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Item 2. Management’s Discussion and Analysis

2025-05-09 compared with 2024-11-08 · 85 added, 122 removed, 270 unchanged (43% of the section changed)

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Cautionary Statement Regarding Forward Looking Statements

This Quarterly Report on Form 10-Q contains statements that are, or may be considered to be, forward-looking statements within the meaning of The Private Securities Litigation Reform Act of 1995, as amended, Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act").

This Quarterly Report on Form 10-Q contains statements that are, or may be considered to be, forward-looking statements within the meaning of federal securities laws, including Section 27A of the securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act");

and the Private Securities Litigation Reform Act of 1995, as amended.

All statements that are not historical facts, including statements about our beliefs or expectations, are "forward-looking statements." These statements may be identified by such forward-looking terminology as "expect," "estimate," "intent," "plan," "intend," "believe," "anticipate," "may," "will," "should," "could," "continue," "project," "opportunity," "predict," "would," "potential," "future," "forecast," "guarantee," "assume," "likely," "target" or similar statements or variations of such terms.

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Our business and our forward-looking statements involve substantial known and unknown risks and uncertainties, including those discussed under "Risk Factors" and "Management’s Discussion and Analysis of Financial Condition and Results of Operations" in our 2024 Annual Report on Form 10-K and this Quarterly Report on Form 10-Q, resulting from:

(i) any reduction in our assets under management;

(ii) inability to achieve the expected benefits of strategic transactions;

(i) reduction in our assets under management;

(ii) financial or business risks from strategic transactions;

(iii) withdrawal, renegotiation or termination of investment management agreements;

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(v) inability to satisfy financial debt covenants and required payments;

(vi) inability to attract and retain key personnel;

(vii) challenges from competition;

(viii) adverse developments related to unaffiliated subadvisers;

(ix) negative changes in key distribution relationships;

(x) interruptions, breaches, or failures of technology systems;

(xi) loss on our investments;

(xii) lack of sufficient capital on satisfactory terms;

(vi) lack of sufficient capital on satisfactory terms;

(vii) inability to attract and retain key personnel;

(viii) challenges from competition;

(ix) adverse developments related to unaffiliated subadvisers;

(x) negative changes in key distribution relationships;

(xi) interruptions, breaches, or failures of technology systems;

(xii) loss on our investments;

(xiii) adverse regulatory and legal developments;

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(xv) adverse civil litigation, government investigations, or proceedings;

(xvi) unfavorable changes in tax laws or limitations;

(xvii) inability to make common stock dividend payments;

(xviii) impediments from certain corporate governance provisions;

(xix) losses or costs not covered by insurance;

(xx) impairment of goodwill or other intangible assets;

(xvi) unfavorable changes in tax laws or unanticipated tax obligations;

(xvii) impediments from certain corporate governance provisions;

(xviii) losses or costs not covered by insurance;

(xix) impairment of goodwill or other intangible assets;

and other risks and uncertainties.

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

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

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

By offering a broad array of products, we believe we can appeal to a greater number of investors and have offerings across market cycles and through changes in investor preferences.

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

Our institutional products are offered through institutional separate accounts and commingled accounts, including subadvisory services to other investment advisers and Company sponsored structured products to a variety of institutional clients.

Our institutional products are offered to a variety of institutional clients through institutional separate accounts and commingled accounts, including subadvisory services to other investment advisers and Company sponsored structured products.

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

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

Our institutional distribution resources include investment manager-specific sales teams primarily focused on the U.S.

market, supported by shared consultant relations and U.S.

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In many of these firms, we have a number of products that are on preferred "recommended" lists and on fee-based advisory programs.

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

Our wealth management business is marketed directly to individual clients by financial advisory teams at our investment managers.

Financial Highlights

▪ Total revenues were $227.0 million in the third quarter of 2024, an increase of $7.8 million, or 3.5%, compared to total revenues of $219.3 million in the third quarter of 2023.

▪ Operating income was $55.3 million in the third quarter of 2024, an increase of $10.4 million, or 23.1%, compared to $44.9 million in the third quarter of 2023.

▪ Net income per diluted share was $5.71 in the third quarter of 2024, an increase of $1.52, or 36.3%, compared to net income per diluted share of $4.19 in the third quarter of 2023.

▪ Total revenues were $217.9 million in the first quarter of 2025, a decrease of $4.1 million, or 1.9%, compared to total revenues of $222.0 million in the first quarter of 2024.

▪ Operating income was $36.6 million in the first quarter of 2025, an increase of $4.3 million, or 13.3%, compared to $32.3 million in the first quarter of 2024.

▪ Net income per diluted share was $4.05 in the first quarter of 2025, a decrease of $0.05, or 1.2%, compared to net income per diluted share of $4.10 in the first quarter of 2024.

Assets Under Management

Total sales were $6.6 billion in the third quarter of 2024, an increase of $0.8 billion, or 13.5%, from $5.8 billion in the third quarter of 2023.

Net flows were $(1.7) billion in the third quarter of 2024 compared to net flows of $(1.5) billion in the third quarter of 2023.

At September 30, 2024, total assets under management were $183.7 billion, representing an increase of $21.2 billion, or 13.0%, from September 30, 2023, and an increase of $11.5 billion, or 6.7%, from December 31, 2023.

The increase in total assets under management from September 30, 2023 included $33.0 billion from positive market performance partially offset by $9.4 billion of net outflows.

The increase in total assets under management from December 31, 2023 included $18.7 billion from positive market performance partially offset by $5.6 billion of net outflows.

Total sales were $6.2 billion in the first quarter of 2025, a decrease of $1.3 billion, or 17.7%, from $7.6 billion in the first quarter of 2024.

Net flows were $(3.0) billion in the first quarter of 2025 compared to net flows of $(1.2) billion in the first quarter of 2024.

At March 31, 2025, total assets under management were $167.5 billion, representing a decrease of $11.8 billion, or 6.6%, from March 31, 2024, and a decrease of $7.5 billion, or 4.3%, from December 31, 2024.

The decrease in total assets under management from March 31, 2024 included $12.2 billion from net outflows partially offset by $2.9 billion from positive market performance.

The decrease in total assets under management from December 31, 2024 included $4.1 billion from negative market performance and $3.0 billion from net outflows.

Assets Under Management by Product

The following table summarizes our assets under management by product:

As of September 30, Change

As of March 31, Change

(in millions) 2025 2024 $ %

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(1) Represents assets under management of U.S.

retail funds, global funds, ETFs and variable insurance funds.

retail funds, global funds and ETFs.

(2) Includes investment models provided to managed account sponsors.

(3) Represents assets under management of institutional separate and commingled accounts including structured products.

(4) Averages are calculated as follows:

– Funds - average daily or weekly balances

– Retail Separate Accounts - prior-quarter ending balances

– Institutional Accounts - average of month-end balances

(4) Calculated according to revenue earning basis that includes average daily, weekly, monthly beginning balance, monthly ending

balance, or quarter beginning and ending balance, as well as quarter beginning or ending spot balance.

Asset Flows by Product

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Three Months Ended

September 30, Nine Months Ended

September 30,

(in millions) 2025 2024

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Beginning balance $ 10,225 $ 10,026

Inflows — — — 24

Outflows (40) —

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(1) Represents assets under management of U.S.

retail funds, global funds, ETFs and variable insurance funds.

(2) Represents open-end and closed-end fund distributions net of reinvestments, the net change in assets from cash management strategies, and the impact of non-sales related activities such as asset acquisitions/(dispositions), seed capital investments/(withdrawals), current income or capital returned by structured products and the use of leverage.

retail funds, global funds and ETFs.

(withdrawals), current income or capital returned by structured products and the use of leverage.

(3) Includes investment models provided to managed account sponsors.

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The following table summarizes assets under management by asset class:

As of September 30, Change % of Total

As of March 31, Change % of Total

(in millions) 2025 2024 $ % 2025 2024

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

Three Months Ended September 30,

Average Fee Earned

(expressed in basis points)

Average Assets Under

(in millions) (4)

2024 2023 2024 2023

Open-End Funds (1) 49.7 51.1 $ 56,731 $ 56,511

Closed-End Funds 58.5 58.2 10,159 10,001

Retail Separate Accounts (2) 43.7 43.3 45,672 38,992

Institutional Accounts (3) 31.0 30.3 63,428 62,368

All Products 41.9 42.0 $ 175,990 $ 167,872

Nine Months Ended September 30,

Three Months Ended March 31,

Average Fee Earned

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(1) Represents assets under management of U.S.

retail funds, global funds, ETFs and variable insurance funds.

retail funds, global funds and ETFs.

(2) Includes investment models provided to managed account sponsors.

(3) Represents assets under management of institutional separate and commingled accounts including structured products.

