Virtus Investment Partners, Inc. · NYSE:VRTS
Virtus Investment Partners — Q3 2024 Earnings Presentation
45 slides from Virtus Investment Partners's earnings presentation, Oct 25, 2024
Slide 1: Third Quarter Earnings Presentation
THIRD QUARTER EARNINGS PRESENTATION October 25, 2024 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 2024 Overview
THIRD QUARTER 2024 OVERVIEW Assets and Flows ■ Assets under management (AUM) increased 6% to $183.7 billion primarily due to market performance; average AUM increased to $176.0 billion ■ Sales increased in all product categories, rising 7% to $6.6 billion ■ Net flows of ($1.7) billion improved from
Slide 6: Results
INVESTMENT PARTNERS RESULTS
Slide 7: Assets Under Management
ASSETS UNDER MANAGEMENT GROWTH DUE TO MARKET PERFORMANCE Institutional Accounts Closed-End Funds ■ AUM of $183.7 billion increased 6% from U.S. Retail Funds Retail Separate Accounts $173.6 billion due to: Global Funds, ETFs, and Variable Insurance Funds – $12.6 billion of market performance, partial
Slide 8: Asset Flows
ASSET FLOWS SALES GROWTH IN ALL PRODUCTS ■ Sales of $6.6 billion increased 7% – Institutional sales of $1.2 billion increased 3% and included a $0.3 billion CLO – Retail separate account sales of $2.3 billion increased 4% due to higher intermediary sold sales – Open-end fund sales of $3.1 billion in
Slide 9: Investment Management Fees, As Adjusted
INVESTMENT MANAGEMENT FEES, AS ADJUSTED STABLE FEE RATE AND HIGHER AVERAGE ASSETS ■ Investment management fees, as adjusted, increased by 1% due to higher average AUM ■ Average fee rate of 41.9 bps compared with 42.2 bps – Average fee rate has remained in narrow range ■ Average fee rate by product –
Slide 10: Employment Expenses, As Adjusted
EMPLOYMENT EXPENSES, AS ADJUSTED LOWER AS A PERCENTAGE OF REVENUES ■ Employment expenses, as adjusted, declined by 1% to $102.5 million ■ Employment expenses, as adjusted, as a percentage of revenues, as adjusted, were 50.0%, down 100 bps reflecting lower fixed expenses % of Revenues, as adjusted 50
Slide 11: Other Operating Expenses, As Adjusted
OTHER OPERATING EXPENSES, AS ADJUSTED REFLECT DISCIPLINED MANAGEMENT ■ Other operating expenses, as adjusted, decreased $1.5 million, or 5%, reflecting: – Continued cost streamlining – Annual equity grant to Board of Directors in prior quarter ■ Other operating expenses, as adjusted, as a percentage
Slide 12: Non-GAAP Results
NON-GAAP RESULTS HIGHER EARNINGS AND MARGIN ■ Operating margin, as adjusted, of 34.4% Operating Income, as Adjusted increased from 32.5%; highest level in Diluted earnings per share, as adjusted two years ■ Interest and dividend income, as adjusted of $4.7 million declined from $6.6 as prior quarter
Slide 13: Capital and Select Balance Sheet
