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Victory Capital Reports First Quarter 2020 Financial Results

05/11/2020

First Quarter 2020 Highlights

  • Total Asset Under Management (AUM) of $123.8 billion
  • Long-term gross flows of $7.3 billion; total net outflows of $2.9 billion
  • GAAP operating margin of 44.3% and adjusted EBITDA margin of 44.8%1
  • GAAP net income of $0.77 per diluted share, up 285% versus first quarter 2019
  • Adjusted net income with tax benefit of $0.92 per diluted share, up 163% versus first quarter 20191
  • Board authorizes regular quarterly cash dividend of $0.05 per share

SAN ANTONIO--(BUSINESS WIRE)-- Victory Capital Holdings, Inc. (NASDAQ: VCTR) (“Victory Capital” or “the Company”) today reported financial results for the quarter ended March 31, 2020.

“I am pleased to report Victory Capital generated excellent financial results during the first quarter, despite unprecedented challenges presented by the COVID-19 pandemic,” said David Brown, Chairman and Chief Executive Officer. “Advance preparation proved essential for delivering uninterrupted service to clients and providing safe working conditions for employees. Our comprehensive and thoroughly tested business continuity plan has ensured that all investment activities remain unaffected, and we have been energized by our organization’s ability to seamlessly adapt to challenging circumstances.

“Our cost structure also adjusted in real time with market fluctuations, proving the resiliency of our next-generation business model and contributing to first-quarter results exceeding expectations.

“Four of our investment franchises achieved positive long-term net flows during the quarter, and net outflows from fixed income products held up much better than the industry-wide averages.

“In addition, we took opportunistic action on the capital management front. Early in the quarter, we repriced our term loan to reduce the interest rate spread by 75 basis points. Later in the quarter, we promptly responded to falling interest rates and effectively locked in a rate of 3.465% on the majority of our current debt. At the same time, we maintained a disciplined capital allocation strategy and deployed most of our free cash flow to further reduce debt, while returning some capital to shareholders with steady share repurchases and the cash dividend. Since last year’s origination of the term loan on July 1, we have repaid $217 million and lowered the current outstanding balance to $883 million.

“Looking ahead, we continue to invest to support future growth and remain committed to executing on our strategy to enhance shareholder value. We are still actively evaluating strategic acquisition candidates and conducting due diligence. Persistent market volatility may accelerate industry consolidation and our flexible business model ideally positions us to benefit in this environment. As always, serving the needs of our clients will remain our top priority, and I am more optimistic than ever about our Company’s ability to withstand and thrive in ever-changing market environments.”

1The Company reports its financial results in accordance with generally accepted accounting principles (“GAAP”). Adjusted EBITDA and Adjusted Net Income are not defined by GAAP and should not be regarded as an alternative to any measurement under GAAP. Please refer to the section “Information Regarding Non-GAAP Financial Measures” at the end of this press release for an explanation of Non-GAAP financial measures and a reconciliation to the nearest GAAP financial measure.

The table below presents AUM, and certain GAAP and non-GAAP (“adjusted”) financial results. Due to rounding, AUM values and other amounts in this press release may not add up precisely to the totals provided.

(in millions except per share amounts or as otherwise noted)

For the Three Months Ended

March 31,

 

December 31,

 

March 31,

2020

 

2019

 

2019

Assets Under Management
Ending

$

123,779

 

$

151,832

 

$

58,119

 

Average

144,112

 

147,867

 

57,043

 

 
Long-term Flows(2)
Long-term Gross(2)

$

7,273

 

$

5,284

 

$

3,038

 

Long-term Net(2)

(3,101

)

(1,474

)

(1,105

)

 
Money Market/Short-term Flows
Money Market/Short-term Gross

$

7,652

 

$

4,371

 

$

Money Market/Short-term Net

201

 

85

 

 
Total Flows
Total Gross

$

14,925

 

$

9,655

 

$

3,038

 

Total Net

(2,900

)

(1,390

)

(1,105

)

 
Consolidated Financial Results (GAAP)
Revenue

$

204.4

 

$

218.6

 

$

87.5

 

