Virtus Investment Partners Earnings 2020-06-30

Balance Sheet	Income Statement	Cash Flow
Assets, Equity	Rev, G Profit, Net Income	Ops, Inv, Fin

Document

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q



☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2020



☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number: 001-10994

VIRTUS INVESTMENT PARTNERS, INC.

(Exact name of registrant as specified in its charter)




Delaware		26-3962811
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

One Financial Plaza, Hartford, CT 06103

(Address of principal executive offices, including Zip Code)

(800) 248-7971

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:



Title of each class	Trading Symbol(s)	Name of each exchange on which registered

Common Stock, $0.01 par value	VRTS	The NASDAQ Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.



Large accelerated filer	☒	Accelerated filer	☐

Non-accelerated filer	☐	Smaller reporting company	☐

		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

The number of shares outstanding of the registrant’s common stock was 7,664,272 as of July 20, 2020.

Table of Contents

VIRTUS INVESTMENT PARTNERS, INC.

INDEX



		Page
Part I. FINANCIAL INFORMATION
Item 1.	Financial Statements (Unaudited)
	Condensed Consolidated Balance Sheets (Unaudited) as of June 30, 2020 and December 31, 2019	1
	Condensed Consolidated Statements of Operations (Unaudited) for the Three and Six Months Ended June 30, 2020 and 2019	2
	Condensed Consolidated Statements of Comprehensive Income (Unaudited) for the Three and Six Months Ended June 30, 2020 and 2019	3
	Condensed Consolidated Statements of Cash Flows (Unaudited) for the Six Months Ended June 30, 2020 and 2019	4
	Condensed Consolidated Statements of Changes in Equity (Unaudited) for the Three and Six Months Ended June 30, 2020 and 2019	5
	Notes to Condensed Consolidated Financial Statements (Unaudited)	6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	19
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	31
Item 4.	Controls and Procedures	31

Part II. OTHER INFORMATION
Item 1.	Legal Proceedings	32
Item 1A.	Risk Factors	32
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	33
Item 6.	Exhibits	33
	Signatures	34

"We," "us," "our," the "Company," and "Virtus" as used in this Quarterly Report on Form 10-Q refer to Virtus Investment Partners, Inc., a Delaware corporation, and its subsidiaries.

Table of Contents

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

Virtus Investment Partners, Inc.

Condensed Consolidated Balance Sheets

(Unaudited)



(in thousands, except share data)	June 30, 2020			December 31, 2019
Assets:
Cash and cash equivalents	$	168,268		$	221,781
Investments	61,301			83,206
Accounts receivable, net	72,435			74,132
Assets of consolidated investment products ("CIP")
Cash and cash equivalents of CIP	77,321			99,691
Cash pledged or on deposit of CIP	6,464			467
Investments of CIP	2,273,820			2,030,110
Other assets of CIP	29,787			23,612
Furniture, equipment and leasehold improvements, net	16,068			18,150
Intangible assets, net	295,325			310,391
Goodwill	290,366			290,366
Deferred taxes, net	10,874			15,879
Other assets	38,058			36,849
Total assets	$	3,340,087		$	3,204,634
Liabilities and Equity
Liabilities:
Accrued compensation and benefits	$	56,228		$	101,377
Accounts payable and accrued liabilities	19,528			23,308
Dividends payable	7,196			8,915
Debt	234,765			277,839
Other liabilities	36,272			40,507
Liabilities of CIP
Notes payable of CIP	2,156,587			1,834,535
Securities purchased payable and other liabilities of CIP	72,313			168,051
Total liabilities	2,582,889			2,454,532
Commitments and Contingencies (Note 13)
Redeemable noncontrolling interests	90,687			63,845
Equity:
Equity attributable to stockholders:
Series D mandatory convertible preferred stock, $0.01 par value, 0 and 1,150,000 shares authorized, issued and outstanding at June 30, 2020 and December 31, 2019, respectively	—			110,843
Common stock, $0.01 par value, 1,000,000,000 shares authorized; 11,777,732 shares issued and 7,664,272 shares outstanding at June 30, 2020 and 10,736,887 shares issued and 6,809,280 shares outstanding at December 31, 2019, respectively	118			107
Additional paid-in capital	1,303,036			1,199,205
Retained earnings (accumulated deficit)	(208,222		)	(215,216		)
Accumulated other comprehensive income (loss)	(17		)	9
Treasury stock, at cost, 4,113,460 and 3,927,607 shares at June 30, 2020 and December 31, 2019, respectively	(436,749		)	(419,249		)
Total equity attributable to stockholders	658,166			675,699
Noncontrolling interests	8,345			10,558
Total equity	666,511			686,257
Total liabilities and equity	$	3,340,087		$	3,204,634

The accompanying notes are an integral part of these condensed consolidated financial statements.

