Virtus Investment Partners Announces Financial Results for the Fourth Quarter 2015

- Earnings per Diluted Share, as Adjusted, of $1.37 in Fourth Quarter Includes ($0.33) Impact from Variable Incentive Fee, Compared with $2.68 in Prior-Year Quarter; Earnings Per Share of $0.76 Includes ($0.97) of Unrealized Losses on Investments

- Operating Income, as Adjusted, of $19.4 Million in Fourth Quarter Compared with $39.2 Million in Prior-Year Quarter; Operating Income of $16.5 Million

- Total Sales of $3.2 Billion in Fourth Quarter Compared with $3.4 Billion in Prior-Year Quarter; Net Flows of ($1.1) Billion in Fourth Quarter Compared with ($2.2) Billion in Prior-Year Quarter

- Assets Under Management of $47.4 Billion at December 31, 2015 Compared with $56.7 Billion at December 31, 2014

- Stock Repurchases Totaling $35.0 Million, Highest Quarterly Level; Ending Shares Outstanding Declined 6.4 Percent from December 31, 2014

Jan 29, 2016, 07:30 ET from Virtus Investment Partners, Inc.

HARTFORD, Conn., Jan. 29, 2016 /PRNewswire/ -- Virtus Investment Partners, Inc. (NASDAQ: VRTS), which operates a multi-manager asset management business, today reported financial results for the three months ended December 31, 2015.

Management Commentary

"The market environment continued to present challenges for asset managers as concerns about global growth as well as other factors negatively impacted investor confidence and behavior," said George R. Aylward, president and chief executive officer.

"Despite the challenging markets, total sales improved 24 percent sequentially, led by a 36 percent increase in mutual fund sales as well as higher sales in separately managed accounts and institutional. Net flows improved to ($1.1) billion from ($1.6) billion, representing our best quarter since third quarter 2014. Flows for the full year, excluding the former AlphaSector products, were positive $0.4 billion.

"Operating income, as adjusted, and the related margin were impacted by lower average assets and higher operating expenses that included discrete items, as well as a negative $4.6 million variable incentive fee. Excluding the negative variable incentive fee, our operating margin, as adjusted, remained strong at 34 percent.

"Our share repurchases were at the highest quarterly level at $35.0 million, which continued our commitment of returning capital to shareholders and contributed to a 6.4 percent reduction in our ending shares outstanding from December 31, 2014. Going forward we will evaluate capital return opportunities while continuing to invest in the business, which remains a priority.

"We believe that our strong balance sheet, multi-manager approach and differentiated product offerings, including our risk managed and quality-oriented strategies, present opportunities during current market conditions."

Financial Highlights (Unaudited)

(Dollars in millions, except per share data or as noted)

Three Months Ended

Three

Months

Ended

Twelve Months Ended

12/31/2015

12/31/2014

Change

9/30/2015

Change

12/31/2015

12/31/2014

Change

Non-GAAP Financial Measures (1)

Revenues, as adjusted

$           66.7

$           85.2

(22)%

$           71.1

(6)%

$         295.0

$         337.2

(13)%

Operating expenses, as adjusted

$           47.3

$           46.0

3%

$           45.8

3%

$         186.7

$         186.7

-

Operating income, as adjusted

$           19.4

$           39.2

(51)%

$           25.3

(23)%

$         108.3

$         150.5

(28)%

Operating margin, as adjusted

29.1%

46.0%

35.6%

36.7%

44.6%

Net income attributable to common stockholders, as adjusted

$           11.9

$           24.7

(52)%

$           15.5

(23)%

$           67.8

$           93.9

(28)%

Earnings per share - diluted, as adjusted

$           1.37

$           2.68

(49)%

$           1.74

(21)%

$           7.57

$         10.10

(25)%

U.S. GAAP Financial Measures

Revenues

$           86.1

$         112.1

(23)%

$           92.4

(7)%

$         382.0

$         450.6

(15)%

Operating expenses

$           69.6

$           75.5

(8)%

$           69.3

1%

$         301.6

$         319.9

(6)%

Operating income

$           16.5

$           36.7

(55)%

$           23.1

(29)%

$           80.4

$         130.7

(39)%

Operating margin

19.2%

32.7%

25.0%

21.0%

29.0%

Net income (loss) attributable to common stockholders

$             6.6

$           18.9

(65)%

$           (0.6)

N/M

$           35.1

$           97.7

(64)%

Earnings (loss) per share - diluted

$           0.76

$           2.05

(63)%

$         (0.07)

N/M

$           3.92

$         10.51

(63)%

Assets Under Management and Flows (in billions)

Ending Assets Under Management

$           47.4

$           56.7

(16)%

$           47.9

(1)%

$           47.4

$           56.7

(16)%

Average Assets Under Management (2)

$           48.5

$           58.3

(17)%

$           50.6

(4)%

$           52.3

$           58.0

(10)%

Gross Sales

$             3.2

$             3.4

(8)%

$             2.5

24%

$           12.7

$           15.2

(17)%

Net Flows

$           (1.1)

$           (2.2)

48%

$           (1.6)

31%

$           (6.3)

$           (1.2)

(425)%

(1) See the information on pages 11 through 15 for a reconciliation to their most directly comparable U.S. GAAP measures and the notes beginning on page 16 for other

important disclosures.

(2) Represents assets under management excluding money market funds that were liquidated in October 2014

N/M - Not Meaningful

Asset Flows and Assets Under Management

Assets under management were $47.4 billion at December 31, 2015 compared with $56.7 billion at December 31, 2014 and $47.9 billion at September 30, 2015. The change from the prior year is attributable to net flows of ($6.3) billion and market depreciation of ($2.2) billion. The sequential change reflects ($1.1) billion of net flows, which more than offset $0.9 billion of market appreciation.

Total sales were $3.2 billion in the fourth quarter compared with $3.4 billion in the prior-year quarter and $2.5 billion in the sequential quarter. Net flows improved to ($1.1) billion in the fourth quarter from ($2.2) billion in the prior-year quarter and ($1.6) billion in the sequential quarter. Net outflows in the quarter were primarily attributable to open-end mutual funds, which offset positive flows in institutional and ETFs.

Open-end mutual fund sales were $2.5 billion in the fourth quarter compared with $2.9 billion in the prior-year quarter and $1.9 billion in the sequential quarter. The increase from the prior quarter was primarily due to higher sales of international equity and fixed income strategies. Mutual fund net flows improved to ($1.2) billion in the fourth quarter from ($2.2) billion in the prior-year quarter and ($1.9) billion in the sequential quarter, reflecting an improvement in flows in the former AlphaSector funds. Excluding the former AlphaSector funds, mutual fund net flows improved to ($0.5) billion from ($0.9) billion in the sequential quarter.

ETF sales were $57.7 million in the fourth quarter compared with $217.7 million in the sequential quarter that included the introduction of an affiliate managed fund. For the respective periods, ETF net flows were $34.7 million compared with $203.9 million.

