Virtus Investment Partners VRTS Form 10-Q filing Q2 FY2026

"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

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

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

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

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

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 institutions and individuals. The Company's investment strategies are offered to institutional clients through institutional separate and commingled accounts, including subadvisory services to other investment advisers as well as collateral management of structured products. The Company’s investment management services are provided to individuals through products consisting of: mutual funds registered pursuant to the Investment Company Act of 1940, as amended that include U.S. retail funds, exchange-traded funds ("ETFs"), Undertaking for Collective Investment in Transferable Securities and Qualifying Investor Funds ("global funds" and collectively with U.S. retail funds and ETFs the "open-end funds"); closed-end funds (collectively with open-end funds, the "funds"); retail separate accounts sold through intermediaries and wealth advisory services provided to high net worth clients through our wealth management business.

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 six months ended June 30, 2026 are not necessarily indicative of the results that may be expected for the year ending December 31, 2026.

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, 2025 (the "2025 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 2025 Annual Report on Form 10-K.

Certain prior period balances on the Condensed Consolidated Balance Sheets have been reclassified to conform to the current period presentation. These changes, which had no effect on net income, total comprehensive income, total assets, or total liabilities and equity as previously reported, are as follows:

• With the acquisition of 56% of the equity of Keystone National Group, LLC ("Keystone") on March 1, 2026, the Company has separately reported its investment manager noncontrolling interests liability on its Condensed Consolidated Balance Sheets. Other investment manager noncontrolling interests liabilities classified within accrued compensation and benefits in prior periods have been reclassified to conform to the current period presentation.

Recent Accounting Pronouncements

New Accounting Standards Not Yet Implemented

In November 2024, the FASB issued ASU 2024-03, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40). The standard requires enhanced disclosures of certain expense captions presented on the face of the Consolidated Income Statement. In January 2025, the FASB issued ASU 2025-01, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40) - Clarifying the Effective Date which clarifies that the standard is effective for fiscal years beginning after December 15, 2026 and interim periods within fiscal years beginning after December 15, 2027. Early adoption is permitted with amendments to be applied either prospectively or retrospectively to any or all prior periods presented in the financial statements. The Company is in the process of evaluating the impact of adopting this standard and, at this time, does not anticipate it will have a material impact on its condensed consolidated financial statements.

In September 2025, the FASB issued ASU 2025-06, Intangibles - Goodwill and Other - Internal Use Software (Subtopic 350-40). The standard amends certain aspects of the accounting for internal-use software costs by requiring an entity to capitalize software costs when (i) management has authorized and committed to funding the software project and (ii) it is probable that the project will be completed and the software will be used to perform the function intended. The standard is

effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2027. Early adoption is permitted using a prospective, modified or retrospective transition approach. 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 condensed consolidated financial statements.

3. Revenues

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. 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. Incentive fees are recognized on certain management contracts when performance hurdles or other specified criteria are achieved upon completion of each contractually determined measurement period and are not subject to clawback.

Investment Management Fees by Source

The following table summarizes investment management fees by source:

4. Acquisitions

On March 1, 2026, the Company completed the acquisition of 56% of the equity of Keystone (the "Acquisition"), an investment manager specializing in asset-centric private credit. The Acquisition expands the Company's offerings into private markets with the addition of a differentiated asset-backed lending capability. The total purchase price of the Acquisition was $308.2 million, comprising $198.8 million paid in cash and $109.4 million in contingent consideration recorded at fair value. The initial contingent consideration consists of $88.1 million in deferred cash consideration at fair value, which represents payments of $65.0 million and $30.0 million to be paid on the first and second anniversary of the acquisition, and a fair value estimate of $21.3 million in contingent consideration related to potential earn-out payments of a maximum of $75.0 million that are based on pre-established performance metrics related to revenue retention and revenue growth rates.

The Company accounted for the Acquisition in accordance with ASC 805, Business Combinations. Accordingly, the purchase price was allocated to the assets acquired, liabilities assumed and noncontrolling interests based upon their estimated fair values at the date of the Acquisition, as well as goodwill and definite-lived intangible assets of $243.7 million and $307.0 million, respectively. The final purchase price allocation will be determined when the Company has completed the detailed valuations and necessary calculations and could differ materially from the preliminary purchase price allocation and may include changes to various balances, including fixed assets, intangible assets and goodwill. The finalization of the purchase price allocation will not extend beyond the one-year measurement period provided under ASC 805.

The following table summarizes the initial estimate of amounts of identified acquired assets, liabilities assumed and noncontrolling interests as of the acquisition date:

Identifiable Intangible Assets Acquired

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

The fair value of investment management agreements was estimated using a multi-period excess earnings method and the fair value of the trade name was estimated using a royalty savings method.

