 | News Release |
Virtus Investment Partners Announces Financial Results for the Third Quarter 2018
▪ | EPS of $3.19; EPS, as Adjusted, of $3.64 |
▪ | Total Sales of $6.3B; Positive Net Flows of $0.5B; Long-Term AUM of $103.9B |
Hartford, CT, October 26, 2018 - Virtus Investment Partners, Inc. (NASDAQ: VRTS) today reported financial results for the three months ended September 30, 2018. The results include the majority investment in Sustainable Growth Advisers (SGA) that closed on July 1, 2018.
Financial Highlights (Unaudited)
(in millions, except per share data or as noted)
Three Months Ended | Three Months Ended | ||||||||||||||||
9/30/2018 | 9/30/2017 | Change | 6/30/2018 | Change | |||||||||||||
U.S. GAAP Financial Measures | |||||||||||||||||
Revenues | $ | 152.2 | $ | 123.7 | 23 | % | $ | 132.9 | 15 | % | |||||||
Operating expenses | $ | 118.3 | $ | 106.9 | 11 | % | $ | 105.6 | 12 | % | |||||||
Operating income (loss) | $ | 33.9 | $ | 16.8 | 102 | % | $ | 27.3 | 24 | % | |||||||
Operating margin | 22.3 | % | 13.6 | % | 20.5 | % | |||||||||||
Net income (loss) attributable to common stockholders | $ | 24.9 | $ | 16.7 | 49 | % | $ | 21.0 | 19 | % | |||||||
Earnings (loss) per share - diluted | $ | 3.19 | $ | 2.21 | 44 | % | $ | 2.75 | 16 | % | |||||||
Weighted average shares outstanding - diluted | 8.456 | 8.492 | — | % | 8.401 | 1 | % | ||||||||||
Non-GAAP Financial Measures (1) | |||||||||||||||||
Revenues, as adjusted | $ | 128.5 | $ | 104.2 | 23 | % | $ | 110.6 | 16 | % | |||||||
Operating expenses, as adjusted | $ | 80.3 | $ | 69.1 | 16 | % | $ | 73.0 | 10 | % | |||||||
Operating income (loss), as adjusted | $ | 48.2 | $ | 35.2 | 37 | % | $ | 37.6 | 28 | % | |||||||
Operating margin, as adjusted | 37.5 | % | 33.8 | % | 34.0 | % | |||||||||||
Net income (loss) attributable to common stockholders, as adjusted | $ | 30.7 | $ | 19.5 | 57 | % | $ | 25.0 | 23 | % | |||||||
Earnings (loss) per share - diluted, as adjusted | $ | 3.64 | $ | 2.30 | 58 | % | $ | 2.97 | 23 | % | |||||||
Weighted average shares outstanding - diluted, as adjusted | 8.456 | 8.492 | — | % | 8.401 | 1 | % | ||||||||||
(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. | 100 Pearl Street | Hartford, CT 06103 | www.virtus.com
Virtus Investment Partners, Inc. 2.
Assets Under Management and Asset Flows
(in billions)
Three Months Ended | Three Months Ended | ||||||||||||||||
9/30/2018 | 9/30/2017 | Change | 6/30/2018 | Change | |||||||||||||
Ending long-term assets under management (1) | $ | 103.9 | $ | 87.1 | 19 | % | $ | 89.8 | 16 | % | |||||||
Ending total assets under management | $ | 105.6 | $ | 90.6 | 17 | % | $ | 91.6 | 15 | % | |||||||
Average long-term assets under management (1) | $ | 102.3 | $ | 86.0 | 19 | % | $ | 88.8 | 15 | % | |||||||
Average total assets under management | $ | 104.1 | $ | 89.3 | 17 | % | $ | 90.5 | 15 | % | |||||||
Gross sales | $ | 6.3 | $ | 4.6 | 37 | % | $ | 6.6 | (5 | %) | |||||||
Net flows | $ | 0.5 | $ | 0.2 | 150 | % | $ | 1.3 | (62 | %) | |||||||
(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 16 percent to $103.9 billion at September 30, 2018 from $89.8 billion at June 30, 2018, as a result of the addition of SGA, market appreciation, and positive net flows. Total assets under management at September 30, 2018 were $105.6 billion, including $1.7 billion of assets in liquidity strategies.
Total sales in the third quarter were $6.3 billion compared with $6.6 billion in the second quarter, as higher sales in retail separate accounts and institutional were more than offset by lower open-end fund sales. Retail separate account sales increased 25 percent sequentially to $0.9 billion, primarily attributable to small/mid-cap equity strategies. There was a 4 percent sequential increase in institutional sales to $1.5 billion, which included meaningful new mandates for three affiliates. Mutual fund sales were $3.8 billion, reflecting an annualized sales rate of 34 percent, compared with $4.4 billion in the prior quarter, which included high levels of domestic equity sales. In the third quarter, domestic equity and bank loan strategies continued to generate strong levels of sales, but declined modestly from unusually high levels in the second quarter.
