What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2023-11-08 compared with 2023-08-09 · 93 added, 85 removed, 311 unchanged (36% of the section changed)

33 unchanged sentences

Certain other factors that may impact our continuing operations, prospects, financial results and liquidity, or that may cause actual results to differ from such forward-looking statements, are discussed or included in the Company’s periodic reports filed with the SEC and are available on our website at www.virtus.com under "Investor Relations." You are urged to carefully consider all such factors.

We provide investment management and related services to individuals and institutions.

We provide investment management and related services to institutions and individuals.

We use a multi-manager, multi-style approach, offering investment strategies from affiliated managers, each having its own distinct investment style, autonomous investment process and individual brand, as well as from select unaffiliated subadvisers for certain of our retail funds.

1 unchanged sentence

Our earnings are primarily from asset-based fees charged for services relating to these various products, including investment management, fund administration, distribution, and shareholder services.

We offer investment strategies for individual and institutional investors in different investment products and through

multiple distribution channels.

We offer investment strategies for institutional and individual investors in different investment products and through multiple distribution channels.

Our investment strategies are available in a diverse range of styles and disciplines, managed by differentiated investment managers.

We have offerings in various asset classes (equity, fixed income, multi-asset and alternatives), geographies (domestic, global, international and emerging), market capitalizations (large, mid and small), styles (growth, core and value) and investment approaches (fundamental and quantitative).

Our retail products include open-end funds, closed-end funds and retail separate accounts.

Our institutional products are offered through separate accounts and pooled or commingled structures to a variety of institutional clients.

Our retail products include open-end funds, closed-end funds and retail separate accounts.

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

Our institutional distribution resources include affiliate specific sales teams primarily focused on the U.S.

market, supported by shared consultant relation support and non-U.S.

institutional distribution.

Our institutional products are marketed through relationships with consultants as well as directly to clients.

We target key market segments, including foundations and endowments, corporations, public and private pension plans, sovereign wealth funds and subadvisory relationships.

Our retail distribution resources in the U.S.

5 unchanged sentences

Our private client business is marketed directly to individual clients by financial advisory teams at our affiliated investment managers.

Our institutional distribution resources include affiliate specific sales teams primarily focused on the U.S.

market, supported by shared consultant relation support and non-U.S.

institutional distribution.

Our institutional products are marketed through relationships with consultants as well as directly to clients.

We target key market segments, including foundations and endowments, corporations, public and private pension plans, sovereign wealth funds and subadvisory relationships.

Financial Highlights

▪ Net income per diluted share was $4.10 in the second quarter of 2023, an increase of $1.81, or 79.0%, compared to net income per diluted share of $2.29 in the second quarter of 2022.

▪ Total sales were $7.6 billion in the second quarter of 2023, a decrease of $0.3 billion, or 3.9%, from $7.9 billion in the second quarter of 2022.

Net flows were breakeven in the second quarter of 2023 compared to net outflows of $4.8 billion in the second quarter of 2022.

▪ Assets under management were $168.3 billion at June 30, 2023, an increase of $12.9 billion, or 8.3%, from June 30, 2022.

▪ Net income per diluted share was $4.19 in the third quarter of 2023, a decrease of $0.06, or 1.4%, compared to net income per diluted share of $4.25 in the third quarter of 2022.

▪ Total sales were $5.8 billion in the third quarter of 2023, an increase of $0.1 billion, or 1.5%, from $5.7 billion in the third quarter of 2022.

Net flows were $(1.5) billion in the third quarter of 2023 compared to net flows of $(3.3) billion in the third quarter of 2022.

▪ Assets under management were $162.5 billion at September 30, 2023, an increase of $17.6 billion, or 12.1%, from September 30, 2022.

On April 1, 2023, the Company completed the acquisition of AlphaSimplex Group, LLC ("AlphaSimplex") for $113.4 million in cash at closing, including $50.0 million drawn from the Company's revolving credit facility.

In June 2023, the Company repaid $10.0 million of the amount drawn on the credit facility.

On August 4, 2023, the Company repaid an additional $20.0 million of the amount drawn on the credit facility.

At September 30, 2023, the Company had repaid $30.0 million of the amount drawn on the credit facility.

