What changed in this filing

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Item 1. Financial Statements

2023-11-08 compared with 2023-08-09 · 119 added, 105 removed, 512 unchanged (30% 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,

2023 December 31,

28 unchanged sentences

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

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

12,160,311 shares issued and 7,182,763 shares outstanding at September 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) ( 373 ) ( 358 )

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

Treasury stock, at cost, 4,977,548 and 4,851,693 shares at September 30, 2023 and December 31, 2022, respectively

( 624,248 ) ( 599,248 )

8 unchanged sentences

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

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

10 unchanged sentences

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

Restructuring expense 691 4,015 691 4,015

Depreciation expense 1,504 938 4,134 2,835

27 unchanged sentences

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

(in thousands) 2023 2022 2023 2022

1 unchanged sentence

Other comprehensive income (loss), net of tax:

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

Foreign currency translation adjustment, net of tax of $ 82 and $ 31 for the three months ended September 30, 2023 and 2022, respectively and $ 5 and $ 280 for the nine months ended September 30, 2023 and 2022

( 226 ) ( 504 ) ( 15 ) ( 791 )

7 unchanged sentences

Condensed Consolidated Statements of Cash Flows

Six Months Ended

Nine Months Ended

September 30,

(in thousands) 2023 2022

7 unchanged sentences

Equity in earnings of equity method investments 810 ( 527 )

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

Distributions from equity method investments 1,789 2,239

Right of use asset — 3,222

Realized and unrealized (gains) losses on investments, net ( 2,459 ) 16,056

Sales (purchases) of investments, net ( 24,881 ) ( 8,396 )

13 unchanged sentences

Capital expenditures ( 6,438 ) ( 5,495 )

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

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

( 108,999 ) ( 19,944 )

9 unchanged sentences

Taxes paid related to net share settlement of restricted stock units ( 13,436 ) ( 16,450 )

Affiliate equity sales (purchases) ( 20,784 ) ( 11,089 )

Net contributions from (distributions to) noncontrolling interests 5,967 ( 1,091 )

1 unchanged sentence

Payments on borrowings by CIP ( 317,362 ) ( 129,996 )

Borrowings by CIP 132,473 —

Net cash provided by (used in) financing activities ( 285,769 ) ( 318,968 )

8 unchanged sentences

Common stock dividends payable $ 13,788 $ 12,014

(in thousands) June 30,

(in thousands) September 30,

2023 December 31, 2022

18 unchanged sentences

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

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

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

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 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

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

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) — — — 30,906 — — — 30,906 671 31,577 6,577

7 unchanged sentences

Stock-based compensation — — 6,209 — — — — 6,209 — 6,209 —

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

Balances at September 30, 2023 7,182,763 $ 122 $ 1,295,988 $ 190,615 $ ( 373 ) 4,977,548 $ ( 624,248 ) $ 862,104 $ 5,448 $ 867,552 $ 96,266

Permanent Equity Temporary Equity

19 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

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

8 unchanged sentences

Stock-based compensation — — 19,964 — — — — 19,964 — 19,964 —

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

Balances at September 30, 2023 7,182,763 $ 122 $ 1,295,988 $ 190,615 $ ( 373 ) 4,977,548 $ ( 624,248 ) $ 862,104 $ 5,448 $ 867,552 $ 96,266

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

4 unchanged sentences

(the "Company," "we," "us," "our" or "Virtus"), a Delaware corporation, operates in the investment management industry through its subsidiaries.

The Company provides investment management and related services to individuals and institutions.

The Company provides investment management and related services to institutions and individuals.

The Company's investment strategies are offered to institutional clients through separate accounts and pooled, or commingled, structures.

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

5 unchanged sentences

and retail separate accounts that include intermediary-sold and private client accounts.

Our investment strategies are offered to institutional clients through separate accounts and pooled, or commingled, structures.

We also provide subadvisory services to other investment advisers and serve as the collateral manager for structured products.

The Company also provides subadvisory services to other investment advisers and serves as the collateral manager for structured products.

Basis of Presentation and Significant Accounting Policies

3 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, 2023 are not necessarily indicative of the results that may be expected for the year ending December 31, 2023.

Operating results for the nine months ended September 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

September 30, Nine Months Ended

September 30,

(in thousands) 2023 2022 2023 2022

10 unchanged sentences

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 purchase price 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 revenues and operating income of AlphaSimplex were not material to the Company's results of operations for the three and nine months ended September 30, 2023.

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

22 unchanged sentences

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

6 unchanged sentences

Acquisitions 48,262

Balance at June 30, 2023 $ 397,098

Balance at September 30, 2023 $ 397,098

Below is a summary of intangible assets, net:

4 unchanged sentences

Intangible amortization — ( 45,581 ) ( 45,581 ) — ( 45,581 )

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

Balances at September 30, 2023 $ 811,428 $ ( 401,388 ) $ 410,040 $ 42,298 $ 452,338

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 June 30, 2023 and December 31, 2022 were as follows:

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

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

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

Investment securities - fair value $ 118,464 $ 76,999

8 unchanged sentences

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

June 30, 2023 December 31, 2022

September 30, 2023 December 31, 2022

(in thousands) Cost Fair Value Cost Fair Value

2 unchanged sentences

Equity securities 15,829 17,167 13,440 14,255

Debt securities 24,339 24,339 — —

Total investment securities - fair value $ 122,324 $ 118,464 $ 80,912 $ 76,999

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.

For the three and nine months ended September 30, 2023, the Company recognized net realized losses of $ 0.1 million and net realized gains $ 2.1 million, respectively, related to its investment securities - fair value.

For the three and nine months ended September 30, 2022, the Company recognized net realized gains of $ 0.4 million and $ 0.4 million, 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 June 30, 2023 and December 31, 2022 by fair value hierarchy level were as follows:

June 30, 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 September 30, 2023 and December 31, 2022 by fair value hierarchy level were as follows:

September 30, 2023

(in thousands) Level 1 Level 2 Level 3 Total

3 unchanged sentences

Equity securities 17,167 — — 17,167

Debt securities — — 24,339 24,339

Nonqualified retirement plan assets 11,328 — — 11,328

16 unchanged sentences

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

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

categorized as Level 1.

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

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

1 unchanged sentence

Nonqualified retirement plan assets represent mutual funds within the Company's nonqualified retirement plan whose fair value is determined based on their published net asset value and are categorized as Level 1.

Debt securitie s represent investments in senior secured bank loans and are based on evaluated quotations received from independent pricing services and are categorized as Level 2 or Level 3.

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

2 unchanged sentences

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

The following table presents a reconciliation of beginning and ending balances of recurring fair value measurements classified as Level 3:

The following tables present a reconciliation of beginning and ending balances of recurring fair value measurements classified as Level 3 assets and liabilities:

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

(in thousands) 2023 2022 2023 2022

Contingent consideration, beginning of period $ 61,710 $ 70,080 $ 78,100 $ 88,400

Balance at beginning of period $ — $ — $ — $ —

Purchases (sales), net 24,339 — 24,339 —

Balance at end of period $ 24,339 $ — $ 24,339 $ —

Balance at beginning of period $ 54,910 $ 72,980 $ 78,100 $ 88,400

Additions for acquisition — — — 1,200

1 unchanged sentence

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

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

Balance at end of period $ 54,910 $ 72,980 $ 54,910 $ 72,980

Equity Transactions

Dividends Declared

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.

On August 16, 2023, the Company declared a quarterly cash dividend of $ 1.90 per common share to be paid on November 15, 2023 to stockholders of record at the close of business on October 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.

During the three and nine months ended September 30, 2023, the Company repurchased 74,015 and 125,855 common shares, respectively, at a weighted average price of $ 202.63 and $ 198.61 per share, respectively, for a total cost, including fees and expenses, of $ 15.0 million and $ 25.0 million, respectively, under its share repurchase program.

As of September 30, 2023, 702,497 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:

Six Months Ended

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

Nine Months Ended

September 30,

(in thousands) 2023 2022

Foreign currency translation adjustments, beginning of period $ ( 358 ) $ 20

Balance at beginning of period $ ( 358 ) $ 20

Net current-period other comprehensive income (loss) (1) ( 15 ) ( 791 )

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

(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.

Balance at end of period $ ( 373 ) $ ( 771 )

(1) Consists of foreign currency translation adjustments, net of tax of $ 5 and $ 280 for the nine months ended September 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 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.

At September 30, 2023, 478,711 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) 2023 2022 2023 2022

2 unchanged sentences

Each RSU entitles the holder to one share of common stock when the restriction expires.

RSUs may be time-vested or performance-contingent (PSUs) that convert into RSUs after performance measurement is complete and generally vest in one to three years .

RSUs may be time-vested or performance-contingent (PSUs) that convert into RSUs after the performance measurement is complete and generally vest in one to three years .

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, 2023 is summarized as follows:

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

of Shares Weighted Average

3 unchanged sentences

Settled ( 199,880 ) $ 119.68

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.

Outstanding at September 30, 2023 349,072 $ 204.23

For the nine months ended September 30, 2023 and 2022, a total of 77,583 and 77,508 RSUs, respectively, were withheld by the Company as a result of net share settlements to settle minimum employee tax withholding obligations.

The Company paid $ 13.4 million and $ 16.5 million for the nine months ended September 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 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.

During the nine months ended September 30, 2023, the Company granted 44,583 PSUs that contain performance-based metrics in addition to a service condition.

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, 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.

As of September 30, 2023, unamortized stock-based compensation expense for unvested RSUs and PSUs was $ 36.0 million with a weighted-average remaining contractual life of 1.3 years.

Earnings (Loss) Per Share

4 unchanged sentences

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) 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 June 30, Six Months Ended June 30,

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

(in thousands) 2023 2022 2023 2022

4 unchanged sentences

The provision for income taxes reflected U.S.

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.

federal, state and local taxes at an estimated effective tax rate of 23.6 % and 35.2 % for the nine months ended September 30, 2023 and 2022, respectively.

The lower estimated effective tax rate for the nine months ended September 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, 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.

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 $ 6.0 million as of June 30, 2023.

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.

The Company's credit agreement (the "Credit Agreement"), most recently amended on June 20, 2023, changing the base interest rate from LIBOR to SOFR, 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.

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

During the nine months ended September 30, 2023, the Company repaid $ 30.0 million and $ 2.1 million outstanding under the revolving credit facility and Term Loan, respectively.

At September 30, 2023, $ 20.0 million and $ 259.5 million was outstanding under the revolving credit facility and Term Loan, respectively.

Commitments and Contingencies

11 unchanged sentences

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

Minority interests 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, 2023 included the following amounts:

These minority interests in the 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 nine months ended September 30, 2023 included the following amounts:

(in thousands) CIP Affiliate Noncontrolling Interests Total

3 unchanged sentences

Total net income (loss) attributable to noncontrolling interests 772 1,632 2,404

Affiliate equity sales (purchases) — ( 20,784 ) ( 20,784 )

Net subscriptions (redemptions) and other 6,676 ( 5,748 ) 928

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

Balances at September 30, 2023 $ 25,716 $ 70,550 $ 96,266

(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 ("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.

A voting interest entity ("VOE") is 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.

1 unchanged sentence

(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.

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.

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 collateralized loan obligations ("CLO") 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 ("GF") 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 June 30, 2023 and December 31, 2022:

June 30, 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 September 30, 2023 and December 31, 2022:

September 30, 2023 December 31, 2022

VOEs VIEs VOEs VIEs

(in thousands) CLOs Other CLOs Other

(in thousands) CLOs GFs CLOs GFs

Cash and cash equivalents $ 865 $ 208,056 $ 1,509 $ 1,153 $ 249,003 $ 789

7 unchanged sentences

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

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

At September 30, 2023, the Company consolidated eight CLOs.

During the month of September 2023, one of the CLOs was issued and the Company made a $ 26.4 million investment in the subordinated notes.

Investments of CLOs

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 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.

The CLOs held investments of $ 2.0 billion at September 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.

The CLOs have a reinvestment period where any prepayments received on bank loan investments may be reinvested.

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

The reinvestment periods end between October 2019 and October 2026, depending on the CLO.

At September 30, 2023, the fair value of the bank loan investments was less than the unpaid principal (par) balance by $ 107.0 million.

At September 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 $ 2.2 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.

The CLOs held notes payable with a total value, at par, of $ 2.2 billion at September 30, 2023, consisting of senior secured floating rate notes payable with a par value of $ 1.9 billion and subordinated notes with a par value of $ 237.4 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 June 30, 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 September 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:

Six Months Ended June 30, 2023

Nine Months Ended September 30, 2023

(in thousands)

7 unchanged sentences

Net Income (Loss) Attributable to CLOs $ 22,586

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, 2023

The following table represents the Company’s own economic interests in the consolidated CLOs, which are eliminated upon consolidation:

Nine Months Ended September 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 June 30, 2023 and December 31, 2022 by fair value hierarchy level were as follows:

As of June 30, 2023

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

As of September 30, 2023

(in thousands) Level 1 Level 2 Level 3 Total

16 unchanged sentences

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

Cash equivalents represent investments in money market funds.

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

Debt and equity investments represent the underlying debt, equity and other securities held in CIP.

Equity investments are valued at the official closing price on the exchange on which the securities are traded and are generally categorized within Level 1.

Level 2 investments represent most debt securities, including bank loans and certain equity securities (including non-U.S.

Level 1 assets represent cash investments in money market funds and debt and equity investments that are valued using published net asset values or the official closing price on the exchange on which the securities are traded.

Level 2 assets represent most debt securities, including bank loans and certain equity securities (including non-U.S.

securities), for which closing prices are not readily available or are deemed to not reflect readily available market prices, and are valued using an independent pricing service.

2 unchanged sentences

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

In certain instances, fair value has been determined utilizing discounted cash flow analyses or single broker non-binding quotes.

Depending on the nature of the inputs, these assets are classified as Level 1, 2 or 3 within the fair value measurement hierarchy.

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

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

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

Level 1 liabilities consist of short sales transactions in which a security is sold that is not owned or is owned but there is no intention to deliver, in anticipation that the price of the security will decline.

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.

Level 2 liabilities consists of notes payables issued by CLOs and are measured using the measurement alternative in ASU 2014-13.

Accordingly, the fair value of CLO liabilities was measured as the fair value of CLO assets less the sum of (i) the fair value of the beneficial interests held by the Company, and (ii) the carrying value of any beneficial interests that represent compensation for services.

The fair value of the beneficial interests held by the Company is based on third-party pricing information without adjustment.

Short sales are transactions in which a security is sold that is not owned or is owned but there is no intention to deliver, in anticipation that the price of the security will decline.

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 purchased payable at June 30, 2023 and December 31, 2022 approximated fair value due to the short-term nature of the instruments.

The securities purchased payable at September 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:

Six Months Ended June 30,

Nine Months Ended September 30,

(in thousands)

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

At September 30, 2023, the carrying value and maximum risk of loss related to the Company's interest in these VIEs was $ 25.3 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