Total net inflows of $0.5 billion included positive net flows from retail separate accounts and open-end funds and compared with net inflows of $1.3 billion in the second quarter. Net flows in retail separate accounts increased to $358.3 million from $161.4 million in the second quarter primarily as a result of higher sales. Mutual fund net flows were positive for the third consecutive quarter at $0.3 billion, compared with $1.1 billion sequentially. Institutional had modest net outflows of ($0.1) billion as sales, which increased by 4 percent to $1.5 billion, were more than offset by $0.8 billion of partial redemptions from existing accounts and $0.8 billion of outflows from 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 $33.9 million from $27.3 million, reflecting a 15 percent increase in total revenues partially offset by a 12 percent increase in operating expenses, both related to the addition of SGA, organic growth of assets under management, and performance-related fees. Third-quarter operating expenses included $4.3 million of acquisition and integration costs compared with $2.0 million in the second quarter, with the increase attributable to professional fees related to the closing of the SGA transaction.
Net income per diluted share of $3.19 included a $0.35 per share benefit from discrete tax adjustments, ($0.37) of acquisition and integration costs, and ($0.49) of realized and unrealized losses on investments. Second 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.
Non-GAAP Results
Revenues, as adjusted, of $128.5 million increased 16 percent from the prior quarter as a result of the addition of SGA, an increase in average assets from market appreciation and positive net flows, and a higher average fee rate. The increase in the fee rate reflected both continued positive flows into domestic equity open-end mutual funds and $3.6 million of performance-related fees. Employment expenses, as adjusted, of $61.7 million increased 15% sequentially due to the addition of SGA and an increase in profit-based variable compensation. Other operating expenses, as adjusted, decreased 5% from the second quarter, which included the annual Board of Director's equity grant and higher sales and marketing costs.
Operating income, as adjusted, and the related margin were $48.2 million and 38 percent, respectively, compared with $37.6 million and 34 percent in the sequential quarter. The sequential-quarter margin expansion reflects higher revenues, the addition of SGA, and lower other operating expenses.
Net income attributable to common stockholders, as adjusted, which is net of the noncontrolling interests related to SGA, was $3.64 per diluted common share, an increase of 23 percent from $2.97 in the prior quarter.
Interest and dividends earned on seed and CLO investments, which are not included in net income, as adjusted, were $3.4 million, or $0.30 on an after-tax per-share basis, compared with $4.6 million or $0.39 per share in the second quarter.
The effective tax rate, as adjusted, was 27 percent, compared with 28 percent in the prior quarter, primarily due to the impact of SGA-related noncontrolling interests.
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 | ||||||||||||||||
9/30/2018 | 9/30/2017 | Change | 6/30/2018 | Change | |||||||||||||
Cash and cash equivalents | $ | 169.0 | $ | 164.9 | 2 | % | $ | 138.8 | 22 | % | |||||||
Debt | $ | 338.9 | $ | 248.5 | 36 | % | $ | 245.1 | 38 | % | |||||||
Redeemable noncontrolling interests | $ | 56.3 | $ | — | N/M | $ | — | N/M | |||||||||
Total equity attributable to stockholders | $ | 643.7 | $ | 584.2 | 10 | % | $ | 624.5 | 3 | % | |||||||
Working capital (1) | $ | 128.2 | $ | 65.0 | 97 | % | $ | 94.3 | 36 | % | |||||||
Net debt (cash) (2) | $ | 182.5 | $ | 146.8 | 24 | % | $ | 119.2 | 53 | % | |||||||
(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 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, at September 30, 2017, contingent consideration, less cash and cash equivalents
N/M - Not Meaningful
Working capital at September 30, 2018 of $128.2 million increased by 36 percent from June 30, 2018, reflecting net cash generated from the business, the impact of the SGA closing, changes in debt outstanding, and return of capital to shareholders.
The company borrowed $105.0 million of term loan debt and utilized existing balance sheet resources to fund its $129.5 million majority investment in SGA. During the quarter, the company repaid $11.6 million of debt. The net leverage ratio, which is net debt to EBITDA (in accordance with the company's credit agreement), was 0.9x at September 30, 2018 compared with 0.7x at June 30, 2018.
The company repurchased approximately 38,200 shares, or 0.5 percent of outstanding common shares, as adjusted, for $5.0 million during the quarter.
In August, the company declared a $0.55 per share common stock dividend, an increase of 22 percent from the previous quarterly rate. The dividend increase is the first since the company initiated a quarterly dividend in May 2014.
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, October 26, 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 for callers in the U.S. and Canada or 253-336-7413 for international callers (Conference ID: 2096767). 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 November 3, 2018 by telephone at 855-859-2056 (U.S. and Canada) or 404-537-3406 (international) (Conference ID: 2096767).
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.
