virtuslogoearningsreleasea05.jpg
News Release
 
 
 
 
 

Virtus Investment Partners Announces Financial Results for the Second Quarter 2018

EPS of $2.75; EPS, as Adjusted, of $2.97
Total Sales of $6.6B; Positive Net Flows of $1.3B; Long-Term AUM of $89.8B

Hartford, CT, July 27, 2018 - Virtus Investment Partners, Inc. (NASDAQ: VRTS) today reported financial results for the three months ended June 30, 2018.

Financial Highlights (Unaudited)
(in millions, except per share data or as noted)
 
Three Months Ended
 
 
 
Three Months Ended
 
 
 
6/30/2018
 
6/30/2017
 
Change
 
3/31/2018
 
Change
 
 
 
 
 
 
 
 
 
 
U.S. GAAP Financial Measures
 
 
 
 
 
 
 
 
 
Revenues
$
132.9

 
$
94.1

 
41
%
 
$
129.0

 
3
%
Operating expenses
$
105.6

 
$
90.9

 
16
%
 
$
106.4

 
(1
%)
Operating income (loss)
$
27.3

 
$
3.2

 
N/M

 
$
22.6

 
21
%
Operating margin
20.5
%
 
3.4
%
 
 
 
17.5
%
 
 
Net income (loss) attributable to common stockholders
$
21.0

 
$
(2.4
)
 
N/M

 
$
21.2

 
(1
%)
Earnings (loss) per share - diluted
$
2.75

 
$
(0.34
)
 
N/M

 
$
2.77

 
(1
%)
Weighted average shares outstanding - diluted
8.401

 
7.064

 
19
%
 
8.411

 
%
 
 
 
 
 
 
 
 
 
 
Non-GAAP Financial Measures (1)
 
 
 
 
 
 
 
 
 
Revenues, as adjusted
$
110.6

 
$
78.6

 
41
%
 
$
108.3

 
2
%
Operating expenses, as adjusted
$
73.0

 
$
55.9

 
31
%
 
$
75.5

 
(3
%)
Operating income (loss), as adjusted
$
37.6

 
$
22.7

 
66
%
 
$
32.8

 
15
%
Operating margin, as adjusted
34.0
%
 
28.8
%
 
 
 
30.3
%
 
 
Net income (loss) attributable to common stockholders, as adjusted
$
25.0

 
$
13.4

 
87
%
 
$
21.8

 
15
%
Earnings (loss) per share - diluted, as adjusted
$
2.97

 
$
1.61

 
84
%
 
$
2.59

 
15
%
Weighted average shares outstanding - diluted, as adjusted
8.401

 
8.311

 
1
%
 
8.411

 
%

(1) See the information beginning on page 11 for reconciliations to the most directly comparable U.S. GAAP measures and other important disclosures
N/M - Not Meaningful

Earnings Summary

The company presents U.S. GAAP and non-GAAP earnings information in this release. Management believes that the non-GAAP financial measures presented reflect the company’s operating results from providing investment management and related services to individuals and institutions and uses these measures to evaluate financial performance. Non-GAAP financial measures have material limitations and should not be viewed in isolation or as a substitute for U.S. GAAP measures. Reconciliations of the non-GAAP financial measures to the most comparable U.S. GAAP measures can be found beginning on page 11 of this earnings release.




Virtus Investment Partners, Inc. 2.


Assets Under Management and Asset Flows
(in billions)
 
Three Months Ended
 
 
 
Three Months Ended
 
 
 
6/30/2018
 
6/30/2017
 
Change

 
3/31/2018
 
Change
Ending long-term assets under management (1)
$
89.8

 
$
85.0

 
6
%
 
$
87.4

 
3
%
Ending total assets under management
$
91.6

 
$
88.6

 
3
%
 
$
89.1

 
3
%
Average long-term assets under management (1)
$
88.8

 
$
60.7

 
46
%
 
$
88.9

 
%
Average total assets under management
$
90.5

 
$
62.0

 
46
%
 
$
90.6

 
%
Gross sales
$
6.6

 
$
3.5

 
89
%
 
$
5.4

 
22
%
Net flows
$
1.3

 
$
(0.2
)
 
N/M

 
$
(0.7
)
 
N/M

 

(1) Excludes assets under management in liquidity strategies, including in certain open-end mutual funds and institutional accounts
N/M - Not Meaningful

Long-term assets under management increased 3 percent to $89.8 billion at June 30, 2018 from $87.4 billion at March 31, 2018, as a result of market appreciation and positive net flows. Total assets under management at June 30, 2018, which included $1.8 billion of assets in liquidity strategies, were $91.6 billion.
Total sales of $6.6 billion increased 22 percent from the first quarter, which included $0.4 billion from a new Collateralized Loan Obligation (CLO), due to higher sales in open-end funds, institutional and retail separate accounts. Mutual fund sales of $4.4 billion increased 15 percent and reflected a strong level of sales in domestic equity and an increase of inflows into bank loans. Institutional sales increased to $1.4 billion from $0.4 billion in the prior quarter, primarily in large-cap value equity.
Total net inflows of $1.3 billion improved from ($0.7) billion in the first quarter, reflecting positive net flows from open-end funds, retail separate accounts and ETFs. Mutual fund net flows were positive $1.1 billion, a significant improvement from $0.1 billion sequentially, due to the higher level of sales as well as a lower level of redemptions. Net flows in retail separate accounts improved to $161.4 million from ($85.2) million in the first quarter, which included a large low-fee redemption in the private client business. Institutional net flows were essentially breakeven as increased sales of $1.4 billion were offset by $0.8 billion of partial redemptions on existing accounts and $0.7 billion of outflows on closed accounts.














