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Item 1. Financial Statements

2023-08-09 compared with 2023-05-09 · 164 added, 79 removed, 453 unchanged (35% of the section changed)

2 unchanged sentences

Condensed Consolidated Balance Sheets

(in thousands, except share data) March 31,

(in thousands, except share data) June 30,

2023 December 31,

28 unchanged sentences

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

12,140,087 shares issued and 7,288,394 shares outstanding at March 31, 2023;

12,158,319 shares issued and 7,254,786 shares outstanding at June 30, 2023;

and 12,033,247 shares issued and 7,181,554 shares outstanding at December 31, 2022

2 unchanged sentences

Accumulated other comprehensive income (loss) ( 147 ) ( 358 )

Treasury stock, at cost, 4,851,693 and 4,851,693 shares at March 31, 2023 and December 31, 2022, respectively

Treasury stock, at cost, 4,903,533 and 4,851,693 shares at June 30, 2023 and December 31, 2022, respectively

( 609,248 ) ( 599,248 )

8 unchanged sentences

Three Months Ended

June 30, Six Months Ended

(in thousands, except per share data) 2023 2022 2023 2022

9 unchanged sentences

Operating expenses of consolidated investment products ("CIP") 360 649 1,060 1,389

Change in fair value of contingent consideration ( 6,800 ) 2,900 ( 6,800 ) 2,900

Depreciation expense 1,485 962 2,630 1,897

27 unchanged sentences

Three Months Ended

June 30, Six Months Ended

(in thousands) 2023 2022 2023 2022

1 unchanged sentence

Other comprehensive income (loss), net of tax:

Foreign currency translation adjustment, net of tax of $( 35 ) and $ 73 for the three months ended March 31, 2023 and 2022, respectively.

Foreign currency translation adjustment, net of tax of $( 42 ) and $ 176 for the three months ended June 30, 2023 and 2022, respectively and $( 77 ) and $ 249 for the six months ended June 30, 2023 and 2022

112 ( 237 ) 211 ( 287 )

Other comprehensive income (loss) 112 ( 237 ) 211 ( 287 )

6 unchanged sentences

Condensed Consolidated Statements of Cash Flows

Three Months Ended

Six Months Ended

(in thousands) 2023 2022

8 unchanged sentences

Realized and unrealized (gains) losses on investments, net ( 4,379 ) 13,562

Distributions from equity method investments 1,080 2,102

Sales (purchases) of investments, net 3,757 ( 9,952 )

Change in fair value of contingent consideration ( 6,800 ) 2,900

Deferred taxes, net ( 103 ) ( 2,271 )

10 unchanged sentences

Cash Flows from Investing Activities:

Capital expenditures and other asset purchases ( 1,448 ) ( 2,510 )

Acquisition of businesses, net of cash acquired of $ 8,443

Capital expenditures ( 2,548 ) ( 4,361 )

Acquisition of businesses, net of cash acquired of $ 4,395 and $ 8,443 for the six months ended June 30, 2023 and 2022, respectively

( 108,999 ) ( 19,773 )

Change in cash and cash equivalents of CIP due to consolidation (deconsolidation), net ( 52 ) ( 308 )

2 unchanged sentences

Cash Flows from Financing Activities:

Payment of long-term debt ( 688 ) ( 687 )

Borrowings on credit agreement 50,000 —

Repayments on credit agreement ( 11,375 ) ( 11,375 )

Common stock dividends paid ( 26,367 ) ( 24,190 )

15 unchanged sentences

Common stock dividends payable $ 12,056 $ 11,229

(in thousands) March 31,

(in thousands) June 30,

2023 December 31, 2022

18 unchanged sentences

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

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

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) — — — 17,402 — — — 17,402 ( 278 ) 17,124 ( 2,865 )

7 unchanged sentences

Stock-based compensation — — 3,975 — — — — 3,975 — 3,975 —

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, 2023 7,288,394 $ 121 $ 1,281,509 $ 155,792 $ ( 259 ) 4,851,693 $ ( 599,248 ) $ 837,915 $ 6,382 $ 844,297 $ 106,630

Net income (loss) — — — 30,257 — — — 30,257 ( 650 ) 29,607 573

Foreign currency translation adjustments — — — — 112 — — 112 — 112 —

Net subscriptions (redemptions) and other — — — — — — — — ( 536 ) ( 536 ) 3,196

Cash dividends declared ($ 1.65 per common share)

— — — ( 12,038 ) — — — ( 12,038 ) — ( 12,038 ) —

Repurchases of common shares ( 51,840 ) — — — — 51,840 ( 10,000 ) ( 10,000 ) — ( 10,000 ) —

Issuance of common shares related to employee stock transactions 18,232 1 ( 1 ) — — — — — — — —

Taxes paid on stock-based compensation — — ( 1,013 ) — — — — ( 1,013 ) ( 1,013 ) —

Stock-based compensation — — 6,280 — — — — 6,280 — 6,280 —

Balances at June 30, 2023 7,254,786 $ 122 $ 1,286,775 $ 174,011 $ ( 147 ) 4,903,533 $ ( 609,248 ) $ 851,513 $ 5,196 $ 856,709 $ 110,399

Permanent Equity Temporary Equity

Common Stock Additional

Capital Retained Earnings (Accumulated

Deficit) Accumulated

Comprehensive

Income (Loss) Treasury Stock Total

Attributed To

Virtus Investment Partners, Inc.

Interests Total

Equity Redeemable

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

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

4 unchanged sentences

— — — ( 23,227 ) — — — ( 23,227 ) — ( 23,227 ) —

Repurchases of common shares ( 347,355 ) — — — — 347,355 ( 70,000 ) ( 70,000 ) — ( 70,000 ) —

Issuance of common shares related to employee stock transactions 116,541 1 ( 1 ) — — — — — — — —

1 unchanged sentence

Stock-based compensation — — 14,768 — — — — 14,768 — 14,768 —

Balances at March 31, 2023 7,288,394 $ 121 $ 1,281,509 $ 155,792 $ ( 259 ) 4,851,693 $ ( 599,248 ) $ 837,915 $ 6,382 $ 844,297 $ 106,630

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 December 31, 2022 7,181,554 $ 120 $ 1,286,244 $ 130,261 $ ( 358 ) 4,851,693 $ ( 599,248 ) $ 817,019 $ 5,917 $ 822,936 $ 113,718

Net income (loss) — — — 68,881 — — — 68,881 115 68,996 ( 4,173 )

Foreign currency translation adjustments — — — — 211 — — 211 — 211 —

Net subscriptions (redemptions) and other — — — — — — — — ( 836 ) ( 836 ) 854

Cash dividends declared ($ 3.30 per common share)

— — — ( 25,131 ) — — — ( 25,131 ) — ( 25,131 ) —

Repurchases of common shares ( 51,840 ) — — — — 51,840 ( 10,000 ) ( 10,000 ) — ( 10,000 ) —

Issuance of common shares related to employee stock transactions 125,072 2 ( 2 ) — — — — — — — —

Taxes paid on stock-based compensation — — ( 13,222 ) — — — — ( 13,222 ) ( 13,222 ) —

Stock-based compensation — — 13,755 — — — — 13,755 — 13,755 —

Balances at June 30, 2023 7,254,786 $ 122 $ 1,286,775 $ 174,011 $ ( 147 ) 4,903,533 $ ( 609,248 ) $ 851,513 $ 5,196 $ 856,709 $ 110,399

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

19 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 three months ended March 31, 2023 are not necessarily indicative of the results that may be expected for the year ending December 31, 2023.

Operating results for the six months ended June 30, 2023 are not necessarily indicative of the results that may be expected for the year ending December 31, 2023.

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, 2022 (the "2022 Annual Report on Form 10-K") filed with the Securities and Exchange Commission (the "SEC").

7 unchanged sentences

Three Months Ended

June 30, Six Months Ended

(in thousands) 2023 2022 2023 2022

5 unchanged sentences

Total investment management fees $ 179,979 $ 185,024 $ 344,457 $ 391,841

AlphaSimplex Group, LLC

On April 1, 2023, the Company completed the acquisition of AlphaSimplex Group, LLC ("AlphaSimplex"), which was accounted for in accordance with Accounting Standards Codification ("ASC") 805, Business Combinations ("ASC 805").

The total purchase price paid of $ 113.4 million was allocated to the assets acquired and liabilities assumed based upon their estimated fair values at the date of the acquisition.

Goodwill of $ 48.3 million and intangible assets of $ 55.4 million were recorded for the acquisition.

The Company expects $ 103.7 million of the purchase price, related to goodwill and intangibles, to be tax deductible over 15 years.

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 AlphaSimplex were not material to the Company's results of operations for the three and six months ended June 30, 2023.

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

April 1, 2023

(in thousands)

Cash and cash equivalents $ 4,395

Investments 8,567

Accounts receivable 5,422

Furniture, equipment and leasehold improvements 4,161

Intangible assets 55,400

Goodwill 48,262

Other assets 9,126

Total Assets 135,333

Accounts payable and accrued liabilities 21,939

Total Liabilities 21,939

Total Net Assets Acquired $ 113,394

Identifiable Intangible Assets Acquired

In connection with the allocation of the AlphaSimplex purchase price, the Company identified the following intangible assets:

April 1, 2023

Approximate Fair Value

( in thousands)

Weighted Average of Useful Life

Definite-lived intangible assets:

Investment management agreements 52,000 10.5

Trade names 3,400 9.0

Total definite-lived intangible assets $ 55,400

The fair value of investment management agreements was estimated using a discounted cash flow method and the fair value of the trade names was estimated using a royalty savings method, each of which was prepared with the assistance of an independent valuation firm and approved by management.

Stone Harbor Investment Partners

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").

The total 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.

Intangible Assets, Net

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

The total purchase price 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.

Goodwill and Intangible Assets, Net

Activity in goodwill was as follows:

(in thousands)

Balance at December 31, 2022 $ 348,836

Acquisitions 48,262

Balance at June 30, 2023 $ 397,098

Below is a summary of intangible assets, net:

2 unchanged sentences

Balances at December 31, 2022 $ 756,028 $ ( 355,807 ) $ 400,221 $ 42,298 $ 442,519

Additions 55,400 — 55,400 — 55,400

Intangible amortization — ( 30,136 ) ( 30,136 ) — ( 30,136 )

Balances at March 31, 2023 $ 756,028 $ ( 370,198 ) $ 385,830 $ 42,298 $ 428,128

Balances at June 30, 2023 $ 811,428 $ ( 385,943 ) $ 425,485 $ 42,298 $ 467,783

Definite-lived intangible asset amortization for the remainder of fiscal year 2023 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 March 31, 2023 and December 31, 2022 were as follows:

(in thousands) March 31, 2023 December 31, 2022

The Company's investments, excluding the assets of consolidated investment products ("CIP") discussed in Note 16, at June 30, 2023 and December 31, 2022 were as follows:

(in thousands) June 30, 2023 December 31, 2022

Investment securities - fair value $ 89,311 $ 76,999

8 unchanged sentences

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

March 31, 2023 December 31, 2022

June 30, 2023 December 31, 2022

(in thousands) Cost Fair Value Cost Fair Value

3 unchanged sentences

Total investment securities - fair value $ 91,287 $ 89,311 $ 80,912 $ 76,999

For the three months ended March 31, 2023 and 2022, the Company recognized net realized gains of $ 1.3 million and $ 0.1 million on the sale of its investment securities - fair value.

For the three and six months ended June 30, 2023, the Company recognized net realized gains of $ 0.8 million and $ 2.2 million, respectively, related to its investment securities - fair value.

For the three and six months ended June 30, 2022, the Company recognized net realized losses of $ 0.1 million and $ 30.0 thousand, respectively, related to 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 March 31, 2023 and December 31, 2022 by fair value hierarchy level were as follows:

March 31, 2023

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, 2023 and December 31, 2022 by fair value hierarchy level were as follows:

June 30, 2023

(in thousands) Level 1 Level 2 Level 3 Total

27 unchanged sentences

Contingent consideration represents liabilities associated with the Company's business combinations.

The estimated fair values are measured using simulation models using unobservable market data inputs prepared with the assistance of an independent valuation firm.

The estimated fair values are measured with simulation models using unobservable market data inputs prepared with the assistance of an independent valuation firm.

These liabilities are categorized as Level 3.

2 unchanged sentences

Three Months Ended

June 30, Six Months Ended

(in thousands) 2023 2022 2023 2022

2 unchanged sentences

Reduction for payments made — — ( 16,390 ) ( 19,520 )

Increase (reduction) of liability related to re-measurement of fair value ( 6,800 ) 2,900 ( 6,800 ) 2,900

Contingent consideration, end of period $ 54,910 $ 72,980 $ 54,910 $ 72,980

1 unchanged sentence

Dividends Declared

On February 22, 2023, the Company declared a quarterly cash dividend of $ 1.65 per common share to be paid on May 15, 2023 to stockholders of record at the close of business on April 28, 2023.

On May 17, 2023, the Company declared a quarterly cash dividend of $ 1.65 per common share to be paid on August 15, 2023 to stockholders of record at the close of business on July 31, 2023.

Common Stock Repurchases

During the three and six months ended June 30, 2023, the Company repurchased 51,840 common shares at a weighted average price of $ 192.87 per share, for a total cost, including fees and expenses, of $ 10.0 million under its share repurchase program.

As of June 30, 2023, 776,512 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.

The program, which has no specified term, may be suspended or terminated at any time.

Accumulated Other Comprehensive Income (Loss)

The changes in accumulated other comprehensive income (loss) by component were as follows:

Three Months Ended

Six Months Ended

(in thousands) 2023 2022

2 unchanged sentences

Foreign currency translation adjustments, end of period $ ( 147 ) $ ( 267 )

(1) Consists of foreign currency translation adjustments, net of tax of $( 35 ) and $ 73 for the three months ended March 31, 2023 and 2022, respectively.

(1) Consists of foreign currency translation adjustments, net of tax of $( 77 ) and $ 249 for the six months ended June 30, 2023 and 2022, respectively.

Stock-Based Compensation

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 March 31, 2023, 484,282 shares of common stock remained available for issuance of the 3,370,000 shares that are authorized for issuance under the Omnibus Plan.

At June 30, 2023, 480,249 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 March 31,

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

(in thousands) 2023 2022 2023 2022

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 three months ended March 31, 2023 is summarized as follows:

RSU activity, inclusive of PSUs, for the six months ended June 30, 2023 is summarized as follows:

of Shares Weighted Average

3 unchanged sentences

Settled ( 196,757 ) $ 118.47

Outstanding at March 31, 2023 370,592 $ 196.29

For the three months ended March 31, 2023 and 2022, a total of 70,716 and 61,859 RSUs, respectively, were withheld by the Company as a result of net share settlements to settle minimum employee tax withholding obligations.

The Company paid $ 12.2 million and $ 13.4 million for the three months ended March 31, 2023 and 2022, respectively, in minimum employee tax withholding obligations related to RSUs withheld for the net share settlements.

Outstanding at June 30, 2023 350,657 $ 204.34

For the six months ended June 30, 2023 and 2022, a total of 76,452 and 72,043 RSUs, respectively, were withheld by the Company as a result of net share settlements to settle minimum employee tax withholding obligations.

The Company paid $ 13.2 million and $ 15.3 million for the six months ended June 30, 2023 and 2022, 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 three months ended March 31, 2023, the Company granted 44,291 PSUs that contain performance-based metrics in addition to a service condition.

During the six months ended June 30, 2023, the Company granted 44,583 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.

1 unchanged sentence

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 March 31, 2023, unamortized stock-based compensation expense for unvested RSUs and PSUs was $ 42.4 million with a weighted-average remaining contractual life of 1.6 years.

As of June 30, 2023, unamortized stock-based compensation expense for unvested RSUs and PSUs was $ 39.3 million with a weighted-average remaining contractual life of 1.5 years.

Earnings (Loss) Per Share

4 unchanged sentences

The computation of basic and diluted EPS is as follows:

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended

(in thousands, except per share amounts) 2023 2022 2023 2022

9 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 March 31,

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

(in thousands) 2023 2022 2023 2022

2 unchanged sentences

In calculating the provision for income taxes, the Company uses an estimate of the annual effective tax rate based upon the facts and circumstances at each interim period.

On a quarterly basis, the estimated annual effective tax rate is adjusted, as appropriate, based upon changes in facts and circumstances, if any, as compared to those forecasted at the beginning of the fiscal year and at each interim period thereafter.

On a quarterly basis, the estimated annual effective tax rate is adjusted, as appropriate, based upon changes in facts and circumstances, if any, compared to those forecasted at the beginning of the fiscal year and at each interim period thereafter.

The provision for income taxes reflected U.S.

federal, state and local taxes at an estimated effective tax rate of 20.1 % and 30.0 % for the three months ended March 31, 2023 and 2022, respectively.

The lower estimated effective tax rate for the three months ended March 31, 2023 was primarily due to excess tax benefits associated with stock-based compensation and the change in valuation allowances in the current year related to the tax effects of unrealized gains on certain Company investments.

federal, state and local taxes at an estimated effective tax rate of 23.2 % and 38.4 % for the six months ended June 30, 2023 and 2022, respectively.

The lower estimated effective tax rate for the six months ended June 30, 2023 was primarily due to excess tax benefits associated with stock-based compensation and the change in valuation allowances in the current year related to the tax effects of unrealized gains on certain Company investments.

The higher effective tax rate in the prior year period was due to valuation allowances recorded 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 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, 2023, the Company repaid $ 0.7 million outstanding under its Term Loan.

At March 31, 2023, $ 260.9 million was outstanding under the Term Loan and there were no outstanding borrowings under the revolving 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 $ 6.3 million as of March 31, 2023.

On April 3, 2023, the Company borrowed $ 50.0 million under the revolving credit facility to partially finance its acquisition of AlphaSimplex Group, LLC (see Note 17 for further information).

The Company's credit agreement, most recently amended on June 20, 2023, changing the base interest rate from LIBOR to SOFR, (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 six months ended June 30, 2023, the Company repaid $ 1.4 million outstanding under its Term Loan.

At June 30, 2023, $ 260.2 million was outstanding under the Term Loan.

On April 3, 2023, the Company borrowed $ 50.0 million under the revolving credit facility to partially finance its acquisition of AlphaSimplex, $ 40.0 million of which was outstanding at June 30, 2023 (see Note 4 for further information).

On August 4, 2023, the Company repaid $ 20.0 million outstanding under the 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, 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.

The Company is involved from time to time in litigation and arbitration, as well as examinations, inquiries and investigations by various regulatory bodies, 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.

The Company records a liability when it is both probable that a liability has been incurred and the amount of the liability can be reasonably estimated.

9 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 three months ended March 31, 2023 included the following amounts:

Redeemable noncontrolling interests for the six months ended June 30, 2023 included the following amounts:

(in thousands) CIP Affiliate Noncontrolling Interests Total

3 unchanged sentences

Total net income (loss) attributable to noncontrolling interests 1,014 ( 5,187 ) ( 4,173 )

Affiliate equity sales (purchases) — — —

Net subscriptions (redemptions) and other 3,527 ( 2,673 ) 854

Balances at March 31, 2023 $ 18,419 $ 88,211 $ 106,630

Balances at June 30, 2023 $ 22,809 $ 87,590 $ 110,399

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

1 unchanged sentence

The condensed consolidated financial statements include the accounts of the Company, its subsidiaries and investment products that are consolidated.

Voting interest entities ("VOEs") are consolidated when the Company is considered to have a controlling financial interest, which is typically present when the Company owns a majority of the voting interest in an entity or otherwise has the power to govern the financial and operating policies of the entity.

The Company evaluates any variable interest entity ("VIEs") in which the Company has a variable interest for consolidation.

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;

or (ii) where as a group, the holders of the equity investment at risk do not possess:

(i) the power through voting or similar rights to direct the activities that most significantly impact the entity's economic performance, (ii) the obligation to absorb expected losses or the right to receive expected residual returns of the entity, or (iii) 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.

The primary beneficiary is the entity that

has both the power to direct the activities that most significantly impact the VIE's economic performance and has the obligation to absorb losses of, or the right to receive benefits from, the VIE that could potentially be significant to the VIE.

Voting interest entities ("VOE") are consolidated when the Company is considered to have a controlling financial interest, which is typically present when the Company owns a majority of the voting interest in an entity or otherwise has the power to govern the financial and operating policies of the entity.

The Company evaluates any variable interest entity ("VIE") in which the Company has a variable interest for consolidation.

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, or (ii) where as a group, the holders of the equity investment at risk do not possess any one of the following:

(a) the power through voting or similar rights to direct the activities that most significantly impact the entity's economic performance, (b) the obligation to absorb expected losses or the right to receive expected residual returns of the entity, or (c) 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.

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

The primary beneficiary is the entity that has both the power to direct the activities that most significantly impact the VIE's economic performance and has the obligation to absorb losses of, or the right to receive benefits from, the VIE that could potentially be significant to the VIE.

In the normal course of its business, the Company sponsors various investment products, some of which are consolidated by the Company.

CIP includes both VOEs, made up primarily of open-end funds in which the Company holds a controlling financial interest, and VIEs, which consist of CLOs and certain global and private funds of which the Company is considered the primary beneficiary.

