- Earnings Per Share - Diluted of $4.10; Earnings Per Share -
Diluted, as Adjusted, of $5.41
- Total Sales of $7.6B; Net Flows of ($1.2B); Assets Under
Management of $179.3B
Virtus Investment Partners, Inc. (NYSE: VRTS) today reported
financial results for the three months ended March 31, 2024.
Financial Highlights (Unaudited) (in millions, except per
share data or as noted)
Three Months Ended
Three Months Ended
3/31/2024
3/31/2023
Change
12/31/2023
Change
U.S. GAAP
Financial Measures
Revenues
$
222.0
$
197.9
12
%
$
214.6
3
%
Operating expenses
$
189.7
$
169.3
12
%
$
175.6
8
%
Operating income (loss)
$
32.3
$
28.6
13
%
$
39.0
(17
%)
Operating margin
14.5
%
14.4
%
18.2
%
Net income (loss) attributable to Virtus
Investment Partners, Inc.
$
29.9
$
38.6
(23
%)
$
30.8
(3
%)
Earnings (loss) per share - diluted
$
4.10
$
5.21
(21
%)
$
4.21
(3
%)
Weighted average shares outstanding -
diluted
7.287
7.410
(2
%)
7.320
—
%
Non-GAAP
Financial Measures (1)
Revenues, as adjusted
$
200.2
$
176.9
13
%
$
193.4
4
%
Operating expenses, as adjusted
$
143.8
$
129.5
11
%
$
129.5
11
%
Operating income (loss), as adjusted
$
56.4
$
47.4
19
%
$
63.9
(12
%)
Operating margin, as adjusted
28.2
%
26.8
%
33.0
%
Net income (loss) attributable to Virtus
Investment Partners, Inc., as adjusted
$
39.4
$
31.1
27
%
$
44.8
(12
%)
Earnings (loss) per share - diluted, as
adjusted
$
5.41
$
4.20
29
%
$
6.11
(11
%)
Weighted average shares outstanding -
diluted, as adjusted
7.287
7.410
(2
%)
7.320
—
%
(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
3/31/2024
3/31/2023
Change
12/31/2023
Change
Ending total assets under management
$
179.3
$
154.8
16
%
$
172.3
4
%
Average total assets under management
$
173.4
$
152.4
14
%
$
162.7
7
%
Total sales
$
7.6
$
6.2
22
%
$
6.2
22
%
Net flows
$
(1.2
)
$
(1.9
)
(37
%)
$
(3.8
)
(68
%)
Total assets under management of $179.3 billion at March 31,
2024 increased 4% from $172.3 billion at December 31, 2023 due to
market performance and positive net flows in retail separate
accounts, partially offset by net outflows in institutional
accounts and open-end funds. In addition, the company provided
services to $2.7 billion of other fee-earning assets.
Total sales increased 22% to $7.6 billion from $6.2 billion in
the fourth quarter as a result of higher sales in all product
categories. Institutional sales of $1.7 billion increased 47% from
$1.2 billion in the prior quarter. Retail separate account sales of
$2.4 billion increased 12% from $2.1 billion led by the
intermediary sold channel. Open-end fund sales of $3.5 billion
increased 18% from $2.9 billion reflecting higher sales in almost
all investment strategies.
Net flows of ($1.2) billion improved from ($3.8) billion in the
fourth quarter and included positive net flows in retail separate
accounts, ETFs, and global funds. Institutional net flows of ($1.3)
billion improved from ($2.2) billion due to higher sales and lower
redemptions. Retail separate account net flows of $0.7 billion
increased from $0.4 billion in the prior quarter. Open-end fund net
flows of ($0.6) billion improved significantly from ($2.0) billion
in the prior quarter and included positive net flows in
small/mid-cap, global equity, and fixed income strategies.