Virtus Investment Partners, Inc. | 100 Pearl Street | Hartford, CT 06103 | www.virtus.com


Virtus Investment Partners, Inc. 3.


GAAP Results

Operating income increased sequentially to $27.3 million from $22.6 million, reflecting a 3 percent increase in investment management fees and a 1 percent decrease in operating expenses, as higher other operating expenses partially offset lower employment expenses. Second-quarter operating expenses included $2.6 million of acquisition and integration costs, a decrease from $3.1 million in the first quarter.
Net income per diluted share of $2.75 included ($0.22) of acquisition and integration costs, ($0.07) of discrete tax adjustments, and ($0.04) of realized and unrealized losses on investments. First-quarter net income per diluted share of $2.77 included $0.32 of realized and unrealized gains on investments and ($0.26) of acquisition and integration costs.
The effective tax rate was 29 percent compared with 22 percent in the prior quarter, which included the release of a valuation allowance and certain excess tax benefits.
Non-GAAP Results
Revenues, as adjusted, of $110.6 million increased 2 percent from the prior quarter, primarily as a result of the positive impact of the net flow mix on the average fee rate earned in the quarter. Employment expenses, as adjusted, which included higher sales-based compensation, decreased from the prior quarter, which included $6.8 million of seasonal expenses. Other operating expenses, as adjusted, increased sequentially to $18.2 million, which included higher sales and marketing costs of $1.2 million as well as $0.8 million for the annual equity grants to the Board of Directors.
Operating income, as adjusted, and the related margin were $37.6 million and 34 percent, respectively, compared with $32.8 million and 30 percent in the sequential quarter.
Net income attributable to common stockholders, as adjusted, was $2.97 per diluted common share, an increase of 15 percent from $2.59 in the prior quarter.
Interest and dividends earned on seed and CLO investments, which are not included in net income, as adjusted, were $4.6 million, or $0.39 on an after-tax per-share basis, an increase from $3.4 million or $0.29 in the first quarter.

The effective tax rate, as adjusted, was 28 percent, which was relatively unchanged from the prior quarter.


Virtus Investment Partners, Inc. | 100 Pearl Street | Hartford, CT 06103 | www.virtus.com


Virtus Investment Partners, Inc. 4.


Select Balance Sheet Items (Unaudited)
(in millions)
 
As of
 
 
 
As of
 
 
 
6/30/2018
 
6/30/2017
 
Change
 
3/31/2018
 
Change
Cash and cash equivalents
$
138.8

 
$
127.6

 
9
%
 
$
80.8

 
72
%
Debt
$
245.1

 
$
248.1

 
(1
%)
 
$
245.4

 
%
Total equity attributable to stockholders
$
624.5

 
$
573.6

 
9
%
 
$
608.8

 
3
%
 
 
 
 
 
 
 
 
 
 
Working capital (1)
$
94.3

 
$
46.5

 
103
%
 
$
80.3

 
17
%
Net debt (cash) (2)
$
119.2

 
$
184.1

 
(35
%)
 
$
177.9

 
(33
%)

(1) Defined as cash and cash equivalents plus accounts receivable, net, less accrued compensation and benefits, accounts payable and accrued liabilities, dividends payable, contingent consideration and required principal payments on debt due over the next twelve months including scheduled amortization and an estimate of the excess cash flow payment; the actual excess cash flow payment will be measured based on fiscal year 2018 financial results and the net leverage ratio as of December 31, 2018
(2) Defined as debt plus unamortized deferred financing costs and contingent consideration less cash and cash equivalents
N/M - Not Meaningful

During the quarter, the company repurchased 60,622 shares, or 0.8 percent of outstanding common shares, as adjusted, for $7.5 million.
Working capital at June 30, 2018 increased from March 31, 2018, reflecting the operating earnings of the business and net proceeds from CLO and seed capital activities, partially offset by the estimated required principal payments on the company's term loan over the next 12 months, interest and dividend payments, and share repurchases.
The net leverage ratio, which is net debt to EBITDA (in accordance with the company's credit agreement), was 0.7x at June 30, 2018 compared with 1.0x at March 31, 2018.
Sustainable Growth Advisers
On July 1, the company closed on its previously announced majority investment in Sustainable Growth Advisers, an investment manager with $11.3 billion in assets under management at June 30 that specializes in high-conviction U.S. and global growth equity portfolios. As previously disclosed, the transaction was financed with balance sheet resources and $105.0 million of term loan debt, which was drawn at the closing.