(4) Averages are calculated as follows:

– Funds - average daily or weekly balances

– Retail Separate Accounts - prior-quarter ending balances

– Institutional Accounts - average of month-end balances

(4) Calculated according to revenue earning basis that includes average daily, weekly, monthly beginning balance, monthly ending balance, or quarter beginning and ending balance, as well as quarter beginning or ending spot balance.

Average fees earned represent investment management fees, net of revenue-related adjustments, and excluding the impact of consolidated investment products ("CIP") divided by average net assets.

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Fund fees are calculated based on average daily or weekly net assets.

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

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

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

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

The average fee rate earned on all products was flat for the three and nine months ended September 30, 2024 compared to the same periods in the prior year.

The average fee rate earned on all products decreased slightly for the three months ended March 31, 2025 compared to the same period in the prior year.

Results of Operations

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Three Months Ended

September 30, Change Nine Months Ended

September 30, Change

March 31, Change

(in thousands) 2025 2024 $ %

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Earnings (loss) per share-diluted $ 4.05 $ 4.10 $ (0.05) (1.2) %

In the third quarter of 2024, total revenues increased 3.5% to $227.0 million from $219.3 million in the third quarter of 2023, primarily as a result of increased average assets under management during the current year period compared to the prior year period.

Operating income increased $10.4 million to $55.3 million in the third quarter of 2024 compared to $44.9 million in the third quarter of 2023, due primarily to the aforementioned increased revenue, as well as decreased operating expenses.

In the first quarter of 2025, total revenues decreased 1.9% to $217.9 million from $222.0 million in the first quarter of 2024, primarily as a result of decreased average fee rates during the current year period compared to the prior year period.

Operating income increased $4.3 million to $36.6 million in the first quarter of 2025 compared to $32.3 million in the first quarter of 2024, due primarily to decreased employment expenses and amortization expense.

Revenues by source were as follows:

Three Months Ended

September 30, Change Nine Months Ended

September 30, Change

March 31, Change

(in thousands) 2025 2024 $ %

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

Investment management fees increased by $9.0 million, or 4.9%, and $44.5 million, or 8.4%, for the three and nine months ended September 30, 2024, respectively, compared to the same periods in the prior year primarily due to the increase in average assets under management.

Investment management fees decreased by $2.3 million, or 1.2%, for the three months ended March 31, 2025, compared to the same period in the prior year primarily due to decreased fee rates during the current year period compared to the prior year period.

Distribution and Service Fees

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

Distribution and service fees decreased by $0.8 million, or 5.3%, and $1.6 million, or 3.8%, for the three and nine months ended September 30, 2024, respectively, compared to the same periods in the prior year primarily due to lower sales and average assets under management for open-end funds in share classes that have sales- and asset-based distribution and service fees.

Distribution and service fees decreased by $1.3 million, or 9.1%, for the three months ended March 31, 2025 compared to the same period in the prior year primarily due to lower sales and average assets under management for open-end funds in share classes that have sales- and asset-based distribution and service fees.

Administration and Shareholder Service Fees

Administration and shareholder service fees represent fees earned for fund administration and shareholder services from our U.S.

retail funds, ETFs and certain closed-end funds.

Fund administration and shareholder service fees decreased by $0.5 million, or 2.7% for the three months ended September 30, 2024 and remained consistent during the nine months ended September 30, 2024, compared to the same periods in the prior year.

The decrease during the three-month period is due to the decrease in average assets under management of our U.S.

retail funds, ETFs and closed-end funds.

Fund administration and shareholder service fees decreased by $0.7 million, or 3.6% for the three months ended March 31, 2025, compared to the same period in the prior year due to the decrease in average assets under management of our U.S.

retail funds.

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Other income and fees primarily represent fees related to other fee-earning assets and marketing fees earned on certain ETFs.

Other income and fees remained consistent during the three and nine months ended September 30, 2024 compared to the same periods in the prior year.

Other income and fees remained consistent during the three months ended March 31, 2025, compared to the same period in the prior year.

Operating Expenses

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Three Months Ended

September 30, Change Nine Months Ended

September 30, Change

March 31, Change

(in thousands) 2025 2024 $ %

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Other operating expenses of CIP 1,000 690 310 44.9 %

Change in fair value of contingent consideration (4,000) — (4,000) N/M (7,300) (6,800) (500) 7.4 %

Restructuring expense — 797 (797) (100.0) %

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Total operating expenses $ 181,337 $ 189,736 $ (8,399) (4.4) %

N/M = Not Meaningful

Employment Expenses

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

Employment expenses of $105.6 million increased by $4.0 million, or 3.9%, for the three months ended September 30, 2024 primarily due to an increase in sales- and profit-based compensation.

Employment expenses increased by $21.5 million, or 7.0%, for the nine months ended September 30, 2024, compared to the same period in the prior year primarily due to an increase in profit- and sales-based compensation and the addition of AlphaSimplex.

Employment expenses of $109.1 million decreased by $6.1 million, or 5.3%, for the three months ended March 31, 2025 primarily due to a decrease in profit- and sales-based compensation.

Distribution and Other Asset-Based Expenses

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These payments are primarily based on assets under management.

Distribution and other asset-based expenses remained consistent for the three months ended September 30, 2024 and decreased by $1.1 million, or 1.5%, for the nine months ended September 30, 2024 compared to the same periods in the prior year.

The decrease during the nine-month period was primarily due to decreases in assets under management in share classes that have asset-based distribution and other asset-based expenses.

Distribution and other asset-based expenses decreased $1.5 million, or 6.0%, for the three months ended March 31, 2025, primarily due to decreases in assets under management in share classes that have asset-based distribution and other asset-based expenses.

Other Operating Expenses

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

Other operating expenses remained consistent during the three and nine months ended September 30, 2024 compared to the same periods in the prior year.

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

Other operating expenses increased $1.7 million, or 5.4%, for the three months ended March 31, 2025 compared to the same period in the prior year primarily due to increased rent for lease renewals and costs associated with lease terminations.

Other Operating Expenses of CIP

Other operating expenses of CIP remained consistent for the three months ended September 30, 2024 and increased by $2.5 million, or 152.0%, for the nine months ended September 30, 2024, compared to the same periods in the prior year.

The increase during the nine-month period was primarily due to the refinancing of two CLOs in the current year to date period.

Change in Fair Value of Contingent Consideration

Contingent consideration related to the Company's acquisitions are fair valued on each reporting date incorporating changes in various estimates, including underlying performance estimates, discount rates and the amount of time until the conditions of the contingent payments are achieved.

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

The $4.0 million and $0.5 million changes in fair value of contingent consideration for the three and nine months ended September 30, 2024, respectively, compared to the same periods in the prior year were primarily attributable to changes in underlying performance estimates.

Other operating expenses of CIP increased by $0.3 million, or 44.9% for the three months ended March 31, 2025, compared to the same period in the prior year primarily due to the launch of new funds in the fourth quarter of 2024 and first quarter of 2025.

Depreciation Expense

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

Depreciation expense increased $0.8 million, or 54.9%, and $2.5 million, or 60.3%, for the three and nine months ended September 30, 2024, respectively, compared to the same periods in the prior year.

The increase during both periods was primarily due to the acceleration of depreciation on leasehold improvements associated with a terminated lease in the current year periods, software and equipment purchases and depreciation expense associated with new office space.

Depreciation expense increased $0.3 million, or 15.6%, for the three months ended March 31, 2025, compared

to the same period in the prior year primarily due to software and equipment purchases and the acceleration of depreciation on leasehold improvements associated with a terminated lease in the prior year.

Amortization Expense

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

Amortization expense decreased $2.5 million, or 16.2%, for the three months ended September 30, 2024, compared to the same period in the prior year, primarily due to intangible assets becoming fully amortized during the current year period.

Amortization expense decreased by $2.2 million, or 4.7%, for the nine months ended September 30, 2024, compared to the same period in the prior year, primarily due to intangible assets becoming fully amortized during the current year period partially offset by the addition of AlphaSimplex intangible assets in the second quarter of the prior year.

Amortization expense decreased $2.4 million, or 15.6%, for the three months ended March 31, 2025, compared to the same period in the prior year, primarily due to intangible assets becoming fully amortized.

Other Income (Expense)

1 unchanged sentence

Three Months Ended

September 30, Change Nine Months Ended

September 30, Change

March 31, Change

(in thousands) 2025 2024 $ %

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Realized and unrealized gain (loss) on investments, net

Realized and unrealized gain (loss) on investments, net changed during the three and nine months ended September 30, 2024 by $6.5 million and $3.9 million, respectively, compared to the same periods in the prior year.

Realized and unrealized gain (loss) on investments, net changed during the three months ended March 31, 2025 by $(4.4) million, compared to the same period in the prior year.

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

Realized and unrealized gain (loss) of CIP, net

Realized and unrealized gain (loss) of CIP, net changed by $(4.1) million and $(13.7) million for the three and nine months ended September 30, 2024, respectively, compared to the same periods in the prior year.

The change for the three months ended September 30, 2024 consisted primarily of changes in net unrealized and realized losses of $51.8 million, due to changes in market values of leveraged loans, partially offset by unrealized gains of $47.7 million related to the value of the notes payable.

The change for the nine months ended September 30, 2024 consisted primarily of changes in net unrealized and realized losses of $46.1 million, due to changes in market values of leveraged loans partially offset by unrealized gains of $32.4 million related to the value of the notes payable.

Realized and unrealized gain (loss) of CIP, net changed by $(9.2) million for the three months ended March 31, 2025, compared to the same period in the prior year.

The change for the three months ended March 31, 2025 consisted primarily of changes in net unrealized and realized losses of $39.3 million, due to changes in market values of leveraged loans, partially offset by unrealized gains of $30.1 million related to the value of the notes payable.

Other income (expense), net

Other income (expense), net changed by $0.4 million and $2.8 million for the three and nine months ended September 30, 2024, respectively, compared to the same periods in the prior year primarily due to changes in the gains and losses on our equity method investments.

Other income (expense), net changed by $0.4 million for the three months ended March 31, 2025, compared to the same period in the prior year primarily due to changes in the gains and losses on our equity method investments.

Interest Income (Expense)

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Three Months Ended

September 30, Change Nine Months Ended

September 30, Change

March 31, Change

(in thousands) 2025 2024 $ %

6 unchanged sentences

Interest Expense

Interest expense decreased $0.4 million, or 6.7%, and $0.3 million, or 2.0%, for the three and nine months ended September 30, 2024, respectively, primarily due to lower average debt outstanding during the current year periods.

Interest expense decreased $1.1 million, or 19.7%, for the three months ended March 31, 2025, primarily due to lower average debt outstanding and lower average interest rates during the current year period.

Interest and Dividend Income

Interest and dividend income remained consistent during the three and nine months ended September 30, 2024 compared to the same periods in the prior year.

Interest and dividend income is earned on cash equivalents and our marketable securities.

Interest and dividend income decreased $0.5 million, or 13.1% during the three months ended March 31, 2025 compared to the same period in the prior year primarily due to lower average interest rates and average investments in the current year period.

Interest and Dividend Income of Investments of CIP

Interest and dividend income of investments of CIP increased $0.8 million, or 1.7%, and $9.6 million, or 6.7% for the three and nine months ended September 30, 2024, respectively, compared to the same periods in the prior year.

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

Interest and dividend income of investments of CIP decreased $3.6 million, or 7.0%, for the three months ended March 31, 2025, compared to the same period in the prior year primarily due to lower average interest rates in the current year period.

Interest Expense of CIP

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

Interest expense of CIP remained consistent for the three months ended September 30, 2024 compared to the same period in the prior year and increased by $7.9 million, or 7.0% for the nine months ended September 30, 2024 compared to the same period in the prior year.

The increase for the current year to date period is primarily attributable to the addition of a CLO in the third quarter of 2023.

Interest expense of CIP decreased by $5.5 million, or 13.6% for the three months ended March 31, 2025 compared to the same period in the prior year, primarily due to lower average interest rates in the current year period.

Income Tax Expense (Benefit)

The provision for income taxes reflected U.S.

federal, state and local taxes at an estimated effective tax rate of 24.4% and 23.6% for the nine months ended September 30, 2024 and 2023, respectively.

The higher estimated effective tax rate for the nine months ended September 30, 2024 was primarily due to a change in excess tax benefits associated with stock-based compensation.

federal, state and local taxes at an estimated effective tax rate of 30.6% and 18.9% for the three months ended March 31, 2025 and 2024, respectively.

The higher estimated effective tax rate for the three months ended March 31, 2025 was primarily due to a change in valuation allowances in the current year related to the tax effects of realized and unrealized losses on Company investments compared to realized and unrealized gains in the prior year.

Liquidity and Capital Resources

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

September 30,

2025 December 31, 2024 Change

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Total equity 896,248 901,636 (5,388) (0.6) %

Nine Months Ended

September 30, Change

Three Months Ended

March 31, Change

(in thousands, Provided by (Used in);

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Financing activities (174,461) (56,146) (118,315) 210.7 %

At September 30, 2024, we had $195.5 million of cash and cash equivalents and $164.7 million of investments, which included $127.9 million of investment securities, compared to $239.6 million of cash and cash equivalents and $132.7 million of investments, which included $97.3 million of investment securities, at December 31, 2023.

At March 31, 2025, we had $135.4 million of cash and cash equivalents and $119.9 million of investments, which included $81.5 million of investment securities, compared to $265.9 million of cash and cash equivalents and $119.2 million of investments, which included $83.8 million of investment securities, at December 31, 2024.

Uses of Capital

Our operating expenses consist of employee compensation and related benefit costs and other operating expenses, which primarily consist of investment research and data costs, software application and development expenses, professional fees, distribution and occupancy costs, as well as interest on our indebtedness and income taxes.

Our operating expenses consist of employee compensation and related benefit costs and other operating expenses, which primarily consist of costs related to distribution, investment research and data, occupancy, software application and development and professional fees, as well as interest on our indebtedness and income taxes.

Annual incentive compensation, our largest annual operating cash expenditure, is paid in the first quarter of the year.

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(vii) integration costs, including restructuring and severance, related to acquisitions, if any;

and (viii) purchases of affiliate equity interests.

and (viii) purchases of our investment management subsidiary equity interests.

Capital and Reserve Requirements

Certain of our subsidiaries are registered with the SEC, Central Bank of Ireland or other regulators that subject them to certain rules regarding minimum net capital.

Certain of our subsidiaries are registered with the SEC, Central Bank of Ireland, Financial Conduct Authority or other regulators that subject them to certain rules regarding minimum net capital.

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

At September 30, 2024, these subsidiaries were in compliance with all minimum net capital requirements.

At March 31, 2025, these subsidiaries were in compliance with all minimum net capital requirements.

Balance Sheet

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Operating Cash Flow

Net cash provided by operating activities of $104.6 million for the nine months ended September 30, 2024 decreased by $125.3 million from net cash provided by operating activities of $229.8 million for the same period in the prior year primarily due to a decrease of $139.4 million in net sales of investments by CIP in the current year period.

Net cash used in operating activities of $3.8 million for the three months ended March 31, 2025 decreased by $30.7 million from net cash used in operating activities of $34.5 million for the same period in the prior year primarily due to an increase of $27.9 million in net sales of investments by CIP in the current year period.

Investing Cash Flow

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

Net cash used in investing activities of $4.8 million for the nine months ended September 30, 2024 decreased by $122.5 million from net cash used in investing activities of $127.3 million for the same period in the prior year primarily due to the AlphaSimplex acquisition in the prior year.

Net cash used in investing activities of $3.0 million for the three months ended March 31, 2025 increased by $0.5 million from net cash used in investing activities of $2.5 million for the same period in the prior year primarily due to an increase in capital expenditures in the current year.

Financing Cash Flow

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

Net cash used in financing activities of $129.5 million for the nine months ended September 30, 2024 decreased by $156.3 million from net cash used of $285.8 million for the same period in the prior year primarily due to a $187.7 million increase in net borrowings of CIP attributable to the refinancing of two CLOs in the current period partially offset by the prior year period $50.0 million borrowing on the credit facility as part of the AlphaSimplex acquisition.

Net cash used in financing activities of $174.5 million for the three months ended March 31, 2025 increased by $118.3 million from net cash used of $56.1 million for the same period in the prior year primarily due to an increase of $105.8 million in payments on borrowings by CIP during the current year period and an increase of $15.0 million in repurchases of our common shares during the current year period.

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 $17.1 million outstanding under the Term Loan during the nine months ended September 30, 2024 and had $241.8 million outstanding under the Term Loan at September 30, 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 $4.3 million as of September 30, 2024.

The Company repaid $0.7 million outstanding under the Term Loan during the three months ended March 31, 2025 and had $235.4 million outstanding under the Term Loan at March 31, 2025.

In accordance with ASC 835, Interest , the amounts outstanding under the Company's Term Loan are presented on the Condensed Consolidated Balance Sheets net of related debt issuance costs, which were $3.7 million as of March 31, 2025.

Critical Accounting Policies and Estimates

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A complete description of our significant accounting policies is included in our 2024 Annual Report on Form 10-K.

There were no material changes in our critical accounting policies and estimates in the three months ended September 30, 2024.

There were no material changes in our critical accounting policies and estimates in the three months ended March 31, 2025.

Recently Issued Accounting Pronouncements

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

During the three and nine months ended September 30, 2024, there were no material changes to the information contained in Part II, Item 7A of the Company's 2023 Annual Report on Form 10-K.

During the three months ended March 31, 2025, there were no material changes to the information contained in Part II, Item 7A of the Company's 2024 Annual Report on Form 10-K.

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis