Virtus Investment Partners, Inc. · NYSE:VRTS

Virtus Investment Partners — Q1 2015 Earnings Presentation

36 slides from Virtus Investment Partners's earnings presentation, May 11, 2015

1. Slide 1: First Quarter 2015 Earnings Presentation

   First Quarter 2015 Earnings Presentation May 11, 2015 George R. Aylward President and Chief Executive Officer Michael A. Angerthal Executive Vice President and Chief Financial Officer

2. 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

3. Slide 3: Agenda

   AGENDA  Overview of First Quarter  First Quarter Results  Q & A Session 3

4. Slide 4: Overview of First Quarter

   _VIRTUS | INVESTMENT PARTNERS OVERVIEW OF FIRST QUARTER

5. Slide 5: Overview of First Quarter

   OVERVIEW OF FIRST QUARTER Assets and Flows  Assets under management1 of $54.8 billion, decreased 3% from prior-year quarter  Total sales and fund sales of $3.7 billion and $3.0 billion, respectively, increased 8% and 6%, from the sequential quarter  Net flows of ($2.2) billion consistent with seq

6. Slide 6: First Quarter Results

   _VIRTUS | INVESTMENT PARTNERS FIRST QUARTER RESULTS

7. Slide 7: Assets Under Management

   ASSETS UNDER MANAGEMENT Quarterly Trends Commentary Long-Term Cash Management $61.4 $60.9 Trend reflects impact of net flows and $58.0 $56.7 market performance $59.9 $59.5 $54.8 $56.5  Assets1 decreased $1.7 billion or 3% from prior year − Reflects mutual fund net outflows, lower leverage, partiall

8. Slide 8: Asset Flows

   ASSET FLOWS Inflows/Outflows Commentary Flows reflective of market trends, product breadth and investment performance $4.2 $4.0 $3.7 $4.2  Total sales of $3.7 billion, increased 8% $3.5 $3.4 $3.7 compared to the fourth quarter  Mutual fund flows by asset class: Q1 14 Q2 14 Q3 14 Q4 14 Q1 15 YTD 14

9. Slide 9: Investment Management Fees, As Adjusted

   INVESTMENT MANAGEMENT FEES, AS ADJUSTED Quarterly Results Year-to-Date Commentary Investment management fees reflect changes in average assets and net fee rate  Fees decreased $0.9 million, or 1%, $78.8 $75.9 versus prior year due to 0.7 bps decline $74.6 $71.7 $70.8 $71.7 $70.8 in average fee rate

10. Slide 10: Employment Expenses, As Adjusted

    EMPLOYMENT EXPENSES, AS ADJUSTED Quarterly Results Year-to-Date Commentary Trend reflects growth of business and variable incentive plans  Increase of $1.5 million sequentially $138.4 primarily due to $2.5 million of incremental payroll taxes (310 bps) $35.6 $34.5 $34.6 $35.2 $34.1 $35.6 $34.5 part

11. Slide 11: Other Operating Expenses, As Adjusted

    OTHER OPERATING EXPENSES, AS ADJUSTED Quarterly Results Year-to-Date Commentary Results reflect timing of product, distribution, and operational initiatives  Increase of $0.7 million or 6% over prior $44.4 year reflects portfolio management $12.7 $11.1 $11.2 $11.2 $11.2 related expenses $10.5 $10.5

12. Slide 12: Non-GAAP Results

    NON-GAAP RESULTS Quarterly Results Year-to-Date Commentary Profitability driven by net flows, market Operating Income, As Adjusted performance and leveragability of the Earnings per share, as adjusted – diluted business  Diluted EPS, as adjusted, decreased 3% $41.6 $39.2 from prior year on 5% lower

13. Slide 13: GAAP Reconciliation

    GAAP RECONCILIATION Q1 2015 Diluted EPS Commentary Non-GAAP measures reflects operating results from core business of managing assets $0.37 ($0.06) ($0.42)  Provides after-tax and per share $2.22 $2.11 performance metrics  Excludes returns generated from $241.8 million seed portfolio  Excludes no

14. Slide 14: Capital Position

    CAPITAL POSITION Select Balance Sheet Items Commentary 3/31/14 6/30/14 9/30/14 12/31/14 3/31/15 Strong capital position reflects cash Cash and cash equivalents $235 $170 $173 $203 $166 generated from the business and capital Seed capital investments 1 $124 $224 $239 $238 $242 activities 2 Investment

