HARTFORD, Conn., Jan. 31, 2020 /PRNewswire/ -- Virtus
Investment Partners, Inc. (NASDAQ: VRTS) today reported financial
results for the three months ended December 31, 2019.
Financial Highlights (Unaudited)
(in millions, except per share data or as noted)
|
Three Months
Ended
|
|
|
|
Three
Months
Ended
|
|
|
|
12/31/2019
|
|
12/31/2018
|
|
Change
|
|
9/30/2019
|
|
Change
|
|
|
|
|
|
|
|
|
|
|
U.S. GAAP Financial
Measures
|
|
|
|
|
|
|
|
|
|
Revenues
|
$
|
146.1
|
|
|
$
|
138.1
|
|
|
6%
|
|
|
$
|
146.0
|
|
|
—%
|
|
Operating
expenses
|
$
|
108.3
|
|
|
$
|
108.8
|
|
|
—%
|
|
|
$
|
110.2
|
|
|
(2%)
|
|
Operating income
(loss)
|
$
|
37.8
|
|
|
$
|
29.2
|
|
|
29%
|
|
|
$
|
35.8
|
|
|
6%
|
|
Operating
margin
|
25.9%
|
|
|
21.2%
|
|
|
|
|
24.5%
|
|
|
|
Net income (loss)
attributable to common stockholders
|
$
|
20.8
|
|
|
$
|
0.1
|
|
|
N/M
|
|
|
$
|
22.0
|
|
|
(5%)
|
|
Earnings (loss) per
share - diluted
|
$
|
2.83
|
|
|
$
|
0.01
|
|
|
N/M
|
|
|
$
|
2.95
|
|
|
(4%)
|
|
Weighted average
shares outstanding - diluted
|
8.084
|
|
|
7.382
|
|
|
10%
|
|
|
8.157
|
|
|
(1%)
|
|
|
|
|
|
|
|
|
|
|
|
Non-GAAP Financial
Measures (1)
|
|
|
|
|
|
|
|
|
|
Revenues, as
adjusted
|
$
|
128.4
|
|
|
$
|
118.6
|
|
|
8%
|
|
|
$
|
127.1
|
|
|
1%
|
|
Operating expenses,
as adjusted
|
$
|
78.3
|
|
|
$
|
77.2
|
|
|
1%
|
|
|
$
|
79.5
|
|
|
(2%)
|
|
Operating income
(loss), as adjusted
|
$
|
50.1
|
|
|
$
|
41.5
|
|
|
21%
|
|
|
$
|
47.7
|
|
|
5%
|
|
Operating margin, as
adjusted
|
39.0%
|
|
|
34.9%
|
|
|
|
|
37.5%
|
|
|
|
Net income (loss)
attributable to common stockholders, as adjusted
|
$
|
34.9
|
|
|
$
|
28.8
|
|
|
21%
|
|
|
$
|
32.9
|
|
|
6%
|
|
Earnings (loss) per
share - diluted, as adjusted
|
$
|
4.32
|
|
|
$
|
3.42
|
|
|
26%
|
|
|
$
|
4.03
|
|
|
7%
|
|
Weighted average
shares outstanding - diluted, as adjusted
|
8.084
|
|
|
8.429
|
|
|
(4%)
|
|
|
8.157
|
|
|
(1%)
|
|
|
|
(1)
|
See the information
beginning on page 11 for reconciliations to the most directly
comparable U.S. GAAP measures and other important
disclosures
|
N/M - Not
Meaningful
|
Earnings Summary
The company presents U.S. GAAP and non-GAAP earnings information
in this release. Management believes that the non-GAAP financial
measures presented reflect the company's operating results from
providing investment management and related services to individuals
and institutions and uses these measures to evaluate financial
performance. Non-GAAP financial measures have material limitations
and should not be viewed in isolation or as a substitute for U.S.
GAAP measures. Reconciliations of the non-GAAP financial measures
to the most comparable U.S. GAAP measures can be found beginning on
page 11 of this earnings release.
Assets Under Management and Asset Flows
(in billions)
|
Three Months
Ended
|
|
|
|
Three Months
Ended
|
|
|
|
12/31/2019
|
|
12/31/2018
|
|
Change
|
|
9/30/2019
|
|
Change
|
Ending long-term
assets under management (1)
|
$
|
107.7
|
|
|
$
|
90.4
|
|
|
19%
|
|
|
$
|
102.8
|
|
|
5%
|
|
Ending total assets
under management
|
$
|
108.9
|
|
|
$
|
92.0
|
|
|
18%
|
|
|
$
|
104.1
|
|
|
5%
|
|
Average long-term
assets under management (1)
|
$
|
103.9
|
|
|
$
|
98.3
|
|
|
6%
|
|
|
$
|
102.8
|
|
|
1%
|
|
Average total assets
under management
|
$
|
105.1
|
|
|
$
|
99.9
|
|
|
5%
|
|
|
$
|
104.5
|
|
|
1%
|
|
Total
sales
|
$
|
4.8
|
|
|
$
|
4.4
|
|
|
9%
|
|
|
$
|
4.8
|
|
|
—%
|
|
Net flows
|
$
|
0.3
|
|
|
$
|
(4.8)
|
|
|
N/M
|
|
|
$
|
(1.1)
|
|
|
N/M
|
|
|
|
(1)
|
Excludes assets under
management in liquidity strategies, including in certain open-end
mutual funds and institutional accounts.
|
N/M - Not
Meaningful
|
Long-term assets under management increased 5% to $107.7 billion at December 31, 2019 from
$102.8 billion at September 30, 2019 due to market appreciation and
positive net flows. Total assets under management at
December 31, 2019 were $108.9
billion, including $1.2
billion of assets in liquidity strategies.
Total sales of $4.8 billion were
unchanged from the third quarter as higher sales from retail
separate accounts, institutional, and exchange traded funds (ETFs)
were offset by lower open-end fund sales. Retail separate account
sales were $1.0 billion, up 24%
sequentially, with growth in both the intermediary-sold and private
client channels. Institutional sales increased 45% sequentially to
$1.2 billion as a result of new
mandates across multiple affiliates. ETF sales of $0.2 billion increased 74% from the third
quarter. Open-end fund sales declined 21% to $2.3 billion from $3.0
billion in the third quarter, which included $0.6 billion of model wins and reallocations.
Total net flows of $0.3 billion
improved meaningfully from ($1.1)
billion in the third quarter and included positive net flows
in retail separate accounts, institutional, and ETFs that were
partially offset by net outflows in open-end funds. Net flows in
retail separate accounts were $0.6
billion, up $0.2 billion from
the prior quarter as a result of stronger sales. Institutional net
flows of $0.1 billion improved from
($1.4) billion in the prior quarter,
which included a single large client redemption. Open-end fund net
flows of ($0.4) billion were a result
of continued net outflows in bank loan strategies, partially offset
by positive net flows in domestic and international equity
strategies.
GAAP Results
Operating income increased 6% sequentially to $37.8 million from $35.8
million in the prior quarter, primarily reflecting lower
employment expenses.
Net income attributable to common stockholders of $2.83 per diluted common share included
($0.71) of fair value adjustments on
affiliate non-controlling interests, ($0.31) of net realized and unrealized losses on
investments, and ($0.11) of
acquisition and integration costs. Third quarter net income per
diluted share of $2.95 included
($0.63) of net realized and
unrealized losses on investments and ($0.12) of acquisition and integration costs.
The effective tax rate of 28% during the fourth quarter compared
with 30% in the prior quarter, reflecting a change in the valuation
allowance related to marketable securities.
Non-GAAP Results
Revenues, as adjusted, of $128.4
million increased 1% from the prior quarter as a result of
an increase in both average long-term assets and the average fee
rate. Revenues included $1.1 million
of performance-related fees compared with $1.2 million in the prior quarter. Employment
expenses, as adjusted, declined 2% to $58.8
million primarily due to lower incentive compensation. Other
operating expenses, as adjusted, of $18.2
million compared with $18.1
million in the prior quarter.
Operating income, as adjusted, and the related margin increased
to $50.1 million and 39%,
respectively, from $47.7 million and
38%, respectively, in the prior quarter. The higher margin
reflected growth in investment management fees and a decline in
employment expenses.