Table of Contents

Virtus Investment Partners, Inc.

Condensed Consolidated Statements of Operations

(Unaudited)



	Three Months Ended June 30,						Six Months Ended June 30,
(in thousands, except per share data)	2020			2019			2020			2019
Revenues
Investment management fees	$	110,550		$	114,591		$	230,838		$	220,509
Distribution and service fees	8,889			10,617			18,349			20,680
Administration and shareholder service fees	13,289			15,054			27,942			29,467
Other income and fees	166			227			331			551
Total revenues	132,894			140,489			277,460			271,207
Operating Expenses
Employment expenses	60,163			58,123			126,293			118,974
Distribution and other asset-based expenses	17,345			21,322			36,754			41,086
Other operating expenses	17,436			19,174			36,321			37,897
Operating expenses of consolidated investment products ("CIP")	2,179			2,568			8,928			3,019
Restructuring and severance	420			320			420			1,496
Depreciation expense	1,196			1,271			2,454			2,484
Amortization expense	7,533			7,583			15,066			15,124
Total operating expenses	106,272			110,361			226,236			220,080
Operating Income (Loss)	26,622			30,128			51,224			51,127
Other Income (Expense)
Realized and unrealized gain (loss) on investments, net	7,114			2,039			(430		)	5,472
Realized and unrealized gain (loss) of CIP, net	(6,744		)	9,720			(15,413		)	7,799
Other income (expense), net	(805		)	696			(193		)	1,146
Total other income (expense), net	(435		)	12,455			(16,036		)	14,417
Interest Income (Expense)
Interest expense	(3,126		)	(5,151		)	(6,325		)	(10,316		)
Interest and dividend income	242			964			994			2,154
Interest and dividend income of investments of CIP	28,634			29,368			57,863			56,770
Interest expense of CIP	(28,150		)	(31,077		)	(52,636		)	(50,778		)
Total interest income (expense), net	(2,400		)	(5,896		)	(104		)	(2,170		)
Income (Loss) Before Income Taxes	23,787			36,687			35,084			63,374
Income tax expense (benefit)	7,578			8,788			17,869			13,007
Net Income (Loss)	16,209			27,899			17,215			50,367
Noncontrolling interests	(4,930		)	(973		)	(10,221		)	(1,695		)
Net Income (Loss) Attributable to Stockholders	11,279			26,926			6,994			48,672
Preferred stockholder dividends	—			(2,084		)	—			(4,168		)
Net Income (Loss) Attributable to Common Stockholders	$	11,279		$	24,842		$	6,994		$	44,504
Earnings (Loss) per Share—Basic	$	1.46		$	3.55		$	0.92		$	6.35
Earnings (Loss) per Share—Diluted	$	1.43		$	3.26		$	0.88		$	5.87
Weighted Average Shares Outstanding—Basic	7,720			6,999			7,572			7,010
Weighted Average Shares Outstanding—Diluted	7,895			8,252			7,936			8,290

The accompanying notes are an integral part of these condensed consolidated financial statements.

Table of Contents

Virtus Investment Partners, Inc.

Condensed Consolidated Statements of Comprehensive Income

(Unaudited)



	Three Months Ended June 30,						Six Months Ended June 30,
(in thousands)	2020			2019			2020			2019
Net Income (Loss)	$	16,209		$	27,899		$	17,215		$	50,367
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustment, net of tax of $0 and $4 for the three months ended June 30, 2020 and 2019, respectively, and $9 and $1 for the six months ended June 30, 2020 and 2019, respectively	(1		)	(8		)	(26		)	(2		)
Other comprehensive income (loss)	(1		)	(8		)	(26		)	(2		)
Comprehensive income (loss)	16,208			27,891			17,189			50,365
Comprehensive (income) loss attributable to noncontrolling interests	(4,930		)	(973		)	(10,221		)	(1,695		)
Comprehensive Income (Loss) Attributable to Stockholders	$	11,278		$	26,918		$	6,968		$	48,670

The accompanying notes are an integral part of these condensed consolidated financial statements.

