Virtus Investment Partners, Inc. · NYSE:VRTS
Virtus Investment Partners — Q3 2017 Earnings Presentation
39 slides from Virtus Investment Partners's earnings presentation, Oct 27, 2017
Slide 1: Third Quarter 2017 Earnings Presentation
Third Quarter 2017 Earnings Presentation October 27, 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 Third Quarter Third Quarter Results Q & A Session 3
Slide 4: Overview of Third Quarter
_VIRTUS | INVESTMENT PARTNERS OVERVIEW OF THIRD QUARTER
Slide 5: Overview of Third Quarter
OVERVIEW OF THIRD QUARTER Assets and Flows Long-term assets under management increased 2.5% sequentially to $87.1 billion reflecting market appreciation and positive flows Total sales of $4.6 billion increased $1.1 billion or 32% from $3.5 billion in the second quarter Net inflows of $0.2 bill
Slide 6: Third Quarter Results
_VIRTUS | INVESTMENT PARTNERS THIRD QUARTER RESULTS
Slide 7: Assets Under Management
ASSETS UNDER MANAGEMENT Quarterly Trends Commentary Long-Term $88.6 $90.6 Sequential increase in long-term AUM Liquidity $87.1 of $2.1 billion, or 2.5%, primarily due to $85.0 market performance Change in long-term AUM from prior $46.5 $45.4 $48.0 year reflects assets from acquisition, $5.6 bill
Slide 8: Asset Flows
ASSET FLOWS Inflows / (Outflows) Commentary Net flows $11.4 $8.3 Sales increased $1.1 billion, or 32%, sequentially due to the higher sales in open- $4.6 $3.3 $3.5 end funds, structured products, institutional $3.1 $2.6 and retail separate accounts Positive net flows of $0.2 billion included: 1
Slide 9: Investment Management Fees, As Adjusted
INVESTMENT MANAGEMENT FEES, AS ADJUSTED Quarterly Results Year to Date Commentary $232.2 Sequential increase of $24.1 million, or $176.4 32%, primarily due to full quarter impact of acquired business $98.4 Open-end fund fee rate of 47.9 bps reflects higher fund expense $74.3 $60.6 $59.3 $59.5 re
Slide 10: Employment Expenses, As Adjusted
EMPLOYMENT EXPENSES, AS ADJUSTED Quarterly Results Year to Date Commentary $132.5 Current quarter includes full-quarter impact from additional employees as a $102.2 result of the acquisition $51.9 Employment expense ratio decreased $39.6 $40.9 sequentially by 230 basis points to 50% $33.1 $33.5
Slide 11: Other Operating Expenses, As Adjusted
OTHER OPERATING EXPENSES, AS ADJUSTED Quarterly Results Year to Date Commentary $41.3 Increased $1.9 million, or 13%, primarily due to a full quarter impact from acquired $33.4 business $16.1 $14.2 Other operating expenses, as adjusted, $11.7 $10.9 $10.9 as a percentage of revenues, as adjusted,
Slide 12: Non-GAAP Results
NON-GAAP RESULTS Quarterly Results Year to Date Commentary Operating Income, As Adjusted $71.4 Diluted EPS, as adjusted, of $2.30 increased 43% sequentially Diluted earnings per share, as adjusted $52.2 Operating income, as adjusted, increased $35.2 55% and 73% compared to prior quarter and prio
Slide 13: Capital Position
CAPITAL POSITION Select Non-GAAP Balance Sheet Items Commentary 9/30/16 12/31/16 3/31/17 6/30/17 9/30/17 Cash and cash equivalents $165 $65 $236 $128 $165 Repurchased 66,244 shares for $7.5 Seed capital investments 1 $179 $180 $175 $104 $109 million, representing 0.8% of outstanding Investments -
Slide 14: Appendix
_VIRTIUS | INVESTMENT PARTNERS Appendix
Slide 15: Non-GAAP Information: Income Statement
NON-GAAP INFORMATION Income Statement1 (Unaudited) Q3:16 Q4:16 Q1:17 Q2:17 Q3:17 YTD:16 YTD:17 Revenues, As Adjusted Investment management fees, as adjusted $60,551 $59,279 $59,513 $74,272 $98,402 176,390 $232,187 Distribution and service fees, as adjusted 12,122 11,500 10,793 10,446 11,486 36,803 3
Slide 16: Non-GAAP Information: Income Statement (continued)
NON-GAAP INFORMATION Income Statement1 (continued) (Unaudited) Q3:16 Q4:16 Q1:17 Q2:17 Q3:17 YTD:16 YTD:17 Other Income (Expense), As Adjusted Realized and unrealized gain (loss) on investments, net, as $51 $1 $0 $0 $0 $140 $0 adjusted Other income, net, as adjusted 250 626 646 46 436 463 1,128 Tota
