Virtus Investment Partners, Inc. · NYSE:VRTS
Virtus Investment Partners — Q3 2021 Earnings Presentation
45 slides from Virtus Investment Partners's earnings presentation, Oct 27, 2021
Slide 1: Third Quarter Earnings Presentation
THIRD QUARTER EARNINGS PRESENTATION October 27, 2021 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
VESTMENT PARTNERS OVERVIEW OF QUARTER
Slide 5: Third Quarter 2021 Overview
THIRD QUARTER 2021 OVERVIEW Assets and Flows ■ Assets under management (AUM) of $177.3 billion, down 1% sequentially due to market performance and modest net outflows ■ Sales of $7.6 billion compared with $9.6 billion in the prior quarter primarily due to lower sales of domestic equity strategies ■
Slide 6: Results
INVESTMENT PARTNERS RESULTS
Slide 7: Assets Under Management
ASSETS UNDER MANAGEMENT LOWER DUE TO MARKET AND FLOWS ■ AUM of $177.3 billion declined 1% due to: – ($0.5) billion of market performance – ($0.6) billion of net flows ■ Retail separate account assets grew 2% to $41.5 billion – Represents 23% of total AUM – 14 consecutive quarters of organic growth –
Slide 8: Asset Flows
ASSET FLOWS MODESTLY NEGATIVE ■ Net flows of ($0.6) billion due to $1.5 billion of open-end fund net outflows, including a $0.7 billion model rebalance, offset by positive flows in: – Retail separate accounts: $0.8 billion – ETFs: $0.1 billion – Institutional: $0.1 billion ■ Sales of $7.6 billion de
Slide 9: Investment Management Fees, As Adjusted
INVESTMENT MANAGEMENT FEES, AS ADJUSTED HIGHER AVERAGE ASSETS ■ Investment management fees, as adjusted, increased sequentially by $6.8 million, or 4%, due to higher average AUM, which increased 4% – Performance-related fees of $0.6 million compared with $0.8 million in the prior quarter ■ Average f
Slide 10: Employment Expenses, As Adjusted
EMPLOYMENT EXPENSES, AS ADJUSTED REFLECTS VARIABLE COMPENSATION ■ Employment expenses, as adjusted, of $86.5 million were flat compared with prior quarter – Higher variable profit-based incentive compensation offset by lower sales-based incentive compensation ■ Ratio as a percentage of revenues, as
Slide 11: Other Operating Expenses, As Adjusted
OTHER OPERATING EXPENSES, AS ADJUSTED INCREASE FROM BUSINESS GROWTH ■ Other operating expenses, as adjusted, of $20.2 million increased $0.3 million, or 1%, sequentially due to: – Growth of the business – Modest increase in travel and related expenses ■ Other operating expenses, as adjusted, as a pe
Slide 12: Non-GAAP Results
NON-GAAP RESULTS HIGHEST LEVEL OF EPS, AS ADJUSTED ■ Operating margin, as adjusted, of 50.6% Operating Income, As Adjusted increased 170 bps from the prior quarter Diluted earnings per share, as adjusted and from 39.3% in the prior-year period ■ Diluted EPS, as adjusted, of $9.71 increased sequentia
Slide 13: Capital and Select Balance Sheet
CAPITAL AND SELECT BALANCE SHEET INCREASED RETURN OF CAPITAL ■ Refinanced credit agreement with new Select Balance Sheet Items: 9/30/20 12/31/20 3/31/21 6/30/21 9/30/21 $275.0 million term loan and $175.0 Cash and cash equivalents $202 $247 $228 $275 $437 million revolver Seed capital investments1 $
