Virtus Investment Partners, Inc. · NYSE:VRTS
Virtus Investment Partners — Q1 2018 Earnings Presentation
40 slides from Virtus Investment Partners's earnings presentation, Apr 27, 2018
Slide 1: First Quarter 2018 Earnings Presentation
First Quarter 2018 Earnings Presentation April 27, 2018 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 Long-term assets under management decreased $1.4 billion, or 1.6%, sequentially to $87.4 billion primarily reflecting net outflows and market depreciation Total sales of $5.4 billion, which included $0.4 billion of inflows from a new CLO, increased $1.3
Slide 6: First Quarter Results
_VIRTUS | INVESTMENT PARTNERS FIRST QUARTER RESULTS
Slide 7: Assets Under Management
ASSETS UNDER MANAGEMENT Quarterly Trends Commentary Long-Term $91.0 Sequential decrease in long-term $88.6 $90.6 $89.1 Liquidity assets of $1.4 billion, or 1.6%, primarily $87.1 $88.8 $87.4 $85.0 due to net outflows and market depreciation $48.0 Change in long-term assets from prior year primari
Slide 8: Asset Flows
ASSET FLOWS Inflows / (Outflows) Year to Date Commentary Net flows Sales increased $1.3 billion, or 32%, $5.4 $5.4 sequentially $4.6 $4.1 $3.3 $3.5 $3.3 Open-ended fund sales increased $1.1 billion, or 43%, reflecting higher sales in domestic equity, international equity and 1 Q1 17 Q2 17 Q3 17
Slide 9: Investment Management Fees, As Adjusted
INVESTMENT MANAGEMENT FEES, AS ADJUSTED Quarterly Results Year to Date Commentary Investment management fees were unchanged sequentially as higher fee rate and average AUM was offset by two fewer days $102.1 $102.0 $102.0 $98.4 Average long-term fee rate increased $74.3 sequentially due to relat
Slide 10: Employment Expenses, As Adjusted
EMPLOYMENT EXPENSES, AS ADJUSTED Quarterly Results Year to Date Commentary Employment expenses, as adjusted, increased sequentially due to seasonally higher employment expenses of: $58.8 $58.8 − $3.9 million of payroll taxes due to $51.9 $52.6 timing of annual incentive $39.6 $40.9 $39.6 payments
Slide 11: Other Operating Expenses, As Adjusted
OTHER OPERATING EXPENSES, AS ADJUSTED Quarterly Results Year to Date Commentary SGA Transaction Costs Decrease of $1.0 million, or 6%, from prior quarter, which included $0.9 million of transaction costs attributable to the $16.7 SGA agreement $16.1 $15.7 $15.7 $14.2 $15.8 Other operating expens
Slide 12: Non-GAAP Results
NON-GAAP RESULTS Quarterly Results Year to Date Commentary Operating Income, As Adjusted Diluted EPS, as adjusted, of $2.59 was relatively unchanged sequentially as Diluted earnings per share, as adjusted seasonally higher employment expenses offset tax savings and increased other income $39.1 − E
Slide 13: Capital Position
CAPITAL POSITION Select Non-GAAP Balance Sheet Items Commentary 3/31/17 6/30/17 9/30/17 12/31/17 03/31/18 Refinanced term loan to reduce interest Cash and cash equivalents $236 $128 $165 $132 $81 rate and increase financial flexibility 1 Seed capital investments $175 $104 $109 $118 $116 Investment
Slide 14: Financial Supplement
_VIRTUS | INVESTMENT PARTNERS Financial Supplement
Slide 15: Non-GAAP Information: Income Statement
NON-GAAP INFORMATION Income Statement1 (Unaudited) Q1:17 Q2:17 Q3:17 Q4:17 Q1:18 YTD:17 YTD:18 Revenues, As Adjusted Investment management fees, as adjusted $59,513 $74,272 $98,402 $102,114 $102,047 $59,513 $102,047 Distribution and service fees, as adjusted 10,793 10,446 11,486 11,623 12,611 10,793
Slide 16: Non-GAAP Information: Income Statement (continued)
NON-GAAP INFORMATION Income Statement1 (continued) (Unaudited) Q1:17 Q2:17 Q3:17 Q4:17 Q1:18 YTD:17 YTD:18 Other Income (Expense), As Adjusted Realized and unrealized gain (loss) on investments, net, as $- $- $- $- ($198) $- ($198) adjusted Other income, net, as adjusted 646 46 436 506 1,319 646 1,3
