What changed in this filing

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Item 2. Management’s Discussion and Analysis

2022-08-09 compared with 2022-05-10 · 104 added, 76 removed, 298 unchanged (38% of the section changed)

11 unchanged sentences

(i) any reduction in our assets under management;

(ii) general domestic and global economic, political, and pandemic conditions;

(ii) general domestic and global economic and political conditions (including war, acts of terrorism and civil unrest);

(iii) inability to achieve the expected benefits of our strategic transactions;

(iv) the effects of the on-going COVID-19 pandemic and associated global economic disruptions;

(iv) the ongoing effects of the COVID-19 pandemic and associated global economic disruption;

(v) withdrawal, renegotiation or termination of investment advisory agreements;

34 unchanged sentences

Our sales efforts are supported by regional sales professionals, a national account relationship group, and separate teams for ETFs and the retirement and insurance channels.

In addition, we leverage third-party distributors for global products sold in the US retail market as well as in certain international jurisdictions.

Our retail separate accounts are distributed through financial intermediaries and directly to private clients by teams at an affiliated manager.

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Financial Highlights

▪ Net income per diluted share was $4.22 in the first quarter of 2022, a decrease of $0.32, or 7.0%, as compared to net income per diluted share of $4.54 in the first quarter of 2021.

▪ Total sales were $9.4 billion in the first quarter of 2022, a decrease of $1.2 billion, or 11.1%, from $10.6 billion in the first quarter of 2021.

Net flows were $(2.0) billion in the first quarter of 2022 compared to $2.5 billion in the first quarter of 2021.

▪ Assets under management were $183.3 billion at March 31, 2022, an increase of $14.5 billion, or 8.6%, from March 31, 2021.

▪ Net income per diluted share was $2.29 in the second quarter of 2022, a decrease of $5.57, or 70.9%, as compared to net income per diluted share of $7.86 in the second quarter of 2021.

▪ Total sales were $7.9 billion in the second quarter of 2022, a decrease of $1.7 billion, or 17.4%, from $9.6 billion in the second quarter of 2021.

Net flows were $(4.8) billion in the second quarter of 2022 compared to $1.5 billion in the second quarter of 2021.

▪ Assets under management were $155.4 billion at June 30, 2022, a decrease of $23.2 billion, or 13.0%, from June 30, 2021.

Stone Harbor Investment Partners

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On October 1, 2021, the Company completed its acquisition of Westchester Capital Management ("Westchester"), a recognized leader in global event-driven strategies with $5.1 billion of assets under management.

AllianzGI Strategic Partnership

On February 1, 2021, the Company finalized a strategic partnership with Allianz Global Investors U.S.

LLC ("AllianzGI"), pursuant to which NFJ Investment Group ("NFJ") was established as a new affiliated investment manager, and the Company became the investment adviser, distributor and/or administrator for $29.5 billion of AllianzGI's open-end, closed-end, institutional and retail separate account assets (the "AGI Relationship", together with Westchester and Stone Harbor, the "Transactions").

Fund Adoption and NFJ Investment Group

On February 1, 2021, the Company finalized an agreement with Allianz Global Investors U.S.

LLC ("AGI"), pursuant to which NFJ Investment Group ("NFJ") was established as a new affiliated investment manager, and the Company became the investment adviser, distributor and/or administrator for $29.5 billion of AGI's open-end, closed-end, institutional and retail separate account assets (together with Westchester and Stone Harbor, the "Transactions").

Assets Under Management

At March 31, 2022, total assets under management were $183.3 billion, representing an increase of $14.5 billion, or 8.6%, from March 31, 2021, and a decrease of $3.8 billion, or 2.1%, from December 31, 2021.

The increase from March 31, 2021 included $19.8 billion from the addition of Stone Harbor and Westchester, partially offset by $1.8 billion of negative market performance and $1.0 billion of net outflows.

The decrease from December 31, 2021 was due to $16.5 billion in negative market performance and $2.0 billion of net outflows, partially offset by $14.7 billion from Stone Harbor.