Assets Under Management

At June 30, 2023, total assets under management were $168.3 billion, representing an increase of $12.9 billion, or 8.3%, from June 30, 2022, and an increase of $18.9 billion, or 12.7%, from December 31, 2022.

The increase from June 30, 2022 was due to $16.3 billion of positive market performance and $7.8 billion from the acquisition of AlphaSimplex, partially offset by $8.6 billion of net outflows.

At September 30, 2023, total assets under management were $162.5 billion, representing an increase of $17.6 billion, or 12.1%, from September 30, 2022, and an increase of $13.2 billion, or 8.8%, from December 31, 2022.

The increase from September 30, 2022 was due to $19.3 billion of positive market performance and $7.8 billion from the acquisition of AlphaSimplex, partially offset by $6.8 billion of net outflows.

The increase from December 31, 2022 was due to $10.5 billion in positive market performance and $7.8 billion from the acquisition of AlphaSimplex, partially offset by $3.4 billion of net outflows.

1 unchanged sentence

The following table summarizes our assets under management by product:

As of June 30, Change

As of September 30, Change

(in millions) 2023 2022 $ %

15 unchanged sentences

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

(in millions) 2023 2022 2023 2022

23 unchanged sentences

Ending balance $ 38,665 $ 33,381 $ 38,665 $ 33,381

Three Months Ended

September 30, Nine Months Ended

September 30,

(in millions) 2023 2022 2023 2022

Institutional Accounts (3)

19 unchanged sentences

The following table summarizes assets under management by asset class:

As of June 30, Change % of Total

As of September 30, Change % of Total

(in millions) 2023 2022 $ % 2023 2022

8 unchanged sentences

Average Assets Under Management and Average Fees Earned

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

Three Months Ended June 30,

The following tables summarize the average management fees earned in basis points and average assets under management:

Three Months Ended September 30,

Average Fee Earned

8 unchanged sentences

All Products 42.0 41.5 $ 167,872 $ 157,072

Six Months Ended June 30,

Nine Months Ended September 30,

Average Fee Earned

19 unchanged sentences

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

Institutional account fees are calculated based on an average of month-end balances, an average of current quarter’s asset values or on a combination of the underlying cash flows and the principal value of the

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

The average fee rate earned on all products for the three and six months ended June 30, 2023 increased by 1.0 basis points and 0.5 basis points, respectively, compared to the same periods in the prior year primarily due to the addition of alternative strategies with higher fee rates from the AlphaSimplex acquisition.

The average fee rate earned on all products for the three and nine months ended September 30, 2023 increased by 0.5 basis points and 0.6 basis points, respectively, compared to the same periods in the prior year primarily due to the addition of alternative strategies with higher fee rates from the AlphaSimplex acquisition.

Results of Operations

1 unchanged sentence

Three Months Ended

June 30, Change Six Months Ended

June 30, Change

September 30, Change Nine Months Ended

September 30, Change

(in thousands) 2023 2022 $ % 2023 2022 $ %

13 unchanged sentences

Earnings (loss) per share-diluted $ 4.19 $ 4.25 $ (0.06) (1.4) % $ 13.50 $ 10.76 $ 2.74 25.5 %

In the second quarter of 2023, total revenues decreased 5.2% to $213.5 million from $225.3 million in the second quarter of 2022, primarily as a result of lower average assets under management due to net outflows partially offset by the addition of AlphaSimplex.

Operating income decreased $17.6 million to $39.0 million in the second quarter of 2023 compared to $56.7 million in the second quarter of 2022, due primarily to the aforementioned lower revenue and increased operating expenses due to the addition of AlphaSimplex.

In the third quarter of 2023, total revenues increased 4.3% to $219.3 million from $210.3 million in the third quarter of 2022, primarily as a result of the addition of AlphaSimplex.

Operating income increased $0.9 million to $44.9 million in the third quarter of 2023 compared to $44.0 million in the third quarter of 2022, due primarily to the aforementioned increased revenue, partially offset by increased operating expenses due to the addition of AlphaSimplex.

Revenues by source were as follows:

Three Months Ended

June 30, Change Six Months Ended

June 30, Change

September 30, Change Nine Months Ended

September 30, Change

(in thousands) 2023 2022 $ % 2023 2022 $ %

11 unchanged sentences

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

Investment management fees decreased by $5.0 million, or 2.7%, and $47.4 million, or 12.1%, for the three and six months ended June 30, 2023, respectively, compared to the same periods in the prior year due primarily to lower average assets under management, partially offset by the addition of AlphaSimplex.

Investment management fees increased by $12.0 million, or 7.0%, and decreased $35.4 million, or 6.3%, for the three and nine months ended September 30, 2023, respectively, compared to the same periods in the prior year.

The increase for the three months ended September 30, 2023 was primarily due to the addition of AlphaSimplex.

The decrease for the nine months ended September 30, 2023 was primarily due to lower average assets under management, partially offset by the addition of AlphaSimplex.

Distribution and Service Fees

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

Distribution and service fees decreased by $3.0 million, or 17.6%, and $8.9 million, or 23.9%, for the for the three and six months ended June 30, 2023, respectively, compared to the same periods in the prior year, primarily due to lower sales and assets for open-end funds in share classes that have sales- and asset-based distribution and service fees.

Distribution and service fees decreased by $1.4 million, or 9.0%, and $10.3 million, or 19.5%, for the three and nine months ended September 30, 2023, respectively, compared to the same periods in the prior year, primarily due to lower average assets for open-end funds in share classes that have sales- and asset-based distribution and service fees.

Administration and Shareholder Service Fees

1 unchanged sentence

retail funds and certain of our closed-end funds.

Fund administration and shareholder service fees decreased by $3.7 million, or 17.0%, and $9.7 million, or 21.0%, for the three and six months ended June 30, 2023, respectively, compared to the same periods in the prior year primarily due to the decrease in average assets under management for our open-end funds during the periods as a result of market performance and net outflows.

Fund administration and shareholder service fees decreased by $1.5 million, or 7.3%, and $11.2 million, or 16.8%, for the three and nine months ended September 30, 2023, respectively, compared to the same periods in the prior year primarily due to the decrease in average assets under management in open-end funds during the periods as a result of market performance and net outflows.

Other Income and Fees

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

Other income and fees remained consistent for the three and six months ended June 30, 2023 compared to the same periods in the prior year.

Other income and fees decreased by $0.1 million, or 9.3%, and $0.4 million, or 12.7%, for the three and nine months ended September 30, 2023, respectively, compared to the same periods in the prior year.

The decline was primarily due to lower redemption income as well as the decline in average other fee-earning assets in the current year periods.

Operating Expenses

1 unchanged sentence

Three Months Ended

June 30, Change Six Months Ended

June 30, Change

September 30, Change Nine Months Ended

September 30, Change

(in thousands) 2023 2022 $ % 2023 2022 $ %

4 unchanged sentences

Other operating expenses of CIP 553 538 15 2.8 % 1,613 1,927 (314) (16.3) %

Restructuring expense 691 4,015 (3,324) (82.8) % 691 4,015 (3,324) (82.8) %

Change in fair value of contingent consideration — — — — % (6,800) 2,900 (9,700) (334.5) %

4 unchanged sentences

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

Employment expenses for the three and six months ended June 30, 2023 were $104.7 million and $203.3 million, respectively, which represented an increase of $15.3 million, or 17.2%, and $8.0 million, or 4.1%, respectively, compared to the same periods in the prior year.

The increase was primarily due to the addition of AlphaSimplex, which includes retention payments to employees as part of the transaction consideration that were classified as compensation expense.

Employment expenses for the three and nine months ended September 30, 2023 were $101.6 million and $304.9 million, respectively, which represented an increase of $13.4 million, or 15.1%, and $21.3 million, or 7.5%, respectively, compared to the same periods in the prior year.

The increases were primarily due to the addition of AlphaSimplex, which includes retention payments to employees as part of the transaction consideration that were classified as employment expense.

Distribution and Other Asset-Based Expenses

3 unchanged sentences

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

During the three and six months ended June 30, 2023, distribution and other asset-based expenses decreased $3.1 million, or 10.9%, and $12.3 million, or 19.9%, respectively, compared to the same periods in the prior year primarily due to a decrease in assets under management in share classes that have asset-based distribution and other asset-based expenses.

During the three and nine months ended September 30, 2023, distribution and other asset-based expenses decreased $2.7 million, or 9.9%, and $14.9 million, or 16.9%, respectively, compared to the same periods in the prior year primarily due to a decrease in assets under management in share classes that have asset-based distribution and other asset-based expenses.

