VIRTUS INVESTMENT PARTNERS, INC. 10-Q

Item 1. Financial Statements Virtus Investment Partners, Inc. Condensed Consolidated Balance Sheets (Unaudited) (in thousands, except share data) September 30, 2023 December 31, 2022 Assets: Cash and cash equivalents $ 195,403 $ 338,234 Investments 152,349 100,330 Accounts receivable, net 107,014 99,274 Assets of consolidated investment products ("CIP") Cash and cash equivalents of CIP 209,747 250,301 Cash pledged or on deposit of CIP 683 644 Investments of CIP 2,069,215 2,190,113 Other assets of CIP 34,481 45,445 Furniture, equipment and leasehold improvements, net 25,503 19,123 Intangible assets, net 452,338 442,519 Goodwill 397,098 348,836 Deferred taxes, net 23,659 23,171 Other assets 97,809 94,944 Total assets $ 3,765,299 $ 3,952,934 Liabilities and Equity Liabilities: Accrued compensation and benefits $ 161,745 $ 181,805 Accounts payable and accrued liabilities 32,740 33,200 Dividends payable 16,860 15,812 Contingent consideration 94,421 128,400 Debt 273,815 255,025 Other liabilities 93,134 87,827 Liabilities of CIP Notes payable of CIP 1,943,949 2,083,314 Securities purchased payable and other liabilities of CIP 184,817 230,897 Total liabilities 2,801,481 3,016,280 Commitments and Contingencies (Note 14) Redeemable noncontrolling interests 96,266 113,718 Equity: Equity attributable to Virtus Investment Partners, Inc.: Common stock, $ 0.01 par value, 1,000,000,000 shares authorized; 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 122 120 Additional paid-in capital 1,295,988 1,286,244 Retained earnings (accumulated deficit) 190,615 130,261 Accumulated other comprehensive income (loss) ( 373 ) ( 358 ) 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 ) Total equity attributable to Virtus Investment Partners, Inc. 862,104 817,019 Noncontrolling interests 5,448 5,917 Total equity 867,552 822,936 Total liabilities and equity $ 3,765,299 $ 3,952,934 The accompanying notes are an integral part of these condensed consolidated financial statements. 1 Table of Contents Virtus Investment Partners, Inc. Condensed Consolidated Statements of Operations (Unaudited) Three Months Ended September 30, Nine Months Ended September 30, (in thousands, except per share data) 2023 2022 2023 2022 Revenues Investment management fees $ 184,869 $ 172,850 $ 529,326 $ 564,691 Distribution and service fees 14,333 15,746 42,618 52,912 Administration and shareholder service fees 19,069 20,563 55,668 66,889 Other income and fees 1,000 1,102 3,069 3,516 Total revenues 219,271 210,261 630,681 688,008 Operating Expenses Employment expenses 101,587 88,230 304,895 283,583 Distribution and other asset-based expenses 24,157 26,818 73,332 88,247 Other operating expenses 30,494 31,096 94,707 94,367 Operating expenses of consolidated investment products ("CIP") 553 538 1,613 1,927 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 Amortization expense 15,382 14,609 45,581 43,895 Total operating expenses 174,368 166,244 518,153 521,769 Operating Income (Loss) 44,903 44,017 112,528 166,239 Other Income (Expense) Realized and unrealized gain (loss) on investments, net ( 1,918 ) ( 2,493 ) 2,469 ( 16,018 ) Realized and unrealized gain (loss) of CIP, net ( 1,013 ) ( 8,440 ) ( 2,853 ) ( 43,443 ) Other income (expense), net 128 ( 659 ) ( 1,062 ) 199 Total other income (expense), net ( 2,803 ) ( 11,592 ) ( 1,446 ) ( 59,262 ) Interest Income (Expense) Interest expense ( 6,222 ) ( 3,557 ) ( 17,444 ) ( 8,661 ) Interest and dividend income 2,872 1,013 8,785 1,870 Interest and dividend income of investments of CIP 49,803 28,644 144,501 71,436 Interest expense of CIP ( 38,218 ) ( 20,356 ) ( 112,153 ) ( 46,860 ) Total interest income (expense), net 8,235 5,744 23,689 17,785 Income (Loss) Before Income Taxes 50,335 38,169 134,771 124,762 Income tax expense (benefit) 12,181 10,754 31,794 43,969 Net Income (Loss) 38,154 27,415 102,977 80,793 Noncontrolling interests ( 7,248 ) 4,265 ( 3,190 ) 1,348 Net Income (Loss) Attributable to Virtus Investment Partners, Inc. $ 30,906 $ 31,680 $ 99,787 $ 82,141 Earnings (Loss) per Share—Basic $ 4.26 $ 4.33 $ 13.72 $ 11.05 Earnings (Loss) per Share—Diluted $ 4.19 $ 4.25 $ 13.50 $ 10.76 Weighted Average Shares Outstanding—Basic 7,258 7,308 7,272 7,434 Weighted Average Shares Outstanding—Diluted 7,379 7,463 7,393 7,636 The accompanying notes are an integral part of these condensed consolidated financial statements. 