HARTFORD, Conn., July 24, 2020 /PRNewswire/ -- Virtus
Investment Partners, Inc. (NASDAQ: VRTS) today reported financial
results for the three months ended June 30,
2020.
Financial
Highlights (Unaudited)
(in millions,
except per share data or as noted)
|
|
|
|
|
|
|
|
|
|
|
|
|
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Three Months
Ended
|
|
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|
Three
Months
Ended
|
|
|
|
|
|
6/30/2020
|
|
6/30/2019
|
|
Change
|
|
3/31/2020
|
|
Change
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U.S. GAAP Financial
Measures
|
|
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Revenues
|
$
|
132.9
|
|
$
|
140.5
|
|
(5%)
|
|
$
|
144.6
|
|
(8%)
|
|
|
Operating
expenses
|
$
|
106.3
|
|
$
|
110.4
|
|
(4%)
|
|
$
|
120.0
|
|
(11%)
|
|
|
Operating income
(loss)
|
$
|
26.6
|
|
$
|
30.1
|
|
(12%)
|
|
$
|
24.6
|
|
8%
|
|
|
Operating
margin
|
20.0%
|
|
21.4%
|
|
|
|
17.0%
|
|
|
|
|
Net income (loss)
attributable to common stockholders
|
$
|
11.3
|
|
$
|
24.8
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|
(54%)
|
|
$
|
(4.3)
|
|
N/M
|
|
|
Earnings (loss) per
share - diluted
|
$
|
1.43
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|
$
|
3.26
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|
(56%)
|
|
$
|
(0.58)
|
|
N/M
|
|
|
Weighted average
shares outstanding - diluted
|
7.895
|
|
8.252
|
|
(4%)
|
|
7.422
|
|
6%
|
|
|
|
|
|
|
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|
Non-GAAP Financial
Measures (1)
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Revenues, as
adjusted
|
$
|
118.1
|
|
$
|
121.0
|
|
(2%)
|
|
$
|
127.1
|
|
(7%)
|
|
|
Operating expenses,
as adjusted
|
$
|
77.6
|
|
$
|
77.3
|
|
—%
|
|
$
|
87.1
|
|
(11%)
|
|
|
Operating income
(loss), as adjusted
|
$
|
40.5
|
|
$
|
43.7
|
|
(7%)
|
|
$
|
40.1
|
|
1%
|
|
|
Operating margin, as
adjusted
|
34.3%
|
|
36.1%
|
|
|
|
31.5%
|
|
|
|
|
Net income (loss)
attributable to common stockholders, as adjusted
|
$
|
25.6
|
|
$
|
30.0
|
|
(15%)
|
|
$
|
26.5
|
|
(3%)
|
|
|
Earnings (loss) per
share - diluted, as adjusted
|
$
|
3.24
|
|
$
|
3.63
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|
(11%)
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|
$
|
3.32
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(2%)
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|
Weighted average
shares outstanding - diluted, as adjusted
|
7.895
|
|
8.252
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|
(4%)
|
|
7.975
|
|
(1%)
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|
|
|
|
|
|
|
|
|
|
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(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)
|
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|
Three Months
Ended
|
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Three
Months
Ended
|
|
|
|
6/30/2020
|
|
6/30/2019
|
|
Change
|
|
3/31/2020
|
|
Change
|
Ending long-term
assets under management (1)
|
$
|
107.1
|
|
$
|
103.3
|
|
4%
|
|
$
|
89.5
|
|
20%
|
Ending total assets
under management
|
$
|
108.5
|
|
$
|
105.0
|
|
3%
|
|
$
|
90.7
|
|
20%
|
Average long-term
assets under management (1)
|
$
|
96.9
|
|
$
|
100.5
|
|
(4)%
|
|
$
|
104.7
|
|
(7)%
|
Average total assets
under management
|
$
|
98.2
|
|
$
|
102.2
|
|
(4)%
|
|
$
|
105.9
|
|
(7)%
|
Total
sales
|
$
|
9.1
|
|
$
|
5.1
|
|
77%
|
|
$
|
7.0
|
|
30%
|
Net flows
|
$
|
2.5
|
|
$
|
0.1
|
|
N/M
|
|
$
|
(1.3)
|
|
N/M
|
|
|
|
|
|
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(1) Excludes assets
under management in liquidity strategies, including in certain
open-end mutual funds and institutional accounts
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N/M - Not
Meaningful
|
Long-term assets under management increased 20% to $107.1 billion at June 30,
2020 from $89.5 billion at
March 31, 2020 as a result of
$15.2 billion of market appreciation
and $2.5 billion of positive net
flows. Total assets under management at June
30, 2020 were $108.5 billion,
including $1.4 billion of assets in
liquidity strategies.
Total sales of $9.1 billion
increased 30% from the first quarter as a result of higher sales of
open-end funds, retail separate accounts, and institutional.
Open-end fund sales increased 13% sequentially to $4.4 billion with higher sales of domestic equity
and investment grade fixed income funds. Retail separate account
sales of $1.5 billion were up 40%
sequentially primarily due to growth in the intermediary-sold
channel. Institutional sales more than doubled to $3.1 billion as a result of flows into existing
mandates as well as new mandates at multiple affiliates.
Net flows of $2.5 billion improved
meaningfully from net outflows of $1.3
billion in the prior quarter due to positive net flows in
open-end funds, retail separate accounts, and institutional.
Open-end fund net flows of $0.4
billion reflected positive net flows in domestic equity and
investment grade fixed income partially offset by net outflows in
international equity and credit sensitive fixed income. Positive
net flows of $0.8 billion in retail
separate accounts included contributions from both the intermediary
sold and private client channels. Institutional net flows of
$1.5 billion improved from net
outflows of $0.3 billion in the prior
quarter.
GAAP Results
Operating income increased 8% sequentially to $26.6 million from $24.6
million in the prior quarter, as an 8% decrease in total
revenues, due to lower average assets under management, was more
than offset by an 11% decline in total operating expenses primarily
resulting from elevated first quarter operating expenses due to
seasonal employment and collateralized loan obligation ("CLO")
launch costs.
Net income attributable to common stockholders of $1.43 per diluted common share included
($0.87) of CLO expenses, ($0.48) of fair value adjustments on affiliate
noncontrolling interests, and ($0.22)
of realized and unrealized losses on investments. First
quarter net income per diluted share of ($0.58) included ($2.10) of realized and unrealized losses on
investments, ($1.00) of CLO launch
costs, ($0.86) of fair value
adjustments on affiliate noncontrolling interests, and a
$0.07 gain on extinguishment of
debt.
The effective tax rate during the second quarter of 32% compared
with 91% in the prior quarter, reflecting changes in the valuation
allowances related to marketable securities.
Non-GAAP Results
Revenues, as adjusted, of $118.1
million decreased 7% from the prior quarter as a result of
lower average assets under management given the low level of
beginning-of-period assets related to market declines in the first
quarter. Revenues, as adjusted, included performance-related fees
of $0.6 million, unchanged from the
prior quarter.
Employment expenses, as adjusted, decreased 12% to $59.0 million largely due to seasonally higher
first quarter expenses. Other operating expenses, as adjusted, of
$17.4 million declined from
$18.9 million in the prior quarter
primarily due to lower travel and entertainment expenses, partially
offset by the annual equity grants to the Board of Directors of
$0.8 million.
Operating income, as adjusted, and the related margin increased
to $40.5 million and 34%,
respectively, from $40.1 million and
32% in the prior quarter primarily due to the impact of the
seasonally higher first quarter employment expenses and lower other
operating expenses, partially offset by lower revenues, as
adjusted. Interest and dividends earned on cash and investments
were $1.1 million, a decrease from
$3.4 million in the first
quarter.
Net income attributable to common stockholders, as adjusted,
which is net of noncontrolling interests, was
$3.24 per diluted common share, a
decrease of $0.08, or 2%, from
$3.32 in the prior quarter. The
decrease primarily reflected lower revenues, as adjusted, as a
result of lower average assets under management, mostly offset by
the impact of the first quarter seasonal employment expenses and
lower other operating expenses.
The effective tax rate, as adjusted, was 27%, a decline from 29%
in the prior quarter.
Select Balance
Sheet Items (Unaudited)
(in
millions)
|
|
|
As
of
|
|
|
|
As
of
|
|
|
|
6/30/2020
|
|
6/30/2019
|
|
Change
|
|
3/31/2020
|
|
Change
|
Cash and cash
equivalents
|
$
|
168.3
|
|
|
$
|
166.0
|
|
|
1%
|
|
$
|
158.5
|
|
|
6%
|
Gross debt
(1)
|
$
|
240.7
|
|
|
$
|
315.7
|
|
|
(24)%
|
|
$
|
258.2
|
|
|
(7)%
|
Redeemable
noncontrolling interests (2)
|
$
|
66.3
|
|
|
$
|
53.7
|
|
|
23%
|
|
$
|
62.2
|
|
|
7%
|
Total equity
attributable to stockholders
|
$
|
658.2
|
|
|
$
|
651.1
|
|
|
1%
|
|
$
|
656.2
|
|
|
—%
|
|
|
|
|
|
|
|
|
|
|
Working capital
(3)
|
$
|
155.9
|
|
|
$
|
148.7
|
|
|
5%
|
|
$
|
155.4
|
|
|
—%
|
Net debt (cash)
(4)
|
$
|
72.4
|
|
|
$
|
149.7
|
|
|
(52)%
|
|
$
|
99.8
|
|
|
(27)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Excludes deferred
financing costs of $5.9 million, $9.6 million, and $6.7 million as
of June 30, 2020, June 30, 2019, and March 31, 2020,
respectively
|
(2)
|
Excludes redeemable
noncontrolling interests of consolidated investment products of
$24.3 million, $6.8 million, and $24.9 million as of June 30, 2020,
June 30, 2019, and March 31, 2020, respectively
|
(3)
|
Defined as cash and
cash equivalents plus accounts receivable, net, less accrued
compensation and benefits, accounts payable and accrued
liabilities, dividends payable and required principal payments due
over the next 12 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 2020 financial
results and the net leverage ratio as of December 31,
2020
|
(4)
|
Defined as gross debt
less cash and cash equivalents
|
Working capital at June 30, 2020
of $155.9 million was essentially
unchanged from March 31, 2020, as net
cash generated from the business was offset by debt repayments and
return of capital to shareholders.
During the second quarter, the company repurchased 74,897
shares, or 1.0% of beginning-of-quarter outstanding common shares,
for $7.5 million. In addition, the
company net settled 21,473 shares for $2.0
million to satisfy employee tax obligations on restricted
stock units.
The company reduced gross debt by $17.5
million, or 7%, to $240.7
million. The net leverage ratio, which is defined as net
debt to EBITDA (in accordance with the company's credit agreement),
was 0.3x at June 30, 2020, down from 0.5x at March 31, 2020 and consistent with 0.3x at
December 31, 2019.
Strategic Partnership with Allianz Global Investors
As announced on July 7, 2020, the
company entered into a strategic partnership agreement with Allianz
Global Investors (AllianzGI) whereby Virtus would become the
investment adviser, distributor, and/or administrator of
AllianzGI's approximately $24 billion
in open-end, closed-end, and retail separate account assets. The
partnership was structured with an alignment of economic interests
over time, and there are no payments at closing. The agreement is
subject to the approval of the AllianzGI U.S. Funds Board and fund
shareholders and is expected to close near year-end 2020.
Conference Call
Management will host an investor conference call on Friday, July 24, 2020, 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: 9967222). 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 July
31, 2020 by telephone at 855-859-2056 (U.S. and Canada) or 404-537-3406 (international)
(Conference ID: 9967222).
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
|
|
|
|
|
6/30/2020
|
|
6/30/2019
|
|
Change
|
|
3/31/2020
|
|
Change
|
|
Revenues
|
|
|
|
|
|
|
|
|
|
|
Investment management
fees
|
$
|
110,550
|
|
$
|
114,591
|
|
(4%)
|
|
$
|
120,288
|
|
(8%)
|
|
Distribution and
service fees
|
8,889
|
|
10,617
|
|
(16%)
|
|
9,460
|
|
(6%)
|
|
Administration and
shareholder service fees
|
13,289
|
|
15,054
|
|
(12%)
|
|
14,653
|
|
(9%)
|
|
Other income and
fees
|
166
|
|
227
|
|
(27%)
|
|
165
|
|
1%
|
|
Total
revenues
|
132,894
|
|
140,489
|
|
(5%)
|
|
144,566
|
|
(8%)
|
|
Operating
Expenses
|
|
|
|
|
|
|
|
|
|
|
Employment
expenses
|
60,163
|
|
58,123
|
|
4%
|
|
66,130
|
|
(9%)
|
|
Distribution and
other asset-based expenses
|
17,345
|
|
21,322
|
|
(19%)
|
|
19,409
|
|
(11%)
|
|
Other operating
expenses
|
17,436
|
|
19,174
|
|
(9%)
|
|
18,885
|
|
(8%)
|
|
Operating expenses of
consolidated investment products
|
2,179
|
|
2,568
|
|
(15%)
|
|
6,749
|
|
(68%)
|
|
Restructuring and
severance
|
420
|
|
320
|
|
31%
|
|
—
|
|
N/M
|
|
Depreciation
expense
|
1,196
|
|
1,271
|
|
(6%)
|
|
1,258
|
|
(5%)
|
|
Amortization
expense
|
7,533
|
|
7,583
|
|
(1%)
|
|
7,533
|
|
—%
|
|
Total operating
expenses
|
106,272
|
|
110,361
|
|
(4%)
|
|
119,964
|
|
(11%)
|
|
Operating Income
(Loss)
|
26,622
|
|
30,128
|
|
(12%)
|
|
24,602
|
|
8%
|
|
Other Income
(Expense)
|
|
|
|
|
|
|
|
|
|
|
Realized and
unrealized gain (loss) on investments, net
|
7,114
|
|
2,039
|
|
249%
|
|
(7,544)
|
|
N/M
|
|
Realized and
unrealized gain (loss) of consolidated investment products,
net
|
(6,744)
|
|
9,720
|
|
N/M
|
|
(8,669)
|
|
(22%)
|
|
Other income
(expense), net
|
(805)
|
|
696
|
|
N/M
|
|
612
|
|
N/M
|
|
Total other income
(expense), net
|
(435)
|
|
12,455
|
|
N/M
|
|
(15,601)
|
|
(97%)
|
|
Interest Income
(Expense)
|
|
|
|
|
|
|
|
|
|
|
Interest
expense
|
(3,126)
|
|
(5,151)
|
|
(39%)
|
|
(3,199)
|
|
(2%)
|
|
Interest and dividend
income
|
242
|
|
964
|
|
(75%)
|
|
752
|
|
(68%)
|
|
Interest and dividend
income of investments of consolidated investment
products
|
28,634
|
|
29,368
|
|
(2%)
|
|
29,229
|
|
(2%)
|
|
Interest expense of
consolidated investment products
|
(28,150)
|
|
(31,077)
|
|
(9%)
|
|
(24,486)
|
|
15%
|
|
Total interest income
(expense), net
|
(2,400)
|
|
(5,896)
|
|
(59%)
|
|
2,296
|
|
N/M
|
|
Income (Loss)
Before Income Taxes
|
23,787
|
|
36,687
|
|
(35%)
|
|
11,297
|
|
111%
|
|
Income tax expense
(benefit)
|
7,578
|
|
8,788
|
|
(14%)
|
|
10,291
|
|
(26%)
|
|
Net Income
(Loss)
|
16,209
|
|
27,899
|
|
(42%)
|
|
1,006
|
|
N/M
|
|
Noncontrolling
interests
|
(4,930)
|
|
(973)
|
|
407%
|
|
(5,291)
|
|
(7%)
|
|
Net Income (Loss)
Attributable to Stockholders
|
11,279
|
|
26,926
|
|
(58%)
|
|
(4,285)
|
|
N/M
|
|
Preferred stockholder
dividends
|
—
|
|
(2,084)
|
|
(100%)
|
|
—
|
|
N/M
|
|
Net Income (Loss)
Attributable to Common Stockholders
|
$
|
11,279
|
|
$
|
24,842
|
|
(55%)
|
|
$
|
(4,285)
|
|
N/M
|
|
Earnings (Loss)
Per Share - Basic
|
$
|
1.46
|
|
$
|
3.55
|
|
(59%)
|
|
$
|
(0.58)
|
|
N/M
|
|
Earnings (Loss)
Per Share - Diluted
|
$
|
1.43
|
|
$
|
3.26
|
|
(56%)
|
|
$
|
(0.58)
|
|
N/M
|
|
Cash Dividends
Declared Per Preferred Share
|
$
|
—
|
|
$
|
1.81
|
|
(100%)
|
|
$
|
—
|
|
N/M
|
|
Cash Dividends
Declared Per Common Share
|
$
|
0.67
|
|
$
|
0.55
|
|
22%
|
|
$
|
0.67
|
|
—%
|
|
Weighted Average
Shares Outstanding - Basic
|
7,720
|
|
6,999
|
|
10%
|
|
7,422
|
|
4%
|
|
Weighted Average
Shares Outstanding - Diluted
|
7,895
|
|
8,252
|
|
(4%)
|
|
7,422
|
|
6%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
N/M - Not
Meaningful
|
|
Assets Under
Management - Product and Asset Class
(in
millions)
|
|
|
Three Months
Ended
|
|
6/30/2019
|
|
09/30/2019
|
|
12/31/2019
|
|
3/31/2020
|
|
6/30/2020
|
By product (period
end):
|
|
|
|
|
|
|
|
|
|
Open-End Funds
(1)
|
$
|
41,223
|
|
|
$
|
41,190
|
|
|
$
|
42,870
|
|
|
$
|
33,498
|
|
|
$
|
40,053
|
|
Closed-End
Funds
|
6,653
|
|
|
6,816
|
|
|
6,748
|
|
|
5,343
|
|
|
5,639
|
|
Exchange Traded
Funds
|
1,078
|
|
|
1,054
|
|
|
1,156
|
|
|
480
|
|
|
541
|
|
Retail Separate
Accounts
|
18,260
|
|
|
18,863
|
|
|
20,414
|
|
|
17,660
|
|
|
22,054
|
|
Institutional
Accounts
|
32,056
|
|
|
30,951
|
|
|
32,635
|
|
|
28,210
|
|
|
34,545
|
|
Structured
Products
|
3,984
|
|
|
3,972
|
|
|
3,903
|
|
|
4,343
|
|
|
4,264
|
|
Total
Long-Term
|
$
|
103,254
|
|
|
$
|
102,846
|
|
|
$
|
107,726
|
|
|
$
|
89,534
|
|
|
$
|
107,096
|
|
Liquidity
(2)
|
1,752
|
|
|
1,221
|
|
|
1,178
|
|
|
1,160
|
|
|
1,365
|
|
Total
|
$
|
105,006
|
|
|
$
|
104,067
|
|
|
$
|
108,904
|
|
|
$
|
90,694
|
|
|
$
|
108,461
|
|
|
|
|
|
|
|
|
|
|
|
By product
(average) (3)
|
|
|
|
|
|
|
|
|
|
Open-End Funds
(1)
|
$
|
40,961
|
|
|
$
|
41,457
|
|
|
$
|
41,718
|
|
|
$
|
41,060
|
|
|
$
|
37,198
|
|
Closed-End
Funds
|
6,551
|
|
|
6,649
|
|
|
6,639
|
|
|
6,524
|
|
|
5,566
|
|
Exchange Traded
Funds
|
1,082
|
|
|
1,048
|
|
|
1,049
|
|
|
962
|
|
|
554
|
|
Retail Separate
Accounts
|
17,123
|
|
|
18,260
|
|
|
18,863
|
|
|
20,414
|
|
|
17,660
|
|
Institutional
Accounts
|
30,771
|
|
|
31,462
|
|
|
31,748
|
|
|
31,534
|
|
|
31,648
|
|
Structured
Products
|
3,968
|
|
|
3,957
|
|
|
3,903
|
|
|
4,191
|
|
|
4,265
|
|
Total
Long-Term
|
$
|
100,456
|
|
|
$
|
102,833
|
|
|
$
|
103,920
|
|
|
$
|
104,685
|
|
|
$
|
96,891
|
|
Liquidity
(2)
|
1,769
|
|
|
1,710
|
|
|
1,195
|
|
|
1,219
|
|
|
1,267
|
|
Total
|
$
|
102,225
|
|
|
$
|
104,543
|
|
|
$
|
105,115
|
|
|
$
|
105,904
|
|
|
$
|
98,158
|
|
|
|
|
|
|
|
|
|
|
|
By asset class
(period end):
|
|
|
|
|
|
|
|
|
|
Equity
|
$
|
64,888
|
|
|
$
|
65,544
|
|
|
$
|
70,720
|
|
|
$
|
57,180
|
|
|
$
|
73,823
|
|
Fixed
Income
|
32,983
|
|
|
31,704
|
|
|
31,186
|
|
|
28,231
|
|
|
28,870
|
|
Alternatives
(4)
|
5,383
|
|
|
5,598
|
|
|
5,820
|
|
|
4,123
|
|
|
4,403
|
|
Total
Long-Term
|
$
|
103,254
|
|
|
$
|
102,846
|
|
|
$
|
107,726
|
|
|
$
|
89,534
|
|
|
$
|
107,096
|
|
Liquidity
(2)
|
1,752
|
|
|
1,221
|
|
|
1,178
|
|
|
1,160
|
|
|
1,365
|
|
Total
|
$
|
105,006
|
|
|
$
|
104,067
|
|
|
$
|
108,904
|
|
|
$
|
90,694
|
|
|
$
|
108,461
|
|
Assets Under
Management - Average Management Fees Earned (5)
(in basis
points)
|
|
|
Three Months
Ended
|
|
6/30/2019
|
|
9/30/2019
|
|
12/31/2019
|
|
3/31/2020
|
|
6/30/2020
|
All
Products
|
|
|
|
|
|
|
|
|
|
Open-End Funds
(1)
|
55.7
|
|
|
56.6
|
|
|
57.4
|
|
|
57.8
|
|
|
58.4
|
|
Closed-End
Funds
|
65.0
|
|
|
64.7
|
|
|
64.0
|
|
|
62.8
|
|
|
61.8
|
|
Exchange Traded
Funds
|
23.4
|
|
|
25.3
|
|
|
22.0
|
|
|
21.3
|
|
|
14.1
|
|
Retail Separate
Accounts
|
48.4
|
|
|
48.0
|
|
|
46.8
|
|
|
50.7
|
|
|
51.0
|
|
Institutional
Accounts (6)
|
30.8
|
|
|
31.8
|
|
|
31.8
|
|
|
29.2
|
|
|
31.3
|
|
Structured Products
(6)
|
35.3
|
|
|
37.3
|
|
|
37.9
|
|
|
33.9
|
|
|
26.8
|
|
All Long-Term
Products (6)
|
46.3
|
|
|
46.9
|
|
|
47.0
|
|
|
46.8
|
|
|
46.8
|
|
Liquidity
(2)
|
10.6
|
|
|
10.7
|
|
|
8.9
|
|
|
9.8
|
|
|
11.8
|
|
All
Products
|
45.7
|
|
|
46.3
|
|
|
46.5
|
|
|
46.4
|
|
|
46.3
|
|
|
|
(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
|
|
- 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 investment
management fees divided by average assets. Investment
management fees exclude the impact of consolidated investment
products
|
(6)
|
Includes
performance-related fees, in basis points, earned during the three
months ended as follows:
|
|
6/30/2019
|
|
9/30/2019
|
|
12/31/2019
|
|
3/31/2020
|
|
6/30/2020
|
Institutional
Accounts
|
0.2
|
|
|
1.5
|
|
|
1.2
|
|
|
0.8
|
|
|
0.7
|
|
Structured
Products
|
—
|
|
|
—
|
|
|
1.5
|
|
|
—
|
|
|
—
|
|
All Long-Term
Products
|
0.1
|
|
|
0.5
|
|
|
0.4
|
|
|
0.2
|
|
|
0.2
|
|
Assets Under
Management - Asset Flows by Product
(in
millions)
|
|
|
Three Months
Ended
|
|
|
Six Months
Ended
|
|
6/30/2019
|
|
9/30/2019
|
|
12/31/2019
|
|
3/31/2020
|
|
6/30/2020
|
|
|
6/30/2019
|
|
6/30/2020
|
Open-End Funds
(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning
balance
|
$
|
40,633
|
|
|
$
|
41,223
|
|
|
$
|
41,190
|
|
|
$
|
42,870
|
|
|
$
|
33,498
|
|
|
|
$
|
37,710
|
|
|
$
|
42,870
|
|
Inflows
|
2,510
|
|
|
2,982
|
|
|
2,343
|
|
|
3,874
|
|
|
4,388
|
|
|
|
5,510
|
|
|
8,262
|
|
Outflows
|
(3,214)
|
|
|
(3,164)
|
|
|
(2,784)
|
|
|
(5,471)
|
|
|
(4,005)
|
|
|
|
(7,081)
|
|
|
(9,476)
|
|
Net flows
|
(704)
|
|
|
(182)
|
|
|
(441)
|
|
|
(1,597)
|
|
|
383
|
|
|
|
(1,571)
|
|
|
(1,214)
|
|
Market
performance
|
1,465
|
|
|
(69)
|
|
|
2,301
|
|
|
(7,730)
|
|
|
6,244
|
|
|
|
5,304
|
|
|
(1,486)
|
|
Other (2)
|
(171)
|
|
|
218
|
|
|
(180)
|
|
|
(45)
|
|
|
(72)
|
|
|
|
(220)
|
|
|
(117)
|
|
Ending
balance
|
$
|
41,223
|
|
|
$
|
41,190
|
|
|
$
|
42,870
|
|
|
$
|
33,498
|
|
|
$
|
40,053
|
|
|
|
$
|
41,223
|
|
|
$
|
40,053
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Closed-End
Funds
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning
balance
|
$
|
6,553
|
|
|
$
|
6,653
|
|
|
$
|
6,816
|
|
|
$
|
6,748
|
|
|
$
|
5,343
|
|
|
|
$
|
5,956
|
|
|
$
|
6,748
|
|
Inflows
|
9
|
|
|
14
|
|
|
10
|
|
|
5
|
|
|
—
|
|
|
|
20
|
|
|
5
|
|
Outflows
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
—
|
|
|
—
|
|
Net flows
|
9
|
|
|
14
|
|
|
10
|
|
|
5
|
|
|
—
|
|
|
|
20
|
|
|
5
|
|
Market
performance
|
182
|
|
|
246
|
|
|
26
|
|
|
(1,185)
|
|
|
380
|
|
|
|
844
|
|
|
(805)
|
|
Other (2)
|
(91)
|
|
|
(97)
|
|
|
(104)
|
|
|
(225)
|
|
|
(84)
|
|
|
|
(167)
|
|
|
(309)
|
|
Ending
balance
|
$
|
6,653
|
|
|
$
|
6,816
|
|
|
$
|
6,748
|
|
|
$
|
5,343
|
|
|
$
|
5,639
|
|
|
|
$
|
6,653
|
|
|
$
|
5,639
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exchange Traded
Funds
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning
balance
|
$
|
1,102
|
|
|
$
|
1,078
|
|
|
$
|
1,054
|
|
|
$
|
1,156
|
|
|
$
|
480
|
|
|
|
$
|
668
|
|
|
$
|
1,156
|
|
Inflows
|
132
|
|
|
94
|
|
|
164
|
|
|
86
|
|
|
74
|
|
|
|
526
|
|
|
160
|
|
Outflows
|
(117)
|
|
|
(54)
|
|
|
(62)
|
|
|
(233)
|
|
|
(140)
|
|
|
|
(163)
|
|
|
(373)
|
|
Net flows
|
15
|
|
|
40
|
|
|
102
|
|
|
(147)
|
|
|
(66)
|
|
|
|
363
|
|
|
(213)
|
|
Market
performance
|
(5)
|
|
|
(36)
|
|
|
23
|
|
|
(505)
|
|
|
137
|
|
|
|
103
|
|
|
(368)
|
|
Other (2)
|
(34)
|
|
|
(28)
|
|
|
(23)
|
|
|
(24)
|
|
|
(10)
|
|
|
|
(56)
|
|
|
(34)
|
|
Ending
balance
|
$
|
1,078
|
|
|
$
|
1,054
|
|
|
$
|
1,156
|
|
|
$
|
480
|
|
|
$
|
541
|
|
|
|
$
|
1,078
|
|
|
$
|
541
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retail Separate
Accounts
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning
balance
|
$
|
17,123
|
|
|
$
|
18,260
|
|
|
$
|
18,863
|
|
|
$
|
20,414
|
|
|
$
|
17,660
|
|
|
|
$
|
14,998
|
|
|
$
|
20,414
|
|
Inflows
|
731
|
|
|
819
|
|
|
1,012
|
|
|
1,061
|
|
|
1,483
|
|
|
|
1,484
|
|
|
2,544
|
|
Outflows
|
(447)
|
|
|
(435)
|
|
|
(436)
|
|
|
(775)
|
|
|
(654)
|
|
|
|
(919)
|
|
|
(1,429)
|
|
Net flows
|
284
|
|
|
384
|
|
|
576
|
|
|
286
|
|
|
829
|
|
|
|
565
|
|
|
1,115
|
|
Market
performance
|
877
|
|
|
297
|
|
|
976
|
|
|
(3,040)
|
|
|
3,560
|
|
|
|
2,772
|
|
|
520
|
|
Other (2)
|
(24)
|
|
|
(78)
|
|
|
(1)
|
|
|
—
|
|
|
5
|
|
|
|
(75)
|
|
|
5
|
|
Ending
balance
|
$
|
18,260
|
|
|
$
|
18,863
|
|
|
$
|
20,414
|
|
|
$
|
17,660
|
|
|
$
|
22,054
|
|
|
|
$
|
18,260
|
|
|
$
|
22,054
|
|
Assets Under
Management - Asset Flows by Product (continued)
(in
millions)
|
|
|
Three Months
Ended
|
|
Six Months
Ended
|
|
6/30/2019
|
|
9/30/2019
|
|
12/31/2019
|
|
3/31/2020
|
|
6/30/2020
|
|
6/30/2019
|
|
6/30/2020
|
Institutional
Accounts
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning
balance
|
$
|
30,514
|
|
|
$
|
32,056
|
|
|
$
|
30,951
|
|
|
$
|
32,635
|
|
|
$
|
28,210
|
|
|
$
|
27,445
|
|
|
$
|
32,635
|
|
Inflows
|
1,737
|
|
|
851
|
|
|
1,235
|
|
|
1,499
|
|
|
3,141
|
|
|
2,691
|
|
|
4,640
|
|
Outflows
|
(1,259)
|
|
|
(2,216)
|
|
|
(1,091)
|
|
|
(1,777)
|
|
|
(1,666)
|
|
|
(2,413)
|
|
|
(3,443)
|
|
Net flows
|
478
|
|
|
(1,365)
|
|
|
144
|
|
|
(278)
|
|
|
1,475
|
|
|
278
|
|
|
1,197
|
|
Market
performance
|
1,141
|
|
|
527
|
|
|
1,553
|
|
|
(4,150)
|
|
|
4,877
|
|
|
4,297
|
|
|
727
|
|
Other (2)
|
(77)
|
|
|
(267)
|
|
|
(13)
|
|
|
3
|
|
|
(17)
|
|
|
36
|
|
|
(14)
|
|
Ending
balance
|
$
|
32,056
|
|
|
$
|
30,951
|
|
|
$
|
32,635
|
|
|
$
|
28,210
|
|
|
$
|
34,545
|
|
|
$
|
32,056
|
|
|
$
|
34,545
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Structured
Products
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning
balance
|
$
|
3,998
|
|
|
$
|
3,984
|
|
|
$
|
3,972
|
|
|
$
|
3,903
|
|
|
$
|
4,343
|
|
|
$
|
3,640
|
|
|
$
|
3,903
|
|
Inflows
|
—
|
|
|
—
|
|
|
—
|
|
|
491
|
|
|
—
|
|
|
389
|
|
|
491
|
|
Outflows
|
(21)
|
|
|
(16)
|
|
|
(45)
|
|
|
(42)
|
|
|
(73)
|
|
|
(37)
|
|
|
(115)
|
|
Net flows
|
(21)
|
|
|
(16)
|
|
|
(45)
|
|
|
449
|
|
|
(73)
|
|
|
352
|
|
|
376
|
|
Market
performance
|
56
|
|
|
54
|
|
|
36
|
|
|
39
|
|
|
33
|
|
|
83
|
|
|
72
|
|
Other (2)
|
(49)
|
|
|
(50)
|
|
|
(60)
|
|
|
(48)
|
|
|
(39)
|
|
|
(91)
|
|
|
(87)
|
|
Ending
balance
|
$
|
3,984
|
|
|
$
|
3,972
|
|
|
$
|
3,903
|
|
|
$
|
4,343
|
|
|
$
|
4,264
|
|
|
$
|
3,984
|
|
|
$
|
4,264
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
Long-Term
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning
balance
|
$
|
99,923
|
|
|
$
|
103,254
|
|
|
$
|
102,846
|
|
|
$
|
107,726
|
|
|
$
|
89,534
|
|
|
$
|
90,417
|
|
|
$
|
107,726
|
|
Inflows
|
5,119
|
|
|
4,760
|
|
|
4,764
|
|
|
7,016
|
|
|
9,086
|
|
|
10,620
|
|
|
16,102
|
|
Outflows
|
(5,058)
|
|
|
(5,885)
|
|
|
(4,418)
|
|
|
(8,298)
|
|
|
(6,538)
|
|
|
(10,613)
|
|
|
(14,836)
|
|
Net flows
|
61
|
|
|
(1,125)
|
|
|
346
|
|
|
(1,282)
|
|
|
2,548
|
|
|
7
|
|
|
1,266
|
|
Market
performance
|
3,716
|
|
|
1,019
|
|
|
4,915
|
|
|
(16,571)
|
|
|
15,231
|
|
|
13,403
|
|
|
(1,340)
|
|
Other (2)
|
(446)
|
|
|
(302)
|
|
|
(381)
|
|
|
(339)
|
|
|
(217)
|
|
|
(573)
|
|
|
(556)
|
|
Ending
balance
|
$
|
103,254
|
|
|
$
|
102,846
|
|
|
$
|
107,726
|
|
|
$
|
89,534
|
|
|
$
|
107,096
|
|
|
$
|
103,254
|
|
|
$
|
107,096
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liquidity
(3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning
balance
|
$
|
1,789
|
|
|
$
|
1,752
|
|
|
$
|
1,221
|
|
|
$
|
1,178
|
|
|
$
|
1,160
|
|
|
$
|
1,613
|
|
|
$
|
1,178
|
|
Other (2)
|
(37)
|
|
|
(531)
|
|
|
(43)
|
|
|
(18)
|
|
|
205
|
|
|
139
|
|
|
187
|
|
Ending
balance
|
$
|
1,752
|
|
|
$
|
1,221
|
|
|
$
|
1,178
|
|
|
$
|
1,160
|
|
|
$
|
1,365
|
|
|
$
|
1,752
|
|
|
$
|
1,365
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning
balance
|
$
|
101,712
|
|
|
$
|
105,006
|
|
|
$
|
104,067
|
|
|
$
|
108,904
|
|
|
$
|
90,694
|
|
|
$
|
92,030
|
|
|
$
|
108,904
|
|
Inflows
|
5,119
|
|
|
4,760
|
|
|
4,764
|
|
|
7,016
|
|
|
9,086
|
|
|
10,620
|
|
|
16,102
|
|
Outflows
|
(5,058)
|
|
|
(5,885)
|
|
|
(4,418)
|
|
|
(8,298)
|
|
|
(6,538)
|
|
|
(10,613)
|
|
|
(14,836)
|
|
Net flows
|
61
|
|
|
(1,125)
|
|
|
346
|
|
|
(1,282)
|
|
|
2,548
|
|
|
7
|
|
|
1,266
|
|
Market
performance
|
3,716
|
|
|
1,019
|
|
|
4,915
|
|
|
(16,571)
|
|
|
15,231
|
|
|
13,403
|
|
|
(1,340)
|
|
Other (2)
|
(483)
|
|
|
(833)
|
|
|
(424)
|
|
|
(357)
|
|
|
(12)
|
|
|
(434)
|
|
|
(369)
|
|
Ending
balance
|
$
|
105,006
|
|
|
$
|
104,067
|
|
|
$
|
108,904
|
|
|
$
|
90,694
|
|
|
$
|
108,461
|
|
|
$
|
105,006
|
|
|
$
|
108,461
|
|
|
|
(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 effect 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
|
|
6/30/2020
|
|
6/30/2019
|
|
3/31/2020
|
Total revenues,
GAAP
|
$
|
132,894
|
|
|
$
|
140,489
|
|
|
$
|
144,566
|
|
Consolidated
investment products revenues (1)
|
2,526
|
|
|
1,867
|
|
|
1,952
|
|
Investment management
fees (2)
|
(8,453)
|
|
|
(10,702)
|
|
|
(9,947)
|
|
Distribution and
service fees (2)
|
(8,892)
|
|
|
(10,620)
|
|
|
(9,462)
|
|
Total revenues, as
adjusted
|
$
|
118,075
|
|
|
$
|
121,034
|
|
|
$
|
127,109
|
|
Reconciliation of
Total Operating Expenses, GAAP to Operating Expenses, as
Adjusted:
|
|
|
Three Months
Ended
|
|
6/30/2020
|
|
6/30/2019
|
|
3/31/2020
|
Total operating
expenses, GAAP
|
$
|
106,272
|
|
|
$
|
110,361
|
|
|
$
|
119,964
|
|
Consolidated
investment products expenses (1)
|
(2,179)
|
|
|
(2,568)
|
|
|
(6,749)
|
|
Distribution and
other asset-based expenses (3)
|
(17,345)
|
|
|
(21,322)
|
|
|
(19,409)
|
|
Amortization of
intangible assets (4)
|
(7,533)
|
|
|
(7,583)
|
|
|
(7,533)
|
|
Restructuring and
severance (5)
|
(420)
|
|
|
(320)
|
|
|
—
|
|
Acquisition and
integration expenses (6)
|
(952)
|
|
|
(1,234)
|
|
|
781
|
|
Other (7)
|
(241)
|
|
|
—
|
|
|
—
|
|
Total operating
expenses, as adjusted
|
$
|
77,602
|
|
|
$
|
77,334
|
|
|
$
|
87,054
|
|
Reconciliation of
Operating Income (Loss), GAAP to Operating Income (Loss), as
Adjusted:
|
|
|
Three Months
Ended
|
|
6/30/2020
|
|
6/30/2019
|
|
3/31/2020
|
Operating income
(loss), GAAP
|
$
|
26,622
|
|
|
$
|
30,128
|
|
|
$
|
24,602
|
|
Consolidated
investment products (earnings) losses (1)
|
4,705
|
|
|
4,435
|
|
|
8,701
|
|
Amortization of
intangible assets (4)
|
7,533
|
|
|
7,583
|
|
|
7,533
|
|
Restructuring and
severance (5)
|
420
|
|
|
320
|
|
|
—
|
|
Acquisition and
integration expenses (6)
|
952
|
|
|
1,234
|
|
|
(781)
|
|
Other (7)
|
241
|
|
|
—
|
|
|
—
|
|
Operating income
(loss), as adjusted
|
$
|
40,473
|
|
|
$
|
43,700
|
|
|
$
|
40,055
|
|
|
|
|
|
|
|
Operating margin,
GAAP
|
20.0%
|
|
|
21.4%
|
|
|
17.0%
|
|
Operating margin, as
adjusted
|
34.3%
|
|
|
36.1%
|
|
|
31.5%
|
|
Reconciliation of Net
Income (Loss) Attributable to Common Stockholders, GAAP to Net
Income (Loss) Attributable to Common Stockholders, as
Adjusted:
|
|
|
Three Months
Ended
|
|
6/30/2020
|
|
6/30/2019
|
|
3/31/2020
|
Net income (loss)
attributable to common stockholders, GAAP
|
$
|
11,279
|
|
|
$
|
24,842
|
|
|
$
|
(4,285)
|
|
Amortization of
intangible assets, net of tax (4)
|
4,731
|
|
|
4,786
|
|
|
4,601
|
|
Restructuring and
severance, net of tax (5)
|
305
|
|
|
233
|
|
|
—
|
|
Acquisition and
integration expenses, net of tax (6)
|
691
|
|
|
900
|
|
|
(554)
|
|
Other, net of tax
(7)
|
4,245
|
|
|
1,733
|
|
|
7,218
|
|
Seed capital and CLO
investments (gains) losses, net of tax (8)
|
4,316
|
|
|
(2,504)
|
|
|
19,484
|
|
Net income (loss)
attributable to common stockholders, as adjusted
|
$
|
25,567
|
|
|
$
|
29,990
|
|
|
$
|
26,464
|
|
|
|
|
|
|
|
Weighted average
shares outstanding - diluted
|
7,895
|
|
|
8,252
|
|
|
7,422
|
|
Dilutive impact of
restricted stock units and stock options
|
—
|
|
|
—
|
|
|
232
|
|
Preferred
stockA
|
—
|
|
|
—
|
|
|
321
|
|
Weighted average
shares outstanding - diluted, as adjusted
|
7,895
|
|
|
8,252
|
|
|
7,975
|
|
|
|
|
|
|
|
Earnings (loss) per
share - diluted, GAAP
|
$
|
1.43
|
|
|
$
|
3.26
|
|
|
$
|
(0.58)
|
|
Earnings (loss) per
share - diluted, as adjusted
|
$
|
3.24
|
|
|
$
|
3.63
|
|
|
$
|
3.32
|
|
A
|
For the period ending
March 31, 2020, assumes conversion of preferred shares to common
shares at the actual mandatory conversion rate of 0.7938 for the
portion of the period prior to the conversion, which occurred on
February 1, 2020
|
Reconciliation of
Income (Loss) Before Taxes, GAAP to Income (Loss) Before Taxes, as
Adjusted:
|
|
|
Three Months
Ended
|
|
6/30/2020
|
|
6/30/2019
|
|
3/31/2020
|
Income (loss) before
taxes, GAAP
|
$
|
23,787
|
|
|
$
|
36,687
|
|
|
$
|
11,297
|
|
Consolidated
investment products (earnings) losses (1)
|
170
|
|
|
(223)
|
|
|
1,732
|
|
Amortization of
intangible assets (4)
|
7,533
|
|
|
7,583
|
|
|
7,533
|
|
Restructuring and
severance (5)
|
420
|
|
|
320
|
|
|
—
|
|
Acquisition and
integration expenses (6)
|
952
|
|
|
1,234
|
|
|
(781)
|
|
Other (7)
|
241
|
|
|
—
|
|
|
(704)
|
|
Seed capital and CLO
investments (gains) losses (8)
|
4,927
|
|
|
(2,446)
|
|
|
20,185
|
|
Income (loss) before
taxes, as adjusted
|
$
|
38,030
|
|
|
$
|
43,155
|
|
|
$
|
39,262
|
|
Reconciliation of
Income Tax Expense (Benefit), GAAP to Income Tax Expense (Benefit),
as Adjusted:
|
|
|
Three Months
Ended
|
|
6/30/2020
|
|
6/30/2019
|
|
3/31/2020
|
Income tax expense
(benefit), GAAP
|
$
|
7,578
|
|
|
$
|
8,788
|
|
|
$
|
10,291
|
|
Tax impact
of:
|
|
|
|
|
|
Amortization
of intangible assets (4)
|
2,062
|
|
|
2,050
|
|
|
2,189
|
|
Restructuring
and severance (5)
|
115
|
|
|
87
|
|
|
—
|
|
Acquisition
and integration expenses (6)
|
261
|
|
|
334
|
|
|
(227)
|
|
Other
(7)
|
(211)
|
|
|
351
|
|
|
(1,547)
|
|
Seed capital
and CLO investments (gains) losses (8)
|
611
|
|
|
58
|
|
|
701
|
|
Income tax expense
(benefit), as adjusted
|
$
|
10,416
|
|
|
$
|
11,668
|
|
|
$
|
11,407
|
|
|
|
|
|
|
|
Effective tax rate,
GAAPA
|
31.9
|
%
|
|
24.0
|
%
|
|
91.1
|
%
|
Effective tax rate,
as adjustedB
|
27.4
|
%
|
|
27.0
|
%
|
|
29.1
|
%
|
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
Administration and Shareholder Service Fees, GAAP to Administration
and Shareholder Service Fees, as Adjusted:
|
|
|
Three Months
Ended
|
|
6/30/2020
|
|
6/30/2019
|
|
3/31/2020
|
Administration and
shareholder service fees, GAAP
|
$
|
13,289
|
|
|
$
|
15,054
|
|
|
$
|
14,653
|
|
Consolidated
investment products fees (1)
|
51
|
|
|
27
|
|
|
39
|
|
Administration and
shareholder service fees, as adjusted
|
$
|
13,340
|
|
|
$
|
15,081
|
|
|
$
|
14,692
|
|
Reconciliation of
Employment Expenses, GAAP to Employment Expenses, as
Adjusted:
|
|
|
Three Months
Ended
|
|
6/30/2020
|
|
6/30/2019
|
|
3/31/2020
|
Employment expenses,
GAAP
|
$
|
60,163
|
|
|
$
|
58,123
|
|
|
$
|
66,130
|
|
Acquisition and
integration expenses (6)
|
(952)
|
|
|
(1,115)
|
|
|
781
|
|
Other (7)
|
(241)
|
|
|
—
|
|
|
—
|
|
Employment expenses,
as adjusted
|
$
|
58,970
|
|
|
$
|
57,008
|
|
|
$
|
66,911
|
|
Reconciliation of
Other Operating Expenses, GAAP to Other Operating Expenses, as
Adjusted:
|
|
|
Three Months
Ended
|
|
6/30/2020
|
|
6/30/2019
|
|
3/31/2020
|
Other operating
expenses, GAAP
|
$
|
17,436
|
|
|
$
|
19,174
|
|
|
$
|
18,885
|
|
Acquisition and
integration expenses (6)
|
—
|
|
|
(119)
|
|
|
—
|
|
Other operating
expenses, as adjusted
|
$
|
17,436
|
|
|
$
|
19,055
|
|
|
$
|
18,885
|
|
Reconciliation of
Total Other Income (Expense), Net, GAAP to Total Other Income
(Expense), Net, as Adjusted:
|
|
|
Three Months
Ended
|
|
6/30/2020
|
|
6/30/2019
|
|
3/31/2020
|
Total other income
(expense), net GAAP
|
$
|
(435)
|
|
|
$
|
12,455
|
|
|
$
|
(15,601)
|
|
Consolidated
investment products (1)
|
(4,949)
|
|
|
(9,211)
|
|
|
(4,855)
|
|
Seed capital and CLO
investments (gains) losses (8)
|
4,927
|
|
|
(2,446)
|
|
|
20,185
|
|
Total other income
(expense), net as adjusted
|
$
|
(457)
|
|
|
$
|
798
|
|
|
$
|
(271)
|
|
Reconciliation of
Interest and Dividend Income, GAAP to Interest and Dividend Income,
as Adjusted:
|
|
|
Three Months
Ended
|
|
6/30/2020
|
|
6/30/2019
|
|
3/31/2020
|
Interest and dividend
income, GAAP
|
$
|
242
|
|
|
$
|
964
|
|
|
$
|
752
|
|
Consolidated
investment products (1)
|
898
|
|
|
2,844
|
|
|
2,629
|
|
Interest and dividend
income, as adjusted
|
$
|
1,140
|
|
|
$
|
3,808
|
|
|
$
|
3,381
|
|
Reconciliation of
Total Noncontrolling Interests, GAAP to Total Noncontrolling
Interests, as Adjusted
|
|
|
Three Months
Ended
|
|
6/30/2020
|
|
6/30/2019
|
|
3/31/2020
|
Total noncontrolling
interests, GAAP
|
$
|
(4,930)
|
|
|
$
|
(973)
|
|
|
$
|
(5,291)
|
|
Consolidated
investment products (1)
|
(170)
|
|
|
223
|
|
|
(1,732)
|
|
Amortization of
intangible assets (4)
|
(740)
|
|
|
(747)
|
|
|
(743)
|
|
Other (7)
|
3,793
|
|
|
—
|
|
|
6,375
|
|
Total noncontrolling
interests, as adjusted
|
$
|
(2,047)
|
|
|
$
|
(1,497)
|
|
|
$
|
(1,391)
|
|
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 the product 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 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.
6.
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
|
6/30/2020
|
|
6/30/2019
|
|
3/31/2020
|
|
|
Employment
expenses
|
952
|
|
|
$
|
1,115
|
|
|
$
|
(781)
|
|
|
|
Other operating
expenses
|
—
|
|
|
119
|
|
|
—
|
|
|
|
Total Acquisition
and Integration Expenses
|
$
|
952
|
|
|
$
|
1,234
|
|
|
$
|
(781)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7. 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. Interest expense is adjusted to remove gains on
early extinguishment 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. Preferred dividends are adjusted as preferred
shares were mandatorily converted into common shares on
February 1, 2020 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
|
6/30/2020
|
|
6/30/2019
|
|
3/31/2020
|
|
|
Occupancy related
expenses
|
$
|
—
|
|
|
$
|
—
|
|
|
—
|
|
|
|
Tax impact of
occupancy related expenses
|
—
|
|
|
—
|
|
|
—
|
|
|
|
Employment expense
fair value adjustments
|
241
|
|
|
—
|
|
|
—
|
|
|
|
Tax impact of
employment expense fair value adjustments
|
(70)
|
|
|
—
|
|
|
—
|
|
|
|
Gain on
extinguishment of debt
|
—
|
|
|
—
|
|
|
(704)
|
|
|
|
Tax impact of
gain on extinguishment of debt
|
—
|
|
|
—
|
|
|
205
|
|
|
|
Other discrete tax
adjustments
|
281
|
|
|
(351)
|
|
|
1,342
|
|
|
|
Affiliate minority
interest fair value adjustments
|
3,793
|
|
|
—
|
|
|
6,375
|
|
|
|
Preferred stockholder
dividends
|
—
|
|
|
2,084
|
|
|
—
|
|
|
|
Total
Other
|
$
|
4,245
|
|
|
$
|
1,733
|
|
|
$
|
7,218
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Seed Capital and CLO Related
8. 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 common stockholders, 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 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 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
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 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 2019 Annual Report on Form 10-K and as supplemented by any
subsequent Quarterly Report on Form 10-Q, as well as the following
risks and uncertainties resulting from: (i) the on-going effects of
the COVID-19 pandemic and associated global economic disruption
(ii) general domestic and global economic, political and pandemic
conditions; (iii) any reduction in our assets under management;
(iv) withdrawal, renegotiation or termination of investment
advisory agreements; (v) damage to our reputation; (vi) failure to
comply with investment guidelines or other contractual
requirements; (vii) inability to satisfy financial covenants and
payments related to our indebtedness; (viii) inability to attract
and retain key personnel; (ix) challenges from the competition we
face in our business; (x) adverse regulatory and legal
developments; (xi) unfavorable changes in tax laws or limitations;
(xii) adverse developments related to unaffiliated subadvisers;
(xiii) negative implications of changes in key distribution
relationships; (xiv) interruptions in or failure to provide
critical technological service by us or third parties; (xv)
volatility associated with our common stock; (xvi) adverse civil
litigation and government investigations or proceedings; (xvii)
risk of loss on our investments; (xviii) inability to make
quarterly common stock dividends; (xix) lack of sufficient capital
on satisfactory terms; (xx) losses or costs not covered by
insurance; (xxi) impairment of goodwill or intangible assets;
(xxii) inability to achieve expected acquisition-related benefits;
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 2019 Annual Report on Form
10-K, our Quarterly Report on Form 10-Q for the quarter ended
March 31, 2020 and our other periodic
reports filed with the Securities and Exchange Commission (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 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 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.
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SOURCE Virtus Investment Partners, Inc.