 5: Overview of Fourth Quarter
OVERVIEW OF FOURTH QUARTER Assets and Flows Assets under management of $47.4 billion, decreased 1% sequentially Total sales of $3.2 billion increased $0.6 billion or 24% from prior quarter; mutual fund sales of $2.5 billion increased $0.7 billion or 36% sequentially Net flows of ($1.1) billion
Slide 6: Fourth Quarter Results
_VIRTUS | INVESTMENT PARTNERS FOURTH QUARTER RESULTS
Slide 7: Assets Under Management
ASSETS UNDER MANAGEMENT Quarterly Trends Commentary Trend reflects impact of net flows and $56.7 market performance $54.8 $52.4 $47.9 $47.4 Assets decreased $9.3 billion or 16% from prior year − Reflects open-end net outflows and market performance − Institutional assets increased to $5.2 billion,
Slide 8: Asset Flows
ASSET FLOWS Inflows/Outflows Commentary Flows reflective of market trends, product breadth and investment performance $15.2 $12.7 Sales of $3.2 billion represents 24% $3.4 $3.7 $3.3 $2.5 $3.2 increase over prior quarter Net flows of ($1.1) billion include ($0.7) billion from former AlphaSector f
Slide 9: Investment Management Fees, As Adjusted
INVESTMENT MANAGEMENT FEES, AS ADJUSTED Quarterly Results Total Year Commentary $301.1 Investment management fees reflect $267.2 changes in average assets and net fee rate $75.9 $70.8 Sequential decrease of $4.3 million, or $70.3 $65.2 $60.9 7%, due to 4% lower average assets and lower fee rate
Slide 10: Employment Expenses, As Adjusted
EMPLOYMENT EXPENSES, AS ADJUSTED Quarterly Results Total Year Commentary Trend reflects staffing levels and variable incentive plans $138.4 $137.1 Increase of $0.9 million, or 3%, over prior quarter primarily reflects higher sales and $35.6 $34.1 $33.6 $33.5 $34.4 additional resources to support q
Slide 11: Other Operating Expenses, As Adjusted
OTHER OPERATING EXPENSES, AS ADJUSTED Quarterly Results Total Year Commentary Results reflect timing of product, $45.5 $46.2 distribution, and operational initiatives $11.6 $12.0 Other operating expenses of $12.0 $11.2 $11.2 $11.3 million included the following discrete items: − $0.6 million of pr
Slide 12: Non-GAAP Results
NON-GAAP RESULTS Quarterly Results Total Year Commentary Profitability impacted by net flows, market Operating Income, As Adjusted performance and leveragability of the Diluted earnings per share, as adjusted business $150.5 Diluted EPS, as adjusted, of $1.37 $39.2 $108.3 includes negative variabl
Slide 13: Capital Position
CAPITAL POSITION Select Balance Sheet Items Commentary 12/31/14 3/31/15 6/30/15 9/30/15 12/31/15 Strong capital position reflects cash Cash and cash equivalents $203 $166 $194 $127 $88 generated from the business and capital Seed capital investments 1 $238 $242 $239 $277 $274 activities 2 Investment
Slide 14: Appendix
_VIRTIUS | INVESTMENT PARTNERS Appendix
Slide 15: Non-GAAP Income Statement
NON-GAAP INCOME STATEMENT Quarterly Trend and Total Year Q4:14 Q1:15 Q2:15 Q3:15 Q4:15 TY:14 TY:15 Revenues, As Adjusted Investment management fees, as adjusted $75,866 $70,801 $70,321 $65,193 $60,853 $301,059 $267,168 Distribution and service fees, as adjusted 21,919 19,618 17,658 15,614 14,272 91,
Slide 16: Non-GAAP Income Statement (continued)
NON-GAAP INCOME STATEMENT Quarterly Trend and Total Year (continued) Q4:14 Q1:15 Q2:15 Q3:15 Q4:15 TY:14 TY:15 Other Income (Expense), as adjusted Realized and unrealized (loss) gain on investments, net, as (282) 116 224 (159) (202) (349) (21) adjusted Other income, net, as adjusted 318 435 247 141
Slide 17: U.S. GAAP Income Statement
U.S. GAAP INCOME STATEMENT Quarterly Trend and Total Year Q4:14 Q1:15 Q2:15 Q3:15 Q4:15 TY:14 TY:15 Revenues Investment management fees $75,374 $70,496 $68,867 $64,891 $60,611 $300,663 $264,865 Distribution and service fees 21,901 19,598 17,635 15,587 14,246 91,950 67,066 Administration and transfer