Revenue realization (in bps)

57.1

 

58.6

 

62.2

 

Operating expenses

113.8

 

154.4

 

65.4

 

Income from operations

90.6

 

64.2

 

22.1

 

Operating margin

44.3

%

29.4

%

25.3

%

Net income

57.2

 

37.6

 

14.5

 

Earnings per diluted share

$

0.77

 

$

0.51

 

$

0.20

 

Cash flow from operations

51.9

 

59.7

 

17.9

 

 
Adjusted Performance Results (Non-GAAP)(1)
Adjusted EBITDA

$

91.5

 

$

102.3

 

$

33.6

 

Adjusted EBITDA margin

44.8

%

46.8

%

38.4

%

Adjusted net income

61.7

 

66.0

 

21.9

 

Tax benefit of goodwill and acquired intangible assets

6.7

 

6.8

 

3.4

 

Adjusted net income with tax benefit

68.5

 

72.8

 

25.3

 

Adjusted net income with tax benefit per diluted share

$

0.92

 

$

0.99

 

$

0.35

 

____________________
1
The Company reports its financial results in accordance with GAAP. Adjusted EBITDA and Adjusted Net Income are not defined by GAAP and should not be regarded as an alternative to any measurement under GAAP. Please refer to the section “Information Regarding Non-GAAP Financial Measures” at the end of this press release for an explanation of Non-GAAP financial measures and a reconciliation to the nearest GAAP financial measure.

 

2 Long-term AUM is defined as total AUM excluding Money Market and short-term assets.

AUM, Flows and Investment Performance

Victory Capital’s AUM decreased by $28.1 billion to $123.8 billion at March 31, 2020, compared with $151.8 billion at December 31, 2019. The decrease was due to negative market action and net outflows of $25.2 billion and $2.9 billion, respectively. Total gross flows for the first quarter were $14.9 billion. For the first quarter, the Company reported long-term gross flows of $7.3 billion.

As of March 31, 2020, Victory Capital offered 116 investment strategies through its nine autonomous Investment Franchises and Solutions Platform. The table below presents outperformance against benchmarks by AUM as of March 31, 2020.

Percentage of AUM Outperforming Benchmark

Trailing

 

Trailing

 

Trailing

 

Trailing

1-Year

 

3-Years

 

5-Years

 

10-Years

44%

 

55%

 

69%

 

79%

First Quarter 2020 Compared with Fourth Quarter 2019

Revenue decreased 6.5% to $204.4 million, in the first quarter, compared with $218.6 million in the fourth quarter, reflecting lower average AUM, one less day in the quarter and a decrease in average fee rate realization as a result of AUM mix shift. GAAP operating margin expanded 1,490 basis points in the first quarter to 44.3%, up from 29.4% in the fourth quarter, due to lower cash operating expenses and a $4.6 million net benefit in acquisition-related expenses. In the prior quarter, acquisition related expenses totaled $22.3 million. Adjusting for the impact of acquisition-related expenses, quarter-over-quarter expenses declined $13.7 million, or 10.4%, reflecting the Company’s variable cost structure. First quarter GAAP net income rose 52% to $57.2 million, up from $37.6 million in the prior quarter. On a per-share basis, GAAP net income advanced 51% to $0.77 per diluted share in the first quarter, versus $0.51 per diluted share in the fourth quarter.

Adjusted net income with tax benefit decreased 6% to $68.5 million in the first quarter, down from $72.8 million in the fourth quarter. On a per-share basis, adjusted net income with tax benefit decreased 7% to $0.92 per diluted share in the first quarter, from $0.99 per diluted share in the prior quarter. Adjusted EBITDA decreased 11% to $91.5 million in the first quarter, versus $102.3 million in the fourth quarter. Adjusted EBITDA margin contracted 200 basis points in the first quarter of 2020 to 44.8% compared with 46.8% in the prior quarter.

First Quarter 2020 Compared with First Quarter 2019

Year-over-year results reflect the acquisition of the USAA Asset Management Company, which closed on July 1, 2019. The acquisition significantly impacted our financial results for the three months ended March 31, 2020 when compared to the three months ended March 31, 2019. Revenue for the three months ended March 31, 2020, rose 134% to $204.4 million, compared with $87.5 million in the same quarter of 2019. The increase was primarily due to higher average AUM as a result of the acquisition.

