- Earnings Per Share - Diluted of $2.43; Earnings Per Share -
Diluted, as Adjusted, of $6.53
- Total Sales of $6.1B; Net Flows of ($2.6B); Assets Under
Management of $173.6B
Virtus Investment Partners, Inc. (NYSE: VRTS) today reported
financial results for the three months ended June 30, 2024.
Financial Highlights (Unaudited)
(in millions, except per share data or as noted)
Three Months Ended
Three Months Ended
6/30/2024
6/30/2023
Change
3/31/2024
Change
U.S. GAAP
Financial Measures
Revenues
$
224.4
$
213.5
5
%
$
222.0
1
%
Operating expenses
$
180.2
$
174.5
3
%
$
189.7
(5
%)
Operating income (loss)
$
44.2
$
39.0
13
%
$
32.3
37
%
Operating margin
19.7
%
18.3
%
14.5
%
Net income (loss) attributable to Virtus
Investment Partners, Inc.
$
17.6
$
30.3
(42
%)
$
29.9
(41
%)
Earnings (loss) per share - diluted
$
2.43
$
4.10
(41
%)
$
4.10
(41
%)
Weighted average shares outstanding -
diluted
7.242
7.385
(2
%)
7.287
(1
%)
Non-GAAP
Financial Measures (1)
Revenues, as adjusted
$
203.0
$
190.6
7
%
$
200.2
1
%
Operating expenses, as adjusted
$
137.0
$
129.0
6
%
$
143.8
(5
%)
Operating income (loss), as adjusted
$
66.0
$
61.6
7
%
$
56.4
17
%
Operating margin, as adjusted
32.5
%
32.3
%
28.2
%
Net income (loss) attributable to Virtus
Investment Partners, Inc., as adjusted
$
47.3
$
40.1
18
%
$
39.4
20
%
Earnings (loss) per share - diluted, as
adjusted
$
6.53
$
5.43
20
%
$
5.41
21
%
(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. Non-GAAP information and reconciliations 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
6/30/2024
6/30/2023
Change
3/31/2024
Change
Ending total assets under management
$
173.6
$
168.3
3%
$
179.3
(3%)
Average total assets under management
$
175.2
$
163.0
7%
$
173.4
1%
Total sales
$
6.1
$
7.6
(19%)
$
7.6
(19%)
Net flows
$
(2.6
)
$
—
N/M
$
(1.2
)
117%
N/M - Not Meaningful
Total assets under management of $173.6 billion at June 30, 2024
decreased 3% from $179.3 billion at March 31, 2024 due to market
performance and net outflows in U.S. retail funds and institutional
accounts, partially offset by positive net flows in retail separate
accounts, exchange-traded funds (ETFs) and global funds. In
addition, the company provided services to $2.6 billion of other
fee-earning assets that are not included in assets under
management.
Total sales of $6.1 billion declined from $7.6 billion in the
first quarter primarily due to lower sales of U.S. retail funds and
institutional accounts. Institutional sales of $1.2 billion
decreased from $1.7 billion in the prior quarter due to lower
domestic equity sales. Retail separate account sales of $2.2
billion compared with $2.4 billion, with higher private client
sales offset by lower intermediary sold. Open-end fund sales of
$2.8 billion declined from $3.5 billion, as higher sales of large
cap and global equity were more than offset by declines in other
strategies.
Net flows of ($2.6) billion compared with ($1.2) billion in the
first quarter and included continued positive net flows in retail
separate accounts, ETFs, and global funds. Institutional net flows
of ($1.7) billion compared with ($1.3) billion and included a
($0.7) billion outflow from a partial rebalancing by a large
account. Retail separate account net flows of $0.5 billion compared
with $0.7 billion in the prior quarter, with positive net flows in
both intermediary sold and private client. Open-end fund net flows
of ($1.3) billion compared with ($0.6) billion in the prior quarter
and included positive net flows in small/mid-cap and global equity
strategies.
GAAP Results
Operating income of $44.2 million increased 37% from $32.3
million in the prior quarter due to a 1% increase in revenues,
reflecting higher average assets under management, and a 5%
decrease in operating expenses. The decrease in operating expenses
was primarily due to lower employment expenses, which declined 8%
to $105.7 million due to seasonally higher expenses in the prior
quarter, and a decrease in the fair value of contingent
consideration. These decreases were partially offset by higher
other operating expenses, primarily due to a $0.7 million annual
equity grant to the Board of Directors, and operating expenses of
consolidated investment products.
