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Victory Capital Reports Strong Fourth Quarter and Full-Year 2022 Results

Fourth-Quarter 2022 Highlights

  • Total Assets Under Management (AUM) of $153.0 billion1
  • Long-term gross flows of $6.5 billion in the quarter; $33.3 billion for the full year
  • Long-term net flows of -$4.4 billion in the quarter; and -$2.5 billion for the full year
  • GAAP operating margin of 39.5%
  • Adjusted EBITDA margin of 49.7% in the quarter; and 49.6% for the full year2
  • GAAP net income of $0.74 per diluted share
  • Adjusted net income with tax benefit of $1.05 per diluted share2
  • Board increased regular quarterly cash dividend 28% to $0.32

Victory Capital Holdings, Inc. (NASDAQ: VCTR) (“Victory Capital” or “the Company”) today reported financial results for the quarter and year ended December 31, 2022.

“We achieved exceptionally strong results in 2022 in the face of historically challenging market conditions,” said David Brown, Chairman and Chief Executive Officer. “We generated record high GAAP operating income and earnings per diluted share for the year, exceeding prior records set in 2021. Moreover, our full year 2022 adjusted EBITDA margin remained healthy at 49.6% marking the second highest annual level ever achieved. These results exemplify superb execution and focus by our team.

“Our investment professionals 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 84%, 79%, and 79%. In addition, the mutual funds and ETFs rated four- or five-stars overall represented 62% of our Fund AUM.

“We returned more capital to shareholders in 2022 than in any year since we have been a public company. Through the repurchase of 4.6 million shares and $69 million in cash dividends, we returned more than $200 million of capital to our shareholders during the year. Additionally, we reduced debt by $150 million during the year to maintain flexibility to pursue inorganic growth opportunities.

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

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.

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.

(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,

 

December 31,

 

December 31,

2022

 

2022

 

2021

 

2022

 

2021

Assets Under Management1
Ending $

152,952

 

$

147,257

 

$

183,654

 

$

152,952

 

$

183,654

 

Average

154,632

 

158,903

 

162,295

 

164,025

 

158,590

 

 
Long-term Flows2
Long-term Gross $

6,502

 

$

6,601

 

$

5,481

 

$

33,313

 

$

27,869

 

Long-term Net

(4,405

)

(553

)

(3,402

)

(2,545

)

(3,952

)

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

179

 

$

194

 

$

84

 

$

621

 

$

386

 

Money Market / Short-term Net

(62

)

(19

)

(98

)

(187

)

(528

)

 
Total Flows
Total Gross $

6,681

 

$

6,796

 

$

5,565

 

$

33,934

 

$

28,254

 

Total Net

(4,466

)

(573

)

(3,500

)

(2,732

)

(4,480

)

 
Consolidated Financial Results (GAAP)
Revenue $

201.5

 

$

207.3

 

$

229.1

 

$

854.8

 

$

890.3

 

Revenue realization (in bps)

51.7

 

51.8

 

56.0

 

52.1

 

56.1

 

Operating expenses

121.9

 

108.6

 

139.3

 

455.7

 

516.4

 

Income from operations

79.6

 

98.6

 

89.8

 

399.1

 

373.8

 

Operating margin

39.5

%

47.6

%

39.2

%

46.7

%

42.0

%

Net income

52.3

 

72.8

 

69.7

 

275.5

 

278.4

 

Earnings per diluted share $

0.74

 

$

1.01

 

$

0.94

 

$

3.81

 

$

3.75

 

Cash flow from operations

67.1

 

103.1

 

112.1

 

335.2

 

376.2

 

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

100.1

 

$

103.6

 

$

114.9

 

$

424.2

 

$

449.0

 

Adjusted EBITDA margin

49.7

%

50.0

%

50.2

%

49.6

%

50.4

%

Adjusted net income

65.0

 

76.2

 

86.4

 

293.8

 

329.0

 

Tax benefit of goodwill and acquired intangible assets

9.5

 

9.3

 

7.3

 

37.5

 

28.0

 

Adjusted net income with tax benefit

74.5

 

85.6

 

93.7

 

331.2

 

357.1

 

Adjusted net income with tax benefit per diluted share $

1.05

 

$

1.19

 

$

1.27

 

$

4.58

 

$

4.82

 

________________________

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 3.9%, or $5.7 billion, to $153.0 billion at December 31, 2022, compared with $147.3 billion at September 30, 2022. The increase was attributable to $10.5 billion of positive market action partially offset by $4.5 billion in negative net flows.

Total gross flows were $6.7 billion in the fourth quarter and $33.9 billion for the year. Long-term AUM increased by 3.9%, or $5.6 billion, to $149.6 billion at December 31, 2022, compared with $144.0 billion at September 30, 2022. For the fourth quarter, the Company reported long-term gross flows of $6.5 billion and net long-term outflows of $4.4 billion. For the year-to-date period, the Company reported long-term gross flows of $33.3 billion and net long-term outflows of $2.5 billion.

At December 31, 2022, Victory Capital offered 128 investment strategies through its 12 autonomous Investment Franchises and Solutions Platform. The table below presents outperformance against benchmarks by AUM as of December 31, 2022.

  Percentage of AUM Outperforming Benchmark  
 

Trailing

 

Trailing

 

Trailing

 

Trailing

 
 

1-Year

 

3-Years

 

5-Years

 

10-Years

 
 

54%

 

84%

 

79%

 

79%

 

Fourth Quarter 2022 Compared with Third Quarter 2022

Revenue decreased 2.8% to $201.5 million, in the fourth quarter, compared with $207.3 million in the third quarter, primarily due to lower average AUM, which decreased 2.7% from $158.9 billion to $154.6 billion. GAAP operating margin contracted 810 basis points in the fourth quarter to 39.5%, down from 47.6% in the third quarter. The decline was primarily driven by a non-cash $10.5 million difference in amounts recorded to change the fair value of consideration payable for acquisitions. Fourth-quarter GAAP net income decreased 28.2% to $52.3 million, down from $72.8 million in the prior quarter. Third quarter net income benefited from a lower than normal tax rate as a result of employees exercising stock options during the period. On a per-share basis, GAAP net income decreased 26.7% to $0.74 per diluted share in the fourth quarter, versus $1.01 per diluted share in the third quarter.

Adjusted net income with tax benefit decreased 12.9% to $74.5 million in the fourth quarter, down from $85.6 million in the third quarter. On a per-share basis, adjusted net income with tax benefit decreased 11.8% to $1.05 per diluted share in the fourth quarter, from $1.19 per diluted share in the prior quarter. Adjusted EBITDA was $100.1 million in the fourth quarter, compared to $103.6 million in the third quarter. Adjusted EBITDA margin contracted 30 basis points in the fourth quarter of 2022 to 49.7%, compared with 50.0% in the prior quarter.

Fourth Quarter 2022 Compared with Fourth Quarter 2021

Revenue for the three months ended December 31, 2022 decreased 12.0% to $201.5 million, compared with $229.1 million in the same quarter of 2021. The decrease was primarily due to lower average AUM, which decreased 4.7% to $154.6 billion, compared with $162.3 billion in the same quarter last year. Also contributing was a slight decrease in revenue realization due to a change in asset mix as a result of the impact of the WestEnd acquisition.

Operating expenses decreased 12.5% to $121.9 million, compared with $139.3 million in last year’s fourth quarter primarily due to a decrease in acquisition-related costs related to the WestEnd and NEC acquisitions that closed in the fourth quarter of 2021 as well as a decrease in variable operating expenses from lower average AUM and earnings. GAAP operating margin expanded 30 basis points to 39.5% in the fourth quarter, from 39.2% in the same quarter of 2021. GAAP net income decreased 25.1% to $52.3 million, or $0.74 per diluted share, in the fourth quarter compared with $69.7 million, or $0.94 per diluted share, in the same quarter of 2021.

Adjusted net income with tax benefit decreased 20.4% to $74.5 million, or $1.05 per diluted share, in the fourth quarter, compared with $93.7 million, or $1.27 per diluted share in the same quarter last year. Adjusted EBITDA decreased 12.9% to $100.1 million in the fourth quarter, compared with $114.9 million in last year’s same quarter. Year-over-year, adjusted EBITDA margin declined slightly by 50 basis points to 49.7% in the fourth quarter of 2022, compared with 50.2% in the same quarter last year.

Year Ended December 31, 2022 Compared with Year Ended December 31, 2021

Revenue for the year ended December 31, 2022, declined 4.0% to $854.8 million, compared with $890.3 million in the same period of 2021. The decrease was primarily due to lower average AUM and a decrease in revenue realization due to a change in asset mix, partially offset by a full-year of revenue from businesses acquired in 2021.

Operating expenses decreased 11.8% to $455.7 million for year ended December 31, 2022, compared with $516.4 million in 2021 primarily due to a decrease in variable operating expenses from lower average AUM, a decrease in acquisition-related costs related to the WestEnd, NEC and THB acquisitions that closed in 2021, and a non-cash $54.4 million benefit in amounts recorded from the change in fair value of consideration payable for acquisitions. GAAP operating margin was 46.7% for the year ended December 31, 2022, a 470 basis point increase from the 42.0% recorded in 2021. GAAP net income declined 1.0% to $275.5 million for the year ended 2022 compared with $278.4 million in the prior year. GAAP net earnings per share increased to $3.81 per diluted share in 2022, up from $3.75 per diluted share in 2021 as a result of fewer weighted average shares outstanding in 2022.

Adjusted net income with tax benefit decreased 7.2% to $331.2 million, or $4.58 per diluted share, for the year ended December 31, 2022, compared with $357.1 million, or $4.82 per diluted share in 2021. For the year ended December 31, 2022, adjusted EBITDA declined 5.5% to $424.2 million, compared with $449.0 million in 2021. Year-over-year, adjusted EBITDA margin declined 80 basis points to 49.6% for the year ended December 31, 2022, compared with 50.4% in the previous year.

Balance Sheet / Capital Management

Total debt outstanding as of December 31, 2022 was approximately $1,002 million. For the year ended December 31, 2022, the Company reduced outstanding debt on the 2021 Incremental Term Loans by $150 million.

During the fourth quarter, the Company repurchased 1.3 million shares under the 10b-5 plan and net settled 0.1 million shares. For the year ended December 31, 2022, the Company repurchased 3.0 million shares under the 10b-5 plan and net settled 1.6 million shares.

The Company’s Board of Directors also approved a regular quarterly cash dividend of $0.32 per share. The dividend is payable on March 27, 2023, to shareholders of record on March 10, 2023.

Conference Call, Webcast and Slide Presentation

The Company will host a conference call tomorrow morning, February 10, 2023, 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, 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 $153.0 billion in assets under management as of December 31, 2022. It was ranked No. 55 on the Fortune 100 Fastest-Growing Companies list for 2022 and is one of only 24 companies to make the list for the second consecutive year. 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.

From Fortune. © 2022 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 Holdings, Inc.

The Fortune annual list ranks the top performing, publicly traded companies in revenues, profits and stock returns over the three-year period ended April 30, 2022.

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,

 

December 31,

 

December 31,

2022

 

2022

 

2021

 

2022

 

2021

Revenue
Investment management fees $

156,346

 

$

160,770

 

$

174,867

 

$

664,710

 

$

674,539

 

Fund administration and distribution fees

45,169

 

46,490

 

54,255

 

190,090

 

215,726

 

Total revenue

201,515

 

207,260

 

229,122

 

854,800

 

890,265

 

 
Expenses
Personnel compensation and benefits

58,846

 

56,869

 

62,528

 

238,198

 

234,833

 

Distribution and other asset-based expenses

37,634

 

39,019

 

45,200

 

161,105

 

176,385

 

General and administrative

13,389

 

12,301

 

12,904

 

52,373

 

53,722

 

Depreciation and amortization

11,150

 

10,686

 

5,384

 

43,201

 

18,840

 

Change in value of consideration payable for acquisition of business

 

(10,500

)

3,200

 

(40,600

)

13,800

 

Acquisition-related costs

85

 

189

 

9,997

 

534

 

16,262

 

Restructuring and integration costs

808

 

56

 

85

 

881

 

2,578

 

Total operating expenses

121,912

 

108,620

 

139,298

 

455,692

 

516,420

 

 
Income from operations

79,603

 

98,640

 

89,824

 

399,108

 

373,845

 

Operating margin

39.5

%

47.6

%

39.2

%

46.7

%

42.0

%

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

2,633

 

(1,446

)

1,498

 

(2,463

)

6,045

 

Interest expense and other financing costs

(13,327

)

(11,479

)

(5,799

)

(43,964

)

(24,652

)

Loss on debt extinguishment

239

 

(369

)

 

(2,648

)

(4,596

)

Total other expense, net

(10,455

)

(13,294

)

(4,301

)

(49,075

)

(23,203

)

 
Income before income taxes

69,148

 

85,346

 

85,523

 

350,033

 

350,642

 

 
Income tax expense

(16,879

)

(12,582

)

(15,781

)

(74,522

)

(72,253

)

 
Net income $

52,269

 

$

72,764

 

$

69,742

 

$

275,511

 

$

278,389

 

 
Earnings per share of common stock
Basic $

0.77

 

$

1.06

 

$

1.02

 

$

4.02

 

$

4.10

 

Diluted

0.74

 

1.01

 

0.94

 

3.81

 

3.75

 

 
Weighted average number of shares outstanding
Basic

68,054

 

68,609

 

68,378

 

68,481

 

67,976

 

Diluted

70,685

 

71,877

 

73,973

 

72,266

 

74,151

 

 
Dividends declared per share $

0.25

 

$

0.25

 

$

0.17

 

$

1.00

 

$

0.53

 

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 Yeard Ended

December 31,

 

September 30,

 

December 31,

 

December 31,

 

December 31,

2022

 

2022

 

2021

 

2022

 

2021

Net income (GAAP) $

52,269

 

$

72,764

 

$

69,742

 

$

275,511

 

$

278,389

 

Income tax expense

(16,879

)

(12,582

)

(15,781

)

(74,522

)

(72,253

)

Income before income taxes $

69,148

 

$

85,346

 

$

85,523

 

$

350,033

 

$

350,642

 

Interest expense

12,006

 

10,795

 

5,328

 

41,024

 

24,285

 

Depreciation

1,959

 

2,030

 

1,746

 

8,045

 

6,209

 

Other business taxes

448

 

539

 

383

 

2,118

 

1,657

 

Amortization of acquisition-related intangible assets

9,191

 

8,657

 

3,638

 

35,160

 

12,631

 

Stock-based compensation

2,420

 

2,230

 

2,499

 

10,143

 

13,110

 

Acquisition, restructuring and exit costs

3,997

 

(7,842

)

15,188

 

(28,722

)

34,546

 

Debt issuance costs

935

 

1,064

 

532

 

5,620

 

5,589

 

Losses from equity method investments

 

759

 

104

 

825

 

331

 

Adjusted EBITDA $

100,104

 

$

103,578

 

$

114,941

 

$

424,246

 

$

449,000

 

Adjusted EBITDA margin

49.7

%

50.0

%

50.2

%

49.6

%

50.4

%

 
 
Net income (GAAP) $

52,269

 

$

72,764

 

$

69,742

 

$

275,511

 

$

278,389

 

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

448

 

539

 

383

 

2,118

 

1,657

 

Amortization of acquisition-related intangible assets

9,191

 

8,657

 

3,638

 

35,160

 

12,631

 

Stock-based compensation

2,420

 

2,230

 

2,499

 

10,143

 

13,110

 

Acquisition, restructuring and exit costs

3,997

 

(7,842

)

15,188

 

(28,722

)

34,546

 

Debt issuance costs

935

 

1,064

 

532

 

5,620

 

5,589

 

Tax effect of above adjustments

(4,247

)

(1,163

)

(5,560

)

(6,080

)

(16,883

)

Adjusted net income $

65,013

 

$

76,249

 

$

86,422

 

$

293,750

 

$

329,039

 

Adjusted net income per diluted share $

0.92

 

$

1.06

 

$

1.17

 

$

4.06

 

$

4.44

 

 
Tax benefit of goodwill and acquired intangible assets $

9,513

 

$

9,328

 

$

7,258

 

$

37,490

 

$

28,012

 

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

0.13

 

$

0.13

 

$

0.10

 

$

0.52

 

$

0.38

 

 
Adjusted net income with tax benefit $

74,526

 

$

85,577

 

$

93,680

 

$

331,240

 

$

357,051

 

Adjusted net income with tax benefit per diluted share $

1.05

 

$

1.19

 

$

1.27

 

$

4.58

 

$

4.82

 

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

38,171

 

$

69,533

 

Investment management fees receivable

68,347

 

80,634

 

Fund administration and distribution fees receivable

14,379

 

17,123

 

Other receivables

1,747

 

6,548

 

Prepaid expenses

8,443

 

6,654

 

Investments in proprietary funds, at fair value

466

 

912

 

Trading securities, at fair value

26,800

 

30,812

 

Property and equipment, net

21,146

 

25,295

 

Goodwill

981,805

 

981,805

 

Other intangible assets, net

1,314,637

 

1,349,797

 

Other assets

64,958

 

10,633

 

Total assets $

2,540,899

 

$

2,579,746

 

 
Liabilities and stockholders' equity
Accounts payable and accrued expenses $

50,862

 

$

62,102

 

Accrued compensation and benefits

58,458

 

53,905

 

Consideration payable for acquisition of business

230,400

 

309,380

 

Deferred compensation plan liability

26,800

 

30,812

 

Deferred tax liability, net

108,138

 

63,120

 

Other liabilities

15,317

 

2,576

 

Long-term debt(1)

985,514

 

1,127,924

 

Total liabilities

1,475,489

 

1,649,819

 

 
Stockholders' equity:
Common stock; $0.01 par value per share: 2022 - 600,000,000 shares authorized, 80,528,137 shares issued and 67,325,534 shares outstanding; 2021 - 600,000,000 shares authorized, 77,242,372 shares issued and 68,662,779 shares outstanding

805

 

772

 

Additional paid-in capital

705,466

 

673,572

 

Treasury stock, at cost: 2022 - 13,202,603 shares; 2021 - 8,579,593 shares

(285,425

)

(153,200

)

Accumulated other comprehensive income

35,442

 

5,972

 

Retained earnings

609,122

 

402,811

 

Total stockholders' equity

1,065,410

 

929,927

 

Total liabilities and stockholders’ equity $

2,540,899

 

$

2,579,746

 

1 Balances at December 31, 2022 and December 31, 2021 are shown net of unamortized loan discount and debt issuance costs in the amount of $16.2 million and $23.3 million, respectively. The gross amount of the debt outstanding was $1,001.7 million as of December 31, 2022 and $1,151.2 million as of December 31, 2021.

Victory Capital Holdings, Inc. and Subsidiaries

Assets Under Management

(unaudited; in millions except for percentages)

 

For the Three Months Ended

 

% Change from

December 31,

 

September 30,

 

December 31,

 

September 30,

 

December 31,

2022

 

2022

 

2021

 

2022

 

2021

Beginning assets under management $

147,257

 

$

154,947

 

$

159,889

 

-5%

 

-8%

Gross client cash inflows

6,681

 

6,796

 

5,565

 

-2%

 

20%

Gross client cash outflows

(11,147

)

(7,368

)

(9,065

)

51%

 

23%

Net client cash flows

(4,466

)

(573

)

(3,500

)

679%

 

28%

Market appreciation (depreciation)

10,492

 

(7,066

)

7,224

 

N/A

 

45%

Realizations and distributions

(295

)

(51

)

 

478%

 

N/A

Acquired assets / Net transfers1

(36

)

 

20,042

 

N/A

 

N/A

Ending assets under management

152,952

 

147,257

 

183,654

 

4%

 

-17%

Average assets under management

154,632

 

158,903

 

162,295

 

-3%

 

-5%

 

For the Year Ended

 

 

 

 

% Change from

December 31,

 

December 31,

 

 

 

 

December 31,

2022

 

2021

 

 

 

 

2021

Beginning assets under management $

183,654

 

$

147,241

 

25%

Gross client cash inflows

33,934

 

28,254

 

20%

Gross client cash outflows

(36,666

)

(32,734

)

12%

Net client cash flows

(2,732

)

(4,480

)

-39%

Market appreciation (depreciation)

(26,495

)

20,583

 

N/A

Realizations and distributions

(376

)

 

N/A

Acquired assets / Net transfers2

(1,100

)

20,310

 

N/A

Ending assets under management

152,952

 

183,654

 

-17%

Average assets under management

164,025

 

158,590

 

3%

1 The three months ended December 31, 2021 includes acquired assets of $795 million and $19.3 billion associated with the NEC and WestEnd acquisitions, which closed on November 1, 2021 and December 31, 2021, respectively. The WestEnd acquired assets had no economic impact on operations in 2021 and no effect on asset flows, revenues, or earnings in the fourth-quarter period ended December 31, 2021. 

2 The year ended December 31, 2021 includes acquired assets of $547 million, $795 million and $19.3 billion associated with the THB, NEC and WestEnd acquisitions, which closed on March 1, 2021, November 1, 2021 and December 31, 2021, respectively. The WestEnd acquired assets had no economic impact on operations in 2021 and no effect on asset flows, revenues, or earnings in the full-year period ended December 31, 2021.

Victory Capital Holdings, Inc. and Subsidiaries

Assets Under Management by Asset Class

(unaudited; in millions)

 
For the Three Months Ended

By Asset Class

 

 

 

 

 

 

 

 

 

 

 

 

Global /

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Mid

 

U.S. Small

 

Fixed

 

U.S. Large

 

Non-U.S.

 

 

 

 

Alternative

 

Total

 

Money Market /

 

 

 

Cap Equity

 

Cap Equity

 

Income

 

Cap Equity

 

Equity

 

Solutions

 

Investments

 

Long-term

 

Short-term

 

Total

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

 

87

 

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

 

48

 

10,464

 

28

 

10,492

 

Realizations and distributions

 

 

 

 

 

 

(295

)

(295

)

 

(295

)

Acquired assets / Net transfers

(8

)

(6

)

(94

)

(106

)

(19

)

114

 

3

 

(116

)

80

 

(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

 

 
September 30, 2022
Beginning assets under management $

26,356

 

$

14,837

 

$

29,398

 

$

11,857

 

$

13,257

 

$

50,485

 

$

5,617

 

$

151,807

 

$

3,140

 

$

154,947

 

Gross client cash inflows

1,508

 

589

 

1,123

 

67

 

742

 

1,745

 

827

 

6,601

 

194

 

6,796

 

Gross client cash outflows

(1,176

)

(939

)

(1,958

)

(269

)

(636

)

(1,315

)

(863

)

(7,155

)

(214

)

(7,368

)

Net client cash flows

333

 

(349

)

(835

)

(203

)

107

 

430

 

(36

)

(553

)

(19

)

(573

)

Market appreciation (depreciation)

(938

)

(404

)

(829

)

(560

)

(1,248

)

(2,930

)

(165

)

(7,074

)

8

 

(7,066

)

Realizations and distributions

 

 

 

 

 

 

(51

)

(51

)

 

(51

)

Acquired assets / Net transfers

3

 

26

 

(536

)

(333

)

178

 

566

 

(31

)

(127

)

127

 

 

Ending assets under management $

25,754

 

$

14,109

 

$

27,198

 

$

10,762

 

$

12,293

 

$

48,551

 

$

5,334

 

$

144,001

 

$

3,256

 

$

147,257

 

 
December 31, 20211
Beginning assets under management $

29,798

 

$

19,863

 

$

36,931

 

$

14,803

 

$

15,840

 

$

38,330

 

$

1,158

 

$

156,722

 

$

3,166

 

$

159,889

 

Gross client cash inflows

1,564

 

762

 

1,386

 

96

 

533

 

782

 

358

 

5,481

 

84

 

5,565

 

Gross client cash outflows

(2,617

)

(1,205

)

(3,077

)

(367

)

(577

)

(968

)

(73

)

(8,883

)

(182

)

(9,065

)

Net client cash flows

(1,053

)

(443

)

(1,691

)

(271

)

(44

)

(186

)

286

 

(3,402

)

(98

)

(3,500

)

Market appreciation (depreciation)

1,840

 

942

 

133

 

1,025

 

291

 

2,959

 

23

 

7,213

 

10

 

7,224

 

Realizations and distributions

 

 

 

 

 

 

 

 

 

 

Acquired assets / Net transfers2

(8

)

(269

)

(220

)

209

 

(37

)

19,262

 

1,081

 

20,020

 

22

 

20,042

 

Ending assets under management $

30,578

 

$

20,094

 

$

35,154

 

$

15,766

 

$

16,050

 

$

60,364

 

$

2,548

 

$

180,554

 

$

3,100

 

$

183,654

 

1 Beginning in January 2022, the Company’s “Other” asset class has been categorized to Solutions, Fixed Income, Global / Non-U.S. Equity, and Alternative Investments based on the underlying investment strategy. Additionally, all assets managed using alternative investment strategies are now included in the Company’s Alternative Investments asset class. Prior-period figures have been adjusted accordingly.

2 The three months ended December 31, 2021 includes acquired assets of $795 million and $19.3 billion associated with the NEC and WestEnd acquisitions, which closed on November 1, 2021 and December 31, 2021, respectively. The WestEnd acquired assets had no economic impact on operations in 2021 and no effect on asset flows, revenues, or earnings in the fourth-quarter period ended December 31, 2021.

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, 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

)

39

 

(26,495

)

Realizations and distributions

 

 

 

 

 

 

(376

)

(376

)

 

(376

)

Acquired assets / Net transfers

14

 

27

 

(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

 

 
December 31, 20211
Beginning assets under management $

26,230

 

$

18,368

 

$

36,639

 

$

14,230

 

$

14,141

 

$

33,676

 

$

422

 

$

143,706

 

$

3,534

 

$

147,241

 

Gross client cash inflows

5,935

 

4,562

 

6,756

 

364

 

2,822

 

6,217

 

1,213

 

27,869

 

386

 

28,254

 

Gross client cash outflows

(7,742

)

(5,644

)

(9,000

)

(1,565

)

(2,362

)

(5,305

)

(201

)

(31,820

)

(914

)

(32,734

)

Net client cash flows

(1,807

)

(1,082

)

(2,244

)

(1,202

)

460

 

912

 

1,012

 

(3,952

)

(528

)

(4,480

)

Market appreciation (depreciation)

6,169

 

2,685

 

649

 

2,766

 

1,662

 

6,611

 

30

 

20,573

 

10

 

20,583

 

Realizations and distributions

 

 

 

 

 

 

 

 

 

 

Acquired assets / Net transfers2

(14

)

122

 

110

 

(28

)

(214

)

19,165

 

1,084

 

20,226

 

84

 

20,310

 

Ending assets under management $

30,578

 

$

20,094

 

$

35,154

 

$

15,766

 

$

16,050

 

$

60,364

 

$

2,548

 

$

180,554

 

$

3,100

 

$

183,654

 

1 Beginning in January 2022, the Company’s “Other” asset class has been categorized to Solutions, Fixed Income, Global / Non-U.S. Equity, and Alternative Investments based on the underlying investment strategy. Additionally, all assets managed using alternative investment strategies are now included in the Company’s Alternative Investments asset class. Prior-period figures have been adjusted accordingly. 

2 The year ended December 31, 2021 includes acquired assets of $547 million, $795 million and $19.3 billion associated with the THB, NEC and WestEnd acquisitions, which closed on March 1, 2021, November 1, 2021 and December 31, 2021, respectively. The WestEnd acquired assets had no economic impact on operations in 2021 and no effect on asset flows, revenues, or earnings in the full-year period ended December 31, 2021.

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, 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 assets / Net transfers

(27

)

(9

)

 

(36

)

Ending assets under management $

99,447

 

$

5,627

 

$

47,877

 

$

152,952

 

 
September 30, 2022
Beginning assets under management $

102,297

 

$

5,155

 

$

47,494

 

$

154,947

 

Gross client cash inflows

4,277

 

515

 

2,003

 

6,796

 

Gross client cash outflows

(5,689

)

(196

)

(1,484

)

(7,368

)

Net client cash flows

(1,411

)

319

 

519

 

(573

)

Market appreciation (depreciation)

(4,290

)

(383

)

(2,393

)

(7,066

)

Realizations and distributions

 

 

(51

)

(51

)

Acquired assets / Net transfers

(5

)

18

 

(13

)

 

Ending assets under management $

96,591

 

$

5,110

 

$

45,557

 

$

147,257

 

 
December 31, 2021
Beginning assets under management $

121,367

 

$

4,371

 

$

34,151

 

$

159,889

 

Gross client cash inflows

4,289

 

260

 

1,016

 

5,565

 

Gross client cash outflows

(6,925

)

(65

)

(2,075

)

(9,065

)

Net client cash flows

(2,635

)

195

 

(1,059

)

(3,500

)

Market appreciation (depreciation)

5,426

 

308

 

1,489

 

7,224

 

Realizations and distributions

 

 

 

 

Acquired assets / Net transfers4

(15

)

(3

)

20,060

 

20,042

 

Ending assets under management $

124,142

 

$

4,871

 

$

54,641

 

$

183,654

 

1 Includes institutional and retail share classes, money market and VIP funds. 

2 Represents only ETF assets held by third parties. Excludes ETF assets held by other Victory Capital products. 

3 Includes collective trust funds, wrap program accounts, UMAs, UCITS, private funds and non-U.S. domiciled pooled vehicles. 

4 The three months ended December 31, 2021 includes acquired assets of $795 million and $19.3 billion associated with the NEC and WestEnd acquisitions, which closed on November 1, 2021 and December 31, 2021, respectively. The WestEnd acquired assets had no economic impact on operations in 2021 and no effect on asset flows, average assets, revenues, or earnings in the fourth-quarter period ended December 31, 2021.

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, 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 assets / Net transfers

(1,098

)

9

 

(11

)

(1,100

)

Ending assets under management $

99,447

 

$

5,627

 

$

47,877

 

$

152,952

 

 
December 31, 2021
Beginning assets under management $

112,998

 

$

3,976

 

$

30,267

 

$

147,241

 

Gross client cash inflows

19,070

 

849

 

8,335

 

28,254

 

Gross client cash outflows

(23,345

)

(375

)

(9,014

)

(32,734

)

Net client cash flows

(4,275

)

474

 

(678

)

(4,480

)

Market appreciation (depreciation)

15,638

 

828

 

4,117

 

20,583

 

Realizations and distributions

 

 

 

 

Acquired assets / Net transfers4

(219

)

(407

)

20,936

 

20,310

 

Ending assets under management $

124,142

 

$

4,871

 

$

54,641

 

$

183,654

 

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, 2021 includes acquired assets of $547 million, $795 million and $19.3 billion associated with the THB, NEC and WestEnd acquisitions, which closed on March 1, 2021, November 1, 2021 and December 31, 2021, respectively. The WestEnd acquired assets had no economic impact on operations in 2021 and no effect on asset flows, average assets, revenues, or earnings in the full-year period ended December 31, 2021.

Information Regarding Non-GAAP Financial Measures

Victory Capital uses non-GAAP financial measures referred to as Adjusted EBITDA and Adjusted Net Income to measure the operating profitability of the Company. These measures eliminate the impact of one-time acquisition, restructuring and integration costs and demonstrate the ongoing operating earnings metrics of the Company. The Company has included these non-GAAP measures to provide investors with the same financial metrics used by management to assess the operating performance of the Company.

Adjusted EBITDA

Adjustments made to GAAP Net Income to calculate Adjusted EBITDA, as applicable, are:

  • Adding back income tax expense;
  • Adding back interest paid on debt and other financing costs, net of interest income;
  • Adding back depreciation on property and equipment;
  • Adding back other business taxes;
  • Adding back amortization expense on acquisition-related intangible assets;
  • Adding back stock-based compensation expense associated with equity awards issued from pools created in connection with the management-led buyout and various acquisitions and as a result of equity grants related to the IPO;
  • Adding back direct incremental costs of acquisitions, including restructuring costs;
  • Adding back debt issuance cost expense;
  • Adjusting for earnings/losses on equity method investments.

Adjusted Net Income

Adjustments made to GAAP Net Income to calculate Adjusted Net Income, as applicable, are:

  • Adding back other business taxes;
  • Adding back amortization expense on acquisition-related intangible assets;
  • Adding back stock-based compensation expense associated with equity awards issued from pools created in connection with the management-led buyout and various acquisitions and as a result of any equity grants related to the IPO;
  • Adding back direct incremental costs of acquisitions, including restructuring costs;
  • Adding back debt issuance cost expense;
  • Subtracting an estimate of income tax expense applied to the sum of the adjustments above.

Tax Benefit of Goodwill and Acquired Intangible Assets

Due to Victory Capital’s acquisitive nature, tax deductions allowed on acquired intangible assets and goodwill provide it with additional significant supplemental economic benefit. The tax benefit of goodwill and intangible assets represent the tax benefits associated with deductions allowed for intangible assets and goodwill generated from prior acquisitions in which the Company received a step-up in basis for tax purposes. Acquired intangible assets and goodwill may be amortized for tax purposes, generally over a 15-year period. The tax benefit from amortization on these assets is included to show the full economic benefit of deductions for all acquired intangible assets with a step-up in tax basis.

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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