Virtus Investment Partners Announces Financial Results for Fourth Quarter 2021

Rhea-AI Summary

Virtus Investment Partners (NASDAQ: VRTS) reported a 55% increase in revenues to $266.3 million for the quarter ending December 31, 2021, compared to $171.6 million a year prior. Operating income rose 64% to $83.7 million, with an operating margin of 31.4%. However, net income attributable to the company was down 15% sequentially to $49.8 million, or $6.29 per diluted share. The firm also reported total assets under management at $187.2 billion, a 6% increase from the previous quarter. The acquisition of Westchester Capital significantly contributed to its growth.

Positive

• 55% year-over-year revenue growth to $266.3 million.
• Operating income increased by 64% to $83.7 million.
• Total assets under management rose 6% to $187.2 billion.
• Earnings per share increased 16% year-over-year to $6.29.

Negative

• Net income decreased 15% sequentially from $58.7 million.
• Operating expenses rose 15% due to integration and amortization costs.
• Net flows were breakeven at $(0.1) billion, indicating stagnant asset inflows.

HARTFORD, Conn., Feb. 4, 2022 /PRNewswire/ -- Virtus Investment Partners, Inc. (NASDAQ: VRTS) today reported financial results for the three months ended December 31, 2021.

Financial Highlights (Unaudited) (in millions, except per share data or as noted)
	Three Months Ended						Three Months Ended
	12/31/2021		12/31/2020		Change		9/30/2021		Change
U.S. GAAP Financial Measures
Revenues	$     266.3		$     171.6		55%		$     252.1		6%
Operating expenses	$     182.6		$     120.7		51%		$     158.8		15%
Operating income (loss)	$       83.7		$       50.9		64%		$       93.3		(10%)
Operating margin	31.4%		29.7%				37.0%
Net income (loss) attributable to Virtus Investment Partners, Inc.	$       49.8		$       43.3		15%		$       58.7		(15%)
Earnings (loss) per share - diluted	$       6.29		$       5.40		16%		$       7.36		(15%)
Weighted average shares outstanding - diluted	7.929		8.026		(1%)		7.984		(1%)
Non-GAAP Financial Measures (1)
Revenues, as adjusted	$     232.6		$     153.5		52%		$     217.7		7%
Operating expenses, as adjusted	$     115.8		$       91.6		26%		$     107.6		8%
Operating income (loss), as adjusted	$     116.8		$       61.9		89%		$     110.1		6%
Operating margin, as adjusted	50.2%		40.3%				50.6 %
Net income (loss) attributable to Virtus Investment Partners, Inc., as adjusted	$       82.1		$       41.4		99%		$       77.5		6%
Earnings (loss) per share - diluted, as adjusted	$     10.36		$       5.15		101%		$       9.71		7%
Weighted average shares outstanding - diluted, as adjusted	7.929		8.026		(1%)		7.984		(1%)

(1)	See the information beginning on page 11 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 11 of this earnings release.

Assets Under Management and Asset Flows (in billions)
	Three Months Ended						Three Months Ended
	12/31/2021		12/31/2020		Change		9/30/2021		Change
Ending total assets under management	$            187.2		$            132.2		42%		$            177.3		6%
Average total assets under management	$            184.6		$            121.1		52%		$            179.6		3%
Total sales	$                8.7		$                8.9		(3%)		$                7.6		14%
Net flows	$               (0.1)		$                2.7		N/M		$               (0.6)		83%
N/M - Not Meaningful

Total assets under management increased 6% to $187.2 billion at December 31, 2021 from $177.3 billion at September 30, 2021 due to $6.3 billion of market performance and $5.1 billion of assets from the acquisition of Westchester Capital Management ("Westchester Capital") on October 1, 2021. In addition, the company had $3.8 billion of other fee earning assets compared with $3.7 billion at September 30, 2021.

Total sales increased 14% to $8.7 billion from $7.6 billion in the prior quarter and included growth in all product categories. Open-end fund sales of $4.1 billion increased 14% due to merger arbitrage, fixed income, and equity strategies. Institutional sales of $2.1 billion increased 16% from $1.8 billion in the prior quarter largely due to global equity mandates. Retail separate account sales of $2.2 billion increased 12% from $2.0 billion in the third quarter primarily due to sales of domestic equity strategies.       

