Virtus Investment Partners, Inc. · NYSE:VRTS

Virtus Investment Partners — Q1 2019 Earnings Presentation

43 slides from Virtus Investment Partners's earnings presentation, Apr 26, 2019

1. Slide 1: First Quarter Earnings Presentation

   FIRST QUARTER EARNINGS PRESENTATION FRIDAY, APRIL 26, 2019 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

   AVIRTUS OVERVIEW OF FIRST QUARTER

5. Slide 5: First Quarter 2019 Overview

   FIRST QUARTER 2019 OVERVIEW Assets and Flows  Long-term assets under management increased $9.5 billion, or 11%, sequentially to $99.9 billion due to market appreciation  Total sales of $5.5 billion increased $1.1 billion, or 24%, compared to prior quarter with higher sales in all product categorie

6. Slide 6: First Quarter Results

   AVIRTUS FIRST QUARTER RESULTS

7. Slide 7: Assets Under Management

   ASSETS UNDER MANAGEMENT QUARTERLY TRENDS Long-Term  Sequential increase in long-term assets Liquidity of $9.5 billion, or 11%, reflects $9.7 $105.6 $101.7 billion of market appreciation $92.0 $89.1 $91.6 $103.9 $99.9  Equity assets as a percentage of total $87.4 $89.8 $90.4 assets increased 290 bp

8. Slide 8: Asset Flows

   ASSET FLOWS INFLOWS / (OUTFLOWS)  Total sales increased $1.1 billion, or 24%, Net flows sequentially $6.6 $6.3 – Exchange traded fund sales included $0.4 $5.4 $5.5 $5.4 $5.5 billion from 2 newly launched strategies $4.4 – Structured product sales included a $0.4 billion CLO issuance Q1 18 Q2 18 Q3

9. Slide 9: Investment Management Fees, As Adjusted

   INVESTMENT MANAGEMENT FEES, AS ADJUSTED QUARTERLY RESULTS  Investment management fees decreased $123.4 $5.7 million, or 5.0%, sequentially due to: $113.3 $107.6 $107.6 $102.0 $104.6 $102.0 – Long-term average assets lower by 3.7% and 2 fewer days; partially offset by – Higher average fee rate, refl

10. Slide 10: Employment Expenses, As Adjusted

    EMPLOYMENT EXPENSES, AS ADJUSTED QUARTERLY RESULTS  Employment expenses, as adjusted, increased sequentially due to $7.5 million of seasonally higher expenses: – $4.2 million of payroll taxes due to timing of $61.7 annual incentive payments $59.4 $58.8 $59.4 $58.1 $58.8 – $2.4 million of employee b

11. Slide 11: Other Operating Expenses, As Adjusted

    OTHER OPERATING EXPENSES, AS ADJUSTED QUARTERLY RESULTS  Other operating expenses, as adjusted, of $18.5 million included $0.6 million of identified items including costs associated with consulting services, $18.2 $18.5 $18.5 $17.8 office relocation, and logo re-design $17.4  Other operating expen

12. Slide 12: Non-GAAP Results

    NON-GAAP RESULTS QUARTER OPERATING RESULTS Operating Income, As Adjusted  Diluted EPS, as adjusted, of $2.73 Diluted earnings per share, as adjusted decreased by $0.69, or 20%, $48.2 sequentially primarily related to seasonal $41.5 employment expenses of $0.65 $37.6 $32.8 $33.5 $32.8 $33.5  Operat

13. Slide 13: Capital Position

    CAPITAL POSITION SELECT NON-GAAP BALANCE SHEET ITEMS  Working capital decreased $2.3 million, or 3/31/18 6/30/18 9/30/18 12/31/18 3/31/19 1.6%, sequentially as changes in debt Cash and cash equivalents $81 $139 $169 $202 $142 1 outstanding and share repurchases more Seed capital investments 2 $116

14. Slide 14: Financial Supplement

    IVIRTUS FINANCIAL SUPPLEMENT

15. Slide 15: Non-GAAP Information: Income Statement

    NON-GAAP INFORMATION INCOME STATEMENT1 (UNAUDITED) Q1:18 Q2:18 Q3:18 Q4:18 Q1:19 YTD:18 YTD:19 Revenues, As Adjusted Investment management fees, as adjusted $102,047 $104,559 $123,379 $113,253 $107,572 $102,047 $107,572 Distribution and service fees, as adjusted 12,611 13,553 13,734 10,831 10,066 12

16. Slide 16: Non-GAAP Information: Income Statement (Continued)

    NON-GAAP INFORMATION INCOME STATEMENT1 (CONTINUED) (UNAUDITED) Q1:18 Q2:18 Q3:18 Q4:18 Q1:19 YTD:18 YTD:19 Other Income (Expense), As Adjusted Realized and unrealized gain (loss) on investments, net, ($198) $137 $10 ($244) $359 ($198) $359 as adjusted Other income, net, as adjusted 1,319 455 549 1,2

17. Slide 17: Non-GAAP Information: Balance Sheet

    NON-GAAP INFORMATION BALANCE SHEET1 (UNAUDITED) 03/31/18 06/30/18 09/30/18 12/31/18 03/31/19 Assets: Cash and cash equivalents $80,765 $138,827 $168,982 $201,705 $142,344 Investments – seed capital 115,848 107,217 109,111 92,846 88,594 Investments – other 136,821 107,030 104,496 93,636 88,558 Invest

18. Slide 18: Non-GAAP Information: Balance Sheet (Continued)

    NON-GAAP INFORMATION BALANCE SHEET1 (CONTINUED) (UNAUDITED) 03/31/18 06/30/18 09/30/18 12/31/18 03/31/19 Liabilities and Equity Liabilities: Accrued compensation and benefits $27,471 $45,187 $70,750 $93,339 $31,105 Accounts payable and accrued liabilities 28,214 25,805 32,803 27,926 27,723 Dividends

19. Slide 19: U.S. GAAP Information: Income Statement

    U.S. GAAP INFORMATION INCOME STATEMENT (UNAUDITED) Q1:18 Q2:18 Q3:18 Q4:18 Q1:19 YTD:18 YTD:19 Revenues Investment management fees $100,476 $103,168 $121,713 $111,664 $105,918 $100,476 $105,918 Distribution and service fees 12,607 13,549 13,730 10,829 10,063 12,607 10,063 Administration and sharehol

20. Slide 20: U.S. GAAP Information: Income Statement (Continued)

    U.S. GAAP INFORMATION INCOME STATEMENT (CONTINUED) (UNAUDITED) Q1:18 Q2:18 Q3:18 Q4:18 Q1:19 YTD:18 YTD:19 Other Income (Expense) Realized and unrealized gain (loss) on investments, net $438 $960 ($374) ($6,241) $3,433 $438 $3,433 Realized and unrealized gain (loss) of consolidated 2,259 (1,779) (4,

21. Slide 21: Assets Under Management by Product and Asset Class

    ASSETS UNDER MANAGEMENT BY PRODUCT AND ASSET CLASS 03/31/18 06/30/18 09/30/18 12/31/18 03/31/19 Assets by Product U.S. Retail Funds $42,092.7 $43,322.6 $44,074.3 $36,778.1 $39,587.1 1 Offshore Funds 127.2 115.7 112.2 108.3 126.0 Variable Insurance Funds 982.6 981.0 985.3 823.6 919.5 Total – Open-End

22. Slide 22: Assets Under Management by Investment Category / Product

    ASSETS UNDER MANAGEMENT BY INVESTMENT CATEGORY / PRODUCT AS OF MARCH 31, 2019 (UNAUDITED) Exchange Retail Open-end Closed-end Structured traded separate Institutional Total funds funds products funds accounts Domestic Equity: Large Cap $ 3,591.3 $ 3,797.9 $ - $ 2,372.9 $ 9,212.4 $ - $ 18,974.5 Mid C

23. Slide 23: Assets Under Management by Investment Category

    ASSETS UNDER MANAGEMENT BY INVESTMENT CATEGORY 9/30/2018 12/31/2018 3/31/2019 Ending Assets By Investment Category Domestic Equity: Large Cap $ 19,953.7 $ 16,923.4 $ 18,974.5 Mid Cap 7,617.8 6,706.5 8,067.1 Small Cap 19,823.0 16,223.8 19,000.2 Total Domestic Equity $ 47,394.5 $ 39,853.7 $ 46,041.8 I

24. Slide 24: Asset Flows: Total/Long-Term

    ASSET FLOWS TOTAL/LONG-TERM 03/31/18 06/30/18 09/30/18 12/31/18 03/31/19 YTD:18 YTD:19 Long-term Beginning balance $88,834.5 $87,443.5 $89,833.6 $103,922.8 $90,417.3 $88,834.5 $90,417.3 Inflows 5,431.0 6,643.1 6,261.2 4,438.4 5,501.1 5,431.0 5,501.1 Outflows (6,161.6) (5,353.8) (5,767.8) (9,210.8) (

25. Slide 25: Asset Flows by Product

    ASSET FLOWS BY PRODUCT 03/31/18 06/30/18 09/30/18 12/31/18 03/31/19 YTD:18 YTD:19 U.S. Retail Funds Beginning balance $41,949.9 $42,092.7 $43,322.6 $44,074.3 $36,778.1 $41,949.9 $36,778.1 Inflows 3,754.2 4,335.6 3,791.8 2,873.3 2,969.3 3,754.2 2,969.3 Outflows (3,617.5) (3,157.1) (3,416.3) (6,709.0)

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

    ASSET FLOWS BY PRODUCT (CONTINUED) 03/31/18 06/30/18 09/30/18 12/31/18 03/31/19 YTD:18 YTD:19 Variable Insurance Funds Beginning balance $1,005.4 $982.6 $981.0 $985.3 $823.6 $1,005.4 $823.6 Inflows 10.1 6.9 5.7 4.2 7.2 10.1 7.2 Outflows (37.8) (36.2) (34.1) (27.2) (31.7) (37.8) (31.7) Net Flows (27.

27. Slide 27: Asset Flows by Product (Continued)

    ASSET FLOWS BY PRODUCT (CONTINUED) 03/31/18 06/30/18 09/30/18 12/31/18 03/31/19 YTD:18 YTD:19 Closed-End Funds Beginning balance $6,666.2 $6,132.7 $6,295.0 $6,342.2 $5,956.0 $6,666.2 $5,956.0 Inflows - 0.5 12.9 8.2 11.5 - 11.5 Outflows - - - - - - - Net Flows - 0.5 12.9 8.2 11.5 - 11.5 Market perfor

28. Slide 28: Asset Flows by Product (Continued)

    ASSET FLOWS BY PRODUCT (CONTINUED) 03/31/18 06/30/18 09/30/18 12/31/18 03/31/19 YTD:18 YTD:19 Intermediary Sold Managed Accounts Beginning balance $10,260.7 $10,535.2 $11,062.6 $12,757.4 $11,274.9 $10,260.7 $11,274.9 Inflows 576.3 632.3 771.0 580.5 588.3 576.3 588.3 Outflows (557.4) (499.5) (461.0)

29. Slide 29: Asset Flows by Product (Continued)

    ASSET FLOWS BY PRODUCT (CONTINUED) 03/31/18 06/30/18 09/30/18 12/31/18 03/31/19 YTD:18 YTD:19 Institutional Accounts Beginning balance $20,815.9 $19,411.2 $19,726.6 $30,960.1 $27,445.0 $20,815.9 $27,445.0 Inflows 423.0 1,425.0 1,484.5 810.8 954.7 423.0 954.7 Outflows (1,649.7) (1,465.8) (1,604.8) (1

30. Slide 30: Asset Flows: Open-End Funds by Asset Class

    ASSET FLOWS OPEN-END FUNDS1 BY ASSET CLASS 03/31/18 06/30/18 09/30/18 12/31/18 03/31/19 YTD:18 YTD:19 Domestic Equity Funds Beginning balance $12,023.3 $12,516.4 $14,677.1 $15,979.3 $12,778.0 $12,023.3 $12,778.0 Inflows 1,386.9 2,320.4 2,033.5 922.1 1,071.1 1,386.9 1,071.1 Outflows (1,011.3) (863.2)

31. Slide 31: Asset Flows: Open-End Funds by Asset Class (Continued)

    ASSET FLOWS OPEN-END FUNDS1 BY ASSET CLASS (CONTINUED) 03/31/18 06/30/18 09/30/18 12/31/18 03/31/19 YTD:18 YTD:19 2 Taxable Bond Funds Beginning balance $17,363.0 $17,241.8 $17,044.7 $16,913.7 $14,507.3 $17,363.0 $14,507.3 Inflows 1,418.6 1,197.5 927.6 1,077.5 952.8 1,418.6 952.8 Outflows (1,517.7)

32. Slide 32: Asset Flows: Open-End Funds by Asset Class (Continued)

    ASSET FLOWS OPEN-END FUNDS1 BY ASSET CLASS (CONTINUED) 03/31/18 06/30/18 09/30/18 12/31/18 03/31/19 YTD:18 YTD:19 2 Alternative Funds Beginning balance $1,461.8 $1,290.3 $1,311.1 $1,257.4 $1,030.6 $1,461.8 $1,030.6 Inflows 71.5 74.2 62.5 49.3 75.5 71.5 75.5 Outflows (159.2) (132.4) (132.4) (175.6) (