Slide 17: Non-GAAP Information: Balance Sheet
NON-GAAP INFORMATION Balance Sheet1 (Unaudited) 9/30/16 12/31/16 03/31/17 06/30/17 09/30/17 Assets: Cash and cash equivalents $165,421 $64,588 $235,930 $127,571 $164,867 Investments – seed capital 179,105 180,085 174,810 104,076 108,511 Investments – other 38,385 29,083 30,714 91,739 92,676 Investme
Slide 18: Non-GAAP Information: Balance Sheet (continued)
NON-GAAP INFORMATION Balance Sheet1 (continued) (Unaudited) 9/30/16 12/31/16 03/31/17 06/30/17 09/30/17 Liabilities and Equity Liabilities: Accrued compensation and benefits $37,813 $47,885 $16,519 $51,978 $69,833 Accounts payable and accrued liabilities 21,429 25,176 30,365 29,167 31,677 Dividends
Slide 19: U.S. GAAP Information: Income Statement
U.S. GAAP INFORMATION Income Statement (Unaudited) Q3:16 Q4:16 Q1:17 Q2:17 Q3:17 YTD:16 YTD:17 Revenues Investment management fees $60,398 $58,996 $59,271 $74,062 $97,295 $176,234 $230,628 Distribution and service fees 12,116 11,489 10,783 10,439 11,482 36,761 32,704 Administration and transfer agen
Slide 20: U.S. GAAP Information: Income Statement (continued)
U.S. GAAP INFORMATION Income Statement (continued) (Unaudited) Q3:16 Q4:16 Q1:17 Q2:17 Q3:17 YTD:16 YTD:17 Other Income (Expense) Realized and unrealized gain (loss) on investments, net $961 $1,398 $297 $1,287 $1,367 3,584 $2,951 Realized and unrealized gain (loss) of consolidated 3,680 (7,140) 4,44
Slide 21: Assets Under Management: Product and Asset Class
ASSETS UNDER MANAGEMENT Assets: Product and Asset Class 9/30/16 12/31/16 03/31/17 06/30/17 09/30/17 Assets by Product Open-End Funds 1 $24,302.7 $22,501.0 $23,768.0 $40,487.6 $41,404.8 Variable Insurance Funds 963.7 931.8 948.8 965.2 992.9 Total – Open-End Funds $25,266.4 $23,432.8 $24,716.8 $41,452
Slide 22: Assets Under Management: Asset Flows, Total
ASSETS UNDER MANAGEMENT Asset Flows: Total Q3:16 Q4:16 Q1:17 Q2:17 Q3:17 YTD:16 YTD:17 All Product Flows Beginning balance $45,169.7 $46,539.5 $45,366.3 $48,019.8 $88,589.4 $47,385.3 $45,366.3 Inflows 3,078.0 2,630.8 3,265.3 3,452.3 4,565.2 8,309.2 11,282.8 Outflows (2,593.4) (3,005.9) (2,745.8) (3,
Slide 23: Assets Under Management: Asset Flows, Product
ASSETS UNDER MANAGEMENT Asset Flows: Product Q3:16 Q4:16 Q1:17 Q2:17 Q3:17 YTD:16 YTD:17 1 Open-End Funds Beginning balance $23,854.9 $24,302.7 $22,501.0 $23,768.0 $40,487.6 $27,865.8 $22,501.0 Inflows 1,869.3 1,635.3 2,025.9 2,240.5 2,835.0 5,400.2 7,101.4 Outflows (2,093.5) (2,344.2) (2,096.6) (2,
Slide 24: Asset Flows: Product (continued)
ASSETS UNDER MANAGEMENT Asset Flows: Product (continued) Q3:16 Q4:16 Q1:17 Q2:17 Q3:17 YTD:16 YTD:17 Closed-End Funds Beginning balance $6,959.6 $6,887.3 $6,757.4 $6,814.3 $6,707.2 $6,222.3 $6,757.4 Inflows - - - - - - - Outflows - - (81.6) (31.2) - (103.3) (112.8) Net Flows - - (81.6) (31.2) - (103
Slide 25: Asset Flows: Product (continued)
ASSETS UNDER MANAGEMENT Asset Flows: Product (continued) Q3:16 Q4:16 Q1:17 Q2:17 Q3:17 YTD:16 YTD:17 Intermediary Sold Managed Accounts Beginning balance $4,462.7 $4,888.9 $5,403.5 $6,035.2 $9,045.2 $3,985.7 $5,403.5 Inflows 418.0 348.7 480.9 500.3 541.5 1,051.4 1,522.7 Outflows (102.6) (183.7) (164
Slide 26: Asset Flows: Product (continued)
ASSETS UNDER MANAGEMENT Asset Flows: Product (continued) Q3:16 Q4:16 Q1:17 Q2:17 Q3:17 YTD:16 YTD:17 Institutional Accounts Beginning balance $4,920.0 $5,376.6 $5,492.7 $5,711.3 $20,639.1 $4,799.7 $5,492.7 Inflows 612.5 321.7 277.7 357.1 439.9 1,023.6 1,074.7 Outflows (207.2) (263.5) (191.9) (612.1)
Slide 27: Asset Flows: Open-End Funds by Asset Class
ASSETS UNDER MANAGEMENT Asset Flows: Open-End Funds1 by Asset Class Q3:16 Q4:16 Q1:17 Q2:17 Q3:17 YTD:16 YTD:17 Domestic Equity Funds Beginning balance $4,498.3 $4,459.1 $4,335.4 $4,574.5 $11,164.9 $4,892.3 $4,335.4 Inflows 249.3 257.1 375.4 458.5 815.1 601.5 1,649.0 Outflows (416.3) (454.5) (403.2)
