- Earnings Per Share - Diluted of $4.21; Earnings Per Share -
Diluted, as Adjusted, of $6.11
- Total Sales of $6.2B; Net Flows of ($3.8B); Assets Under
Management of $172.3B
Virtus Investment Partners, Inc. (NYSE: VRTS) today reported
financial results for the three months ended December 31, 2023.
Financial Highlights
(Unaudited)
(in millions, except per share data or as
noted)
Three Months Ended
Three Months Ended
12/31/2023
12/31/2022
Change
9/30/2023
Change
U.S. GAAP Financial
Measures
Revenues
$
214.6
$
198.4
8
%
$
219.3
(2
%)
Operating expenses
$
175.6
$
167.2
5
%
$
174.4
1
%
Operating income (loss)
$
39.0
$
31.2
25
%
$
44.9
(13
%)
Operating margin
18.2
%
15.7
%
20.5
%
Net income (loss) attributable to Virtus
Investment Partners, Inc.
$
30.8
$
35.4
(13
%)
$
30.9
—
%
Earnings (loss) per share - diluted
$
4.21
$
4.77
(12
%)
$
4.19
—
%
Weighted average shares outstanding -
diluted
7.320
7.419
(1
%)
7.379
(1
%)
Non-GAAP Financial
Measures (1)
Revenues, as adjusted
$
193.4
$
176.3
10
%
$
197.5
(2
%)
Operating expenses, as adjusted
$
129.5
$
120.2
8
%
$
130.5
(1
%)
Operating income (loss), as adjusted
$
63.9
$
56.1
14
%
$
67.0
(5
%)
Operating margin, as adjusted
33.0
%
31.8
%
33.9
%
Net income (loss) attributable to Virtus
Investment Partners, Inc., as adjusted
$
44.8
$
38.3
17
%
$
45.8
(2
%)
Earnings (loss) per share - diluted, as
adjusted
$
6.11
$
5.17
18
%
$
6.21
(2
%)
Weighted average shares outstanding -
diluted, as adjusted
7.320
7.419
(1
%)
7.379
(1
%)
(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
12/31/2023
12/31/2022
Change
9/30/2023
Change
Ending total assets under management
$
172.3
$
149.4
15
%
$
162.5
6
%
Average total assets under management
$
162.7
$
148.6
9
%
$
167.9
(3
%)
Total sales
$
6.2
$
7.3
(14
%)
$
5.8
7
%
Net flows
$
(3.8
)
$
(3.4
)
12
%
$
(1.5
)
N/M
N/M - Not Meaningful
Total assets under management of $172.3 billion at December 31,
2023 increased 6% from $162.5 billion at September 30, 2023
primarily due to market performance with positive net flows in
retail separate accounts, partially offset by net outflows in
institutional and open-end funds. In addition, the company provided
services to $2.6 billion of other fee-earning assets.
Total sales increased 7% to $6.2 billion from $5.8 billion in
the third quarter due to higher retail sales, with growth in both
retail separate accounts and open-end funds. Retail separate
account sales of $2.1 billion increased 15% from $1.8 billion led
by growth in the private client channel. Open-end fund sales of
$2.9 billion increased 9% from $2.7 billion primarily reflecting
higher sales of mid-cap, small/mid-cap, and bank loan strategies.
Institutional sales of $1.2 billion declined modestly from $1.3
billion in the prior quarter, which included a $0.3 billion
collateralized loan obligation (CLO) issuance.
Net flows of ($3.8) billion compared with ($1.5) billion in the
third quarter. Institutional net flows of ($2.2) billion compared
with ($0.4) billion and included repositioning by several large
retirement plan mandates. Retail separate account net flows of $0.4
billion increased from $0.3 billion in the prior quarter, with net
inflows in both the intermediary sold and private client channels.
Open-end fund net flows of ($2.0) billion compared with ($1.5)
billion in the prior quarter due to higher redemptions across
strategies but included continued positive net flows in
small/mid-cap and global equity strategies.
GAAP Results
Operating income of $39.0 million declined 13% from $44.9
million in the prior quarter due to a 2% decrease in revenues,
reflecting lower average assets under management, and a 1% increase
in operating expenses. The increase in operating expenses primarily
reflected CLO issuance expenses and fair value adjustments to
contingent consideration, partially offset by lower employment
expenses, primarily variable incentive compensation, and lower
distribution and other asset-based expenses.