GAAP Results
Operating income of $32.3 million declined 17% from $39.0
million in the prior quarter as a 3% increase in revenues,
reflecting higher average assets under management, was more than
offset by an 8% increase in operating expenses. The increase in
operating expenses was primarily due to higher employment expenses
as a result of seasonal employment items and higher variable
incentive compensation, partially offset by lower operating
expenses of consolidated investment products and lower fair value
adjustments to contingent consideration. Other operating expenses
were nearly flat sequentially.
Net income attributable to Virtus Investment Partners, Inc. of
$4.10 per diluted share included ($0.69) of fair value adjustments
to affiliate minority interests, ($0.12) of amortization related to
an early lease termination fee, and ($0.11) of acquisition and
integration costs, partially offset by $0.76 of realized and
unrealized gains on investments. Net income per diluted share of
$4.21 in the prior quarter included ($0.76) of fair value
adjustments to affiliate minority 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.
The effective tax rate of 19% decreased from 26% in the prior
quarter, primarily reflecting changes in valuation allowances
related to marketable securities.
Non-GAAP Results
Revenues, as adjusted, of $200.2 million increased 4% from
$193.4 million in the prior quarter primarily due to 7% higher
average assets under management partially offset by lower
performance fees.
Employment expenses, as adjusted, of $111.6 million increased
from $96.7 million in the prior quarter due to $10.9 million of
seasonal expenses, primarily payroll taxes and benefits related to
the timing of annual incentive payments, in addition to higher
variable incentive compensation. Other operating expenses, as
adjusted, of $30.2 million decreased from $31.2 million.
Operating income, as adjusted, of $56.4 million and the related
margin of 28.2% decreased from $63.9 million and 33.0% in the prior
quarter, respectively, due to the seasonal employment expenses,
partially offset by higher investment management fees and lower
other operating expenses.
Net income attributable to Virtus Investment Partners, Inc., as
adjusted, per diluted share was $5.41, a decrease of 11% from $6.11
in the prior quarter. The decrease primarily reflected $1.11 per
share of seasonal expenses, partially offset by higher revenues, as
adjusted, and lower other operating expenses, as adjusted.
The effective tax rate, as adjusted, of 26% compared with 27% in
the prior quarter.
Select Balance Sheet Items (Unaudited) (in millions)
As of
As of
3/31/2024
3/31/2023
Change
12/31/2023
Change
Cash and cash equivalents
$
123.9
$
213.4
(42
%)
$
239.6
(48
%)
Gross debt (1)
$
258.1
$
260.9
(1
%)
$
258.8
—
%
Contingent consideration (2)
$
66.7
$
101.2
(34
%)
$
90.9
(27
%)
Redeemable noncontrolling interests
(3)
$
80.0
$
88.2
(9
%)
$
74.2
8
%
Total equity exc. noncontrolling
interests
$
871.7
$
837.9
4
%
$
864.0
1
%
Working capital (4)
$
123.4
$
208.3
(41
%)
$
109.1
13
%
Net debt (cash) (5)
$
134.2
$
47.5
183
%
$
19.2
N/M
(1)
Excludes deferred financing costs of $5.1
million, $6.3 million, and $5.4 million as of March 31, 2024, March
31, 2023, and December 31, 2023, respectively
(2)
Represents estimates of revenue
participation and contingent payments
(3)
Excludes redeemable noncontrolling
interests of consolidated investment products of $35.2 million,
$18.4 million, and $30.6 million as of March 31, 2024, March 31,
2023, and December 31, 2023, 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 interests 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
N/M - Not Meaningful
Working capital of $123.4 million at March 31, 2024 compared
with $109.1 million at December 31, 2023, as earnings more than
offset return of capital.
During the quarter, the company repurchased 21,108 shares for
$5.0 million and net settled an additional 42,588 shares for $9.9
million.
Net debt was $134.2 million, or 0.4x EBITDA, at March 31,
2024.
Conference Call and Investor Presentation
Management will host an investor conference call and webcast on
Friday, April 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.