Slide 28: Asset Flows: Open-End Funds by Asset Class (continued)
ASSETS UNDER MANAGEMENT Asset Flows: Open-End Funds1 by Asset Class (continued) Q3:16 Q4:16 Q1:17 Q2:17 Q3:17 YTD:16 YTD:17 2 Taxable Bond Funds Beginning balance $8,946.1 $9,083.1 $8,918.8 $9,138.2 $17,518.3 $9,202.1 $8,918.8 Inflows 482.4 571.4 725.6 834.2 1,238.8 1,434.2 2,798.6 Outflows (502.0)
Slide 29: Average Net Fees and AUM
ASSETS UNDER MANAGEMENT Average Net Fees and AUM (Unaudited) Q3:16 Q4:16 Q1:17 Q2:17 Q3:17 YTD:16 YTD:17 1 Average Net Management Fees (in basis points, annualized) 2 Open-End Funds 49.7 50.0 50.1 50.4 47.7 48.6 49.2 Variable Insurance Funds 61.8 62.4 61.2 60.1 59.0 56.9 60.1 Total Open-End Funds 50
Slide 30: U.S. GAAP to Non-GAAP Reconciliation: Q3 2017
U.S. GAAP TO NON-GAAP RECONCILIATION Reclassifications Adjustments Q3 2017 U.S. GAAP Distribution and other asset- Consolidated investment Amortization of intangible Restructuring Seed capital and Acquisition and integration Non-GAAP (Unaudited) Basis based expenses products assets and severance CLO
Slide 31: U.S. GAAP to Non-GAAP Reconciliation: Q2 2017
U.S. GAAP TO NON-GAAP RECONCILIATION Q2 2017 Reclassifications Adjustments Distribution and Consolidated Amortization Acquisition and (Unaudited) U.S. GAAP other asset- investment of intangible Restructuring Seed capital and integration Non-GAAP Basis based expenses products assets and severance CLO
Slide 32: U.S. GAAP to Non-GAAP Reconciliation: Q1 2017
U.S. GAAP TO NON-GAAP RECONCILIATION Reclassifications Adjustments Q1 2017 Distribution and Consolidated Amortization Acquisition and U.S. GAAP other asset- investment of intangible Seed capital and integration Non-GAAP (Unaudited) Basis based expenses products assets CLO investments expenses Other
Slide 33: U.S. GAAP to Non-GAAP Reconciliation: Q4 2016
U.S. GAAP TO NON-GAAP RECONCILIATION Q4 2016 Reclassifications Distribution and Consolidated Amortization Adjustments Acquisition and U.S. GAAP other asset- investment of intangible Seed capital and integration Non-GAAP (Unaudited) Basis based expenses products assets CLO investments expenses Other
Slide 34: U.S. GAAP to Non-GAAP Reconciliation: Q3 2016
U.S. GAAP TO NON-GAAP RECONCILIATION Q3 2016 Reclassifications Distribution and Consolidated Amortization Adjustments U.S. GAAP other asset- investment of intangible Restructuring Seed capital and Non-GAAP (Unaudited) Basis based expenses products assets and severance CLO investments Other Basis Rev
Slide 35: U.S. GAAP to Non-GAAP Reconciliation: YTD 2017
U.S. GAAP TO NON-GAAP RECONCILIATION Reclassifications Adjustments YTD 2017 Distribution and Consolidated Amortization of Acquisition and U.S. GAAP other asset- investment intangible Restructuring Seed capital and integration Non-GAAP (Unaudited) Basis based expenses products assets and severance CL
Slide 36: U.S. GAAP to Non-GAAP Reconciliation: YTD 2016
U.S. GAAP TO NON-GAAP RECONCILIATION Reclassifications Adjustments YTD 2016 Distribution and Consolidated Amortization U.S. GAAP other asset- investment of intangible Restructuring Seed capital and Non-GAAP (Unaudited) Basis based expenses products assets and severance CLO investments Other Basis Re
Slide 37: Footnotes
FOOTNOTES Non-GAAP financial information differ 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 fro
Slide 38: Footnotes
FOOTNOTES Components of Acquisition and integration expense and Other for the respective periods are shown in the table below: (Unaudited) Q3:16 Q4:16 Q1:17 Q2:17 Q3:17 YTD:16 YTD:17 Acquistion and Integration Expenses Employment expenses $- $- $- $2,059 $2,275 $- $4,334 Restructuring and severance
Slide 39: Virtus Investment Partners
VIRTIUS | INVESTMENT PARTNERS
Virtus Investment Partners — Q3 2017 Earnings Presentation on 6ix