Institutional sales were $226.6 million in the fourth quarter compared with $309.9 million in the prior-year quarter and $199.5 million in the sequential quarter. Net flows were positive for the fifth consecutive quarter at $45.3 million compared with $177.8 million in the prior-year quarter and $89.2 million in the sequential quarter.

Earnings Summary

Non-GAAP Results

Management believes that a series of non-GAAP financial measures most accurately 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. Quarterly and annual reconciliations of the most comparable U.S. GAAP measure to each non-GAAP measure can be found on pages 11 through 15 of this earnings release.

Revenues, as Adjusted

Total revenues, as adjusted, were $66.7 million in the fourth quarter compared with $85.2 million in the prior-year quarter and $71.1 million in the sequential quarter. The decline from the prior periods reflects lower investment management and administration and transfer agent fees.

Investment management fees, as adjusted, were $60.9 million in the fourth quarter compared with $75.9 million in the prior-year quarter and $65.2 million in the sequential quarter. Average assets under management were $48.5 billion in the fourth quarter compared with $58.3 billion in the prior-year quarter and $50.6 billion in the sequential quarter. The average fee rate in the quarter decreased to 48.4 basis points from 51.5 basis points in the prior-year quarter and 49.4 basis points in the sequential quarter. The average fee rate in the fourth and third quarters each included the impact of a negative $4.6 million variable incentive fee; excluding that fee the open-end fund fee rate for the fourth and third quarters would have been 52.1 basis points and 53.1 basis points, respectively.

Administration and transfer agent fees, as adjusted, were $11.1 million in the fourth quarter compared with $14.3 million in the prior-year quarter and $11.7 million in the sequential quarter. The decrease from the prior periods reflects the decline in average open-end fund assets under management.

Operating Expenses, as Adjusted

Total operating expenses, as adjusted, were $47.3 million in the fourth quarter compared with $46.0 million in the prior-year quarter and $45.7 million in the sequential quarter. The increase from prior periods reflects higher employment expenses, as adjusted, and other operating expenses, as adjusted.

Employment expenses, as adjusted, were $34.4 million in the fourth quarter compared with $34.1 million in the prior-year quarter and $33.5 million in the sequential quarter. The increase over the sequential quarter includes higher sales-based compensation due to higher sales and incremental costs associated with additional resources to support quantitative strategies.

Other operating expenses, as adjusted, were $12.0 million in the fourth quarter compared with $11.2 million in the prior-year quarter and $11.3 million in the sequential quarter. The current quarter includes $0.8 million of discrete professional fees and fund-related expenses.

Operating Income, as Adjusted, and Related Margin

Operating income, as adjusted, was $19.4 million for the fourth quarter compared with $39.2 million in the prior-year quarter and $25.3 million in the sequential quarter. The related margin was 29 percent compared with 46 percent and 36 percent for the respective prior periods, reflecting lower revenues, as adjusted. Excluding the negative impact of the variable incentive fee, fourth quarter operating income, as adjusted, and related margin would have been $24.0 million and 34 percent, compared with $29.9 million and 40 percent in the sequential quarter.

Net Income Attributable to Common Stockholders, as Adjusted

Net income attributable to common stockholders, as adjusted, was $11.9 million, or $1.37 per diluted share, compared with $24.7 million or $2.68 per share in the prior-year quarter and $15.5 million or $1.74 per share in the sequential quarter. Current and prior quarter adjusted earnings per share included ($0.33) and ($0.32) related to the variable incentive fee. Excluding the impact of that fee, current and prior quarter adjusted earnings per share would have been $1.70 and $2.06, respectively.

Effective Tax Rate, as Adjusted

The effective tax rate, as adjusted, was 39 percent for the fourth quarter compared with 37 percent in the prior-year quarter and 38 percent in the sequential quarter.

GAAP Results

Total revenues were $86.1 million in the fourth quarter compared with $112.1 million in the prior-year quarter and $92.4 million in the sequential quarter due to lower average assets and fee rates.

Operating expenses were $69.6 million in the fourth quarter compared with $75.5 million in the prior-year quarter and $69.3 million in the sequential quarter. Operating expenses decreased from the prior-year quarter due to lower distribution and other asset-based expenses.

In the fourth quarter, the company reported net income attributable to common stockholders of $6.6 million, or $0.76 per fully diluted common share, that includes ($8.5) million, or ($0.97) per share, of unrealized losses on investments. This compares with net income of $18.9 million, or $2.05 per share, in the prior-year quarter that included ($8.4) million, or ($0.91) per share, of unrealized losses. In the sequential quarter, the company reported a net loss of ($0.6) million, or ($0.07) per share, that included ($16.6), million or ($1.89) per share, of unrealized losses.

The effective fourth quarter tax rate was 60 percent compared with 45 percent in the prior-year quarter and 162 percent in the sequential quarter. The tax rates for the respective periods were impacted by valuation allowances of $2.5 million, $2.4 million and $6.2 million related to the unrealized loss position of the company's marketable securities portfolio.

Investment Capabilities and Products

The Virtus DFA Target Date Retirement Income funds1, managed by Dimensional Fund Advisors, were introduced in January. The funds seek to help individuals invest toward future retirement income and support income needs in retirement with a focus on managing risks, including inflation and changes in interest rates.

Balance Sheet and Liquidity

Cash and investments were $421.5 million at December 31, 2015 compared with $469.5 million at December 31, 2014 and $444.7 million at September 30, 2015. The decrease from prior periods was primarily due to return of capital to shareholders that offset cash generated. On a per share basis, cash and investments were $50 at December 31, 2015 compared with $52 at December 31, 2014 and $51 at September 30, 2015. At December 31, 2015, the company had no debt outstanding and $75.0 million of unused capacity on its credit facility.

Working capital was $71.8 million at December 31, 2015 compared with $190.6 million at December 31, 2014 and $106.6 million at September 30, 2015. The change from December 31, 2014 reflects return of capital, increased seed activity and an equity investment in an entity created for a potential CLO. The change from September 30, 2015 was primarily due to the highest level of capital return to shareholders and an additional investment of $20.0 million in the potential CLO, bringing the total investment in the CLO entity to $40.0 million.

The company's seed capital investments were $273.7 million at December 31, 2015 compared with $238.2 million at December 31, 2014 and $276.8 million at September 30, 2015. The change from the prior-year quarter reflects $49.2 million of net seed activity partially offset by unrealized mark-to-market adjustments.

In the fourth quarter, the company returned $38.9 million to shareholders, including share repurchases of $35.0 million. As a result of share repurchases, ending shares outstanding decreased to 8.4 million at December 31, 2015, a decline of 6.4 percent from December 31, 2014 and 3.1 percent from September 30, 2015.