Net income attributable to Virtus Investment Partners, Inc. of
$2.43 per diluted share included ($1.71) of realized and unrealized
losses on investments, ($1.04) of fair value adjustments to
minority interests, ($0.18) of amortization of an early lease
termination fee, ($0.13) of collateralized loan obligation (CLO)
expense, ($0.11) of acquisition and integration costs, and ($0.07)
of restructuring expenses, partially offset by $0.34 of fair value
adjustments to contingent consideration. Net income per diluted
share of $4.10 in the prior quarter included ($0.69) of fair value
adjustments to affiliate minority interests, ($0.12) of
amortization related to an early lease termination fee, ($0.11) of
acquisition and integration costs and ($0.08) of restructuring,
partially offset by $0.76 of realized and unrealized gains on
investments.
The effective tax rate of 31% increased from 19% in the prior
quarter, primarily reflecting changes in income tax valuation
allowances from net unrealized and realized losses on the company’s
investments compared with gains in the prior quarter.
Non-GAAP Results
Revenues, as adjusted, of $203.0 million increased 1% from
$200.2 million in the prior quarter primarily due to higher average
assets under management.
Employment expenses, as adjusted, of $103.5 million decreased
from $111.6 million due to prior quarter seasonal expenses,
partially offset by higher variable incentive compensation. Other
operating expenses, as adjusted, of $31.3 million increased from
$30.2 million primarily due to the $0.7 million annual equity grant
to the Board of Directors.
Operating income, as adjusted, of $66.0 million and the related
margin of 32.5% increased from $56.4 million and 28.2%,
respectively, in the prior quarter primarily due to prior quarter
seasonal expenses and higher investment management fees.
Net income attributable to Virtus Investment Partners, Inc., as
adjusted, per diluted share was $6.53, an increase of 21% from
$5.41 in the prior quarter. The increase primarily reflected the
impact of prior quarter seasonal items and higher investment
management fees.
The effective tax rate, as adjusted, of 26% was unchanged from
the prior quarter.
Select Balance Sheet Items
(Unaudited) (in millions)
As of
As of
6/30/2024
6/30/2023
Change
3/31/2024
Change
Cash and cash equivalents
$
183.0
$
201.5
(9
%)
$
123.9
48
%
Gross debt (1)
$
252.4
$
300.2
(16
%)
$
258.1
(2
%)
Contingent consideration (2)
$
63.4
$
94.4
(33
%)
$
66.7
(5
%)
Redeemable noncontrolling interests
(3)
$
84.7
$
87.6
(3
%)
$
80.0
6
%
Total equity exc. noncontrolling
interests
$
868.7
$
851.5
2
%
$
871.7
—
%
Other Metrics
Working capital (4)
$
143.0
$
162.0
(12
%)
$
123.4
16
%
Net debt (cash) (5)
$
69.4
$
98.7
(30
%)
$
134.2
(48
%)
(1)
Excludes deferred financing costs of $4.8
million, $6.0 million, and $5.1 million, as of June 30, 2024, June
30, 2023, and March 31, 2024, respectively
(2)
Represents estimated revenue participation
and contingent payments
(3)
Excludes redeemable noncontrolling
interests of consolidated investment products of $44.7 million,
$22.8 million, and $35.2 million as of June 30, 2024, June 30,
2023, and March 31, 2024, respectively
(4)
Defined as cash and cash equivalents plus
accounts receivable, net, and deferred compensation related
investments less accrued compensation and benefits excluding
affiliate minority interests, 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 March 31, 2024,
minority interest liabilities accounted for as accrued compensation
were removed from the definition of working capital and prior
periods have been adjusted to conform to this definition.
(5)
Defined as gross debt less cash and cash
equivalents in accordance with the company's credit agreement
Working capital of $143.0 million at June 30, 2024 compared with
$123.4 million at March 31, 2024, as cash earnings more than offset
return of capital and debt repayment.