Table of Contents

Virtus Investment Partners, Inc.

Condensed Consolidated Statements of Cash Flows

(Unaudited)



	Six Months Ended June 30,
(in thousands)	2020			2019
Cash Flows from Operating Activities:
Net income (loss)	$	17,215		$	50,367
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation expense, intangible asset and other amortization	21,557			19,810
Stock-based compensation	10,113			11,384
Amortization of deferred commissions	1,038			1,805
Payments of deferred commissions	(974		)	(973		)
Equity in earnings of equity method investments	93			(1,209		)
(Gain) loss on extinguishment of debt	(705		)	—
Realized and unrealized (gains) losses on investments, net	431			(4,634		)
Distributions from equity method investments	726			675
Sales (purchases) of investments, net	4,703			13,767
Deferred taxes, net	5,014			252
Changes in operating assets and liabilities:
Accounts receivable, net and other assets	(2,032		)	(2,394		)
Accrued compensation and benefits, accounts payable, accrued liabilities and other liabilities	(52,788		)	(44,325		)
Operating activities of consolidated investment products ("CIP"):
Realized and unrealized (gains) losses on investments of CIP, net	11,603			(13,222		)
Purchases of investments by CIP	(920,392		)	(532,342		)
Sales of investments by CIP	442,859			348,771
Net proceeds (purchases) of short term investments by CIP	68			(309		)
(Purchases) sales of securities sold short by CIP, net	250			1,193
Change in other assets of CIP	(1,790		)	71
Change in liabilities of CIP	2,130			3,140
Amortization of discount on notes payable of CIP	11,169			4,505
Net cash provided by (used in) operating activities	(449,712		)	(143,668		)
Cash Flows from Investing Activities:
Capital expenditures and other asset purchases	(475		)	(6,111		)
Change in cash and cash equivalents of CIP due to consolidation (deconsolidation), net	9,724			(1,571		)
Sale of available-for-sale securities	—			2,044
Net cash provided by (used in) investing activities	9,249			(5,638		)
Cash Flows from Financing Activities:
Payment of long term debt	(44,059		)	(24,825		)
Common stock dividends paid	(11,320		)	(8,392		)
Preferred stock dividends paid	(2,084		)	(4,168		)
Repurchases of common shares	(17,500		)	(22,499		)
Proceeds from exercise of stock options	114			643
Taxes paid related to net share settlement of restricted stock units	(5,569		)	(6,509		)
Net subscriptions received from (redemptions/distributions paid to) noncontrolling interests	(3,951		)	6,599
Financing activities of CIP:
Payments on borrowings by CIP	(326,201		)	(195,697		)
Borrowings by CIP	781,147			400,782
Net cash provided by (used in) financing activities	370,577			145,934
Net increase (decrease) in cash, cash equivalents and restricted cash	(69,886		)	(3,372		)
Cash, cash equivalents and restricted cash, beginning of period	321,939			254,656
Cash, cash equivalents and restricted cash, end of period	$	252,053		$	251,284
Non-Cash Investing Activities:
Change in accrual for capital expenditures	$	(21	)	$	(1,813	)
Non-Cash Financing Activities:
Increase (decrease) to noncontrolling interests due to consolidation (deconsolidation) of CIP, net	$	17,137		$	(6,423	)
Common stock dividends payable	$	5,169		$	3,849
Preferred stock dividends payable	$	—		$	2,084
Conversion of preferred stock to common stock	$	115,000		$	—



(in thousands)	June 30, 2020		December 31, 2019
Reconciliation of cash, cash equivalents and restricted cash
Cash and cash equivalents	$	168,268	$	221,781
Cash of CIP	77,321		99,691
Cash pledged or on deposit of CIP	6,464		467
Cash, cash equivalents and restricted cash at end of period	$	252,053	$	321,939

The accompanying notes are an integral part of these condensed consolidated financial statements.

Table of Contents

Virtus Investment Partners, Inc.