CIP includes both VOEs, made up primarily of open-end funds in which the Company holds a controlling financial interest, and VIEs, which consist of collateralized loan obligations ("CLO") and certain global and private funds of which the Company is considered the primary beneficiary.

The consolidation and deconsolidation of these investment products have no impact on net income (loss) attributable to Virtus Investment Partners, Inc.

1 unchanged sentence

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 March 31, 2023 and December 31, 2022:

March 31, 2023 December 31, 2022

The following table presents the balances of CIP that, after intercompany eliminations, were reflected on the Condensed Consolidated Balance Sheets as of June 30, 2023 and December 31, 2022:

June 30, 2023 December 31, 2022

VOEs VIEs VOEs VIEs

9 unchanged sentences

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

At March 31, 2023, the Company consolidated seven CLOs.

At June 30, 2023, the Company consolidated seven 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 $ 2.0 billion at March 31, 2023 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 %.

The CLOs held investments of $ 1.9 billion at June 30, 2023 consisting of bank loan investments that 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 2032 and pay interest at LIBOR or SOFR plus a spread of up to 9.0 %.

The CLOs may elect to reinvest any prepayments received on bank loan investments up until the periods between October 2019 and October 2026, depending on the CLO.

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

At March 31, 2023, the fair value of the senior bank loans was less than the unpaid principal balance by $ 120.3 million.

At March 31, 2023, there were no material collateral assets in default.

At June 30, 2023, the fair value of the senior bank loans was less than the unpaid principal balance by $ 154.4 million.

At June 30, 2023, there were no material collateral assets in default.

Notes Payable of CLOs

The CLOs held notes payable with a total value, at par, of $ 2.3 billion at March 31, 2023, consisting of senior secured floating rate notes payable with a par value of $ 2.1 billion and subordinated notes with a par value of $ 261.2 million.

The CLOs held notes payable with a total value, at par, of $ 2.2 billion at June 30, 2023, consisting of senior secured floating rate notes payable with a par value of $ 2.0 billion and subordinated notes with a par value of $ 261.2 million.

These note obligations bear interest at variable rates based on LIBOR plus a pre-defined spread ranging from 0.8 % to 9.1 %.

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 March 31, 2023, 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 June 30, 2023, 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:

Three Months Ended March 31, 2023

Six Months Ended June 30, 2023

(in thousands)

6 unchanged sentences

Noncontrolling interests ( 115 )

Net Income (Loss) Attributable to CIP $ 9,216

Net Income (Loss) Attributable to CLOs $ 12,496

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:

Three Months Ended March 31, 2023

Six Months Ended June 30, 2023

(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 March 31, 2023 and December 31, 2022 by fair value hierarchy level were as follows:

As of March 31, 2023

The assets and liabilities of CIP measured at fair value on a recurring basis as of June 30, 2023 and December 31, 2022 by fair value hierarchy level were as follows:

As of June 30, 2023

(in thousands) Level 1 Level 2 Level 3 Total

33 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 March 31, 2023 and December 31, 2022 approximated fair value due to the short term nature of the instruments.

The securities purchased payable at June 30, 2023 and December 31, 2022 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:

Three Months Ended March 31,

Six Months Ended June 30,

(in thousands)

13 unchanged sentences

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

The Company has determined that the investment management fees it receives for serving as collateral manager for these CLOs 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 CLOs that individually, or in the aggregate, would absorb more than an insignificant amount of the CLOs' expected losses or receive more than an insignificant amount of the CLOs' 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 determined that the investment management fees it receives for serving as collateral manager for these CLOs did not represent a variable interest as (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 CLOs that individually, or in the aggregate, would absorb more than an insignificant amount of the CLOs' expected losses or receive more than an insignificant amount of the CLOs' 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 March 31, 2023, the carrying value and maximum risk of loss related to the Company's interest in these VIEs was $ 32.8 million.

Subsequent Event

On April 1, 2023, the Company completed its previously announced acquisition of AlphaSimplex Group, LLC, a leading manager of liquid alternative investment solutions.

Transaction consideration of $ 130.0 million was financed with existing balance sheet resources including $ 50.0 million drawn from the Company's revolving credit facility.

At June 30, 2023, the carrying value and maximum risk of loss related to the Company's interest in these VIEs was $ 25.4 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