Redeemable Noncontrolling Interests and Investment Manager Noncontrolling Interests Liability

Represents the noncontrolling interests of Keystone equity units subject to holder put rights and Company call rights and conditional and unconditional redemption provisions depending on unit class. Noncontrolling interests with conditional redemption provisions are classified as redeemable noncontrolling interests and noncontrolling interests with unconditional redemption provisions are classified as a liability. The fair value of these noncontrolling interests were estimated by applying the income and market approach valuation methodologies. Significant assumptions and inputs include discount rate (10%-11%) and future revenue and earnings assumptions. See Note 14 for further discussion.

Acquired Business

Revenues and earnings of Keystone subsequent to the closing date of the Acquisition of March 1, 2026 for the three and four months ended June 30, 2026 were as follows:

(1) Includes $7.3 million and $9.8 million of amortization expense in the three and four month periods, respectively, related to the identifiable intangible assets acquired.

The following unaudited pro forma condensed consolidated results of operations are provided for illustrative purposes only and assume that the Acquisition occurred on January 1, 2025. The unaudited pro forma information also reflects adjustment for transaction and integration expenses as if the transaction had been consummated on January 1, 2025. This unaudited pro-forma information should not be relied upon as being indicative of historical results that would have been obtained if the Acquisition had occurred on that date, nor of the results that may be obtained in the future.

For the three and six months ended June 30, 2026, the Company incurred $0.3 million and $5.9 million, respectively, in transaction and integration costs associated with the Acquisition, which are included in other operating expenses on the Company's Condensed Consolidated Statements of Operations.

5. Goodwill and Intangible Assets, Net

Activity in goodwill was as follows:

Below is a summary of intangible assets, net:

Definite-lived intangible asset amortization for the remainder of fiscal year 2026 and succeeding fiscal years is estimated as follows:

6. Investments

Investments consist primarily of investments in equity method investments and the Company's sponsored products. The Company's investments, excluding the assets of consolidated investment products ("CIP") discussed in Note 15, at June 30, 2026 and December 31, 2025 were as follows:

(1) The Company's equity method investments are valued on a three-month lag based upon the availability of financial information.

Investment Securities - fair value

Investment securities - fair value consist of investments in the Company's sponsored funds and in separate accounts. The composition of the Company’s investment securities - fair value was as follows:

For the three and six months ended June 30, 2026, the Company recognized net realized gains of $1.3 million and $3.3 million, respectively, related to its investment securities - fair value. For the three and six months ended June 30, 2025, the Company recognized net realized losses of $0.2 million and $21.5 thousand, respectively, related to its investment securities - fair value.

7. Fair Value Measurements

The Company’s assets and liabilities measured at fair value on a recurring basis, excluding the assets and liabilities of CIP discussed in Note 15, as of June 30, 2026 and December 31, 2025 by fair value hierarchy level were as follows:

June 30, 2026

December 31, 2025

The following is a discussion of the valuation methodologies used for the Company’s assets measured at fair value.

Cash equivalents represent investments in money market funds. Cash investments in money market funds are valued using published net asset values and are classified as Level 1.

Sponsored funds represent investments in 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 values of closed-end funds and ETFs are determined based on the official closing price on the exchange on which they are traded and are categorized as Level 1.

Equity securities represent securities traded on active markets, are valued at the official closing price (typically the last sale or bid) on the exchange on which the securities are primarily traded and are categorized as Level 1.

Debt securities represent investments in corporate and government bonds. The fair values of corporate and government bonds traded on active markets, are valued at the official closing price on the exchange on which the securities are primarily traded and are categorized as Level 1. Debt securities for which closing prices are not readily available or are deemed to not reflect readily available market prices, and are valued using an independent pricing service, are categorized as Level 2.

Nonqualified retirement plan assets represent U.S. retail 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 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 and/or the passage of time. Contingent consideration is remeasured at fair value each reporting date using a simulation model or an income approach valuation technique 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:

The contingent consideration liability as of June 30, 2026 was comprised of the following:

• Keystone Acquisition liability as of June 30, 2026 was $103.4 million, measured using an options pricing model and discounted cash flow valuation technique. The most significant unobservable inputs used relate to the discount rates (range of 6.14% - 6.30%) and the market price of risk adjustment (5.80%).
• NFJ Group transaction liability as of June 30, 2026 was $11.3 million measured using an options pricing model valuation technique. The most significant unobservable inputs used relate to the revenue growth rates, discount rates (6.15%) and the market price of risk adjustment (6.20%).

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

8. Equity Transactions

Dividends Declared

On May 20, 2026, the Company declared a quarterly cash dividend of $2.40 per common share to be paid on August 14, 2026 to shareholders of record at the close of business on July 31, 2026.

Common Stock Repurchases

During the three and six months ended June 30, 2026, the Company repurchased 70,097 and 143,560 common shares, respectively, under its share repurchase program at a weighted average price of $142.63 and $139.28 per share, respectively, for a total cost, including fees and expenses, of $10.5 million and $20.5 million, respectively. As of June 30, 2026, 662,388 shares remained available for repurchase. Under the terms of the program, the Company may repurchase shares of its common stock from time to time at its discretion through open market repurchases, privately negotiated transactions and/or other mechanisms, depending on price and prevailing market and business conditions. The program, which has no specified term, may be suspended or terminated at any time.

