Virtus Investment Partners Announces Financial Results for First Quarter 2022

Rhea-AI Summary

Virtus Investment Partners (NASDAQ: VRTS) reported Q1 2022 financial results, revealing total sales of $9.4B, a 16% increase from Q1 2021. However, net income fell 10% to $33.1M, while EPS decreased to $4.22. Total assets under management stood at $183.3B, down 2% from Q4 2021. Despite positive net flows in institutional and retail accounts, overall net flows were negative at ($2.0B) due to outflows from open-end funds. Adjusted EPS was $7.87, down 24% from the previous quarter.

Positive

• Total sales increased 16% year-over-year to $9.4B.
• Adjusted EPS of $7.87, up 16% from Q1 2021.
• Total assets under management rose 9% compared to Q1 2021.

Negative

• Net income decreased 10% to $33.1M.
• Total assets under management dropped 2% from $187.2B in Q4.
• Net flows were negative at ($2.0B), largely due to open-end fund outflows.

• Earnings Per Share - Diluted of $4.22; Earnings Per Share - Diluted, as Adjusted, of $7.87
• Total Sales of $9.4B; Net Flows of ($2.0B); Assets Under Management of $183.3B 

HARTFORD, Conn., April 29, 2022 /PRNewswire/ -- Virtus Investment Partners, Inc. (NASDAQ: VRTS) today reported financial results for the three months ended March 31, 2022.

 

Financial Highlights (Unaudited) (in millions, except per share data or as noted)
	Three Months Ended						Three Months Ended
	3/31/2022		3/31/2021		Change		12/31/2021		Change
U.S. GAAP Financial Measures
Revenues	$     252.4		$     216.9		16%		$     266.3		(5%)
Operating expenses	$     186.9		$     154.8		21%		$     182.6		2%
Operating income (loss)	$       65.6		$       62.1		6%		$       83.7		(22%)
Operating margin	26.0%		28.7%				31.4%
Net income (loss) attributable to Virtus Investment Partners, Inc.	$       33.1		$       36.6		(10%)		$       49.8		(34%)
Earnings (loss) per share - diluted	$       4.22		$       4.54		(7%)		$       6.29		(33%)
Weighted average shares outstanding - diluted	7.839		8.052		(3%)		7.929		(1%)
Non-GAAP Financial Measures (1)
Revenues, as adjusted	$     221.9		$     187.3		18%		$     232.6		(5%)
Operating expenses, as adjusted	$     131.9		$     109.3		21%		$     115.8		14%
Operating income (loss), as adjusted	$       90.1		$       78.0		16%		$     116.8		(23%)
Operating margin, as adjusted	40.6%		41.6%				50.2%
Net income (loss) attributable to Virtus Investment Partners, Inc., as adjusted	$       61.7		$       54.6		13%		$       82.1		(25%)
Earnings (loss) per share - diluted, as adjusted	$       7.87		$       6.78		16%		$     10.36		(24%)
Weighted average shares outstanding - diluted, as adjusted	7.839		8.052		(3%)		7.929		(1%)

(1)	See the information beginning on page 10 for reconciliations to the most directly comparable U.S. GAAP measures and other important disclosures

 

Earnings Summary

The company presents U.S. GAAP and non-GAAP earnings information in this release. Management believes that the non-GAAP financial measures presented reflect the company's operating results from providing investment management and related services to individuals and institutions and uses these measures to evaluate financial performance. Non-GAAP financial measures have material limitations and should not be viewed in isolation or as a substitute for U.S. GAAP measures. Reconciliations of the non-GAAP financial measures to the most comparable U.S. GAAP measures can be found beginning on page 10 of this earnings release.

 

Assets Under Management and Asset Flows (in billions)
	Three Months Ended						Three Months Ended
	3/31/2022		3/31/2021		Change		12/31/2021		Change
Ending total assets under management	$            183.3		$            168.9		9%		$            187.2		(2%)
Average total assets under management	$            190.1		$            154.3		23%		$            184.6		3%
Total sales	$                9.4		$              10.6		(11%)		$                8.7		8%
Net flows	$               (2.0)		$                2.5		N/M		$                 —		N/M

N/M - Not Meaningful

 

Total assets under management of $183.3 billion at March 31, 2022 compared with $187.2 billion at December 31, 2021. The addition of $14.7 billion of assets from the January 1, 2022 acquisition of Stone Harbor Investment Partners and positive net flows in institutional and retail separate accounts were more than offset by market performance and open-end fund net outflows. In addition, other fee earning assets of $3.5 billion compared with $3.8 billion at December 31, 2021.

Total sales increased 8% to $9.4 billion from $8.7 billion due to growth in open-end funds and institutional, which reached its second highest quarterly level. Open-end fund sales of $5.0 billion increased 14%, with increases in most strategies, particularly leveraged finance, domestic equity, and alternatives. Institutional sales of $2.4 billion grew 16% from $2.1 billion and included increases in existing mandates as well as new mandates at multiple affiliates, including Stone Harbor. Retail separate account sales of $2.0 billion compared with $2.2 billion.       

Net flows were ($2.0) billion as positive net flows in institutional and retail separate accounts were more than offset by open-end fund net outflows. Institutional net flows of $0.8 billion, up from $0.5 billion, were positive for the sixth consecutive quarter and included a positive emerging markets debt contribution. Retail separate accounts generated positive net flows of $0.6 billion with continued net inflows in both the intermediary sold and private client channels. Open-end fund net flows of ($3.4) billion compared with ($1.6) billion in the prior quarter, with higher net outflows particularly in more growth-oriented equity strategies.  

GAAP Results

Operating income of $65.6 million compared with $83.7 million in the prior quarter due to a 5% decrease in total revenues and a 2% increase in total operating expenses. The decrease in total revenues was primarily due to a lower average fee rate as a result of the impact of market performance, the addition of the lower average fee Stone Harbor assets, and two fewer days in the quarter. The increase in operating expenses included $9.7 million of seasonal items, increased intangible asset amortization, and higher employment and other operating expenses primarily due to the acquisition of Stone Harbor and business initiatives.

Net income attributable to Virtus Investment Partners, Inc. of $4.22 per diluted common share included ($1.97) of realized and unrealized losses on investments, ($0.61) of acquisition and integration costs, and ($0.57) of fair value adjustments to affiliate noncontrolling interests. Net income per diluted share in the prior quarter of $6.29 included a ($1.16) fair value adjustment to affiliate noncontrolling interests, ($1.14) of fair value adjustments to contingent consideration, ($0.47) of expense for a collateralized loan obligation (CLO) reset transaction, ($0.28) of realized and unrealized losses on investments, and ($0.19) of acquisition and integration costs. The fair value adjustments to affiliate noncontrolling interests reflected an increase in the value of the affiliate.

The effective tax rate during the quarter of 30% compared with 31% in the prior quarter.

Non-GAAP Results

Revenues, as adjusted, of $221.9 million declined from $232.6 million in the prior quarter due to a lower average fee rate and two fewer days in the quarter, partially offset by higher average assets due to the addition of Stone Harbor.

Employment expenses, as adjusted, of $101.6 million increased from $92.0 million in the prior quarter due to $9.7 million of seasonal items, primarily payroll taxes and benefits related to the timing of annual incentive payments. Other operating expenses, as adjusted, of $29.3 million increased sequentially from $22.9 million due to the addition of Stone Harbor and $1.3 million of business initiative discrete expenses.

Operating income, as adjusted, of $90.1 million and the related margin of 40.6% compared with $116.8 million and 50.2% in the prior quarter primarily due to the seasonal employment expenses and lower investment management fees.

Net income attributable to Virtus Investment Partners, Inc., as adjusted, per diluted common share was $7.87, a decrease of $2.49, or 24%, from $10.36 in the prior quarter. The sequential decline primarily reflected seasonal employment expenses and lower investment management fees.

The effective tax rate, as adjusted, of 27% was unchanged from the prior quarter.

 

Select Balance Sheet Items (Unaudited) (in millions)
	As of						As of
	3/31/2022		3/31/2021		Change		12/31/2021		Change
Cash and cash equivalents	$        225.2		$        228.3		(1%)		$        378.9		(41%)
Gross debt (1)	$        273.6		$        199.8		37%		$        274.3		—%
Contingent consideration (2)	$        130.7		$        137.7		(5%)		$        162.6		(20%)
Redeemable noncontrolling interests (3)	$        129.3		$          98.1		32%		$        126.5		2%
Total equity exc. noncontrolling interests	$        816.5		$        729.4		12%		$        828.3		(1%)
Working capital (4)	$        196.1		$        211.1		(7%)		$        219.8		(11%)
Net debt (cash) (5)	$          48.4		$         (28.5)		N/M		$       (104.6)		N/M