2 Table of Contents Virtus Investment Partners, Inc. Condensed Consolidated Statements of Comprehensive Income (Unaudited) Three Months Ended September 30, Nine Months Ended September 30, (in thousands) 2023 2022 2023 2022 Net Income (Loss) $ 38,154 $ 27,415 $ 102,977 $ 80,793 Other comprehensive income (loss), net of tax: 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 ) Other comprehensive income (loss) ( 226 ) ( 504 ) ( 15 ) ( 791 ) Comprehensive income (loss) 37,928 26,911 102,962 80,002 Comprehensive (income) loss attributable to noncontrolling interests ( 7,248 ) 4,265 ( 3,190 ) 1,348 Comprehensive Income (Loss) Attributable to Virtus Investment Partners, Inc. $ 30,680 $ 31,176 $ 99,772 $ 81,350 The accompanying notes are an integral part of these condensed consolidated financial statements. 3 Table of Contents Virtus Investment Partners, Inc. Condensed Consolidated Statements of Cash Flows (Unaudited) Nine Months Ended September 30, (in thousands) 2023 2022 Cash Flows from Operating Activities: Net income (loss) $ 102,977 $ 80,793 Adjustments to reconcile net income to net cash provided by (used in) operating activities: Depreciation expense, intangible asset and other amortization 51,017 48,143 Stock-based compensation 20,072 19,267 Amortization of deferred commissions 1,261 3,653 Payments of deferred commissions ( 1,105 ) ( 1,789 ) Equity in earnings of equity method investments 810 ( 527 ) 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 ) Change in fair value of contingent consideration ( 6,800 ) 2,900 Deferred taxes, net 2,735 ( 5,500 ) Changes in operating assets and liabilities: Accounts receivable, net and other assets 3,441 32,940 Accrued compensation and benefits, accounts payable, accrued liabilities and other liabilities ( 38,966 ) ( 76,639 ) Operating activities of consolidated investment products ("CIP"): Realized and unrealized (gains) losses on investments of CIP, net ( 1,769 ) 41,312 Purchases of investments by CIP ( 905,184 ) ( 601,749 ) Sales of investments by CIP 1,028,251 595,451 Net proceeds (purchases) of short-term investments and securities sold short by CIP ( 168 ) ( 655 ) Change in other assets and liabilities of CIP ( 1,181 ) 4,129 Net cash provided by (used in) operating activities 229,840 154,850 Cash Flows from Investing Activities: Capital expenditures ( 6,438 ) ( 5,495 ) 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 ) Change in cash and cash equivalents of CIP due to consolidation (deconsolidation), net ( 267 ) ( 308 ) Purchase of equity method investment ( 11,645 ) — Net cash provided by (used in) investing activities ( 127,349 ) ( 25,747 ) Cash Flows from Financing Activities: Borrowings on credit agreement 50,000 — Repayments on credit agreement ( 32,063 ) ( 12,062 ) Common stock dividends paid ( 38,385 ) ( 35,244 ) Repurchase of common shares ( 25,000 ) ( 80,000 ) Payment of contingent consideration ( 27,179 ) ( 33,036 ) 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 ) Financing activities of CIP: 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 ) Effect of exchange rate changes on cash, cash equivalents and restricted cash ( 68 ) ( 650 ) Net increase (decrease) in cash, cash equivalents and restricted cash ( 183,346 ) ( 190,515 ) Cash, cash equivalents and restricted cash, beginning of period 589,179 586,145 Cash, cash equivalents and restricted cash, end of period $ 405,833 $ 395,630 Non-Cash Investing Activities: Contingent consideration $ — $ 1,200 Non-Cash Financing Activities: Increase (decrease) to noncontrolling interests due to consolidation (deconsolidation) of CIP, net $ ( 7,170 ) $ ( 338 ) Common stock dividends payable $ 13,788 $ 12,014 (in thousands) September 30, 2023 December 31, 2022 Reconciliation of cash, cash equivalents and restricted cash Cash and cash equivalents $ 195,403 $ 338,234 Cash of CIP 209,747 250,301 Cash pledged or on deposit of CIP 683 644 Cash, cash equivalents and restricted cash at end of period $ 405,833 $ 589,179 The accompanying notes are an integral part of these condensed consolidated financial statements. 