Virtus Investment Partners, Inc. | 100 Pearl Street | Hartford, CT 06103 | www.virtus.com


Virtus Investment Partners, Inc. 5.


Conference Call

Virtus Investment Partners management will host an investor conference call on Friday, July 27, at 10 a.m. Eastern to discuss these financial results and related matters. The webcast of the call can be accessed in the Investor Relations section of www.virtus.com, or by telephone at 877-930-7765 if calling from within the U.S. or 253-336-7413 if calling from outside the U.S. (Conference ID: 4288344). The presentation that will be reviewed as part of the conference call will be available prior to the call in the Investor Relations section of www.virtus.com. A replay of the call will be available through August 4, 2018 by telephone at 855-859-2056 if calling from within the U.S. or 404-537-3406 if calling from outside the U.S. (Conference ID: 4288344).

About Virtus Investment Partners

Virtus Investment Partners (NASDAQ: VRTS) is a distinctive partnership of boutique investment managers singularly committed to the long-term success of individual and institutional investors. Virtus offers access to a variety of investment styles across multiple disciplines to meet a wide array of investor needs, and provides products and services through affiliated managers and select subadvisers, each with a distinct investment style, autonomous investment process and individual brand. Its affiliates include Ceredex Value Advisors, Duff & Phelps Investment Management, Kayne Anderson Rudnick Investment Management, Newfleet Asset Management, Rampart Investment Management, Seix Investment Advisors, Silvant Capital Management, Sustainable Growth Advisers, and Virtus ETF Advisers. Additional information can be found at www.virtus.com.

Contacts
Jeanne Hess, Investor Relations
(860) 263-4730
jeanne.hess@virtus.com 
Joe Fazzino, Media Relations
(860) 263-4725
joe.fazzino@virtus.com





Virtus Investment Partners, Inc. | 100 Pearl Street | Hartford, CT 06103 | www.virtus.com


Virtus Investment Partners, Inc. 6.


U.S. GAAP Condensed Consolidated Statements of Operations (Unaudited)
(in thousands, except per share data)
 
Three Months Ended
 
 
 
Three Months Ended
 
 
 
Six Months Ended
 
 
 
6/30/2018

 
6/30/2017

 
Change
 
3/31/2018
 
Change
 
6/30/2018

 
6/30/2017

 
Change
Revenues
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Investment management fees
$
103,168

 
$
74,062

 
39
%
 
$
100,476

 
3
%
 
$
203,644

 
$
133,333

 
53
%
Distribution and service fees
13,549

 
10,439

 
30
%
 
12,607

 
7
%
 
26,156

 
21,222

 
23
%
Administration and transfer agent fees
15,967

 
9,476

 
68
%
 
15,738

 
1
%
 
31,705

 
18,457

 
72
%
Other income and fees
248

 
155

 
60
%
 
207

 
20
%
 
455

 
896

 
(49
%)
     Total revenues
132,932

 
94,132

 
41
%
 
129,028

 
3
%
 
261,960

 
173,908

 
51
%
Operating Expenses
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Employment expenses
54,868

 
42,992

 
28
%
 
60,696

 
(10
%)
 
115,564

 
82,633

 
40
%
Distribution and other asset-based expenses
23,721

 
15,764

 
50
%
 
22,291

 
6
%
 
46,012

 
31,087

 
48
%
Other operating expenses
19,128

 
20,236

 
(5
%)
 
16,862

 
13
%
 
35,990

 
33,462

 
8
%
Operating expenses of consolidated investment products
1,783

 
473

 
277
%
 
511

 
249
%
 
2,294

 
1,115

 
106
%
Restructuring and severance

 
8,894

 
(100
%)
 

 
N/M

 

 
8,894

 
(100
%)
Depreciation expense
1,100

 
776

 
42
%
 
1,015

 
8
%
 
2,115

 
1,440

 
47
%
Amortization expense
5,024

 
1,813

 
177
%
 
5,036

 
%
 
10,060

 
2,046

 
392
%
     Total operating expenses
105,624

 
90,948

 
16
%
 
106,411

 
(1
%)
 
212,035

 
160,677

 
32
%
Operating Income (Loss)
27,308

 
3,184

 
N/M

 
22,617

 
21
%
 
49,925

 
13,231

 
277
%
Other Income (Expense)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Realized and unrealized gain (loss) on investments, net
960

 
1,287

 
(25
%)
 
438

 
119
%
 
1,398

 
1,584

 
(12
%)
Realized and unrealized gain (loss) of consolidated investment products, net
(1,779
)
 
(1,424
)
 
25
%
 
2,259

 
N/M

 
480

 
3,020

 
(84
%)
Other income (expense), net
455

 
47

 
N/M

 
1,319

 
(66
%)
 
1,774

 
693

 
156
%
     Total other income (expense), net
(364
)
 
(90
)
 
304
%
 
4,016

 
N/M

 
3,652

 
5,297

 
(31
%)
Interest Income (Expense)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest expense
(4,469
)
 
(3,739
)
 
20
%
 
(3,858
)
 
16
%
 
(8,327
)
 
