VRTS - Earnings call transcript Q4 2021 | Virtus Investment Partners, Inc.

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Operator

Good morning. My name is Gigi 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 website, www.virtus.com. This call is being recorded and will be available for replay on the Virtus website. participants a all mode. time, this are listen-only in At a there and time. After remarks, be question-and-answer that the speaker’s at will period follow instructions will will Sean your conference turn I host, now the Rourke. to

Sean Rourke

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

Financial Aylward, today and CEO, Chief are Angerthal, George President Officer. speakers Our Michael and

Following period. their prepared have we Q&A a remarks, will

those in on disclosures may page of we forth within begin XXXX. and cause known from news the Before discussed release such subject SEC factors our actual discussed Securities today's call note presentation. And slide materially those and this and the Private are the matters of risks to limited contain two in Certain Reform set the results uncertainties, please unknown the in uncertainties statements Act discussed and These Litigation including filings. as statements. meaning risks on of but differ may to to not forward-looking

results addition basis, non-GAAP certain use our a to on evaluate In we measures financial GAAP results. presented to

Reconciliations in substitutes with Non-GAAP be available our today's in measures financial should which financial the and measures supplement read the Non-GAAP these website. Our are results on measures financial GAAP and GAAP for are included financial not are results. and of GAAP conjunction applicable news release

to George. Now I over to George? call like would the turn

George Aylward

positioned market the may to Good and well results what XXXX. more then accomplishments be Sean. provide significant morning, will Mike today in the and with year, navigate a the we We're past financial you, Thank morning of I strategic pleased challenging which of detail. an this environment us start with everyone. reported overview will

the resources new management nearly credit enhance and cash business transactions, year, at significantly our cash to in management more debt share up on capital return the million, nearly the Over the transactions, flexibility with capabilities. transactions of flow, These strategic executed through per providing multi-asset cash affiliate. year consecutive meaningful share, doubling a of in return and under and that and a is January second the XX% to meaningfully increase positive dividend, which and and and to strategies. organic with continue to were $XXX increased Partners our year, balance also scale shareholders. than growth position, AllianzGI our finalized as And and Harbor operating our a by assets differentiated of include talented profitability existing which increased delivered highest excited earnings capital markets flow generated to in first, invest breadth we The distribution have ongoing assets net We increased levels sheet meaningfully strategies for three higher billion investment welcome past billion strategic EBITDA team $XX.X generation. Capital. will under Westchester differentiated Investment increased Stone ended highly emerging complementary of and we're And including repurchases $XX and including in and

our of separate operating our investment strong the margin, repurchases. we positive specifically, increase as of including return financial of flows highest performance, For continued strong including fourth net quarter, capital, operating continued a level adjusted, institutional, and very in delivered XX% share level ETFs, per share earnings retail and and in results, accounts,

by ongoing break and open-end accounts, which Westchester categories. Net management these retail billion Xst. was By growth September organic mandates XXth assets the ETFs positive with results, then both with at of for $XXX.X affiliates retail under with separate the positive addition flows were Sales and from for trends consecutive momentum from new flow closed were net institutional emerging inflows consecutive flows quarter, market with even were due up market as of sequentially total review Capital, a open-end up existing XX% outflows. consecutive due increased largely in in continued generated October and domestic from were and of a and on net performance $X.X for accounts. positive offset and fifth positive from generated outflows product XX% And multiple flows separate quarter essentially and negative, to growth Institutional fund $X.X and strategies. to organic billion, ETFs Turning equity accounts the traction net XXth sixth all product, net consistent the quarter. industry to net growth flows growth rate. billion

saw the In and In ETFs. continue accounts, open-end strategies quarter flows strategies accelerated. have bank we a net and equity domestic funds, outflow in seeing alternatives inflows be into positive including continued terms to trends separate still positive of institutional international we're loans and fourth flows net in the January, flows where retail

and as the income financial Operating X% increased related reflected Earnings benefits to adjusted with the expense our XX.X% of X% $XXX quarter and Our sequentially to increased structure. the of was for sequentially share variable and from XX the our $XX.XX, results AUM per revenues. million adjusted margin higher a prior primarily by growth the quarter, percentage reported to prior as up points relatively due highest nearly consistent year level period.