At June 30, 2022, total assets under management were $155.4 billion, representing a decrease of $23.2 billion, or 13.0%, from June 30, 2021, and a decrease of $31.8 billion, or 17.0%, from December 31, 2021.

The decrease from June 30, 2021 was due to $33.4 billion of negative market performance and $7.2 billion of net outflows partially offset by an increase of $19.8 billion in assets under management from the addition of Stone Harbor and Westchester.

The decrease from December 31, 2021 was due to $39.3 billion in negative market performance and $6.7 billion of net outflows, partially offset by an increase of $14.7 billion in assets under management from the addition of Stone Harbor.

Other Fee Earning Assets

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Other fee earning assets are not included in our assets under management.

At December 31, 2021, we had $3.5 billion of other fee earning assets.

At June 30, 2021, we had $3.0 billion of other fee earning assets.

Operating Results

In the first quarter of 2022, total revenues increased 16.4% to $252.4 million from $216.9 million in the first quarter of 2021, primarily as a result of higher average assets under management as a result of the assets from the Transactions.

Operating income increased $3.4 million to $65.6 million in the first quarter of 2022 compared to $62.1 million in the first quarter of 2021, primarily due to the same factors previously mentioned.

In the second quarter of 2022, total revenues decreased 7.7% to $225.3 million from $244.0 million in the second quarter of 2021, primarily as a result of lower average assets under management due to negative market performance and net outflows partially offset by an increase in assets under management from Stone Harbor and Westchester.

Operating income decreased $29.7 million to $56.7 million in the second quarter of 2022 compared to $86.4 million in the second quarter of 2021, due primarily to the previously mentioned factors.

Assets Under Management by Product

The following table summarizes our assets under management by product:

As of March 31, Change

As of June 30, Change

(in millions) 2022 2021 $ %

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Three Months Ended

June 30, Six Months Ended

(in millions) 2022 2021 2022 2021

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Beginning balance $ 12,060 $ 11,664 $ 12,068 $ 5,914

Inflows 24 — 32 —

Outflows — — — —

Net flows 24 — 32 —

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The following table summarizes assets under management by asset class:

As of March 31, Change % of Total

As of June 30, Change % of Total

(in millions) 2022 2021 $ % 2022 2021

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The following table summarizes the average management fees earned in basis points and average assets under management:

Three Months Ended March 31,

Three Months Ended June 30,

Average Fee Earned

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All Products 41.2 42.5 $ 171,381 $ 172,878

Six Months Ended June 30,

Average Fee Earned

(expressed in basis points)

Average Assets Under

(in millions) (3)

2022 2021 2022 2021

Open-End Funds (1) 46.3 46.6 $ 70,564 $ 71,211

Closed-End Funds 57.6 55.6 $ 11,583 $ 10,638

Retail Separate Accounts 43.2 44.9 $ 42,681 $ 34,681

Institutional Accounts (2) 31.1 32.5 $ 55,915 $ 47,081

All Products 41.6 42.8 $ 180,743 $ 163,611

(1) Represents assets under management of U.S.

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Revenue-related adjustments are based on specific agreements and reflect the portion of investment management fees passed-through to third-party client intermediaries for services to investors in sponsored investment products.

Fund fees are calculated based on average daily or weekly net assets.

Fund fees are calculated based on average daily or weekly net

Retail separate account fees are calculated based on the end of the preceding or current quarter’s asset values or on an average of month-end balances.

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Average fees earned will vary based on several factors, including the asset mix and expense reimbursements to the funds.

The average fee rate earned on all products for the three months ended March 31, 2022 decreased by 1.2 basis points compared to the same period in the prior year primarily due to lower fee rates earned on the assets under management acquired from the AGI Relationship and Stone Harbor.

The average fee rate earned on all products for the three and six months ended June 30, 2022 decreased by 1.3 basis points and 1.2 basis points, respectively, compared to the same periods in the prior year primarily due to lower fee rates earned on the assets under management acquired from Stone Harbor and a lower proportion of assets under management in equity products as a result of negative equity markets in the current year periods.

