Fourth Quarter 2017 Highlights and Recent
Developments1
Victory Capital Holdings, Inc. (NASDAQ:VCTR) ("Victory Capital" or
the "Company") today reported its results for the fourth quarter
and year ended December 31, 2017.
"Our strong results for the fourth quarter and
full-year 2017 are a direct reflection of our continued commitment
to delivering superior risk-adjusted investment performance to our
clients," said David Brown, Chairman and Chief Executive Officer of
Victory Capital. "We have evolved our business into a
next-generation, integrated multi-boutique investment management
firm with nine individually branded, largely autonomous Investment
Franchises. Our focus is on attracting specialist managers and
providing a centralized – not standardized – operating platform
that enables them to focus on the pursuit of investment
excellence.
"Our progress over the last several years has
included the completion of three strategic acquisitions and the
development of a suite of rules-based, strategic beta ETFs –
branded VictoryShares – which we believe is resonating with our
clients.
"During the fourth quarter, AUM increased to
$61.8 billion, reflecting positive net flows, solid market returns
and strong investment results from our Investment Franchises and
our VictoryShares ETFs.
"Looking ahead, we are excited about the
opportunity to create long-term value for our shareholders through
the disciplined execution of our long-term corporate vision, which
combines strategic acquisitions with organic growth. As in the
past, serving the needs of our clients remains our top
priority."
1 Adjusted measures are non-GAAP financial measures. An
explanation of these non-GAAP financial measures is included under
the heading “Information Regarding Non-GAAP Financial Measures” at
the end of this press release. Please see the non-GAAP
reconciliation tables.
The table below presents AUM, and certain GAAP and non-GAAP
("adjusted") financial results.
(in
millions except per share amounts or as otherwise
noted) |
|
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|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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For the Three Months Ended |
|
For the Years Ended |
|
|
|
December 31, |
|
September 30, |
|
December 31, |
|
December 31, |
|
December 31, |
|
|
|
2017 |
|
2017 |
|
2016 |
|
2017 |
|
2016 |
|
Assets
Under Management |
|
|
|
|
|
|
|
|
|
|
|
Ending |
$ |
61,771 |
|
|
$ |
58,997 |
|
|
$ |
54,965 |
|
|
$ |
61,771 |
|
|
$ |
54,965 |
|
|
|
Average |
|
60,354 |
|
|
|
57,875 |
|
|
|
52,022 |
|
|
|
57,823 |
|
|
|
41,756 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Flows |
|
|
|
|
|
|
|
|
|
|
|
Gross |
$ |
4,371 |
|
|
$ |
3,879 |
|
|
$ |
6,224 |
|
|
$ |
16,929 |
|
|
$ |
16,037 |
|
|
|
Net |
|
294 |
|
|
|
(778 |
) |
|
|
1,622 |
|
|
|
(1,471 |
) |
|
|
875 |
|
|
|
Net flows
excluding Diversified Equity(1) |
|
- |
|
|
|
- |
|
|
|
1,854 |
|
|
|
(853 |
) |
|
|
2,266 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated Financial Results (GAAP) |
|
|
|
|
|
|
|
|
|
|
|
Revenue |
$ |
105.6 |
|
|
$ |
102.4 |
|
|
$ |
98.1 |
|
|
$ |
409.6 |
|
|
$ |
297.9 |
|
|
|
Operating
expenses |
|
78.7 |
|
|
|
78.2 |
|
|
|
91.5 |
|
|
|
319.4 |
|
|
|
273.4 |
|
|
|
Income
from operations |
|
26.9 |
|
|
|
24.2 |
|
|
|
6.6 |
|
|
|
90.2 |
|
|
|
24.5 |
|
|
|
Operating
margin |
|
25.5 |
% |
|
|
23.7 |
% |
|
|
6.7 |
% |
|
|
22.0 |
% |
|
|
8.2 |
% |
|
|
Net
income/(loss) |
|
11.2 |
|
|
|
7.9 |
|
|
|
(2.7 |
) |
|
|
25.8 |
|
|
|
(6.1 |
) |
|
|
Earnings
per diluted share |
$ |
0.19 |
|
|
$ |
0.13 |
|
|
$ |
(0.05 |
) |
|
$ |
0.43 |
|
|
$ |
(0.12 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted
Performance Results (Non-GAAP)(2) |
|
|
|
|
|
|
|
|
|
|
|
Adjusted
EBITDA |
$ |
40.0 |
|
|
$ |
39.3 |
|
|
$ |
32.1 |
|
|
$ |
149.1 |
|
|
$ |
98.1 |
|
|
|
Adjusted
EBITDA margin |
|
37.9 |
% |
|
|
38.3 |
% |
|
|
32.7 |
% |
|
|
36.4 |
% |
|
|
32.9 |
% |
|
|
Adjusted
net income |
|
18.1 |
|
|
|
17.1 |
|
|
|
12.8 |
|
|
|
62.0 |
|
|
|
39.0 |
|
|
|
Tax
benefit of goodwill and acquired intangibles |
|
5.0 |
|
|
|
4.9 |
|
|
|
4.2 |
|
|
|
19.7 |
|
|
|
16.8 |
|
|
|
Adjusted
net income with tax benefit |
|
23.1 |
|
|
|
22.0 |
|
|
|
17.0 |
|
|
|
81.7 |
|
|
|
55.8 |
|
|
|
Adjusted
net income with tax benefit per diluted share |
$ |
0.39 |
|
|
$ |
0.37 |
|
|
$ |
0.31 |
|
|
$ |
1.37 |
|
|
$ |
1.12 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
(1) In May 2017, the Company made a decision to exit the
Diversified Equity Franchise; all remaining AUM was transferred to
the Munder Capital Management Franchise to manage beginning May 15,
2017. |
|
|
(2) Adjusted EBITDA and Adjusted Net Income are non-GAAP
financial measures. Reconciliation of each of Adjusted EBITDA and
Adjusted Net Income to net income/(loss) have been provided in the
non-GAAP reconciliation tables in this press release. An
explanation of these non-GAAP financial measures is included below
under the heading "Information Regarding Non-GAAP Financial
Measures". |
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AUM, Flows and Investment
Performance
Victory Capital's AUM increased $2.8 billion, or
5%, to $61.8 billion at December 31, 2017, compared to $59.0
billion at September 30, 2017. The increase was primarily due to
$2.6 billion in net market appreciation and net inflows of $0.3
billion. Gross flows for the fourth quarter were $4.4 billion. For
the year ended December 31, 2017, AUM increased $6.8 billion, or
12%, to $61.8 billion from $55.0 billion at December 31, 2016. The
increase was primarily due to $8.4 billion in net market
appreciation, partially offset by $1.5 billion of net outflows (or
$0.9 billion excluding the Diversified Equity Franchise). Gross
flows for the year were $16.9 billion.