from quarter. approximately quarter buybacks XX,XXX repurchasing now of million, for we in to million during increased up the $XX the the stock $XX Turning Capital, shares level prior

sheet a continue position Our With to call flow. quarter in over remains cash to we net I'll as turn Mike. the balance ended that, we the Mike. and cash significant generate strong

Mike Angerthal

slide of under X, were from from $XXX.X management. up our X% of billion market sequential increase Thank under reflected$X.X XXst, $XXX.X management you, XXth. billion George. Westchester The at September And results billion $X.X everyone. and assets with good billion At December Capital. assets morning performance on assets Starting

by approximately respectively. retail Assets and XX% XX%, representing funds, accounts, type product open-end with and be of continued diversified to separate XX%, institutional, AUM

addition increased international, alternatives that of and included January domestic which of AUM income AUM of in of XX% XX% and the XX% In X, of compared forma $XXX represented December XX% total equity basis On institutional strategies The quarter. terms Capital asset with X.X% fixed in on X.X% in respectively with Stone XX% equity assets Westchester specialty. to assets or prior from and classes, long-term of pro XXst. billion XX% in a accounts at including in XX% - closed Harbor, global,

six $X performance funds that of funds. managers. We set rated had At AUM ago, December assets representing XX with stars or funds year different continued from or in a diverse fund relative five to or stars were billion nine or four up a were five and XX% from more generate strong of strategies XXst, across investment XX% four-, strategies. rated five-star We three-, of had approximately four

In addition performance. to fund strong

on institutional groups a five of and the of retail As basis. December XX% assets their Also benchmarks same separate were basis. and their five-year of outperforming median XX, on of assets performance assets XX% their exceeding institutional XX% beating XX% were retail over And institutional the were three-year XX% assets separate years. of assets of account peer account benchmarks of

fifth accounts, Slide by X, flows retail break-even from net separate offset Reviewing the essentially by retail product separate asset to net all were in were and that Net flows flows. accounts, net flows ETFs outflows Turning rate positive XX%. positive open-end annualized were multiple for funds. organic institutional, mandates generated flows. $X.X quarter consecutive as of net billion again, affiliates. core billion with growth ETFs flows by at Institutional from equity an billion quarter, of driven for $X.X had $X.X were of domestic benefiting net the positive

retail fund and Total net billion up XX% $X.X to billion, sales in fund separate net sales Retail sales $X.X consistent to particular SMID-cap. income increased the which alternatives sales from By-product contributed strategies. flows XX% For with equity strength largely increased positive sales were funds class $X.X with domestic fixed flows. equity, $X.X all sequentially global by trends and billion equity, Bank is strategies. up but income driven XX% to outflows open-end were fixed equity were industry alternative markets strong specialty, asset particularly negative Institutional to equity largely account products, billion for growth channel. $X.X and in domestic global equity, were continued billion, of to XX%. while XX% emerging strategies increased billion. due due international each $X.X loan multi-asset generate also By

Slide growth million The impact million assets. were $X.X to addition XX.X growth in of or rate. points basis fee strategies, of respect and from up X.X reflecting largely fee funds, Westchester The assets adjusted quarter, the third higher X% rate sequentially, the from and of average XX.X reflected $X.X X, quarter a With as Capital. to higher unchanged market-driven management equity Turning in the reflecting fees million. increased points the the Capital average fee quarter increased prior rate in of basis open-end rate Westchester sequentially. X% to the of $XX.X relatively million of $XXX.X Performance in the average investment fees level fee XX.X

trend addition incentive primarily of as ahead XX basis sequentially, rate Capital. due all sales-based to takes institutional expenses million, and X% in Stone employment anticipate compensation, to higher employment at the a expenses. in team points, range shows we primarily of as increased XX products, as the XX Westchester the assets. Total which for $XX adjusted five-quarter variable Harbor's into addition Looking account Slide would profit of well fee of the the

the the percentage expenses essentially of quarter. employment as revenues, a level prior XX.X%, As were same

and of is be we XX% subject variability adjusted a which XXXX, believe on would reasonable markets range to employment sales. for ahead for based Looking expenses XX% as to revenues,

the are For modeling employment which this include first-quarter will range. not included purposes expenses seasonal in