Balance Sheet Highlights (Unaudited)

(in millions)

As of

As of

12/31/2015

12/31/2014

Change

9/30/2015

Change

Cash and cash equivalents

$               87.6

$             202.8

(57)%

$             126.5

(31)%

Seed capital investments (1)

273.7

238.2

15%

276.8

(1)%

Investments - other (2)

60.2

28.5

111%

41.4

45%

     Total - cash and investments

$             421.5

$             469.5

(10)%

$             444.7

(5)%

Deferred taxes, net

$               54.1

60.2

(10)%

$               59.7

(9)%

Dividends payable

$                 4.2

$                 4.3

(1)%

$                 4.3

(1)%

Total equity attributable to stockholders

$             509.6

$             563.5

(10)%

$             539.6

(6)%

Working capital (3)

$               71.8

$             190.6

(62)%

$             106.6

(33)%

(1) Represents the company's investments in sponsored investment products including the company's investment in consolidated sponsored investment products (CSIPs), net of non-controlling interests. For the periods ending December 31, 2015, December 31, 2014, and September 30, 2015, net assets of CSIPs represent $343.5 million, $252.3 million, and $338.7 million, of total assets, $15.4 million, $12.6 million, and $29.8 million of total liabilities, and $73.9 million, $23.1 million, and $49.9 million of redeemable noncontrolling interests, respectively

(2) Investments that are not related to the company's seed investments including mutual funds and a potential CLO

(3) Defined as cash and investments plus accounts receivable, net, less seed capital investments, a potential CLO, accrued compensation and benefits, accounts payable and accrued liabilities, and dividends payable

N/M - Not Meaningful

Conference Call

Virtus Investment Partners management will host an investor conference call on Friday, January 29, at 10 a.m. Eastern to discuss these financial results and related matters. The webcast of the call will be available in the Investor Relations section of www.virtus.com or by telephone at 877-930-7765 if calling from within the U.S. or 253-336-7413 if calling from outside the U.S. (Conference ID: 37387004). A replay of the call will be available through March 1 via webcast or by telephone at 855-859-2056 if calling from within the U.S. or 404-537-3406 if calling from outside the U.S. (Conference ID: 37387004). The presentation that will be reviewed as part of the conference call will be available in the Presentations section of www.virtus.com.

About Virtus Investment Partners

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. Virtus offers access to a variety of investment styles across multiple disciplines to meet a wide array of investor needs, and provides products and services through affiliated managers and select subadvisers, each with a distinct investment style, autonomous investment process and individual brand. Its affiliates include Cliffwater Investments, Duff & Phelps Investment Management, Euclid Advisors, Kayne Anderson Rudnick Investment Management, Kleinwort Benson Investors International, Newfleet Asset Management, Rampart Investment Management, Virtus ETF Solutions, and Zweig Advisers. Additional information can be found at www.virtus.com.

 

 

 

U.S. GAAP Consolidated Statements of Operations

(in thousands, except per share data)

Three Months Ended

Three

Months

Ended

Twelve Months Ended

12/31/2015

12/31/2014

Change

9/30/2015

Change

12/31/2015

12/31/2014

Change

Revenues

Investment management fees

$       60,611

$       75,374

(20)%

$                       64,891

(7)%

$     264,865

$     300,663

(12)%

Distribution and service fees

14,246

21,901

(35)%

15,587

(9)%

67,066

91,950

(27)%

Administration and transfer agent fees

11,014

14,197

(22)%

11,614

(5)%

48,247

56,016

(14)%

Other income and fees

244

665

(63)%

283

(14)%

1,799

1,969

(9)%

     Total revenues

86,115

112,137

(23)%

92,375

(7)%

381,977

450,598

(15)%

Operating Expenses

Employment expenses

34,376

34,053

1%

33,504

3%

137,095

139,809

(2)%

Distribution and other asset-based expenses

19,831

27,526

(28)%

21,717

(9)%

89,731

123,665

(27)%

Other operating expenses

12,498

11,579

8%

11,165

12%

63,901

46,531

37%

Other operating expenses of consolidated sponsored investment

products

1,239

664

87%

1,120

11%

4,134

3,038

36%

Restructuring and severance

-

-

-

-

-

-

294

N/M

Depreciation and other amortization

881

723

22%

910

(3)%

3,443

2,763

25%

Amortization expense

784

927

(15)%

837

(6)%

3,295

3,778

(13)%

     Total operating expenses

69,609

75,472

(8)%

69,253

1%

301,599

319,878

(6)%

Operating Income

16,506

36,665

(55)%

23,122

(29)%

80,378

130,720

(39)%

Other Income (Expense)

Realized and unrealized gain (loss) on investments, net

332

(798)

N/M

(2,082)

N/M

(862)

914

N/M

Realized and unrealized (loss) gain on investments of

consolidated sponsored investment products, net

(4,910)

(5,798)

15%

(17,619)

72%

(23,181)

(4,648)

399%

Realized and unrealized loss on investments of consolidated

investment product, net

(2,784)

-

N/M

(721)

286%

(3,505)

-

N/M

Other income, net

75

318

(76)%

141

(47)%

898

891

1%

     Total other (expense), net

(7,287)

(6,278)

(16)%

(20,281)

64%

(26,650)

(2,843)

N/M

Interest Income (Expense)

Interest expense

(141)

(125)

(13)%

(138)

2%

(523)

(537)

3%

Interest and dividend income

355

653

(46)%

324

10%

1,261

1,706

(26)%

Interest and dividend income of investments of consolidated

sponsored investment products

3,184

2,534

26%

2,898

10%

11,504

7,268

58%

Interest income of investments of consolidated investment

product

1,632

-

N/M

41

N/M

1,673

-

N/M

     Total interest income, net

5,030

3,062

64%

3,125

61%

13,915

8,437

65%

Income Before Income Taxes

14,249

33,449

(57)%

5,966

139%

67,643

136,314

(50)%

Income tax expense

8,612

15,038

(43)%

9,669

(11)%

36,972

39,349

(6)%

Net Income (Loss)

5,637

18,411

(69)%

(3,703)

N/M

30,671

96,965

(68)%

Noncontrolling interests

999

468

113%

3,054

(67)%

4,435

735

N/M

Net Income (Loss) Attributable to Common Stockholders

$         6,636

$       18,879

(65)%

$                          (649)

N/M

$       35,106

$       97,700

(64)%

Earnings (Loss) Per Share - Basic

$           0.78

$           2.09

(62)%

$                         (0.07)

N/M

$           3.99

$         10.75

(63)%

Earnings (Loss) Per Share - Diluted

$           0.76

$           2.05

(63)%

$                         (0.07)

N/M

$           3.92

$         10.51

(63)%

Cash Dividends Declared Per Share

$           0.45

$           0.45

-

$                           0.45

-

$           1.80

$           1.35

33%

Weighted Average Shares Outstanding - Basic

8,562

9,021

(5)%

8,775

(2)%

8,797

9,091

(3)%

Weighted Average Shares Outstanding - Diluted

8,726

9,203

(5)%

8,775

(1)%

8,960

9,292

(4)%

N/M - Not Meaningful

 

 

 

Non-GAAP Consolidated Income Statement Information

(in thousands, except per share data)