As of December 31, 2017, Victory Capital offered
65 investment strategies through its nine autonomous Investment
Franchises and Solutions Platform. The table below presents
outperformance against benchmarks by AUM and strategies as of
December 31, 2017.
|
|
Trailing 1-Year |
|
Trailing 3-Years |
|
Trailing 5-Years |
|
Trailing 10-Years |
Percentage
of AUM Outperforming Benchmark |
88% |
|
84% |
|
84% |
|
80% |
Percentage
of Strategies Outperforming Benchmark |
74% |
|
72% |
|
77% |
|
75% |
Fourth Quarter of 2017 Compared to Third Quarter of
2017
For the quarter ended December 31, 2017, net
income increased 43% to $11.2 million, or $0.19 per diluted share,
compared to net income of $7.9 million, or $0.13 per diluted share,
for the third quarter of 2017. GAAP operating margin was 25.5% for
the quarter compared to 23.7% for the third quarter of 2017.
Adjusted Net Income with tax benefit increased 5% to $23.1 million,
or $0.39 per diluted share comprised of $0.30 per diluted share in
Adjusted Net Income and $0.09 per diluted share in tax benefit,
compared to $22.0 million, or $0.37 per diluted share comprised of
$0.29 per diluted share in Adjusted Net Income and $0.08 per
diluted share in tax benefit, for the third quarter of 2017.
Adjusted EBITDA and Adjusted EBITDA margin were
$40.0 million and 37.9%, respectively, for the fourth quarter of
2017, compared to $39.3 million and 38.3%, respectively, for the
third quarter of 2017. The increases in net income, Adjusted Net
Income and Adjusted EBITDA resulted from higher revenue coupled
with scale effects in the business. The increases in net income and
Adjusted Net Income also reflected lower interest expense,
primarily due to refinancing activity in August 2017.
- Revenue increased 3% to $105.6 million, compared to $102.4
million for the third quarter of 2017 due to higher average AUM,
partially offset by a decrease in the realized fee rate due to
asset mix.
- Operating expenses were $78.7 million, compared to $78.2
million in the third quarter of 2017.
Fourth Quarter of 2017 Compared to
Fourth Quarter of 2016
For the quarter ended December 31, 2017, net
income was $11.2 million, or $0.19 per diluted share, compared to a
net loss of $2.7 million, or $0.05 per basic and diluted share, in
the fourth quarter of 2016. GAAP operating margin was 25.5% for the
quarter compared to 6.7% for the fourth quarter of 2016. Adjusted
Net Income with tax benefit increased 36% to $23.1 million, or
$0.39 per diluted share comprised of $0.30 per diluted share in
Adjusted Net Income and $0.09 per diluted share in tax benefit in
the fourth quarter of 2017, compared to $17.0 million, or $0.31 per
diluted share comprised of $0.23 per diluted share in Adjusted Net
Income and $0.08 per diluted share in tax benefit, in the fourth
quarter of 2016.
Adjusted EBITDA and Adjusted EBITDA margin were
$40.0 million and 37.9%, respectively, for the fourth quarter of
2017, compared to $32.1 million and 32.7%, respectively, for the
fourth quarter a year ago. Net income, Adjusted Net Income and
Adjusted EBITDA increased due to higher revenue coupled with scale
effects, the successful integration of RS Investments and, specific
to net income and Adjusted Net Income, a decrease in interest
expense primarily due to refinancing activity in August 2017.
- Revenue increased 8% to $105.6 million, compared to $98.1
million for the fourth quarter of 2016, due to higher average AUM,
partially offset by a decrease in the realized fee rate due to
asset mix.
- Operating expenses decreased 14% to $78.7 million, compared to
$91.5 million in the fourth quarter of 2016, primarily due to scale
effects and the successful integration of RS Investments.
Year Ended December 31, 2017 Compared to
Year Ended December 31, 2016
For the year ended December 31, 2017, net income
was $25.8 million, or $0.43 per diluted share, compared to a net
loss of $6.1 million, or $0.12 per basic and diluted share, for
2016. GAAP operating margin was 22.0% in 2017 compared to 8.2% in
2016. Adjusted Net Income with tax benefit increased 46% to $81.7
million, or $1.37 per diluted share comprised of $1.04 per diluted
share in Adjusted Net Income and $0.33 per diluted share in tax
benefit in 2017, compared to $55.8 million, or $1.12 per diluted
share comprised of $0.78 per diluted share in Adjusted Net Income
and $0.34 per diluted share in tax benefit, in 2016.
Adjusted EBITDA and Adjusted EBITDA margin were
$149.1 million and 36.4%, respectively, in 2017, compared to $98.1
million and 32.9%, respectively, in 2016.
- Revenue for the year increased 38% to $409.6 million, compared
to $297.9 million in 2016 as a result of higher AUM primarily due
to the acquisition of RS Investments in July 2016.
- Operating expenses increased 17% to $319.4 million, compared to
$273.4 million in 2016, primarily due to the acquisition of RS
Investments in July 2016.
Balance Sheet / Capital
Management
Cash and cash equivalents were $12.9 million at
December 31, 2017, compared to $16.4 million at December 31, 2016.
The Company paid down $18.0 million of debt during the fourth
quarter, resulting in aggregate debt outstanding of $499.7 million
at December 31, 2017, compared to $517.7 million at September 30,
2017. The repayment of debt resulted in annualized interest expense
savings of $1.2 million.
Subsequent to year-end, the Company issued 11.7
million shares of Class A common stock in an initial public
offering, or IPO, for an aggregate of $143.0 million in net
proceeds. The Company used the net proceeds from its IPO, together
with cash on hand, to pay down debt and entered into a new $360.0
million syndicated senior credit facility. In March 2018, the
Company issued an additional 1.1 million shares of Class A common
stock pursuant to an underwriters' option to purchase additional
shares in the IPO for $13.5 million in net proceeds. Victory
Capital used the net proceeds from the option exercise, as well as
cash on hand, to repay $37.0 million of the outstanding term loan,
resulting in annualized interest expense savings of approximately
$1.6 million. As of March 26, 2018, aggregate debt outstanding is
$323.0 million.
Impact of Tax Reform
On December 22, 2017, the Tax Cuts and Jobs Act
("Tax Act") was enacted. The Tax Act significantly revises the U.S.
corporate income tax law by, among other things, decreasing the
federal corporate income tax rate from 35% to 21% effective January
1, 2018. As a result of the reduction in the corporate income tax
rate, the Company is required to remeasure its U.S. net deferred
taxes at December 31, 2017. The impact of the remeasurement is a
one-time credit to income tax expense of $2.4 million for the three
months and year ended December 31, 2017.
Effective January 1, 2018, Victory Capital
estimates the impact of the Tax Act will lower the Company's
combined statutory federal income tax rate plus an estimate for
state, local and foreign income taxes from approximately 38% to
approximately 24%, thus lowering its income tax expense beginning
in calendar year 2018. The reduction in the combined statutory
federal income tax rate plus an estimate for state, local and
foreign income taxes, from approximately 38% to approximately 24%,
will reduce the tax benefit of goodwill and acquired intangible
assets beginning in 2018.