COVID XX% operating travel $XX.X back well addition Turning Capital in pre adjusted continued - were related of million million. expenses basis, $XX.X though in including up increase levels. XX, sequential $X.X business increase on the of yet to the million from expenses, growth Slide as as The a not reflected other to sequential a and Westchester as

points leveragability revenues, the XX period, sequentially. percentage down were basis the a prior points business. expenses up the As were XXX X.X%, of reflecting From however, basis year other they operating of

and range travel and expect the forward, and related expenses million infrastructure investments reflecting operating we uncertain. in $XX other in $XX addition expenses, to million a Stone our our of of which estimate quarter, Select Harbor. technology still of per are Looking

XX% the business, our points sequentially, in the keep And the in adjusted or management. increased $X.XX adjusted due from Directors increased strategic second in to revenues percentage the compared of Board in Slide Operating sequentially, to in increased by operating quarter. average annual X% Net from For quarter. under increase as share $XX.XX modeling the as significant highly income X% of earnings. or higher in operating quarter. margin to due illustrates million Compared higher income $X.X including adjusted diluted of with transactions. of XX.X% XX.X% prior-year third in per due X.X accretive as XX.X% The equity as assets occur year, growth XX purposes, the increased with trend grants revenues. million prior $XXX.X mind income the adjusted that

losses of interest in Regarding share CLO million. results, trend the from both of the $X.XX in quarter. shows And XX the at $X.XX Working $X.XX a A XXst third reflecting and increase for net items. values of our balance included GAAP was and realized liability reset per December of income $X.XX down on the items. select expense per sequentially $XXX sheet minority investments. Slide share of decreased $X.XX fair capital the liquidity participation million $XXX and reduction revenue transaction, unrealized capital liability. following the and from XX% the

the was $XXX times, December times $XXX payments on and times Westchester significant XXst, As for in return XXth due million operating of the level at million flow. XX% vary AUM revenues. quarterly and generated offset above December EBITDA debt XX-month gross sequentially, the at which Westchester changes amount the estimated $XXX EBITDA during Westchester than At from participation a in run-rate quarter, Capital. the to $XXX based Market earn-out cash more in X.X over up approached $XX period. quarter, on XXst. AGI has December AGI revenue growth basis, and over generated consideration September on the increased X.X based at a in million cash up and growth fourth consideration million that capital, by fourth as down X.X meaningfully year X% $XXX Capital and includes and Capital in from Contingent million million This We will was trailing XXXX from AGI prior net XXst, time On to income from quarter. EBITDA basis. business Westchester appreciation flows and of positive

quarter During level XX,XXX shares for million position million. repurchased We in common debt a exceeding prior above million. stock of the with net we $XX fourth cash cash the quarter by the quarter, $XX $XXX of gross ended

first revenue Stone well as include $XX Harbor. annual for million incentives, First and payment for quarter XXXX, closing participation cash payment obligations payment as of the our approximately the

in repurchases, including include stocks our In quarter remain will capital, addition, trading recent priority share return of given which levels. a cash outlays the first

As over let growth as the George? the that, other turn in to With invest well me George. the opportunities of to business. call back

George Aylward

Thank you, Mike.

Gigi, now the will your lines, would take please? We you questions. up open

Operator

Instructions]. [Operator stand Q&A the compile Please by roster. while we

the from comes Piper Sandler. question first of line Mody Our Sumeet from

line is open. Your now

Sumeet Mody

Hey, thanks. Good George. morning, Good morning, Mike.

George Aylward

Morning.

Sumeet Mody

-- year. wanted given of mix this remarks, follow of like kind to the Can George, some bend, on the value first is? with it your of in up and -- can value of it maybe backdrop on you out then beginning some outperform we've to flows? at what had Just prepared remind the impact thus us maybe in seen the versus growth on you or the rotation performance inflation, kind firm-wide your of opportunity commentary of an far this the Do how into view stall the rate strategies increases year? market benchmarks kind think Virtus performs view you environment then secondly, you as an throughout what's what And growth

George Aylward

question. follow-up. can give I'm thoughts going Great you Sure. and Mike some to

look we at opportunity. an think absolutely I as So this

managers in of periods quarter where environments these the on active how of I of of opportunity management you of done teams portfolio prior in the if commented think most that management. XXXX, are perform. as volatility, have how executing value we've their active the sort first that believers recall they management, to we the across-the-board our And demonstrated strategies show

beginning like I is on favor when question. that The growth in managers not going the I are pleased as changing And strategy of offering increase the we're preferences, when then broad they're fourth rates, were a so equity right? are value market see said rate did set, interest that think floating part to things able our out-of-favor, and the whole offerings opportunity as up. again, and flows our So participate investor quarter, which to for to rising multi-affiliate commented that several we accelerated out well things it and have of collection in really we've the it relates have on model those the Mike side. to commented of rates designed that cycles behind Going we are XX% in the think when favor. like fund But I first Mike And been and the quarter. the is

volatility in investor So I of to the anything -- of is we Mike, for us opportunity that? as our markets, managers, sort balance generally look is all for overall, what you as But of to have. the meant markets, offerings allow us at and sort we I active add show navigate the preferences. the well changes to great in to speak the want want think you to a the

Mike Angerthal

basis a of Yeah, the some the pro diversity just diversity in on on overall forma increases and the institutional bit a the portfolio. income. the Stone on adding fixed stats gave I'll add We Harbor

equity assets, maybe our into well Kayne looking probably And that's others. across and NFJ, remainder of and the would is Anderson, value looking but not growth would it, XX% our at less be portfolio, just diverse generally value than are managers, growth I think managers, value of I equity it just solely balanced. and SGA, that. core equity the half, obviously slightly about growth core and the think and

Sumeet Mody

Thanks, Got it. helpful. guys. That's really

far, you year? then that Stone in we're there and Harbor. expect how kind of platform, just you see to from flows a it's know and the to update integrating turning can the what platform us impacts this institutional on Just and only maybe month I performance thus

George Aylward

as excited lot Harbor as commented Stone very agreements we're I have a our complex. into I've having been think we've Harbor the us conversations Stone Well and joining them time previously, Sure. bring reached period actually over to a of with we've to of

as their as them and how they're So to mentioned, of integrating in our point, integrate is make we're been part sort opportunity great affiliates. a your optimize and also what capabilities services on into Virtus, to of that from to done set bring of the also their to has lot to of in But how terms also there of we latter other technology support in part of distribution. side work I've our terms some available

well, think I that the is great incredibly the So as to has that as well due think gone a and I lot a opportunity. of just people basically and as [Indiscernible]

Sumeet Mody

can't you. you're I think I Mike, Hey, here. hear cutting out

Mike Angerthal

so the I clients Stone on, the they've joined us their was that Harbor. permanent to George come certainly now that first strategies this in the to in and finalizing continuing on And the look bringing going it, process I've quarter at they've home their bring and got they're to closing of team we forward think the is forward. -- just

Sumeet Mody

Thank you. just it's new opportunities in asset whether those the And last there or in are on and one up volatility any viewing has just it. front, Got the conversations distribution, opened then the me, early classes from recent expanded year? how through non-correlated the here you M&A

George Aylward

be The mean, last growth this activity I consider. has what what M&A we be necessary about fundamentally the in our That We're terms months we just quite M&A, selective we're of completed. Well, years in robust. we've for the to of part strategy. XX again, we'll that being for at, third continues amount referred to our very been look of of strategy to don't talking seeing I said, many Sure. long-term overall want

either select accretion evaluate will through to but well strategic that general expand there of terms the access be additions business to So to is of the of we markets, find increasing and flow and capabilities as our cash to extent to our will what as of different scale the value filter offerings, we opportunities, the those, those in shareholders. absolutely the

we environment the So certainly participating conversations continue. We industry the be as M&A it's our think and includes sector active across as the very think will we'll in well. will that board a others

Sumeet Mody

George. Thanks, Mike. thanks, Great,

Mike Angerthal

Thank you.

Operator

Thank you.

next Our Cyprys Stanley. comes question line from of Morgan from Michael the

now is line open. Your

Michael Cyprys

morning, Thanks and George taking question. Michael. good the Hey, for

level sort that of amount color year Virtus to for cash the all on the you dividend the appropriate could generation it sense? how multi-pronged the for was the ago level increase us about can good bit do is here. you of you talk And make today the the versus It of business, spoke what on buybacks, And given in think -- little you Just look on rate like flows at around about time run here? sort a give that guess, could of I when guess modest I what of would are think quarter, the a areas deploying bit a in make -- I payout? or you what areas for or most just looks hoping a ratio, think sorry question to the question. how last quarter. most can So Is much of we this side, sense? that the I spending payout that about M&A and you dividend accelerate products know XX% think maybe distribution can but high the little cash

George Aylward

fine. that's No,

into So two pieces. I'll break them

noted, EBITDA. you've us of our flow So capital, has generation in terms of increased. as cash the for run stat Mike rate the gave on significantly of the

of flow. generation significant So cash

flow capital management of have on as elements that execute the to continue that invest strategy, selectively sense. extent have balance really transactions return because and the currently the side, business and the with level about to as capital to all that growth have, said we've it M&A organic we lower to in ability well they the of always the make future cash on leverage shareholders, we our we we is As of evaluate

So those. will the we of quarter. generally continue of the to in We've given all any in said those balancing we balance past, evaluate opportunities

So reflective our opportunities a level as of was views other our buybacks stock of last and uptick quarter our we higher to did well stock. as that

that of continue that referred actually available to our as things to looking as into us to we in opportunities We're think business, opportunities well businesses. about for the are cash to excited continue how our the institutional Mike decision. invest will flow we the grow trade to business. are, evaluate growth in those all And our like at great the we I business our grow non-US

the So year. side, this dividend I meaningful continue increase we very we'll to a had balance, think on

So of years in increases we've consecutive had dividend. multiple our

that been think we that do our shareholders. for So the has to thing right

I'll go and to go M&A. continue the evaluate M&A to as on I then with Mike we'll then So back those can capital opportunities. the finish And

I people, busy M&A a of lot considering is opportunities. like everyone think

we've We are we it are complementary sort makes that in or look So of of activities what in the of last in to things different context product sense XX at for as types we the capability partaking one differentiated. those XX look us that additive the over at have we years. done

we're along So lines. Westchester right those installing obviously, Harbor,

to we be what have. So continue which currently look complementary would for we with those redundant not and things

I less area, are things asset that correlated liquid think in less classes. So also about that and

add to which the will in capital want management growth you And the use the institutional generate all either do that organically we're always at set, to do of that. of I've opportunity to we view generally strategies, business. that example that also an shareholders that more things our again, do to do strategy? another less was Westchester of will opportunity we invest view future Mike, the we'd great we you area look commented things what liquid footprint think being We are opportunity at as to grow the less client time increase that comment we that us And business scale us to types correlated then like would flow expand of allowing but us We would to types that have. which capabilities at predominantly at. to resources, we I of our can return get of strategies. cash for an based So opportunities than into for be those through looking think to an or look U.S. on

Mike Angerthal

of into capital remain capital return the we're levels take approaches. Yeah. I components when repurchases recent strategies on the of of share we And absolute both on we at first basis a touched stock of consideration in the the basis and focused given our in us, the that we we're and upcoming. quarter notably, key cognizant priority he a evaluate a quarter the that'll that do significant on something that. trading And an think on and management. of factors the lot as relative and of will balanced that for meaningful with And then looking well business payments and be in we investing other as And certainly we do have first stock

first closing noted, the I As annual payment. participation the and Stone for payment revenue there's Harbor

All will occurring incentive. first with be along of the in quarter those annual

meaningful but look we it component priority of and share think that returning closely balancing of an repurchases. that's we're So to We'll important shareholders. in at capital

Michael Cyprys

could Great. efficiency. expense a Thanks maybe I so follow-up question much. if just on And

have right, think operating I positive for XXXX I fifth consecutive managers if many listed don't that is other what leverage have money achieved. I the delivered guys which year, in You think

ability your give come XXXX you accomplishment maybe flex while And leverage? rate with deliver in volatility just others markets about could down industry. operating a how struggle to So think as market a positive us you maybe a in you're Westchester with could philosophy talk Stone expense I bit, And deals and alter to run the just on positive that have operating that you be that generate the the are that base. congratulations new able sense does to able might what to perhaps if how guess of little your about and into Harbor, leverage we extent bit the and

George Aylward

can give I'll us Sure. Mike that. add and to then Well, thoughts some

think the that have are capture demonstrate margin. we on basis helpful of for able the the been to been that. that markets expansion I that have we Again, incremental pleased leveragability and

history past the some particular, our you in of the at done couple transactions been see that we've there. years the the And over higher helpful been sales think I kind as nature of have in rate. fee well of generally of as

some has been of in increased. our So rate fee to actually peers it's generally countercyclical that our

and expense percentage again, variable go think implications your there. we side, if generally, maintain a point, have Our on base. generally of to a and particularly we I very revenue goes down, to be compensation, in there base, particularly But flexible that try high markets But variable nature. expense the will is compensation down

in continue and we over at bit incremental or more us again, margins a quarters, sort previously, that challenge it we to to to few market a hope So the the little pull the make assist next spoke of Mike. will of

Mike Angerthal

into think the we accretive profitability XX%. provided that alluded of took if are do the be that or transactions year-over-year the meaningfully we've margin, reiterate historical I a has think in key contributor. key We're that's the with and drivers do than that and adding XX% fourth were a point outlook about the to top been whether markets certainly those vary strategic here. of will George's to increase margins maintain operating line on revenue period that us we and factors -- the some touched he bit incremental variability really above end of driver points structure, Yeah, higher impacted I X,XXX-basis nearly different that of be the enabled contribution on and to shift being able the that to that but XX% little leverage to the And quarter. just I I which And, also incremental was the year at fee the of by talked for it were over full range based we rate has cost a our a of margin think more we employment the consideration on expenses the the think sales key metrics,

Michael Cyprys

sort the guidance way And side, You XX%, changes appreciation? of are guide expense any and of follow-up expense kind your color you out said Or etc? range, even equity would levels market lower what's end point another want expense in your or range. markets just of a how baked terms in of down sort if of to what market know, just sire out to markets the to on shift the of on flex broader or in would

Mike Angerthal

capture Yeah, markets, of January sorts. think was that recovery then down QX reflective but of a we a and I range tried in is markets a in the to current Certainly draw markets. there

market and we'll on volatile, range time, employment in So to current as obviously we tried We'll the these as volatile to to that that the shift tried ranges appropriate. be markets those environments side. continue especially we capture update might we update capture over you, but If provided, are market you the environment.

As include the seasonal a reminder, quarter will first items. the

this in capture extend So, continues, modeling well. But you're we'll that appropriate. as update you variability to as the

Michael Cyprys

so Thanks Great. much.

Operator

This concludes I our Mr. question-and-answer would over to you. the Aylward. conference like turn Thank session. back to

George Aylward

thank Thank you to the today you. joining And give as I for if very call you want on other always, us. a us you And or we call again, to the Well, encourage thank everyone Great. questions. have any send message much.

Operator

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

may You disconnect. now

Virtus Investment Partners (VRTS) 4 Feb 222021 Q4 Earnings call transcript