(3,982
)
 
109
%
Interest and dividend income
1,818

 
446

 
308
%
 
721

 
152
%
 
2,539

 
634

 
300
%
Interest and dividend income of investments of consolidated investment products
23,679

 
5,102

 
364
%
 
21,403

 
11
%
 
45,082

 
10,758

 
319
%
Interest expense of consolidated investment products
(15,278
)
 
(2,995
)
 
410
%
 
(14,549
)
 
5
%
 
(29,827
)
 
(5,852
)
 
410
%
     Total interest income (expense), net
5,750

 
(1,186
)
 
N/M

 
3,717

 
55
%
 
9,467

 
1,558

 
N/M

Income (Loss) Before Income Taxes
32,694

 
1,908

 
N/M

 
30,350

 
8
%
 
63,044

 
20,086

 
214
%
Income tax expense (benefit)
9,465

 
1,880

 
403
%
 
6,523

 
45
%
 
15,988

 
6,313

 
153
%
Net Income (Loss)
23,229

 
28

 
N/M

 
23,827

 
(3
%)
 
47,056

 
13,773

 
242
%
Noncontrolling interests
(159
)
 
(333
)
 
(52
%)
 
(527
)
 
(70
%)
 
(686
)
 
(1,051
)
 
(35
%)
Net Income (Loss) Attributable to Stockholders
23,070

 
(305
)
 
N/M

 
23,300

 
(1
%)
 
46,370

 
12,722

 
264
%
Preferred stockholder dividends
(2,084
)
 
(2,084
)
 
%
 
(2,084
)
 
%
 
(4,168
)
 
(4,168
)
 
%
Net Income (Loss) Attributable to Common Stockholders
$
20,986

 
$
(2,389
)
 
N/M

 
$
21,216

 
(1
%)
 
$
42,202

 
$
8,554

 
393
%
Earnings (Loss) Per Share - Basic
$
2.91

 
$
(0.34
)
 
N/M

 
$
2.95

 
(1
%)
 
$
5.86

 
$
1.26

 
365
%
Earnings (Loss) Per Share - Diluted
$
2.75

 
$
(0.34
)
 
N/M

 
$
2.77

 
(1
%)
 
$
5.52

 
$
1.22

 
352
%
Cash Dividends Declared Per Preferred Share
$
1.81

 
$
1.81

 
%
 
$
1.81

 
%
 
$
3.63

 
$
3.63

 
%
Cash Dividends Declared Per Common Share
$
0.45

 
$
0.45

 
%
 
$
0.45

 
%
 
$
0.90

 
$
0.90

 
%
Weighted Average Shares Outstanding - Basic (in thousands)
7,211

 
7,064

 
2
%
 
7,198

 
%
 
7,204

 
6,804

 
6
%
Weighted Average Shares Outstanding - Diluted (in thousands)
8,401

 
7,064

 
19
%
 
8,411

 
%
 
8,396

 
7,020

 
20
%

N/M - Not Meaningful


Virtus Investment Partners, Inc. | 100 Pearl Street | Hartford, CT 06103 | www.virtus.com


Virtus Investment Partners, Inc. 7.


Assets Under Management - Product and Asset Class
(in millions)
 
Three Months Ended
 
6/30/2017
 
09/30/2017
 
12/31/2017
 
3/31/2018
 
6/30/2018
By product (period end):
 
 
 
 
 
 
 
 
 
Open-End Funds (1)
$
41,452.8

 
$
42,397.7

 
$
43,077.6

 
$
43,202.5

 
$
44,419.3

Closed-End Funds
6,707.2

 
6,735.4

 
6,666.2

 
6,132.7

 
6,295.0

Exchange Traded Funds
968.8

 
955.7

 
1,039.2

 
980.2

 
1,029.9

Retail Separate Accounts
12,351.1

 
13,057.2

 
13,936.8

 
14,012.3

 
14,678.4

Institutional Accounts
20,639.1

 
20,630.5

 
20,815.9

 
19,411.2

 
19,726.6

Structured Products
2,899.8

 
3,360.0

 
3,298.8

 
3,704.6

 
3,684.4

Total Long-Term
$
85,018.8

 
$
87,136.5

 
$
88,834.5

 
$
87,443.5

 
$
89,833.6

Liquidity (2)
3,570.6

 
3,431.4

 
2,128.7

 
1,641.6

 
1,784.9

Total
$
88,589.4

 
$
90,567.9

 
$
90,963.2

 
$
89,085.1

 
$
91,618.5

 
 
 
 
 
 
 
 
 
 
By product (average) (3)
 
 
 
 
 
 
 
 
 
