Virtus Investment Partners, Inc. · NYSE:VRTS
Virtus Investment Partners — Q1 2021 Earnings Presentation
44 slides from Virtus Investment Partners's earnings presentation, Apr 28, 2021
Slide 1: First Quarter Earnings Presentation
FIRST QUARTER EARNINGS PRESENTATION April 28, 2021 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 Quarter ■ Results ■ Q & A Session 3
Slide 4: Overview of Quarter
INVESTMENT PARTNERS OVERVIEW OF QUARTER
Slide 5: First Quarter 2021 Overview
FIRST QUARTER 2021 OVERVIEW Assets and Flows ■ Assets under management (AUM) increased 28% sequentially to $168.9 billion due to the addition of the AllianzGI (AGI) assets, market appreciation, and positive net flows ■ Sales of $10.6 billion increased 19% sequentially on higher sales of open-end fun
Slide 6: Results
INVESTMENT PARTNERS RESULTS
Slide 7: Assets Under Management
ASSETS UNDER MANAGEMENT INCREASED DUE TO AGI PARTNERSHIP, MARKET, AND FLOWS $168.9 ■ Total assets increased by $36.7 billion, or 28%, sequentially to $168.9 billion due to: – $29.5 billion addition of AGI assets $132.2 – $4.7 billion of market appreciation $116.5 $108.5 – $2.4 billion of positive ne
Slide 8: Asset Flows
ASSET FLOWS CONSISTENT POSITIVE NET FLOWS ■ Net flows of $2.4 billion, representing $10.6 $10.6 7.5% annualized organic growth $9.4 $8.9 – Retail separate accounts: $1.8 billion $7.9 $7.2 $7.2 – Open-end funds: $0.6 billion – Exchange traded funds: $0.1 billion – Institutional: Modestly positive – P
Slide 9: Investment Management Fees, As Adjusted
INVESTMENT MANAGEMENT FEES, AS ADJUSTED POSITIVE IMPACT FROM HIGHER AVERAGE AUM ■ Investment management fees, as adjusted, increased sequentially by $27.1 $163.9 $163.9 million, or 20%, due to higher average $136.8 AUM $122.4 – Average assets increased 27% $112.3 $112.3 $104.6 – Performance-related
Slide 10: Employment Expenses, As Adjusted
EMPLOYMENT EXPENSES, AS ADJUSTED SEASONALLY HIGHER BUT BENEFITING FROM SCALE ■ Employment expenses, as adjusted, of $90.4 million included $9.4 million of $90.4 $90.4 seasonally higher expenses: – $4.9 million of payroll taxes due to timing $73.5 of annual incentive payments $66.9 $66.1 $66.9 $59.0
Slide 11: Other Operating Expenses, As Adjusted
OTHER OPERATING EXPENSES, AS ADJUSTED CONTINUED LOW LEVEL OF TRAVEL EXPENSES ■ Other operating expenses, as adjusted, of $17.8 million increased $0.7 million, $18.9 $18.9 or 4%, sequentially $17.4 $17.8 $17.8 $17.1 – Increase primarily reflects expenses $16.3 associated with new affiliate ■ Trend of
Slide 12: Non-GAAP Results
NON-GAAP RESULTS CONTINUED STRONG GROWTH IN PROFITABILITY ■ Operating margin, as adjusted, of 41.6% Operating Income, As Adjusted increased 130 bps from the prior quarter Diluted earnings per share, as adjusted and from 31.5% in the prior year period – Excluding seasonal employment expenses, $78.0 $
Slide 13: Capital and Select Balance Sheet
CAPITAL AND SELECT BALANCE SHEET BALANCED CAPITAL MANAGEMENT ■ Working capital of $211 million Select Balance Sheet Items: 3/31/20 6/30/20 9/30/20 12/31/20 3/31/21 increased 23% sequentially due to Cash and cash equivalents $158 $168 $202 $247 $228 cash generation and capital activities Seed capital
Slide 14: Financial Supplement
INVESTMENT PARTNERS FINANCIAL SUPPLEMENT
Slide 15: Non-GAAP Information: Income Statement
NON-GAAP INFORMATION INCOME STATEMENT 1 (UNAUDITED) Q1:20 Q2:20 Q3:20 Q4:20 Q1:21 YTD:20 YTD:21 Revenues, As Adjusted Investment management fees, as adjusted $112,252 $104,569 $122,359 $136,824 $163,935 $112,252 $163,935 Administration and shareholder service fees, as adjusted 14,692 13,340 15,180 1
Slide 16: Non-GAAP Information: Income Statement (Continued)
NON-GAAP INFORMATION INCOME STATEMENT 1 (CONTINUED) (UNAUDITED) Q1:20 Q2:20 Q3:20 Q4:20 Q1:21 YTD:20 YTD:21 Other Income (Expense), As Adjusted Realized and unrealized gain (loss) on investments, net, as adjusted ($883) $348 ($205) $147 ($73) ($883) ($73) Other income, net, as adjusted 612 (805) 999
Slide 17: Non-GAAP Information: Balance Sheet
NON-GAAP INFORMATION BALANCE SHEET 1 (UNAUDITED) 3/31/2020 6/30/2020 9/30/2020 12/31/2020 3/31/2021 Assets: Cash and cash equivalents $158,456 $168,268 $202,212 $246,511 $228,260 Investments – seed capital 90,562 102,802 115,586 135,418 121,690 Investments – other 80,715 61,268 64,267 69,032 66,909
Slide 18: Non-GAAP Information: Balance Sheet (Continued)
NON-GAAP INFORMATION BALANCE SHEET 1 (CONTINUED) (UNAUDITED) 3/31/2020 6/30/2020 9/30/2020 12/31/2020 3/31/2021 Liabilities and Equity Liabilities: Accrued compensation and benefits $36,641 $56,228 $87,256 $122,514 $62,335 Accounts payable and accrued liabilities 23,594 19,528 21,633 25,357 55,153 D
Slide 19: U.S. GAAP Information: Income Statement
U.S. GAAP INFORMATION INCOME STATEMENT (UNAUDITED) Q1:20 Q2:20 Q3:20 Q4:20 Q1:21 YTD:20 YTD:21 Revenues Investment management fees $120,288 $110,550 $129,785 $144,715 $173,269 $120,288 $173,269 Distribution and service fees 9,460 8,889 9,797 10,279 20,348 9,460 20,348 Administration and shareholder
Slide 20: U.S. GAAP Information: Income Statement (Continued)
U.S. GAAP INFORMATION INCOME STATEMENT (CONTINUED) (UNAUDITED) Q1:20 Q2:20 Q3:20 Q4:20 Q1:21 YTD:20 YTD:21 Other Income (Expense) Realized and unrealized gain (loss) on investments, net ($7,544) $7,114 $2,498 $5,071 $891 ($7,544) $891 Realized and unrealized gain (loss) of CIP 1, net (8,669) (6,744)
Slide 21: Assets Under Management by Product and Asset Class
ASSETS UNDER MANAGEMENT BY PRODUCT AND ASSET CLASS 3/31/2020 6/30/2020 9/30/2020 12/31/2020 3/31/2021 Assets by Product U.S. Retail Funds $33,144 $39,520 $42,650 $48,492 $69,730 Offshore Funds 445 686 926 1,173 1,343 Variable Insurance Funds 772 938 998 1,106 1,091 Total – Open-End Funds $34,361 $41
Slide 22: Assets Under Management by Product and Asset Class
ASSETS UNDER MANAGEMENT BY PRODUCT AND ASSET CLASS Open-End Closed-End Exchange Retail Separate Institutional Structured Total as of Funds Funds Traded Funds Accounts Accounts Products 3/31/2021 Equity: Domestic Equity $28,235 $— $73 $28,216 $20,631 $— $77,155 International Equity 11,438 — 6 176 1,3
Slide 23: Asset Flows: Total
ASSET FLOWS TOTAL 3/31/2020 6/30/2020 9/30/2020 12/31/2020 3/31/2021 YTD:20 YTD:21 Total Beginning balance $108,904 $90,694 $108,461 $116,487 $132,194 $108,904 $132,194 Inflows 7,201 9,412 7,874 8,941 10,611 7,201 10,611 Outflows (8,574) (6,649) (6,603) (6,249) (8,178) (8,574) (8,178) Net Flows (1,3
Slide 24: Asset Flows by Product
ASSET FLOWS BY PRODUCT 3/31/2020 6/30/2020 9/30/2020 12/31/2020 3/31/2021 YTD:20 YTD:21 U.S. Retail Funds Beginning balance $42,412 $33,144 $39,520 $42,650 $48,492 $42,412 $48,492 Inflows 3,957 4,552 3,553 4,049 5,652 3,957 5,652 Outflows (5,672) (4,066) (3,189) (3,408) (5,157) (5,672) (5,157) Net F
