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Victory Capital Reports Record Third-Quarter 2021 Financial Results

Third Quarter 2021 Highlights

  • Total Assets Under Management (AUM) of $159.9 billion
  • Long-term gross flows of $5.7 billion
  • Long-term net inflows of $0.1 billion
  • GAAP operating margin expands to 43.7%
  • Adjusted EBITDA margin expands to 50.8%1
  • GAAP net income of $1.00 per diluted share
  • Adjusted net income with tax benefit of $1.25 per diluted share1
  • Board authorizes 13% increase in regular quarterly cash dividend

Victory Capital Holdings, Inc. (NASDAQ: VCTR) (“Victory Capital” or “the Company”) today reported financial results for the quarter ended September 30, 2021.

“Adjusted EBITDA margins were greater than 50% for the past five consecutive quarters. Over that same period, we generated sequential growth in revenue and earnings, and set new records for both in the third quarter,” said David Brown, Chairman and Chief Executive Officer. “The third quarter also marked our second consecutive quarter of achieving positive net flows. Additionally during the quarter we announced the launch of our alternative investments platform with the acquisition of New Energy Capital.

“Today, we also disclosed plans to become a leader in the growing SMA market segment with the acquisition of WestEnd Advisors—a fast growing third-party ETF model specialist. Combining WestEnd’s excellent investment performance with the depth and breadth of our established distribution creates a tremendous opportunity to accelerate organic growth and create substantial value.

“We continued to allocate capital to reduce debt in the third quarter, and lowered our net leverage ratio to 1.3x. At the same time, we also increased our cash position to help fund the NEC acquisition, which closed earlier this week. For the WestEnd acquisition, fully committed debt financing is already in place. Additionally, our Board declared another increase in our quarterly cash dividend, which was raised to $0.17 per share.

“Importantly, as always, we continued to focus on our top priority which is generating strong investment performance and serving our clients.”

1 The Company reports its financial results in accordance with generally accepted accounting principles (“GAAP”). Adjusted EBITDA and Adjusted Net Income are not defined by GAAP and should not be regarded as an alternative to any measurement under GAAP. Please 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,

2021

 

2021

 

2020

 

2021

 

2020

Assets Under Management(2)
Ending $

159,889

$

161,936

$

132,662

$

159,889

$

132,662

Average

162,469

158,471

133,096

157,344

135,378

 
Long-term Flows(3)
Long-term Gross $

5,689

$

9,973

$

5,067

$

22,388

$

17,506

Long-term Net

131

302

(2,878)

(550)

(9,445)

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

92

$

102

$

367

$

301

$

12,429

Money Market/Short-term Net

(113)

(126)

(96)

(430)

(8,311)

 
Total Flows
Total Gross $

5,781

$

10,074

$

5,433

$

22,689

$

29,935

Total Net

18

176

(2,974)

(980)

(17,756)

 
Consolidated Financial Results (GAAP)
Revenue $

226.3

$

221.9

$

188.7

$

661.1

$

575.0

Revenue realization (in bps)

55.3

56.2

56.4

56.2

56.7

Operating expenses

127.3

126.6

108.1

377.1

337.9

Income from operations

99.0

95.3

80.6

284.0

237.0

Operating margin

43.7%

42.9%

42.7%

43.0%

41.2%

Net income

74.2

69.3

55.7

208.6

157.6

Earnings per diluted share $

1.00

$

0.93

$

0.76

$

2.81

$

2.14

Cash flow from operations

99.9

84.5

61.8

264.1

182.7

 
Adjusted Performance Results (Non-GAAP)(1)
Adjusted EBITDA $

115.0

$

112.2

$

95.6

$

334.1

$

273.5

Adjusted EBITDA margin

50.8%

50.6%

50.7%

50.5%

47.6%

Adjusted net income

85.6

80.3

66.7

242.6

186.7

Tax benefit of goodwill and acquired intangible assets

6.9

6.9

6.7

20.8

20.2

Adjusted net income with tax benefit

92.6

87.2

73.4

263.4

206.9

Adjusted net income with tax benefit per diluted share $

1.25

$

1.18

$

1.00

$

3.55

$

2.81

______________________________

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 The three months ended June 30, 2021 includes $250 million of seed capital that USAA liquidated and $25 million related to Victory’s closure of two mutual funds and an ETF.