GAAP operating margin was 44.3% in the first quarter, a 1900 basis point increase from the 25.3% recorded in the same quarter of 2019 primarily due to improved operating leverage. Operating expenses increased 74% to $113.8 million, compared with $65.4 million in last year’s first quarter, reflecting the Company’s larger scale and new call center dedicated to serving USAA members. GAAP net income rose 294% to $57.2 million, or $0.77 per diluted share, in the first quarter compared with $14.5 million, or $0.20 per diluted share, in the same quarter of 2019.

Adjusted net income with tax benefit advanced 171% to $68.5 million, or $0.92 per diluted share, in the first quarter, compared with $25.3 million, or $0.35 per diluted share in the same quarter last year. Adjusted EBITDA rose 172% to $91.5 million, compared with $33.6 million in last year’s same quarter. Year-over-year, adjusted EBITDA margin expanded 640 basis points to 44.8% in the first quarter of 2020, compared with 38.4% in the same quarter last year.

Balance Sheet / Capital Management

During the first quarter, the Company reduced outstanding debt by an additional $38 million. To date, the Company has reduced total debt by $217 million, since July 1, 2019. On January 21, 2020, the Company repriced its Term Loan, lowering the interest rate spread by 75 basis points, from 3.25% over LIBOR, to 2.50% over LIBOR. On March 27, 2020, the Company executed a floating-to-fixed interest rate swap transaction to effectively fix the interest rate at 3.465% on $450 million of its outstanding Term Loan.

Today, the Company’s Board of Directors declared a regular quarterly cash dividend of $0.05 per share payable on June 25, 2020, to shareholders of record on June 10, 2020.

Conference Call, Webcast and Slide Presentation

The Company will host a conference call this morning, May 11, at 10:00 a.m. ET to discuss the results. Analysts and investors may participate in the question-and-answer session. To participate in the conference call, please call (877) 823-8673 (domestic) or (647) 689-4067 (international), shortly before 10:00 a.m. ET and reference the Victory Capital Conference Call. A live, listen-only webcast will also be available via the investor relations section of the Company’s website at https://ir.vcm.com. Prior to the call, a supplemental slide presentation that will be used during the conference call will be available on the Events and Presentations page of the Company’s investor relations website. For anyone who is unable to join the live event, an archive of the webcast will be available for replay shortly after the call concludes.

About Victory Capital

Victory Capital is a diversified global asset management firm with $131.8 billion in assets under management as of April 30, 2020. The Company operates a next-generation business model combining boutique investment qualities with the benefits of a fully integrated, centralized operating and distribution platform.

Victory Capital provides specialized investment strategies to institutions, intermediaries, retirement platforms and individual investors. With nine autonomous Investment Franchises and a Solutions Platform, Victory Capital offers a wide array of investment styles and investment vehicles including, actively managed mutual funds, separately managed accounts, rules-based and active ETFs, multi-asset class strategies, custom-designed solutions and a 529 College Savings Plan.

For more information, please visit www.vcm.com or follow us on: Twitter and LinkedIn.

FORWARD-LOOKING STATEMENTS

This press release may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements may include, without limitation, any statements preceded by, followed by or including words such as “target,” “believe,” “expect,” “aim,” “intend,” “may,” “anticipate,” “assume,” “budget,” “continue,” “estimate,” “future,” “objective,” “outlook,” “plan,” “potential,” “predict,” “project,” “will,” “can have,” “likely,” “should,” “would,” “could” and other words and terms of similar meaning or the negative thereof. Such forward-looking statements involve known and unknown risks, uncertainties and other important factors beyond Victory Capital’s control such as the COVID-19 pandemic and its effect on our business, operations and financial results going forward, as discussed in Victory Capital’s filings with the SEC, that could cause Victory Capital’s actual results, performance or achievements to be materially different from the expected results, performance or achievements expressed or implied by such forward-looking statements.