About Victory Capital
Victory Capital is an independent investment
management firm operating a next-generation, integrated
multi-boutique business model with $61.8 billion in assets under
management and advisement as of December 31, 2017.
Victory Capital's differentiated model is
comprised of nine Investment Franchises, each with an independent
culture and investment approach. Additionally, the Company offers a
rules-based Solutions Platform, featuring the VictoryShares ETF
brand, as well as custom and multi-asset class solutions. The
Company's Investment Franchises and Solutions Platform are
supported by a centralized distribution, marketing and operational
environment, in which the investment professionals can focus on the
pursuit of investment excellence.
Victory Capital provides institutions, financial
advisors and retirement platforms with a variety of asset classes
and investment vehicles, including separately managed accounts,
collective trusts, mutual funds, ETFs and UMA/SMA vehicles.
For more information, please visit
www.vcm.com.
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, 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; 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 we are 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.
INVESTOR RELATIONS WEBSITE
Victory Capital may use the Investor Relations
section of its website, https://ir.vcm.com, to disclose material
information to investors and the marketplace as a means of
disclosing material, non-public information and for complying with
disclosure obligations under Regulation Fair Disclosure ("Reg FD").
Victory Capital encourages investors, the media and other
interested parties to visit its investor relations website
regularly.
ContactsInvestors:Lauren Crawford,
310-622-8239lcrawford@finprofiles.com
Media: Tricia Ross, 310-622-8226tross@finprofiles.com
|
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|
|
|
|
Victory Capital Holdings, Inc. and
Subsidiaries |
Consolidated Statements of
Operations |
(unaudited; in thousands except
shares) |
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended |
|
For the Years Ended |
|
December 31, |
|
September 30, |
|
December 31, |
|
December 31, |
|
December 31, |
|
2017 |
|
2017 |
|
2016 |
|
2017 |
|
2016 |
Revenue |
|
|
|
|
|
|
|
|
|
Investment management
fees |
$ |
89,206 |
|
|
$ |
86,016 |
|
|
$ |
82,030 |
|
|
$ |
343,811 |
|
|
$ |
248,482 |
|
Fund administration and
distribution fees |
|
16,440 |
|
|
|
16,372 |
|
|
|
16,049 |
|
|
|
65,818 |
|
|
|
49,401 |
|
Total revenue |
|
105,646 |
|
|
|
102,388 |
|
|
|
98,079 |
|
|
|
409,629 |
|
|
|
297,883 |
|
|
|
|
|
|
|
|
|
|
|
Expenses |
|
|
|
|
|
|
|
|
|
Personnel compensation
and benefits |
|
37,339 |
|
|
|
36,097 |
|
|
|
44,331 |
|
|
|
144,111 |
|
|
|
122,615 |
|
Distribution and other
asset-based expenses |
|
25,213 |
|
|
|
24,801 |
|
|
|
26,951 |
|
|
|
103,439 |
|
|
|
77,497 |
|
General and
administrative |
|
7,947 |
|
|
|
8,867 |
|
|
|
8,282 |
|
|
|
33,996 |
|
|
|
26,628 |
|
Depreciation and
amortization |
|
6,570 |
|
|
|
7,055 |
|
|
|
8,654 |
|
|
|
29,910 |
|
|
|
30,405 |
|
Change in value of
consideration payable for acquisition of business |
|
(269 |
) |
|
|
- |
|
|
|
(303 |
) |
|
|
(294 |
) |
|
|
(378 |
) |
Acquisition-related
costs |
|
659 |
|
|
|
844 |
|
|
|
944 |
|
|
|
2,094 |
|
|
|
6,619 |
|
Restructuring and
integration costs |
|
1,261 |
|
|
|
483 |
|
|
|
2,650 |
|
|
|
6,205 |
|
|
|
10,012 |
|
Total operating
expenses |
|
78,720 |
|
|
|
78,147 |
|
|
|
91,509 |
|
|
|
319,461 |
|
|
|
273,398 |
|
|
|
|
|
|
|
|
|
|
|
Income from
operations |
|
26,926 |
|
|
|
24,241 |
|
|
|
6,570 |
|
|
|
90,168 |
|
|
|
24,485 |
|
Operating
margin |
|
25.5 |
% |
|
|
23.7 |
% |
|
|
6.7 |
% |
|
|
22.0 |
% |
|
|
8.2 |
% |
|
|
|
|
|
|
|
|
|
|
Other income
(expense) |
|
|
|
|
|
|
|
|
|
Interest income and
other income/(expense) |
|
(2,097 |
) |
|
|
753 |
|
|
|
596 |
|
|
|
(2,913 |
) |
|
|
1,086 |
|
Interest expense and
other financing costs |
|
(10,308 |
) |
|
|
(12,018 |
) |
|
|
(11,265 |
) |
|
|
(48,797 |
) |
|
|
(34,642 |
) |
Total other income
(expense), net |
|
(12,405 |
) |
|
|
(11,265 |
) |
|
|
(10,669 |
) |
|
|
(51,710 |
) |
|
|
(33,556 |
) |
Income/(loss) before
income taxes |
|
14,521 |
|
|
|
12,976 |
|
|
|
(4,099 |
) |
|
|
38,458 |
|
|
|
(9,071 |
) |
|
|
|
|
|
|
|
|
|
|
Income tax
(expense)/benefit |
|
(3,312 |
) |
|
|
(5,126 |
) |
|
|
1,411 |
|
|
|
(12,632 |
) |
|
|
3,000 |
|
Net
income/(loss) |
$ |
11,209 |
|
|
$ |
7,850 |
|
|
$ |
(2,688 |
) |
|
$ |
25,826 |
|
|
$ |
(6,071 |
) |
Earnings per share -
basic |
$ |
0.20 |
|
|
$ |
0.14 |
|
|
$ |
(0.05 |
) |
|
$ |
0.47 |
|
|
$ |
(0.12 |
) |
Earnings per share -
diluted |
|
0.19 |
|
|
|
0.13 |
|
|
|
(0.05 |
) |
|
|
0.43 |
|
|
|
(0.12 |
) |
Weighted average shares
