What changed in this filing

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Item 1. Financial Statements

2021-05-06 compared with 2020-11-05 · 112 added, 174 removed, 469 unchanged (38% of the section changed)

2 unchanged sentences

Condensed Consolidated Balance Sheets

(in thousands, except share data) September 30,

(in thousands, except share data) March 31,

2021 December 31,

17 unchanged sentences

Dividends payable 8,593 9,013

Contingent consideration (Note 3) 137,664 —

Debt 195,726 201,212

7 unchanged sentences

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 September 30, 2020 and December 31, 2019, respectively

Common stock, $ 0.01 par value, 1,000,000,000 shares authorized;

11,780,481 shares issued and 7,613,154 shares outstanding at September 30, 2020, respectively, and 10,736,887 shares issued and 6,809,280 shares outstanding at December 31, 2019, respectively

11,876,994 shares issued and 7,649,679 shares outstanding at March 31, 2021, respectively, and 11,790,869 shares issued and 7,583,466 shares outstanding at December 31, 2020, respectively

Additional paid-in capital 1,284,643 1,298,002

1 unchanged sentence

Accumulated other comprehensive income (loss) 35 29

Treasury stock, at cost, 4,167,327 and 3,927,607 shares at September 30, 2020 and December 31, 2019, respectively

Treasury stock, at cost, 4,227,315 and 4,207,403 shares at March 31, 2021 and December 31, 2020, respectively

( 456,748 ) ( 451,749 )

7 unchanged sentences

Three Months Ended

September 30, Nine Months Ended

September 30,

(in thousands, except per share data) 2021 2020

9 unchanged sentences

Operating expenses of consolidated investment products ("CIP") 559 6,749

Restructuring and severance 735 523 1,155 2,019

Depreciation expense 1,098 1,258

17 unchanged sentences

Noncontrolling interests ( 15,626 ) ( 5,291 )

Net Income (Loss) Attributable to Stockholders 29,648 24,085 36,642 72,757

Preferred stockholder dividends — ( 2,085 ) — ( 6,253 )

Net Income (Loss) Attributable to Common Stockholders $ 36,588 $ ( 4,285 )

7 unchanged sentences

Three Months Ended

September 30, Nine Months Ended

September 30,

(in thousands) 2021 2020

1 unchanged sentence

Other comprehensive income (loss), net of tax:

Foreign currency translation adjustment, net of tax of $( 6 ) and $ 4 for the three months ended September 30, 2020 and 2019, respectively, and $ 3 and $ 5 for the nine months ended September 30, 2020 and 2019, respectively

17 ( 12 ) ( 9 ) ( 14 )

Foreign currency translation adjustment, net of tax of $ 0 and $ 9 for the three months ended March 31, 2021 and 2020, respectively

Other comprehensive income (loss) 6 ( 25 )

5 unchanged sentences

Condensed Consolidated Statements of Cash Flows

Nine Months Ended

September 30,

Three Months Ended

(in thousands) 2021 2020

9 unchanged sentences

Realized and unrealized (gains) losses on investments, net ( 889 ) 7,544

Distributions from equity method investments 921 828

Sales (purchases) of investments, net ( 25 ) 2,153

16 unchanged sentences

Change in cash and cash equivalents of CIP due to consolidation (deconsolidation), net ( 48 ) 9,724

Sale of available-for-sale securities — 2,023

Net cash provided by (used in) investing activities ( 2,608 ) 9,366

4 unchanged sentences

Repurchases of common shares ( 4,999 ) ( 10,000 )

Stock options exercised 66 101

Taxes paid related to net share settlement of restricted stock units ( 15,163 ) ( 3,551 )

9 unchanged sentences

Change in accrual for capital expenditures $ 45 $ ( 20 )

Contingent consideration $ 137,664 $ —

Non-Cash Financing Activities:

1 unchanged sentence

Common stock dividends payable $ 6,219 $ 5,175

Preferred stock dividends payable $ — $ 2,085

Conversion of preferred stock to common stock $ — $ 115,000

(in thousands) September 30,

(in thousands) March 31,

2021 December 31, 2020

18 unchanged sentences

(in thousands, except per share data) Shares Par Value Shares Amount Shares Amount

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

Net income (loss) — — — — — 24,085 — — — 24,085 ( 68 ) 24,017 1,342

Foreign currency translation adjustments — — — — — — ( 12 ) — — ( 12 ) — ( 12 ) —

Net subscriptions (redemptions) and other — — — — 548 — — — — 548 ( 657 ) ( 109 ) 29,766

Cash dividends declared ($ 1.81 per preferred share)

— — — — ( 2,085 ) — — — — ( 2,085 ) — ( 2,085 ) —

Cash dividends declared ($ 0.67 per common share)

— — — — ( 4,972 ) — — — — ( 4,972 ) — ( 4,972 ) —

Repurchases of common shares ( 70,949 ) — — — — — — 70,949 ( 7,501 ) ( 7,501 ) — ( 7,501 ) —

Issuance of common shares related to employee stock transactions 3,653 — — — 5 — — — — 5 — 5 —

