HARTFORD, Conn., Oct. 26, 2018 /PRNewswire/ -- 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.
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.
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.
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.
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 Presentations 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.
The company provides investment management products and services
through its affiliated managers and select subadvisers, each with a
distinct investment style, autonomous investment process, and
individual brand. Virtus Investment Partners offers access to a
variety of investment styles across multiple disciplines to meet a
wide array of investor needs. 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 is available at virtus.com.
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%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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
|
|
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
|
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
|
|
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
|
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%
|
|
|
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
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
AAssumes
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)
|
7,541
|
|
|
5,063
|
|
|
5,024
|
|
Restructuring and
severance (4)
|
—
|
|
|
137
|
|
|
—
|
|
Acquisition and
integration expenses (5)
|
4,290
|
|
|
4,918
|
|
|
2,596
|
|
Other (6)
|
228
|
|
|
406
|
|
|
133
|
|
Seed capital and CLO
investments (earnings) loss (7)
|
(2,439)
|
|
|
(7,233)
|
|
|
(5,630)
|
|
Income (loss) before
taxes, as adjusted
|
$
|
44,058
|
|
|
$
|
31,709
|
|
|
$
|
34,658
|
|
|
Reconciliation of
Income Tax Expense (Benefit), GAAP to Income Tax Expense (Benefit),
as Adjusted:
|
|
|
|
Three Months
Ended
|
|
9/30/2018
|
|
9/30/2017
|
|
6/30/2018
|
Income tax expense
(benefit), GAAP
|
$
|
6,653
|
|
|
$
|
9,626
|
|
|
$
|
9,465
|
|
Tax impact of
amortization of intangible assets (3)
|
2,014
|
|
|
1,944
|
|
|
1,407
|
|
Tax impact of
restructuring and severance (4)
|
—
|
|
|
53
|
|
|
—
|
|
Tax impact of
acquisition and integration expenses (5)
|
1,146
|
|
|
1,889
|
|
|
727
|
|
Tax impact of other
(6)
|
477
|
|
|
339
|
|
|
(531)
|
|
Tax impact of seed
capital and CLO investments (earnings) loss (7)
|
1,477
|
|
|
(1,678)
|
|
|
(1,360)
|
|
Income tax expense
(benefit), as adjusted
|
$
|
11,767
|
|
|
$
|
12,173
|
|
|
$
|
9,708
|
|
|
|
|
|
|
|
Effective tax rate,
GAAPA
|
19.2%
|
|
|
31.9%
|
|
|
29.0%
|
|
Effective tax rate,
as adjusted
|
26.7%
|
|
|
38.4%
|
|
|
28.0%
|
|
|
|
|
|
|
|
|
|
|
A Reflects
income tax expense (benefit), GAAP, divided by income (loss) before
taxes, GAAP
|
B Reflects
income tax expense (benefit), as adjusted, divided by income (loss)
before taxes, as adjusted
|
|
Reconciliation of
Investment Management Fees, GAAP to Investment Management Fees, as
Adjusted:
|
|
|
Three Months
Ended
|
|
9/30/2018
|
|
9/30/2017
|
|
6/30/2018
|
Investment management
fees, GAAP
|
$
|
121,713
|
|
|
$
|
97,295
|
|
|
$
|
103,168
|
|
Consolidated
investment products fees (2)
|
1,666
|
|
|
1,107
|
|
|
1,391
|
|
Investment management
fees, as adjusted
|
$
|
123,379
|
|
|
$
|
98,402
|
|
|
$
|
104,559
|
|
|
Reconciliation of
Administration and Transfer Agent Fees, GAAP to Administration and
Transfer Agent Fees, as
Adjusted:
|
|
|
|
Three Months
Ended
|
|
9/30/2018
|
|
9/30/2017
|
|
6/30/2018
|
Administration and
transfer agent fees, GAAP
|
$
|
16,567
|
|
|
$
|
14,699
|
|
|
$
|
15,967
|
|
Consolidated
investment products fees (2)
|
12
|
|
|
10
|
|
|
28
|
|
Administration and
transfer agent fees, as adjusted
|
$
|
16,579
|
|
|
$
|
14,709
|
|
|
$
|
15,995
|
|
|
Reconciliation of
Employment Expenses, GAAP to Employment Expenses, as
Adjusted:
|
|
|
|
Three Months
Ended
|
|
9/30/2018
|
|
9/30/2017
|
|
6/30/2018
|
Employment expenses,
GAAP
|
$
|
63,269
|
|
|
$
|
54,159
|
|
|
$
|
54,868
|
|
Acquisition and
integration expenses (5)
|
(1,561)
|
|
|
(2,275)
|
|
|
(1,208)
|
|
Employment expenses,
as adjusted
|
$
|
61,708
|
|
|
$
|
51,884
|
|
|
$
|
53,660
|
|
|
Reconciliation of
Restructuring and Severance, GAAP to Restructuring and Severance,
as Adjusted:
|
|
|
|
Three Months
Ended
|
|
9/30/2018
|
|
9/30/2017
|
|
6/30/2018
|
Restructuring and
severance, GAAP
|
$
|
—
|
|
|
$
|
1,584
|
|
|
$
|
—
|
|
Restructuring and
severance (4)
|
—
|
|
|
(137)
|
|
|
—
|
|
Acquisition and
integration expenses (5)
|
—
|
|
|
(1,447)
|
|
|
—
|
|
Restructuring and
severance, as adjusted
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
Reconciliation of
Other Operating Expenses, GAAP to Other Operating Expenses, as
Adjusted:
|
|
|
|
Three Months
Ended
|
|
9/30/2018
|
|
9/30/2017
|
|
6/30/2018
|
Other operating
expenses, GAAP
|
$
|
20,350
|
|
|
$
|
17,733
|
|
|
$
|
19,128
|
|
Acquisition and
integration expenses (5)
|
(2,729)
|
|
|
(1,196)
|
|
|
(768)
|
|
Other (6)
|
(228)
|
|
|
(406)
|
|
|
(133)
|
|
Other operating
expenses, as adjusted
|
$
|
17,393
|
|
|
$
|
16,131
|
|
|
$
|
18,227
|
|
|
Reconciliation of
Total Other Income (Expense), Net, GAAP to Total Other Income
(Expense), Net, as Adjusted:
|
|
|
|
Three Months
Ended
|
|
9/30/2018
|
|
9/30/2017
|
|
6/30/2018
|
Total other income
(expense), net GAAP
|
$
|
(4,560)
|
|
|
$
|
15,268
|
|
|
$
|
(364)
|
|
Consolidated
investment products total other (income) expense, net
(2)
|
4,148
|
|
|
(11,552)
|
|
|
2,001
|
|
Seed capital and CLO
investments total other (income) expense, net (7)
|
971
|
|
|
(3,280)
|
|
|
(1,045)
|
|
Total other income
(expense), net as adjusted
|
$
|
559
|
|
|
$
|
436
|
|
|
$
|
592
|
|
|
Reconciliation of
Interest Expense, GAAP to Interest Expense, as Adjusted:
|
|
|
Three Months
Ended
|
|
9/30/2018
|
|
9/30/2017
|
|
6/30/2018
|
Interest expense,
GAAP
|
$
|
(5,155)
|
|
|
$
|
(4,116)
|
|
|
$
|
(4,469)
|
|
Acquisition and
integration expenses (5)
|
—
|
|
|
—
|
|
|
620
|
|
Interest expense, as
adjusted
|
$
|
(5,155)
|
|
|
$
|
(4,116)
|
|
|
$
|
(3,849)
|
|
|
Reconciliation of
Total Noncontrolling Interests, GAAP to Total Noncontrolling
Interests, as Adjusted:
|
|
|
|
Three Months
Ended
|
|
9/30/2018
|
|
9/30/2017
|
|
6/30/2018
|
Total noncontrolling
interests, GAAP
|
$
|
(933)
|
|
|
$
|
(1,731)
|
|
|
$
|
(159)
|
|
Consolidated
investment products (2)
|
146
|
|
|
1,731
|
|
|
159
|
|
Amortization of
intangible assets (3)
|
(755)
|
|
|
—
|
|
|
—
|
|
Total noncontrolling
interests, as adjusted
|
$
|
(1,542)
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Notes to
Reconciliations:
|
|
|
1.
|
Distribution and
other asset-based expenses - Primarily payments to distribution
partners for providing services to investors in our sponsored funds
and payments to third-party service providers for investment
management-related services. Management believes that making this
adjustment aids in comparing the company's operating results with
other asset management firms that do not utilize intermediary
distribution partners or third-party service providers.
|
|
|
|
2.
|
Consolidated
investment products - Revenues and expenses generated by operating
activities of mutual funds and CLOs that are consolidated in the
financial statements. Management believes that excluding these
operating activities to reflect net revenues and expenses of the
company prior to the consolidation of these products is consistent
with the approach of reflecting its operating results from managing
third-party client assets.
|
|
|
|
3.
|
Amortization of
intangible assets - Non-cash amortization expense or impairment
expense, if any, attributable to acquisition-related intangible
assets, including any portion that is allocated to noncontrolling
interests. Management believes that making this adjustment aids in
comparing the company's operating results with other asset
management firms that have not engaged in acquisitions.
|
|
|
|
4.
|
Restructuring and
severance - Certain expenses associated with restructuring the
business, including lease abandonment-related expenses and
severance costs associated with staff reductions, that are not
reflective of the ongoing earnings generation of the business.
Management believes that making this adjustment aids in comparing
the company's operating results with prior periods.
|
|
|
|
5.
|
Acquisition and
integration expenses - Expenses that are directly related to
acquisition and integration activities. Acquisition expenses
include transaction closing costs, certain professional fees, and
financing fees. Integration expenses include costs incurred that
are directly attributable to combining businesses, including
compensation, restructuring and severance charges, professional
fees, consulting fees, and other expenses. Management believes that
making these adjustments aids in comparing the company's operating
results with other asset management firms that have not engaged in
acquisitions.
|
|
|
|
Components of
Acquisition and Integration Expenses for the respective periods are
shown below:
|
|
|
|
|
|
Three Months
Ended
|
|
Acquisition and
Integration Expenses
|
9/30/2018
|
|
9/30/2017
|
|
6/30/2018
|
|
Employment
expenses
|
$
|
1,561
|
|
|
$
|
2,275
|
|
|
$
|
1,208
|
|
|
Restructuring and
severance
|
—
|
|
|
1,447
|
|
|
—
|
|
|
Other operating
expenses
|
2,729
|
|
|
1,196
|
|
|
768
|
|
|
Interest
expense
|
—
|
|
|
—
|
|
|
620
|
|
|
Total Acquisition
and Integration Expenses
|
$
|
4,290
|
|
|
$
|
4,918
|
|
|
$
|
2,596
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6.
|
Other -
Certain expenses that are not reflective of the ongoing earnings
generation of the business. In addition, it includes income tax
expense (benefit) items, such as adjustments for uncertain tax
positions, changes in tax law, valuation allowances and other
unusual or infrequent items not related to current operating
results to reflect a normalized effective rate. Preferred dividends
are adjusted as the shares are mandatorily convertible into common
shares at the end of three years and the non-GAAP weighted average
shares are adjusted to reflect the conversion. Management believes
that making these adjustments aids in comparing the company's
operating results with prior periods.
|
|
|
|
Components of Other
for the respective periods are shown below:
|
|
|
|
|
|
Three Months
Ended
|
|
Other
|
9/30/2018
|
|
9/30/2017
|
|
6/30/2018
|
|
Occupancy related
expenses
|
$
|
228
|
|
|
$
|
—
|
|
|
$
|
111
|
|
|
Tax impact of
occupancy related expenses
|
(61)
|
|
|
—
|
|
|
(31)
|
|
|
System transition
expenses
|
—
|
|
|
406
|
|
|
22
|
|
|
Tax impact of system
transition expenses
|
—
|
|
|
(156)
|
|
|
(6)
|
|
|
Other discrete tax
adjustments
|
(416)
|
|
|
(183)
|
|
|
568
|
|
|
Preferred stockholder
dividends
|
2,085
|
|
|
2,084
|
|
|
2,084
|
|
|
Total
Other
|
$
|
1,836
|
|
|
$
|
2,151
|
|
|
$
|
2,748
|
|
|
|
7.
|
Seed capital and
CLO investments earnings (loss) - Gains and losses (realized
and unrealized), dividends and interest income generated by seed
capital and CLO investments. Earnings or losses generated by
investments in seed capital and CLO investments can vary
significantly from period to period and do not reflect the
company's operating results from providing investment management
and related services. Management believes that making this
adjustment aids in comparing the company's operating results with
prior periods and with other asset management firms that do not
have meaningful seed capital and CLO investments.
|
Definitions:
Revenues, as adjusted, comprise the fee revenues paid
by clients for investment management and related services.
Revenues, as adjusted, for purposes of calculating net income
attributable to common stockholders, as adjusted, differ from U.S.
GAAP revenues in that they are reduced by distribution and other
asset-based expenses that are generally passed through to external
parties, and exclude the impact of consolidated investment
products.
Operating expenses, as adjusted, is calculated to
reflect expenses from ongoing continuing operations. Operating
expenses, as adjusted, for purposes of calculating net income
attributable to common stockholders, as adjusted, differ from U.S.
GAAP expenses in that they exclude amortization or impairment, if
any, of intangible assets, restructuring and severance, the impact
of consolidated investment products, acquisition and
integration-related expenses and certain other expenses that do not
reflect the ongoing earnings generation of the business.
Operating margin, as adjusted, is a metric used to
evaluate efficiency represented by operating income, as adjusted,
divided by revenues, as adjusted.
Earnings (loss) per share, as adjusted, represent net
income (loss) attributable to common stockholders, as adjusted,
divided by weighted average shares outstanding, as adjusted, on
either a basic or diluted basis.
Forward-Looking Information
This press release 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 Securities Litigation Reform Act of 1995, as
amended. These statements may be identified by such forward-looking
terminology as "expect," "estimate," "intent," "plan," "intend,"
"believe," "anticipate," "may," "will," "should," "could,"
"continue," "project," "opportunity," "predict," "would,"
"potential," "future," "forecast," "guarantee," "assume," "likely,"
"target" or similar statements or variations of such terms.
Our forward-looking statements are based on a series of
expectations, assumptions and projections about our company and the
markets in which we operate, are not guarantees of future results
or performance, and involve substantial risks and uncertainty
including assumptions and projections concerning our assets under
management, net asset inflows and outflows, operating cash flows,
business plans and ability to borrow, for all future periods. All
of our forward-looking statements are as of the date of this
release only. The company can give no assurance that such
expectations or forward-looking statements will prove to be
correct. Actual results may differ materially.
Our business and our forward-looking statements involve
substantial known and unknown risks and uncertainties, including
those discussed under "Risk Factors," and "Management's Discussion
and Analysis of Financial Condition and Results of Operations" in
our 2017 Annual Report on Form 10-K as well as the following risks
and uncertainties: (a) any reduction in our assets under
management; (b) withdrawal, renegotiation or termination of
investment advisory agreements; (c) damage to our reputation; (d)
failure to comply with investment guidelines or other contractual
requirements; (e) inability to satisfy financial covenants and
payments related to our indebtedness; (f) inability to attract and
retain key personnel; (g) challenges from the competition we face
in our business; (h) adverse regulatory and legal developments; (i)
unfavorable changes in tax laws or limitations; (j) adverse
developments related to unaffiliated subadvisers; (k) negative
implications of changes in key distribution relationships; (l)
interruptions in or failure to provide critical technological
service by us or third parties; (m) volatility associated with our
common and preferred stock; (n) adverse civil litigation and
government investigations or proceedings; (o) risk of loss on our
investments; (p) inability to make quarterly common and preferred
stock distributions; (q) lack of sufficient capital on satisfactory
terms; (r) losses or costs not covered by insurance; (s) impairment
of goodwill or intangible assets; (t) inability to achieve expected
acquisition-related benefits; and other risks and uncertainties
described in our 2017 Annual Report on Form 10-K or in any of our
filings with the Securities and Exchange Commission ("SEC").
Certain other factors which may impact our continuing
operations, prospects, financial results and liquidity, or which
may cause actual results to differ from such forward-looking
statements, are discussed or included in the company's periodic
reports filed with the SEC and are available on our website at
www.virtus.com under "Investor Relations." You are urged to
carefully consider all such factors.
The company does not undertake or plan to update or revise any
such forward-looking statements to reflect actual results, changes
in plans, assumptions, estimates or projections, or other
circumstances occurring after the date of this release, even if
such results, changes or circumstances make it clear that any
forward-looking information will not be realized. If there are any
future public statements or disclosures by us which modify or
impact any of the forward-looking statements contained in or
accompanying this release, such statements or disclosures will be
deemed to modify or supersede such statements in this release.
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SOURCE Virtus Investment Partners, Inc.