What changed in this filing

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Item 1. Financial Statements

2022-11-08 compared with 2022-08-09 · 111 added, 97 removed, 549 unchanged (27% of the section changed)

2 unchanged sentences

Condensed Consolidated Balance Sheets

(in thousands, except share data) June 30,

(in thousands, except share data) September 30,

2022 December 31,

28 unchanged sentences

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

12,023,288 shares issued and 7,275,337 shares outstanding at June 30, 2022;

12,030,346 shares issued and 7,231,973 shares outstanding at September 30, 2022;

and 11,906,747 shares issued and 7,506,151 shares outstanding at December 31, 2021

2 unchanged sentences

Accumulated other comprehensive income (loss) ( 771 ) 20

Treasury stock, at cost, 4,747,951 and 4,400,596 shares at June 30, 2022 and December 31, 2021, respectively

Treasury stock, at cost, 4,798,373 and 4,400,596 shares at September 30, 2022 and December 31, 2021, respectively

( 589,248 ) ( 509,248 )

8 unchanged sentences

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

(in thousands, except per share data) 2022 2021 2022 2021

10 unchanged sentences

Change in fair value of contingent consideration — — 2,900 —

Restructuring expense 4,015 — 4,015 —

Depreciation expense 938 915 2,835 2,994

27 unchanged sentences

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

(in thousands) 2022 2021 2022 2021

1 unchanged sentence

Other comprehensive income (loss), net of tax:

Foreign currency translation adjustment, net of tax of $ 176 and $( 2 ) for the three months ended June 30, 2022 and 2021, respectively, and $ 249 and $( 2 ) for the six months ended June 30, 2022 and 2021, respectively.

Foreign currency translation adjustment, net of tax of $ 31 and $ 6 for the three months ended September 30, 2022 and 2021, respectively, and $ 280 and $ 4 for the nine months ended September 30, 2022 and 2021, respectively.

( 504 ) ( 17 ) ( 791 ) ( 11 )

7 unchanged sentences

Condensed Consolidated Statements of Cash Flows

Six Months Ended

Nine Months Ended

September 30,

(in thousands) 2022 2021

12 unchanged sentences

Deferred taxes, net ( 5,500 ) ( 2,672 )

Right of use asset 3,222 —

Changes in operating assets and liabilities:

14 unchanged sentences

Cash Flows from Financing Activities:

Refinancing of credit agreement — 81,155

Payment of long-term debt ( 12,062 ) ( 11,826 )

Payment of deferred financing costs — ( 7,039 )

Common stock dividends paid ( 35,244 ) ( 20,030 )

2 unchanged sentences

Taxes paid related to net share settlement of restricted stock units ( 16,450 ) ( 19,362 )

Affiliate equity sales (purchases) ( 11,089 ) —

Net contributions from (distributions to) noncontrolling interests ( 1,091 ) 552

11 unchanged sentences

Common stock dividends payable $ 12,014 $ 11,478

(in thousands) June 30,

(in thousands) September 30,

2022 December 31, 2021

18 unchanged sentences

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

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

Balances at June 30, 2021 7,651,606 $ 119 $ 1,280,667 $ ( 35,704 ) $ 35 4,254,236 $ ( 464,248 ) $ 780,869 $ 8,968 $ 789,837 $ 131,525

Net income (loss) — — — 58,736 — — — 58,736 374 59,110 13,401

7 unchanged sentences

Stock-based compensation — — 4,872 — — — — 4,872 — 4,872 —

Balances at September 30, 2021 7,587,757 $ 119 $ 1,273,376 $ 23,032 $ 18 4,318,730 $ ( 484,248 ) $ 812,297 $ 8,813 $ 821,110 $ 131,669

Balances at June 30, 2022 7,275,337 $ 120 $ 1,275,907 $ 88,196 $ ( 267 ) 4,747,951 $ ( 579,248 ) $ 784,708 $ 6,997 $ 791,705 $ 139,147

Balances at March 31, 2022 7,472,829 $ 120 $ 1,273,802 $ 81,783 $ ( 30 ) 4,526,048 $ ( 539,248 ) $ 816,427 $ 7,806 $ 824,233 $ 138,738