Open-End Funds (1)
$
30,651.6

 
$
42,080.9

 
$
42,840.1

 
$
43,751.4

 
$
44,000.8

Closed-End Funds
6,809.6

 
6,758.1

 
6,726.0

 
6,346.1

 
6,167.0

Exchange Traded Funds
900.8

 
945.0

 
958.3

 
1,045.7

 
1,026.8

Retail Separate Accounts
10,143.7

 
12,345.5

 
13,051.9

 
13,923.3

 
13,999.0

Institutional Accounts
10,795.1

 
20,728.6

 
20,933.1

 
20,165.8

 
19,942.3

Structured Products
1,392.9

 
3,111.1

 
3,304.0

 
3,619.1

 
3,681.5

Total Long-Term
$
60,693.7

 
$
85,969.2

 
$
87,813.4

 
$
88,851.4

 
$
88,817.4

Liquidity (2)
1,328.6

 
3,331.1

 
3,635.1

 
1,787.6

 
1,699.3

Total
$
62,022.3

 
$
89,300.3

 
$
91,448.5

 
$
90,639.0

 
$
90,516.7

 
 
 
 
 
 
 
 
 
 
By asset class (period end):
 
 
 
 
 
 
 
 
 
Equity
$
41,672.6

 
$
43,147.9

 
$
45,779.8

 
$
45,892.8

 
$
48,894.8

Fixed Income
39,102.1

 
39,741.7

 
38,740.0

 
37,999.2

 
37,176.0

Alternatives (4)
4,244.1

 
4,246.9

 
4,314.7

 
3,551.5

 
3,762.8

Liquidity (2)
3,570.6

 
3,431.4

 
2,128.7

 
1,641.6

 
1,784.9

Total
$
88,589.4

 
$
90,567.9

 
$
90,963.2

 
$
89,085.1

 
$
91,618.5

















Virtus Investment Partners, Inc. | 100 Pearl Street | Hartford, CT 06103 | www.virtus.com


Virtus Investment Partners, Inc. 8.


Assets Under Management - Average Net Management Fees Earned (5)
(in basis points)

Three Months Ended

6/30/2017
 
9/30/2017
 
12/31/2017
 
3/31/2018

6/30/2018
All Products
 
 
 
 
 
 
 
 
 
Open-End Funds (1)
50.7


47.9


50.1


50.3


51.8

Closed-End Funds
65.8


66.0


66.0


66.3


66.1

Exchange Traded Funds
27.2


27.0


15.7


18.2


14.7

Retail Separate Accounts
49.7


46.6


46.1


47.6


48.4

Institutional Accounts
32.7

 
31.0

 
31.2

 
31.8

 
31.7

Structured Products (6)
33.5


47.1


38.8


39.2


36.2

All Long-Term Products
48.3


44.8


45.4


46.0


46.7

Liquidity (2)
11.4

 
6.0

 
8.5

 
11.8

 
9.5

All Products
47.5

 
43.4

 
43.9

 
45.3

 
46.0



(1) Represents assets under management of U.S. 1940 Act mutual funds and Undertakings for Collective Investments in Transferable Securities (UCITS)
(2) Represents assets under management in liquidity strategies, including in certain open-end funds and institutional accounts
(3) Averages are calculated as follows:
- Funds - average daily or weekly balances
- Retail Separate Accounts - prior-quarter ending balance or average of month-end balances in quarter
- Institutional Accounts and Structured Products - average of month-end balances in quarter
(4) Consists of real estate securities, master-limited partnerships, options strategies and other
(5) Represents net investment management fees divided by average assets. Net investment management fees are investment management fees, as adjusted, less fees paid to third-party service providers for investment management related services, which impacted the fee rate in the three months ended June 30, 2018 for Open-End Funds and All Products by 0.4 and 0.3 basis points, respectively
(6) Includes incentive fees earned in the three months ended September 30, 2017, December 31, 2017, March 31, 2018, and June 30, 2018 that impacted the fee rate by 10.2, 1.4, 0.2 and 0.1 basis points, respectively


Virtus Investment Partners, Inc. | 100 Pearl Street | Hartford, CT 06103 | www.virtus.com


Virtus Investment Partners, Inc. 9.


Assets Under Management - Asset Flows by Product
(in millions)
 
Three Months Ended
 
Six Months Ended
 
6/30/2017
 
9/30/2017
 
12/31/2017
 
3/31/2018
 
6/30/2018
 
6/30/2017
 
6/30/2018
Open-End Funds (1)
 
 
 
 
 
 
 
 
 
 
 
 
 
Beginning balance
$
24,716.8

 
$
41,452.8

 
$
42,397.7

 
$
43,077.6

 
$
43,202.5

 
$
23,432.8

 
$
43,077.6

Inflows
2,253.9

 
2,842.5

 
2,647.8

 
3,783.6

 
4,356.6

 
4,286.6

 
8,140.2

Outflows
(2,278.6
)
 
(2,872.7
)
 
(3,275.0
)
 
(3,662.2
)
 
(3,220.6
)
 
(4,413.3
)
 
(6,882.8
)
Net flows
(24.7
)
 
(30.2
)
 
(627.2
)
 
121.4

 
1,136.0

 
(126.7
)
 
1,257.4

Market performance
1,212.3

 
1,040.7

 
1,409.5

 
69.8

 
170.5

 
2,656.8

 
240.3

Other (2)
15,548.4

 
(65.6
)
 
(102.4
)
 
(66.3
)
 
(89.7
)
 
15,489.9

 
(156.0
)
Ending balance
$
41,452.8

 
$
42,397.7

 
$
43,077.6

 
$
43,202.5

 
$
44,419.3

 
$
41,452.8

 
$
44,419.3

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Closed-End Funds
 
 
 
 
 
 
 
 
 
 
 
 
 
Beginning balance
$
6,814.3

 
$
6,707.2

 
$
6,735.4

 
$
6,666.2

 
$
6,132.7

 
$
6,757.4

 
$
6,666.2

Inflows

 

 

 

 
0.5

 

 
0.5

Outflows
(31.2
)
 

 

 

 

 
(112.8
)
 

Net flows
(31.2
)
 

 

 

 
0.5

 
(112.8
)
 
0.5

Market performance
16.4

 
124.4

 
22.8

 
(406.1
)
 
250.0

 
297.2

 
(156.1
)
Other (2)
(92.3
)
 
(96.2
)
 
(92.0
)
 
(127.4
)
 
(88.2
)
 
(234.6
)
 
(215.6
)
Ending balance
$
6,707.2

 
$
6,735.4

 
$
6,666.2

 
$
6,132.7

 
$
6,295.0

 
$
6,707.2

 
$
6,295.0

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Exchange Traded Funds
 
 
 
 
 
 
 
 
 
 
 
 
 
Beginning balance
$
863.3

 
$
968.8

 
$
955.7

 
$
1,039.2

 
$
980.2

 
$
596.8

 
$
1,039.2

Inflows
185.1

 
104.1

 
177.7

 
139.5

 
86.5

 
450.8

 
226.0

Outflows
(51.3
)
 
(28.9
)
 
(49.4
)
 
(63.2
)
 
(71.7
)
 
(74.3
)
 
(134.9
)
Net flows
133.8

 
75.2

 
128.3

 
76.3

 
14.8

 
376.5

 
91.1

Market performance
(8.5
)
 
4.2

 
(8.8
)
 
(77.5
)
 
65.2

 
26.1

 
(12.3
)
Other (2)
(19.8
)
 
(92.5
)
 
(36.0
)
 
(57.8
)
 
(30.3
)
 
(30.6
)
 
(88.1
)
Ending balance
$
968.8

 
$
955.7

 
$
1,039.2

 
$
980.2

 
$
1,029.9

 
$
968.8

 
$
1,029.9

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Retail Separate Accounts
 
 
 
 
 
 
 
 
 
 
 
 
 
Beginning balance
$
9,312.1

 
$
12,351.1

 
$
13,057.2

 
$
13,936.8

 
$
14,012.3

 
$
8,473.5

 
$
13,936.8

Inflows
656.2

 
704.4

 
680.5

 
701.3

 
736.7

 
1,345.4

 
1,438.0

Outflows
(455.7
)
 
(480.1
)
 
(512.5
)
 
(786.5
)
 
(575.3
)
 
(753.6
)
 
(1,361.8
)
Net flows
200.5

 
224.3

 
168.0

 
(85.2
)
 
161.4

 
591.8

 
76.2

Market performance
341.6

 
478.3

 
722.4

 
160.7

 
499.7

 
795.4

 
660.4

Other (2)
2,496.9

 
3.5

 
(10.8
)
 

 
5.0

 
2,490.4

 
5.0

Ending balance
$
12,351.1

 
$
13,057.2

 
$
13,936.8

 
$
14,012.3

 
$
14,678.4

 
$
12,351.1

 
$
14,678.4
























Virtus Investment Partners, Inc. | 100 Pearl Street | Hartford, CT 06103 | www.virtus.com


Virtus Investment Partners, Inc. 10.


Assets Under Management - Asset Flows by Product (continued)
(in millions)
 
Three Months Ended
 
Six Months Ended
 
6/30/2017
 
9/30/2017
 
12/31/2017
 
3/31/2018
 
6/30/2018
 
6/30/2017
 
6/30/2018
Institutional Accounts
 
 
 
 
 
 
 
 
 
 
 
 
 
Beginning balance
$
5,711.3

 
$
20,639.1

 
$
20,630.5

 
$
20,815.9

 
$
19,411.2

 
$
5,492.7

 
$
20,815.9

Inflows
357.1

 
439.9

 
609.7

 
423.0

 
1,425.0

 
634.8

 
1,848.0

Outflows
(612.1
)
 
(893.7
)
 
(1,000.4
)
 
(1,649.7
)
 
(1,465.8
)
 
(804.0
)
 
(3,115.5
)
Net flows
(255.0
)
 
(453.8
)
 
(390.7
)
 
(1,226.7
)
 
(40.8
)
 
(169.2
)
 
(1,267.5
)
Market performance
168.1

 
451.1

 
581.9

 
(172.7
)
 
486.4

 
306.4

 
313.7

Other (2)
15,014.7

 
(5.9
)
 
(5.8
)
 
(5.3
)
 
(130.2
)
 
15,009.2

 
(135.5
)
Ending balance
$
20,639.1

 
$
20,630.5

 
$
20,815.9

 
$
19,411.2

 
$
19,726.6

 
$
20,639.1

 
$
19,726.6

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Structured Products
 
 
 
 
 
 
 
 
 
 
 
 
 
Beginning balance
$
602.0

 
$
2,899.8

 
$
3,360.0

 
$
3,298.8

 
$
3,704.6

 
$
613.1

 
$
3,298.8

Inflows

 
474.3

 

 
383.6

 
37.8

 

 
421.4

Outflows
(224.0
)
 
(55.6
)
 
(49.5
)
 

 
(20.4
)
 
(240.7
)
 
(20.4
)
Net flows
(224.0
)
 
418.7

 
(49.5
)
 
383.6

 
17.4

 
(240.7
)
 
401.0

Market performance
13.5

 
37.1

 
4.8

 
37.9

 
45.3

 
23.8

 
83.2

Other (2)
2,508.3

 
4.4

 
(16.5
)
 
(15.7
)
 
(82.9
)
 
2,503.6

 
(98.6
)
Ending balance
$
2,899.8

 
$
3,360.0

 
$
3,298.8

 
$
3,704.6

 
$
3,684.4

 
$
2,899.8

 
$
3,684.4

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total Long-Term
 
 
 
 
 
 
 
 
 
 
 
 
 
Beginning balance
$
48,019.8

 
$
85,018.8

 
$
87,136.5

 
$
88,834.5

 
$
87,443.5

 
$
45,366.3

 
$
88,834.5

Inflows
3,452.3

 
4,565.2

 
4,115.7

 
5,431.0

 
6,643.1

 
6,717.6

 
12,074.1

Outflows
(3,652.9
)
 
(4,331.0
)
 
(4,886.8
)
 
(6,161.6
)
 
(5,353.8
)
 
(6,398.7
)
 
(11,515.4
)
Net flows
(200.6
)
 
234.2

 
(771.1
)
 
(730.6
)
 
1,289.3

 
318.9

 
558.7

Market performance
1,743.4

 
2,135.8

 
2,732.6

 
(387.9
)
 
1,517.1

 
4,105.7

 
1,129.2

Other (2)
35,456.2

 
(252.3
)
 
(263.5
)
 
(272.5
)
 
(416.3
)
 
35,227.9

 
(688.8
)
Ending balance
$
85,018.8

 
$
87,136.5

 
$
88,834.5

 
$
87,443.5

 
$
89,833.6

 
$
85,018.8

 
$
89,833.6

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Liquidity (3)
 
 
 
 
 
 
 
 
 
 
 
 
 
Beginning balance
$

 
$
3,570.6

 
$
3,431.4

 
$
2,128.7

 
$
1,641.6

 
$

 
$
2,128.7

Other (2)
3,570.6

 
(139.2
)
 
(1,302.7
)
 
(487.1
)
 
143.3

 
3,570.6

 
(343.8
)
Ending balance
$
3,570.6

 
$
3,431.4

 
$
2,128.7

 
$
1,641.6

 
$
1,784.9

 
$
3,570.6

 
$
1,784.9

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total
 
 
 
 
 
 
 
 
 
 
 
 
 
Beginning balance
$
48,019.8

 
$
88,589.4

 
$
90,567.9

 
$
90,963.2

 
$
89,085.1

 
$
45,366.3

 
$
90,963.2

Inflows
3,452.3

 
4,565.2

 
4,115.7

 
5,431.0

 
6,643.1

 
6,717.6

 
12,074.1

Outflows
(3,652.9
)
 
(4,331.0
)
 
(4,886.8
)
 
(6,161.6
)
 
(5,353.8
)
 
(6,398.7
)
 
(11,515.4
)
Net flows
(200.6
)
 
234.2

 
(771.1
)
 
(730.6
)
 
1,289.3

 
318.9

 
558.7

Market performance
1,743.4

 
2,135.8

 
2,732.6

 
(387.9
)
 
1,517.1

 
4,105.7

 
1,129.2

Other (2)
39,026.8

 
(391.5
)
 
(1,566.2
)
 
(759.6
)
 
(273.0
)
 
38,798.5

 
(1,032.6
)
Ending balance
$
88,589.4

 
$
90,567.9

 
$
90,963.2

 
$
89,085.1

 
$
91,618.5

 
$
88,589.4

 
$
91,618.5


(1) Represents assets under management of U.S. 1940 Act mutual funds and Undertakings for Collective Investment in Transferable Securities (UCITS)
(2) Represents open-end and closed-end fund distributions net of reinvestments, the net change in assets from liquidity strategies, and the impact on net flows from non-sales related activities such as asset acquisitions/(dispositions), seed capital investments/(withdrawals), structured products reset transactions, and the use of leverage
(3) Represents assets under management in liquidity strategies, including in certain open-end funds and institutional accounts



Virtus Investment Partners, Inc. | 100 Pearl Street | Hartford, CT 06103 | www.virtus.com


Virtus Investment Partners, Inc. 11.


Non-GAAP Information and Reconciliations
(in thousands except per share data)

The following are reconciliations and related notes of the most comparable U.S. GAAP measure to each non-GAAP measure.

