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Item 1. Financial Statements

2024-08-08 compared with 2024-05-08 · 122 added, 74 removed, 460 unchanged (30% of the section changed)

2 unchanged sentences

Condensed Consolidated Balance Sheets

(in thousands, except share data) March 31,

(in thousands, except share data) June 30,

2024 December 31,

28 unchanged sentences

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

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

12,233,778 shares issued and 7,082,071 shares outstanding at June 30, 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) ( 200 ) ( 87 )

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

Treasury stock, at cost, 5,151,707 and 5,075,500 shares at June 30, 2024 and December 31, 2023, respectively

( 661,963 ) ( 644,464 )

8 unchanged sentences

Three Months Ended

June 30, Six Months Ended

(in thousands, except per share data) 2024 2023 2024 2023

9 unchanged sentences

Other operating expenses of consolidated investment products ("CIP") 2,909 360 3,599 1,060

Change in fair value of contingent consideration ( 3,300 ) ( 6,800 ) ( 3,300 ) ( 6,800 )

Restructuring expense 690 — 1,487 —

28 unchanged sentences

Three Months Ended

June 30, Six Months Ended

(in thousands) 2024 2023 2024 2023

1 unchanged sentence

Other comprehensive income (loss), net of tax:

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

Foreign currency translation adjustment, net of tax of $ 2 and $( 42 ) for the three months ended June 30, 2024 and 2023, respectively and $ 38 and $( 77 ) for the six months ended June 30, 2024 and 2023

( 13 ) 112 ( 113 ) 211

Other comprehensive income (loss) ( 13 ) 112 ( 113 ) 211

6 unchanged sentences

Condensed Consolidated Statements of Cash Flows

Three Months Ended

Six Months Ended

(in thousands) 2024 2023

5 unchanged sentences

Equity in earnings of equity method investments ( 1,436 ) 1,151

Distributions from equity method investments 2,341 1,080

Realized and unrealized (gains) losses on investments, net ( 1,838 ) ( 4,379 )

Change in fair value of contingent consideration ( 3,300 ) ( 6,800 )

Lease termination ( 1,334 ) —

Deferred taxes, net 653 ( 103 )

9 unchanged sentences

Change in other assets and liabilities of CIP ( 6,843 ) 9,021

Amortization of discount on notes payable of CIP 1,887 —

Net cash provided by (used in) operating activities 35,427 102,088

1 unchanged sentence

Capital expenditures ( 3,251 ) ( 2,548 )

Acquisition of businesses, net of cash acquired of $ 4,395 for the six months ended June 30, 2023

— ( 108,999 )

Change in cash and cash equivalents of CIP due to consolidation (deconsolidation), net ( 549 ) ( 52 )

2 unchanged sentences

Cash Flows from Financing Activities:

Borrowings on credit agreement — 50,000

Repayments on credit agreement ( 6,375 ) ( 11,375 )

7 unchanged sentences

Payments on borrowings by CIP ( 690,496 ) ( 175,043 )

Borrowings by CIP 738,064 —

Net cash provided by (used in) financing activities ( 21,844 ) ( 210,727 )

6 unchanged sentences

Common stock dividends payable $ 13,561 $ 12,056

(in thousands) March 31,

(in thousands) June 30,

2024 December 31, 2023

1 unchanged sentence

Cash and cash equivalents $ 183,001 $ 239,602

Cash of CIP 123,030 100,732

Cash and cash equivalents of CIP 166,738 100,732

Cash pledged or on deposit of CIP 958 680

14 unchanged sentences

(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

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

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

3 unchanged sentences

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

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

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

1 unchanged sentence

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

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

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

Net income (loss) — — — 17,614 — — — 17,614 ( 673 ) 16,941 9,081

Foreign currency translation adjustments — — — — ( 13 ) — — ( 13 ) — ( 13 ) —

Net subscriptions (redemptions) and other — — 62 — — — — 62 ( 235 ) ( 173 ) 5,184

Cash dividends declared ($ 1.90 per common share)

