Document
false0000883237 0000883237 2020-01-31 2020-01-31



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 OR 15(d) of The Securities Exchange Act of 1934

January 31, 2020
Date of Report (date of earliest event reported)

VIRTUS INVESTMENT PARTNERS, INC.
(Exact name of registrant as specified in its charter)
Delaware
001-10994
26-3962811
 
(State or other jurisdiction of incorporation)
(Commission File Number)
(I.R.S. Employer Identification No.)
 
 
 
One Financial Plaza
Hartford
CT
06103
 
(Address of principal executive offices)
 
(Zip Code)
 
(800) 248-7971
Registrant's telephone number, including area code

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading Symbol(s)
Name of each exchange on which registered
Common Stock, $0.01 par value
(including Preferred Share Purchase Rights)
VRTS
The NASDAQ Stock Market LLC

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
o





Item 2.02 Results of Operations and Financial Condition.
 
On January 31, 2020, Virtus Investment Partners, Inc. (the “Company”) issued a press release reporting results for the quarter ended December 31, 2019. A copy of this press release is being furnished as Exhibit 99.1 to this Current Report on Form 8-K and is incorporated herein by reference.
 
The information in this report, including the exhibits hereto, (i) shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that section and (ii) shall not be incorporated by reference into any filing of the Company with the Securities and Exchange Commission, whether made before or after the date hereof, regardless of any general incorporation language in such filings (unless the Company specifically states that the information or exhibits in this particular report are incorporated by reference).


Item 9.01 Financial Statements and Exhibits.
 
(d)     Exhibits
 
99.1     Press release of Virtus Investment Partners, Inc., dated January 31, 2020.
104    Cover Page Interactive Data File (embedded within the Inline XBRL document).






SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
 
 
 
VIRTUS INVESTMENT PARTNERS, INC.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Dated:
January 31, 2020
By:  
/s/ Michael A. Angerthal
 
 
 
Name:
Michael A. Angerthal
 
 
 
Title:
Chief Financial Officer
 
 
 
 
 
 




Exhibit
News Release
 
 
 
 
 

Virtus Investment Partners Announces Financial Results for Fourth Quarter 2019

Earnings Per Share - Diluted of $2.83; Earnings Per Share - Diluted, as Adjusted, of $4.32
Total Sales of $4.8B; Net Flows of $0.3B; Long-Term AUM of $107.7B; Total AUM of $108.9B

Hartford, CT, January 31, 2020 - Virtus Investment Partners, Inc. (NASDAQ: VRTS) today reported financial results for the three months ended December 31, 2019.

Financial Highlights (Unaudited)
(in millions, except per share data or as noted)
 
Three Months Ended
 
 
 
Three Months Ended
 
 
 
12/31/2019
 
12/31/2018
 
Change
 
9/30/2019
 
Change
 
 
 
 
 
 
 
 
 
 
U.S. GAAP Financial Measures
 
 
 
 
 
 
 
 
 
Revenues
$
146.1

 
$
138.1

 
6
%
 
$
146.0

 
%
Operating expenses
$
108.3

 
$
108.8

 
%
 
$
110.2

 
(2
%)
Operating income (loss)
$
37.8

 
$
29.2

 
29
%
 
$
35.8

 
6
%
Operating margin
25.9
%
 
21.2
%
 
 
 
24.5
%
 
 
Net income (loss) attributable to common stockholders
$
20.8

 
$
0.1

 
N/M

 
$
22.0

 
(5
%)
Earnings (loss) per share - diluted
$
2.83

 
$
0.01

 
N/M

 
$
2.95

 
(4
%)
Weighted average shares outstanding - diluted
8.084

 
7.382

 
10
%
 
8.157

 
(1
%)
 
 
 
 
 
 
 
 
 
 
Non-GAAP Financial Measures (1)
 
 
 
 
 
 
 
 
 
Revenues, as adjusted
$
128.4

 
$
118.6

 
8
%
 
$
127.1

 
1
%
Operating expenses, as adjusted
$
78.3

 
$
77.2

 
1
%
 
$
79.5

 
(2
%)
Operating income (loss), as adjusted
$
50.1

 
$
41.5

 
21
%
 
$
47.7

 
5
%
Operating margin, as adjusted
39.0
%
 
34.9
%
 
 
 
37.5
%
 
 
Net income (loss) attributable to common stockholders, as adjusted
$
34.9

 
$
28.8

 
21
%
 
$
32.9

 
6
%
Earnings (loss) per share - diluted, as adjusted
$
4.32

 
$
3.42

 
26
%
 
$
4.03

 
7
%
Weighted average shares outstanding - diluted, as adjusted
8.084

 
8.429

 
(4
%)
 
8.157

 
(1
%)

(1) See the information beginning on page 11 for reconciliations to the most directly comparable U.S. GAAP measures and other important disclosures
N/M - Not Meaningful

Earnings Summary

The company presents U.S. GAAP and non-GAAP earnings information in this release. Management believes that the non-GAAP financial measures presented reflect the company’s operating results from providing investment management and related services to individuals and institutions and uses these measures to evaluate financial performance. Non-GAAP financial measures have material limitations and should not be viewed in isolation or as a substitute for U.S. GAAP measures. Reconciliations of the non-GAAP financial measures to the most comparable U.S. GAAP measures can be found beginning on page 11 of this earnings release.