Net income (loss) — — — 31,680 — — — 31,680 151 31,831 ( 4,416 )

7 unchanged sentences

Stock-based compensation — — 5,004 — — — — 5,004 — 5,004 —

Balances at June 30, 2022 7,275,337 $ 120 $ 1,275,907 $ 88,196 $ ( 267 ) 4,747,951 $ ( 579,248 ) $ 784,708 $ 6,997 $ 791,705 $ 139,147

Balances at September 30, 2022 7,231,973 $ 120 $ 1,281,780 $ 107,324 $ ( 771 ) 4,798,373 $ ( 589,248 ) $ 799,205 $ 6,734 $ 805,939 $ 124,442

Permanent Equity Temporary Equity

19 unchanged sentences

Stock-based compensation — — 20,052 — — — — 20,052 — 20,052 —

Balances at June 30, 2021 7,651,606 $ 119 $ 1,280,667 $ ( 35,704 ) $ 35 4,254,236 $ ( 464,248 ) $ 780,869 $ 8,968 $ 789,837 $ 131,525

Balances at September 30, 2021 7,587,757 $ 119 $ 1,273,376 $ 23,032 $ 18 4,318,730 $ ( 484,248 ) $ 812,297 $ 8,813 $ 821,110 $ 131,669

Balances at December 31, 2021 7,506,151 $ 119 $ 1,276,424 $ 60,962 $ 20 4,400,596 $ ( 509,248 ) $ 828,277 $ 8,350 $ 836,627 $ 138,965

8 unchanged sentences

Stock-based compensation — — 19,772 — — — — 19,772 — 19,772 —

Balances at June 30, 2022 7,275,337 $ 120 $ 1,275,907 $ 88,196 $ ( 267 ) 4,747,951 $ ( 579,248 ) $ 784,708 $ 6,997 $ 791,705 $ 139,147

Balances at September 30, 2022 7,231,973 $ 120 $ 1,281,780 $ 107,324 $ ( 771 ) 4,798,373 $ ( 589,248 ) $ 799,205 $ 6,734 $ 805,939 $ 124,442

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

6 unchanged sentences

The Company’s retail investment management services are provided to individuals through products consisting of:

mutual funds registered pursuant to the Investment Company Act of 1940 ("U.S.

retail funds"), as amended;

mutual funds registered pursuant to the Investment Company Act of 1940, as amended ("U.S.

retail funds");

Undertaking for Collective Investment in Transferable Securities ("UCITS") and Qualifying Investor Funds ("QIFs"), collectively, "global funds" and collectively with mutual funds, exchange traded funds ("ETFs"), and variable insurance funds, the "open-end funds";

8 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 six months ended June 30, 2022 are not necessarily indicative of the results that may be expected for the year ending December 31, 2022.

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, 2021 ("2021 Annual Report on Form 10-K") filed with the Securities and Exchange Commission (the "SEC").

Operating results for the nine months ended September 30, 2022 are not necessarily indicative of the results that may be expected for the year ending December 31, 2022.

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, 2021 (the "2021 Annual Report on Form 10-K") filed with the Securities and Exchange Commission (the "SEC").

The Company’s significant accounting policies, which have been consistently applied, are summarized in its 2021 Annual Report on Form 10-K.

6 unchanged sentences

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

(in thousands) 2022 2021 2022 2021

6 unchanged sentences

Stone Harbor Investment Partners

On January 1, 2022, the Company completed the acquisition of Stone Harbor Investment Partners, LLC ("Stone Harbor"), which was accounted for in accordance with ASC 805, Business Combinations ("ASC 805").

On January 1, 2022, the Company acquired Stone Harbor Investment Partners, LLC ("Stone Harbor"), which was accounted for in accordance with ASC 805, Business Combinations ("ASC 805").

Transaction consideration consisted of $ 28.2 million paid in cash at closing, net working capital adjustment of $ 0.7 million to be paid in the fourth quarter of 2022, and $ 1.2 million in contingent consideration recorded at fair value, which represents future potential earn-out payments based on pre-established performance metrics related to revenue retention and revenue growth rates.