Slide 17: Non-GAAP Information: Balance Sheet
NON-GAAP INFORMATION Balance Sheet1 (Unaudited) 03/31/17 06/30/17 09/30/17 12/31/17 03/31/18 Assets: Cash and cash equivalents $235,930 $127,571 $164,867 $132,150 $80,765 Investments – seed capital 174,810 104,076 108,511 118,443 115,848 Investments – other 30,714 91,739 92,676 112,105 136,821 Inves
Slide 18: Non-GAAP Information: Balance Sheet (continued)
NON-GAAP INFORMATION Balance Sheet1 (continued) (Unaudited) 03/31/17 06/30/17 09/30/17 12/31/17 03/31/18 Liabilities and Equity Liabilities: Accrued compensation and benefits $16,519 $51,978 $69,833 $86,658 $27,471 Accounts payable and accrued liabilities 30,365 29,167 31,677 29,607 28,214 Dividends
Slide 19: U.S. GAAP Information: Income Statement
U.S. GAAP INFORMATION Income Statement (Unaudited) Q1:17 Q2:17 Q3:17 Q4:17 Q1:18 YTD:17 YTD:18 Revenues Investment management fees $59,271 $74,062 $97,295 $100,447 $100,476 $59,271 $100,476 Distribution and service fees 10,783 10,439 11,482 11,618 12,607 10,783 12,607 Administration and shareholder
Slide 20: U.S. GAAP Information: Income Statement (continued)
U.S. GAAP INFORMATION Income Statement (continued) (Unaudited) Q1:17 Q2:17 Q3:17 Q4:17 Q1:18 YTD:17 YTD:18 Other Income (Expense) Realized and unrealized gain (loss) on investments, net $297 $1,287 $1,367 $22 $438 $297 $438 Realized and unrealized gain (loss) of consolidated 4,444 (1,424) 13,465 (2,
Slide 21: Assets Under Management: Product and Asset Class
ASSETS UNDER MANAGEMENT Assets: Product and Asset Class 03/31/17 06/30/17 09/30/17 12/31/17 03/31/18 Assets by Product Retail Funds $23,710.4 $40,421.0 $41,325.4 $41,949.9 $42,092.7 1 UCITS 57.6 66.6 79.4 122.3 127.2 Variable Insurance Funds 948.8 965.2 992.9 1,005.4 982.6 Total – Open-End Funds $24
Slide 22: Asset Flows: Total/Long-term
ASSETS UNDER MANAGEMENT Asset Flows: Total/Long-term Q1:17 Q2:17 Q3:17 Q4:17 Q1:18 YTD:17 YTD:18 Long-term Beginning balance $45,366.3 $48,019.8 $85,018.8 $87,136.5 $88,834.5 $45,366.3 $88,834.5 Inflows 3,265.3 3,452.3 4,565.2 4,115.7 5,431.0 3,265.3 5,431.0 Outflows (2,745.8) (3,652.9) (4,331.0) (4
Slide 23: Asset Flows: Product
ASSETS UNDER MANAGEMENT Asset Flows: Product Q1:17 Q2:17 Q3:17 Q4:17 Q1:18 YTD:17 YTD:18 Retail Funds Beginning balance $22,452.1 $23,710.4 $40,421.0 $41,325.4 $41,949.9 $22,452.1 $41,949.9 Inflows 2,016.3 2,217.3 2,821.5 2,619.0 3,754.2 2,016.3 3,754.2 Outflows (2,095.0) (2,236.0) (2,836.9) (3,236.
Slide 24: Asset Flows: Product
ASSETS UNDER MANAGEMENT Asset Flows: Product Q1:17 Q2:17 Q3:17 Q4:17 Q1:18 YTD:17 YTD:18 Variable Insurance Funds Beginning balance $931.8 $948.8 $965.2 $992.9 $1,005.4 $931.8 $1,005.4 Inflows 6.8 13.4 7.5 6.9 10.1 6.8 10.1 Outflows (38.1) (40.7) (33.6) (33.4) (37.8) (38.1) (37.8) Net Flows (31.3) (
Slide 25: Asset Flows: Product (continued)
ASSETS UNDER MANAGEMENT Asset Flows: Product (continued) Q1:17 Q2:17 Q3:17 Q4:17 Q1:18 YTD:17 YTD:18 Closed-End Funds Beginning balance $6,757.4 $6,814.3 $6,707.2 $6,735.4 $6,666.2 $6,757.4 $6,666.2 Inflows - - - - - - - Outflows (81.6) (31.2) - - - (81.6) - Net Flows (81.6) (31.2) - - - (81.6) - Ma
Slide 26: Asset Flows: Product (continued)
ASSETS UNDER MANAGEMENT Asset Flows: Product (continued) Q1:17 Q2:17 Q3:17 Q4:17 Q1:18 YTD:17 YTD:18 Intermediary Sold Managed Accounts Beginning balance $5,403.5 $6,035.2 $9,045.2 $9,577.7 $10,260.7 $5,403.5 $10,260.7 Inflows 480.9 500.3 541.5 551.5 576.3 480.9 576.3 Outflows (164.0) (214.0) (409.7
Slide 27: Asset Flows: Product (continued)
ASSETS UNDER MANAGEMENT Asset Flows: Product (continued) Q1:17 Q2:17 Q3:17 Q4:17 Q1:18 YTD:17 YTD:18 Institutional Accounts Beginning balance $5,492.7 $5,711.3 $20,639.1 $20,630.5 $20,815.9 $5,492.7 $20,815.9 Inflows 277.7 357.1 439.9 609.7 423.0 277.7 423.0 Outflows (191.9) (612.1) (893.7) (1,000.4