Virtus Investment Partners, Inc. | One Financial Plaza | Hartford, CT 06103 | www.virtus.com


Virtus Investment Partners, Inc. 2.


Assets Under Management and Asset Flows
(in billions)
 
Three Months Ended
 
 
 
Three Months Ended
 
 
 
12/31/2019
 
12/31/2018
 
Change

 
9/30/2019
 
Change
Ending long-term assets under management (1)
$
107.7

 
$
90.4

 
19
%
 
$
102.8

 
5
%
Ending total assets under management
$
108.9

 
$
92.0

 
18
%
 
$
104.1

 
5
%
Average long-term assets under management (1)
$
103.9

 
$
98.3

 
6
%
 
$
102.8

 
1
%
Average total assets under management
$
105.1

 
$
99.9

 
5
%
 
$
104.5

 
1
%
Total sales
$
4.8

 
$
4.4

 
9
%
 
$
4.8

 
%
Net flows
$
0.3

 
$
(4.8
)
 
N/M

 
$
(1.1
)
 
N/M

 

(1) Excludes assets under management in liquidity strategies, including in certain open-end mutual funds and institutional accounts.
N/M - Not Meaningful

Long-term assets under management increased 5% to $107.7 billion at December 31, 2019 from $102.8 billion at September 30, 2019 due to market appreciation and positive net flows. Total assets under management at December 31, 2019 were $108.9 billion, including $1.2 billion of assets in liquidity strategies.
Total sales of $4.8 billion were unchanged from the third quarter as higher sales from retail separate accounts, institutional, and exchange traded funds (ETFs) were offset by lower open-end fund sales. Retail separate account sales were $1.0 billion, up 24% sequentially, with growth in both the intermediary-sold and private client channels. Institutional sales increased 45% sequentially to $1.2 billion as a result of new mandates across multiple affiliates. ETF sales of $0.2 billion increased 74% from the third quarter. Open-end fund sales declined 21% to $2.3 billion from $3.0 billion in the third quarter, which included $0.6 billion of model wins and reallocations.
Total net flows of $0.3 billion improved meaningfully from ($1.1) billion in the third quarter and included positive net flows in retail separate accounts, institutional, and ETFs that were partially offset by net outflows in open-end funds. Net flows in retail separate accounts were $0.6 billion, up $0.2 billion from the prior quarter as a result of stronger sales. Institutional net flows of $0.1 billion improved from ($1.4) billion in the prior quarter, which included a single large client redemption. Open-end fund net flows of ($0.4) billion were a result of continued net outflows in bank loan strategies, partially offset by positive net flows in domestic and international equity strategies.














Virtus Investment Partners, Inc. | One Financial Plaza | Hartford, CT 06103 | www.virtus.com


Virtus Investment Partners, Inc. 3.



GAAP Results

Operating income increased 6% sequentially to $37.8 million from $35.8 million in the prior quarter, primarily reflecting lower employment expenses.
Net income attributable to common stockholders of $2.83 per diluted common share included ($0.71) of fair value adjustments on affiliate non-controlling interests, ($0.31) of net realized and unrealized losses on investments, and ($0.11) of acquisition and integration costs. Third quarter net income per diluted share of $2.95 included ($0.63) of net realized and unrealized losses on investments and ($0.12) of acquisition and integration costs.

The effective tax rate of 28% during the fourth quarter compared with 30% in the prior quarter, reflecting a change in the valuation allowance related to marketable securities.

Non-GAAP Results
Revenues, as adjusted, of $128.4 million increased 1% from the prior quarter as a result of an increase in both average long-term assets and the average fee rate. Revenues included $1.1 million of performance-related fees compared with $1.2 million in the prior quarter. Employment expenses, as adjusted, declined 2% to $58.8 million primarily due to lower incentive compensation. Other operating expenses, as adjusted, of $18.2 million compared with $18.1 million in the prior quarter.
Operating income, as adjusted, and the related margin increased to $50.1 million and 39%, respectively, from $47.7 million and 38%, respectively, in the prior quarter. The higher margin reflected growth in investment management fees and a decline in employment expenses.
Interest and dividends earned on cash equivalents, seed capital, and collateralized loan obligation (CLO) investments were $4.1 million, an increase from $3.5 million in the third quarter, primarily due to higher dividend income.
Net income attributable to common stockholders, as adjusted, which is net of noncontrolling interests, was $4.32 per diluted common share, an increase of $0.29, or 7%, from $4.03 in the prior quarter. The increase primarily reflected higher operating income, as adjusted.
The effective tax rate, as adjusted, was 27%, unchanged from the prior quarter.


Virtus Investment Partners, Inc. | One Financial Plaza | Hartford, CT 06103 | www.virtus.com


Virtus Investment Partners, Inc. 4.


Select Balance Sheet Items (Unaudited)
(in millions)
 
As of
 
 
 
As of
 
 
 
12/31/2019
 
12/31/2018
 
Change
 
9/30/2019
 
Change
Cash and cash equivalents
$
221.8

 
$
201.7

 
10
%
 
$
195.9

 
13
%
Gross debt (1)
$
285.7

 
$
340.6

 
(16
%)
 
$
300.7

 
(5
%)
Redeemable noncontrolling interests
$
58.4

 
$
55.1

 
6
%
 
$
53.1

 
10
%
Total equity attributable to stockholders
$
675.7

 
$
629.9

 
7
%
 
$
665.7

 
2
%
 
 
 
 
 
 
 
 
 
 
Working capital (2)
$
160.1

 
$
140.2

 
14
%
 
$
158.0

 
1
%
Net debt (cash) (3)
$
63.9

 
$
138.9

 
(54
%)
 
$
104.9

 
(39
%)

(1) Excludes deferred financing costs of $7.9 million, $11.4 million, and $8.7 million as of December 31, 2019, December 31, 2018, and September 30, 2019, respectively.
(2) Defined as cash and cash equivalents plus accounts receivable, net, less accrued compensation and benefits, accounts payable and accrued liabilities, dividends payable and required principal payments due over the next 12 months, including scheduled amortization and an estimate of the excess cash flow payment; the actual excess cash flow payment will be measured based on fiscal year 2019 financial results and the net leverage ratio as of December 31, 2019.
(3) Defined as gross debt less cash and cash equivalents.

Working capital at December 31, 2019 of $160.1 million increased 1% from September 30, 2019, reflecting net cash generated from the business partially offset by principal payments on debt and return of capital to shareholders.
During the fourth quarter, the company repurchased 85,745 shares, or 1.2% of beginning-of-quarter outstanding common shares, for $10.0 million. In addition, the company net settled 7,954 shares for $0.9 million to satisfy employee tax obligations on restricted stock units.
The company repaid $15.0 million of debt in the fourth quarter. The net leverage ratio, which is net debt to EBITDA (in accordance with the company's credit agreement), was 0.3x at December 31, 2019, down from 0.5x at September 30, 2019 and 0.7x at December 31, 2018.
As previously disclosed, each share of the company’s 7.25% mandatorily convertible preferred stock will automatically convert into 0.7938 shares of the company’s common stock and be available to commence trading on February 4, 2020. The conversion will result in the issuance of 912,870 shares of common stock, modestly lower than the estimated converted shares assumed in the calculation of outstanding shares at December 31, 2019.









Virtus Investment Partners, Inc. | One Financial Plaza | Hartford, CT 06103 | www.virtus.com


Virtus Investment Partners, Inc. 5.


Conference Call

Management will host an investor conference call on Friday, January 31, 2020, at 10 a.m. Eastern to discuss these financial results and related matters. The webcast of the call can be accessed in the Investor Relations section of www.virtus.com, or by telephone at 877-930-7765 for callers in the U.S. and Canada or 253-336-7413 for international callers (Conference ID: 4583175). The presentation that will be reviewed as part of the conference call will be available prior to the call in the Investor Relations section of www.virtus.com. A replay of the call will be available through February 7, 2020, by telephone at 855-859-2056 (U.S. and Canada) or 404-537-3406 (international) (Conference ID: 4583175).

About Virtus Investment Partners

Virtus Investment Partners, Inc. (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 affiliated managers include Ceredex Value Advisors, Duff & Phelps Investment Management, Kayne Anderson Rudnick Investment Management, Newfleet Asset Management, Rampart Investment Management, Seix Investment Advisors, Silvant Capital Management, and Sustainable Growth Advisers. Additional information can be found at www.virtus.com.

Investor Relations Contact
Sean Rourke
(860) 263-4709
sean.rourke@virtus.com























Virtus Investment Partners, Inc. | One Financial Plaza | Hartford, CT 06103 | www.virtus.com


Virtus Investment Partners, Inc. 6.


U.S. GAAP Condensed Consolidated Statements of Operations (Unaudited)
(in thousands, except per share data)
 
Three Months Ended
 
 
 
Three Months Ended
 
 
 
Twelve Months Ended
 
 
 
12/31/2019

 
12/31/2018

 
Change
 
9/30/2019
 
Change
 
12/31/2019

 
12/31/2018

 
Change
Revenues
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Investment management fees
$
120,945

 
$
111,664

 
8
%
 
$
120,023

 
1
%
 
$
461,477

 
$
437,021

 
6
%
Distribution and service fees
9,776

 
10,829

 
(10
%)
 
10,442

 
(6
%)
 
40,898

 
50,715

 
(19
%)
Administration and shareholder service fees
15,137

 
15,342

 
(1
%)
 
15,280

 
(1
%)
 
59,884

 
63,614

 
(6
%)
Other income and fees
226

 
230

 
(2
%)
 
210

 
8
%
 
987

 
885

 
12
%
     Total revenues
146,084

 
138,065

 
6
%
 
145,955

 
%
 
563,246

 
552,235

 
2
%
Operating Expenses
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Employment expenses
60,265

 
59,668

 
1
%
 
61,282

 
(2
%)
 
240,521

 
238,501

 
1
%
Distribution and other asset-based expenses
20,086

 
21,043

 
(5
%)
 
20,927

 
(4
%)
 
82,099

 
92,441

 
(11
%)
Other operating expenses
18,238

 
18,513

 
(1
%)
 
18,228

 
%
 
74,363

 
74,853

 
(1
%)
Operating expenses of consolidated investment products
620

 
692

 
(10
%)
 
376

 
65
%
 
4,015

 
3,515

 
14
%
Restructuring and severance
283

 
87

 
225
%
 
523

 
(46
%)
 
2,302

 
87

 
N/M

Depreciation expense
1,263

 
1,293

 
(2
%)
 
1,245

 
1
%
 
4,992

 
4,597

 
9
%
Amortization expense
7,533

 
7,541

 
%
 
7,587

 
(1
%)
 
30,244

 
25,142

 
20
%
     Total operating expenses
108,288

 
108,837

 
(1
%)
 
110,168

 
(2
%)
 
438,536

 
439,136

 
%
Operating Income (Loss)
37,796

 
29,228

 
29
%
 
35,787

 
6
%
 
124,710

 
113,099

 
10
%
Other Income (Expense)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Realized and unrealized gain (loss) on investments, net
1,570

 
(6,241
)
 
N/M

 
2

 
N/M

 
7,044

 
(5,217
)
 
N/M

Realized and unrealized gain (loss) of consolidated investment products, net
(3,657
)
 
(16,997
)
 
(78
%)
 
(5,344
)
 
(32
%)
 
(1,202
)
 
(21,252
)
 
(94
%)
Other income (expense), net
519

 
966

 
(46
%)
 
746

 
(30
%)
 
2,411

 
3,289

 
(27
%)
     Total other income (expense), net
(1,568
)
 
(22,272
)
 
(93
%)
 
(4,596
)
 
(66
%)
 
8,253

 
(23,180
)
 
N/M

Interest Income (Expense)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest expense
(4,268
)
 
(5,963
)
 
(28
%)
 
(4,889
)
 
(13
%)
 
(19,473
)
 
(19,445
)
 
%
Interest and dividend income
827

 
1,744

 
(53
%)
 
863

 
(4
%)
 
3,844

 
4,999

 
(23
%)
Interest and dividend income of investments of consolidated investment products
28,296

 
26,678

 
6
%
 
30,290

 
(7
%)
 
115,356

 
98,356

 
17
%
Interest expense of consolidated investment products
(19,975
)
 
(18,002
)
 
11
%
 
(21,252
)
 
(6
%)
 
(92,005
)
 
(64,788
)
 
42
%
     Total interest income (expense), net
4,880

 
4,457

 
9
%
 
5,012

 
(3
%)
 
7,722

 
19,122

 
(60
%)
Income (Loss) Before Income Taxes
41,108

 
11,413

 
260
%
 
36,203

 
14
%
 
140,685

 
109,041

 
29
%
Income tax expense (benefit)
11,326

 
10,320

 
10
%
 
10,844

 
4
%
 
35,177

 
32,961

 
7
%
Net Income (Loss)
29,782

 
1,093

 
N/M

 
25,359

 
17
%
 
105,508

 
76,080

 
39
%
Noncontrolling interests
(6,890
)
 
1,068

 
N/M

 
(1,274
)
 
441
%
 
(9,859
)
 
(551
)
 
N/M

Net Income (Loss) Attributable to Stockholders
22,892

 
2,161

 
N/M

 
24,085

 
(5
%)
 
95,649

 
75,529

 
27
%
Preferred stockholder dividends
(2,084
)
 
(2,084
)
 
%
 
(2,085
)
 
%
 
(8,337
)
 
(8,337
)
 
%
Net Income (Loss) Attributable to Common Stockholders
$
20,808

 
$
77

 
N/M

 
$
22,000

 
(5
%)
 
$
87,312

 
$
67,192

 
30
%
Earnings (Loss) Per Share - Basic
$
3.02

 
$
0.01

 
N/M

 
$
3.17

 
(5
%)
 
