Second Consecutive Quarter of Positive Net
Flows and Positive Net Flows Year-to-Date
Third Quarter 2019 Highlights
- Total AUM of $145.8 billion
- Long-term net inflows of $726 million; long-term gross flows of
$7.5 billion
- GAAP operating margin of 25.9%; GAAP earnings of $0.35 per
diluted share
- Adjusted net income with tax benefit per diluted share of
$0.911
- Adjusted EBITDA margin of 44.8%1
- Debt reduced by $63 million
- Board authorizes regular quarterly cash dividend of $0.05 per
share
Victory Capital Holdings, Inc. (NASDAQ: VCTR) (“Victory Capital”
or “the Company”) today reported financial results for the three
and nine months ended September 30, 2019.
“I’m pleased to report that Victory Capital continued to deliver
excellent financial results in the third quarter of 2019, our first
quarter post the acquisition of USAA Asset Management Company,”
said David Brown, Chairman and Chief Executive Officer. “Revenue
and adjusted net income more than doubled sequentially and adjusted
EBITDA margin expanded to a record 44.8%. This marks our third
consecutive quarter of meaningful margin expansion, which
demonstrates the power of our integrated business model.
“Total AUM grew to $145.8 billion as of September 30, 2019.
Long-term net inflows were positive for the second consecutive
quarter at $726 million and are $3.3 billion year to date.
Long-term gross flows were $7.5 billion for the quarter.
“Our integration efforts following the close of the USAA Asset
Management acquisition continue to progress well, and we expect to
achieve our previously disclosed cost synergies ahead of schedule.
The direct channel for USAA members was reopened on July 1, 2019,
and our call center, which is staffed largely by former USAA
employees, is actively serving members’ investment needs.
“We paid down $63 million of debt during the quarter. Subsequent
to quarter-end, we paid down an additional $40 million, bringing
our total debt reduction since July 1, 2019, to $103 million.
Additionally, today, we declared a second consecutive quarterly
cash dividend of $0.05 per share.
“Looking ahead, our long-term corporate vision remains focused
on leveraging our full suite of strategies to drive organic growth
while maintaining the capital flexibility to pursue strategic
acquisitions that we believe will augment our existing business. As
in the past, serving the needs of our clients remains our top
priority.”
1 The Company reports its financial
results in accordance with generally accepted accounting principles
(“GAAP”). Adjusted EBITDA and Adjusted Net Income are not defined
by GAAP and should not be regarded as an alternative to any
measurement under GAAP. Please see the section “Information
Regarding Non-GAAP Financial Measures” at the end of this press
release for an explanation of Non-GAAP financial measures and a
reconciliation to the nearest GAAP financial measure.
The financial results reflect the acquisition of the USAA Asset
Management Company that closed on July 1, 2019. The acquisition
significantly increased assets under management as well as the
financial results for the three and nine months ended September 30,
2019. The table below presents AUM, and certain GAAP and non-GAAP
(“adjusted”) financial results. Due to rounding, AUM values and
other amounts in this press release may not add up precisely to the
totals provided.
(in millions except per share amounts
or as otherwise noted)
For the Three Months
Ended
For the Nine Months
Ended
September 30,
June 30,
September 30,
September 30,
September 30,
2019
2019
2018
2019
2018
Assets Under Management Ending
$
145,832
$
64,077
$
63,640
$
145,832
$
63,640
Average
145,904
60,063
63,447
87,670
62,361
Long-term Flows(2) Long-term Gross(2)
$
7,456
$
7,514
$
2,896
$
18,008
$
10,102
Long-term Net(2)
726
3,694
(672
)
3,314
(1,408
)
Money Market Flows Money Market Gross
$
4,449
$
—
$
—
$
4,449
$
—
Money Market Net
(65
)
—
—
(65
)
—
Total Flows Total Gross
$
11,905
$
7,514
$
2,896
$
22,457
$
10,102
Total Net
661
3,694
(672
)
3,249
(1,408
)
Consolidated Financial Results (GAAP) Revenue(2)
$
215.0
$
91.4
$
108.1
$
393.8
$
317.4
Revenue realization (in bps)(3)
58.5
61.0
67.6
60.1
68.0
Operating expenses(3)
159.4
68.6
76.3
293.4
228.7
Income from operations
55.6
22.7
31.8
100.4
88.8
Operating margin(3)
25.9
%
24.9
%
29.4
%
25.5
%
28.0
%
Net income
26.0
14.4
20.6
54.9
49.8
Earnings per diluted share
$
0.35
$
0.20
$
0.29
$
0.75
$
0.71
Cash flow from operations
118.4
31.4
40.3
167.7
99.9
Adjusted Performance Results (Non-GAAP)(1) Adjusted EBITDA
$
96.3
$
36.6
$
43.3
$
166.5
$
123.8
Adjusted EBITDA margin(3)
44.8
%
40.0
%
40.1
%
42.3
%
39.0
%
Adjusted net income
60.5
24.4
29.0
106.8
78.6
Tax benefit of goodwill and acquired intangible assets
6.8
3.4
3.3
13.5
10.0
Adjusted net income with tax benefit
67.3
27.7
32.3
120.3
88.6
Adjusted net income with tax benefit per diluted share
$
0.91
$
0.38
$
0.45
$
1.64
$
1.26
Brown added: “The 480-basis point increase in adjusted EBITDA
margin this quarter, more than offset the 2.5 basis-point decline
in average fee rate realization. Our next generation integrated
multi-boutique model is designed to thrive in a lower-fee-rate
environment. We are focused on expanding margins and
profitability—more than the top-line impact from mix shift—which is
being driven by increasing sales of lower-fee Solutions and Fixed
Income products.”
1 The Company reports its financial
results in accordance with GAAP. Adjusted EBITDA and Adjusted Net
Income are not defined by GAAP and should not be regarded as an
alternative to any measurement under GAAP. Please see the section
“Information Regarding Non-GAAP Financial Measures” at the end of
this press release for an explanation of Non-GAAP financial
measures and a reconciliation to the nearest GAAP financial
measure.
2 Long-term AUM is defined as total AUM
excluding Money Market assets.
3 On January 1, 2019, the Company adopted
ASU 2014-09, “Revenue from Contracts with Customers,” and now
records all Mutual Fund and ETF waivers and expense reimbursements
as a reduction of reported revenue and not as an expense item.
Prior periods have not been restated, as permitted by the Financial
Accounting Standards Board, due to the Company adopting the new
revenue guidance using the modified retrospective method.
AUM, Flows and Investment Performance
Victory Capital’s total AUM increased by 128%, or $81.8 billion,
to $145.8 billion at September 30, 2019, compared with $64.1
billion at June 30, 2019. The increase was attributable to $81.1
billion of acquired assets and positive long-term net inflows of
$726 million. Total gross flows were $11.9 billion for the third
quarter and $22.5 billion for the year-to-date period. Long-term
AUM increased by 110%, or $70.3 billion, to $134.4 billion at
September 30, 2019, compared with $64.1 billion at June 30, 2019.
For the year-to-date period, the Company reported long-term gross
flows of $18.0 billion and positive net inflows of $3.3
billion.
At quarter end, Victory Capital offered 116 investment
strategies through its nine autonomous Investment Franchises and
Solutions Platform. The table below presents outperformance against
benchmarks by AUM and strategies for Legacy Victory Capital, USAA
Fixed Income products and total firm-wide products through
September 30, 2019.
Trailing
Trailing
Trailing
Trailing
Percentage of AUM Outperforming Benchmark
1-Year
3-Years
5-Years
10-Years
Legacy Victory Capital
76%
83%
73%
92%
USAA Fixed Income
67%
88%
88%
95%
Total Victory Capital
59%
64%
60%
73%
Third Quarter 2019 Compared with Second Quarter 2019
Revenue increased 135% to $215.0 million, in the third quarter
of 2019, compared with revenue of $91.4 million in the second
quarter. The increase was due to higher average AUM in the third
quarter, offset by a lower reported average fee rate related to
shifting business mix. GAAP operating margin increased 100 basis
points in the third quarter to 25.9%, from 24.9% in the second
quarter. Third quarter GAAP net income rose 81% to $26.0 million,
up from $14.4 million in the second quarter. On a per-share basis,
GAAP net income grew 75% to a record $0.35 per diluted share in the
third quarter, versus $0.20 per diluted share in the previous three
months.
Adjusted net income with tax benefit increased 143% to $67.3
million in the third quarter, up from $27.7 million in the second
quarter. Adjusted net income per diluted share increased 139% to
$0.91 per diluted share in the third quarter of 2019, up from $0.38
per diluted share in the second quarter of the year. Adjusted
EBITDA rose 163% to a record high $96.3 million for the year’s
third quarter, versus $36.6 million in the prior quarter. Adjusted
EBITDA margin expanded 480 basis points to 44.8% in the third
quarter of 2019, compared with 40.0% in the second quarter of this
year.
Third Quarter 2019 Compared with Third Quarter 2018
Revenue for the quarter ended September 30, 2019, advanced 99%
to $215.0 million, compared with $108.1 million in the same quarter
last year, due to higher average AUM, offset by a lower average fee
rate realization and the adoption of ASU 2014-09 in 2019. Revenue
for the third quarter of 2019 includes a reduction of $5.2 million
in mutual fund waivers and reimbursements due to the adoption of
ASU 2014-09, compared with no such reduction of revenue in the
prior year.
GAAP operating margin was 25.9% in the quarter, compared with
29.4% in the third quarter of 2018. Operating expenses increased
109% to $159.4 million, compared with $76.3 million in the
prior-year quarter. The current-year quarter included $21.2 million
of acquisition, restructuring, and integration operating
expenses—compared with $1.5 million of similar costs in the third
quarter of 2018—reducing GAAP operating margin by 987 basis points
in the current year. Last year’s third-quarter distribution and
other asset based expenses included $3.1 million of fund waivers
and reimbursements that are no longer included in operating
expenses following the adoption of ASU 2014-09 on January 1, 2019.
GAAP net income rose 26% to $26.0 million, or $0.35 per diluted
share, in the third quarter compared with $20.6 million, or $0.29
per diluted share, in the same quarter last year.
Adjusted net income with tax benefit more than doubled to $67.3
million, or $0.91 per diluted share, in the third quarter, compared
with $32.3 million, or $0.45 per diluted share in the same quarter
of 2018. Adjusted EBITDA rose 122% to $96.3 million, compared with
$43.3 million in last year’s third quarter. Year-over-year,
adjusted EBITDA margin expanded 470 basis points to 44.8% in the
third quarter of 2019, compared with 40.1% in the same quarter last
year.
Nine Months Ended September 30, 2019 Compared with Nine
Months Ended September 30, 2018
Revenue increased 24% to $393.8 million for the nine months
ended September 30, 2019, compared with $317.4 million last year’s
comparable period, due to higher average AUM offset by a lower fee
rates and the adoption of ASU 2014-09 in 2019. Revenue for the nine
months includes a reduction of $13.4 million in mutual fund waivers
and reimbursements due to the adoption of ASU 2014-09 on January 1,
2019, compared with no such reduction of revenue for the same
period in 2018.
For the nine-month period, GAAP operating margin was 25.5%,
compared with 28.0% in the comparable period of 2018. Operating
expenses increased 28% to $293.4 million in the current year’s nine
months, compared with $228.7 million in last year’s same period.
Current-year operating expenses include $28.6 million of
acquisition, restructuring, and integration costs, that reduced
GAAP operating margin by 726 basis points in the current year,
compared with $2.1 million of such costs in the same 2018 period.
For the year-to-date period, GAAP net income was $54.9 million, or
$0.75 per diluted share in 2019, up from $49.8 million, or $0.71
per diluted share, in the comparable period of 2018.
Adjusted net income with tax benefit was $120.3 million, or
$1.64 per diluted share, for the nine months ended September 30,
2019, comprised of $1.46 per diluted share in adjusted net income
and $0.18 per diluted share in tax benefit. This was up from
adjusted net income with tax benefit of $88.6 million, or $1.26 per
diluted share in 2018. Adjusted EBITDA and Adjusted EBITDA margin
increased to $166.5 million and 42.3%, respectively, for the 2019
nine months, up from $123.8 million and 39.0%, respectively, in
last year’s same period.
Balance Sheet / Capital Management
On July 1, 2019, the Company entered into a new $1.1 billion
seven-year term loan, established a five-year $100 million senior
secured revolving credit facility that remains undrawn and repaid
and terminated the previous credit agreement. During the third
quarter, the Company reduced outstanding debt by $63 million and
initiated a quarterly cash dividend. Subsequent to quarter end, the
Company repaid an additional $40 million of debt, reducing total
debt by $103 million, since July 1.
Today, the Company’s Board of Directors declared a quarterly
cash dividend of $0.05 per share cash dividend payable on December
26, 2019, to shareholders of record on December 10, 2019.
Conference Call, Webcast and Slide Presentation
The Company will host a conference call tomorrow morning,
November 5, at 8:00 a.m. ET to discuss the results. Analysts and
investors may participate in the question-and-answer session. To
participate in the conference call, please dial (866) 465-5145
(domestic) or (409) 220-9945 (international), shortly before 8:00
a.m. ET. A live, listen-only webcast will also be available via the
investor relations section of the Company’s website at
https://ir.vcm.com. Prior to the call, a supplemental slide
presentation that will be used during the conference call will be
available on the Events and Presentations page of the Company’s
investor relations website. For anyone who is unable to join the
live event, an archive of the webcast will be available for replay
shortly after the call concludes.
About Victory Capital
Victory Capital is a global investment management firm operating
a next-generation, integrated multi-boutique business model with
$145.8 billion in assets under management as of September 30,
2019.
Victory Capital provides specialized investment strategies to
institutions, intermediaries, retirement platforms and individual
investors, including USAA members through its direct member
channel. Through its Investment Franchises and Solutions Platform,
Victory Capital offers a diverse array of independent investment
approaches and innovative investment vehicles designed to drive
better investor outcomes. This includes actively managed mutual
funds and separately managed accounts, rules-based and active ETFs,
multi-asset class strategies, custom solutions and a 529 College
Savings Plan.
For more information, please visit www.vcm.com or follow us on
Twitter and LinkedIn.
FORWARD-LOOKING STATEMENTS
This press release may contain forward-looking statements within
the meaning of the Private Securities Litigation Reform Act of
1995. These statements may include, without limitation, any
statements preceded by, followed by or including words such as
“target,” “believe,” “expect,” “aim,” “intend,” “may,”
“anticipate,” “assume,” “budget,” “continue,” “estimate,” “future,”
“objective,” “outlook,” “plan,” “potential,” “predict,” “project,”
“will,” “can have,” “likely,” “should,” “would,” “could” and other
words and terms of similar meaning or the negative thereof. Such
forward-looking statements involve known and unknown risks,
uncertainties and other important factors beyond Victory Capital’s
control, 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.
Victory Capital and its affiliates are not affiliated with
United Services Automobile Association or its affiliates. USAA and
the USAA logo are registered trademarks and the USAA logo is a
trademark of United Services Automobile Association and are being
used by Victory Capital and its affiliates under license.
Victory Capital Holdings, Inc.
and Subsidiaries
Unaudited Condensed
Consolidated Statements of Operations
(in thousands except per share
data and percentages)
For the Three Months
Ended
For the Nine Months
Ended
September 30,
June 30,
September 30,
September 30,
September 30,
2019
2019
2018
2019
2018
Revenue Investment management fees
$
155,406
$
78,042
$
92,525
$
307,859
$
270,653
Fund administration and distribution fees
59,574
13,318
15,557
85,960
46,792
Total revenue
214,980
91,360
108,082
393,819
317,445
Expenses Personnel compensation and benefits
55,556
35,542
38,027
125,599
111,970
Distribution and other asset-based expenses
57,202
16,182
24,269
89,151
73,557
General and administrative
17,654
7,087
6,951
31,828
23,095
Depreciation and amortization
7,768
5,263
5,574
18,253
17,917
Change in value of consideration payable for acquisition of
business
—
(14
)
—
(14
)
(4
)
Acquisition-related costs
16,386
2,787
1,451
21,950
1,446
Restructuring and integration costs
4,841
1,788
—
6,629
702
Total operating expenses
159,407
68,635
76,272
293,396
228,683
Income from operations
55,573
22,725
31,810
100,423
88,762
Operating margin
25.9
%
24.9
%
29.4
%
25.5
%
28.0
%
Other income (expense) Interest income and other
income/(expense)
2,742
656
(200
)
5,231
(229
)
Interest expense and other financing costs
(16,856
)
(4,520
)
(4,458
)
(26,000
)
(16,256
)
Loss on debt extinguishment
(7,409
)
—
—
(7,409
)
(6,058
)
Total other expense, net
(21,523
)
(3,864
)
(4,658
)
(28,178
)
(22,543
)
Income before income taxes
34,050
18,861
27,152
72,245
66,219
Income tax expense
(8,058
)
(4,478
)
(6,562
)
(17,343
)
(16,430
)
Net income
$
25,992
$
14,383
$
20,590
$
54,902
$
49,789
Earnings per share of common stock Basic
$
0.38
$
0.21
$
0.30
$
0.81
$
0.76
Diluted
0.35
0.20
0.29
0.75
0.71
Weighted average number of shares outstanding Basic
67,724
67,583
67,972
67,610
65,817
Diluted
73,671
73,521
71,864
73,300
70,168
Dividends declared per share
$
0.05
$
—
$
—
$
0.05
$
—
Victory Capital Holdings, Inc.
and Subsidiaries
Reconciliation of GAAP to
Non-GAAP Measures
(unaudited; in thousands
except per share data and percentages)
For the Three Months
Ended
For the Nine Months
Ended
September 30,
June 30,
September 30,
September 30,
September 30,
2019
2019
2018
2019
2018
Net income (GAAP)
$
25,992
$
14,383
$
20,590
$
54,902
$
49,789
Income tax expense
(8,058
)
(4,478
)
(6,562
)
(17,343
)
(16,430
)
Income before income taxes
$
34,050
$
18,861
$
27,152
$
72,245
$
66,219
Interest expense
18,388
3,613
4,053
25,854
16,376
Depreciation
682
612
775
1,865
2,247
Other business taxes
146
424
350
1,125
1,168
Amortization of acquisition-related intangible assets
7,086
4,651
4,799
16,388
15,670
Stock-based compensation
4,326
3,321
4,005
9,125
11,295
Acquisition, restructuring and exit costs
24,452
4,575
1,647
31,804
2,725
Debt issuance costs
10,002
366
373
10,732
7,436
Pre-IPO governance expenses
—
—
—
—
138
Earnings/losses from equity method investments
(2,837
)
150
167
(2,683
)
506
Adjusted EBITDA
$
96,295
$
36,573
$
43,321
$
166,455
$
123,780
Adjusted EBITDA margin
44.8
%
40.0
%
40.1
%
42.3
%
39.0
%
Net income (GAAP)
$
25,992
$
14,383
$
20,590
$
54,902
$
49,789
Adjustment to reflect the operating performance of the Company
Other business taxes
146
424
350
1,125
1,168
Amortization of acquisition-related intangible assets
7,086
4,651
4,799
16,388
15,670
Stock-based compensation
4,326
3,321
4,005
9,125
11,295
Acquisition, restructuring and exit costs
24,452
4,575
1,647
31,804
2,725
Debt issuance costs
10,002
366
373
10,732
7,436
Pre-IPO governance expenses
—
—
—
—
138
Tax effect of above adjustments
(11,503
)
(3,334
)
(2,794
)
(17,293
)
(9,608
)
Adjusted net income
$
60,501
$
24,386
$
28,970
$
106,783
$
78,613
Adjusted net income per diluted share
$
0.82
$
0.33
$
0.40
$
1.46
$
1.12
Tax benefit of goodwill and acquired intangible
assets
$
6,802
$
3,361
$
3,318
$
13,523
$
9,958
Tax benefit of goodwill and acquired intangible assets per
diluted share
$
0.09
$
0.05
$
0.05
$
0.18
$
0.14
Adjusted net income with tax benefit
$
67,303
$
27,747
$
32,288
$
120,306
$
88,571
Adjusted net income with tax benefit per diluted share
$
0.91
$
0.38
$
0.45
$
1.64
$
1.26
Victory Capital Holdings, Inc.
and Subsidiaries
Unaudited Condensed
Consolidated Balance Sheets
(In thousands, except for
shares)
September 30, 2019 December 31, 2018
Assets Cash and cash equivalents
$
78,963
$
51,491
Receivables
86,446
44,120
Prepaid expenses
4,606
2,664
Investments
16,993
13,320
Property and equipment, net
11,317
8,780
Goodwill
391,515
284,108
Other intangible assets, net
1,198,361
387,679
Other assets
3,441
9,349
Total assets
$
1,791,642
$
801,511
Liabilities and stockholders' equity Accounts payable
and accrued expenses
$
102,078
$
20,350
Accrued compensation and benefits
44,629
30,228
Consideration payable for acquisition of business
102,800
5,838
Deferred tax liability, net
9,522
6,212
Other liabilities
20,000
14,478
Long-term debt(1)
1,005,928
268,857
Total liabilities
1,284,957
345,963
Stockholders' equity: Class A common stock, $0.01 par
value per share: 2019 - 400,000,000 shares authorized, 17,806,125
shares issued and 16,413,700 shares outstanding; 2018 - 400,000,000
shares authorized, 15,280,833 shares issued and 14,424,558 shares
outstanding
178
153
Class B common stock, $0.01 par value per share: 2019 - 200,000,000
shares authorized, 53,684,006 shares issued and 51,283,669 shares
outstanding; 2018 - 200,000,000 shares authorized, 55,284,408
shares issued and 53,137,428 shares outstanding
537
553
Additional paid-in capital
617,469
604,401
Class A treasury stock, at cost: 2019 - 1,392,425 shares; 2018 -
856,275 shares
(16,440
)
(8,045
)
Class B treasury stock, at cost: 2019 - 2,400,337 shares; 2018 -
2,146,980 shares
(26,161
)
(21,719
)
Accumulated other comprehensive loss
(45
)
(86
)
Retained deficit
(68,853
)
(119,709
)
Total stockholders' equity
506,685
455,548
Total liabilities and stockholders’ equity
$
1,791,642
$
801,511
(1)
In connection with the acquisition, the
Company entered into the 2019 Credit Agreement, dated July 1, 2019.
All indebtedness outstanding under the previous credit agreement
was repaid and terminated as of July 1, 2019. Balances at September
30, 2019 and December 31, 2018 are shown net of unamortized loan
discount and debt issuance costs in the amount of $31.1 million and
$11.1 million, respectively. The gross amount of the debt
outstanding was $1,037.0 million as of September 30, 2019 and
$280.0 million as of December 31, 2018.
Victory Capital Holdings, Inc.
and Subsidiaries
Assets Under
Management
(unaudited; in millions except
for percentages)
For the Three Months
Ended
% Change from
September 30,
June 30,
September 30,
June 30,
September 30,
2019
2019
2018
2019
2018
Beginning assets under management
$
64,077
$
58,119
$
62,256
10%
3%
Gross client cash inflows
11,905
7,514
2,896
58%
311%
Gross client cash outflows
(11,244
)
(3,819
)
(3,568
)
194%
215%
Net client cash flows
661
3,694
(672
)
-82%
198%
Market appreciation (depreciation)
(54
)
2,269
2,056
-102%
-103%
Acquired assets / Net transfers
81,147
(4
)
—
n/m
n/m
Ending assets under management
145,832
64,077
63,640
128%
129%
Average assets under management
145,904
60,063
63,447
143%
130%
For the Nine Months
Ended
% Change from
September 30,
September 30,
September 30,
2019
2018
2018
Beginning assets under management
$
52,763
$
61,771
-15%
Gross client cash inflows
22,457
10,102
122%
Gross client cash outflows
(19,208
)
(11,510
)
67%
Net client cash flows
3,249
(1,408
)
331%
Market appreciation (depreciation)
8,675
3,285
164%
Acquired assets / Net transfers
81,143
(8
)
n/m
Ending assets under management
145,832
63,640
129%
Average assets under management
87,670
62,361
41%
Victory Capital Holdings, Inc.
and Subsidiaries
Assets Under Management by
Asset Class
(unaudited; in
millions)
For the Three Months Ended By Asset Class
Global /
U.S. Mid
U.S. Small
Fixed
U.S. Large
Non-U.S.
Total
Money
Cap Equity
Cap Equity
Income
Cap Equity
Equity
Solutions
Other
Long-term
Market
Total
September 30, 2019 Beginning assets under management
$
24,203
$
15,278
$
7,300
$
4,108
$
5,498
$
6,919
$
771
$
64,077
$
—
$
64,077
Gross client cash inflows
880
779
4,071
166
326
1,207
28
7,456
4,449
11,905
Gross client cash outflows
(1,396
)
(1,069
)
(1,789
)
(497
)
(566
)
(1,296
)
(118
)
(6,730
)
(4,514
)
(11,244
)
Net client cash flows
(516
)
(290
)
2,282
(331
)
(240
)
(89
)
(90
)
726
(65
)
661
Market appreciation (depreciation)
(26
)
(249
)
528
(301
)
(192
)
225
(83
)
(98
)
44
(54
)
Acquired assets / Net transfers
1,818
1,527
27,674
10,012
6,465
22,523
(354
)
69,665
11,482
81,147
Ending assets under management
$
25,479
$
16,266
$
37,784
$
13,488
$
11,532
$
29,579
$
243
$
134,371
$
11,460
$
145,832
June 30, 2019 Beginning assets under management
$
22,169
$
14,714
$
6,973
$
4,117
$
5,234
$
3,996
$
918
$
58,119
$
—
$
58,119
Gross client cash inflows
2,784
729
506
22
333
3,092
48
7,514
—
7,514
Gross client cash outflows
(1,840
)
(924
)
(330
)
(128
)
(205
)
(295
)
(97
)
(3,819
)
—
(3,819
)
Net client cash flows
944
(195
)
176
(106
)
128
2,797
(49
)
3,694
—
3,694
Market appreciation (depreciation)
1,090
760
152
101
137
126
(97
)
2,269
—
2,269
Acquired assets / Net transfers
—
—
(1
)
(4
)
—
—
—
(4
)
—
(4
)
Ending assets under management
$
24,203
$
15,278
$
7,300
$
4,108
$
5,498
$
6,919
$
771
$
64,077
$
—
$
64,077
September 30, 2018 Beginning assets under management
$
24,485
$
15,971
$
6,978
$
4,577
$
4,705
$
3,815
$
1,725
$
62,256
$
—
$
62,256
Gross client cash inflows
964
740
449
42
307
321
73
2,896
—
2,896
Gross client cash outflows
(1,660
)
(860
)
(346
)
(179
)
(193
)
(61
)
(269
)
(3,568
)
—
(3,568
)
Net client cash flows
(696
)
(120
)
103
(137
)
114
260
(196
)
(672
)
—
(672
)
Market appreciation (depreciation)
1,225
587
67
204
(81
)
149
(95
)
2,056
—
2,056
Acquired assets / Net transfers
—
—
1
—
—
—
(1
)
—
—
—
Ending assets under management
$
25,014
$
16,438
$
7,149
$
4,644
$
4,738
$
4,224
$
1,433
$
63,640
$
—
$
63,640
Victory Capital Holdings, Inc.
and Subsidiaries
Assets Under Management by
Asset Class
(unaudited; in
millions)
For the Nine Months Ended By Asset Class
Global /
U.S. Mid
U.S. Small
Fixed
U.S. Large
Non-U.S.
Total
Money
Cap Equity
Cap Equity
Income
Cap Equity
Equity
Solutions
Other
Long-term
Market
Total
September 30, 2019 Beginning assets under management
$
20,019
$
12,948
$
6,836
$
3,759
$
4,610
$
3,767
$
823
$
52,763
$
—
$
52,763
Gross client cash inflows
4,656
2,500
4,880
214
1,024
4,578
155
18,008
4,449
22,457
Gross client cash outflows
(5,021
)
(3,052
)
(2,502
)
(809
)
(1,048
)
(1,940
)
(321
)
(14,694
)
(4,514
)
(19,208
)
Net client cash flows
(365
)
(552
)
2,378
(595
)
(24
)
2,638
(166
)
3,314
(65
)
3,249
Market appreciation (depreciation)
4,006
2,345
896
316
480
649
(60
)
8,631
44
8,675
Acquired assets / Net transfers
1,820
1,526
27,674
10,007
6,465
22,525
(354
)
69,661
$
11,482
81,143
Ending assets under management
$
25,479
$
16,266
$
37,784
$
13,488
$
11,532
$
29,579
$
243
$
134,371
$
11,460
$
145,832
September 30, 2018 Beginning assets under management
$
25,185
$
15,308
$
7,551
$
4,789
$
4,105
$
3,028
$
1,805
$
61,771
$
—
$
61,771
Gross client cash inflows
3,292
2,383
1,145
200
1,420
1,307
355
10,102
—
10,102
Gross client cash outflows
(5,162
)
(2,527
)
(1,637
)
(677
)
(594
)
(307
)
(606
)
(11,510
)
—
(11,510
)
Net client cash flows
(1,870
)
(144
)
(492
)
(477
)
826
1,000
(251
)
(1,408
)
—
(1,408
)
Market appreciation (depreciation)
1,680
1,293
89
320
(185
)
156
(68
)
3,285
—
3,285
Acquired assets / Net transfers
19
(19
)
1
12
(8
)
40
(53
)
(8
)
—
(8
)
Ending assets under management
$
25,014
$
16,438
$
7,149
$
4,644
$
4,738
$
4,224
$
1,433
$
63,640
$
—
$
63,640
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
September 30, 2019 Beginning assets under management
$
34,258
$
3,093
$
26,726
$
64,077
Gross client cash inflows
8,383
245
3,277
11,905
Gross client cash outflows
(9,643
)
(258
)
(1,343
)
(11,244
)
Net client cash flows
(1,260
)
(13
)
1,934
661
Market appreciation (depreciation)
267
4
(325
)
(54
)
Acquired assets / Net transfers
80,806
782
(441
)
81,147
Ending assets under management
$
114,071
$
3,867
$
27,894
$
145,832
June 30, 2019 Beginning assets under management
$
33,786
3,123
21,210
58,119
Gross client cash inflows
1,998
107
5,409
7,514
Gross client cash outflows
(2,874
)
(231
)
(714
)
(3,819
)
Net client cash flows
(876
)
(124
)
4,694
3,694
Market appreciation (depreciation)
1,352
94
823
2,269
Acquired assets / Net transfers
(4
)
—
—
(4
)
Ending assets under management
$
34,258
$
3,093
$
26,726
$
64,077
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
Acquired assets / Net transfers
—
—
—
—
Ending assets under management
$
38,189
$
3,295
$
22,156
$
63,640
(1)
Includes institutional and retail share
classes, money market 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 Nine Months Ended
By Vehicle
Separate
Accounts
Mutual
and Other
Funds(1)
ETFs
Vehicles(2)
Total
September 30, 2019 Beginning assets under management
$
30,492
$
2,956
$
19,315
$
52,763
Gross client cash inflows
12,760
594
9,103
22,457
Gross client cash outflows
(15,403
)
(789
)
(3,016
)
(19,208
)
Net client cash flows
(2,643
)
(195
)
6,087
3,249
Market appreciation (depreciation)
5,421
323
2,931
8,675
Acquired assets / Net transfers
80,802
782
(441
)
81,143
Ending assets under management
$
114,071
$
3,867
$
27,894
$
145,832
September 30, 2018 Beginning assets under management
$
37,967
$
2,250
$
21,555
$
61,771
Gross client cash inflows
7,279
1,082
1,741
10,102
Gross client cash outflows
(8,924
)
(143
)
(2,443
)
(11,510
)
Net client cash flows
(1,645
)
939
(702
)
(1,408
)
Market appreciation (depreciation)
1,878
106
1,301
3,285
Acquired assets / Net transfers
(11
)
—
3
(8
)
Ending assets under management
$
38,189
$
3,295
$
22,156
$
63,640
(1)
Includes institutional and retail share
classes, money market 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, as applicable, are:
- Adding back income tax expense;
- Adding back interest paid on debt and other financing costs,
net of interest income;
- Adding back depreciation on property and equipment;
- Adding back other business taxes;
- Adding back amortization expense on acquisition-related
intangible assets;
- Adding back stock-based compensation expense associated with
equity awards issued from pools created in connection with the
management-led buyout and various acquisitions and as a result of
equity grants related to the IPO;
- Adding back direct incremental costs of acquisitions and the
IPO, including restructuring costs;
- Adding back debt issuance cost expense;
- 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, as applicable, are:
- Adding back other business taxes;
- Adding back amortization expense on acquisition-related
intangible assets;
- Adding back stock-based compensation expense associated with
equity awards issued from pools created in connection with the
management-led buyout and various acquisitions and as a result of
any equity grants related to the IPO;
- Adding back direct incremental costs of acquisitions and the
IPO, including restructuring costs;
- Adding back debt issuance cost expense;
- Adding back pre-IPO governance expenses paid to the Company’s
private equity partners that terminated as of the completion of the
IPO; and
- Subtracting an estimate of income tax expense applied to the
sum of the adjustments above.
Tax Benefit of Goodwill and Acquired
Intangible Assets
Due to Victory Capital’s acquisitive nature, tax deductions
allowed on acquired intangible assets and goodwill provide it with
additional significant supplemental economic benefit. The tax
benefit of goodwill and intangible assets represent the tax
benefits associated with deductions allowed for intangible assets
and goodwill generated from prior acquisitions in which the Company
received a step-up in basis for tax purposes. Acquired intangible
assets and goodwill may be amortized for tax purposes, generally
over a 15-year period. The tax benefit from amortization on these
assets is included to show the full economic benefit of deductions
for all acquired intangible assets with a step-up in tax basis.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20191104005877/en/
Investors: Matthew Dennis, CFA Chief of Staff Director,
Investor Relations 216-898-2412 mdennis@vcm.com
Media: Tricia Ross 310-622-8226 tross@finprofiles.com
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