VRTS - Earnings call transcript Q4 2017 | Virtus Investment Partners, Inc.

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Operator

Good morning. My name is Andrew, and I will be your conference operator today. I would like to welcome everyone to the Virtus Investment Partners quarterly conference call. The slide presentation for this call is available in the investor relations section of the Virtus Web site, www.virtus.com. This call is also being recorded and will be available for replay on the Virtus Web site. participants a all mode. time, this are listen-only in At question-and-answer there’ll instructions After remarks, a period time. the speakers’ that be and at will follow Hess. turn your now conference Jeanne will I the host, to go Please ahead.

Jeanne Hess

like On Thank and Virtus I to and our good discussion everyone. financial the to you, of behalf results XXXX. you welcome for morning, Investment of Partners, of operating the would fourth quarter

factors webcast. on our Certain your earnings and risks of page cause I Reform discussed on filings. within those Before direct attention statements. that set to forth risks known and report as including, to annual Form and accompanies in SEC differ important may statements the presentation we materially and and uncertainties, are in discussed of XX-Q release those Act call this of but two the this quarterly and in subject disclosures These Form matters the uncertainties on to, Litigation not forward-looking XX-K may to on slide begin, other report the discussed results unknown and XXXX, today's such Private actual contain Securities meaning from limited the

to GAAP to on addition presented non-GAAP financial Virtus its a results certain uses measures In evaluate results. basis,

to release, earnings for site. Web applicable measures financial our with measures available are these GAAP financial non-GAAP in conjunction Our should is measures included press not GAAP the read of on and financial non-GAAP in substitutes are be results GAAP which Reconciliations our results.

call Now Aylward. our President I to and over George the George? turn to CEO, would like

George Aylward

flows, Mike more financial for the start I’ll it detail on today over the to Jeanne, discussing for you, Thank everyone. turning morning, quarter, assets, including before good results the results. earnings and by

that comments announced questions, your make will SGA this Sustainable with taking Before Growth earlier morning. Advisers or on our was some agreement I

$X.X assets, increased quarter more net Retail oriented were and the Anderson Long-term due $X.X included which in to positive Now offset flows Rudnick. retail net under separate as offsets and billion X.X% Total the net separate equity $X.X appreciation net market begin $XX a outflows. than strategies, period inflows billion sequentially to billion. compared ended ETFs AUM third let with $X.X be issuance billion. were than the the assets sales with as strong with flows. accounts management strategies quarter which billion CLO account at billion compared open billion, of by were $X.X Kayne and in positive include quarter, in the outflows liquidity flows funds. sequentially me $XX.X Total ended Total and negative by quality continued to more institutional primarily offered net in

the core for sales. by net in fund positive Multi-Sector to with cap Newfleet. remains in were in We flows opportunities the and including quarter. managed by Emerging the flows cap the billion lumpy higher were in negative quarter, generated fund flows to Kayne's funds as Term Insititutional cap bank loan there in Bond notable $X.X funds. funds, primarily small have compared flows and net billion any net have sales continue market Mutual international small were Institutional industry or separate quarter strategy eight category that generally are third flat quarter Fund positive the to due growth. higher $X.X the in positive outflows trend generate Mutual asset negative the consistent small and believe Short reflecting class. from that redemptions. Vontobel this accounts and past no to inflows flows strategy flows single were also continue growth increased in retail outlook in ETFs strong. flows had for quarter, the offset

fund as four and five to of investment approximately three their relative continued and a starts performance XX% on of year of five solid meeting institutional rated be AUM benchmarks the XXst having assets XX% basis. to Our December and with

include January strong retail we almost In accounts flows, which and of were separate across net mutual terms in retail as fund asset have flows seen were the five sales, growth positive years. classes

product other new as for million January. categories, one thing by As managed is CLO the we announced, note issued of previously we in a that $XXX Seix

operating XX% the the the prior in to transaction which quarter per in in XX.X% million more SGA adjusted. adjusted in from margin quarter RidgeWorth results. to agreement. transaction XX.X% as Operating Moving adjusted. as onto adjusted to prior resulted income The adjusted than Revenue costs in of prior sequential XX.X% in rates Fourth with in earnings quarter. XX% adjusted, that from revenues year $X.XX the all higher well offset $X.XX of realization financial expenses, income average as higher quarter as and the due X% operating synergies on as expected share fee as as included increased higher X% increased $X.X from the and assets increase the higher as quarter operating increased increase quarter

Turning to balance the sheet.

fixed offerings we part strategy offshore a to of for our income quarter, expand investors. new the that During see as our product

facilitated transaction on one period a reset of reinvestment its we our maturity and thereby date. extending addition, existing In CLOs,

provide balance to Now, the over turn results Mike? I'll more it financial sheet. to detailed a and of Mike view

Mike Angerthal

primarily ended X.X% The everyone. $XX.X distributions. the appreciation market on market reflects billion, of outflows $X.X morning, $X.X from assets appreciation year under management. sequential Thank from the billion, with of reflects outflows change quarter, dividend of billion. $X.X reflects which partially of XX% respectively. slide quarter We and prior assets prior activity the and from RidgeWorth net billion, the quarter long-term net increases $X billion, and other acquisition, you, assets by offset billion, the of of prior-year The which and $X.X increase George. Starting negative seven, includes Good of

$X.X retail in continues to by in billion our $X well accounts, income fixed balanced between December with and billion total and ETS. products remained equity of assets billion AUM structured quarter funds, to type $XX.X equity, product $XX.X the slightly of in billion separate assets. billion $X.X $XX.X open-end billion long-term increasing diversified institutional, XXst, with Our be funds, closed-end in of At in XX%

fund Turning flows. asset positive the $X.X sales $X.X offset accounts outflows in an offset increase in mutual were accounts net primarily asset of funds prior and With quarter. a quarter, trends the $X.X outflows billion net XX%, XX% for and and institutional. inflows that combined of retail fixed sales funds Total in had strategies more to funds, funds flows inflows than negative cap prior-year an income separate the Fixed outflows net the The as $X.X billion and inflows flat inflows flows, open-end were billion would by and note the offset mid by higher than were net small billion billion flows increased year, follows. net income. sales flows by Total class or a The accounts cap and separate of large ETFs of $X.X increase higher from launch $X.X in this as $X.X of $X.X strategies. in retail opportunities loan quarter flows decrease the compared than more CLO the to more due billion for from strategies into in strategies, billion from generated in were XX% to open-end with due in $X.X separate were markets had or net consistent quarter. billion $X.X of equity quarter by as were inflows emerging to Net from retail outflows in investment in quarter by in slide the outflows of Domestic cap the as market equity ETFs had positive were third funds bank outflows billion, quarter and XXXX. institutional, is billion were multi-sector increase $X.X International offset sequential by funds. net billion as net net fund. the on and the for of quarter international equities respect small flows the to I prior eight, category.

basis due the and was rate. million quarter fees I to average from to XX.X rate in to rate to quarter. quarter. long-term $X.X the reimbursements, slide fund rate fees the to that higher the the adjusted result and to products. increase impact higher prior fee XX newly nine. to points due million management an prior on partially by quarter. points also consolidation to would XX a Incentive average offset basis higher the in a due sequentially average compared lower funds. X% sequential reimbursements on $X.X fee the from The and incentive increased points blended $XXX.X The basis The expense structured million of management assets open-end The of providers under fee quarter fund the increase with in from launched products Turning decreased as of of products by equity million due reimbursements third increase fee basis was structured for appreciation. fee Investment assets fund ETF points increased lower points net decreased service on the for assets on note XX in XX.X of fees reflects expense expense market quarter basis prior higher XX from fee lower rate $X.X quarter fourth as mutual

reasonable based open end points the and XX quarter. XX higher million was profit from ETF quarter for for rate shows trend For adjusted expenses five due believe the of as rate the $XX.X are being we the basis increased The Slide Total increase employment assumptions, all equal. else modeling X% expenses. employment the prior fee purposes, to compensation. basis points fund incentive XX fee in

with percentage were As employment in compared quarter. expenses the adjusted, of revenues XX% a third as XX%

higher the million of stock-based Of attributable amounted and taxes taxes employee in million this to amount, quarter retirement payroll eligible we $X.X was benefits to each first incremental that first levels compensation. $X year, a the payroll As in incur reminder, of and of other quarter XXXX.

in million primarily related benefit these million adjusted items transaction. timing modifications. of of match, were operating to expenses has operating of the approximately to costs costs, first of expenses by The XX% sequentially. to adjusted expect higher which RidgeWorth well The approximately seasonal as $XX.X quarter $X.X includes X% first cost in the remaining increase the million, current Other expect planned XXX(k) million higher other agreement. from or with increase transaction in of staffing quarter due the trend the We with the activities. as operational resulted associated quarter line $X the that increase as was reflects $X.X to we the and distribution SGA an product, million $X.X to The levels timing XXXX staffing

other illustrates XX $XX.X adjusted costs, expense those were financial the operating million. results. of Slide Excluding as trend

and as quarter Operating the to preferred effective points to quarter. income $XX.X non-GAAP shares impacted or prior price operating the XXX XX.X%, higher XX% of was fourth shares The average million and share Job the the XXX $X.X by third XX% points $X.XX of Notably, impact basis synergies stock The margin Weighted in Cuts reflects In of as RidgeWorth by quarter, to per related points adjusted apportionment results, adjusted common quarter increased was declined outstanding changes basis $XX in the Earnings Tax state increase the the hypostatically fourth an sequentially as the to quarter adjusted increase increase as converting compared from basis XXXX prior the quarter rate was margin terms as fewer an adjusted common reflecting year. tax an $X.XX the Act. not share in tax million, adjusted XX the quarter rate were fourth from as XX,XXX or transaction. than the million sequentially. in prior quarter. in X% factors. the resulted sequentially in of XX%, of the

tax and adjusted going limitations In effective tax of XX% The of by federal federal forward, the an compared our federal approximately tax new reflects deductions. terms rate certain decrease preliminary the with in as rates impact effective of the decline state of deductions of rate, federal on rate the the our on indicate the the impact lower XX%. analysis offset rate partially

net this per method. tax per $X.XX share, the million the share that Fourth following the per XX% in the income new items. GAAP $X.XX share, third new Acquisition and $X.X of average of rates. earnings per non-cash in GAAP at $XX.X resulted corporate assets share Fourth results. share $X.XX the A which million of and weighted tax tax the our diluted costs if-converted or million to Regarding $X.XX the deferred reflecting in per the $X.XX tax of decrease integration $X.X outstanding primarily quarter impact from legislation remeasurement quarter's of calculation included compared in quarter. to quarter lower shares third decreased charge or due quarter, or was

GAAP income mentioned the common we quarter previously, under to whether as it's the each more we deduct or converted net dividend into As treat shares calculate if from shares. preferred dilutive preferred

investments was fourth The by interest which were period in our given in those of as million tax reinvestment the the the deducting quarter, reset compared $X.X costs. In of C income. XX of shows shares the the yield lower investments treat the for $XXX multisector $XXX.X date product capital impact we Siex. net the million the transaction vintage transaction the income, million position CLO, quarter, income September dilutive dilutive $XXX.X expansion within of At the $XX.X prior the million the the For cash quarter debt to benefits $XXX income of given range recycled and third EBITDA Slide included that investment September million ratio well this the liability note business. the $X.X higher our in more CLO and CLO to from $XXX it fluctuate December by XXXX a were was to the increase it the represents of include In existing liquidity as relative in Newfleet. maturity December investments CLO more on targeted UCIT generated dividend is of charge. with at dividend CLO distribution on investments seed the million, lower certain seed benefit company. income included provides million an to by that of will converted at XXst million non-GAAP trend Company’s a our the and based resulted and to that of to measure not as investments while quarter, net economic adjusted, specific and level times, reflecting important capital X.X Net to X.X as due times $XXX.X XXst, reset In from the which It’s capital our the XXth managed the launch was metrics. debt XXth, significant a bank quarter. million, of and in generated needs. decrease managed

interest plus back that, on a is bank over EBITDA George? compensation, generally in as dividend stock-based turn credit agreement defined and phased As in and as investments reminder, our with calculated to is accordance income me and adjusted operating call With George. let income fully the synergies.

George Aylward

and purchase equity XXXX, to manage are approach and our the Thanks, with demand and founding equity strategies, in for They offerings They've last billion sustainable strategies assets market. in international U.S. approach distinctive morning significantly in strategies equity investment well growth has flows. illustrates our increase mandates. approximately December base. announcement agreement offerings our a investing. pro billion clients. grown to in environment Mike. approximately current the their performance The predictable Japan $X basis. they SGA institutional clients believe assets manage so this XX% XXst before generally They clients. strategies, in further the primarily significantly Canada, with billion our billion in to distinctive and assets businesses item are research global management portfolios, our or equity U.S. December of presence clients I boutique-manager invest sub-advisory and nearly expand They our to in our in SGA, would to global separate Their generated doubled Australia, from would has has since of under want at product affiliated three would in client years clearly are discuss in taking managed growth attract SGA about generated for growth. majority all currently investing strong for conviction Their interest with and lines a their or respectively. also add favored their This forma that add passive equity XX% large your and They capability particularly of the they addition past Essentially business. and SGA questions managers our net will manages how of global assets $X.X they Middle-East. international differentiated on $X.X into conviction their growth AUM positioned that accounts for distinctive positive and global XXst. $X.X XXXX. family cap focused offer Europe, and a in is the would institutional Their billion to institutional over diversify total AUM our of as primarily institutional for high AUM a high that institutional growth meaningful and of The an institutional $XX.X

the institutional pipeline, opportunities optimistic We are for growth growth for and about a channel. with solid They've relationships consultants which strong should further outlook present SGA. the in

In we addition, markets, opportunities strategies their channels. product distribution retail other expand believe available make affiliates, presence structures are other another leveraging to our to in We retail as we do there to will their U.S. and with look resources. our a

also to their other usage. will strategies including make ETFs for structure, available mutual retail product separate selectively fund We accounts,

private million, client position consents. acquire in XX% the closing will by purchase equity partners. investor, pending price portion of The a equity company SGA’s held any consisting the a and would adjustments of by minority interest purchase be We $XXX.X tied the at held to

maintaining autonomy three retaining into transaction strategies, invest interest proceeds the our day-to-day which managers co-founders, equity as culture control over continue brand other of partners, portion will process, entered clients. Like an with in independent structure, long-term SGA the and over operate aligns activities. firm, of its affiliated boutique their their its and interest investment shareholders individual to All retain into for the They which also agreements. aligns employment the have including will significant a

to sheet expect transaction capacity finance and the debt new our upon from conditions. market using million credit $XXX financing existing or We resources of balance depending

our immediately is and net XX% IRR EBITDA. financially approximately attractive earnings. below Our will to Xx for remain debt and be deliver leverage expectation transaction an is non-GAAP that to is expected accretive The to

adjusted as fourth accretion XXXX of transaction of on EPS expect pro rate earnings, X% We basis a quarter of costs. excluding approximately run forma

obligations. intangibles purchase reduce will tax addition, In

As would significant is of a acquisition focus be firm, expected no boutique there with duplication costs. of smaller the

boutique by component our a important preposition. the value our affiliate to the of SGA and an our XXXX. element The close transaction expect news growth of illustrates middle We strategy addition key of as of

said we’ll that M&A strategy. dependent to and not often growth have say We long-term on continue an our is

However, a resources. that key and provides opportunities by with to element support their distinctive offering to our with of providing model different product it distribution is growth our their strategies in multi-boutique and access boutiques structures selectively us partner

allows model Our right set. a flexible the partner to firm having limiting particular us not for our capability by with partnering, opportunity approach to thereby

this the open provides important up investor’s which SGA is Silvant preposition to to years an in of an We Andrew, growth managers, because the boutique investing, acquisition organization. is mangers offerings distribution Ceredex lines they investment scale providing and have RidgeWorth We solutions whereas multi-boutique portfolio. fleet of up a the successfully attractive larger focus the offering from Rampart is questions. and can other our of management the to model strategies in on additive and XXXX and a through a diversified XXXX. to and opportunity. that, can believe leveraged approach clients you firm open our affiliated new the please. to excited to their expand XXXX let Seix, well benefiting distinctive ETF our value With current their part a with quality investment We're over resources us while investment XXXX, about our establishment in in

Operator

Instructions]. [Operator Certainly

comes Credit-Suisse. line Ghosh first from question Ari of Our with the

Your line is open. now

Ari Ghosh

deal, that the about SGA then firstly on bit on And is $X.X that be could So Thank in -- billion inflows institutional your forward, out pipeline you compares talk the pretty touch how looked the to is company been performances And called fee rate of existing Maybe has the of like a then could that with little recently. doing, what you size and you well. prior years? in up in helpful if line XXXX, you. what what doing as would that that looking blend.

George Aylward

answer what see of I questions. some those can to I’ll do

little and first as expanding you're their to more on bit from pleased asking So from part be the our away channel institutional very about assets to retail. we we're that in business look diversify

think Mike fee profile… So institutional I their

Mike Angerthal

with your we around consistent generally AUM, that reported their to think the blended assumption rate points, I It’s XX on fair Ari. its in institutional basis that use

George Aylward

terms some And made reference flows. of to the then of in just I their

last I I the indicated, years part and they’re last plus billion, they what more Ari, years. an that indication year they like bit. think gave second up question, at looked the in XXXX, broke that that As $XX.X started $X gives three than billion in little that you, first beginning doubled of profiles I number I those you you net of a flow of over And about missed

Ari Ghosh

magnitude there but of touch like, compared of the if could know to question pipeline be or a I you either year. the what it on embedded, prior just were may looked lot

to of over months Just that pipeline we’re at SGA. the want next looking a the sense from XX get

George Aylward

the yet any we’re that completed. feel as assume they’ve can bit specifics haven't going going you and if those transaction opportunity we’ll the We're little of about But can have, forward. there to we start understand. very you, give continue to the they’ll had line, of opportunities And announcing we good and pipeline. they again At kind talking types more And set a we into time, on see that pipeline. have insight that I not about relationships the down

Ari Ghosh

count keeping where Thank down levels, should and every maybe magnitude came to even either timing buyback up, still just had continue should quick that the a you think months? next the it follow for or how XXXX now year? the deal, Or XX over around right the capital plans we this transaction about is you. following debt of 'XX? then we then deployment probably and Does of some And these expect your share change

George Aylward

believe capital. our I important selective use do We’ve us have for and really and know, M&A of really because it's that aside when in very same and we there capital repeatedly and RidgeWorth CLOs. development spent primary very where goal new we of very now the we the in true was appropriate Again, at times for a it’s at structure done the now of of investments in time SGA, things a we as been shareholders repurchases the both very the highest time. And its best big have portions on of to these business. comfortable of And utilize good we’ve looking result lot on We’ve being a it flexibility, of recycle that really we organic side maintain a look been as the happen to set growth lot is the transaction opportunities products said, that organic -- really stock we years. actually increasingly and over at the you Mike aggressive were

we to think So maintain I continue will flexibility. with

number. using to continue debt to that’s going As flow and and the our at of transaction, post we’re the type finance keeping significant we we’re going said transaction Xx a with clearly, obviously cash very leverage side be generate sheet to to cash this SGA, But flow positive the balance business.

the capital the to do Mike, to different and continue things point time, uses done evaluate, past. in to add we’ll So the of that? to you anything we’ve any at want

Mike Angerthal

standpoint. specific a from out point to just Ari And

existing an required calendar which that calculate it, be year flow XXXX in has loan excess calculation on based based suite we’ll feature and As the on QX a you cash down there know, pay 'XX. in term will

after evaluate through go thinking forward. the certainly, think covenant that I follow. as that’s we’ll priorities, outlined, contractual So capital that, a And George we’ll

Operator

line with the And America. of our comes next Bank from Carrier Michael question of

Your line now open. is

Sameer Murukutla

This a question high is tax It Michael rate, actually you your the peers. for XX%. I Carrier. gave versus A little us quick Murukutla Sameer seems know on on the

on more it’s So ending you give XXs? just lower can us why detail versus up XX any

Mike Angerthal

be beneficiary certainly limitations certainly Cuts that when we’re haven’t There new under will rate. Act. be it Jobs the seen and to deductions pleased that peers. I our are of the so a look the into Tax But will something we that the federal goes have rules, certain XX at and certainly,

So and then on you deductions limitations have the XX% reduction the and the have the federal further deductions state the tax tax in the state XX% some rate. are limited the by will plus

changes, is we’ll XX% a true it think and to that I estimate up. good extent So the

Sameer Murukutla

a just guess question your margin outlook going as follow-up a I on just forward.

quarter then You announced in the XX.X and SGA did you deal.

forward, where could top this at? margin Looking do you think out maybe

George Aylward

of any drivers of the markets will are be assets margin our really One bigger are levels. what doing how in our the and fluctuation

strong a having half in obviously markets is but equity XX% in January So our that as equities were only fixed reminder, of and XX% are assets income.

so it's cost items, the money. to related So large one we're small transaction We highly a about it's expensive where the growth, in. pleased manage And equity shop two highlighted margin SGA, or cap specifically an not came cost to that. way as think you

going that as to should in transaction to margin. to give think So specifics of that our dilutive we’re terms margin. margin accretive any But opposed to you would be again, not a be the of would our

Mike Angerthal

or margins is about from. ratios to XX% a assumption it's But AUM going growth in We've range. And I a forward. that's XX% always of tax talked revenue think or that I the where the incremental also growth think good comes caveat --

Operator

Sypris]. we have the a And [Michael line Instructions] question of from [Operator

open. now is line Your

Unidentified Analyst

I work you well? you affiliates think going with In misinterpreting to this relative sense bit that have one the Just shares. How that pull other you on as the on to a organization going there didn’t also going of of the one operations. a some little them little wanted it have. overall I as this much your you’re of about structure, some other bit stake. quite thinking is circle just others bit the bit, that? centralized revenue the larger the cases, this operational am you’re how more elaborate the organizational It back SGA to seems affiliates you on affiliates a if could you to XX% relative within Why just little bit XX? the Maybe How others. transaction center stake a get to to and

George Aylward

to of And ability or do affiliates culture, our separate types for just what as approximately day XX or control the scale continue very equity own clear, $XX their the and individual they’ll cap in own it their affiliates SGA things, own they manager; managing are be opportunities to now; business; job that we things their each they different to executing businesses. to and to total what of Couple for allows we help offer their and is to and make But of basis business it who shared correct all firms do easier infrastructure when do people operate to do could billion; that a all large have exactly business. growth for support them as distinct day over in locations, multi-affiliate own data systems to them; of plan. or do in their to in of is their can our them very is or process and managing terms economies a identities, be they were and investment of their operate their that. say

that XX%, I saying multi-boutiques. I both your of way would XXX%. structures you're that’s and So in our SGA include forgot question, our the part the second describe current

And I for the us right was the include that also our XXX%. important, flexibility I model, business really point about than less it’s some when strategy. of it right making the because partner for We or was finding the was talked

very not growth opportunity or differentiated We're manager. set conviction going of an to structure. it’s our cookie So a equity whether high cutter limit kind distinctive any to ETF it’s business whether

they care structural they amongst XXX%, its So of and stay that are who they its each manage our whether really money are, the only -- consistent individual of depend on take that’s thing But that whether their or each they clients. XX% independently, is affiliates they will that opportunity.

Unidentified Analyst

And any It a you you as just if strategic a it’s here. long cost talk been this compelling in give follow recap you’ve view up, a the bit around? to how for rationale what doesn’t history terms them play like synergy could color discussion little as seem with And could and in you of transaction. just

George Aylward

synergies. about And great point, this is not

right. capability, product a is this Now,

we of actual types myriad So at look right. illustrations we’ve through transactions I’ll as of use different and looked the that

great really and double as a as great was unlock an effectively So company. of to the to add opportunity affiliates transaction of well costs synergies duplications twofer. terms family size the the and It in to was RidgeWorth three almost of capabilities,

was million into they’re and you So accelerate product ETF now many we when ability which This a that many, solutions, as about we may the And in happy the business. capability within strategy. elements. division as really expansion with more our then $XX brought to remember, product is $X.X was differentiated portable which related Rampart investment effectively we're yield/optional was billion, our that. ETF enter made with we and And how where do

adding the set opportunity can at looked can we grow. of each good really great; be with in product the managers synergies either capability, core really if that is will or of those filter coupled gravy; that getting but our through So and are expanding great a what’s they transaction synergies; are

continuum going whole we fit I’ve the of forward. for that have those. and things through those to continue said, of we one And again So look we’ll look done each as

Unidentified Analyst

product picking that’s about If I question, here you’re sneak portfolio that another you there. okay. the that up follow if up that’s have it’s So capability can just international

on Just may on with just at the affiliate probably how of interest, and about other thinking affiliates curious and of from how thinking some aligning alignment interest you're this defer you're that that. just all

George Aylward

with maintaining I and significant that overall business. generally interest profitability, is the grow mean, how it an don’t the judged its defers of of And terms we're interest us value. think materially. in in grow they it which to alignment have elevated interest, minority I of to by alignment

interest So really with affiliates or profit of revenue based, other profit have our we are you contribution really the on all alignment thought models that’s which were consistent But I said, where think and based. you our were miles before great not. a I there remember that’s more can’t what

really provide dollar utilized of So by to for incentive of Virtus, compensation is the that for affiliate. contributed affiliates a every profit is the that percentage the to shareholders of to

affiliates to So as said, then shareholders. do equity structures. thought certain in And that for sight great as line from the that further generally components those into we’ve align of always clear was we’ve use our we

structure have. very shareholders and we affiliates those the from to important alignment us, about pretty Virtus those professionals and good feel investment for we So is

Operator

And the with next from of line our question Jefferies. comes Surinder Thind

open. line Your now is

Surinder Thind

about how following wanted of just about up the just the use to earlier two capital or it. and question thinking on you’re things. one Just I clarify

with about correctly did times I maximum to Was at that if hear EBITDA? after to, the comfortable the going is, First debt to that you’re two And the ratio leverage point? is level this that correct? acquisition, so, approach SGA net that’s will

Mike Angerthal

basis comfortable we to specific No, to just we’d of transaction. debt we think level I $XXX capacity EBITDA that think a of gave of alluding be don’t clarify, level would just pro of post the leverage. be on that’s in a were And would the what to I gross be would with that type credit forma it, million result assuming on that the utilization facility

Surinder Thind

that talked some would with, around the goes to the much be to in that -- able maintaining flexibility. to you firm approach wanted Can you while -- leverage ratio what be you up, ability being comfortable it is obviously color ways provide your about the or more sense where levels grow you your flexible situational in as the

leverage decreases. the to ability your as up, inorganically obviously So grow goes ratio

debt does share become at so of And and other needs over pay point down priority its repurchases a whether stuff? what

George Aylward

RidgeWorth of a the We transaction. of and lot around the we look as we about to at comments that of time back some think factors the refer made

more of grown levels leverage. the had. that influence. the we’ve bit SGA of presume equity exposure developed it little retail risk and And leverage, utilize with about comfortable profile and and because we’ve And another most and as think got we In part, of we diversified manager with addition business, the leverage. of conservatively as now expand run of and different into business the will very it’s existence, that did always certain the I So diversified our our a strategy, of we not for really was size

create think we how is we addressing we our What and is business that then large the was business, how about best we which the our to for with value what I simple. diverse is So couple is shareholders. how job And was very can manage earlier, leverage. the

so we primarily opportunities do in very And the maintain that to resources terms So aware, have investments, comfortable balance do flexibility we as of are the as at same on sheet, keeping as you like now in other of within while significant that CLO. range time create terms in of our capital, our well to seed other considering we make leverage evaluating sure value.

that a different of do we for sheet we So opportunities. evaluate -- have we types balance

So Mike?

Mike Angerthal

just I'll downs, point reiterate cash the flow of the facility debt sweep. And requirement on pay the the excess

So downs. be those a pay certainly that debt will priority service and the to

Surinder Thind

that theme far, themes one other through generally are around are so spend terms about continue are -- now where I invest to guys we to centralized question the expense time basically behind it's that's things outlook then the little operates than that because than about Things earnings should are season, past, mean, And on what the the that in to more you the this of obviously was prior. everybody what of in and the but the say everybody and maybe about that to analyst think we to changing thinking that was to than is a is autonomously? no, in on we’re been their community is is higher that given going And model been risks kind touch invest. call. base everybody then bit I and the a into trying we've to would about like talked if in think touched earnings I are elevate going approach terms expenses. just they guys of most your investment. bit doing. And given little you force thinking emerging of where gone to about some How of yes. we about of requirements, how How guys industry as been a guess reported where need so still years should really the this there more thus higher more guys we've is begin kind thing We've that perhaps fall autonomous you the versus think as have just being

George Aylward

bunch a So whole let of things. me clarify

elements of their for autonomy each the So of different variety we benefits provided a client affiliates assets right. of of managing our business, cost do and as whole running scale their

and outsource So whether it’s office. that back trading it's systems are middle whether multi-affiliate,

money, managing clients cost of scale structure. and of combined to in about from operate affiliate services managing do the don’t money and tremendously servicing benefitting the the language many they So we’re terms are confuse of using I'm that they how contracts autonomously and able multi business in of not the within

to so cost that's no if So are that -- and duplication somehow think really of about there us. correct is cost thinking of not affiliate you’re a way

Surinder Thind

was to the of of a And question lot was capabilities, technology there guys where all more is a also or the office some you those to -- to investment I'm it's data obviously to the in kinds more your within of spend much decision the I it's making take lot is incremental be of of that you need around part comfortable operations, your do of the big go maybe to boutique is new run wasn’t But was the Vertus back terms the of guess that. becoming just whether or do systems core things a tends processes so whether is the one sources my enhancing care model was sense obviously of It capabilities, part things. through that trying of the it's of that of that advantages incremental component. trying some these, technical about enhance it the -- -- -- as in there where or occurring

George Aylward

What down. talking not will about costs are us of say is less. industry all add to more And I structures, distribution on types AI up that point, think wide that cost it's and going are data you’re either with I'll if will going to costs processes whether its not with or capabilities, whether cost all money investment of those things your enhancements what's to

the you’re have of to example, so cost amongst the where share adding helpful, we work distribution for retail, affiliates the having in think for service multi-boutiques again add area process, would of have But we other do relationship that’s us as really affiliate utilize appropriate, align their things doesn’t retail we them have if that capabilities, I in of it for. to in a to focused source single retail them look new as easier a to having very to is again, our investment on make affiliates we support do in But mean for a can we’ll by So that. they lot have it a a on retail may good and invest particularly by multiple side, we where shared that, to those those areas referring having have the we tell place. anything course, to provider really

Operator

Mr. our today. conference session for concludes to over And I'd this to the Aylward. back like question-and-answer turn

George Aylward

questions. Thank I And you call if us and for Great. any to thank joining to today very you us everyone other further we want encourage certainly you have much.

Operator

participating. for you That today's concludes Thank conference.

day. You may now wonderful disconnect. a Everyone, have

Virtus Investment Partners (VRTS) 2 Feb 182017 Q4 Earnings call transcript