Interest and dividends earned on cash equivalents, seed capital,
and collateralized loan obligation (CLO) investments were
$4.1 million, an increase from
$3.5 million in the third quarter,
primarily due to higher dividend income.
Net income attributable to common stockholders, as adjusted,
which is net of noncontrolling interests, was
$4.32 per diluted common share, an
increase of $0.29, or 7%, from
$4.03 in the prior quarter. The
increase primarily reflected higher operating income, as
adjusted.
The effective tax rate, as adjusted, was 27%, unchanged from the
prior quarter.
Select Balance Sheet Items (Unaudited)
(in millions)
|
As
of
|
|
|
|
As
of
|
|
|
|
12/31/2019
|
|
12/31/2018
|
|
Change
|
|
9/30/2019
|
|
Change
|
Cash and cash
equivalents
|
$
|
221.8
|
|
|
$
|
201.7
|
|
|
10%
|
|
|
$
|
195.9
|
|
|
13%
|
|
Gross debt
(1)
|
$
|
285.7
|
|
|
$
|
340.6
|
|
|
(16%)
|
|
|
$
|
300.7
|
|
|
(5%)
|
|
Redeemable
noncontrolling interests
|
$
|
58.4
|
|
|
$
|
55.1
|
|
|
6%
|
|
|
$
|
53.1
|
|
|
10%
|
|
Total equity
attributable to stockholders
|
$
|
675.7
|
|
|
$
|
629.9
|
|
|
7%
|
|
|
$
|
665.7
|
|
|
2%
|
|
|
|
|
|
|
|
|
|
|
|
Working capital
(2)
|
$
|
160.1
|
|
|
$
|
140.2
|
|
|
14%
|
|
|
$
|
158.0
|
|
|
1%
|
|
Net debt (cash)
(3)
|
$
|
63.9
|
|
|
$
|
138.9
|
|
|
(54%)
|
|
|
$
|
104.9
|
|
|
(39%)
|
|
|
|
(1)
|
Excludes deferred
financing costs of $7.9 million, $11.4 million, and $8.7 million as
of December 31, 2019, December 31, 2018, and September 30, 2019,
respectively.
|
(2)
|
Defined as cash and
cash equivalents plus accounts receivable, net, less accrued
compensation and benefits, accounts payable and accrued
liabilities, dividends payable and required principal payments due
over the next 12 months, including scheduled amortization and an
estimate of the excess cash flow payment; the actual excess cash
flow payment will be measured based on fiscal year 2019 financial
results and the net leverage ratio as of December 31,
2019.
|
(3)
|
Defined as gross debt
less cash and cash equivalents.
|
Working capital at December 31, 2019 of $160.1 million increased 1% from September 30, 2019, reflecting net cash generated
from the business partially offset by principal payments on debt
and return of capital to shareholders.
During the fourth quarter, the company repurchased 85,745
shares, or 1.2% of beginning-of-quarter outstanding common shares,
for $10.0 million. In addition, the
company net settled 7,954 shares for $0.9
million to satisfy employee tax obligations on restricted
stock units.
The company repaid $15.0 million
of debt in the fourth quarter. The net leverage ratio, which is net
debt to EBITDA (in accordance with the company's credit agreement),
was 0.3x at December 31, 2019, down from 0.5x at September 30, 2019 and 0.7x at December 31, 2018.
As previously disclosed, each share of the company's 7.25%
mandatorily convertible preferred stock will automatically convert
into 0.7938 shares of the company's common stock and be available
to commence trading on February 4,
2020. The conversion will result in the issuance of 912,870
shares of common stock, modestly lower than the estimated converted
shares assumed in the calculation of outstanding shares at
December 31, 2019.
Conference Call
Management will host an investor conference call on Friday, January 31, 2020, at 10 a.m. Eastern to discuss these financial
results and related matters. The webcast of the call can be
accessed in the Investor Relations section of www.virtus.com, or by
telephone at 877-930-7765 for callers in the U.S. and Canada or 253-336-7413 for international
callers (Conference ID: 4583175). The presentation that will be
reviewed as part of the conference call will be available prior to
the call in the Investor Relations section of www.virtus.com. A
replay of the call will be available through February 7, 2020, by telephone at 855-859-2056
(U.S. and Canada) or 404-537-3406
(international) (Conference ID: 4583175).
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.
The company provides investment management products and services
through its affiliated managers and select subadvisers, each with a
distinct investment style, autonomous investment process, and
individual brand. Virtus Investment Partners offers access to a
variety of investment styles across multiple disciplines to meet a
wide array of investor needs. Its affiliated managers include
Ceredex Value Advisors, Duff & Phelps Investment Management,
Kayne Anderson Rudnick Investment Management, Newfleet Asset
Management, Rampart Investment Management, Seix Investment
Advisors, Silvant Capital Management, and Sustainable Growth
Advisers.
U.S. GAAP Condensed Consolidated Statements of Operations
(Unaudited)
(in thousands, except per share data)
|
Three Months
Ended
|
|
|
|
Three
Months
Ended
|
|
|
|
Twelve Months
Ended
|
|
|
|
12/31/2019
|
|
12/31/2018
|
|
Change
|
|
9/30/2019
|
|
Change
|
|
12/31/2019
|
|
12/31/2018
|
|
Change
|
Revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment management
fees
|
$
|
120,945
|
|
|
$
|
111,664
|
|
|
8%
|
|
|
$
|
120,023
|
|
|
1%
|
|
|
$
|
461,477
|
|
|
$
|
437,021
|
|
|
6%
|
|
Distribution and
service fees
|
9,776
|
|
|
10,829
|
|
|
(10%)
|
|
|
10,442
|
|
|
(6%)
|
|
|
40,898
|
|
|
50,715
|
|
|
(19%)
|
|
Administration and
shareholder service fees
|
15,137
|
|
|
15,342
|
|
|
(1%)
|
|
|
15,280
|
|
|
(1%)
|
|
|
59,884
|
|
|
63,614
|
|
|
(6%)
|
|
Other income and
fees
|
226
|
|
|
230
|
|
|
(2%)
|
|
|
210
|
|
|
8%
|
|
|
987
|
|
|
885
|
|
|
12%
|
|
Total
revenues
|
146,084
|
|
|
138,065
|
|
|
6%
|
|
|
145,955
|
|
|
—%
|
|
|
563,246
|
|
|
552,235
|
|
|
2%
|
|
Operating
Expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Employment
expenses
|
60,265
|
|
|
59,668
|
|
|
1%
|
|
|
61,282
|
|
|
(2%)
|
|
|
240,521
|
|
|
238,501
|
|
|
1%
|
|
Distribution and
other asset-based expenses
|
20,086
|
|
|
21,043
|
|
|
(5%)
|
|
|
20,927
|
|
|
(4%)
|
|
|
82,099
|
|
|
92,441
|
|
|
(11%)
|
|
Other operating
expenses
|
18,238
|
|
|
18,513
|
|
|
(1%)
|
|
|
18,228
|
|
|
—%
|
|
|
74,363
|
|
|
74,853
|
|
|
(1%)
|
|
Operating expenses of
consolidated investment products
|
620
|
|
|
692
|
|
|
(10%)
|
|
|
376
|
|
|
65%
|
|
|
4,015
|
|
|
3,515
|
|
|
14%
|
|
Restructuring and
severance
|
283
|
|
|
87
|
|
|
225%
|
|
|
523
|
|
|
(46%)
|
|
|
2,302
|
|
|
87
|
|
|
N/M
|
|
Depreciation
expense
|
1,263
|
|
|
1,293
|
|
|
(2%)
|
|
|
1,245
|
|
|
1%
|
|
|
4,992
|
|
|
4,597
|
|
|
9%
|
|
Amortization
expense
|
7,533
|
|
|
7,541
|
|
|
—%
|
|
|
7,587
|
|
|
(1%)
|
|
|
30,244
|
|
|
25,142
|
|
|
20%
|
|
Total operating
expenses
|
108,288
|
|
|
108,837
|
|
|
(1%)
|
|
|
110,168
|
|
|
(2%)
|
|
|
438,536
|
|
|
439,136
|
|
|
—%
|
|
Operating Income
(Loss)
|
37,796
|
|
|
29,228
|
|
|
29%
|
|
|
35,787
|
|
|
6%
|
|
|
124,710
|
|
|
113,099
|
|
|
10%
|
|
Other Income
(Expense)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Realized and
unrealized gain (loss) on investments, net
|
1,570
|
|
|
(6,241)
|
|
|
N/M
|
|
|
2
|
|
|
N/M
|
|
|
7,044
|
|
|
(5,217)
|
|
|
N/M
|
|
Realized and
unrealized gain (loss) of consolidated investment products,
net
|
(3,657)
|
|
|
(16,997)
|
|
|
(78%)
|
|
|
(5,344)
|
|
|
(32%)
|
|
|
(1,202)
|
|
|
(21,252)
|
|
|
(94%)
|
|
Other income
(expense), net
|
519
|
|
|
966
|
|
|
(46%)
|
|
|
746
|
|
|
(30%)
|
|
|
2,411
|
|
|
3,289
|
|
|
(27%)
|
|
Total other income
(expense), net
|
(1,568)
|
|
|
(22,272)
|
|
|
(93%)
|
|
|
(4,596)
|
|
|
(66%)
|
|
|
8,253
|
|
|
(23,180)
|
|
|
N/M
|
|
Interest Income
(Expense)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
expense
|
(4,268)
|
|
|
(5,963)
|
|
|
(28%)
|
|
|
(4,889)
|
|
|
(13%)
|
|
|
(19,473)
|
|
|
(19,445)
|
|
|
—%
|
|
Interest and dividend
income
|
827
|
|
|
1,744
|
|
|
(53%)
|
|
|
863
|
|
|
(4%)
|
|
|
3,844
|
|
|
4,999
|
|
|
(23%)
|
|
Interest and dividend
income of investments of consolidated investment
products
|
28,296
|
|
|
26,678
|
|
|
6%
|
|
|
30,290
|
|
|
(7%)
|
|
|
115,356
|
|
|
98,356
|
|
|
17%
|
|
Interest expense of
consolidated investment products
|
(19,975)
|
|
|
(18,002)
|
|
|
11%
|
|
|
(21,252)
|
|
|
(6%)
|
|
|
(92,005)
|
|
|
(64,788)
|
|
|
42%
|
|
Total interest income
(expense), net
|
4,880
|
|
|
4,457
|
|
|
9%
|
|
|
5,012
|
|
|
(3%)
|
|
|
7,722
|
|
|
19,122
|
|
|
(60%)
|
|
Income (Loss)
Before Income Taxes
|
41,108
|
|
|
11,413
|
|
|
260%
|
|
|
36,203
|
|
|
14%
|
|
|
140,685
|
|
|
109,041
|
|
|
29%
|
|
Income tax expense
(benefit)
|
11,326
|
|
|
10,320
|
|
|
10%
|
|
|
10,844
|
|
|
4%
|
|
|
35,177
|
|
|
32,961
|
|
|
7%
|
|
Net Income
(Loss)
|
29,782
|
|
|
1,093
|
|
|
N/M
|
|
|
25,359
|
|
|
17%
|
|
|
105,508
|
|
|
76,080
|
|
|
39%
|
|
Noncontrolling
interests
|
(6,890)
|
|
|
1,068
|
|
|
N/M
|
|
|
(1,274)
|
|
|
441%
|
|
|
(9,859)
|
|
|
(551)
|
|
|
N/M
|
|
Net Income (Loss)
Attributable to Stockholders
|
22,892
|
|
|
2,161
|
|
|
N/M
|
|
|
24,085
|
|
|
(5%)
|
|
|
95,649
|
|
|
75,529
|
|
|
27%
|
|
Preferred stockholder
dividends
|
(2,084)
|
|
|
(2,084)
|
|
|
—%
|
|
|
(2,085)
|
|
|
—%
|
|
|
(8,337)
|
|
|
(8,337)
|
|
|
—%
|
|
Net Income (Loss)
Attributable to Common Stockholders
|
$
|
20,808
|
|
|
$
|
77
|
|
|
N/M
|
|
|
$
|
22,000
|
|
|
(5%)
|
|
|
$
|
87,312
|
|
|
$
|
67,192
|
|
|
30%
|
|
Earnings (Loss)
Per Share - Basic
|
$
|
3.02
|
|
|
$
|
0.01
|
|
|
N/M
|
|
|
$
|
3.17
|
|
|
(5%)
|
|
|
$
|
12.54
|
|
|
$
|
9.37
|
|
|
34%
|
|
Earnings (Loss)
Per Share - Diluted
|
$
|
2.83
|
|
|
$
|
0.01
|
|
|
N/M
|
|
|
$
|
2.95
|
|
|
(4%)
|
|
|
$
|
11.74
|
|
|
$
|
8.86
|
|
|
33%
|
|
Cash Dividends
Declared Per Preferred Share
|
$
|
1.81
|
|
|
$
|
1.81
|
|
|
—%
|
|
|
$
|
1.81
|
|
|
—%
|
|
|
$
|
7.25
|
|
|
$
|
7.25
|
|
|
—%
|
|
Cash Dividends
Declared Per Common Share
|
$
|
0.67
|
|
|
$
|
0.55
|
|
|
22%
|
|
|
$
|
0.67
|
|
|
—%
|
|
|
$
|
2.44
|
|
|
$
|
2.00
|
|
|
22%
|
|
Weighted Average
Shares Outstanding - Basic
|
6,881
|
|
|
7,111
|
|
|
(3%)
|
|
|
6,947
|
|
|
(1%)
|
|
|
6,963
|
|
|
7,174
|
|
|
(3%)
|
|
Weighted Average
Shares Outstanding - Diluted
|
8,084
|
|
|
7,382
|
|
|
10%
|
|
|
8,157
|
|
|
(1%)
|
|
|
8,149
|
|
|
8,527
|
|
|
(4%)
|
|
Assets Under Management - Product and Asset Class
(in millions)
|
Three Months
Ended
|
|
12/31/2018
|
|
03/31/2019
|
|
6/30/2019
|
|
9/30/2019
|
|
12/31/2019
|
By product (period
end):
|
|
|
|
|
|
|
|
|
|
Open-End Funds
(1)
|
$
|
37,710
|
|
|
$
|
40,633
|
|
|
$
|
41,223
|
|
|
$
|
41,190
|
|
|
$
|
42,870
|
|
Closed-End
Funds
|
5,956
|
|
|
6,553
|
|
|
6,653
|
|
|
6,816
|
|
|
6,748
|
|
Exchange Traded
Funds
|
668
|
|
|
1,102
|
|
|
1,078
|
|
|
1,054
|
|
|
1,156
|
|
Retail Separate
Accounts
|
14,998
|
|
|
17,123
|
|
|
18,260
|
|
|
18,863
|
|
|
20,414
|
|
Institutional
Accounts
|
27,445
|
|
|
30,514
|
|
|
32,056
|
|
|
30,951
|
|
|
32,635
|
|
Structured
Products
|
3,640
|
|
|
3,998
|
|
|
3,984
|
|
|
3,972
|
|
|
3,903
|
|
Total
Long-Term
|
$
|
90,417
|
|
|
$
|
99,923
|
|
|
$
|
103,254
|
|
|
$
|
102,846
|
|
|
$
|
107,726
|
|
Liquidity
(2)
|
1,613
|
|
|
1,789
|
|
|
1,752
|
|
|
1,221
|
|
|
1,178
|
|
Total
|
$
|
92,030
|
|
|
$
|
101,712
|
|
|
$
|
105,006
|
|
|
$
|
104,067
|
|
|
$
|
108,904
|
|
|
|
|
|
|
|
|
|
|
|
By product
(average) (3)
|
|
|
|
|
|
|
|
|
|
Open-End Funds
(1)
|
$
|
41,602
|
|
|
$
|
39,532
|
|
|
$
|
40,961