$
12.54

 
$
9.37

 
34
%
Earnings (Loss) Per Share - Diluted
$
2.83

 
$
0.01

 
N/M

 
$
2.95

 
(4
%)
 
$
11.74

 
$
8.86

 
33
%
Cash Dividends Declared Per Preferred Share
$
1.81

 
$
1.81

 
%
 
$
1.81

 
%
 
$
7.25

 
$
7.25

 
%
Cash Dividends Declared Per Common Share
$
0.67

 
$
0.55

 
22
%
 
$
0.67

 
%
 
$
2.44

 
$
2.00

 
22
%
Weighted Average Shares Outstanding - Basic
6,881

 
7,111

 
(3
%)
 
6,947

 
(1
%)
 
6,963

 
7,174

 
(3
%)
Weighted Average Shares Outstanding - Diluted
8,084

 
7,382

 
10
%
 
8,157

 
(1
%)
 
8,149

 
8,527

 
(4
%)

N/M - Not Meaningful

Virtus Investment Partners, Inc. | One Financial Plaza | Hartford, CT 06103 | www.virtus.com


Virtus Investment Partners, Inc. 7.



Assets Under Management - Product and Asset Class
(in millions)
 
Three Months Ended
 
12/31/2018
 
03/31/2019
 
6/30/2019
 
9/30/2019
 
12/31/2019
By product (period end):
 
 
 
 
 
 
 
 
 
Open-End Funds (1)
$
37,710

 
$
40,633

 
$
41,223

 
$
41,190

 
$
42,870

Closed-End Funds
5,956

 
6,553

 
6,653

 
6,816

 
6,748

Exchange Traded Funds
668

 
1,102

 
1,078

 
1,054

 
1,156

Retail Separate Accounts
14,998

 
17,123

 
18,260

 
18,863

 
20,414

Institutional Accounts
27,445

 
30,514

 
32,056

 
30,951

 
32,635

Structured Products
3,640

 
3,998

 
3,984

 
3,972

 
3,903

Total Long-Term
$
90,417

 
$
99,923

 
$
103,254

 
$
102,846

 
$
107,726

Liquidity (2)
1,613

 
1,789

 
1,752

 
1,221

 
1,178

Total
$
92,030

 
$
101,712

 
$
105,006

 
$
104,067

 
$
108,904

 
 
 
 
 
 
 
 
 
 
By product (average) (3)
 
 
 
 
 
 
 
 
 
Open-End Funds (1)
$
41,602

 
$
39,532

 
$
40,961

 
$
41,457

 
$
41,718

Closed-End Funds
6,235

 
6,258

 
6,551

 
6,649

 
6,639

Exchange Traded Funds
831

 
871

 
1,082

 
1,048

 
1,049

Retail Separate Accounts
16,817

 
14,998

 
17,123

 
18,260

 
18,863

Institutional Accounts
29,172

 
29,354

 
30,771

 
31,462

 
31,748

Structured Products
3,627

 
3,669

 
3,968

 
3,957

 
3,903

Total Long-Term
$
98,284

 
$
94,682

 
$
100,456

 
$
102,833

 
$
103,920

Liquidity (2)
1,607

 
1,725

 
1,769

 
1,710

 
1,195

Total
$
99,891

 
$
96,407

 
$
102,225

 
$
104,543

 
$
105,115

 
 
 
 
 
 
 
 
 
 
By asset class (period end):
 
 
 
 
 
 
 
 
 
Equity
$
53,297

 
$
61,781

 
$
64,888

 
$
65,544

 
$
70,720

Fixed Income
33,425

 
33,674

 
32,983

 
31,704

 
31,186

Alternatives (4)
3,695

 
4,468

 
5,383

 
5,598

 
5,820

Total Long-Term
$
90,417

 
$
99,923

 
$
103,254

 
$
102,846

 
$
107,726

Liquidity (2)
1,613

 
1,789

 
1,752

 
1,221

 
1,178

Total
$
92,030

 
$
101,712

 
$
105,006

 
$
104,067

 
$
108,904















Virtus Investment Partners, Inc. | One Financial Plaza | Hartford, CT 06103 | www.virtus.com


Virtus Investment Partners, Inc. 8.




