Virtus Investment Partners, Inc. · NYSE:VRTS
Virtus Investment Partners — Q4 2016 Earnings Presentation
39 slides from Virtus Investment Partners's earnings presentation, Jan 25, 2017
Slide 1: Fourth Quarter 2016 Earnings Presentation
Fourth Quarter 2016 Earnings Presentation January 25, 2017 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 Fourth Quarter Fourth Quarter Results Q & A Session 3
Slide 4: Overview of Fourth Quarter
_VIRTUS | INVESTMENT PARTNERS OVERVIEW OF FOURTH QUARTER
Slide 5: Overview of Fourth Quarter
OVERVIEW OF FOURTH QUARTER Assets and Flows Assets under management decreased 3% sequentially to $45.4 billion Total sales of $2.6 billion compared with $3.1 billion in the third quarter Net outflows of $0.4 billion reflect $0.7 billion of mutual fund net outflows partially offset by positive
Slide 6: Fourth Quarter Results
_VIRTUS | INVESTMENT PARTNERS FOURTH QUARTER RESULTS
Slide 7: Assets Under Management
ASSETS UNDER MANAGEMENT Quarterly Trends Commentary Trend reflects impact of net flows and market performance $47.4 Sequential decrease of $1.1 billion, or $45.7 $45.2 $46.5 $45.4 3%, reflects market depreciation of $0.6 billion and net outflows of $0.4 billion Sequential changes by product cate
Slide 8: Asset Flows
ASSET FLOWS Inflows/ (Outflows) Commentary Net flows Flows reflect market trends, product breadth and investment performance $12.7 $10.9 Sales decreased $0.5 billion, or 15%, $3.2 $3.1 sequentially due to lower mutual fund and $2.8 $2.6 $2.4 institutional sales Redemptions increased $0.4 billion
Slide 9: Investment Management Fees, As Adjusted
INVESTMENT MANAGEMENT FEES, AS ADJUSTED Quarterly Results Total Year Commentary Investment management fees reflect changes in average assets and net fee rate $267.2 $235.7 Sequential decrease of $1.3 million, or 2%, due to lower average assets under management $60.9 $60.6 $59.3 $57.7 $58.1 − Avera
Slide 10: Employment Expenses, As Adjusted
EMPLOYMENT EXPENSES, AS ADJUSTED Quarterly Results Total Year Commentary Trend reflects staffing levels and variable incentive plans Employment expenses, as adjusted, $137.1 $135.6 increased $0.4 million from prior quarter primarily due to higher variable $36.0 compensation $34.4 $33.5 $33.1 $33.1
Slide 11: Other Operating Expenses, As Adjusted
OTHER OPERATING EXPENSES, AS ADJUSTED Quarterly Results Total Year Commentary Results reflect timing of product, distribution, and operational initiatives $46.2 $45.1 Increase of $0.8 million, or 7%, sequentially primarily reflects increased $12.0 $12.1 $11.7 sales and marketing and product costs
Slide 12: Non-GAAP Results
NON-GAAP RESULTS Quarterly Results Total Year Commentary Profitability impacted by net flows, market Operating Income, As Adjusted performance and leveragability of the Diluted earnings per share, as adjusted business Diluted EPS, as adjusted, of $1.75 increased 7% from prior quarter primarily $10
Slide 13: Capital Position
CAPITAL POSITION Select Non-GAAP Balance Sheet Items Commentary 12/31/15 3/31/16 6/30/16 9/30/16 12/31/16 Capital position reflects share repurchases Cash and cash equivalents $88 $50 $156 $165 $65 and cash generated from the business 1 Seed capital investments $274 $281 $174 $179 $180 Investments -
Slide 14: Appendix
_VIRTIUS | INVESTMENT PARTNERS Appendix
Slide 15: Non-GAAP Income Statement Information