Taxes paid on stock-based compensation — — — — ( 93 ) — — — — ( 93 ) — ( 93 ) —

Stock-based compensation — — — — 4,694 — — — — 4,694 — 4,694 —

Balances at September 30, 2019 6,877,596 $ 107 1,150,000 $ 110,843 $ 1,202,130 $ ( 238,108 ) $ ( 19 ) 3,841,862 $ ( 409,249 ) $ 665,704 $ 11,912 $ 677,616 $ 91,610

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

Net income (loss) — — — — — 29,648 — — — 29,648 977 30,625 10,309

Foreign currency translation adjustments — — — — — — 17 — — 17 — 17 —

Net subscriptions (redemptions) and other — — — — — — — — — — ( 340 ) ( 340 ) ( 1,719 )

Cash dividends declared ($ 0.82 per common share)

— — — — ( 6,695 ) — — — — ( 6,695 ) — ( 6,695 ) —

Repurchases of common shares ( 53,867 ) — — — — — — 53,867 ( 7,500 ) ( 7,500 ) — ( 7,500 ) —

Issuance of common shares related to employee stock transactions 2,749 — — — 49 — — — — 49 — 49 —

Taxes paid on stock-based compensation — — — — ( 124 ) — — — — ( 124 ) ( 124 ) —

Stock-based compensation — — — — 5,469 — — — — 5,469 — 5,469 —

Balances at September 30, 2020 7,613,154 $ 118 — $ — $ 1,301,735 $ ( 178,574 ) $ — 4,167,327 $ ( 444,249 ) $ 679,030 $ 8,982 $ 688,012 $ 99,277

Permanent Equity Temporary Equity

Common Stock Preferred Stock Additional

Capital Retained Earnings (Accumulated

Deficit) Accumulated

Comprehensive

Income (Loss) Treasury Stock Total

Attributed To

Stockholders Non-

Interests Total

Equity Redeemable

(in thousands, except per share data) Shares Par Value Shares Amount Shares Amount

Balances at December 31, 2019 6,809,280 $ 107 1,150,000 $ 110,843 $ 1,199,205 $ ( 215,216 ) $ 9 3,927,607 $ ( 419,249 ) $ 675,699 $ 10,558 $ 686,257 $ 63,845

Net income (loss) — — — — — ( 4,285 ) — — — ( 4,285 ) 255 ( 4,030 ) 5,036

Reclassification from other comprehensive (income) loss — — — — — — 726 — — 726 — 726 —

Foreign currency translation adjustments — — — — — — ( 25 ) — — ( 25 ) — ( 25 ) —

Net subscriptions (redemptions) and other — — — — — — — — — — ( 566 ) ( 566 ) 18,234

Cash dividends declared ($ 5.44 per preferred share)

— — — — ( 6,253 ) — — — — ( 6,253 ) — ( 6,253 ) —

Cash dividends declared ($ 0.67 per common share)

1 unchanged sentence

Repurchases of common shares ( 110,956 ) — — — — — — 110,956 ( 10,000 ) ( 10,000 ) — ( 10,000 ) —

Conversion of preferred stock 912,806 9 ( 1,150,000 ) ( 110,843 ) 110,834 — — — — — — — —

Issuance of common shares related to employee stock transactions 84,283 1 — — 100 — — — — 101 — 101 —

1 unchanged sentence

Stock-based compensation — — — — 4,459 — — — — 4,459 — 4,459 —

Balances at September 30, 2019 6,877,596 $ 107 1,150,000 $ 110,843 $ 1,202,130 $ ( 238,108 ) $ ( 19 ) 3,841,862 $ ( 409,249 ) $ 665,704 $ 11,912 $ 677,616 $ 91,610

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

Balances at December 31, 2020 7,583,466 $ 118 — $ — $ 1,298,002 $ ( 135,259 ) $ 29 4,207,403 $ ( 451,749 ) $ 711,141 $ 9,799 $ 720,940 $ 115,513

2 unchanged sentences

Net subscriptions (redemptions) and other — — — — — — — — — — ( 557 ) ( 557 ) ( 18,582 )

Conversion of preferred stock 912,806 9 ( 1,150,000 ) ( 110,843 ) 110,834 — — — — — — — —

Cash dividends declared ($ 0.82 per common share)

4 unchanged sentences

Stock-based compensation — — — — 8,435 — — — — 8,435 — 8,435 —

Balances at September 30, 2020 7,613,154 $ 118 — $ — $ 1,301,735 $ ( 178,574 ) $ — 4,167,327 $ ( 444,249 ) $ 679,030 $ 8,982 $ 688,012 $ 99,277

Balances at March 31, 2021 7,649,679 $ 119 — $ — $ 1,284,643 $ ( 98,671 ) $ 35 4,227,315 $ ( 456,748 ) $ 729,378 $ 9,317 $ 738,695 $ 112,482

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

15 unchanged sentences

In the opinion of management, these financial statements contain all adjustments, consisting only of normal recurring adjustments, necessary for a fair statement of the Company’s financial condition and results of operations.

Operating results for the nine months ended September 30, 2020 are not necessarily indicative of the results that may be expected for the year ending December 31, 2020.