Slide 28: Asset Flows: Open-End Funds by Asset Class
ASSETS UNDER MANAGEMENT Asset Flows: Open-End Funds1 by Asset Class Q1:17 Q2:17 Q3:17 Q4:17 Q1:18 YTD:17 YTD:18 Domestic Equity Funds Beginning balance $4,335.4 $4,574.5 $11,164.9 $11,513.3 $12,023.3 $4,335.4 $12,023.3 Inflows 375.4 458.5 815.1 764.6 1,386.9 375.4 1,386.9 Outflows (403.2) (469.0) (8
Slide 29: Asset Flows: Open-End Funds by Asset Class (continued)
ASSETS UNDER MANAGEMENT Asset Flows: Open-End Funds1 by Asset Class (continued) Q1:17 Q2:17 Q3:17 Q4:17 Q1:18 YTD:17 YTD:18 2 Taxable Bond Funds Beginning balance $8,918.8 $9,138.2 $17,518.3 $17,754.4 $17,363.0 $8,918.8 $17,363.0 Inflows 725.6 834.2 1,238.8 1,160.1 1,418.6 725.6 1,418.6 Outflows (61
Slide 30: Asset Flows: Open-End Funds by Asset Class (continued)
ASSETS UNDER MANAGEMENT Asset Flows: Open-End Funds1 by Asset Class (continued) Q1:17 Q2:17 Q3:17 Q4:17 Q1:18 YTD:17 YTD:18 2 Alternative Funds Beginning balance $1,682.2 $1,610.3 $1,603.0 $1,536.1 $1,461.8 $1,682.2 $1,461.8 Inflows 133.1 122.4 73.8 65.2 71.5 133.1 71.5 Outflows (212.0) (140.2) (164
Slide 31: Average Net Fees and AUM
ASSETS UNDER MANAGEMENT Average Net Fees and AUM (Unaudited) Q1:17 Q2:17 Q3:17 Q4:17 Q1:18 YTD:17 YTD:18 Average Net Management Fees 1 (in basis points, annualized) Retail Funds 50.2 50.5 47.7 49.8 50.2 50.2 50.2 2 UCITS 10.3 15.4 27.9 - - 10.3 - Variable Insurance Funds 61.2 60.1 59.0 65.8 65.3 61.
Slide 32: Average Net Fees and AUM (continued)
ASSETS UNDER MANAGEMENT Average Net Fees and AUM (continued) (Unaudited) Q1:17 Q2:17 Q3:17 Q4:17 Q1:18 YTD:17 YTD:18 1 Average Assets by Product Retail Funds $23,150.7 $29,625.3 $41,027.9 $41,744.8 $42,607.8 $23,150.7 $42,607.8 2 UCITS 53.8 59.1 72.0 93.0 128.1 53.8 128.1 Variable Insurance Funds 95
Slide 33: U.S. GAAP to Non-GAAP Reconciliation Q1 2018
U.S. GAAP TO NON-GAAP RECONCILIATION Q1 2018 (Unaudited) Reclassifications Adjustments Distribution and Consolidated Amortization Acquisition and U.S. GAAP other asset- investment of intangible Seed capital and integration Non-GAAP Basis based expenses products assets CLO investments expenses Other
Slide 34: U.S. GAAP to Non-GAAP Reconciliation Q4 2017
U.S. GAAP TO NON-GAAP RECONCILIATION Q4 2017 (Unaudited) Reclassifications Adjustments Distribution and Consolidated Amortization Acquisition and U.S. GAAP other asset- investment of intangible Seed capital and integration Non-GAAP Basis based expenses products assets CLO investments expenses Other
Slide 35: U.S. GAAP to Non-GAAP Reconciliation Q3 2017
U.S. GAAP TO NON-GAAP RECONCILIATION Q3 2017 Reclassifications Adjustments (Unaudited) Distribution and Consolidated Amortization Acquisition and U.S. GAAP other asset- investment of intangible Restructuring Seed capital and integration Non-GAAP Basis based expenses products assets and severance CLO
Slide 36: 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 37: U.S. GAAP to Non-GAAP Reconciliation Q1 2017
U.S. GAAP TO NON-GAAP RECONCILIATION Q1 2017 Reclassifications Adjustments Distribution and Consolidated Amortization Acquisition and (Unaudited) U.S. GAAP other asset- investment of intangible Seed capital and integration Non-GAAP Basis based expenses products assets CLO investments expenses Other
Slide 38: 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 39: Footnotes
FOOTNOTES Components of Acquisition and Integration Expenses and Other for the respective periods are shown in the table below: (Unaudited) Q1:17 Q2:17 Q3:17 Q4:17 Q1:18 YTD:17 YTD:18 Acquisition and Integration Expenses Employment expenses $- 2,059 $2,275 $2,009 $1,903 $- $1,903 Restructuring and s
Slide 40: Virtus Investment Partners
VIRTIUS | INVESTMENT PARTNERS
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