Future contingent consideration will be paid, if earned, in 2023, 2026 and 2027.

The contingent consideration has been accounted for as a liability within contingent consideration on the Company's Condensed Consolidated Balance Sheet.

The initial transaction consideration of $ 30.1 million was allocated to the assets acquired and liabilities assumed, based upon their estimated fair values at the date of the acquisition, as well as goodwill of $ 10.3 million and definite-lived intangible assets of $ 10.8 million.

1 unchanged sentence

The transaction consideration allocation is based upon preliminary information and is subject to change if additional information becomes available.

The final fair value of the net assets acquired may result in adjustments to certain assets and liabilities, including goodwill.

The revenues and operating income of Stone Harbor were not material to the Company's results of operations for the three and six months ended June 30, 2022.

Transaction consideration consisted of $ 28.2 million in cash paid at closing and $ 1.2 million in contingent consideration recorded at fair value, which represents future potential earn-out payments based on pre-established performance metrics related to revenue retention and revenue growth rates.

Future contingent consideration will be paid, if earned, in 2023, 2026 and 2027.

The contingent consideration has been accounted for as a liability within contingent consideration on the Company's Condensed Consolidated Balance Sheet.

The revenues and operating income of Stone Harbor were not material to the Company's results of operations for the three and nine months ended September 30, 2022.

The following table summarizes the identified acquired assets and liabilities assumed as of the Stone Harbor acquisition date:

3 unchanged sentences

Intangible assets

Accounts payable and accrued liabilities

Accounts payable, accrued and other liabilities

Total liabilities

12 unchanged sentences

The fair value of investment management agreements was estimated using a discounted cash flow method, the fair value of the trade names was estimated using a royalty savings method, and the fair value of the software was estimated using a royalty savings method and replacement cost approach.

The Stone Harbor fair value estimates were prepared with the assistance of an independent valuation firm.

The fair value estimates were prepared with the assistance of an independent valuation firm.

Westchester Capital Management

On October 1, 2021, the Company completed the acquisition of Westchester Capital Management, LLC ("Westchester"), which was accounted for in accordance with ASC 805.

The total transaction consideration of $ 169.3 million

was allocated to the assets acquired and liabilities assumed based upon their estimated fair values at the date of the acquisition.

On October 1, 2021, the Company acquired Westchester Capital Management, LLC ("Westchester"), which was accounted for in accordance with ASC 805.

Transaction consideration consisted of $ 156.8 million in cash and contingent consideration representing future potential earn-out payments based on pre-established performance metrics related to revenue growth rates, accounted for as a liability on the Company's Condensed Consolidated Balance sheet.

Future contingent consideration payments will be made, if earned, in 2025 and 2026.

As of September 30, 2022, the contingent consideration balance was $ 15.4 million.

The total transaction consideration of $ 169.3 million was allocated to the assets acquired and liabilities assumed based upon their estimated fair values at the date of the acquisition.

Goodwill of $ 23.0 million and intangible assets of $ 144.4 million were recorded as a result of the acquisition.

The Company expects $ 155.6 million of the purchase price to be tax deductible over 15 years.

The revenues and operating income of Westchester were not material to the Company's results of operations for the three and six months ended June 30, 2022.

Transaction consideration consisted of $ 156.8 million in cash and contingent consideration accounted for as a liability on the Company's Condensed Consolidated Balance sheet, which represents future potential earn-out payments based on pre-established performance metrics related to revenue growth rates.

Future contingent consideration payments will be made, if earned, in 2025 and 2026.

As of June 30, 2022, the contingent consideration balance was $ 15.4 million.

The revenues and operating income of Westchester were not material to the Company's results of operations for the three and nine months ended September 30, 2022.

Fund Adoption and NFJ Investment Group

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

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

LLC ("AGI"), pursuant to which the Company became the investment adviser, distributor and/or administrator of certain of AGI's open-end, closed-end and retail separate account assets.

This transaction was classified as an asset acquisition, and the cost of the acquisition was allocated to the assets acquired on the basis of their relative fair values.