NON-GAAP INCOME STATEMENT INFORMATION Quarterly Trend and Total Year Q4:15 Q1:16 Q2:16 Q3:16 Q4:16 FY:15 FY:16 Revenues, As Adjusted Investment management fees, as adjusted $60,853 $57,735 $58,104 $60,551 $59,279 $267,168 $235,669 Distribution and service fees, as adjusted 14,272 12,502 12,179 12,12
Slide 16: Non-GAAP Income Statement Information (continued)
NON-GAAP INCOME STATEMENT INFORMATION Quarterly Trend and Total Year (continued) Q4:15 Q1:16 Q2:16 Q3:16 Q4:16 FY:15 FY:16 Other Income (Expense), As Adjusted Realized and unrealized gain (loss) on investments, net, as ($202) ($5) $94 $51 $1 ($21) $141 adjusted Other income, net, as adjusted 75 228
Slide 17: U.S. GAAP Income Statement
U.S. GAAP INCOME STATEMENT Quarterly Trend and Total Year Q4:15 Q1:16 Q2:16 Q3:16 Q4:16 FY:15 FY:16 Revenues Investment management fees $60,611 $57,644 $58,192 $60,398 $58,996 $264,865 $235,230 Distribution and service fees 14,246 12,478 12,167 12,116 11,489 67,066 48,250 Administration and transfer
Slide 18: U.S. GAAP Income Statement (continued)
U.S. GAAP INCOME STATEMENT Quarterly Trend and Total Year (continued) Q4:15 Q1:16 Q2:16 Q3:16 Q4:16 FY:15 FY:16 Other Income (Expense) Realized and unrealized gain (loss) on investments, net $332 ($658) $3,281 $961 $1,398 ($862) $4,982 Realized and unrealized gain (loss) on investments of (4,910) 29
Slide 19: Condensed Non-GAAP Balance Sheet
1 CONDENSED NON-GAAP BALANCE SHEET Quarter-end Trend 12/30/15 3/31/16 6/30/16 9/30/16 12/31/16 Assets: Cash and cash equivalents $87,574 $50,402 $155,532 $165,421 $64,588 Investments – seed capital 273,679 280,929 174,130 179,105 180,085 Investments – other 60,225 51,136 38,362 38,385 29,083 Total c
Slide 20: Condensed Non-GAAP Balance Sheet (continued)
1 CONDENSED NON-GAAP BALANCE SHEET Quarter-end Trend (continued) 12/30/15 3/31/16 6/30/16 9/30/16 12/31/16 Liabilities and Equity Liabilities: Accrued compensation and benefits $49,617 $15,035 $26,242 $37,813 $47,885 Accounts payable and accrued liabilities 23,036 20,563 20,448 21,429 25,176 Dividen
Slide 21: Assets Under Management
ASSETS UNDER MANAGEMENT Quarterly Trend and Total Year Q4:15 Q1:16 Q2:16 Q3:16 Q4:16 FY:15 FY:16 Ending Assets by Product Open-End Funds $27,865.8 $25,560.3 $23,854.9 $24,302.7 $22,501.0 $27,865.8 $22,501.0 Variable Insurance Funds $1,016.3 $975.7 $958.9 $963.7 $931.8 $1,016.3 $931.8 Total – Open-En
Slide 22: Average Net Fees and Assets
AVERAGE NET FEES AND ASSETS Quarterly Trend and Total Year Q4:15 Q1:16 Q2:16 Q3:16 Q4:16 FY:15 FY:16 Average Net Management Fees (1) (In basis points, annualized) Open-End Funds 45.9 47.1 49.2 49.7 50.0 48.1 48.9 Variable Insurance Funds 48.6 53.2 55.4 61.8 62.4 50.0 58.2 Total Open-End Funds 46.0 4
Slide 23: Asset Flow Detail
ASSET FLOW DETAIL Quarterly Trend and Total Year: All Product Flows and AUM By Asset Class Q4:15 Q1:16 Q2:16 Q3:16 Q4:16 FY:15 FY:16 All Product Flows Beginning balance $47,937.7 $47,385.3 $45,651.2 $45,169.7 $46,539.5 $56,702.4 $47,385.3 Inflows 3,164.0 2,841.1 2,390.1 3,078.0 2,630.8 12,689.8 10,9
Slide 24: Asset Flow Detail
ASSET FLOW DETAIL Asset Flows – By Product Q4:15 Q1:16 Q2:16 Q3:16 Q4:16 FY:15 FY:16 Open-End Funds Beginning balance $28,717.1 $27,865.8 $25,560.3 $23,854.9 $24,302.7 $36,292.3 $27,865.8 Inflows 2,540.4 2,186.4 1,344.5 1,869.3 1,635.3 10,009.4 7,035.5 Outflows (3,662.6) (4,748.2) (3,756.9) (2,093.5
Slide 25: Asset Flow Detail
ASSET FLOW DETAIL Asset Flows – By Product (continued) Q4:15 Q1:16 Q2:16 Q3:16 Q4:16 FY:15 FY:16 Closed-End Funds Beginning balance $6,349.8 $6,222.3 $6,543.6 $6,959.6 $6,887.3 $7,581.4 $6,222.3 Inflows - - - - - - - Outflows - - (103.3) - - - (103.3) Net Flows - - (103.3) - - - (103.3) Market perfo