Operating results for the three months ended March 31, 2021 are not necessarily indicative of the results that may be expected for the year ending December 31, 2021.

These unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020 ("2020 Annual Report on Form 10-K") filed with the Securities and Exchange Commission (the "SEC").

1 unchanged sentence

New Accounting Standards Implemented

In August 2018, the Financial Accounting Standards Board (the "FASB") issued Accounting Standards Update ("ASU") 2018-15, Intangibles-Goodwill and Other-Internal-Use Software (Subtopic 350-40) .

This standard aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software, including an internal-use software license.

The Company adopted this standard on January 1, 2020.

The adoption of this standard did not have a material impact on the Company's condensed consolidated financial statements.

In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820) .

This standard modifies the disclosure requirements on fair value measurements.

In January 2020, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2020-01, Investments - Equity Securities (Topic 321), Investments-Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815) .

This standard clarifies the interaction of the accounting for equity securities under Topic 321, the accounting for equity method investments in Topic 323 and the accounting for certain forward contracts and purchased options in Topic 815.

The Company adopted this standard on January 1, 2021.

The adoption of this standard did not have a material impact on the Company's condensed consolidated financial statements.

New Accounting Standards Not Yet Implemented

In January 2020, the FASB issued ASU 2020-01, Investments - Equity Securities (Topic 321), Investments-Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815) .

This standard clarifies the interaction of the accounting for equity securities under Topic 321, the accounting for equity method investments in Topic 323, and the accounting for certain forward contracts and purchased options in Topic 815.

This standard is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020.

Early adoption is permitted, with the amendments to be applied on a prospective basis.

The Company is currently evaluating the impact of adopting this standard on its condensed consolidated financial statements.

In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740):

1 unchanged sentence

This standard simplifies the accounting for income taxes by removing certain exceptions to the general principles of Topic 740, Income Taxes, and also improves consistent application by clarifying and amending existing guidance.

This standard is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020.

Early adoption is permitted, with the amendments to be applied on a retrospective, modified retrospective or prospective basis, depending on the specific amendment.

The Company has evaluated the impact of adopting this standard and, at this time, does not anticipate it will have a material impact on its condensed consolidated financial statements.

The Company adopted this standard on January 1, 2021.

The adoption of this standard did not have a material impact on the Company's condensed consolidated financial statements.

The Company's revenues are recognized when a performance obligation is satisfied, which occurs when control of the services is transferred to customers.

1 unchanged sentence

The net asset values from which investment management, distribution and service, and administration and shareholder service fees are calculated are variable in nature and subject to factors outside of the Company's control such as additional investments, withdrawals and market performance.

Because of this, these fees are considered constrained until the end of the contractual measurement period (monthly or quarterly), which is when asset values are generally determinable.

Because of this, these fees are considered constrained until the end of the contractual

measurement period (monthly or quarterly), which is when asset values are generally determinable.

Revenue Disaggregated by Source

1 unchanged sentence

Three Months Ended

September 30, Nine Months Ended

September 30,

(in thousands) 2021 2020

11 unchanged sentences

Total revenues $ 216,897 $ 144,566

AllianzGI Strategic Partnership

On February 1, 2021, the Company completed the actions necessary to finalize its strategic partnership with Allianz Global Investors ("AllianzGI"), announced in July 2020, pursuant to which the Company became the investment adviser, distributor and/or administrator of certain of AllianzGI's open-end, closed-end and retail separate account assets.

Additionally, as part of the strategic partnership, AllianzGI’s Dallas-based Value Equity team joined the Company as a newly established affiliated manager, NFJ Investment Group.

Assets acquired in connection with the transaction primarily consisted of definite-lived intangible assets representing open-end, closed-end and retail separate account investment contracts as well as indefinite-lived assets consisting of goodwill related to the NFJ Investment Group.

The NFJ Investment Group revenues and operating income was not material to the Company's results of operations for the three months ended March 31, 2021.

Transaction consideration consists of variable cash payments based on a percentage of the investment management fees earned on certain open-end, closed-end and retail separate account assets adopted under the transaction.

Payments are to be made annually around the anniversary of the closing date of the transaction over the next seven years .

The transaction consideration is being accounted for as contingent consideration with the estimated future payments of $ 137.7 million as of March 31, 2021 being recorded as a liability on the Company's Condensed Consolidated Balance Sheet.

In addition, the Company capitalized $ 7.7 million of costs associated with certain assets acquired.

The following table summarizes the identified acquired assets:

February 1, 2021

(in thousands) Approximate Fair Value Weighted Average Useful Life

Definite-lived intangible assets:

Open-end and closed-end fund investment contracts $ 101,447 13 years

Retail separate account investment contracts 17,000 6 years

Trade name 1,941 8 years

Total definite-lived intangible assets $ 120,388

Goodwill 25,000

Total assets acquired $ 145,388

Intangible Assets, Net

Below is a summary of intangible assets, net:

(in thousands) September 30, 2020 December 31, 2019

(in thousands) March 31, 2021 December 31, 2020

Definite-lived intangible assets:

4 unchanged sentences

Total intangible assets, net $ 391,187 $ 280,264

Activity in intangible assets, net was as follows:

Nine Months Ended September 30,

Activity in goodwill and intangible assets, net was as follows:

Three Months Ended March 31,

(in thousands) 2021 2020

10 unchanged sentences

Investments consist primarily of investments in the Company's sponsored products.