outstanding - basic |
|
55,119,711 |
|
|
|
54,961,161 |
|
|
|
54,824,510 |
|
|
|
54,930,852 |
|
|
|
50,017,712 |
|
Weighted average shares
outstanding - diluted |
|
59,768,134 |
|
|
|
59,738,176 |
|
|
|
54,824,510 |
|
|
|
59,577,348 |
|
|
|
50,017,712 |
|
Dividends declared per
share |
$ |
0.23 |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
2.42 |
|
|
$ |
- |
|
|
|
|
|
|
|
|
|
|
|
Victory Capital Holdings, Inc. and
Subsidiaries |
Reconcilation of GAAP to Non-GAAP
Measures |
(unaudited; in thousands except
shares) |
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended |
|
For the Years Ended |
|
December 31, |
|
September 30, |
|
December 31, |
|
December 31, |
|
December 31, |
|
2017 |
|
2017 |
|
2016 |
|
2017 |
|
2016 |
Net income /
(loss) |
$ |
11,209 |
|
|
$ |
7,850 |
|
|
$ |
(2,688 |
) |
|
$ |
25,826 |
|
|
$ |
(6,071 |
) |
GAAP income tax
(expense) / benefit |
|
(3,312 |
) |
|
|
(5,126 |
) |
|
|
1,411 |
|
|
|
(12,632 |
) |
|
|
3,000 |
|
Income / (loss)
before taxes |
$ |
14,521 |
|
|
$ |
12,976 |
|
|
$ |
(4,099 |
) |
|
$ |
38,458 |
|
|
$ |
(9,071 |
) |
Interest expense /
(income) |
|
9,328 |
|
|
|
10,648 |
|
|
|
10,324 |
|
|
|
44,330 |
|
|
|
31,286 |
|
Depreciation |
|
895 |
|
|
|
858 |
|
|
|
930 |
|
|
|
3,561 |
|
|
|
3,156 |
|
Other business
taxes |
|
428 |
|
|
|
619 |
|
|
|
397 |
|
|
|
1,887 |
|
|
|
1,137 |
|
GAAP amortization of
acquisition-related intangibles |
|
5,676 |
|
|
|
6,197 |
|
|
|
7,725 |
|
|
|
26,349 |
|
|
|
27,250 |
|
Stock-based
compensation |
|
1,740 |
|
|
|
4,060 |
|
|
|
2,221 |
|
|
|
11,752 |
|
|
|
8,827 |
|
Acquisition,
restructuring and exit costs |
|
6,001 |
|
|
|
1,241 |
|
|
|
6,729 |
|
|
|
15,041 |
|
|
|
23,025 |
|
Debt issuance
costs |
|
788 |
|
|
|
2,419 |
|
|
|
862 |
|
|
|
6,035 |
|
|
|
2,749 |
|
Pre-IPO governance
expenses |
|
347 |
|
|
|
301 |
|
|
|
300 |
|
|
|
1,248 |
|
|
|
1,181 |
|
Earnings/losses from
equity method investments |
|
319 |
|
|
|
(65 |
) |
|
|
- |
|
|
|
427 |
|
|
|
- |
|
Compensation in excess
of expected levels due to acquisitions |
|
- |
|
|
|
- |
|
|
|
6,678 |
|
|
|
- |
|
|
|
8,534 |
|
Adjusted
EBITDA |
$ |
40,043 |
|
|
$ |
39,254 |
|
|
$ |
32,067 |
|
|
$ |
149,088 |
|
|
$ |
98,074 |
|
Adjusted EBITDA
margin |
|
37.9 |
% |
|
|
38.3 |
% |
|
|
32.7 |
% |
|
|
36.4 |
% |
|
|
32.9 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income /
loss |
$ |
11,209 |
|
|
$ |
7,850 |
|
|
$ |
(2,688 |
) |
|
$ |
25,826 |
|
|
$ |
(6,071 |
) |
Adjustment to reflect
the operating performance of the Company |
|
|
|
|
|
|
|
|
|
i. Other business
taxes |
|
428 |
|
|
|
619 |
|
|
|
397 |
|
|
|
1,887 |
|
|
|
1,137 |
|
ii. GAAP amortization
of acquisition-related intangibles |
|
5,676 |
|
|
|
6,197 |
|
|
|
7,725 |
|
|
|
26,349 |
|
|
|
27,250 |
|
iii. Stock-based
compensation |
|
1,740 |
|
|
|
4,060 |
|
|
|
2,221 |
|
|
|
11,752 |
|
|
|
8,827 |
|
iv. Acquisition,
restructuring and exit costs |
|
6,001 |
|
|
|
1,241 |
|
|
|
6,729 |
|
|
|
15,041 |
|
|
|
23,025 |
|
v. Debt issuance
costs |
|
788 |
|
|
|
2,419 |
|
|
|
862 |
|
|
|
6,035 |
|
|
|
2,749 |
|
vi. Pre-IPO governance
expenses |
|
347 |
|
|
|
301 |
|
|
|
300 |
|
|
|
1,248 |
|
|
|
1,181 |
|
vii. Compensation in
excess of expected levels due to acquisition |
|
- |
|
|
|
- |
|
|
|
6,678 |
|
|
|
- |
|
|
|
8,534 |
|
Tax effect of above
adjustments |
|
(5,692 |
) |
|
|
(5,638 |
) |
|
|
(9,467 |
) |
|
|
(23,678 |
) |
|
|
(27,627 |
) |
viii. Remeasurement of
net deferred taxes |
|
(2,422 |
) |
|
|
- |
|
|
|
- |
|
|
|
(2,422 |
) |
|
|
- |
|
Adjusted net
income |
$ |
18,075 |
|
|
$ |
17,049 |
|
|
$ |
12,757 |
|
|
$ |
62,038 |
|
|
$ |
39,005 |
|
Adjusted net
income per diluted share |
$ |
0.30 |
|
|
$ |
0.29 |
|
|
$ |
0.23 |
|
|
$ |
1.04 |
|
|
$ |
0.78 |
|
|
|
|
|
|
|
|
|
|
|
Tax benefit of
goodwill and acquired intangibles |
$ |
4,998 |
|
|
$ |
4,901 |
|
|
$ |
4,197 |
|
|
$ |
19,691 |
|
|
$ |
16,786 |
|
Tax benefit of
goodwill and acquired intangibles per diluted share |
$ |
0.09 |
|
|
$ |
0.08 |
|
|
$ |
0.08 |
|
|
$ |
0.33 |
|
|
$ |
0.34 |
|
|
|
|
|
|
|
|
|
|
|
Adjusted net
income with tax benefit |
$ |
23,073 |
|
|
$ |
21,950 |
|
|
$ |
16,954 |
|
|
$ |
81,729 |
|
|
$ |
55,791 |
|
Adjusted net
income with tax benefit per diluted share |
$ |
0.39 |
|
|
$ |
0.37 |
|
|
$ |
0.31 |
|
|
$ |
1.37 |
|
|
$ |
1.12 |
|
|
|
|
|
|
|
|
|
|
|
Victory Capital Holdings, Inc. and
Subsidiaries |
Consolidated Balance Sheets |
(In thousands, except for shares) |
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2017 |
|
December 31, 2016 |
ASSETS |
|
|
|
|
Cash and
cash equivalents |
|
$ |
12,921 |
|
|
$ |
16,441 |
|
Investment management fees receivable |
|
|
42,264 |
|
|
|
43,597 |
|
Fund
administration and distribution fees receivable |
|
|
3,925 |
|
|
|
4,604 |
|
Other
receivables |
|
|
9,728 |
|
|
|
35,669 |
|
Prepaid
expenses |
|
|
5,441 |
|
|
|
4,208 |
|
Available‑for‑sale securities, at fair value |
|
|
677 |
|
|
|
525 |
|
Trading
securities, at fair value |
|
|
10,659 |
|
|
|
5,638 |
|
Property
and equipment, net |
|
|
8,844 |
|
|
|
9,544 |
|
Goodwill |
|
|
284,108 |
|
|
|
284,108 |
|
Other
intangible assets, net |
|
|
408,000 |
|
|
|
434,349 |
|
Deferred
tax asset, net |
|
|
– |
|
|
|
7,452 |
|
Other
assets |
|
|
6,055 |
|
|
|
4,816 |
|
Total
assets |
|
$ |
792,622 |
|
|
$ |
850,951 |
|
|
|
|
|
|
LIABILITIES AND
STOCKHOLDERS' EQUITY |
|
|
|
|
Accounts
payable |
|
$ |
327 |
|
|
$ |
3,712 |
|
Accrued
compensation and benefits |
|
|
29,305 |
|
|
|
40,539 |
|
Accrued
expenses |
|
|
21,669 |
|
|
|
27,535 |
|
Consideration payable for acquisition of business |
|
|
9,856 |
|
|
|
17,267 |
|
Deferred
compensation plan liability |
|
|
10,659 |
|
|
|
5,638 |
|
Deferred
tax liability, net |
|
|
4,068 |
|
|
|
- |
|
Other
liabilities |
|
|
2,330 |
|
|
|
6,734 |
|
Long-term
debt(1) |
|
|
483,225 |
|
|
|
418,528 |
|
Total liabilities |
|
|
561,439 |
|
|
|
519,953 |
|
|
|
|
|
|
Stockholders'
equity: |
|
|
|
|
Common
stock, par value $0.01 per share; 2017— 78,837,300 shares
authorized, 57,182,730 shares issued and 55,118,673 shares
outstanding; 2016—78,837,300 shares authorized, 56,505,321 shares
issued and 54,785,792 shares outstanding |
|
|
572 |
|
|
|
565 |
|
Additional paid-in capital |
|
|
435,334 |
|
|
|
421,747 |
|
Treasury
stock, at cost: 2017— 2,064,057 shares; 2016— 1,719,529 shares |
|
|
(20,899 |
) |
|
|
(16,245 |
) |
Accumulated other comprehensive loss |
|
|
64 |
|
|
|
(537 |
) |
Retained
deficit |
|
|
(183,888 |
) |
|
|
(74,532 |
) |
Total stockholders'
equity |
|
|
231,183 |
|
|
|
330,998 |
|
Total
liabilities and stockholders' equity |
|
$ |
792,622 |
|
|
$ |
850,951 |
|
|
|
|
|
|
|
|
|
|
|
(1) Balance
at December 31, 2017 is shown net of unamortized loan discount and
debt issuance costs in the amount of $16.5 million. The gross
amount of the debt outstanding was $499.7 million. |
|
|
|
|
|
Victory Capital Holdings, Inc. and
Subsidiaries |
Assets Under Management |
(unaudited; in millions) |
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended |
|
% Change from |
|
|
December 31, |
|
September 30, |
|
December 31, |
|
September 30, |
|
December 31, |
|
|
2017 |
|
2017 |
|
2016 |
|
2017 |
|
2016 |
Beginning
assets under management |
$ |
58,997 |
|
|
$ |
56,973 |
|
|
$ |
51,356 |
|
|
4% |
|
15% |
|
Gross
client cash inflows |
|
4,371 |
|
|
|
3,879 |
|
|
|
6,224 |
|
|
13% |
|
-30% |
|
Gross
client cash outflows |
|
(4,077 |
) |
|
|
(4,658 |
) |
|
|
(4,602 |
) |
|
-12% |
|
-11% |
Net client
cash flows |
|
294 |
|
|
|
(778 |
) |
|
|
1,622 |
|
|
N/M |
|
-82% |
Market
appreciation (depreciation) |
|
2,575 |
|
|
|
2,802 |
|
|
|
2,044 |
|
|
-8% |
|
26% |
Net
transfers |
|
(95 |
) |
|
|
(0 |
) |
|
|
(56 |
) |
|
N/M |
|
70% |
Ending
assets under management |
|
61,771 |
|
|
|
58,997 |
|
|
|
54,965 |
|
|
5% |
|
12% |
Average
assets under management |
|
60,354 |
|
|
|
57,875 |
|
|
|
52,022 |
|
|
4% |
|
16% |
Net client
cash flows excluding Diversified Equity |
|
294 |
|
|
|
(778 |
) |
|
|
1,854 |
|
|
N/M |
|
-84% |
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Years Ended |
|
|
|
% Change from |
|
|
|
|
December 31, |
|
December 31, |
|
|
|
December 31, |
|
|
|
|
2017 |
|
2016 |
|
|
|
2016 |
|
|
Beginning
assets under management |
$ |
54,965 |
|
|
$ |
33,111 |
|
|
|
|
66% |
|
|
|
Gross
client cash inflows |
|
16,929 |
|
|
|
16,037 |
|
|
|
|
6% |
|
|
|
Gross
client cash outflows |
|
(18,400 |
) |
|
|
(15,162 |
) |
|
|
|
21% |
|
|
Net client
cash flows |
|
(1,471 |
) |
|
|
875 |
|
|
|
|
N/M |
|
|
Market
appreciation (depreciation) |
|
8,372 |
|
|
|
4,393 |
|
|
|
|
91% |
|
|
Net
transfers |
|
(95 |
) |
|
|
16,587 |
|
|
|
|
N/M |
|
|
Ending
assets under management |
|
61,771 |
|
|
|
54,965 |
|
|
|
|
12% |
|
|
Average
assets under management |
|
57,823 |
|
|
|
41,756 |
|
|
|
|
38% |
|
|
Net client
cash flows excluding Diversified Equity |
|
(853 |
) |
|
|
2,266 |
|
|
|
|
N/M |
|
|
|
|
|
|
|
|
|
|
|
|
|
Victory Capital Holdings, Inc. and
Subsidiaries |
Assets Under Management by Asset
Class |
(unaudited; in millions) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended |
|
By Asset Class |
|
|
|
|
U.S. Large Cap Equity |
|
U.S. Mid Cap Equity |
|
U.S. Small Cap Equity |
|
Global / Non-U.S. Equity |
|
Fixed Income |
|
Commodity |
|
Solutions |
|
Other |
|
Total |
|
December 31, 2017 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning
assets under management |
|
$ |
4,806 |
|
|
$ |
23,389 |
|
|
$ |
14,833 |
|
|
$ |
3,735 |
|
|
$ |
7,777 |
|
|
$ |
1,517 |
|
|
$ |
2,591 |
|
|
$ |
349 |
|
|
$ |
58,997 |
|
|
|
Gross
client cash inflows |
|
|
57 |
|
|
|
2,335 |
|
|
|
716 |
|
|
|
366 |
|
|
|
403 |
