What changed in this filing

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Item 1. Financial Statements

2024-05-08 compared with 2023-11-08 · 97 added, 194 removed, 437 unchanged (40% of the section changed)

2 unchanged sentences

Condensed Consolidated Balance Sheets

(in thousands, except share data) September 30,

(in thousands, except share data) March 31,

2024 December 31,

28 unchanged sentences

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;

12,224,489 shares issued and 7,127,881 shares outstanding at March 31, 2024;

and 12,163,228 shares issued and 7,087,728 shares outstanding at December 31, 2023

2 unchanged sentences

Accumulated other comprehensive income (loss) ( 187 ) ( 87 )

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

Treasury stock, at cost, 5,096,608 and 5,075,500 shares at March 31, 2024 and December 31, 2023, respectively

( 649,463 ) ( 644,464 )

8 unchanged sentences

Three Months Ended

September 30, Nine Months Ended

September 30,

(in thousands, except per share data) 2024 2023

8 unchanged sentences

Other operating expenses 31,375 30,730

Operating expenses of consolidated investment products ("CIP") 553 538 1,613 1,927

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

Other operating expenses of consolidated investment products ("CIP") 690 700

Restructuring expense 797 —

28 unchanged sentences

Three Months Ended

September 30, Nine Months Ended

September 30,

(in thousands) 2024 2023

1 unchanged sentence

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 )

Foreign currency translation adjustment, net of tax of $ 36 and $( 35 ) for the three months ended March 31, 2024 and 2023, respectively

Other comprehensive income (loss) ( 100 ) 99

6 unchanged sentences

Condensed Consolidated Statements of Cash Flows

Nine Months Ended

September 30,

Three Months Ended

(in thousands) 2024 2023

4 unchanged sentences

Stock-based compensation 6,831 5,749

Amortization of deferred commissions 1,261 3,653

Payments of deferred commissions ( 1,105 ) ( 1,789 )

Equity in earnings of equity method investments ( 498 ) 554

Distributions from equity method investments 1,789 2,239

Right of use asset — 3,222

Realized and unrealized (gains) losses on investments, net ( 3,393 ) ( 2,670 )

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

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

Deferred taxes, net 1,086 1,441

Changes in operating assets and liabilities:

Sales (purchases) of investments, net 5,987 5,217

Accounts receivable, net and other assets ( 341 ) 8,725

9 unchanged sentences

Capital expenditures ( 1,923 ) ( 1,448 )

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 ( 537 ) ( 52 )

2 unchanged sentences

Cash Flows from Financing Activities:

Borrowings on credit agreement 50,000 —

Repayments on credit agreement ( 688 ) ( 688 )

7 unchanged sentences

Payments on borrowings by CIP ( 17,794 ) ( 61,213 )

Borrowings by CIP 132,473 —

Net cash provided by (used in) financing activities ( 56,146 ) ( 115,078 )

3 unchanged sentences

Cash, cash equivalents and restricted cash, end of period $ 247,677 $ 418,177

Non-Cash Investing Activities:

Contingent consideration $ — $ 1,200

Non-Cash Financing Activities:

1 unchanged sentence

Common stock dividends payable $ 13,467 $ 11,850

(in thousands) September 30,

(in thousands) March 31,

2024 December 31, 2023

18 unchanged sentences

(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

Capital Retained Earnings (Accumulated

Deficit) Accumulated

Comprehensive

Income (Loss) Treasury Stock Total

Attributed To

Virtus Investment Partners, Inc.

Interests Total

Equity Redeemable

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

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

4 unchanged sentences

— — — ( 13,093 ) — — — ( 13,093 ) — ( 13,093 ) —

Repurchases of common shares ( 397,777 ) — — — — 397,777 ( 80,000 ) ( 80,000 ) — ( 80,000 ) —

Issuance of common shares related to employee stock transactions 106,840 1 ( 1 ) — — — — — — — —

1 unchanged sentence

Stock-based compensation — — 7,475 — — — — 7,475 — 7,475 —

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

Balances at December 31, 2023 7,087,728 $ 122 $ 1,300,999 $ 207,356 $ ( 87 ) 5,075,500 $ ( 644,464 ) $ 863,926 $ 4,363 $ 868,289 $ 104,869

8 unchanged sentences

Stock-based compensation — — 7,010 — — — — 7,010 — 7,010 —

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

Balances at March 31, 2024 7,127,881 $ 122 $ 1,298,157 $ 223,023 $ ( 187 ) 5,096,608 $ ( 649,463 ) $ 871,652 $ 4,351 $ 876,003 $ 115,185

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

5 unchanged sentences

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 investment strategies are offered to institutional clients through institutional separate and commingled accounts, including structured products.

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.

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

The Company also provides subadvisory services to other investment advisers.

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

Operating results for the three months ended March 31, 2024 are not necessarily indicative of the results that may be expected for the year ending December 31, 2024.

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, 2023 (the "2023 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 2023 Annual Report on Form 10-K.

New Accounting Standards Not Yet Implemented

In November 2023, the Financial Accounting Standards Board (the "FASB") issued Accounting Standards Update ("ASU") 2023-07, Segment Reporting (Topic 280) .

This standard updates reportable segment disclosure requirements, clarifies circumstances in which an entity can disclose multiple segment measures of profit or loss and provides new segment disclosure requirements for entities with a single reportable segment.

This standard is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2023 and interim periods within fiscal years beginning after December 15, 2024.

Early adoption is permitted, with the amendments to be applied retrospectively to all prior periods presented in the financial statements.

The Company is in the process of evaluating the impact of adopting this standard and, at this time, does not anticipate it will have a material impact on its consolidated financial statements.

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740).

This standard updates income tax disclosure requirements by requiring disaggregated information about a reporting entity's effective tax rate reconciliation as well as information on income taxes paid.

This standard is effective for fiscal years beginning after December 15, 2024.

Early adoption is permitted.

The Company is in the process of evaluating the impact of adopting this standard and, at this time, does not anticipate it will have a material impact on its consolidated financial statements.

In March 2024, the FASB issued ASU 2024-01, Compensation - Stock Compensation (Topic 718), Scope Application of Profits Interest and Similar Awards.

This standard provides clarity regarding whether profits interest and similar awards are within the scope of Topic 718 of the Accounting Standards Codification.

This standard is effective for fiscal years beginning after December 15, 2024.

Early adoption is permitted.

The Company is in the process of evaluating the impact of adopting this standard and, at this time, does not anticipate it will have a material impact on its consolidated financial statements.

The Company's revenues are recognized when a performance obligation is satisfied, which occurs when control of the services is transferred to customers.

5 unchanged sentences

Three Months Ended

September 30, Nine Months Ended

September 30,

(in thousands) 2024 2023

9 unchanged sentences

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)

Cash and cash equivalents $ 4,395

Investments 8,567

Accounts receivable 5,422

Furniture, equipment and leasehold improvements 4,161

Intangible assets 55,400

Goodwill 48,262

Other assets 9,126

Total Assets 135,333

Accounts payable and accrued liabilities 21,939

Total Liabilities 21,939

Total Net Assets Acquired $ 113,394

Identifiable Intangible Assets Acquired

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

April 1, 2023

Approximate Fair Value

( in thousands)

Weighted Average of Useful Life

Definite-lived intangible assets:

Investment management agreements 52,000 10.5

Trade names 3,400 9.0

Total definite-lived intangible assets $ 55,400

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

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.

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

Intangible Assets, Net

Below is a summary of intangible assets, net:

2 unchanged sentences

Balances at December 31, 2023 $ 806,655 $ ( 416,834 ) $ 389,821 $ 42,298 $ 432,119

Additions 55,400 — 55,400 — 55,400

Intangible amortization — ( 15,335 ) ( 15,335 ) — ( 15,335 )

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

Balances at March 31, 2024 $ 806,655 $ ( 432,169 ) $ 374,486 $ 42,298 $ 416,784

Definite-lived intangible asset amortization for the remainder of fiscal year 2024 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 September 30, 2023 and December 31, 2022 were as follows:

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

The Company's investments, excluding the assets of consolidated investment products ("CIP") discussed in Note 16, at March 31, 2024 and December 31, 2023 were as follows:

(in thousands) March 31,

2024 December 31, 2023

Investment securities - fair value $ 90,497 $ 97,304

1 unchanged sentence

Nonqualified retirement plan assets 13,743 12,682

Other investments — 1,729

Total investments $ 127,448 $ 132,696

(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

1 unchanged sentence

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

September 30, 2023 December 31, 2022

March 31, 2024 December 31, 2023

(in thousands) Cost Fair Value Cost Fair Value

2 unchanged sentences

Equity securities 16,875 20,983 16,353 19,871

Debt securities 24,339 24,339 — —

Total investment securities - fair value $ 85,942 $ 90,497 $ 97,147 $ 97,304

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.

For the three months ended March 31, 2024 and 2023, the Company recognized net realized losses of $ 0.4 million and net realized gains $ 1.3 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 September 30, 2023 and December 31, 2022 by fair value hierarchy level were as follows:

September 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 March 31, 2024 and December 31, 2023 by fair value hierarchy level were as follows:

March 31, 2024

(in thousands) Level 1 Level 2 Level 3 Total

3 unchanged sentences

Equity securities 20,983 — — 20,983

Debt securities — — 24,339 24,339

Nonqualified retirement plan assets 13,743 — — 13,743

20 unchanged sentences

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.

Contingent consideration represents liabilities associated with the Company's Westchester Capital Management ("WCM") and NFJ Investment Group ("NFJ") transactions .

The continent consideration related to the WCM transaction as of March 31, 2024 was $ 11.1 million and represents the fair value of future potential earn-out payments based on pre-established performance metrics related to revenue growth rates.

The estimated fair value of the WCM liability is measured using an options pricing model valuation technique utilizing unobservable market data inputs prepared with the assistance of an independent valuation firm.

The most significant unobservable inputs used relate to the aforementioned revenue growth rates, discount rate (range of 6 %- 7 %) and the market price of risk adjustment ( 9 %).

The NFJ contingent consideration liability as of March 31, 2024 was $ 30.6 million and represents the fair value of the projected future revenue participation payments.

The NFJ revenue participation payments consist of variable payments based on a percentage of the investment management fees earned on certain NFJ managed assets.

The estimated fair value of the NFJ liability is measured using an options pricing model valuation technique utilizing unobservable market data inputs prepared with the assistance of an independent valuation firm.

The most significant unobservable inputs used relate to the revenue growth rates, discount rates (range of 6 % - 7 %) and the market price of risk adjustment ( 7 %).

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:

The following table presents a reconciliation of beginning and ending balances of the Company's contingent consideration liabilities:

Three Months Ended

September 30, Nine Months Ended

September 30,

(in thousands) 2024 2023

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

Contingent consideration, beginning of period $ 56,200 $ 78,100

Reduction for payments made ( 14,492 ) ( 16,390 )

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

Contingent consideration, end of period $ 41,708 $ 61,710

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

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.

On February 21, 2024, the Company declared a quarterly cash dividend of $ 1.90 per common share to be paid on May 15, 2024 to shareholders of record at the close of business on April 30, 2024.

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

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 months ended March 31, 2024, the Company repurchased 21,108 common shares at a weighted average price of $ 236.84 per share for a total cost, including fees and expenses, of $ 5.0 million under its share repurchase program.

As of March 31, 2024, 583,437 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.

1 unchanged sentence

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

Nine Months Ended

September 30,

Three Months Ended

(in thousands) 2024 2023

2 unchanged sentences

Balance at end of period $ ( 187 ) $ ( 259 )

(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.

(1) Consists of foreign currency translation adjustments, net of tax of $ 36 and $( 35 ) for the three months ended March 31, 2024 and 2023, 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 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.

At March 31, 2024, 375,169 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,

Three Months Ended March 31,

(in thousands) 2024 2023

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 the 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 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:

RSU activity, inclusive of PSUs, for the three months ended March 31, 2024 is summarized as follows:

of Shares Weighted Average

3 unchanged sentences

Settled ( 103,849 ) $ 229.92

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.

Outstanding at March 31, 2024 341,193 $ 205.10

For the three months ended March 31, 2024 and 2023, a total of 42,588 and 70,716 RSUs, respectively, were withheld by the Company as a result of net share settlements to settle minimum employee tax withholding obligations and for which the Company paid $ 9.9 million and $ 12.2 million respectively, in minimum employee tax withholding obligations.

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")

and (ii) the Monte Carlo simulation valuation model for awards that contain a "market condition" performance metric under ASC 718.

During the three months ended March 31, 2024 and 2023, the Company granted 26,733 and 44,291 PSUs, respectively, that contain performance-based metrics in addition to a service condition.

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.

As of March 31, 2024, unamortized stock-based compensation expense for unvested RSUs and PSUs was $ 45.5 million with a weighted-average remaining contractual life of 1.6 years.

Earnings (Loss) Per Share

4 unchanged sentences

The computation of basic and diluted EPS is as follows:

Three Months Ended September 30, Nine Months Ended

September 30,

Three Months Ended March 31,

(in thousands, except per share amounts) 2024 2023

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 September 30, Nine Months Ended September 30,

Three Months Ended March 31,

(in thousands) 2024 2023

4 unchanged sentences

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.

federal, state and local taxes at an estimated effective tax rate of 18.9 % and 20.1 % for the three months ended March 31, 2024 and 2023, respectively.

The lower estimated effective tax rate for the three months ended March 31, 2024 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.

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.

The Company's credit agreement, as amended (the "Credit Agreement"), comprises (i) a $ 275.0 million term loan with a seven-year term (the "Term Loan") expiring in September 2028, and (ii) a $ 175.0 million revolving credit facility with a five-year term expiring in September 2026.

The Company repaid $ 0.7 million outstanding under the Term Loan during the three months ended March 31, 2024 and had $ 258.1 million outstanding under the Term Loan at March 31, 2024.

Commitments and Contingencies

8 unchanged sentences

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 rights are exercisable at pre-established intervals 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.

1 unchanged sentence

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:

Redeemable noncontrolling interests for the three months ended March 31, 2024 included the following amounts:

(in thousands) CIP Affiliate Noncontrolling Interests Total

5 unchanged sentences

Net subscriptions (redemptions) and other 3,117 — 3,117

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

Balances at March 31, 2024 $ 35,189 $ 79,996 $ 115,185

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

8 unchanged sentences

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.

CIP includes both VOEs, made up primarily of U.S.

retail funds and ETFs 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 the Company's net income (loss).

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.

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

The following table presents the balances of CIP that, after intercompany eliminations, were reflected on the Condensed Consolidated Balance Sheets as of March 31, 2024 and December 31, 2023:

March 31, 2024 December 31, 2023

VOEs VIEs VOEs VIEs

11 unchanged sentences

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.

At March 31, 2024, the Company consolidated seven CLOs.

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.

The CLOs held investments of $ 2.0 billion at March 31, 2024, 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 2024 and 2032 and generally pay interest at SOFR plus a spread.

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 CLOs held notes payable with a total value, at par, of $ 2.1 billion at March 31, 2024, consisting of senior secured floating rate notes payable with a par value of $ 1.9 billion and subordinated notes with a par value of $ 215.1 million.

These note obligations bear interest at variable rates based on SOFR plus a pre-defined spread.

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)

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:

Nine Months Ended September 30, 2023

Three Months Ended March 31, 2024

(in thousands)

8 unchanged sentences

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

Three Months Ended March 31, 2024

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

As of September 30, 2023

The assets and liabilities of CIP measured at fair value on a recurring basis as of March 31, 2024 and December 31, 2023 by fair value hierarchy level were as follows:

As of March 31, 2024

(in thousands) Level 1 Level 2 Level 3 Total

19 unchanged sentences

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.

Debt investments, other than bank loans, 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.

1 unchanged sentence

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.

These securities are valued using unadjusted prices from an independent pricing service.

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.

Level 2 liabilities consist of notes payable 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.

The securities purchased payable at March 31, 2024 and December 31, 2023 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:

Nine Months Ended September 30,

Three Months Ended March 31,

(in thousands)

Balance at beginning of period $ 37,062 $ 43,581

Realized gains (losses), net ( 4,306 ) ( 596 )

Change in unrealized gains (losses), net 3,980 ( 425 )

Realized and unrealized gains (losses), net ( 324 ) 111

Purchases — 4

Amortization 284 9

Sales ( 14,625 ) ( 7,195 )

9 unchanged sentences

The Company has interests in certain other VIEs that the Company does not consolidate as it is not the primary beneficiary since its interest in these entities does not provide the Company with the power to direct the activities that most significantly impact the entities' economic performance.

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

At March 31, 2024, the carrying value and maximum risk of loss related to the Company's interest in these VIEs was $ 29.1 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