The Company's investments, excluding the assets of consolidated investment products ("CIP") discussed in Note 15, at September 30, 2020 and December 31, 2019 were as follows:

(in thousands) September 30, 2020 December 31, 2019

The Company's investments, excluding the assets of consolidated investment products ("CIP") discussed in Note 16, at March 31, 2021 and December 31, 2020 were as follows:

(in thousands) March 31, 2021 December 31, 2020

Investment securities - fair value $ 40,904 $ 39,990

7 unchanged sentences

The composition of the Company’s investment securities - fair value was as follows:

September 30, 2020 December 31, 2019

March 31, 2021 December 31, 2020

(in thousands) Cost Fair Value Cost Fair Value

4 unchanged sentences

Total investment securities - fair value $ 37,797 $ 40,904 $ 31,999 $ 39,990

For the three and nine months ended September 30, 2020, the Company recognized realized gains of $ 4.5 million and

$ 4.2 million, respectively, on the sale of its investment securities - fair value.

For the three and nine months ended September 30, 2019, the Company recognized realized gains of $ 1.0 million and $ 0.4 million, respectively, on the sale of its investment securities - fair value.

For the three months ended March 31, 2021, the Company recognized realized gains of $ 0.8 million on the sale of its investment securities - fair value.

For the three months ended March 31, 2020, the Company recognized realized losses of $ 0.3 million on the sale of its investment securities - fair value.

Fair Value Measurements

The Company’s assets and liabilities measured at fair value on a recurring basis, excluding the assets and liabilities of CIP discussed in Note 15, as of September 30, 2020 and December 31, 2019 by fair value hierarchy level were as follows:

September 30, 2020

The Company’s assets and liabilities measured at fair value on a recurring basis, excluding the assets and liabilities of CIP discussed in Note 16, as of March 31, 2021 and December 31, 2020 by fair value hierarchy level were as follows:

March 31, 2021

(in thousands) Level 1 Level 2 Level 3 Total

19 unchanged sentences

Sponsored funds represent investments in open-end funds, closed-end funds and ETFs for which the Company acts as the investment manager.

The fair value of open-end funds is determined based on their published net asset values and are categorized as Level 1.

The fair value of open-end funds is determined based on their published net asset values and are

categorized as Level 1.

The fair value of closed-end funds and ETFs is determined based on the official closing price on the exchange on which they are traded and are categorized as Level 1.

3 unchanged sentences

Cash, accounts receivable, accounts payable and accrued liabilities equal or approximate fair value based on the short-term nature of these instruments.

The Company had no Level 3 investments for the three- and nine-month periods ended September 30, 2020 and no Level 3 investments for the three months ended September 30, 2019.

The following table is a reconciliation of assets for Level 3 investments for which significant unobservable inputs were used to determine fair value for the nine months ended September 30, 2019:

Nine Months Ended September 30,

(in thousands)

Level 3 Investments (1)

Balance at beginning of period $ 4,122

Purchases (sales), net ( 4,185 )

Change in realized and unrealized gain (loss), net 63

Balance at end of period $ —

(1) The investments that are categorized as Level 3 were valued utilizing third-party pricing information without adjustment.

The Company had no Level 3 investments for the three-month periods ended March 31, 2021 and 2020, respectively.

Equity Transactions

Preferred Stock Conversion

On February 3, 2020, 1,150,000 shares of mandatory convertible preferred stock ("MCPS") converted to 912,870 shares of the Company's common stock.

Each share of MCPS converted to 0.7938 shares of common stock at a conversion price of $ 125.97 per share, subject to customary anti-dilution adjustments.

The number of shares of common stock issued upon conversion was determined based on the volume-weighted average price per share of the Company's common stock over the 20 consecutive trading day period beginning on, and including, the 22nd scheduled trading day immediately preceding the mandatory conversion date.

Dividends Declared

On August 19, 2020, the Company declared a quarterly cash dividend of $ 0.82 per common share to be paid on November 13, 2020 to stockholders of record at the close of business on October 30, 2020.

On February 24, 2021, the Company declared a quarterly cash dividend of $ 0.82 per common share to be paid on May 14, 2021 to stockholders of record at the close of business on April 30, 2021.

Common Stock Repurchases

In May 2020, the Company's Board of Directors authorized an additional 750,000 shares to be repurchased under the Company's share repurchase program, bringing the total number of shares authorized to be repurchased under the program since its inception to 4,930,045 shares.

During the three and nine months ended September 30, 2020, the Company repurchased 53,867 and 239,720 common shares, respectively, at a weighted average price of $ 139.20 and $ 104.26 per share, respectively, for a total cost, including fees and expenses, of $ 7.5 million and $ 25.0 million, respectively, under its share repurchase program.