|
|
|
71 |
|
|
|
377 |
|
|
|
46 |
|
|
|
4,371 |
|
|
|
Gross
client cash outflows |
|
|
(282 |
) |
|
|
(1,819 |
) |
|
|
(873 |
) |
|
|
(211 |
) |
|
|
(654 |
) |
|
|
(154 |
) |
|
|
(62 |
) |
|
|
(22 |
) |
|
|
(4,077 |
) |
|
Net client
cash flows |
|
|
(225 |
) |
|
|
515 |
|
|
|
(158 |
) |
|
|
155 |
|
|
|
(251 |
) |
|
|
(83 |
) |
|
|
315 |
|
|
|
24 |
|
|
|
294 |
|
|
Market
appreciation (depreciation) |
|
|
210 |
|
|
|
1,281 |
|
|
|
633 |
|
|
|
232 |
|
|
|
68 |
|
|
|
(16 |
) |
|
|
150 |
|
|
|
18 |
|
|
|
2,575 |
|
|
Net
transfers |
|
|
(1 |
) |
|
|
0 |
|
|
|
0 |
|
|
|
(18 |
) |
|
|
(43 |
) |
|
|
0 |
|
|
|
(28 |
) |
|
|
(5 |
) |
|
|
(95 |
) |
|
Ending
assets under management |
|
|
4,789 |
|
|
|
25,185 |
|
|
|
15,308 |
|
|
|
4,105 |
|
|
|
7,551 |
|
|
|
1,419 |
|
|
|
3,028 |
|
|
|
386 |
|
|
|
61,771 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2017 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning
assets under management |
|
$ |
4,825 |
|
|
$ |
22,390 |
|
|
$ |
14,452 |
|
|
$ |
3,606 |
|
|
$ |
7,708 |
|
|
$ |
1,421 |
|
|
$ |
2,230 |
|
|
$ |
340 |
|
|
$ |
56,973 |
|
|
|
Gross
client cash inflows |
|
|
36 |
|
|
|
1,772 |
|
|
|
997 |
|
|
|
195 |
|
|
|
484 |
|
|
|
55 |
|
|
|
324 |
|
|
|
17 |
|
|
|
3,879 |
|
|
|
Gross
client cash outflows |
|
|
(185 |
) |
|
|
(1,766 |
) |
|
|
(1,612 |
) |
|
|
(348 |
) |
|
|
(512 |
) |
|
|
(145 |
) |
|
|
(52 |
) |
|
|
(39 |
) |
|
|
(4,658 |
) |
|
Net client
cash flows |
|
|
(149 |
) |
|
|
6 |
|
|
|
(615 |
) |
|
|
(153 |
) |
|
|
(28 |
) |
|
|
(89 |
) |
|
|
272 |
|
|
|
(22 |
) |
|
|
(778 |
) |
|
Market
appreciation (depreciation) |
|
|
131 |
|
|
|
993 |
|
|
|
995 |
|
|
|
283 |
|
|
|
95 |
|
|
|
185 |
|
|
|
88 |
|
|
|
31 |
|
|
|
2,802 |
|
|
Net
transfers |
|
|
(0 |
) |
|
|
0 |
|
|
|
0 |
|
|
|
0 |
|
|
|
1 |
|
|
|
0 |
|
|
|
0 |
|
|
|
(1 |
) |
|
|
(0 |
) |
|
Ending
assets under management |
|
|
4,806 |
|
|
|
23,389 |
|
|
|
14,833 |
|
|
|
3,735 |
|
|
|
7,777 |
|
|
|
1,517 |
|
|
|
2,591 |
|
|
|
349 |
|
|
|
58,997 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2016 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning
assets under management |
|
$ |
6,320 |
|
|
$ |
16,934 |
|
|
$ |
13,010 |
|
|
$ |
3,581 |
|
|
$ |
7,969 |
|
|
$ |
1,865 |
|
|
$ |
1,436 |
|
|
$ |
241 |
|
|
$ |
51,356 |
|
|
|
Gross
client cash inflows |
|
|
64 |
|
|
|
3,953 |
|
|
|
1,068 |
|
|
|
203 |
|
|
|
578 |
|
|
|
107 |
|
|
|
244 |
|
|
|
6 |
|
|
|
6,224 |
|
|
|
Gross
client cash outflows |
|
|
(447 |
) |
|
|
(1,570 |
) |
|
|
(1,357 |
) |
|
|
(138 |
) |
|
|
(762 |
) |
|
|
(209 |
) |
|
|
(104 |
) |
|
|
(17 |
) |
|
|
(4,602 |
) |
|
Net client
cash flows |
|
|
(382 |
) |
|
|
2,383 |
|
|
|
(289 |
) |
|
|
65 |
|
|
|
(184 |
) |
|
|
(101 |
) |
|
|
140 |
|
|
|
(10 |
) |
|
|
1,622 |
|
|
Market
appreciation (depreciation) |
|
|
(16 |
) |
|
|
768 |
|
|
|
1,368 |
|
|
|
(187 |
) |
|
|
(62 |
) |
|
|
118 |
|
|
|
55 |
|
|
|
(1 |
) |
|
|
2,044 |
|
|
Net
transfers |
|
$ |
(0 |
) |
|
$ |
(2 |
) |
|
$ |
0 |
|
|
$ |
0 |
|
|
$ |
3 |
|
|
$ |
0 |
|
|
$ |
(56 |
) |
|
$ |
(0 |
) |
|
|
(56 |
) |
|
Ending
assets under management |
|
|
5,921 |
|
|
|
20,083 |
|
|
|
14,090 |
|
|
|
3,460 |
|
|
|
7,726 |
|
|
|
1,882 |
|
|
|
1,575 |
|
|
|
229 |
|
|
|
54,965 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Victory Capital Holdings, Inc. and
Subsidiaries |
Assets Under Management by Asset
Class |
(unaudited; in millions) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended |
|
By Asset Class |
|
|
|
|
U.S. Large Cap Equity |
|
U.S. Mid Cap Equity |
|
U.S. Small Cap Equity |
|
Global / Non-U.S. Equity |
|
Fixed Income |
|
Commodity |
|
Solutions |
|
Other |
|
Total |
|
December 31, 2017 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning
assets under management |
|
$ |
5,921 |
|
|
$ |
20,083 |
|
|
$ |
14,090 |
|
|
$ |
3,460 |
|
|
$ |
7,726 |
|
|
$ |
1,882 |
|
|
$ |
1,575 |
|
|
$ |
229 |
|
|
$ |
54,965 |
|
|
|
Gross
client cash inflows |
|
|
230 |
|
|
|
8,622 |
|
|
|
3,613 |
|
|
|
924 |
|
|
|
1,777 |
|
|
|
305 |
|
|
|
1,342 |
|
|
|
116 |
|
|
|
16,929 |
|
|
|
Gross
client cash outflows |
|
|
(1,702 |
) |
|
|
(7,299 |
) |
|
|
(4,722 |
) |
|
|
(1,333 |
) |
|
|
(2,240 |
) |
|
|
(778 |
) |
|
|
(213 |
) |
|
|
(113 |
) |
|
|
(18,400 |
) |
|
Net client
cash flows |
|
|
(1,472 |
) |
|
|
1,323 |
|
|
|
(1,109 |
) |
|
|
(410 |
) |
|
|
(462 |
) |
|
|
(473 |
) |
|
|
1,129 |
|
|
|
3 |
|
|
|
(1,471 |
) |
|
Market
appreciation (depreciation) |
|
|
347 |
|
|
|
3,778 |
|
|
|
2,327 |
|
|
|
1,073 |
|
|
|
388 |
|
|
|
10 |
|
|
|
352 |
|
|
|
96 |
|
|
|
8,372 |
|
|
Net
transfers |
|
|
(7 |
) |
|
|
1 |
|
|
|
0 |
|
|
|
(18 |
) |
|
|
(101 |
) |
|
|
0 |
|
|
|
(28 |
) |
|
|
57 |
|
|
|
(95 |
) |
|
Ending
assets under management |
|
|
4,789 |
|
|
|
25,185 |
|
|
|
15,308 |
|
|
|
4,105 |
|
|
|
7,551 |
|
|
|
1,419 |
|
|
|
3,028 |
|
|
|
386 |
|
|
|
61,771 |
|
|
Net client
cash flows excluding Diversified Equity |
|
|
(854 |
) |
|
|
1,323 |
|
|
|
(1,109 |
) |
|
|
(410 |
) |
|
|
(462 |
) |
|
|
(473 |
) |
|
|
1,129 |
|
|
|
3 |
|
|
|
(853 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2016 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning
assets under management |
|
$ |
5,763 |
|
|
$ |
12,396 |
|
|
$ |
6,500 |
|
|
$ |
2,114 |
|
|
$ |
5,058 |
|
|
$ |
- |
|
|
$ |
953 |
|
|
$ |
327 |
|
|
$ |
33,111 |
|
|
|
Gross
client cash inflows |
|
|
276 |
|
|
|
8,965 |
|
|
|
3,263 |
|
|
|
1,021 |
|
|
|
1,639 |
|
|
|
169 |
|
|
|
691 |
|
|
|
12 |
|
|
|
16,037 |
|
|
|
Gross
client cash outflows |
|
|
(1,962 |
) |
|
|
(5,898 |
) |
|
|
(3,341 |
) |
|
|
(537 |
) |
|
|
(2,400 |
) |
|
|
(500 |
) |
|
|
(491 |
) |
|
|
(34 |
) |
|
|
(15,162 |
) |
|
Net client
cash flows |
|
|
(1,686 |
) |
|
|
3,067 |
|
|
|
(78 |
) |
|
|
484 |
|
|
|
(761 |
) |
|
|
(330 |
) |
|
|
201 |
|
|
|
(22 |
) |
|
|
875 |
|
|
Market
appreciation (depreciation) |
|
|
(243 |
) |
|
|
1,961 |
|
|
|
2,307 |
|
|
|
9 |
|
|
|
107 |
|
|
|
102 |
|
|
|
139 |
|
|
|
11 |
|
|
|
4,393 |
|
|
Net
transfers |
|
|
2,087 |
|
|
|
2,658 |
|
|
|
5,360 |
|
|
|
852 |
|
|
|
3,323 |
|
|
|
2,110 |
|
|
|
283 |
|
|
|
(87 |
) |
|
|
16,587 |
|
|
Ending
assets under management |
|
|
5,921 |
|
|
|
20,083 |
|
|
|
14,090 |
|
|
|
3,460 |
|
|
|
7,726 |
|
|
|
1,882 |
|
|
|
1,575 |
|
|
|
229 |
|
|
|
54,965 |
|
|
Net client
cash flows excluding Diversified Equity |
|
|
(295 |
) |
|
|
3,067 |
|
|
|
(78 |
) |
|
|
484 |
|
|
|
(761 |
) |
|
|
(330 |
) |
|
|
201 |
|
|
|
(22 |
) |
|
|
2,266 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Victory Capital Holdings, Inc. and
Subsidiaries |
|
Assets Under Management by
Vehicle |
|
(unaudited; in millions) |
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended |
|
By Vehicle |
|
|
|
|
Mutual Funds(1) |
|
ETFs |
|
Other(2) |
|
Total |
|
December 31, 2017 |
|
|
|
|
|
|
|
|
|
Beginning
assets under management |
|
$ |
37,341 |
|
|
$ |
1,875 |
|
|
$ |
19,782 |
|
|
$ |
58,997 |
|
|
|
Gross client cash
inflows |
|
|
2,264 |
|
|
|
278 |
|
|
|
1,829 |
|
|
|
4,371 |
|
|
|
Gross client cash
outflows |
|
|
(3,121 |
) |
|
|
(16 |
) |
|
|
(941 |
) |
|
|
(4,077 |
) |
|
Net client
cash flows |
|
|
(857 |
) |
|
|
262 |
|
|
|
889 |
|
|
|
294 |
|
|
Market
appreciation (depreciation) |
|
|
1,577 |
|
|
|
113 |
|
|
|
886 |
|
|
|
2,575 |
|
|
Net
transfers |
|
|
(93 |
) |
|
|
- |
|
|
|
(2 |
) |
|
|
(95 |
) |
|
Ending
assets under management |
|
|
37,967 |
|
|
|
2,250 |
|
|
|
21,555 |
|
|
|
61,771 |
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2017 |
|
|
|
|
|
|
|
|
|
Beginning
assets under management |
|
$ |
36,133 |
|
|
$ |
1,578 |
|
|
$ |
19,263 |
|
|
$ |
56,973 |
|
|
|
Gross client cash
inflows |
|
|
2,759 |
|
|
|
238 |
|
|
|
883 |
|
|
|
3,879 |
|
|
|
Gross client cash
outflows |
|
|
(3,479 |
) |
|
|
(2 |
) |
|
|
(1,177 |
) |
|
|
(4,658 |
) |
|
Net client
cash flows |
|
|
(720 |
) |
|
|
236 |
|
|
|
(294 |
) |
|
|
(778 |
) |
|
Market
appreciation (depreciation) |
|
|
1,927 |
|
|
|
61 |
|
|
|
813 |
|
|
|
2,802 |
|
|
Net
transfers |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
Ending
assets under management |
|
|
37,341 |
|
|
|
1,875 |
|
|
|
19,782 |
|
|
|
58,997 |
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2016 |
|
|
|
|
|
|
|
|
|
Beginning
assets under management |
|
$ |
32,301 |
|
|
$ |
664 |
|
|
$ |
18,392 |
|
|
$ |
51,356 |
|
|
|
Gross client cash
inflows |
|
|
3,455 |
|
|
|
212 |
|
|
|
2,557 |
|
|
|
6,224 |
|
|
|
Gross client cash
outflows |
|
|
(3,189 |
) |
|
|
(2 |
) |
|
|
(1,412 |
) |
|
|
(4,602 |
) |
|
Net client
cash flows |
|
|
266 |
|
|
|
210 |
|
|
|
1,145 |
|
|
|
1,622 |
|
|
Market
appreciation (depreciation) |
|
|
1,486 |
|
|
|
32 |
|
|
|
526 |
|
|
|
557 |
|
|
Net
transfers |
|
|
(78 |
) |
|
|
- |
|
|
|
22 |
|
|
|
(56 |
) |
|
Ending
assets under management |
|
|
33,975 |
|
|
|
906 |
|
|
|
20,085 |
|
|
|
54,965 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
Includes institutional and retail share classes. |
|
|
|
|
|
|
|
|
|
(2) Includes institutional separate accounts, collective trust
funds, wrap program separate accounts and unified managed accounts
or UMAs. |
|
|
|
|
|
|
|
|
|
|
|
|
|
Victory Capital Holdings, Inc. and
Subsidiaries |
|
Assets Under Management by
Vehicle |
|
(unaudited; in millions) |
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended |
|
By Vehicle |
|
|
|
|
Mutual Funds(1) |
|
ETFs |
|
Other(2) |
|
Total |
|
December 31, 2017 |
|
|
|
|
|
|
|
|
|
Beginning
assets under management |
|
$ |
33,975 |
|
|
$ |
906 |
|
|
$ |
20,085 |
|
|
$ |
54,965 |
|
|
Gross client cash inflows |
|
|
11,922 |
|
|
|
1,111 |
|
|
|
3,896 |
|
|
|
16,929 |
|
|
Gross client cash outflows |
|
|
(13,259 |
) |
|
|
(20 |
) |
|
|
(5,121 |
) |
|
|
(18,400 |
) |
|
Net client
cash flows |
|
|
(1,337 |
) |
|
|
1,091 |
|
|
|
(1,225 |
) |
|
|
(1,471 |
) |
|
Market
appreciation (depreciation) |
|
|
5,427 |
|
|
|
253 |
|
|
|
2,692 |
|
|
|
8,372 |
|
|
Net
transfers |
|
|
(98 |
) |
|
|
- |
|
|
|
3 |
|
|
|
(95 |
) |
|
Ending
assets under management |
|
|
37,967 |
|
|
|
2,250 |
|
|
|
21,555 |
|
|
|
61,771 |
|
|
Net client
cash flows excluding Diversified Equity |
|
|
(1,180 |
) |
|
|
1,091 |
|
|
|
(764 |
) |
|
|
(853 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2016 |
|
|
|
|
|
|
|
|
|
Beginning
assets under management |
|
$ |
17,103 |
|
|
$ |
353 |
|
|
$ |
15,655 |
|
|
$ |
33,111 |
|
|
Gross client cash inflows |
|
|
10,388 |
|
|
|
536 |
|
|
|
5,112 |
|
|
|
16,037 |
|
|
Gross client cash outflows |
|
|
(9,703 |
) |
|
|
(61 |
) |
|
|
(5,397 |
) |
|
|
(15,162 |
) |
|
Net client
cash flows |
|
|
685 |
|
|
|
475 |
|
|
|
(285 |
) |
|
|
875 |
|
|
Market
appreciation (depreciation) |
|
|
3,144 |
|
|
|
77 |
|
|
|
1,171 |
|
|
|
4,393 |
|
|
Net
transfers |
|
|
13,043 |
|
|
|
- |
|
|
|
3,543 |
|
|
|
16,587 |
|
|
Ending
assets under management |
|
|
33,975 |
|
|
|
906 |
|
|
|
20,085 |
|
|
|
54,965 |
|
|
Net client
cash flows excluding Diversified Equity |
|
|
1,127 |
|
|
|
475 |
|
|
|
664 |
|
|
|
2,266 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) Includes
institutional and retail share classes. |
|
|
|
|
|
|
|
|
|
|
(2) Includes institutional separate accounts, collective trust
funds, wrap program separate accounts and unified managed accounts
or UMAs. |
|
|
|
|
|
|
|
|
|
|
|
|
|
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 business. These measures
eliminate the impact of one‑time acquisition, restructuring and
integration costs and demonstrate the ongoing operating earnings
metrics of the business. 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
are:
- Adding back interest paid on debt net of interest income;
- Adding back depreciation on property and equipment;
- Adding back other business taxes;
- Adding back GAAP amortization of acquisition‑related
intangibles;
- Adding back the expense associated with stock‑based
compensation associated with equity issued from pools that were
created in connection with the management‑led buyout with Crestview
GP from KeyCorp, the Munder Acquisition and the RS Acquisition and
as a result of any equity grants related to the IPO;
- Adding back direct incremental costs of acquisitions and the
IPO, including expenses associated with third‑party advisors, proxy
solicitations of mutual fund shareholders for transaction consents,
vendor contract early termination costs, impairment of receivables
recorded in connection with an acquisition and severance, retention
and transaction incentive compensation;
- Adding back debt issuance costs;
- Adding back pre‑IPO governance expenses paid to the Company's
private equity partners that terminated as of the completion of the
IPO;
- Adjusting for earnings/losses on equity method investments;
and
- Adding back annual incentive compensation paid in excess of
expected levels due to acquisitions.
Adjusted Net Income
Adjustments made to GAAP net income to calculate
Adjusted Net Income are:
- Adding back other business taxes;
- Adding back GAAP amortization of acquisition‑related
intangibles;
- Adding back the expense associated with stock‑based
compensation associated with equity issued from pools that were
created in connection with the management‑led buyout with Crestview
GP from KeyCorp, the Munder Acquisition and the RS Acquisition and
as a result of any equity grants related to the IPO;
- Adding back direct incremental costs of acquisitions and the
IPO, including expenses associated with third‑party advisors, proxy
solicitations of mutual fund shareholders for transaction consents,
vendor contract early termination costs, impairment of receivables
recorded in connection with an acquisition and severance, retention
and transaction incentive compensation;
- Adding back debt issuance costs;
- Adding back pre‑IPO governance expenses paid to the Company's
private equity partners that terminated as of the completion of the
IPO;
- Adding back annual incentive compensation paid in excess of
expected levels due to acquisitions;
- Subtracting an estimate of income tax expense on the
adjustments; and
- Subtracting the impact of remeasuring the U.S. net deferred
taxes under the Tax Act.
Tax Benefit of Goodwill and Acquired
Intangibles
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 intangibles represents the
tax benefits associated with deductions allowed for intangibles 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 intangibles with a step‑up in tax basis.
Victory Capital (NASDAQ:VCTR)
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