Assets Under Management - Average Management Fees Earned (5)
(in basis points)
 
Three Months Ended
 
12/31/2018
 
3/31/2019
 
6/30/2019
 
9/30/2019
 
12/31/2019
All Products
 
 
 
 
 
 
 
 
 
Open-End Funds (1)
54.4

 
54.6

 
55.7

 
56.6

 
57.4

Closed-End Funds
65.5

 
64.9

 
65.0

 
64.7

 
64.0

Exchange Traded Funds
15.2

 
16.7

 
23.4

 
25.3

 
22.0

Retail Separate Accounts
48.1

 
48.7

 
48.4

 
48.0

 
46.8

Institutional Accounts (6)
29.2

 
30.6

 
30.8

 
31.8

 
31.8

Structured Products (6)
36.7

 
37.1

 
35.3

 
37.3

 
37.9

All Long-Term Products (6)
45.6

 
45.9

 
46.3

 
46.9

 
47.0

Liquidity (2)
9.9

 
9.9

 
10.6

 
10.7

 
8.9

All Products
45.0

 
45.3

 
45.7

 
46.3

 
46.5




(1) Represents assets under management of U.S. retail funds, offshore funds and variable insurance funds.
(2) Represents assets under management in liquidity strategies, including in certain open-end funds and institutional accounts.
(3) Averages are calculated as follows:
- Funds - average daily or weekly balances
- Retail Separate Accounts - prior-quarter ending balance or average of month-end balances in quarter
- Institutional Accounts and Structured Products - average of month-end balances in quarter
(4) Consists of real estate securities, mid-stream energy securities and master limited partnerships, options strategies, and other.
(5) Represents investment management fees divided by average assets. Investment management fees exclude the impact of consolidated investment products. Prior periods have been recast to conform to the current period definition of investment management fees.
(6) Includes performance-related fees, in basis points, earned during the three months ended as follows:
 
12/31/2018
 
3/31/2019
 
6/30/2019
 
9/30/2019
 
12/31/2019
Institutional Accounts
0.2

 
0.5

 
0.2

 
1.5

 
1.2

Structured Products
0.9

 

 

 

 
1.5

All Long-Term Products
0.1

 
0.2

 
0.1

 
0.5

 
0.4


Virtus Investment Partners, Inc. | One Financial Plaza | Hartford, CT 06103 | www.virtus.com


Virtus Investment Partners, Inc. 9.


Assets Under Management - Asset Flows by Product
(in millions)
 
Three Months Ended
 
Twelve Months Ended
 
12/31/2018
 
3/31/2019
 
6/30/2019
 
9/30/2019
 
12/31/2019
 
12/31/2018
 
12/31/2019
Open-End Funds (1)
 
 
 
 
 
 
 
 
 
 
 
 
 
Beginning balance
$
45,172

 
$
37,710

 
$
40,633

 
$
41,223

 
$
41,190

 
$
43,078

 
$
37,710

Inflows
2,889

 
3,000

 
2,510

 
2,982

 
2,343

 
14,836

 
10,835

Outflows
(6,751
)
 
(3,867
)
 
(3,214
)
 
(3,164
)
 
(2,784
)
 
(17,098
)
 
(13,029
)
Net flows
(3,862
)
 
(867
)
 
(704
)
 
(182
)
 
(441
)
 
(2,262
)
 
(2,194
)
Market performance
(3,226
)
 
3,839

 
1,465

 
(69
)
 
2,301

 
(2,522
)
 
7,536

Other (2)
(374
)
 
(49
)
 
(171
)
 
218

 
(180
)
 
(584
)
 
(182
)
Ending balance
$
37,710

 
$
40,633

 
$
41,223

 
$
41,190

 
$
42,870

 
$
37,710

 
$
42,870

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Closed-End Funds
 
 
 
 
 
 
 
 
 
 
 
 
 
Beginning balance
$
6,342

 
$
5,956

 
$
6,553

 
$
6,653

 
$
6,816

 
$
6,666

 
$
5,956

Inflows
8

 
11

 
9

 
14

 
10

 
22

 
44

Outflows

 

 

 

 

 

 

Net flows
8

 
11

 
9

 
14

 
10

 
22

 
44

Market performance
(257
)
 
662

 
182

 
246

 
26

 
(289
)
 
1,116

Other (2)
(137
)
 
(76
)
 
(91
)
 
(97
)
 
(104
)
 
(443
)
 
(368
)
Ending balance
$
5,956

 
$
6,553

 
$
6,653

 
$
6,816

 
$
6,748

 
$
5,956

 
$
6,748

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Exchange Traded Funds
 
 
 
 
 
 
 
 
 
 
 
 
 
Beginning balance
$
983

 
$
668

 
$
1,102

 
$
1,078

 
$
1,054

 
$
1,039

 
$
668

Inflows
29

 
394

 
132

 
94

 
164

 
290

 
784

Outflows
(107
)
 
(46
)
 
(117
)
 
(54
)
 
(62
)
 
(342
)
 
(279
)
Net flows
(78
)
 
348

 
15

 
40

 
102

 
(52
)
 
505

Market performance
(201
)
 
108

 
(5
)
 
(36
)
 
23

 
(163
)
 
90

Other (2)
(36
)
 
(22
)
 
(34
)
 
(28
)
 
(23
)
 
(156
)
 