 

3 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 decreased by 1.3%, or $2.0 billion, to $159.9 billion at September 30, 2021, compared with $161.9 billion at June 30, 2021. The decrease was primarily attributable to negative market action of $2.1 billion. Total gross flows were $5.8 billion for the third quarter and $22.7 billion for the year-to-date period. Long-term AUM decreased by 1.2%, or $2.0 billion, to $156.7 billion at September 30, 2021, compared with $158.7 billion at June 30, 2021. For the third quarter, the Company reported long-term gross flows of $5.7 billion and net long-term inflows of $0.1 billion. For the year-to-date period, the Company reported long-term gross flows of $22.4 billion and net long-term outflows of $0.6 billion.

At September 30, 2021, Victory Capital offered 124 investment strategies through its 10 autonomous Investment Franchises and Solutions Platform. The table below presents outperformance against benchmarks by AUM as of September 30, 2021.

Percentage of AUM Outperforming Benchmark

Trailing

 

Trailing

 

Trailing

 

Trailing

1-Year

 

3-Years

 

5-Years

 

10-Years

65%

 

68%

 

77%

 

72%

Third Quarter 2021 Compared with Second Quarter 2021

Revenue increased 2.0% to $226.3 million, in the third quarter, compared with $221.9 million in the second quarter, primarily due to higher average AUM. GAAP operating margin expanded 80 basis points in the third quarter to 43.7%, up from 42.9% in the second quarter. Third quarter GAAP net income increased 7.1% to $74.2 million, up from $69.3 million in the prior quarter. On a per-share basis, GAAP net income increased 7.5% to $1.00 per diluted share in the third quarter, versus $0.93 per diluted share in the second quarter.

Adjusted net income with tax benefit increased 6.2% to $92.6 million in the third quarter, up from $87.2 million in the second quarter. On a per-share basis, adjusted net income with tax benefit increased 5.9% to $1.25 per diluted share in the third quarter, from $1.18 per diluted share in the prior quarter. Adjusted EBITDA increased 2.4% to $115.0 million in the third quarter, versus $112.2 million in the second quarter. Adjusted EBITDA margin expanded 20 basis points in the third quarter of 2021 to 50.8%, compared with 50.6% in the prior quarter.

Third Quarter 2021 Compared with Third Quarter 2020

Revenue for the three months ended September 30, 2021, rose 19.9% to $226.3 million, compared with $188.7 million in the same quarter of 2020. The increase was primarily due to higher average AUM.

Illustrating the inherent operating leverage in the Company’s business model, third quarter operating expenses increased 17.8% to $127.3 million, compared with $108.1 million in last year’s third quarter, reflecting variable operating expenses that rose as a result of the higher average AUM and earnings as well as continued investments to support future growth. GAAP operating margin expanded 100 basis points to 43.7% in the third quarter, from 42.7% in the same quarter of 2020. GAAP net income rose 33.1% to $74.2 million, or $1.00 per diluted share, in the third quarter compared with $55.7 million, or $0.76 per diluted share, in the same quarter of 2020.

Adjusted net income with tax benefit advanced 26.1% to $92.6 million, or $1.25 per diluted share, in the third quarter, compared with $73.4 million, or $1.00 per diluted share in the same quarter last year. Adjusted EBITDA rose 20.2% to $115.0 million in the third quarter, compared with $95.6 million in last year’s same quarter. Year-over-year, adjusted EBITDA margin expanded 10 basis points to 50.8% in the third quarter of 2021, compared with 50.7% in the same quarter last year.

Nine Months Ended September 30, 2021 Compared with Nine Months Ended September 30, 2020

Revenue for the nine months ended September 30, 2021, rose 15.0% to $661.1 million, compared with $575.0 million in the same period of 2020. The increase was primarily due to higher average AUM.

Displaying the inherent operating leverage in the Company’s business model, operating expenses increased 11.6% to $377.1 million for the nine months ended September 30, 2021, compared with $337.9 million in the same period in 2020, reflecting the Company’s variable operating expenses that rose as a result of the higher average AUM and earnings as well as continued investments to support future growth. GAAP operating margin was 43.0% for the nine months ended September 30, 2021, a 180 basis point increase from the 41.2% recorded in the same period in 2020 primarily due to improved operating leverage. GAAP net income rose 32.4% to $208.6 million, or $2.81 per diluted share, in the first nine months of 2021 compared with $157.6 million, or $2.14 per diluted share, in the same period in 2020.

Adjusted net income with tax benefit advanced 27.3% to $263.4 million, or $3.55 per diluted share, in the first nine months of 2021, compared with $206.9 million, or $2.81 per diluted share in the same period in 2020. For the nine months ended September 30, 2021, adjusted EBITDA rose 22.2% to $334.1 million, compared with $273.5 million for the same period in 2020. Year-over-year, adjusted EBITDA margin expanded 290 basis points to 50.5% in the first nine months of 2021, compared with 47.6% in the same period last year.

Balance Sheet / Capital Management

During the third quarter, the Company reduced outstanding debt by an additional $35.0 million for a total debt reduction of $453.8 million, since July 1, 2019.

During the third quarter, the Company repurchased 189 thousand shares under the 10b-5 plan.

Today, the Company’s Board of Directors declared another increase in our quarterly cash dividend, which was raised to $0.17 per share, a 13% increase over the dividend declared in the prior quarter. The dividend is payable on December 27, 2021, to shareholders of record on December 10, 2021.

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 $159.9 billion in assets under management as of September 30, 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 11 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, active ETFs, multi-asset class strategies, custom-designed solutions, private funds, and a 529 Education 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,

 

 

2021

 

2021

 

2020

 

2021

 

2020

Revenue
Investment management fees $

171,355

$

168,033

$

137,240

$

499,672

$

414,153

Fund administration and distribution fees

54,935

53,871

51,416

161,471

160,810

Total revenue

226,290

221,904

188,656

661,143

574,963

 
Expenses
Personnel compensation and benefits

55,837

57,462

47,375

172,305

144,051

Distribution and other asset-based expenses

44,859

44,223

39,123

131,185

135,613

General and administrative

13,795

13,713

13,196

40,818

38,373

Depreciation and amortization

4,377

4,694

3,936

13,456

12,152

Change in value of consideration payable for acquisition of business

2,400

5,700

2,000

10,600

1,800

Acquisition-related costs

6,007

422

1,148

6,265

1,056

Restructuring and integration costs

18

422

1,285

2,493

4,888

Total operating expenses

127,293

126,636

108,063

377,122

337,933

 
Income from operations

98,997

95,268

80,593

284,021

237,030

Operating margin

43.7%

42.9%

42.7%

43.0%

41.2%

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

(119)

1,932

1,120

4,547

(86)

Interest expense and other financing costs

(5,853)

(6,155)

(8,187)

(18,853)

(29,305)

Loss on debt extinguishment

(669)

(1,146)

(758)

(4,596)

(1,675)

Total other expense, net

(6,641)

(5,369)

(7,825)

(18,902)

(31,066)

 
Income before income taxes

92,356

89,899

72,768

265,119

205,964

 
Income tax expense

(18,181)

(20,629)

(17,027)

(56,472)

(48,337)

 
Net income $

74,175

$

69,270

$

55,741

$

208,647

$

157,627

 
Earnings per share of common stock
Basic $

1.09

$

1.02

$

0.82

$

3.08

$

2.33

Diluted

1.00

0.93

0.76

2.81

2.14

 
Weighted average number of shares outstanding
Basic

67,980

67,776

67,743

67,840

67,785

Diluted

74,053

74,166

73,437

74,162

73,703

 
Dividends declared per share $

0.15

$

0.12

$

0.06

$

0.36

$

0.16

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 Nine Months Ended

 

 

September 30,

 

June 30,

 

September 30,

 

September 30,

 

September 30,

 

 

2021

 