9. 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 Amended and Restated Omnibus Incentive and Equity Plan (the "Omnibus Plan"). At June 30, 2026, 472,441 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:

Restricted Stock Units

Each RSU entitles the holder to one share of common stock when the restriction expires. RSUs may be time-vested or performance-contingent PSUs that convert into RSUs after performance measurement is complete and generally vest in one to three years. Shares that are issued upon vesting are newly issued shares from the Omnibus Plan and are not issued from treasury stock.

RSU activity, inclusive of PSUs, for the six months ended June 30, 2026 is summarized as follows:

For the six months ended June 30, 2026 and 2025, a total of 43,483 and 40,064 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 $5.5 million and $7.0 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 six months ended June 30, 2026 and 2025, the Company granted 45,782 and 37,777 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. Compensation expense for PSU awards that contain a market condition is fixed at the date of grant and will not be adjusted in future periods based upon the achievement of the market condition. Compensation expense for PSU awards with a performance condition is recorded each period based upon a probability assessment of the expected outcome of the performance metric with a final adjustment upon measurement at the end of the performance period.

As of June 30, 2026, unamortized stock-based compensation expense for unvested RSUs and PSUs was $42.4 million with a weighted-average remaining contractual life of 1.6 years.

10. Earnings (Loss) Per Share

Earnings (loss) per share ("EPS") is calculated in accordance with ASC 260, Earnings per Share. Basic EPS is computed by dividing net income (loss) attributable to Virtus Investment Partners, Inc. by the weighted-average number of common shares outstanding for the period, excluding dilution for potential common stock issuances. Diluted EPS reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock, including shares issuable upon the vesting of RSUs and stock option exercises using the treasury stock method, as determined under the if-converted method.

The computation of basic and diluted EPS is as follows:

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.

11. Income Taxes

In calculating the provision for income taxes, the Company uses an estimate of the annual effective tax rate based upon the facts and circumstances at each interim period. On a quarterly basis, the estimated annual effective tax rate is adjusted, as appropriate, based upon changes in facts and circumstances, if any, compared to those forecasted at the beginning of the fiscal year and at each interim period thereafter.

The provision for income taxes reflected U.S. federal, state and local taxes at an estimated effective tax rate of 23.5% and 25.9% for the six months ended June 30, 2026 and 2025, respectively. The lower estimated effective tax rate for the six months ended June 30, 2026 was primarily due to a change in valuation allowances in the current year related to the tax effects of higher realized and unrealized gains on Company investments compared to the prior year and the rate impact of lower pre-tax income.

12. Debt

Credit Agreement

The Company's credit agreement (the "Credit Agreement") provides for (i) a $400.0 million term loan for the Company with a seven-year term (the "Term Loan") expiring in September 2032, and (ii) a $250.0 million revolving credit facility (the "Revolver") with a five-year term expiring in September 2030. The Company borrowed $50.0 million under the Revolver during the six months ended June 30, 2026. During the six months ended June 30, 2026, the Company repaid $20.0 million and $2.0 million outstanding under the Revolver and Term Loan, respectively. At June 30, 2026, the Company had $30.0 million and $397.0 million outstanding under the Revolver and Term Loan, respectively. In accordance with ASC 835, Interest, the amounts outstanding under the Company's Term Loan are presented on the Condensed Consolidated Balance Sheets net of related debt issuance costs, which were $8.4 million as of June 30, 2026.

13. Commitments and Contingencies

Legal Matters

The Company is involved from time to time in litigation and arbitration, as well as examinations, inquiries and investigations by various regulatory bodies, involving its compliance with, among other things, securities laws, client investment guidelines, laws governing the activities of broker-dealers and other laws and regulations affecting its products and other activities.

The Company records a liability when it 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 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.

14. Redeemable Noncontrolling Interests and Investment Manager Noncontrolling Interests Liability

Minority interests held in majority-owned investment management subsidiaries are subject to certain redemption provisions which may consist of holder put and company call rights and/or other conditional and unconditional redemption features. The rights are exercisable at pre-established intervals or upon certain conditions, such as death, disability or retirement and are redeemable at a pre-established fixed redemption price during a discrete period or pre-established multiples of earnings before interest, taxes, depreciation and amortization. These redemption provisions are not legally detachable or separately exercisable and are deemed to be embedded in the related noncontrolling interests. The Company, in purchasing equity of the investment management subsidiary, has the option to settle in cash or shares of the Company's common stock and is entitled to the cash flow associated with any purchased equity.

Redeemable noncontrolling interests

Minority interests held in majority-owned investment management subsidiaries that are subject to conditional or contingent redemption provisions are classified as mezzanine equity within redeemable noncontrolling interests on the Company's Consolidated Balance Sheets and recorded at estimated redemption value, 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 six months ended June 30, 2026 included the following amounts:

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

Investment Manager Noncontrolling Interest Liability

Minority interests held in a majority-owned investment management subsidiary that are subject to unconditional redemption provisions are considered mandatorily redeemable and classified as a liability. This liability is recorded at the greater of the estimated redemption value or the initial fair value with any changes recorded on the Condensed Consolidated Statements of Operations within other expenses along with any distributions earned and paid. The balance as of June 30, 2026 was $152.5 million primarily attributable to the Keystone acquisition (see Note 4).

