EX-99.1 2 dex991.htm INVESTOR PRESENTATION

Keefe, Bruyette & Woods Investment Management & Specialty Finance Conference June 8, 2011 Exhibit 99.1

Important Disclosures 2

Speakers George R. Aylward President and Chief Executive Officer Michael A. Angerthal Executive Vice President and Chief Financial Officer 3

Introduction LISTING NASDAQ: VRTS COMMENCED TRADING January 2, 2009 FIRST TRADE $9.00 CLOSING PRICE, JUNE 6, 2011 $57.01 COMMON SHARES OUTSTANDING (DILUTED) 6.9 million SERIES B CONVERT. PREF. 35,217 (Convertible to 1.3MM Common) MARKET CAPITALIZATION 1 $471 million 1 Fully converted, as of June 6, 2011 4

Virtus Value Proposition Business Model • Multi-boutique manager, multi-strategy model • Broad investment capabilities from affiliates and subadvisers • Shared distribution and support services • Platform model that allows for new teams and firms Products • Diversified and balanced product set • Active product management • Strong relative performance • Competitive mutual fund offerings Distribution • Multi-market distribution • Broad and balanced retail distribution reach • Well-defined value proposition • Experienced retail sales force and effective strategy Financial and Operating Attributes • Significant growth in assets, sales and net flows • Bottom-line growth and margin expansion • Solid balance sheet and capital flexibility • Significant tax attributes 5

Business Model Product Distribution Financial and Operating Attributes Multi-boutique manager, multi-strategy model Broad investment capabilities from affiliates and subadvisers Shared distribution and support services Platform model that allows for new teams and firms Business Model Products Distribution Financial and Operating Attributes 6

Virtus Brand We are unconstrained by a single investment approach. Rather, we provide access to independent, specialized investment philosophies through our multi-discipline, multi-strategy approach. We have the flexibility, agility and responsiveness of a boutique asset management firm with the product breadth, distribution reach, and investment talent similar to some larger firms. Virtus is committed to thoughtfully providing investment solutions, adhering to the highest standards of product quality, operational excellence and fiduciary responsibility. We are a distinctive partnership of boutique investment managers singularly committed to the long-term success of individual and institutional investors. 7

Multi-Boutique, Multi-Strategy Model Affiliates that comprise Virtus External subadvisers 8

Business Model Products Distribution Financial and Operating Attributes Diversified and balanced product set Active product management Strong relative performance Competitive mutual fund offerings 9

Diversified Product Set Total AUM $31.9 billion $ in billions As of March 31, 2011 10

Active Product Management Monitor performance and change or replace managers when needed Identify investment needs of clients and introduce new offerings Identify strong performing product capabilities that can benefit from our distribution Enhance and expand capabilities through fund adoptions 11

Strong Relative Performance PERFORMANCE AS OF MARCH 31, 2011 1 Mutual funds and institutional products All analysis excludes closed-end funds and money market products % of AUM Exceeding Benchmarks % of AUM in Top Half of Peer Category 1 12

Competitive Mutual Fund Offerings Load Waived Morningstar as of May 31, 2011 U.S. EQUITY Quality Small-Cap AlphaSector™ Rotation Core Equity Small-Cap Core Value Equity Growth & Income Mid-Cap Value Quality Large-Cap Value Small-Cap Sustainable Growth Strategic Growth Mid-Cap Growth ASSET ALLOCATION FUNDS Tactical Allocation Balanced Allocation Balanced FIXED INCOME Multi-Sector Short-Term Bond Senior Floating Rate Fund Short/Intermediate Bond Tax-Exempt Bond Intermediate Tax-Exempt Bond Institutional Bond Bond CA Tax-Exempt Bond Multi-Sector Fixed Income Intermediate Government Bond High Yield High Yield Income ALTERNATIVE International REIT Global Infrastructure REIT Alternatives Diversifier Market Neutral INTERNATIONAL EQUITY Emerging Mkts Opportunities Foreign Opportunities Global Opportunities 13