2021

 

2020

 

2021

 

2020

Net income (GAAP) $

74,175

$

69,270

$

55,741

$

208,647

$

157,627

Income tax expense

(18,181)

(20,629)

(17,027)

(56,472)

(48,337)

Income before income taxes $

92,356

$

89,899

$

72,768

$

265,119

$

205,964

Interest expense

5,561

6,086

7,497

18,957

26,292

Depreciation

1,693

1,524

814

4,463

2,444

Other business taxes

376

524

256

1,274

(2,821)

Amortization of acquisition-related intangible assets

2,684

3,171

3,122

8,993

9,708

Stock-based compensation

2,851

3,124

2,806

10,611

11,246

Acquisition, restructuring and exit costs

8,425

6,544

6,996

19,358

15,559

Debt issuance costs

960

1,304

1,386

5,057

5,087

Losses from equity method investments

70

65

227

Adjusted EBITDA $

114,976

$

112,241

$

95,645

$

334,059

$

273,479

Adjusted EBITDA margin

50.8%

50.6%

50.7%

50.5%

47.6%

 
 
Net income (GAAP) $

74,175

$

69,270

$

55,741

$

208,647

$

157,627

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

376

524

256

1,274

(2,821)

Amortization of acquisition-related intangible assets

2,684

3,171

3,122

8,993

9,708

Stock-based compensation

2,851

3,124

2,806

10,611

11,246

Acquisition, restructuring and exit costs

8,425

6,544

6,996

19,358

15,559

Debt issuance costs

960

1,304

1,386

5,057

5,087

Tax effect of above adjustments

(3,824)

(3,667)

(3,642)

(11,323)

(9,695)

Adjusted net income $

85,647

$

80,270

$

66,665

$

242,617

$

186,711

Adjusted net income per diluted share $

1.16

$

1.08

$

0.91

$

3.27

$

2.53

 
Tax benefit of goodwill and acquired intangible assets $

6,918

$

6,918

$

6,745

$

20,754

$

20,218

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

0.09

$

0.09

$

0.09

$

0.28

$

0.27

 
Adjusted net income with tax benefit $

92,565

$

87,188

$

73,410

$

263,371

$

206,929

Adjusted net income with tax benefit per diluted share $

1.25

$

1.18

$

1.00

$

3.55

$

2.81

 

1 Refer to page 15 for further information regarding the Company’s non-GAAP financial measures.

Victory Capital Holdings, Inc. and Subsidiaries

Unaudited Condensed Consolidated Balance Sheets

(In thousands, except for shares)

 

 

 

 

 

 

 

September 30, 2021

 

December 31, 2020

Assets
Cash and cash equivalents $

64,740

$

22,744

Receivables

103,180

88,182

Prepaid expenses

5,569

6,082

Investments, at fair value

29,801

23,493

Property and equipment, net

23,686

18,747

Goodwill

404,750

404,750

Other intangible assets, net

1,154,235

1,162,641

Other assets

5,069

4,090

Total assets $

1,791,030

$

1,730,729

 
Liabilities and stockholders' equity
Accounts payable and accrued expenses $

54,058

$

42,144

Accrued compensation and benefits

44,536

47,278

Consideration payable for acquisition of business

103,100

92,500

Deferred tax liability, net

56,914

37,684

Other liabilities

30,858

34,573

Long-term debt, net1

633,897

769,009

Total liabilities

923,363

1,023,188

 
Stockholders' equity
Class A common stock, $0.01 par value per share:
2021 - 400,000,000 shares authorized, 20,149,558 shares issued and 16,203,371 shares outstanding; 2020 - 400,000,000 shares authorized, 19,388,671 shares issued and 16,205,689 shares outstanding

201

194

Class B common stock, $0.01 par value per share:
2021 - 200,000,000 shares authorized, 56,343,339 shares issued and 51,929,173 shares outstanding; 2020 - 200,000,000 shares authorized, 54,766,934 shares issued and 51,336,177 shares outstanding

563

548

Additional paid-in capital

665,898

647,602

Class A treasury stock, at cost: 2021 - 3,946,187 shares; 2020 - 3,182,982 shares

(69,565)

(47,844)

Class B treasury stock, at cost: 2021 - 4,414,166 shares; 2020 - 3,430,757 shares

(75,749)

(47,080)

Accumulated other comprehensive income (loss)

1,571

(7,460)

Retained earnings

344,748

161,581

Total stockholders' equity

867,667

707,541

Total liabilities and stockholders' equity $

1,791,030

$

1,730,729

 

1 Balances at September 30, 2021 and December 31, 2020 are shown net of unamortized loan discount and debt issuance costs in the amount of $12.3 million and $19.2 million, respectively. The gross amount of the debt outstanding was $646.2 million as of September 30, 2021 and $788.2 million as of December 31, 2020.

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,

 

 

2021

 

2021

 

2020

 

2021

 

2020

Beginning assets under management $

161,936

$

154,331

$

129,070

5%

 

25%

Gross client cash inflows

5,781

10,074

5,433

-43%

 

6%

Gross client cash outflows

(5,763)

(9,898)

(8,408)

-42%

 

-31%

Net client cash flows

18

176

(2,974)

-90%

 

N/A

Market appreciation (depreciation)

(2,062)

7,703

6,566

N/A

 

N/A

Acquired assets / Net transfers1

(3)

(275)

-99%

 

-100%

Ending assets under management

159,889

161,936

132,662

-1%

 

21%

Average assets under management

162,469

158,471

133,096

3%

 

22%

 

For the Nine Months Ended

 

 

 

 

% Change from

September 30,

 

September 30,

 

 

 

 

September 30,

2021

 

2020

 

 

 

 

2020

Beginning assets under management $

147,241

$

151,832

-3%

Gross client cash inflows

22,689

29,935

-24%

Gross client cash outflows

(23,669)

(47,691)

-50%

Net client cash flows

(980)

(17,756)

-94%

Market appreciation (depreciation)

13,359

(1,413)

N/A

Acquired assets / Net transfers2

269

100%

Ending assets under management

159,889

132,662

21%

Average assets under management

157,344

135,378

16%

 

1 The three months ended June 30, 2021 includes $250 million of seed capital that USAA liquidated and $25 million related to Victory’s closure of two mutual funds and an ETF.

 

2 The nine months ended September 30, 2021 includes the transfer in of $547 million of assets associated with the THB Asset Management acquisition, which closed on March 1, 2021 partially offset by $250 million of seed capital that USAA liquidated and $25 million related to Victory’s closure of two mutual funds and an ETF.

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, 2021
Beginning assets under management $

30,340

$

20,617

$

36,410

$

15,284

$

15,931

$

39,640

$

460

$

158,682

$

3,254

$

161,936

Gross client cash inflows

1,217

1,491

1,588

79

514

774

26

5,689

92

5,781

Gross client cash outflows

(1,332)

(1,315)

(1,262)

(359)

(481)

(734)

(75)

(5,558)

(205)

(5,763)

Net client cash flows

(114)

175

326

(281)

34

41

(49)

131

(113)

18

Market appreciation (depreciation)

(449)

(898)

57

(115)

(374)

(289)

6

(2,061)

(1)

(2,062)

Acquired assets / Net transfers

21

(32)

103

(85)

(21)

(15)

(1)

(30)

27

(3)

Ending assets under management $

29,798

$

19,863

$

36,897

$

14,803

$

15,570

$

39,376

$

416

$

156,722

$

3,166

$

159,889

 
June 30, 2021
Beginning assets under management $

29,156

$

20,230

$

36,776

$

14,448

$

14,652

$

35,356

$

341

$

150,958

$

3,373

$

154,331

Gross client cash inflows

1,412

1,238

1,750

91

1,072

4,370

40

9,973

102

10,074

Gross client cash outflows

(1,940)

(1,428)

(2,949)

(407)

(541)

(2,380)

(27)

(9,671)

(228)

(9,898)

Net client cash flows

(527)

(190)

(1,200)

(316)

531

1,991

13

302

(126)

176

Market appreciation (depreciation)

1,745

616

677

1,253

928

2,419

62

7,700

3

7,703

Acquired assets / Net transfers1

(33)

(39)

156

(101)

(180)

(126)

44

(278)

3

(275)

Ending assets under management $

30,340

$

20,617

$

36,410

$

15,284

$

15,931

$

39,640

$

460

$

158,682

$

3,254

$

161,936

 
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

 

1 The three months ended June 30, 2021 includes $250 million of seed capital that USAA liquidated and $25 million related to Victory’s closure of two mutual funds and an ETF.

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, 2021
Beginning assets under management $

26,230

$

18,368

$

36,599

$

14,230

$

13,982

$

34,041

$

257

$

143,706

$

3,534

$

147,241

Gross client cash inflows

4,371

3,800

5,362

268

2,179

6,288

120

22,388

301

22,689

Gross client cash outflows

(5,125)

(4,439)

(5,913)

(1,199)

(1,669)

(4,463)

(130)

(22,937)

(732)

(23,669)

Net client cash flows

(754)

(639)

(551)

(931)

510

1,825

(9)

(550)

(430)

(980)

Market appreciation (depreciation)

4,328

1,743

516

1,741

1,255

3,651

125

13,359

13,359

Acquired assets / Net transfers1

(6)

391

333

(237)

(177)

(140)

43

207

62

269

Ending assets under management $

29,798

$

19,863

$

36,897

$

14,803

$

15,570

$

39,376

$

416

$

156,722

$

3,166

$

159,889

 
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

 

1 The nine months ended September 30, 2021 includes the transfer in of $547 million of assets associated with the THB Asset Management acquisition, which closed on March 1, 2021 partially offset by $250 million of seed capital that USAA liquidated and $25 million related to Victory’s closure of two mutual funds and an ETF.

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

September 30, 2021
Beginning assets under management $

123,164

$

4,354

$

34,418

$

161,936

Gross client cash inflows

4,256

109

1,416

5,781

Gross client cash outflows

(4,751)

(23)

(989)

(5,763)

Net client cash flows

(495)

86

427

18

Market appreciation (depreciation)

(1,242)

(41)

(779)

(2,062)

Acquired assets / Net transfers

(60)

(28)

85

(3)

Ending assets under management $

121,367

$

4,371

$

34,151

$

159,889

 
June 30, 2021
Beginning assets under management $

117,830

$

4,441

$

32,061

$

154,331

Gross client cash inflows

5,060

239

4,775

10,074

Gross client cash outflows

(5,376)

(169)

(4,353)

(9,898)

Net client cash flows

(317)

70

423

176

Market appreciation (depreciation)

5,879

218

1,606

7,703

Acquired assets / Net transfers4

(229)

(375)

329

(275)

Ending assets under management $

123,164

$

4,354

$

34,418

$

161,936

 
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)

(8,408)

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

 

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 accounts, UMAs, UCITS, private funds and non-U.S. domiciled pooled vehicles.

 

4 The three months ended June 30, 2021 includes $250 million of seed capital that USAA liquidated and $25 million related to Victory’s closure of two mutual funds and an ETF.

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

 

 

 

Funds1

 

ETFs2

 

Vehicles3

 

Total

September 30, 2021
Beginning assets under management $

112,998

$

3,976

$

30,267

$

147,241

Gross client cash inflows

14,781

589

7,320

22,689

Gross client cash outflows

(16,420)

(310)

(6,939)

(23,669)

Net client cash flows

(1,640)

279

381

(980)

Market appreciation (depreciation)

10,212

520

2,627

13,359

Acquired assets / Net transfers4

(204)

(404)

876

269

Ending assets under management $

121,367

$

4,371

$

34,151

$

159,889

 
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

 

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 accounts, UMAs, UCITS, private funds and non-U.S. domiciled pooled vehicles.

 

4 The nine months ended September 30, 2021 includes the transfer in of $547 million of assets associated with the THB Asset Management acquisition, which closed on March 1, 2021 partially offset by $250 million of seed capital that USAA liquidated and $25 million related to Victory’s closure of two mutual funds and an ETF.

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.

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