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Victory Capital Reports Strong Third-Quarter Earnings and Positive Net Long-Term Flows for Year-to-Date Period

Third-Quarter 2022 Highlights

  • Total Assets Under Management (AUM) of $147.3 billion1
  • Long-term gross flows of $6.6 billion in the quarter; $26.8 billion YTD
  • Long-term net flows of -$553 million in the quarter; $1.9 billion of positive long-term net flows YTD
  • GAAP operating margin of 47.6%
  • Adjusted EBITDA margin of 50.0%2
  • GAAP net income of $1.01 per diluted share
  • Adjusted net income with tax benefit of $1.19 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 September 30, 2022.

“Our business continued to perform exceptionally well in a very challenging market environment,” said David Brown, Chairman and Chief Executive Officer. “In the third quarter, adjusted EBITDA margin expanded 80 basis points to 50.0%, up from 49.2% in the second quarter, resulting in 49.6% for the year-to-date period. We also returned more capital to our shareholders in the third quarter than in any quarter in our history.

“Our investment professionals delivered excellent investment performance to our clients. At quarter end, the percentage of our AUM outperforming benchmarks over the respective 3-, 5-, and 10-year periods was 81%, 79%, and 80%. In addition, the number of our mutual funds and ETFs rated four- or five-stars, by Morningstar, increased to 52 products as of September 30, up from 43 products, at the beginning of the year.

“We repurchased 1.8 million shares during the quarter and 3.2 million shares year to date. Additionally, we reduced debt by $30 million this quarter, increasing year-to-date debt reduction to $145 million.

“Our long-term net flows are positive $1.9 billion year to date, through the end of September, and we improved quarter-over-quarter net long-term flows as well. Looking ahead, we remain optimistic about our future growth opportunities, despite the difficult market environment.

“Our acquisition strategy has not changed, and we continue to search for strategic acquisitions that will make our company better. As always, we continue to focus on serving our clients, which is our top priority.”

1 Adjusted measures are non-GAAP financial measures. An explanation of these non-GAAP financial measures is included under the heading “Information Regarding Non-GAAP Financial Measures” at the end of this press release. Please see the non-GAAP reconciliation tables.

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,

2022

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

Assets Under Management1
Ending $

147,257

 

$

154,947

 

$

159,889

 

$

147,257

 

$

159,889

 

Average

158,903

 

165,703

 

162,469

 

167,157

 

157,344

 

 
Long-term Flows2
Long-term Gross $

6,601

 

$

9,198

 

$

5,689

 

$

26,812

 

$

22,388

 

Long-term Net

(553

)

(630

)

131

 

1,860

 

(550

)

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

194

 

$

123

 

$

92

 

$

441

 

$

301

 

Money Market/Short-term Net

(19

)

(53

)

(113

)

(125

)

(430

)

 
Total Flows
Total Gross $

6,796

 

$

9,321

 

$

5,781

 

$

27,253

 

$

22,689

 

Total Net

(573

)

(683

)

18

 

1,734

 

(980

)

 
Consolidated Financial Results (GAAP)
Revenue $

207.3

 

$

216.0

 

$

226.3

 

$

653.3

 

$

661.1

 

Revenue realization (in bps)

51.8

 

52.3

 

55.3

 

52.3

 

56.2

 

Operating expenses

108.6

 

96.7

 

127.3

 

333.8

 

377.1

 

Income from operations

98.6

 

119.3

 

99.0

 

319.5

 

284.0

 

Operating margin

47.6

%

55.2

%

43.7

%

48.9

%

43.0

%

Net income

72.8

 

79.2

 

74.2

 

223.2

 

208.6

 

Earnings per diluted share $

1.01

 

$

1.09

 

$

1.00

 

$

3.07

 

$

2.81

 

Cash flow from operations

103.1

 

90.2

 

99.9

 

268.1

 

264.1

 

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

103.6

 

$

106.2

 

$

115.0

 

$

324.1

 

$

334.1

 

Adjusted EBITDA margin

50.0

%

49.2

%

50.8

%

49.6

%

50.5

%

Adjusted net income

76.2

 

71.4

 