Net flows were essentially breakeven at ($0.1) billion as positive net flows in retail separate accounts, institutional, and exchange traded funds (ETFs) were offset by open-end fund net outflows. Retail separate accounts contributed positive net flows of $1.1 billion, up 44% sequentially, with continued net inflows in both the intermediary sold and private client channels. Institutional net flows of $0.5 billion, up sequentially from $0.1 billion, were positive for the fifth consecutive quarter and included new mandates at multiple affiliates. ETF net flows of $0.1 billion were primarily due to preferred security and real estate strategies. Open-end fund net flows of ($1.7) billion compared with ($1.5) billion in the prior quarter and largely reflected net outflows from emerging markets and domestic equity strategies, partially offset by positive net flows in leveraged finance and multi-asset strategies.    

GAAP Results

Operating income of $83.7 million compared with $93.3 million in the prior quarter as a 6% increase in total revenues, due to higher average assets under management, was more than offset by a 15% increase in total operating expenses. The sequential increase in operating expenses included fair value adjustments to contingent consideration, as well as increased intangible asset amortization and higher employment and other operating expenses primarily due to the acquisition of Westchester Capital and growth in the business.

Net income attributable to Virtus Investment Partners, Inc. of $6.29 per diluted common share included ($1.16) of fair value adjustments 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. Net income per diluted share in the prior quarter of $7.36 included ($1.36) of fair value adjustments to affiliate noncontrolling interests, ($0.27) of realized and unrealized losses on investments, and ($0.21) of acquisition and integration costs. The fair value adjustments to affiliate noncontrolling interests and contingent consideration reflected increases in the value of affiliate minority ownership and revenue participation liabilities, respectively.

The effective tax rate during the quarter of 31% compared with 26% in the prior quarter primarily due to changes in valuation allowances related to marketable securities.

Non-GAAP Results

Revenues, as adjusted, increased 7% sequentially to $232.6 million due to a 3% increase in average assets under management and a higher average fee rate due to market performance and the addition of  Westchester Capital.

Employment expenses, as adjusted, of $92.0 million, compared with $86.5 million in the third quarter, reflected higher profit- and sales-based variable compensation as well as the addition of Westchester Capital. Other operating expenses, as adjusted, of $22.9 million increased sequentially from $20.2 million due to growth of the business, the addition of Westchester Capital, and an increase in travel and related expenses.

Operating income, as adjusted, increased to $116.8 million from $110.1 million in the prior quarter due to higher revenues. The operating margin, as adjusted, of 50.2% compared with 50.6% in the third quarter.

Net income attributable to Virtus Investment Partners, Inc., as adjusted, per diluted common share was $10.36, an increase of $0.65, or 7%, from $9.71 in the prior quarter and the company's highest reported level. The sequential increase primarily reflected higher revenues, as adjusted, as a result of higher average assets under management.

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
	12/31/2021		12/31/2020		Change		9/30/2021		Change
Cash and cash equivalents	$        378.9		$        246.5		54%		$        437.2		(13%)
Gross debt (1)	$        274.3		$        205.7		33%		$        275.0		—%
Contingent consideration (2)	$        162.6		$              —		N/M		$        137.7		18%
Redeemable noncontrolling interests (3)	$        126.5		$          87.5		45%		$        118.9		6%
Total equity exc. noncontrolling interests	$        828.3		$        711.2		16%		$        812.3		2%
Working capital (4)	$        219.8		$        172.0		28%		$        345.5		(36%)
Net debt (cash) (5)	$       (104.6)		$         (40.8)		156%		$       (162.2)		(36%)

(1)	Excludes deferred financing costs of $8.0 million, $4.5 million, and $8.3 million, as of December 31, 2021, December 31, 2020, and September 30, 2021, respectively
(2)	Represents estimates of AllianzGI-related revenue participation and Westchester Capital revenue earn out payments of $150.1 million and $12.5 million, respectively
(3)	Excludes redeemable noncontrolling interests of consolidated investment products of $12.4 million, $28.1 million, and $12.8 million as of December 31, 2021, December 31, 2020, and September 30, 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 $219.8 million at December 31, 2021 compared with $345.5 million at September 30, 2021 as net cash generated from the business was more than offset by $155.0 million of consideration for the acquisition of Westchester Capital as well as $25.0 million to repurchase 81,866 shares of common stock.   