Other Operating Expenses

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

Other operating expenses increased $1.9 million, or 6.1%, and $0.9 million, or 1.5%, for the three and six months ended June 30, 2023, respectively, compared to the

same periods in the prior year primarily due to the addition of AlphaSimplex.

Other operating expenses decreased $0.6 million, or 1.9%, and increased $0.3 million, or 0.4%, for the three and nine months ended September 30, 2023, respectively, compared to the same periods in the prior year.

The decrease in the three-month period ended September 30, 2023 was

primarily attributable to lower legal expenses and other third-party support costs partially offset by the addition of AlphaSimplex.

The increase for the nine-month period ended September 30, 2023 was primarily due to the addition of AlphaSimplex, partially offset by a decrease in other third-party support costs.

Other Operating Expenses of CIP

Other operating expenses of CIP remained consistent during the three and six months ended June 30, 2023 compared to the respective periods in the prior year.

Other operating expenses of CIP remained consistent during the three and nine months ended September 30, 2023 compared to the respective periods in the prior year.

Change in Fair Value of Contingent Consideration

1 unchanged sentence

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

The $9.7 million change in fair value of contingent consideration for the three and six months ended June 30, 2023 compared to the respective periods in the prior year was primarily attributable to changes in underlying performance estimates and discount rates.

The $9.7 million change in fair value of contingent consideration for the nine months ended September 30, 2023 compared to the respective period in the prior year was primarily attributable to changes in underlying performance estimates and discount rates.

Depreciation Expense

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

Depreciation expense increased $0.5 million, or 54.4%, and $0.7 million, or 38.6% for the three and six months ended June 30, 2023, respectively, compared to the respective periods in the prior year.

The increases are primarily due to the addition of AlphaSimplex, as well as software and equipment purchases made in the current year periods.

Depreciation expense increased $0.6 million, or 60.3%, and $1.3 million, or 45.8%, for the three and nine months ended September 30, 2023, respectively, compared to the respective periods in the prior year.

The increases were primarily due to the addition of AlphaSimplex, as well as software and equipment purchases made in the current year periods.

Amortization Expense

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

Amortization expense increased $1.2 million, or 8.1%, and $0.9 million, or 3.1% for the three and six months ended June 30, 2023, respectively, compared to the same periods in the prior year primarily due to the addition of AlphaSimplex.

Amortization expense increased $0.8 million, or 5.3%, and $1.7 million, or 3.8%, for the three and nine months ended September 30, 2023, respectively, compared to the same periods in the prior year, primarily due to the addition of AlphaSimplex.

Other Income (Expense)

1 unchanged sentence

Three Months Ended

June 30, Change Six Months Ended

June 30, Change

September 30, Change Nine Months Ended

September 30, Change

(in thousands) 2023 2022 $ % 2023 2022 $ %

5 unchanged sentences

Realized and unrealized gain (loss) on investments, net

Realized and unrealized gain (loss) on investments, net changed during the three and six months ended June 30, 2023 by $12.3 million and $17.9 million, respectively, compared to the same periods in the prior year.

Realized and unrealized gain (loss) on investments, net changed during the three and nine months ended September 30, 2023 by $0.6 million and $18.5 million, respectively, compared to the same periods in the prior year.

The realized and unrealized gains and losses reflect changes in overall market conditions for the respective periods.

Realized and unrealized gain (loss) of CIP, net

Realized and unrealized gain (loss) of CIP, net changed by $17.2 million and $33.2 million during the three and six months ended June 30, 2023, respectively, compared to the same periods in the prior year.

The change for the three months ended June 30, 2023 consisted primarily of net realized and unrealized gains of $29.7 million due to changes in market values of leveraged loans, partially offset by changes in unrealized losses of $12.5 million related to the value of the notes payable.

The change for the six months ended June 30, 2023 consisted primarily of net realized and unrealized gains of $82.9 million due to changes in market values of leveraged loans, partially offset by changes in unrealized losses of $49.7 million related to the value of the notes payable.

Realized and unrealized gain (loss) of CIP, net changed by $7.4 million and $40.6 million during the three and nine months ended September 30, 2023, respectively, compared to the same periods in the prior year.

The change for the three months ended September 30, 2023 consisted primarily of unrealized gains of $41.8 million due to changes in market values of leveraged loans, partially offset by changes in unrealized losses of $34.4 million related to the value of the notes payable.

The change for the nine months ended September 30, 2023 consisted primarily of unrealized gains of $124.8 million due to changes in market values of leveraged loans, partially offset by changes in unrealized losses of $84.2 million related to the value of the notes payable.

Other income (expense), net

Other income (expense), net changed by $1.4 million and $2.0 million during the three and six months ended June 30, 2023, respectively, compared to the same periods in the prior year primarily due to equity method investment losses during the current year periods compared to equity method investment gains during the prior-year periods.

Other income (expense), net changed by $0.8 million and $1.3 million during the three and nine months ended September 30, 2023, respectively, compared to the same periods in the prior year primarily due to changes in the gains and losses on our equity method investments.

Interest Income (Expense)

1 unchanged sentence

Three Months Ended

June 30, Change Six Months Ended

June 30, Change

September 30, Change Nine Months Ended

September 30, Change

(in thousands) 2023 2022 $ % 2023 2022 $ %

6 unchanged sentences

Interest Expense

Interest expense increased $3.4 million, or 120.1%, and $6.1 million, or 119.9% during the three and six months ended June 30, 2023, respectively, compared to the same periods in the prior year attributable to higher average interest rates and higher average debt balances during the current year periods.

Interest expense increased $2.7 million, or 74.9%, and $8.8 million, or 101.4%, during the three and nine months ended September 30, 2023, respectively, compared to the same periods in the prior year.

The increases were attributable to higher average interest rates and higher average debt balances during the current year periods.

Interest and Dividend Income

Interest and dividend income increased $2.1 million, or 405.7%, and $5.1 million, or 590.0%, during the three and six months ended June 30, 2023, respectively, compared to the same periods in the prior year primarily attributable to higher interest earned on cash balances during the current year periods compared to prior year periods.

Interest and dividend income increased $1.9 million, or 183.5%, and $6.9 million, or 369.8%, during the three and nine months ended September 30, 2023, respectively, compared to the same periods in the prior year.

The increases were primarily attributable to higher interest earned on cash balances during the current year periods compared to the prior year periods.

Interest and Dividend Income of Investments of CIP

Interest and dividend income of investments of CIP increased $25.5 million, or 113.7%, and $51.9 million, or 121.3%, for the three and six months ended June 30, 2023, respectively, compared to the same period in the prior year.

The increases were primarily due to higher average interest rates during the current year periods and the addition of a CLO in the fourth quarter of 2022.

Interest and dividend income of investments of CIP increased $21.2 million, or 73.9%, and $73.1 million, or 102.3%, for the three and nine months ended September 30, 2023, respectively, compared to the same periods in the prior year.

The increases were primarily due to higher average interest rates during the current year periods and the addition of a CLO in the third and fourth quarter of 2023 and 2022, respectively.

Interest Expense of CIP

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

Interest expense of CIP increased $24.3 million, or 168.7%, and $47.4 million, or 179.0%, for the three and six months ended June 30, 2023, respectively, compared to the same periods in the prior year.

The increases during the three and six months ended June 30, 2023 were primarily due to higher average interest rates and the addition of a CLO in the fourth quarter of 2022.

Interest expense of CIP increased $17.9 million, or 87.7%, and $65.3 million, or 139.3%, for the three and nine months ended September 30, 2023, respectively, compared to the same periods in the prior year.

The increases during the three and nine months ended September 30, 2023 were primarily due to higher average interest rates and the addition of a CLO in the third and fourth quarter of 2023 and 2022 respectively.

Income Tax Expense (Benefit)

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 of our 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 of our 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 of our investments.

2 unchanged sentences

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

June 30, 2023 December 31, 2022 Change

September 30, 2023 December 31, 2022 Change

(in thousands) $ %

6 unchanged sentences

Total equity 867,552 822,936 44,616 5.4 %

Six Months Ended

June 30, Change

Nine Months Ended

September 30, Change

(in thousands) 2023 2022 $ %

4 unchanged sentences

Financing activities (285,769) (318,968) 33,199 (10.4) %

At June 30, 2023, we had $201.5 million of cash and cash equivalents and $123.3 million of investments, which included $89.3 million of investment securities, compared to $338.2 million of cash and cash equivalents and $100.3 million of investments, which included $77.0 million of investment securities, at December 31, 2022.

At September 30, 2023, we had $195.4 million of cash and cash equivalents and $152.3 million of investments, which included $118.5 million of investment securities, compared to $338.2 million of cash and cash equivalents and $100.3 million of investments, which included $77.0 million of investment securities, at December 31, 2022.

Uses of Capital

Our main uses of capital related to operating activities comprise employee compensation and related benefit costs, which include annual incentive compensation, other operating expenses, which primarily consist of investment research, technology costs, professional fees, distribution and occupancy costs, interest on our indebtedness and income taxes.

Our main uses of capital related to operating activities comprise employee compensation and related benefit costs, other operating expenses, which primarily consist of investment research, technology costs, professional fees, distribution and occupancy costs, interest on our indebtedness and income taxes.

Annual incentive compensation, which is one of the largest annual operating cash expenditures, is typically paid in the first quarter of the year.

11 unchanged sentences

We operate an SEC registered broker-dealer subsidiary that is subject to certain rules regarding minimum net capital.

The broker-dealer is required to maintain a ratio of "aggregate indebtedness" to "net capital," as defined, which may not exceed 15 to 1 and must also maintain a minimum amount of net capital.

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

At June 30, 2023, the ratio of aggregate indebtedness to net capital of our broker-dealer was below the maximum allowed, and net capital was significantly greater than the required minimum.

Failure to meet these requirements could result in adverse consequences to us, including additional reporting requirements or interruption of our business.

At September 30, 2023, our broker-dealer net capital was significantly greater than the required minimum.

Balance Sheet

4 unchanged sentences

Operating Cash Flow

Net cash provided by operating activities of $102.1 million for the six months ended June 30, 2023 increased by $64.5 million from net cash provided by operating activities of $37.6 million for the same period in the prior year primarily due to an increase of $77.7 million in net sales of investments by CIP.

Net cash provided by operating activities of $229.8 million for the nine months ended September 30, 2023 increased by $75.0 million from net cash provided by operating activities of $154.9 million for the same period in the prior year primarily due to an increase of $129.9 million in net sales of investments by CIP.

Investing Cash Flow

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

Net cash used in investing activities was $123.2 million for the six months ended June 30, 2023 compared to net cash used in investing activities of $24.4 million in the same period for the prior year.

The increase in cash used in investing activities during the six months ended June 30, 2023 compared to the prior year period is primarily due to the acquisition of AlphaSimplex.

Net cash used in investing activities was $127.3 million for the nine months ended September 30, 2023 compared to net cash used in investing activities of $25.7 million in the same period for the prior year.

The increase in cash used in investing activities during the nine months ended September 30, 2023 compared to the prior year period was primarily due to the acquisition of AlphaSimplex.

Financing Cash Flow

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

Net cash used in financing activities decreased by $29.5 million to $210.7 million for the six months ended June 30, 2023 from $240.2 million for the six months ended June 30, 2022.

The net change was primarily due to a $60.0 million decrease in share repurchases, an increase of $50.0 million in net borrowings on the credit agreement in the current year and lower contingent consideration payments, partially offset by a $92.3 million increase on the repayment on borrowings of CIP.

Net cash used in financing activities decreased by $33.2 million to $285.8 million for the nine months ended September 30, 2023 from $319.0 million for the nine months ended September 30, 2022.

The net change was primarily due to a $55.0 million decrease in share repurchases and an increase of $30.0 million in net borrowings on the credit agreement in the current year, partially offset by a $54.9 million increase on the repayment on borrowings of CIP.

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.

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 were outstanding under the revolving credit facility and Term Loan, respectively.

Critical Accounting Policies and Estimates

3 unchanged sentences

A complete description of our significant accounting policies is included in our 2022 Annual Report on Form 10-K.

There were no material changes in our critical accounting policies and estimates in the three months ended June 30, 2023.

There were no material changes in our critical accounting policies and estimates in the three months ended September 30, 2023.

Recently Issued Accounting Pronouncements

2 unchanged sentences

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

During the three and six months ended June 30, 2023, there were no material changes to the information contained in Part II, Item 7A of the Company's 2022 Annual Report on Form 10-K.

During the three and nine months ended September 30, 2023, there were no material changes to the information contained in Part II, Item 7A of the Company's 2022 Annual Report on Form 10-K.

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis