Third Quarter 2020 Highlights
- Total Assets Under Management (AUM) of $132.7 billion
- Long-term gross flows of $5.1 billion; long-term net outflows
of $2.9 billion
- GAAP operating margin of 43%
- Record adjusted EBITDA margin of 51%1
- GAAP net income of $0.76 per diluted share
- Record adjusted net income with tax benefit of $1.00 per
diluted share1
- Board authorizes 17% increase in regular quarterly cash
dividend
- Board authorizes new $15 million share repurchase program
Victory Capital Holdings, Inc. (NASDAQ: VCTR) (“Victory Capital”
or “the Company”) today reported financial results for the quarter
and nine-months ended September 30, 2020.
“I am pleased to report that Victory Capital generated record
financial results for the quarter and nine-month periods,” said
David Brown, Chairman and Chief Executive Officer. “Our ability to
achieve industry-leading operating margins while continuing to grow
and invest in our business provides strong evidence of the strength
and efficiency of our business model.
“Today we announced the planned acquisition of THB Asset
Management, which will be our 10th Investment Franchise. THB has a
38-year history with an impressive investment performance track
record. All of it strategies have consistently outperformed
respective benchmarks throughout various market cycles and rank
among the top tier of their strategy peer groups. THB currently
manages approximately $435 million in the micro-cap, small-cap and
mid-cap asset classes, including U.S., global and international
strategies. These are capacity-constrained asset classes that we
know well, and THB has ample room for AUM growth across its product
set. Aligning with our responsible investing initiatives, all of
THB’s strategies have ESG considerations fully integrated into
their investment processes. In addition to serving clients in the
U.S., THB has a distribution footprint in Australia and Europe and
provides us with expanded opportunities in regions in which we have
limited presence today. The transaction is accretive to earnings on
day one and illustrates the appeal of our business model to
experienced investment organizations. Moreover, our acquisition
pipeline remains strong, and we continue to look for larger scale
transactions that enhance our existing model.
“From a capital management perspective, we remain committed to
our strategy of creating flexibility through reduction of debt so
we can pursue inorganic opportunities while also returning capital
to shareholders through dividends and share buybacks. During the
quarter, we repaid an additional $44 million in debt, lowering our
leverage ratio to 2.0x at quarter end. Additionally, we announced a
17% increase in our regular quarterly cash dividend as well as a
new $15 million share repurchase program.
“Our Investment Franchises continued to deliver strong
investment performance during the quarter, with 70% of total AUM
outperforming benchmarks over the three-year period ending
September 30, and 69% over the five-year period. As always, serving
our clients remains our top priority.”
1The Company reports its financial results in accordance with
generally accepted accounting principles (“GAAP”). Adjusted EBITDA
and Adjusted Net Income are not defined by GAAP and should not be
regarded as an alternative to any measurement under GAAP. Please
refer to the section “Information Regarding Non-GAAP Financial
Measures” at the end of this press release for an explanation of
Non-GAAP financial measures and a reconciliation to the nearest
GAAP financial measure.
The table below presents AUM, and certain GAAP and non-GAAP
(“adjusted”) financial results. Due to rounding, AUM values and
other amounts in this press release may not add up precisely to the
totals provided.
(in millions except per share amounts or as otherwise
noted)
For the Three Months Ended For the Nine Months Ended
September 30,
June 30,
September 30,
September 30,
September 30,
2020
2020
2019
2020
2019
Assets Under Management Ending $
132,662
$
129,070
$
145,832
$
132,662
$
145,832
Average
133,096
128,927
145,904
135,378
87,670
Long-term Flows(2) Long-term Gross(2) $
5,067
$
5,166
$
7,456
$
17,506
$
18,008
Long-term Net(2)
(2,878
)
(3,466
)
726
(9,445
)
3,314
Money Market/Short-term Flows Money Market/Short-term Gross
$
367
$
4,411
$
4,449
$
12,429
$
4,449
Money Market/Short-term Net
(96
)
(8,416
)
(65
)
(8,311
)
(65
)
Total Flows Total Gross $
5,433
$
9,577
$
11,905
$
29,935
$
22,457
Total Net
(2,974
)
(11,882
)
661
(17,756
)
3,249
Consolidated Financial Results (GAAP) Revenue $
188.7
$
181.9
$
215.0
$
575.0
$
393.8
Revenue realization (in bps)
56.4
56.7
58.5
56.7
60.1
Operating expenses
108.1
116.1
159.4
337.9
293.4
Income from operations
80.6
65.8
55.6
237.0
100.4
Operating margin
42.7
%
36.2
%
25.9
%
41.2
%
25.5
%
Net income
55.7
44.7
26.0
157.6
54.9
Earnings per diluted share $
0.76
$
0.61
$
0.35
$
2.14
$
0.75
Cash flow from operations
61.8
69.0
118.4
182.7
167.7
Adjusted Performance Results (Non-GAAP)(1) Adjusted EBITDA $
95.6
$
86.3
$
96.3
$
273.5
$
166.5
Adjusted EBITDA margin
50.7
%
47.5
%
44.8
%
47.6
%
42.3
%
Adjusted net income
66.7
58.3
60.5
186.7
106.8
Tax benefit of goodwill and acquired intangible assets
6.7
6.7
6.8
20.2
13.5
Adjusted net income with tax benefit
73.4
65.1
67.3
206.9
120.3
Adjusted net income with tax benefit per diluted share $
1.00
$
0.89
$
0.91
$
2.81
$
1.64
1 The Company reports its financial results in accordance with
GAAP. Adjusted EBITDA and Adjusted Net Income are not defined by
GAAP and should not be regarded as an alternative to any
measurement under GAAP. Please refer to the section “Information
Regarding Non-GAAP Financial Measures” at the end of this press
release for an explanation of Non-GAAP financial measures and a
reconciliation to the nearest GAAP financial measure.
2 Long-term AUM is defined as total AUM excluding Money Market
and short-term assets.
AUM, Flows and Investment Performance
Victory Capital’s total AUM increased by 2.8%, or $3.6 billion,
to $132.7 billion at September 30, 2020, compared with $129.1
billion at June 30, 2020. The increase was attributable to positive
market action of $6.6 billion, partially offset by net outflows of
$3.0 billion. Total gross flows were $5.4 billion for the third
quarter and $29.9 billion for the year-to-date period. Long-term
AUM increased by 2.9%, or $3.7 billion, to $129.0 billion at
September 30, 2020, compared with $125.3 billion at June 30, 2020.
For the year-to-date period, the Company reported long-term gross
flows of $17.5 billion and net long-term outflows of $9.4
billion.
At September 30, 2020, Victory Capital offered 118 investment
strategies through its nine autonomous Investment Franchises and
Solutions Platform. The table below presents outperformance against
benchmarks by AUM as of September 30, 2020.
Percentage of AUM Outperforming Benchmark Trailing
Trailing Trailing Trailing 1-Year
3-Years 5-Years 10-Years
55%
70%
69%
75%
Third Quarter 2020 Compared with Second Quarter 2020
Revenue increased 4% to $188.7 million, in the third quarter,
compared with $181.9 million in the second quarter, reflecting an
increase in average AUM. GAAP operating margin expanded 650 basis
points in the third quarter to 42.7%, up from 36.2% in the second
quarter. The increase was attributable to a combination of improved
operating leverage and a $3.3 million reduction in expense recorded
in the change in the fair value of contingent acquisition payments
from $5.3 million expense in the second quarter compared to $2.0
million expense in the third quarter. Third quarter GAAP net income
increased 25% to $55.7 million, up from $44.7 million in the prior
quarter. On a per-share basis, GAAP net income increased 25% to
$0.76 per diluted share in the third quarter, versus $0.61 per
diluted share in the second quarter.
Adjusted net income with tax benefit increased 13% to $73.4
million in the third quarter, up from $65.1 million in the second
quarter. On a per-share basis, adjusted net income with tax benefit
increased 12% to $1.00 per diluted share in the third quarter, from
$0.89 per diluted share in the prior quarter. Adjusted EBITDA
increased 11% to $95.6 million in the third quarter, versus $86.3
million in the second quarter. Adjusted EBITDA margin expanded 320
basis points in the third quarter of 2020 to 50.7% compared to
47.5% in the prior quarter.
Third Quarter 2020 Compared with Third Quarter 2019
Revenue for the three months ended September 30, 2020, decreased
12% to $188.7 million, compared to $215.0 million in the same
quarter of 2019. The decrease was primarily due to lower average
AUM. GAAP operating margin was 42.7% in the third quarter, a 1,680
basis point increase from the 25.9% recorded in the same quarter of
2019 primarily due to improved operating leverage. Operating
expenses decreased 32% to $108.1 million, compared with $159.4
million in last year’s third quarter. GAAP net income rose 115% to
$55.7 million, or $0.76 per diluted share, in the third quarter
compared to $26.0 million, or $0.35 per diluted share, in the same
quarter of 2019.
Adjusted net income with tax benefit advanced 9% to $73.4
million, or $1.00 per diluted share, in the third quarter, compared
to $67.3 million, or $0.91 per diluted share in the same quarter
last year. Adjusted EBITDA was relatively flat, decreasing 1% to
$95.6 million, compared with $96.3 million in last year’s same
quarter. Year-over-year, Adjusted EBITDA margin expanded 590 basis
points to 50.7% in the third quarter of 2020, compared with 44.8%
in the same quarter last year.
Nine Months Ended September 30, 2020 Compared with Nine
Months Ended September 30, 2019
Year-over-year results reflect the acquisition of the USAA Asset
Management Company, which closed on July 1, 2019. The acquisition
significantly impacted our financial results for the year-to-date
period ended September 30, 2020 when compared to the year-to-date
period ended September 30, 2019. Revenue for the nine months ended
September 30, 2020, rose 46% to $575.0 million, compared with
$393.8 million in the same period of 2019. The increase was
primarily due to higher average AUM as a result of the
acquisition.
GAAP operating margin was 41.2% for the nine months ended
September 30, 2020, a 1,570 basis point increase from the 25.5%
recorded in the same period in 2019 primarily due to improved
operating leverage. Operating expenses increased 15% to $337.9
million for the first nine months of 2020, compared with $293.4
million in the same period in 2019, reflecting the Company’s larger
scale and new call center dedicated to serving our direct channel.
GAAP net income rose 187% to $157.6 million, or $2.14 per diluted
share, in the first nine months of 2020 compared with $54.9
million, or $0.75 per diluted share, in the same period in
2019.
Adjusted net income with tax benefit advanced 72% to $206.9
million, or $2.81 per diluted share, in the first nine months of
2020, compared with $120.3 million, or $1.64 per diluted share in
the same period in 2019. For the nine months ended September 30,
2020, adjusted EBITDA rose 64% to $273.5 million, compared with
$166.5 million for the same period in 2019. Year-over-year,
adjusted EBITDA margin expanded 530 basis points to 47.6% in the
first nine months of 2020, compared with 42.3% in the same period
last year.
Balance Sheet / Capital Management
During the first nine months of 2020, the Company reduced
outstanding debt by an additional $114.8 million. Subsequent to
September 30, 2020, the Company reduced outstanding term loan
principal by $20.0 million, for a total debt reduction of $282.8
million since July 1, 2019.
During the third quarter, the Company repurchased 529,349
shares, at an average price of $17.72 per share, for a total cost
of $9.4 million. Today, the Company announced that its Board of
Directors approved a new common stock repurchase program
authorizing the repurchase of up to $15 million of its Class A
Common Stock through December 31, 2022. Under the new program, the
Company may purchase its shares from time to time in the open
market or in privately negotiated transactions. The amount and
timing of the purchases will depend on a number of factors
including the price and availability of the Company’s shares,
trading volume, capital availability, Company performance and
general economic and market conditions. The share repurchase
program may be suspended or discontinued at any time.
Today, the Company’s Board of Directors declared a $0.07 per
share quarterly cash dividend, an increase of 17% and 40%,
respectively, over the third quarter 2020 and second quarter 2020.
The dividend is payable on December 28, 2020, to shareholders of
record on December 10, 2020.
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 call (877) 823-8673
(domestic) or (647) 689-4067 (international), shortly before 8:00
a.m. ET and reference the Victory Capital Conference Call. A live,
listen-only webcast will also be available via the investor
relations section of the Company’s website at https://ir.vcm.com.
Prior to the call, a supplemental slide presentation that will be
used during the conference call will be available on the Events and
Presentations page of the Company’s investor relations website. For
anyone who is unable to join the live event, an archive of the
webcast will be available for replay shortly after the call
concludes.
About Victory Capital
Victory Capital is a diversified global asset management firm
with $132.7 billion in assets under management as of September 30,
2020. The Company operates a next-generation business model
combining boutique investment qualities with the benefits of a
fully integrated, centralized operating and distribution
platform.
Victory Capital provides specialized investment strategies to
institutions, intermediaries, retirement platforms and individual
investors. With nine autonomous Investment Franchises and a
Solutions Platform, Victory Capital offers a wide array of
investment styles and investment vehicles including, actively
managed mutual funds, separately managed accounts, rules-based and
active ETFs, multi-asset class strategies, custom-designed
solutions and a 529 College Savings Plan.
For more information, please visit www.vcm.com or follow us on:
Twitter and LinkedIn.
FORWARD-LOOKING STATEMENTS
This press release may contain forward-looking statements within
the meaning of the Private Securities Litigation Reform Act of
1995. These statements may include, without limitation, any
statements preceded by, followed by or including words such as
“target,” “believe,” “expect,” “aim,” “intend,” “may,”
“anticipate,” “assume,” “budget,” “continue,” “estimate,” “future,”
“objective,” “outlook,” “plan,” “potential,” “predict,” “project,”
“will,” “can have,” “likely,” “should,” “would,” “could” and other
words and terms of similar meaning or the negative thereof. Such
forward-looking statements involve known and unknown risks,
uncertainties and other important factors beyond Victory Capital’s
control such as the COVID-19 pandemic and its effect on our
business, operations and financial results going forward, as
discussed in Victory Capital’s filings with the SEC, that could
cause Victory Capital’s actual results, performance or achievements
to be materially different from the expected results, performance
or achievements expressed or implied by such forward-looking
statements.
Although it is not possible to identify all such risks and
factors, they include, among others, the following: reductions in
AUM based on investment performance, client withdrawals, difficult
market conditions and other factors such as a pandemic; the nature
of the Company’s contracts and investment advisory agreements; the
Company’s ability to maintain historical returns and sustain its
historical growth; the Company’s dependence on third parties to
market its strategies and provide products or services for the
operation of its business; the Company’s ability to retain key
investment professionals or members of its senior management team;
the Company’s reliance on the technology systems supporting its
operations; the Company’s ability to successfully acquire and
integrate new companies; the concentration of the Company’s
investments in long-only small- and mid-cap equity and U.S.
clients; risks and uncertainties associated with non-U.S.
investments; the Company’s efforts to establish and develop new
teams and strategies; the ability of the Company’s investment teams
to identify appropriate investment opportunities; the Company’s
ability to limit employee misconduct; the Company’s ability to meet
the guidelines set by its clients; the Company’s exposure to
potential litigation (including administrative or tax proceedings)
or regulatory actions; the Company’s ability to implement effective
information and cyber security policies, procedures and
capabilities; the Company’s substantial indebtedness; the potential
impairment of the Company’s goodwill and intangible assets;
disruption to the operations of third parties whose functions are
integral to the Company’s ETF platform; the Company’s determination
that Victory Capital is not required to register as an "investment
company" under the 1940 Act; the fluctuation of the Company’s
expenses; the Company’s ability to respond to recent trends in the
investment management industry; the level of regulation on
investment management firms and the Company’s ability to respond to
regulatory developments; the competitiveness of the investment
management industry; the dual class structure of the Company’s
common stock; the level of control over the Company retained by
Crestview GP; the Company’s status as an emerging growth company
and a controlled company; and other risks and factors listed under
"Risk Factors" and elsewhere in the Company’s filings with the
SEC.
Such forward-looking statements are based on numerous
assumptions regarding Victory Capital’s present and future business
strategies and the environment in which it will operate in the
future. Any forward-looking statement made in this press release
speaks only as of the date hereof. Except as required by law,
Victory Capital assumes no obligation to update these
forward-looking statements, or to update the reasons actual results
could differ materially from those anticipated in the
forward-looking statements, even if new information becomes
available in the future.
Victory Capital Holdings, Inc.
and Subsidiaries
Unaudited Consolidated
Statements of Operations
(in thousands except per share
data and percentages)
For the Three Months Ended For the Nine Months
Ended September 30, June 30, September 30,
September 30, September 30,
2020
2020
2019
2020
2019
Revenue Investment management fees $
137,240
$
130,032
$
155,406
$
414,153
$
307,859
Fund administration and distribution fees
51,416
51,854
59,574
160,810
85,960
Total revenue
188,656
181,886
214,980
574,963
393,819
Expenses Personnel compensation and benefits
47,375
49,105
55,556
144,051
125,599
Distribution and other asset-based expenses
39,123
41,630
57,202
135,613
89,151
General and administrative
13,196
13,289
17,654
38,373
31,828
Depreciation and amortization
3,936
4,166
7,768
12,152
18,253
Change in value of consideration payable for acquisition of
business
2,000
5,300
—
1,800
(14
)
Acquisition-related costs
1,148
(23
)
16,386
1,056
21,950
Restructuring and integration costs
1,285
2,605
4,841
4,888
6,629
Total operating expenses
108,063
116,072
159,407
337,933
293,396
Income from operations
80,593
65,814
55,573
237,030
100,423
Operating margin
42.7
%
36.2
%
25.9
%
41.2
%
25.5
%
Other income (expense) Interest income and other
income (expense)
1,120
2,966
2,742
(86
)
5,231
Interest expense and other financing costs
(8,187
)
(9,710
)
(16,856
)
(29,305
)
(26,000
)
Gain (loss) on debt extinguishment
(758
)
137
(7,409
)
(1,675
)
(7,409
)
Total other expense, net
(7,825
)
(6,607
)
(21,523
)
(31,066
)
(28,178
)
Income before income taxes
72,768
59,207
34,050
205,964
72,245
Income tax expense
(17,027
)
(14,487
)
(8,058
)
(48,337
)
(17,343
)
Net income $
55,741
$
44,720
$
25,992
$
157,627
$
54,902
Earnings per share of common stock Basic $
0.82
$
0.66
$
0.38
$
2.33
$
0.81
Diluted
0.76
0.61
0.35
2.14
0.75
Weighted average number of shares outstanding Basic
67,743
67,821
67,724
67,785
67,610
Diluted
73,437
73,204
73,671
73,703
73,300
Dividends declared per share $
0.06
$
0.05
$
0.05
$
0.16
$
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,
2020
2020
2019
2020
2019
Net income (GAAP) $
55,741
$
44,720
$
25,992
$
157,627
$
54,902
Income tax expense
(17,027
)
(14,487
)
(8,058
)
(48,337
)
(17,343
)
Income before income taxes $
72,768
$
59,207
$
34,050
$
205,964
$
72,245
Interest expense
7,497
8,267
18,388
26,292
25,854
Depreciation
814
746
682
2,444
1,865
Other business taxes
256
219
146
(2,821
)
1,125
Amortization of acquisition-related intangible assets
3,122
3,420
7,086
9,708
16,388
Stock-based compensation
2,806
3,068
4,326
11,246
9,125
Acquisition, restructuring and exit costs
6,996
10,105
24,452
15,559
31,804
Debt issuance costs
1,386
1,312
10,002
5,087
10,732
Earnings from equity method investments
—
—
(2,837
)
—
(2,683
)
Adjusted EBITDA $
95,645
$
86,344
$
96,295
$
273,479
$
166,455
Adjusted EBITDA margin
50.7
%
47.5
%
44.8
%
47.6
%
42.3
%
Net income (GAAP) $
55,741
$
44,720
$
25,992
$
157,627
$
54,902
Adjustment to reflect the operating performance of the Company
Other business taxes
256
219
146
(2,821
)
1,125
Amortization of acquisition-related intangible assets
3,122
3,420
7,086
9,708
16,388
Stock-based compensation
2,806
3,068
4,326
11,246
9,125
Acquisition, restructuring and exit costs
6,996
10,105
24,452
15,559
31,804
Debt issuance costs
1,386
1,312
10,002
5,087
10,732
Tax effect of above adjustments
(3,642
)
(4,531
)
(11,503
)
(9,695
)
(17,293
)
Adjusted net income $
66,665
$
58,313
$
60,501
$
186,711
$
106,783
Adjusted net income per diluted share $
0.91
$
0.80
$
0.82
$
2.53
$
1.46
Tax benefit of goodwill and acquired intangible
assets $
6,745
$
6,745
$
6,802
$
20,218
$
13,523
Tax benefit of goodwill and acquired intangible assets per
diluted share $
0.09
$
0.09
$
0.09
$
0.27
$
0.18
Adjusted net income with tax benefit $
73,410
$
65,058
$
67,303
$
206,929
$
120,306
Adjusted net income with tax benefit per diluted share
$
1.00
$
0.89
$
0.91
$
2.81
$
1.64
Victory Capital Holdings, Inc.
and Subsidiaries
Unaudited Condensed
Consolidated Balance Sheets
(In thousands, except for
shares)
September 30, 2020 December 31, 2019
Assets Cash and cash equivalents $
56,284
$
37,121
Receivables
79,196
95,093
Prepaid expenses
5,335
4,852
Investments
19,617
19,076
Property and equipment, net
18,741
13,240
Goodwill
404,750
404,750
Other intangible assets, net
1,165,763
1,175,471
Other assets
4,305
3,706
Total assets $
1,753,991
$
1,753,309
Liabilities and stockholders' equity Accounts payable
and accrued expenses $
56,313
$
89,203
Accrued compensation and benefits
40,859
54,842
Consideration payable for acquisition of business
120,500
118,700
Deferred tax liability, net
28,117
5,486
Other liabilities
32,768
22,668
Long-term debt, net(1)
815,877
924,539
Total liabilities
1,094,434
1,215,438
Stockholders' equity Class A common stock, $0.01 par
value per share: 2020 - 400,000,000 shares authorized, 19,350,111
shares issued and 16,438,709 shares outstanding; 2019 - 400,000,000
shares authorized, 18,099,772 shares issued and 16,414,617 shares
outstanding
193
181
Class B common stock, $0.01 par value per share: 2020 - 200,000,000
shares authorized, 54,400,113 shares issued and 51,165,503 shares
outstanding; 2019 - 200,000,000 shares authorized, 53,937,394
shares issued and 51,281,512 shares outstanding
544
539
Additional paid-in capital
641,467
624,766
Class A treasury stock, at cost: 2020 - 2,911,402 shares; 2019 -
1,685,155 shares
(42,488
)
(21,524
)
Class B treasury stock, at cost: 2020 - 3,234,610 shares; 2019 -
2,655,882 shares
(42,576
)
(31,386
)
Accumulated other comprehensive loss
(8,987
)
—
Retained earnings (deficit)
111,404
(34,705
)
Total stockholders' equity
659,557
537,871
Total liabilities and stockholders' equity $
1,753,991
$
1,753,309
1 Balances at September 30, 2020 and December 31, 2019 are shown
net of unamortized loan discount and debt issuance costs in the
amount of $21.3 million and $27.5 million, respectively. The gross
amount of the debt outstanding was $837.2 million as of September
30, 2020 and $952 million as of December 31, 2019.
Victory Capital Holdings, Inc.
and Subsidiaries
Assets Under
Management
(unaudited; in millions except
for percentages)
For the Three Months Ended % Change from
September 30, June 30, September 30,
June 30,
September 30,
2020
2020
2019
2020
2019
Beginning assets under management $
129,070
$
123,779
$
64,077
4%
101%
Gross client cash inflows
5,433
9,577
11,905
-43%
-54%
Gross client cash outflows
(8,408
)
(21,459
)
(11,244
)
-61%
-25%
Net client cash flows
(2,974
)
(11,882
)
661
-75%
-550%
Market appreciation (depreciation)
6,566
17,173
(54
)
-62%
N/M
Acquired assets / Net transfers
—
—
81,147
0%
-100%
Ending assets under management
132,662
129,070
145,832
3%
-9%
Average assets under management
133,096
128,927
145,904
3%
-9%
For the Nine Months Ended
% Change from
September 30, September 30,
September 30,
2020
2019
2019
Beginning assets under management $
151,832
$
52,763
188%
Gross client cash inflows
29,935
22,457
33%
Gross client cash outflows
(47,691
)
(19,208
)
148%
Net client cash flows
(17,756
)
3,249
-647%
Market appreciation (depreciation)
(1,413
)
8,675
-116%
Acquired assets / Net transfers
—
81,143
-100%
Ending assets under management
132,662
145,832
-9%
Average assets under management
135,378
87,670
54%
Victory Capital Holdings, Inc.
and Subsidiaries
Assets Under Management by
Asset Class
(unaudited; in
millions)
For the Three Months Ended By Asset Class
Global / U.S. Mid U.S. Small Fixed
U.S. Large Non-U.S. Total Money Market
/ Cap Equity Cap Equity Income Cap
Equity Equity Solutions Other
Long-term Short-term Total September 30,
2020 Beginning assets under management $
22,483
$
14,083
$
35,622
$
12,524
$
11,130
$
29,305
$
195
$
125,343
$
3,727
$
129,070
Gross client cash inflows
760
1,061
1,470
147
463
1,155
11
5,067
367
5,433
Gross client cash outflows
(1,890
)
(1,175
)
(1,850
)
(753
)
(568
)
(1,694
)
(16
)
(7,944
)
(463
)
(8,408
)
Net client cash flows
(1,129
)
(114
)
(380
)
(606
)
(105
)
(539
)
(5
)
(2,878
)
(96
)
(2,974
)
Market appreciation (depreciation)
1,259
591
607
1,141
948
2,001
19
6,566
1
6,566
Acquired assets / Net transfers
(73
)
(107
)
(2
)
182
1
—
(1
)
—
—
—
Ending assets under management $
22,540
$
14,453
$
35,848
$
13,242
$
11,974
$
30,767
$
207
$
129,031
$
3,631
$
132,662
June 30, 2020 Beginning assets under management $
18,622
$
11,885
$
35,402
$
10,703
$
9,372
$
25,526
$
140
$
111,650
$
12,129
$
123,779
Gross client cash inflows
943
997
1,498
216
436
1,067
10
5,166
4,411
9,577
Gross client cash outflows
(1,511
)
(1,393
)
(2,775
)
(599
)
(575
)
(1,767
)
(12
)
(8,632
)
(12,826
)
(21,459
)
Net client cash flows
(568
)
(396
)
(1,278
)
(383
)
(138
)
(700
)
(3
)
(3,466
)
(8,416
)
(11,882
)
Market appreciation (depreciation)
4,428
2,592
1,503
2,207
1,898
4,479
55
17,159
14
17,173
Acquired assets / Net transfers
2
2
(4
)
(2
)
(1
)
—
3
—
—
—
Ending assets under management $
22,483
$
14,083
$
35,622
$
12,524
$
11,130
$
29,305
$
195
$
125,343
$
3,727
$
129,070
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
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 Market
/ Cap Equity Cap Equity Income Cap
Equity Equity Solutions Other
Long-term Short-term Total September 30,
2020 Beginning assets under management $
26,347
$
17,346
$
37,973
$
14,091
$
12,603
$
31,649
$
236
$
140,245
$
11,587
$
151,832
Gross client cash inflows
3,177
3,291
4,918
600
1,570
3,917
32
17,506
12,429
29,935
Gross client cash outflows
(5,666
)
(3,878
)
(7,515
)
(2,159
)
(1,827
)
(5,855
)
(52
)
(26,951
)
(20,740
)
(47,691
)
Net client cash flows
(2,489
)
(587
)
(2,597
)
(1,558
)
(256
)
(1,938
)
(20
)
(9,445
)
(8,311
)
(17,756
)
Market appreciation (depreciation)
(1,220
)
(2,142
)
749
520
(399
)
1,045
(13
)
(1,461
)
48
(1,413
)
Acquired assets / Net transfers
(99
)
(164
)
(278
)
190
27
11
5
(307
)
307
—
Ending assets under management $
22,540
$
14,453
$
35,848
$
13,242
$
11,974
$
30,767
$
207
$
129,031
$
3,631
$
132,662
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
Victory Capital Holdings, Inc.
and Subsidiaries
Assets Under Management by
Vehicle
(unaudited; in
millions)
For the Three Months Ended By Vehicle
Separate Accounts Mutual and Other
Funds(1) ETFs(2) Vehicles(3) Total
September 30, 2020 Beginning assets under management $
100,430
$
3,462
$
25,179
$
129,070
Gross client cash inflows
4,251
18
1,164
5,433
Gross client cash outflows
(6,847
)
(139
)
(1,421
)
(8,406
)
Net client cash flows
(2,596
)
(121
)
(257
)
(2,974
)
Market appreciation (depreciation)
5,151
147
1,269
6,566
Acquired assets / Net transfers
(63
)
—
63
—
Ending assets under management $
102,921
$
3,488
$
26,254
$
132,662
June 30, 2020 Beginning assets under management $
98,305
$
3,177
$
22,296
$
123,779
Gross client cash inflows
8,621
90
866
9,577
Gross client cash outflows
(19,726
)
(214
)
(1,519
)
(21,459
)
Net client cash flows
(11,104
)
(124
)
(653
)
(11,882
)
Market appreciation (depreciation)
13,229
409
3,535
17,173
Acquired assets / Net transfers
—
—
—
—
Ending assets under management $
100,430
$
3,462
$
25,179
$
129,070
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
(1) Includes institutional and retail share classes, money
market and VIP funds.
(2) Excludes assets managed for other proprietary product (i.e.
funds of funds) in order to adjust for double counting.
(3) Includes collective trust funds, wrap program separate
accounts and unified managed accounts or UMAs.
Victory Capital Holdings, Inc.
and Subsidiaries
Assets Under Management by
Vehicle
(unaudited; in
millions)
For the Nine Months Ended By Vehicle
Separate Accounts Mutual and Other
Funds(1) ETFs(2) Vehicles(3) Total
September 30, 2020 Beginning assets under management $
118,605
$
4,213
$
29,014
$
151,832
Gross client cash inflows
26,617
363
2,954
29,935
Gross client cash outflows
(42,204
)
(814
)
(4,673
)
(47,691
)
Net client cash flows
(15,587
)
(451
)
(1,718
)
(17,756
)
Market appreciation (depreciation)
(33
)
(274
)
(1,105
)
(1,413
)
Acquired assets / Net transfers
(63
)
—
63
—
Ending assets under management $
102,921
$
3,488
$
26,254
$
132,662
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
(1) Includes institutional and retail share classes, money
market and VIP funds.
(2) Excludes assets managed for other proprietary product (i.e.
funds of funds) in order to adjust for double counting.
(3) Includes collective trust funds, wrap program separate
accounts and unified managed accounts or UMAs.
Information Regarding Non-GAAP
Financial Measures
Victory Capital uses non-GAAP financial measures referred to as
Adjusted EBITDA and Adjusted Net Income to measure the operating
profitability of the Company. These measures eliminate the impact
of one-time acquisition, restructuring and integration costs and
demonstrate the ongoing operating earnings metrics of the Company.
The Company has included these non-GAAP measures to provide
investors with the same financial metrics used by management to
assess the operating performance of the Company.
Adjusted EBITDA
Adjustments made to GAAP Net Income to calculate Adjusted
EBITDA, as applicable, are:
- Adding back income tax expense;
- Adding back interest paid on debt and other financing costs,
net of interest income;
- Adding back depreciation on property and equipment;
- Adding back other business taxes;
- Adding back amortization expense on acquisition-related
intangible assets;
- Adding back stock-based compensation expense associated with
equity awards issued from pools created in connection with the
management-led buyout and various acquisitions and as a result of
equity grants related to the IPO;
- Adding back direct incremental costs of acquisitions, including
restructuring costs;
- Adding back debt issuance cost expense;
- Adjusting for earnings/losses on equity method
investments.
Adjusted Net Income
Adjustments made to GAAP Net Income to calculate Adjusted Net
Income, as applicable, are:
- Adding back other business taxes;
- Adding back amortization expense on acquisition-related
intangible assets;
- Adding back stock-based compensation expense associated with
equity awards issued from pools created in connection with the
management-led buyout and various acquisitions and as a result of
any equity grants related to the IPO;
- Adding back direct incremental costs of acquisitions, including
restructuring costs;
- Adding back debt issuance cost expense;
- Subtracting an estimate of income tax expense applied to the
sum of the adjustments above.
Tax Benefit of Goodwill and Acquired
Intangible Assets
Due to Victory Capital’s acquisitive nature, tax deductions
allowed on acquired intangible assets and goodwill provide it with
additional significant supplemental economic benefit. The tax
benefit of goodwill and intangible assets represent the tax
benefits associated with deductions allowed for intangible assets
and goodwill generated from prior acquisitions in which the Company
received a step-up in basis for tax purposes. Acquired intangible
assets and goodwill may be amortized for tax purposes, generally
over a 15-year period. The tax benefit from amortization on these
assets is included to show the full economic benefit of deductions
for all acquired intangible assets with a step-up in tax basis.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20201104005467/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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