Additionally, as part of the transaction, AGI’s Dallas-based Value Equity team joined the Company as a newly established affiliated manager, NFJ Investment Group ("NFJ").

Additionally, as part of the transaction, AGI’s Value Equity team joined the Company as a newly established affiliated manager, NFJ Investment Group ("NFJ").

The addition of NFJ was classified as a business combination under ASC 805, and assets acquired were recorded at fair value.

Assets acquired primarily consisted of definite-lived intangible assets representing investment contracts as well as indefinite-lived assets consisting of goodwill related to NFJ.

The revenues and operating income of NFJ were not material to the Company's results of operations for the three and six months ended June 30, 2022 or 2021.

The revenues and operating income of NFJ were not material to the Company's results of operations for the three and nine months ended September 30, 2022 or 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 from the transaction.

Payments are to be made annually on the anniversary of the closing date of the transactions over seven years .

Contingent payment obligations related to the NFJ acquisition, which were accounted for in accordance with ASC 805 are remeasured at fair value as of each reporting period-end, with the change in fair value recorded within the Condensed Consolidated Statement of Operations.

Contingent payment obligations related to NFJ, which were accounted for in accordance with ASC 805, are remeasured at fair value as of each reporting period-end, with the change in fair value recorded within the Condensed Consolidated Statement of Operations.

An estimate of these future payments has been recorded as a liability and included as contingent consideration on the Company's Condensed Consolidated Balance Sheet.

A payment of $ 33.0 million was made in the first quarter of 2022.

The estimated value of future revenue participation payments at June 30, 2022 was $ 117.0 million.

The estimated value of future revenue participation payments at September 30, 2022 was $ 117.0 million.

Goodwill and Intangible Assets, Net

3 unchanged sentences

Acquisitions 10,430

Balance at June 30, 2022 $ 347,423

Balance at September 30, 2022 $ 348,836

Below is a summary of intangible assets, net:

4 unchanged sentences

Intangible amortization — ( 43,895 ) ( 43,895 ) — ( 43,895 )

Balances at June 30, 2022 $ 766,376 $ ( 326,589 ) $ 439,787 $ 42,298 $ 482,085

Balances at September 30, 2022 $ 766,376 $ ( 341,198 ) $ 425,178 $ 42,298 $ 467,476

Definite-lived intangible asset amortization for the remainder of fiscal year 2022 and succeeding fiscal years is estimated as follows:

5 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 16, at June 30, 2022 and December 31, 2021 were as follows:

(in thousands) June 30, 2022 December 31, 2021

The Company's investments, excluding the assets of consolidated investment products ("CIP") discussed in Note 17, at September 30, 2022 and December 31, 2021 were as follows:

(in thousands) September 30, 2022 December 31, 2021

Investment securities - fair value $ 73,134 $ 80,335

7 unchanged sentences

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

June 30, 2022 December 31, 2021

September 30, 2022 December 31, 2021

(in thousands) Cost Fair Value Cost Fair Value

3 unchanged sentences

Total investment securities - fair value $ 82,358 $ 73,134 $ 73,749 $ 80,335

For the three and six months ended June 30, 2022, the Company recognized net realized losses of $ 0.1 million and $ 30 thousand, respectively, on the sale of its investment securities - fair value.

For the three and six months ended June 30, 2021, the Company recognized net realized gains of $ 1.0 million and $ 1.8 million, respectively, on the sale of its investment securities - fair value.

For each of the three and nine months ended September 30, 2022, the Company recognized net realized gains of $ 0.4 million on the sale of its investment securities - fair value.

For the three and nine months ended September 30, 2021, the Company recognized net realized gains of $ 0.2 million and $ 2.0 million, respectively, 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 16, as of June 30, 2022 and December 31, 2021 by fair value hierarchy level were as follows:

June 30, 2022

The Company’s assets and liabilities measured at fair value on a recurring basis, excluding the assets and liabilities of CIP discussed in Note 17, as of September 30, 2022 and December 31, 2021 by fair value hierarchy level were as follows:

September 30, 2022

(in thousands) Level 1 Level 2 Level 3 Total

32 unchanged sentences

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

(in thousands) 2022 2021 2022 2021

6 unchanged sentences

Dividends Declared

On May 18, 2022, the Company declared a quarterly cash dividend of $ 1.50 per common share to be paid on August 15, 2022 to stockholders of record at the close of business on July 29, 2022.