33. Slide 33: Average Net Management Fees by Product

    INVESTMENT MANAGEMENT FEES AVERAGE NET MANAGEMENT FEES BY PRODUCT (UNAUDITED) Q1:18 Q2:18 Q3:18 Q4:18 Q1:19 YTD:18 YTD:19 1 Average Net Management Fees (in basis points, annualized) U.S. Retail Funds 50.2 51.6 54.1 53.9 54.2 50.2 54.2 Offshore Funds 2 - 33.8 40.7 29.6 23.9 - 23.9 Variable Insurance

34. Slide 34: Average Assets by Product

    INVESTMENT MANAGEMENT FEES AVERAGE ASSETS BY PRODUCT (UNAUDITED) Q1:18 Q2:18 Q3:18 Q4:18 Q1:19 YTD:18 YTD:19 1 Average Assets by Product U.S. Retail Funds $42,607.8 $42,889.1 $44,029.2 $40,596.9 $38,520.9 $42,607.8 $38,520.9 Offshore Funds 2 128.1 118.4 113.9 113.5 119.2 128.1 119.2 Variable Insuran

35. Slide 35: Reconciliation: U.S. GAAP to Non-GAAP Q1 2019

    RECONCILIATION: U.S. GAAP TO NON-GAAP Q1 2019 (UNAUDITED) Reclassifications Adjustments Distribution Acquisition and other Consolidated Amortization Restructuring Seed capital and U.S. GAAP asset-based investment of intangible and and CLO integration Non-GAAP Basis expenses products assets Severance

36. Slide 36: Reconciliation: U.S. GAAP to Non-GAAP Q4 2018

    RECONCILIATION: U.S. GAAP TO NON-GAAP Q4 2018 (UNAUDITED) Reclassifications Adjustments Distribution Acquisition and other Consolidated Amortization Restructuring Seed capital and U.S. GAAP asset-based investment of intangible and and CLO integration Non-GAAP Basis expenses products assets Severance

37. Slide 37: Reconciliation: U.S. GAAP to Non-GAAP Q3 2018

    RECONCILIATION: U.S. GAAP TO NON-GAAP Q3 2018 (UNAUDITED) Reclassifications Adjustments Distribution Acquisition and other Consolidated Amortization Seed capital and U.S. GAAP asset-based investment of intangible and CLO integration Non-GAAP Basis expenses products assets investments related Other B

38. Slide 38: Reconciliation: U.S. GAAP to Non-GAAP Q2 2018

    RECONCILIATION: U.S. GAAP TO NON-GAAP Q2 2018 (UNAUDITED) Reclassifications Adjustments Seed capital Distribution and Acquisition and other Consolidated Amortization integration and U.S. GAAP asset-based investment of intangible related integration Non-GAAP Basis expenses products assets expenses re

39. Slide 39: Reconciliation: U.S. GAAP to Non-GAAP Q1 2018

    RECONCILIATION: U.S. GAAP TO NON-GAAP Q1 2018 (UNAUDITED) Reclassifications Adjustments Distribution Acquisition and other Consolidated Amortization Seed capital and U.S. GAAP asset-based investment of intangible and CLO integration Non-GAAP Basis expenses products assets investments related Other B

40. Slide 40: Reconciliation: U.S. GAAP to Non-GAAP (Unaudited)

    RECONCILIATION: U.S. GAAP TO NON-GAAP (UNAUDITED) Q1:18 Q2:18 Q3:18 Q4:18 Q1:19 YTD:18 YTD:19 Weighted average shares outstanding - diluted Weighted average shares outstanding - diluted, GAAP 8,411 8,401 8,456 7,382 8,322 8,411 8,322 1 Preferred stock - - - 1,047 - - - Weighted average shares outsta

41. Slide 41: 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

42. Slide 42: Footnotes (Unaudited)

    FOOTNOTES (UNAUDITED) Components of Acquisition and Integration Expenses and Other for the respective periods are shown in the table below: Q1:18 Q2:18 Q3:18 Q4:18 Q1:19 YTD:18 YTD:19 Acquisition and Integration Expenses Employment expenses $1,903 $1,208 $1,561 $1,595 $1,433 $1,903 $1,433 Restructur

43. Slide 43: Investment Partners

    INVESTMENT PARTNERS

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