- Earnings Per Share - Diluted of $4.19; Earnings Per Share -
Diluted, as Adjusted, of $6.21
- Total Sales of $5.8B; Net Flows of ($1.5B); Assets Under
Management of $162.5B
Virtus Investment Partners, Inc. (NASDAQ: VRTS) today reported
financial results for the three months ended September 30,
2023.
Financial Highlights (Unaudited) (in millions, except per
share data or as noted)
Three Months Ended
Three Months Ended
9/30/2023
9/30/2022
Change
6/30/2023
Change
U.S. GAAP Financial Measures
Revenues
$
219.3
$
210.3
4
%
$
213.5
3
%
Operating expenses
$
174.4
$
166.2
5
%
$
174.5
—
%
Operating income (loss)
$
44.9
$
44.0
2
%
$
39.0
15
%
Operating margin
20.5
%
20.9
%
18.3
%
Net income (loss) attributable to Virtus
Investment Partners, Inc.
$
30.9
$
31.7
(3
%)
$
30.3
2
%
Earnings (loss) per share - diluted
$
4.19
$
4.25
(1
%)
$
4.10
2
%
Weighted average shares outstanding -
diluted
7.379
7.463
(1
%)
7.385
—
%
Non-GAAP Financial Measures (1)
Revenues, as adjusted
$
197.5
$
185.7
6
%
$
190.6
4
%
Operating expenses, as adjusted
$
130.5
$
120.8
8
%
$
129.0
1
%
Operating income (loss), as adjusted
$
67.0
$
64.9
3
%
$
61.6
9
%
Operating margin, as adjusted
33.9
%
35.0
%
32.3
%
Net income (loss) attributable to Virtus
Investment Partners, Inc., as adjusted
$
45.8
$
43.0
7
%
$
40.1
14
%
Earnings (loss) per share - diluted, as
adjusted
$
6.21
$
5.76
8
%
$
5.43
14
%
Weighted average shares outstanding -
diluted, as adjusted
7.379
7.463
(1
%)
7.385
—
%
(1)
See the information beginning on page 10 for reconciliations to the
most directly comparable U.S. GAAP measures and other important
disclosures
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 10 of this earnings release.
Assets Under Management and Asset Flows (in billions)
Three Months Ended
Three Months Ended
9/30/2023
9/30/2022
Change
6/30/2023
Change
Ending total assets under management
$
162.5
$
145.0
12
%
$
168.3
(3
%)
Average total assets under management
$
167.9
$
157.1
7
%
$
163.0
3
%
Total sales
$
5.8
$
5.7
2
%
$
7.6
(23
%)
Net flows
$
(1.5
)
$
(3.3
)
N/M
$
—
N/M
N/M - Not Meaningful
Total assets under management of $162.5 billion at September 30,
2023 declined from $168.3 billion at June 30, 2023 primarily due to
market performance and open-end fund net outflows. In addition, the
company provided services to $2.5 billion of other fee-earning
assets.
Total sales of $5.8 billion decreased from $7.6 billion in the
second quarter as increases in retail separate accounts and
open-end funds were more than offset by lower institutional sales.
Institutional sales of $1.3 billion declined from $3.7 billion in
the prior quarter, which included a large fixed income mandate.
Retail separate account sales of $1.8 billion increased 37% from
$1.3 billion reflecting strong sales of small/mid cap. Open-end
fund sales of $2.7 billion increased 5% from $2.6 billion primarily
reflecting higher sales of alternatives and fixed income.
Net flows of ($1.5) billion compared with breakeven net flows in
the second quarter. Institutional net flows of ($0.4) billion
declined from $2.2 billion in the prior quarter, which included the
large mandate. Retail separate account net flows of $0.3 billion
compared with ($0.1) billion in the prior quarter, with net inflows
in both the intermediary sold and private client channels. Open-end
fund net flows of ($1.5) billion compared with ($2.1) billion in
the prior quarter due to higher sales and lower redemptions and
included improved net flows in alternatives, fixed income, and
domestic equity.