Although it is not possible to identify all such risks and factors, they include, among others, the following: reductions in AUM based on investment performance, client withdrawals, difficult market conditions and other factors such as a pandemic; the nature of the Company’s contracts and investment advisory agreements; the Company’s ability to maintain historical returns and sustain its historical growth; the Company’s dependence on third parties to market its strategies and provide products or services for the operation of its business; the Company’s ability to retain key investment professionals or members of its senior management team; the Company’s reliance on the technology systems supporting its operations; the Company’s ability to successfully acquire and integrate new companies; the concentration of the Company’s investments in long-only small- and mid-cap equity and U.S. clients; risks and uncertainties associated with non-U.S. investments; the Company’s efforts to establish and develop new teams and strategies; the ability of the Company’s investment teams to identify appropriate investment opportunities; the Company’s ability to limit employee misconduct; the Company’s ability to meet the guidelines set by its clients; the Company’s exposure to potential litigation (including administrative or tax proceedings) or regulatory actions; the Company’s ability to implement effective information and cyber security policies, procedures and capabilities; the Company’s substantial indebtedness; the potential impairment of the Company’s goodwill and intangible assets; disruption to the operations of third parties whose functions are integral to the Company’s ETF platform; the Company’s determination that Victory Capital is not required to register as an "investment company" under the 1940 Act; the fluctuation of the Company’s expenses; the Company’s ability to respond to recent trends in the investment management industry; the level of regulation on investment management firms and the Company’s ability to respond to regulatory developments; the competitiveness of the investment management industry; the dual class structure of the Company’s common stock; the level of control over the Company retained by Crestview GP; the Company’s status as an emerging growth company and a controlled company; and other risks and factors listed under "Risk Factors" and elsewhere in the Company’s filings with the SEC.

Such forward-looking statements are based on numerous assumptions regarding Victory Capital’s present and future business strategies and the environment in which it will operate in the future. Any forward-looking statement made in this press release speaks only as of the date hereof. Except as required by law, Victory Capital assumes no obligation to update these forward-looking statements, or to update the reasons actual results could differ materially from those anticipated in the forward-looking statements, even if new information becomes available in the future.

 

Victory Capital Holdings, Inc. and Subsidiaries

Unaudited Consolidated Statements of Operations

(in thousands except per share data and percentages)

 

For the Three Months Ended

March 31,

 

December 31,

 

March 31,

2020

 

2019

 

2019

Revenue
Investment management fees

$

146,881

 

$

158,943

 

$

74,411

 

Fund administration and distribution fees

57,540

 

59,611

 

13,068

 

Total revenue

204,421

 

218,554

 

87,479

 

 
Expenses
Personnel compensation and benefits

47,571

 

54,210

 

34,501

 

Distribution and other asset-based expenses

54,860

 

57,471

 

15,767

 

General and administrative

11,888

 

14,740

 

7,087

 

Depreciation and amortization

4,050

 

5,620

 

5,222

 

Change in value of consideration payable for acquisition of business

(5,500

)

19,900

 

Acquisition-related costs

(69

)

367

 

2,777

 

Restructuring and integration costs

998

 

2,049

 

Total operating expenses

113,798

 

154,357

 

65,354

 

 
Income from operations

90,623

 

64,197

 

22,125

 

Operating margin

44.3

%

29.4

%

25.3

%

 
Other income (expense)
Interest income and other income (expense)

(4,172

)

1,598

 

1,833

 

Interest expense and other financing costs

(11,408

)

(14,901

)

(4,624

)

Loss on debt extinguishment

(1,054

)

(2,451

)

Total other expense, net

(16,634

)

(15,754

)

(2,791

)

 
Income before income taxes

73,989

 

48,443

 

19,334

 

 
Income tax expense

(16,823

)

(10,854

)

(4,807

)

 
Net income

$

57,166

 

$

37,589

 

$

14,527

 

 
Earnings per share of common stock
Basic

$

0.84

 

$

0.56

 

$

0.22

 

Diluted

0.77

 

0.51

 

0.20

 

 
Weighted average number of shares outstanding
Basic

67,790

 

67,633

 

67,521

 

Diluted

74,350

 

73,856

 

72,282

 

 
Dividends declared per share

$

0.05

 

$

0.05

 

$

 

Victory Capital Holdings, Inc. and Subsidiaries

Reconciliation of GAAP to Non-GAAP Measures

(unaudited; in thousands except per share data and percentages)

 

For the Three Months Ended

March 31,

 

December 31,

 

March 31,

2020

 

2019

 

2019

Net income (GAAP)

$

57,166

 

$

37,589

 

$

14,527

 

Income tax expense

(16,823

)

(10,854

)

(4,807

)

Income before income taxes

$

73,989

 

$

48,443

 

$

19,334

 

Interest expense

10,528

 

14,852

 

3,853

 

Depreciation

884

 

1,130

 

571

 

Other business taxes

(3,296

)

359

 

555

 

Amortization of acquisition-related intangible assets

3,166

 

4,490

 

4,651

 

Stock-based compensation

5,372

 

5,724

 

1,478

 

Acquisition, restructuring and exit costs

(1,542

)

24,947

 

2,777

 

Debt issuance costs

2,389

 

2,387

 

364

 

Earnings from equity method investments

4

 

Adjusted EBITDA

$

91,490

 

$

102,332

 

$

33,587

 

Adjusted EBITDA margin

44.8

%

46.8

%

38.4

%

 
 
Net income (GAAP)

$

57,166

 

$

37,589

 

$

14,527

 

Adjustment to reflect the operating performance of the Company
Other business taxes

(3,296

)

359

 

555

 

Amortization of acquisition-related intangible assets

3,166

 

4,490

 

4,651

 

Stock-based compensation

5,372

 

5,724

 

1,478

 

Acquisition, restructuring and exit costs

(1,542

)

24,947

 

2,777

 

Debt issuance costs

2,389

 

2,387

 

364

 

Tax effect of above adjustments

(1,522

)

(9,477

)

(2,456

)

Adjusted net income

$

61,733

 

$

66,019

 

$

21,896

 

Adjusted net income per diluted share

$

0.83

 

$

0.89

 

$

0.30

 

 
Tax benefit of goodwill and acquired intangible assets

$

6,728

 

$

6,801

 

$

3,361

 

Tax benefit of goodwill and acquired intangible assets per diluted share

$

0.09

 

$

0.09

 

$

0.05

 

 
Adjusted net income with tax benefit

$

68,461

 

$

72,820

 

$

25,257

 

Adjusted net income with tax benefit per diluted share

$

0.92

 

$

0.99

 

$

0.35

 

 

Victory Capital Holdings, Inc. and Subsidiaries

Unaudited Condensed Consolidated Balance Sheets

(In thousands, except for shares)

 

March 31, 2020

 

December 31, 2019

Assets
Cash and cash equivalents

$

37,130

 

$

37,121

 

Receivables

77,610

 

95,093

 

Prepaid expenses

6,709

 

4,852

 

Investments

15,631

 

19,076

 

Property and equipment, net

14,028

 

13,240

 

Goodwill

404,750

 

404,750

 

Other intangible assets, net

1,172,305

 

1,175,471

 

Other assets

3,600

 

3,706

 

Total assets

$

1,731,763

 

$

1,753,309

 

 
Liabilities and stockholders' equity
Accounts payable and accrued expenses

$

79,111

 

$

89,203

 

Accrued compensation and benefits

33,544

 

54,842

 

Consideration payable for acquisition of business

113,200

 

118,700

 

Deferred tax liability, net

11,134

 

5,486

 

Other liabilities

25,047

 

22,668

 

Long-term debt, net(1)

888,647

 

924,539

 

Total liabilities

1,150,683

 

1,215,438

 

 
Stockholders' equity
Class A common stock, $0.01 par value per share: 2020 - 400,000,000 shares authorized, 18,508,087 shares issued and 16,582,902 shares outstanding; 2019 - 400,000,000 shares authorized, 18,099,772 shares issued and 16,414,617 shares outstanding

185

 

181

 

Class B common stock, $0.01 par value per share: 2020 - 200,000,000 shares authorized, 54,537,895 shares issued and 51,436,953 shares outstanding; 2019 - 200,000,000 shares authorized, 53,937,394 shares issued and 51,281,512 shares outstanding

545

 

539

 

Additional paid-in capital

632,468

 

624,766

 

Class A treasury stock, at cost: 2020 - 1,925,185 shares; 2019 - 1,685,155 shares

(25,918

)

(21,524

)

Class B treasury stock, at cost: 2020 - 3,100,942 shares; 2019 - 2,655,882 shares

(40,173

)

(31,386

)

Accumulated other comprehensive loss

(4,887

)

Retained earnings (deficit)

18,860

 

(34,705

)

Total stockholders' equity

581,080

 

537,871

 

Total liabilities and stockholders' equity

$

1,731,763

 

$

1,753,309

 

1 Balances at March 31, 2020 and December 31, 2019 are shown net of unamortized loan discount and debt issuance costs in the amount of $25.4 million and $27.5 million, respectively. The gross amount of the debt outstanding was $914 million as of March 31, 2020 and $952 million as of December 31, 2019.

 

Victory Capital Holdings, Inc. and Subsidiaries

Assets Under Management

(unaudited; in millions except for percentages)

 

 

 

 

 

 

 

For the Three Months Ended

 

% Change from

 

 

March 31,

 

December 31,

 

March 31,

 

December 31,

 

March 31,

 

 

2020

 

2019

 

2019

 

2019

 

2019

Beginning assets under management

$

151,832

 

$

145,832

 

$

52,763

 

4

%

188

%

Gross client cash inflows

14,925

 

9,655

 

3,038

 

55

%

391

%

Gross client cash outflows

(17,825

)

(11,045

)

(4,143

)

61

%

330

%

Net client cash flows

(2,900

)

(1,390

)

(1,105

)

109

%

162

%

Market appreciation (depreciation)

(25,153

)

7,389

 

6,460

 

-440

%

-489

%

Acquired assets / Net transfers

0

%

0

%

Ending assets under management

123,779

 

151,832

 

58,119

 

-18

%

113

%

Average assets under management

144,112

 

147,867

 

57,043

 

-3

%

153

%

 

Victory Capital Holdings, Inc. and Subsidiaries

Assets Under Management by Asset Class

(unaudited; in millions)

 
For the Three Months Ended By Asset Class

Global /

U.S. Mid

U.S. Small

Fixed

U.S. Large

Non-U.S.

Total

Money Market/

Cap Equity

Cap Equity

Income

Cap Equity

Equity

Solutions

Other

Long-term

Short-term

Total

March 31, 2020
Beginning assets under management

$

26,347

 

$

17,346

 

$

37,973

 

$

14,091

 

$

12,603

 

$

31,649

 

$

236

 

$

140,245

 

$

11,587

 

$

151,832

 

Gross client cash inflows

1,474

 

1,233

 

1,951

 

238

 

671

 

1,695

 

11

 

7,273

 

7,652

 

14,925

 

Gross client cash outflows

(2,265

)

(1,310

)

(2,890

)

(807

)

(684

)

(2,394

)

(24

)

(10,374

)

(7,451

)

(17,825

)

Net client cash flows

(791

)

(77

)

(939

)

(569

)

(13

)

(699

)

(12

)

(3,101

)

201

 

(2,900

)

Market appreciation (depreciation)

(6,907

)

(5,325

)

(1,361

)

(2,828

)

(3,245

)

(5,436

)

(86

)

(25,187

)

34

 

(25,153

)

Acquired assets / Net transfers

(28

)

(59

)

(272

)

9

 

27

 

12

 

3

 

(307

)

307

 

Ending assets under management

$

18,622

 

$

11,885

 

$

35,402

 

$

10,703

 

$

9,372

 

$

25,526

 

$

140

 

$

111,650

 

$

12,129

 

$

123,779

 

 
December 31, 2019
Beginning assets under management

$

25,479

 

$

16,266

 

$

37,784

 

$

13,488

 

$

11,532

 

$

29,579

 

$

243

 

$

134,371

 