Three Months Ended

Three

Months

Ended

Twelve Months Ended

12/31/2015

12/31/2014

Change

9/30/2015

Change

12/31/2015

12/31/2014

Change

Revenues, As Adjusted

Investment management fees, as adjusted

$       60,853

$       75,866

(20)%

$                       65,193

(7)%

$     267,168

$     301,059

(11)%

Distribution and service fees, as adjusted

14,272

21,919

(35)%

15,614

(9)%

67,162

91,998

(27)%

Administration and transfer agent fees, as adjusted

11,123

14,275

(22)%

11,714

(5)%

48,617

56,233

(14)%

Other income and fees, as adjusted

244

665

(63)%

283

(14)%

1,799

1,969

(9)%

Distribution and other asset-based expenses, as adjusted

(19,831)

(27,526)

28%

(21,717)

9%

(89,731)

(114,089)

21%

     Total revenues, as adjusted

66,661

85,199

(22)%

71,087

(6)%

295,015

337,170

(13)%

Operating Expenses, As Adjusted

Employment expenses, as adjusted

34,376

34,053

1%

33,504

3%

137,095

138,441

(1)%

Other operating expenses, as adjusted

12,001

11,220

7%

11,335

6%

46,153

45,481

1%

Depreciation and other amortization, as adjusted

881

723

22%

910

(3)%

3,443

2,763

25%

     Total operating expenses, as adjusted

47,258

45,996

3%

45,749

3%

186,691

186,685

-

Operating Income, As Adjusted

19,403

39,203

(51)%

25,338

(23)%

108,324

150,485

(28)%

Other Income (Expense), as adjusted

Realized and unrealized (loss) on investments, net, as adjusted

(202)

(282)

28%

(159)

27%

(21)

(349)

94%

Other income, net, as adjusted

75

318

(76)%

141

(47)%

898

891

1%

     Total other income (expense), net, as adjusted

(127)

36

N/M

(18)

N/M

877

542

62%

Interest Income (Expense), as adjusted

Interest expense, as adjusted

(141)

(125)

(13)%

(138)

2%

(523)

(537)

3%

Interest and dividend income, as adjusted

204

269

(24)%

247

(17)%

845

957

(12)%

     Total interest income, net, as adjusted

63

144

(56)%

109

(42)%

322

420

(23)%

Pre-Tax Income, As Adjusted

19,339

39,383

(51)%

25,429

(24)%

109,523

151,447

(28)%

Income tax expense, as adjusted

7,475

14,738

(49)%

9,787

(24)%

41,889

57,725

(27)%

Net Income, As Adjusted

11,864

24,645

(52)%

15,642

(24)%

67,634

93,722

(28)%

Noncontrolling interests, as adjusted

67

43

54%

(94)

N/M

175

129

36%

Net Income Attributable to Common Stockholders, As Adjusted

$       11,931

$       24,688

(52)%

$                       15,548

(23)%

$       67,809

$       93,851

(28)%

Earnings Per Share - Basic, As Adjusted

$           1.39

$           2.74

(49)%

$                           1.77

(21)%

$           7.71

$         10.32

(25)%

Earnings Per Share - Diluted, As Adjusted

$           1.37

$           2.68

(49)%

$                           1.74

(21)%

$           7.57

$         10.10

(25)%

Weighted Average Shares Outstanding - Basic

8,562

9,021

(5)%

8,775

(2)%

8,797

9,091

(3)%

Weighted Average Shares Outstanding - Diluted

8,726

9,203

(5)%

8,931

(2)%

8,960

9,292

(4)%

N/M - Not Meaningful

 

 

 

Assets Under Management - Product and Asset Class

(in millions)

Three Months Ended

Dec 31, 2015

Sep 30, 2015

Jun 30, 2015

Mar 31, 2015

Dec 31, 2014

By product (period end):

Open-End Funds (1)

$     28,882.1

$     29,716.4

$     33,345.3

$     35,317.8

$     37,514.2

Closed-End Funds

6,222.3

6,349.8

6,901.0

7,288.0

7,581.4

Exchange Traded Funds

340.8

306.9

132.6

-

-

Separately Managed Accounts (2)

6,784.4

6,539.6

6,952.1

7,131.0

6,884.8

Institutional Accounts (2)

5,155.7

5,025.0

5,070.0

5,036.2

4,722.0

Total

$     47,385.3

$     47,937.7

$     52,401.0

$     54,773.0

$     56,702.4

By product (average) (3)

Open-End Funds (1)

$     30,017.6

$     31,627.1

$     34,852.2

$     36,663.7

$     39,550.2

Closed-End Funds

6,378.5

6,714.5

7,256.5

7,435.8

7,551.8

Exchange Traded Funds

343.4

269.9

103.9

-

-

Money Market Funds

-

-

-

-

176.5

Separately Managed Accounts (2)

6,552.7

6,930.9

7,125.3

6,846.3

6,620.4

Institutional Accounts (2)

5,199.9

5,082.4

5,054.8

4,786.7

4,602.6

Total

$     48,492.1

$     50,624.8

$     54,392.7

$     55,732.5

$     58,501.5

By asset class (period end):

Equity

$     28,314.9

$     28,231.0

$     31,908.8

$     33,129.0

$     34,180.7

Fixed Income

15,115.6

15,580.6

16,010.8

16,521.1

16,681.6

Alternatives (4)

3,468.7

3,681.7

4,031.2

4,703.8

5,372.4

Other (5)

486.1

444.4

450.2

419.1

467.7

Total

$     47,385.3

$     47,937.7

$     52,401.0

$     54,773.0

$     56,702.4

Assets Under Management - Average Net Management Fees Earned (6)

(In basis points)

Three Months Ended

Dec 31, 2015

Sep 30, 2015

Jun 30, 2015

Mar 31, 2015

Dec 31, 2014

Open-End Funds (1)

46.0

47.3

49.2

49.9

50.6

Closed-End Funds

66.3

66.9

66.9

66.7

67.2

Exchange Traded Funds

29.1

21.9

8.9

-

-

Separately Managed Accounts (2)

54.4

54.5

53.5

54.2

51.7

Institutional Accounts (2)

34.4

34.2

34.9

36.3

35.2

All Products

48.4

49.4

50.7

51.5

51.5

(1) Includes assets under management of open-end and variable insurance funds 

(2) Includes assets under management related to option strategies

(3) Averages are calculated as follows:

   - Funds - average daily or weekly balances

   - Separately Managed Accounts - prior quarter ending balance or average of month-end balances in quarter

   - Institutional Accounts - average of month-end balances in quarter

(4) Consists of long/short equity, real estate securities, master-limited partnerships, and other

(5) Consists of option strategies

(6) Represents net investment management fees divided by average assets. Net investment management fees are defined as investment management fees, as adjusted, less fees paid to third party service providers for investment management related services.  For the three months ended December 31, 2015, the impact of third party service providers for investment management related services on Open-End Funds and All Products was 2.2 and 1.4 basis points, respectively.

 

 

 

Assets Under Management - Asset Flows by Product

(in millions)

Three Months Ended

Twelve Months Ended

12/31/2015

9/30/2015

6/30/2015

3/31/2015

12/31/2014

12/31/2015

12/31/2014

Open-End Funds (1)

Beginning balance

$    29,716.4

$    33,345.3

$    35,317.8

$    37,514.2

$    41,076.3

$    37,514.2

$    37,679.5

Inflows

2,546.9

1,866.2

2,619.5

3,014.2

2,856.2

10,046.8

12,733.7

Outflows

(3,702.0)

(3,736.0)

(4,174.5)

(5,398.0)

(5,090.2)

(17,010.5)

(13,428.1)

Net Flows

(1,155.1)

(1,869.8)

(1,555.0)

(2,383.8)

(2,234.0)

(6,963.7)

(694.4)

Market performance

425.2

(1,780.9)

(352.9)

197.1

(348.1)

(1,511.5)

1,297.2

Other (2)

(104.4)

21.8

(64.6)

(9.7)

(980.0)

(156.9)

(768.1)

Ending balance

$  28,882.1

$  29,716.4

$  33,345.3

$  35,317.8

$  37,514.2

$  28,882.1

$  37,514.2

Closed-End Funds

Beginning balance

$      6,349.8

$      6,901.0

$      7,288.0

$      7,581.4

$      7,568.1

$      7,581.4

$      6,499.6

Inflows

-

-

-

-

-

-

493.8

Outflows

-

-

-

-

-

-

-

Net Flows

-

-

-

-

-

-

493.8

Market performance

18.7

(380.4)

(281.6)

(168.6)

123.2

(811.9)

799.3

Other (2)

(146.2)

(170.8)

(105.4)

(124.8)

(109.9)

(547.2)

(211.3)

Ending balance

$    6,222.3

$    6,349.8

$    6,901.0

$    7,288.0

$    7,581.4

$    6,222.3

$    7,581.4

Exchange Traded Funds

Beginning balance

$         306.9

$         132.6

$               -

$               -

$               -

$               -

$               -

Inflows

57.7

217.7

67.4

-

-

342.8

-

Outflows

(23.0)

(13.8)

(12.2)

-

-

(49.0)

-

Net Flows

34.7

203.9

55.2

-

-

293.8

-

Market performance

1.6

(29.1)

(0.4)

-

-

(27.9)

-

Other (2)

(2.4)

(0.5)

77.8

-

-

74.9

-

Ending balance

$       340.8

$       306.9

$       132.6

$              -

$              -

$       340.8

$              -

Money Market Funds

Beginning balance

$               -

$               -

$               -

$               -

$      1,231.9

$               -

$      1,556.6

Other (2)

-

-

-

-

(1,231.9)

-

(1,556.6)

Ending balance

$              -

$              -

$              -

$              -

$              -

$              -

$              -

Separately Managed Accounts

Beginning balance

$      6,539.6

$      6,952.1

$      7,131.0

$      6,884.8

$      6,653.0

$      6,884.8

$      7,433.1

Inflows

332.8

263.8

366.8

328.5

263.7

1,291.9

1,333.6

Outflows

(396.6)

(334.5)

(342.2)

(355.3)

(412.5)

(1,428.6)

(2,244.8)

Net Flows

(63.8)

(70.7)

24.6

(26.8)

(148.8)

(136.7)

(911.2)

Market performance

312.0

(353.2)

(65.5)

177.4

397.6

70.7

355.5

Other (2)

(3.4)

11.4

(138.0)

95.6

(17.0)

(34.4)

7.4

Ending balance

$    6,784.4

$    6,539.6

$    6,952.1

$    7,131.0

$    6,884.8

$    6,784.4

$    6,884.8

Institutional Accounts (3)

Beginning balance

$      5,025.0

$      5,070.0

$      5,036.2

$      4,722.0

$      4,348.3

$      4,722.0

$      4,570.8

Inflows

226.6

199.5

214.1

368.1

309.9

1,008.3

650.5

Outflows

(181.3)

(110.3)

(87.3)

(147.2)

(132.1)

(526.1)

(743.0)

Net Flows

45.3

89.2

126.8

220.9

177.8

482.2

(92.5)

Market performance

120.4

(109.9)

(81.9)

117.6

216.8

46.2

389.2

Other (2)

(35.0)

(24.3)

(11.1)

(24.3)

(20.9)

(94.7)

(145.5)

Ending balance

$    5,155.7

$    5,025.0

$    5,070.0

$    5,036.2

$    4,722.0

$    5,155.7

$    4,722.0

Total

Beginning balance

$    47,937.7

$    52,401.0

$    54,773.0

$    56,702.4

$    60,877.6

$    56,702.4

$    57,739.6

Inflows

3,164.0

2,547.2

3,267.8

3,710.8

3,429.8

12,689.8

15,211.6

Outflows

(4,302.9)

(4,194.6)

(4,616.2)

(5,900.5)

(5,634.8)

(19,014.2)

(16,415.9)

Net Flows

(1,138.9)

(1,647.4)

(1,348.4)

(2,189.7)

(2,205.0)

(6,324.4)

(1,204.3)

Market performance

877.9

(2,653.5)

(782.3)

323.5

389.5

(2,234.4)

2,841.2

Other (2)

(291.4)

(162.4)

(241.3)

(63.2)

(2,359.7)

(758.3)

(2,674.1)

Ending balance

$  47,385.3

$  47,937.7

$  52,401.0

$  54,773.0

$  56,702.4

$  47,385.3

$  56,702.4

(1) Includes assets under management of open-end and variable insurance funds

(2) Represents open-end and closed-end mutual fund distributions, net of reinvestments, net flows of cash management strategies, net flows and market performance of structured products, which are a component of institutional accounts, and net flows from non-sales related activities such as asset acquisitions/(dispositions), marketable securities investments/(withdrawals), and the impact on assets from the use of leverage

(3) Includes assets under management related to option strategies

 

 

 

Reconciliation of U.S. GAAP Consolidated Statement of Operations to Non-GAAP Consolidated Income Statement Information

(Unaudited, in thousands)

Three months ended December 31, 2015

Reclassifications

Adjustments

U.S. GAAP

Basis

Distribution

and other

asset-based

expenses

Consolidated

investment

products

Amortization

of intangible

assets

Seed capital and

CLO investments

Other

Non-GAAP

Basis

Revenues

Investment management fees

$        60,611

$                         -

$                        242

$                            -

$                               -

$              -

$           60,853

Distribution and services fees

14,246

-

26

-

-

-

14,272

Administration and transfer agent fees

11,014

-

109

-

-

-

11,123

Other income and fees

244

-

-

-

-

-

244

Distribution and other asset-based expenses

-

(19,831)

-

-

-

-

(19,831)

     Total revenues

86,115

(19,831)

377

-

-

-

66,661

Operating Expenses

Employment expenses

34,376

-

-

-

-

-

34,376

Distribution and other asset-based expenses

19,831

(19,831)

-

-

-

-

-

Other operating expense

12,498

-

-

-

-

(497)

12,001

Other operating expenses of consolidated sponsored

     investment products

1,239

-

(1,239)

-

-

-

-

Restructuring and severance

-

-

-

-

-

-

-

Depreciation and other amortization

881

-

-

-

-

-

881

Amortization expense

784

-

-

(784)