CAPITAL AND SELECT BALANCE SHEET CLO AND AFFILIATE EQUITY INVESTMENTS ■ Working capital of $108.5 million Select Balance Sheet Items: 9/30/23 12/31/23 3/31/24 6/30/24 9/30/24 compared with $143.0 million; cash Cash and cash equivalents $195 $240 $124 $183 $196 earnings 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) Q3:23 Q4:23 Q1:24 Q2:24 Q3:24 YTD:23 YTD:24 Revenues, As Adjusted Investment management fees, as adjusted $177,387 $174,448 $180,547 $183,670 $185,487 $506,120 $549,704 Administration and shareholder service fees, as adjusted 19,064 18,213 18,717 18
Slide 16: Non-GAAP Information: Income Statement (Continued)
NON-GAAP INFORMATION INCOME STATEMENT1 (CONTINUED) (UNAUDITED) Q3:23 Q4:23 Q1:24 Q2:24 Q3:24 YTD:23 YTD:24 Other Income (Expense), As Adjusted Realized and unrealized gain (loss) on investments, net, as adjusted ($297) ($289) $122 ($211) $656 ($577) $567 Other income, net, as adjusted 128 622 550 59
Slide 17: Non-GAAP Information: Balance Sheet
NON-GAAP INFORMATION BALANCE SHEET1 (UNAUDITED) 9/30/2023 12/31/2023 3/31/2024 6/30/2024 9/30/2024 Assets: Cash and cash equivalents $195,403 $239,602 $123,880 $183,001 $195,533 Investments – seed capital 126,017 144,351 144,682 139,584 143,901 Investments – other 145,449 131,238 128,025 118,384 140
Slide 18: Non-GAAP Information: Balance Sheet (Continued)
NON-GAAP INFORMATION BALANCE SHEET1 (CONTINUED) (UNAUDITED) 9/30/2023 12/31/2023 3/31/2024 6/30/2024 9/30/2024 Liabilities and Equity Liabilities: Accrued compensation and benefits $161,745 $200,837 $95,591 $132,261 $180,078 Accounts payable and accrued liabilities 32,740 38,756 44,282 30,275 30,073
Slide 19: U.S. GAAP Information: Income Statement
U.S. GAAP INFORMATION INCOME STATEMENT (UNAUDITED) Q3:23 Q4:23 Q1:24 Q2:24 Q3:24 YTD:23 YTD:24 Revenues Investment management fees $184,869 $182,149 $188,360 $191,652 $193,843 $529,326 $573,855 Distribution and service fees 14,333 13,535 14,030 13,410 13,567 42,618 41,007 Administration and sharehol
Slide 20: U.S. GAAP Information: Income Statement (Continued)
U.S. GAAP INFORMATION INCOME STATEMENT (CONTINUED) (UNAUDITED) Q3:23 Q4:23 Q1:24 Q2:24 Q3:24 YTD:23 YTD:24 Other Income (Expense) Realized and unrealized gain (loss) on investments, net ($1,918) $4,056 $3,416 ($1,553) $4,552 $2,469 $6,415 Realized and unrealized gain (loss) of CIP1, net (1,013) 449
Slide 21: Assets Under Management by Product, Asset Class and Region
ASSETS UNDER MANAGEMENT BY PRODUCT, ASSET CLASS AND REGION 9/30/2023 12/31/2023 3/31/2024 6/30/2024 9/30/2024 Assets by Product U.S. Retail Funds $47,776 $49,064 $50,252 $48,064 $49,219 Global Funds 4,140 4,560 4,749 4,809 5,343 Exchange Traded Funds 1,404 1,545 1,898 2,108 2,642 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 9/30/2024 Equity: Domestic Equity $21,070 $— $40,079 $25,325 $86,474 International Equity 3,072 — 71 1,393 4,536 Global Equity 2,327 — 419 9,078 11,824 Speci
Slide 23: Asset Flows: Total
ASSET FLOWS TOTAL 9/30/2023 12/31/2023 3/31/2024 6/30/2024 9/30/2024 YTD:23 YTD:24 Total Beginning balance $168,316 $162,539 $172,259 $179,311 $173,585 $149,376 $172,259 Inflows 5,810 6,237 7,583 6,137 6,597 19,620 20,317 Outflows (7,309) (10,037) (8,821) (8,762) (8,321) (23,040) (25,904) Net Flows
Slide 24: Asset Flows by Product