85.6

 

228.7

 

242.6

 

Tax benefit of goodwill and acquired intangible assets

9.3

 

9.3

 

6.9

 

28.0

 

20.8

 

Adjusted net income with tax benefit

85.6

 

80.7

 

92.6

 

256.7

 

263.4

 

Adjusted net income with tax benefit per diluted share $

1.19

 

$

1.11

 

$

1.25

 

$

3.53

 

$

3.55

 

________________________

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 5.0%, or $7.7 billion, to $147.3 billion at September 30, 2022, compared with $154.9 billion at June 30, 2022. The decrease was primarily attributable to negative market action of $7.1 billion as a result of volatility and unprecedented pullbacks in the market. Total gross flows were $6.8 billion for the third quarter and $27.3 billion for the year-to-date period. For the third quarter and year-to-date periods, the Company reported total net outflows of $0.6 billion and net inflows of $1.7 billion, respectively.

As of September 30, 2022, Victory Capital offered 130 investment strategies through its 12 autonomous Investment Franchises and Solutions Platform. The table below presents outperformance against benchmarks by AUM as of September 30, 2022.

Percentage of AUM Outperforming Benchmark

Trailing

Trailing

Trailing

Trailing

1-Year

3-Years

5-Years

10-Years

53%

81%

79%

80%

Third Quarter 2022 Compared with Second Quarter 2022

Revenue decreased 4.0% to $207.3 million in the third quarter, compared with $216.0 million in the second quarter, primarily due to a decrease in average AUM and revenue realization. Operating expenses increased 12.4% to $108.6 million, compared with $96.7 million in the second quarter primarily due to a non-cash $16.1 million difference in amounts recorded to the change in the fair value of consideration payable for acquisitions. GAAP operating margin contracted 760 basis points in the third quarter to 47.6%, down from 55.2% in the second quarter. Third quarter GAAP net income decreased 8.1% to $72.8 million, down from $79.2 million in the prior quarter. Third quarter GAAP 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 7.3% to $1.01 per diluted share in the third quarter, versus $1.09 per diluted share in the second quarter.

Adjusted net income with tax benefit increased 6.0% to $85.6 million in the third quarter, up from $80.7 million in the second quarter. On a per-share basis, adjusted net income with tax benefit increased 7.2% to $1.19 per diluted share in the third quarter, from $1.11 per diluted share in the prior quarter. Adjusted EBITDA decreased 2.5% to $103.6 million in the third quarter, versus $106.2 million in the second quarter. Adjusted EBITDA margin expanded 80 basis points in the third quarter of 2022 to 50.0% compared with 49.2% in the prior quarter.

Third Quarter 2022 Compared with Third Quarter 2021

Revenue for the three months ended September 30, 2022, declined 8.4% to $207.3 million, compared with $226.3 million in the same quarter of 2021 as a result of lower average AUM and revenue realization over the comparable period.

Operating expenses decreased 14.7% to $108.6 million, compared with $127.3 million in last year’s third quarter due the combination of a non-cash $12.9 million difference in amounts recorded to the change in the fair value of consideration payable for acquisitions as well as a decrease in acquisition-related costs. GAAP operating margin expanded 390 basis points to 47.6% in the third quarter, from 43.7% in the same quarter of 2021. GAAP net income decreased 1.9% to $72.8 million, or $1.01 per diluted share, in the third quarter compared with $74.2 million, or $1.00 per diluted share, in the same quarter of 2021. Third quarter GAAP net income benefited from a lower than normal tax rate as a result of employees exercising stock options during the period.

Adjusted net income with tax benefit decreased 7.6% to $85.6 million, or $1.19 per diluted share, in the third quarter, compared with $92.6 million, or $1.25 per diluted share in the same quarter last year. Adjusted EBITDA decreased 9.9% to $103.6 million, compared with $115.0 million in last year’s same quarter. Year-over-year, adjusted EBITDA margin contracted 80 basis points to 50.0% in the third quarter of 2022, compared with 50.8% in the same quarter last year.