$

11,460

 

$

145,832

 

Gross client cash inflows

1,007

 

838

 

1,608

 

266

 

433

 

1,118

 

15

 

5,284

 

4,371

 

9,655

 

Gross client cash outflows

(1,642

)

(1,142

)

(1,684

)

(610

)

(491

)

(1,139

)

(52

)

(6,758

)

(4,286

)

(11,045

)

Net client cash flows

(635

)

(304

)

(76

)

(344

)

(58

)

(21

)

(37

)

(1,474

)

85

 

(1,390

)

Market appreciation (depreciation)

1,505

 

1,384

 

262

 

946

 

1,129

 

2,091

 

32

 

7,348

 

41

 

7,389

 

Acquired assets / Net transfers

(3

)

3

 

1

 

Ending assets under management

$

26,347

 

$

17,346

 

$

37,973

 

$

14,091

 

$

12,603

 

$

31,649

 

$

236

 

$

140,245

 

$

11,587

 

$

151,832

 

 
March 31, 2019
Beginning assets under management

$

20,019

 

$

12,948

 

$

6,836

 

$

3,759

 

$

4,610

 

$

3,767

 

$

824

 

$

52,763

 

$

$

52,763

 

Gross client cash inflows

993

 

992

 

303

 

26

 

365

 

279

 

81

 

3,038

 

3,038

 

Gross client cash outflows

(1,786

)

(1,059

)

(383

)

(183

)

(277

)

(349

)

(107

)

(4,143

)

(4,143

)

Net client cash flows

(793

)

(67

)

(79

)

(158

)

88

 

(70

)

(26

)

(1,105

)

(1,105

)

Market appreciation (depreciation)

2,942

 

1,834

 

216

 

516

 

535

 

297

 

120

 

6,460

 

6,460

 

Acquired assets / Net transfers

2

 

(1

)

(1

)

1

 

(1

)

Ending assets under management

$

22,169

 

$

14,714

 

$

6,973

 

$

4,117

 

$

5,234

 

$

3,996

 

$

918

 

$

58,119

 

$

$

58,119

 

 

Victory Capital Holdings, Inc. and Subsidiaries

Assets Under Management by Vehicle

(unaudited; in millions)

 
For the Three Months Ended

By Vehicle

Separate

Accounts

Mutual

and Other

Funds(1)

ETFs(2)

Vehicles(3)

Total

March 31, 2020
Beginning assets under management

$

118,605

 

$

4,213

 

$

29,014

 

$

151,832

 

Gross client cash inflows

13,745

 

255

 

925

 

14,925

 

Gross client cash outflows

(15,631

)

(461

)

(1,733

)

(17,825

)

Net client cash flows

(1,886

)

(205

)

(809

)

(2,900

)

Market appreciation (depreciation)

(18,413

)

(830

)

(5,910

)

(25,153

)

Acquired assets / Net transfers

 

 

 

 

Ending assets under management

$

98,305

 

$

3,177

 

$

22,296

 

$

123,779

 

 
December 31, 2019
Beginning assets under management

$

114,071

 

$

3,867

 

$

27,894

 

$

145,832

 

Gross client cash inflows

8,799

 

249

 

607

 

9,655

 

Gross client cash outflows

(9,835

)

(125

)

(1,085

)

(11,045

)

Net client cash flows

(1,036

)

124

 

(478

)

(1,390

)

Market appreciation (depreciation)

5,569

 

222

 

1,598

 

7,389

 

Acquired assets / Net transfers

 

 

 

 

Ending assets under management

$

118,605

 

$

4,213

 

$

29,014

 

$

151,832

 

 
March 31, 2019
Beginning assets under management

$

30,492

 

$

2,956

 

$

19,315

 

$

52,763

 

Gross client cash inflows

2,379

 

242

 

417

 

3,038

 

Gross client cash outflows

(2,887

)

(299

)

(957

)

(4,143

)

Net client cash flows

(508

)

(58

)

(540

)

(1,105

)

Market appreciation (depreciation)

3,801

 

224

 

2,435

 

6,460

 

Acquired assets / Net transfers

 

 

 

 

Ending assets under management

$

33,786

 

$

3,123

 

$

21,210

 

$

58,119

 

(1) Includes institutional and retail share classes, money market and VIP funds.

 

(2) Excludes assets managed for other proprietary product (i.e. funds of funds) in order to adjust for double counting.

 

(3) Includes collective trust funds, wrap program separate accounts and unified managed accounts or UMAs.

 

Victory Capital Holdings, Inc. and Subsidiaries

Assets Under Management1

(unaudited; in millions)

 

As of:

By Asset Class

April 30, 2020

March 31, 2020

Fixed Income

$ 35,476

$ 35,402

Solutions

27,867

25,526

U.S. Mid Cap Equity

21,148

18,622

U.S. Small Cap Equity

13,280

11,885

U.S. Large Cap Equity

11,880

10,703

Global / Non-U.S. Equity

10,213

9,372

Other

183

140

Total Long-Term Assets

$ 120,047

$ 111,650

Money Market/Short-Term Assets

11,766

12,129

Total Assets Under Management

$ 131,814

$ 123,779

 
 
By Vehicle
Mutual Funds2

104,372

98,305

Separate Accounts and Other Vehicles3

24,070

22,296

ETFs

3,372

3,177

Total Assets Under Management

$ 131,814

$ 123,779

 

1Due to rounding, numbers presented in these tables may not add up precisely to the totals provided.

 

2Includes institutional and retail share classes, money market and VIP funds.

 

3Includes collective trust funds, wrap program accounts and unified managed accounts.

Information Regarding Non-GAAP Financial Measures

Victory Capital uses non-GAAP financial measures referred to as Adjusted EBITDA and Adjusted Net Income to measure the operating profitability of the Company. These measures eliminate the impact of one-time acquisition, restructuring and integration costs and demonstrate the ongoing operating earnings metrics of the Company. The Company has included these non-GAAP measures to provide investors with the same financial metrics used by management to assess the operating performance of the Company.

Adjusted EBITDA

Adjustments made to GAAP Net Income to calculate Adjusted EBITDA, as applicable, are:

  • Adding back income tax expense;
  • Adding back interest paid on debt and other financing costs, net of interest income;
  • Adding back depreciation on property and equipment;
  • Adding back other business taxes;
  • Adding back amortization expense on acquisition-related intangible assets;
  • Adding back stock-based compensation expense associated with equity awards issued from pools created in connection with the management-led buyout and various acquisitions and as a result of equity grants related to the IPO;
  • Adding back direct incremental costs of acquisitions, including restructuring costs;
  • Adding back debt issuance cost expense;
  • Adjusting for earnings/losses on equity method investments.

Adjusted Net Income

Adjustments made to GAAP Net Income to calculate Adjusted Net Income, as applicable, are:

  • Adding back other business taxes;
  • Adding back amortization expense on acquisition-related intangible assets;
  • Adding back stock-based compensation expense associated with equity awards issued from pools created in connection with the management-led buyout and various acquisitions and as a result of any equity grants related to the IPO;
  • Adding back direct incremental costs of acquisitions, including restructuring costs;
  • Adding back debt issuance cost expense;
  • Subtracting an estimate of income tax expense applied to the sum of the adjustments above.

Tax Benefit of Goodwill and Acquired Intangible Assets

Due to Victory Capital’s acquisitive nature, tax deductions allowed on acquired intangible assets and goodwill provide it with additional significant supplemental economic benefit. The tax benefit of goodwill and intangible assets represent the tax benefits associated with deductions allowed for intangible assets and goodwill generated from prior acquisitions in which the Company received a step-up in basis for tax purposes. Acquired intangible assets and goodwill may be amortized for tax purposes, generally over a 15-year period. The tax benefit from amortization on these assets is included to show the full economic benefit of deductions for all acquired intangible assets with a step-up in tax basis.

Investors:
Matthew Dennis, CFA
Chief of Staff
Director, Investor Relations
216-898-2412
mdennis@vcm.com

Media:
Tricia Ross
310-622-8226
tross@finprofiles.com

Source: Victory Capital Holdings, Inc.

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