ASSET FLOWS BY PRODUCT 9/30/2023 12/31/2023 3/31/2024 6/30/2024 9/30/2024 YTD:23 YTD:24 U.S. Retail Funds Beginning balance $50,429 $47,776 $49,064 $50,252 $48,064 $47,494 $49,064 Inflows 2,382 2,629 2,929 2,291 2,364 7,315 7,584 Outflows (3,954) (4,628) (3,906) (3,843) (3,871) (13,063) (11,620) Net
Slide 25: Asset Flows by Product (Continued)
ASSET FLOWS BY PRODUCT (CONTINUED) 9/30/2023 12/31/2023 3/31/2024 6/30/2024 9/30/2024 YTD:23 YTD:24 Exchange Traded Funds Beginning balance $1,337 $1,404 $1,545 $1,898 $2,108 $1,226 $1,545 Inflows 124 105 298 241 450 331 989 Outflows (52) (46) (28) (43) (59) (212) (130) Net Flows 72 59 270 198 391 1
Slide 26: Asset Flows by Product (Continued)
ASSET FLOWS BY PRODUCT (CONTINUED) 9/30/2023 12/31/2023 3/31/2024 6/30/2024 9/30/2024 YTD:23 YTD:24 Closed-End Funds Beginning balance $10,166 $9,472 $10,026 $10,064 $9,915 $10,361 $10,026 Inflows — — — — — 24 — Outflows — — — (41) — — (41) Net Flows — — — (41) — 24 (41) Market performance (504) 753
Slide 27: Asset Flows by Product (Continued)
ASSET FLOWS BY PRODUCT (CONTINUED) 9/30/2023 12/31/2023 3/31/2024 6/30/2024 9/30/2024 YTD:23 YTD:24 Intermediary Sold Managed Accounts2 Beginning balance $31,878 $31,708 $35,438 $38,610 $37,537 $29,160 $35,438 Inflows 1,661 1,741 2,171 1,895 1,985 3,747 6,051 Outflows (1,353) (1,441) (1,505) (1,465)
Slide 28: Asset Flows by Product (Continued)
ASSET FLOWS BY PRODUCT (CONTINUED) 9/30/2023 12/31/2023 3/31/2024 6/30/2024 9/30/2024 YTD:23 YTD:24 Institutional Separate Accounts Beginning balance $58,780 $56,613 $59,548 $61,253 $58,828 $46,908 $59,548 Inflows 1,002 1,179 1,734 1,085 943 6,514 3,762 Outflows (1,648) (3,406) (3,022) (2,913) (2,34
Slide 29: Asset Flows by Asset Class
ASSET FLOWS BY ASSET CLASS 9/30/2023 12/31/2023 3/31/2024 6/30/2024 9/30/2024 YTD:23 YTD:24 Domestic Equity Beginning balance $71,984 $69,978 $77,263 $83,474 $79,679 $64,948 $77,263 Inflows 2,731 3,023 4,390 3,381 3,185 7,785 10,956 Outflows (3,109) (3,704) (4,190) (4,854) (3,954) (9,353) (12,998) N
Slide 30: Asset Flows by Asset Class (Continued)
ASSET FLOWS BY ASSET CLASS (CONTINUED) 9/30/2023 12/31/2023 3/31/2024 6/30/2024 9/30/2024 YTD:23 YTD:24 Global Equity Beginning balance $9,835 $9,478 $10,552 $11,228 $11,224 $8,292 $10,552 Inflows 182 477 318 363 274 1,016 955 Outflows (367) (407) (203) (443) (289) (1,054) (935) Net Flows (185) 70 1
Slide 31: Asset Flows by Asset Class (Continued)
ASSET FLOWS BY ASSET CLASS (CONTINUED) 9/30/2023 12/31/2023 3/31/2024 6/30/2024 9/30/2024 YTD:23 YTD:24 Leveraged Finance Beginning balance $9,247 $9,306 $9,083 $8,941 $8,790 $10,196 $9,083 Inflows 544 345 366 364 530 1,060 1,260 Outflows (366) (571) (505) (410) (363) (1,889) (1,278) Net Flows 178 (
Slide 32: Asset Flows by Asset Class (Continued)
ASSET FLOWS BY ASSET CLASS (CONTINUED) 9/30/2023 12/31/2023 3/31/2024 6/30/2024 9/30/2024 YTD:23 YTD:24 Investment Grade Beginning balance $9,827 $9,440 $10,128 $9,969 $10,030 $7,029 $10,128 Inflows 191 194 179 119 302 2,708 600 Outflows (229) (232) (258) (155) (239) (784) (652) Net Flows (38) (38)
Slide 33: Asset Flows by Asset Class (Continued)