Nine Months Ended September 30, 2022 Compared with Nine Months Ended September 30, 2021

Revenue for the nine months ended September 30, 2022, decreased 1.2% to $653.3 million, compared with $661.1 million in the same period of 2021. The decrease was primarily due to lower revenue realization as a result of the WestEnd acquisition partially offset by higher average AUM.

Operating expenses decreased 11.5% to $333.8 million for the nine months ended September 30, 2022, compared with $377.1 million in the same period in 2021. The decrease was due to a non-cash $51.2 million difference in amounts recorded to the change in the fair value of consideration payable for acquisitions, and a decrease in variable expenses, partially offset by continued investments to support future growth. GAAP operating margin was 48.9% for the nine months ended September 30, 2022, a 590 basis point increase from the 43.0% recorded in the same period in 2021. GAAP net income rose 7.0% to $223.2 million, or $3.07 per diluted share, in the first nine months of 2022 compared with $208.6 million, or $2.81 per diluted share, in the same period in 2021.

Adjusted net income with tax benefit decreased 2.5% to $256.7 million, or $3.53 per diluted share, in the first nine months of 2022, compared with $263.4 million, or $3.55 per diluted share in the same period in 2021. For the nine months ended September 30, 2022, adjusted EBITDA decreased 3.0% to $324.1 million, compared with $334.1 million for the same period in 2021. Year-over-year, adjusted EBITDA margin contracted 90 basis points to 49.6% in the first nine of 2022, compared with 50.5% in the same period last year.

Balance Sheet / Capital Management

During the third quarter, the Company reduced outstanding debt by an additional $30 million, increasing year-to-date debt reduction to $145 million. The total debt outstanding as of September 30, 2022 was approximately $1,017 million, exclusive of $11 million in open market term loan debt repurchases that had yet to settle. Total outstanding debt consisted of an existing term loan balance of $642 million and the 2021 Incremental Term Loans balance of $375 million.

The Company repurchased 1.8 million shares during the third quarter and 3.2 million shares year to date.

The Company’s Board of Directors also approved a regular quarterly cash dividend of $0.25 per share. The dividend is payable on December 23, 2022, to shareholders of record on December 9, 2022.

Conference Call, Webcast and Slide Presentation

The Company will host a conference call tomorrow morning, November 4, 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 $147.3 billion in assets under management as of September 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 Nine Months Ended

 

 

September 30,

 

June 30,

 

September 30,

 

September 30,

 

September 30,

 

 

2022

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

Revenue
Investment management fees $

160,770

 

$

168,129

 

$

171,355

 

$

508,364

 

$

499,672

 

Fund administration and distribution fees

46,490

 

47,877

 

54,935

 

144,921

 

161,471

 

Total revenue

207,260

 

216,006

 

226,290

 

653,285

 

661,143

 

 
Expenses
Personnel compensation and benefits

56,869

 

57,582

 

55,837

 

179,352

 

172,305

 

Distribution and other asset-based expenses

39,019

 

40,868

 

44,859

 

123,471

 

131,185

 

General and administrative

12,301

 

13,921

 

13,795

 

38,984

 

40,818

 

Depreciation and amortization

10,686

 

10,758

 

4,377

 

32,051

 

13,456

 

Change in value of consideration payable for acquisition of business

(10,500

)

(26,600

)

2,400

 

(40,600

)

10,600

 

Acquisition-related costs

189

 

143

 

6,007

 

449

 

6,265

 

Restructuring and integration costs

56

 

8

 

18

 

73

 

2,493

 

Total operating expenses

108,620

 

96,680

 

127,293

 

333,780

 

377,122

 

 
Income from operations

98,640

 

119,326

 

98,997

 

319,505

 

284,021

 

Operating margin

47.6

%

55.2

%

43.7

%

48.9

%

43.0

%

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

(1,446

)

(3,443

)

(119

)

(5,096

)

4,547

 

Interest expense and other financing costs

(11,479

)

(9,925

)

(5,853

)

(30,637

)

(18,853

)

Loss on debt extinguishment

(369

)

(963

)

(669

)

(2,887

)

(4,596

)

Total other income (expense), net

(13,294

)

(14,331

)

(6,641

)

(38,620

)

(18,902

)

