VIRTUS INVESTMENT PARTNERS, INC. HARTFORD, Conn., Oct. 30, 2015 /PRNewswire/ -- Virtus Investment Partners, Inc. (NASDAQ: VRTS), which operates a multi-manager asset management business, today reported financial results for the three months ended September 30, 2015.
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Management Commentary
"The volatile financial markets in the third quarter led to a challenging environment for asset managers," said George R. Aylward, president and chief executive officer. "The decline in global markets affected investor behavior, which impacted our results.
"Our third quarter earnings reflect the impact of lower average assets due to equity market declines and net outflows, as well as a negative $4.6 million variable incentive fee. This fee impacted our operating income, as adjusted, and margin. Earnings per share, as adjusted, benefited from a lower share count resulting from share repurchases.
"Open-end mutual fund sales and flows declined over prior periods, consistent with trends we are seeing in the industry. A decline in demand for emerging market equities offset an improvement in outflows in the former AlphaSector funds, which declined to ($0.9) billion from ($2.1) billion sequentially. Both ETFs and institutional had positive net flows.
"We increased our existing share repurchase program by 1.5 million shares, which will allow us to be more opportunistic with repurchases as we continue to invest in the business. The increase underscores our commitment to returning capital to shareholders."
Financial Highlights (Unaudited)
(Dollars in millions, except per share data or as noted)
Three Months Ended Three Months Ended Nine Months Ended
------------------ ------------------ -----------------
9/30/2015 9/30/2014 Change 6/30/2015 Change 9/30/2015 9/30/2014 Change
--------- --------- ------ --------- ------ --------- --------- ------
Non-GAAP Financial Measures (1)
------------------------------
Revenues, as adjusted $71.1 $88.6 (20)% $77.5 (8)% $228.3 $252.0 (9)%
Operating expenses, as adjusted $45.8 $47.0 (3)% $46.1 (1)% $139.4 $140.7 (1)%
Operating income, as adjusted $25.3 $41.6 (39)% $31.4 (19)% $88.9 $111.3 (20)%
Operating margin, as adjusted 35.6% 46.9% 40.5% 38.9% 44.2%
Net income attributable to common stockholders, as adjusted $15.5 $25.6 (39)% $20.0 (22)% $55.9 $69.2 (19)%
Earnings per share - diluted, as adjusted $1.74 $2.76 (37)% $2.21 (21)% $6.18 $7.42 (17)%
U.S. GAAP Financial Measures
----------------------------
Revenues $92.4 $117.8 (22)% $99.7 (7)% $295.9 $338.5 (13)%
Operating expenses $69.3 $78.9 (12)% $83.4 (17)% $232.0 $244.4 (5)%
Operating income $23.1 $38.9 (41)% $16.2 43% $63.9 $94.1 (32)%
Operating margin 25.0% 33.0% 16.3% 21.6% 27.8%
Net income (loss) attributable to common stockholders $(0.6) $37.3 N/M $9.8 N/M $28.5 $78.8 (64)%
Earnings (loss) per share - diluted $(0.07) $4.02 N/M $1.08 N/M $3.15 $8.46 (63)%
Assets Under Management and Flows (in billions)
----------------------------------------------
Ending Assets Under Management (2) $47.9 $59.6 (20)% $52.4 (9)% $47.9 $59.6 (20)%
Average Assets Under Management (2) $50.6 $60.5 (16)% $54.4 (7)% $52.8 $58.0 (9)%
Gross Sales $2.5 $3.5 (28)% $3.3 (22)% $9.5 $11.8 (19)%
Net Flows $(1.6) $0.5 N/M $(1.3) (22)% $(5.2) $1.0 N/M
(1) See the information on pages 12 through 16 for a reconciliation to their most directly comparable U.S. GAAP measures and the notes beginning on page 17 for other
important disclosures
(2) Represents assets under management excluding money market funds that were liquidated in October 2014
N/M - Not Meaningful
Asset Flows and Assets Under Management
Total assets under management were $47.9 billion at September 30, 2015 compared with $59.6 billion at September 30, 2014 and $52.4 billion at June 30, 2015. The decrease from prior periods is attributable to net outflows and market depreciation.
Total sales were $2.5 billion in the third quarter compared with $3.5 billion in the prior-year quarter and $3.3 billion in the sequential quarter. Net flows were ($1.6) billion in the third quarter compared with $0.5 billion in the prior-year quarter and ($1.3) billion in the sequential quarter. Net outflows in the quarter were primarily attributable to open-end mutual funds, which offset positive flows in ETFs and institutional.
Open-end mutual fund sales were $1.9 billion in the third quarter compared with $3.1 billion in the prior-year quarter and $2.6 billion in the sequential quarter. Mutual fund net flows were ($1.9) billion in the third quarter compared with $0.6 billion in the prior-year quarter and ($1.6) billion in the sequential quarter. Net outflows in the current quarter were primarily attributable to ($0.9) billion in the former AlphaSector funds, an improvement from ($2.1) billion in the prior quarter, and a decrease in international equity net flows reflective of investor sentiment on the asset class.
ETF sales were $217.7 million in the third quarter compared with $67.4 million in the sequential quarter due primarily to sales of the recently launched Virtus Newfleet Multi-Sector Unconstrained Bond ETF(1). For the same periods, net flows were $203.9 million compared with $55.2 million, respectively.
Institutional sales were $199.5 million in the third quarter compared with $109.4 million in the prior-year quarter and $214.1 million in the sequential quarter. Net flows were $89.2 million in the third quarter compared with ($127.1) million in the prior-year quarter and $126.8 million in the sequential quarter.
Earnings Summary
Non-GAAP Results
Management believes that a series of non-GAAP financial measures most accurately 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. Quarterly reconciliations of the most comparable U.S. GAAP measure to each non-GAAP measure can be found on pages 12 to 16 of this earnings release.
Revenues, As Adjusted
Total revenues, as adjusted, were $71.1 million in the third quarter compared with $88.6 million in the prior-year quarter and $77.5 million in the sequential quarter. The decline from the prior periods reflects lower investment management and administration and transfer agent fees.
Investment management fees, as adjusted, were $65.2 million in the third quarter compared with $78.8 million in the prior-year quarter and $70.3 million in the sequential quarter. Average assets under management were $50.6 billion in the third quarter compared with $60.5 billion in the prior-year quarter and $54.4 billion in the sequential quarter. The average fee rate in the quarter decreased to 49.4 basis points from 50.6 basis points in the prior-year quarter and 50.7 basis points in the sequential quarter. The third quarter average fee rate included a negative $4.6 million variable incentive fee on one of the company's mutual funds, the majority of which was previously attributable to the fund's former subadviser. Excluding the fee, the open-end fund fee rate for the quarter would have been 53.1 basis points.
Administration and transfer agent fees, as adjusted, were $11.7 million in the third quarter compared with $14.9 million in the prior-year quarter and $12.7 million in the sequential quarter. The decrease from prior periods reflects the decline in average open-end fund assets.
Operating Expenses, As Adjusted
Total operating expenses, as adjusted, were $45.8 million in the third quarter, compared with $47.0 million in the prior-year quarter and $46.1 million in the sequential quarter. The decrease from the prior-year quarter reflects lower employment expenses; the sequential decline reflects lower other operating expenses.
Employment expenses, as adjusted, were $33.5 million in the third quarter compared with $35.2 million in the prior-year quarter and $33.6 million in the sequential quarter. The decrease over the prior-year quarter is attributable to lower incentive compensation partially offset by higher costs associated with increased staffing levels, primarily at the affiliates.
Other operating expenses, as adjusted, were $11.3 million in the third quarter compared with $11.1 million in the prior-year quarter and $11.6 million in the sequential quarter. The sequential quarter decline primarily reflects the timing of annual equity grants to the Board of Directors in the second quarter of 2015.
Operating Income, As Adjusted, and Related Margin
Operating income, as adjusted, was $25.3 million for the third quarter compared with $41.6 million in the prior-year quarter and $31.4 million in the sequential quarter. The related margin was 36 percent compared with 47 percent and 41 percent for the respective prior periods, reflecting lower revenues, as adjusted. Excluding the negative impact of the variable incentive fee, third quarter operating income, as adjusted, would have been $29.9 million and the margin would have been 40 percent.
Net Income Attributable to Common Stockholders, As Adjusted
Net income attributable to common stockholders, as adjusted, was $15.5 million, or $1.74 per diluted share, compared with $25.6 million, or $2.76 per share, in the prior-year quarter and $20.0 million, or $2.21 per share, in the sequential quarter. Current quarter adjusted earnings per share included ($0.32) related to the variable incentive fee. Excluding the impact of the fee, third quarter adjusted earnings per share would have been $2.06.
Effective Tax Rate, As Adjusted
The third quarter effective tax rate, as adjusted, was 38 percent, unchanged from the prior-year and sequential quarters.
GAAP Results
Total revenues were $92.4 million in the third quarter compared with $117.8 million in the prior-year quarter and $99.7 million in the sequential quarter due to lower average assets and fee rates.
Operating expenses were $69.3 million in the third quarter compared with $78.9 million in the prior-year quarter and $83.4 million in the sequential quarter. Operating expenses in the second quarter of 2015 included an $11.3 million loss contingency, related to a previously disclosed regulatory matter, which was unchanged in the third quarter. In October, the company reached an agreement in principle with the staff of the Securities and Exchange Commission to settle the matter. The agreement in principle is subject to review and approval by the Commission.
In the third quarter, the company reported a net loss attributable to common stockholders of ($0.6) million or ($0.07) per fully diluted common share that includes ($16.6) million or ($1.89) per share of unrealized losses on investments. This compares with net income of $37.3 million or $4.02 per share in the prior-year quarter that included ($4.7) million or ($0.50) per share of unrealized losses and $15.5 million or $1.67 per share primarily related to the resolution of uncertain tax positions. Sequential quarter net income of $9.8 million or $1.08 per share included ($2.0) million or ($0.22) per share of unrealized losses and ($7.4) million or ($0.82) related to a loss contingency.
The effective third quarter tax rate was 162 percent compared with (5) percent in the prior-year quarter and 46 percent in the sequential quarter. The current quarter tax rate included a $6.2 million valuation allowance related to the unrealized loss position of the company's marketable securities portfolio; the tax rate for the third quarter 2014 was impacted by a $15.5 million net benefit related to the resolution of uncertain tax positions.
Investment Capabilities and Products
In August, the company introduced its first actively managed ETF from an affiliated manager, the Virtus Newfleet Multi-Sector Unconstrained Bond Fund ETF(1 )(Ticker: NFLT). The fund's strategy seeks to provide a high level of current income, and, secondarily, capital appreciation.
The Virtus Select MLP and Energy Fund(2) (Class I: VLPIX), managed by Duff and Phelps Investment Management, was introduced in September. The fund's strategy seeks to generate attractive total returns by investing primarily in MLPs and GPs that own midstream oil and natural gas assets that are backed by long-term, fee-based contracts.
Balance Sheet and Liquidity
Cash and investments were $444.7 million at September 30, 2015 compared with $440.8 million at September 30, 2014 and $455.5 million at June 30, 2015. The sequential quarter decline was due to return of capital to shareholders and negative returns on seed investments that offset cash generated. On a per share basis, cash and investments were $51 at September 30, 2015 compared with $49 at September 30, 2014 and $52 at June 30, 2015. At September 30, 2015, the company had no debt outstanding and $75.0 million of unused capacity on its credit facility.
Working capital was $106.6 million at September 30, 2015 compared with $173.7 million at September 30, 2014 and $185.6 million at June 30, 2015.
The company's seed capital investments increased to $276.8 million at September 30, 2015 from $239.6 million at September 30, 2014 and $238.9 million at June 30, 2015. The third quarter increase reflects the seeding of the Virtus Multi-Strategy Target Return Fund(3 )(Class I: VMSIX), partially offset by the returns of the seed investments.
During the third quarter 2015, the company invested $20.0 million in an entity that was created specifically to accumulate bank loan assets for securitization as a potential CLO that will be managed by its Newfleet affiliate. The company has a controlling interest in the entity and is consolidating its assets and liabilities. At September 30, 2015, the entity held $131.9 million of assets and liabilities of $112.7 million that are secured by the assets of the entity and are not general obligations of the company.
In the third quarter, the company returned $21.2 million to shareholders including share repurchases of $17.0 million, its highest quarterly level. As a result of share repurchases, basic shares outstanding decreased by 4 percent to 8.7 million from 9.1 million at September 30, 2014.
On October 21, 2015, the Board of Directors authorized an increase of 1.5 million shares of common stock to the existing share repurchase program, which had 0.3 million shares remaining at September 30, bringing total capacity to 1.8 million shares. Under the terms of the program, the company may repurchase shares of its common stock from time to time at its discretion through open market repurchases and/or privately negotiated transactions, depending on price and prevailing market and business conditions. The program, which has no specified term, may be suspended or terminated at any time.
Balance Sheet Highlights (Unaudited)
(in millions)
As of As of
----- -----
9/30/2015 9/30/2014 Change 6/30/2015 Change
--------- --------- ------ --------- ------
Cash and cash equivalents $126.5 $172.7 (27)% $194.3 (35)%
Seed capital investments (1) 276.8 239.6 16% 238.9 16%
Investments - other (2) 41.4 28.5 45% 22.3 85%
---- ---- ----
Total - cash and investments $444.7 $440.8 1% $455.5 (2)%
Deferred taxes, net $59.7 59.7 - $59.8 -
Dividends payable $4.3 $4.2 1% $4.3 -
Total equity attributable to stockholders $539.6 $560.6 (4)% $559.4 (4)%
Working capital (3) $106.6 $173.7 (39)% $185.6 (43)%
(1) Represents the company's investments in sponsored investment products including the company's investment in consolidated sponsored investment products (CSIPs), net of non-controlling interests. For the periods ending September 30, 2015, September 30, 2014, and June 30, 2015, net
assets of CSIPs represent $338.7 million, $263.4 million, and $292.2 million, of total assets, $29.8 million, $23.8 million, and $19.5 million of total liabilities, and $49.9 million, $22.3 million, and $55.6 million of redeemable noncontrolling interests, respectively
(2) Investments that are not related to the company's seed investments including mutual funds and CLOs
(3) Defined as cash and investments plus accounts receivable, net, less seed capital investments, CLO investment, accrued compensation and benefits, accounts payable and accrued liabilities, and dividends payable
N/M - Not Meaningful
Conference Call
Virtus Investment Partners management will host an investor conference call on Friday, October 30, at 10 a.m. Eastern to discuss these financial results and related matters. The webcast of the call will be available in the Investor Relations section of www.virtus.com or by telephone at 877-930-7765 if calling from within the U.S. or 253-336-7413 if calling from outside the U.S. (Conference ID: 67326384). A replay of the call will be available through December 1 via webcast or by telephone at 855-859-2056 if calling from within the U.S. or 404-537-3406 if calling from outside the U.S. (Conference ID: 67326384). The presentation that will be reviewed as part of the conference call will be available in the Presentations section of www.virtus.com.
About Virtus Investment Partners
Virtus Investment Partners (NASDAQ: VRTS) is a distinctive partnership of boutique investment managers singularly committed to the long-term success of individual and institutional investors. Virtus offers access to a variety of investment styles across multiple disciplines to meet a wide array of investor needs, and provides products and services through affiliated managers and select subadvisers, each with a distinct investment style, autonomous investment process, and individual brand. Its affiliates include Cliffwater Investments, Duff & Phelps Investment Management, Euclid Advisors, Kayne Anderson Rudnick Investment Management, Kleinwort Benson Investors International, Newfleet Asset Management, Rampart Investment Management, Virtus ETF Solutions, and Zweig Advisers. Additional information can be found at www.virtus.com.
U.S. GAAP Consolidated Statements of Operations
(in thousands, except per share data)
Three Months Ended Three Months Ended Nine Months Ended
------------------ ------------------ -----------------
9/30/2015 9/30/2014 Change 6/30/2015 Change 9/30/2015 9/30/2014 Change
--------- --------- ------ --------- ------ --------- --------- ------
Revenues
Investment management fees $64,891 $78,960 (18)% $68,867 (6)% $204,254 $225,289 (9)%
Distribution and service fees 15,587 23,671 (34)% 17,635 (12)% 52,820 70,049 (25)%
Administration and transfer agent fees 11,614 14,804 (22)% 12,577 (8)% 37,233 41,819 (11)%
Other income and fees 283 406 (30)% 577 (51)% 1,555 1,304 19%
Total revenues 92,375 117,841 (22)% 99,656 (7)% 295,862 338,461 (13)%
------ ------- ------ ------- -------
Operating Expenses
Employment expenses 33,504 35,246 (5)% 33,593 - 102,719 105,756 (3)%
Distribution and other asset-based expenses 21,717 29,180 (26)% 23,676 (8)% 69,900 96,139 (27)%
Other operating expenses 11,165 11,288 (1)% 23,512 (53)% 51,403 34,952 47%
Other operating expenses of consolidated sponsored investment 1,120 1,246 (10)% 957 17% 2,895 2,374 22%
products
Restructuring and severance - 294 N/M - - - 294 N/M
Depreciation and other amortization 910 713 28% 873 4% 2,562 2,040 26%
Amortization expense 837 947 (12)% 837 - 2,511 2,851 (12)%
Total operating expenses 69,253 78,914 (12)% 83,448 (17)% 231,990 244,406 (5)%
------ ------ ------ ------- -------
Operating Income 23,122 38,927 (41)% 16,208 43% 63,872 94,055 (32)%
------ ------ ------ ------ ------
Other Income (Expense)
Realized and unrealized (loss) gain on investments, net (2,082) (1,039) (100)% 343 N/M (1,194) 1,712 N/M
Realized and unrealized (loss) gain on investments of (17,619) (5,330) (231)% (3,242) 443% (18,271) 1,150 N/M
consolidated sponsored investment products, net
Realized and unrealized loss on investments of consolidated (764) - N/M - N/M (764) - N/M
investment product, net
Other income of consolidated investment product, net 43 - N/M - N/M 43 - N/M
Other income, net 141 233 (40)% 247 (43)% 823 573 44%
Total other (expense) income, net (20,281) (6,136) (231)% (2,652) N/M (19,363) 3,435 N/M
------- ------ ------ ------- -----
Interest Income (Expense)
Interest expense (138) (149) 7% (121) 15% (382) (412) 7%
Interest and dividend income 324 326 (1)% 302 7% 906 1,053 (14)%
Interest and dividend income of investments of consolidated sponsored investment products 2,898 2,222 30% 3,098 (6)% 8,320 4,734 76%
Interest income of investments of consolidated investment product 41 - N/M - N/M 41 - N/M
Total interest income, net 3,125 2,399 30% 3,279 (5)% 8,885 5,375 65%
----- ----- ----- ----- -----
Income Before Income Taxes 5,966 35,190 (83)% 16,835 (65)% 53,394 102,865 (48)%
Income tax expense (benefit) 9,669 (1,805) N/M 7,823 24% 28,360 24,311 17%
Net (Loss) Income (3,703) 36,995 N/M 9,012 N/M 25,034 78,554 (68)%
------ ------ ----- ------ ------
Noncontrolling interests 3,054 345 N/M 765 299% 3,436 267 N/M
Net (Loss) Income Attributable to Common Stockholders $(649) $37,340 N/M $9,777 N/M $28,470 $78,821 (64)%
===== ======= ====== ======= =======
(Loss) Earnings Per Share - Basic $(0.07) $4.10 N/M $1.10 N/M $3.21 $8.65 (63)%
====== ===== ===== ===== =====
(Loss) Earnings Per Share - Diluted $(0.07) $4.02 N/M $1.08 N/M $3.15 $8.46 (63)%
====== ===== ===== ===== =====
Cash Dividends Declared Per Share $0.45 $0.45 - $0.45 - $1.35 $0.90 50%
===== ===== ===== ===== =====
Weighted Average Shares Outstanding - Basic 8,775 9,096 (4)% 8,889 (1)% 8,876 9,115 (3)%
===== ===== ===== ===== =====
Weighted Average Shares Outstanding - Diluted 8,775 9,279 (5)% 9,037 (3)% 9,039 9,322 (3)%
===== ===== ===== ===== =====
Non-GAAP Consolidated Income Statement Information
(in thousands, except per share data)
Three Months Ended Three Months Ended Nine Months Ended
------------------ ------------------ -----------------
9/30/2015 9/30/2014 Change 6/30/2015 Change 9/30/2015 9/30/2014 Change
--------- --------- ------ --------- ------ --------- --------- ------
Revenues, As Adjusted
Investment management fees, as adjusted $65,193 $78,849 (17)% $70,321 (7)% $206,315 $225,193 (8)%
Distribution and service fees, as adjusted 15,614 23,681 (34)% 17,658 (12)% 52,890 70,079 (25)%
Administration and transfer agent fees, as adjusted 11,714 14,872 (21)% 12,662 (7)% 37,495 41,958 (11)%
Other income and fees, as adjusted 283 406 (30)% 577 (51)% 1,555 1,304 19%
Distribution and other asset-based expenses, as adjusted (21,717) (29,180) 26% (23,676) 8% (69,900) (86,563) 19%
Total revenues, as adjusted 71,087 88,628 (20)% 77,542 (8)% 228,355 251,971 (9)%
------ ------ ------ ------- -------
Operating Expenses, As Adjusted
Employment expenses, as adjusted 33,504 35,246 (5)% 33,593 - 102,719 104,388 (2)%
Other operating expenses, as adjusted 11,335 11,072 2% 11,643 (3)% 34,153 34,261 -
Depreciation and other amortization, as adjusted 910 713 28% 873 4% 2,562 2,040 26%
Total operating expenses, as adjusted 45,749 47,031 (3)% 46,109 (1)% 139,434 140,689 (1)%
------ ------ ------ ------- -------
Operating Income, As Adjusted 25,338 41,597 (39)% 31,433 (19)% 88,921 111,282 (20)%
------ ------ ------ ------ -------
Other Income (Expense), as adjusted
Realized and unrealized (loss) gain on investments, net, as adjusted (159) (326) 51% 224 N/M 183 (67) N/M
Other income, net, as adjusted 141 233 (40)% 247 (43)% 823 573 44%
Total other income, net, as adjusted (18) (93) 81% 471 N/M 1,006 506 99%
--- --- --- ----- ---
Interest Income (Expense), as adjusted
Interest expense, as adjusted (138) (149) 7% (121) 15% (382) (412) 7%
Interest and dividend income, as adjusted 247 226 9% 175 41% 641 688 (7)%
Total interest income, net, as adjusted 109 77 42% 54 103% 259 276 (6)%
--- --- --- --- ---
Pre-Tax Income, As Adjusted 25,429 41,581 (39)% 31,958 (20)% 90,186 112,064 (20)%
Income tax expense, as adjusted 9,787 15,993 (39)% 12,127 (19)% 34,414 42,987 (20)%
Net Income, As Adjusted 15,642 25,588 (39)% 19,831 (21)% 55,772 69,077 (19)%
------ ------ ------ ------ ------
Noncontrolling interests, as adjusted (94) 45 N/M 165 N/M 105 86 23%
Net Income Attributable to Common Stockholders, As Adjusted $15,548 $25,633 (39)% $19,996 (22)% $55,877 $69,163 (19)%
======= ======= ======= ======= =======
Earnings Per Share - Basic, As Adjusted $1.77 $2.82 (37)% $2.25 (21)% $6.30 $7.59 (17)%
===== ===== ===== ===== =====
Earnings Per Share - Diluted, As Adjusted $1.74 $2.76 (37)% $2.21 (21)% $6.18 $7.42 (17)%
===== ===== ===== ===== =====
Weighted Average Shares Outstanding - Basic 8,775 9,096 (4)% 8,889 (1)% 8,876 9,115 (3)%
===== ===== ===== ===== =====
Weighted Average Shares Outstanding - Diluted 8,931 9,279 (4)% 9,037 (1)% 9,039 9,322 (3)%
===== ===== ===== ===== =====
Assets Under Management - Product and Asset Class
(in millions)
Three Months Ended
Sep 30, 2015 Jun 30, 2015 Mar 31, 2015 Dec 31, 2014 Sep 30, 2014
------------ ------------ ------------ ------------ ------------
By product (period end):
Open-End Funds (1) $29,716.4 $33,345.3 $35,317.8 $37,514.2 $41,076.3
Closed-End Funds 6,349.8 6,901.0 7,288.0 7,581.4 7,568.1
Exchange Traded Funds 306.9 132.6 - - -
Money Market Funds - - - - 1,231.9
Separately Managed Accounts
(2) 6,539.6 6,952.1 7,131.0 6,884.8 6,653.0
Institutional Accounts (2) 5,025.0 5,070.0 5,036.2 4,722.0 4,348.3
Total $47,937.7 $52,401.0 $54,773.0 $56,702.4 $60,877.6
========= ========= ========= ========= =========
By product (average) (3)
Open-End Funds (1) $31,627.1 $34,852.2 $36,663.7 $39,550.2 $41,639.6
Closed-End Funds 6,714.5 7,256.5 7,435.8 7,551.8 7,571.4
Exchange Traded Funds 269.9 103.9 - - -
Money Market Funds - - - 176.5 1,310.1
Separately Managed Accounts
(2) 6,930.9 7,125.3 6,846.3 6,620.4 6,793.5
Institutional Accounts (2) 5,082.4 5,054.8 4,786.7 4,602.6 4,483.6
Total $50,624.8 $54,392.7 $55,732.5 $58,501.5 $61,798.2
========= ========= ========= ========= =========
By asset class (period end):
Equity $28,231.0 $31,908.8 $33,129.0 $34,180.7 $35,573.6
Fixed Income 15,580.6 16,010.8 16,521.1 16,681.6 16,671.0
Alternatives (4) 3,681.7 4,031.2 4,703.8 5,372.4 6,769.5
Other (5) 444.4 450.2 419.1 467.7 1,863.5
Total $47,937.7 $52,401.0 $54,773.0 $56,702.4 $60,877.6
========= ========= ========= ========= =========
Assets Under Management - Average Net Management Fees Earned (6)
(In basis points)
Three Months Ended
Sep 30, 2015 Jun 30, 2015 Mar 31, 2015 Dec 31, 2014 Sep 30, 2014
------------ ------------ ------------ ------------ ------------
Open-End Funds (1) 47.3 49.2 49.9 50.6 50.8
Closed-End Funds 66.9 66.9 66.7 67.2 67.1
Exchange Traded Funds 21.9 8.9 - - -
Separately Managed Accounts
(2) 54.5 53.5 54.2 51.7 51.3
Institutional Accounts (2) 34.2 34.9 36.3 35.2 34.8
All Products 49.4 50.7 51.5 51.5 50.6
(1) Includes assets under management of open-end and variable insurance funds
(2) Includes assets under management related to option strategies
(3) Averages are calculated as follows:
- Funds - average daily or weekly balances
- Separately Managed Accounts - prior quarter ending balance or average of month-end balances in quarter
- Institutional Accounts - average of month-end balances in quarter
(4) Consists of long/short equity, real estate securities, master-limited partnerships, and other
(5) Consists of cash management and option strategies; as of December 31, 2014 only reflects options strategies. Cash management strategies were $1,340.7 as of September 30, 2014.
(6) Represents net investment management fees divided by average assets. Net investment management fees are defined as investment management fees, as adjusted, less fees paid to third party service providers for investment management related services.
Assets Under Management - Asset Flows by Product
(in millions)
Three Months Ended Nine Months Ended
------------------ -----------------
9/30/2015 6/30/2015 3/31/2015 12/31/2014 9/30/2014 9/30/2015 9/30/2014
--------- --------- --------- ---------- --------- --------- ---------
Open-End Funds (1)
Beginning balance $33,345.3 $35,317.8 $37,514.2 $41,076.3 $41,124.6 $37,514.2 $37,679.5
Inflows 1,866.2 2,619.5 3,014.2 2,856.2 3,055.2 7,499.9 9,877.5
Outflows (3,736.0) (4,174.5) (5,398.0) (5,090.2) (2,442.2) (13,308.5) (8,337.9)
-------- -------- -------- -------- -------- --------- --------
Net Flows (1,869.8) (1,555.0) (2,383.8) (2,234.0) 613.0 (5,808.6) 1,539.6
Market performance (1,780.9) (352.9) 197.1 (348.1) (727.3) (1,936.7) 1,645.3
Other (2) 21.8 (64.6) (9.7) (980.0) 66.0 (52.5) 211.9
Ending balance $29,716.4 $33,345.3 $35,317.8 $37,514.2 $41,076.3 $29,716.4 $41,076.3
========= ========= ========= ========= ========= ========= =========
Closed-End Funds
Beginning balance $6,901.0 $7,288.0 $7,581.4 $7,568.1 $7,530.6 $7,581.4 $6,499.6
Inflows - - - - 30.5 - 493.8
Outflows - - - - - - -
--- --- --- --- --- --- ---
Net Flows - - - - 30.5 - 493.8
Market performance (380.4) (281.6) (168.6) 123.2 (98.4) (830.6) 676.1
Other (2) (170.8) (105.4) (124.8) (109.9) 105.4 (401.0) (101.4)
Ending balance $6,349.8 $6,901.0 $7,288.0 $7,581.4 $7,568.1 $6,349.8 $7,568.1
======== ======== ======== ======== ======== ======== ========
Exchange Traded Funds
Beginning balance $132.6 $ - $ - $ - $ - $ - $ -
Inflows 217.7 67.4 - - - 285.1 -
Outflows (13.8) (12.2) - - - (26.0) -
----- ----- --- --- --- ----- ---
Net Flows 203.9 55.2 - - - 259.1 -
Market performance (29.1) (0.4) - - - (29.5) -
Other (2) (0.5) 77.8 - - - 77.3 -
Ending balance $306.9 $132.6 $ - $ - $ - $306.9 $ -
====== ====== ================ ================ ================ ====== ================
Money Market Funds
Beginning balance $ - $ - $ - $1,231.9 $1,311.7 $ - $1,556.6
Other (2) - - - (1,231.9) (79.8) - (324.7)
Ending balance $ - $ - $ - $ - $1,231.9 $ - $1,231.9
================ ================ ================ ================ ======== ================ ========
Separately Managed Accounts
Beginning balance $6,952.1 $7,131.0 $6,884.8 $6,653.0 $6,862.4 $6,884.8 $7,433.1
Inflows 263.8 366.8 328.5 263.7 319.2 959.1 1,069.9
Outflows (334.5) (342.2) (355.3) (412.5) (343.3) (1,032.0) (1,832.3)
------ ------ ------ ------ ------ -------- --------
Net Flows (70.7) 24.6 (26.8) (148.8) (24.1) (72.9) (762.4)
Market performance (353.2) (65.5) 177.4 397.6 (180.5) (241.3) (42.1)
Other (2) 11.4 (138.0) 95.6 (17.0) (4.8) (31.0) 24.4
Ending balance $6,539.6 $6,952.1 $7,131.0 $6,884.8 $6,653.0 $6,539.6 $6,653.0
======== ======== ======== ======== ======== ======== ========
Institutional Accounts (3)
Beginning balance $5,070.0 $5,036.2 $4,722.0 $4,348.3 $4,565.0 $4,722.0 $4,570.8
Inflows 199.5 214.1 368.1 309.9 109.4 781.7 340.6
Outflows (110.3) (87.3) (147.2) (132.1) (236.5) (344.8) (610.9)
------ ----- ------ ------ ------ ------ ------
Net Flows 89.2 126.8 220.9 177.8 (127.1) 436.9 (270.3)
Market performance (109.9) (81.9) 117.6 216.8 (45.6) (74.2) 172.4
Other (2) (24.3) (11.1) (24.3) (20.9) (44.0) (59.7) (124.6)
Ending balance $5,025.0 $5,070.0 $5,036.2 $4,722.0 $4,348.3 $5,025.0 $4,348.3
======== ======== ======== ======== ======== ======== ========
Total
Beginning balance $52,401.0 $54,773.0 $56,702.4 $60,877.6 $61,394.3 $56,702.4 $57,739.6
Inflows 2,547.2 3,267.8 3,710.8 3,429.8 3,514.3 9,525.8 11,781.8
Outflows (4,194.6) (4,616.2) (5,900.5) (5,634.8) (3,022.0) (14,711.3) (10,781.1)
-------- -------- -------- -------- -------- --------- ---------
Net Flows (1,647.4) (1,348.4) (2,189.7) (2,205.0) 492.3 (5,185.5) 1,000.7
Market performance (2,653.5) (782.3) 323.5 389.5 (1,051.8) (3,112.3) 2,451.7
Other (2) (162.4) (241.3) (63.2) (2,359.7) 42.8 (466.9) (314.4)
Ending balance $47,937.7 $52,401.0 $54,773.0 $56,702.4 $60,877.6 $47,937.7 $60,877.6
========= ========= ========= ========= ========= ========= =========
(1) Includes assets under management of open-end and variable insurance funds
(2) Represents open-end and closed-end mutual fund distributions, net of reinvestments, net flows of cash management strategies, net flows and market performance of structured products, which are a component of institutional accounts, and net flows from non-sales related activities such as asset acquisitions/(dispositions), marketable
securities investments/(withdrawals), and the impact on assets from the use of leverage
(3) Includes assets under management related to option strategies
Virtus Investment Partners, Inc.
Reconciliation of U.S. GAAP Consolidated Statement of Operations to Non-GAAP Consolidated Income Statement Information
(Unaudited, in thousands)
Three months ended September 30, 2015
Reclassifications Adjustments
----------------- -----------
U.S. GAAP Basis Distribution and other asset-based expenses Consolidated investment products Amortization of intangible assets Seed capital and CLO investments impact Other Non-GAAP Basis
--------------- ------------------------------------------- -------------------------------- --------------------------------- --------------------------------------- ----- --------------
Revenues
Investment management fees $64,891 $ - $302 $ - $ - $ - $65,193
Distribution and services fees 15,587 - 27 - - - 15,614
Administration and transfer agent fees 11,614 - 100 - - - 11,714
Other income and fees 283 - - - - - 283
Distribution and other asset-based expenses - (21,717) - - - - (21,717)
Total revenues 92,375 (21,717) 429 - - - 71,087
------ ------- --- --- --- --- ------
Operating Expenses
Employment expenses 33,504 - - - - - 33,504
Distribution and other asset-based expenses 21,717 (21,717) - - - - -
Other operating expense 11,165 - - - - 170 11,335
Other operating expenses of consolidated sponsored investment products 1,120 - (1,120) - - - -
Restructuring and severance - - - - - - -
Depreciation and other amortization 910 - - - - - 910
Amortization expense 837 - - (837) - - -
Total operating expenses 69,253 (21,717) (1,120) (837) - 170 45,749
------ ------- ------ ---- --- --- ------
Operating Income 23,122 - 1,549 837 - (170) 25,338
------ --- ----- --- --- ---- ------
Other Income (Expense)
Realized and unrealized (loss) gain on investments, net (2,082) - (14,145) - 16,068 - (159)
Realized and unrealized (loss) gain on investments (17,619) - 17,619 - - - -
of consolidated sponsored investment products, net
Realized and unrealized (loss) gain on investments (764) - 764 - - - -
of consolidated investment product, net
Other income of consolidated investment product, net 43 - (43) - - - -
Other income, net 141 - (680) - 680 - 141
Total other (expense) income, net (20,281) - 3,515 - 16,748 - (18)
------- --- ----- --- ------ --- ---
Interest Income (Expense)
Interest expense (138) - - - - - (138)
Interest and dividend income 324 - 1,023 - (1,100) - 247
Interest and dividend income of investments of consolidated sponsored investment products, net 2,898 - (2,898) - - - -
Interest income of investments of consolidated investment product, net 41 - (41) - - - -
Total interest income, net 3,125 - (1,916) - (1,100) - 109
----- --- ------ --- ------ --- ---
Income Before Income Taxes 5,966 - 3,148 837 15,648 (170) 25,429
Income tax expense 9,669 - - 322 (139) (65) 9,787
Net Income (3,703) - 3,148 515 15,787 (105) 15,642
------ --- ----- --- ------ ---- ------
Noncontrolling interests 3,054 - (3,148) - - - (94)
----- --- ------ --- --- --- ---
Net Income Attributable to Common Stockholders $(649) $ - $ - $515 $15,787 $(105) $15,548
===== =========================== =========================== ==== ======= ===== =======
Earnings Per Share - Basic $(0.07) $1.77
====== =====
Earnings Per Share - Diluted $(0.07) $1.74
====== =====
Weighted Average Shares Outstanding - Basic (in thousands) 8,775 8,775
===== =====
Weighted Average Shares Outstanding - Diluted (in thousands) 8,775 8,931
===== =====
See pages 17 through 18 for notes to the reconciliation
Virtus Investment Partners, Inc.
Reconciliation of U.S. GAAP Consolidated Statement of Operations to Non-GAAP Consolidated Income Statement Information
(Unaudited, in thousands)
Three months ended September 30, 2014
Reclassifications Adjustments
----------------- -----------
U.S. GAAP Basis Distribution and other asset-based
expenses Consolidated investment products Amortization of intangible assets Seed capital and CLO investments impact Other Non-GAAP Basis
--------------- ---------------------------------- -------------------------------- --------------------------------- --------------------------------------- ----- --------------
Revenues
Investment management fees $78,960 $ - $(111) $ - $ - $ - $78,849
Distribution and service fees 23,671 - 10 - - - 23,681
Administration and transfer agent fees 14,804 - 68 - - - 14,872
Other income and fees 406 - - - - - 406
Distribution and other asset-based expenses - (29,180) - - - - (29,180)
Total revenues 117,841 (29,180) (33) - - - 88,628
------- ------- --- --- --- --- ------
Operating Expenses
Employment expenses 35,246 - - - - - 35,246
Distribution and other asset-based expenses 29,180 (29,180) - - - - -
Other operating expenses 11,288 - - - - (216) 11,072
Other operating expenses of consolidated
sponsored investment products 1,246 - (1,246) - - - -
Restructuring and severance 294 - - - - (294) -
Depreciation and other amortization 713 - - - - - 713
Amortization expense 947 - - (947) - - -
Total operating expenses 78,914 (29,180) (1,246) (947) - (510) 47,031
------ ------- ------ ---- --- ---- ------
Operating Income 38,927 - 1,213 947 - 510 41,597
------ --- ----- --- --- --- ------
Other Income (Expense)
Realized and unrealized (loss) gain on investments, net (1,039) - (4,872) - 5,585 - (326)
Realized and unrealized (loss) gain on investments
of consolidated sponsored investment products, net (5,330) - 5,330 - - - -
Realized and unrealized gain (loss) on investments
of consolidated investment product, net - - - - - - -
Other income of consolidated investment product, net - - - - - - -
Other income, net 233 - - - - - 233
Total other income (expense), net (6,136) - 458 - 5,585 - (93)
------ --- --- --- ----- --- ---
Interest Income (Expense)
Interest expense (149) - - - - - (149)
Interest and dividend income 326 - 851 - (951) - 226
Interest and dividend income of investments
of consolidated sponsored investment products 2,222 - (2,222) - - - -
Total interest income (expense), net 2,399 - (1,371) - (951) - 77
----- --- ------ --- ---- --- ---
Income Before Income Taxes 35,190 - 300 947 4,634 510 41,581
Income tax expense (1,805) - - 364 1,782 15,652 15,993
Net Income 36,995 - 300 583 2,852 (15,142) 25,588
------ --- --- --- ----- ------- ------
Noncontrolling interests 345 - (300) - - - 45
--- --- ---- --- --- --- ---
Net Income Attributable to Common Stockholders $37,340 $ - $ - $583 $2,852 $(15,142) $25,633
======= ========================= ========================= ==== ====== ======== =======
Earnings Per Share - Basic $4.10 $2.82
===== =====
Earnings Per Share - Diluted $4.02 $2.76
===== =====
Weighted Average Shares Outstanding - Basic (in thousands) 9,096 9,096
===== =====
Weighted Average Shares Outstanding - Diluted (in thousands) 9,279 9,279
===== =====
See pages 17 through 18 for notes to the reconciliation
Virtus Investment Partners, Inc.
Reconciliation of U.S. GAAP Consolidated Statement of Operations to Non-GAAP Consolidated Income Statement Information
(Unaudited, in thousands)
Three months ended June 30, 2015
Reclassifications Adjustments
----------------- -----------
U.S. GAAP Basis Distribution and other asset-based
expenses Consolidated investment products Amortization of intangible assets Seed capital and CLO investments impact Other Non-GAAP Basis
--------------- ---------------------------------- -------------------------------- --------------------------------- --------------------------------------- ----- --------------
Revenues
Investment management fees $68,867 $ - $288 $ - $ - $1,166 $70,321
Distribution and service fees 17,635 - 23 - - - 17,658
Administration and transfer agent fees 12,577 - 85 - - - 12,662
Other income and fees 577 - - - - - 577
Distribution and other asset-based expenses - (23,676) - - - - (23,676)
Total revenues 99,656 (23,676) 396 - - 1,166 77,542
------ ------- --- --- --- ----- ------
Operating Expenses
Employment expenses 33,593 - - - - - 33,593
Distribution and other asset-based expenses 23,676 (23,676) - - - - -
Other operating expenses 23,512 - - - - (11,869) 11,643
Other operating expenses of consolidated
sponsored investment products 957 - (957) - - - -
Restructuring and severance - - - - - - -
Depreciation and other amortization 873 - - - - - 873
Amortization expense 837 - - (837) - - -
Total operating expenses 83,448 (23,676) (957) (837) - (11,869) 46,109
------ ------- ---- ---- --- ------- ------
Operating Income 16,208 - 1,353 837 - 13,035 31,433
------ --- ----- --- --- ------ ------
Other Income (Expense)
Realized and unrealized gain (loss) on investments, net 343 - (1,828) - 1,709 - 224
Realized and unrealized (loss) gain on investments
of consolidated sponsored investment products, net (3,242) - 3,242 - - - -
Realized and unrealized gain (loss) on investments
of consolidated investment product, net - - - - - - -
Other income of consolidated investment product, net - - - - - - -
Other income, net 247 - - - - - 247
Total other income (expense), net (2,652) - 1,414 - 1,709 - 471
------ --- ----- --- ----- --- ---
Interest Income (Expense)
Interest expense (121) - - - - - (121)
Interest and dividend income 302 - 931 - (1,058) - 175
Interest and dividend income of investments
of consolidated sponsored investment products 3,098 - (3,098) - - - -
Total interest income (expense), net 3,279 - (2,167) - (1,058) - 54
----- --- ------ --- ------ --- ---
Income Before Income Taxes 16,835 - 600 837 651 13,035 31,958
Income tax expense 7,823 - - 318 (579) 4,565 12,127
Net Income 9,012 - 600 519 1,230 8,470 19,831
----- --- --- --- ----- ----- ------
Noncontrolling interests 765 - (600) - - - 165
--- --- ---- --- --- --- ---
Net Income Attributable to Common Stockholders $9,777 $ - $ - $519 $1,230 $8,470 $19,996
====== ========================= ========================= ==== ====== ====== =======
Earnings Per Share - Basic $1.10 $2.25
===== =====
Earnings Per Share - Diluted $1.08 $2.21
===== =====
Weighted Average Shares Outstanding - Basic (in thousands) 8,889 8,889
===== =====
Weighted Average Shares Outstanding - Diluted (in thousands) 9,037 9,037
===== =====
See pages 17 through 18 for notes to the reconciliation
Virtus Investment Partners, Inc.
Reconciliation of U.S. GAAP Consolidated Statement of Operations to Non-GAAP Consolidated Income Statement Information
(Unaudited, in thousands)
Nine Months Ended September 30, 2015
Reclassifications Adjustments
----------------- -----------
U.S. GAAP Basis Distribution and other asset-based expenses Consolidated investment products Amortization of intangible assets Seed capital and CLO investments impact Other Non-GAAP Basis
--------------- ------------------------------------------- -------------------------------- --------------------------------- --------------------------------------- ----- --------------
Revenues
Investment management fees $204,254 $ - $895 $ - $ - $1,166 $206,315
Distribution and services fees 52,820 - 70 - - - 52,890
Administration and transfer agent fees 37,233 - 262 - - - 37,495
Other income and fees 1,555 - - - - - 1,555
Distribution and other asset-based expenses - (69,900) - - - - (69,900)
Total revenues 295,862 (69,900) 1,227 - - 1,166 228,355
------- ------- ----- --- --- ----- -------
Operating Expenses
Employment expenses 102,719 - - - - - 102,719
Distribution and other asset-based expenses 69,900 (69,900) - - - - -
Other operating expense 51,403 - - - - (17,250) 34,153
Other operating expenses of consolidated sponsored 2,895 - (2,895) - - - -
investment products
Restructuring and severance - - - - - - -
Depreciation and other amortization 2,562 - - - - - 2,562
Amortization expense 2,511 - - (2,511) - - -
Total operating expenses 231,990 (69,900) (2,895) (2,511) - (17,250) 139,434
------- ------- ------ ------ --- ------- -------
Operating Income 63,872 - 4,122 2,511 - 18,416 88,921
------ --- ----- ----- --- ------ ------
Other Income (Expense)
Realized and unrealized (loss) gain on investments, net (1,194) - (13,632) - 15,009 - 183
Realized and unrealized (loss) gain on investments (18,271) - 18,271 - - - -
of consolidated sponsored investment products, net
Realized and unrealized (loss) gain on investments (764) - 764 - - - -
of consolidated investment product, net
Other income of consolidated investment product, net 43 - (43) - - - -
Other income, net 823 - (680) - 680 - 823
Total other (expense) income, net (19,363) - 4,680 - 15,689 - 1,006
------- --- ----- --- ------ --- -----
Interest Income (Expense)
Interest expense (382) - - - - - (382)
Interest and dividend income 906 - 2,890 - (3,155) - 641
Interest and dividend income of investments of consolidated sponsored investment products, net 8,320 - (8,320) - - - -
Interest income of investments of consolidated investment product, net 41 - (41) - - - -
Total interest income, net 8,885 - (5,471) - (3,155) - 259
----- --- ------ --- ------ --- ---
Income Before Income Taxes 53,394 - 3,331 2,511 12,534 18,416 90,186
Income tax expense 28,360 - - 959 (1,138) 6,233 34,414
Net Income 25,034 - 3,331 1,552 13,672 12,183 55,772
------ --- ----- ----- ------ ------ ------
Noncontrolling interests 3,436 - (3,331) - - - 105
----- --- ------ --- --- --- ---
Net Income Attributable to Common Stockholders $28,470 $ - $ - $1,552 $13,672 $12,183 $55,877
======= =========================== =========================== ====== ======= ======= =======
Earnings Per Share - Basic $3.21 $6.30
===== =====
Earnings Per Share - Diluted $3.15 $6.18
===== =====
Weighted Average Shares Outstanding - Basic (in thousands) 8,876 8,876
===== =====
Weighted Average Shares Outstanding - Diluted (in thousands) 9,039 9,039
===== =====
See pages 17 through 18 for notes to the reconciliation
Virtus Investment Partners, Inc.
Reconciliation of U.S. GAAP Consolidated Statement of Operations to Non-GAAP Consolidated Income Statement Information
(Unaudited, in thousands)
Nine months ended September 30, 2014
Reclassifications Adjustments
----------------- -----------
U.S. GAAP Basis Distribution and other asset-based
expenses Consolidated investment products Closed-end fund launch costs Amortization of intangible assets Seed capital and CLO investments impact Other Non-GAAP Basis
--------------- ---------------------------------- -------------------------------- ---------------------------- --------------------------------- --------------------------------------- ----- --------------
Revenues
Investment management fees $225,289 $ - $(96) $ - $ - $ - $ - $225,193
Distribution and service fees 70,049 - 30 - - - - 70,079
Administration and transfer agent fees 41,819 - 139 - - - - 41,958
Other income and fees 1,304 - - - - - - 1,304
Distribution and other asset-based expenses - (86,563) - - - - - (86,563)
Total revenues 338,461 (86,563) 73 - - - - 251,971
------- ------- --- --- --- --- --- -------
Operating Expenses
Employment expenses 105,756 - - (509) - - (859) 104,388
Distribution and other asset-based expenses 96,139 (86,563) - (9,576) - - - -
Other operating expenses 34,952 - - - - - (691) 34,261
Other operating expenses of consolidated - - - - - - -
sponsored investment products 2,374 - (2,374) - - - - -
Restructuring and severance 294 - - - - - (294) -
Depreciation and other amortization 2,040 - - - - - - 2,040
Amortization expense 2,851 - - - (2,851) - - -
Total operating expenses 244,406 (86,563) (2,374) (10,085) (2,851) - (1,844) 140,689
------- ------- ------ ------- ------ --- ------ -------
Operating Income 94,055 - 2,447 10,085 2,851 - 1,844 111,282
------ --- ----- ------ ----- --- ----- -------
Other Income (Expense)
Realized and unrealized gain (loss) on investments, net 1,712 - 1,712 - - (3,491) - (67)
Realized and unrealized gain (loss) on investments
of consolidated sponsored investment products, net 1,150 - (1,150) - - - - -
Realized and unrealized gain (loss) on investments
of consolidated investment product, net - - - - - - -
Other income of consolidated investment product, net - - - - - - -
Other income, net 573 - - - - - - 573
Total other income (expense), net 3,435 - 562 - - (3,491) - 506
----- --- --- --- --- ------ --- ---
Interest Income (Expense)
Interest expense (412) - - - - - - (412)
Interest and dividend income 1,053 - 1,906 - - (2,271) - 688
Interest and dividend income of investments
of consolidated sponsored investment products 4,734 - (4,734) - - - - -
Total interest income (expense), net 5,375 - (2,828) - - (2,271) - 276
----- --- ------ --- --- ------ --- ---
Income Before Income Taxes 102,865 - 181 10,085 2,851 (5,762) 1,844 112,064
Income tax expense 24,311 - - 3,861 1,094 (2,199) 15,920 42,987
Net Income 78,554 - 181 6,224 1,757 (3,563) (14,076) 69,077
------ --- --- ----- ----- ------ ------- ------
Noncontrolling interests 267 - (181) - - - - 86
--- --- ---- --- --- --- --- ---
Net Income Attributable to Common Stockholders $78,821 $ - $ - $6,224 $1,757 $(3,563) $(14,076) $69,163
======= ========================= ========================= ====== ====== ======= ======== =======
Earnings Per Share - Basic $8.65 $7.59
===== =====
Earnings Per Share - Diluted $8.46 $7.42
===== =====
Weighted Average Shares Outstanding - Basic (in thousands) 9,115 9,115
===== =====
Weighted Average Shares Outstanding - Diluted (in thousands) 9,322 9,322
===== =====
See pages 17 through 18 for notes to the reconciliation
Virtus Investment Partners, Inc.
Notes
The following are notes to the reconciliations of the most comparable U.S. GAAP measure to each non-GAAP measure for the third quarter of 2015, the third quarter of 2014, the second quarter of 2015 and the nine-months ended September 30, 2015 and September 30, 2014 presented on pages 12 to 16.
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 adjustment 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.
In particular, the company reclassifies:
1. Distribution and other asset-based expenses - These costs are generally
passed directly through to external parties. Management believes that
making this adjustment aids in comparing the company's operating results
with other asset management firms that do not distribute products through
intermediary distribution partners or utilize third party service
providers for investment management related services.
2. Consolidated investment products - Management believes that excluding the
operating activities of majority-owned funds and CLOs to reflect revenues
and expenses of the company prior to the consolidation of these products
is consistent with the approach of reflecting its operating results as
only revenues generated and expenses incurred related to providing
investment management and related services will be included in operating
income, as adjusted.
Net income attributable to common stockholders, as adjusted, excludes from net income:
-- Closed-end fund launch costs - Expenses related to the launch of
closed-end funds, or similar products, including structuring fees and
sales-based compensation related to the launch. The timing of closed-end
fund issuances can be unpredictable, and related costs can fluctuate
considerably. In addition, revenue associated with these costs will not
fully impact financial results until future periods. Management believes
that making these adjustments aids in comparing the company's operating
results with prior periods and with other asset management firms that do
not issue closed-end funds, or similar products.
-- Amortization of intangible assets - Non-cash amortization expense or
impairment expense, if any, attributable to acquisition-related
intangible assets. 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.
-- Seed capital and CLO investments impact - Gains and losses (realized and
unrealized), dividends and interest income generated by seed capital and
CLO investments. Earnings or losses generated by investments in seed
capital products 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.
-- Other - Expenses and loss contingencies related to restructuring,
severance, regulatory matters, and certain transition items that are not
reflective of the ongoing earnings generation of the business. In
addition, income tax expense/(benefit) items, such as adjustments for
uncertain tax positions, valuation allowances and other unusual 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 in the table below:
Three Months Ended Nine Months Ended
------------------ -----------------
Other (in thousands) 9/30/2015 9/30/2014 6/30/2015 9/30/2015 9/30/2014
--------- --------- --------- --------- ---------
Loss contingency $ - $ - $11,300 $16,500 $ -
Tax impact of loss contingency - - (3,907) (5,507) -
Transition related revenues - - 1,166 1,166 -
Tax impact of transition related revenues - - (442) (442) -
System transition expenses (170) 216 569 750 691
Tax impact of system transition expenses 65 (83) (216) (284) (265)
Newfleet transition expenses - - - - 859
Tax impact of Newfleet transition expenses - - - - (329)
Restructuring and severance - 294 - - 294
Tax impact of restructuring and severance - (113) - - (113)
Discrete tax adjustments - (15,456) - - (15,213)
Total Other $(105) $(15,142) $8,470 $12,183 $(14,076)
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Revenues, as adjusted, comprise the fee revenues paid by clients for investment management and related services. Revenues, as adjusted, for purposes of calculating net income attributable to common stockholders, as adjusted, differ from U.S. GAAP revenues in that they are reduced by distribution and other asset-based expenses that are generally passed through to external parties, and exclude the impact of consolidated sponsored investment products.
Operating expenses, as adjusted, is calculated to reflect expenses from ongoing continuing operations attributable to stockholders. Operating expenses, as adjusted, for purposes of calculating net income attributable to common stockholders, as adjusted, differ from U.S. GAAP expenses in that they exclude amortization or impairment, if any, of intangible assets, restructuring and severance, the impact of consolidated sponsored investment products, 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 per share, as adjusted, represent net income attributable to common stockholders, as adjusted, divided by weighted average shares outstanding, on either a basic or diluted basis.
(1) The Virtus Newfleet Multi-Sector Unconstrained Bond ETF is subject to the risks of fixed income investing, including credit and interest, high yield-high risk fixed income investing, foreign and emerging markets, bank loans, asset- and mortgage-backed securities, and derivatives.
Please carefully consider the investment objectives, risks, charges, and expenses of this product before investing. For this and other information contact us at 888-383-0553 or visit Newfleet.com for a prospectus. Read it carefully before you invest or send money.
Exchange Traded Funds Distributed by ETF Distributors, LLC, member FINRA and subsidiary of Virtus Investment Partners, Inc.
(2) The Virtus Select MLP and Energy Fund is subject to the risks of equity securities, MLPs, energy sector concentration, and non-diversification.
(3) The Virtus Multi-Strategy Target Return Fund is subject to the risks of equity securities, foreign & emerging markets, credit and interest, high yield-high risk fixed income securities, derivatives, leverage, counterparties and portfolio turnover.
Investors should carefully consider the investment objectives, risks, charges and expenses of any Virtus Mutual Fund before investing. The prospectus and summary prospectus contains this and other information about the fund. Please contact your financial representative, call 1-800- 243-4361 or visit www.virtus.com to obtain a current prospectus and/or summary prospectus. You should read the prospectus and/or summary prospectus carefully before you invest or send money.
Mutual funds distributed by VP Distributors, LLC, member FINRA and subsidiary of Virtus Investment Partners, Inc.
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. These statements may be identified by such forward-looking terminology as "expect," "estimate," "plan," "intend," "believe," "anticipate," "may," "will," "should," "could," "continue," "project," or similar statements or variations of such terms.
Our forward-looking statements are based on a series of expectations, assumptions and projections about our company, are not guarantees of future results or performance, and involve substantial risks and uncertainty, including assumptions and projections concerning our assets under management, cash inflows and outflows, operating cash flows, our ability to expand distribution and product offerings, and future credit facilities, for all forward periods. All of our 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 2014 Annual Report on Form 10-K, as well as the following risks and uncertainties: (a) any reduction in our assets under management, (b) the withdrawal, renegotiation or termination of our investment advisory agreements; (c) damage to our reputation; (d) our inability to attract and retain key personnel; (e) the competition we face in our business; (f) adverse regulatory and legal developments; (g) limitations on our deferred tax assets; (h) adverse developments with respect to, or changes in our relationships with, unaffiliated subadvisers; (i) changes in key distribution relationships; (j) interruptions in service or failure to provide service by third-party service providers; (k) any reduction in value of our marketable securities; (l) our inability to make intended quarterly distributions; (m) lack of availability of required and necessary capital on satisfactory terms; and (n) liabilities and losses not covered by our insurance policies and (o) certain other risks and uncertainties described in our 2014 Annual Report on Form 10-K or in any of our filings with the Securities and Exchange Commission ("SEC").
Certain other factors which may impact our continuing operations, prospects, financial results and liquidity or which may cause actual results to differ from such forward-looking statements are discussed or included in the company's periodic reports filed with the SEC and are available on our website at www.virtus.com under "Investor Relations." You are urged to carefully consider all such factors.
The company does not undertake or plan to update or revise any such forward-looking statements to reflect actual results, changes in plans, assumptions, estimates or projections, or other circumstances occurring after the date of this release, even if such results, changes or circumstances make it clear that any forward-looking information will not be realized. If there are any future public statements or disclosures by us which modify or impact any of the forward-looking statements contained in or accompanying this release, such statements or disclosures will be deemed to modify or supersede such statements in this release.
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SOURCE Virtus Investment Partners, Inc.