Acquisition of Stone Harbor Investment Partners

On January 1, 2022 the company completed its acquisition of Stone Harbor Investment Partners, a premier manager of emerging markets debt, multi-asset credit, global corporate, and other strategies with $14.7 billion of assets under management.  

Conference Call

Management will host an investor conference call on Friday, February 4, 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: 1776729). 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 February 11, 2022 by telephone at 855-859-2056 (U.S. and Canada) or 404-537-3406 (international) (Conference ID: 1776729).

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				Twelve Months Ended
	12/31/2021		12/31/2020		Change		9/30/2021		Change		12/31/2021		12/31/2020		Change
Revenues
Investment management fees	$   213,673		$   144,715		48%		$   201,133		6%		$   781,585		$   505,338		55%
Distribution and service fees	23,464		10,279		128%		23,293		1%		90,555		38,425		136%
Administration and shareholder service fees	27,615		16,407		68%		26,479		4%		102,531		59,463		72%
Other income and fees	1,510		245		N/M		1,159		30%		4,563		670		N/M
Total revenues	266,262		171,646		55%		252,064		6%		979,234		603,896		62%
Operating Expenses
Employment expenses	91,496		73,527		24%		87,345		5%		358,230		267,299		34%
Distribution and other asset-based expenses	36,032		20,686		74%		36,692		(2%)		141,039		77,010		83%
Other operating expenses	25,808		17,232		50%		22,800		13%		90,134		69,896		29%
Operating expenses of consolidated investment products	1,705		641		166%		639		167%		3,562		10,585		(66%)
Restructuring and severance	—		—		N/M		—		N/M		—		1,155		(100%)
Change in fair value of contingent consideration	12,400		—		N/M		—		N/M		12,400		—		N/M
Depreciation expense	906		1,100		(18%)		915		(1%)		3,900		4,660		(16%)
Amortization expense	14,262		7,529		89%		10,391		37%		44,481		30,127		48%
Total operating expenses	182,609		120,715		51%		158,782		15%		653,746		460,732		42%
Operating Income (Loss)	83,653		50,931		64%		93,282		(10%)		325,488		143,164		127%
Other Income (Expense)
Realized and unrealized gain (loss) on investments, net	1,026		5,071		(80%)		(504)		N/M		3,907		7,139		(45%)
Realized and unrealized gain (loss) of consolidated investment products, net	2,980		10,768		(72%)		(2,801)		N/M		(1,761)		(1,965)		(10%)
Other income (expense), net	632		1,070		(41%)		1,001		(37%)		4,230		1,876		125%
Total other income (expense), net	4,638		16,909		(73%)		(2,304)		N/M		6,376		7,050		(10%)
Interest Income (Expense)
Interest expense	(2,322)		(2,692)		(14%)		(2,348)		(1%)		(9,240)		(11,894)		(22%)
Interest and dividend income	793		236		236%		269		195%		1,364		1,367		—%
Interest and dividend income of investments of consolidated investment products	20,765		25,697		(19%)		22,877		(9%)		90,080		109,648		(18%)
Interest expense of consolidated investment products	(18,056)		(15,179)		19%		(13,442)		34%		(60,398)		(85,437)		(29%)
Total interest income (expense), net	1,180		8,062		(85%)		7,356		(84%)		21,806		13,684		59%
Income (Loss) Before Income Taxes	89,471		75,902		18%		98,334		(9%)		353,670		163,898		116%
Income tax expense (benefit)	27,458		14,088		95%		25,823		6%		90,835		43,935		107%
Net Income (Loss)	62,013		61,814		—%		72,511		(14%)		262,835		119,963		119%
Noncontrolling interests	(12,173)		(18,499)		(34%)		(13,775)		(12%)		(54,704)		(40,006)		37%
Net Income (Loss) Attributable to Virtus Investment Partners, Inc.	$     49,840		$     43,315		15%		$     58,736		(15%)		$   208,131		$     79,957		160%
Earnings (Loss) Per Share - Basic	$         6.54		$         5.67		15%		$         7.64		(14%)		$       27.13		$       10.49		159%
Earnings (Loss) Per Share - Diluted	$         6.29		$         5.40		16%		$         7.36		(15%)		$       26.01		$       10.02		160%
Cash Dividends Declared Per Common Share	$         1.50		$         0.82		83%		$         1.50		—%		$         4.64		$         2.98		56%
Weighted Average Shares Outstanding - Basic	7,623		7,641		—%		7,691		(1%)		7,672		7,620		1%
Weighted Average Shares Outstanding - Diluted	7,929		8,026		(1%)		7,984		(1%)		8,003		7,976		—%
N/M - Not Meaningful

 

Assets Under Management - Product and Asset Class (in millions)
	Three Months Ended
	12/31/2020		03/31/2021		6/30/2021		9/30/2021		12/31/2021
By product (period end):
Open-End Funds (1)	$           50,771		$           72,164		$           75,333		$           73,044		$           77,227
Closed-End Funds	5,914		11,664		11,993		11,721		12,068
Exchange Traded Funds	837		1,021		1,260		1,321		1,479
Retail Separate Accounts	29,751		37,244		40,578		41,528		44,538
Institutional Accounts	40,861		42,802		45,604		45,882		48,140
Structured Products	4,060		3,985		3,870		3,809		3,734
Total	$         132,194		$         168,880		$         178,638		$         177,305		$         187,186
By product (average) (2)
Open-End Funds (1)	$           47,782		$           66,247		$           74,126		$           75,073		$           78,916
Closed-End Funds	5,847		9,340		11,936		12,091		12,043
Exchange Traded Funds	683		890		1,159		1,295		1,387
Retail Separate Accounts	24,727		32,118		37,244		40,578		41,528
Institutional Accounts	37,989		41,764		44,538		46,739		46,959
Structured Products	4,068		3,985		3,875		3,803		3,734
Total	$         121,096		$         154,344		$         172,878		$         179,579		$         184,567
By asset class (period end):
Equity	$           86,268		$         106,183		$         113,751		$         112,732		$         116,546
Fixed Income	28,965		35,069		35,426		35,240		34,261
Multi-Asset (3)	12,201		22,498		23,668		23,641		24,853
Alternatives (4)	4,760		5,130		5,793		5,692		11,526
Total	$         132,194		$         168,880		$         178,638		$         177,305		$         187,186

 

Assets Under Management - Average Management Fees Earned (5) (in basis points)
	Three Months Ended
	12/31/2020		3/31/2021		6/30/2021		9/30/2021		12/31/2021
By Product:
Open-End Funds (1)	51.8		48.0		46.4		46.3		49.3
Closed-End Funds	62.2		56.2		55.1		56.2		55.5
Exchange Traded Funds	3.3		6.7		14.0		10.4		6.5
Retail Separate Accounts	47.1		45.7		44.2		44.0		44.6
Institutional Accounts (6)	34.6		31.5		32.2		31.0		32.4
Structured Products	31.1		38.8		40.0		35.1		35.2
All Products (6)	44.9		43.1		42.5		42.0		43.7

(1)	Represents assets under management of U.S. retail funds, offshore funds and variable insurance funds
(2)	Averages are calculated as follows:
	- Funds - average daily or weekly balances
	- Retail Separate Accounts - prior-quarter ending balance
	- Institutional Accounts and Structured Products - average of month-end balances in quarter
(3)	Includes strategies with substantial holdings in at least two of the following asset classes: equity, fixed income and alternatives
(4)	Consists of event-driven, real estate securities, infrastructure, long/short, and other strategies
(5)	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
(6)	Includes performance-related fees, in basis points, earned during the three months ended as follows:

	12/31/2020		3/31/2021		6/30/2021		9/30/2021		12/31/2021
Institutional Accounts	3.9		0.6		0.7		0.5		0.6
All Products	1.2		0.2		0.2		0.1		0.1

 

Assets Under Management - Asset Flows by Product (in millions)
	Three Months Ended										Twelve Months Ended
	12/31/2020		3/31/2021		6/30/2021		9/30/2021		12/31/2021		12/31/2020		12/31/2021
Open-End Funds (1)
Beginning balance	$       44,574		$       50,771		$       72,164		$       75,333		$       73,044		$       43,824		$       50,771
Inflows	4,285		5,853		4,743		3,635		4,135		17,055		18,366
Outflows	(3,527)		(5,258)		(4,987)		(5,103)		(5,870)		(16,890)		(21,218)
Net flows	758		595		(244)		(1,468)		(1,735)		165		(2,852)
Market performance	5,694		1,130		3,469		(745)		2,241		7,222		6,095
Other (2)	(255)		19,668		(56)		(76)		3,677		(440)		23,213
Ending balance	$       50,771		$       72,164		$       75,333		$       73,044		$       77,227		$       50,771		$       77,227
Closed-End Funds
Beginning balance	$         5,629		$         5,914		$       11,664		$       11,993		$       11,721		$         6,748		$         5,914
Inflows	5		—		—		3		19		25		22
Outflows	—		—		—		—		—		—		—
Net flows	5		—		—		3		19		25		22
Market performance	364		105		514		(114)		718		(387)		1,223
Other (2)	(84)		5,645		(185)		(161)		(390)		(472)		4,909
Ending balance	$         5,914		$       11,664		$       11,993		$       11,721		$       12,068		$         5,914		$       12,068
Exchange Traded Funds
Beginning balance	$           543		$           837		$         1,021		$         1,260		$         1,321		$         1,156		$           837
Inflows	218		175		232		174		211		438		792
Outflows	(40)		(77)		(92)		(65)		(73)		(448)		(307)
Net flows	178		98		140		109		138		(10)		485
Market performance	126		98		104		(30)		41		(254)		213
Other (2)	(10)		(12)		(5)		(18)		(21)		(55)		(56)
Ending balance	$           837		$         1,021		$         1,260		$         1,321		$         1,479		$           837		$         1,479
Retail Separate Accounts
Beginning balance	$       24,727		$       29,751		$       37,244		$       40,578		$       41,528		$       20,414		$       29,751
Inflows	2,181		2,699		2,273		2,003		2,240		6,452		9,215
Outflows	(914)		(896)		(833)		(1,231)		(1,125)		(2,960)		(4,085)
Net flows	1,267		1,803		1,440		772		1,115		3,492		5,130
Market performance	3,757		2,141		1,910		178		1,895		5,868		6,124
Other (2)	—		3,549		(16)		—		—		(23)		3,533
Ending balance	$       29,751		$       37,244		$       40,578		$       41,528		$       44,538		$       29,751		$       44,538

 

Assets Under Management - Asset Flows by Product (continued) (in millions)
	Three Months Ended										Twelve Months Ended
	12/31/2020		3/31/2021		6/30/2021		9/30/2021		12/31/2021		12/31/2020		12/31/2021
Institutional Accounts
Beginning balance	$       36,851		$       40,861		$       42,802		$       45,604		$       45,882		$       32,859		$       40,861
Inflows	2,252		1,884		2,302		1,808		2,099		8,967		8,093
Outflows	(1,687)		(1,868)		(2,184)		(1,727)		(1,625)		(7,512)		(7,404)
Net flows	565		16		118		81		474		1,455		689
Market performance	3,481		1,181		2,752		222		1,409		6,684		5,564
Other (2)	(36)		744		(68)		(25)		375		(137)		1,026
Ending balance	$       40,861		$       42,802		$       45,604		$       45,882		$       48,140		$       40,861		$       48,140
Structured Products
Beginning balance	$         4,163		$         4,060		$         3,985		$         3,870		$         3,809		$         3,903		$         4,060
Inflows	—		—		—		—		8		491		8
Outflows	(81)		(79)		(118)		(69)		(84)		(265)		(350)
Net flows	(81)		(79)		(118)		(69)		(76)		226		(342)
Market performance	9		35		33		36		29		91		133
Other (2)	(31)		(31)		(30)		(28)		(28)		(160)		(117)
Ending balance	$         4,060		$         3,985		$         3,870		$         3,809		$         3,734		$         4,060		$         3,734
Total
Beginning balance	$     116,487		$     132,194		$     168,880		$     178,638		$     177,305		$     108,904		$     132,194
Inflows	8,941		10,611		9,550		7,623		8,712		33,428		36,496
Outflows	(6,249)		(8,178)		(8,214)		(8,195)		(8,777)		(28,075)		(33,364)
Net flows	2,692		2,433		1,336		(572)		(65)		5,353		3,132
Market performance	13,431		4,690		8,782		(453)		6,333		19,224		19,352
Other (2)	(416)		29,563		(360)		(308)		3,613		(1,287)		32,508
Ending balance	$     132,194		$     168,880		$     178,638		$     177,305		$     187,186		$     132,194		$     187,186