Slide 18: U.S. GAAP Income Statement (continued)
U.S. GAAP INCOME STATEMENT Quarterly Trend and Total Year (continued) Q4:14 Q1:15 Q2:15 Q3:15 Q4:15 TY:14 TY:15 Other Income (Expense) Realized and unrealized gain (loss) on investments, net (798) 545 343 (2,082) 332 914 (862) Realized and unrealized gain (loss) on investments of (5,798) 2,590 (3,24
Slide 19: Condensed Balance Sheet
CONDENSED BALANCE SHEET Quarter-end Trend 12/31/14 3/31/15 6/30/15 9/30/15 12/31/15 Assets: Cash and cash equivalents $202,847 $166,031 $194,334 $126,470 $87,574 Investments 63,448 56,995 59,301 55,225 56,738 Accounts receivable, net 49,721 52,792 43,488 40,107 38,757 Assets of consolidated sponsore
Slide 20: Condensed Balance Sheet (continued)
CONDENSED BALANCE SHEET Quarter-end Trend (continued) 12/31/14 3/31/15 6/30/15 9/30/15 12/31/15 Liabilities and Equity Liabilities: Accrued compensation and benefits $54,815 $17,343 $27,134 $38,206 $49,617 Accounts payable and accrued liabilities 31,627 32,627 43,456 39,739 23,036 Dividends payable
Slide 21: AUM and Average Net Management Fees Earned
AUM AND AVERAGE NET MANAGEMENT FEES EARNED Quarterly Trend and Total Year Q4:14 Q1:15 Q2:15 Q3:15 Q4:15 TY:14 TY:15 By Product (period end) Open-End Funds $36,292.3 $34,120.5 $32,211.0 $28,717.1 $27,865.8 $36,292.3 $27,865.8 Variable Insurance Funds 1,221.9 1,197.3 1,134.3 999.3 1,016.3 1,221.9 1,01
Slide 22: AUM and Average Net Management Fees Earned
AUM AND AVERAGE NET MANAGEMENT FEES EARNED Quarterly Trend and Total Year Q4:14 Q1:15 Q2:15 Q3:15 Q4:15 TY:14 TY:15 Average Net Management Fees Earned (1) (In basis points, annualized) Open-End Funds 50.6 49.9 49.1 47.2 45.9 51.3 48.1 Variable Insurance Funds 48.0 51.4 51.2 48.7 48.6 50.9 50.0 Subto
Slide 23: Assets Under Management
ASSETS UNDER MANAGEMENT Quarterly Trend and Total Year: All Product Flows and AUM By Asset Class Q4:14 Q1:15 Q2:15 Q3:15 Q4:15 TY:14 TY:15 All Product Flows Beginning balance $60,877.6 $56,702.4 $54,773.0 $52,401.0 $47,937.7 $57,739.6 $56,702.4 Inflows 3,429.8 3,710.8 3,267.8 2,547.2 3,164.0 15,211.
Slide 24: Assets Under Management: Asset Flows by Product
ASSETS UNDER MANAGEMENT Asset Flows – By Product Q4:14 Q1:15 Q2:15 Q3:15 Q4:15 TY:14 TY:15 Open-End Funds Beginning balance $39,838.8 $36,292.3 $34,120.5 $32,211.0 $28,717.1 $36,367.7 $36,292.3 Inflows 2,841.3 2,999.9 2,611.3 1,857.8 2,540.4 12,665.6 10,009.4 Outflows (5,028.5) (5,329.3) (4,120.1) (
Slide 25: Asset Flows by Product (continued)
ASSETS UNDER MANAGEMENT Asset Flows – By Product (continued) Q4:14 Q1:15 Q2:15 Q3:15 Q4:15 TY:14 TY:15 Closed-End Funds Beginning balance $7,568.1 $7,581.4 $7,288.0 $6,901.0 $6,349.8 $6,499.6 $7,581.4 Inflows - - - - - 493.8 - Outflows - - - - - - - Net Flows - - - - - 493.8 - Market performance 123
Slide 26: Asset Flows by Product (continued)
ASSETS UNDER MANAGEMENT Asset Flows – By Product (continued) Q4:14 Q1:15 Q2:15 Q3:15 Q4:15 TY:14 TY:15 Intermediary Sold Managed Accounts Beginning balance $4,030.2 $4,188.7 $4,250.3 $4,180.6 $3,853.5 $5,095.8 $4,188.7 Inflows 106.5 176.7 150.4 132.9 193.1 621.1 653.1 Outflows (231.4) (219.6) (185.7
Slide 27: Asset Flows by Product (continued)
ASSETS UNDER MANAGEMENT Asset Flows – By Product (continued) Q4:14 Q1:15 Q2:15 Q3:15 Q4:15 TY:14 TY:15 Institutional Accounts Beginning balance $3,900.4 $4,296.5 $4,620.6 $4,665.1 $4,638.7 $4,003.7 $4,296.5 Inflows 309.9 368.1 214.1 199.5 226.6 650.5 1,008.3 Outflows (132.1) (147.2) (87.3) (110.3) (
Slide 28: Open-End Asset Flows by Asset Class
ASSETS UNDER MANAGEMENT Open-End Asset Flows – By Asset Class Q4:14 Q1:15 Q2:15 Q3:15 Q4:15 TY:14 TY:15 Domestic Equity Funds Beginning balance $12,080.5 $10,389.7 $7,934.4 $6,019.7 $4,785.3 $11,092.1 $10,389.7 Inflows 754.0 340.6 134.7 107.6 108.0 3,636.4 690.9 Outflows (2,197.8) (2,574.8) (1,926.4
