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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
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☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended September 30, 2022
OR
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☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission File Number: 001-10994
VIRTUS INVESTMENT PARTNERS, INC.
(Exact name of registrant as specified in its charter)
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Delaware | | 26-3962811 |
(State or other jurisdiction of incorporation or organization) | | (I.R.S. Employer Identification No.) |
One Financial Plaza, Hartford, CT 06103
(Address of principal executive offices, including Zip Code)
(800) 248-7971
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
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Title of each class | | Trading Symbol(s) | | Name of each exchange on which registered |
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Common Stock, $0.01 par value | | VRTS | | The NASDAQ Stock Market LLC |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.
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Large accelerated filer | | ☒ | | Accelerated filer | | ☐ |
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Non-accelerated filer | | ☐ | | Smaller reporting company | | ☐ |
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| | | | Emerging growth company | | ☐ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
The number of shares outstanding of the registrant’s common stock was 7,231,973 as of October 28, 2022.
VIRTUS INVESTMENT PARTNERS, INC.
INDEX
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Item 1. | | |
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Item 2. | | |
Item 3. | | |
Item 4. | | |
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Item 1. | | |
Item 1A. | | |
Item 2. | | |
Item 6. | | |
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"We," "us," "our," the "Company," and "Virtus" as used in this Quarterly Report on Form 10-Q refer to Virtus Investment Partners, Inc., a Delaware corporation, and its subsidiaries.
PART I – FINANCIAL INFORMATION
Item 1. Financial Statements
Virtus Investment Partners, Inc.
Condensed Consolidated Balance Sheets
(Unaudited)
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(in thousands, except share data) | September 30, 2022 | | December 31, 2021 |
Assets: | | | |
Cash and cash equivalents | $ | 309,248 | | | $ | 378,921 | |
Investments | 98,245 | | | 108,890 | |
Accounts receivable, net | 104,695 | | | 123,873 | |
Assets of consolidated investment products ("CIP") | | | |
Cash and cash equivalents of CIP | 85,791 | | | 206,620 | |
Cash pledged or on deposit of CIP | 591 | | | 604 | |
Investments of CIP | 1,976,975 | | | 2,140,238 | |
Other assets of CIP | 17,432 | | | 44,210 | |
Furniture, equipment and leasehold improvements, net | 19,237 | | | 12,542 | |
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Intangible assets, net | 467,476 | | | 500,571 | |
Goodwill | 348,836 | | | 338,406 | |
Deferred taxes, net | 24,979 | | | 19,204 | |
Other assets | 92,532 | | | 60,102 | |
Total assets | $ | 3,546,037 | | | $ | 3,934,181 | |
Liabilities and Equity | | | |
Liabilities: | | | |
Accrued compensation and benefits | $ | 145,361 | | | $ | 187,449 | |
Accounts payable and accrued liabilities | 37,758 | | | 48,496 | |
Dividends payable | 15,357 | | | 14,824 | |
Contingent consideration (Note 4) | 133,628 | | | 162,564 | |
Debt | 255,428 | | | 266,346 | |
Other liabilities | 90,698 | | | 60,225 | |
Liabilities of CIP | | | |
Notes payable of CIP | 1,864,943 | | | 2,033,617 | |
Securities purchased payable and other liabilities of CIP | 72,483 | | | 185,068 | |
Total liabilities | 2,615,656 | | | 2,958,589 | |
Commitments and Contingencies (Note 15) | | | |
Redeemable noncontrolling interests | 124,442 | | | 138,965 | |
Equity: | | | |
Equity attributable to Virtus Investment Partners, Inc.: | | | |
Common stock, $0.01 par value, 1,000,000,000 shares authorized; 12,030,346 shares issued and 7,231,973 shares outstanding at September 30, 2022; and 11,906,747 shares issued and 7,506,151 shares outstanding at December 31, 2021 | 120 | | | 119 | |
Additional paid-in capital | 1,281,780 | | | 1,276,424 | |
Retained earnings (accumulated deficit) | 107,324 | | | 60,962 | |
Accumulated other comprehensive income (loss) | (771) | | | 20 | |
Treasury stock, at cost, 4,798,373 and 4,400,596 shares at September 30, 2022 and December 31, 2021, respectively | (589,248) | | | (509,248) | |
Total equity attributable to Virtus Investment Partners, Inc. | 799,205 | | | 828,277 | |
Noncontrolling interests | 6,734 | | | 8,350 | |
Total equity | 805,939 | | | 836,627 | |
Total liabilities and equity | $ | 3,546,037 | | | $ | 3,934,181 | |
The accompanying notes are an integral part of these condensed consolidated financial statements.
Virtus Investment Partners, Inc.
Condensed Consolidated Statements of Operations
(Unaudited)
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| Three Months Ended September 30, | | Nine Months Ended September 30, |
(in thousands, except per share data) | 2022 | | 2021 | | 2022 | | 2021 |
Revenues | | | | | | | |
Investment management fees | $ | 172,850 | | | $ | 201,133 | | | $ | 564,691 | | | $ | 567,912 | |
Distribution and service fees | 15,746 | | | 23,293 | | | 52,912 | | | 67,091 | |
Administration and shareholder service fees | 20,563 | | | 26,479 | | | 66,889 | | | 74,916 | |
Other income and fees | 1,102 | | | 1,159 | | | 3,516 | | | 3,053 | |
Total revenues | 210,261 | | | 252,064 | | | 688,008 | | | 712,972 | |
Operating Expenses | | | | | | | |
Employment expenses | 88,230 | | | 87,345 | | | 283,583 | | | 266,734 | |
Distribution and other asset-based expenses | 26,818 | | | 36,692 | | | 88,247 | | | 105,007 | |
Other operating expenses | 31,096 | | | 22,800 | | | 94,367 | | | 64,326 | |
Operating expenses of consolidated investment products ("CIP") | 538 | | | 639 | | | 1,927 | | | 1,857 | |
Change in fair value of contingent consideration | — | | | — | | | 2,900 | | | — | |
Restructuring expense | 4,015 | | | — | | | 4,015 | | | — | |
Depreciation expense | 938 | | | 915 | | | 2,835 | | | 2,994 | |
Amortization expense | 14,609 | | | 10,391 | | | 43,895 | | | 30,219 | |
Total operating expenses | 166,244 | | | 158,782 | | | 521,769 | | | 471,137 | |
Operating Income (Loss) | 44,017 | | | 93,282 | | | 166,239 | | | 241,835 | |
Other Income (Expense) | | | | | | | |
Realized and unrealized gain (loss) on investments, net | (2,493) | | | (504) | | | (16,018) | | | 2,881 | |
Realized and unrealized gain (loss) of CIP, net | (8,440) | | | (2,801) | | | (43,443) | | | (4,741) | |
Other income (expense), net | (659) | | | 1,001 | | | 199 | | | 3,598 | |
Total other income (expense), net | (11,592) | | | (2,304) | | | (59,262) | | | 1,738 | |
Interest Income (Expense) | | | | | | | |
Interest expense | (3,557) | | | (2,348) | | | (8,661) | | | (6,918) | |
Interest and dividend income | 1,013 | | | 269 | | | 1,870 | | | 571 | |
Interest and dividend income of investments of CIP | 28,644 | | | 22,877 | | | 71,436 | | | 69,315 | |
Interest expense of CIP | (20,356) | | | (13,442) | | | (46,860) | | | (42,342) | |
Total interest income (expense), net | 5,744 | | | 7,356 | | | 17,785 | | | 20,626 | |
Income (Loss) Before Income Taxes | 38,169 | | | 98,334 | | | 124,762 | | | 264,199 | |
Income tax expense (benefit) | 10,754 | | | 25,823 | | | 43,969 | | | 63,377 | |
Net Income (Loss) | 27,415 | | | 72,511 | | | 80,793 | | | 200,822 | |
Noncontrolling interests | 4,265 | | | (13,775) | | | 1,348 | | | (42,531) | |
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Net Income (Loss) Attributable to Virtus Investment Partners, Inc. | $ | 31,680 | | | $ | 58,736 | | | $ | 82,141 | | | $ | 158,291 | |
Earnings (Loss) per Share—Basic | $ | 4.33 | | | $ | 7.64 | | | $ | 11.05 | | | $ | 20.59 | |
Earnings (Loss) per Share—Diluted | $ | 4.25 | | | $ | 7.36 | | | $ | 10.76 | | | $ | 19.72 | |
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Weighted Average Shares Outstanding—Basic | 7,308 | | | 7,691 | | | 7,434 | | | 7,688 | |
Weighted Average Shares Outstanding—Diluted | 7,463 | | | 7,984 | | | 7,636 | | | 8,028 | |
The accompanying notes are an integral part of these condensed consolidated financial statements.
Virtus Investment Partners, Inc.
Condensed Consolidated Statements of Comprehensive Income
(Unaudited)
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| Three Months Ended September 30, | | Nine Months Ended September 30, |
(in thousands) | 2022 | | 2021 | | 2022 | | 2021 |
Net Income (Loss) | $ | 27,415 | | | $ | 72,511 | | | $ | 80,793 | | | $ | 200,822 | |
Other comprehensive income (loss), net of tax: | | | | | | | |
Foreign currency translation adjustment, net of tax of $31 and $6 for the three months ended September 30, 2022 and 2021, respectively, and $280 and $4 for the nine months ended September 30, 2022 and 2021, respectively. | (504) | | | (17) | | | (791) | | | (11) | |
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Other comprehensive income (loss) | (504) | | | (17) | | | (791) | | | (11) | |
Comprehensive income (loss) | 26,911 | | | 72,494 | | | 80,002 | | | 200,811 | |
Comprehensive (income) loss attributable to noncontrolling interests | 4,265 | | | (13,775) | | | 1,348 | | | (42,531) | |
Comprehensive Income (Loss) Attributable to Virtus Investment Partners, Inc. | $ | 31,176 | | | $ | 58,719 | | | $ | 81,350 | | | $ | 158,280 | |
The accompanying notes are an integral part of these condensed consolidated financial statements.
Virtus Investment Partners, Inc.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
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| Nine Months Ended September 30, |
(in thousands) | 2022 | | 2021 |
Cash Flows from Operating Activities: | | | |
Net income (loss) | $ | 80,793 | | | $ | 200,822 | |
Adjustments to reconcile net income to net cash provided by (used in) operating activities: | | | |
Depreciation expense, intangible asset and other amortization | 48,143 | | | 35,217 | |
Stock-based compensation | 19,267 | | | 21,833 | |
Amortization of deferred commissions | 3,653 | | | 2,606 | |
Payments of deferred commissions | (1,789) | | | (4,664) | |
Equity in earnings of equity method investments | (527) | | | (3,701) | |
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Realized and unrealized (gains) losses on investments, net | 16,056 | | | (2,875) | |
Distributions from equity method investments | 2,239 | | | 3,133 | |
Sales (purchases) of investments, net | (8,396) | | | (3,453) | |
Change in fair value of contingent consideration | 2,900 | | | — | |
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Deferred taxes, net | (5,500) | | | (2,672) | |
Right of use asset | 3,222 | | | — | |
Changes in operating assets and liabilities: | | | |
Accounts receivable, net and other assets | 32,940 | | | (41,421) | |
Accrued compensation and benefits, accounts payable, accrued liabilities and other liabilities | (76,639) | | | 23,242 | |
Operating activities of consolidated investment products ("CIP"): | | | |
Realized and unrealized (gains) losses on investments of CIP, net | 41,312 | | | (4,139) | |
Purchases of investments by CIP | (601,749) | | | (917,355) | |
Sales of investments by CIP | 595,451 | | | 1,101,258 | |
Net proceeds (purchases) of short-term investments and securities sold short by CIP | (655) | | | 16,165 | |
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Change in other assets and liabilities of CIP | 4,129 | | | (317) | |
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Net cash provided by (used in) operating activities | 154,850 | | | 423,679 | |
Cash Flows from Investing Activities: | | | |
Capital expenditures and other asset purchases | (5,495) | | | (4,822) | |
Acquisition of businesses, net of cash acquired of $8,443 | (19,944) | | | — | |
Change in cash and cash equivalents of CIP due to consolidation (deconsolidation), net | (308) | | | (11,703) | |
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Net cash provided by (used in) investing activities | (25,747) | | | (16,525) | |
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Cash Flows from Financing Activities: | | | |
Refinancing of credit agreement | — | | | 81,155 | |
Payment of long-term debt | (12,062) | | | (11,826) | |
Payment of deferred financing costs | — | | | (7,039) | |
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Common stock dividends paid | (35,244) | | | (20,030) | |
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Repurchase of common shares | (80,000) | | | (32,499) | |
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Payment of contingent consideration | (33,036) | | | — | |
Taxes paid related to net share settlement of restricted stock units | (16,450) | | | (19,362) | |
Affiliate equity sales (purchases) | (11,089) | | | — | |
Net contributions from (distributions to) noncontrolling interests | (1,091) | | | 552 | |
Financing activities of CIP: | | | |
Payments on borrowings by CIP | (129,996) | | | (144,464) | |
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Net cash provided by (used in) financing activities | (318,968) | | | (153,513) | |
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Effect of exchange rate changes on cash, cash equivalents and restricted cash | (650) | | | — | |
Net increase (decrease) in cash, cash equivalents and restricted cash | (190,515) | | | 253,641 | |
Cash, cash equivalents and restricted cash, beginning of period | 586,145 | | | 339,849 | |
Cash, cash equivalents and restricted cash, end of period | $ | 395,630 | | | $ | 593,490 | |
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Non-Cash Investing Activities: | | | |
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Contingent consideration | $ | 1,200 | | | $ | 137,664 | |
Non-Cash Financing Activities: | | | |
Increase (decrease) to noncontrolling interests due to consolidation (deconsolidation) of CIP, net | $ | (338) | | | $ | (32,007) | |
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Common stock dividends payable | $ | 12,014 | | | $ | 11,478 | |
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(in thousands) | September 30, 2022 | | December 31, 2021 |
Reconciliation of cash, cash equivalents and restricted cash | | | |
Cash and cash equivalents | $ | 309,248 | | | $ | 378,921 | |
Cash of CIP | 85,791 | | | 206,620 | |
Cash pledged or on deposit of CIP | 591 | | | 604 | |
Cash, cash equivalents and restricted cash at end of period | $ | 395,630 | | | $ | 586,145 | |
The accompanying notes are an integral part of these condensed consolidated financial statements.
Virtus Investment Partners, Inc.
Condensed Consolidated Statements of Changes in Stockholders' Equity
(Unaudited)
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| Permanent Equity | | Temporary Equity |
| Common Stock | | | | Additional Paid-in Capital | | Retained Earnings (Accumulated Deficit) | | Accumulated Other Comprehensive Income (Loss) | | Treasury Stock | | Total Attributed To Virtus Investment Partners, Inc. | | Non- controlling Interests | | Total Equity | | Redeemable Non- controlling Interests |
(in thousands, except per share data) | Shares | | Par Value | | | | | | Shares | | Amount | |
Balances at June 30, 2021 | 7,651,606 | | | $ | 119 | | | | | | | $ | 1,280,667 | | | $ | (35,704) | | | $ | 35 | | | 4,254,236 | | | $ | (464,248) | | | $ | 780,869 | | | $ | 8,968 | | | $ | 789,837 | | | $ | 131,525 | |
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Net income (loss) | — | | | — | | | | | | | — | | | 58,736 | | | — | | | — | | | — | | | 58,736 | | | 374 | | | 59,110 | | | 13,401 | |
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Foreign currency translation adjustments | — | | | — | | | | | | | — | | | — | | | (17) | | | — | | | — | | | (17) | | | — | | | (17) | | | — | |
Net subscriptions (redemptions) and other | — | | | — | | | | | | | — | | | — | | | — | | | — | | | — | | | — | | | (529) | | | (529) | | | (13,257) | |
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Cash dividends declared ($1.50 per common share) | — | | | — | | | | | | | (12,015) | | | — | | | — | | | — | | | — | | | (12,015) | | | — | | | (12,015) | | | — | |
Repurchases of common shares | (64,494) | | | — | | | | | | | — | | | — | | | — | | | 64,494 | | | (20,000) | | | (20,000) | | | — | | | (20,000) | | | — | |
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Issuance of common shares related to employee stock transactions | 645 | | | — | | | | | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
Taxes paid on stock-based compensation | — | | | — | | | | | | | (148) | | | — | | | — | | | — | | | — | | | (148) | | | — | | | (148) | | | — | |
Stock-based compensation | — | | | — | | | | | | | 4,872 | | | — | | | — | | | — | | | — | | | 4,872 | | | — | | | 4,872 | | | — | |
Balances at September 30, 2021 | 7,587,757 | | | $ | 119 | | | | | | | $ | 1,273,376 | | | $ | 23,032 | | | $ | 18 | | | 4,318,730 | | | $ | (484,248) | | | $ | 812,297 | | | $ | 8,813 | | | $ | 821,110 | | | $ | 131,669 | |
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 | |
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Net income (loss) | — | | | — | | | | | | | — | | | 31,680 | | | — | | | — | | | — | | | 31,680 | | | 151 | | | 31,831 | | | (4,416) | |
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Foreign currency translation adjustments | — | | | — | | | | | | | — | | | — | | | (504) | | | — | | | — | | | (504) | | | — | | | (504) | | | — | |
Net subscriptions (redemptions) and other | — | | | — | | | | | | | 2,035 | | | — | | | — | | | — | | | — | | | 2,035 | | | (414) | | | 1,621 | | | (10,289) | |
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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) | | | — | |
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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 | |
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| Permanent Equity | | Temporary Equity |
| Common Stock | | | | Additional Paid-in Capital | | Retained Earnings (Accumulated Deficit) | | Accumulated Other Comprehensive Income (Loss) | | Treasury Stock | | Total Attributed To Virtus Investment Partners, Inc. | | Non- controlling Interests | | Total Equity | | Redeemable Non- controlling Interests |
(in thousands, except per share data) | Shares | | Par Value | | | | | | Shares | | Amount | |
Balances at December 31, 2020 | 7,583,466 | | | $ | 118 | | | | | | | $ | 1,298,002 | | | $ | (135,259) | | | $ | 29 | | | 4,207,403 | | | $ | (451,749) | | | $ | 711,141 | | | $ | 9,799 | | | $ | 720,940 | | | $ | 115,513 | |
Net income (loss) | — | | | — | | | | | | | — | | | 158,291 | | | — | | | — | | | — | | | 158,291 | | | 719 | | | 159,010 | | | 41,812 | |
Foreign currency translation adjustments | — | | | — | | | | | | | — | | | — | | | (11) | | | — | | | — | | | (11) | | | — | | | (11) | | | — | |
Net subscriptions (redemptions) and other | — | | | — | | | | | | | — | | | — | | | — | | | — | | | — | | | — | | | (1,705) | | | (1,705) | | | (25,656) | |
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Cash dividends declared ($3.14 per common share) | — | | | — | | | | | | | (25,315) | | | — | | | — | | | — | | | — | | | (25,315) | | | — | | | (25,315) | | | — | |
Repurchases of common shares | (111,327) | | | — | | | | | | | — | | | — | | | — | | | 111,327 | | | (32,499) | | | (32,499) | | | — | | | (32,499) | | | — | |
Issuance of common shares related to employee stock transactions | 115,618 | | | 1 | | | | | | | 65 | | | — | | | — | | | — | | | — | | | 66 | | | — | | | 66 | | | — | |
Taxes paid on stock-based compensation | — | | | — | | | | | | | (19,428) | | | — | | | — | | | — | | | — | | | (19,428) | | | — | | | (19,428) | | | — | |
Stock-based compensation | — | | | — | | | | | | | 20,052 | | | — | | | — | | | — | | | — | | | 20,052 | | | — | | | 20,052 | | | — | |
Balances at September 30, 2021 | 7,587,757 | | | $ | 119 | | | | | | | $ | 1,273,376 | | | $ | 23,032 | | | $ | 18 | | | 4,318,730 | | | $ | (484,248) | | | $ | 812,297 | | | $ | 8,813 | | | $ | 821,110 | | | $ | 131,669 | |
Balances at December 31, 2021 | 7,506,151 | | | $ | 119 | | | | | | | $ | 1,276,424 | | | $ | 60,962 | | | $ | 20 | | | 4,400,596 | | | $ | (509,248) | | | $ | 828,277 | | | $ | 8,350 | | | $ | 836,627 | | | $ | 138,965 | |
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Net income (loss) | — | | | — | | | | | | | — | | | 82,141 | | | — | | | — | | | — | | | 82,141 | | | (184) | | | 81,957 | | | (1,164) | |
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Foreign currency translation adjustments | — | | | — | | | | | | | — | | | — | | | (791) | | | — | | | — | | | (791) | | | — | | | (791) | | | — | |
Net subscriptions (redemptions) and other | — | | | — | | | | | | | 2,035 | | | — | | | — | | | — | | | — | | | 2,035 | | | (1,432) | | | 603 | | | (13,359) | |
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Cash dividends declared ($4.65 per common share) | — | | | — | | | | | | | — | | | (35,779) | | | — | | | — | | | — | | | (35,779) | | | — | | | (35,779) | | | — | |
Repurchases of common shares | (397,777) | | | — | | | | | | | — | | | — | | | — | | | 397,777 | | | (80,000) | | | (80,000) | | | — | | | (80,000) | | | — | |
Issuance of common shares related to employee stock transactions | 123,599 | | | 1 | | | | | | | (1) | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
Taxes paid on stock-based compensation | — | | | — | | | | | | | (16,450) | | | — | | | — | | | — | | | — | | | (16,450) | | | | | (16,450) | | | — | |
Stock-based compensation | — | | | — | | | | | | | 19,772 | | | — | | | — | | | — | | | — | | | 19,772 | | | — | | | 19,772 | | | — | |
Balances at September 30, 2022 | 7,231,973 | | | $ | 120 | | | | | | | $ | 1,281,780 | | | $ | 107,324 | | | $ | (771) | | | 4,798,373 | | | $ | (589,248) | | | $ | 799,205 | | | $ | 6,734 | | | $ | 805,939 | | | $ | 124,442 | |
The accompanying notes are an integral part of these condensed consolidated financial statements.
Virtus Investment Partners, Inc.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
1. Organization and Business
Virtus Investment Partners, Inc. (the "Company," "we," "us," "our" or "Virtus"), a Delaware corporation, operates in the investment management industry through its subsidiaries.
The Company provides investment management and related services to individuals and institutions. 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 ("UCITS") and Qualifying Investor Funds ("QIFs"), collectively, "global funds" and collectively with mutual funds, exchange traded funds ("ETFs"), and variable insurance funds, the "open-end funds"; closed-end funds (collectively, with open-end funds, the "funds"); and retail separate accounts. Institutional investment management services are offered through separate accounts and pooled or commingled structures to a variety of institutional clients. The Company also provides subadvisory services to other investment advisers and serves as the collateral manager for structured products.
2. Basis of Presentation and Significant Accounting Policies
Basis of Presentation
The unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP") for interim financial information. Accordingly, they do not include all of the information and notes required by GAAP for complete financial statements. In the opinion of management, these financial statements contain all adjustments, consisting only of normal recurring adjustments, necessary for a fair statement of the Company’s financial condition and results of operations. Operating results for the nine months ended September 30, 2022 are not necessarily indicative of the results that may be expected for the year ending December 31, 2022.
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, 2021 (the "2021 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 2021 Annual Report on Form 10-K.
3. Revenues
The Company's revenues are recognized when a performance obligation is satisfied, which occurs when control of the services is transferred to customers. Investment management fees, distribution and service fees, and administration and shareholder service fees are generally calculated as a percentage of average net assets of the investment portfolios managed. The net asset values from which these fees are calculated are variable in nature and subject to factors outside of the Company's control, such as additional investments, withdrawals and market performance. Because of this, these fees are considered constrained until the end of the contractual measurement period (monthly or quarterly), which is when asset values are generally determinable.
Investment Management Fees by Source
The following table summarizes investment management fees by source:
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| Three Months Ended September 30, | | Nine Months Ended September 30, |
(in thousands) | 2022 | | 2021 | | 2022 | | 2021 |
Investment management fees | | | | | | | |
Open-end funds | $ | 80,234 | | | $ | 99,711 | | | $ | 262,486 | | | $ | 286,104 | |
Closed-end funds | 15,773 | | | 17,116 | | | 48,887 | | | 46,451 | |
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Retail separate accounts | 39,154 | | | 46,625 | | | 134,069 | | | 126,612 | |
Institutional accounts | 37,689 | | | 37,681 | | | 119,249 | | | 108,745 | |
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Total investment management fees | $ | 172,850 | | | $ | 201,133 | | | $ | |