Virtus Investment Partners, Inc. · NYSE:VRTS
Virtus Investment Partners — Q1 2016 Earnings Presentation
38 slides from Virtus Investment Partners's earnings presentation, Apr 29, 2016
Slide 1: First Quarter 2016 Earnings Presentation
First Quarter 2016 Earnings Presentation April 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 First Quarter First Quarter Results Q & A Session 3
Slide 4: Overview of First Quarter
_VIRTUS | INVESTMENT PARTNERS OVERVIEW OF FIRST QUARTER
Slide 5: Overview of First Quarter
OVERVIEW OF FIRST QUARTER Assets and Flows Assets under management decreased 3.7% sequentially to $45.7 billion Total sales of $2.8 billion decreased $0.3 billion or 10% from sequential quarter; mutual fund sales of $2.2 billion decreased $0.4 billion or 14% sequentially Net flows of ($2.6) bi
Slide 6: First Quarter Results
_VIRTUS | INVESTMENT PARTNERS FIRST QUARTER RESULTS
Slide 7: Assets Under Management
ASSETS UNDER MANAGEMENT Quarterly Trends Commentary Trend reflects impact of net flows and market performance $54.8 $52.4 $47.9 $47.4 Sequential decrease of $1.7 billion, or $45.7 3.7% primarily reflects net flows of ($2.6) billion offset by $1.1 billion of market appreciation Assets decreased $
Slide 8: Asset Flows
ASSET FLOWS Inflows/Outflows Commentary Flows reflect market trends, product breadth and investment performance Sales of $2.8 billion represent 10% $3.7 $3.7 $3.3 $2.5 $3.2 $2.8 $2.8 sequential decrease due to lower open-end fund sales Net flows of ($2.6) billion include ($1.5) Q1 15 Q2 15 Q3 15
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 Sequential decrease of $3.2 million, or $70.8 $70.3 $70.8 $65.2 $60.9 5%, due to 6% decline in average assets $57.7 $57.7 Decrease from
Slide 10: Employment Expenses, As Adjusted
EMPLOYMENT EXPENSES, AS ADJUSTED Quarterly Results Year to Date Commentary Trend reflects staffing levels and variable incentive plans Increase of $1.6 million, or 5% over prior quarter primarily due to $2.3 million of incremental payroll taxes partially offset $35.6 $36.0 $35.6 $36.0 by lower var
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 Other operating expenses declined $1.6 million sequentially due to: $11.6 $12.0 $11.2 $11.3 $10.4 $11.2 $10.4 − Lower travel and marketing ex
Slide 12: Non-GAAP Results
NON-GAAP RESULTS Operating Income, As Adjusted Commentary Diluted earnings per share, as adjusted Profitability impacted by net flows, market performance and leveragability of the business Diluted EPS, as adjusted, of $1.12 $32.2 $31.4 $32.2 includes: $25.3 $19.4 − ($0.17) per share of incremental
Slide 13: Capital Position
CAPITAL POSITION Select Non-GAAP Balance Sheet Items Commentary 3/31/15 6/30/15 9/30/15 12/31/15 3/31/16 Strong capital position reflects cash Cash and cash equivalents $166 $194 $127 $88 $50 generated from the business and capital Seed capital investments 1 $242 $239 $277 $274 $281 activities 2 Inv
Slide 14: Appendix
_VIRTIUS | INVESTMENT PARTNERS Appendix
Slide 15: Non-GAAP Income Statement
NON-GAAP INCOME STATEMENT Quarterly Trend and Total Year Q1:15 Q2:15 Q3:15 Q4:15 Q1:16 YTD:15 YTD:16 Revenues, As Adjusted Investment management fees, as adjusted $70,801 $70,321 $65,193 $60,853 $57,735 $70,801 $57,735 Distribution and service fees, as adjusted 19,618 17,658 15,614 14,272 12,502 19,
Slide 16: Non-GAAP Income Statement (continued)
NON-GAAP INCOME STATEMENT Quarterly Trend and Total Year (continued) Q1:15 Q2:15 Q3:15 Q4:15 Q1:16 YTD:15 YTD:16 Other Income (Expense), As Adjusted Realized and unrealized (loss) gain on investments, net, as 116 224 (159) (202) (5) 116 (5) adjusted Other income, net, as adjusted 435 247 141 75 228
Slide 17: U.S. GAAP Income Statement
U.S. GAAP INCOME STATEMENT Quarterly Trend and Total Year Q1:15 Q2:15 Q3:15 Q4:15 Q1:16 YTD:15 YTD:16 Revenues Investment management fees $70,496 $68,867 $64,891 $60,611 $57,644 $70,496 $57,644 Distribution and service fees 19,598 17,635 15,587 14,246 12,478 19,598 12,478 Administration and transfer
Slide 18: U.S. GAAP Income Statement (continued)
U.S. GAAP INCOME STATEMENT Quarterly Trend and Total Year (continued) Q1:15 Q2:15 Q3:15 Q4:15 Q1:16 YTD:15 YTD:16 Other Income (Expense) Realized and unrealized gain (loss) on investments, net 545 343 (2,082) 332 (658) 545 (658) Realized and unrealized gain (loss) on investments of 2,590 (3,242) (17
Slide 19: Condensed Balance Sheet
CONDENSED BALANCE SHEET Quarter-end Trend 3/31/15 6/30/15 9/30/15 12/31/15 3/31/16 Assets: Cash and cash equivalents $166,031 $194,334 $126,470 $87,574 $50,402 Investments – seed capital 241,813 238,862 276,806 273,679 280,929 Investments – other 22,366 22,338 41,409 60,225 51,136 Total cash and inv
Slide 20: Condensed Balance Sheet (continued)
CONDENSED BALANCE SHEET Quarter-end Trend (continued) 3/31/15 6/30/15 9/30/15 12/31/15 3/31/16 Liabilities and Equity Liabilities: Accrued compensation and benefits $17,343 $27,134 $38,206 $49,617 $15,035 Accounts payable and accrued liabilities 32,627 43,456 39,739 23,036 20,563 Dividends payable 4
Slide 21: AUM and Average Net Management Fees Earned
AUM AND AVERAGE NET MANAGEMENT FEES EARNED Quarterly Trend and Total Year Q1:15 Q2:15 Q3:15 Q4:15 Q1:16 YTD:15 YTD:16 By Product (period end) Open-End Funds $34,120.5 $32,211.0 $28,717.1 $27,865.8 $25,560.3 $34,120.5 $25,560.3 Variable Insurance Funds 1,197.3 1,134.3 999.3 1,016.3 975.7 1,197.3 975.
Slide 22: AUM and Average Net Management Fees Earned
AUM AND AVERAGE NET MANAGEMENT FEES EARNED Quarterly Trend and Total Year Q1:15 Q2:15 Q3:15 Q4:15 Q1:16 YTD:15 YTD:16 Average Net Management Fees Earned (1) (In basis points, annualized) Open-End Funds 49.9 49.1 47.2 45.9 47.1 49.9 47.1 Variable Insurance Funds 51.4 51.2 48.7 48.6 53.2 51.4 53.2 Sub
Slide 23: Assets Under Management
ASSETS UNDER MANAGEMENT Quarterly Trend and Total Year: All Product Flows and AUM By Asset Class Q1:15 Q2:15 Q3:15 Q4:15 Q1:16 YTD:15 YTD:16 All Product Flows Beginning balance $56,702.4 $54,773.0 $52,401.0 $47,937.7 $47,385.3 $56,702.4 $47,385.3 Inflows 3,710.8 3,267.8 2,547.2 3,164.0 2,841.1 3,710
Slide 24: Assets Under Management: Asset Flows by Product
ASSETS UNDER MANAGEMENT Asset Flows – By Product Q1:15 Q2:15 Q3:15 Q4:15 Q1:16 YTD:15 YTD:16 Open-End Funds Beginning balance $36,292.3 $34,120.5 $32,211.0 $28,717.1 $27,865.8 $36,292.3 $27,865.8 Inflows 2,999.9 2,611.3 1,857.8 2,540.4 2,186.4 2,999.9 2,186.4 Outflows (5,329.3) (4,120.1) (3,684.5) (
Slide 25: Asset Flows by Product (continued)
ASSETS UNDER MANAGEMENT Asset Flows – By Product (continued) Q1:15 Q2:15 Q3:15 Q4:15 Q1:16 YTD:15 YTD:16 Closed-End Funds Beginning balance $7,581.4 $7,288.0 $6,901.0 $6,349.8 $6,222.3 $7,581.4 $6,222.3 Inflows - - - - - - - Outflows - - - - - - - Net Flows - - - - - - - Market performance (168.6) (
Slide 26: Asset Flows by Product (continued)
ASSETS UNDER MANAGEMENT Asset Flows – By Product (continued) Q1:15 Q2:15 Q3:15 Q4:15 Q1:16 YTD:15 YTD:16 Intermediary Sold Managed Accounts Beginning balance $4,188.7 $4,250.3 $4,180.6 $3,853.5 $3,985.7 $4,188.7 $3,985.7 Inflows 176.7 150.4 132.9 193.1 295.9 176.7 295.9 Outflows (219.6) (185.7) (176
Slide 27: Asset Flows by Product (continued)
ASSETS UNDER MANAGEMENT Asset Flows – By Product (continued) Q1:15 Q2:15 Q3:15 Q4:15 Q1:16 YTD:15 YTD:16 Institutional Accounts Beginning balance $4,296.5 $4,620.6 $4,665.1 $4,638.7 $4,799.7 $4,296.5 $4,799.7 Inflows 368.1 214.1 199.5 226.6 186.2 368.1 186.2 Outflows (147.2) (87.3) (110.3) (181.3) (
Slide 28: Open-End Asset Flows by Asset Class
ASSETS UNDER MANAGEMENT Open-End Asset Flows – By Asset Class Q1:15 Q2:15 Q3:15 Q4:15 Q1:16 YTD:15 YTD:16 Domestic Equity Funds Beginning balance $10,389.7 $7,934.4 $6,019.7 $4,785.3 $4,349.0 $10,389.7 $4,349.0 Inflows 340.6 134.7 107.6 108.0 120.6 340.6 120.6 Outflows (2,574.8) (1,926.4) (968.9) (6
Slide 29: Open-End Asset Flows by Asset Class (continued)
ASSETS UNDER MANAGEMENT Open-End Asset Flows – By Asset Class (continued) Q1:15 Q2:15 Q3:15 Q4:15 Q1:16 YTD:15 YTD:16 Taxable Bond Funds Beginning balance $10,600.4 $10,308.7 $9,960.9 $9,446.0 $8,990.8 $10,600.4 $8,990.8 Inflows 656.4 473.0 419.4 536.2 518.6 656.4 518.6 Outflows (1,057.4) (860.6) (8
Slide 30: U.S. GAAP to Non-GAAP Reconciliation – Q1 2016
U.S. GAAP TO NON-GAAP RECONCILIATION – Q1 2016 Reclassifications Adjustments Distribution and Consolidated Amortization U.S. GAAP other asset- investment of intangible Seed capital and Non-GAAP Basis based expenses products assets CLO investments Other Basis Revenues Investment management fees $ 57,
Slide 31: 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 32: 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 33: 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 34: 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 35: U.S. GAAP to Non-GAAP Reconciliation – March 31, 2016
U.S. GAAP TO NON-GAAP RECONCILIATION – MARCH 31, 2016 Reclassifications Consolidated Sponsored Consolidated U.S. GAAP Investment Investment Non-GAAP Basis Products Products Basis Assets: Cash and cash equivalents 50,402 - - 50,402 Investments - seed capital 69,040 211,888 - 280,929 Investments - CLO
Slide 36: 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 37: Footnotes
FOOTNOTES See components of Other in the table below: Q1:15 Q2:15 Q3:15 Q4:15 Q1:16 YTD:15 YTD:16 Other ($ in thousands) Loss contingency $5,200 $11,300 $- $- $- $5,200 $- Tax impact of loss contingency (1,600) (3,907) - - - (1,600) - Transition related revenues - 1,166 - - - - - Tax impact of trans
Slide 38: Virtus Investment Partners
VIRTIUS | INVESTMENT PARTNERS
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