Equity awards of majority owned investment management subsidiary

The Company issues equity-based profit-interest awards of a majority owned investment manager to its employees, with awards having up to a three-year vesting period when issued. These profit-interest awards are subject to holder put rights and Company call rights at pre-established multiples of earnings before interest, taxes, depreciation and amortization, with certain awards also subject to pre-established thresholds. The awards are accounted for as cash-settled liability awards under ASC 718, with changes in value at each reporting date recognized as compensation expense over the requisite service period, if any, in the Company’s Condensed Consolidated Statements of Operations. The awards are classified as a liability within investment manager noncontrolling interests liability on the Condensed Consolidated Balance Sheets until the awards are settled. Additionally, these awards have a right to participate in distributions of the investment manager which are recorded as employment expense in the Company’s Condensed Consolidated Statements of Operations.

The liability associated with these awards was $12.2 million and $14.4 million at June 30, 2026 and December 31, 2025, respectively. Compensation expense related to these awards totaled $(1.2) million and $(0.8) million for the six months ended June 30, 2026 and 2025, respectively.

15. Consolidation

The condensed consolidated financial statements include the accounts of the Company, its subsidiaries and investment products that are consolidated. A voting interest entity ("VOE") is consolidated when the Company is considered to have a controlling financial interest, which is typically present when the Company owns a majority of the voting interest in an entity or otherwise has the power to govern the financial and operating policies of the entity.

The Company evaluates any variable interest entity ("VIE") in which the Company has a variable interest for consolidation. A VIE is an entity in which either (i) the equity investment at risk is not sufficient to permit the entity to finance its own activities without additional financial support, or (ii) where, as a group, the holders of the equity investment at risk do not possess any one of the following: (a) the power through voting or similar rights to direct the activities that most significantly impact the entity's economic performance, (b) the obligation to absorb expected losses or the right to receive expected residual returns of the entity, or (c) proportionate voting and economic interests and where substantially all of the entity's activities either involve or are conducted on behalf of an investor with disproportionately fewer voting rights. If an entity has any of these characteristics, it is considered a VIE and is required to be consolidated by its primary beneficiary. The primary beneficiary is the entity that has both the power to direct the activities that most significantly impact the VIE's economic performance and has the obligation to absorb losses of, or the right to receive benefits from, the VIE that could potentially be significant to the VIE.

In the normal course of its business, the Company sponsors various investment products, some of which are consolidated by the Company. CIP includes both VOEs, made up primarily of ETFs and U.S. retail funds in which the Company holds a controlling financial interest, and VIEs which consist of collateralized loan obligations ("CLO") and certain global and private funds ("GF") of which the Company is considered the primary beneficiary. The consolidation and deconsolidation of these investment products have no impact on the Company's net income (loss). The Company's risk with respect to these investment products is limited to its beneficial interests in these products. The Company has no right to the benefits from, and does not bear the risks associated with, these investment products beyond the Company's investment 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 June 30, 2026 and December 31, 2025:

Consolidated CLOs

The majority of the Company's CIP that are VIEs are CLOs. 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 June 30, 2026, the Company consolidated eight CLOs. The financial information of CLOs is included in the Company's condensed consolidated financial statements on a one-month lag based upon the availability of their financial information.

Investments of CLOs

The CLOs held investments of $2.4 billion at June 30, 2026, 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 2026 and 2033 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 $2.6 billion at June 30, 2026, consisting of senior secured floating rate notes payable with a par value of $2.3 billion and subordinated notes with a par value of $271.8 million. These note obligations bear interest at variable rates based on SOFR plus a pre-defined spread.

The Company's beneficial interests and maximum exposure to loss related to these consolidated CLOs is limited to (i) ownership in the subordinated notes and (ii) accrued management fees. The secured notes of the consolidated CLOs have contractual recourse only to the related assets of the CLO and are classified as financial liabilities. Although these beneficial interests are eliminated upon consolidation, the application of the measurement alternative prescribed by ASU 2014-13, Consolidation (Topic 810) ("ASU 2014-13"), results in the net assets of the consolidated CLOs shown above to be equivalent to the beneficial interests retained by the Company at June 30, 2026, as shown in the table below:

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

The following table represents the Company’s own economic interests in the consolidated CLOs, which are eliminated upon consolidation:

Fair Value Measurements of CIP

The assets and liabilities of CIP measured at fair value on a recurring basis as of June 30, 2026 and December 31, 2025 by fair value hierarchy level were as follows:

The following is a discussion of the valuation methodologies used for the assets and liabilities of the Company’s CIP measured at fair value:

Level 1 assets represent cash investments in money market funds, debt and equity investments, and derivatives (futures) that are valued using published net asset values or the official closing price on the exchange on which the securities are traded.

Level 2 assets represent most debt securities (including bank loans), certain equity securities (including non-U.S. securities), and derivatives (forwards and swaps), for which closing prices are not readily available or are deemed to not reflect readily available market prices, and are valued using other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risk, etc.) by an independent pricing service. Debt investments, other than bank loans, are valued based on quotations received from independent pricing services or from dealers who make markets in such securities. Bank loan investments, which are included as debt investments, are generally priced at the average mid-point of bid and ask quotations obtained from a third-party pricing service utilizing matrix pricing models that consider information regarding securities with similar characteristics. Fair value may also be based upon valuations obtained from independent third-party brokers or dealers utilizing matrix pricing models that consider information regarding securities with similar characteristics.

Level 3 assets include debt and equity securities that are not widely traded, are illiquid or are priced by dealers based on pricing models used by market makers in the security. These securities are valued using significant unobservable inputs and may be based on an internal valuation committees’ own assumptions in determining fair value or unadjusted prices from an independent pricing service.

Level 1 liabilities consist of derivatives (short sales and futures). These liabilities are recorded on the Condensed Consolidated Balance Sheets within other liabilities of CIP and are classified as Level 1 based on the underlying equity security.

Level 2 liabilities primarily consist of notes payable issued by CLOs and are measured using the measurement alternative in ASU 2014-13. Accordingly, the fair value of CLO liabilities was measured as the fair value of CLO assets less the sum of (i) the fair value of the beneficial interests held by the Company, and (ii) the carrying value of any beneficial interests that represent compensation for services. The fair value of the beneficial interests held by the Company is based on third-party pricing information without adjustment.

The securities purchased payable at June 30, 2026 and December 31, 2025 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:

(1) The investments that are categorized as Level 3 were valued utilizing third-party pricing information without adjustment. Transfers in and/or out of levels are reflected when significant inputs, including market inputs or performance attributes, used for the fair value measurement become observable/unobservable at period end.

Nonconsolidated VIEs

The Company serves as the collateral manager for other CLOs that are not consolidated. The assets and liabilities of these CLOs reside in bankruptcy remote, special purpose entities in which the Company has no ownership of, nor holds any notes issued by, the CLOs, and provides neither recourse nor guarantees. The Company has determined that the investment management fees it receives for serving as collateral manager for these CLOs did not represent a variable interest as (i) the fees the Company earns are compensation for services provided and are commensurate with the level of effort required to provide the investment management services, (ii) the Company does not hold other interests in the CLOs that individually, or in the aggregate, would absorb more than an insignificant amount of the CLOs' expected losses or receive more than an insignificant amount of the CLOs' expected residual return, and (iii) the investment management arrangement only includes terms, conditions and amounts that are customarily present in arrangements for similar services negotiated at arm's length.

The Company has interests in certain other VIEs that the Company does not consolidate as it is not the primary beneficiary since its interest in these entities does not provide the Company with the power to direct the activities that most significantly impact the entities' economic performance. At June 30, 2026, the carrying value and maximum risk of loss related to the Company's interest in these VIEs was $64.8 million.

16. Segments

The key GAAP measure of segment profit or loss that the chief operating decision maker ("CODM") uses to evaluate the Company’s financial performance and allocate resources of the Company is net income, as reported on the Company’s Condensed Consolidated Statements of Operations. In addition, the CODM uses net income in deciding whether to reinvest profits or allocate profits to other uses of capital, such as for acquisitions or to pay dividends. All expense categories on the Condensed Consolidated Statements of Operations are significant and there are no other significant segment expenses that would require disclosure. Assets provided to the CODM are consistent with those reported on the Condensed Consolidated Balance Sheets.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

(1) Represents U.S. retail funds, ETFs and global funds.

(2) Consists of traditional closed-end and tender offer funds.

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

(4) Represents institutional separate and commingled accounts including structured products.

(5) 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

The following table summarizes asset flows by product:

(1) Represents U.S. retail funds, ETFs and global funds.

(2) Represents open-end and closed-end fund distributions net of reinvestments, 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.

(3) Consists of traditional closed-end and tender offer funds.

(4) Primarily represents fund shares repurchased due to tender offers.

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

(6) Represents institutional separate and commingled accounts including structured products.

Assets Under Management by Asset Class

The following table summarizes assets under management by asset class:

(1) Consists of multi-asset offerings not included in equity, fixed income and alternatives.

(2) Consists of listed real estate, managed futures, infrastructure, event-driven, private markets and other strategies.

Average Assets Under Management and Average Fees Earned

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

(1) Represents U.S. retail funds, ETFs and global funds.

(2) Consists of traditional closed-end and tender offer funds.

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

(4) Represents institutional separate and commingled accounts including structured products.

(5) 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. Revenue-related adjustments are based on specific agreements and reflect the portion of investment management fees passed-through to third-party client intermediaries for services to investors in sponsored investment products. Fund fees are calculated based on average daily, weekly, or monthly ending net asset balances. Retail separate account fees, which include fees for 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, the end of the preceding quarter or month's net assets 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 increased for the three and six months ended June 30, 2026 compared to the same periods in the prior year primarily due to higher fee rates earned on the assets under management acquired from Keystone partially offset by a shift in the asset mix in our open-end funds to certain strategies, which have a lower fee rate.

Results of Operations

Summary Financial Data

N/M = Not Meaningful

In the second quarter of 2026, total revenues decreased 4.4% to $201.4 million from $210.5 million in the second quarter of 2025, primarily as a result of decreased average assets under management, partially offset by the addition of Keystone. Operating income decreased by $17.9 million to $27.3 million in the second quarter of 2026 compared to $45.2 million in the second quarter of 2025, due primarily to an increase in amortization expenses as a result of the Keystone acquisition and decreased revenues as mentioned above.

Revenues

Revenues by source were as follows:

Investment Management Fees

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 decreased by $8.6 million, or 4.8%, and $25.6 million, or 7.0%, for the three and six months ended June 30, 2026, respectively, compared to the same periods in the prior year primarily due to decreased average assets

under management.

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 traditional closed-end funds. Fund administration and shareholder service fees decreased $0.7 million, or 3.9%, and $1.4 million, or 3.9%, during the three and six months ended June 30, 2026, respectively, compared to the same periods in the prior year primarily due to the decrease in average assets under management of our U.S. retail funds partially offset by increased closed-end fund administration fees.

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 remained consistent and decreased by $1.3 million, or 5.4%, for the three and six months ended June 30, 2026, respectively, compared to the same periods in the prior year. The decrease during the six month period is 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.

Other Income and Fees

Other income and fees primarily represent fees related to other fee-earning assets and marketing fees earned on certain ETFs. Other income and fees increased $0.4 million, or 36.9%, and $0.8 million, or 35.9%, for the three and six months ended June 30, 2026, respectively, compared to the same periods in the prior year primarily due to increased marketing fees earned on ETFs during the current year periods.

Operating Expenses

Operating expenses by category were as follows:

N/M = Not Meaningful

Employment Expenses

Employment expenses consist of fixed and variable compensation and related employee benefit costs. Employment expenses increased by $4.4 million, or 4.5%, and $0.6 million, or 0.3%, for the three and six months ended June 30, 2026, respectively, primarily due to the addition of Keystone employees and an increase in stock-based compensation expense partially offset by a decrease in incentive compensation.

Distribution and Other Asset-Based Expenses

Distribution and other asset-based expenses consist primarily of payments to third-party client intermediaries for providing services to investors in sponsored investment products. These payments are primarily based on assets under management. Distribution and other asset-based expenses decreased $1.7 million, or 7.7%, and $4.1 million, or 9.0%, for the three and six months ended June 30, 2026, respectively, 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 consist primarily 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 remained consistent for the three months ended June 30, 2026 and 2025, and increased $2.8 million, or 4.2%, for the six months ended June 30, 2026 compared to the same periods in the prior year primarily due to transaction costs and ongoing costs associated with the Keystone acquisition partially offset by decreased rent associated with lease terminations in the prior year.

Other Operating Expenses of CIP

Other operating expenses of CIP were consistent for the three months ended June 30, 2026 and 2025, and increased by $1.1 million, or 62.5%, for the six months ended June 30, 2026, compared to the same periods in the prior year primarily due to refinancing activities associated with one CLO in the current year.

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 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 change in fair value of contingent consideration for the three and six months ended June 30, 2026 was primarily attributable to changes in underlying performance estimates and the passage of time.

Restructuring Expense

During the three and six months ended June 30, 2026, the Company incurred $0.8 million and $3.7 million, respectively, in restructuring expense related to severance costs.

Depreciation Expense

Depreciation expense consists primarily of the straight-line depreciation of furniture, equipment and leasehold improvements. Depreciation expense decreased by $0.3 million, or 16.3%, for the three months ended June 30, 2026 primarily due to computer equipment in the current year becoming fully depreciated. Depreciation expense decreased $1.0 million, or 23.1%, for the six months ended June 30, 2026, compared to the same period in the prior year primarily due to the prior year acceleration of depreciation on leasehold improvements associated with a terminated lease and a decrease in depreciation expense on computer equipment in the current year due to these assets becoming fully depreciated.

Amortization Expense

Amortization expense consists of the amortization of definite-lived intangible assets over their estimated useful lives. Amortization expense increased by $7.1 million, or 54.9%, and $9.3 million, or 36.1%, for the three and six months ended June 30, 2026, respectively, compared to the same periods in the prior year, primarily due to the additional amortization associated with the Keystone acquisition.

Other Income (Expense)

Other Income (Expense), net by category were as follows:

N/M = Not Meaningful

Realized and unrealized gain (loss) on investments, net

Realized and unrealized gain (loss) on investments, net changed during the three and six months ended June 30, 2026

by $0.6 million and $2.4 million compared to the same periods in the prior year. The change for the three and six months ended June 30, 2026 is primarily attributable to an increase in realized gains due to changes in market values of our investments.