(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 cash management 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

 

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	12/31/2021		12/31/2020		9/30/2021
Total revenues, GAAP	$         266,262		$         171,646		$         252,064
Consolidated investment products revenues (1)	2,374		2,581		2,298
Investment management fees (2)	(12,567)		(10,403)		(13,396)
Distribution and service fees (2)	(23,465)		(10,283)		(23,296)
Total revenues, as adjusted	$         232,604		$         153,541		$         217,670
Operating Expenses
Total operating expenses, GAAP	$         182,609		$         120,715		$         158,782
Consolidated investment products expenses (1)	(1,705)		(641)		(639)
Distribution and other asset-based expenses (3)	(36,032)		(20,686)		(36,692)
Amortization of intangible assets (4)	(14,262)		(7,529)		(10,391)
Acquisition and integration expenses (5)	(14,454)		344		(2,271)
Other (6)	(374)		(580)		(1,230)
Total operating expenses, as adjusted	$         115,782		$           91,623		$         107,559
Operating Income (Loss)
Operating income (loss), GAAP	$           83,653		$           50,931		$           93,282
Consolidated investment products (earnings) losses (1)	4,079		3,222		2,937
Amortization of intangible assets (4)	14,262		7,529		10,391
Acquisition and integration expenses (5)	14,454		(344)		2,271
Other (6)	374		580		1,230
Operating income (loss), as adjusted	$         116,822		$           61,918		$         110,111
Operating margin, GAAP	31.4%		29.7%		37.0%
Operating margin, as adjusted	50.2%		40.3%		50.6%

 

	Three Months Ended
Income (Loss) Before Taxes	12/31/2021		12/31/2020		9/30/2021
Income (loss) before taxes, GAAP	$           89,471		$           75,902		$           98,334
Consolidated investment products (earnings) losses (1)	(517)		(3,292)		(315)
Amortization of intangible assets (4)	14,262		7,529		10,391
Acquisition and integration expenses (5)	14,454		(344)		2,271
Other (6)	374		580		1,410
Seed capital and CLO investments (gains) losses (7)	(1,285)		(18,798)		(2,110)
Income (loss) before taxes, as adjusted	$         116,759		$           61,577		$         109,981
Income Tax Expense (Benefit)
Income tax expense (benefit), GAAP	$           27,458		$           14,088		$           25,823
Tax impact of:
Amortization of intangible assets (4)	3,844		2,055		2,751
Acquisition and integration expenses (5)	3,896		(94)		601
Other (6)	(850)		706		717
Seed capital and CLO investments (gains) losses (7)	(2,880)		49		(779)
Income tax expense (benefit), as adjusted	$           31,468		$           16,804		$           29,113
Effective tax rate, GAAPA	30.7%		18.6%		26.3%
Effective tax rate, as adjustedB	27.0%		27.3%		26.5%

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	$           49,840		$           43,315		$           58,736
Amortization of intangible assets, net of tax (4)	9,682		4,739		6,904
Acquisition and integration expenses, net of tax (5)	10,558		(250)		1,670
Other, net of tax (6)	10,455		12,405		11,534
Seed capital and CLO investments (gains) losses, net of tax (7)	1,595		(18,847)		(1,331)
Net income (loss) attributable to Virtus Investment Partners, Inc., as adjusted	$           82,130		$           41,362		$           77,513
Weighted average shares outstanding - diluted	7,929		8,026		7,984
Earnings (loss) per share - diluted, GAAP	$               6.29		$               5.40		$               7.36
Earnings (loss) per share - diluted, as adjusted	$             10.36		$               5.15		$               9.71

 

	Three Months Ended
Administration and Shareholder Services Fees	12/31/2021		12/31/2020		9/30/2021
Administration and shareholder service fees, GAAP	$           27,615		$           16,407		$           26,479
Consolidated investment products fees (1)	50		65		3
Administration and shareholder service fees, as adjusted	$           27,665		$           16,472		$           26,482
Employment Expenses
Employment expenses, GAAP	$           91,496		$           73,527		$          87,345
Acquisition and integration expenses (5)	846		515		(429)
Other (6)	(346)		(580)		(445)
Employment expenses, as adjusted	$           91,996		$           73,462		$          86,471
Other Operating Expenses
Other operating expenses, GAAP	$           25,808		$           17,232		$           22,800
Acquisition and integration expenses (5)	(2,900)		(171)		(1,842)
Other (6)	(28)		—		(785)
Other operating expenses, as adjusted	$           22,880		$           17,061		$           20,173
Total Other Income (Expense), Net,
Total other income (expense), net GAAP	$             4,638		$           16,909		$           (2,304)
Consolidated investment products (1)	(2,866)		3,106		5,439
Seed capital and CLO investments (gains) losses (7)	(1,285)		(18,798)		(2,110)
Total other income (expense), net as adjusted	$                487		$             1,217		$             1,025
Interest and Dividend Income
Interest and dividend income, GAAP	$                 793		$                 236		$                 269
Consolidated investment products (1)	979		898		744
Interest and dividend income, as adjusted	$              1,772		$              1,134		$              1,013
Total Noncontrolling Interests
Total noncontrolling interests, GAAP	$         (12,173)		$         (18,499)		$         (13,775)
Consolidated investment products (1)	517		3,292		315
Amortization of intangible assets (4)	(736)		(735)		(736)
Other (6)	9,231		12,531		10,841
Total noncontrolling interests, as adjusted	$           (3,161)		$           (3,411)		$           (3,355)

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	12/31/2021		12/31/2020		9/30/2021
		Employment expenses	$              (846)		$              (515)		$                 429
		Other operating expenses	2,900		171		1,842
		Change in fair value of contingent consideration	12,400		—		—
		Total Acquisition and Integration Expenses	$           14,454		$              (344)		$             2,271

 

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	12/31/2021		12/31/2020		9/30/2021
		Non-capitalized debt issuance costs	$                   28		$                   —		$                 785
		Employment expense fair value adjustments	346		580		445
		(Gain) / loss on extinguishment or modification of debt	—		—		180
		Tax impact of adjustments	(101)		(158)		(373)
		Other discrete tax adjustments	951		(548)		(344)
		Affiliate minority interest fair value adjustments	9,231		12,531		10,841
		Total Other	$           10,455		$           12,405		$           11,534

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 2020 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 2020 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 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 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-fourth-quarter-2021-301475286.html

SOURCE Virtus Investment Partners, Inc.

FAQ

What were Virtus Investment Partners' earnings for Q4 2021?

Virtus Investment Partners reported earnings of $6.29 per diluted share for Q4 2021.

How much did Virtus Investment Partners earn in total revenues for Q4 2021?

The total revenues for Virtus Investment Partners in Q4 2021 were $266.3 million.

What is the current total assets under management for VRTS?

As of December 31, 2021, Virtus Investment Partners had total assets under management of $187.2 billion.

What contributed to the revenue growth at Virtus Investment Partners?

The acquisition of Westchester Capital and increased market performance contributed to the revenue growth.

What was the net income for Virtus Investment Partners in Q4 2021?

The net income attributable to Virtus Investment Partners for Q4 2021 was $49.8 million.