-

-

-

     Total operating expenses

69,609

(19,831)

(1,239)

(784)

-

(497)

47,258

Operating Income

16,506

-

1,616

784

-

497

19,403

Other Income (Expense)

Realized and unrealized (loss) gain on investments, net

332

-

(5,539)

-

5,005

-

(202)

Realized and unrealized (loss) gain on investments

     of consolidated sponsored investment products, net

(4,910)

-

4,910

-

-

-

-

Realized and unrealized (loss) gain on investments

     of consolidated investment product, net

(2,784)

-

2,784

-

-

-

-

Other income, net

75

-

(1,155)

-

1,155

-

75

     Total other (expense) income, net

(7,287)

-

1,000

-

6,160

-

(127)

Interest Income (Expense)

Interest expense

(141)

-

-

-

-

-

(141)

Interest and dividend income

355

-

3,132

-

(3,283)

-

204

Interest and dividend income of investments of consolidated

     sponsored investment products, net

3,184

-

(3,184)

-

-

-

-

Interest income of investments of consolidated investment

     product, net

1,632

-

(1,632)

-

-

-

-

     Total interest income, net

5,030

-

(1,684)

-

(3,283)

-

63

Income Before Income Taxes

14,249

-

932

784

2,877

497

19,339

Income tax expense

8,612

-

-

303

(1,387)

(53)

7,475

Net Income

5,637

-

932

481

4,264

550

11,864

Noncontrolling interests

999

-

(932)

-

-

-

67

Net Income Attributable to Common Stockholders

$          6,636

$                       -

$                          -

$                       481

$                        4,264

$         550

$           11,931

Earnings Per Share - Basic

$            0.78

$               1.39

Earnings Per Share - Diluted

$            0.76

$               1.37

Weighted Average Shares Outstanding - Basic (in thousands)

8,562

8,562

Weighted Average Shares Outstanding - Diluted  (in thousands)

8,726

8,726

See pages 16 through 17 for notes to the reconciliation

 

 

 

Reconciliation of U.S. GAAP Consolidated Statement of Operations to Non-GAAP Consolidated Income Statement Information

(Unaudited, in thousands, except per share data)

Three months ended December 31, 2014

Reclassifications

Adjustments

U.S. GAAP

Basis

Distribution

and other

asset-based

expenses

Consolidated

sponsored

investment

products

Amortization

of intangible

assets

Seed capital

investments

Other

Non-GAAP

Basis

Revenues

Investment management fees

$        75,374

$                       -

$                     492

$                -

$                       -

$            -

$           75,866

Distribution and service fees

21,901

-

18

-

-

-

21,919

Administration and transfer agent fees

14,197

-

78

-

-

-

14,275

Other income and fees

665

-

-

-

-

-

665

Distribution and other asset-based expenses

-

(27,526)

-

-

-

-

(27,526)

     Total revenues

112,137

(27,526)

588

-

-

-

85,199

Operating Expenses

Employment expenses

34,053

-

-

-

-

-

34,053

Distribution and other asset-based expenses

27,526

(27,526)

-

-

-

-

-

Other operating expenses

11,579

-

-

-

-

(359)

11,220

Other operating expenses of consolidated

     sponsored investment products

664

-

(664)

-

-

-

-

Restructuring and severance

-

-

-

-

-

-

-

Depreciation and other amortization

723

-

-

-

-

-

723

Amortization expense

927

-

-

(927)

-

-

-

     Total operating expenses

75,472

(27,526)

(664)

(927)

-

(359)

45,996

Operating Income

36,665

-

1,252

927

-

359

39,203

Other Income (Expense)

Realized and unrealized gain (loss) on investments, net

(798)

-

(5,207)

-

5,723

-

(282)

Realized and unrealized gain (loss) on investments

     of consolidated sponsored investment products, net

(5,798)

-

5,798

-

-

-

-

Other income (expense), net

318

-

-

-

-

-

318

     Total other income (expense), net

(6,278)

-

591

-

5,723

-

36

Interest Income (Expense)

Interest expense

(125)

-

-

-

-

-

(125)

Interest and dividend income

653

-

1,116

-

(1,500)

-

269

Interest and dividend income of investments

     of consolidated sponsored investment products

2,534

-

(2,534)

-

-

-

-

     Total interest income (expense), net

3,062

-

(1,418)

-

(1,500)

-

144

Income Before Income Taxes

33,449

-

425

927

4,223

359

39,383

Income tax expense

15,038

-

-

347

(782)

135

14,738

Net Income

18,411

-

425

580

5,005

224

24,645

Noncontrolling interests

468

-

(425)

-

-

-

43

Net Income Attributable to Common Stockholders

$        18,879

$                       -

$                       -

$              580

$                 5,005

$         224

$           24,688

Earnings Per Share - Basic

$            2.09

$               2.74

Earnings Per Share - Diluted

$            2.05

$               2.68

Weighted Average Shares Outstanding - Basic

9,021

9,021

Weighted Average Shares Outstanding - Diluted

9,203

9,203

See pages 16 through 17 for notes to the reconciliation

 

 

 

Reconciliation of U.S. GAAP Consolidated Statement of Operations to Non-GAAP Consolidated Income Statement Information

(Unaudited, dollars in thousands except per share data)

Three months ended September 30, 2015

Reclassifications

Adjustments

U.S. GAAP

Basis

Distribution and

other asset-based

expenses

Consolidated

investment

products

Amortization

of intangible

assets

Seed capital and

CLO investments

Other

Non-GAAP

Basis

Revenues

Investment management fees

$        64,891

$                         -

$                     302

$                  -

$                             -

$              -

$           65,193

Distribution and services fees

15,587

-

27

-

-

-

15,614

Administration and transfer agent fees

11,614

-

100

-

-

-

11,714

Other income and fees

283

-

-

-

-

-

283

Distribution and other asset-based expenses

-

(21,717)

-

-

-

-

(21,717)

     Total revenues

92,375

(21,717)

429

-

-

-

71,087

Operating Expenses

Employment expenses

33,504

-

-

-

-

-

33,504

Distribution and other asset-based expenses

21,717

(21,717)

-

-

-

-

-

Other operating expense

11,165

-

-

-

-

170

11,335

Other operating expenses of consolidated sponsored investment products

1,120

-

(1,120)

-

-

-

-

Restructuring and severance

-

-

-

-

-

-

-

Depreciation and other amortization

910

-

-

-

-

-

910

Amortization expense

837

-

-

(837)

-

-

-

     Total operating expenses

69,253

(21,717)

(1,120)

(837)

-

170

45,749

Operating Income

23,122

-

1,549

837

-

(170)

25,338

Other Income (Expense)

Realized and unrealized (loss) gain on investments, net

(2,082)

-

(14,145)

-

16,068

-

(159)

Realized and unrealized (loss) gain on investments

     of consolidated sponsored investment products, net

(17,619)

-

17,619

-

-

-

-

Realized and unrealized (loss) gain on investments

     of consolidated investment product, net

(721)

-

721

-

-

-

-

Other income, net

141

-

(680)

