First Quarter 2022 Highlights
- Total Assets Under Management (AUM) of $178.1 billion1
- Long-term gross flows of $11.0 billion
- Long-term net inflows of $3.0 billion
- GAAP operating margin of 44.1%
- Adjusted EBITDA margin of 49.7%2
- GAAP net income of $0.97 per diluted share
- Adjusted net income with tax benefit of $1.23 per diluted
share2
- Board authorizes regular $0.25 quarterly cash dividend and a
new $100 million share repurchase program
Victory Capital Holdings, Inc. (NASDAQ: VCTR) (“Victory Capital”
or “the Company”) today reported financial results for the quarter
ended March 31, 2022.
“We had positive organic growth momentum across all of our
channels as we entered into 2022, and it continued through the end
of the quarter. This was our third quarter, out of the last four,
with positive net long-term inflows,” said David Brown, Chairman
and Chief Executive Officer. “This is particularly gratifying,
given the challenging macroeconomic and geopolitical backdrop
during the period and the associated market disruptions. Our
institutional, retail intermediary, as well as our direct investor
business all achieved sequential and year-over-year improvement in
both gross and net long-term asset flows. This culminated in
quarterly gross sales of $11 billion and positive net long-term
inflows of $3 billion during the quarter.
“Investment performance was also exceptional during the quarter.
A majority of our strategies continued to outperform their
benchmarks over the 1-, 3-, 5-, and 10-year periods. Through
quarter-end, 78% and 83%, of our total AUM outperformed benchmarks
over the critical 3-year and 5-year periods, respectively.
“Our variable cost structure enabled us to generate healthy
profit margins in the first quarter. Margins were in line with
previous guidance and our consolidated average fee rate decreased,
as expected, due to a shift in product mix associated with the
WestEnd Advisors (“WestEnd”) acquisition.
“Strong and predictable cash flow generation has allowed us to
continue paying down debt at a fast pace. Since the beginning of
the year, we have repaid a total of $90 million of debt. With our
current $15 million share repurchase authorization nearing
completion, the Board authorized a new $100 million share
repurchase plan, which is the largest in our history. This new
program provides us with flexibility to be more opportunistic with
repurchase activity.
“As always, we continue to focus on our top priority, which is
generating strong investment performance and serving our
clients.”
1
Total AUM includes both
discretionary and non-discretionary client assets.
2
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 refer to the section “Information
Regarding Non-GAAP Financial Measures” at the end of this press
release for an explanation of Non-GAAP financial measures and a
reconciliation to the nearest GAAP financial measure.
The table below presents AUM, and certain GAAP and non-GAAP
(“adjusted”) financial results. Due to rounding, AUM values and
other amounts in this press release may not add up precisely to the
totals provided.
(in millions except per share amounts
or as otherwise noted)
For the Three Months
Ended
March 31,
December 31,
March 31,
2022
2021
2021
Assets Under Management1 Ending $
178,098
$
183,654
$
154,331
Average
176,863
162,295
151,090
Long-term Flows2 Long-term Gross $
11,012
$
5,481
$
6,726
Long-term Net
3,043
(3,402
)
(983
)
Money Market/Short-term Flows Money Market/Short-term Gross
$
124
$
84
$
108
Money Market/Short-term Net
(53
)
(98
)
(191
)
Total Flows Total Gross $
11,136
$
5,565
$
6,833
Total Net
2,990
(3,500
)
(1,174
)
Consolidated Financial Results (GAAP) Revenue $
230.0
$
229.1
$
212.9
Revenue realization (in bps)
52.7
56.0
57.2
Operating expenses
128.5
139.3
123.2
Income from operations
101.5
89.8
89.8
Operating margin
44.1
%
39.2
%
42.1
%
Net income
71.3
69.7
65.2
Earnings per diluted share $
0.97
$
0.94
$
0.88
Cash flow from operations
74.8
112.1
79.6
Adjusted Performance Results (Non-GAAP)3 Adjusted EBITDA $
114.4
$
114.9
$
106.8
Adjusted EBITDA margin
49.7
%
50.2
%
50.2
%
Adjusted net income
81.1
86.4
76.7
Tax benefit of goodwill and acquired intangible assets
9.3
7.3
6.9
Adjusted net income with tax benefit
90.4
93.7
83.6
Adjusted net income with tax benefit per diluted share $
1.23
$
1.27
$
1.13
___________________________
1
Total AUM includes both
discretionary and non-discretionary client assets.
2
Long-term AUM is defined as total
AUM excluding Money Market and Short-term assets.
3
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.
AUM, Flows and Investment Performance
Victory Capital’s AUM decreased by $5.6 billion to $178.1
billion at March 31, 2022, compared with $183.7 billion at December
31, 2021. The decrease was due to negative market action of $8.3
billion, partially offset by net inflows of $3.0 billion. Total
gross flows for the first quarter were $11.1 billion, including
long-term gross flows of $11.0 billion.
As of March 31, 2022, Victory Capital offered 129 investment
strategies through its 12 autonomous Investment Franchises and
Solutions Platform. The table below presents outperformance against
benchmarks by AUM as of March 31, 2022.
Percentage of AUM
Outperforming Benchmark
Trailing
Trailing
Trailing
Trailing
1-Year
3-Years
5-Years
10-Years
68%
78%
83%
79%
First Quarter 2022 Compared with Fourth Quarter 2021
Revenue increased $0.9 million to $230.0 million, in the first
quarter, compared with $229.1 million in the fourth quarter, due to
additional revenue associated with the WestEnd acquisition, which
closed on December 31, 2021, partially offset by two fewer days in
the quarter and lower revenue realization due to changes in asset
mix, resulting from the impact of WestEnd and lower average net
assets. GAAP operating margin expanded 490 basis points in the
first quarter to 44.1%, up from 39.2% in the fourth quarter, due to
lower acquisition-related costs as a result of the WestEnd and New
Energy Capital (“NEC”) acquisitions in the fourth quarter of 2021
and a non-cash $6.7 million difference in amounts recorded to the
change in fair value of consideration payable for acquisitions,
partially offset by continued investments to support future growth.
First quarter GAAP net income rose 2% to $71.3 million, up from
$69.7 million in the prior quarter. On a per-share basis, GAAP net
income advanced 3% to $0.97 per diluted share in the first quarter,
versus $0.94 per diluted share in the fourth quarter.
Adjusted net income with tax benefit decreased 3% to $90.4
million in the first quarter, down from $93.7 million in the fourth
quarter. On a per-share basis, adjusted net income with tax benefit
decreased 3% to $1.23 per diluted share in the first quarter, from
$1.27 per diluted share in the prior quarter. Adjusted EBITDA
decreased $0.6 million to $114.4 million in the first quarter
compared to $114.9 million in the fourth quarter. Adjusted EBITDA
margin contracted 50 basis points in the first quarter of 2022 to
49.7% compared with 50.2% in the prior quarter primarily due to
higher seasonal payroll taxes and benefits.
First Quarter 2022 Compared with First Quarter 2021
Revenue for the three months ended March 31, 2022, rose 8% to
$230.0 million, compared with $212.9 million in the same quarter of
2021. The increase was primarily due to higher average AUM
partially offset by lower revenue realization as a result of the
WestEnd acquisition.
GAAP operating margin was 44.1% in the first quarter, a 200
basis point increase from 42.1% in the same quarter of 2021.
Operating expenses increased 4% to $128.5 million, compared with
$123.2 million in the first quarter of 2021. The increase was
primarily due to continued investments to support future growth as
well as an increase in personnel expense from acquisitions,
partially offset by a non-cash $6.0 million difference in amounts
recorded to the change in fair value of consideration payable for
acquisitions. GAAP net income rose 9% to $71.3 million, or $0.97
per diluted share, in the first quarter compared with $65.2
million, or $0.88 per diluted share, in the same quarter of
2021.
Adjusted net income with tax benefit advanced 8% to $90.4
million, or $1.23 per diluted share, in the first quarter, compared
with $83.6 million, or $1.13 per diluted share in the same quarter
last year. Adjusted EBITDA rose 7% to $114.4 million, compared with
$106.8 million in the same quarter of 2021. Year-over-year,
adjusted EBITDA margin contracted 50 basis points to 49.7% in the
first quarter of 2022, compared with 50.2% in the same quarter last
year.
Balance Sheet / Capital Management
During the first quarter, the Company reduced outstanding debt
by an additional $70.0 million. The total debt outstanding as of
March 31, 2022 was approximately $1,081 million and consisted of an
existing term loan balance of $646 million and the 2021 Incremental
Term Loans balance of $435 million. Subsequent to March 31, 2022,
the Company reduced outstanding debt on the 2021 Incremental Term
Loans by $20.0 million.
During the first quarter, the Company repurchased 293 thousand
shares under its current share repurchase program, which is nearing
completion. The Company’s Board of Directors approved a new common
stock repurchase program authorizing the repurchase of up to $100
million of its common stock. Under the new program, which will
commence immediately upon completion of the current program, the
Company may purchase its shares from time to time until December
31, 2023 in privately negotiated transactions, through block
trades, pursuant to open market purchases, or pursuant to any
trading plan that may be adopted in accordance with Rule 10b5-1 of
the SEC. 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.
The Company’s Board of Directors also approved a regular
quarterly cash dividend of $0.25 per share. The dividend is payable
on June 27, 2022, to shareholders of record on June 10, 2022.
Conference Call, Webcast and Slide Presentation
The Company will host a conference call tomorrow morning, May 6,
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 (888) 330-3571 (domestic) or (646)
960-0657 (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 $178.1 billion in assets under management as of March 31,
2022. It was ranked ninth on Fortune’s list of the 100 Fastest
Growing Companies for 2021. 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 12 autonomous Investment Franchises and a Solutions
Platform, Victory Capital offers a wide array of investment
products, including mutual funds, ETFs, separately managed
accounts, alternative investments, third-party ETF model
strategies, collective investment trusts, private funds, and a 529
Education Savings Plan.
For more information, please visit www.vcm.com or follow us:
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 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.
©2021 Fortune Media IP Limited All rights reserved.
Fortune is a registered trademark of Fortune Media IP Limited and
is used under license. Fortune and Fortune Media IP Limited are not
affiliated with, and do not endorse products or services of,
Victory Capital Management, Inc.
Fortune’s annual list ranks the top performing, publicly traded
companies in revenues, profits and stock returns over the
three-year period ended April 30, 2021.
Victory Capital Holdings, Inc.
and Subsidiaries
Unaudited Consolidated
Statements of Operations
(in thousands except per share
data and percentages)
For the Three Months
Ended
March 31,
December 31,
March 31,
2022
2021
2021
Revenue Investment management fees $
179,465
$
174,867
$
160,284
Fund administration and distribution fees
50,554
54,255
52,665
Total revenue
230,019
229,122
212,949
Expenses Personnel compensation and benefits
64,901
62,528
59,006
Distribution and other asset-based expenses
43,584
45,200
42,103
General and administrative
12,762
12,904
13,310
Depreciation and amortization
10,607
5,384
4,385
Change in value of consideration payable for acquisition of
business
(3,500
)
3,200
2,500
Acquisition-related costs
117
9,997
(164
)
Restructuring and integration costs
9
85
2,053
Total operating expenses
128,480
139,298
123,193
Income from operations
101,539
89,824
89,756
Operating margin
44.1
%
39.2
%
42.1
%
Other income (expense) Interest income and other
income (expense)
(207
)
1,498
2,734
Interest expense and other financing costs
(9,233
)
(5,799
)
(6,845
)
Loss on debt extinguishment
(1,555
)
—
(2,781
)
Total other income (expense), net
(10,995
)
(4,301
)
(6,892
)
Income before income taxes
90,544
85,523
82,864
Income tax expense
(19,271
)
(15,781
)
(17,662
)
Net income $
71,273
$
69,742
$
65,202
Earnings per share of common stock Basic $
1.04
$
1.02
$
0.96
Diluted
0.97
0.94
0.88
Weighted average number of shares outstanding Basic
68,747
68,378
67,761
Diluted
73,652
73,973
74,108
Dividends declared per share $
0.25
$
0.17
$
0.09
Victory Capital Holdings, Inc. and Subsidiaries
Reconciliation of GAAP to
Non-GAAP Measures1
(unaudited; in thousands
except per share data and percentages)
For the Three Months
Ended
March 31,
December 31,
March 31,
2022
2021
2021
Net income (GAAP) $
71,273
$
69,742
$
65,202
Income tax expense
(19,271
)
(15,781
)
(17,662
)
Income before income taxes $
90,544
$
85,523
$
82,864
Interest expense
8,724
5,328
7,310
Depreciation
1,954
1,746
1,246
Other business taxes
590
383
374
Amortization of acquisition-related intangible assets
8,656
3,638
3,138
Stock-based compensation
2,633
2,499
4,636
Acquisition, restructuring and exit costs
(844
)
15,188
4,389
Debt issuance costs
2,061
532
2,793
Losses from equity method investments
57
104
92
Adjusted EBITDA $
114,375
$
114,941
$
106,842
Adjusted EBITDA margin
49.7
%
50.2
%
50.2
%
Net income (GAAP) $
71,273
$
69,742
$
65,202
Adjustment to reflect the operating performance of the Company
Other business taxes
590
383
374
Amortization of acquisition-related intangible assets
8,656
3,638
3,138
Stock-based compensation
2,633
2,499
4,636
Acquisition, restructuring and exit costs
(844
)
15,188
4,389
Debt issuance costs
2,061
532
2,793
Tax effect of above adjustments
(3,274
)
(5,560
)
(3,832
)
Adjusted net income $
81,095
$
86,422
$
76,700
Adjusted net income per diluted share $
1.10
$
1.17
$
1.03
Tax benefit of goodwill and acquired intangible
assets $
9,322
$
7,258
$
6,918
Tax benefit of goodwill and acquired intangible assets per
diluted share $
0.13
$
0.10
$
0.09
Adjusted net income with tax benefit $
90,417
$
93,680
$
83,618
Adjusted net income with tax benefit per diluted share
$
1.23
$
1.27
$
1.13
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.
Victory Capital Holdings, Inc. and Subsidiaries
Unaudited Condensed
Consolidated Balance Sheets
(In thousands, except for
shares)
March 31, 2022
December 31, 2021
Assets Cash and cash equivalents $
38,550
$
69,533
Receivables
93,713
104,305
Prepaid expenses
7,914
6,654
Investments, at fair value
32,388
31,724
Property and equipment, net
24,760
25,295
Goodwill
981,805
981,805
Other intangible assets, net
1,341,140
1,349,797
Other assets
52,322
10,633
Total assets $
2,572,592
$
2,579,746
Liabilities and stockholders' equity Accounts payable
and accrued expenses $
47,587
$
62,102
Accrued compensation and benefits
43,388
53,905
Consideration payable for acquisition of business
305,553
309,380
Deferred tax liability, net
76,176
63,120
Other liabilities
53,085
33,388
Long-term debt, net1
1,060,529
1,127,924
Total liabilities
1,586,318
1,649,819
Stockholders' equity Common stock, $0.01 par value
per share:2022 - 600,000,000 shares authorized, 77,947,578 shares
issued and 68,789,615 shares outstanding; 2021 - 600,000,000 shares
authorized, 77,242,372 shares issued and 68,662,779 shares
outstanding
779
772
Additional paid-in capital
678,812
673,572
Treasury stock, at cost: 2022 - 9,157,963 shares; 2021 - 8,579,593
shares
(171,954
)
(153,200
)
Accumulated other comprehensive income (loss)
22,171
5,972
Retained earnings
456,466
402,811
Total stockholders' equity
986,274
929,927
Total liabilities and stockholders' equity $
2,572,592
$
2,579,746
1
Balances at March 31, 2022 and
December 31, 2021 are shown net of unamortized loan discount and
debt issuance costs in the amount of $20.7 million and $23.3
million, respectively. The gross amount of the debt outstanding was
$1,081.2 million as of March 31, 2022 and $1,151.2 million as of
December 31, 2021.
Victory Capital Holdings, Inc. and Subsidiaries
Assets Under
Management
(unaudited; in millions except
for percentages)
For the Three Months
Ended
% Change from
March 31,
December 31,
March 31,
December 31,
March 31,
2022
2021
2021
2021
2021
Beginning assets under management $
183,654
$
159,889
$
147,241
15%
25%
Gross client cash inflows
11,136
5,565
6,833
100%
63%
Gross client cash outflows
(8,145
)
(9,065
)
(8,007
)
-10%
2%
Net client cash flows
2,990
(3,500
)
(1,174
)
N/A
N/A
Market appreciation (depreciation)
(8,250
)
7,224
7,718
N/A
N/A
Realizations and distributions
(30
)
—
—
N/A
N/A
Acquired assets / Net transfers1
(266
)
20,042
547
N/A
N/A
Ending assets under management
178,098
183,654
154,331
-3%
15%
Average assets under management
176,863
162,295
151,090
9%
17%
1
The three months ended December
31, 2021 includes acquired assets of $795 million and $19.3 billion
associated with the NEC and WestEnd acquisitions, which closed on
November 1, 2021 and December 31, 2021, respectively. The WestEnd
acquired assets had no economic impact on operations in 2021 and no
effect on asset flows, revenues, or earnings in the fourth-quarter
period ended December 31, 2021. The three months ended March 31,
2021 includes the transfer in of $547 million of assets associated
with the THB Asset Management (“THB”) acquisition, which closed on
March 1, 2021.
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.
Alternative
Total
Money Market/
Cap Equity
Cap Equity
Income
Cap Equity
Equity
Solutions
Investments
Long-term
Short-term
Total
March 31, 2022 Beginning assets under management $
30,578
$
20,094
$
35,154
$
15,766
$
16,050
$
60,364
$
2,548
$
180,554
$
3,100
$
183,654
Gross client cash inflows
2,433
1,118
1,604
126
1,241
2,802
1,688
11,012
124
11,136
Gross client cash outflows
(1,834
)
(1,352
)
(2,149
)
(383
)
(618
)
(1,475
)
(157
)
(7,969
)
(176
)
(8,145
)
Net client cash flows
599
(235
)
(545
)
(258
)
624
1,327
1,531
3,043
(53
)
2,990
Market appreciation (depreciation)
(655
)
(1,381
)
(1,541
)
(1,083
)
(1,096
)
(2,470
)
(28
)
(8,255
)
5
(8,250
)
Realizations and distributions
—
—
—
—
—
—
(30
)
(30
)
—
(30
)
Acquired assets / Net transfers
21
11
3
123
77
(565
)
3
(327
)
61
(266
)
Ending assets under management $
30,543
$
18,489
$
33,071
$
14,548
$
15,654
$
58,656
$
4,025
$
174,985
$
3,113
$
178,098
December 31, 20211 Beginning assets under management
$
29,798
$
19,863
$
36,931
$
14,803
$
15,840
$
38,330
$
1,158
$
156,722
$
3,166
$
159,889
Gross client cash inflows
1,564
762
1,386
96
533
782
358
5,481
84
5,565
Gross client cash outflows
(2,617
)
(1,205
)
(3,077
)
(367
)
(577
)
(968
)
(73
)
(8,883
)
(182
)
(9,065
)
Net client cash flows
(1,053
)
(443
)
(1,691
)
(271
)
(44
)
(186
)
286
(3,402
)
(98
)
(3,500
)
Market appreciation (depreciation)
1,840
942
133
1,025
291
2,959
23
7,213
10
7,224
Acquired assets / Net transfers2
(8
)
(269
)
(220
)
209
(37
)
19,262
1,081
20,020
22
20,042
Ending assets under management $
30,578
$
20,094
$
35,154
$
15,766
$
16,050
$
60,364
$
2,548
$
180,554
$
3,100
$
183,654
March 31, 20211 Beginning assets under management $
26,230
$
18,368
$
36,639
$
14,230
$
14,141
$
33,676
$
422
$
143,706
$
3,534
$
147,241
Gross client cash inflows
1,741
1,072
2,025
98
646
839
304
6,726
108
6,833
Gross client cash outflows
(1,854
)
(1,696
)
(1,705
)
(432
)
(673
)
(1,323
)
(26
)
(7,709
)
(299
)
(8,007
)
Net client cash flows
(112
)
(624
)
320
(334
)
(26
)
(484
)
278
(983
)
(191
)
(1,174
)
Market appreciation (depreciation)
3,032
2,024
(219
)
604
754
1,516
8
7,720
(2
)
7,718
Acquired assets / Net transfers3
6
461
73
(52
)
25
1
1
515
32
547
Ending assets under management $
29,156
$
20,230
$
36,813
$
14,448
$
14,894
$
34,709
$
709
$
150,958
$
3,373
$
154,331
1
Beginning in January 2022, the
Company’s “Other” asset class has been categorized to Solutions,
Fixed Income, Global / Non-U.S. Equity, and Alternative Investments
based on the underlying investment strategy. Additionally, all
assets managed using alternative investment strategies are now
included in the Company’s Alternative Investments asset class.
Prior-period figures have been adjusted accordingly.
2
The three months ended December
31, 2021 includes acquired assets of $795 million and $19.3 billion
associated with the NEC and WestEnd acquisitions, which closed on
November 1, 2021 and December 31, 2021, respectively. The WestEnd
acquired assets had no economic impact on operations in 2021 and no
effect on asset flows, revenues, or earnings in the fourth-quarter
period ended December 31, 2021.
3
The three months ended March 31,
2021 includes the transfer in of $547 million of assets associated
with the THB acquisition, which closed on March 1, 2021.
Victory Capital Holdings, Inc. and Subsidiaries
Assets Under Management by
Vehicle
(unaudited; in
millions)
For the Three Months Ended
By Vehicle
Separate
Accounts and
Mutual
Other Pooled
Funds1
ETFs2
Vehicles3
Total
March 31, 2022 Beginning assets under management $
124,142
$
4,871
$
54,641
$
183,654
Gross client cash inflows
6,590
543
4,003
11,136
Gross client cash outflows
(6,383
)
(69
)
(1,694
)
(8,145
)
Net client cash flows
207
474
2,308
2,990
Market appreciation (depreciation)
(5,964
)
(99
)
(2,187
)
(8,250
)
Realizations and distributions
—
—
(30
)
(30
)
Acquired assets / Net transfers
(266
)
—
—
(266
)
Ending assets under management $
118,119
$
5,246
$
54,733
$
178,098
December 31, 2021 Beginning assets under management $
121,367
$
4,371
$
34,151
$
159,889
Gross client cash inflows
4,289
260
1,016
5,565
Gross client cash outflows
(6,925
)
(65
)
(2,075
)
(9,065
)
Net client cash flows
(2,635
)
195
(1,059
)
(3,500
)
Market appreciation (depreciation)
5,426
308
1,489
7,224
Acquired assets / Net transfers4
(15
)
(3
)
20,060
20,042
Ending assets under management $
124,142
$
4,871
$
54,641
$
183,654
March 31, 20211 Beginning assets under management $
112,998
$
3,976
$
30,267
$
147,241
Gross client cash inflows
5,465
240
1,128
6,833
Gross client cash outflows
(6,293
)
(117
)
(1,598
)
(8,007
)
Net client cash flows
(828
)
123
(469
)
(1,174
)
Market appreciation (depreciation)
5,575
343
1,801
7,718
Acquired assets / Net transfers5
85
—
462
547
Ending assets under management $
117,830
$
4,441
$
32,061
$
154,331
1
Includes institutional and retail
share classes, money market and VIP funds.
2
Represents only ETF assets held
by third parties. Excludes ETF assets held by other Victory Capital
products.
3
Includes collective trust funds,
wrap program accounts, UMAs, UCITS, private funds and non-U.S.
domiciled pooled vehicles.
4
The three months ended December
31, 2021 includes acquired assets of $795 million and $19.3 billion
associated with the NEC and WestEnd acquisitions, which closed on
November 1, 2021 and December 31, 2021, respectively. The WestEnd
acquired assets had no economic impact on operations in 2021 and no
effect on asset flows, average assets, revenues, or earnings in the
fourth-quarter period ended December 31, 2021.
5
Includes the transfer in of $547
million of assets associated with the THB acquisition, which closed
on March 1, 2021.
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/20220505005679/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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