During the quarter, the company repurchased 55,099 shares for
$12.5 million, and repaid $5.7 million of debt.
Gross debt at June 30, 2024 was $252.4 million, and net debt was
$69.4 million, or 0.2x EBITDA.
Conference Call and Investor Presentation
Management will host an investor conference call and webcast on
Friday, July 26, 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.
We routinely post important information for investors on the
Investor Relations section of our website and may use this website
as a means of disclosing material, non-public information and for
complying with our disclosure obligations under Regulation FD.
Accordingly, investors should monitor our website, in addition to
following our press releases, SEC filings, public conference calls,
presentations and webcasts. We may also use social media channels
to communicate with our investors and the public about our company,
our products and other matters, and those communications could be
deemed to be material information. The information contained on, or
that may be accessed through, our website or social media channels
are not incorporated by reference into, and are not a part of, this
document.
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
Six Months Ended
6/30/2024
6/30/2023
Change
3/31/2024
Change
6/30/2024
6/30/2023
Change
Revenues
Investment management fees
$
191,652
$
179,979
6
%
$
188,360
2
%
$
380,012
$
344,457
10
%
Distribution and service fees
13,410
14,132
(5
%)
14,030
(4
%)
27,440
28,285
(3
%)
Administration and shareholder service
fees
18,308
18,240
—
%
18,678
(2
%)
36,986
36,599
1
%
Other income and fees
1,014
1,185
(14
%)
974
4
%
1,988
2,069
(4
%)
Total revenues
224,384
213,536
5
%
222,042
1
%
446,426
411,410
9
%
Operating Expenses
Employment expenses
105,667
104,694
1
%
115,163
(8
%)
220,830
203,308
9
%
Distribution and other asset-based
expenses
23,695
25,460
(7
%)
24,348
(3
%)
48,043
49,175
(2
%)
Other operating expenses
33,050
33,483
(1
%)
31,375
5
%
64,425
64,213
—
%
Operating expenses of consolidated
investment products
2,909
360
N/M
690
322
%
3,599
1,060
240
%
Restructuring expense
690
—
N/M
797
(13
%)
1,487
—
N/M
Change in fair value of contingent
consideration
(3,300
)
(6,800
)
(51
%)
—
N/M
(3,300
)
(6,800
)
(51
%)
Depreciation expense
2,270
1,485
53
%
2,028
12
%
4,298
2,630
63
%
Amortization expense
15,198
15,808
(4
%)
15,335
(1
%)
30,533
30,199
1
%
Total operating expenses
180,179
174,490
3
%
189,736
(5
%)
369,915
343,785
8
%
Operating Income (Loss)
44,205
39,046
13
%
32,306
37
%
76,511
67,625
13
%
Other Income (Expense)
Realized and unrealized gain (loss) on
investments, net
(1,553
)
1,717
N/M
3,416
N/M
1,863
4,387
(58
%)
Realized and unrealized gain (loss) of
consolidated investment products, net
(12,936
)
(4,436
)
192
%
1,535
N/M
(11,401
)
(1,840
)
N/M
Other income (expense), net
597
(847
)
N/M
550
9
%
1,147
(1,190
)
N/M
Total other income (expense),
net
(13,892
)
(3,566
)
290
%
5,501
N/M
(8,391
)
1,357
N/M
Interest Income (Expense)
Interest expense
(5,611
)
(6,217
)
(10
%)
(5,681
)
(1
%)
(11,292
)
(11,222
)
1
%
Interest and dividend income
2,643
2,675
(1
%)
3,469
(24
%)
6,112
5,913
3
%
Interest and dividend income of
investments of consolidated investment products
52,385
47,884
9
%
51,115
2
%
103,500
94,698
9
%
Interest expense of consolidated
investment products
(41,960
)
(38,732
)
8
%
(40,012
)
5
%
(81,972
)
(73,935
)
11
%
Total interest income (expense),
net
7,457
5,610
33
%
8,891
(16
%)
16,348
15,454
6
%
Income (Loss) Before Income
Taxes
37,770
41,090
(8
%)
46,698
(19
%)
84,468
84,436
—
%
Income tax expense (benefit)
11,748
10,910
8
%
8,831
33
%
20,579
19,613
5
%
Net Income (Loss)
26,022
30,180
(14
%)
37,867
(31
%)
63,889
64,823
(1
%)
Noncontrolling interests
(8,408
)
77
N/M
(8,009
)
5
%
(16,417
)
4,058
N/M
Net Income (Loss) Attributable to
Virtus Investment Partners, Inc.
$
17,614
$
30,257
(42
%)
$
29,858
(41
%)
$
47,472
$
68,881
(31
%)
Earnings (Loss) Per Share -
Basic
$
2.47
$
4.14
(40
%)
$
4.19
(41
%)
$
6.66
$
9.47
(30
%)
Earnings (Loss) Per Share -
Diluted
$
2.43
$
4.10
(41
%)
$
4.10
(41
%)
$
6.54
$
9.31
(30
%)
Cash Dividends Declared Per Common
Share
$
1.90
$
1.65
15
%
$
1.90
—
%
$
3.80
$
3.30
15
%
Weighted Average Shares Outstanding -
Basic
7,127
7,308
(2
%)
7,119
—
%
7,123
7,277
(2
%)
Weighted Average Shares Outstanding -
Diluted
7,242
7,385
(2
%)
7,287
(1
%)
7,264
7,398
(2
%)
N/M - Not Meaningful
Assets Under Management - Product and
Asset Class (in millions)
Three Months Ended
6/30/2023
9/30/2023
12/31/2023
3/31/2024
6/30/2024
By Product (period end):
Open-End Funds (1)
$
56,828
$
54,145
$
56,062
$
57,818
$
55,852
Closed-End Funds
10,166
9,472
10,026
10,064
9,915
Retail Separate Accounts (2)
38,992
38,665
43,202
46,816
45,672
Institutional Accounts (3)
62,330
60,257
62,969
64,613
62,146
Total
$
168,316
$
162,539
$
172,259
$
179,311
$
173,585
By Product (average) (4)
Open-End Funds (1)
$
56,120
$
56,511
$
54,132
$
56,828
$
56,692
Closed-End Funds
10,224
10,001
9,591
9,862
9,894
Retail Separate Accounts
37,397
38,992
38,665
43,202
46,816
Institutional Accounts (3)
59,248
62,368
60,319
63,466
61,773
Total
$
162,989
$
167,872
$
162,707
$
173,358
$
175,175
By Asset Class (period end):
Equity
$
91,211
$
87,984
$
96,703
$
103,501
$
99,224
Fixed Income
38,361
37,352
37,192
37,037
36,970
Multi-Asset (5)
20,914
19,937
21,411
21,975
21,060
Alternatives (6)
17,830
17,266
16,953
16,798
16,331
Total
$
168,316
$
162,539
$
172,259
$
179,311
$
173,585
Assets Under Management - Average
Management Fees Earned (7) (in basis points)
Three Months Ended
6/30/2023
9/30/2023
12/31/2023
3/31/2024
6/30/2024
By Product:
Open-End Funds (1)
49.3
51.1
49.7
49.9
50.9
Closed-End Funds
57.6
58.2
58.4
58.7
58.6
Retail Separate Accounts (2)
44.1
43.3
43.3
43.9
43.3
Institutional Accounts (3)(8)
31.6
30.3
33.2
30.8
30.7
All Products (8)
42.2
42.0
42.6
41.9
42.2
(1)
Represents assets under management of U.S.
retail funds, global funds, exchange traded funds, and variable
insurance funds
(2)
Includes investment models provided to
managed account sponsors
(3)
Represents assets under management of
institutional separate and commingled accounts including structured
products
(4)
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
(5)
Consists of multi-asset offerings not
included in equity, fixed income, and alternatives
(6)
Consists of managed futures, event-driven,
real estate securities, infrastructure, long/short, and other
strategies
(7)
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
(8)
Includes performance-related fees, in
basis points, earned during the three months ended as follows:
6/30/2023
9/30/2023
12/31/2023
3/31/2024
6/30/2024
Institutional Accounts
0.2
0.4
2.2
0.3
0.3
All Products
0.1
0.1
0.8
0.1
0.1
Assets Under Management - Asset Flows
by Product (in millions)
Three Months Ended
Six Months Ended
6/30/2023
9/30/2023
12/31/2023
3/31/2024
6/30/2024
6/30/2023
6/30/2024
Open-End Funds (1)
Beginning balance
$
53,865
$
56,828
$
54,145
$
56,062
$
57,818
$
53,000
$
56,062
Inflows
2,550
2,687
2,940
3,476
2,777
5,561
6,253
Outflows
(4,692
)
(4,137
)
(4,905
)
(4,104
)
(4,120
)
(9,484
)
(8,224
)
Net flows
(2,142
)
(1,450
)
(1,965
)
(628
)
(1,343
)
(3,923
)
(1,971
)
Market performance
2,163
(1,034
)
4,260
2,560
(480
)
4,934
2,080
Other (2)
2,942
(199
)
(378
)
(176
)
(143
)
2,817
(319
)
Ending balance
$
56,828
$
54,145
$
56,062
$
57,818
$
55,852
$
56,828
$
55,852
Closed-End Funds
Beginning balance
$
10,358
$
10,166
$
9,472
$
10,026
$
10,064
$
10,361
$
10,026
Inflows
20
—
—
—
—
24
—
Outflows
—
—
—
—
(41
)
—
(41
)
Net flows
20
—
—
—
(41
)
24
(41
)
Market performance
(1
)
(504
)
753
239
83
204
322
Other (2)
(211
)
(190
)
(199
)
(201
)
(191
)
(423
)
(392
)
Ending balance
$
10,166
$
9,472
$
10,026
$
10,064
$
9,915
$
10,166
$
9,915
Retail Separate Accounts (3)
Beginning balance
$
37,397
$
38,992
$
38,665
$
43,202
$
46,816
$
35,352
$
43,202
Inflows
1,346
1,849
2,118
2,373
2,172
2,713
4,545
Outflows
(1,434
)
(1,524
)
(1,726
)
(1,695
)
(1,688
)
(2,722
)
(3,383
)
Net flows
(88
)
325
392
678
484
(9
)
1,162
Market performance
1,683
(652
)
4,144
2,936
(1,631
)
3,649
1,305
Other (2)
—
—
1
—
3
—
3
Ending balance
$
38,992
$
38,665
$
43,202
$
46,816
$
45,672
$
38,992
$
45,672
Institutional Accounts (4)
Beginning balance
$
53,229
$
62,330
$
60,257
$
62,969
$
64,613
$
50,663
$
62,969
Inflows
3,660
1,274
1,179
1,734
1,188
5,512
2,922
Outflows
(1,478
)
(1,648
)
(3,406
)
(3,022
)
(2,913
)
(3,525
)
(5,935
)
Net flows
2,182
(374
)
(2,227
)
(1,288
)
(1,725
)
1,987
(3,013
)
Market performance
2,440
(1,434
)
5,165
3,001
(549
)
5,346
2,452
Other (2)
4,479
(265
)
(226
)
(69
)
(193
)
4,334
(262
)
Ending balance
$
62,330
$
60,257
$
62,969
$
64,613
$
62,146
$
62,330
$
62,146
Total
Beginning balance
$
154,849
$
168,316
$
162,539
$
172,259
$
179,311
$
149,376
$
172,259
Inflows
7,576
5,810
6,237
7,583
6,137
13,810
13,720
Outflows
(7,604
)
(7,309
)
(10,037
)
(8,821
)
(8,762
)
(15,731
)
(17,583
)
Net flows
(28
)
(1,499
)
(3,800
)
(1,238
)
(2,625
)
(1,921
)
(3,863
)
Market performance
6,285
(3,624
)
14,322
8,736
(2,577
)
14,133
6,159
Other (2)
7,210
(654
)
(802
)
(446
)
(524
)
6,728
(970
)
Ending balance
$
168,316
$
162,539
$
172,259
$
179,311
$
173,585
$
168,316
$
173,585
(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)
Includes investment models provided to
managed account sponsors
(4)
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. Management uses these
measures to evaluate the company’s financial performance and
operational decision-making. Management believes that these
non-GAAP financial measures, when presented together with directly
comparable U.S. GAAP measures, are useful to investors and other
interested parties to provide additional insight, promote
transparency and allow for a more comprehensive understanding of
the information used by management. Please see the Notes to
Reconciliations on page 14 for additional information on how these
measures reflect the company’s operating results. Non-GAAP
financial measures have material limitations and should not be
viewed in isolation or as a substitute for U.S. GAAP measures.
Also, the non-GAAP financial measures referenced in this release
may not be comparable to the similarly titled measures used by
other companies.
The following are reconciliations and related notes of the most
directly comparable U.S. GAAP measure to each non-GAAP measure:
Three Months Ended
Revenues
6/30/2024
6/30/2023
3/31/2024
Total revenues, GAAP
$
224,384
$
213,536
$
222,042
Consolidated investment products revenues
(1)
2,326
2,479
2,544
Investment management fees (2)
(10,282
)
(11,326
)
(10,316
)
Distribution and service fees (2)
(13,413
)
(14,134
)
(14,032
)
Total revenues, as adjusted
$
203,015
$
190,555
$
200,238
Operating Expenses
Total operating expenses, GAAP
$
180,179
$
174,490
$
189,736
Consolidated investment products expenses
(1)
(2,909
)
(360
)
(690
)
Distribution and other asset-based
expenses (3)
(23,695
)
(25,460
)
(24,348
)
Amortization of intangible assets (4)
(15,198
)
(15,808
)
(15,335
)
Restructuring expense (5)
(690
)
—
(797
)
Deferred compensation and related
investments (6)
36
(747
)
(1,249
)
Acquisition and integration expenses
(7)
2,201
(3,165
)
(1,042
)
Other (8)
(2,907
)
49
(2,444
)
Total operating expenses, as adjusted
$
137,017
$
128,999
$
143,831
Operating Income (Loss)
Operating income (loss), GAAP
$
44,205
$
39,046
$
32,306
Consolidated investment products
(earnings) losses (1)
5,235
2,839
3,234
Amortization of intangible assets (4)
15,198
15,808
15,335
Restructuring expense (5)
690
—
797
Deferred compensation and related
investments (6)
(36
)
747
1,249
Acquisition and integration expenses
(7)
(2,201
)
3,165
1,042
Other (8)
2,907
(49
)
2,444
Operating income (loss), as adjusted
$
65,998
$
61,556
$
56,407
Operating margin, GAAP
19.7
%
18.3
%
14.5
%
Operating margin, as adjusted
32.5
%
32.3
%
28.2
%
Three Months Ended
Income (Loss) Before Taxes
6/30/2024
6/30/2023
3/31/2024
Income (loss) before taxes, GAAP
$
37,770
$
41,090
$
46,698
Consolidated investment products
(earnings) losses (1)
268
283
(1,819
)
Amortization of intangible assets (4)
15,198
15,808
15,335
Restructuring expense (5)
690
—
797
Deferred compensation and related
investments (6)
545
(596
)
(400
)
Acquisition and integration expenses
(7)
(2,201
)
3,165
1,042
Other (8)
2,907
(49
)
2,444
Seed capital and CLO investments (gains)
losses (9)
12,175
(1,057
)
(7,333
)
Income (loss) before taxes, as
adjusted
$
67,352
$
58,644
$
56,764
Income Tax Expense (Benefit)
Income tax expense (benefit), GAAP
$
11,748
$
10,910
$
8,831
Tax impact of:
Amortization of intangible assets (4)
3,973
4,334
3,993
Restructuring expense (5)
180
—
208
Deferred compensation and related
investments (6)
142
(163
)
(104
)
Acquisition and integration expenses
(7)
(575
)
868
271
Other (8)
1,415
628
1,056
Seed capital and CLO investments (gains)
losses (9)
725
(497
)
529
Income tax expense (benefit), as
adjusted
$
17,608
$
16,080
$
14,784
Effective tax rate, GAAPA
31.1
%
26.6
%
18.9
%
Effective tax rate, as adjustedB
26.1
%
27.4
%
26.0
%
A Reflects income tax expense (benefit),
GAAP, divided by income (loss) before taxes, GAAP
B Reflects income tax expense (benefit),
as adjusted, divided by income (loss) before taxes, as adjusted
Net Income (Loss) Attributable to
Virtus Investment Partners, Inc.
Net income (loss) attributable to Virtus
Investment Partners, Inc.
$
17,614
$
30,257
$
29,858
Amortization of intangible assets, net of
tax (4)
10,738
10,775
10,863
Restructuring expense, net of tax (5)
510
—
589
Deferred compensation and related
investments (6)
403
(433
)
(296
)
Acquisition and integration expenses, net
of tax (7)
(1,626
)
2,297
771
Other, net of tax (8)
8,164
(2,253
)
5,476
Seed capital and CLO investments (gains)
losses, net of tax (9)
11,450
(560
)
(7,862
)
Net income (loss) attributable to Virtus
Investment Partners, Inc., as adjusted
$
47,253
$
40,083
$
39,399
Weighted average shares outstanding -
diluted
7,242
7,385
7,287
Earnings (loss) per share - diluted,
GAAP
$
2.43
$
4.10
$
4.10
Earnings (loss) per share - diluted, as
adjusted
$
6.53
$
5.43
$
5.41
Three Months Ended
Administration and Shareholder Services
Fees
6/30/2024
6/30/2023
3/31/2024
Administration and shareholder service
fees, GAAP
$
18,308
$
18,240
$
18,678
Consolidated investment products fees
(1)
23
33
39
Administration and shareholder service
fees, as adjusted
$
18,331
$
18,273
$
18,717
Employment Expenses
Employment expenses, GAAP
$
105,667
$
104,694
$
115,163
Deferred compensation and related
investments (6)
36
(747
)
(1,249
)
Acquisition and integration expenses
(7)
(1,099
)
(8,183
)
(1,042
)
Other (8)
(1,134
)
49
(1,262
)
Employment expenses, as adjusted
$
103,470
$
95,813
$
111,610
Other Operating Expenses
Other operating expenses, GAAP
$
33,050
$
33,483
$
31,375
Acquisition and integration expenses
(7)
—
(1,782
)
—
Other (8)
(1,773
)
—
(1,182
)
Other operating expenses, as adjusted
$
31,277
$
31,701
$
30,193
Total Other Income (Expense),
Net
Total other income (expense), net GAAP
$
(13,892
)
$
(3,566
)
$
5,501
Consolidated investment products (1)
1,492
4,868
4,127
Deferred compensation and related
investments (6)
611
(1,312
)
(1,623
)
Seed capital and CLO investments (gains)
losses (9)
12,175
(1,057
)
(7,333
)
Total other income (expense), net as
adjusted
$
386
$
(1,067
)
$
672
Interest and Dividend Income
Interest and dividend income, GAAP
$
2,643
$
2,675
$
3,469
Consolidated investment products (1)
3,966
1,728
1,923
Deferred compensation and related
investments (6)
(30
)
(31
)
(26
)
Interest and dividend income, as
adjusted
$
6,579
$
4,372
$
5,366
Total Noncontrolling Interests
Total noncontrolling interests, GAAP
$
(8,408
)
$
77
$
(8,009
)
Consolidated investment products (1)
(268
)
(283
)
1,819
Amortization of intangible assets (4)
(487
)
(699
)
(479
)
Other (8)
6,672
(1,576
)
4,088
Total noncontrolling interests, as
adjusted
$
(2,491
)
$
(2,481
)
$
(2,581
)
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
6/30/2024
6/30/2023
3/31/2024
Employment expenses
$
1,099
$
8,183
$
1,042
Other operating expenses
—
1,782
—
Change in fair value of contingent
consideration
(3,300
)
(6,800
)
—
Total Acquisition and Integration
Expenses
$
(2,201
)
$
3,165
$
1,042
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 and amortization of lease
termination fees. 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
6/30/2024
6/30/2023
3/31/2024
Employment expense fair value
adjustments
$
1,134
$
(49
)
$
1,262
Amortization of lease termination fees
1,773
—
1,182
Tax impact of adjustments
(760
)
13
(637
)
Other discrete tax adjustments
(655
)
(641
)
(419
)
Affiliate minority interest fair value
adjustments
6,672
(1,576
)
4,088
Total Other
$
8,164
$
(2,253
)
$
5,476
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, Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, 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 2023 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
management 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 2023
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/20240726441755/en/
Investor Relations Contact Sean Rourke (860) 263-4709
sean.rourke@Virtus.com
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