Condensed Consolidated Statements of Changes in Equity

(Unaudited)



	Permanent Equity																													Temporary Equity
	Common Stock				Preferred Stock			Additional Paid-in Capital			Retained Earnings (Accumulated Deficit)			Accumulated Other Comprehensive Income (Loss)			Treasury Stock				Total Attributed To Stockholders			Non- controlling Interests			Total Equity			Redeemable Non- controlling Interests
(in thousands, except per share data)	Shares		Par Value		Shares	Amount		Additional Paid-in Capital			Retained Earnings (Accumulated Deficit)			Accumulated Other Comprehensive Income (Loss)			Shares	Amount			Total Attributed To Stockholders			Non- controlling Interests			Total Equity			Redeemable Non- controlling Interests
Balances at March 31, 2019	6,978,925		$	107	1,150,000	$	110,843	$	1,205,926		$	(289,119	)	$	1		3,703,204	$	(394,248	)	$	633,510		$	12,948		$	646,458		$	59,003
Net income (loss)	—		—		—	—		—			26,926			—			—	—			26,926			224			27,150			749
Foreign currency translation adjustments	—		—		—	—		—			—			(8		)	—	—			(8		)	—			(8		)	—
Net subscriptions (redemptions) and other	—		—		—	—		290			—			—			—	—			290			(535		)	(245		)	750
Cash dividends declared ($1.8125 per preferred share)	—		—		—	—		(2,084		)	—			—			—	—			(2,084		)	—			(2,084		)	—
Cash dividends declared ($0.55 per common share)	—		—		—	—		(4,104		)	—			—			—	—			(4,104		)	—			(4,104		)	—
Repurchases of common shares	(67,709	)	—		—	—		—			—			—			67,709	(7,500		)	(7,500		)	—			(7,500		)	—
Issuance of common shares related to employee stock transactions	33,676		—		—	—		565			—			—			—	—			565			—			565			—
Taxes paid on stock-based compensation	—		—		—	—		(1,294		)	—			—			—	—			(1,294		)	—			(1,294		)	—
Stock-based compensation	—		—		—	—		4,734			—			—			—	—			4,734			—			4,734			—
Balances at June 30, 2019	6,944,892		$	107	1,150,000	$	110,843	$	1,204,033		$	(262,193	)	$	(7	)	3,770,913	$	(401,748	)	$	651,035		$	12,637		$	663,672		$	60,502
Balances at March 31, 2020	7,695,413		$	117	—	$	—	$	1,304,868		$	(219,501	)	$	(16	)	4,038,563	$	(429,249	)	$	656,219		$	10,247		$	666,466		$	87,115
Net income (loss)	—		—		—	—		—			11,279			—			—	—			11,279			(1,378		)	9,901			6,308
Foreign currency translation adjustments	—		—		—	—		—			—			(1		)	—	—			(1		)	—			(1		)	—
Net subscriptions (redemptions) and other	—		—		—	—		(167		)	—			—			—	—			(167		)	(524		)	(691		)	(2,736		)
Cash dividends declared ($0.67 per common share)	—		—		—	—		(5,496		)	—			—			—	—			(5,496		)	—			(5,496		)	—
Repurchases of common shares	(74,897	)	—		—	—		—			—			—			74,897	(7,500		)	(7,500		)	—			(7,500		)	—
Issuance of common shares related to employee stock transactions	43,756		1		—	—		12			—			—			—	—			13			—			13			—
Taxes paid on stock-based compensation	—		—		—	—		(2,019		)	—			—			—	—			(2,019		)				(2,019		)	—
Stock-based compensation	—		—		—	—		5,838			—			—			—	—			5,838			—			5,838			—
Balances at June 30, 2020	7,664,272		$	118	—	$	—	$	1,303,036		$	(208,222	)	$	(17	)	4,113,460	$	(436,749	)	$	658,166		$	8,345		$	666,511		$	90,687