Slide 26: Asset Flow Detail
ASSET FLOW DETAIL Asset Flows – By Product (continued) Q4:15 Q1:16 Q2:16 Q3:16 Q4:16 FY:15 FY:16 Intermediary Sold Managed Accounts Beginning balance $3,853.5 $3,985.7 $4,151.5 $4,462.7 $4,888.9 $4,188.7 $3,985.7 Inflows 193.1 295.9 337.5 418.0 348.7 653.1 1,400.1 Outflows (255.2) (235.0) (148.3) (1
Slide 27: Asset Flow Detail
ASSET FLOW DETAIL Asset Flows – By Product (continued) Q4:15 Q1:16 Q2:16 Q3:16 Q4:16 FY:15 FY:16 Institutional Accounts Beginning balance $4,638.7 $4,799.7 $4,848.3 $4,920.0 $5,376.6 $4,296.5 $4,799.7 Inflows 226.6 186.2 224.9 612.5 321.7 1,008.3 1,345.3 Outflows (181.3) (276.6) (292.0) (207.2) (263
Slide 28: Asset Flow Detail
ASSET FLOW DETAIL Open-End Asset Flows – By Asset Class Q4:15 Q1:16 Q2:16 Q3:16 Q4:16 FY:15 FY:16 Domestic Equity Funds Beginning balance $4,785.3 $4,349.0 $4,213.5 $3,985.1 $3,958.9 $10,389.7 $4,349.0 Inflows 108.0 120.6 227.3 244.1 254.0 690.9 846.0 Outflows (679.6) (576.6) (525.5) (391.9) (430.3)
Slide 29: Asset Flow Detail
ASSET FLOW DETAIL Open-End Asset Flows – By Asset Class (continued) Q4:15 Q1:16 Q2:16 Q3:16 Q4:16 FY:15 FY:16 Taxable Bond Funds Beginning balance $9,446.0 $8,990.8 $8,752.3 $8,736.5 $8,869.9 $10,600.4 $8,990.8 Inflows 536.2 518.6 418.3 473.7 564.6 2,085.0 1,975.2 Outflows (905.1) (843.6) (630.2) (4
Slide 30: U.S. GAAP to Non-GAAP Reconciliation – Q4 2016
U.S. GAAP TO NON-GAAP RECONCILIATION – Q4 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 $ 58,
Slide 31: U.S. GAAP to Non-GAAP Reconciliation – Q3 2016
U.S. GAAP TO NON-GAAP RECONCILIATION – Q3 2016 Reclassifications Adjustments Distribution and Consolidated Amortization U.S. GAAP other asset- investment of intangible Restructuring Seed capital and Non-GAAP Basis based expenses products assets and severance CLO investments Other Basis Revenues Inve
Slide 32: U.S. GAAP to Non-GAAP Reconciliation – Q2 2016
U.S. GAAP TO NON-GAAP RECONCILIATION – Q2 2016 Reclassifications Adjustments Distribution and Consolidated Amortization U.S. GAAP other asset- investment of intangible Restructuring Seed capital and Non-GAAP Basis based expenses products assets and severance CLO investments Other Basis Revenues Inve
Slide 33: 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 34: U.S. GAAP to Non-GAAP Reconciliation – Q4 2015
U.S. GAAP TO NON-GAAP RECONCILIATION – Q4 2015 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 $ 60,
Slide 35: U.S. GAAP to Non-GAAP Reconciliation – Full Year 2016
U.S. GAAP TO NON-GAAP RECONCILIATION – FULL YEAR 2016 Reclassifications Adjustments Distribution and Consolidated Amortization U.S. GAAP other asset- investment of intangible Restructuring Seed capital and Non-GAAP Basis based expenses products assets and severance CLO investments Other Basis Revenu
Slide 36: U.S. GAAP to Non-GAAP Reconciliation – Full Year 2015
U.S. GAAP TO NON-GAAP RECONCILIATION – FULL YEAR 2015 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 fee
Slide 37: 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 38: Footnotes
FOOTNOTES Components of Other for the respective periods are shown in the table below: Q4:15 Q1:16 Q2:16 Q3:16 Q4:16 FY:15 FY:16 Other ($ in thousands) Loss contingency $- $- $- $- $- $16,500 $- Tax impact of loss contingency - - - - - (5,507) - Transition related revenues - - - - - 1,166 - Tax impa
Slide 39: VIRTIUS |
VIRTIUS | INVESTMENT PARTNERS
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