(1)	Excludes deferred financing costs of $7.7 million, $4.0 million, and $8.0 million, as of March 31, 2022, March 31, 2021, and December 31, 2021, respectively
(2)	Represents estimates of revenue participation and contingent payments
(3)	Excludes redeemable noncontrolling interests of consolidated investment products of $9.4 million, $14.4 million, and $12.4 million as of March 31, 2022, March 31, 2021, and December 31, 2021, respectively
(4)	Defined as cash and cash equivalents plus accounts receivable, net, less accrued compensation and benefits, accounts payable and accrued liabilities, dividends payable, debt principal payments due over next 12 months and revenue participation amounts earned as of the balance sheet date and due within 12 months
(5)	Defined as gross debt less cash and cash equivalents
N/M - Not Meaningful

 

Working capital of $196.1 million at March 31, 2022 compared with $219.8 million at December 31, 2021 as net cash generated from the business was more than offset by return of capital to shareholders and the closing payment for Stone Harbor.  

During the quarter, the company returned $30.0 million to shareholders through the repurchase of 125,452 shares of common stock. In addition, the company net settled 61,859 shares for $13.4 million to satisfy employee tax obligations.

Conference Call

Management will host an investor conference call on Friday, April 29, 2022, 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 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: 8588601). 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 virtus.com. A replay of the call will be available through May 6, 2022 by telephone at 855-859-2056 (U.S. and Canada) or 404-537-3406 (international) (Conference ID: 8588601).

About Virtus Investment Partners, Inc.

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. We provide investment management products and services from our affiliated managers, each with a distinct investment style and autonomous investment process, as well as select subadvisers. Investment solutions are available across multiple disciplines and product types to meet a wide array of investor needs. Additional information about our firm, investment partners, and strategies is available at virtus.com.

 

U.S. GAAP Condensed Consolidated Statements of Operations (Unaudited) (in thousands, except per share data)
	Three Months Ended						Three Months Ended
	3/31/2022		3/31/2021		Change		12/31/2021		Change
Revenues
Investment management fees	$   206,817		$   173,269		19%		$   213,673		(3%)
Distribution and service fees	20,007		20,348		(2%)		23,464		(15%)
Administration and shareholder service fees	24,344		22,560		8%		27,615		(12%)
Other income and fees	1,272		720		77%		1,510		(16%)
Total revenues	252,440		216,897		16%		266,262		(5%)
Operating Expenses
Employment expenses	105,993		91,759		16%		91,496		16%
Distribution and other asset-based expenses	32,846		32,294		2%		36,032		(9%)
Other operating expenses	31,712		19,580		62%		25,808		23%
Operating expenses of consolidated investment products	740		559		32%		1,705		(57%)
Change in fair value of contingent consideration	—		—		N/M		12,400		(100%)
Depreciation expense	935		1,098		(15%)		906		3%
Amortization expense	14,662		9,465		55%		14,262		3%
Total operating expenses	186,888		154,755		21%		182,609		2%
Operating Income (Loss)	65,552		62,142		5%		83,653		(22%)
Other Income (Expense)
Realized and unrealized gain (loss) on investments, net	(2,982)		891		N/M		1,026		N/M
Realized and unrealized gain (loss) of consolidated investment products, net	(13,344)		(4,687)		185%		2,980		N/M
Other income (expense), net	287		1,771		(84%)		632		(55%)
Total other income (expense), net	(16,039)		(2,025)		N/M		4,638		N/M
Interest Income (Expense)
Interest expense	(2,279)		(2,314)		(2%)		(2,322)		(2%)
Interest and dividend income	328		136		141%		793		(59%)
Interest and dividend income of investments of consolidated investment products	20,380		23,876		(15%)		20,765		(2%)
Interest expense of consolidated investment products	(12,088)		(14,448)		(16%)		(18,056)		(33%)
Total interest income (expense), net	6,341		7,250		(13%)		1,180		437%
Income (Loss) Before Income Taxes	55,854		67,367		(17%)		89,471		(38%)
Income tax expense (benefit)	16,735		15,153		10%		27,458		(39%)
Net Income (Loss)	39,119		52,214		(25%)		62,013		(37%)
Noncontrolling interests	(6,060)		(15,626)		(61%)		(12,173)		(50%)
Net Income (Loss) Attributable to Virtus Investment Partners, Inc.	$     33,059		$     36,588		(10%)		$     49,840		(34%)
Earnings (Loss) Per Share - Basic	$         4.38		$        4.79		(9%)		$         6.54		(33%)
Earnings (Loss) Per Share - Diluted	$         4.22		$        4.54		(7%)		$         6.29		(33%)
Cash Dividends Declared Per Common Share	$         1.50		$        0.82		83%		$         1.50		—%
Weighted Average Shares Outstanding - Basic	7,546		7,633		(1%)		7,623		(1%)
Weighted Average Shares Outstanding - Diluted	7,839		8,052		(3%)		7,929		(1%)