(107
)
Ending balance
$
668

 
$
1,102

 
$
1,078

 
$
1,054

 
$
1,156

 
$
668

 
$
1,156

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Retail Separate Accounts
 
 
 
 
 
 
 
 
 
 
 
 
 
Beginning balance
$
16,817

 
$
14,998

 
$
17,123

 
$
18,260

 
$
18,863

 
$
13,937

 
$
14,998

Inflows
701

 
753

 
731

 
819

 
1,012

 
3,061

 
3,315

Outflows
(515
)
 
(472
)
 
(447
)
 
(435
)
 
(436
)
 
(2,440
)
 
(1,790
)
Net flows
186

 
281

 
284

 
384

 
576

 
621

 
1,525

Market performance
(2,005
)
 
1,895

 
877

 
297

 
976

 
(736
)
 
4,045

Other (2)

 
(51
)
 
(24
)
 
(78
)
 
(1
)
 
1,176

 
(154
)
Ending balance
$
14,998

 
$
17,123

 
$
18,260

 
$
18,863

 
$
20,414

 
$
14,998

 
$
20,414
























Virtus Investment Partners, Inc. | One Financial Plaza | Hartford, CT 06103 | www.virtus.com


Virtus Investment Partners, Inc. 10.


Assets Under Management - Asset Flows by Product (continued)
(in millions)
 
Three Months Ended
 
Twelve Months Ended
 
12/31/2018
 
3/31/2019
 
6/30/2019
 
9/30/2019
 
12/31/2019
 
12/31/2018
 
12/31/2019
Institutional Accounts
 
 
 
 
 
 
 
 
 
 
 
 
 
Beginning balance
$
30,961

 
$
27,445

 
$
30,514

 
$
32,056

 
$
30,951

 
$
20,815

 
$
27,445

Inflows
811

 
954

 
1,737

 
851

 
1,235

 
4,144

 
4,777

Outflows
(1,822
)
 
(1,154
)
 
(1,259
)
 
(2,216
)
 
(1,091
)
 
(6,543
)
 
(5,720
)
Net flows
(1,011
)
 
(200
)
 
478

 
(1,365
)
 
144

 
(2,399
)
 
(943
)
Market performance
(2,491
)
 
3,156

 
1,141

 
527

 
1,553

 
(992
)
 
6,377

Other (2)
(14
)
 
113

 
(77
)
 
(267
)
 
(13
)
 
10,021

 
(244
)
Ending balance
$
27,445

 
$
30,514

 
$
32,056

 
$
30,951

 
$
32,635

 
$
27,445

 
$
32,635

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Structured Products
 
 
 
 
 
 
 
 
 
 
 
 
 
Beginning balance
$
3,648

 
$
3,640

 
$
3,998

 
$
3,984

 
$
3,972

 
$
3,299

 
$
3,640

Inflows

 
389

 

 

 

 
421

 
389

Outflows
(16
)
 
(16
)
 
(21
)
 
(16
)
 
(45
)
 
(71
)
 
(98
)
Net flows
(16
)
 
373

 
(21
)
 
(16
)
 
(45
)
 
350

 
291

Market performance
57

 
27

 
56

 
54

 
36

 
180

 
173

Other (2)
(49
)
 
(42
)
 
(49
)
 
(50
)
 
(60
)
 
(189
)
 
(201
)
Ending balance
$
3,640

 
$
3,998

 
$
3,984

 
$
3,972

 
$
3,903

 
$
3,640

 
$
3,903

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total Long-Term
 
 
 
 
 
 
 
 
 
 
 
 
 
Beginning balance
$
103,923

 
$
90,417

 
$
99,923

 
$
103,254

 
$
102,846

 
$
88,834

 
$
90,417

Inflows
4,438

 
5,501

 
5,119

 
4,760

 
4,764

 
22,774

 
20,144

Outflows
(9,211
)
 
(5,555
)
 
(5,058
)
 
(5,885
)
 
(4,418
)
 
(26,494
)
 
(20,916
)
Net flows
(4,773
)
 
(54
)
 
61

 
(1,125
)
 
346

 
(3,720
)
 
(772
)
Market performance
(8,123
)
 
9,687

 
3,716

 
1,019

 
4,915

 
(4,522
)
 
19,337

Other (2)
(610
)
 
(127
)
 
(446
)
 
(302
)
 
(381
)
 
9,825

 
(1,256
)
Ending balance
$
90,417

 
$
99,923

 
$
103,254

 
$
102,846

 
$
107,726

 
$
90,417

 
$
107,726

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Liquidity (3)
 
 
 
 
 
 
 
 
 
 
 
 
 
Beginning balance
$
1,675

 
$
1,613

 
$
1,789

 
$
1,752

 
$
1,221

 
$
2,129

 
$
1,613

Other (2)
(62
)
 
176

 
(37
)
 
(531
)
 
(43
)
 
(516
)
 
(435
)
Ending balance
$
1,613

 
$
1,789

 
$
1,752

 
$
1,221

 
$
1,178

 
$
1,613

 
$
1,178

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total
 
 
 
 
 
 
 
 
 
 
 
 
 
Beginning balance
$
105,598

 
$
92,030

 
$
101,712

 
$
105,006

 
$
104,067

 
$
90,963

 
$
92,030

Inflows
4,438

 
5,501

 
5,119

 
4,760

 
4,764

 
22,774

 
20,144

Outflows
(9,211
)
 
(5,555
)
 
(5,058
)
 
(5,885
)
 
(4,418
)
 
(26,494
)
 
(20,916
)
Net flows
(4,773
)
 
(54
)
 
61

 
(1,125
)
 
346

 
(3,720
)
 
(772
)
Market performance
(8,123
)
 
9,687

 
3,716

 
1,019

 
4,915

 
(4,522
)
 
19,337

Other (2)
(672
)
 
49

 
(483
)
 
(833
)
 
(424
)
 
9,309

 
(1,691
)
Ending balance
$
92,030

 
$
101,712

 
$
105,006

 
$
104,067

 
$
108,904

 
$
92,030

 
$
108,904


(1) Represents assets under management of U.S. retail funds, offshore funds and variable insurance funds.
(2) Represents open-end and closed-end fund distributions net of reinvestments, the net change in assets from liquidity strategies, and the effect on net flows from non-sales related activities such as asset acquisitions/(dispositions), seed capital investments/(withdrawals), structured products reset transactions, and the use of leverage.
(3) Represents assets under management in liquidity strategies, including in certain open-end funds and institutional accounts.



Virtus Investment Partners, Inc. | One Financial Plaza | Hartford, CT 06103 | www.virtus.com


Virtus Investment Partners, Inc. 11.


Non-GAAP Information and Reconciliations
(in thousands except per share data)

The following are reconciliations and related notes of the most comparable U.S. GAAP measure to each non-GAAP measure.

The non-GAAP financial measures included in this release differ from financial measures determined in accordance with U.S. GAAP as a result of the reclassification of certain income statement items, as well as the exclusion of certain expenses and other items that are not reflective of the earnings generated from providing investment management and related services. Non-GAAP financial measures have material limitations and should not be viewed in isolation or as a substitute for U.S. GAAP measures.

Reconciliation of Total Revenues, GAAP to Total Revenues, as Adjusted:
 
Three Months Ended
 
12/31/2019
 
12/31/2018
 
9/30/2019
Total revenues, GAAP
$
146,084

 
$
138,065

 
$
145,955

Consolidated investment products revenues (1)
2,377

 
1,615

 
2,110

Investment management fees (2)
(10,304)
 
(10,212)
 
(10,476)
Distribution and service fees (2)
(9,782)
 
(10,831)
 
(10,451)
Total revenues, as adjusted
$
128,375

 
$
118,637

 
$
127,138



Reconciliation of Total Operating Expenses, GAAP to Operating Expenses, as Adjusted:
 
Three Months Ended
 
12/31/2019
 
12/31/2018
 
9/30/2019
Total operating expenses, GAAP
$
108,288

 
$
108,837

 
$
110,168

Consolidated investment products expenses (1)
(620)
 
(692)
 
(376)
Distribution and other asset-based expenses (3)
(20,086)
 
(21,043)
 
(20,927)
Amortization of intangible assets (4)
(7,533)
 
(7,541)
 
(7,587)
Restructuring and severance (5)
(283)
 
(366)
 
(523)
Acquisition and integration expenses (6)
(1,193)
 
(1,679)
 
(1,304)
Other (7)
(308)
 
(338)
 

Total operating expenses, as adjusted
$
78,265

 
$
77,178

 
$
79,451



Reconciliation of Operating Income (Loss), GAAP to Operating Income (Loss), as Adjusted:
 
Three Months Ended
 
12/31/2019
 
12/31/2018
 
9/30/2019
Operating income (loss), GAAP
$
37,796

 
$
29,228

 
$
35,787

Consolidated investment products (earnings) losses (1)
2,997

 
2,307

 
2,486

Amortization of intangible assets (4)
7,533

 
7,541

 
7,587

Restructuring and severance (5)
283

 
366

 
523

Acquisition and integration expenses (6)
1,193

 
1,679

 
1,304

Other (7)
308

 
338

 

Operating income (loss), as adjusted
$
50,110

 
$
41,459

 
$
47,687

 
 
 
 
 
 
Operating margin, GAAP
25.9
%
 
21.2
%
 
24.5
%
Operating margin, as adjusted
39.0
%
 
34.9
%
 
37.5
%

Virtus Investment Partners, Inc. | One Financial Plaza | Hartford, CT 06103 | www.virtus.com


Virtus Investment Partners, Inc. <