Slide 25: Asset Flows by Product (Continued)
ASSET FLOWS BY PRODUCT (CONTINUED) 3/31/2020 6/30/2020 9/30/2020 12/31/2020 3/31/2021 YTD:20 YTD:21 Variable Insurance Funds Beginning balance $949 $772 $938 $998 $1,106 $949 $1,106 Inflows 13 8 9 10 10 13 10 Outflows (37) (27) (35) (29) (40) (37) (40) Net Flows (24) (19) (26) (19) (30) (24) (30) Ma
Slide 26: Asset Flows by Product (Continued)
ASSET FLOWS BY PRODUCT (CONTINUED) 3/31/2020 6/30/2020 9/30/2020 12/31/2020 3/31/2021 YTD:20 YTD:21 Closed-End Funds Beginning balance $6,748 $5,343 $5,639 $5,629 $5,914 $6,748 $5,914 Inflows 5 — 15 5 — 5 — Outflows — — — — — — — Net Flows 5 — 15 5 — 5 — Market performance (1,185) 380 54 364 105 (1,
Slide 27: Asset Flows by Product (Continued)
ASSET FLOWS BY PRODUCT (CONTINUED) 3/31/2020 6/30/2020 9/30/2020 12/31/2020 3/31/2021 YTD:20 YTD:21 Intermediary Sold Managed Accounts Beginning balance $15,592 $13,410 $17,116 $19,456 $23,852 $15,592 $23,852 Inflows 907 1,324 1,538 1,990 2,494 907 2,494 Outflows (688) (574) (519) (810) (791) (688)
Slide 28: Asset Flows by Product (Continued)
ASSET FLOWS BY PRODUCT (CONTINUED) 3/31/2020 6/30/2020 9/30/2020 12/31/2020 3/31/2021 YTD:20 YTD:21 Institutional Accounts Beginning balance $32,859 $28,507 $34,819 $36,851 $40,861 $32,859 $40,861 Inflows 1,499 3,141 2,075 2,252 1,884 1,499 1,884 Outflows (1,777) (1,667) (2,381) (1,687) (1,868) (1,7
Slide 29: Asset Flows by Asset Class
ASSET FLOWS BY ASSET CLASS 3/31/2020 6/30/2020 9/30/2020 12/31/2020 3/31/2021 YTD:20 YTD:21 Domestic Equity Beginning balance $44,976 $36,378 $49,234 $53,621 $63,680 $44,976 $63,680 Inflows 2,861 5,614 3,586 4,767 4,896 2,861 4,896 Outflows (2,813) (2,078) (3,303) (3,079) (3,818) (2,813) (3,818) Net
Slide 30: Asset Flows by Asset Class (Continued)
ASSET FLOWS BY ASSET CLASS (CONTINUED) 3/31/2020 6/30/2020 9/30/2020 12/31/2020 3/31/2021 YTD:20 YTD:21 Global Equity Beginning balance $6,422 $5,807 $7,022 $8,299 $9,512 $6,422 $9,512 Inflows 507 268 1,134 731 501 507 501 Outflows (264) (377) (627) (232) (617) (264) (617) Net Flows 243 (109) 507 49
Slide 31: Asset Flows by Asset Class (Continued)
ASSET FLOWS BY ASSET CLASS (CONTINUED) 3/31/2020 6/30/2020 9/30/2020 12/31/2020 3/31/2021 YTD:20 YTD:21 Leveraged Finance Beginning balance $12,289 $10,514 $10,563 $10,529 $10,730 $12,289 $10,730 Inflows 1,019 528 379 466 847 1,019 847 Outflows (1,791) (996) (617) (534) (529) (1,791) (529) Net Flows
Slide 32: Asset Flows by Asset Class (Continued)
ASSET FLOWS BY ASSET CLASS (CONTINUED) 3/31/2020 6/30/2020 9/30/2020 12/31/2020 3/31/2021 YTD:20 YTD:21 Investment Grade Beginning balance $7,891 $7,989 $8,244 $8,778 $8,883 $7,891 $8,883 Inflows 351 605 838 515 427 351 427 Outflows (494) (586) (338) (445) (366) (494) (366) Net Flows (143) 19 500 70
Slide 33: Asset Flows by Asset Class (Continued)
ASSET FLOWS BY ASSET CLASS (CONTINUED) 3/31/2020 6/30/2020 9/30/2020 12/31/2020 3/31/2021 YTD:20 YTD:21 1 Multi-Asset Beginning balance $11,487 $9,708 $10,714 $11,105 $12,201 $11,487 $12,201 Inflows 216 167 218 211 561 216 561 Outflows (167) (188) (130) (132) (329) (167) (329) Net Flows 49 (21) 88 7
Slide 34: Investment Management Fees: Average Assets by Product