The non-GAAP financial measures included in this release 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 exclusion of certain expenses and other items that are not reflective of the earnings generated from providing investment management and related services. Non-GAAP financial measures have material limitations and should not be viewed in isolation or as a substitute for U.S. GAAP measures.

Reconciliation of Total Revenues, GAAP to Total Revenues, as Adjusted:
 
Three Months Ended
 
6/30/2018
 
6/30/2017
 
3/31/2018
Total revenues, GAAP
$
132,932

 
$
94,132

 
$
129,028

Distribution and other asset-based expenses (1)
(23,721
)
 
(15,764
)
 
(22,291
)
Consolidated investment products revenues (2)
1,423

 
236

 
1,576

Total revenues, as adjusted
$
110,634

 
$
78,604

 
$
108,313


Reconciliation of Total Operating Expenses, GAAP to Operating Expenses, as Adjusted:
 
Three Months Ended
 
6/30/2018
 
6/30/2017
 
3/31/2018
Total operating expenses, GAAP
$
105,624

 
$
90,948

 
$
106,411

Distribution and other asset-based expenses (1)
(23,721
)
 
(15,764
)
 
(22,291
)
Consolidated investment products expenses (2)
(1,783
)
 
(473
)
 
(511
)
Amortization of intangible assets (3)
(5,024
)
 
(1,813
)
 
(5,036
)
Restructuring and severance (4)

 
(255
)
 

Acquisition and integration expenses (5)
(1,976
)
 
(16,327
)
 
(3,092
)
Other (6)
(133
)
 
(374
)
 
20

Total operating expenses, as adjusted
$
72,987

 
$
55,942

 
$
75,501


Reconciliation of Operating Income (Loss), GAAP to Operating Income (Loss), as Adjusted:
 
Three Months Ended
 
6/30/2018
 
6/30/2017
 
3/31/2018
Operating income (loss), GAAP
$
27,308

 
$
3,184

 
$
22,617

Consolidated investment products (earnings) loss (2)
3,206

 
709

 
2,087

Amortization of intangible assets (3)
5,024

 
1,813

 
5,036

Restructuring and severance (4)

 
255

 

Acquisition and integration expenses (5)
1,976

 
16,327

 
3,092

Other (6)
133

 
374

 
(20
)
Operating income (loss), as adjusted
$
37,647

 
$
22,662

 
$
32,812

 
 
 
 
 
 
Operating margin, GAAP
20.5
%
 
3.4
%
 
17.5
%
Operating margin, as adjusted
34.0
%
 
28.8
%
 
30.3
%




Virtus Investment Partners, Inc. | 100 Pearl Street | Hartford, CT 06103 | www.virtus.com


Virtus Investment Partners, Inc. 12.


Reconciliation of Net Income (Loss) Attributable to Common Stockholders, GAAP to Net Income (Loss) Attributable to Common Stockholders, as Adjusted:
 
Three Months Ended
 
6/30/2018
 
6/30/2017
 
3/31/2018
Net income (loss) attributable to common stockholders, GAAP
$
20,986

 
$
(2,389
)
 
$
21,216

Amortization of intangible assets, net of tax (3)
3,617

 
1,124

 
3,626

Restructuring and severance, net of tax (4)

 
158

 

Acquisition and integration expenses, net of tax (5)
1,869

 
11,540

 
2,255

Other, net of tax (6)
2,748

 
3,779

 
1,176

Seed capital and CLO investments (earnings) loss, net of tax (7)
(4,270
)
 
(859
)
 
(6,447
)
Net income (loss) attributable to common stockholders, as adjusted
$
24,950

 
$
13,353

 
$
21,826

 
 
 
 
 
 
Weighted average shares outstanding - diluted
8,401

 
7,064

 
8,411

Preferred stockA

 
1,045

 

Restricted stock units

 
202

 

Weighted average shares outstanding - diluted, as adjusted
8,401

 
8,311

 
8,411

 
 
 
 
 
 
Earnings (loss) per share - diluted, GAAP
$
2.75

 
$
(0.34
)
 
$
2.77

Earnings (loss) per share - diluted, as adjusted
$
2.97

 
$
1.61

 
$
2.59

A Assumes conversion of preferred shares to common shares at the 20-day volume-weighted average common stock price as of period end, subject to a conversion price range of $110 to $132 per share, resulting in a conversion ratio range of 0.9091 to 0.7576

Reconciliation of Income (Loss) Before Taxes, GAAP to Income (Loss) Before Taxes, as Adjusted:
 
Three Months Ended
 
6/30/2018
 
6/30/2017
 
3/31/2018
Income (loss) before taxes, GAAP
$
32,694

 
$
1,908

 
$
30,350

Consolidated investment products (earnings) loss (2)
(159
)
 
(333
)
 
(527
)
Amortization of intangible assets (3)
5,024

 
1,813

 
5,036

Restructuring and severance (4)

 
255

 

Acquisition and integration expenses (5)
2,596

 
18,613

 
3,132

Other (6)
133

 
374

 
(20
)
Seed capital and CLO investments (earnings) loss (7)
(5,630
)
 
(1,096
)
 
(7,588