-

680

-

141

     Total other (expense) income, net

(20,281)

-

3,515

-

16,748

-

(18)

Interest Income (Expense)

Interest expense

(138)

-

-

-

-

-

(138)

Interest and dividend income

324

-

1,023

-

(1,100)

-

247

Interest and dividend income of investments of consolidated

sponsored investment products, net

2,898

-

(2,898)

-

-

-

-

Interest income of investments of consolidated investment

product, net

41

-

(41)

-

-

-

-

     Total interest income, net

3,125

-

(1,916)

-

(1,100)

-

109

Income Before Income Taxes

5,966

-

3,148

837

15,648

(170)

25,429

Income tax expense

9,669

-

-

322

(139)

(65)

9,787

Net Income

(3,703)

-

3,148

515

15,787

(105)

15,642

Noncontrolling interests

3,054

-

(3,148)

-

-

-

(94)

Net Income Attributable to Common Stockholders

$           (649)

$                         -

$                         -

$              515

$                   15,787

$        (105)

$           15,548

Earnings Per Share - Basic

$          (0.07)

$               1.77

Earnings Per Share - Diluted

$          (0.07)

$               1.74

Weighted Average Shares Outstanding - Basic (in

thousands)

8,775

8,775

Weighted Average Shares Outstanding - Diluted  (in

thousands)

8,775

8,931

See pages 16 through 17 for notes to the reconciliation

 

 

 

Reconciliation of U.S. GAAP Consolidated Statement of Operations to Non-GAAP Consolidated Income Statement Information

(Unaudited, in thousands)

Twelve Months Ended December 31, 2015

Reclassifications

Adjustments

U.S. GAAP

Basis

Distribution and

other asset-based

expenses

Consolidated

investment

products

Amortization

of intangible

assets

Seed capital and

CLO investments

Other

Non-GAAP

Basis

Revenues

Investment management fees

$      264,865

$                                     -

$                               1,137

$                               -

$                               -

$      1,166

$         267,168

Distribution and services fees

67,066

-

96

-

-

-

67,162

Administration and transfer agent fees

48,247

-

370

-

-

-

48,617

Other income and fees

1,799

-

-

-

-

-

1,799

Distribution and other asset-based expenses

-

(89,731)

-

-

-

-

(89,731)

     Total revenues

381,977

(89,731)

1,603

-

-

1,166

295,015

Operating Expenses

Employment expenses

137,095

-

-

-

-

-

137,095

Distribution and other asset-based expenses

89,731

(89,731)

-

-

-

-

-

Other operating expense

63,901

-

-

-

-

(17,748)

46,153

Other operating expenses of consolidated sponsored

     investment products

4,134

-

(4,134)

-

-

-

-

Restructuring and severance

-

-

-

-

-

-

-

Depreciation and other amortization

3,443

-

-

-

-

-

3,443

Amortization expense

3,295

-

-

(3,295)

-

-

-

     Total operating expenses

301,599

(89,731)

(4,134)

(3,295)

-

(17,748)

186,691

Operating Income

80,378

-

5,737

3,295

-

18,914

108,324

Other Income (Expense)

Realized and unrealized (loss) gain on investments, net

(862)

-

(19,173)

-

20,014

-

(21)

Realized and unrealized (loss) gain on investments

     of consolidated sponsored investment products, net

(23,181)

-

23,181

-

-

-

-

Realized and unrealized (loss) gain on investments

     of consolidated investment product, net

(3,505)

-

3,505

-

-

-

-

Other income, net

898

-

(1,835)

-

1,835

-

898

     Total other (expense) income, net

(26,650)

-

5,678

-

21,849

-

877

Interest Income (Expense)

Interest expense

(523)

-

-

-

-

-

(523)

Interest and dividend income

1,261

-

6,022

-

(6,438)

-

845

Interest and dividend income of investments of consolidated

     sponsored investment products, net

11,504

-

(11,504)

-

-

-

-

Interest income of investments of consolidated investment

     product, net

1,673

-

(1,673)

-

-

-

-

     Total interest income, net

13,915

-

(7,155)

-

(6,438)

-

322

Income Before Income Taxes

67,643

-

4,260

3,295

15,411

18,914

109,523

Income tax expense

36,972

-

-

1,262

(2,525)

6,180

41,889

Net Income

30,671

-

4,260

2,033

17,936

12,734

67,634

Noncontrolling interests

4,435

-

(4,260)

-

-

-

175

Net Income Attributable to Common Stockholders

$        35,106

$                                     -

$                                       -

$                       2,033

$                      17,936

$    12,734

$           67,809

Earnings Per Share - Basic

$            3.99

$               7.71

Earnings Per Share - Diluted

$            3.92

$               7.57

Weighted Average Shares Outstanding - Basic (in thousands)

8,797

8,797

Weighted Average Shares Outstanding - Diluted  (in thousands)

8,960

8,960

See pages 16 through 17 for notes to the reconciliation

 

 

 

Reconciliation of U.S. GAAP Consolidated Statement of Operations to Non-GAAP Consolidated Income Statement Information

(Unaudited, dollars in thousands except per share data)

Twelve months ended December 31, 2014

Reclassifications

Adjustments

U.S. GAAP

Basis

Distribution and

other asset-based

expenses

Consolidated

sponsored

investment

products

Closed-end fund

launch costs

Amortization

of intangible

assets

Seed capital

investments

Other

Non-GAAP

Basis

Revenues

Investment management fees

$      300,663

$                       -

$                     396

$                        -

$                -

$                       -

$            -

$         301,059

Distribution and services fees

91,950

-

48

-

-

-

-

91,998

Administration and transfer agent fees

56,016

-

217

-

-

-

-

56,233

Other income and fees

1,969

-

-

-

-

-

-

1,969

Distribution and other asset-based expenses

-

(114,089)

-

-

-

-

-

(114,089)

     Total revenues

450,598

(114,089)

661

-

-

-

-

337,170

Operating Expenses

Employment expenses

139,809

-

-

(509)

-

-

(859)

138,441

Distribution and other asset-based expenses

123,665

(114,089)

-

(9,576)

-

-

-

-

Other operating expense

46,531

-

-

-

-

-

(1,050)

45,481

Other operating expenses of consolidated

     sponsored investment products

3,038

-

(3,038)

-

-

-

-

-

Restructuring and severance

294

-

-

-

-

-

(294)

-

Depreciation and other amortization

2,763

-

-

-

-

-

-

2,763

Amortization expense

3,778

-

-

-

(3,778)

-

-

-

     Total operating expenses

319,878

(114,089)

(3,038)

(10,085)

(3,778)

-

(2,203)

186,685

Operating Income

130,720

-

3,699

10,085

3,778

-

2,203

150,485

Other Income (Expense)

Realized and unrealized (loss) gain on investments, net

914

-

(3,495)

-

-

2,232

-

(349)

Realized and unrealized (loss) gain on investments

     of consolidated sponsored investment products, net

(4,648)

-

4,648

-

-

-

-

-

Other income, net

891

-

-

-

-

-

-

891

     Total other income (expense), net

(2,843)

-

1,153

-

-

2,232

-

542

Interest Income (Expense)

Interest expense

(537)

-

-

-

-

-

-

(537)

Interest and dividend income

1,706

-

3,022

-

-

(3,771)

-

957

Interest and dividend income of investments of consolidated

sponsored investment products, net

7,268

-

(7,268)

-

-

-

-

-

     Total interest income, net

8,437

-

(4,246)

-

-

(3,771)

-

420

Income Before Income Taxes

136,314

-

606

10,085

3,778

(1,539)

2,203

151,447

Income tax expense

39,349

-

-

3,861

1,441

(2,981)

16,055

57,725

Net Income

96,965

-

606

6,224

2,337

1,442

(13,852)

93,722

Noncontrolling interests

735

-

(606)

-

-

-

-

129

Net Income Attributable to Common Stockholders

$        97,700

$                       -

$                       -

$                  6,224

$           2,337

$                 1,442

$   (13,852)

$           93,851

Earnings Per Share - Basic

$          10.75

$             10.32

Earnings Per Share - Diluted

$          10.51

$             10.10

Weighted Average Shares Outstanding - Basic  

(in thousands)

9,091

9,091

Weighted Average Shares Outstanding - Diluted 

(in thousands)

9,292

9,292

See pages 16 through 17 for notes to the reconciliation

 

Virtus Investment Partners, Inc.

Notes

The following are notes to the reconciliations of the most comparable U.S. GAAP measure to each non-GAAP measure for the periods presented on pages 11 through 15.

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 adjustment 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.

In particular, the company reclassifies:

  1. Distribution and other asset-based expenses - These costs are generally passed directly through to external parties. Management believes that making this adjustment aids in comparing the company's operating results with other asset management firms that do not distribute products through intermediary distribution partners or utilize third party service providers for investment management related services.
  2. Consolidated investment products - Management believes that excluding the operating activities of majority-owned funds and CLOs to reflect revenues and expenses of the company prior to the consolidation of these products is consistent with the approach of reflecting its operating results as only revenues generated and expenses incurred related to providing investment management and related services will be included in operating income, as adjusted.

Net income attributable to common stockholders, as adjusted, excludes from net income:

  • Closed-end fund launch costs - Expenses related to the launch of closed-end funds, or similar products, including structuring fees and sales-based compensation related to the launch. The timing of closed-end fund issuances can be unpredictable, and related costs can fluctuate considerably. In addition, revenue associated with these costs will not fully impact financial results until future periods. Management believes that making these adjustments aids in comparing the company's operating results with prior periods and with other asset management firms that do not issue closed-end funds, or similar products.
  • Amortization of intangible assets - Non-cash amortization expense or impairment expense, if any, attributable to acquisition-related intangible assets. 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.
  • Seed capital and CLO investments - Gains and losses (realized and unrealized), dividends and interest income generated by seed capital and CLO investments. Earnings or losses generated by investments in seed capital products 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.
  • Other – Certain expenses and losses related to restructuring, severance, regulatory matters, and transition items that are not reflective of the ongoing earnings generation of the business. In addition, income tax expense/(benefit) items, such as adjustments for uncertain tax positions, valuation allowances and other unusual 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 in the table below:

 

Three Months Ended

Twelve Months Ended

Other (in thousands)

12/31/2015

9/30/2015

12/31/2014

12/31/2015

12/31/2014

Loss contingency

$                -

$                -

$                -

$         16,500

$                -

Tax impact of loss contingency

-

-

-

(5,507)

-

Transition related revenues

-

-

-

1,166

-

Tax impact of transition related revenues

-

-

-

(442)

-

System transition expenses

497

(170)

359

1,248

1,050

Tax impact of system transition expenses

(192)

65

(135)

(476)

(400)

Newfleet transition expenses

-

-

-

-

859

Tax impact of Newfleet transition expenses

-

-

-

-

(329)

Restructuring and severance

-

-

-

-

294

Tax impact of restructuring and severance

-

-

-

-

(113)

Discrete tax adjustments

245

-

-

245

(15,213)

Total Other

$            550

$           (105)

$            224

$       12,734

$     (13,852)

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 common stockholders, as adjusted, differ from U.S. GAAP revenues in that they are reduced by distribution and other asset-based expenses that are generally passed through to external parties, and exclude the impact of consolidated sponsored investment products. 

Operating expenses, as adjusted, is calculated to reflect expenses from ongoing continuing operations attributable to stockholders. Operating expenses, as adjusted, for purposes of calculating net income attributable to common stockholders, as adjusted, differ from U.S. GAAP expenses in that they exclude amortization or impairment, if any, of intangible assets, restructuring and severance, the impact of consolidated sponsored investment products, 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 per share, as adjusted, represent net income attributable to common stockholders, as adjusted, divided by weighted average shares outstanding, on either a basic or diluted basis.

1 The Virtus DFA Target Date Retirement Income funds are subject to the risks of equity securities, credit and interest, foreign and emerging markets, inflation protected securities, allocation and fund of funds.

Investors should carefully consider the investment objectives, risks, charges and expenses of any Virtus Mutual Fund before investing. The prospectus and summary prospectus contains this and other information about the fund. Please contact your financial representative, call 1-800- 243-4361 or visit www.virtus.com to obtain a current prospectus and/or summary prospectus. You should read the prospectus and/or summary prospectus carefully before you invest or send money.

Mutual funds distributed by VP Distributors, LLC, member FINRA and subsidiary of Virtus Investment Partners, Inc.

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. These statements may be identified by such forward-looking terminology as "expect," "estimate," "plan," "intend," "believe," "anticipate," "may," "will," "should," "could," "continue," "project," or similar statements or variations of such terms.

Our forward-looking statements are based on a series of expectations, assumptions and projections about our company, are not guarantees of future results or performance, and involve substantial risks and uncertainty, including assumptions and projections concerning our assets under management, cash inflows and outflows, operating cash flows, our ability to expand distribution and product offerings, and future credit facilities, for all forward periods. All of our 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 2014 Annual Report on Form 10-K, as well as the following risks and uncertainties: (a) any reduction in our assets under management, (b) the withdrawal, renegotiation or termination of our investment advisory agreements; (c) damage to our reputation; (d) our inability to attract and retain key personnel; (e) the competition we face in our business; (f) adverse regulatory and legal developments; (g) limitations on our deferred tax assets; (h) adverse developments with respect to, or changes in our relationships with, unaffiliated subadvisers; (i) changes in key distribution relationships; (j) interruptions in service or failure to provide service by third-party service providers; (k) any reduction in value of our marketable securities; (l) our inability to make intended quarterly distributions; (m) lack of availability of required and necessary capital on satisfactory terms; and (n) liabilities and losses not covered by our insurance policies and (o) certain other risks and uncertainties described in our 2014 Annual Report on Form 10-K or in any of our filings with the Securities and Exchange Commission ("SEC").

Certain other factors which may impact our continuing operations, prospects, financial results and liquidity or which 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 which modify or impact 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.

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SOURCE Virtus Investment Partners, Inc.



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