Business Model Products Distribution Financial and Operating Attributes Multi-market distribution Broad and balanced retail distribution reach Well-defined value proposition Experienced retail sales force and effective strategy 14

ATTRIBUTES CHANNELS RETAIL Segmentation Well-defined value proposition Diagnostic sales approach Metric driven accountability Wirehouse Regional Planners RIA DCIO / VIT INSTITUTIONAL Affiliate-centric Consultative approach Consultants Direct Multi-Market Distribution 15

Broad and Balanced Reach As of March 31, 2011 * Figures include both long-term mutual funds and sponsored managed accounts AUM BY FIRM* YTD SALES BY FIRM* $15.3 billion $2.3 billion 16

Well-Defined Value Proposition One point access to a number of differentiated and diverse high quality boutique managers Assist financial advisors to gather, place and retain assets Utilize a consultative approach to help financial advisors better manage their book of business 17

Business Model Products Distribution Financial and Operating Attributes Significant growth in assets, sales and net flows Bottom-line growth and margin expansion Solid balance sheet and capital flexibility Significant tax attributes 18

ASSETS UNDER MANAGEMENT $ in billions 1 TOTAL CAGR – Reflects compound annual growth rate for Long-Term and Cash AUM from 12/31/08 to 3/31/11 2 LT CAGR – Reflects compound annual growth rate for Long-Term AUM from 12/31/08 to 3/31/11 Financial and Operating Attributes AUM DRIVERS Sales - $3.9 $5.8 $2.6 Net Flows - $0.1 $1.6 $1.4 Market Appreciation - $3.0 $2.3 $0.9 12/31/08 12/31/09 12/31/10 3/31/11 Long-Term Cash $22.6 19

$ in millions 1 Annualized Financial and Operating Attributes 20

Financial and Operating Attributes OPERATING INCOME, AS ADJUSTED $ in millions 1 See Appendix for Reconciliation from GAAP to Non-GAAP Reporting. 2 Percentage of Revenues, as adjusted 21 1

Financial and Operating Attributes 1 Working Capital divided by annualized quarterly operating expenses $ in millions WORKING CAPITAL TREND 12/31/08 12/31/09 12/31/10 3/31/11 % of Spend 1 27% 25% 28% 27% Cash $51.1 $28.6 $43.9 $33.0 Debt $20.0 $15.0 $15.0 $15.0 Stockholders’ equity $36.6 $29.7 $48.3 $50.6 22

Financial and Operating Attributes $ in millions FEDERAL DEFERRED TAX ASSET INVENTORY COMPONENTS DEFERRED TAX ASSETS ORDINARY INCOME TAX SHIELD Net Operating Losses $10.4 $29.6 Intangible Assets 60.0 192.1 Subtotal-Ordinary Income Attributes $70.4 $221.7 Capital Losses $81.5 - Subtotal-Capital Income Attributes $81.5 - TOTAL $151.9 $221.7 Note: Amounts are reduced by Section 382 limitations; substantially all assets have a full valuation allowance recorded 23

Financial and Operating Attributes KEY ATTRIBUTES AUM (5/31/11) $5.2B Q1 2011 organic growth rate 1 49.0% Fee rate on internalized AUM 25 bps Run rate incremental revenue $12.8M Team members 13 1 Annualized MULTI-SECTOR TEAM 24

Growth Opportunities Product offerings – New strategies from existing managers – New products from existing strategies – New affiliated subadvisers and teams Distribution capabilities – Institutional market – Further retail penetration outside of wirehouses – Selective resource expansion Operational and infrastructure enhancements 25

Virtus Value Proposition Multi-boutique manager, multi-strategy model Diversified and balanced product set Distribution through multiple channels with broad retail access Sales and profitability momentum Improved profitability by leveraging business model 26

