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Victory Capital Reports Strong Second Quarter Earnings and Positive Net Long-Term Flows for First Half of Year

Second-Quarter 2022 Highlights

  • Total Assets Under Management (AUM) of $154.9 billion1
  • Long-term gross flows of $9.2 billion in the second quarter; $20.2 billion in the year-to-date period
  • Long-term net flows of ($0.6) billion in the second quarter; $2.4 billion of positive long-term net flows in the year-to-date period
  • GAAP operating margin of 55.2%
  • Adjusted EBITDA margin of 49.2%2
  • GAAP net income of $1.09 per diluted share
  • Adjusted net income with tax benefit of $1.11 per diluted share2
  • Board authorizes regular $0.25 quarterly cash dividend

Victory Capital Holdings, Inc. (NASDAQ: VCTR) (“Victory Capital” or “the Company”) today reported financial results for the quarter ended June 30, 2022.

“We are adeptly navigating the extraordinary declines in both the equity and fixed income markets on behalf of our clients,” said David Brown, Chairman and Chief Executive Officer. “The $20.2 billion of gross long-term flows and the $2.4 billion of positive net long-term inflows in the first half of 2022 demonstrate the confidence our clients have in our investment products and the professionals we have managing them.

“Periods of volatility create unique opportunities for actively managed strategies and as a result our investment performance continues to be excellent. As of June 30, the percentage of our AUM outperforming benchmarks over the respective 3-, 5-, and 10-year periods was 85%, 79%, and 80%.

“The resiliency of our operating model is also on full display during these historically challenging market conditions. Our adjusted EBITDA margin exceeded 49% for the eighth consecutive quarter. This is a reflection of the overall strength of our platform and the hard work and dedication of our employees, who ensure that our clients around the world are receiving superior service.

“Our operating model also affords us the ability to continue to reinvest back into our business so we can emerge from this difficult period as an even stronger organization. At the same time, we continue to reduce debt and return excess capital to shareholders. During the second quarter, we repaid $45 million in debt and returned more capital to shareholders in the form of share repurchases and cash dividends than in any other quarter in our history.

“The recent market environment has not slowed our inorganic growth strategy, and we are currently in various stages of diligence with multiple acquisition prospects. As always, we continue to focus on serving our clients, which is our top priority.”

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

 

For the Six Months Ended

June 30,

 

March 31,

 

June 30,

 

June 30,

 

June 30,

2022

 

2022

 

2021

 

2022

 

2021

Assets Under Management1
Ending $

154,947

 

$

178,098

 

$

161,936

 

$

154,947

 

$

161,936

 

Average

165,703

 

176,863

 

158,471

 

171,283

 

154,781

 

 
Long-term Flows2
Long-term Gross $

9,198

 

$

11,012

 

$

9,973

 

$

20,210

 

$

16,698

 

Long-term Net

(630

)

3,043

 

302

 

2,413

 

(681

)

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

123

 

$

124

 

$

102

 

$

247

 

$

209

 

Money Market/Short-term Net

(53

)

(53

)

(126

)

(106

)

(317

)

 
Total Flows
Total Gross $

9,321

 

$

11,136

 

$

10,074

 

$

20,457

 

$

16,908

 

Total Net

(683

)

2,990

 

176

 

2,307

 

(998

)

 
Consolidated Financial Results (GAAP)
Revenue $

216.0

 

$

230.0

 

$

221.9

 

$

446.0

 

$

434.9

 

Revenue realization (in bps)

52.3

 

52.7

 

56.2

 

52.5

 

56.7

 

Operating expenses

96.7

 

128.5

 

126.6

 

225.2

 

249.8

 

Income from operations

119.3

 

101.5

 

95.3

 

220.9

 

185.0

 

Operating margin

55.2

%

44.1

%

42.9

%

49.5

%

42.5

%

Net income

79.2

 

71.3

 

69.3

 

150.5

 

134.5

 

Earnings per diluted share $

1.09

 

$

0.97

 

$

0.93

 

$

2.05

 

$

1.81

 

Cash flow from operations

90.2

 

74.8

 

84.5

 

165.1

 

164.2

 

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

106.2

 

$

114.4

 

$

112.2

 

$

220.6

 

$

219.1

 

Adjusted EBITDA margin

49.2

%

49.7

%

50.6

%

49.5

%

50.4

%

Adjusted net income

71.4

 

81.1

 

80.3

 

152.5

 

157.0

 

Tax benefit of goodwill and acquired intangible assets

9.3

 

9.3

 

6.9

 

18.6

 

13.8

 

Adjusted net income with tax benefit

80.7

 

90.4

 

87.2

 

171.1

 

170.8

 

Adjusted net income with tax benefit per diluted share $

1.11

 

$

1.23

 

$

1.18

 

$

2.34

 

$

2.30

 

________________________

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 decreased by 13.0%, or $23.2 billion, to $154.9 billion at June 30, 2022, compared with $178.1 billion at March 31, 2022. The decrease was primarily attributable to negative market action of $21.7 billion as a result of volatility and unprecedented pullbacks in the market. Total gross flows were $9.3 billion for the second quarter and $20.5 billion for the year-to-date period. For the second quarter and year-to-date periods, the Company reported total net outflows of $0.7 billion and net inflows of $2.3 billion, respectively.

As of June 30, 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 June 30, 2022.

Percentage of AUM Outperforming Benchmark

Trailing

 

Trailing

 

Trailing

 

Trailing

1-Year

 

3-Years

 

5-Years

 

10-Years

58%

 

85%

 

79%

 

80%

Second Quarter 2022 Compared with First Quarter 2022

Revenue decreased 6.1% to $216.0 million in the second quarter, compared with $230.0 million in the first quarter, primarily due to a decrease in average AUM and revenue realization partially offset by one extra day in the quarter. GAAP operating margin expanded 1,110 basis points in the second quarter to 55.2%, up from 44.1% in the first quarter primarily due to the combination of a non-cash $23.1 million difference in amounts recorded to the change in the fair value of consideration payable for acquisitions as well as decrease in variable expenses including compensation, distribution and other asset based expenses. Second quarter GAAP net income increased 11.1% to $79.2 million, up from $71.3 million in the prior quarter. On a per-share basis, GAAP net income increased 12.4% to $1.09 per diluted share in the second quarter, versus $0.97 per diluted share in the first quarter.

Adjusted net income with tax benefit decreased 10.7% to $80.7 million in the second quarter, down from $90.4 million in the first quarter. On a per-share basis, adjusted net income with tax benefit decreased 9.8% to $1.11 per diluted share in the second quarter, from $1.23 per diluted share in the prior quarter. Adjusted EBITDA decreased 7.2% to $106.2 million in the second quarter, versus $114.4 million in the first quarter. Adjusted EBITDA margin contracted 50 basis points in the second quarter of 2022 to 49.2% compared with 49.7% in the prior quarter.

Second Quarter 2022 Compared with Second Quarter 2021

Revenue for the three months ended June 30, 2022, declined 2.7% to $216.0 million, compared with $221.9 million in the same quarter of 2021 as a result of lower revenue realization over the comparable period.

Operating expenses decreased 23.7% to $96.7 million, compared with $126.6 million in last year’s second quarter due to a non-cash $32.3 million difference in amounts recorded to the change in the fair value of consideration payable for acquisitions. GAAP operating margin expanded 1,230 basis points to 55.2% in the second quarter, from 42.9% in the same quarter of 2021. GAAP net income rose 14.3% to $79.2 million, or $1.09 per diluted share, in the second quarter compared with $69.3 million, or $0.93 per diluted share, in the same quarter of 2021.

Adjusted net income with tax benefit decreased 7.4% to $80.7 million, or $1.11 per diluted share, in the second quarter, compared with $87.2 million, or $1.18 per diluted share in the same quarter last year. Adjusted EBITDA decreased 5.4% to $106.2 million, compared with $112.2 million in last year’s same quarter. Year-over-year, adjusted EBITDA margin contracted 140 basis points to 49.2% in the second quarter of 2022, compared with 50.6% in the same quarter last year.

Six Months Ended June 30, 2022 Compared with Six Months Ended June 30, 2021

Revenue for the six months ended June 30, 2022, increased 2.6% to $446.0 million, compared with $434.9 million in the same period of 2021. The increase was primarily due to higher average AUM partially offset by lower revenue realization as a result of the WestEnd acquisition.

Operating expenses decreased 9.9% to $225.2 million for the six months ended June 30, 2022, compared with $249.8 million in the same period in 2021 due to a combination of non-cash $38.3 million difference in amounts recorded to the change in the fair value of consideration payable for acquisitions as well as a decrease in variable expenses, partially offset by continued investments to support future growth. GAAP operating margin was 49.5% for the six months ended June 30, 2022, a 700 basis point increase from the 42.5% recorded in the same period in 2021. GAAP net income rose 11.9% to $150.5 million, or $2.05 per diluted share, in the first six months of 2022 compared with $134.5 million, or $1.81 per diluted share, in the same period in 2021.

Adjusted net income with tax benefit increased 0.2% to $171.1 million, or $2.34 per diluted share, in the first six months of 2022, compared with $170.8 million, or $2.30 per diluted share in the same period in 2021. For the six months ended June 30, 2022, adjusted EBITDA rose 0.7% to $220.6 million, compared with $219.1 million for the same period in 2021. Year-over-year, adjusted EBITDA margin contracted 90 basis points to 49.5% in the first six months of 2022, compared with 50.4% in the same period last year.

Balance Sheet / Capital Management

During the second quarter, the Company reduced outstanding debt by an additional $45.0 million. The total debt outstanding as of June 30, 2022 was approximately $1,036 million and consisted of an existing term loan balance of $646.2 million and the 2021 Incremental Term Loans balance of $390.0 million. Subsequent to June 30, 2022, we reduced outstanding term loan principal by an additional $25.6 million through open market term loan debt repurchases and prepayments.

During the second quarter, the Company repurchased 640 thousand shares.

The Company’s Board of Directors also approved a regular quarterly cash dividend of $0.25 per share. The dividend is payable on September 26, 2022, to shareholders of record on September 12, 2022.

Conference Call, Webcast and Slide Presentation

The Company will host a conference call tomorrow morning, August 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 (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 $154.9 billion in assets under management as of June 30, 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 conflict in Ukraine and 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

 

For the Six Months Ended

June 30,

 

March 31,

 

June 30,

 

June 30,

 

June 30,

2022

 

2022

 

2021

 

2022

 

2021

Revenue
Investment management fees $

168,129

 

$

179,465

 

$

168,033

 

$

347,594

 

$

328,317

 

Fund administration and distribution fees

47,877

 

50,554

 

53,871

 

98,431

 

106,536

 

Total revenue

216,006

 

230,019

 

221,904

 

446,025

 

434,853

 

 
Expenses
Personnel compensation and benefits

57,582

 

64,901

 

57,462

 

122,483

 

116,468

 

Distribution and other asset-based expenses

40,868

 

43,584

 

44,223

 

84,452

 

86,326

 

General and administrative

13,921

 

12,762

 

13,713

 

26,683

 

27,023

 

Depreciation and amortization

10,758

 

10,607

 

4,694

 

21,365

 

9,079

 

Change in value of consideration payable for acquisition of business

(26,600

)

(3,500

)

5,700

 

(30,100

)

8,200

 

Acquisition-related costs

143

 

117

 

422

 

260

 

258

 

Restructuring and integration costs

8

 

9

 

422

 

17

 

2,475

 

Total operating expenses

96,680

 

128,480

 

126,636

 

225,160

 

249,829

 

 
Income from operations

119,326

 

101,539

 

95,268

 

220,865

 

185,024

 

Operating margin

55.2

%

44.1

%

42.9

%

49.5

%

42.5

%

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

(3,443

)

(207

)

1,932

 

(3,650

)

4,666

 

Interest expense and other financing costs

(9,925

)

(9,233

)

(6,155

)

(19,158

)

(13,000

)

Loss on debt extinguishment

(963

)

(1,555

)

(1,146

)

(2,518

)

(3,927

)

Total other income (expense), net

(14,331

)

(10,995

)

(5,369

)

(25,326

)

(12,261

)

 
Income before income taxes

104,995

 

90,544

 

89,899

 

195,539

 

172,763

 

 
Income tax expense

(25,790

)

(19,271

)

(20,629

)

(45,061

)

(38,291

)

 
Net income $

79,205

 

$

71,273

 

$

69,270

 

$

150,478

 

$

134,472

 

 
Earnings per share of common stock
Basic $

1.16

 

$

1.04

 

$

1.02

 

$

2.19

 

$

1.98

 

Diluted

1.09

 

0.97

 

0.93

 

2.05

 

1.81

 

 
Weighted average number of shares outstanding
Basic

68,521

 

68,747

 

67,776

 

68,633

 

67,769

 

Diluted

72,867

 

73,652

 

74,166

 

73,265

 

74,155

 

 
Dividends declared per share $

0.25

 

$

0.25

 

$

0.12

 

$

0.50

 

$

0.21

 

 

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 Six Months Ended

June 30,

 

March 31,

 

June 30,

 

June 30,

 

June 30,

2022

 

2022

 

2021

 

2022

 

2021

Net income (GAAP) $

79,205

 

$

71,273

 

$

69,270

 

$

150,478

 

$

134,472

 

Income tax expense

(25,790

)

(19,271

)

(20,629

)

(45,061

)

(38,291

)

Income before income taxes $

104,995

 

$

90,544

 

$

89,899

 

$

195,539

 

$

172,763

 

Interest expense

9,499

 

8,724

 

6,086

 

18,223

 

13,396

 

Depreciation

2,102

 

1,954

 

1,524

 

4,056

 

2,770

 

Other business taxes

541

 

590

 

524

 

1,131

 

898

 

Amortization of acquisition-related intangible assets

8,656

 

8,656

 

3,171

 

17,312

 

6,309

 

Stock-based compensation

2,860

 

2,633

 

3,124

 

5,493

 

7,760

 

Acquisition, restructuring and exit costs

(24,033

)

(844

)

6,544

 

(24,877

)

10,933

 

Debt issuance costs

1,560

 

2,061

 

1,304

 

3,621

 

4,097

 

Losses from equity method investments

9

 

57

 

65

 

66

 

157

 

Adjusted EBITDA $

106,189

 

$

114,375

 

$

112,241

 

$

220,564

 

$

219,083

 

Adjusted EBITDA margin

49.2

%

49.7

%

50.6

%

49.5

%

50.4

%

 
 
Net income (GAAP) $

79,205

 

$

71,273

 

$

69,270

 

$

150,478

 

$

134,472

 

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

541

 

590

 

524

 

1,131

 

898

 

Amortization of acquisition-related intangible assets

8,656

 

8,656

 

3,171

 

17,312

 

6,309

 

Stock-based compensation

2,860

 

2,633

 

3,124

 

5,493

 

7,760

 

Acquisition, restructuring and exit costs

(24,033

)

(844

)

6,544

 

(24,877

)

10,933

 

Debt issuance costs

1,560

 

2,061

 

1,304

 

3,621

 

4,097

 

Tax effect of above adjustments

2,604

 

(3,274

)

(3,667

)

(670

)

(7,499

)

Adjusted net income $

71,393

 

$

81,095

 

$

80,270

 

$

152,488

 

$

156,970

 

Adjusted net income per diluted share $

0.98

 

$

1.10

 

$

1.08

 

$

2.08

 

$

2.12

 

 
Tax benefit of goodwill and acquired intangible assets $

9,327

 

$

9,322

 

$

6,918

 

$

18,649

 

$

13,836

 

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

0.13

 

$

0.13

 

$

0.09

 

$

0.25

 

$

0.19

 

 
Adjusted net income with tax benefit $

80,720

 

$

90,417

 

$

87,188

 

$

171,137

 

$

170,806

 

Adjusted net income with tax benefit per diluted share $

1.11

 

$

1.23

 

$

1.18

 

$

2.34

 

$

2.30

 

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)

 

June 30, 2022 December 31, 2021
Assets
Cash and cash equivalents $

42,718

 

$

69,533

 

Receivables

90,900

 

104,305

 

Prepaid expenses

7,760

 

6,654

 

Investments, at fair value

29,498

 

31,724

 

Property and equipment, net

24,609

 

25,295

 

Goodwill

981,805

 

981,805

 

Other intangible assets, net

1,332,484

 

1,349,797

 

Other assets

57,796

 

10,633

 

Total assets $

2,567,570

 

$

2,579,746

 

 
Liabilities and stockholders' equity
Accounts payable and accrued expenses $

45,737

 

$

62,102

 

Accrued compensation and benefits

48,308

 

53,905

 

Consideration payable for acquisition of business

278,400

 

309,380

 

Deferred tax liability, net

90,914

 

63,120

 

Other liabilities

48,534

 

33,388

 

Long-term debt, net1

1,017,496

 

1,127,924

 

Total liabilities

1,529,389

 

1,649,819

 

 
Stockholders' equity
Common stock, $0.01 par value per share:

2022 - 600,000,000 shares authorized, 78,361,311 shares issued and 68,365,862 shares outstanding; 2021 - 600,000,000 shares authorized, 77,242,372 shares issued and 68,662,779 shares outstanding

784

 

772

 

Additional paid-in capital

685,543

 

673,572

 

Treasury stock, at cost: 2022 - 9,995,449 shares; 2021 - 8,579,593 shares

(193,701

)

(153,200

)

Accumulated other comprehensive income

27,175

 

5,972

 

Retained earnings

518,380

 

402,811

 

Total stockholders' equity

1,038,181

 

929,927

 

Total liabilities and stockholders' equity $

2,567,570

 

$

2,579,746

 

1 Balances at June 30, 2022 and December 31, 2021 are shown net of unamortized loan discount and debt issuance costs in the amount of $18.7 million and $23.3 million, respectively. The gross amount of the debt outstanding was $1,036.2 million as of June 30, 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

June 30,

 

March 31,

 

June 30,

 

March 31,

 

June 30,

2022

 

2022

 

2021

 

2022

 

2021

Beginning assets under management $

178,098

 

$

183,654

 

$

154,331

 

-3%

 

15%

Gross client cash inflows

9,321

 

11,136

 

10,074

 

-16%

 

-7%

Gross client cash outflows

(10,005

)

(8,145

)

(9,898

)

23%

 

1%

Net client cash flows

(683

)

2,990

 

176

 

N/A

 

N/A

Market appreciation (depreciation)

(21,670

)

(8,250

)

7,703

 

163%

 

N/A

Realizations and distributions

 

(30

)

 

N/A

 

N/A

Acquired assets / Net transfers

(797

)

(266

)

(275

)

200%

 

190%

Ending assets under management

154,947

 

178,098

 

161,936

 

-13%

 

-4%

Average assets under management

165,703

 

176,863

 

158,471

 

-6%

 

5%

 

For the Six Months Ended

% Change from

June 30,

 

June 30,

June 30,

2022

 

2021

2021

Beginning assets under management $

183,654

 

$

147,241

 

25%

Gross client cash inflows

20,457

 

16,908

 

21%

Gross client cash outflows

(18,150

)

(17,906

)

1%

Net client cash flows

2,307

 

(998

)

N/A

Market appreciation (depreciation)

(29,921

)

15,421

 

N/A

Realizations and distributions

(30

)

 

N/A

Acquired assets / Net transfers

(1,064

)

272

 

N/A

Ending assets under management

154,947

 

161,936

 

-4%

Average assets under management

171,283

 

154,781

 

11%

 

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

June 30, 2022
Beginning assets under management $

30,543

 

$

18,489

 

$

33,071

 

$

14,548

 

$

15,654

 

$

58,656

 

$

4,025

 

$

174,985

 

$

3,113

 

$

178,098

 

Gross client cash inflows

1,476

 

701

 

1,455

 

126

 

1,140

 

2,249

 

2,051

 

9,198

 

123

 

9,321

 

Gross client cash outflows

(1,649

)

(1,791

)

(2,743

)

(396

)

(1,090

)

(1,761

)

(397

)

(9,828

)

(177

)

(10,005

)

Net client cash flows

(174

)

(1,090

)

(1,288

)

(270

)

50

 

488

 

1,654

 

(630

)

(53

)

(683

)

Market appreciation (depreciation)

(4,011

)

(2,558

)

(1,575

)

(2,365

)

(2,437

)

(8,652

)

(70

)

(21,669

)

(2

)

(21,670

)

Realizations and distributions

 

 

 

 

 

 

 

 

 

 

Acquired assets / Net transfers

(2

)

(4

)

(809

)

(56

)

(10

)

(7

)

9

 

(879

)

82

 

(797

)

Ending assets under management $

26,356

 

$

14,837

 

$

29,398

 

$

11,857

 

$

13,257

 

$

50,485

 

$

5,617

 

$

151,807

 

$

3,140

 

$

154,947

 

 
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 transfers2

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

 

 
June 30, 20211
Beginning assets under management $

29,156

 

$

20,230

 

$

36,813

 

$

14,448

 

$

14,894

 

$

34,709

 

$

709

 

$

150,958

 

$

3,373

 

$

154,331

 

Gross client cash inflows

1,412

 

1,238

 

1,754

 

91

 

1,108

 

4,056

 

314

 

9,973

 

102

 

10,074

 

Gross client cash outflows

(1,940

)

(1,428

)

(2,953

)

(407

)

(562

)

(2,340

)

(41

)

(9,671

)

(228

)

(9,898

)

Net client cash flows

(527

)

(190

)

(1,200

)

(316

)

545

 

1,716

 

274

 

302

 

(126

)

176

 

Market appreciation (depreciation)

1,745

 

616

 

678

 

1,253

 

984

 

2,431

 

(7

)

7,700

 

3

 

7,703

 

Acquired assets / Net transfers3

(33

)

(39

)

153

 

(101

)

(180

)

(81

)

2

 

(278

)

3

 

(275

)

Ending assets under management $

30,340

 

$

20,617

 

$

36,444

 

$

15,284

 

$

16,244

 

$

38,774

 

$

978

 

$

158,682

 

$

3,254

 

$

161,936

 

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.

 

Victory Capital Holdings, Inc. and Subsidiaries

Assets Under Management by Asset Class

(unaudited; in millions)

 

For the Six Months Ended By Asset Class

 

 

 

 

 

 

 

 

 

 

 

 

Global /

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Mid

 

U.S. Small

 

Fixed

 

U.S. Large

 

Non-U.S.

 

 

 

 

Alternative

 

Total

 

Money

 

 

 

Cap Equity

 

Cap Equity

 

Income

 

Cap Equity

 

Equity

 

Solutions

 

Investments

 

Long-term

 

Market

 

Total

June 30, 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

3,909

 

1,819

 

3,060

 

251

 

2,382

 

5,051

 

3,739

 

20,210

 

247

 

20,457

 

Gross client cash outflows

(3,484

)

(3,143

)

(4,893

)

(779

)

(1,708

)

(3,236

)

(554

)

(17,797

)

(353

)

(18,150

)

Net client cash flows

425

 

(1,325

)

(1,833

)

(528

)

673

 

1,815

 

3,185

 

2,413

 

(106

)

2,307

 

Market appreciation (depreciation)

(4,666

)

(3,939

)

(3,116

)

(3,449

)

(3,533

)

(11,122

)

(98

)

(29,923

)

3

 

(29,921

)

Realizations and distributions

 

 

 

 

(30

)

(30

)

 

(30

)

Acquired assets / Net transfers

19

 

7

 

(806

)

68

 

67

 

(572

)

12

 

(1,206

)

143

 

(1,064

)

Ending assets under management $

26,356

 

$

14,837

 

$

29,398

 

$

11,857

 

$

13,257

 

$

50,485

 

$

5,617

 

$

151,807

 

$

3,140

 

$

154,947

 

 
June 30, 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

3,154

 

2,310

 

3,779

 

189

 

1,754

 

4,894

 

619

 

16,698

 

209

 

16,908

 

Gross client cash outflows

(3,794

)

(3,124

)

(4,658

)

(839

)

(1,235

)

(3,663

)

(66

)

(17,379

)

(526

)

(17,906

)

Net client cash flows

(640

)

(814

)

(879

)

(650

)

519

 

1,231

 

552

 

(681

)

(317

)

(998

)

Market appreciation (depreciation)

4,777

 

2,641

 

459

 

1,857

 

1,739

 

3,947

 

1

 

15,420

 

1

 

15,421

 

Acquired assets / Net transfers

(27

)

423

 

226

 

(152

)

(155

)

(80

)

2

 

236

 

36

 

272

 

Ending assets under management $

30,340

 

$

20,617

 

$

36,444

 

$

15,284

 

$

16,244

 

$

38,774

 

$

978

 

$

158,682

 

$

3,254

 

$

161,936

 

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.

 

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

 

 

 

Funds(1)

 

ETFs(2)

 

Vehicles(3)

 

Total

June 30, 2022
Beginning assets under management $

118,119

 

$

5,246

 

$

54,733

 

$

178,098

 

Gross client cash inflows

6,114

 

608

 

2,600

 

9,321

 

Gross client cash outflows

(7,678

)

(130

)

(2,196

)

(10,005

)

Net client cash flows

(1,565

)

478

 

404

 

(683

)

Market appreciation (depreciation)

(13,457

)

(568

)

(7,645

)

(21,670

)

Realizations and distributions

 

 

 

 

Acquired assets / Net transfers

(800

)

 

2

 

(797

)

Ending assets under management $

102,297

 

$

5,155

 

$

47,494

 

$

154,947

 

 
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

 

 
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 transfers

(229

)

(375

)

329

 

(275

)

Ending assets under management $

123,164

 

$

4,354

 

$

34,418

 

$

161,936

 

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.

 

Victory Capital Holdings, Inc. and Subsidiaries

Assets Under Management by Vehicle

(unaudited; in millions)

 

For the Six Months Ended

By Vehicle

 

 

 

 

 

 

Separate

 

 

 

 

 

 

 

 

 

Accounts

 

 

 

Mutual

 

 

 

 

and Other

 

 

 

Funds(1)

 

ETFs(2)

 

Vehicles(3)

 

Total

June 30, 2022
Beginning assets under management $

124,142

 

$

4,871

 

$

54,641

 

$

183,654

 

Gross client cash inflows

12,704

 

1,151

 

6,603

 

20,457

 

Gross client cash outflows

(14,061

)

(199

)

(3,890

)

(18,150

)

Net client cash flows

(1,357

)

952

 

2,712

 

2,307

 

Market appreciation (depreciation)

(19,421

)

(667

)

(9,832

)

(29,921

)

Realizations and distributions

(30

)

(30

)

Acquired assets / Net transfers

(1,066

)

 

2

 

(1,064

)

Ending assets under management $

102,297

 

$

5,155

 

$

47,494

 

$

154,947

 

 
June 30, 2021
Beginning assets under management $

112,998

 

$

3,976

 

$

30,267

 

$

147,241

 

Gross client cash inflows

10,525

 

479

 

5,904

 

16,908

 

Gross client cash outflows

(11,669

)

(286

)

(5,950

)

(17,906

)

Net client cash flows

(1,145

)

193

 

(46

)

(998

)

Market appreciation (depreciation)

11,454

 

561

 

3,406

 

15,421

 

Acquired assets / Net transfers

(144

)

(375

)

791

 

272

 

Ending assets under management $

123,164

 

$

4,354

 

$

34,418

 

$

161,936

 

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.

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.

Contacts

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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