Contact
Joe Fazzino (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 | Nine Months Ended | ||||||||||||||||||||||||||
9/30/2018 | 9/30/2017 | Change | 6/30/2018 | Change | 9/30/2018 | 9/30/2017 | Change | |||||||||||||||||||||
Revenues | ||||||||||||||||||||||||||||
Investment management fees | $ | 121,713 | $ | 97,295 | 25 | % | $ | 103,168 | 18 | % | $ | 325,357 | $ | 230,628 | 41 | % | ||||||||||||
Distribution and service fees | 13,730 | 11,482 | 20 | % | 13,549 | 1 | % | 39,886 | 32,704 | 22 | % | |||||||||||||||||
Administration and transfer agent fees | 16,567 | 14,699 | 13 | % | 15,967 | 4 | % | 48,272 | 33,156 | 46 | % | |||||||||||||||||
Other income and fees | 200 | 199 | 1 | % | 248 | (19 | %) | 655 | 1,095 | (40 | %) | |||||||||||||||||
Total revenues | 152,210 | 123,675 | 23 | % | 132,932 | 15 | % | 414,170 | 297,583 | 39 | % | |||||||||||||||||
Operating Expenses | ||||||||||||||||||||||||||||
Employment expenses | 63,269 | 54,159 | 17 | % | 54,868 | 15 | % | 178,833 | 136,792 | 31 | % | |||||||||||||||||
Distribution and other asset-based expenses | 25,386 | 20,552 | 24 | % | 23,721 | 7 | % | 71,398 | 51,639 | 38 | % | |||||||||||||||||
Other operating expenses | 20,350 | 17,733 | 15 | % | 19,128 | 6 | % | 56,340 | 51,195 | 10 | % | |||||||||||||||||
Operating expenses of consolidated investment products | 529 | 6,757 | (92 | %) | 1,783 | (70 | %) | 2,823 | 7,872 | (64 | %) | |||||||||||||||||
Restructuring and severance | — | 1,584 | (100 | %) | — | N/M | — | 10,478 | (100 | %) | ||||||||||||||||||
Depreciation expense | 1,189 | 1,038 | 15 | % | 1,100 | 8 | % | 3,304 | 2,478 | 33 | % | |||||||||||||||||
Amortization expense | 7,541 | 5,063 | 49 | % | 5,024 | 50 | % | 17,601 | 7,109 | 148 | % | |||||||||||||||||
Total operating expenses | 118,264 | 106,886 | 11 | % | 105,624 | 12 | % | 330,299 | 267,563 | 23 | % | |||||||||||||||||
Operating Income (Loss) | 33,946 | 16,789 | 102 | % | 27,308 | 24 | % | 83,871 | 30,020 | 179 | % | |||||||||||||||||
Other Income (Expense) | ||||||||||||||||||||||||||||
Realized and unrealized gain (loss) on investments, net | (374 | ) | 1,367 | N/M | 960 | N/M | 1,024 | 2,951 | (65 | %) | ||||||||||||||||||
Realized and unrealized gain (loss) of consolidated investment products, net | (4,735 | ) | 13,465 | N/M | (1,779 | ) | 166 | % | (4,255 | ) | 16,485 | N/M | ||||||||||||||||
Other income (expense), net | 549 | 436 | 26 | % | 455 | 21 | % | 2,323 | 1,129 | 106 | % | |||||||||||||||||
Total other income (expense), net | (4,560 | ) | 15,268 | N/M | (364 | ) | N/M | (908 | ) | 20,565 | N/M | |||||||||||||||||
Interest Income (Expense) | ||||||||||||||||||||||||||||
Interest expense | (5,155 | ) | (4,116 | ) | 25 | % | (4,469 | ) | 15 | % | (13,482 | ) | (8,098 | ) | 66 | % | ||||||||||||
Interest and dividend income | 716 | 679 | 5 | % | 1,818 | (61 | %) | 3,255 | 1,313 | 148 | % | |||||||||||||||||
Interest and dividend income of investments of consolidated investment products | 26,596 | 17,778 | 50 | % | 23,679 | 12 | % | 71,678 | 28,536 | 151 | % | |||||||||||||||||
Interest expense of consolidated investment products | (16,959 | ) | (16,249 | ) | 4 | % | (15,278 | ) | 11 | % | (46,786 | ) | (22,101 | ) | 112 | % | ||||||||||||
Total interest income (expense), net | 5,198 | (1,908 | ) | N/M | 5,750 | (10 | %) | 14,665 | (350 | ) | N/M | |||||||||||||||||
Income (Loss) Before Income Taxes | 34,584 | 30,149 | 15 | % | 32,694 | 6 | % | 97,628 | 50,235 | 94 | % | |||||||||||||||||
Income tax expense (benefit) | 6,653 | 9,626 | (31 | %) | 9,465 | (30 | %) | 22,641 | 15,939 | 42 | % | |||||||||||||||||
Net Income (Loss) | 27,931 | 20,523 | 36 | % | 23,229 | 20 | % | 74,987 | 34,296 | 119 | % | |||||||||||||||||
Noncontrolling interests | (933 | ) | (1,731 | ) | (46 | %) | (159 | ) | 487 | % | (1,619 | ) | (2,782 | ) | (42 | %) | ||||||||||||
Net Income (Loss) Attributable to Stockholders | 26,998 | 18,792 | 44 | % | 23,070 | 17 | % | 73,368 | 31,514 | 133 | % | |||||||||||||||||
Preferred stockholder dividends | (2,085 | ) | (2,084 | ) | — | % | (2,084 | ) | — | % | (6,253 | ) | (6,252 | ) | — | % | ||||||||||||
Net Income (Loss) Attributable to Common Stockholders | $ | 24,913 | $ | 16,708 | 49 | % | $ | 20,986 | 19 | % | $ | 67,115 | $ | 25,262 | 166 | % | ||||||||||||
Earnings (Loss) Per Share - Basic | $ | 3.47 | $ | 2.32 | 50 | % | $ | 2.91 | 19 | % | $ | 9.33 | $ | 3.64 | 156 | % | ||||||||||||
Earnings (Loss) Per Share - Diluted | $ | 3.19 | $ | 2.21 | 44 | % | $ | 2.75 | 16 | % | $ | 8.67 | $ | 3.52 | 146 | % | ||||||||||||
Cash Dividends Declared Per Preferred Share | $ | 1.81 | $ | 1.81 | — | % | $ | 1.81 | — | % | $ | 5.44 | $ | 5.44 | — | % | ||||||||||||
Cash Dividends Declared Per Common Share | $ | 0.55 | $ | 0.45 | 22 | % | $ | 0.45 | 22 | % | $ | 1.45 | $ | 1.35 | 7 | % | ||||||||||||
Weighted Average Shares Outstanding - Basic (in thousands) | 7,175 | 7,212 | (1 | %) | 7,211 | — | % | 7,195 | 6,942 | 4 | % | |||||||||||||||||
Weighted Average Shares Outstanding - Diluted (in thousands) | 8,456 | 8,492 | — | % | 8,401 | 1 | % | 8,463 | 7,168 | 18 | % | |||||||||||||||||
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 | |||||||||||||||||||
9/30/2017 | 12/31/2017 | 3/31/2018 | 6/30/2018 | 9/30/2018 | |||||||||||||||
By product (period end): | |||||||||||||||||||
Open-End Funds (1) | $ | 42,397.7 | $ | 43,077.6 | $ | 43,202.5 | $ | 44,419.3 | $ | 45,171.8 | |||||||||
Closed-End Funds | 6,735.4 | 6,666.2 | 6,132.7 | 6,295.0 | 6,342.2 | ||||||||||||||
Exchange Traded Funds | 955.7 | 1,039.2 | 980.2 | 1,029.9 | 983.4 | ||||||||||||||
Retail Separate Accounts | 13,057.2 | 13,936.8 | 14,012.3 | 14,678.4 | 16,817.5 | ||||||||||||||
Institutional Accounts | 20,630.5 | 20,815.9 | 19,411.2 | 19,726.6 | 30,960.1 | ||||||||||||||
Structured Products | 3,360.0 | 3,298.8 | 3,704.6 | 3,684.4 | 3,647.8 | ||||||||||||||
Total Long-Term | $ | 87,136.5 | $ | 88,834.5 | $ | 87,443.5 | $ | 89,833.6 | $ | 103,922.8 | |||||||||
Liquidity (2) | 3,431.4 | 2,128.7 | 1,641.6 | 1,784.9 | 1,675.1 | ||||||||||||||
Total | $ | 90,567.9 | $ | 90,963.2 | $ | 89,085.1 | $ | 91,618.5 | $ | 105,597.9 | |||||||||
By product (average) (3) | |||||||||||||||||||
Open-End Funds (1) | $ | 42,080.9 | $ | 42,840.1 | $ | 43,751.4 | $ | 44,000.8 | $ | 45,137.1 | |||||||||
Closed-End Funds | 6,758.1 | 6,726.0 | 6,346.1 | 6,167.0 | 6,386.7 | ||||||||||||||
Exchange Traded Funds | 945.0 | 958.3 | 1,045.7 | 1,026.8 | 1,035.9 | ||||||||||||||
Retail Separate Accounts | 12,345.5 | 13,051.9 | 13,923.3 | 13,999.0 | 15,536.7 | ||||||||||||||
Institutional Accounts | 20,728.6 | 20,933.1 | 20,165.8 | 19,942.3 | 30,583.4 | ||||||||||||||
Structured Products | 3,111.1 | 3,304.0 | 3,619.1 | 3,681.5 | 3,635.7 | ||||||||||||||
Total Long-Term | $ | 85,969.2 | $ | 87,813.4 | $ | 88,851.4 | $ | 88,817.4 | $ | 102,315.5 | |||||||||
Liquidity (2) | 3,331.1 | 3,635.1 | 1,787.6 | 1,699.3 | 1,750.3 | ||||||||||||||
Total | $ | 89,300.3 | $ | 91,448.5 | $ | 90,639.0 | $ | 90,516.7 | $ | 104,065.8 | |||||||||
By asset class (period end): | |||||||||||||||||||
Equity | $ | 42,722.5 | $ | 45,359.6 | $ | 45,428.3 | $ | 48,404.4 | $ | 62,654.4 | |||||||||
Fixed Income | 39,419.7 | 38,421.2 | 37,766.2 | 36,934.8 | 36,819.9 | ||||||||||||||
Alternatives (4) | 4,994.3 | 5,053.7 | 4,249.0 | 4,494.4 | 4,448.5 | ||||||||||||||
Liquidity (2) | 3,431.4 | 2,128.7 | 1,641.6 | 1,784.9 | 1,675.1 | ||||||||||||||
Total | $ | 90,567.9 | $ | 90,963.2 | $ | 89,085.1 | $ | 91,618.5 | $ | 105,597.9 | |||||||||
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 | ||||||||||||||
9/30/2017 | 12/31/2017 | 3/31/2018 | 6/30/2018 | 9/30/2018 | ||||||||||
All Products | ||||||||||||||
Open-End Funds (1) | 47.9 | 50.1 | 50.3 | 51.8 | 54.3 | |||||||||
Closed-End Funds | 66.0 | 66.0 | 66.3 | 66.1 | 65.9 | |||||||||
Exchange Traded Funds | 27.0 | 15.7 | 18.2 | 14.7 | 13.7 | |||||||||
Retail Separate Accounts | 46.6 | 46.1 | 47.6 | 48.4 | 49.2 | |||||||||
Institutional Accounts (6) | 31.0 | 31.2 | 31.8 | 31.7 | 31.9 | |||||||||
Structured Products (7) | 47.1 | 38.8 | 39.2 | 36.2 | 60.0 | |||||||||
All Long-Term Products (8) | 44.8 | 45.4 | 46.0 | 46.7 | 47.4 | |||||||||
Liquidity (2) | 6.0 | 8.5 | 11.8 | 9.5 | 10.1 | |||||||||
All Products | 43.4 | 43.9 | 45.3 | 46.0 | 46.8 | |||||||||
(1) Represents assets under management of U.S. retail funds, offshore funds and variable insurance funds
(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, mid-stream energy securities and 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 September 30, 2018 for Open-End Funds and All Products by 0.3 and 0.3 basis points, respectively
(6) Includes incentive fees earned in three months ended September 30, 2018 that impacted the fee rate by 1.8 basis points
(7) Includes incentive fees earned in the three months ended September 30, 2017, December 31, 2017, March 31, 2018, June 30, 2018 and September 30, 2018 that impacted the fee rate by 10.2, 1.4, 0.2, 0.1 and 24.6 basis points, respectively
(8) Includes incentive fees earned in the three months ended September 30, 2017, December 31, 2017 and September 30, 2018 that impacted the fee rate by 0.4, 0.1 and 1.4 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 | Nine Months Ended | ||||||||||||||||||||||||||
9/30/2017 | 12/31/2017 | 3/31/2018 | 6/30/2018 | 9/30/2018 | 9/30/2017 | 9/30/2018 | |||||||||||||||||||||
Open-End Funds (1) | |||||||||||||||||||||||||||
Beginning balance | $ | 41,452.8 | $ | 42,397.7 | $ | 43,077.6 | $ | 43,202.5 | $ | 44,419.3 | $ | 23,432.8 | $ | 43,077.6 | |||||||||||||
Inflows | 2,842.5 | 2,647.8 | 3,783.6 | 4,356.6 | 3,807.4 | 7,129.1 | 11,947.6 | ||||||||||||||||||||
Outflows | (2,872.7 | ) | (3,275.0 | ) | (3,662.2 | ) | (3,220.6 | ) | (3,465.1 | ) | (7,286.0 | ) | (10,347.9 | ) | |||||||||||||
Net flows | (30.2 | ) | (627.2 | ) | 121.4 | 1,136.0 | 342.3 | (156.9 | ) | 1,599.7 | |||||||||||||||||
Market performance | 1,040.7 | 1,409.5 | 69.8 | 170.5 | 464.1 | 3,697.5 | 704.4 | ||||||||||||||||||||
Other (2) | (65.6 | ) | (102.4 | ) | (66.3 | ) | (89.7 | ) | (53.9 | ) | 15,424.3 | (209.9 | ) | ||||||||||||||
Ending balance | $ | 42,397.7 | $ | 43,077.6 | $ | 43,202.5 | $ | 44,419.3 | $ | 45,171.8 | $ | 42,397.7 | $ | 45,171.8 | |||||||||||||
Closed-End Funds | |||||||||||||||||||||||||||
Beginning balance | $ | 6,707.2 | $ | 6,735.4 | $ | 6,666.2 | $ | 6,132.7 | $ | 6,295.0 | $ | 6,757.4 | $ | 6,666.2 | |||||||||||||
Inflows | — | — | — | 0.5 | 12.9 | — | 13.4 | ||||||||||||||||||||
Outflows | — | — | — | — | — | (112.8 | ) | — | |||||||||||||||||||
Net flows | — | — | — | 0.5 | 12.9 | (112.8 | ) | 13.4 | |||||||||||||||||||
Market performance | 124.4 | 22.8 | (406.1 | ) | 250.0 | 124.4 | 421.6 | (31.7 | ) | ||||||||||||||||||
Other (2) | (96.2 | ) | (92.0 | ) | (127.4 | ) | (88.2 | ) | (90.1 | ) | (330.8 | ) | (305.7 | ) | |||||||||||||
Ending balance | $ | 6,735.4 | $ | 6,666.2 | $ | 6,132.7 | $ | 6,295.0 | $ | 6,342.2 | $ | 6,735.4 | $ | 6,342.2 | |||||||||||||
Exchange Traded Funds | |||||||||||||||||||||||||||
Beginning balance | $ | 968.8 | $ | 955.7 | $ | 1,039.2 | $ | 980.2 | $ | 1,029.9 | $ | 596.8 | $ | 1,039.2 | |||||||||||||
Inflows | 104.1 | 177.7 | 139.5 | 86.5 | 35.0 | 554.9 | 261.0 | ||||||||||||||||||||
Outflows | (28.9 | ) | (49.4 | ) | (63.2 | ) | (71.7 | ) | (100.4 | ) | (103.2 | ) | (235.3 | ) | |||||||||||||
Net flows | 75.2 | 128.3 | 76.3 | 14.8 | (65.4 | ) | 451.7 | 25.7 | |||||||||||||||||||
Market performance | 4.2 | (8.8 | ) | (77.5 | ) | 65.2 | 50.1 | 30.3 | 37.8 | ||||||||||||||||||
Other (2) | (92.5 | ) | (36.0 | ) | (57.8 | ) | (30.3 | ) | (31.2 | ) | (123.1 | ) | (119.3 | ) | |||||||||||||
Ending balance | $ | 955.7 | $ | 1,039.2 | $ | 980.2 | $ | 1,029.9 | $ | 983.4 | $ | 955.7 | $ | 983.4 | |||||||||||||
Retail Separate Accounts | |||||||||||||||||||||||||||
Beginning balance | $ | 12,351.1 | $ | 13,057.2 | $ | 13,936.8 | $ | 14,012.3 | $ | 14,678.4 | $ | 8,473.5 | $ | 13,936.8 | |||||||||||||
Inflows | 704.4 | 680.5 | 701.3 | 736.7 | 921.4 | 2,049.8 | 2,359.4 | ||||||||||||||||||||
Outflows | (480.1 | ) | (512.5 | ) | (786.5 | ) | (575.3 | ) | (563.1 | ) | (1,233.7 | ) | (1,924.9 | ) | |||||||||||||
Net flows | 224.3 | 168.0 | (85.2 | ) | 161.4 | 358.3 | 816.1 | 434.5 | |||||||||||||||||||
Market performance | 478.3 | 722.4 | 160.7 | 499.7 | 608.7 | 1,273.7 | 1,269.1 | ||||||||||||||||||||
Other (2) | 3.5 | (10.8 | ) | — | 5.0 | 1,172.1 | 2,493.9 | 1,177.1 | |||||||||||||||||||
Ending balance | $ | 13,057.2 | $ | 13,936.8 | $ | 14,012.3 | $ | 14,678.4 | $ | 16,817.5 | $ | 13,057.2 | $ | 16,817.5 | |||||||||||||
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 | Nine Months Ended | ||||||||||||||||||||||||||
9/30/2017 | 12/31/2017 | 3/31/2018 | 6/30/2018 | 9/30/2018 | 9/30/2017 | 9/30/2018 | |||||||||||||||||||||
Institutional Accounts | |||||||||||||||||||||||||||
Beginning balance | $ | 20,639.1 | $ | 20,630.5 | $ | 20,815.9 | $ | 19,411.2 | $ | 19,726.6 | $ | 5,492.7 | $ | 20,815.9 | |||||||||||||
Inflows | 439.9 | 609.7 | 423.0 | 1,425.0 | 1,484.5 | 1,074.7 | 3,332.5 | ||||||||||||||||||||
Outflows | (893.7 | ) | (1,000.4 | ) | (1,649.7 | ) | (1,465.8 | ) | (1,604.8 | ) | (1,697.7 | ) | (4,720.3 | ) | |||||||||||||
Net flows | (453.8 | ) | (390.7 | ) | (1,226.7 | ) | (40.8 | ) | (120.3 | ) | (623.0 | ) | (1,387.8 | ) | |||||||||||||
Market performance | 451.1 | 581.9 | (172.7 | ) | 486.4 | 1,184.8 | 757.5 | 1,498.5 | |||||||||||||||||||
Other (2) | (5.9 | ) | (5.8 | ) | (5.3 | ) | (130.2 | ) | 10,169.0 | 15,003.3 | 10,033.5 | ||||||||||||||||
Ending balance | $ | 20,630.5 | $ | 20,815.9 | $ | 19,411.2 | $ | 19,726.6 | $ | 30,960.1 | $ | 20,630.5 | $ | 30,960.1 | |||||||||||||
Structured Products | |||||||||||||||||||||||||||
Beginning balance | $ | 2,899.8 | $ | 3,360.0 | $ | 3,298.8 | $ | 3,704.6 | $ | 3,684.4 | $ | 613.1 | $ | 3,298.8 | |||||||||||||
Inflows | 474.3 | — | 383.6 | 37.8 | — | 474.3 | 421.4 | ||||||||||||||||||||
Outflows | (55.6 | ) | (49.5 | ) | — | (20.4 | ) | (34.4 | ) | (296.3 | ) | (54.8 | ) | ||||||||||||||
Net flows | 418.7 | (49.5 | ) | 383.6 | 17.4 | (34.4 | ) | 178.0 | 366.6 | ||||||||||||||||||
Market performance | 37.1 | 4.8 | 37.9 | 45.3 | 39.8 | 60.9 | 123.0 | ||||||||||||||||||||
Other (2) | 4.4 | (16.5 | ) | (15.7 | ) | (82.9 | ) | (42.0 | ) | 2,508.0 | (140.6 | ) | |||||||||||||||
Ending balance | $ | 3,360.0 | $ | 3,298.8 | $ | 3,704.6 | $ | 3,684.4 | $ | 3,647.8 | $ | 3,360.0 | $ | 3,647.8 | |||||||||||||
Total Long-Term | |||||||||||||||||||||||||||
Beginning balance | $ | 85,018.8 | $ | 87,136.5 | $ | 88,834.5 | $ | 87,443.5 | $ | 89,833.6 | $ | 45,366.3 | $ | 88,834.5 | |||||||||||||
Inflows | 4,565.2 | 4,115.7 | 5,431.0 | 6,643.1 | 6,261.2 | 11,282.8 | 18,335.3 | ||||||||||||||||||||
Outflows | (4,331.0 | ) | (4,886.8 | ) | (6,161.6 | ) | (5,353.8 | ) | (5,767.8 | ) | (10,729.7 | ) | (17,283.2 | ) | |||||||||||||
Net flows | 234.2 | (771.1 | ) | (730.6 | ) | 1,289.3 | 493.4 | 553.1 | 1,052.1 | ||||||||||||||||||
Market performance | 2,135.8 | 2,732.6 | (387.9 | ) | 1,517.1 | 2,471.9 | 6,241.5 | 3,601.1 | |||||||||||||||||||
Other (2) | (252.3 | ) | (263.5 | ) | (272.5 | ) | (416.3 | ) | 11,123.9 | 34,975.6 | 10,435.1 | ||||||||||||||||
Ending balance | $ | 87,136.5 | $ | 88,834.5 | $ | 87,443.5 | $ | 89,833.6 | $ | 103,922.8 | $ | 87,136.5 | $ | 103,922.8 | |||||||||||||
Liquidity (3) | |||||||||||||||||||||||||||
Beginning balance | $ | 3,570.6 | $ | 3,431.4 | $ | 2,128.7 | $ | 1,641.6 | $ | 1,784.9 | $ | — | $ | 2,128.7 | |||||||||||||
Other (2) | (139.2 | ) | (1,302.7 | ) | (487.1 | ) | 143.3 | (109.8 | ) | 3,431.4 | (453.6 | ) | |||||||||||||||
Ending balance | $ | 3,431.4 | $ | 2,128.7 | $ | 1,641.6 | $ | 1,784.9 | $ | 1,675.1 | $ | 3,431.4 | $ | 1,675.1 | |||||||||||||
Total | |||||||||||||||||||||||||||
Beginning balance | $ | 88,589.4 | $ | 90,567.9 | $ | 90,963.2 | $ | 89,085.1 | $ | 91,618.5 | $ | 45,366.3 | $ | 90,963.2 | |||||||||||||
Inflows | 4,565.2 | 4,115.7 | 5,431.0 | 6,643.1 | 6,261.2 | 11,282.8 | 18,335.3 | ||||||||||||||||||||
Outflows | (4,331.0 | ) | (4,886.8 | ) | (6,161.6 | ) | (5,353.8 | ) | (5,767.8 | ) | (10,729.7 | ) | (17,283.2 | ) | |||||||||||||
Net flows | 234.2 | (771.1 | ) | (730.6 | ) | 1,289.3 | 493.4 | 553.1 | 1,052.1 | ||||||||||||||||||
Market performance | 2,135.8 | 2,732.6 | (387.9 | ) | 1,517.1 | 2,471.9 | 6,241.5 | 3,601.1 | |||||||||||||||||||
Other (2) | (391.5 | ) | (1,566.2 | ) | (759.6 | ) | (273.0 | ) | 11,014.1 | 38,407.0 | 9,981.5 | ||||||||||||||||
Ending balance | $ | 90,567.9 | $ | 90,963.2 | $ | 89,085.1 | $ | 91,618.5 | $ | 105,597.9 | $ | 90,567.9 | $ | 105,597.9 | |||||||||||||
(1) Represents assets under management of U.S. retail funds, offshore funds and variable insurance funds
(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 | |||||||||||
9/30/2018 | 9/30/2017 | 6/30/2018 | |||||||||