As of September 30, 2020, 762,718 shares remained available for repurchase.

During the three months ended March 31, 2021, the Company repurchased 19,912 common shares at a weighted average price of $ 251.07 per share, for a total cost, including fees and expenses, of $ 5.0 million under its share repurchase program.

As of March 31, 2021, 702,730 shares remained available for repurchase.

Under the terms of the program, the Company may repurchase shares of its common stock from time to time at its discretion through open market repurchases, privately negotiated transactions and/or other mechanisms, depending on price and prevailing market and business conditions.

1 unchanged sentence

Accumulated Other Comprehensive Income (Loss)

The changes in accumulated other comprehensive income (loss) by component for the nine months ended September 30, 2020 and 2019 were as follows:

(in thousands) Unrealized Gains (Losses) on

Available-for-Sale Foreign

The changes in accumulated other comprehensive income (loss) by component for the three months ended March 31, 2021 and 2020 were as follows:

(in thousands) Foreign

Balance at December 31, 2020 $ 29

1 unchanged sentence

Net current-period other comprehensive income (loss) 6

Balance at September 30, 2020 $ — $ —

(in thousands) Unrealized Gains (Losses) on

Available-for-Sale Foreign

Balance at March 31, 2021 $ 35

(in thousands) Foreign

Balance at December 31, 2019 $ 9

Foreign currency translation adjustments, net of tax of $ 9

Amounts reclassified from accumulated other comprehensive income (loss), net of tax of $( 254 )

Net current-period other comprehensive income (loss) ( 25 )

Balance at September 30, 2019 $ — $ ( 19 )

Balance at March 31, 2020 $ ( 16 )

Stock-Based Compensation

Pursuant to the Company's Omnibus Incentive and Equity Plan (the "Plan"), officers, employees and directors may be granted equity-based awards, including restricted stock units ("RSUs"), performance stock units ("PSUs"), stock options and unrestricted shares of common stock.

At September 30, 2020, 336,276 shares of common stock remained available for issuance of the 2,820,000 shares that are authorized for issuance under the Plan.

At March 31, 2021, 271,890 shares of common stock remained available for issuance of the 2,820,000 shares that are authorized for issuance under the Plan.

Stock-based compensation expense is summarized as follows:

Three Months Ended September 30, Nine Months Ended September 30,

2020 2019 2020 2019

Three Months Ended March 31,

(in thousands)

4 unchanged sentences

Shares that are issued upon vesting are newly issued shares from the Plan and are not issued from treasury stock.

RSU activity, inclusive of PSUs, for the nine months ended September 30, 2020 is summarized as follows:

RSU activity, inclusive of PSUs, for the three months ended March 31, 2021 is summarized as follows:

of Shares Weighted Average

3 unchanged sentences

Settled ( 143,139 ) $ 125.81

Outstanding at September 30, 2020 555,101 $ 106.27

For the nine months ended September 30, 2020 and 2019, a total of 63,566 and 58,487 RSUs, respectively, were withheld by the Company as a result of net share settlements to settle minimum employee tax withholding obligations.

The Company paid $ 5.6 million and $ 5.9 million for the nine months ended September 30, 2020 and 2019, respectively, in minimum employee tax withholding obligations related to RSUs withheld for net share settlements.

Outstanding at March 31, 2021 461,321 $ 129.09

For the three months ended March 31, 2021 and 2020, a total of 57,885 and 41,426 RSUs, respectively, were withheld by the Company as a result of net share settlements to settle minimum employee tax withholding obligations.

The Company paid $ 15.2 million and $ 3.6 million for the three months ended March 31, 2021 and 2020, respectively, in minimum employee tax withholding obligations related to RSUs withheld for net share settlements.

These net share settlements had the effect of share repurchases by the Company as they reduced the number of shares that would have been otherwise issued as a result of the vesting.

During the nine months ended September 30, 2020, the Company granted 68,371 PSUs that contain performance-based metrics in addition to a service condition.

During the three months ended March 31, 2021, the Company granted 24,798 PSUs that contain performance-based metrics in addition to a service condition.

Compensation expense for PSUs is generally recognized over a three-year service period based upon the value determined using a combination of (i) the intrinsic value method, for awards that contain a performance metric that represents a "performance condition" in accordance with ASC 718, and (ii) the Monte Carlo simulation valuation model for awards that contain a "market condition" performance metric under ASC 718.

Compensation expense for

PSU awards that contain a market condition is fixed at the date of grant and will not be adjusted in future periods based upon the achievement of the market condition.

Compensation expense for PSU awards that contain a market condition is fixed at the date of grant and will not be adjusted in future periods based upon the achievement of the market condition.

Compensation expense for PSU awards with a performance condition is recorded each period based upon a probability assessment of the expected outcome of the performance metric with a final adjustment upon measurement at the end of the performance period.

As of September 30, 2020, unamortized stock-based compensation expense for unvested RSUs and PSUs was $ 27.2 million, with a weighted-average remaining amortization period of 1.4 years.

As of March 31, 2021, unamortized stock-based compensation expense for unvested RSUs and PSUs was $ 35.2 million, with a weighted-average remaining contractual life of 1.5 years.