— — — ( 14,097 ) — — — ( 14,097 ) — ( 14,097 ) —

Repurchases of common shares ( 55,099 ) — — — — 55,099 ( 12,500 ) ( 12,500 ) — ( 12,500 ) —

Issuance of common shares related to employee stock transactions 9,289 — — — — — — — — — —

Taxes paid on stock-based compensation — — ( 592 ) — — — — ( 592 ) — ( 592 ) —

Stock-based compensation — — 6,549 — — — — 6,549 — 6,549 —

Balances at June 30, 2024 7,082,071 $ 122 $ 1,304,176 $ 226,540 $ ( 200 ) 5,151,707 $ ( 661,963 ) $ 868,675 $ 3,443 $ 872,118 $ 129,450

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

8 unchanged sentences

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

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

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

Balances at 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

Net income (loss) — — — 47,472 — — — 47,472 ( 282 ) 47,190 16,699

Foreign currency translation adjustments — — — — ( 113 ) — — ( 113 ) — ( 113 ) —

Net subscriptions (redemptions) and other — — 62 — — — — 62 ( 638 ) ( 576 ) 7,882

Cash dividends declared ($ 3.80 per common share)

— — — ( 28,288 ) — — — ( 28,288 ) — ( 28,288 ) —

Repurchases of common shares ( 76,207 ) — — — — 76,207 ( 17,499 ) ( 17,499 ) — ( 17,499 ) —

Issuance of common shares related to employee stock transactions 70,550 — — — — — — — — — —

Taxes paid on stock-based compensation — — ( 10,444 ) — — — — ( 10,444 ) — ( 10,444 ) —

Stock-based compensation — — 13,559 — — — — 13,559 — 13,559 —

Balances at June 30, 2024 7,082,071 $ 122 $ 1,304,176 $ 226,540 $ ( 200 ) 5,151,707 $ ( 661,963 ) $ 868,675 $ 3,443 $ 872,118 $ 129,450

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 institutional separate and commingled accounts, including structured products.

The Company's investment strategies are offered to institutional clients through institutional separate and commingled accounts, including subadvisory services to other investment advisers and Company sponsored structured products.

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");

mutual funds registered pursuant to the Investment Company Act of 1940, as amended (the "open-end funds") that include U.S.

retail funds, exchange-traded funds ("ETFs") and variable insurance funds;

Undertaking for Collective Investment in Transferable Securities and Qualifying Investor Funds (collectively, "global 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.

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

Operating results for the six months ended June 30, 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").

16 unchanged sentences

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.

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

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.

4 unchanged sentences

Three Months Ended

June 30, Six Months Ended

(in thousands) 2024 2023 2024 2023

15 unchanged sentences

Intangible amortization — ( 30,533 ) ( 30,533 ) — ( 30,533 )

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

Balances at June 30, 2024 $ 806,655 $ ( 447,367 ) $ 359,288 $ 42,298 $ 401,586

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 March 31, 2024 and December 31, 2023 were as follows:

(in thousands) March 31,

The Company's investments, excluding the assets of consolidated investment products ("CIP") discussed in Note 16, at June 30, 2024 and December 31, 2023 were as follows:

(in thousands) June 30,

2024 December 31, 2023

7 unchanged sentences

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

March 31, 2024 December 31, 2023

June 30, 2024 December 31, 2023

(in thousands) Cost Fair Value Cost Fair Value

3 unchanged sentences

Total investment securities - fair value $ 84,159 $ 86,248 $ 97,147 $ 97,304

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.

For the three and six months ended June 30, 2024, the Company recognized net realized gains of $ 1.0 million and $ 0.7 million, respectively, related to its investment securities - fair value.

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

Fair Value Measurements

The Company’s assets and liabilities measured at fair value on a recurring basis, excluding the assets and liabilities of CIP discussed in Note 16, as of March 31, 2024 and December 31, 2023 by fair value hierarchy level were as follows:

March 31, 2024

The Company’s assets and liabilities measured at fair value on a recurring basis, excluding the assets and liabilities of CIP discussed in Note 16, as of June 30, 2024 and December 31, 2023 by fair value hierarchy level were as follows:

June 30, 2024

(in thousands) Level 1 Level 2 Level 3 Total

20 unchanged sentences

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.