 
Income before income taxes

85,346

 

104,995

 

92,356

 

280,885

 

265,119

 

 
Income tax expense

(12,582

)

(25,790

)

(18,181

)

(57,643

)

(56,472

)

 
Net income $

72,764

 

$

79,205

 

$

74,175

 

$

223,242

 

$

208,647

 

 
Earnings per share of common stock
Basic $

1.06

 

$

1.16

 

$

1.09

 

$

3.25

 

$

3.08

 

Diluted

1.01

 

1.09

 

1.00

 

3.07

 

2.81

 

 
Weighted average number of shares outstanding
Basic

68,609

 

68,521

 

67,980

 

68,625

 

67,840

 

Diluted

71,877

 

72,867

 

74,053

 

72,797

 

74,162

 

 
Dividends declared per share $

0.25

 

$

0.25

 

$

0.15

 

$

0.75

 

$

0.36

 

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,

 

 

2022

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

Net income (GAAP) $

72,764

 

$

79,205

 

$

74,175

 

$

223,242

 

$

208,647

 

Income tax expense

(12,582

)

(25,790

)

(18,181

)

(57,643

)

(56,472

)

Income before income taxes $

85,346

 

$

104,995

 

$

92,356

 

$

280,885

 

$

265,119

 

Interest expense

10,795

 

9,499

 

5,561

 

29,018

 

18,957

 

Depreciation

2,030

 

2,102

 

1,693

 

6,086

 

4,463

 

Other business taxes

539

 

541

 

376

 

1,670

 

1,274

 

Amortization of acquisition-related intangible assets

8,657

 

8,656

 

2,684

 

25,969

 

8,993

 

Stock-based compensation

2,230

 

2,860

 

2,851

 

7,723

 

10,611

 

Acquisition, restructuring and exit costs

(7,842

)

(24,033

)

8,425

 

(32,719

)

19,358

 

Debt issuance costs

1,064

 

1,560

 

960

 

4,685

 

5,057

 

Losses from equity method investments

759

 

9

 

70

 

825

 

227

 

Adjusted EBITDA $

103,578

 

$

106,189

 

$

114,976

 

$

324,142

 

$

334,059

 

Adjusted EBITDA margin

50.0

%

49.2

%

50.8

%

49.6

%

50.5

%

 
 
Net income (GAAP) $

72,764

 

$

79,205

 

$

74,175

 

$

223,242

 

$

208,647

 

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

539

 

541

 

376

 

1,670

 

1,274

 

Amortization of acquisition-related intangible assets

8,657

 

8,656

 

2,684

 

25,969

 

8,993

 

Stock-based compensation

2,230

 

2,860

 

2,851

 

7,723

 

10,611

 

Acquisition, restructuring and exit costs

(7,842

)

(24,033

)

8,425

 

(32,719

)

19,358

 

Debt issuance costs

1,064

 

1,560

 

960

 

4,685

 

5,057

 

Tax effect of above adjustments

(1,163

)

2,604

 

(3,824

)

(1,833

)

(11,323

)

Adjusted net income $

76,249

 

$

71,393

 

$

85,647

 

$

228,737

 

$

242,617

 

Adjusted net income per diluted share $

1.06

 

$

0.98

 

$

1.16

 

$

3.14

 

$

3.27

 

 
Tax benefit of goodwill and acquired intangible assets $

9,328

 

$

9,327

 

$

6,918

 

$

27,977

 

$

20,754

 

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

0.13

 

$

0.13

 

$

0.09

 

$

0.38

 

$

0.28

 

 
Adjusted net income with tax benefit $

85,577

 

$

80,720

 

$

92,565

 

$

256,714

 

$

263,371

 

Adjusted net income with tax benefit per diluted share $

1.19

 

$

1.11

 

$

1.25

 

$

3.53

 

$

3.55

 

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)

 

 

 

September 30, 2022

 

December 31, 2021

Assets
Cash and cash equivalents $

66,669

 

$

69,533

 

Receivables

87,534

 

104,305

 

Prepaid expenses

7,321

 

6,654

 

Investments, at fair value

28,908

 

31,724

 

Property and equipment, net

23,124

 

25,295

 

Goodwill

981,805

 

981,805

 

Other intangible assets, net

1,323,828

 

1,349,797

 

Other assets

69,936

 

10,633

 

Total assets $

2,589,125

 

$

2,579,746

 

 
Liabilities and stockholders' equity
Accounts payable and accrued expenses $

50,145

 

$

62,102

 

Accrued compensation and benefits

52,951

 

53,905

 

Consideration payable for acquisition of business

267,900

 

309,380

 

Deferred tax liability, net

103,394

 

63,120

 

Other liabilities

47,883

 

33,388

 

Long-term debt, net1

999,843

 

1,127,924

 

Total liabilities

1,522,116

 

1,649,819

 

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

2022 - 600,000,000 shares authorized, 80,288,530 shares issued and 68,481,824 shares outstanding; 2021 - 600,000,000 shares authorized, 77,242,372 shares issued and 68,662,779 shares outstanding

803

 

772

 

Additional paid-in capital

699,242

 

673,572

 

Treasury stock, at cost: 2022 - 11,806,706 shares; 2021 - 8,579,593 shares

(243,901

)

(153,200

)

Accumulated other comprehensive income

37,121

 

5,972

 

Retained earnings

573,744

 

402,811

 

Total stockholders' equity

1,067,009

 

929,927

 

Total liabilities and stockholders' equity $

2,589,125

 

$

2,579,746

 

1 Balances at September 30, 2022 and December 31, 2021 are shown net of unamortized loan discount and debt issuance costs in the amount of $17.4 million and $23.3 million, respectively. The gross amount of the debt outstanding was $1,017.2 million as of September 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

September 30,

June 30,

September 30,

June 30,

 

September 30,

2022

 

2022

 

2021

 

2022

 

2021

Beginning assets under management $

154,947

 

$

178,098

 

$

161,936

 

-13%

 

-4%

Gross client cash inflows

6,796

 

9,321

 

5,781

 

-27%

 

18%

Gross client cash outflows

(7,368

)

(10,005

)

(5,763

)

-26%

 

28%

Net client cash flows

(573

)

(683

)

18

 

-16%

 

N/A

Market appreciation (depreciation)

(7,066

)

(21,670

)

(2,062

)

-67%

 

243%

Realizations and distributions

(51

)

 

 

N/A

 

N/A

Acquired assets / Net transfers

 

(797

)

(3

)

-100%

 

-100%

Ending assets under management

147,257

 

154,947

 

159,889

 

-5%

 

-8%

Average assets under management

158,903

 

165,703

 

162,469

 

-4%

 

-2%

 

 

 

For the Nine Months Ended

% Change from

 

 

September 30,

 

September 30,

September 30,

 

 

2022

 

 

2021

 

2021

 

 

Beginning assets under management $

183,654

 

$

147,241

 

25%

 

 

Gross client cash inflows

27,253

 

22,689

 

20%

 

 

Gross client cash outflows

(25,518

)

(23,669

)

8%

 

 

Net client cash flows

1,734

 

(980

)

N/A

 

 

Market appreciation (depreciation)

(36,987

)

13,359

 

N/A

 

 

Realizations and distributions

(80

)

 

N/A

 

 

Acquired assets / Net transfers

(1,064

)

269

 

N/A

 

 

Ending assets under management

147,257

 

159,889

 

-8%

 

 

Average assets under management

167,157

 

157,344

 

6%

 

 

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

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

 

 
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

 

 
September 30, 20211
Beginning assets under management $

30,340

 

$

20,617

 

$

36,444

 

$

15,284

 

$

16,244

 

$

38,774

 

$

978

 

$

158,682

 

$

3,254

 

$

161,936

 

Gross client cash inflows

1,217

 

1,491

 

1,591

 

79

 

536

 

541

 

236

 

5,689

 

92

 

5,781

 

Gross client cash outflows

(1,332

)

(1,315

)

(1,264

)

(359

)

(551

)

(675

)

(62

)

(5,558

)

(205

)

(5,763

)

Net client cash flows

(114

)

175

 

326

 

(281

)

(15

)

(134

)

174

 

131

 

(113

)

18

 

Market appreciation (depreciation)

(449

)

(898

)

57

 

(115

)

(367

)

(294

)

5

 

(2,061

)

(1

)

(2,062

)

Acquired assets / Net transfers3

21

 

(32

)

103

 

(85

)

(21

)

(17

)

1

 

(30

)

27

 

(3

)

Ending assets under management $

29,798

 

$

19,863

 

$

36,931

 

$

14,803

 

$

15,840

 

$

38,330

 

$

1,158

 

$

156,722

 

$

3,166

 

$

159,889

 

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 Nine 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

September 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

5,417

 

2,408

 

4,183

 

318

 

3,124

 

6,796

 

4,566

 

26,812

 

441

 

27,253

 

Gross client cash outflows

(4,659

)

(4,082

)

(6,851

)

(1,048

)

(2,344

)

(4,551

)

(1,417

)

(24,952

)

(567

)

(25,518

)

Net client cash flows

758

 

(1,674

)

(2,668

)

(730

)

780

 

2,246

 

3,149

 

1,860

 

(125

)

1,734

 

Market appreciation (depreciation)

(5,604

)

(4,343

)

(3,945

)

(4,008

)

(4,781

)

(14,052

)

(263

)

(36,998

)

11

 

(36,987

)

Realizations and distributions

 

 

 

 

 

 

(80

)

(80

)

 

(80

)

Acquired assets / Net transfers

22

 

33

 

(1,342

)

(266

)

245

 

(6

)

(19

)

(1,334

)

270

 

(1,064

)

Ending assets under management $

25,754

 

$

14,109

 

$

27,198

 

$

10,762

 

$

12,293

 

$

48,551

 

$

5,334

 

$

144,001

 

$

3,256

 

$

147,257

 

 
September 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

4,371

 

3,800

 

5,370

 

268

 

2,290

 

5,435

 

854

 

22,388

 

301

 

22,689

 

Gross client cash outflows

(5,125

)

(4,439

)

(5,923

)

(1,199

)

(1,786

)

(4,337

)

(128

)

(22,937

)

(732

)

(23,669

)

Net client cash flows

(754

)

(639

)

(553

)

(931

)

504

 

1,098

 

726

 

(550

)

(430

)

(980

)

Market appreciation (depreciation)

4,328

 

1,743

 

516

 

1,741

 

1,371

 

3,653

 

6

 

13,359

 

 

13,359

 

Acquired assets / Net transfers

(6

)

391

 

329

 

(237

)

(176

)

(97

)

3

 

207

 

62

 

269

 

Ending assets under management $

29,798

 

$

19,863

 

$

36,931

 

$

14,803

 

$

15,840

 

$

38,330

 

$

1,158

 

$

156,722

 

$

3,166

 

$

159,889

 

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

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

 

 
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

 

 
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

 

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 Nine Months Ended

 

By Vehicle

 

 

 

 

 

 

 

 

Separate

 

 

 

 

 

 

 

 

 

 

 

Accounts

 

 

 

 

 

Mutual

 

 

 

 

and Other

 

 

 

 

 

Funds(1)

 

ETFs(2)

 

Vehicles(3)

 

Total

September 30, 2022
Beginning assets under management $

124,142

 

$

4,871

 

$

54,641

 

$

183,654

 

Gross client cash inflows

16,981

 

1,666

 

8,606

 

27,253

 

Gross client cash outflows

(19,750

)

(394

)

(5,374

)

(25,518

)

Net client cash flows

(2,769

)

1,271

 

3,231

 

1,734

 

Market appreciation (depreciation)

(23,712

)

(1,051

)

(12,225

)

(36,987

)

Realizations and distributions

 

 

(80

)

(80

)

Acquired assets / Net transfers

(1,071

)

18

 

(11

)

(1,064

)

Ending assets under management $

96,591

 

$

5,110

 

$

45,557

 

$

147,257

 

 
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 transfers

(204

)

(404

)

876

 

269

 

Ending assets under management $

121,367

 

$

4,371

 

$

34,151

 

$

159,889

 

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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