15. Slide 15: Appendix

    _VIRTIUS | INVESTMENT PARTNERS Appendix

16. Slide 16: U.S. GAAP Income Statement

    U.S. GAAP INCOME STATEMENT Quarterly Trend and Year-to-Date Q1:14 Q2:14 Q3:14 Q4:14 Q1:15 YTD:14 YTD:15 Revenues Investment management fees $71,792 $74,537 $78,960 $75,374 $70,496 $71,792 $70,496 Distribution and service fees 22,438 23,940 23,671 21,901 19,598 22,438 19,598 Administration and transf

17. Slide 17: U.S. GAAP Income Statement (continued)

    U.S. GAAP INCOME STATEMENT Quarterly Trend and Year-to-Date (continued) Q1:14 Q2:14 Q3:14 Q4:14 Q1:15 YTD:14 YTD:15 Other Income (Expense) Realized and unrealized gain (loss) on investments, net 1,846 905 (1,039) (798) 545 1,846 545 Realized and unrealized gain (loss) on investments of 36 6,444 (5,3

18. Slide 18: Non-GAAP Income Statement

    NON-GAAP INCOME STATEMENT Quarterly Trend and Year-to-Date Q1:14 Q2:14 Q3:14 Q4:14 Q1:15 YTD:14 YTD:15 Revenues, As Adjusted Investment management fees $71,744 $74,600 $78,849 $75,866 $70,801 $71,744 $70,801 Distribution and service fees 22,451 23,947 23,681 21,919 19,618 22,451 19,618 Administratio

19. Slide 19: Non-GAAP Income Statement (continued)

    NON-GAAP INCOME STATEMENT Quarterly Trend and Year-to-Date (continued) Q1:14 Q2:14 Q3:14 Q4:14 Q1:15 YTD:14 YTD:15 Other Income (Expense) Realized and unrealized gain (loss) on investments, net 106 153 (326) (282) 119 106 119 Other income, net 151 189 233 318 435 151 435 Total other income (expense)

20. Slide 20: Condensed Balance Sheet

    CONDENSED BALANCE SHEET Quarter-end Trend 3/31/14 6/30/14 9/30/14 12/31/14 3/31/15 Assets: Cash and cash equivalents $234,795 $170,367 $172,709 $202,847 $166,031 Cash of consolidated sponsored investment products 2,543 361 1,055 457 2,058 Cash pledged or on deposit of consolidated sponsored - 11,958

21. Slide 21: Condensed Balance Sheet (continued)

    CONDENSED BALANCE SHEET Quarter-end Trend (continued) 3/31/14 6/30/14 9/30/14 12/31/14 3/31/15 Liabilities and Equity Liabilities: Accrued compensation and benefits $18,349 $29,784 $42,924 $54,815 $17,343 Accounts payable and accrued liabilities 29,169 33,131 33,389 31,627 32,627 Dividends payable -

22. Slide 22: Schedule of Marketable Securities

    SCHEDULE OF MARKETABLE SECURITIES Market Q1:15 Value at Total Investment Benchmark Index 3/31/2015 Return Investments - Seed Capital: International Small Cap SMA MSCI AC World Ex U.S. Small Cap Index $5.2 $0.3 Portable Yield Strategy SMA N/A 3.3 - Emerging Markets Equity Income MSCI Emerging Markets

23. Slide 23: AUM and Average Net Management Fees Earned

    AUM AND AVERAGE NET MANAGEMENT FEES EARNED Quarterly Trend and Year-to-Date Q1:14 Q2:14 Q3:14 Q4:14 Q1:15 YTD:14 YTD:15 By Product (period end) Mutual Funds – Long-Term Open-End $37,347.0 $39,819.1 $39,838.8 $36,292.3 $34,120.5 $37,347.0 $34,120.5 Mutual Funds – Closed-End 6,690.7 7,530.6 7,568.1 7,

24. Slide 24: Assets Under Management

    ASSETS UNDER MANAGEMENT Quarterly Trend and Year-to-Date: All Product Flows and AUM By Asset Class Q1:14 Q2:14 Q3:14 Q4:14 Q1:15 YTD:14 YTD:15 All Product Flows Beginning balance $57,739.6 $58,011.2 $61,394.3 $60,877.6 $56,702.4 $57,739.6 $56,702.4 Inflows 4,249.2 4,018.3 3,514.3 3,429.8 3,710.8 4,2

