Virtus Investment Partners(US:VRTS)2020-07-24 19:20Financial Data and Key Metrics Changes - Long-term assets under management (AUM) increased by nearly $18 billion or 20% to $107.1 billion as of June 30, driven by market appreciation and positive net flows [12][20] - Operating income as adjusted was $40.5 million with a margin of 34.3%, up from $40.1 million and 31.5% in the previous quarter [18][36] - Earnings per share as adjusted decreased by 2% to $3.24, primarily due to lower revenues [38] Business Line Data and Key Metrics Changes - Positive net flows for the quarter totaled $2.5 billion, with strong contributions from various asset classes [14][23] - Open-end net flows were positive at $0.4 billion, with domestic equity leading the way [15][25] - Retail separate accounts saw positive net flows of $0.8 billion, marking 18 consecutive quarters of positive flows [15][24] - Institutional net flows were positive at $1.5 billion, reflecting the attractiveness of the investment strategies [16][112] Market Data and Key Metrics Changes - Total sales for the quarter reached $9.1 billion, a 30% sequential increase and 77% year-over-year growth [27] - Domestic equity net flows were positive at $1.2 billion, a significant improvement from the previous quarter [25] - Fixed income fund net outflows improved to $0.3 billion from $1.4 billion in the first quarter [26] Company Strategy and Development Direction - The company announced a strategic partnership with Allianz Global Investors, expected to add approximately $24 billion in AUM and enhance fund offerings and distribution capabilities [11][43] - The partnership is structured to align interests without requiring upfront payments, focusing on growth and profitability [50][84] - The company aims to leverage existing infrastructure to maximize growth opportunities and maintain a balanced capital structure [66][70] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the strong organic growth rate of 11% annualized and the broad-based contributions across product categories [9][23] - The management highlighted the importance of maintaining relationships and adapting to a work-from-home environment to sustain sales momentum [75][76] - Future expectations include continued positive trends in sales and net flows, with a focus on sustainable growth and long-term value creation [70][112] Other Important Information - The company repurchased approximately 75,000 shares, representing about 1% of shares outstanding, and reduced debt by 25% over the past year [19][40] - The effective tax rate as adjusted for the quarter was 27%, down from 29% in the prior quarter [37] Q&A Session Summary Question: Background on the Allianz partnership - Management characterized the partnership as a growth-oriented collaboration rather than a transaction, emphasizing alignment of interests [55][56] Question: Expected incremental margin from the partnership - The expected incremental margin is projected to be in the range of 50% to 60%, leveraging existing infrastructure [60][61] Question: Impact of the partnership on debt levels - The partnership is structured to ensure that payments will be a subset of revenues earned, maintaining a favorable capital structure [66][67] Question: Institutional sales composition - Institutional sales included both new mandates and significant contributions from existing clients, indicating broad-based growth [108][112] Question: Retail separate accounts performance - Retail separate accounts have seen 17 consecutive quarters of positive flows, driven by strong investment performance across multiple distribution platforms [116]