On August 17, 2022, the Company declared a quarterly cash dividend of $ 1.65 per common share to be paid on November 15, 2022 to stockholders of record at the close of business on October 31, 2022.

Common Stock Repurchases

During the three and six months ended June 30, 2022, the Company repurchased 221,903 and 347,355 common shares, respectively, at a weighted average price of $ 180.23 and $ 201.49 per share, respectively, for a total cost, including fees and expenses, of $ 40.0 million and $ 70.0 million, respectively, under its share repurchase program.

During the three and nine months ended September 30, 2022, the Company repurchased 50,422 and 397,777 common shares, respectively, at a weighted average price of $ 198.29 and $ 201.09 per share, respectively, for a total cost, including fees and expenses, of $ 10.0 million and $ 80.0 million, respectively, under its share repurchase program.

In May 2022, the Company's Board of Directors authorized an additional 750,000 shares to be repurchased under the share repurchase program.

As of June 30, 2022, 932,094 shares remained available for repurchase.

As of September 30, 2022, 881,672 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 six months ended June 30, 2022 and 2021 were as follows:

The changes in accumulated other comprehensive income (loss) by component for the nine months ended September 30, 2022 and 2021 were as follows:

Foreign Currency

3 unchanged sentences

Net current-period other comprehensive income (loss) (1) ( 791 )

Balance at June 30, 2022 $ ( 267 )

Balance at September 30, 2022 $ ( 771 )

Foreign Currency

3 unchanged sentences

Net current-period other comprehensive income (loss) (1) ( 11 )

Balance at June 30, 2021 $ 35

(1) Consists of foreign currency translation adjustments, net of tax of $ 249 and $( 2 ) for the six months ended June 30, 2022 and 2021, respectively.

Balance at September 30, 2021 $ 18

(1) Consists of foreign currency translation adjustments, net of tax of $ 280 and $ 4 for the nine months ended September 30, 2022 and 2021, respectively.

Stock-Based Compensation

Pursuant to the Company's Omnibus Incentive and Equity Plan (the "Omnibus 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 June 30, 2022, 668,628 shares of common stock remain available for issuance of the 3,370,000 shares that are authorized for issuance under the Omnibus Plan.

Equity-based awards, including restricted stock units ("RSUs"), performance stock units ("PSUs"), stock options and unrestricted shares of common stock may be granted to officers, employees and directors of the Company pursuant to the

Company's Omnibus Incentive and Equity Plan (the "Omnibus Plan").

At September 30, 2022, 661,463 shares of common stock remained available for issuance of the 3,370,000 shares that are authorized for issuance under the Omnibus Plan.

Stock-based compensation expense is summarized as follows:

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

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

(in thousands) 2022 2021 2022 2021

4 unchanged sentences

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

RSU activity, inclusive of PSUs, for the six months ended June 30, 2022 is summarized as follows:

RSU activity, inclusive of PSUs, for the nine months ended September 30, 2022 is summarized as follows:

of Shares Weighted Average

3 unchanged sentences

Settled ( 196,518 ) $ 118.79

Outstanding at June 30, 2022 385,778 $ 173.99

For the six months ended June 30, 2022 and 2021, a total of 72,043 and 72,324 RSUs, respectively, were withheld by the Company as a result of net share settlements to settle minimum employee tax withholding obligations.

The Company paid $ 15.3 million and $ 19.3 million for the six months ended June 30, 2022 and 2021, respectively, in minimum employee tax withholding obligations related to RSUs withheld for the net share settlements.

Outstanding at September 30, 2022 380,420 $ 177.16

For the nine months ended September 30, 2022 and 2021, a total of 77,508 and 72,795 RSUs, respectively, were withheld by the Company as a result of net share settlements to settle minimum employee tax withholding obligations.

The Company paid $ 16.5 million and $ 19.4 million for the nine months ended September 30, 2022 and 2021, respectively, in minimum employee tax withholding obligations related to RSUs withheld for the 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 otherwise been issued as a result of the vesting.

During the six months ended June 30, 2022, the Company granted 30,516 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.

During the nine months ended September 30, 2022, the Company granted 30,516 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, Stock Compensation ("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 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 June 30, 2022, unamortized stock-based compensation expense for unvested RSUs and PSUs was $ 35.2 million with a weighted-average remaining contractual life of 1.4 years.

As of September 30, 2022, unamortized stock-based compensation expense for unvested RSUs and PSUs was $ 32.5 million with a weighted-average remaining contractual life of 1.2 years.

Restructuring Expense

During the three and nine months ended September 30, 2022, the Company incurred $ 4.0 million in restructuring costs, primarily related to the write-down of right-of-use assets for a lease in conjunction with the consolidation of certain office space.

Earnings (Loss) Per Share

2 unchanged sentences

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 shares issuable upon the vesting of RSUs and stock option exercises using the treasury stock method, as determined under the if-converted method.

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 shares issuable upon the vesting of RSUs and stock option exercises using the treasury stock method, as determined under the if-converted method.

The computation of basic and diluted EPS is as follows:

Three Months Ended June 30, Six Months Ended

Three Months Ended September 30, Nine Months Ended

September 30,

(in thousands, except per share amounts) 2022 2021 2022 2021

10 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 June 30, Six Months Ended June 30,

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

(in thousands) 2022 2021 2022 2021

4 unchanged sentences

The provision for income taxes reflected U.S.

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.

federal, state and local taxes at an estimated effective tax rate of 35.2 % and 24.0 % for the nine months ended September 30, 2022 and 2021, respectively.

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

Credit Agreement

The Company's credit agreement, as amended (the "Credit Agreement"), comprises (i) a $ 275.0 million seven-year term loan (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 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.

During the nine months ended September 30, 2022, the Company repaid $ 12.1 million outstanding under its Term Loan.

At September 30, 2022, $ 262.2 million was outstanding under the Term Loan and there were no outstanding borrowings under the revolving credit facility.

Commitments and Contingencies

Legal Matters

The Company is involved from time to time in litigation and arbitration, as well as examinations, inquiries and investigations by various regulatory bodies, including the SEC, involving its compliance with, among other things, securities laws, client investment guidelines, laws governing the activities of broker-dealers and other laws and regulations affecting its products and other activities.

Legal and regulatory matters of this nature involve or may involve but are not limited to the

Company's activities as an employer, issuer of securities, investor, investment adviser, broker-dealer or taxpayer.

The Company is involved from time to time in litigation and arbitration, as well as examinations, inquiries and

investigations by various regulatory bodies, including the SEC, involving its compliance with, among other things, securities laws, client investment guidelines, laws governing the activities of broker-dealers and other laws and regulations affecting its products and other activities.

Legal and regulatory matters of this nature involve or may involve but are not limited to the Company's activities as an employer, issuer of securities, investor, investment adviser, broker-dealer or taxpayer.

In addition, in the normal course of business, the Company discusses matters with its regulators raised during regulatory examinations or is otherwise subject to their inquiry.

13 unchanged sentences

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

Redeemable noncontrolling interests for the six months ended June 30, 2022 included the following amounts:

Redeemable noncontrolling interests for the nine months ended September 30, 2022 included the following amounts:

(in thousands) CIP Affiliate Noncontrolling Interests Total

3 unchanged sentences

Total net income (loss) attributable to noncontrolling interests ( 2,222 ) 1,058 ( 1,164 )

Affiliate equity sales (purchases) — ( 11,089 ) ( 11,089 )

Net subscriptions (redemptions) and other 5,966 ( 8,236 ) ( 2,270 )

Balances at June 30, 2022 $ 13,050 $ 126,097 $ 139,147

Balances at September 30, 2022 $ 16,160 $ 108,282 $ 124,442

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

4 unchanged sentences

A VIE is an entity in which either (i) the equity investment at risk is not sufficient to permit the entity to finance its own activities without additional financial support;

economic performance, (y) the obligation to absorb expected losses or the right to receive expected residual returns of the entity, or (z) proportionate voting and economic interests and where substantially all of the entity's activities either involve or are conducted on behalf of an investor with disproportionately fewer voting rights.

or (ii) where as a group, the holders of the equity investment at risk do not possess (x) the power through voting or similar rights to direct the activities that most significantly impact the entity's economic performance, (y) the obligation to absorb expected losses or the right to receive expected residual returns of the entity, or (z) proportionate voting and economic interests and where substantially all of the entity's activities either involve or are conducted on behalf of an investor with disproportionately fewer voting rights.