Slide 29: Open-End Asset Flows by Asset Class (continued)
ASSETS UNDER MANAGEMENT Open-End Asset Flows – By Asset Class (continued) Q4:14 Q1:15 Q2:15 Q3:15 Q4:15 TY:14 TY:15 Taxable Bond Funds Beginning balance $11,039.3 $10,600.4 $10,308.7 $9,960.9 $9,446.0 $10,425.1 $10,600.4 Inflows 814.8 656.4 473.0 419.4 536.2 3,724.5 2,085.0 Outflows (1,203.0) (1,057
Slide 30: U.S. GAAP to Non-GAAP Reconciliation – Q4 2015
U.S. GAAP TO NON-GAAP RECONCILIATION – Q4 2015 Reclassifications Adjustments U.S. GAAP Distribution and other Consolidated investment Amortization of Seed capital and Non-GAAP Basis asset-based expenses products intangible assets CLO investments Other Basis Revenues Investment management fees $ 60,6
Slide 31: U.S. GAAP to Non-GAAP Reconciliation – Q3 2015
U.S. GAAP TO NON-GAAP RECONCILIATION – Q3 2015 Reclassifications Adjustments U.S. GAAP Distribution and other Consolidated investment Amortization of Seed capital and CLO Non-GAAP Basis asset-based expenses products intangible assets investments Other Basis Revenues Investment management fees $ 64,8
Slide 32: U.S. GAAP to Non-GAAP Reconciliation – Q2 2015
U.S. GAAP TO NON-GAAP RECONCILIATION – Q2 2015 Reclassifications Adjustments U.S. GAAP Distribution and other Consolidated investment Amortization of Seed capital and CLO Non-GAAP Basis asset-based expenses products intangible assets investments Other Basis Revenues Investment management fees $ 68,8
Slide 33: U.S. GAAP to Non-GAAP Reconciliation – Q1 2015
U.S. GAAP TO NON-GAAP RECONCILIATION – Q1 2015 Reclassifications Adjustments U.S. GAAP Distribution and other Consolidated investment Amortization of Seed capital and CLO Non-GAAP Basis asset-based expenses products intangible assets investments Other Basis Revenues Investment management fees $ 70,4
Slide 34: U.S. GAAP to Non-GAAP Reconciliation – Q4 2014
U.S. GAAP TO NON-GAAP RECONCILIATION – Q4 2014 Reclassifications Adjustments U.S. GAAP Distribution and other Consolidated sponsored Amortization of Seed capital Non-GAAP Basis asset-based expenses investment products intangible assets investments Other Basis Revenues Investment management fees $ 75
Slide 35: U.S. GAAP to Non-GAAP Reconciliation – TY 2015
U.S. GAAP TO NON-GAAP RECONCILIATION – TY 2015 Reclassifications Adjustments U.S. GAAP Distribution and other Consolidated investment Amortization of Seed capital and Non-GAAP Basis asset-based expenses products intangible assets CLO investments Other Basis Revenues Investment management fees $ 264,
Slide 36: U.S. GAAP to Non-GAAP Reconciliation – TY 2014
U.S. GAAP TO NON-GAAP RECONCILIATION – TY 2014 Reclassifications Adjustments Consolidated Distribution and sponsored Amortization U.S. GAAP other asset- investment Closed-end fund of intangible Seed capital Non-GAAP Basis based expenses products launch costs assets investments Other Basis Revenues I
Slide 37: Footnotes
FOOTNOTES Non-GAAP financial measures differ from financial measures determined in accordance with U.S. GAAP as a result of the reclassification of certain income statement items, as well as the adjustment of certain expenses and other items that are not reflective of the earnings generated from pro
Slide 38: Footnotes
FOOTNOTES See components of Other in the table below: Q4:14 Q1:15 Q2:15 Q3:15 Q4:15 YTD:14 YTD:15 Other ($ in thousands) Loss contingency $- $5,200 $11,300 $- $- $- $16,500 Tax impact of loss contingency - (1,600) (3,907) - - - (5,507) Transition related revenues - - 1,166 - - - 1,166 Tax impact of
Slide 39: Virtus Investment Partners
VIRTIUS | INVESTMENT PARTNERS
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