|
|
|
$
|
41,457
|
|
|
$
|
41,718
|
|
Closed-End
Funds
|
6,235
|
|
|
6,258
|
|
|
6,551
|
|
|
6,649
|
|
|
6,639
|
|
Exchange Traded
Funds
|
831
|
|
|
871
|
|
|
1,082
|
|
|
1,048
|
|
|
1,049
|
|
Retail Separate
Accounts
|
16,817
|
|
|
14,998
|
|
|
17,123
|
|
|
18,260
|
|
|
18,863
|
|
Institutional
Accounts
|
29,172
|
|
|
29,354
|
|
|
30,771
|
|
|
31,462
|
|
|
31,748
|
|
Structured
Products
|
3,627
|
|
|
3,669
|
|
|
3,968
|
|
|
3,957
|
|
|
3,903
|
|
Total
Long-Term
|
$
|
98,284
|
|
|
$
|
94,682
|
|
|
$
|
100,456
|
|
|
$
|
102,833
|
|
|
$
|
103,920
|
|
Liquidity
(2)
|
1,607
|
|
|
1,725
|
|
|
1,769
|
|
|
1,710
|
|
|
1,195
|
|
Total
|
$
|
99,891
|
|
|
$
|
96,407
|
|
|
$
|
102,225
|
|
|
$
|
104,543
|
|
|
$
|
105,115
|
|
|
|
|
|
|
|
|
|
|
|
By asset class
(period end):
|
|
|
|
|
|
|
|
|
|
Equity
|
$
|
53,297
|
|
|
$
|
61,781
|
|
|
$
|
64,888
|
|
|
$
|
65,544
|
|
|
$
|
70,720
|
|
Fixed
Income
|
33,425
|
|
|
33,674
|
|
|
32,983
|
|
|
31,704
|
|
|
31,186
|
|
Alternatives
(4)
|
3,695
|
|
|
4,468
|
|
|
5,383
|
|
|
5,598
|
|
|
5,820
|
|
Total
Long-Term
|
$
|
90,417
|
|
|
$
|
99,923
|
|
|
$
|
103,254
|
|
|
$
|
102,846
|
|
|
$
|
107,726
|
|
Liquidity
(2)
|
1,613
|
|
|
1,789
|
|
|
1,752
|
|
|
1,221
|
|
|
1,178
|
|
Total
|
$
|
92,030
|
|
|
$
|
101,712
|
|
|
$
|
105,006
|
|
|
$
|
104,067
|
|
|
$
|
108,904
|
|
Assets Under Management - Average Management Fees Earned
(5)
(in basis points)
|
Three Months
Ended
|
|
12/31/2018
|
|
3/31/2019
|
|
6/30/2019
|
|
9/30/2019
|
|
12/31/2019
|
All
Products
|
|
|
|
|
|
|
|
|
|
Open-End Funds
(1)
|
54.4
|
|
|
54.6
|
|
|
55.7
|
|
|
56.6
|
|
|
57.4
|
|
Closed-End
Funds
|
65.5
|
|
|
64.9
|
|
|
65.0
|
|
|
64.7
|
|
|
64.0
|
|
Exchange Traded
Funds
|
15.2
|
|
|
16.7
|
|
|
23.4
|
|
|
25.3
|
|
|
22.0
|
|
Retail Separate
Accounts
|
48.1
|
|
|
48.7
|
|
|
48.4
|
|
|
48.0
|
|
|
46.8
|
|
Institutional
Accounts (6)
|
29.2
|
|
|
30.6
|
|
|
30.8
|
|
|
31.8
|
|
|
31.8
|
|
Structured Products
(6)
|
36.7
|
|
|
37.1
|
|
|
35.3
|
|
|
37.3
|
|
|
37.9
|
|
All Long-Term
Products (6)
|
45.6
|
|
|
45.9
|
|
|
46.3
|
|
|
46.9
|
|
|
47.0
|
|
Liquidity
(2)
|
9.9
|
|
|
9.9
|
|
|
10.6
|
|
|
10.7
|
|
|
8.9
|
|
All
Products
|
45.0
|
|
|
45.3
|
|
|
45.7
|
|
|
46.3
|
|
|
46.5
|
|
|
|
|
|
(1)
|
Represents assets
under management of U.S. retail funds, offshore funds and variable
insurance funds.
|
(2)
|
Represents assets
under management in liquidity strategies, including in certain
open-end funds and institutional accounts.
|
(3)
|
Averages are
calculated as follows:
|
|
- Funds - average
daily or weekly balances
|
|
- Retail Separate
Accounts - prior-quarter ending balance or average of month-end
balances in quarter
|
|
- Institutional
Accounts and Structured Products - average of month-end balances in
quarter
|
(4)
|
Consists of real
estate securities, mid-stream energy securities and master limited
partnerships, options strategies, and other.
|
(5)
|
Represents investment
management fees divided by average assets. Investment
management fees exclude the impact of consolidated investment
products. Prior periods have been recast to conform to the
current period definition of investment management fees.
|
(6)
|
Includes
performance-related fees, in basis points, earned during the three
months ended as follows:
|
|
12/31/2018
|
|
3/31/2019
|
|
6/30/2019
|
|
9/30/2019
|
|
12/31/2019
|
Institutional
Accounts
|
0.2
|
|
|
0.5
|
|
|
0.2
|
|
|
1.5
|
|
|
1.2
|
|
Structured
Products
|
0.9
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1.5
|
|
All Long-Term
Products
|
0.1
|
|
|
0.2
|
|
|
0.1
|
|
|
0.5
|
|
|
0.4
|
|
Assets Under Management - Asset Flows by Product
(in millions)
|
Three Months
Ended
|
|
Twelve Months
Ended
|
|
12/31/2018
|
|
3/31/2019
|
|
6/30/2019
|
|
9/30/2019
|
|
12/31/2019
|
|
12/31/2018
|
|
12/31/2019
|
Open-End Funds
(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning
balance
|
$
|
45,172
|
|
|
$
|
37,710
|
|
|
$
|
40,633
|
|
|
$
|
41,223
|
|
|
$
|
41,190
|
|
|
$
|
43,078
|
|
|
$
|
37,710
|
|
Inflows
|
2,889
|
|
|
3,000
|
|
|
2,510
|
|
|
2,982
|
|
|
2,343
|
|
|
14,836
|
|
|
10,835
|
|
Outflows
|
(6,751)
|
|
|
(3,867)
|
|
|
(3,214)
|
|
|
(3,164)
|
|
|
(2,784)
|
|
|
(17,098)
|
|
|
(13,029)
|
|
Net flows
|
(3,862)
|
|
|
(867)
|
|
|
(704)
|
|
|
(182)
|
|
|
(441)
|
|
|
(2,262)
|
|
|
(2,194)
|
|
Market
performance
|
(3,226)
|
|
|
3,839
|
|
|
1,465
|
|
|
(69)
|
|
|
2,301
|
|
|
(2,522)
|
|
|
7,536
|
|
Other (2)
|
(374)
|
|
|
(49)
|
|
|
(171)
|
|
|
218
|
|
|
(180)
|
|
|
(584)
|
|
|
(182)
|
|
Ending
balance
|
$
|
37,710
|
|
|
$
|
40,633
|
|
|
$
|
41,223
|
|
|
$
|
41,190
|
|
|
$
|
42,870
|
|
|
$
|
37,710
|
|
|
$
|
42,870
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Closed-End
Funds
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning
balance
|
$
|
6,342
|
|
|
$
|
5,956
|
|
|
$
|
6,553
|
|
|
$
|
6,653
|
|
|
$
|
6,816
|
|
|
$
|
6,666
|
|
|
$
|
5,956
|
|
Inflows
|
8
|
|
|
11
|
|
|
9
|
|
|
14
|
|
|
10
|
|
|
22
|
|
|
44
|
|
Outflows
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Net flows
|
8
|
|
|
11
|
|
|
9
|
|
|
14
|
|
|
10
|
|
|
22
|
|
|
44
|
|
Market
performance
|
(257)
|
|
|
662
|
|
|
182
|
|
|
246
|
|
|
26
|
|
|
(289)
|
|
|
1,116
|
|
Other (2)
|
(137)
|
|
|
(76)
|
|
|
(91)
|
|
|
(97)
|
|
|
(104)
|
|
|
(443)
|
|
|
(368)
|
|
Ending
balance
|
$
|
5,956
|
|
|
$
|
6,553
|
|
|
$
|
6,653
|
|
|
$
|
6,816
|
|
|
$
|
6,748
|
|
|
$
|
5,956
|
|
|
$
|
6,748
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exchange Traded
Funds
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning
balance
|
$
|
983
|
|
|
$
|
668
|
|
|
$
|
1,102
|
|
|
$
|
1,078
|
|
|
$
|
1,054
|
|
|
$
|
1,039
|
|
|
$
|
668
|
|
Inflows
|
29
|
|
|
394
|
|
|
132
|
|
|
94
|
|
|
164
|
|
|
290
|
|
|
784
|
|
Outflows
|
(107)
|
|
|
(46)
|
|
|
(117)
|
|
|
(54)
|
|
|
(62)
|
|
|
(342)
|
|
|
(279)
|
|
Net flows
|
(78)
|
|
|
348
|
|
|
15
|
|
|
40
|
|
|
102
|
|
|
(52)
|
|
|
505
|
|
Market
performance
|
(201)
|
|
|
108
|
|
|
(5)
|
|
|
(36)
|
|
|
23
|
|
|
(163)
|
|
|
90
|
|
Other (2)
|
(36)
|
|
|
(22)
|
|
|
(34)
|
|
|
(28)
|
|
|
(23)
|
|
|
(156)
|
|
|
(107)
|
|
Ending
balance
|
$
|
668
|
|
|
$
|
1,102
|
|
|
$
|
1,078
|
|
|
$
|
1,054
|
|
|
$
|
1,156
|
|
|
$
|
668
|
|
|
$
|
1,156
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retail Separate
Accounts
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning
balance
|
$
|
16,817
|
|
|
$
|
14,998
|
|
|
$
|
17,123
|
|
|
$
|
18,260
|
|
|
$
|
18,863
|
|
|
$
|
13,937
|
|
|
$
|
14,998
|
|
Inflows
|
701
|
|
|
753
|
|
|
731
|
|
|
819
|
|
|
1,012
|
|
|
3,061
|
|
|
3,315
|
|
Outflows
|
(515)
|
|
|
(472)
|
|
|
(447)
|
|
|
(435)
|
|
|
(436)
|
|
|
(2,440)
|
|
|
(1,790)
|
|
Net flows
|
186
|
|
|
281
|
|
|
284
|
|
|
384
|
|
|
576
|
|
|
621
|
|
|
1,525
|
|
Market
performance
|
(2,005)
|
|
|
1,895
|
|
|
877
|
|
|
297
|
|
|
976
|
|
|
(736)
|
|
|
4,045
|
|
Other (2)
|
—
|
|
|
(51)
|
|
|
(24)
|
|
|
(78)
|
|
|
(1)
|
|
|
1,176
|
|
|
(154)
|
|
Ending
balance
|
$
|
14,998
|
|
|
$
|
17,123
|
|
|
$
|
18,260
|
|
|
$
|
18,863
|
|
|
$
|
20,414
|
|
|
$
|
14,998
|
|
|
$
|
20,414
|
|
Assets Under Management - Asset Flows by Product
(continued)
(in millions)
|
Three Months
Ended
|
|
Twelve Months
Ended
|
|
12/31/2018
|
|
3/31/2019
|
|
6/30/2019
|
|
9/30/2019
|
|
12/31/2019
|
|
12/31/2018
|
|
12/31/2019
|
Institutional
Accounts
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning
balance
|
$
|
30,961
|
|
|
$
|
27,445
|
|
|
$
|
30,514
|
|
|
$
|
32,056
|
|
|
$
|
30,951
|
|
|
$
|
20,815
|
|
|
$
|
27,445
|
|
Inflows
|
811
|
|
|
954
|
|
|
1,737
|
|
|
851
|
|
|
1,235
|
|
|
4,144
|
|
|
4,777
|
|
Outflows
|
(1,822)
|
|
|
(1,154)
|
|
|
(1,259)
|
|
|
(2,216)
|
|
|
(1,091)
|
|
|
(6,543)
|
|
|
(5,720)
|
|
Net flows
|
(1,011)
|
|
|
(200)
|
|
|
478
|
|
|
(1,365)
|
|
|
144
|
|
|
(2,399)
|
|
|
(943)
|
|
Market
performance
|
(2,491)
|
|
|
3,156
|
|
|
1,141
|
|
|
527
|
|
|
1,553
|
|
|
(992)
|
|
|
6,377
|
|
Other (2)
|
(14)
|
|
|
113
|
|
|
(77)
|
|
|
(267)
|
|
|
(13)
|
|
|
10,021
|
|
|
(244)
|
|
Ending
balance
|
$
|
27,445
|
|
|
$
|
30,514
|
|
|
$
|
32,056
|
|
|
$
|
30,951
|
|
|
$
|
32,635
|
|
|
$
|
27,445
|
|
|
$
|
32,635
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Structured
Products
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning
balance
|
$
|
3,648
|
|
|
$
|
3,640
|
|
|
$
|
3,998
|
|
|
$
|
3,984
|
|
|
$
|
3,972
|
|
|
$
|
3,299
|
|
|
$
|
3,640
|
|
Inflows
|
—
|
|
|
389
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
421
|
|
|
389
|
|
Outflows
|
(16)
|
|
|
(16)
|
|
|
(21)
|
|
|
(16)
|
|
|
(45)
|
|
|
(71)
|
|
|
(98)
|
|
Net flows
|
(16)
|
|
|
373
|
|
|
(21)
|
|
|
(16)
|
|
|
(45)
|
|
|
350
|
|
|
291
|
|
Market
performance
|
57
|
|
|
27
|
|
|
56
|
|
|
54
|
|
|
36
|
|
|
180
|
|
|
173
|
|
Other (2)
|
(49)
|
|
|
(42)
|
|
|
(49)
|
|
|
(50)
|
|
|
(60)
|
|
|
(189)
|
|
|
(201)
|
|
Ending
balance
|
$
|
3,640
|
|
|
$
|
3,998
|
|
|
$
|
3,984
|
|
|
$
|
3,972
|
|
|
$
|
3,903
|
|
|
$
|
3,640
|
|
|
$
|
3,903
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
Long-Term
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning
balance
|
$
|
103,923
|
|
|
$
|
90,417
|
|
|
$
|
99,923
|
|
|
$
|
103,254
|
|
|
$
|
102,846
|
|
|
$
|
88,834
|
|
|
$
|
90,417
|
|
Inflows
|
4,438
|
|
|
5,501
|
|
|
5,119
|
|
|
4,760
|
|
|
4,764
|
|
|
22,774
|
|
|
20,144
|
|
Outflows
|
(9,211)
|
|
|
(5,555)
|
|
|
(5,058)
|
|
|
(5,885)
|
|
|
(4,418)
|
|
|
(26,494)
|
|
|
(20,916)
|
|
Net flows
|
(4,773)
|
|
|
(54)
|
|
|
61
|
|
|
(1,125)
|
|
|
346
|
|
|
(3,720)
|
|
|
(772)
|
|
Market
performance
|
(8,123)
|
|
|
9,687
|
|
|
3,716
|
|
|
1,019
|
|
|
4,915
|
|
|
(4,522)
|
|
|
19,337
|
|
Other (2)
|
(610)
|
|
|
(127)
|
|
|
(446)
|
|
|
(302)
|
|
|
(381)
|
|
|
9,825
|
|
|
(1,256)
|
|
Ending
balance
|
$
|
90,417
|
|
|
$
|
99,923
|
|
|
$
|
103,254
|
|
|
$
|
102,846
|
|
|
$
|
107,726
|
|
|
$
|
90,417
|
|
|
$
|
107,726
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liquidity
(3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning
balance
|
$
|
1,675
|
|
|
$
|
1,613
|
|
|
$
|
1,789
|
|
|
$
|
1,752
|
|
|
$
|
1,221
|
|
|
$
|
2,129
|
|
|
$
|
1,613
|
|
Other (2)
|
(62)
|
|
|
176
|
|
|
(37)
|
|
|
(531)
|
|
|
(43)
|
|
|
(516)
|
|
|
(435)
|
|
Ending
balance
|
$
|
1,613
|
|
|
$
|
1,789
|
|
|
$
|
1,752
|
|
|
$
|
1,221
|
|
|
$
|
1,178
|
|
|
$
|
1,613
|
|
|
$
|
1,178
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning
balance
|
$
|
105,598
|
|
|
$
|
92,030
|
|
|
$
|
101,712
|
|
|
$
|
105,006
|
|
|
$
|
104,067
|
|
|
$
|
90,963
|
|
|
$
|
92,030
|
|
Inflows
|
4,438
|
|
|
5,501
|
|
|
5,119
|
|
|
4,760
|
|
|
4,764
|
|
|
22,774
|
|
|
20,144
|
|
Outflows
|
(9,211)
|
|
|
(5,555)
|
|
|
(5,058)
|
|
|
(5,885)
|
|
|
(4,418)
|
|
|
(26,494)
|
|
|
(20,916)
|
|
Net flows
|
(4,773)
|
|
|
(54)
|
|
|
61
|
|
|
(1,125)
|
|
|
346
|
|
|
(3,720)
|
|
|
(772)
|
|
Market
performance
|
(8,123)
|
|
|
9,687
|
|
|
3,716
|
|
|
1,019
|
|
|
4,915
|
|
|
(4,522)
|
|
|
19,337
|
|
Other (2)
|
(672)
|
|
|
49
|
|
|
(483)
|
|
|
(833)
|
|
|
(424)
|
|
|
9,309
|
|
|
(1,691)
|
|
Ending
balance
|
$
|
92,030
|
|
|
$
|
101,712
|
|
|
$
|
105,006
|
|
|
$
|
104,067
|
|
|
$
|
108,904
|
|
|
$
|
92,030
|
|
|
$
|
108,904
|
|
|
|
(1)
|
Represents assets
under management of U.S. retail funds, offshore funds and variable
insurance funds.
|
(2)
|
Represents open-end
and closed-end fund distributions net of reinvestments, the net
change in assets from liquidity strategies, and the effect on net
flows from non-sales related activities such as asset
acquisitions/(dispositions), seed capital
investments/(withdrawals), structured products reset transactions,
and the use of leverage.
|
(3)
|
Represents assets
under management in liquidity strategies, including in certain
open-end funds and institutional accounts.
|
Non-GAAP Information and Reconciliations
(in thousands except per share data)
The following are reconciliations and related notes of the most
comparable U.S. GAAP measure to each non-GAAP measure.
The non-GAAP financial measures included in this release differ
from financial measures determined in accordance with U.S. GAAP as
a result of the reclassification of certain income statement items,
as well as the exclusion of certain expenses and other items that
are not reflective of the earnings generated from providing
investment management and related services. Non-GAAP financial
measures have material limitations and should not be viewed in
isolation or as a substitute for U.S. GAAP measures.
Reconciliation of Total Revenues, GAAP to Total Revenues, as
Adjusted:
|
Three Months
Ended
|
|
12/31/2019
|
|
12/31/2018
|
|
9/30/2019
|
Total revenues,
GAAP
|
$
|
146,084
|
|
|
$
|
138,065
|
|
|
$
|
145,955
|
|
Consolidated
investment products revenues (1)
|
2,377
|
|
|
1,615
|
|
|
2,110
|
|
Investment management
fees (2)
|
(10,304)
|
|
|
(10,212)
|
|
|
(10,476)
|
|
Distribution and
service fees (2)
|
(9,782)
|
|
|
(10,831)
|
|
|
(10,451)
|
|
Total revenues, as
adjusted
|
$
|
128,375
|
|
|
$
|
118,637
|
|
|
$
|
127,138
|
|
Reconciliation of Total Operating Expenses, GAAP to Operating
Expenses, as Adjusted:
|
Three Months
Ended
|
|
12/31/2019
|
|
12/31/2018
|
|
9/30/2019
|
Total operating
expenses, GAAP
|
$
|
108,288
|
|
|
$
|
108,837
|
|
|
$
|
110,168
|
|
Consolidated
investment products expenses (1)
|
(620)
|
|
|
(692)
|
|
|
(376)
|
|
Distribution and
other asset-based expenses (3)
|
(20,086)
|
|
|
(21,043)
|
|
|
(20,927)
|
|
Amortization of
intangible assets (4)
|
(7,533)
|
|
|
(7,541)
|
|
|
(7,587)
|
|
Restructuring and
severance (5)
|
(283)
|
|
|
(366)
|
|
|
(523)
|
|
Acquisition and
integration expenses (6)
|
(1,193)
|
|
|
(1,679)
|
|
|
(1,304)
|
|
Other (7)
|
(308)
|
|
|
(338)
|
|
|
—
|
|
Total operating
expenses, as adjusted
|
$
|
78,265
|
|
|
$
|
77,178
|
|
|
$
|
79,451
|
|
Reconciliation of Operating Income (Loss), GAAP to Operating
Income (Loss), as Adjusted:
|
Three Months
Ended
|
|
12/31/2019
|
|
12/31/2018
|
|
9/30/2019
|
Operating income
(loss), GAAP
|
$
|
37,796
|
|
|
$
|
29,228
|
|
|
$
|
35,787
|
|
Consolidated
investment products (earnings) losses (1)
|
2,997
|
|
|
2,307
|
|
|
2,486
|
|
Amortization of
intangible assets (4)
|
7,533
|
|
|
7,541
|
|
|
7,587
|
|
Restructuring and
severance (5)
|
283
|
|
|
366
|
|
|
523
|
|
Acquisition and
integration expenses (6)
|
1,193
|
|
|
1,679
|
|
|
1,304
|
|
Other (7)
|
308
|
|
|
338
|
|
|
—
|
|
Operating income
(loss), as adjusted
|
$
|
50,110
|
|
|
$
|
41,459
|
|
|
$
|
47,687
|
|
|
|
|
|
|
|
Operating margin,
GAAP
|
25.9%
|
|
|
21.2%
|
|
|
24.5%
|
|
Operating margin, as
adjusted
|
39.0%
|
|
|
34.9%
|
|
|
37.5%
|
|
Reconciliation of Net Income (Loss) Attributable to Common
Stockholders, GAAP to Net Income (Loss) Attributable to Common
Stockholders, as Adjusted:
|
Three Months
Ended
|
|
12/31/2019
|
|
12/31/2018
|
|
9/30/2019
|
Net income (loss)
attributable to common stockholders, GAAP
|
$
|
20,808
|
|
|
$
|
77
|
|
|
$
|
22,000
|
|
Amortization of
intangible assets, net of tax (4)
|
4,737
|
|
|
4,684
|
|
|
4,803
|
|
Restructuring and
severance, net of tax (5)
|
206
|
|
|
264
|
|
|
382
|
|
Acquisition and
integration expenses, net of tax (6)
|
868
|
|
|
1,174
|
|
|
953
|
|
Other, net of tax
(7)
|
8,193
|
|
|
2,988
|
|
|
2,231
|
|
Seed capital and CLO
investments (gains) losses, net of tax (8)
|
93
|
|
|
19,635
|
|
|
2,545
|
|
Net income (loss)
attributable to common stockholders, as adjusted
|
$
|
34,905
|
|
|
$
|
28,822
|
|
|
$
|
32,914
|
|
|
|
|
|
|
|
Weighted average
shares outstanding - diluted
|
8,084
|
|
|
7,382
|
|
|
8,157
|
|
Preferred
stockA
|
—
|
|
|
1,047
|
|
|
—
|
|
Weighted average
shares outstanding - diluted, as adjusted
|
8,084
|
|
|
8,429
|
|
|
8,157
|
|
|
|
|
|
|
|
Earnings (loss) per
share - diluted, GAAP
|
$
|
2.83
|
|
|
$
|
0.01
|
|
|
$
|
2.95
|
|
Earnings (loss) per
share - diluted, as adjusted
|
$
|
4.32
|
|
|
$
|
3.42
|
|
|
$
|
4.03
|
|
|
|
A
|
Assumes conversion of
preferred shares to common shares at the 20-day volume-weighted
average common stock price at period end, subject to a conversion
price range of $109.34 to $131.21 per share resulting in a
conversion ratio range of 0.9146 to 0.7622 as of December 31,
2019.
|
Reconciliation of Income (Loss) Before Taxes, GAAP to Income
(Loss) Before Taxes, as Adjusted:
|
Three Months
Ended
|
|
12/31/2019
|
|
12/31/2018
|
|
9/30/2019
|
Income (loss) before
taxes, GAAP
|
$
|
41,108
|
|
|
$
|
11,413
|
|
|
$
|
36,203
|
|
Consolidated
investment products (earnings) losses (1)
|
(304)
|
|
|
1,268
|
|
|
(367)
|
|
Amortization of
intangible assets (4)
|
7,533
|
|
|
7,541
|
|
|
7,587
|
|
Restructuring and
severance (5)
|
283
|
|
|
366
|
|
|
523
|
|
Acquisition and
integration expenses (6)
|
1,193
|
|
|
1,679
|
|
|
1,304
|
|
Other (7)
|
308
|
|
|
338
|
|
|
—
|
|
Seed capital and CLO
investments (gains) losses (8)
|
311
|
|
|
18,745
|
|
|
2,038
|
|
Income (loss) before
taxes, as adjusted
|
$
|
50,432
|
|
|
$
|
41,350
|
|
|
$
|
47,288
|
|
Reconciliation of Income Tax Expense (Benefit), GAAP to Income
Tax Expense (Benefit), as Adjusted:
|
Three Months
Ended
|
|
12/31/2019
|
|
12/31/2018
|
|
9/30/2019
|
Income tax expense
(benefit), GAAP
|
$
|
11,326
|
|
|
$
|
10,320
|
|
|
$
|
10,844
|
|
Tax impact
of:
|
|
|
|
|
|
Amortization
of intangible assets (4)
|
2,054
|
|
|
2,102
|
|
|
2,042
|
|
Restructuring
and severance (5)
|
77
|
|
|
102
|
|
|
141
|
|
Acquisition
and integration expenses (6)
|
325
|
|
|
468
|
|
|
351
|
|
Other
(7)
|
(247)
|
|
|
(566)
|
|
|
(146)
|
|
Seed capital
and CLO investments (gains) losses (8)
|
218
|
|
|
(900)
|
|
|
(507)
|
|
Income tax expense
(benefit), as adjusted
|
$
|
13,753
|
|
|
$
|
11,526
|
|
|
$
|
12,725
|
|
|
|
|
|
|
|
Effective tax rate,
GAAPA
|
27.6%
|
|
|
90.4%
|
|
|
30.0%
|
|
Effective tax rate,
as adjustedB
|
27.3%
|
|
|
27.9%
|
|
|
26.9%
|
|
|
|
A
|
Reflects income tax
expense (benefit), GAAP, divided by income (loss) before taxes,
GAAP.
|
B
|
Reflects income tax
expense (benefit), as adjusted, divided by income (loss) before
taxes, as adjusted.
|
Reconciliation of Administration and Shareholder Service Fees,
GAAP to Administration and Shareholder Service Fees, as
Adjusted:
|
Three Months
Ended
|
|
12/31/2019
|
|
12/31/2018
|
|
9/30/2019
|
Administration and
shareholder service fees, GAAP
|
$
|
15,137
|
|
|
$
|
15,342
|
|
|
$
|
15,280
|
|
Consolidated
investment products fees (1)
|
52
|
|
|
24
|
|
|
49
|
|
Administration and
shareholder service fees, as adjusted
|
$
|
15,189
|
|
|
$
|
15,366
|
|
|
$
|
15,329
|
|
Reconciliation of Employment Expenses, GAAP to Employment
Expenses, as Adjusted:
|
Three Months
Ended
|
|
12/31/2019
|
|
12/31/2018
|
|
9/30/2019
|
Employment expenses,
GAAP
|
$
|
60,265
|
|
|
$
|
59,668
|
|
|
$
|
61,282
|
|
Acquisition and
integration expenses (6)
|
(1,193)
|
|
|
(1,595)
|
|
|
(1,223)
|
|
Other (7)
|
(308)
|
|
|
—
|
|
|
—
|
|
Employment expenses,
as adjusted
|
$
|
58,764
|
|
|
$
|
58,073
|
|
|
$
|
60,059
|
|
Reconciliation of Other Operating Expenses, GAAP to Other
Operating Expenses, as Adjusted:
|
Three Months
Ended
|
|
12/31/2019
|
|
12/31/2018
|
|
9/30/2019
|
Other operating
expenses, GAAP
|
$
|
18,238
|
|
|
$
|
18,513
|
|
|
$
|
18,228
|
|
Acquisition and
integration expenses (6)
|
—
|
|
|
(363)
|
|
|
(81)
|
|
Other (7)
|
—
|
|
|
(338)
|
|
|
—
|
|
Other operating
expenses, as adjusted
|
$
|
18,238
|
|
|
$
|
17,812
|
|
|
$
|
18,147
|
|
Reconciliation of Total Other Income (Expense), Net, GAAP to
Total Other Income (Expense), Net, as Adjusted:
|
Three Months
Ended
|
|
12/31/2019
|
|
12/31/2018
|
|
9/30/2019
|
Total other income
(expense), net GAAP
|
$
|
(1,568)
|
|
|
$
|
(22,272)
|
|
|
$
|
(4,596)
|
|
Consolidated
investment products (1)
|
1,747
|
|
|
4,555
|
|
|
3,593
|
|
Seed capital and CLO
investments (gains) losses (8)
|
311
|
|
|
18,745
|
|
|
2,038
|
|
Total other income
(expense), net as adjusted
|
$
|
490
|
|
|
$
|
1,028
|
|
|
$
|
1,035
|
|
Reconciliation of Interest and Dividend Income, GAAP to Interest
and Dividend Income, as Adjusted:
|
Three Months
Ended
|
|
12/31/2019
|
|
12/31/2018
|
|
9/30/2019
|
Interest and dividend
income, GAAP
|
$
|
827
|
|
|
$
|
1,744
|
|
|
$
|
863
|
|
Consolidated
investment products (1)
|
3,273
|
|
|
3,082
|
|
|
2,592
|
|
Interest and dividend
income, as adjusted
|
$
|
4,100
|
|
|
$
|
4,826
|
|
|
$
|
3,455
|
|
Reconciliation of Total Noncontrolling Interests, GAAP to Total
Noncontrolling Interests, as Adjusted
|
Three Months
Ended
|
|
12/31/2019
|
|
12/31/2018
|
|
9/30/2019
|
Total noncontrolling
interests, GAAP
|
$
|
(6,890)
|
|
|
$
|
1,068
|
|
|
$
|
(1,274)
|
|
Consolidated
investment products (1)
|
304
|
|
|
(1,268)
|
|
|
367
|
|
Amortization of
intangible assets (4)
|
(742)
|
|
|
(755)
|
|
|
(742)
|
|
Acquisition and
integration expenses (6)
|
—
|
|
|
(37)
|
|
|
—
|
|
Other (7)
|
5,554
|
|
|
—
|
|
|
—
|
|
Seed capital and CLO
investments (gains) losses (8)
|
—
|
|
|
(10)
|
|
|
—
|
|
Total noncontrolling
interests, as adjusted
|
$
|
(1,774)
|
|
|
$
|
(1,002)
|
|
|
$
|
(1,649)
|
|
Notes to Reconciliations:
Reclassifications:
1. Consolidated
investment products - Revenues and expenses
generated by operating activities of mutual funds and CLOs that are
consolidated in the financial statements. Management believes that
excluding these operating activities to reflect net revenues and
expenses of the company prior to the consolidation of these
products is consistent with the approach of reflecting its
operating results from managing third-party client assets.
Other adjustments:
Revenue Related
2. Investment management
/ Distribution and service fees - Each of
these revenue line items is reduced to exclude fees passed through
to third-party client intermediaries who own the retail client
relationship and are responsible for distributing the product and
servicing the client. The amount of fees fluctuates each
period, based on a predetermined percentage of the value of assets
under management, and varies based on the type of investment
product. The specific adjustments are as follows:
Investment management fees -
Based on specific agreements, the portion of investment management
fees passed-through to third-party intermediaries for services to
investors in sponsored investment products.
Distribution and service
fees - Based on distinct arrangements, fees collected by
the company then passed-through to third-party client
intermediaries for services to investors in sponsored investment
products. The adjustment represents all of the company's
distribution and service fees that are recorded as a separate line
item on the condensed consolidated statements of operations.
Management believes that making these adjustments aids in comparing
the company's operating results with other asset management firms
that do not utilize third-party client intermediaries.
Expense Related
3. Distribution
and other asset-based expenses - Primarily payments to
third-party client intermediaries for providing services to
investors in sponsored investment products. Management believes
that making this adjustment aids in comparing the company's
operating results with other asset management firms that do not
utilize third-party client intermediaries.
4. Amortization of
intangible assets - Non-cash amortization expense or
impairment expense, if any, attributable to acquisition-related
intangible assets, including any portion that is allocated to
noncontrolling interests. Management believes that making this
adjustment aids in comparing the company's operating results with
other asset management firms that have not engaged in
acquisitions.
5. Restructuring and
severance - Certain expenses associated with restructuring
the business, including lease abandonment-related expenses and
severance costs associated with staff reductions, that are not
reflective of the ongoing earnings generation of the business.
Management believes that making this adjustment aids in comparing
the company's operating results with prior periods.
6. Acquisition and
integration expenses - Expenses that are directly related
to acquisition and integration activities. Acquisition expenses
include transaction closing costs, certain professional fees, and
financing fees. Integration expenses include costs incurred that
are directly attributable to combining businesses, including
compensation, restructuring and severance charges, professional
fees, consulting fees, and other expenses. Management believes that
making these adjustments aids in comparing the company's operating
results with other asset management firms that have not engaged in
acquisitions.
Components of Acquisition and Integration Expenses for the
respective periods are shown below:
|
Three Months
Ended
|
Acquisition and
Integration Expenses
|
12/31/2019
|
|
12/31/2018
|
|
9/30/2019
|
Employment
expenses
|
$
|
1,193
|
|
|
$
|
1,595
|
|
|
$
|
1,223
|
|
Restructuring and
severance
|
—
|
|
|
(279)
|
|
|
—
|
|
Other operating
expenses
|
—
|
|
|
363
|
|
|
81
|
|
Total Acquisition
and Integration Expenses
|
$
|
1,193
|
|
|
$
|
1,679
|
|
|
$
|
1,304
|
|
7. Other -
Certain expenses that are not reflective of the ongoing earnings
generation of the business. Employment expenses and noncontrolling
interests are adjusted for fair value measurements of affiliate
minority interests. Income tax expense (benefit) items are adjusted
for uncertain tax positions, changes in tax law, valuation
allowances, and other unusual or infrequent items not related to
current operating results to reflect a normalized effective
rate. Preferred dividends are adjusted as the shares are
mandatorily convertible into common shares at the end of three
years, and the non-GAAP weighted average shares are adjusted to
reflect the conversion. Management believes that making these
adjustments aids in comparing the company's operating results with
prior periods.
Components of Other for the
respective periods are shown below:
|
Three Months
Ended
|
Other
|
12/31/2019
|
|
12/31/2018
|
|
9/30/2019
|
Occupancy related
expenses
|
$
|
—
|
|
|
$
|
338
|
|
|
$
|
—
|
|
Tax impact of
occupancy related expenses
|
—
|
|
|
(94)
|
|
|
—
|
|
Employment expense
fair value adjustments
|
308
|
|
|
—
|
|
|
—
|
|
Tax impact of
employment expense fair value adjustments
|
(84)
|
|
|
—
|
|
|
—
|
|
Other discrete tax
adjustments
|
331
|
|
|
660
|
|
|
146
|
|
Affiliate minority
interest fair value adjustments
|
5,554
|
|
|
—
|
|
|
—
|
|
Preferred stockholder
dividends
|
2,084
|
|
|
2,084
|
|
|
2,085
|
|
Total
Other
|
$
|
8,193
|
|
|
$
|
2,988
|
|
|
$
|
2,231
|
|
Seed Capital and CLO Related
8. Seed capital and CLO
investments (gains) losses - Gains and losses (realized
and unrealized) of seed capital and CLO investments. Gains and
losses (realized and unrealized) generated by investments in seed
capital and CLO investments can vary significantly from period to
period and do not reflect the company's operating results from
providing investment management and related services. Management
believes that making this adjustment aids in comparing the
company's operating results with prior periods and with other asset
management firms that do not have meaningful seed capital and CLO
investments.
Definitions:
Revenues, as adjusted, comprise the fee
revenues paid by clients for investment management and related
services. Revenues, as adjusted, for purposes of calculating net
income attributable to common stockholders, as adjusted, differ
from U.S. GAAP, namely in excluding the impact of operating
activities of consolidated investment products and reduced to
exclude fees passed-through to third-party client intermediaries
who own the retail client relationship and are responsible for
distributing the product and servicing the client.
Operating expenses, as adjusted, is
calculated to reflect expenses from ongoing continuing operations.
Operating expenses, as adjusted, for purposes of calculating net
income attributable to 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 effect of consolidated investment products,
acquisition and integration-related expenses and certain other
expenses that do not reflect the ongoing earnings generation of the
business.
Operating margin, as adjusted, is a metric
used to evaluate efficiency represented by operating income, as
adjusted, divided by revenues, as adjusted.
Earnings (loss) per share, as
adjusted, represent net income (loss) attributable to
common stockholders, as adjusted, divided by weighted average
shares outstanding, as adjusted, on either a basic or diluted
basis.
Forward-Looking Information
This press release contains statements that are, or may be
considered to be, forward-looking statements. All statements that
are not historical facts, including statements about our beliefs or
expectations, are "forward-looking statements" within the meaning
of The Private Securities Litigation Reform Act of 1995, as
amended. These statements may be identified by such forward-looking
terminology as "expect," "estimate," "intent," "plan," "intend,"
"believe," "anticipate," "may," "will," "should," "could,"
"continue," "project," "opportunity," "predict," "would,"
"potential," "future," "forecast," "guarantee," "assume," "likely,"
"target" or similar statements or variations of such terms.
Our forward-looking statements are based on a series of
expectations, assumptions and projections about the company
and the markets in which we operate, are not guarantees
of future results or performance, and involve substantial risks and
uncertainty including assumptions and projections concerning our
assets under management, net asset inflows and outflows, operating
cash flows, business plans and ability to borrow, for all future
periods. All forward-looking statements are as of the date of this
release only. The company can give no assurance that such
expectations or forward-looking statements will prove to be
correct. Actual results may differ materially.
Our business and our forward-looking statements involve
substantial known and unknown risks and uncertainties, including
those discussed under "Risk Factors," and "Management's Discussion
and Analysis of Financial Condition and Results of Operations" in
our 2018 Annual Report on Form 10-K as well as the following risks
and uncertainties: (a) any reduction in our assets under
management; (b) withdrawal, renegotiation or termination of
investment advisory agreements; (c) damage to our reputation; (d)
failure to comply with investment guidelines or other contractual
requirements; (e) inability to satisfy financial covenants and
payments related to our indebtedness; (f) inability to attract and
retain key personnel; (g) challenges from the competition we face
in our business; (h) adverse regulatory and legal developments; (i)
unfavorable changes in tax laws or limitations; (j) adverse
developments related to unaffiliated subadvisers; (k) negative
implications of changes in key distribution relationships; (l)
interruptions in or failure to provide critical technological
service by us or third parties; (m) volatility associated with our
common and preferred stock; (n) adverse civil litigation and
government investigations or proceedings; (o) risk of loss on our
investments; (p) inability to make quarterly common and preferred
stock distributions; (q) lack of sufficient capital on satisfactory
terms; (r) losses or costs not covered by insurance; (s) impairment
of goodwill or intangible assets; (t) inability to achieve expected
acquisition-related benefits; and other risks and uncertainties
described in our 2018 Annual Report on Form 10-K and our filings
with the Securities and Exchange Commission (the "SEC").
Certain other factors that may impact our continuing operations,
prospects, financial results and liquidity, or that may cause
actual results to differ from such forward-looking statements, are
discussed or included in the company's periodic reports filed with
the SEC and are available on our website at www.virtus.com under
"Investor Relations." You are urged to carefully consider all such
factors.
The company does not undertake or plan to update or revise any
such forward-looking statements to reflect actual results, changes
in plans, assumptions, estimates or projections, or other
circumstances occurring after the date of this release, even if
such results, changes or circumstances make it clear that any
forward-looking information will not be realized. If there are any
future public statements or disclosures by us that modify or affect
any of the forward-looking statements contained in or accompanying
this release, such statements or disclosures will be deemed to
modify or supersede such statements in this release.
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SOURCE Virtus Investment Partners, Inc.