25. Slide 25: Assets Under Management: Asset Flows by Product

    ASSETS UNDER MANAGEMENT Asset Flows – By Product Q1:14 Q2:14 Q3:14 Q4:14 Q1:15 YTD:14 YTD:15 Mutual Funds – Long-Term Open-End Beginning balance $36,367.7 $37,347.0 $39,819.1 $39,838.8 $36,292.3 $36,367.7 $36,292.3 Inflows 3,641.3 3,148.5 3,034.5 2,841.3 2,999.9 3,641.3 2,999.9 Outflows (3,388.9) (2

26. Slide 26: Asset Flows by Product (continued)

    ASSETS UNDER MANAGEMENT Asset Flows – By Product (continued) Q1:14 Q2:14 Q3:14 Q4:14 Q1:15 YTD:14 YTD:15 Variable Insurance Funds Beginning balance $ 1,311.8 $1,286.6 $1,305.5 $1,237.5 $1,221.9 $ 1,311.8 $1,221.9 Inflows 11.6 20.9 20.7 14.9 14.3 11.6 14.3 Outflows (55.5) (53.3) (59.3) (61.7) (68.7)

27. Slide 27: Long-Term Open-End Asset Flows by Asset Class

    ASSETS UNDER MANAGEMENT Long-Term Open-End Asset Flows – By Asset Class Q1:14 Q2:14 Q3:14 Q4:14 Q1:15 YTD:14 YTD:15 Mutual Funds – Domestic Equity Beginning balance $11,092.1 $11,575.7 $12,189.5 $12,080.5 $10,389.7 $11,092.1 $10,389.7 Inflows 1,160.9 907.7 813.8 754.0 340.6 1,160.9 340.6 Outflows (7

28. Slide 28: Long-Term Open-End Asset Flows by Asset Class (continued)

    ASSETS UNDER MANAGEMENT Long-Term Open-End Asset Flows – By Asset Class (continued) Q1:14 Q2:14 Q3:14 Q4:14 Q1:15 YTD:14 YTD:15 Mutual Funds – Taxable Bond Beginning balance $10,425.1 $10,646.1 $11,003.2 $11,039.3 $10,600.4 $10,425.1 $10,600.4 Inflows 991.2 1,013.2 905.3 814.8 656.4 991.2 656.4 Outf

29. Slide 29: U.S. GAAP to Non-GAAP Reconciliation – Q1:15

    U.S. GAAP TO NON-GAAP RECONCILIATION – Q1:15 Reclassifications Adjustments U.S. GAAP Distribution and Consolidated sponsored Amortization of Seed capital Non-GAAP Basis administration expenses investment products intangible assets investments impact Other Basis Revenues Investment management fees $

30. Slide 30: U.S. GAAP to Non-GAAP Reconciliation – Q4:14

    U.S. GAAP TO NON-GAAP RECONCILIATION – Q4:14 Reclassifications Adjustments U.S. GAAP Distribution and Consolidated sponsored Amortization of Seed capital Non-GAAP Basis administration expenses investment products intangible assets investments impact Other Basis Revenues Investment management fees $

31. Slide 31: U.S. GAAP to Non-GAAP Reconciliation – Q3:14

    U.S. GAAP TO NON-GAAP RECONCILIATION – Q3:14 Reclassifications Adjustments U.S. GAAP Distribution and Consolidated sponsored Amortization of Seed capital Non-GAAP Basis administration expenses investment products intangible assets investments impact Other Basis Revenues Investment management fees $

32. Slide 32: U.S. GAAP to Non-GAAP Reconciliation – Q2:14

    U.S. GAAP TO NON-GAAP RECONCILIATION – Q2:14 Reclassifications Adjustments U.S. GAAP Distribution and Consolidated sponsored Closed-end fund Amortization of Seed capital Non-GAAP Basis administration expenses investment products launch costs intangible assets investments impact Other Basis Revenues

33. Slide 33: U.S. GAAP to Non-GAAP Reconciliation – Q1:14

    U.S. GAAP TO NON-GAAP RECONCILIATION – Q1:14 Reclassifications Adjustments U.S. GAAP Distribution and Consolidated sponsored Amortization of Seed capital Non-GAAP Basis administration expenses investment products intangible assets investments impact Other Basis Revenues Investment management fees $

34. Slide 34: 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

35. Slide 35: Footnotes

    FOOTNOTES See components of other in the table below: Q1:14 Q2:14 Q3:14 Q4:14 Q1:15 Other ($ in thousands) Newfleet transition expenses $492 $367 $- $- $- Tax impact of Newfleet transition expenses (189) (140) - - - System transition expenses - 475 216 359 351 Tax impact of system transition expense

36. Slide 36: Virtus Investment Partners

    VIRTIUS | INVESTMENT PARTNERS

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