Total revenues, GAAP | $ | 152,210 | $ | 123,675 | $ | 132,932 | |||||
Distribution and other asset-based expenses (1) | (25,386 | ) | (20,552 | ) | (23,721 | ) | |||||
Consolidated investment products revenues (2) | 1,682 | 1,121 | 1,423 | ||||||||
Total revenues, as adjusted | $ | 128,506 | $ | 104,244 | $ | 110,634 | |||||
Reconciliation of Total Operating Expenses, GAAP to Operating Expenses, as Adjusted:
Three Months Ended | |||||||||||
9/30/2018 | 9/30/2017 | 6/30/2018 | |||||||||
Total operating expenses, GAAP | $ | 118,264 | $ | 106,886 | $ | 105,624 | |||||
Distribution and other asset-based expenses (1) | (25,386 | ) | (20,552 | ) | (23,721 | ) | |||||
Consolidated investment products expenses (2) | (529 | ) | (6,757 | ) | (1,783 | ) | |||||
Amortization of intangible assets (3) | (7,541 | ) | (5,063 | ) | (5,024 | ) | |||||
Restructuring and severance (4) | — | (137 | ) | — | |||||||
Acquisition and integration expenses (5) | (4,290 | ) | (4,918 | ) | (1,976 | ) | |||||
Other (6) | (228 | ) | (406 | ) | (133 | ) | |||||
Total operating expenses, as adjusted | $ | 80,290 | $ | 69,053 | $ | 72,987 | |||||
Reconciliation of Operating Income (Loss), GAAP to Operating Income (Loss), as Adjusted:
Three Months Ended | |||||||||||
9/30/2018 | 9/30/2017 | 6/30/2018 | |||||||||
Operating income (loss), GAAP | $ | 33,946 | $ | 16,789 | $ | 27,308 | |||||
Consolidated investment products (earnings) loss (2) | 2,211 | 7,878 | 3,206 | ||||||||
Amortization of intangible assets (3) | 7,541 | 5,063 | 5,024 | ||||||||
Restructuring and severance (4) | — | 137 | — | ||||||||
Acquisition and integration expenses (5) | 4,290 | 4,918 | 1,976 | ||||||||
Other (6) | 228 | 406 | 133 | ||||||||
Operating income (loss), as adjusted | $ | 48,216 | $ | 35,191 | $ | 37,647 | |||||
Operating margin, GAAP | 22.3 | % | 13.6 | % | 20.5 | % | |||||
Operating margin, as adjusted | 37.5 | % | 33.8 | % | 34.0 | % | |||||
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 | |||||||||||
9/30/2018 | 9/30/2017 | 6/30/2018 | |||||||||
Net income (loss) attributable to common stockholders, GAAP | $ | 24,913 | $ | 16,708 | $ | 20,986 | |||||
Amortization of intangible assets, net of tax (3) | 4,772 | 3,119 | 3,617 | ||||||||
Restructuring and severance, net of tax (4) | — | 84 | — | ||||||||
Acquisition and integration expenses, net of tax (5) | 3,144 | 3,029 | 1,869 | ||||||||
Other, net of tax (6) | 1,836 | 2,151 | 2,748 | ||||||||
Seed capital and CLO investments (earnings) loss, net of tax (7) | (3,916 | ) | (5,555 | ) | (4,270 | ) | |||||
Net income (loss) attributable to common stockholders, as adjusted | $ | 30,749 | $ | 19,536 | $ | 24,950 | |||||
Weighted average shares outstanding - diluted | 8,456 | 8,492 | 8,401 | ||||||||
Weighted average shares outstanding - diluted, as adjusted | 8,456 | 8,492 | 8,401 | ||||||||
Earnings (loss) per share - diluted, GAAP | $ | 3.19 | $ | 2.21 | $ | 2.75 | |||||
Earnings (loss) per share - diluted, as adjusted | $ | 3.64 | $ | 2.30 | $ | 2.97 | |||||
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 | |||||||||||
9/30/2018 | 9/30/2017 | 6/30/2018 | |||||||||
Income (loss) before taxes, GAAP | $ | 34,584 | $ | 30,149 | $ | 32,694 | |||||
Consolidated investment products (earnings) loss (2) | (146 | ) | (1,731 | ) | (159 | ) | |||||
Amortization of intangible assets (3) | < | ||||||||||