ASSET FLOWS BY ASSET CLASS (CONTINUED) 9/30/2023 12/31/2023 3/31/2024 6/30/2024 9/30/2024 YTD:23 YTD:24 Multi-Asset1 Beginning balance $20,914 $19,937 $21,411 $21,975 $21,060 $19,937 $21,411 Inflows 319 431 335 393 391 1,100 1,119 Outflows (412) (613) (455) (544) (1,121) (1,335) (2,120) Net Flows (9
Slide 34: Investment Management Fees: Average Assets by Product
INVESTMENT MANAGEMENT FEES AVERAGE ASSETS1 BY PRODUCT Q3:23 Q4:23 Q1:24 Q2:24 Q3:24 YTD:23 YTD:24 U.S. Retail Funds $50,000 $47,602 $49,586 $49,104 $48,446 $49,598 $49,045 Global Funds 4,261 4,262 4,623 4,717 5,110 3,804 4,817 Exchange Traded Funds 1,382 1,431 1,718 1,991 2,303 1,325 2,004 Variable
Slide 35: Investment Management Fees: Average Fees Earned by Product
INVESTMENT MANAGEMENT FEES AVERAGE MANAGEMENT FEES EARNED1 BY PRODUCT (IN BASIS POINTS) Q3:23 Q4:23 Q1:24 Q2:24 Q3:24 YTD:23 YTD:24 U.S. Retail Funds 53.2 52.9 52.7 53.0 53.0 51.4 52.9 Global Funds 40.8 30.5 34.6 45.2 35.7 36.5 38.4 Exchange Traded Funds 10.1 4.3 11.8 11.3 12.5 9.4 11.9 Variable Ins
Slide 36: Reconciliation: U.S. GAAP to Non-GAAP, Q3 2024
RECONCILIATION: U.S. GAAP TO NON-GAAP Q3 2024 (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 37: Reconciliation: U.S. GAAP to Non-GAAP, Q2 2024
RECONCILIATION: U.S. GAAP TO NON-GAAP Q2 2024 (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 38: Reconciliation: U.S. GAAP to Non-GAAP, Q1 2024
RECONCILIATION: U.S. GAAP TO NON-GAAP Q1 2024 (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 39: Reconciliation: U.S. GAAP to Non-GAAP, Q4 2023
RECONCILIATION: U.S. GAAP TO NON-GAAP Q4 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 40: Reconciliation: U.S. GAAP to Non-GAAP, Q3 2023
RECONCILIATION: U.S. GAAP TO NON-GAAP Q3 2023 (UNAUDITED) Reclassification Other adjustments Amortizatio Deferred Consolidated n of Seed capital compensatio Acquisition U.S. GAAP investment Revenue intangible Restructuring and CLO n and related and Non-GAAP Basis products related assets expense inve
Slide 41: Reconciliation: U.S. GAAP to Non-GAAP, YTD 2024
RECONCILIATION: U.S. GAAP TO NON-GAAP YTD 2024 (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 2023
RECONCILIATION: U.S. GAAP TO NON-GAAP YTD 2023 (UNAUDITED) Reclassification Other adjustments Amortizatio Deferred Consolidated n of Seed capital compensation Acquisition U.S. GAAP investment Revenue intangible Restructurin and CLO and related and Non-GAAP Basis products related assets g expense inv
Slide 43: Reconciliation: Footnotes
RECONCILIATION: 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 earni
Slide 44: Reconciliation: Footnotes
RECONCILIATION: FOOTNOTES (UNAUDITED) Components of Acquisition and Integration Expenses and Other for the respective periods are shown in the table below: Q3 2023 Q4 2023 Q1 2024 Q2 2024 Q3 2024 YTD:23 YTD:24 Acquisition and Integration Expenses Employment expenses $2,642 $1,760 $1,042 $1,099 $956
Slide 45: Investment Partners
INVESTMENT PARTNERS
Virtus Investment Partners — Q3 2024 Earnings Presentation on 6ix