Slide 14: Financial Supplement
INVESTMENT PARTNERS FINANCIAL SUPPLEMENT
Slide 15: Non-GAAP Information: Income Statement
NON-GAAP INFORMATION INCOME STATEMENT 1 (UNAUDITED) Q3:20 Q4:20 Q1:21 Q2:21 Q3:21 YTD:20 YTD:21 Revenues, As Adjusted Investment management fees, as adjusted $122,359 $136,824 $163,935 $183,230 $190,029 $339,180 $537,194 Administration and shareholder service fees, as adjusted 15,180 16,472 22,621 2
Slide 16: Non-GAAP Information: Income Statement (Continued)
NON-GAAP INFORMATION INCOME STATEMENT 1 (CONTINUED) (UNAUDITED) Q3:20 Q4:20 Q1:21 Q2:21 Q3:21 YTD:20 YTD:21 Other Income (Expense), As Adjusted Realized and unrealized gain (loss) on investments, net, as adjusted ($205) $147 ($73) $476 $24 ($740) $427 Other income, net, as adjusted 999 1,070 1,771 8
Slide 17: Non-GAAP Information: Balance Sheet
NON-GAAP INFORMATION BALANCE SHEET 1 (UNAUDITED) 9/30/2020 12/31/2020 3/31/2021 6/30/2021 9/30/2021 Assets: Cash and cash equivalents $202,212 $246,511 $228,260 $275,439 $437,242 Investments – seed capital 115,586 135,418 121,690 140,679 144,476 Investments – other 64,267 69,032 66,909 73,723 78,643
Slide 18: Non-GAAP Information: Balance Sheet (Continued)
NON-GAAP INFORMATION BALANCE SHEET 1 (CONTINUED) (UNAUDITED) 9/30/2020 12/31/2020 3/31/2021 6/30/2021 9/30/2021 Liabilities and Equity Liabilities: Accrued compensation and benefits $87,256 $122,514 $62,335 $96,509 $139,106 Accounts payable and accrued liabilities 21,633 25,357 55,153 45,755 41,716
Slide 19: U.S. GAAP Information: Income Statement
U.S. GAAP INFORMATION INCOME STATEMENT (UNAUDITED) Q3:20 Q4:20 Q1:21 Q2:21 Q3:21 YTD:20 YTD:21 Revenues Investment management fees $129,785 $144,715 $173,269 $193,510 $201,133 $360,623 $567,912 Distribution and service fees 9,797 10,279 20,348 23,450 23,293 28,146 67,091 Administration and sharehold
Slide 20: U.S. GAAP Information: Income Statement (Continued)
U.S. GAAP INFORMATION INCOME STATEMENT (CONTINUED) (UNAUDITED) Q3:20 Q4:20 Q1:21 Q2:21 Q3:21 YTD:20 YTD:21 Other Income (Expense) Realized and unrealized gain (loss) on investments, net $2,498 $5,071 $891 $2,494 ($504) $2,068 $2,881 Realized and unrealized gain (loss) of CIP 1, net 2,680 10,768 (4,6
Slide 21: Assets Under Management by Product and Asset Class
ASSETS UNDER MANAGEMENT BY PRODUCT AND ASSET CLASS 9/30/2020 12/31/2020 3/31/2021 6/30/2021 9/30/2021 Assets by Product U.S. Retail Funds $42,650 $48,492 $69,730 $72,746 $70,526 Offshore Funds 926 1,173 1,343 1,456 1,399 Variable Insurance Funds 998 1,106 1,091 1,131 1,119 Total – Open-End Funds $44
Slide 22: Assets Under Management by Product and Asset Class
ASSETS UNDER MANAGEMENT BY PRODUCT AND ASSET CLASS Open-End Closed-End Exchange Retail Separate Institutional Structured Total as of Funds Funds Traded Funds Accounts Accounts Products 9/30/2021 Equity: Domestic Equity $28,566 $— $93 $31,799 $22,873 $— $83,331 International Equity 10,349 — 7 191 1,4
Slide 23: Asset Flows: Total
ASSET FLOWS TOTAL 9/30/2020 12/31/2020 3/31/2021 6/30/2021 9/30/2021 YTD:20 YTD:21 Total Beginning balance $108,461 $116,487 $132,194 $168,880 $178,638 $108,904 $132,194 Inflows 7,874 8,941 10,611 9,550 7,623 24,487 27,784 Outflows (6,603) (6,249) (8,178) (8,214) (8,195) (21,826) (24,587) Net Flows
Slide 24: Asset Flows by Product
ASSET FLOWS BY PRODUCT 9/30/2020 12/31/2020 3/31/2021 6/30/2021 9/30/2021 YTD:20 YTD:21 U.S. Retail Funds Beginning balance $39,520 $42,650 $48,492 $69,730 $72,746 $42,412 $48,492 Inflows 3,553 4,049 5,652 4,591 3,555 12,062 13,798 Outflows (3,189) (3,408) (5,157) (4,864) (4,964) (12,927) (14,985) N
Slide 25: Asset Flows by Product (Continued)
ASSET FLOWS BY PRODUCT (CONTINUED) 9/30/2020 12/31/2020 3/31/2021 6/30/2021 9/30/2021 YTD:20 YTD:21 Variable Insurance Funds Beginning balance $938 $998 $1,106 $1,091 $1,131 $949 $1,106 Inflows 9 10 10 13 14 30 37 Outflows (35) (29) (40) (40) (34) (99) (114) Net Flows (26) (19) (30) (27) (20) (69) (
Slide 26: Asset Flows by Product (Continued)
ASSET FLOWS BY PRODUCT (CONTINUED) 9/30/2020 12/31/2020 3/31/2021 6/30/2021 9/30/2021 YTD:20 YTD:21 Closed-End Funds Beginning balance $5,639 $5,629 $5,914 $11,664 $11,993 $6,748 $5,914 Inflows 15 5 — — 3 20 3 Outflows — — — — — — — Net Flows 15 5 — — 3 20 3 Market performance 54 364 105 514 (114) (
Slide 27: Asset Flows by Product (Continued)
ASSET FLOWS BY PRODUCT (CONTINUED) 9/30/2020 12/31/2020 3/31/2021 6/30/2021 9/30/2021 YTD:20 YTD:21 Intermediary Sold Managed Accounts Beginning balance $17,116 $19,456 $23,852 $31,133 $34,125 $15,592 $23,852 Inflows 1,538 1,990 2,494 2,066 1,726 3,769 6,286 Outflows (519) (810) (791) (700) (1,103)
Slide 28: Asset Flows by Product (Continued)
ASSET FLOWS BY PRODUCT (CONTINUED) 9/30/2020 12/31/2020 3/31/2021 6/30/2021 9/30/2021 YTD:20 YTD:21 Institutional Accounts Beginning balance $34,819 $36,851 $40,861 $42,802 $45,604 $32,859 $40,861 Inflows 2,075 2,252 1,884 2,302 1,808 6,715 5,994 Outflows (2,381) (1,687) (1,868) (2,184) (1,727) (5,8
Slide 29: Asset Flows by Asset Class
ASSET FLOWS BY ASSET CLASS 9/30/2020 12/31/2020 3/31/2021 6/30/2021 9/30/2021 YTD:20 YTD:21 Domestic Equity Beginning balance $49,234 $53,621 $63,680 $77,155 $82,819 $44,976 $63,680 Inflows 3,586 4,767 4,896 4,467 3,445 12,061 12,808 Outflows (3,303) (3,079) (3,818) (3,634) (3,344) (8,194) (10,796)
Slide 30: Asset Flows by Asset Class (Continued)
ASSET FLOWS BY ASSET CLASS (CONTINUED) 9/30/2020 12/31/2020 3/31/2021 6/30/2021 9/30/2021 YTD:20 YTD:21 Global Equity Beginning balance $7,022 $8,299 $9,512 $9,681 $10,623 $6,422 $9,512 Inflows 1,134 731 501 669 732 1,909 1,902 Outflows (627) (232) (617) (404) (308) (1,268) (1,329) Net Flows 507 499
Slide 31: Asset Flows by Asset Class (Continued)
ASSET FLOWS BY ASSET CLASS (CONTINUED) 9/30/2020 12/31/2020 3/31/2021 6/30/2021 9/30/2021 YTD:20 YTD:21 Leveraged Finance Beginning balance $10,563 $10,529 $10,730 $11,981 $12,270 $12,288 $10,730 Inflows 379 466 847 684 577 1,926 2,108 Outflows (617) (534) (529) (552) (692) (3,404) (1,773) Net Flows
Slide 32: Asset Flows by Asset Class (Continued)
ASSET FLOWS BY ASSET CLASS (CONTINUED) 9/30/2020 12/31/2020 3/31/2021 6/30/2021 9/30/2021 YTD:20 YTD:21 Investment Grade Beginning balance $8,244 $8,778 $8,883 $8,509 $8,245 $7,891 $8,883 Inflows 838 515 427 337 274 1,794 1,038 Outflows (338) (445) (366) (601) (572) (1,418) (1,539) Net Flows 500 70
Slide 33: Asset Flows by Asset Class (Continued)
ASSET FLOWS BY ASSET CLASS (CONTINUED) 9/30/2020 12/31/2020 3/31/2021 6/30/2021 9/30/2021 YTD:20 YTD:21 Multi-Asset 1 Beginning balance $10,714 $11,105 $12,201 $22,498 $23,668 $11,487 $12,201 Inflows 218 211 561 674 672 601 1,907 Outflows (130) (132) (329) (488) (392) (485) (1,209) Net Flows 88 79 2
Slide 34: Investment Management Fees: Average Assets by Product
INVESTMENT MANAGEMENT FEES AVERAGE ASSETS 1 BY PRODUCT Q3:20 Q4:20 Q1:21 Q2:21 Q3:21 YTD:20 YTD:21 U.S. Retail Funds $41,773 $45,675 $63,872 $71,599 $72,476 $39,712 $69,316 Offshore Funds 842 1,049 1,265 1,411 1,453 $625 $1,376 Variable Insurance Funds 988 1,058 1,110 1,116 1,144 $921 $1,124 Total –
Slide 35: Average Management Fees Earned by Product
INVESTMENT MANAGEMENT FEES AVERAGE MANAGEMENT FEES EARNED 1 BY PRODUCT (IN BASIS POINTS) Q3:20 Q4:20 Q1:21 Q2:21 Q3:21 YTD:20 YTD:21 Total Open-End Funds 57.9 59.1 54.2 52.2 52.2 57.2 52.9 Revenue related adjustments (7.5) (7.3) (6.2) (5.8) (5.9) (7.7) (6.0) Total Open-End Funds, Net 50.4 51.8 48.0
Slide 36: Reconciliation: U.S. GAAP to Non-GAAP, Q3 2021
RECONCILIATION: U.S. GAAP TO NON-GAAP Q3 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 37: Reconciliation: U.S. GAAP to Non-GAAP, Q2 2021
RECONCILIATION: U.S. GAAP TO NON-GAAP Q2 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 managem
Slide 38: Reconciliation: U.S. GAAP to Non-GAAP, Q1 2021
RECONCILIATION: U.S. GAAP TO NON-GAAP Q1 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 39: Reconciliation: U.S. GAAP to Non-GAAP, Q4 2020
RECONCILIATION: U.S. GAAP TO NON-GAAP Q4 2020 (UNAUDITED) Reclassification Other adjustments Consolidated Amortization Seed capital U.S. GAAP investment of intangible and CLO Acquisition Non-GAAP Basis products Revenue related assets investments and integration Other Basis Revenues Investment manage
Slide 40: Reconciliation: U.S. GAAP to Non-GAAP, Q3 2020
RECONCILIATION: U.S. GAAP TO NON-GAAP Q3 2020 (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 and Severance assets investments integration Other Basi
Slide 41: Reconciliation: U.S. GAAP to Non-GAAP, YTD 2021
RECONCILIATION: U.S. GAAP TO NON-GAAP YTD 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 manag
Slide 42: Reconciliation: U.S. GAAP to Non-GAAP, YTD 2020
RECONCILIATION: U.S. GAAP TO NON-GAAP YTD 2020 (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 and Severance assets investments integration Other Bas
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 2020 Q4 2020 Q1 2021 Q2 2021 Q3 2021 YTD:20 YTD:21 Acquisition and Integration Expenses Employment expenses $999 $(515) $867 $615 $429 $1,170 $1,911 Other op
Slide 45: Virtus Investment Partners
3éVIRTUS INVESTM! ENT PARTNERS
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