Results of Operations

Summary Financial Data

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

(in thousands) 2022 2021 2022 vs.

2021 % 2022 2021 2022 vs.

Investment management fees $ 185,024 $ 193,510 $ (8,486) (4.4) % $ 391,841 $ 366,779 $ 25,062 6.8 %

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Revenues by source were as follows:

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

(in thousands) 2022 2021 2022 vs.

2021 % 2022 2021 2022 vs.

Investment management fees

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Institutional accounts 38,663 37,367 1,296 3.5 % 81,560 71,064 10,496 14.8 %

Structured products 906 1,259 (353) (28.0) %

Total investment management fees 185,024 193,510 (8,486) (4.4) % 391,841 366,779 25,062 6.8 %

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Investment management fees are earned based on a percentage of assets under management and are paid pursuant to the terms of the respective investment management contracts, which generally require monthly or quarterly payments.

Investment management fees increased by $33.5 million, or 19.4%, for the three months ended March 31, 2022, compared to the same period in the prior year.

The increase in investment management fees was due to an increase in average assets under management of $35.8 billion, or 23.2% as a result of the Transactions.

Investment management fees decreased by $8.5 million, or 4.4%, for the three months ended June 30, 2022, and increased $25.1 million, or 6.8%, for the six months ended June 30, 2022, compared to the same periods in the prior year.

The decrease during the three-month period in investment management fees was due to a decrease in average assets under management of $1.5 billion, or 0.9%, as well as a lower blended fee rate, partially offset by the addition of Stone Harbor and Westchester assets under management.

The increase during the six-month period in investment management fees was due to an increase in

average assets under management of $17.1 billion, or 10.5%, as a result of the Transactions, partially offset by a lower blended fee rate.

Distribution and Service Fees

Distribution and service fees are sales- and asset-based fees earned from open-end funds for marketing and distribution services.

Distribution and service fees decreased by $0.3 million, or 1.7%, for the three months ended March 31, 2022, compared to the same period in the prior year, due primarily to lower sales for open-end funds in share classes that have distribution and service fees primarily as a result of market performance and net outflows.

Distribution and service fees decreased by $6.3 million, or 26.8%, and $6.6 million, or 15.1%, for the three and six months ended June 30, 2022, respectively, compared to the same periods in the prior year, due primarily to lower sales for open-end funds in share classes that have sales-based distribution and service fees.

Administration and Shareholder Service Fees

Administration and shareholder service fees represent fees earned for fund administration and shareholder services from our open-end mutual funds, ETFs, and certain of our closed-end funds.

Fund administration and shareholder service fees increased by $1.8 million, or 7.9%, for the three months ended March 31, 2022, compared to the same period in the prior year primarily due to the increase in average assets under management for our open-end and closed-end funds during the period, predominantly as a result of the Transactions.

Administration and shareholder service fees represent fees earned for fund administration and shareholder services from our U.S.

retail funds, ETFs, and certain of our closed-end funds.

Fund administration and shareholder service fees decreased by $3.9 million, or 15.1%, and $2.1 million, or 4.4%, for the three and six months ended June 30, 2022, respectively, compared to the same periods in the prior year primarily due to the decrease in average assets under management for our open-end and closed-end funds during the periods as a result of market performance and net outflows.

Other Income and Fees

Other income and fees primarily represent fees related to other fee-earning assets and contingent sales charges earned from investor redemptions of certain shares sold without a front-end sales charge.

Other income and fees increased by $0.6 million, or 76.7%, for the three months ended March 31, 2022, compared to the same period in the prior year primarily due to a full quarter of fees associated with other fee-earning assets as a result of the AGI Relationship.

Other income and fees increased by $0.5 million, or 27.5%, for the six months ended June 30, 2022, compared to the same period in the prior year.

The increase for the six months ended June 30, 2022 was primarily due to higher redemption income in the period.

Operating Expenses

Operating expenses by category were as follows:

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

(in thousands) 2022 2021 2022 vs.