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Appendix Q1:09 Q2:09 Q3:09 Q4:09 Q1:10 Q2:10 Q3:10 Q4:10 Q1:11 Revenues, GAAP Basis $26,251 $27,181 $30,395 $33,325 $33,447 $34,788 $35,582 $40,739 $44,121 Less: Distribution and administration expenses 6,838 7,449 7,510 8,142 7,344 7,786 8,217 9,858 11,077 Revenues, as adjusted $19,413 $19,732 $22,885 $25,183 $26,103 $27,002 $27,365 $30,881 $33,044 Operating Expenses, GAAP Basis $30,722 $30,003 $31,017 $32,033 $32,740 $33,571 $32,685 $36,289 $39,678 Less: Distribution and administrative expenses 6,838 7,449 7,510 8,142 7,344 7,786 8,217 9,858 11,077 Depreciation and amortization 2,268 2,217 2,436 2,070 2,024 1,793 1,588 1,524 1,535 Stock-based compensation 333 1,203 949 1,035 845 1,163 988 898 841 Restructuring and severance charges 437 193 450 22 30 1,100 228 277 147 Operating Expenses, as adjusted $20,846 $18,941 $19,672 $20,764 $22,497 $21,729 $21,664 $23,732 $26,078 Operating Income (Loss), as adjusted ($1,433) $791 $3,213 $4,419 $3,606 $5,273 $5,701 $7,149 $6,966 Operating margin, GAAP basis (17%) (10%) (2%) 4% 2% 3% 8% 11% 10% Operating margin, as adjusted (7%) 4% 14% 18% 14% 20% 21% 23% 21% $ in thousands Reconciliation from GAAP to Non-GAAP Reporting 28

Appendix Notes for Reconciliation to GAAP Reporting 1) Revenues, as adjusted, is a non-GAAP financial measure calculated by netting distribution and administration expenses from GAAP revenues. Management believes revenues, as adjusted, provides useful information to investors because distribution and administrative expenses are costs that are generally passed directly through to external parties. Effective with the 2010 first quarter, the company no longer pays outside service providers for certain fund administration and transfer agency services from the fees it collects for open-end funds it manages. These amounts are now paid by the funds directly to the third-party service providers and, as a result, the revenue and expense previously recorded by the company for these services are no longer reflected. These payments were reported in the above reconciliation of GAAP to non-GAAP revenue and expenses for the 2009 period. 2) Operating expenses, as adjusted, is a non-GAAP financial measure that management believes provides investors with additional information because of the nature of the specific excluded operating expenses. Specifically, management adds back amortization and impairments attributable to acquisition related intangible assets as this is useful to an investor to consider our operating results with the results of other asset management firms that have not engaged in significant acquisitions. In addition, we add back restructuring and severance charges as we believe that operating expenses exclusive of these costs will aid comparability of the information to prior reporting periods. We believe that because of the variety of equity awards used by companies and the varying methodologies for determining stock-based compensation expense, excluding stock-based compensation enhances the ability of management and investors to compare financial results over periods. Distribution and administrative expenses are excluded for the reason set forth above. 3) Operating income (loss), as adjusted, and operating margin, as adjusted, are calculated using the basis of revenues, as adjusted, and operating expenses, as adjusted, as described above. The above measures should not be considered as substitutes for any measures derived in accordance with GAAP and may not be comparable to similarly titled measures of other companies. Exclusion of items in our non-GAAP presentation should not be considered as an inference that these items are unusual, infrequent or non-recurring. Virtus Investment Partners reports its financial results on a Generally Accepted Accounting Principles (GAAP) basis; however management believes that evaluating the company's ongoing operating results may be enhanced if investors have additional non-GAAP financial measures. Management reviews non-GAAP financial measures to assess ongoing operations and considers them only to be additional metrics for both management and investors to consider the company's financial performance over time, as noted in the footnotes below. Management does not advocate that investors consider such non-GAAP financial measures in isolation from, or as a substitute for, financial results prepared in accordance with GAAP. 29