If an entity has any of these characteristics, it is considered a VIE and is required to be consolidated by its primary beneficiary.

5 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 June 30, 2022 and December 31, 2021:

June 30, 2022 December 31, 2021

The following table presents the balances of CIP that, after intercompany eliminations, were reflected on the Condensed Consolidated Balance Sheets as of September 30, 2022 and December 31, 2021:

September 30, 2022 December 31, 2021

VOEs VIEs VOEs VIEs

9 unchanged sentences

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

At June 30, 2022, the Company consolidated six CLOs.

At September 30, 2022, 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 their financial information.

1 unchanged sentence

Investments of CLOs

The CLOs held investments of $ 1.9 billion at June 30, 2022 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 $ 1.9 billion at September 30, 2022 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 2023 and 2030 and pay interest at LIBOR plus a spread of up to 10.0 %.

1 unchanged sentence

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

At June 30, 2022, the fair value of the senior bank loans was less than the unpaid principal balance by $ 113.6 million.

At June 30, 2022, there were no material collateral assets in default.

At September 30, 2022, the fair value of the senior bank loans was less than the unpaid principal balance by $ 110.4 million.

At September 30, 2022, there were no material collateral assets in default.

Notes Payable of CLOs

The CLOs held notes payable with a total value, at par, of $ 2.2 billion at June 30, 2022, consisting of senior secured floating rate notes payable with a par value of $ 1.9 billion and subordinated notes with a par value of $ 233.7 million.

The CLOs held notes payable with a total value, at par, of $ 2.1 billion at September 30, 2022, consisting of senior secured floating rate notes payable with a par value of $ 1.9 billion and subordinated notes with a par value of $ 233.7 million.

These note obligations bear interest at variable rates based on LIBOR plus a pre-defined spread ranging from 0.8 % to 8.9 %.

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 June 30, 2022, 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 September 30, 2022, 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:

Six Months Ended June 30, 2022

Nine Months Ended September 30, 2022

(in thousands)

8 unchanged sentences

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:

Six Months Ended June 30, 2022

Nine Months Ended September 30, 2022

(in thousands)

3 unchanged sentences

Fair Value Measurements of CIP

The assets and liabilities of CIP measured at fair value on a recurring basis as of June 30, 2022 and December 31, 2021 by fair value hierarchy level were as follows:

As of June 30, 2022

The assets and liabilities of CIP measured at fair value on a recurring basis as of September 30, 2022 and December 31, 2021 by fair value hierarchy level were as follows:

As of September 30, 2022

(in thousands) Level 1 Level 2 Level 3 Total

34 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 June 30, 2022 and December 31, 2021 approximated fair value due to the short-term nature of the instruments.

The securities purchase payable at September 30, 2022 and December 31, 2021 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:

Six Months Ended June 30,

Nine Months Ended September 30,

(in thousands)

15 unchanged sentences

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 June 30, 2022, the carrying value and maximum risk of loss related to the Company's interest in these VIEs was $ 27.8 million .

At September 30, 2022, the carrying value and maximum risk of loss related to the Company's interest in these VIEs was $ 25.4 million .

Subsequent Event

On October 19, 2022, the Company entered into an agreement to acquire AlphaSimplex Group, LLC, a leading manager of liquid alternative investment solutions with $ 10.9 billion of assets under management at September 30, 2022.

The transaction is expected to close near the end of the first quarter of 2023, subject to customary closing conditions, necessary regulatory approvals, and approvals by the mutual fund boards and fund shareholders.

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