Fourth Quarter 2018
Highlights¹
Victory Capital Holdings, Inc. (NASDAQ: VCTR) (“Victory Capital” or
“the Company”) today reported its results for the three months and
full year ended December 31, 2018.
“I am pleased to report that Victory Capital
delivered strong investment and financial performance during the
fourth quarter of 2018, a period of unprecedented volatility for
the financial markets,” said David Brown, Chairman and Chief
Executive Officer. “Strong operating margins, cash flows and
expense control during the volatile quarter highlighted the health
and sustainability of our integrated multi-boutique business
model.
“Our model provides diversification across asset
classes, product types and business channels and has enabled us to
build scale in operations, administration and technology. As a
result, we have been able to reinvest efficiently in the business
and allocate the resources necessary to deliver superior service to
our clients and Investment Franchises.
“Our Franchises and Solutions Platform delivered
strong investment performance during the quarter, resulting in 57%
of our AUM outperforming their respective benchmarks over the
trailing one-year, 68% over the three-year, 74% over the five-year,
and 88% over the 10-year periods.
“As previously reported, total AUM decreased to
$52.8 billion as of December 31, 2018, due primarily to market
depreciation. Gross flows in the fourth quarter were strong at $4.0
billion, while resulting in net flows of ($1.0) billion as
investors retreated from higher risk asset classes and rotated into
cash.
“Overall, our pipeline for 2019 is healthy as
are our sales prospects, fueled by robust investment performance
and a diverse product set,” Mr. Brown continued.
“Momentum in VictoryShares ETFs remained strong
in 2018, with net flows of $121 million for the quarter and $1.1
billion for the full year. Our ETFs have achieved positive net
flows every quarter since we entered the ETF business in 2015.
During 2018, our ETF market share increased 33% compared with
year-end 2017, according to Morningstar.
“Looking ahead, we intend to grow organically by
leveraging the diverse capabilities of our Investment Franchises
and Solutions Platform, supported by our well-established
distribution system. In addition, we remain committed to inorganic
growth through acquisitions. In the second half of 2018, we
announced two strategic acquisitions. During the fourth quarter, we
announced our agreement to purchase USAA Asset Management Company,
which includes its mutual fund, ETF and 529 College Savings Plan
businesses. This will greatly enhance our existing distribution
platform with the addition of USAA’s direct membership channel.
This announcement followed the third-quarter disclosure of our
planned acquisition of Harvest Volatility Management.
“Together, these two acquisitions will
significantly diversify our AUM and investment capabilities, while
further enhancing economies of scale. Plans to integrate both
businesses are on track, and we are on target to accomplish our
synergy goal of $100 million for the USAA transaction. We expect to
close both transactions in the second quarter of 2019.
“Our M&A pipeline remains active as we
continue to seek prospects representing the ‘growers of the
future’. This includes adding unique, innovative products and
solutions that solve issues for client portfolios. 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) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months
Ended |
|
For the Year
Ended |
|
|
December 31, |
|
September 30, |
|
December 31, |
|
December 31, |
|
December 31, |
|
|
2018 |
|
2018 |
|
2017 |
|
2018 |
|
2017 |
Assets Under
Management |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending |
|
$ |
52,763 |
|
|
$ |
63,640 |
|
|
$ |
61,771 |
|
|
$ |
52,763 |
|
|
$ |
61,771 |
|
Average |
|
|
58,474 |
|
|
|
63,447 |
|
|
|
60,354 |
|
|
|
61,390 |
|
|
|
57,823 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Flows |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross |
|
$ |
4,028 |
|
|
$ |
2,896 |
|
|
$ |
4,371 |
|
|
$ |
14,130 |
|
|
$ |
16,929 |
|
Net |
|
|
(1,019 |
) |
|
|
(672 |
) |
|
|
294 |
|
|
|
(2,427 |
) |
|
|
(1,471 |
) |
Net flows
excluding Diversified Equity(1) |
|
|
(1,019 |
) |
|
|
(672 |
) |
|
|
294 |
|
|
|
(2,427 |
) |
|
|
(853 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated Financial
Results (GAAP) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue |
|
$ |
96.0 |
|
|
$ |
108.1 |
|
|
$ |
105.6 |
|
|
$ |
413.4 |
|
|
$ |
409.6 |
|
Revenue
realization (in bps) |
|
|
65.1 |
|
|
|
67.6 |
|
|
|
69.4 |
|
|
|
67.3 |
|
|
|
70.8 |
|
Operating
expenses |
|
|
70.2 |
|
|
|
76.3 |
|
|
|
78.7 |
|
|
|
298.9 |
|
|
|
319.5 |
|
Income
from operations |
|
|
25.8 |
|
|
|
31.8 |
|
|
|
26.9 |
|
|
|
114.5 |
|
|
|
90.2 |
|
Operating
margin |
|
|
26.8 |
% |
|
|
29.4 |
% |
|
|
25.5 |
% |
|
|
27.7 |
% |
|
|
22.0 |
% |
Net
income |
|
|
13.9 |
|
|
|
20.6 |
|
|
|
11.2 |
|
|
|
63.7 |
|
|
|
25.8 |
|
Earnings
per diluted share |
|
$ |
0.19 |
|
|
$ |
0.29 |
|
|
$ |
0.19 |
|
|
$ |
0.90 |
|
|
$ |
0.43 |
|
Cash flow
from operations |
|
|
34.4 |
|
|
|
40.3 |
|
|
|
36.8 |
|
|
|
134.3 |
|
|
|
96.2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted Performance
Results (Non-GAAP)(2) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted
EBITDA |
|
$ |
36.4 |
|
|
$ |
43.3 |
|
|
$ |
40.0 |
|
|
$ |
160.2 |
|
|
$ |
149.1 |
|
Adjusted
EBITDA margin |
|
|
37.9 |
% |
|
|
40.1 |
% |
|
|
37.9 |
% |
|
|
38.7 |
% |
|
|
36.4 |
% |
Adjusted
net income |
|
|
23.6 |
|
|
|
29.0 |
|
|
|
18.1 |
|
|
|
102.3 |
|
|
|
62.0 |
|
Tax
benefit of goodwill and acquired intangibles |
|
|
3.3 |
|
|
|
3.3 |
|
|
|
5.0 |
|
|
|
13.3 |
|
|
|
19.7 |
|
Adjusted
net income with tax benefit |
|
|
27.0 |
|
|
|
32.3 |
|
|
|
23.1 |
|
|
|
115.5 |
|
|
|
81.7 |
|
Adjusted
net income with tax benefit per diluted share |
|
$ |
0.38 |
|
|
$ |
0.45 |
|
|
$ |
0.39 |
|
|
$ |
1.64 |
|
|
$ |
1.37 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(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 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". |
|
AUM, Flows and Investment
Performance
Victory Capital’s AUM decreased by $10.8 billion
to $52.8 billion at December 31, 2018, compared to $63.6 billion at
September 30, 2018. The decrease was due to market depreciation of
$9.9 billion in addition to net outflows of $1.0 billion. Gross
flows for the fourth quarter were $4.0 billion.
As of December 31, 2018, Victory Capital offered
71 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, 2018.
|
|
|
|
|
|
|
|
|
|
|
Trailing |
|
Trailing |
|
Trailing |
|
Trailing |
|
|
1-Year |
|
3-Years |
|
5-Years |
|
10-Years |
Percentage of AUM
Outperforming Benchmark |
|
57% |
|
68% |
|
74% |
|
88% |
Percentage of
Strategies Outperforming Benchmark |
|
59% |
|
59% |
|
63% |
|
75% |
|
|
|
|
|
|
|
|
|
Fourth Quarter of 2018 Compared
to Third Quarter of 2018
For the quarter ended December 31, 2018, GAAP
Net Income decreased 33% to $13.9 million, or $0.19 per diluted
share, compared to GAAP Net Income of $20.6 million, or $0.29 per
diluted share, for the third quarter of 2018. GAAP operating margin
was 26.8% for the quarter compared to 29.4% for the third quarter
of 2018. Adjusted Net Income with tax benefit decreased 16% to
$27.0 million, or $0.38 per diluted share comprised of $0.33 per
diluted share in Adjusted Net Income and $0.05 per diluted share in
tax benefit, compared to $32.3 million, or $0.45 per diluted share
comprised of $0.40 per diluted share in Adjusted Net Income and
$0.05 per diluted share in tax benefit, for the third quarter of
2018.
Adjusted EBITDA and Adjusted EBITDA margin were
$36.4 million and 37.9%, respectively, for the quarter ended
December 31, 2018, compared to $43.3 million and 40.1% in the third
quarter of 2018. Net Income, Adjusted Net Income and Adjusted
EBITDA decreased due to lower revenue partially offset by lower
variable operating expenses.
- Revenue was $96.0 million, a decrease from $108.1 million for
the third quarter of 2018 due to a decrease in average AUM and a
decrease in the realized fee rate due to asset mix.
- Operating expenses decreased to $70.2 million, compared to
$76.3 million in the third quarter of 2018 primarily due to lower
AUM and revenue levels which drive certain variable expenses,
partially offset by an increase in acquisition costs.
Fourth Quarter of 2018 Compared
to Fourth Quarter of 2017
For the quarter ended December 31, 2018, GAAP
Net Income increased 24% to $13.9 million, or $0.19 per diluted
share, compared to $11.2 million, or $0.19 per diluted share, in
the fourth quarter of 2017. GAAP operating margin increased to
26.8% for the quarter from 25.5% for the fourth quarter of 2017.
Adjusted Net Income with tax benefit increased 17% to $27.0
million, or $0.38 per diluted share comprised of $0.33 per diluted
share in Adjusted Net Income and $0.05 per diluted share in tax
benefit in the fourth quarter of 2018, compared 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. Net Income and Adjusted Net Income
increased primarily due to lower interest expense in the fourth
quarter of 2018 as a result of refinancing activities and debt
pre-payments.
Adjusted EBITDA and Adjusted EBITDA margin were
$36.4 million and 37.9%, respectively, for the fourth quarter of
2018, compared to $40.0 million and 37.9%, respectively, for the
fourth quarter a year ago. Adjusted EBITDA decreased due to lower
revenue, partially offset by lower variable operating
expenses.
- Revenue decreased $9.6 million to $96.0 million, compared to
$105.6 million for the fourth quarter of 2017, due to a decrease in
average AUM and a decrease in the realized fee rate due to asset
mix.
- Operating expenses decreased 11% to $70.2 million, compared to
$78.7 million in the fourth quarter of 2017, primarily due to lower
AUM and revenue levels which drive certain variable expenses,
partially offset by an increase in acquisition costs.
Year Ended December 31, 2018
Compared to Year Ended December 31, 2017
For the year ended December 31, 2018, GAAP Net
Income increased 147% to $63.7 million, or $0.90 per diluted share,
compared to $25.8 million, or $0.43 per diluted share, for the year
ended December 31, 2017. GAAP operating margin increased to 27.7%
for the year ended December 31, 2018 from 22.0% for the year ended
December 31, 2017. Adjusted Net Income with tax benefit increased
41% to $115.5 million, or $1.64 per diluted share comprised of
$1.45 per diluted share in Adjusted Net Income and $0.19 per
diluted share in tax benefit for the year ended December 31, 2018,
compared 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, for the year ended December 31,
2017.
Adjusted EBITDA and Adjusted EBITDA margin were
$160.2 million and 38.7%, respectively, for the year ended December
31, 2018, compared to $149.1 million and 36.4%, respectively, for
the year ended December 31, 2017. Net Income, Adjusted Net Income
and Adjusted EBITDA increased due to higher revenue coupled with
operational efficiencies, lower intangible amortization and reduced
distribution expense related to AUM levels and, specific to Net
Income and Adjusted Net Income, lower interest expense as a result
of refinancing activities and debt pre-payments.
- Revenue increased to $413.4 million for the year ended December
31, 2018, compared to $409.6 million for the year ended December
31, 2017, due to higher average AUM, partially offset by a decrease
in the realized fee rate due to asset mix.
- Operating expenses for the year ended December 31, 2018
decreased 6% to $298.9 million, compared to $319.5 million for the
year ended December 31, 2017, primarily due to operational
efficiencies, lower intangible amortization and reduced
distribution expense related to AUM levels.
Balance Sheet / Capital
Management
Cash and cash equivalents were $51.5 million at
December 31, 2018, compared to $12.9 million at December 31, 2017.
During the quarter, the Company did not make any debt pay-downs
with cash on hand. The term loan balance at December 31, 2018 was
$280.0 million.
During the quarter, the Company repurchased
498,578 shares at an average price of $9.03 per share.
Conference Call, Webcast and
Slide Presentation
The Company will host a conference call and
webcast at 8:30 a.m. Eastern Time today, February 6, 2019. Analysts
and investors may participate in the question-and-answer session.
The call can be accessed via telephone at (866) 465-5145 (domestic)
or (409) 220-9945 (international). Please reference the Victory
Capital Conference Call. A recorded replay of the conference call
will be available shortly after the conclusion of the live call and
can be accessed until February 20, 2019 by dialing (855) 859-2056
(domestic) or (404) 537-3406 (international) and enter the
Conference ID Number 5157508.
The slide presentation and webcast of the
conference call can be accessed on the Events and Presentations
page of the Company’s investor relations website at
https://ir.vcm.com.
About Victory
Capital
Victory Capital is a global investment
management firm operating a next-generation, integrated
multi-boutique business model with $52.8 billion in assets under
management as of December 31, 2018.
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, UCITs and UMA/SMA
vehicles.
For more information, please visit www.vcm.com.
Go to www.victorysharesliterature.com for ETF prospectuses or
www.victoryfundliterature.com for mutual fund prospectuses.
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 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.
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:Lisa Mueller,
310-622-8231lmueller@finprofiles.com
Media: Tricia Ross,
310-622-8226tross@finprofiles.com
Victory Funds are distributed by Victory Capital
Advisers, Inc. (VCA). VictoryShares ETFs are distributed by
Foreside Fund Services, LLC. Victory Capital Management Inc. (VCM)
is the adviser to VictoryShares ETFs and Victory Funds. VCM and VCA
are affiliated. They are not affiliated with Foreside Fund
Services, LLC.
|
|
Victory Capital Holdings, Inc. and
Subsidiaries |
|
Unaudited Consolidated Statements of
Operations |
|
(in thousands except shares) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months
Ended |
|
|
|
For the Year
Ended |
|
|
|
|
December 31, |
|
|
September 30, |
|
|
December 31, |
|
|
December 31, |
|
|
December 31, |
|
|
|
2018 |
|
|
2018 |
|
|
2017 |
|
|
2018 |
|
|
2017 |
|
Revenue |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment management
fees |
|
$ |
82,030 |
|
|
|
$ |
92,525 |
|
|
|
$ |
89,206 |
|
|
|
$ |
352,683 |
|
|
|
$ |
343,811 |
|
|
Fund
administration and distribution fees |
|
|
13,937 |
|
|
|
|
15,557 |
|
|
|
|
16,440 |
|
|
|
|
60,729 |
|
|
|
|
65,818 |
|
|
Total revenue |
|
|
95,967 |
|
|
|
|
108,082 |
|
|
|
|
105,646 |
|
|
|
|
413,412 |
|
|
|
|
409,629 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Personnel
compensation and benefits |
|
|
33,910 |
|
|
|
|
38,027 |
|
|
|
|
37,339 |
|
|
|
|
145,880 |
|
|
|
|
144,111 |
|
|
Distribution and other asset-based expenses |
|
|
21,123 |
|
|
|
|
24,269 |
|
|
|
|
25,213 |
|
|
|
|
94,680 |
|
|
|
|
103,439 |
|
|
General
and administrative |
|
|
6,910 |
|
|
|
|
6,951 |
|
|
|
|
7,947 |
|
|
|
|
30,005 |
|
|
|
|
33,996 |
|
|
Depreciation and amortization |
|
|
5,360 |
|
|
|
|
5,574 |
|
|
|
|
6,570 |
|
|
|
|
23,277 |
|
|
|
|
29,910 |
|
|
Change in
value of consideration payable for acquisition of business |
|
|
(33 |
) |
|
|
|
— |
|
|
|
|
(269 |
) |
|
|
|
(37 |
) |
|
|
|
(294 |
) |
|
Acquisition-related costs |
|
|
2,900 |
|
|
|
|
1,451 |
|
|
|
|
659 |
|
|
|
|
4,346 |
|
|
|
|
2,094 |
|
|
Restructuring and integration costs |
|
|
40 |
|
|
|
|
— |
|
|
|
|
1,261 |
|
|
|
|
742 |
|
|
|
|
6,205 |
|
|
Total operating expenses |
|
|
70,210 |
|
|
|
|
76,272 |
|
|
|
|
78,720 |
|
|
|
|
298,893 |
|
|
|
|
319,461 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
from operations |
|
|
25,757 |
|
|
|
|
31,810 |
|
|
|
|
26,926 |
|
|
|
|
114,519 |
|
|
|
|
90,168 |
|
|
Operating margin |
|
|
26.8 |
% |
|
|
|
29.4 |
% |
|
|
|
25.5 |
% |
|
|
|
27.7 |
% |
|
|
|
22.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
income (expense) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
income and other income/(expense) |
|
|
(2,627 |
) |
|
|
|
(200 |
) |
|
|
|
(2,097 |
) |
|
|
|
(2,856 |
) |
|
|
|
(2,913 |
) |
|
Interest
expense and other financing costs |
|
|
(4,438 |
) |
|
|
|
(4,458 |
) |
|
|
|
(10,308 |
) |
|
|
|
(20,694 |
) |
|
|
|
(48,467 |
) |
|
Loss on
debt extinguishment |
|
|
— |
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
(6,058 |
) |
|
|
|
(330 |
) |
|
Total
other income (expense), net |
|
|
(7,065 |
) |
|
|
|
(4,658 |
) |
|
|
|
(12,405 |
) |
|
|
|
(29,608 |
) |
|
|
|
(51,710 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
before income taxes |
|
|
18,692 |
|
|
|
|
27,152 |
|
|
|
|
14,521 |
|
|
|
|
84,911 |
|
|
|
|
38,458 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
tax expense |
|
|
(4,777 |
) |
|
|
|
(6,562 |
) |
|
|
|
(3,312 |
) |
|
|
|
(21,207 |
) |
|
|
|
(12,632 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income |
|
$ |
13,915 |
|
|
|
$ |
20,590 |
|
|
|
$ |
11,209 |
|
|
|
$ |
63,704 |
|
|
|
$ |
25,826 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per share of common
stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
$ |
0.21 |
|
|
|
$ |
0.30 |
|
|
|
$ |
0.20 |
|
|
|
$ |
0.96 |
|
|
|
$ |
0.47 |
|
|
Diluted |
|
|
0.19 |
|
|
|
|
0.29 |
|
|
|
|
0.19 |
|
|
|
|
0.90 |
|
|
|
|
0.43 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of shares
outstanding |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
|
67,715,681 |
|
|
|
|
67,972,313 |
|
|
|
|
55,119,711 |
|
|
|
|
66,295,240 |
|
|
|
|
54,930,852 |
|
|
Diluted |
|
|
71,557,705 |
|
|
|
|
71,863,566 |
|
|
|
|
59,768,134 |
|
|
|
|
70,510,536 |
|
|
|
|
59,577,348 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends declared per
share |
|
$ |
— |
|
|
|
$ |
— |
|
|
|
$ |
0.23 |
|
|
|
$ |
— |
|
|
|
$ |
2.42 |
|
|
Victory Capital Holdings, Inc. and
Subsidiaries |
Reconciliation of GAAP to Non-GAAP
Measures |
(unaudited; in thousands except
shares) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months
Ended |
|
For the Year
Ended |
|
|
December 31, |
|
September 30, |
|
December 31, |
|
December 31, |
|
December 31, |
|
|
2018 |
|
2018 |
|
2017 |
|
2018 |
|
2017 |
Net
income (GAAP) |
|
$ |
13,915 |
|
|
$ |
20,590 |
|
|
$ |
11,209 |
|
|
$ |
63,704 |
|
|
$ |
25,826 |
|
Income tax expense |
|
|
(4,777 |
) |
|
|
(6,562 |
) |
|
|
(3,312 |
) |
|
|
(21,207 |
) |
|
|
(12,632 |
) |
Income
before taxes |
|
$ |
18,692 |
|
|
$ |
27,152 |
|
|
$ |
14,521 |
|
|
$ |
84,911 |
|
|
$ |
38,458 |
|
Interest
expense |
|
|
3,797 |
|
|
|
4,053 |
|
|
|
9,328 |
|
|
|
20,173 |
|
|
|
44,330 |
|
Depreciation |
|
|
709 |
|
|
|
775 |
|
|
|
895 |
|
|
|
2,956 |
|
|
|
3,561 |
|
Other
business taxes |
|
|
337 |
|
|
|
350 |
|
|
|
428 |
|
|
|
1,505 |
|
|
|
1,887 |
|
Amortization of acquisition-related intangibles |
|
|
4,651 |
|
|
|
4,799 |
|
|
|
5,676 |
|
|
|
20,321 |
|
|
|
26,349 |
|
Stock-based compensation |
|
|
3,943 |
|
|
|
4,005 |
|
|
|
1,740 |
|
|
|
15,238 |
|
|
|
11,752 |
|
Acquisition, restructuring and exit costs |
|
|
3,664 |
|
|
|
1,647 |
|
|
|
6,001 |
|
|
|
6,389 |
|
|
|
15,041 |
|
Debt
issuance costs |
|
|
371 |
|
|
|
373 |
|
|
|
788 |
|
|
|
7,807 |
|
|
|
6,035 |
|
Pre-IPO
governance expenses |
|
|
— |
|
|
|
— |
|
|
|
347 |
|
|
|
138 |
|
|
|
1,248 |
|
Earnings/losses from equity method investments |
|
|
224 |
|
|
|
167 |
|
|
|
319 |
|
|
|
730 |
|
|
|
427 |
|
Adjusted EBITDA |
|
$ |
36,388 |
|
|
$ |
43,321 |
|
|
$ |
40,043 |
|
|
$ |
160,168 |
|
|
$ |
149,088 |
|
Adjusted EBITDA margin |
|
|
37.9 |
% |
|
|
40.1 |
% |
|
|
37.9 |
% |
|
|
38.7 |
% |
|
|
36.4 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income (GAAP) |
|
$ |
13,915 |
|
|
$ |
20,590 |
|
|
$ |
11,209 |
|
|
$ |
63,704 |
|
|
$ |
25,826 |
|
Adjustment to reflect
the operating performance of the Company |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
business taxes |
|
|
337 |
|
|
|
350 |
|
|
|
428 |
|
|
|
1,505 |
|
|
|
1,887 |
|
Amortization of acquisition-related intangibles |
|
|
4,651 |
|
|
|
4,799 |
|
|
|
5,676 |
|
|
|
20,321 |
|
|
|
26,349 |
|
Stock-based compensation |
|
|
3,943 |
|
|
|
4,005 |
|
|
|
1,740 |
|
|
|
15,238 |
|
|
|
11,752 |
|
Acquisition, restructuring and exit costs |
|
|
3,664 |
|
|
|
1,647 |
|
|
|
6,001 |
|
|
|
6,389 |
|
|
|
15,041 |
|
Debt
issuance costs |
|
|
371 |
|
|
|
373 |
|
|
|
788 |
|
|
|
7,807 |
|
|
|
6,035 |
|
Pre-IPO
governance expenses |
|
|
— |
|
|
|
— |
|
|
|
347 |
|
|
|
138 |
|
|
|
1,248 |
|
Tax
effect of above adjustments |
|
|
(3,241 |
) |
|
|
(2,794 |
) |
|
|
(5,692 |
) |
|
|
(12,849 |
) |
|
|
(23,678 |
) |
Remeasurement of net deferred taxes |
|
|
— |
|
|
|
— |
|
|
|
(2,422 |
) |
|
|
— |
|
|
|
(2,422 |
) |
Adjusted net income |
|
$ |
23,640 |
|
|
$ |
28,970 |
|
|
$ |
18,075 |
|
|
$ |
102,253 |
|
|
$ |
62,038 |
|
Adjusted net income per diluted
share |
|
$ |
0.33 |
|
|
$ |
0.40 |
|
|
$ |
0.30 |
|
|
$ |
1.45 |
|
|
$ |
1.04 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tax
benefit of goodwill and acquired intangibles |
|
$ |
3,320 |
|
|
$ |
3,318 |
|
|
$ |
4,998 |
|
|
$ |
13,278 |
|
|
$ |
19,691 |
|
Tax
benefit of goodwill and acquired intangibles per diluted
share |
|
$ |
0.05 |
|
|
$ |
0.05 |
|
|
$ |
0.09 |
|
|
$ |
0.19 |
|
|
$ |
0.33 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted net income with tax
benefit |
|
$ |
26,960 |
|
|
$ |
32,288 |
|
|
$ |
23,073 |
|
|
$ |
115,531 |
|
|
$ |
81,729 |
|
Adjusted net income with tax benefit per diluted
share |
|
$ |
0.38 |
|
|
$ |
0.45 |
|
|
$ |
0.39 |
|
|
$ |
1.64 |
|
|
$ |
1.37 |
|
Victory Capital Holdings, Inc. and
Subsidiaries |
Unaudited Consolidated Balance
Sheets |
(In thousands, except for shares) |
|
|
|
|
|
|
|
|
|
December 31, 2018 |
|
December 31, 2017 |
Assets |
|
|
|
|
|
|
Cash and cash
equivalents |
|
$ |
51,491 |
|
|
$ |
12,921 |
|
Investment management fees receivable |
|
|
37,980 |
|
|
|
42,264 |
|
Fund
administration and distribution fees receivable |
|
|
3,153 |
|
|
|
3,925 |
|
Other
receivables |
|
|
2,987 |
|
|
|
9,728 |
|
Prepaid
expenses |
|
|
2,664 |
|
|
|
5,441 |
|
Available-for-sale securities, at fair value |
|
|
601 |
|
|
|
677 |
|
Trading
securities, at fair value |
|
|
12,719 |
|
|
|
10,659 |
|
Property
and equipment, net |
|
|
8,780 |
|
|
|
8,844 |
|
Goodwill |
|
|
284,108 |
|
|
|
284,108 |
|
Other
intangible assets, net |
|
|
387,679 |
|
|
|
408,000 |
|
Other
assets |
|
|
9,349 |
|
|
|
6,055 |
|
Total
assets |
|
$ |
801,511 |
|
|
$ |
792,622 |
|
|
|
|
|
|
|
|
Liabilities and stockholders'
equity |
|
|
|
|
|
|
Accounts
payable |
|
$ |
607 |
|
|
$ |
327 |
|
Accrued
compensation and benefits |
|
|
30,228 |
|
|
|
29,305 |
|
Accrued
expenses |
|
|
19,743 |
|
|
|
21,669 |
|
Deferred
compensation plan liability |
|
|
12,719 |
|
|
|
10,659 |
|
Consideration payable for acquisition of business |
|
|
5,838 |
|
|
|
9,856 |
|
Deferred
tax liability, net |
|
|
6,212 |
|
|
|
4,068 |
|
Other
liabilities |
|
|
1,759 |
|
|
|
2,330 |
|
Long-term
debt(1) |
|
|
268,857 |
|
|
|
483,225 |
|
Total
liabilities |
|
|
345,963 |
|
|
|
561,439 |
|
|
|
|
|
|
|
|
Stockholders' equity: |
|
|
|
|
|
|
Common
stock, $0.01 par value per share: 2018 - no shares authorized,
issued and outstanding; 2017 - 78,837,300 shares authorized,
57,182,730 issued and 55,118,673 shares outstanding |
|
|
— |
|
|
|
572 |
|
Class A
common stock, $0.01 par value per share: 2018 - 400,000,000 shares
authorized, 15,280,833 shares issued and 14,424,558 shares
outstanding; 2017 - no shares authorized, issued and
outstanding |
|
|
153 |
|
|
|
— |
|
Class B
common stock, $0.01 par value per share: 2018 - 200,000,000 shares
authorized, 55,284,408 shares issued and 53,137,428 shares
outstanding; 2017 - no shares authorized, issued and
outstanding |
|
|
553 |
|
|
|
— |
|
Additional paid-in capital |
|
|
604,401 |
|
|
|
435,334 |
|
Class A
treasury stock, at cost: 2018 - 856,275 shares; 2017 - no
shares |
|
|
(8,045 |
) |
|
|
— |
|
Class B
treasury stock, at cost: 2018 - 2,146,980 shares; 2017 - 2,064,057
shares |
|
|
(21,719 |
) |
|
|
(20,899 |
) |
Accumulated other comprehensive income (loss) |
|
|
(86 |
) |
|
|
64 |
|
Retained
deficit |
|
|
(119,709 |
) |
|
|
(183,888 |
) |
Total
stockholders' equity |
|
|
455,548 |
|
|
|
231,183 |
|
Total
liabilities and stockholders’ equity |
|
$ |
801,511 |
|
|
$ |
792,622 |
|
|
(1) Balance at December 31, 2018 is shown net of
unamortized loan discount and debt issuance costs in the amount of
$11.1 million. The gross amount of the debt outstanding was $280.0
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, |
|
|
2018 |
|
2018 |
|
2017 |
|
2018 |
|
2017 |
Beginning assets under
management |
|
$ |
63,640 |
|
|
$ |
62,256 |
|
|
$ |
58,997 |
|
|
2% |
|
8% |
Gross
client cash inflows |
|
|
4,028 |
|
|
|
2,896 |
|
|
|
4,371 |
|
|
39% |
|
-8% |
Gross
client cash outflows |
|
|
(5,047 |
) |
|
|
(3,568 |
) |
|
|
(4,077 |
) |
|
41% |
|
24% |
Net client cash
flows |
|
|
(1,019 |
) |
|
|
(672 |
) |
|
|
294 |
|
|
-52% |
|
-447% |
Market appreciation
(depreciation) |
|
|
(9,858 |
) |
|
|
2,056 |
|
|
|
2,575 |
|
|
n/m |
|
-483% |
Net transfers |
|
|
— |
|
|
|
— |
|
|
|
(95 |
) |
|
n/m |
|
n/m |
Ending assets under
management |
|
|
52,763 |
|
|
|
63,640 |
|
|
|
61,771 |
|
|
-17% |
|
-15% |
Average assets under
management |
|
|
58,474 |
|
|
|
63,447 |
|
|
|
60,354 |
|
|
-8% |
|
-3% |
Net client cash flows
excluding Diversified Equity |
|
|
(1,019 |
) |
|
|
(672 |
) |
|
|
294 |
|
|
-52% |
|
-447% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Year
Ended |
|
|
|
|
% Change from |
|
|
|
|
December 31, |
|
December 31, |
|
|
|
|
December 31, |
|
|
|
|
2018 |
|
2017 |
|
|
|
|
2017 |
|
|
Beginning assets under
management |
|
$ |
61,771 |
|
|
$ |
54,965 |
|
|
|
|
|
12% |
|
|
Gross
client cash inflows |
|
|
14,130 |
|
|
|
16,929 |
|
|
|
|
|
-17% |
|
|
Gross
client cash outflows |
|
|
(16,557 |
) |
|
|
(18,400 |
) |
|
|
|
|
-10% |
|
|
Net client cash
flows |
|
|
(2,427 |
) |
|
|
(1,471 |
) |
|
|
|
|
-65% |
|
|
Market appreciation
(depreciation) |
|
|
(6,573 |
) |
|
|
8,372 |
|
|
|
|
|
-179% |
|
|
Net transfers |
|
|
(8 |
) |
|
|
(95 |
) |
|
|
|
|
n/m |
|
|
Ending assets under
management |
|
|
52,763 |
|
|
|
61,771 |
|
|
|
|
|
-15% |
|
|
Average assets under
management |
|
|
61,390 |
|
|
|
57,823 |
|
|
|
|
|
6% |
|
|
Net client cash flows
excluding Diversified Equity |
|
|
(2,427 |
) |
|
|
(853 |
) |
|
|
|
|
-185% |
|
|
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. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cap Equity |
|
Cap Equity |
|
Income |
|
Cap Equity |
|
Equity |
|
Solutions |
|
Commodity |
|
Other |
|
Total |
December 31, 2018 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning assets under
management |
|
$ |
25,014 |
|
|
$ |
16,438 |
|
|
$ |
7,149 |
|
|
$ |
4,644 |
|
|
$ |
4,738 |
|
|
$ |
4,224 |
|
|
$ |
966 |
|
|
$ |
467 |
|
|
$ |
63,640 |
|
Gross
client cash inflows |
|
|
1,238 |
|
|
|
815 |
|
|
|
369 |
|
|
|
59 |
|
|
|
1,068 |
|
|
|
406 |
|
|
|
44 |
|
|
|
29 |
|
|
|
4,028 |
|
Gross
client cash outflows |
|
|
(2,045 |
) |
|
|
(1,235 |
) |
|
|
(666 |
) |
|
|
(171 |
) |
|
|
(409 |
) |
|
|
(281 |
) |
|
|
(192 |
) |
|
|
(48 |
) |
|
|
(5,047 |
) |
Net client cash
flows |
|
|
(807 |
) |
|
|
(420 |
) |
|
|
(297 |
) |
|
|
(112 |
) |
|
|
659 |
|
|
|
125 |
|
|
|
(148 |
) |
|
|
(19 |
) |
|
|
(1,019 |
) |
Market appreciation
(depreciation) |
|
|
(4,165 |
) |
|
|
(3,085 |
) |
|
|
(22 |
) |
|
|
(775 |
) |
|
|
(787 |
) |
|
|
(582 |
) |
|
|
(348 |
) |
|
|
(94 |
) |
|
|
(9,858 |
) |
Net transfers |
|
|
(23 |
) |
|
|
15 |
|
|
|
6 |
|
|
|
2 |
|
|
|
— |
|
|
|
— |
|
|
|
(1 |
) |
|
|
1 |
|
|
|
— |
|
Ending assets under
management |
|
$ |
20,019 |
|
|
$ |
12,948 |
|
|
$ |
6,836 |
|
|
$ |
3,759 |
|
|
$ |
4,610 |
|
|
$ |
3,767 |
|
|
$ |
469 |
|
|
$ |
355 |
|
|
$ |
52,763 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2018 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning assets under
management |
|
$ |
24,485 |
|
|
$ |
15,971 |
|
|
$ |
6,978 |
|
|
$ |
4,577 |
|
|
$ |
4,705 |
|
|
$ |
3,815 |
|
|
$ |
1,291 |
|
|
$ |
434 |
|
|
$ |
62,256 |
|
Gross
client cash inflows |
|
|
964 |
|
|
|
740 |
|
|
|
449 |
|
|
|
42 |
|
|
|
307 |
|
|
|
321 |
|
|
|
27 |
|
|
|
46 |
|
|
|
2,896 |
|
Gross
client cash outflows |
|
|
(1,660 |
) |
|
|
(860 |
) |
|
|
(346 |
) |
|
|
(179 |
) |
|
|
(193 |
) |
|
|
(61 |
) |
|
|
(238 |
) |
|
|
(31 |
) |
|
|
(3,568 |
) |
Net client cash
flows |
|
|
(696 |
) |
|
|
(120 |
) |
|
|
103 |
|
|
|
(137 |
) |
|
|
114 |
|
|
|
260 |
|
|
|
(211 |
) |
|
|
15 |
|
|
|
(672 |
) |
Market appreciation
(depreciation) |
|
|
1,225 |
|
|
|
587 |
|
|
|
67 |
|
|
|
204 |
|
|
|
(81 |
) |
|
|
149 |
|
|
|
(114 |
) |
|
|
19 |
|
|
|
2,056 |
|
Net transfers |
|
|
— |
|
|
|
— |
|
|
|
1 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(1 |
) |
|
|
— |
|
Ending assets under
management |
|
$ |
25,014 |
|
|
$ |
16,438 |
|
|
$ |
7,149 |
|
|
$ |
4,644 |
|
|
$ |
4,738 |
|
|
$ |
4,224 |
|
|
$ |
966 |
|
|
$ |
467 |
|
|
$ |
63,640 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2017 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning assets under
management |
|
$ |
23,389 |
|
|
$ |
14,833 |
|
|
$ |
7,777 |
|
|
$ |
4,806 |
|
|
$ |
3,735 |
|
|
$ |
2,591 |
|
|
$ |
1,517 |
|
|
$ |
349 |
|
|
$ |
58,997 |
|
Gross
client cash inflows |
|
|
2,335 |
|
|
|
716 |
|
|
|
403 |
|
|
|
57 |
|
|
|
366 |
|
|
|
377 |
|
|
|
71 |
|
|
|
46 |
|
|
|
4,371 |
|
Gross
client cash outflows |
|
|
(1,819 |
) |
|
|
(873 |
) |
|
|
(654 |
) |
|
|
(282 |
) |
|
|
(211 |
) |
|
|
(62 |
) |
|
|
(154 |
) |
|
|
(22 |
) |
|
|
(4,077 |
) |
Net client cash
flows |
|
|
515 |
|
|
|
(158 |
) |
|
|
(251 |
) |
|
|
(225 |
) |
|
|
155 |
|
|
|
315 |
|
|
|
(83 |
) |
|
|
24 |
|
|
|
294 |
|
Market appreciation
(depreciation) |
|
|
1,281 |
|
|
|
633 |
|
|
|
68 |
|
|
|
210 |
|
|
|
232 |
|
|
|
150 |
|
|
|
(16 |
) |
|
|
18 |
|
|
|
2,575 |
|
Net transfers |
|
|
— |
|
|
|
— |
|
|
|
(43 |
) |
|
|
(1 |
) |
|
|
(18 |
) |
|
|
(28 |
) |
|
|
— |
|
|
|
(5 |
) |
|
|
(95 |
) |
Ending assets under
management |
|
$ |
25,185 |
|
|
$ |
15,308 |
|
|
$ |
7,551 |
|
|
$ |
4,789 |
|
|
$ |
4,105 |
|
|
$ |
3,028 |
|
|
$ |
1,419 |
|
|
$ |
386 |
|
|
$ |
61,771 |
|
Victory Capital Holdings, Inc. and
Subsidiaries |
Assets Under Management by Asset
Class |
(unaudited; in millions) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Year Ended |
|
By Asset Class |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Global / |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Mid |
|
U.S. Small |
|
Fixed |
|
U.S. Large |
|
Non-U.S. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cap Equity |
|
Cap Equity |
|
Income |
|
Cap Equity |
|
Equity |
|
Solutions |
|
Commodity |
|
Other |
|
Total |
December 31, 2018 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning assets under
management |
|
$ |
25,185 |
|
|
$ |
15,308 |
|
|
$ |
7,551 |
|
|
$ |
4,789 |
|
|
$ |
4,105 |
|
|
$ |
3,028 |
|
|
$ |
1,419 |
|
|
$ |
386 |
|
|
$ |
61,771 |
|
Gross
client cash inflows |
|
|
4,530 |
|
|
|
3,198 |
|
|
|
1,514 |
|
|
|
259 |
|
|
|
2,488 |
|
|
|
1,713 |
|
|
|
244 |
|
|
|
184 |
|
|
|
14,130 |
|
Gross
client cash outflows |
|
|
(7,207 |
) |
|
|
(3,762 |
) |
|
|
(2,303 |
) |
|
|
(848 |
) |
|
|
(1,003 |
) |
|
|
(588 |
) |
|
|
(709 |
) |
|
|
(137 |
) |
|
|
(16,557 |
) |
Net client cash
flows |
|
|
(2,677 |
) |
|
|
(564 |
) |
|
|
(789 |
) |
|
|
(589 |
) |
|
|
1,485 |
|
|
|
1,125 |
|
|
|
(465 |
) |
|
|
47 |
|
|
|
(2,427 |
) |
Market appreciation
(depreciation) |
|
|
(2,485 |
) |
|
|
(1,792 |
) |
|
|
67 |
|
|
|
(455 |
) |
|
|
(972 |
) |
|
|
(426 |
) |
|
|
(484 |
) |
|
|
(26 |
) |
|
|
(6,573 |
) |
Net transfers |
|
|
(4 |
) |
|
|
(4 |
) |
|
|
7 |
|
|
|
14 |
|
|
|
(8 |
) |
|
|
40 |
|
|
|
(1 |
) |
|
|
(52 |
) |
|
|
(8 |
) |
Ending assets under
management |
|
$ |
20,019 |
|
|
$ |
12,948 |
|
|
$ |
6,836 |
|
|
$ |
3,759 |
|
|
$ |
4,610 |
|
|
$ |
3,767 |
|
|
$ |
469 |
|
|
$ |
355 |
|
|
$ |
52,763 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2017 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning assets under
management |
|
$ |
20,083 |
|
|
$ |
14,090 |
|
|
$ |
7,726 |
|
|
$ |
5,921 |
|
|
$ |
3,460 |
|
|
$ |
1,575 |
|
|
$ |
1,882 |
|
|
$ |
229 |
|
|
$ |
54,965 |
|
Gross
client cash inflows |
|
|
8,622 |
|
|
|
3,613 |
|
|
|
1,777 |
|
|
|
230 |
|
|
|
924 |
|
|
|
1,342 |
|
|
|
305 |
|
|
|
116 |
|
|
|
16,929 |
|
Gross
client cash outflows |
|
|
(7,299 |
) |
|
|
(4,722 |
) |
|
|
(2,240 |
) |
|
|
(1,702 |
) |
|
|
(1,333 |
) |
|
|
(213 |
) |
|
|
(778 |
) |
|
|
(113 |
) |
|
|
(18,400 |
) |
Net client cash
flows |
|
|
1,323 |
|
|
|
(1,109 |
) |
|
|
(462 |
) |
|
|
(1,472 |
) |
|
|
(410 |
) |
|
|
1,129 |
|
|
|
(473 |
) |
|
|
3 |
|
|
|
(1,471 |
) |
Market appreciation
(depreciation) |
|
|
3,778 |
|
|
|
2,327 |
|
|
|
388 |
|
|
|
347 |
|
|
|
1,073 |
|
|
|
352 |
|
|
|
10 |
|
|
|
96 |
|
|
|
8,372 |
|
Net transfers |
|
|
1 |
|
|
|
— |
|
|
|
(101 |
) |
|
|
(7 |
) |
|
|
(18 |
) |
|
|
(28 |
) |
|
|
— |
|
|
|
57 |
|
|
|
(95 |
) |
Ending assets under
management |
|
$ |
25,185 |
|
|
$ |
15,308 |
|
|
$ |
7,551 |
|
|
$ |
4,789 |
|
|
$ |
4,105 |
|
|
$ |
3,028 |
|
|
$ |
1,419 |
|
|
$ |
386 |
|
|
$ |
61,771 |
|
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 |
|
Vehicles(2) |
|
Total |
December 31, 2018 |
|
|
|
|
|
|
|
|
|
|
|
|
Beginning assets under
management |
|
$ |
38,189 |
|
|
$ |
3,295 |
|
|
$ |
22,156 |
|
|
$ |
63,640 |
|
Gross
client cash inflows |
|
|
2,350 |
|
|
|
319 |
|
|
|
1,359 |
|
|
|
4,028 |
|
Gross
client cash outflows |
|
|
(3,857 |
) |
|
|
(198 |
) |
|
|
(992 |
) |
|
|
(5,047 |
) |
Net client cash
flows |
|
|
(1,507 |
) |
|
|
121 |
|
|
|
367 |
|
|
|
(1,019 |
) |
Market appreciation
(depreciation) |
|
|
(6,190 |
) |
|
|
(460 |
) |
|
|
(3,208 |
) |
|
|
(9,858 |
) |
Net transfers |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Ending assets under
management |
|
$ |
30,492 |
|
|
$ |
2,956 |
|
|
$ |
19,315 |
|
|
$ |
52,763 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2018 |
|
|
|
|
|
|
|
|
|
|
|
|
Beginning assets under
management |
|
$ |
37,818 |
|
|
$ |
2,906 |
|
|
$ |
21,532 |
|
|
$ |
62,256 |
|
Gross
client cash inflows |
|
|
2,098 |
|
|
|
305 |
|
|
|
493 |
|
|
|
2,896 |
|
Gross
client cash outflows |
|
|
(2,950 |
) |
|
|
(18 |
) |
|
|
(600 |
) |
|
|
(3,568 |
) |
Net client cash
flows |
|
|
(852 |
) |
|
|
287 |
|
|
|
(107 |
) |
|
|
(672 |
) |
Market appreciation
(depreciation) |
|
|
1,223 |
|
|
|
102 |
|
|
|
731 |
|
|
|
2,056 |
|
Net transfers |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Ending assets under
management |
|
$ |
38,189 |
|
|
$ |
3,295 |
|
|
$ |
22,156 |
|
|
$ |
63,640 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 |
|
|
(1) Includes institutional and retail share
classes and VIP funds. |
(2) Includes 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) |
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Year Ended |
|
By Vehicle |
|
|
|
|
|
|
|
|
Separate |
|
|
|
|
|
|
|
|
|
|
|
Accounts |
|
|
|
|
|
Mutual |
|
|
|
|
and Other |
|
|
|
|
|
Funds(1) |
|
ETFs |
|
Vehicles(2) |
|
Total |
December 31, 2018 |
|
|
|
|
|
|
|
|
|
|
|
|
Beginning assets under
management |
|
$ |
37,967 |
|
|
$ |
2,250 |
|
|
$ |
21,555 |
|
|
$ |
61,771 |
|
Gross
client cash inflows |
|
|
9,629 |
|
|
|
1,401 |
|
|
|
3,100 |
|
|
|
14,130 |
|
Gross
client cash outflows |
|
|
(12,781 |
) |
|
|
(341 |
) |
|
|
(3,435 |
) |
|
|
(16,557 |
) |
Net client cash
flows |
|
|
(3,152 |
) |
|
|
1,060 |
|
|
|
(335 |
) |
|
|
(2,427 |
) |
Market appreciation
(depreciation) |
|
|
(4,312 |
) |
|
|
(354 |
) |
|
|
(1,907 |
) |
|
|
(6,573 |
) |
Net transfers |
|
|
(11 |
) |
|
|
— |
|
|
|
3 |
|
|
|
(8 |
) |
Ending assets under
management |
|
$ |
30,492 |
|
|
$ |
2,956 |
|
|
$ |
19,315 |
|
|
$ |
52,763 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 |
|
|
(1) Includes institutional and retail share
classes and VIP funds. |
(2) Includes 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 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 are:
- Adding back income tax;
- 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 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, loss on other receivable
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; and
- Adjusting for earnings/losses on equity method
investments.
Adjusted Net Income
Adjustments made to GAAP Net Income to calculate
Adjusted Net Income are:
- Adding back other business taxes;
- Adding back 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, loss on other receivable
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;
- 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 Cuts and Jobs 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.
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