Net income attributable to Virtus Investment Partners, Inc. of
$4.21 per diluted share included ($0.71) of fair value adjustments
to affiliate noncontrolling interests, ($0.36) of CLO issuance
expense, ($0.18) of acquisition and integration costs, and ($0.13)
of fair value adjustments to contingent consideration, partially
offset by $0.35 of realized and unrealized gains on investments.
Net income per diluted share of $4.19 in the prior quarter included
($0.67) of fair value adjustments to affiliate noncontrolling
interests and ($0.30) of acquisition and integration costs.
The effective tax rate of 26% increased from 24% in the prior
quarter, primarily reflecting changes in valuation allowances
related to marketable securities.
Non-GAAP Results
Revenues, as adjusted, of $193.4 million decreased 2% from
$197.5 million in the prior quarter primarily due to 3% lower
average assets under management partially offset by higher
performance fees.
Employment expenses, as adjusted, of $96.7 million decreased
from $98.8 million in the prior quarter primarily due to lower
variable incentive compensation. Other operating expenses, as
adjusted, of $31.2 million increased from $30.1 million largely due
to higher travel and related expenses and increased market data
expenses.
Operating income, as adjusted, of $63.9 million and the related
margin of 33.0% decreased from $67.0 million and 33.9% in the prior
quarter, respectively, due to the lower investment management fees
driven by lower average assets under management.
Net income attributable to Virtus Investment Partners, Inc., as
adjusted, per diluted share was $6.11, a modest decrease of $0.10,
or 2%, from $6.21 in the prior quarter. The decrease primarily
reflected lower investment management fees due to lower average
assets under management.
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
12/31/2023
12/31/2022
Change
9/30/2023
Change
Cash and cash equivalents
$
239.6
$
338.2
(29
%)
$
195.4
23
%
Gross debt (1)
$
258.8
$
261.6
(1
%)
$
279.5
(7
%)
Contingent consideration (2)
$
90.9
$
128.4
(29
%)
$
94.4
(4
%)
Redeemable noncontrolling interests
(3)
$
74.2
$
95.5
(22
%)
$
70.6
5
%
Total equity exc. noncontrolling
interests
$
864.0
$
817.0
6
%
$
862.1
—
%
Working capital (4)
$
100.6
$
193.2
(48
%)
$
105.6
(5
%)
Net debt (cash) (5)
$
19.2
$
(76.7
)
N/M
$
84.1
(77
%)
(1)
Excludes deferred financing costs of $5.4
million, $6.5 million, and $5.7 million, as of December 31,
2023, December 31, 2022, and September 30, 2023,
respectively
(2)
Represents estimates of revenue
participation and contingent payments
(3)
Excludes redeemable noncontrolling
interests of consolidated investment products of $30.6 million,
$18.3 million, and $25.7 million as of December 31, 2023,
December 31, 2022, and September 30, 2023,
respectively
(4)
Defined as cash and cash equivalents plus
accounts receivable, net, and deferred compensation related
investments 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. As of
December 31, 2023, deferred compensation related investments were
added to the definition of working capital and prior period amounts
have been adjusted to conform to this definition.
(5)
Defined as gross debt less cash and cash
equivalents
N/M - Not Meaningful
Working capital of $100.6 million at December 31, 2023 compared
with $105.6 million at September 30, 2023, as return of capital and
debt repayment offset cash earnings.
During the quarter, the company repurchased 97,952 shares of
common stock for $20.0 million. For the full year 2023, the company
repurchased 223,807 shares for $45.0 million and reduced shares
outstanding by 1%.
The company repaid the remaining $20.0 million balance of the
revolving credit facility during the quarter. Net debt was $19.2
million, or 0.1x EBITDA, at December 31, 2023.