INVESTMENT MANAGEMENT FEES AVERAGE ASSETS 1 BY PRODUCT Q1:20 Q2:20 Q3:20 Q4:20 Q1:21 YTD:20 YTD:21 U.S. Retail Funds $40,600 $36,765 $41,773 $45,675 $63,872 $40,600 $63,872 Offshore Funds 481 553 842 1,049 1,265 481 1,265 Variable Insurance Funds 911 864 988 1,058 1,110 911 1,110 Total – Open-End Fu
Slide 35: Average Management Fees Earned by Product (Basis Points)
INVESTMENT MANAGEMENT FEES AVERAGE MANAGEMENT FEES EARNED 1 BY PRODUCT (IN BASIS POINTS) Q1:20 Q2:20 Q3:20 Q4:20 Q1:21 YTD:20 YTD:21 Total Open-End Funds 56.6 56.9 57.9 59.1 54.2 56.6 54.2 Revenue related adjustments (8.1) (7.4) (7.5) (7.3) (6.2) (8.1) (6.2) Total Open-End Funds, Net 48.5 49.5 50.4
Slide 36: Reconciliation: U.S. GAAP to Non-GAAP Q1 2021
RECONCILIATION: U.S. GAAP TO NON-GAAP Q1 2021 (UNAUDITED) Reclassification Other adjustments Consolidated Amortization Seed capital Acquisition U.S. GAAP investment Revenue of intangible and CLO and Non-GAAP Basis products related assets investments integration Other Basis Revenues Investment manage
Slide 37: Reconciliation: U.S. GAAP to Non-GAAP Q4 2020
RECONCILIATION: U.S. GAAP TO NON-GAAP Q4 2020 (UNAUDITED) Reclassification Other adjustments Consolidated Amortization Seed capital Acquisition U.S. GAAP investment Revenue of intangible and CLO and Non-GAAP Basis products related assets investments integration Other Basis Revenues Investment manage
Slide 38: Reconciliation: U.S. GAAP to Non-GAAP Q3 2020
RECONCILIATION: U.S. GAAP TO NON-GAAP Q3 2020 (UNAUDITED) Reclassification Other adjustments Consolidated Amortization Seed capital Acquisition U.S. GAAP investment Revenue Restructuring of intangible and CLO and Non-GAAP Basis products related and Severance assets investments integration Other Basi
Slide 39: Reconciliation: U.S. GAAP to Non-GAAP Q2 2020
RECONCILIATION: U.S. GAAP TO NON-GAAP Q2 2020 (UNAUDITED) Reclassification Other adjustments Consolidated Amortization Seed capital Acquisition U.S. GAAP investment Revenue Restructuring of intangible and CLO and Non-GAAP Basis products related and Severance assets investments integration Other Basi
Slide 40: Reconciliation: U.S. GAAP to Non-GAAP Q1 2020
RECONCILIATION: U.S. GAAP TO NON-GAAP Q1 2020 (UNAUDITED) Reclassification Other adjustments Consolidated Amortization Seed capital Acquisition U.S. GAAP investment Revenue of intangible and CLO and Non-GAAP Basis products related assets investments integration Other Basis Revenues Investment manage
Slide 41: Reconciliation: Weighted Average Shares Outstanding
RECONCILIATION: U.S. GAAP TO NON-GAAP (UNAUDITED) Q1:20 Q2:20 Q3:20 Q4:20 Q1:21 YTD:20 YTD:21 Weighted Average Shares Outstanding - Diluted Weighted Average Shares Outstanding - Diluted, GAAP 7,422 7,895 7,997 8,026 8,052 7,422 8,052 Dilutive impact of restricted stock units and stock options 232 —
Slide 42: 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
Slide 43: Footnotes
FOOTNOTES (UNAUDITED) Components of Acquisition and Integration Expenses and Other for the respective periods are shown in the table below: Q1 2020 Q2 2020 Q3 2020 Q4 2020 Q1 2021 YTD:20 YTD:21 Acquisition and Integration Expenses Employment expenses $(781) $952 $999 $(515) $867 $(781) $867 Other op
Slide 44: Investment Partners
INVESTMENT PARTNERS
Virtus Investment Partners — Q1 2021 Earnings Presentation on 6ix