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

The fair values of U.S.

retail funds and global funds are determined based on their published net asset values and are categorized as Level 1.

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

1 unchanged sentence

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

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.

Contingent consideration represents liabilities associated with contingent payment arrangements made in connection with the Company’s business combinations.

In these contingent payment arrangements, the Company agrees to pay additional transaction consideration to the seller based on future performance.

Contingent consideration is remeasured at fair value each reporting date using a simulation model with the assistance of an independent valuation firm and approved by management and are categorized as Level 3.

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

Three Months Ended

June 30, Six Months Ended

(in thousands) 2024 2023 2024 2023

1 unchanged sentence

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

Increase (reduction) of liability related to re-measurement of fair value ( 3,300 ) ( 6,800 ) ( 3,300 ) ( 6,800 )

Contingent consideration, end of period $ 38,408 $ 54,910 $ 38,408 $ 54,910

The contingent consideration related to the Westchester Capital Management transaction as of June 30, 2024, was $ 7.8 million measured using an options pricing model valuation technique.

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

The NFJ Investment Group contingent consideration liability as of June 30, 2024, was $ 30.6 million measured using an options pricing model valuation technique.

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 %).

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

1 unchanged sentence

Dividends Declared

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.

On May 15, 2024, the Company declared a quarterly cash dividend of $ 1.90 per common share to be paid on August 15, 2024 to shareholders of record at the close of business on July 31, 2024.

Common Stock Repurchases

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.

During the three and six months ended June 30, 2024, the Company repurchased 55,099 and 76,207 common shares, respectively, at a weighted average price of $ 226.83 and $ 229.60 per share, respectively, for a total cost, including fees and expenses, of $ 12.5 million and $ 17.5 million, respectively, under its share repurchase program.

As of June 30, 2024, 528,338 shares remained available for repurchase.

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:

Three Months Ended

Six Months Ended

(in thousands) 2024 2023

2 unchanged sentences

Balance at end of period $ ( 200 ) $ ( 147 )

(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.

(1) Consists of foreign currency translation adjustments, net of tax of $ 38 and $( 77 ) for the six months ended June 30, 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 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.

Equity-based awards, including restricted stock units ("RSUs"), performance stock units ("PSUs"), and unrestricted shares of common stock, have been granted to officers, employees and directors of the Company pursuant to the Company's Omnibus Incentive and Equity Plan (the "Omnibus Plan").

At June 30, 2024, 818,989 shares of common stock remained available for issuance of the 3,825,000 shares that are authorized for issuance under the Omnibus Plan.

Stock-based compensation expense is summarized as follows:

Three Months Ended March 31,

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

(in thousands) 2024 2023 2024 2023

4 unchanged sentences

Shares that are issued upon vesting are newly issued shares from the Omnibus Plan and are not issued from treasury stock.

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

RSU activity, inclusive of PSUs, for the six months ended June 30, 2024 is summarized as follows:

of Shares Weighted Average

3 unchanged sentences

Settled ( 112,498 ) $ 229.57

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.

Outstanding at June 30, 2024 343,277 $ 205.57

For the six months ended June 30, 2024 and 2023, a total of 45,117 and 76,452 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 $ 10.4 million and $ 13.2 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 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.

During the six months ended June 30, 2024 and 2023, the Company granted 26,757 and 44,583 PSUs, respectively, that contain performance-based metrics in addition to a service condition.

Compensation expense for PSUs is generally recognized over a three-year service period based upon the value determined using a combination of (i) the intrinsic value method for awards that contain a performance metric that represents a "performance condition" in accordance with ASC 718, Stock Compensation ("ASC 718") and (ii) the Monte Carlo simulation valuation model for awards that contain a "market condition" performance metric under ASC 718.

1 unchanged sentence

Compensation expense for PSU awards with a performance condition is recorded each period based upon a probability assessment of the expected outcome of the performance metric with a final adjustment upon measurement at the end of the performance period.

As of March 31, 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.

As of June 30, 2024, unamortized stock-based compensation expense for unvested RSUs and PSUs was $ 40.5 million with a weighted-average remaining contractual life of 1.4 years.

Earnings (Loss) Per Share

4 unchanged sentences

The computation of basic and diluted EPS is as follows:

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended

(in thousands, except per share amounts) 2024 2023 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 March 31,

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

(in thousands) 2024 2023 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 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.

federal, state and local taxes at an estimated effective tax rate of 24.4 % and 23.2 % for the six months ended June 30, 2024 and 2023, respectively.

The higher estimated effective tax rate for the six months ended June 30, 2024 was primarily due to a change in 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, 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.

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 $ 5.1 million as of March 31, 2024.

The Company repaid $ 6.4 million outstanding under the Term Loan during the six months ended June 30, 2024 and had $ 252.4 million outstanding under the Term Loan at June 30, 2024.

Commitments and Contingencies

1 unchanged sentence

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.

The Company records a liability when it believes that 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.

1 unchanged sentence

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 or upon certain conditions, such as retirement.

Minority interests held in the affiliate are subject to holder put rights and Company call rights at pre-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 or upon certain conditions, such as

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 three months ended March 31, 2024 included the following amounts:

Redeemable noncontrolling interests for the six months ended June 30, 2024 included the following amounts:

(in thousands) CIP Affiliate Noncontrolling Interests Total

5 unchanged sentences

Net subscriptions (redemptions) and other 12,237 ( 3,936 ) 8,301

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

Balances at June 30, 2024 $ 44,713 $ 84,737 $ 129,450

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

13 unchanged sentences

The Company has no right to the benefits from, and does not bear the risks associated with, these investment products beyond the Company's investments in, and fees generated from, these products.

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

March 31, 2024 December 31, 2023

The following table presents the balances of CIP that, after intercompany eliminations, were reflected on the Condensed Consolidated Balance Sheets as of June 30, 2024 and December 31, 2023:

June 30, 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 March 31, 2024, the Company consolidated seven CLOs.

At June 30, 2024, the Company consolidated seven CLOs.

Investments of CLOs

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.

The CLOs held investments of $ 2.0 billion at June 30, 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 2025 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 $ 2.1 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.

The CLOs held notes payable with a total value, at par, of $ 2.2 billion at June 30, 2024, consisting of senior secured floating rate notes payable with a par value of $ 2.0 billion and subordinated notes with a par value of $ 217.9 million.

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

1 unchanged sentence

The secured notes of the consolidated CLOs have contractual recourse only to the related assets of the CLO and are classified as financial liabilities.

Although these beneficial interests are eliminated upon consolidation, the application of the measurement alternative prescribed by ASU 2014-13, Consolidation (Topic 810) ("ASU 2014-13"), results in the net assets of the consolidated CLOs shown above to be equivalent to the beneficial interests retained by the Company at March 31, 2024, as shown in the table below:

(in thousands)

3 unchanged sentences

The following table represents income and expenses of the consolidated CLOs included on the Company’s Condensed Consolidated Statements of Operations for the period indicated:

Three Months Ended March 31, 2024

Six Months Ended June 30, 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:

Three Months Ended March 31, 2024

Six Months Ended June 30, 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 March 31, 2024 and December 31, 2023 by fair value hierarchy level were as follows:

As of March 31, 2024

The assets and liabilities of CIP measured at fair value on a recurring basis as of June 30, 2024 and December 31, 2023 by fair value hierarchy level were as follows:

As of June 30, 2024

(in thousands) Level 1 Level 2 Level 3 Total

2 unchanged sentences

Equity investments 35,229 97 1,874 37,200

Derivatives 124 — — 124

Total assets measured at fair value $ 198,958 $ 2,034,447 $ 36,983 $ 2,270,388

25 unchanged sentences

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 March 31, 2024 and December 31, 2023 approximated fair value due to the short-term nature of the instruments.

The securities purchased payable at June 30, 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:

Three Months Ended March 31,

Six Months Ended June 30,

(in thousands)

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

At June 30, 2024, the carrying value and maximum risk of loss related to the Company's interest in these VIEs was $ 27.8 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