4 Table of Contents Virtus Investment Partners, Inc. Condensed Consolidated Statements of Changes in Stockholders' Equity (Unaudited) Permanent Equity Temporary Equity Common Stock Additional Paid-in Capital Retained Earnings (Accumulated Deficit) Accumulated Other Comprehensive Income (Loss) Treasury Stock Total Attributed To Virtus Investment Partners, Inc. Non- controlling Interests Total Equity Redeemable Non- controlling Interests (in thousands, except per share data) Shares Par Value Shares Amount 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 ) Foreign currency translation adjustments — — — — ( 504 ) — — ( 504 ) — ( 504 ) — Net subscriptions (redemptions) and other — — 2,035 — — — — 2,035 ( 414 ) 1,621 ( 10,289 ) Cash dividends declared ($ 1.65 per common share) — — — ( 12,552 ) — — — ( 12,552 ) — ( 12,552 ) — Repurchases of common shares ( 50,422 ) — — — — 50,422 ( 10,000 ) ( 10,000 ) — ( 10,000 ) — Issuance of common shares related to employee stock transactions 7,058 — — — — — — — — — — Taxes paid on stock-based compensation — — ( 1,166 ) — — — — ( 1,166 ) — ( 1,166 ) — 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 Net income (loss) — — — 30,906 — — — 30,906 671 31,577 6,577 Foreign currency translation adjustments — — — — ( 226 ) — — ( 226 ) — ( 226 ) — Net subscriptions (redemptions) and other — — 3,218 — — — — 3,218 ( 419 ) 2,799 ( 20,710 ) Cash dividends declared ($ 1.90 per common share) — — — ( 14,302 ) — — — ( 14,302 ) — ( 14,302 ) — Repurchases of common shares ( 74,015 ) — — — — 74,015 ( 15,000 ) ( 15,000 ) — ( 15,000 ) — Issuance of common shares related to employee stock transactions 1,992 — — — — — — — — — — Taxes paid on stock-based compensation — — ( 214 ) — — — — ( 214 ) — ( 214 ) — Stock-based compensation — — 6,209 — — — — 6,209 — 6,209 — 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 Common Stock Additional Paid-in Capital Retained Earnings (Accumulated Deficit) Accumulated Other Comprehensive Income (Loss) Treasury Stock Total Attributed To Virtus Investment Partners, Inc. Non- controlling Interests Total Equity Redeemable Non- controlling Interests (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 Net income (loss) — — — 82,141 — — — 82,141 ( 184 ) 81,957 ( 1,164 ) Foreign currency translation adjustments — — — — ( 791 ) — — ( 791 ) — ( 791 ) — Net subscriptions (redemptions) and other — — 2,035 — — — — 2,035 ( 1,432 ) 603 ( 13,359 ) Cash dividends declared ($ 4.65 per common share) — — — ( 35,779 ) — — — ( 35,779 ) — ( 35,779 ) — Repurchases of common shares ( 397,777 ) — — — — 397,777 ( 80,000 ) ( 80,000 ) — ( 80,000 ) — Issuance of common shares related to employee stock transactions 123,599 1 ( 1 ) — — — — — — — — Taxes paid on stock-based compensation — — ( 16,450 ) — — — — ( 16,450 ) — ( 16,450 ) — Stock-based compensation — — 19,772 — — — — 19,772 — 19,772 — 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 Net income (loss) — — — 99,787 — — — 99,787 786 100,573 2,404 Foreign currency translation adjustments — — — — ( 15 ) — — ( 15 ) — ( 15 ) — Net subscriptions (redemptions) and other — — 3,218 — — — — 3,218 ( 1,255 ) 1,963 ( 19,856 ) Cash dividends declared ($ 5.20 per common share) — — — ( 39,433 ) — — — ( 39,433 ) — ( 39,433 ) — Repurchases of common shares ( 125,855 ) — — — — 125,855 ( 25,000 ) ( 25,000 ) — ( 25,000 ) — Issuance of common shares related to employee stock transactions 127,064 2 ( 2 ) — — — — — — — — Taxes paid on stock-based compensation — — ( 13,436 ) — — — — ( 13,436 ) — ( 13,436 ) — Stock-based compensation — — 19,964 — — — — 19,964 — 19,964 — 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. 5 Table of Contents Virtus Investment Partners, Inc. Notes to Condensed Consolidated Financial Statements (Unaudited) 1. Organization and Business Virtus Investment Partners, Inc. (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 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: mutual funds registered pursuant to the Investment Company Act of 1940, as amended ("U.S. retail funds"); Undertaking for Collective Investment in Transferable Securities and Qualifying Investor Funds (collectively, "global funds") and collectively with U.S. retail funds, variable insurance funds, and exchange-traded funds ("ETFs"), (the "open-end funds"); closed-end funds (collectively, with open-end funds, the "funds"); and retail separate accounts that include intermediary-sold and private client accounts. The Company also provides subadvisory services to other investment advisers and serves as the collateral manager for structured products. 2. Basis of Presentation and Significant Accounting Policies Basis of Presentation The unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP") for interim financial information. Accordingly, they do not include all of the information and notes required by GAAP for complete financial statements. 