2021 % 2022 2021 2022 vs.

Operating expenses

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Other operating expenses of CIP 649 659 (10) (1.5) % 1,389 1,218 171 14.0 %

Change in fair value of contingent consideration 2,900 — 2,900 N/M 2,900 — 2,900 N/M

Depreciation expense 962 981 (19) (1.9) % 1,897 2,079 (182) (8.8) %

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Total operating expenses $ 168,637 $ 157,600 $ 11,037 7.0 % $ 355,525 $ 312,355 $ 43,170 12.9 %

N/M = Not Meaningful

Employment Expenses

Employment expenses consist of fixed and variable compensation and related employee benefit costs.

Employment expenses for the three months ended March 31, 2022 were $106.0 million, which represented an increase of $14.2 million, or 15.5%, compared to the same period in the prior year.

The increase was primarily due to the addition of Stone Harbor and Westchester.

Employment expenses for the three and six months ended June 30, 2022 were $89.4 million and $195.4 million, which represented an increase of $1.7 million, or 2.0%, and $16.0 million, or 8.9%, respectively, compared to the same periods in the prior year.

The increases in both periods were primarily due to the addition of Stone Harbor and Westchester.

Distribution and Other Asset-Based Expenses

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The deferred sales commissions are amortized on a straight-line basis over the period commissions are recovered from distribution fee revenues and contingent sales charges received upon redemption of shares.

Distribution and other asset-based expenses increased $0.6 million or 1.7%, as compared to the same period in the prior year primarily due to an increase in assets under management as a result of the Transactions partially offset by a lower percentage of sales and assets under management in share classes that have distribution and other asset-based expenses.

During the three and six months ended June 30, 2022, distribution and other asset-based expenses decreased $7.4 million, or 20.6%, and $6.9 million, or 10.1%, respectively, as

compared to the same periods in the prior year primarily due to lower sales and a decrease in assets under management in share classes that have sales- and asset-based distribution and other asset-based expenses.

Other Operating Expenses

Other operating expenses primarily consist of investment research and technology costs, professional fees, travel and distribution related costs, rent and occupancy expenses, and other business costs.

Other operating expenses for the three months ended March 31, 2022 increased by $12.1 million, or 62.0%, as compared to the same period in the prior year primarily due to discrete business initiative professional fees and the Transactions.

For the three and six months ended June 30, 2022, other operating expenses increased by $9.6 million, or 43.8%, and $21.7 million, or 52.4%, respectively, as compared to the same periods in the prior year primarily due the addition of Stone Harbor and Westchester, as well as higher travel and related expenses.

Other Operating Expenses of CIP

Other operating expenses of CIP remained consistent during the three months ended March 31, 2022, compared to the same period in the prior year.

Other operating expenses of CIP remained consistent during the three and six months ended June 30, 2022, compared to the same periods in the prior year.

Change in Fair Value of Contingent Consideration

Our contingent consideration related to our NFJ, Westchester and Stone Harbor transactions are recorded at fair value each reporting date taking into consideration changes in various estimates, including probability of success, discount rates and amount of time until the conditions of the contingent payments are achieved.

The change in fair value is recorded in the current period as a gain or loss.

The change in value of continent consideration of $2.9 million during the three and six months ended June 30, 2022 was primarily attributable to higher future revenue projections and the time value of money.

Depreciation Expense

Depreciation expense consists primarily of the straight-line depreciation of furniture, equipment and leasehold improvements.

Depreciation expense remained consistent during the three months ended March 31, 2022, compared to the same period in the prior year.

Depreciation expense remained consistent during three and six months ended June 30, 2022, compared to the same periods in the prior year.

Amortization Expense

Amortization expense consists of the amortization of definite-lived intangible assets over their estimated useful lives.

Amortization expense increased $5.2 million, or 54.9%, for the three months ended March 31, 2022, compared to the same period in the prior year, due to the additional amortization associated with the Transactions.

Amortization expense increased $4.3 million, or 41.1%, and $9.5 million, or 47.7%, for the three and six months ended June 30, 2022, respectively, compared to the same periods in the prior year.

The increase during the three-month period was due to the additional amortization associated with the acquisitions of Stone Harbor and Westchester.

The increase during the six-month period was due to the additional amortization associated with the Transactions.

Other Income (Expense)

Other Income (Expense), net by category were as follows:

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

(in thousands) 2022 2021 2022 vs.

2021 % 2022 2021 2022 vs.

Other Income (Expense)

Realized and unrealized gain (loss) on investments, net $ (10,543) $ 2,494 $ (13,037) (522.7) % $ (13,525) $ 3,385 $ (16,910) (499.6) %

Realized and unrealized gain (loss) of CIP, net (13,344) (4,687) (8,657) 184.7 %

Realized and unrealized gain (loss) of CIP, net (21,659) 2,747 (24,406) (888.5) % (35,003) (1,940) (33,063) N/M

Other income (expense), net 571 826 (255) (30.9) % 858 2,597 (1,739) (67.0) %

1 unchanged sentence

Realized and unrealized gain (loss) on investments, net

Realized and unrealized gain (loss) on investments, net changed during the three months ended March 31, 2022 by $(3.9) million, as compared to the same period in the prior year.

The realized and unrealized gains and losses during the three months ended March 31, 2022 reflected changes in overall market conditions experienced during the periods.

Realized and unrealized gain (loss) on investments, net changed during the three and six months ended June 30, 2022 by $(13.0) million and $(16.9) million, respectively, as compared to the same periods in the prior year.

The realized and unrealized gains and losses during the periods reflected changes in overall market conditions experienced during the periods.

Realized and unrealized gain (loss) of CIP, net

Realized and unrealized gain (loss) of CIP, net changed $(8.7) million, during the three months ended March 31, 2022, compared to the same period in the prior year.

The change for the three months ended March 31, 2022 consisted primarily of an increase in unrealized losses of $54.4 million, due to changes in market values of leveraged loans, partially offset by changes in unrealized gains of $45.7 million related to the value of the notes payable.

Realized and unrealized gain (loss) of CIP, net changed $(24.4) million and $(33.1) million during the three and six months ended June 30, 2022, respectively, compared to the same periods in the prior year.

The changes for the three and six months ended June 30, 2022 consisted primarily of an increase in unrealized losses of $70.4 million and $124.8 million,

respectively, due to changes in market values of leveraged loans, partially offset by changes in unrealized gains of

$46.0 million and $91.7 million, respectively, related to the value of the notes payable.

Other income (expense), net

Other income (expense), net changed $(1.5) million during the three months ended March 31, 2022, compared to the same period in the prior year.

The change during the three-month period was primarily due to decreased earnings from equity method investments during the current year period.

Other income (expense), net decreased $0.3 million and $1.7 million during the three and six months ended June 30, 2022, respectively, compared to the same periods in the prior year.

The decreases during the three- and six-month periods were primarily due to decreased earnings from equity method investments during the current year periods.

Interest Income (Expense)

Interest Income (Expense), net by category were as follows:

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

(in thousands) 2022 2021 2022 vs.

2021 % 2022 2021 2022 vs.

Interest Income (Expense)

5 unchanged sentences

Interest Expense

Interest expense remained consistent during the three months ended March 31, 2022, compared to the same period in the prior year.

Interest expense increased $0.6 million, or 25.2%, and $0.5 million, or 11.7%, during the three and six months ended June 30, 2022, respectively, compared to the same periods in the prior year.

The increases were attributable to higher average debt balances outstanding in the current year periods.

Interest and Dividend Income

Interest and dividend income remained consistent during the three months ended March 31, 2022, compared to the same period in the prior year.

Interest and dividend income increased $0.4 million, or 218.7%, and $0.6 million, or 183.8%, during the three and six months ended June 30, 2022, respectively, compared to the same periods in the prior year.

The increases were attributable to higher average investment balances during the current year periods compared to prior year periods.

Interest and Dividend Income of Investments of CIP

Interest and dividend income of investments of CIP decreased $3.5 million, or 14.6%, for the three months ended March 31, 2022, compared to the same period in the prior year.

The decrease was primarily due to a decrease in interest earned from our consolidated CLOs.

Interest and dividend income of investments of CIP decreased $0.2 million, or 0.7%, and $3.6 million, or 7.9%, for the three and six months ended June 30, 2022, respectively, compared to the same periods in the prior year.

The decreases were primarily due to lower average investment balances partially offset by higher average interest rates.

Interest Expense of CIP

Interest expense of CIP represents interest expense on the notes payable of CIP.

Interest expense of CIP decreased $2.4 million, or 16.3%, for the three months ended March 31, 2022, compared to the same period in the prior year.

The decrease during the three months ended March 31, 2022 was primarily due to lower average debt balances of CIP during the current year period.

Interest expense of CIP decreased $36 thousand, or 0.2%, and $2.4 million, or 8.3%, for the three and six months ended June 30, 2022, respectively, compared to the same periods in the prior year.

The decreases during the three and six months ended June 30, 2022 were primarily due to lower average debt balances of CIP during the current year periods.

Income Tax Expense (Benefit)

The provision for income taxes reflected U.S.

federal, state and local taxes at an estimated effective tax rate of 30.0% and 22.5% for the three months ended March 31, 2022 and 2021, respectively.

The comparatively higher estimated effective tax rate for the three months ended March 31, 2022 was primarily due to valuation allowances recorded in the current year for the tax effects of unrealized losses on certain Company investments.

federal, state and local taxes at an estimated effective tax rate of 38.4% and 22.6% for the six months ended June 30, 2022 and 2021, respectively.

The higher estimated effective tax rate for the six months ended June 30, 2022 was primarily due to valuation allowances recorded in the current year for the tax effects of unrealized losses on certain Company investments.

Liquidity and Capital Resources

1 unchanged sentence

The following table summarizes certain financial data relating to our liquidity and capital resources:

March 31, 2022 December 31, 2021 Change

June 30, 2022 December 31, 2021 Change

(in thousands) 2022 vs.

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Total equity 791,705 836,627 (44,922) (5.4) %

Three Months Ended

March 31, Change

Six Months Ended

June 30, Change

(in thousands) 2022 2021 2022 vs.

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Financing activities (240,177) (167,645) (72,532) 43.3 %

At March 31, 2022, we had $225.2 million of cash and cash equivalents and $116.8 million of investments, which included $88.4 million of investment securities, compared to $378.9 million of cash and cash equivalents and $108.9 million of investments, which included $80.3 million of investment securities, at December 31, 2021.

At June 30, 2022, we had $250.5 million of cash and cash equivalents and $102.8 million of investments, which included $77.2 million of investment securities, compared to $378.9 million of cash and cash equivalents and $108.9 million of investments, which included $80.3 million of investment securities, at December 31, 2021.

Uses of Capital

Our main uses of capital related to operating activities comprise employee compensation and related benefit costs, which include annual incentive compensation, other operating expenses, which primarily consist of investment research,

technology costs, professional fees, distribution and occupancy costs;

interest on our indebtedness;

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Failure to meet these requirements could result in adverse consequences to us, including additional reporting requirements, a lower required ratio of aggregate indebtedness to net capital, or interruption of our business.

At March 31, 2022, the ratio of aggregate indebtedness to net capital of our broker-dealer was below the maximum allowed, and net capital was significantly greater than the required minimum.

At June 30, 2022, the ratio of aggregate indebtedness to net capital of our broker-dealer was below the maximum allowed, and net capital was significantly greater than the required minimum.

Balance Sheet

3 unchanged sentences

Operating Cash Flow

Net cash used in operating activities of $81.8 million for the three months ended March 31, 2022 changed by $231.9 million from net cash provided by operating activities of $150.2 million for the same period in the prior year primarily due to a $192.7 million reduction in sales of investments by CIP and increased compensation and benefit payments during the current-year period compared to the prior-year period.

Net cash provided by operating activities of $37.6 million for the six months ended June 30, 2022 changed by $201.6 million from net cash provided by operating activities of $239.2 million for the same period in the prior year primarily due to a $164.2 million reduction in sales of investments by CIP and increased compensation and benefit payments during the current year period compared to the prior-year period.

Investing Cash Flow

Cash flows from investing activities consist primarily of capital expenditures and other investing activities related to our business operations.

Net cash used in investing activities was $22.6 million for the three months ended March 31, 2022 compared to net cash used in investing activities of $2.6 million in the same period for the prior year.

The primary investing activity during the three months ended March 31, 2022 related to cash paid for Stone Harbor.

The primary investing activities for the three months ended March 31, 2021 were $2.6 million of capital expenditures and other asset purchases.

Net cash used in investing activities was $24.4 million for the six months ended June 30, 2022 compared to net cash used in investing activities of $5.5 million in the same period for the prior year.

The increase in cash used in investing activities during the six months ended June 30, 2022 compared to the prior year period related to cash paid for the Stone Harbor acquisition in the six months ended June 30, 2022.

Financing Cash Flow

Cash flows from financing activities consist primarily of transactions related to our common shares, issuance and repayment of debt by us and our CIP, payments of contingent consideration and changes to noncontrolling interests.

Net cash used in financing activities increased by $58.1 million to $145.8 million for the three months ended March 31, 2022 from $87.7 million for the three months ended March 31, 2021.

The net change was primarily due to contingent consideration payments of $33.0 million during the current-year period not in the prior-year period, along with an increase of $16.7 million in net borrowings of CIP during the three months ended March 31, 2022 compared to the prior year period.

Net cash used in financing activities increased by $72.5 million to $240.2 million for the six months ended June 30, 2022 from $167.6 million for the six months ended June 30, 2021.

The net change was primarily due to an increase in repurchases of common shares of $57.5 million and contingent consideration payments of $33.0 million during the current year period that did not occur in the prior year period, partially offset by a decrease of $21.0 million in net borrowings of CIP during the six months ended June 30, 2022 compared to the prior year period.

Credit Agreement

The Company's credit agreement, as amended (the "Credit Agreement"), comprises (i) a $275.0 million term loan with a seven-year term (the "Term Loan") expiring in September 2028, and (ii) a $175.0 million revolving credit facility with a five-year term expiring in September 2026.

During the three months ended March 31, 2022, the Company repaid $0.7 million outstanding under its Term Loan.

At March 31, 2022, $273.6 million was outstanding under the Term Loan, and the Company had no outstanding borrowings under its revolving credit facility.

In accordance with ASC 835, Interest , the amounts outstanding under the Company's Term Loan are presented in the Condensed Consolidated Balance Sheet net of related debt

issuance costs, which were $7.7 million as of March 31, 2022.

During the six months ended June 30, 2022, the Company repaid $11.4 million outstanding under its Term Loan.

At June 30, 2022, $262.9 million was outstanding under the Term Loan, and the Company had no outstanding borrowings under its revolving credit facility.

In accordance with ASC 835, Interest , the amounts outstanding under the Company's Term Loan are presented in the Condensed Consolidated Balance Sheet net of related debt issuance costs, which were $7.1 million as of June 30, 2022.

Critical Accounting Policies and Estimates

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A complete description of our significant accounting policies is included in our 2021 Annual Report on Form 10-K.

There were no material changes in our critical accounting policies and estimates in the three months ended March 31, 2022.

There were no material changes in our critical accounting policies and estimates in the three months ended June 30, 2022.

Recently Issued Accounting Pronouncements

For a discussion of accounting standards, see Note 2 in our condensed consolidated financial statements.

Quantitative and Qualitative Disclosures About Market Risk

The Company is primarily exposed to market risk associated with unfavorable movements in interest rates and securities prices.

During the three months ended March 31, 2022, there were no material changes to the information contained in Part II, Item 7A of the Company's 2020 Annual Report on Form 10-K.

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 2. Management’s Discussion and Analysis