Conference Call and Investor Presentation
Management will host an investor conference call and webcast on
Friday, February 2, 2024, 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 (NYSE: 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
Twelve Months Ended
12/31/2023
12/31/2022
Change
9/30/2023
Change
12/31/2023
12/31/2022
Change
Revenues
Investment management fees
$
182,149
$
163,648
11
%
$
184,869
(1
%)
$
711,475
$
728,339
(2
%)
Distribution and service fees
13,535
14,606
(7
%)
14,333
(6
%)
56,153
67,518
(17
%)
Administration and shareholder service
fees
18,189
18,973
(4
%)
19,069
(5
%)
73,857
85,862
(14
%)
Other income and fees
714
1,144
(38
%)
1,000
(29
%)
3,783
4,660
(19
%)
Total revenues
214,587
198,371
8
%
219,271
(2
%)
845,268
886,379
(5
%)
Operating Expenses
Employment expenses
99,847
87,676
14
%
101,587
(2
%)
404,742
371,259
9
%
Distribution and other asset-based
expenses
23,470
24,365
(4
%)
24,157
(3
%)
96,802
112,612
(14
%)
Other operating expenses
31,164
31,811
(2
%)
30,494
2
%
125,871
126,178
—
%
Operating expenses of consolidated
investment products
2,611
2,481
5
%
553
372
%
4,224
4,408
(4
%)
Restructuring expense
133
—
N/M
691
(81
%)
824
4,015
(79
%)
Change in fair value of contingent
consideration
1,290
5,120
(75
%)
—
N/M
(5,510
)
8,020
N/M
Depreciation expense
1,670
1,088
53
%
1,504
11
%
5,804
3,923
48
%
Amortization expense
15,446
14,609
6
%
15,382
—
%
61,027
58,504
4
%
Total operating expenses
175,631
167,150
5
%
174,368
1
%
693,784
688,919
1
%
Operating Income (Loss)
38,956
31,221
25
%
44,903
(13
%)
151,484
197,460
(23
%)
Other Income (Expense)
Realized and unrealized gain (loss) on
investments, net
4,056
3,529
15
%
(1,918
)
N/M
6,525
(12,489
)
N/M
Realized and unrealized gain (loss) of
consolidated investment products, net
449
4,147
(89
%)
(1,013
)
N/M
(2,404
)
(39,296
)
(94
%)
Other income (expense), net
622
(352
)
N/M
128
386
%
(440
)
(153
)
188
%
Total other income (expense),
net
5,127
7,324
(30
%)
(2,803
)
N/M
3,681
(51,938
)
N/M
Interest Income (Expense)
Interest expense
(5,987
)
(4,512
)
33
%
(6,222
)
(4
%)
(23,431
)
(13,173
)
78
%
Interest and dividend income
3,673
2,578
42
%
2,872
28
%
12,458
4,448
180
%
Interest and dividend income of
investments of consolidated investment products
53,206
35,889
48
%
49,803
7
%
197,707
107,325
84
%
Interest expense of consolidated
investment products
(43,182
)
(33,374
)
29
%
(38,218
)
13
%
(155,335
)
(80,234
)
94
%
Total interest income (expense),
net
7,710
581
N/M
8,235
(6
%)
31,399
18,366
71
%
Income (Loss) Before Income
Taxes
51,793
39,126
32
%
50,335
3
%
186,564
163,888
14
%
Income tax expense (benefit)
13,294
13,291
—
%
12,181
9
%
45,088
57,260
(21
%)
Net Income (Loss)
38,499
25,835
49
%
38,154
1
%
141,476
106,628
33
%
Noncontrolling interests
(7,665
)
9,565
N/M
(7,248
)
6
%
(10,855
)
10,913
N/M
Net Income (Loss) Attributable to
Virtus Investment Partners, Inc.
$
30,834
$
35,400
(13
%)
$
30,906
—
%
$
130,621
$
117,541
11
%
Earnings (Loss) Per Share -
Basic
$
4.30
$
4.87
(12
%)
$
4.26
1
%
$
18.02
$
15.90
13
%
Earnings (Loss) Per Share -
Diluted
$
4.21
$
4.77
(12
%)
$
4.19
—
%
$
17.71
$
15.50
14
%
Cash Dividends Declared Per Common
Share
$
1.90
$
1.65
15
%
$
1.90
—
%
$
7.10
$
6.30
13
%
Weighted Average Shares Outstanding -
Basic
7,178
7,262
(1
%)
7,258
(1
%)
7,249
7,391
(2
%)
Weighted Average Shares Outstanding -
Diluted
7,320
7,419
(1
%)
7,379
(1
%)
7,375
7,582
(3
%)
N/M - Not Meaningful