Earnings (Loss) Per Share

Basic earnings (loss) per share ("EPS") is computed by dividing net income (loss) attributable to common stockholders by the weighted-average number of common shares outstanding for the period, excluding dilution for potential common stock issuances.

Diluted EPS reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock, including:

(i) shares issuable upon the vesting of RSUs and stock option exercises using the treasury stock method and (ii) shares issuable upon the conversion of the MCPS, as determined under the if-converted method.

Earnings (loss) per share ("EPS") is calculated in accordance with ASC 260, Earnings per Share.

Basic EPS is computed by dividing net income (loss) attributable to common stockholders by the weighted-average number of common shares outstanding for the period, excluding dilution for potential common stock issuances.

Diluted EPS reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock,

(i) shares issuable upon the vesting of RSUs and stock option exercises using the treasury stock method and (ii) shares issuable upon the conversion of the Company's previously outstanding mandatory convertible preferred stock ("MCPS"), as determined under the if-converted method.

For purposes of calculating diluted EPS, preferred stock dividends have been subtracted from net income (loss) in periods in which utilizing the if-converted method would be anti-dilutive.

The computation of basic and diluted EPS is as follows:

Three Months Ended September 30, Nine Months Ended

September 30,

Three Months Ended March 31,

(in thousands, except per share amounts) 2021 2020

1 unchanged sentence

Noncontrolling interests ( 15,626 ) ( 5,291 )

Net Income (Loss) Attributable to Stockholders 29,648 24,085 36,642 72,757

Preferred stock dividends — ( 2,085 ) — ( 6,253 )

Net Income (Loss) Attributable to Common Stockholders $ 36,588 $ ( 4,285 )

5 unchanged sentences

The following table details the securities that have been excluded from the above computation of weighted-average number of shares for diluted EPS, because the effect would be anti-dilutive.

Three Months Ended September 30, Nine Months Ended September 30,

Three Months Ended March 31,

(in thousands) 2021 2020

Restricted stock units and options 10 597

Preferred stock — 321

Total anti-dilutive securities 10 918

2 unchanged sentences

The provision for income taxes reflected U.S.

federal, state and local taxes at an estimated effective tax rate of 33.9 % and 24.0 % for the nine months ended September 30, 2020 and 2019, respectively.

The comparatively higher estimated effective tax rate for the nine months ended September 30, 2020 was primarily due to valuation allowances recorded for the tax effects of unrealized losses on certain Company investments.

federal, state and local taxes at an estimated effective tax rate of 22.5 % and 91.1 % for the three months ended March 31, 2021 and 2020, respectively.

The comparatively lower estimated effective tax rate for the three months ended March 31, 2021 was primarily due to valuation allowances recorded in the prior year period for the tax effects of unrealized losses on certain Company investments.

C redit Agreement

The Company's credit agreement, as amended (the "Credit Agreement"), is comprised of (i) $ 365.0 million of seven-year term debt (the "Term Loan") expiring in June 2024 and (ii) a $ 100.0 million five-year revolving credit facility (the "Credit Facility") expiring in June 2022.

During the nine months ended September 30, 2020, the Company reduced its Term Loan by $ 62.5 million, including the retirement of $ 10.0 million of principal for $ 8.9 million from certain debt holders in accordance with the prepayment provisions in the Credit Agreement.

At September 30, 2020, $ 223.2 million was outstanding under the Term Loan, and the Company had no outstanding borrowings under its Credit Facility.

In accordance with ASC 835, Interest, the amounts outstanding under the Company's Term Loan are presented on the Condensed Consolidated Balance Sheet net of related debt issuance costs, which were $ 5.2 million as of September 30, 2020.

During the three months ended March 31, 2021, the Company repaid $ 5.9 million outstanding under its Term Loan.

At March 31, 2021, $ 199.8 million remained outstanding under the Term Loan, and the Company had no outstanding borrowings under its Credit Facility.

Commitments and Contingencies

16 unchanged sentences

The Company, in purchasing affiliate equity, has the option to settle in cash or shares of the Company's common stock and is entitled to the cash flow associated with any purchased equity.

Minority interests are recorded at estimated redemption value within redeemable noncontrolling interests on the Company's Condensed Consolidated Balance Sheets, and changes in estimated redemption value of these interests are recorded on the Company’s Condensed Consolidated Statements of Operations within noncontrolling interests.

Redeemable noncontrolling interests for the nine months ended September 30, 2020 included the following amounts:

Minority interests in an affiliate are recorded at estimated redemption value within redeemable noncontrolling interests in the Company's Condensed Consolidated Balance Sheets, and any changes in the estimated redemption value are recorded in the Condensed Consolidated Statements of Operations within noncontrolling interests.

Redeemable noncontrolling interests for the three months ended March 31, 2021 included the following amounts:

(in thousands) CIP Affiliate Noncontrolling Interests Total

4 unchanged sentences

Net subscriptions (redemptions) and other ( 13,594 ) ( 4,988 ) ( 18,582 )

Balances at September 30, 2020 $ 24,651 $ 74,626 $ 99,277

Balances at March 31, 2021 $ 14,423 $ 98,059 $ 112,482

(1) Relates to noncontrolling interests redeemable at other than fair value.

13 unchanged sentences

The Company has no right to the benefits from, and does not bear the risks associated with, these investment products beyond the Company’s investments in, and fees generated from, these products.

The following table presents the balances of CIP that, after intercompany eliminations, were reflected on the Condensed Consolidated Balance Sheets as of September 30, 2020 and December 31, 2019:

September 30, 2020 December 31, 2019

(in thousands) VOEs CLOs Other VOEs CLOs Other

The following table presents the balances of CIP that, after intercompany eliminations, were reflected on the Condensed Consolidated Balance Sheets as of March 31, 2021 and December 31, 2020:

March 31, 2021 December 31, 2020

VOEs VIEs VOEs VIEs

(in thousands) CLOs Other CLOs Other

Cash and cash equivalents $ 1,409 $ 168,514 $ 1,536 $ 9,837 $ 82,295 $ 1,206

7 unchanged sentences

The majority of the Company's CIP that are VIEs are CLOs.

At September 30, 2020, the Company consolidated six CLOs.

The financial information of certain CLOs is included on the Company's condensed consolidated financial statements on a one-month lag based upon the availability of the fund financial information.

At March 31, 2021, the Company consolidated six CLOs.

The financial information of certain CLOs is included on the Company's condensed consolidated financial statements on a one-month lag based upon the availability of the fund's financial information.

A majority-owned consolidated private fund, whose primary purpose is to invest in CLOs for which the Company serves as the collateral manager, is also included.

Investments of CLOs

The CLOs held investments of $ 2.2 billion at September 30, 2020 consisting of bank loan investments, which comprise the majority of the CLOs' portfolio asset collateral and are senior secured corporate loans across a variety of industries.

The CLOs held investments of $ 2.2 billion at March 31, 2021 consisting of bank loan investments, which comprise the majority of the CLOs' portfolio asset collateral and are senior secured corporate loans across a variety of industries.

These bank loan investments mature at various dates between 2021 and 2029 and pay interest at LIBOR plus a spread of up to 10.00 %.

1 unchanged sentence

Generally, subsequent prepayments received after the reinvestment period must be used to pay down the note obligations.

At September 30, 2020, the fair value of the senior bank loans was less than the unpaid principal balance by $ 135.8 million.

At September 30, 2020, there were no material collateral assets in default.

At March 31, 2021, the fair value of the senior bank loans was less than the unpaid principal

balance by $ 39.2 million.

At March 31, 2021, there were no material collateral assets in default.

Notes Payable of CLOs

The CLOs held notes payable with a total value, at par, of $ 2.5 billion at September 30, 2020, consisting of senior secured floating rate notes payable with a par value of $ 2.2 billion and subordinated notes with a par value of $ 225.9 million.

The CLOs held notes payable with a total value, at par, of $ 2.4 billion at March 31, 2021, consisting of senior secured floating rate notes payable with a par value of $ 2.2 billion and subordinated notes with a par value of $ 225.9 million.

These note obligations bear interest at variable rates based on LIBOR plus a pre-defined spread ranging from 0.8 % to 8.7 %.

2 unchanged sentences

The secured notes of the consolidated CLOs have contractual recourse only to the related assets of the CLO and are classified as financial liabilities.

Although these beneficial interests are eliminated upon consolidation, the application of the measurement alternative prescribed by ASU 2014-13, Consolidation (Topic 810) ("ASU 2014-13") results in the net assets of the consolidated CLOs shown above to be equivalent to the beneficial interests retained by the Company at September 30, 2020, as shown in the table below:

Although these beneficial interests are eliminated upon consolidation, the application of the measurement alternative prescribed by ASU 2014-13, Consolidation (Topic 810) ("ASU 2014-13"), results in the net assets of the consolidated CLOs shown above to be equivalent to the beneficial interests retained by the Company at March 31, 2021, as shown in the table below:

(in thousands)

3 unchanged sentences

The following table represents income and expenses of the consolidated CLOs included on the Company’s Condensed Consolidated Statements of Operations for the period indicated:

(in thousands) Nine Months Ended September 30, 2020

(in thousands) Three Months Ended March 31, 2021

Realized and unrealized gain (loss), net $ ( 4,156 )

6 unchanged sentences

Net Income (loss) attributable to CIP $ 3,780

As summarized in the table below, the application of the measurement alternative as prescribed by ASU 2014-13 results in the consolidated net income summarized above to be equivalent to the Company’s own economic interests in the

consolidated CLOs, which are eliminated upon consolidation:

(in thousands) Nine Months Ended September 30, 2020

(in thousands) Three Months Ended March 31, 2021

Distributions received and unrealized gains (losses) on the subordinated notes held by the Company $ 1,411

2 unchanged sentences

Fair Value Measurements of CIP

The assets and liabilities of CIP measured at fair value on a recurring basis as of September 30, 2020 and December 31, 2019 by fair value hierarchy level were as follows:

As of September 30, 2020

The assets and liabilities of CIP measured at fair value on a recurring basis as of March 31, 2021 and December 31, 2020 by fair value hierarchy level were as follows:

As of March 31, 2021

(in thousands) Level 1 Level 2 Level 3 Total

2 unchanged sentences

Equity investments 28,904 1,298 782 30,984

Derivatives 586 845 — 1,431

Total assets measured at fair value $ 197,594 $ 2,242,961 $ 27,566 $ 2,468,121

Notes payable $ — $ 2,197,695 $ — $ 2,197,695

Derivatives 539 433 — 972

Short sales 656 — — 656

5 unchanged sentences

Equity investments 38,468 3,856 814 43,138

Derivatives 858 1,227 — 2,085

Total assets measured at fair value $ 138,480 $ 2,224,282 $ 54,182 $ 2,416,944

Notes payable $ — $ 2,190,445 $ — $ 2,190,445

Derivatives 714 757 — 1,471

Short sales 520 — — 520

1 unchanged sentence

The following is a discussion of the valuation methodologies used for the assets and liabilities of the Company’s CIP measured at fair value:

Cash equivalents represent investments in money ma rket funds.

Cash equivalents represent investments in money market funds.

Cash investments in money market funds are valued using published net asset values and are classified as Level 1.

4 unchanged sentences

Debt investments are valued based on quotations received from independent pricing services or from dealers who make markets in such securities.

Bank loan investments, which are included

as debt investments, are generally priced at the average mid-point of bid and ask quotations obtained from a third-party pricing service.

Bank loan investments, which are included as debt investments, are generally priced at the average mid-point of bid and ask quotations obtained from a third-party pricing service.

Fair value may also be based upon valuations obtained from independent third-party brokers or dealers utilizing matrix pricing models that consider information regarding securities with similar characteristics.

2 unchanged sentences

Level 3 investments include debt and equity securities that are not widely traded, are illiquid or are priced by dealers based on pricing models used by market makers in the security.

Derivative assets and liabilities represent futures contracts, swaps contracts, option contracts and forward contracts held in CIP.

Derivative assets and liabilities represent futures contracts, swaps contracts, option contracts and forward contracts

Derivative instruments in an asset position are classified as other assets of CIP on the Condensed Consolidated Balance Sheets.

4 unchanged sentences

The cash pledged or on deposit is recorded on the Condensed Consolidated Balance Sheets of the Company as Cash pledged or on deposit of CIP.

The fair value of such derivatives at September 30, 2020 was immaterial.

The fair value of such derivatives at December 31, 2020, was immaterial.

Notes payable represent notes issued by CIP CLOs and are measured using the measurement alternative in ASU 2014-13.

3 unchanged sentences

Short sales are recorded on the Condensed Consolidated Balance Sheets within other liabilities of CIP and are classified as Level 1 based on the underlying equity security.

The securities purchase payable at September 30, 2020 and December 31, 2019 approximated fair value due to the short-term nature of the instruments.

The securities purchase payable at March 31, 2021 and December 31, 2020 approximated fair value due to the short-term nature of the instruments.

The following table is a reconciliation of assets of CIP for Level 3 investments for which significant unobservable inputs were used to determine fair value:

Nine Months Ended September 30,

Three Months Ended March 31,

(in thousands)

Level 3 Investments of CIP (1)

Balance at beginning of period $ 54,182 $ 40,422

12 unchanged sentences

The assets and liabilities of these CDOs reside in bankruptcy remote, special purpose entities in which the Company has no ownership of, nor holds any notes issued by, the CDOs, and provides neither recourse nor guarantees.

The Company has determined that the investment management fees it receives for serving as collateral

manager for these CDOs did not represent a variable interest since (i) the fees the Company earns are compensation for services provided and are commensurate with the level of effort required to provide the investment management services, (ii) the Company does not hold other interests in the CDOs that individually, or in the aggregate, would absorb more than an insignificant amount of the CDOs' expected losses or receive more than an insignificant amount of the CDOs' expected residual return, and (iii) the investment management arrangement only includes terms, conditions and amounts that are customarily present in arrangements for similar services negotiated at arm's length.

The Company has interests in certain other VIEs that the Company does not consolidate as it is not the primary beneficiary since its interest in these entities does not provide the Company with the power to direct the activities that most significantly impact the entities' economic performance.

At September 30, 2020, the carrying value and maximum risk of loss related to the Company's interest in these VIEs was $ 26.2 million.

The Company has determined that the investment management fees it receives for serving as collateral manager for these CDOs did not represent a variable interest since (i) the fees the Company earns are compensation for services provided and are commensurate with the level of effort required to provide the investment management services, (ii) the Company does not hold other interests in the CDOs that individually, or in the aggregate, would absorb more than an insignificant amount of the CDOs' expected losses or receive more than an insignificant amount of the CDOs' expected residual return, and (iii) the investment management arrangement only includes terms, conditions and amounts that are customarily present in arrangements for similar services negotiated at arm's length.

significantly impact the entities' economic performance.

At March 31, 2021, the carrying value and maximum risk of loss related to the Company's interest in these VIEs was $ 30.6 million.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements