Victory Capital Reports Strong Fourth-Quarter and Full-Year 2023 Results

Fourth-Quarter 2023 Highlights

Total Assets Under Management (AUM) of $166.6 billion1
Long-term gross flows of $6.6 billion in the quarter
Long-term net flows of ($1.1) billion in the quarter
GAAP operating margin of 41.9%
Adjusted EBITDA margin of 52.3% in the quarter2
GAAP net income of $0.82 per diluted share
Adjusted net income with tax benefit of $1.15 per diluted share2
Board increased regular quarterly cash dividend by 5% to $0.335

Victory Capital Holdings, Inc. (NASDAQ: VCTR) (“Victory Capital” or “the Company”) today reported financial results for the quarter and year ended December 31, 2023.

“We made significant progress in our strategic growth initiatives during 2023 and continued to validate the effectiveness and resiliency of our unique operating platform,” said David Brown, Chairman and Chief Executive Officer. “We invested in our business via the launching of several new products, enhancing our investment capabilities in several areas, and expanding our technology resources across the platform. Concurrently, we also expanded our profit margin with adjusted EBITDA margin rising 130 basis points to 50.9% for the year.

“In the final quarter of 2023, both long-term gross and net flows improved to their best levels in more than a year, which is encouraging as we begin 2024.

“Our Franchises continued to deliver excellent investment performance for clients. At year end, the percentage of our AUM outperforming benchmarks over the respective 3-, 5-, and 10-year periods was 62%, 84%, and 79%. In addition, 70% of our AUM in mutual funds and ETFs were rated four or five stars overall by Morningstar.

“During the fourth quarter, we repurchased an additional 1.8 million shares, increasing the capital returned to shareholders from repurchases during the year to $158 million. Combined with cash dividends, we returned $243 million to shareholders in 2023, an increase of 21% over the previous year, and the most we have ever returned to our shareholders in our Company’s history.

“Our M&A diligence activities have progressed, and entering the new year we are optimistic about the prospects for executing on a transaction aligned with our strategic growth objectives.

“As always, we continue to focus on serving our clients, which is our top priority.”

Total AUM includes both discretionary and non-discretionary client assets.

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

For the Year Ended

December 31,

September 30,

December 31,

2023

2022

2023

2022

Assets Under Management1 Ending $

166,611

153,506

152,952

166,611

152,952

Average

156,734

161,147

154,632

158,268

164,025

Long-term Flows2 Long-term Gross $

6,557

5,255

6,502

23,251

33,313

Long-term Net

(1,134

)

(1,700

)

(4,405

)

(6,176

)

(2,545

)

Money Market/Short-term Flows Money Market / Short-term Gross $

188

193

179

853

621

Money Market / Short-term Net

(47

)

(19

)

(62

)

(391

)

(187

)

Total Flows Total Gross $

6,745

5,449

6,681

24,104

33,934

Total Net

(1,181

)

(1,719

)

(4,466

)

(6,567

)

(2,732

)

Consolidated Financial Results (GAAP) Revenue $

205.8

209.7

201.5

821.0

854.8

Revenue realization (in bps)

52.1

51.6

51.7

51.9

52.1

Operating expenses

119.5

129.6

121.9

492.6

455.7

Income from operations

86.3

80.0

79.6

328.5

399.1

Operating margin

41.9

38.2

39.5

40.0

46.7

Net income

55.2

52.0

52.3

213.2

275.5

Earnings per diluted share $

0.82

0.77

0.74

3.12

3.81

Cash flow from operations

97.1

91.6

67.1

330.3

335.2

Adjusted Performance Results (Non-GAAP)3 Adjusted EBITDA $

107.6

107.2

100.1

418.0

424.2

Adjusted EBITDA margin

52.3

51.1

49.7

50.9

49.6

Adjusted net income

67.4

70.3

65.0

269.7

293.8

Tax benefit of goodwill and acquired intangible assets

9.7

9.5

38.3

37.5

Adjusted net income with tax benefit

77.0

79.8

74.5

307.9

331.2

Adjusted net income with tax benefit per diluted share $

1.15

1.18

1.05

4.51

4.58

_________________

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 total AUM increased by 8.5%, or $13.1 billion, to $166.6 billion at December 31, 2023, compared with $153.5 billion at September 30, 2023. The increase was attributable to $14.3 billion of positive market action partially offset by $1.2 billion in negative net flows.

Total gross flows were $6.7 billion in the fourth quarter and $24.1 billion for the year. Long-term AUM increased by 8.7%, or $13.0 billion, to $163.3 billion at December 31, 2023, compared with $150.3 billion at September 30, 2023. For the fourth quarter, the Company reported long-term gross flows of $6.6 billion and net long-term outflows of $1.1 billion. For the year-to-date period, the Company reported long-term gross flows of $23.3 billion and net long-term outflows of $6.2 billion.

At December 31, 2023, Victory Capital offered 118 investment strategies through its 11 autonomous Investment Franchises and Solutions Platform. The table below presents outperformance against benchmarks by AUM as of December 31, 2023.

Percentage of AUM Outperforming Benchmark

Trailing

1-Year

3-Years

5-Years

10-Years

49%

62%

84%

79%

Fourth Quarter 2023 Compared with Third Quarter 2023

Revenue decreased 1.9% to $205.8 million, in the fourth quarter, compared with $209.7 million in the third quarter, primarily due to lower average AUM, which decreased 2.7% from $161.1 billion at September 30, 2023 to $156.7 billion at December 31, 2023. GAAP operating margin expanded 370 basis points in the fourth quarter to 41.9%, up from 38.2% in the third quarter. The increase was primarily due to the combination of a non-cash $6.3 million difference in amounts recorded to the change in the fair value of consideration payable for acquisitions and a decrease in depreciation and amortization expense as a result of a write-down of an intangible asset in the third quarter. Reflecting these lower non-cash expenses, fourth-quarter GAAP net income increased 6.2% to $55.2 million, up from $52.0 million in the prior quarter. On a per-share basis, GAAP net income increased 6.5% to $0.82 per diluted share in the fourth quarter, versus $0.77 per diluted share in the third quarter.

Adjusted net income with tax benefit decreased 3.5% to $77.0 million in the fourth quarter, down from $79.8 million in the third quarter. On a per-share basis, adjusted net income with tax benefit decreased 2.5% to $1.15 per diluted share in the fourth quarter, from $1.18 per diluted share in the prior quarter. Adjusted EBITDA was $107.6 million in the fourth quarter, compared to $107.2 million in the third quarter. Adjusted EBITDA margin expanded 120 basis points in the fourth quarter of 2023 to 52.3%, compared with 51.1% in the prior quarter.

Fourth Quarter 2023 Compared with Fourth Quarter 2022

Revenue for the three months ended December 31, 2023 increased 2.1% to $205.8 million, compared with $201.5 million in the same quarter of 2022. The increase was primarily due to higher average AUM, which increased 1.4% to $156.7 billion, compared with $154.6 billion in the same quarter last year. Also contributing was a slight increase in revenue realization due to a change in asset mix.

Operating expenses decreased 2.0% to $119.5 million, compared with $121.9 million in last year’s fourth quarter primarily due to a $4.9 million decrease in personnel compensation and benefits and a $3.2 million decrease in depreciation and amortization expense partially offset by a $4.0 million increase in non-cash difference in amounts recorded to the change in the fair value of consideration payable for acquisitions as well as a $3.3 million increase in general and administrative expense due to unwind costs associated with the monetization of the Company’s Swap. GAAP operating margin expanded 240 basis points to 41.9% in the fourth quarter, from 39.5% in the same quarter of 2022. GAAP net income increased 5.6% to $55.2 million, or $0.82 per diluted share, in the fourth quarter compared with $52.3 million, or $0.74 per diluted share, in the same quarter of 2022.

Adjusted net income with tax benefit increased 3.4% to $77.0 million in the fourth quarter, up from $74.5 million in the same quarter last year. On a per share basis, adjusted net income with tax benefit increased 9.5% to $1.15 per diluted share in the fourth quarter, from $1.05 per diluted share in the same quarter last year. Adjusted EBITDA increased 7.4% to $107.6 million in the fourth quarter, compared with $100.1 million in last year’s same quarter. Year-over-year, adjusted EBITDA margin expanded 260 basis points to 52.3% in the fourth quarter of 2023, compared with 49.7% in the same quarter last year.

Year Ended December 31, 2023 Compared with Year Ended December 31, 2022

Revenue for the year ended December 31, 2023, declined 4.0% to $821.0 million, compared with $854.8 million in the same period of 2022. The decrease was primarily due to lower average AUM.

Operating expenses increased 8.1% to $492.6 million for year ended December 31, 2023, compared with $455.7 million in 2022 due to a non-cash $63.8 million difference in amounts recorded from the change in fair value of consideration payable for acquisitions partially offset by a decrease in variable operating expenses from lower average AUM and earnings. GAAP operating margin was 40.0% for the year ended December 31, 2023, a 670 basis point decrease from the 46.7% recorded in 2022. GAAP net income declined 22.6% to $213.2 million for the year ended 2023 compared with $275.5 million in the prior year. GAAP net earnings per share decreased to $3.12 per diluted share in 2023, down from $3.81 per diluted share in 2022.

Adjusted net income with tax benefit decreased 7.0% to $307.9 million for the year ended December 31, 2023, down from $331.2 million in 2022. On a per share basis, adjusted net income with tax benefit decreased 1.5% to $4.51 per diluted share for the year ended December 31, 2023, from $4.58 per diluted share in 2022. For the year ended December 31, 2023, adjusted EBITDA declined 1.5% to $418.0 million, compared with $424.2 million in 2022. Year-over-year, adjusted EBITDA margin expanded 130 basis points to 50.9% for the year ended December 31, 2023, compared with 49.6% in the previous year.

Balance Sheet / Capital Management

The Company ended the year with $124 million of cash on its balance sheet.

Total debt outstanding as of December 31, 2023 was approximately $1,002 million and consisted of an existing term loan balance of $631 million and the 2021 Incremental Term Loans balance of $371 million.

During the fourth quarter, the Company repurchased 1.7 million shares under the 10b-5 plan and net settled 0.1 million shares. For the year ended December 31, 2023, the Company repurchased 4.2 million shares under the 10b-5 plan and net settled 0.8 million shares.

The Company’s Board of Directors also approved a regular quarterly cash dividend of $0.335 per share. The dividend is payable on March 25, 2024, to shareholders of record on March 11, 2024.

Conference Call, Webcast and Slide Presentation

The Company will host a conference call tomorrow morning, February 9, 2024, 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 1-888-330-3571 (domestic) or 1-646-960-0657 (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, supplemental materials will be available on the investor relations section of the Company’s website at https://ir.vcm.com before the conference call begins. 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 $166.6 billion in assets under management as of December 31, 2023. The Company employs a next-generation business strategy that combines 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 11 autonomous Investment Franchises and a Solutions Business, Victory Capital offers a wide array of investment products and services, including mutual funds, ETFs, separately managed accounts, alternative investments, third-party ETF model strategies, collective investment trusts, private funds, a 529 Education Savings Plan, and brokerage services.

Victory Capital is headquartered in San Antonio, Texas, with offices and investment professionals in the U.S. and around the world. To learn more please visit www.vcm.com or follow Victory Capital on Facebook, 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 continued geopolitical uncertainty including the conflicts in Ukraine and Israel 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; 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 Year Ended

December 31,

September 30,

December 31,

2023

2022

2023

2022

Revenue Investment management fees $

160,677

163,953

156,346

640,876

664,710

Fund administration and distribution fees

45,117

45,735

45,169

180,152

190,090

Total revenue

205,794

209,688

201,515

821,028

854,800

Expenses Personnel compensation and benefits

53,949

54,501

58,846

220,992

238,198

Distribution and other asset-based expenses

36,438

38,160

37,634

149,596

161,105

General and administrative

16,702

13,947

13,389

56,287

52,373

Depreciation and amortization

7,984

12,333

11,150

41,647

43,201

Change in value of consideration payable for acquisition of business

4,000

10,336

—

23,236

(40,600

)

Acquisition-related costs

116

217

534

Restructuring and integration costs

320

246

808

595

881

Total operating expenses

119,476

129,639

121,912

492,570

455,692

Income from operations

86,318

80,049

79,603

328,458

399,108

Operating margin

41.9

38.2

39.5

40.0

46.7

Other income (expense) Interest income and other income (expense)

3,765

1,452

2,633

8,732

(2,463

)

Interest expense and other financing costs

(16,561

)

(15,580

)

(13,327

)

(61,282

)

(43,964

)

Loss on debt extinguishment

—

239

—

(2,648

)

Total other expense, net

(12,796

)

(14,128

)

(10,455

)

(52,550

)

(49,075

)

Income before income taxes

73,522

65,921

69,148

275,908

350,033

Income tax expense

(18,316

)

(13,914

)

(16,879

)

(62,751

)

(74,522

)

Net income $

55,206

52,007

52,269

213,157

275,511

Earnings per share of common stock Basic $

0.85

0.79

0.77

3.22

4.02

Diluted

0.82

0.77

0.74

3.12

3.81

Weighted average number of shares outstanding Basic

65,309

65,774

68,054

66,202

68,481

Diluted

66,935

67,676

70,685

68,214

72,266

Dividends declared per share $

0.32

0.25

1.28

1.00

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

For the Year Ended

December 31,

September 30,

December 31,

2023

2022

2023

2022

Net income (GAAP) $

55,206

52,007

52,269

213,157

275,511

Income tax expense

(18,316

)

(13,914

)

(16,879

)

(62,751

)

(74,522

)

Income before income taxes $

73,522

65,921

69,148

275,908

350,033

Interest expense

15,532

14,660

12,006

57,820

41,024

Depreciation

2,273

2,302

1,959

8,842

8,045

Other business taxes

305

636

448

1,707

2,118

Amortization of acquisition-related intangible assets

5,711

10,032

9,191

32,805

35,160

Stock-based compensation

1,503

1,451

2,420

6,496

10,143

Acquisition, restructuring and exit costs

5,586

11,463

3,997

28,982

(28,722

)

Debt issuance costs

3,128

762

935

5,394

5,620

Losses from equity method investments

—

825

Adjusted EBITDA $

107,560

107,227

100,104

417,954

424,246

Adjusted EBITDA margin

52.3

51.1

49.7

50.9

49.6

Net income (GAAP) $

55,206

52,007

52,269

213,157

275,511

Adjustment to reflect the operating performance of the Company Other business taxes

305

636

448

1,707

2,118

Amortization of acquisition-related intangible assets

5,711

10,032

9,191

32,805

35,160

Stock-based compensation

1,503

1,451

2,420

6,496

10,143

Acquisition, restructuring and exit costs

5,586

11,463

3,997

28,982

(28,722

)

Debt issuance costs

3,128

762

935

5,394

5,620

Tax effect of above adjustments

(4,061

)

(6,085

)

(4,247

)

(18,847

)

(6,080

)

Adjusted net income $

67,378

70,266

65,013

269,694

293,750

Adjusted net income per diluted share $

1.01

1.04

0.92

3.95

4.06

Tax benefit of goodwill and acquired intangible assets $

9,655

9,536

9,513

38,252

37,490

Tax benefit of goodwill and acquired intangible assets per diluted share $

0.14

0.13

0.56

0.52

Adjusted net income with tax benefit $

77,033

79,802

74,526

307,946

331,240

Adjusted net income with tax benefit per diluted share $

1.15

1.18

1.05

4.51

4.58

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 Consolidated Balance Sheets

(In thousands, except for shares)

December 31, 2023

December 31, 2022

Assets Cash and cash equivalents $

123,547

38,171

Investment management fees receivable

71,888

68,347

Fund administration and distribution fees receivable

14,238

14,379

Other receivables

1,444

1,747

Prepaid expenses

5,785

8,443

Investments in proprietary funds, at fair value

534

466

Deferred compensation plan investments, at fair value

31,274

26,800

Property and equipment, net

19,578

21,146

Goodwill

981,805

Other intangible assets, net

1,281,832

1,314,637

Other assets

10,691

64,958

Total assets $

2,542,616

2,540,899

Liabilities and stockholders' equity Accounts payable and accrued expenses $

56,477

50,862

Accrued compensation and benefits

55,456

58,458

Consideration payable for acquisition of business

217,200

230,400

Deferred compensation plan liability

31,274

26,800

Deferred tax liability, net

128,714

108,138

Other liabilities

11,225

15,317

Long-term debt(1)

989,269

985,514

Total liabilities

1,489,615

1,475,489

Stockholders' equity: Common stock; $0.01 par value per share: 2023 - 600,000,000 shares authorized, 82,404,305 shares issued and 64,254,714 shares outstanding; 2022 - 600,000,000 shares authorized, 80,528,137 shares issued and 67,325,534 shares outstanding

824

805

Additional paid-in capital

728,283

705,466

Treasury stock, at cost: 2023 - 18,149,591 shares; 2022 - 13,202,603 shares

(444,286

)

(285,425

)

Accumulated other comprehensive income

31,328

35,442

Retained earnings

736,852

609,122

Total stockholders' equity

1,053,001

1,065,410

Total liabilities and stockholders’ equity $

2,542,616

2,540,899

1 Balances at December 31, 2023 and December 31, 2022 are shown net of unamortized loan discount and debt issuance costs in the amount of $12.4 million and $16.2 million, respectively. The gross amount of the debt outstanding was $1,001.7 million as of December 31, 2023 and 2022, respectively.

Victory Capital Holdings, Inc. and Subsidiaries

Assets Under Management

(unaudited; in millions except for percentages)

For the Three Months Ended

% Change from

December 31,

September 30,

December 31,

September 30,

December 31,

2023

2022

2023

2022

Beginning assets under management $

153,506

161,622

147,257

-5%

Gross client cash inflows

6,745

5,449

6,681

24%

Gross client cash outflows

(7,926

)

(7,168

)

(11,147

)

11%

-29%

Net client cash flows

(1,181

)

(1,719

)

(4,466

)

-31%

-74%

Market appreciation (depreciation)

14,315

(4,888

)

10,492

N/A

36%

Realizations and distributions

(27

)

—

(295

)

N/A

Acquired & divested assets / Net transfers1

)

(1,508

)

(36

)

N/A

Ending assets under management

166,611

153,506

152,952

Average assets under management

156,734

161,147

154,632

-3%

For the Year Ended

% Change from

December 31,

2023

2022

Beginning assets under management $

152,952

183,654

-17%

Gross client cash inflows

24,104

33,934

-29%

Gross client cash outflows

(30,671

)

(36,666

)

-16%

Net client cash flows

(6,567

)

(2,732

)

140%

Market appreciation (depreciation)

21,878

(26,495

)

N/A

Realizations and distributions

(100

)

(376

)

-73%

Acquired & divested assets / Net transfers2

(1,552

)

(1,100

)

41%

Ending assets under management

166,611

152,952

Average assets under management

158,268

164,025

-4%

1 The three months ended September 30, 2023 reflects divested assets of $1.3 billion associated with the INCORE transaction.

2 The year ended December 31, 2023 reflects divested assets of $1.3 billion associated with the INCORE transaction.

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 December 31, 2023 Beginning assets under management $

28,235

14,650

23,790

11,596

14,807

53,998

3,222

150,298

3,208

153,506

Gross client cash inflows

1,008

555

1,072

1,251

2,110

498

6,557

188

6,745

Gross client cash outflows

(1,548

)

(938

)

(1,890

)

(329

)

(657

)

(1,977

)

(352

)

(7,691

)

(234

)

(7,926

)

Net client cash flows

(541

)

(383

)

(818

)

(267

)

595

133

146

(1,134

)

(47

)

(1,181

)

Market appreciation (depreciation)

2,917

1,698

1,392

1,320

1,387

5,474

14,278

14,315

Realizations and distributions

—

(27

)

(27

)

—

(27

)

Acquired & divested assets / Net transfers

)

(15

)

(16

)

(20

)

(74

)

Ending assets under management $

30,604

15,959

24,355

12,635

16,772

59,585

3,431

163,340

3,271

166,611

September 30, 2023 Beginning assets under management $

30,007

15,664

26,098

12,170

15,392

55,836

3,301

158,469

3,152

161,622

Gross client cash inflows

1,224

458

892

392

1,988

249

5,255

193

5,449

Gross client cash outflows

(1,769

)

(920

)

(1,343

)

(282

)

(519

)

(1,720

)

(402

)

(6,955

)

(213

)

(7,168

)

Net client cash flows

(545

)

(462

)

(451

)

(231

)

(126

)

268

(153

)

(1,700

)

(19

)

(1,719

)

Market appreciation (depreciation)

(1,224

)

(547

)

(460

)

(287

)

(451

)

(2,028

)

(4,927

)

(4,888

)

Realizations and distributions

—

Acquired & divested assets / Net transfers 1

)

(1,397

)

(57

)

(78

)

(1,545

)

(1,508

)

Ending assets under management $

28,235

14,650

23,790

11,596

14,807

53,998

3,222

150,298

3,208

153,506

December 31, 2022 Beginning assets under management $

25,754

14,109

27,198

10,762

12,293

48,551

5,334

144,001

3,256

147,257

Gross client cash inflows

1,442

754

1,342

1,025

1,372

479

6,502

179

6,681

Gross client cash outflows

(2,259

)

(1,133

)

(2,694

)

(450

)

(767

)

(1,697

)

(1,907

)

(10,906

)

(241

)

(11,147

)

Net client cash flows

(818

)

(379

)

(1,352

)

(362

)

258

(324

)

(1,427

)

(4,405

)

(62

)

(4,466

)

Market appreciation (depreciation)

2,963

1,378

601

680

1,628

3,166

10,464

10,492

Realizations and distributions

—

(295

)

(295

)

—

(295

)

Acquired & divested assets / Net transfers

)

(94

)

(106

)

(19

)

114

(116

)

(36

)

Ending assets under management $

27,892

15,103

26,353

10,973

14,160

51,507

3,663

149,649

3,302

152,952

1 The three months ended September 30, 2023 reflects divested assets of $1.3 billion associated with the INCORE transaction.

Victory Capital Holdings, Inc. and Subsidiaries

Assets Under Management by Asset Class

(unaudited; in millions)

For the Year Ended By Asset Class Global / U.S. Mid U.S. Small Fixed U.S. Large Non-U.S. Alternative Total Money Market / Cap Equity Cap Equity Income Cap Equity Equity Solutions Investments Long-term Short-term Total December 31, 2023 Beginning assets under management $

27,892

15,103

26,353

10,973

14,160

51,507

3,663

149,649

3,302

152,952

Gross client cash inflows

5,090

2,741

4,024

284

2,581

6,937

1,593

23,251

853

24,104

Gross client cash outflows

(5,536

)

(3,859

)

(6,129

)

(1,286

)

(2,304

)

(8,310

)

(2,002

)

(29,426

)

(1,245

)

(30,671

)

Net client cash flows

(446

)

(1,117

)

(2,105

)

(1,002

)

276

(1,373

)

(409

)

(6,176

)

(391

)

(6,567

)

Market appreciation (depreciation)

3,153

1,978

1,595

2,809

2,431

9,494

270

21,729

149

21,878

Realizations and distributions

—

(100

)

(100

)

—

(100

)

Acquired & divested assets / Net transfers1

)

(1,487

)

(145

)

(96

)

(43

)

(1,763

)

211

(1,552

)

Ending assets under management $

30,604

15,959

24,355

12,635

16,772

59,585

3,431

163,340

3,271

166,611

December 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

6,859

3,162

5,524

406

4,149

8,169

5,045

33,313

621

33,934

Gross client cash outflows

(6,919

)

(5,214

)

(9,545

)

(1,498

)

(3,111

)

(6,247

)

(3,324

)

(35,858

)

(807

)

(36,666

)

Net client cash flows

(60

)

(2,053

)

(4,020

)

(1,093

)

1,038

1,921

1,721

(2,545

)

(187

)

(2,732

)

Market appreciation (depreciation)

(2,641

)

(2,965

)

(3,345

)

(3,328

)

(3,153

)

(10,887

)

(215

)

(26,533

)

(26,495

)

Realizations and distributions

—

(376

)

(376

)

—

(376

)

Acquired & divested assets / Net transfers

(1,436

)

(372

)

226

107

(16

)

(1,450

)

350

(1,100

)

Ending assets under management $

27,892

15,103

26,353

10,973

14,160

51,507

3,663

149,649

3,302

152,952

1 The year ended December 31, 2023 reflects divested assets of $1.3 billion associated with the INCORE transaction.

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 Funds1 ETFs2 Vehicles3 Total December 31, 2023 Beginning assets under management $

101,138

4,710

47,658

153,506

Gross client cash inflows

4,126

343

2,276

6,745

Gross client cash outflows

(5,887

)

(356

)

(1,682

)

(7,926

)

Net client cash flows

(1,761

)

(13

)

593

(1,181

)

Market appreciation (depreciation)

9,466

273

4,577

14,315

Realizations and distributions

—

(27

)

(27

)

Acquired & divested assets / Net transfers

(41

)

—

)

Ending assets under management $

108,802

4,970

52,840

166,611

September 30, 2023 Beginning assets under management $

105,916

5,193

50,513

161,622

Gross client cash inflows

3,283

232

1,933

5,449

Gross client cash outflows

(5,119

)

(557

)

(1,492

)

(7,168

)

Net client cash flows

(1,836

)

(324

)

441

(1,719

)

Market appreciation (depreciation)

(2,925

)

(165

)

(1,799

)

(4,888

)

Realizations and distributions

—

Acquired & divested assets / Net transfers4

(17

)

(1,497

)

(1,508

)

Ending assets under management $

101,138

4,710

47,658

153,506

December 31, 2022 Beginning assets under management $

96,591

5,110

45,557

147,257

Gross client cash inflows

4,217

378

2,087

6,681

Gross client cash outflows

(7,953

)

(178

)

(3,016

)

(11,147

)

Net client cash flows

(3,736

)

200

(930

)

(4,466

)

Market appreciation (depreciation)

6,620

327

3,546

10,492

Realizations and distributions

—

(295

)

(295

)

Acquired & divested assets / Net transfers

(27

)

—

(36

)

Ending assets under management $

99,447

5,627

47,877

152,952

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 September 30, 2023 reflects divested assets of $1.3 billion associated with the INCORE transaction.

Victory Capital Holdings, Inc. and Subsidiaries

Assets Under Management by Vehicle

(unaudited; in millions)

For the Year Ended By Vehicle Separate Accounts Mutual and Other Funds1 ETFs2 Vehicles3 Total December 31, 2023 Beginning assets under management $

99,447

5,627

47,877

152,952

Gross client cash inflows

15,594

969

7,542

24,104

Gross client cash outflows

(21,276

)

(1,567

)

(7,828

)

(30,671

)

Net client cash flows

(5,682

)

(599

)

(286

)

(6,567

)

Market appreciation (depreciation)

15,114

(56

)

6,820

21,878

Realizations and distributions

—

(100

)

(100

)

Acquired & divested assets / Net transfers4

(77

)

(1,471

)

(1,552

)

Ending assets under management $

108,802

4,970

52,840

166,611

December 31, 2022 Beginning assets under management $

124,142

4,871

54,641

183,654

Gross client cash inflows

21,198

2,043

10,692

33,934

Gross client cash outflows

(27,703

)

(572

)

(8,391

)

(36,666

)

Net client cash flows

(6,505

)

1,472

2,302

(2,732

)

Market appreciation (depreciation)

(17,092

)

(724

)

(8,679

)

(26,495

)

Realizations and distributions

—

(376

)

(376

)

Acquired & divested assets / Net transfers5

(1,098

)

(11

)

(1,100

)

Ending assets under management $

99,447

5,627

47,877

152,952

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 year ended December 31, 2023 reflects divested assets of $1.3 billion associated with the INCORE transaction.

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/20240208387209/en/

Investors: Matthew Dennis, CFA Chief of Staff Director, Investor Relations 216-898-2412 mdennis@vcm.com

Media: Jessica Davila Director, Global Communications 210-694-9693 jessica_davila@vcm.com

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