N/M - Not Meaningful

 

Assets Under Management - Product and Asset Class (in millions)
	Three Months Ended
	3/31/2021		06/30/2021		9/30/2021		12/31/2021		3/31/2022
By Product (period end):
Open-End Funds (1)	$           73,185		$           76,593		$           74,365		$           78,706		$           73,149
Closed-End Funds	11,664		11,993		11,721		12,068		12,060
Retail Separate Accounts	37,244		40,578		41,528		44,538		40,824
Institutional Accounts (2)	46,787		49,474		49,691		51,874		57,309
Total	$         168,880		$         178,638		$         177,305		$         187,186		$         183,342
By Product (average) (3)
Open-End Funds (1)	$           67,137		$           75,285		$           76,368		$           80,303		$           75,537
Closed-End Funds	9,340		11,936		12,091		12,043		11,762
Retail Separate Accounts	32,118		37,244		40,578		41,528		44,538
Institutional Accounts (2)	45,749		48,413		50,542		50,693		58,269
Total	$         154,344		$         172,878		$         179,579		$         184,567		$         190,106
By Asset Class (period end):
Equity	$         106,183		$         113,751		$         112,732		$         116,546		$         102,989
Fixed Income	35,069		35,426		35,240		34,261		45,418
Multi-Asset (4)	22,498		23,668		23,641		24,853		23,415
Alternatives (5)	5,130		5,793		5,692		11,526		11,520
Total	$         168,880		$         178,638		$         177,305		$         187,186		$         183,342

 

Assets Under Management - Average Management Fees Earned (6) (in basis points)
	Three Months Ended
	3/31/2021		6/30/2021		9/30/2021		12/31/2021		3/31/2022
By Product:
Open-End Funds (1)	47.5		45.9		45.7		48.5		46.5
Closed-End Funds	56.2		55.1		56.2		55.5		58.4
Retail Separate Accounts	45.7		44.2		44.0		44.6		43.6
Institutional Accounts (2)(7)	32.1		32.8		31.3		32.6		31.5
All Products (7)	43.1		42.5		42.0		43.7		41.9

(1)	Represents assets under management of U.S. retail funds, global funds, exchange traded funds, and variable insurance funds
(2)	Represents assets under management of institutional separate and commingled accounts including structured products
(3)	Averages are calculated as follows:
	- Funds - average daily or weekly balances
	- Retail Separate Accounts - prior-quarter ending balance
	- Institutional Accounts - average of month-end balances in quarter
(4)	Includes strategies with substantial holdings in at least two of the following asset classes: equity, fixed income and alternatives
(5)	Consists of event-driven, real estate securities, infrastructure, long/short, and other strategies
(6)	Represents investment management fees, as adjusted, divided by average assets. Investment management fees, as adjusted, exclude the impact of consolidated investment products and are net of revenue-related adjustments. Revenue-related adjustments are based on specific agreements and reflect the portion of investment management fees passed through to third-party client intermediaries for services to investors in sponsored investment products
(7)	Includes performance-related fees, in basis points, earned during the three months ended as follows:

 

	3/31/2021		6/30/2021		9/30/2021		12/31/2021		3/31/2022
Institutional Accounts	0.6		0.7		0.5		0.6		0.5
All Products	0.2		0.2		0.1		0.1		0.1

 

Assets Under Management - Asset Flows by Product (in millions)
	Three Months Ended
	3/31/2021		6/30/2021		9/30/2021		12/31/2021		3/31/2022
Open-End Funds (1)
Beginning balance	$     51,608		$     73,185		$     76,593		$     74,365		$     78,706
Inflows	6,028		4,975		3,809		4,346		4,956
Outflows	(5,335)		(5,079)		(5,168)		(5,943)		(8,378)
Net flows	693		(104)		(1,359)		(1,597)		(3,422)
Market performance	1,228		3,573		(775)		2,282		(6,907)
Other (2)	19,656		(61)		(94)		3,656		4,772
Ending balance	$     73,185		$     76,593		$     74,365		$     78,706		$     73,149
Closed-End Funds
Beginning balance	$       5,914		$     11,664		$     11,993		$     11,721		$     12,068
Inflows	—		—		3		19		8
Outflows	—		—		—		—		—
Net flows	—		—		3		19		8
Market performance	105		514		(114)		718		(196)
Other (2)	5,645		(185)		(161)		(390)		180
Ending balance	$     11,664		$     11,993		$     11,721		$     12,068		$     12,060
Retail Separate Accounts
Beginning balance	$     29,751		$     37,244		$     40,578		$     41,528		$     44,538
Inflows	2,699		2,273		2,003		2,240		2,022
Outflows	(896)		(833)		(1,231)		(1,125)		(1,394)
Net flows	1,803		1,440		772		1,115		628
Market performance	2,141		1,910		178		1,895		(4,342)
Other (2)	3,549		(16)		—		—		—
Ending balance	$     37,244		$     40,578		$     41,528		$     44,538		$     40,824

 

Institutional Accounts (3)
Beginning balance	$     44,921		$     46,787		$     49,474		$     49,691		$     51,874
Inflows	1,884		2,302		1,808		2,107		2,449
Outflows	(1,868)		(2,184)		(1,727)		(1,625)		(1,623)
Net flows	16		118		81		482		826
Market performance	1,216		2,785		258		1,438		(5,012)
Other (2)	634		(216)		(122)		263		9,621
Ending balance	$     46,787		$     49,474		$     49,691		$     51,874		$     57,309
Total
Beginning balance	$   132,194		$   168,880		$   178,638		$   177,305		$   187,186
Inflows	10,611		9,550		7,623		8,712		9,435
Outflows	(8,099)		(8,096)		(8,126)		(8,693)		(11,395)
Net flows	2,512		1,454		(503)		19		(1,960)
Market performance	4,690		8,782		(453)		6,333		(16,457)
Other (2)	29,484		(478)		(377)		3,529		14,573
Ending balance	$   168,880		$   178,638		$   177,305		$   187,186		$   183,342

(1)	Represents assets under management of U.S. retail funds, global funds, exchange traded funds, and variable insurance funds
(2)	Represents open-end and closed-end fund distributions net of reinvestments, the net change in assets from cash management strategies, and the impact of non-sales related activities such as asset acquisitions/(dispositions), seed capital investments/(withdrawals), current income or capital returned by structured products and the use of leverage
(3)	Represents assets under management of institutional separate and commingled accounts including structured products

 

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

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

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

	Three Months Ended
Revenues	3/31/2022		3/31/2021		12/31/2021
Total revenues, GAAP	$         252,440		$         216,897		$         266,262
Consolidated investment products revenues (1)	2,354		2,673		2,374
Investment management fees (2)	(12,838)		(11,943)		(12,567)
Distribution and service fees (2)	(20,008)		(20,351)		(23,465)
Total revenues, as adjusted	$         221,948		$         187,276		$         232,604

 

Operating Expenses
Total operating expenses, GAAP	$         186,888		$         154,755		$         182,609
Consolidated investment products expenses (1)	(740)		(559)		(1,705)
Distribution and other asset-based expenses (3)	(32,846)		(32,294)		(36,032)
Amortization of intangible assets (4)	(14,662)		(9,465)		(14,262)
Acquisition and integration expenses (5)	(6,667)		(2,647)		(14,454)
Other (6)	(122)		(480)		(374)
Total operating expenses, as adjusted	$         131,851		$         109,310		$         115,782

 

Operating Income (Loss)
Operating income (loss), GAAP	$           65,552		$           62,142		$           83,653
Consolidated investment products (earnings) losses (1)	3,094		3,232		4,079
Amortization of intangible assets (4)	14,662		9,465		14,262
Acquisition and integration expenses (5)	6,667		2,647		14,454
Other (6)	122		480		374
Operating income (loss), as adjusted	$           90,097		$           77,966		$         116,822
Operating margin, GAAP	26.0%		28.7%		31.4%
Operating margin, as adjusted	40.6%		41.6%		50.2%

 

	Three Months Ended
Income (Loss) Before Taxes	3/31/2022		3/31/2021		12/31/2021
Income (loss) before taxes, GAAP	$           55,854		$           67,367		$           89,471
Consolidated investment products (earnings) losses (1)	806		(30)		(517)
Amortization of intangible assets (4)	14,662		9,465		14,262
Acquisition and integration expenses (5)	6,667		2,647		14,454
Other (6)	122		480		374
Seed capital and CLO investments (gains) losses (7)	10,735		(1,533)		(1,285)
Income (loss) before taxes, as adjusted	$           88,846		$           78,396		$         116,759

 

Income Tax Expense (Benefit)
Income tax expense (benefit), GAAP	$           16,735		$           15,153		$           27,458
Tax impact of:
Amortization of intangible assets (4)	3,974		2,528		3,844
Acquisition and integration expenses (5)	1,807		707		3,896
Other (6)	2,603		2,931		(850)
Seed capital and CLO investments (gains) losses (7)	(1,041)		(377)		(2,880)
Income tax expense (benefit), as adjusted	$           24,078		$           20,942		$           31,468
Effective tax rate, GAAPA	30.0%		22.5%		30.7%
Effective tax rate, as adjustedB	27.1%		26.7%		27.0%

 

A	Reflects income tax expense (benefit), GAAP, divided by income (loss) before taxes, GAAP
B	Reflects income tax expense (benefit), as adjusted, divided by income (loss) before taxes, as adjusted

 

Net Income (Loss) Attributable to Virtus Investment Partners, Inc.
Net income (loss) attributable to Virtus Investment Partners, Inc., GAAP	$           33,059		$           36,588		$           49,840
Amortization of intangible assets, net of tax (4)	9,952		6,201		9,682
Acquisition and integration expenses, net of tax (5)	4,860		1,940		10,558
Other, net of tax (6)	2,007		11,047		10,455
Seed capital and CLO investments (gains) losses, net of tax (7)	11,776		(1,156)		1,595
Net income (loss) attributable to Virtus Investment Partners, Inc., as adjusted	$           61,654		$           54,620		$           82,130
Weighted average shares outstanding - diluted	7,839		8,052		7,929
Earnings (loss) per share - diluted, GAAP	$               4.22		$               4.54		$               6.29
Earnings (loss) per share - diluted, as adjusted	$               7.87		$               6.78		$             10.36

 

	Three Months Ended
Administration and Shareholder Services Fees	3/31/2022		3/31/2021		12/31/2021
Administration and shareholder service fees, GAAP	$           24,344		$           22,560		$           27,615
Consolidated investment products fees (1)	43		61		50
Administration and shareholder service fees, as adjusted	$           24,387		$           22,621		$           27,665

 

Employment Expenses
Employment expenses, GAAP	$         105,993		$           91,759		$          91,496
Acquisition and integration expenses (5)	(4,282)		(867)		846
Other (6)	(122)		(480)		(346)
Employment expenses, as adjusted	$         101,589		$           90,412		$          91,996

 

Other Operating Expenses
Other operating expenses, GAAP	$           31,712		$           19,580		$           25,808
Acquisition and integration expenses (5)	(2,385)		(1,780)		(2,900)
Other (6)	—		—		(28)
Other operating expenses, as adjusted	$           29,327		$           17,800		$           22,880

 

Total Other Income (Expense), Net,
Total other income (expense), net GAAP	$        (16,039)		$          (2,025)		$             4,638
Consolidated investment products (1)	5,136		5,256		(2,866)
Seed capital and CLO investments (gains) losses (7)	10,735		(1,533)		(1,285)
Total other income (expense), net as adjusted	$              (168)		$             1,698		$                 487

 

Interest and Dividend Income
Interest and dividend income, GAAP	$                 328		$                 136		$                 793
Consolidated investment products (1)	868		910		979
Interest and dividend income, as adjusted	$             1,196		$             1,046		$             1,772

 

Total Noncontrolling Interests
Total noncontrolling interests, GAAP	$          (6,060)		$        (15,626)		$        (12,173)
Consolidated investment products (1)	(806)		30		517
Amortization of intangible assets (4)	(736)		(736)		(736)
Other (6)	4,488		13,498		9,231
Total noncontrolling interests, as adjusted	$          (3,114)		$          (2,834)		$          (3,161)

 

Notes to Reconciliations:

Reclassifications:

1. Consolidated investment products - Revenues and expenses generated by operating activities of mutual funds and CLOs that are consolidated in the financial statements. Management believes that excluding these operating activities to reflect net revenues and expenses of the company prior to the consolidation of these products is consistent with the approach of reflecting its operating results from managing third-party client assets.

Other Adjustments:

Revenue Related

2. Investment management/Distribution and service fees - Each of these revenue line items is reduced to exclude fees passed through to third-party client intermediaries who own the retail client relationship and are responsible for distributing the product and servicing the client. The amount of fees fluctuates each period, based on a predetermined percentage of the value of assets under management, and varies based on the type of investment product. The specific adjustments are as follows:

Investment management fees - Based on specific agreements, the portion of investment management fees passed-through to third-party intermediaries for services to investors in sponsored investment products.

Distribution and service fees - Based on distinct arrangements, fees collected by the company then passed-through to third-party client intermediaries for services to investors in sponsored investment products. The adjustment represents all of the company's distribution and service fees that are recorded as a separate line item on the condensed consolidated statements of operations.

Management believes that making these adjustments aids in comparing the company's operating results with other asset management firms that do not utilize third-party client intermediaries.

Expense Related

3. Distribution and other asset-based expenses - Primarily payments to third-party client intermediaries for providing services to investors in sponsored investment products. Management believes that making this adjustment aids in comparing the company's operating results with other asset management firms that do not utilize third-party client intermediaries.

4. Amortization of intangible assets - Non-cash amortization expense or impairment expense, if any, attributable to acquisition-related intangible assets, including any portion that is allocated to noncontrolling interests. Management believes that making this adjustment aids in comparing the company's operating results with other asset management firms that have not engaged in acquisitions.

5. Acquisition and integration expenses - Expenses that are directly related to acquisition and integration activities. Acquisition expenses include transaction closing costs, change in fair value of contingent consideration, certain professional fees, and financing fees. Integration expenses include costs incurred that are directly attributable to combining businesses, including compensation, restructuring and severance charges, professional fees, consulting fees, and other expenses. Management believes that making these adjustments aids in comparing the company's operating results with other asset management firms that have not engaged in acquisitions.

 

Components of Acquisition and Integration Expenses for the respective periods are shown below:

   

	Three Months Ended
Acquisition and Integration Expenses	3/31/2022		3/31/2021		12/31/2021
Employment expenses	$             4,282		$                 867		$              (846)
Other operating expenses	2,385		1,780		2,900
Change in fair value of contingent consideration	—		—		12,400
Total Acquisition and Integration Expenses	$             6,667		$             2,647		$           14,454

 

6. Other - Certain expenses that are not reflective of the ongoing earnings generation of the business. Employment expenses and noncontrolling interests are adjusted for fair value measurements of affiliate minority interests. Other operating expenses are adjusted for non-capitalized debt issuance costs. Interest expense is adjusted to remove gains on early extinguishment of debt and the write-off of previously capitalized costs associated with the modification of debt. Income tax expense (benefit) items are adjusted for uncertain tax positions, changes in tax law, valuation allowances, and other unusual or infrequent items not related to current operating results to reflect a normalized effective rate. Management believes that making these adjustments aids in comparing the company's operating results with prior periods.

Components of Other for the respective periods are shown below:

   

	Three Months Ended
Other	3/31/2022		3/31/2021		12/31/2021
Employment expense fair value adjustments	$                 122		$                480		$                 346
Non-capitalized debt issuance costs	—		—		28
Tax impact of adjustments	(33)		(128)		(101)
Other discrete tax adjustments	(2,570)		(2,803)		951
Affiliate minority interest fair value adjustments	4,488		13,498		9,231
Total Other	$             2,007		$           11,047		$           10,455

 

Seed Capital and CLO Related

7. Seed capital and CLO investments (gains) losses - Gains and losses (realized and unrealized) of seed capital and CLO investments. Gains and losses (realized and unrealized) generated by investments in seed capital and CLO investments can vary significantly from period to period and do not reflect the company's operating results from providing investment management and related services. Management believes that making this adjustment aids in comparing the company's operating results with prior periods and with other asset management firms that do not have meaningful seed capital and CLO investments.

Definitions:

Revenues, as adjusted, comprise the fee revenues paid by clients for investment management and related services. Revenues, as adjusted, for purposes of calculating net income attributable to Virtus Investment Partners, Inc., as adjusted, differ from U.S. GAAP, namely in excluding the impact of operating activities of consolidated investment products and reduced to exclude fees passed through to third-party client intermediaries who own the retail client relationship and are responsible for distributing the product and servicing the client.

Operating expenses, as adjusted, is calculated to reflect expenses from ongoing continuing operations. Operating expenses, as adjusted, for purposes of calculating net income attributable to Virtus Investment Partners, Inc., as adjusted, differ from U.S. GAAP expenses in that they exclude amortization or impairment, if any, of intangible assets, restructuring and severance, the effect of consolidated investment products, acquisition and integration-related expenses and certain other expenses that do not reflect the ongoing earnings generation of the business.

Operating margin, as adjusted, is a metric used to evaluate efficiency represented by operating income, as adjusted, divided by revenues, as adjusted.