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
3/31/2024
3/31/2023
Change
12/31/2023
Change
Revenues
Investment management fees
$
188,360
$
164,478
15
%
$
182,149
3
%
Distribution and service fees
14,030
14,153
(1
%)
13,535
4
%
Administration and shareholder service
fees
18,678
18,359
2
%
18,189
3
%
Other income and fees
974
884
10
%
714
36
%
Total revenues
222,042
197,874
12
%
214,587
3
%
Operating Expenses
Employment expenses
115,163
98,614
17
%
99,847
15
%
Distribution and other asset-based
expenses
24,348
23,715
3
%
23,470
4
%
Other operating expenses
31,375
30,730
2
%
31,164
1
%
Operating expenses of consolidated
investment products
690
700
(1
%)
2,611
(74
%)
Restructuring expense
797
—
N/M
133
499
%
Change in fair value of contingent
consideration
—
—
N/M
1,290
(100
%)
Depreciation expense
2,028
1,145
77
%
1,670
21
%
Amortization expense
15,335
14,391
7
%
15,446
(1
%)
Total operating expenses
189,736
169,295
12
%
175,631
8
%
Operating Income (Loss)
32,306
28,579
13
%
38,956
(17
%)
Other Income (Expense)
Realized and unrealized gain (loss) on
investments, net
3,416
2,670
28
%
4,056
(16
%)
Realized and unrealized gain (loss) of
consolidated investment products, net
1,535
2,596
(41
%)
449
242
%
Other income (expense), net
550
(343
)
N/M
622
(12
%)
Total other income (expense),
net
5,501
4,923
12
%
5,127
7
%
Interest Income (Expense)
Interest expense
(5,681
)
(5,005
)
14
%
(5,987
)
(5
%)
Interest and dividend income
3,469
3,238
7
%
3,673
(6
%)
Interest and dividend income of
investments of consolidated investment products
51,115
46,814
9
%
53,206
(4
%)
Interest expense of consolidated
investment products
(40,012
)
(35,203
)
14
%
(43,182
)
(7
%)
Total interest income (expense),
net
8,891
9,844
(10
%)
7,710
15
%
Income (Loss) Before Income
Taxes
46,698
43,346
8
%
51,793
(10
%)
Income tax expense (benefit)
8,831
8,703
1
%
13,294
(34
%)
Net Income (Loss)
37,867
34,643
9
%
38,499
(2
%)
Noncontrolling interests
(8,009
)
3,981
N/M
(7,665
)
4
%
Net Income (Loss) Attributable to
Virtus Investment Partners, Inc.
$
29,858
$
38,624
(23
%)
$
30,834
(3
%)
Earnings (Loss) Per Share -
Basic
$
4.19
$
5.33
(21
%)
$
4.30
(3
%)
Earnings (Loss) Per Share -
Diluted
$
4.10
$
5.21
(21
%)
$
4.21
(3
%)
Cash Dividends Declared Per Common
Share
$
1.90
$
1.65
15
%
$
1.90
—
%
Weighted Average Shares Outstanding -
Basic
7,119
7,245
(2
%)
7,178
(1
%)
Weighted Average Shares Outstanding -
Diluted
7,287
7,410
(2
%)
7,320
—
%
N/M - Not Meaningful
Assets Under Management - Product and Asset Class (in
millions)
Three Months Ended
3/31/2023
6/30/2023
9/30/2023
12/31/2023
3/31/2024
By Product (period end):
Open-End Funds (1)
$
53,865
$
56,828
$
54,145
$
56,062
$
57,818
Closed-End Funds
10,358
10,166
9,472
10,026
10,064
Retail Separate Accounts
37,397
38,992
38,665
43,202
46,816
Institutional Accounts (2)
53,229
62,330
60,257
62,969
64,613
Total
$
154,849
$
168,316
$
162,539
$
172,259
$
179,311
By Product (average) (3)
Open-End Funds (1)
$
54,141
$
56,120
$
56,511
$
54,132
$
56,828
Closed-End Funds
10,424
10,224
10,001
9,591
9,862
Retail Separate Accounts
35,352
37,397