	Permanent Equity																									Temporary Equity
	Common Stock			Preferred Stock			Additional Paid-in Capital		Retained Earnings (Accumulated Deficit)			Accumulated Other Comprehensive Income (Loss)			Treasury Stock				Total Attributed To Stockholders		Non- controlling Interests			Total Equity		Redeemable Non- controlling Interests
(in thousands, except per share data)	Shares	Par Value		Shares	Amount		Additional Paid-in Capital		Retained Earnings (Accumulated Deficit)			Accumulated Other Comprehensive Income (Loss)			Shares	Amount			Total Attributed To Stockholders		Non- controlling Interests			Total Equity		Redeemable Non- controlling Interests
Balances at December 31, 2018	6,997,382	$	106	1,150,000	$	110,843	$	1,209,805	$	(310,865	)	$	(731	)	3,555,242	$	(379,249	)	$	629,909	$	13,958		$	643,867	$	57,481
Net income (loss)	—	—		—	—		—		48,672			—			—	—			48,672		(229		)	48,443		1,924

Price	114.29	EPS	9
Shares	8	P/E	12
MCap	939	P/FCF	-9
Net Debt	13	EBIT	101
TEV	952	TEV/EBIT	9
TTM 2019-09-30, in MM, except price, ratios

10-Q	2020-06-30	Filed 2020-08-06
10-Q	2020-03-31	Filed 2020-05-06
10-K	2019-12-31	Filed 2020-02-27
10-Q	2019-09-30	Filed 2019-11-06
10-Q	2019-06-30	Filed 2019-08-06
10-Q	2019-03-31	Filed 2019-05-06
10-K	2018-12-31	Filed 2019-02-27
10-Q	2018-09-30	Filed 2018-11-08
10-Q	2018-06-30	Filed 2018-08-08
10-Q	2018-03-31	Filed 2018-05-08
10-K	2017-12-31	Filed 2018-02-27
10-Q	2017-09-30	Filed 2017-11-06
10-Q	2017-06-30	Filed 2017-08-08
10-Q	2017-03-31	Filed 2017-05-08
10-K	2016-12-31	Filed 2017-02-27
10-Q	2016-09-30	Filed 2016-11-07
10-Q	2016-06-30	Filed 2016-08-09
10-Q	2016-03-31	Filed 2016-05-03
10-K	2015-12-31	Filed 2016-02-24
10-Q	2015-09-30	Filed 2015-10-30
10-Q	2015-06-30	Filed 2015-07-31
10-Q	2015-03-31	Filed 2015-05-11
10-K	2014-12-31	Filed 2015-03-02
10-Q	2014-09-30	Filed 2014-11-07
10-Q	2014-06-30	Filed 2014-07-29
10-Q	2014-03-31	Filed 2014-05-07
10-K	2013-12-31	Filed 2014-02-24
10-Q	2013-09-30	Filed 2013-11-04
10-Q	2013-06-30	Filed 2013-08-02
10-Q	2013-03-31	Filed 2013-05-07
10-K	2012-12-31	Filed 2013-03-01
10-Q	2012-09-30	Filed 2012-11-07
10-Q	2012-06-30	Filed 2012-08-07
10-Q	2012-03-31	Filed 2012-05-08
10-K	2011-12-31	Filed 2012-03-01
10-Q	2011-09-30	Filed 2011-11-04
10-Q	2011-06-30	Filed 2011-08-05
10-Q	2011-03-31	Filed 2011-05-05
10-K	2010-12-31	Filed 2011-03-01
10-Q	2010-09-30	Filed 2010-11-04
10-Q	2010-06-30	Filed 2010-08-06
10-Q	2010-03-31	Filed 2010-05-04
10-K	2009-12-31	Filed 2010-03-08

8-K	2020-07-24	Earnings, Exhibits
8-K	2020-07-04	Other Events, Exhibits
8-K	2020-05-18
8-K	2020-05-01
8-K	2020-02-09
8-K	2020-01-31
8-K	2020-01-09
8-K	2019-10-25
8-K	2019-09-29
8-K	2019-07-26
8-K	2019-05-15
8-K	2019-04-26
8-K	2019-04-10
8-K	2019-02-01
8-K	2018-10-26
8-K	2018-07-27
8-K	2018-07-02
8-K	2018-06-11
8-K	2018-05-15
8-K	2018-04-27
8-K	2018-03-26
8-K	2018-02-15
8-K	2018-02-14
8-K	2018-02-07
8-K	2018-02-02

EX-31.1	vrts06302020ex-311.htm
EX-31.2	vrts06302020ex-312.htm
EX-32.1	vrts06302020ex-321.htm

VRTS 10Q Quarterly Report

Virtus Investment Partners Earnings 2020-06-30