GAAP Results
Operating income of $44.9 million increased 15% from $39.0
million in the prior quarter due to an increase in revenues
reflecting higher average assets under management. Operating
expenses of $174.4 million were relatively unchanged, with lower
employment and other operating expenses compared with the prior
quarter, which included fair value adjustments to contingent
consideration. Employment and other operating expenses each
declined from the prior quarter primarily due to lower acquisition
and integration expenses.
Net income attributable to Virtus Investment Partners, Inc. of
$4.19 per diluted share included ($0.67) of fair value adjustments
to affiliate noncontrolling interests and ($0.30) of acquisition
and integration costs. Net income per diluted share of $4.10 in the
prior quarter included ($0.31) of acquisition and integration
costs, ($0.30) of net realized and unrealized losses on
investments, and $0.21 of fair value adjustments to affiliate
noncontrolling interests.
The effective tax rate of 24% decreased from 27% in the prior
quarter, primarily reflecting changes in valuation allowances
related to marketable securities.
Non-GAAP Results
Revenues, as adjusted, of $197.5 million increased 4% from
$190.6 million in the prior quarter primarily due to higher average
assets under management.
Employment expenses, as adjusted, of $98.8 million increased
from $95.8 million in the prior quarter due to higher profit-,
sales-, and stock performance-based incentive compensation. Other
operating expenses, as adjusted, of $30.1 million declined from
$31.7 million in the prior quarter, which included the annual
equity grants to the Board of Directors of $0.9 million.
Operating income, as adjusted, of $67.0 million and the related
margin of 33.9% increased from $61.6 million and 32.3% in the prior
quarter, respectively, due to higher investment management fees and
relatively unchanged operating expenses.
Net income attributable to Virtus Investment Partners, Inc., as
adjusted, per diluted share was $6.21, an increase of $0.78, or
14%, from $5.43 in the prior quarter. The increase primarily
reflected higher investment management fees.
The effective tax rate, as adjusted, of 27% was unchanged from
the prior quarter.
Select Balance Sheet Items (Unaudited) (in millions)
As of
As of
9/30/2023
9/30/2022
Change
6/30/2023
Change
Cash and cash equivalents
$
195.4
$
309.2
(37
%)
$
201.5
(3
%)
Gross debt (1)
$
279.5
$
262.3
7
%
$
300.2
(7
%)
Contingent consideration (2)
$
94.4
$
133.6
(29
%)
$
94.4
—
%
Redeemable noncontrolling interests
(3)
$
70.6
$
108.3
(35
%)
$
87.6
(19
%)
Total equity exc. noncontrolling
interests
$
862.1
$
799.2
8
%
$
851.5
1
%
Working capital (4)
$
73.4
$
195.2
(62
%)
$
124.0
(41
%)
Net debt (cash) (5)
$
84.1
$
(47.0
)
N/M
$
98.7
(15
%)
(1)
Excludes deferred financing costs of $5.7 million, $6.8 million,
and $6.0 million, as of September 30, 2023, September 30, 2022, and
June 30, 2023, respectively
(2)
Represents estimates of revenue participation and contingent
payments
(3)
Excludes redeemable noncontrolling interests of consolidated
investment products of $25.7 million, $16.2 million, and $22.8
million as of September 30, 2023, September 30, 2022, and June 30,
2023, respectively
(4)
Defined as cash and cash equivalents plus accounts receivable, net,
less accrued compensation and benefits, accounts payable and
accrued liabilities, dividends payable, debt principal payments due
over next 12 months and revenue participation amounts earned as of
the balance sheet date and due within 12 months
(5)
Defined as gross debt less cash and cash equivalents
N/M - Not Meaningful
Working capital of $73.4 million at September 30, 2023 declined
from $124.0 million at June 30, 2023, as cash earnings were more
than offset by return of capital, debt repayment, the issuance of a
new collateralized loan obligation (CLO), and an increase in
ownership of an affiliate.
During the quarter, the company increased its quarterly dividend
by 15% to $1.90 per share and repurchased 74,015 shares of common
stock for $15.0 million.
The company repaid $20.0 million of the revolving credit
facility during the quarter. Net debt was $84.1 million, or 0.3x
EBITDA, at September 30, 2023.
Conference Call and Investor Presentation
Management will host an investor conference call and webcast on
Friday, October 27, 2023, at 10 a.m. Eastern to discuss these
financial results and related matters. The presentation that will
accompany the conference call is available in the Investor
Relations section of virtus.com. A replay of the call will be
available in the Investor Relations section for at least one
year.
About Virtus Investment Partners, Inc.
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. We
provide investment management products and services from our
affiliated managers, each with a distinct investment style and
autonomous investment process, as well as select subadvisers.
Investment solutions are available across multiple disciplines and
product types to meet a wide array of investor needs. Additional
information about our firm, investment partners, and strategies 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
9/30/2023
9/30/2022
Change
6/30/2023
Change
9/30/2023
9/30/2022
Change
Revenues
Investment management fees
$
184,869
$
172,850
7%
$
179,979
3%
$
529,326
$
564,691
(6%)
Distribution and service fees
14,333
15,746
(9%)
14,132
1%
42,618
52,912
(19%)
Administration and shareholder service
fees
19,069
20,563
(7%)
18,240
5%
55,668
66,889
(17%)
Other income and fees
1,000
1,102
(9%)
1,185
(16%)
3,069
3,516
(13%)
Total revenues
219,271
210,261
4%
213,536
3%
630,681
688,008
(8%)
Operating Expenses
Employment expenses
101,587
88,230
15%
104,694
(3%)
304,895
283,583
8%
Distribution and other asset-based
expenses
24,157
26,818
(10%)
25,460
(5%)
73,332
88,247
(17%)
Other operating expenses
30,494
31,096
(2%)
33,483
(9%)
94,707
94,367
—%
Operating expenses of consolidated
investment products
553
538
3%
360
54%
1,613
1,927
(16%)
Restructuring expense
691
4,015
(83%)
—
N/M
691
4,015
(83%)
Change in fair value of contingent
consideration
—
—
N/M
(6,800
)
(100%)
(6,800
)
2,900
N/M
Depreciation expense
1,504
938
60%
1,485
1%
4,134
2,835
46%
Amortization expense
15,382
14,609
5%
15,808
(3%)
45,581
43,895
4%
Total operating expenses
174,368
166,244
5%
174,490
—%
518,153
521,769
(1%)
Operating Income (Loss)
44,903
44,017
2%
39,046
15%
112,528
166,239
(32%)
Other Income (Expense)
Realized and unrealized gain (loss) on
investments, net
(1,918
)
(2,493
)
(23%)
1,717
N/M
2,469
(16,018
)
N/M
Realized and unrealized gain (loss) of
consolidated investment products, net
(1,013
)
(8,440
)
(88%)
(4,436
)
(77%)
(2,853
)
(43,443
)
(93%)
Other income (expense), net
128
(659
)
N/M
(847
)
N/M
(1,062
)
199
N/M
Total other income (expense),
net
(2,803
)
(11,592
)
(76%)
(3,566
)
(21%)
(1,446
)
(59,262
)
(98%)
Interest Income (Expense)
Interest expense
(6,222
)
(3,557
)
75%
(6,217
)
—%
(17,444
)
(8,661
)
101%
Interest and dividend income
2,872
1,013
184%
2,675
7%
8,785
1,870
370%
Interest and dividend income of
investments of consolidated investment products
49,803
28,644
74%
47,884
4%
144,501
71,436
102%
Interest expense of consolidated
investment products
(38,218
)
(20,356
)
88%
(38,732
)
(1%)
(112,153
)
(46,860
)
139%
Total interest income (expense),
net
8,235
5,744
43%
5,610
47%
23,689
17,785
33%
Income (Loss) Before Income
Taxes
50,335
38,169
32%
41,090
22%
134,771
124,762
8%
Income tax expense (benefit)
12,181
10,754
13%
10,910
12%
31,794
43,969
(28%)
Net Income (Loss)
38,154
27,415
39%
30,180
26%
102,977
80,793
27%
Noncontrolling interests
(7,248
)
4,265
N/M
77
N/M
(3,190
)
1,348
N/M
Net Income (Loss) Attributable to
Virtus Investment Partners, Inc.
$
30,906
$
31,680
(2%)
$
30,257
2%
$
99,787
$
82,141
21%
Earnings (Loss) Per Share -
Basic
$
4.26
$
4.33
(2%)
$
4.14
3%
$
13.72
$
11.05
24%
Earnings (Loss) Per Share -
Diluted
$
4.19
$
4.25
(1%)
$
4.10
2%
$
13.50
$
10.76
25%
Cash Dividends Declared Per Common
Share
$
1.90
$
1.65
15%
$
1.65
15%
$
5.20
$
4.65
12%
Weighted Average Shares Outstanding -
Basic
7,258
7,308
(1%)
7,308
(1%)
7,272
7,434
(2%)
Weighted Average Shares Outstanding -
Diluted
7,379
7,463
(1%)
7,385
—%
7,393
7,636
(3%)
N/M - Not Meaningful
Assets Under Management - Product and Asset Class (in
millions)
Three Months Ended
9/30/2022
12/31/2022
3/31/2023
6/30/2023
9/30/2023
By Product (period end):
Open-End Funds (1)
$
54,454
$
53,000
$
53,865
$
56,828
$
54,145
Closed-End Funds
10,146
10,361
10,358
10,166
9,472
Retail Separate Accounts
33,381
35,352
37,397
38,992
38,665
Institutional Accounts (2)
46,993
50,663
53,229
62,330
60,257
Total
$
144,974
$
149,376
$
154,849
$
168,316
$
162,539
By Product (average) (3)
Open-End Funds (1)
$
60,185
$
54,870
$
54,141
$
56,120
$
56,511
Closed-End Funds
10,971
10,389
10,424
10,224
10,001
Retail Separate Accounts
35,248
33,381
35,352
37,397
38,992
Institutional Accounts (2)
50,668
49,981
52,444
59,248
62,368
Total
$
157,072
$
148,621
$
152,361
$
162,989
$
167,872
By Asset Class (period end):
Equity
$
78,034
$
81,894
$
87,511
$
91,211
$
87,984
Fixed Income
36,910
36,903
36,596
38,361
37,352
Multi-Asset (4)
19,364
19,937
20,597
20,914
19,937
Alternatives (5)
10,666
10,642
10,145
17,830
17,266
Total
$
144,974
$
149,376
$
154,849
$
168,316
$
162,539
Assets Under Management - Average Management Fees Earned
(6) (in basis points)
Three Months Ended
9/30/2022
12/31/2022
3/31/2023
6/30/2023
9/30/2023
By Product:
Open-End Funds (1)
46.8
47.2
47.6
49.3
51.1
Closed-End Funds
57.0
57.1
57.1
57.6
58.2
Retail Separate Accounts
42.2
42.6
44.2
44.1
43.3
Institutional Accounts (2)(7)
31.3
32.0
31.8
31.6
30.3
All Products (7)
41.5
41.7
42.0
42.2
42.0
(1)
Represents assets under management of U.S. retail funds, global
funds, exchange traded funds, and variable insurance funds
(2)
Represents assets under management of institutional separate and
commingled accounts including structured products
(3)
Averages are calculated as follows:
- Funds - average daily or weekly
balances
- Retail Separate Accounts - prior-quarter
ending balance
- Institutional Accounts - average of
month-end balances in quarter
(4)
Consists of strategies and client accounts with substantial
holdings in at least two of the following asset classes: equity,
fixed income, and alternatives
(5)
Consists of managed futures, event-driven, real estate securities,
infrastructure, long/short, and other strategies
(6)
Represents investment management fees, as adjusted, divided by
average assets. Investment management fees, as adjusted, exclude
the impact of consolidated investment products and are net of
revenue-related adjustments. Revenue-related adjustments are based
on specific agreements and reflect the portion of investment
management fees passed through to third-party client intermediaries
for services to investors in sponsored investment products
(7)
Includes performance-related fees, in basis points, earned during
the three months ended as follows:
9/30/2022
12/31/2022
3/31/2023
6/30/2023
9/30/2023
Institutional Accounts
0.2
0.4
0.2
0.2
0.4
All Products
0.1
0.1
0.1
0.1
0.1
Assets Under Management - Asset Flows by Product (in
millions)
Three Months Ended
Nine Months Ended
9/30/2022
12/31/2022
3/31/2023
6/30/2023
9/30/2023
9/30/2022
9/30/2023
Open-End Funds (1)
Beginning balance
$
59,479
$
54,454
$
53,000
$
53,865
$
56,828
$
78,706
$
53,000
Inflows
2,880
3,029
3,011
2,550
2,687
10,956
8,248
Outflows
(5,689
)
(6,839
)
(4,792
)
(4,692
)
(4,137
)
(21,710
)
(13,621
)
Net flows
(2,809
)
(3,810
)
(1,781
)
(2,142
)
(1,450
)
(10,754
)
(5,373
)
Market performance
(2,012
)
2,806
2,771
2,163
(1,034
)
(17,919
)
3,900
Other (2)
(204
)
(450
)
(125
)
2,942
(199
)
4,421
2,618
Ending balance
$
54,454
$
53,000
$
53,865
$
56,828
$
54,145
$
54,454
$
54,145
Closed-End Funds
Beginning balance
$
10,645
$
10,146
$
10,361
$
10,358
$
10,166
$
12,068
$
10,361
Inflows
157
2
4
20
—
189
24
Outflows
—
—
—
—
—
—
—
Net flows
157
2
4
20
—
189
24
Market performance
(531
)
631
205
(1
)
(504
)
(1,977
)
(300
)
Other (2)
(125
)
(418
)
(212
)
(211
)
(190
)
(134
)
(613
)
Ending balance
$
10,146
$
10,361
$
10,358
$
10,166
$
9,472
$
10,146
$
9,472
Retail Separate Accounts
Beginning balance
$
35,248
$
33,381
$
35,352
$
37,397
$
38,992
$
44,538
$
35,352
Inflows
1,179
1,221
1,367
1,346
1,849
4,489
4,562
Outflows
(1,418
)
(1,651
)
(1,288
)
(1,434
)
(1,524
)
(4,789
)
(4,246
)
Net flows
(239
)
(430
)
79
(88
)
325
(300
)
316
Market performance
(1,628
)
2,401
1,966
1,683
(652
)
(10,857
)
2,997
Ending balance
$
33,381
$
35,352
$
37,397
$
38,992
$
38,665
$
33,381
$
38,665
Institutional Accounts (3)
Beginning balance
$
50,048
$
46,993
$
50,663
$
53,229
$
62,330
$
51,874
$
50,663
Inflows
1,507
2,999
1,852
3,660
1,274
7,408
6,786
Outflows
(1,930
)
(2,162
)
(2,047
)
(1,478
)
(1,648
)
(6,585
)
(5,173
)
Net flows
(423
)
837
(195
)
2,182
(374
)
823
1,613
Market performance
(2,475
)
2,976
2,906
2,440
(1,434
)
(15,144
)
3,912
Other (2)
(157
)
(143
)
(145
)
4,479
(265
)
9,440
4,069
Ending balance
$
46,993
$
50,663
$
53,229
$
62,330
$
60,257
$
46,993
$
60,257
Total
Beginning balance
$
155,420
$
144,974
$
149,376
$
154,849
$
168,316
$
187,186
$
149,376
Inflows
5,723
7,251
6,234
7,576
5,810
23,042
19,620
Outflows
(9,037
)
(10,652
)
(8,127
)
(7,604
)
(7,309
)
(33,084
)
(23,040
)
Net flows
(3,314
)
(3,401
)
(1,893
)
(28
)
(1,499
)
(10,042
)
(3,420
)
Market performance
(6,646
)
8,814
7,848
6,285
(3,624
)
(45,897
)
10,509
Other (2)
(486
)
(1,011
)
(482
)
7,210
(654
)
13,727
6,074
Ending balance
$
144,974
$
149,376
$
154,849
$
168,316
$
162,539
$
144,974
$
162,539
(1)
Represents assets under management of U.S. retail funds, global
funds, exchange traded funds, and variable insurance funds
(2)
Represents open-end and closed-end fund distributions net of
reinvestments, the net change in assets from cash management
strategies, and the impact of non-sales related activities such as
asset acquisitions/(dispositions), seed capital
investments/(withdrawals), current income or capital returned by
structured products and the use of leverage
(3)
Represents assets under management of institutional separate and
commingled accounts including structured products
Non-GAAP Information and Reconciliations (in thousands
except per share data)
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.
The following are reconciliations and related notes of the most
comparable U.S. GAAP measure to each non-GAAP measure:
Three Months Ended
Revenues
9/30/2023
9/30/2022
6/30/2023
Total revenues, GAAP
$
219,271
$
210,261
$
213,536
Consolidated investment products revenues
(1)
2,337
2,243
2,479
Investment management fees (2)
(9,823
)
(11,070
)
(11,326
)
Distribution and service fees (2)
(14,334
)
(15,748
)
(14,134
)
Total revenues, as adjusted
$
197,451
$
185,686
$
190,555
Operating Expenses
Total operating expenses, GAAP
$
174,368
$
166,244
$
174,490
Consolidated investment products expenses
(1)
(553
)
(538
)
(360
)
Distribution and other asset-based
expenses (3)
(24,157
)
(26,818
)
(25,460
)
Amortization of intangible assets (4)
(15,382
)
(14,609
)
(15,808
)
Restructuring expense (5)
(691
)
(4,015
)
—
Deferred compensation and related
investments (6)
278
—
(747
)
Acquisition and integration expenses
(7)
(3,013
)
—
(3,165
)
Other (8)
(379
)
486
49
Total operating expenses, as adjusted
$
130,471
$
120,750
$
128,999
Operating Income (Loss)
Operating income (loss), GAAP
$
44,903
$
44,017
$
39,046
Consolidated investment products
(earnings) losses (1)
2,890
2,781
2,839
Amortization of intangible assets (4)
15,382
14,609
15,808
Restructuring expense (5)
691
4,015
—
Deferred compensation and related
investments (6)
(278
)
—
747
Acquisition and integration expenses
(7)
3,013
—
3,165
Other (8)
379
(486
)
(49
)
Operating income (loss), as adjusted
$
66,980
$
64,936
$
61,556
Operating margin, GAAP
20.5
%
20.9
%
18.3
%
Operating margin, as adjusted
33.9
%
35.0
%
32.3
%
Three Months Ended
Income (Loss) Before Taxes
9/30/2023
9/30/2022
6/30/2023
Income (loss) before taxes, GAAP
$
50,335
$
38,169
$
41,090
Consolidated investment products
(earnings) losses (1)
(429
)
478
283
Amortization of intangible assets (4)
15,382
14,609
15,808
Restructuring expense (5)
691
4,015
—
Deferred compensation and related
investments (6)
212
—
(596
)
Acquisition and integration expenses
(7)
3,013
—
3,165
Other (8)
379
(486
)
(49
)
Seed capital and CLO investments (gains)
losses (9)
(3,146
)
5,363
(1,057
)
Income (loss) before taxes, as
adjusted
$
66,437
$
62,148
$
58,644
Income Tax Expense (Benefit)
Income tax expense (benefit), GAAP
$
12,181
$
10,754
$
10,910
Tax impact of:
Amortization of intangible assets (4)
4,209
3,939
4,334
Restructuring expense (5)
189
1,082
—
Deferred compensation and related
investments (6)
58
—
(163
)
Acquisition and integration expenses
(7)
824
—
868
Other (8)
276
610
628
Seed capital and CLO investments (gains)
losses (9)
441
370
(497
)
Income tax expense (benefit), as
adjusted
$
18,178
$
16,755
$
16,080
Effective tax rate, GAAPA
24.2
%
28.2
%
26.6
%
Effective tax rate, as adjustedB
27.4
%
27.0
%
27.4
%
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
Net Income (Loss) Attributable to
Virtus Investment Partners, Inc.
Net income (loss) attributable to Virtus
Investment Partners, Inc., GAAP
$
30,906
$
31,680
$
30,257
Amortization of intangible assets, net of
tax (4)
10,603
9,952
10,775
Restructuring expense, net of tax (5)
502
2,933
—
Deferred compensation and related
investments (6)
154
—
(433
)
Acquisition and integration expenses, net
of tax (7)
2,189
—
2,297
Other, net of tax (8)
5,056
(6,558
)
(2,253
)
Seed capital and CLO investments (gains)
losses, net of tax (9)
(3,587
)
4,993
(560
)
Net income (loss) attributable to Virtus
Investment Partners, Inc., as adjusted
$
45,823
$
43,000
$
40,083
Weighted average shares outstanding -
diluted
7,379
7,463
7,385
Earnings (loss) per share - diluted,
GAAP
$
4.19
$
4.25
$
4.10
Earnings (loss) per share - diluted, as
adjusted
$
6.21
$
5.76
$
5.43
Three Months Ended
Administration and Shareholder Services
Fees
9/30/2023
9/30/2022
6/30/2023
Administration and shareholder service
fees, GAAP
$
19,069
$
20,563
$
18,240
Consolidated investment products fees
(1)
(5
)
24
33
Administration and shareholder service
fees, as adjusted
$
19,064
$
20,587
$
18,273
Employment Expenses
Employment expenses, GAAP
$
101,587
$
88,230
$
104,694
Deferred compensation and related
investments (6)
278
—
(747
)
Acquisition and integration expenses
(7)
(2,642
)
—
(8,183
)
Other (8)
(379
)
486
49
Employment expenses, as adjusted
$
98,844
$
88,716
$
95,813
Other Operating Expenses
Other operating expenses, GAAP
$
30,494
$
31,096
$
33,483
Acquisition and integration expenses
(7)
(371
)
—
(1,782
)
Other operating expenses, as adjusted
$
30,123
$
31,096
$
31,701
Total Other Income (Expense),
Net
Total other income (expense), net GAAP
$
(2,803
)
$
(11,592
)
$
(3,566
)
Consolidated investment products (1)
5,262
4,788
4,868
Deferred compensation and related
investments (6)
518
—
(1,312
)
Seed capital and CLO investments (gains)
losses (9)
(3,146
)
5,363
(1,057
)
Total other income (expense), net as
adjusted
$
(169
)
$
(1,441
)
$
(1,067
)
Interest and Dividend Income
Interest and dividend income, GAAP
$
2,872
$
1,013
$
2,675
Consolidated investment products (1)
3,004
1,197
1,728
Deferred compensation and related
investments (6)
(28
)
—
(31
)
Interest and dividend income, as
adjusted
$
5,848
$
2,210
$
4,372
Total Noncontrolling Interests
Total noncontrolling interests, GAAP
$
(7,248
)
$
4,265
$
77
Consolidated investment products (1)
429
(478
)
(283
)
Amortization of intangible assets (4)
(570
)
(718
)
(699
)
Other (8)
4,953
(5,462
)
(1,576
)
Total noncontrolling interests, as
adjusted
$
(2,436
)
$
(2,393
)
$
(2,481
)
Notes to
Reconciliations:
Reclassifications:
1. 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.
Other Adjustments:
Revenue Related
2. Investment management/Distribution and
service fees - Each of these revenue line items is reduced
to exclude fees passed through to third-party client intermediaries
who own the retail client relationship and are responsible for
distributing company sponsored investment products and servicing
the client. The amount of fees fluctuates each period, based on a
predetermined percentage of the value of assets under management,
and varies based on the type of investment product. The specific
adjustments are as follows:
Investment management
fees - Based on specific agreements, the portion of
investment management fees passed-through to third-party
intermediaries for services to investors in sponsored investment
products.
Distribution and
service fees - Based on distinct arrangements, fees
collected by the company then passed-through to third-party client
intermediaries for services to investors in sponsored investment
products. The adjustment represents all of the company's
distribution and service fees that are recorded as a separate line
item on the condensed consolidated statements of operations.
Management believes that making these adjustments aids in
comparing the company's operating results with other asset
management firms that do not utilize third-party client
intermediaries.
Expense Related
3. Distribution and other asset-based
expenses - Primarily payments to third-party client
intermediaries for providing services to investors in sponsored
investment products. Management believes that making this
adjustment aids in comparing the company’s operating results with
other asset management firms that do not utilize third-party client
intermediaries.
4. 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.
5. Restructuring expense - Certain
non-recurring expenses associated with restructuring the business,
including lease abandonment-related expenses and severance costs
associated with staff reductions that are not reflective of ongoing
earnings generation of the business.
6. Deferred compensation and related
investments - Compensation expense, gains and losses
(realized and unrealized), and interest and dividend income related
to market performance of deferred compensation and related balance
sheet investments. Market performance of deferred compensation
plans and related investments can vary significantly from period to
period. Management believes that making this adjustment aids in
comparing the Company's operating results with prior periods.
7. Acquisition and integration
expenses - Expenses that are directly related to acquisition
and integration activities. Acquisition expenses include certain
transaction related employment expenses, transaction closing costs,
change in fair value of contingent consideration, 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
9/30/2023
9/30/2022
6/30/2023
Employment expenses
$
2,642
$
—
$
8,183
Other operating expenses
371
—
1,782
Change in fair value of contingent
consideration
—
—
(6,800
)
Total Acquisition and Integration
Expenses
$
3,013
$
—
$
3,165
8. Other - Certain expenses that
are not reflective of the ongoing earnings generation of the
business. Employment expenses and noncontrolling interests are
adjusted for fair value measurements of affiliate minority
interests. Other operating expenses are adjusted for
non-capitalized debt issuance costs. Interest expense is adjusted
to remove gains on early extinguishment of debt and the write-off
of previously capitalized costs associated with the modification of
debt. Income tax expense (benefit) items are adjusted 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. 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
9/30/2023
9/30/2022
6/30/2023
Employment expense fair value
adjustments
$
379
$
(486
)
$
(49
)
Tax impact of adjustments
(104
)
131
13
Other discrete tax adjustments
(172
)
(741
)
(641
)
Affiliate minority interest fair value
adjustments
4,953
(5,462
)
(1,576
)
Total Other
$
5,056
$
(6,558
)
$
(2,253
)
Seed Capital and CLO Related
9. Seed capital and CLO investments
(gains) losses - Gains and losses (realized and unrealized)
of seed capital and CLO investments. Gains and losses (realized and
unrealized) 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
Virtus Investment Partners, Inc., as adjusted, differ from U.S.
GAAP, namely in excluding the impact of operating activities of
consolidated investment products and reduced to exclude fees passed
through to third-party client intermediaries who own the retail
client relationship and are responsible for distributing the
product and servicing the client.
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
Virtus Investment Partners, Inc., as adjusted, differ from U.S.
GAAP expenses in that they exclude amortization or impairment, if
any, of intangible assets, restructuring and severance, the effect
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 Virtus Investment Partners, Inc., 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 the 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
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 2022 Annual Report on Form 10-K, as supplemented by our
periodic filings with the Securities and Exchange Commission (the
"SEC"), as well as the following risks and uncertainties resulting
from: (i) any reduction in our assets under management; (ii)
inability to achieve expected benefits of strategic transactions;
(iii) withdrawal, renegotiation or termination of investment
advisory agreements; (iv) damage to our reputation; (v) inability
to satisfy financial debt covenants and required payments; (vi)
inability to attract and retain key personnel; (vii) challenges
from competition; (viii) adverse developments related to
unaffiliated subadvisers; (ix) negative changes in key distribution
relationships; (x) interruptions, breaches, or failures of
technology systems; (xi) loss on our investments; (xii) lack of
sufficient capital on satisfactory terms; (xiii) adverse regulatory
and legal developments; (xiv) failure to comply with investment
guidelines or other contractual requirements; (xv) adverse civil
litigation, government investigations, or proceedings; (xvi)
unfavorable changes in tax laws or limitations; (xvii) inability to
make common stock dividend payments; (xviii) impediments from
certain corporate governance provisions; (xix) losses or costs not
covered by insurance; (xx) impairment of goodwill or other
intangible assets; and other risks and uncertainties. Any
occurrence of, or any material adverse change in, one or more risk
factors or risks and uncertainties referred to above, in our 2022
Annual Report on Form 10-K and our other periodic reports filed
with the SEC could materially and adversely affect our operations,
financial results, cash flows, prospects and liquidity.
Certain other factors that may impact our continuing operations,
prospects, financial results and liquidity, or that 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 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 that modify or affect
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.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20231027264757/en/
Investor Relations Contact Sean Rourke (860) 263-4709
sean.rourke@virtus.com
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