38,992
38,665
43,202
Institutional Accounts (2)
52,444
59,248
62,368
60,319
63,466
Total
$
152,361
$
162,989
$
167,872
$
162,707
$
173,358
By Asset Class (period end):
Equity
$
87,511
$
91,211
$
87,984
$
96,703
$
103,501
Fixed Income
36,596
38,361
37,352
37,192
37,037
Multi-Asset (4)
20,597
20,914
19,937
21,411
21,975
Alternatives (5)
10,145
17,830
17,266
16,953
16,798
Total
$
154,849
$
168,316
$
162,539
$
172,259
$
179,311
Assets Under Management - Average Management Fees Earned
(6) (in basis points)
Three Months Ended
3/31/2023
6/30/2023
9/30/2023
12/31/2023
3/31/2024
By Product:
Open-End Funds (1)
47.6
49.3
51.1
49.7
49.9
Closed-End Funds
57.1
57.6
58.2
58.4
58.7
Retail Separate Accounts
44.2
44.1
43.3
43.3
43.9
Institutional Accounts (2)(7)
31.8
31.6
30.3
33.2
30.8
All Products (7)
42.0
42.2
42.0
42.6
41.9
(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:
3/31/2023
6/30/2023
9/30/2023
12/31/2023
3/31/2024
Institutional Accounts
0.2
0.2
0.4
2.2
0.3
All Products
0.1
0.1
0.1
0.8
0.1
Assets Under Management - Asset Flows by Product (in
millions)
Three Months Ended
3/31/2023
6/30/2023
9/30/2023
12/31/2023
3/31/2024
Open-End Funds (1)
Beginning balance
$
53,000
$
53,865
$
56,828
$
54,145
$
56,062
Inflows
3,011
2,550
2,687
2,940
3,476
Outflows
(4,792
)
(4,692
)
(4,137
)
(4,905
)
(4,104
)
Net flows
(1,781
)
(2,142
)
(1,450
)
(1,965
)
(628
)
Market performance
2,771
2,163
(1,034
)
4,260
2,560
Other (2)
(125
)
2,942
(199
)
(378
)
(176
)
Ending balance
$
53,865
$
56,828
$
54,145
$
56,062
$
57,818
Closed-End Funds
Beginning balance
$
10,361
$
10,358
$
10,166
$
9,472
$
10,026
Inflows
4
20
—
—
—
Outflows
—
—
—
—
—
Net flows
4
20
—
—
—
Market performance
205
(1
)
(504
)
753
239
Other (2)
(212
)
(211
)
(190
)
(199
)
(201
)
Ending balance
$
10,358
$
10,166
$
9,472
$
10,026
$
10,064
Retail Separate Accounts
Beginning balance
$
35,352
$
37,397
$
38,992
$
38,665
$
43,202
Inflows
1,367
1,346
1,849
2,118
2,373
Outflows
(1,288
)
(1,434
)
(1,524
)
(1,726
)
(1,695
)
Net flows
79
(88
)
325
392
678
Market performance
1,966
1,683
(652
)
4,144
2,936
Other (2)
—
—
—
1
—
Ending balance
$
37,397
$
38,992
$
38,665
$
43,202
$
46,816
Institutional Accounts (3)
Beginning balance
$
50,663
$
53,229
$
62,330
$
60,257
$
62,969
Inflows
1,852
3,660
1,274
1,179
1,734
Outflows
(2,047
)
(1,478
)
(1,648
)
(3,406
)
(3,022
)
Net flows
(195
)
2,182
(374
)
(2,227
)
(1,288
)
Market performance
2,906
2,440
(1,434
)
5,165
3,001
Other (2)
(145
)
4,479
(265
)
(226
)
(69
)
Ending balance
$
53,229
$
62,330
$
60,257
$
62,969
$
64,613
Total
Beginning balance
$
149,376
$
154,849
$
168,316
$
162,539
$
172,259
Inflows
6,234
7,576
5,810
6,237
7,583
Outflows
(8,127
)
(7,604
)
(7,309
)
(10,037
)
(8,821
)
Net flows
(1,893
)
(28
)
(1,499
)
(3,800
)
(1,238
)
Market performance
7,848
6,285
(3,624
)
14,322
8,736
Other (2)
(482
)
7,210
(654
)
(802
)
(446
)
Ending balance
$
154,849
$
168,316
$
162,539
$
172,259
$
179,311
(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
3/31/2024
3/31/2023
12/31/2023
Total revenues, GAAP
$
222,042
$
197,874
$
214,587
Consolidated investment products revenues
(1)
2,544
2,750
2,258
Investment management fees (2)
(10,316
)
(9,561
)
(9,933
)
Distribution and service fees (2)
(14,032
)
(14,154
)
(13,537
)
Total revenues, as adjusted
$
200,238
$
176,909
$
193,375
Operating Expenses
Total operating expenses, GAAP
$
189,736
$
169,295
$
175,631
Consolidated investment products expenses
(1)
(690
)
(700
)
(2,611
)
Distribution and other asset-based
expenses (3)
(24,348
)
(23,715
)
(23,470
)
Amortization of intangible assets (4)
(15,335
)
(14,391
)
(15,446
)
Restructuring expense (5)
(797
)
—
(133
)
Deferred compensation and related
investments (6)
(1,249
)
(572
)
(925
)
Acquisition and integration expenses
(7)
(1,042
)
(965
)
(3,050
)
Other (8)
(2,444
)
592
(472
)
Total operating expenses, as adjusted
$
143,831
$
129,544
$
129,524
Operating Income (Loss)
Operating income (loss), GAAP
$
32,306
$
28,579
$
38,956
Consolidated investment products
(earnings) losses (1)
3,234
3,450
4,869
Amortization of intangible assets (4)
15,335
14,391
15,446
Restructuring expense (5)
797
—
133
Deferred compensation and related
investments (6)
1,249
572
925
Acquisition and integration expenses
(7)
1,042
965
3,050
Other (8)
2,444
(592
)
472
Operating income (loss), as adjusted
$
56,407
$
47,365
$
63,851
Operating margin, GAAP
14.5
%
14.4
%
18.2
%
Operating margin, as adjusted
28.2
%
26.8
%
33.0
%
Three Months Ended
Income (Loss) Before Taxes
3/31/2024
3/31/2023
12/31/2023
Income (loss) before taxes, GAAP
$
46,698
$
43,346
$
51,793
Consolidated investment products
(earnings) losses (1)
(1,819
)
(1,412
)
(1,316
)
Amortization of intangible assets (4)
15,335
14,391
15,446
Restructuring expense (5)
797
—
133
Deferred compensation and related
investments (6)
(400
)
(344
)
(783
)
Acquisition and integration expenses
(7)
1,042
965
3,050
Other (8)
2,444
(592
)
472
Seed capital and CLO investments (gains)
losses (9)
(7,333
)
(10,140
)
(5,078
)
Income (loss) before taxes, as
adjusted
$
56,764
$
46,214
$
63,717
Income Tax Expense (Benefit)
Income tax expense (benefit), GAAP
$
8,831
$
8,703
$
13,294
Tax impact of:
Amortization of intangible assets (4)
3,993
4,025
4,202
Restructuring expense (5)
208
—
36
Deferred compensation and related
investments (6)
(104
)
(96
)
(213
)
Acquisition and integration expenses
(7)
271
270
830
Other (8)
1,056
1,745
(11
)
Seed capital and CLO investments (gains)
losses (9)
529
(1,722
)
(801
)
Income tax expense (benefit), as
adjusted
$
14,784
$
12,925
$
17,337
Effective tax rate, GAAPA
18.9
%
20.1
%
25.7
%
Effective tax rate, as adjustedB
26.0
%
28.0
%
27.2
%
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
$
29,858
$
38,624
$
30,834
Amortization of intangible assets, net of
tax (4)
10,863
9,687
10,764
Restructuring expense, net of tax (5)
589
—
97
Deferred compensation and related
investments (6)
(296
)
(248
)
(570
)
Acquisition and integration expenses, net
of tax (7)
771
695
2,220
Other, net of tax (8)
5,476
(9,236
)
5,689
Seed capital and CLO investments (gains)
losses, net of tax (9)
(7,862
)
(8,418
)
(4,277
)
Net income (loss) attributable to Virtus
Investment Partners, Inc., as adjusted
$
39,399
$
31,104
$
44,757
Weighted average shares outstanding -
diluted
7,287
7,410
7,320
Earnings (loss) per share - diluted,
GAAP
$
4.10
$
5.21
$
4.21
Earnings (loss) per share - diluted, as
adjusted
$
5.41
$
4.20
$
6.11
Three Months Ended
Administration and Shareholder Services
Fees
3/31/2024
3/31/2023
12/31/2023
Administration and shareholder service
fees, GAAP
$
18,678
$
18,359
$
18,189
Consolidated investment products fees
(1)
39
30
24
Administration and shareholder service
fees, as adjusted
$
18,717
$
18,389
$
18,213
Employment Expenses
Employment expenses, GAAP
$
115,163
$
98,614
$
99,847
Deferred compensation and related
investments (6)
(1,249
)
(572
)
(925
)
Acquisition and integration expenses
(7)
(1,042
)
—
(1,760
)
Other (8)
(1,262
)
592
(472
)
Employment expenses, as adjusted
$
111,610
$
98,634
$
96,690
Other Operating Expenses
Other operating expenses, GAAP
$
31,375
$
30,730
$
31,164
Acquisition and integration expenses
(7)
—
(965
)
—
Other (8)
(1,182
)
—
—
Other operating expenses, as adjusted
$
30,193
$
29,765
$
31,164
Total Other Income (Expense),
Net
Total other income (expense), net GAAP
$
5,501
$
4,923
$
5,127
Consolidated investment products (1)
4,127
5,721
1,681
Deferred compensation and related
investments (6)
(1,623
)
(907
)
(1,397
)
Seed capital and CLO investments (gains)
losses (9)
(7,333
)
(10,140
)
(5,078
)
Total other income (expense), net as
adjusted
$
672
$
(403
)
$
333
Interest and Dividend Income
Interest and dividend income, GAAP
$
3,469
$
3,238
$
3,673
Consolidated investment products (1)
1,923
1,028
2,158
Deferred compensation and related
investments (6)
(26
)
(9
)
(311
)
Interest and dividend income, as
adjusted
$
5,366
$
4,257
$
5,520
Total Noncontrolling Interests
Total noncontrolling interests, GAAP
$
(8,009
)
$
3,981
$
(7,665
)
Consolidated investment products (1)
1,819
1,412
1,316
Amortization of intangible assets (4)
(479
)
(679
)
(480
)
Other (8)
4,088
(6,899
)
5,206
Total noncontrolling interests, as
adjusted
$
(2,581
)
$
(2,185
)
$
(1,623
)
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
3/31/2024
3/31/2023
12/31/2023
Employment expenses
$
1,042
$
—
$
1,760
Other operating expenses
—
965
—
Change in fair value of contingent
consideration
—
—
1,290
Total Acquisition and Integration
Expenses
$
1,042
$
965
$
3,050
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
3/31/2024
3/31/2023
12/31/2023
Employment expense fair value
adjustments
$
1,262
$
(592
)
$
472
Amortization of lease termination fees
1,182
—
—
Tax impact of adjustments
(637
)
166
(128
)
Other discrete tax adjustments
(419
)
(1,911
)
139
Affiliate minority interest fair value
adjustments
4,088
(6,899
)
5,206
Total Other
$
5,476
$
(9,236
)
$
5,689
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 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
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 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/20240426212057/en/
Investor Relations Contact Sean Rourke (860) 263-4709
sean.rourke@Virtus.com
Virtus Investment Partners (NYSE:VRTS)
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