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 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"). The Company’s significant accounting policies, which have been consistently applied, are summarized in its 2022 Annual Report on Form 10-K. 3. Revenues The Company's revenues are recognized when a performance obligation is satisfied, which occurs when control of the services is transferred to customers. Investment management fees, distribution and service fees, and administration and shareholder service fees are generally calculated as a percentage of average net assets of the investment portfolios managed. The net asset values from which these fees are calculated are variable in nature and subject to factors outside of the Company's control, such as additional investments, withdrawals and market performance. Because of this, these fees are considered constrained until the end of the contractual measurement period (monthly or quarterly), which is when asset values are generally determinable. Investment Management Fees by Source The following table summarizes investment management fees by source: Three Months Ended September 30, Nine Months Ended September 30, (in thousands) 2023 2022 2023 2022 Investment management fees Open-end funds $ 80,294 $ 80,234 $ 229,721 $ 262,486 Closed-end funds 14,673 15,773 44,025 48,887 Retail separate accounts 44,441 39,154 127,323 134,069 Institutional accounts 45,461 37,689 128,257 119,249 Total investment management fees $ 184,869 $ 172,850 $ 529,326 $ 564,691 6 Table of Contents 4. Acquisitions 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 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 nine months ended September 30, 2023. The following table summarizes the identified acquired assets and liabilities assumed as of the AlphaSimplex acquisition date: April 1, 2023 (in thousands) Assets: 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 Liabilities: 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 (in years) 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. 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. 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. 7 Table of Contents 5. 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 September 30, 2023 $ 397,098 Below is a summary of intangible assets, net: Definite-Lived Indefinite-Lived Total (in thousands) Gross Book Value Accumulated Amortization Net Book Value Net Book Value Net Book Value Balances at December 31, 2022 $ 756,028 $ ( 355,807 ) $ 400,221 $ 42,298 $ 442,519 Additions 55,400 — 55,400 — 55,400 Intangible amortization — ( 45,581 ) ( 45,581 ) — ( 45,581 ) 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: Fiscal Year Amount (in thousands) Remainder of 2023 $ 15,445 2024 56,739 2025 51,971 2026 50,991 2027 47,890 2028 and thereafter 187,004 Total $ 410,040 6. Investments 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 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 Equity method investments (1) 22,557 11,448 Nonqualified retirement plan assets 11,328 10,154 Other investments — 1,729 Total investments $ 152,349 $ 100,330 (1) The Company's equity method investments are valued on a three-month lag based upon the availability of financial information. On January 1, 2023, the Company made an additional investment in an existing minority interest in an affiliated manager for $ 11.6 million including transaction costs. Investment Securities - fair value Investment securities - fair value consist of investments in the Company's sponsored funds and separately managed accounts. The composition of the Company’s investment securities - fair value was as follows: 8 Table of Contents 9 Table of Contents September 30, 2023 December 31, 2022 (in thousands) Cost Fair Value Cost Fair Value Investment Securities - fair value Sponsored funds $ 82,156 $ 76,958 $ 67,472 $ 62,744 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 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. 7. 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 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 Assets Cash equivalents $ 157,635 $ — $ — $ 157,635 Investment securities - fair value Sponsored funds 76,958 — — 76,958 Equity securities 17,167 — — 17,167 Debt securities — — 24,339 24,339 Nonqualified retirement plan assets 11,328 — — 11,328 Total assets measured at fair value $ 263,088 $ — $ 24,339 $ 287,427 Liabilities Contingent consideration $ — $ — $ 54,910 $ 54,910 Total liabilities measured at fair value $ — $ — $ 54,910 $ 54,910 December 31, 2022 (in thousands) Level 1 Level 2 Level 3 Total Assets Cash equivalents $ 287,126 $ — $ — $ 287,126 Investment securities - fair value Sponsored funds 62,744 — — 62,744 Equity securities 14,255 — — 14,255 Nonqualified retirement plan assets 10,154 — — 10,154 Total assets measured at fair value $ 374,279 $ — $ — $ 374,279 Liabilities Contingent consideration $ — $ — $ 78,100 $ 78,100 Total liabilities measured at fair value $ — $ — $ 78,100 $ 78,100 10 Table of Contents The following is a discussion of the valuation methodologies used for the Company’s assets 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. 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 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. Equity securities represent securities traded on active markets, are valued at the official closing price (typically the last sale or bid) on the exchange on which the securities are primarily traded and are categorized as Level 1. 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. 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. Cash, accounts receivable, accounts payable and accrued liabilities equal or approximate fair value based on the short-term nature of these instruments. 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 September 30, Nine Months Ended September 30, (in thousands) 2023 2022 2023 2022 Assets Balance at beginning of period $ — $ — $ — $ — Purchases (sales), net 24,339 — 24,339 — Balance at end of period $ 24,339 $ — $ 24,339 $ — Liabilities Balance at beginning of period $ 54,910 $ 72,980 $ 78,100 $ 88,400 Additions for acquisition — — — 1,200 Reduction for payments made — — ( 16,390 ) ( 19,520 ) Increase (reduction) of liability related to re-measurement of fair value — — ( 6,800 ) 2,900 Balance at end of period $ 54,910 $ 72,980 $ 54,910 $ 72,980 8. Equity Transactions Dividends Declared 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 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 11 Table of Contents 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. 9. Accumulated Other Comprehensive Income (Loss) The changes in accumulated other comprehensive income (loss) were as follows: Nine Months Ended September 30, (in thousands) 2023 2022 Balance at beginning of period $ ( 358 ) $ 20 Net current-period other comprehensive income (loss) (1) ( 15 ) ( 791 ) 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. 10. 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 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 September 30, Nine Months Ended September 30, (in thousands) 2023 2022 2023 2022 Stock-based compensation expense $ 7,668 $ 5,148 $ 20,072 $ 19,267 Restricted Stock Units 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 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 nine months ended September 30, 2023 is summarized as follows: Number of Shares Weighted Average Grant Date Fair Value Outstanding at December 31, 2022 377,087 $ 178.21 Granted 207,206 $ 160.10 Forfeited ( 35,341 ) $ 146.07 Settled ( 199,880 ) $ 119.68 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 nine months ended September 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") 12 Table of Contents 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 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. 11. Earnings (Loss) Per Share Earnings (loss) per share ("EPS") is calculated in accordance with ASC 260, Earnings per Share . Basic EPS is computed by dividing net income (loss) attributable to Virtus Investment Partners, Inc. by the weighted-average number of common shares outstanding for the period, excluding dilution for potential common stock issuances. Diluted EPS reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock, including shares issuable upon the vesting of RSUs and stock option exercises using the treasury stock method, as determined under the if-converted method. The computation of basic and diluted EPS is as follows: Three Months Ended September 30, Nine Months Ended September 30, (in thousands, except per share amounts) 2023 2022 2023 2022 Net Income (Loss) $ 38,154 $ 27,415 $ 102,977 $ 80,793 Noncontrolling interests ( 7,248 ) 4,265 ( 3,190 ) 1,348 Net Income (Loss) Attributable to Virtus Investment Partners, Inc. $ 30,906 $ 31,680 $ 99,787 $ 82,141 Shares: Basic: Weighted-average number of shares outstanding 7,258 7,308 7,272 7,434 Plus: Incremental shares from assumed conversion of dilutive instruments 121 155 121 202 Diluted: Weighted-average number of shares outstanding 7,379 7,463 7,393 7,636 Earnings (Loss) per Share—Basic $ 4.26 $ 4.33 $ 13.72 $ 11.05 Earnings (Loss) per Share—Diluted $ 4.19 $ 4.25 $ 13.50 $ 10.76 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 September 30, Nine Months Ended September 30, (in thousands) 2023 2022 2023 2022 Restricted stock units 2 31 3 32 Total anti-dilutive securities 2 31 3 32 12. Income Taxes 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, 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 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. 13 Table of Contents 13. Debt Credit Agreement 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. 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 $ 5.7 million as of September 30, 2023. 14. 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 records a liability when it is both probable that a liability has been incurred and the amount of the liability can be reasonably estimated. Significant judgment is required in both the determination of probability and the determination as to whether a loss is reasonably estimable. Based on information currently available, available insurance coverage, indemnities and established reserves, the Company believes that the outcomes of its legal and regulatory proceedings are not likely, either individually or in the aggregate, to have a material adverse effect on the Company's results of operations, cash flows or its consolidated financial condition. However, in the event of unexpected subsequent developments, and given the inherent unpredictability of these legal and regulatory matters, the Company can provide no assurance that its assessment of any legal matter will reflect the ultimate outcome, and an adverse outcome in certain matters could have a material adverse effect on the Company's results of operations or cash flows in particular quarterly or annual periods. 15. Redeemable Noncontrolling Interests Redeemable noncontrolling interests represent third-party investments in the Company's CIP and minority interests held in a consolidated affiliate. Minority interests held in the affiliate are subject to holder put rights and Company call rights at established multiples of earnings before interest, taxes, depreciation and amortization and, as such, are considered redeemable at other than fair value. The rights are exercisable at pre-established intervals (between four and seven years from their issuance) or upon certain conditions, such as retirement. The put and call rights are not legally detachable or separately exercisable and are deemed to be embedded in the related noncontrolling interests. 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. 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. 14 Table of Contents Redeemable noncontrolling interests for the nine months ended September 30, 2023 included the following amounts: (in thousands) CIP Affiliate Noncontrolling Interests Total Balances at December 31, 2022 $ 18,268 $ 95,450 $ 113,718 Net income (loss) attributable to noncontrolling interests 772 5,245 6,017 Changes in redemption value (1) — ( 3,613 ) ( 3,613 ) 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 September 30, 2023 $ 25,716 $ 70,550 $ 96,266 (1) Relates to noncontrolling interests redeemable at other than fair value. 16. Consolidation The condensed consolidated financial statements include the accounts of the Company, its subsidiaries and investment products that are consolidated. 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. 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. 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 ("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. The Company's risk with respect to these investment products is limited to its beneficial interests in these products. 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. 15 Table of Contents 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: As of September 30, 2023 December 31, 2022 VOEs VIEs VOEs VIEs (in thousands) CLOs GFs CLOs GFs Cash and cash equivalents $ 865 $ 208,056 $ 1,509 $ 1,153 $ 249,003 $ 789 Investments 19,147 1,978,308 71,760 24,669 2,106,764 58,680 Other assets 110 33,143 1,228 295 43,993 1,157 Notes payable — ( 1,943,949 ) — — ( 2,083,314 ) — Securities purchased payable and other liabilities ( 547 ) ( 183,520 ) ( 750 ) ( 573 ) ( 230,141 ) ( 183 ) Noncontrolling interests ( 6,451 ) ( 5,448 ) ( 19,265 ) ( 7,879 ) ( 5,917 ) ( 10,389 ) Net interests in CIP $ 13,124 $ 86,590 $ 54,482 $ 17,665 $ 80,388 $ 50,054 Consolidated CLOs The majority of the Company's CIP that are VIEs are 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 $ 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 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 %. The principal amounts outstanding of these note obligations mature on dates ranging from October 2027 to October 2034. The Company's beneficial interests and maximum exposure to loss related to these consolidated CLOs is limited to (i) ownership in the subordinated notes and (ii) accrued management fees. 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 September 30, 2023, as shown in the table below: (in thousands) Subordinated notes $ 85,556 Accrued investment management fees 1,034 Total Beneficial Interests $ 86,590 16 Table of Contents 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: Nine Months Ended September 30, 2023 (in thousands) Income: Realized and unrealized gain (loss), net $ ( 3,317 ) Interest income 140,078 Total Income 136,761 Expenses: Other operating expenses 1,236 Interest expense 112,153 Total Expense 113,389 Noncontrolling interests ( 786 ) Net Income (Loss) Attributable to CLOs $ 22,586 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) Distributions received and unrealized gains (losses) on the subordinated notes held by the Company $ 15,907 Investment management fees 6,679 Total Economic Interests $ 22,586 Fair Value Measurements of CIP 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 Assets Cash equivalents $ 208,056 $ — $ — $ 208,056 Debt investments 167 1,976,568 61,939 2,038,674 Equity investments 28,761 437 1,343 30,541 Total assets measured at fair value $ 236,984 $ 1,977,005 $ 63,282 $ 2,277,271 Liabilities Notes payable $ — $ 1,943,949 $ — $ 1,943,949 Short sales 489 — — 489 Total liabilities measured at fair value $ 489 $ 1,943,949 $ — $ 1,944,438 17 Table of Contents As of December 31, 2022 (in thousands) Level 1 Level 2 Level 3 Total Assets Cash equivalents $ 249,003 $ — $ — $ 249,003 Debt investments 243 2,119,082 42,246 2,161,571 Equity investments 25,003 2,204 1,335 28,542 Total assets measured at fair value $ 274,249 $ 2,121,286 $ 43,581 $ 2,439,116 Liabilities Notes payable $ — $ 2,083,314 $ — $ 2,083,314 Short sales 414 — — 414 Total liabilities measured at fair value $ 414 $ 2,083,314 $ — $ 2,083,728 The following is a discussion of the valuation methodologies used for the assets and liabilities of the Company’s CIP measured at fair value: 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. Debt investments are valued based on quotations received from independent pricing services or from dealers who make markets in such securities. Bank loan investments, which are included as debt investments, are generally priced at the average mid-point of bid and ask quotations obtained from a third-party pricing service. 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. 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. The securities purchased payable at September 30, 2023 and December 31, 2022 approximated fair value due to the short-term nature of the instruments. 18 Table of Contents 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: Nine Months Ended September 30, (in thousands) 2023 2022 Balance at beginning of period $ 43,581 $ 3,157 Realized gains (losses), net ( 4,306 ) ( 596 ) Change in unrealized gains (losses), net 3,980 ( 425 ) Purchases 3,430 1,930 Amortization 284 9 Sales ( 7,890 ) ( 12,142 ) Transfers to Level 2 ( 79,288 ) ( 53,746 ) Transfers from Level 2 103,491 107,622 Balance at end of period (1) $ 63,282 $ 45,809 (1) The investments that are categorized as Level 3 were valued utilizing third-party pricing information without adjustment. Transfers in and/or out of levels are reflected when significant inputs, including market inputs or performance attributes, used for the fair value measurement become observable/unobservable at period end. Nonconsolidated VIEs The Company serves as the collateral manager for other CLOs that are not consolidated. 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 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 September 30, 2023, the carrying value and maximum risk of loss related to the Company's interest in these VIEs was $ 25.3 million. 19 Table of Contents