Assets Under Management - Product and
Asset Class
(in millions)
Three Months Ended
12/31/2022
3/31/2023
6/30/2023
9/30/2023
12/31/2023
By Product (period end):
Open-End Funds (1)
$
53,000
$
53,865
$
56,828
$
54,145
$
56,062
Closed-End Funds
10,361
10,358
10,166
9,472
10,026
Retail Separate Accounts
35,352
37,397
38,992
38,665
43,202
Institutional Accounts (2)
50,663
53,229
62,330
60,257
62,969
Total
$
149,376
$
154,849
$
168,316
$
162,539
$
172,259
By Product (average) (3)
Open-End Funds (1)
$
54,870
$
54,141
$
56,120
$
56,511
$
54,132
Closed-End Funds
10,389
10,424
10,224
10,001
9,591
Retail Separate Accounts
33,381
35,352
37,397
38,992
38,665
Institutional Accounts (2)
49,981
52,444
59,248
62,368
60,319
Total
$
148,621
$
152,361
$
162,989
$
167,872
$
162,707
By Asset Class (period end):
Equity
$
81,894
$
87,511
$
91,211
$
87,984
$
96,703
Fixed Income
36,903
36,596
38,361
37,352
37,192
Multi-Asset (4)
19,937
20,597
20,914
19,937
21,411
Alternatives (5)
10,642
10,145
17,830
17,266
16,953
Total
$
149,376
$
154,849
$
168,316
$
162,539
$
172,259
Assets Under Management - Average
Management Fees Earned (6)
(in basis points)
Three Months Ended
12/31/2022
3/31/2023
6/30/2023
9/30/2023
12/31/2023
By Product:
Open-End Funds (1)
47.2
47.6
49.3
51.1
49.7
Closed-End Funds
57.1
57.1
57.6
58.2
58.4
Retail Separate Accounts
42.6
44.2
44.1
43.3
43.3
Institutional Accounts (2)(7)
32.0
31.8
31.6
30.3
33.2
All Products (7)
41.7
42.0
42.2
42.0
42.6
(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:
12/31/2022
3/31/2023
6/30/2023
9/30/2023
12/31/2023
Institutional Accounts
0.4
0.2
0.2
0.4
2.2
All Products
0.1
0.1
0.1
0.1
0.8
Assets Under Management - Asset Flows
by Product
(in millions)
Three Months Ended
Twelve Months Ended
12/31/2022
3/31/2023
6/30/2023
9/30/2023
12/31/2023
12/31/2022
12/31/2023
Open-End Funds (1)
Beginning balance
$
54,454
$
53,000
$
53,865
$
56,828
$
54,145
$
78,706
$
53,000
Inflows
3,029
3,011
2,550
2,687
2,940
13,985
11,188
Outflows
(6,839
)
(4,792
)
(4,692
)
(4,137
)
(4,905
)
(28,549
)
(18,526
)
Net flows
(3,810
)
(1,781
)
(2,142
)
(1,450
)
(1,965
)
(14,564
)
(7,338
)
Market performance
2,806
2,771
2,163
(1,034
)
4,260
(15,113
)
8,160
Other (2)
(450
)
(125
)
2,942
(199
)
(378
)
3,971
2,240
Ending balance
$
53,000
$
53,865
$
56,828
$
54,145
$
56,062
$
53,000
$
56,062
Closed-End Funds
Beginning balance
$
10,146
$
10,361
$
10,358
$
10,166
$
9,472
$
12,068
$
10,361
Inflows
2
4
20
—
—
191
24
Outflows
—
—
—
—
—
—
—
Net flows
2
4
20
—
—
191
24
Market performance
631
205
(1
)
(504
)
753
(1,346
)
453
Other (2)
(418
)
(212
)
(211
)
(190
)
(199
)
(552
)
(812
)
Ending balance
$
10,361
$
10,358
$
10,166
$
9,472
$
10,026
$
10,361
$
10,026
Retail Separate Accounts
Beginning balance
$
33,381
$
35,352
$
37,397
$
38,992
$
38,665
$
44,538
$
35,352
Inflows
1,221
1,367
1,346
1,849
2,118
5,710
6,680
Outflows
(1,651
)
(1,288
)
(1,434
)
(1,524
)
(1,726
)
(6,440
)
(5,972
)
Net flows
(430
)
79
(88
)
325
392
(730
)
708
Market performance
2,401
1,966
1,683
(652
)
4,144
(8,456
)
7,141
Other (2)
—
—
—
—
1
—
1
Ending balance
$
35,352
$
37,397
$
38,992
$
38,665
$
43,202
$
35,352
$
43,202
Institutional Accounts (3)
Beginning balance
$
46,993
$
50,663
$
53,229
$
62,330
$
60,257
$
51,874
$
50,663
Inflows
2,999
1,852
3,660
1,274
1,179
10,407
7,965
Outflows
(2,162
)
(2,047
)
(1,478
)
(1,648
)
(3,406
)
(8,747
)
(8,579
)
Net flows
837
(195
)
2,182
(374
)
(2,227
)
1,660
(614
)
Market performance
2,976
2,906
2,440
(1,434
)
5,165
(12,168
)
9,077
Other (2)
(143
)
(145
)
4,479
(265
)
(226
)
9,297
3,843
Ending balance
$
50,663
$
53,229
$
62,330
$
60,257
$
62,969
$
50,663
$
62,969
Total
Beginning balance
$
144,974
$
149,376
$
154,849
$
168,316
$
162,539
$
187,186
$
149,376
Inflows
7,251
6,234
7,576
5,810
6,237
30,293
25,857
Outflows
(10,652
)
(8,127
)
(7,604
)
(7,309
)
(10,037
)
(43,736
)
(33,077
)
Net flows
(3,401
)
(1,893
)
(28
)
(1,499
)
(3,800
)
(13,443
)
(7,220
)
Market performance
8,814
7,848
6,285
(3,624
)
14,322
(37,083
)
24,831
Other (2)
(1,011
)
(482
)
7,210
(654
)
(802
)
12,716
5,272
Ending balance
$
149,376
$
154,849
$
168,316
$
162,539
$
172,259
$
149,376
$
172,259
(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
12/31/2023
12/31/2022
9/30/2023
Total revenues, GAAP
$
214,587
$
198,371
$
219,271
Consolidated investment products revenues
(1)
2,258
2,264
2,337
Investment management fees (2)
(9,933
)
(9,758
)
(9,823
)
Distribution and service fees (2)
(13,537
)
(14,607
)
(14,334
)
Total revenues, as adjusted
$
193,375
$
176,270
$
197,451
Operating Expenses
Total operating expenses, GAAP
$
175,631
$
167,150
$
174,368
Consolidated investment products expenses
(1)
(2,611
)
(2,481
)
(553
)
Distribution and other asset-based
expenses (3)
(23,470
)
(24,365
)
(24,157
)
Amortization of intangible assets (4)
(15,446
)
(14,609
)
(15,382
)
Restructuring expense (5)
(133
)
—
(691
)
Deferred compensation and related
investments (6)
(925
)
—
278
Acquisition and integration expenses
(7)
(3,050
)
(6,175
)
(3,013
)
Other (8)
(472
)
637
(379
)
Total operating expenses, as adjusted
$
129,524
$
120,157
$
130,471
Operating Income (Loss)
Operating income (loss), GAAP
$
38,956
$
31,221
$
44,903
Consolidated investment products
(earnings) losses (1)
4,869
4,745
2,890
Amortization of intangible assets (4)
15,446
14,609
15,382
Restructuring expense (5)
133
—
691
Deferred compensation and related
investments (6)
925
—
(278
)
Acquisition and integration expenses
(7)
3,050
6,175
3,013
Other (8)
472
(637
)
379
Operating income (loss), as adjusted
$
63,851
$
56,113
$
66,980
Operating margin, GAAP
18.2
%
15.7
%
20.5
%
Operating margin, as adjusted
33.0
%
31.8
%
33.9
%
Three Months Ended
Income (Loss) Before Taxes
12/31/2023
12/31/2022
9/30/2023
Income (loss) before taxes, GAAP
$
51,793
$
39,126
$
50,335
Consolidated investment products
(earnings) losses (1)
(1,316
)
(441
)
(429
)
Amortization of intangible assets (4)
15,446
14,609
15,382
Restructuring expense (5)
133
—
691
Deferred compensation and related
investments (6)
(783
)
—
212
Acquisition and integration expenses
(7)
3,050
6,175
3,013
Other (8)
472
(637
)
379
Seed capital and CLO investments (gains)
losses (9)
(5,078
)
(3,322
)
(3,146
)
Income (loss) before taxes, as
adjusted
$
63,717
$
55,510
$
66,437
Income Tax Expense (Benefit)
Income tax expense (benefit), GAAP
$
13,294
$
13,291
$
12,181
Tax impact of:
Amortization of intangible assets (4)
4,202
3,988
4,209
Restructuring expense (5)
36
—
189
Deferred compensation and related
investments (6)
(213
)
—
58
Acquisition and integration expenses
(7)
830
1,686
824
Other (8)
(11
)
(3,766
)
276
Seed capital and CLO investments (gains)
losses (9)
(801
)
(46
)
441
Income tax expense (benefit), as
adjusted
$
17,337
$
15,153
$
18,178
Effective tax rate, GAAPA
25.7
%
34.0
%
24.2
%
Effective tax rate, as adjustedB
27.2
%
27.3
%
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
$
30,834
$
35,400
$
30,906
Amortization of intangible assets, net of
tax (4)
10,764
9,942
10,603
Restructuring expense, net of tax (5)
97
—
502
Deferred compensation and related
investments (6)
(570
)
—
154
Acquisition and integration expenses, net
of tax (7)
2,220
4,489
2,189
Other, net of tax (8)
5,689
(8,216
)
5,056
Seed capital and CLO investments (gains)
losses, net of tax (9)
(4,277
)
(3,276
)
(3,587
)
Net income (loss) attributable to Virtus
Investment Partners, Inc., as adjusted
$
44,757
$
38,339
$
45,823
Weighted average shares outstanding -
diluted
7,320
7,419
7,379
Earnings (loss) per share - diluted,
GAAP
$
4.21
$
4.77
$
4.19
Earnings (loss) per share - diluted, as
adjusted
$
6.11
$
5.17
$
6.21
Three Months Ended
Administration and Shareholder Services
Fees
12/31/2023
12/31/2022
9/30/2023
Administration and shareholder service
fees, GAAP
$
18,189
$
18,973
$
19,069
Consolidated investment products fees
(1)
24
32
(5
)
Administration and shareholder service
fees, as adjusted
$
18,213
$
19,005
$
19,064
Employment Expenses
Employment expenses, GAAP
$
99,847
$
87,676
$
101,587
Deferred compensation and related
investments (6)
(925
)
—
278
Acquisition and integration expenses
(7)
(1,760
)
—
(2,642
)
Other (8)
(472
)
637
(379
)
Employment expenses, as adjusted
$
96,690
$
88,313
$
98,844
Other Operating Expenses
Other operating expenses, GAAP
$
31,164
$
31,811
$
30,494
Acquisition and integration expenses
(7)
—
(1,055
)
(371
)
Other operating expenses, as adjusted
$
31,164
$
30,756
$
30,123
Total Other Income (Expense),
Net
Total other income (expense), net GAAP
$
5,127
$
7,324
$
(2,803
)
Consolidated investment products (1)
1,681
(3,782
)
5,262
Deferred compensation and related
investments (6)
(1,397
)
—
518
Seed capital and CLO investments (gains)
losses (9)
(5,078
)
(3,322
)
(3,146
)
Total other income (expense), net as
adjusted
$
333
$
220
$
(169
)
Interest and Dividend Income
Interest and dividend income, GAAP
$
3,673
$
2,578
$
2,872
Consolidated investment products (1)
2,158
1,111
3,004
Deferred compensation and related
investments (6)
(311
)
—
(28
)
Interest and dividend income, as
adjusted
$
5,520
$
3,689
$
5,848
Total Noncontrolling Interests
Total noncontrolling interests, GAAP
$
(7,665
)
$
9,565
$
(7,248
)
Consolidated investment products (1)
1,316
441
429
Amortization of intangible assets (4)
(480
)
(679
)
(570
)
Other (8)
5,206
(11,345
)
4,953
Total noncontrolling interests, as
adjusted
$
(1,623
)
$
(2,018
)
$
(2,436
)
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
12/31/2023
12/31/2022
9/30/2023
Employment expenses
$
1,760
$
—
$
2,642
Other operating expenses
—
1,055
371
Change in fair value of contingent
consideration
1,290
5,120
—
Total Acquisition and Integration
Expenses
$
3,050
$
6,175
$
3,013
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
12/31/2023
12/31/2022
9/30/2023
Employment expense fair value
adjustments
$
472
$
(637
)
$
379
Tax impact of adjustments
(128
)
174
(104
)
Other discrete tax adjustments
139
3,592
(172
)
Affiliate minority interest fair value
adjustments
5,206
(11,345
)
4,953
Total Other
$
5,689
$
(8,216
)
$
5,056
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/20240202303942/en/
Investor Relations Contact Sean Rourke (860) 263-4709
sean.rourke@virtus.com
Grafico Azioni Virtus Investment Partners (NYSE:VRTS)
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Grafico Azioni Virtus Investment Partners (NYSE:VRTS)
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