Earnings (loss) per share, as adjusted, represent net income (loss) attributable to Virtus Investment Partners, Inc., as adjusted, divided by weighted average shares outstanding, as adjusted, on either a basic or diluted basis.

Forward-Looking Information

This press release contains statements that are, or may be considered to be, forward-looking statements. All statements that are not historical facts, including statements about our beliefs or expectations, are "forward-looking statements" within the meaning of The Private Securities Litigation Reform Act of 1995, as amended. These statements may be identified by such forward-looking terminology as "expect," "estimate," "intent," "plan," "intend," "believe," "anticipate," "may," "will," "should," "could," "continue," "project," "opportunity," "predict," "would," "potential," "future," "forecast," "guarantee," "assume," "likely," "target" or similar statements or variations of such terms.

Our forward-looking statements are based on a series of expectations, assumptions and projections about the company and the markets in which we operate, are not guarantees of future results or performance, and involve substantial risks and uncertainty including assumptions and projections concerning our assets under management, net asset inflows and outflows, operating cash flows, business plans and ability to borrow, for all future periods. All forward-looking statements are as of the date of this release only. The company can give no assurance that such expectations or forward-looking statements will prove to be correct. Actual results may differ materially.

Our business and our forward-looking statements involve substantial known and unknown risks and uncertainties, including those discussed under "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" in our 2021 Annual Report on Form 10-K, as supplemented by our periodic filings with the Securities and Exchange Commission (the "SEC"), as well as the following risks and uncertainties resulting from: (i) any reduction in our assets under management; (ii) general domestic and global economic, political and pandemic conditions; (iii) inability to achieve the expected benefits of our strategic transactions; (iv) the ongoing effects of the COVID-19 pandemic and associated global economic disruption; (v) withdrawal, renegotiation or termination of investment advisory agreements; (vi) damage to our reputation; (vii) inability to satisfy financial covenants and payments related to our indebtedness; (viii) inability to attract and retain key personnel; (ix) challenges from the competition we face in our business; (x) adverse developments related to unaffiliated subadvisers; (xi) negative changes in key distribution relationships; (xii) interruptions in or failure to provide critical technological service by us or third parties; (xiii) loss on our investments; (xiv) lack of sufficient capital on satisfactory terms; (xv) adverse regulatory and legal developments; (xvi) failure to comply with investment guidelines or other contractual requirements; (xvii) adverse civil litigation and government investigations or proceedings; (xviii) unfavorable changes in tax laws or limitations; (xix) volatility associated with our common stock; (xx) inability to make quarterly common stock dividends; (xxi) certain corporate governance provisions in our charter and bylaws; (xxii) losses or costs not covered by insurance; (xxiii) impairment of goodwill or intangible assets; and other risks and uncertainties. Any occurrence of, or any material adverse change in, one or more risk factors or risks and uncertainties referred to above, in our 2021 Annual Report on Form 10-K and our other periodic reports filed with the SEC could materially and adversely affect our operations, financial results, cash flows, prospects and liquidity.

Certain other factors that may impact our continuing operations, prospects, financial results and liquidity, or that may cause actual results to differ from such forward-looking statements, are discussed or included in the company's periodic reports filed with the SEC and are available on our website at virtus.com under "Investor Relations." You are urged to carefully consider all such factors.

The company does not undertake or plan to update or revise any such forward-looking statements to reflect actual results, changes in plans, assumptions, estimates or projections, or other circumstances occurring after the date of this release, even if such results, changes or circumstances make it clear that any forward-looking information will not be realized. If there are any future public statements or disclosures by us that modify or affect any of the forward-looking statements contained in or accompanying this release, such statements or disclosures will be deemed to modify or supersede such statements in this release.

 

View original content to download multimedia:https://www.prnewswire.com/news-releases/virtus-investment-partners-announces-financial-results-for-first-quarter-2022-301536007.html

SOURCE Virtus Investment Partners, Inc.

FAQ

What were Virtus Investment Partners' earnings in Q1 2022?

Virtus Investment Partners reported earnings per share of $4.22, with adjusted EPS at $7.87.

How did total sales perform for Virtus Investment Partners in Q1 2022?

Total sales were $9.4 billion, representing a 16% increase compared to Q1 2021.

What is the current status of assets under management for VRTS?

As of March 31, 2022, assets under management stood at $183.3 billion, down 2% from the previous quarter.

What were the net flows for Virtus Investment Partners in Q1 2022?

Net flows were negative at ($2.0 billion), primarily due to outflows from open-end funds.