Realized and unrealized gain (loss) of CIP, net

Realized and unrealized gain (loss) of CIP, net changed by $19.6 million and $12.9 million for the three and six months ended June 30, 2026, respectively, compared to the same periods in the prior year. The change for the three months ended June 30, 2026 consisted primarily of changes in net unrealized and realized gains of $39.8 million due to changes in market values of leveraged loans, partially offset by net unrealized losses of $20.2 million related to the value of the notes payable. The change for the six months ended June 30, 2026 consisted primarily of changes in net unrealized and realized gains of $20.3 million due to changes in market values of leveraged loans, partially offset by net unrealized losses of $7.4 million related to the value of the notes payable.

Other income (expense), net

Other income (expense) changed by $(1.9) million and $(2.2) million for the three and six months ended June 30, 2026, respectively, compared to the same periods in the prior year primarily due to noncontrolling interest liability distributions partially offset by changes in the gains on our equity method investments.

Interest Income (Expense)

Interest Income (Expense), net by category were as follows:

Interest Expense

Interest expense increased $2.6 million, or 56.0%, and $4.8 million, or 52.1%, for the three and six months ended June 30, 2026, primarily due to increased average debt outstanding during the current year periods.

Interest and Dividend Income

Interest and dividend income is earned on cash equivalents and marketable securities. Interest and dividend income decreased $0.7 million, or 33.2%, and $0.8 million, or 14.8%, for the three and six months ended June 30, 2026, compared to the same periods in the prior year primarily due to lower average interest rates.

Interest and Dividend Income of Investments of CIP

Interest and dividend income of investments of CIP increased $0.7 million, or 1.5%, and $1.8 million, or 1.9%, for the three and six months ended June 30, 2026, respectively, compared to the same periods in the prior year, primarily due to the addition of a CLO in the fourth quarter of 2025 partially offset by lower interest rates.

Interest Expense of CIP

Interest expense of CIP represents interest expense on the notes payable of CIP. Interest expense of CIP remained consistent and decreased by $0.5 million, or 0.7%, for the three and six months ended June 30, 2026, respectively, compared to the same periods in the prior year. The decrease during the six months ended June 30, 2026 is primarily due to lower interest rates partially offset by the addition of a CLO in the fourth quarter of 2025.

Income Tax Expense (Benefit)

The provision for income taxes reflected U.S. federal, state and local taxes at an estimated effective tax rate of 23.5% and 25.9% for the six months ended June 30, 2026 and 2025, respectively. The lower estimated effective tax rate for the six

months ended June 30, 2026 was primarily due to a change in valuation allowances in the current year related to the tax effects of higher realized and unrealized gains on Company investments compared to the prior year.

Liquidity and Capital Resources

Certain Financial Data

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

N/M = Not Meaningful

N/M = Not Meaningful

Overview

At June 30, 2026, we had $176.2 million of cash and cash equivalents and $139.9 million of investments, which included $49.7 million of investment securities, compared to $386.5 million of cash and cash equivalents and $157.5 million of investments, which included $76.5 million of investment securities, at December 31, 2025.

Uses of Capital

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. In 2026 and 2025, we paid $144.8 million and $158.4 million, respectively, in incentive compensation earned during the years ended December 31, 2025 and 2024, respectively.

In addition to operating activities, other uses of cash could include: (i) investments in organic growth, including seeding or launching new products and expanding distribution; (ii) debt principal payments through scheduled amortization or additional paydowns; (iii) dividend payments to common stockholders; (iv) repurchases of our common stock, or withholding obligations for the net settlement of employee share transactions; (v) investments in our technology infrastructure; (vi) investments in inorganic growth opportunities that may require upfront and/or future payments; (vii) integration costs, including restructuring and severance, related to acquisitions, if any; and (viii) purchases of investment manager equity interests.

Capital and Reserve Requirements

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 June 30, 2026, our broker-dealer net capital was significantly greater than the required minimum.

Balance Sheet

Cash and cash equivalents consist of cash in banks and money market fund investments. Investments consist primarily of investments in our sponsored funds. CIP represent investment products for which we provide investment management services and where we have either a controlling financial interest or are considered the primary beneficiary of an investment product that is considered a variable interest entity.

Operating Cash Flow

Net cash provided by operating activities of $93.3 million for the six months ended June 30, 2026 increased by $21.4 million from net cash provided by operating activities of $72.0 million for the same period in the prior year primarily due to an increase of $20.4 million in net sales of investments by CIP and $20.0 million in net sales of investments by us, partially offset by a $20.0 million decrease in net income in the current year period.

Investing Cash Flow

Cash flows from investing activities consist primarily of acquisitions of businesses, capital expenditures and other investing activities related to our business operations. Net cash used in investing activities of $199.8 million for the six months ended June 30, 2026 increased by $195.8 million from net cash used in investing activities of $4.0 million for the same period in the prior year primarily due to the acquisition of Keystone.

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 $84.4 million for the six months ended June 30, 2026 decreased by $142.1 million from net cash used of $226.5 million for the same period in the prior year primarily due to an increase of $96.1 million in net borrowings of CIP and $29.4 million in net borrowings by us, and a $29.5 million decrease in repurchases of common shares during the current year period.

Credit Agreement

The Company's credit agreement (the "Credit Agreement") provides for (i) a $400.0 million term loan for the Company with a seven-year term (the "Term Loan") expiring in September 2032, and (ii) a $250.0 million revolving credit facility (the "Revolver") with a five-year term expiring in September 2030. The Company borrowed $50.0 million under the Revolver during the six months ended June 30, 2026. During the six months ended June 30, 2026, the Company repaid $20.0 million and $2.0 million outstanding under the Revolver and Term Loan, respectively. At June 30, 2026, the Company had $30.0 million and $397.0 million outstanding under the Revolver and Term Loan, respectively. In accordance with ASC 835, Interest, the amounts outstanding under the Company's Term Loan are presented on the Condensed Consolidated Balance Sheets net of related debt issuance costs, which were $8.4 million as of June 30, 2026.

Critical Accounting Policies and Estimates

Our financial statements and the accompanying notes are prepared in accordance with accounting principles generally accepted in the United States of America, which require the use of estimates. Actual results will vary from these estimates. A discussion of our critical accounting policies and estimates is included in Management’s Discussion and Analysis of Financial Condition and Results of Operations in our 2025 Annual Report on Form 10-K. A complete description of our significant accounting policies is included in our 2025 Annual Report on Form 10-K. There were no material changes in our critical accounting policies and estimates in the three months ended June 30, 2026.

Recently Issued Accounting Pronouncements

For a discussion of accounting standards, see Note 2 in our condensed consolidated financial statements.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

The Company is primarily exposed to market risk associated with unfavorable movements in interest rates and securities prices. During the three and six months ended June 30, 2026, there were no material changes to the information contained in Part II, Item 7A of the Company's 2025 Annual Report on Form 10-K.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures designed to ensure that information required to be disclosed in reports filed or submitted under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms and that such information is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. Any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives.

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act) as of the end of the period covered by this Quarterly Report on Form 10-Q. Consistent with guidance issued by the Securities and Exchange Commission that an assessment of internal controls over financial reporting of a recently acquired business may be omitted from management's evaluation of disclosure controls and procedures, management is excluding an assessment of the internal controls of Keystone, which was acquired by the Company on March 1, 2026, from its evaluation of the effectiveness of the Company's disclosure controls and procedures. Keystone represented approximately 12.3% of the Company's consolidated total assets at June 30, 2026 and 6.9% and 4.8% of the Company's consolidated total revenues as of and for the three and six months ended June 30, 2026, respectively.

Based on their evaluation, our Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures were effective at the reasonable assurance level as of June 30, 2026, the end of the period covered by this Quarterly Report on Form 10-Q.

Changes in Internal Control over Financial Reporting

There have been no changes in our internal control over financial reporting (as defined in Rule 13a-15(f) or 15d-15(f) under the Exchange Act) identified in connection with the evaluation required by Rules 13a-15(d) or 15d-15(d) of the Exchange Act that occurred during the period covered by this Quarterly Report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II – OTHER INFORMATION

Item 1. Legal Proceedings

The information set forth in response to Item 103 of Regulation S-K under "Legal Proceedings" is incorporated by reference from Part I, Financial Information Item 1. "Financial Statements" Note 13 "Commitments and Contingencies" of this Quarterly Report on Form 10-Q.

Item 1A. Risk Factors

There have been no material changes to the Company’s risk factors from those previously reported in our 2025 Annual Report on Form 10-K.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

An aggregate of 6,430,045 shares of our common stock have been authorized to be repurchased under a share repurchase program, initially approved by our Board of Directors in 2010. As of June 30, 2026, 662,388 shares remained available for repurchase. Under the terms of the program, we may repurchase shares of our common stock from time to time at our discretion through open market repurchases, privately negotiated transactions and/or other mechanisms, depending on price, prevailing market and business conditions. The program, which has no specified term, may be suspended or terminated at any time.

The following table sets forth information regarding our share repurchases in each month during the quarter ended June 30, 2026.

(1) Average price paid per share is calculated on a settlement basis and excludes commissions and taxes.

Item 5. Other Information

During the three months ended June 30, 2026, none of the Company's directors or officers (as defined in Rule 16a-1(f) of the Securities Exchange Act of 1934, as amended), adopted, terminated or modified a Rule 10b5-1 trading arrangement or non-Rule 10b5-1 trading arrangement (as such terms are defined in Item 408 of Regulation S-K of the Securities Act of 1933, as amended).

Item 6. Exhibits

This certification is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (Exchange Act), or otherwise subject to the liability of that section, nor shall it be deemed incorporated by reference into any filing under the Securities Act of 1933, as amended or the Exchange Act.