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Victory Capital Reports Strong Third Quarter Earnings

Third-Quarter 2023 Highlights

  • Total Assets Under Management (AUM) of $153.5 billion1
  • Long-term gross flows of $5.3 billion
  • Long-term net flows of ($1.7) billion
  • GAAP operating margin of 38%
  • Adjusted EBITDA margin of 51.1%2
  • GAAP net income of $0.77 per diluted share
  • Adjusted net income with tax benefit of $1.18 per diluted share2
  • Board authorizes regular $0.32 quarterly cash dividend

Victory Capital Holdings, Inc. (NASDAQ: VCTR) (“Victory Capital” or “the Company”) today reported financial results for the quarter ended September 30, 2023.

“Adjusted EBITDA margin expanded further to 51.1% in the third quarter,” said David Brown, Chairman and Chief Executive Officer. “This was the 13th consecutive quarter above our target of 49%, and the 9th quarter over that period that our margins were 50% or higher.

“Additionally, we recorded the highest level of quarterly revenue in more than a year, and the highest levels of quarterly Adjusted EBITDA and Adjusted Net Income this calendar year.

“Our firmwide investment performance continues to be strong. Through the end of September, the percentage of our AUM outperforming benchmarks for the one-year period rose to 70%, up from 63% at the end of June. For the respective 3-, 5-, and 10-year periods 65%, 82%, and 78% of our AUM outperformed their respective benchmarks.

“In the third quarter, net long-term outflows totaled $1.7 billion, which was an improvement from the second quarter.

“During the quarter we accumulated cash on our balance sheet, which rose to $108 million as of September 30. Subsequent to quarter-end, we monetized the floating-to-fixed swap on a portion of our debt generating an additional $43 million of cash. These actions are designed to increase our financial flexibility as we continue to conduct due diligence activities on multiple inorganic growth opportunities.

“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 Nine Months Ended

September 30,

 

June 30,

 

September 30,

 

September 30,

 

September 30,

2023

 

2023

 

2022

 

2023

 

2022

Assets Under Management1
Ending $

153,506

 

$

161,622

 

$

147,257

 

$

153,506

 

$

147,257

 

Average

161,147

 

157,372

 

158,903

 

158,779

 

167,157

 

 
Long-term Flows2
Long-term Gross $

5,255

 

$

5,591

 

$

6,601

 

$

16,694

 

$

26,812

 

Long-term Net

(1,700

)

(2,106

)

(553

)

(5,041

)

1,860

 

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

193

 

$

231

 

$

194

 

$

666

 

$

441

 

Money Market/Short-term Net

(19

)

(316

)

(19

)

(345

)

(125

)

 
Total Flows
Total Gross $

5,449

 

$

5,822

 

$

6,796

 

$

17,359

 

$

27,253

 

Total Net

(1,719

)

(2,422

)

(573

)

(5,386

)

1,734

 

 
Consolidated Financial Results (GAAP)
Revenue $

209.7

 

$

204.2

 

$

207.3

 

$

615.2

 

$

653.3

 

Revenue realization (in bps)

51.6

 

52.1

 

51.8

 

51.8

 

52.3

 

Operating expenses

129.6

 

116.7

 

108.6

 

373.1

 

333.8

 

Income from operations

80.0

 

87.5

 

98.6

 

242.1

 

319.5

 

Operating margin

38.2

%

42.9

%

47.6

%

39.4

%

48.9

%

Net income

52.0

 

56.7

 

72.8

 

158.0

 

223.2

 

Earnings per diluted share $

0.77

 

$

0.83

 

$

1.01

 

$

2.30

 

$

3.07

 

Cash flow from operations

91.6

 

77.4

 

103.1

 

233.2

 

268.1

 

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

107.2

 

$

104.0

 

$

103.6

 

$

310.4

 

$

324.1

 

Adjusted EBITDA margin

51.1

%

50.9

%

50.0

%

50.5

%

49.6

%

Adjusted net income

70.3

 

66.4

 

76.2

 

202.3

 

228.7

 

Tax benefit of goodwill and acquired intangible assets

9.5

 

9.5

 

9.3

 

28.6

 

28.0

 

Adjusted net income with tax benefit

79.8

 

75.9

 

85.6

 

230.9

 

256.7

 

Adjusted net income with tax benefit per diluted share $

1.18

 

$

1.11

 

$

1.19

 

$

3.36

 

$

3.53

 

_______________________

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 $8.1 billion, to $153.5 billion at September 30, 2023, compared with $161.6 billion at June 30, 2023. The decrease was attributable to the combination of negative market action, net outflows and the divestiture of certain INCORE accounts of $4.9 billion, $1.7 billion and $1.3 billion, respectively. Total gross flows were $5.4 billion for the third quarter and $17.4 billion for the year-to-date period. For the third quarter and year-to-date periods, the Company reported total net outflows of $1.7 billion and $5.4 billion, respectively.

As of September 30, 2023, Victory Capital offered 116 investment strategies through its 11 autonomous Investment Franchises and Solutions Platform. The table below presents outperformance against benchmarks by AUM as of September 30, 2023.

Percentage of AUM Outperforming Benchmark

Trailing

 

Trailing

 

Trailing

 

Trailing

1-Year

 

3-Years

 

5-Years

 

10-Years

70%

 

65%

 

82%

 

78%

Third Quarter 2023 Compared with Second Quarter 2023

Revenue increased 2.7% to $209.7 million in the third quarter, compared with $204.2 million in the second quarter, primarily due to an increase in average AUM and one extra day in the quarter. GAAP operating margin contracted 470 basis points in the third quarter to 38.2%, down from 42.9% in the second quarter primarily due to the combination of a non-cash $8.8 million difference in amounts recorded to the change in the fair value of consideration payable for acquisitions and an increase in depreciation and amortization expense due to the write-down of an intangible asset. Reflecting these higher non-cash expenses, third quarter GAAP net income decreased 8.2% to $52.0 million, down from $56.7 million in the prior quarter. On a per-share basis, GAAP net income decreased 7.1% to $0.77 per diluted share in the third quarter, versus $0.83 per diluted share in the second quarter.

Adjusted net income with tax benefit increased 5.1% to $79.8 million in the third quarter, up from $75.9 million in the second quarter. On a per-share basis, adjusted net income with tax benefit increased 6.4% to $1.18 per diluted share in the third quarter, from $1.11 per diluted share in the prior quarter. Adjusted EBITDA increased 3.1% to $107.2 million in the third quarter, versus $104.0 million in the second quarter. Adjusted EBITDA margin expanded 20 basis points in the third quarter of 2023 to 51.1% compared with 50.9% in the prior quarter.

Third Quarter 2023 Compared with Third Quarter 2022

Revenue for the three months ended September 30, 2023, increased 1.2% to $209.7 million, compared with $207.3 million in the same quarter of 2022 as a result of higher average AUM over the comparable period.

GAAP operating expenses increased 19.4% to $129.6 million, compared with $108.6 million in last year’s third quarter due to a non-cash $20.8 million difference in amounts recorded to the change in the fair value of consideration payable for acquisitions as well as an increase in depreciation and amortization expense, partially offset by a reduction in compensation expense. GAAP operating margin contracted 940 basis points to 38.2% in the third quarter, from 47.6% in the same quarter of 2022. GAAP net income declined 28.5% to $52.0 million, or $0.77 per diluted share, in the third quarter compared with $72.8 million, or $1.01 per diluted share, in the same quarter of 2022.

Adjusted net income with tax benefit decreased 6.7% to $79.8 million, or $1.18 per diluted share, in the third quarter, compared with $85.6 million, or $1.19 per diluted share in the same quarter last year. Adjusted EBITDA increased 3.5% to $107.2 million, compared with $103.6 million in last year’s same quarter. Year-over-year, adjusted EBITDA margin expanded 110 basis points to 51.1% in the third quarter of 2023, compared with 50.0% in the same quarter last year.

Nine Months Ended September 30, 2023 Compared with Nine Months Ended September 30, 2022

Revenue for the nine months ended September 30, 2023, decreased 5.8% to $615.2 million, compared with $653.3 million in the same period of 2022. The decrease was primarily due to lower average AUM and a decrease in revenue realization.

GAAP operating expenses increased 11.8% to $373.1 million for the nine months ended September 30, 2023, compared with $333.8 million in the same period in 2022 due to a non-cash $59.8 million difference in amounts recorded to the change in the fair value of consideration payable for acquisitions, partially offsetting was a decrease in variable expenses including compensation, distribution and other asset-based expenses. GAAP operating margin was 39.4% for the nine months ended September 30, 2023, a 950 basis point decrease from the 48.9% recorded in the same period in 2022. GAAP net income decreased 29.3% to $158.0 million, or $2.30 per diluted share, in the first nine months of 2023 compared with $223.2 million, or $3.07 per diluted share, in the same period in 2022.

Adjusted net income with tax benefit decreased 10.0% to $230.9 million, or $3.36 per diluted share, in the first nine months of 2023, compared with $256.7 million, or $3.53 per diluted share in the same period in 2022. For the nine months ended September 30, 2023, adjusted EBITDA declined 4.2% to $310.4 million, compared with $324.1 million for the same period in 2022. Year-over-year, adjusted EBITDA margin expanded 90 basis points to 50.5% in the first nine months of 2023, compared with 49.6% in the same period last year.

Balance Sheet / Capital Management

The Company ended the third quarter with $108 million of cash on its balance sheet.

Total debt outstanding as of September 30, 2023 was approximately $1,002 million and consisted of an existing term loan balance of $631 million and the 2021 Incremental Term Loans balance of $371 million.

On October 30, 2023, the Company monetized the floating-to-fixed swap on a portion of its debt generating an additional $43.4 million of cash net of costs.

The Company’s Board of Directors approved a regular quarterly cash dividend of $0.32 per share. The dividend is payable on December 22, 2023, to shareholders of record on December 11, 2023.

Conference Call, Webcast and Slide Presentation

The Company will host a conference call tomorrow morning, November 3, 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 $153.5 billion in assets under management as of September 30, 2023. 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 employs a next-generation business strategy that combines boutique investment qualities with the benefits of a fully integrated, centralized operating and distribution platform.

Victory Capital provides specialized investment strategies to institutions, intermediaries, retirement platforms and individual investors. With 11 autonomous Investment Franchises and a Solutions Business, Victory Capital offers a wide array of investment products and services, including mutual funds, ETFs, separately managed accounts, alternative investments, third-party ETF model strategies, collective investment trusts, private funds, a 529 Education Savings Plan, and brokerage services.

Victory Capital is headquartered in San Antonio, Texas, with offices nationwide and investment professionals in the U.S. and abroad. To learn more please visit www.vcm.com or follow Victory Capital on Facebook, Twitter, and LinkedIn.

FORWARD-LOOKING STATEMENTS

This press release may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements may include, without limitation, any statements preceded by, followed by or including words such as “target,” “believe,” “expect,” “aim,” “intend,” “may,” “anticipate,” “assume,” “budget,” “continue,” “estimate,” “future,” “objective,” “outlook,” “plan,” “potential,” “predict,” “project,” “will,” “can have,” “likely,” “should,” “would,” “could” and other words and terms of similar meaning or the negative thereof. Such forward-looking statements involve known and unknown risks, uncertainties and other important factors beyond Victory Capital’s control such as the conflict in Ukraine and Israel and its effect on our business, operations and financial results going forward, as discussed in Victory Capital’s filings with the SEC, that could cause Victory Capital’s actual results, performance or achievements to be materially different from the expected results, performance or achievements expressed or implied by such forward-looking statements.

Although it is not possible to identify all such risks and factors, they include, among others, the following: reductions in AUM based on investment performance, client withdrawals, difficult market conditions and other factors such as a pandemic; the nature of the Company’s contracts and investment advisory agreements; the Company’s ability to maintain historical returns and sustain its historical growth; the Company’s dependence on third parties to market its strategies and provide products or services for the operation of its business; the Company’s ability to retain key investment professionals or members of its senior management team; the Company’s reliance on the technology systems supporting its operations; the Company’s ability to successfully acquire and integrate new companies; the concentration of the Company’s investments in long-only small- and mid-cap equity and U.S. clients; risks and uncertainties associated with non-U.S. investments; the Company’s efforts to establish and develop new teams and strategies; the ability of the Company’s investment teams to identify appropriate investment opportunities; the Company’s ability to limit employee misconduct; the Company’s ability to meet the guidelines set by its clients; the Company’s exposure to potential litigation (including administrative or tax proceedings) or regulatory actions; the Company’s ability to implement effective information and cyber security policies, procedures and capabilities; the Company’s substantial indebtedness; the potential impairment of the Company’s goodwill and intangible assets; disruption to the operations of third parties whose functions are integral to the Company’s ETF platform; the Company’s determination that Victory Capital is not required to register as an "investment company" under the 1940 Act; the fluctuation of the Company’s expenses; the Company’s ability to respond to recent trends in the investment management industry; the level of regulation on investment management firms and the Company’s ability to respond to regulatory developments; the competitiveness of the investment management industry; the level of control over the Company retained by Crestview GP; 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 Nine Months Ended

September 30,

 

June 30,

 

September 30,

 

September 30,

 

September 30,

2023

 

2023

 

2022

 

2023

 

2022

Revenue
Investment management fees $

163,953

 

$

159,410

 

$

160,770

 

$

480,199

 

$

508,364

 

Fund administration and distribution fees

45,735

 

44,816

 

46,490

 

135,035

 

144,921

 

Total revenue

209,688

 

204,226

 

207,260

 

615,234

 

653,285

 

 
Expenses
Personnel compensation and benefits

54,501

 

54,940

 

56,869

 

167,043

 

179,352

 

Distribution and other asset-based expenses

38,160

 

37,344

 

39,019

 

113,158

 

123,471

 

General and administrative

13,947

 

13,250

 

12,301

 

39,585

 

38,984

 

Depreciation and amortization

12,333

 

9,650

 

10,686

 

33,663

 

32,051

 

Change in value of consideration payable for acquisition of business

10,336

 

1,500

 

(10,500

)

19,236

 

(40,600

)

Acquisition-related costs

116

 

16

 

189

 

134

 

449

 

Restructuring and integration costs

246

 

 

56

 

275

 

73

 

Total operating expenses

129,639

 

116,700

 

108,620

 

373,094

 

333,780

 

 
Income from operations

80,049

 

87,526

 

98,640

 

242,140

 

319,505

 

Operating margin

38.2

%

42.9

%

47.6

%

39.4

%

48.9

%

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

1,452

 

1,971

 

(1,446

)

4,967

 

(5,096

)

Interest expense and other financing costs

(15,580

)

(14,902

)

(11,479

)

(44,721

)

(30,637

)

Loss on debt extinguishment

 

 

(369

)

 

(2,887

)

Total other income (expense), net

(14,128

)

(12,931

)

(13,294

)

(39,754

)

(38,620

)

 
Income before income taxes

65,921

 

74,595

 

85,346

 

202,386

 

280,885

 

 
Income tax expense

(13,914

)

(17,924

)

(12,582

)

(44,435

)

(57,643

)

 
Net income $

52,007

 

$

56,671

 

$

72,764

 

$

157,951

 

$

223,242

 

 
Earnings per share of common stock
Basic $

0.79

 

$

0.85

 

$

1.06

 

$

2.38

 

$

3.25

 

Diluted

0.77

 

0.83

 

1.01

 

2.30

 

3.07

 

 
Weighted average number of shares outstanding
Basic

65,774

 

66,466

 

68,609

 

66,504

 

68,625

 

Diluted

67,676

 

68,500

 

71,877

 

68,636

 

72,797

 

 
Dividends declared per share $

0.32

 

$

0.32

 

$

0.25

 

$

0.96

 

$

0.75

 

 

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,

2023

 

2023

 

2022

 

2023

 

2022

Net income (GAAP) $

52,007

 

$

56,671

 

$

72,764

 

$

157,951

 

$

223,242

 

Income tax expense

(13,914

)

(17,924

)

(12,582

)

(44,435

)

(57,643

)

Income before income taxes $

65,921

 

$

74,595

 

$

85,346

 

$

202,386

 

$

280,885

 

Interest expense

14,660

 

14,146

 

10,795

 

42,288

 

29,018

 

Depreciation

2,302

 

2,296

 

2,030

 

6,569

 

6,086

 

Other business taxes

636

 

382

 

539

 

1,402

 

1,670

 

Amortization of acquisition-related intangible assets

10,032

 

7,353

 

8,657

 

27,094

 

25,969

 

Stock-based compensation

1,451

 

1,538

 

2,230

 

4,993

 

7,723

 

Acquisition, restructuring and exit costs

11,463

 

2,949

 

(7,842

)

23,396

 

(32,719

)

Debt issuance costs

762

 

756

 

1,064

 

2,266

 

4,685

 

Losses from equity method investments

 

 

759

 

 

825

 

Adjusted EBITDA $

107,227

 

$

104,015

 

$

103,578

 

$

310,394

 

$

324,142

 

Adjusted EBITDA margin

51.1

%

50.9

%

50.0

%

50.5

%

49.6

%

 
 
Net income (GAAP) $

52,007

 

$

56,671

 

$

72,764

 

$

157,951

 

$

223,242

 

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

636

 

382

 

539

 

1,402

 

1,670

 

Amortization of acquisition-related intangible assets

10,032

 

7,353

 

8,657

 

27,094

 

25,969

 

Stock-based compensation

1,451

 

1,538

 

2,230

 

4,993

 

7,723

 

Acquisition, restructuring and exit costs

11,463

 

2,949

 

(7,842

)

23,396

 

(32,719

)

Debt issuance costs

762

 

756

 

1,064

 

2,266

 

4,685

 

Tax effect of above adjustments

(6,085

)

(3,244

)

(1,163

)

(14,786

)

(1,833

)

Adjusted net income $

70,266

 

$

66,405

 

$

76,249

 

$

202,316

 

$

228,737

 

Adjusted net income per diluted share $

1.04

 

$

0.97

 

$

1.06

 

$

2.95

 

$

3.14

 

 
Tax benefit of goodwill and acquired intangible assets $

9,536

 

$

9,537

 

$

9,328

 

$

28,597

 

$

27,977

 

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

0.14

 

$

0.14

 

$

0.13

 

$

0.42

 

$

0.38

 

 
Adjusted net income with tax benefit $

79,802

 

$

75,942

 

$

85,577

 

$

230,913

 

$

256,714

 

Adjusted net income with tax benefit per diluted share $

1.18

 

$

1.11

 

$

1.19

 

$

3.36

 

$

3.53

 

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, 2023 December 31, 2022
Assets
Cash and cash equivalents $

107,987

 

$

38,171

 

Receivables

95,174

 

84,473

 

Prepaid expenses

6,458

 

8,443

 

Investments, at fair value

29,858

 

27,266

 

Property and equipment, net

21,203

 

21,146

 

Goodwill

981,805

 

981,805

 

Other intangible assets, net

1,287,542

 

1,314,637

 

Other assets

61,778

 

64,958

 

Total assets $

2,591,805

 

$

2,540,899

 

 
Liabilities and stockholders' equity
Accounts payable and accrued expenses $

59,552

 

$

50,862

 

Accrued compensation and benefits

52,167

 

58,458

 

Consideration payable for acquisition of business

249,636

 

230,400

 

Deferred tax liability, net

124,995

 

108,138

 

Other liabilities

40,996

 

42,117

 

Long-term debt, net1

988,323

 

985,514

 

Total liabilities

1,515,669

 

1,475,489

 

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

2023 - 600,000,000 shares authorized, 82,224,284 shares issued and 65,911,628 shares outstanding; 2022 - 600,000,000 shares authorized, 80,528,137 shares issued and 67,325,534 shares outstanding

822

 

805

 

Additional paid-in capital

723,252

 

705,466

 

Treasury stock, at cost: 2023 - 16,312,656 shares; 2022 - 13,202,603 shares

(384,462

)

(285,425

)

Accumulated other comprehensive income

34,220

 

35,442

 

Retained earnings

702,304

 

609,122

 

Total stockholders' equity

1,076,136

 

1,065,410

 

Total liabilities and stockholders' equity $

2,591,805

 

$

2,540,899

 

1 Balances at September 30, 2023 and December 31, 2022 are shown net of unamortized loan discount and debt issuance costs in the amount of $13.4 million and $16.2 million, respectively. The gross amount of the debt outstanding was $1,001.7 million as of September 30, 2023 and December 31, 2022, respectively.

 

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,

2023

 

2023

 

2022

 

2023

 

2022

Beginning assets under management $

161,622

 

$

158,621

 

$

154,947

 

2%

 

4%

Gross client cash inflows

5,449

 

5,822

 

6,796

 

-6%

 

-20%

Gross client cash outflows

(7,168

)

(8,244

)

(7,368

)

-13%

 

-3%

Net client cash flows

(1,719

)

(2,422

)

(573

)

-29%

 

200%

Market appreciation (depreciation)

(4,888

)

5,537

 

(7,066

)

N/A

 

-31%

Realizations and distributions

 

(73

)

(51

)

N/A

 

N/A

Acquired & divested assets / Net transfers1

(1,508

)

(41

)

 

3578%

 

N/A

Ending assets under management

153,506

 

161,622

 

147,257

 

-5%

 

4%

Average assets under management

161,147

 

157,372

 

158,903

 

2%

 

1%

 

 

 

For the Nine Months Ended

% Change from

 

 

September 30,

 

September 30,

 

 

 

 

September 30,

 

 

2023

 

2022

 

 

 

 

2022

 

 

Beginning assets under management $

152,952

 

$

183,654

 

-17%

 

 

Gross client cash inflows

17,359

 

27,253

 

-36%

 

 

Gross client cash outflows

(22,745

)

(25,518

)

-11%

 

 

Net client cash flows

(5,386

)

1,734

 

N/A

 

 

Market appreciation (depreciation)

7,563

 

(36,987

)

N/A

 

 

Realizations and distributions

(73

)

(80

)

-9%

 

 

Acquired & divested assets / Net transfers1

(1,549

)

(1,064

)

46%

 

 

Ending assets under management

153,506

 

147,257

 

4%

 

 

Average assets under management

158,779

 

167,157

 

-5%

 

 

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

 

Victory Capital Holdings, Inc. and Subsidiaries

Assets Under Management by Asset Class

(unaudited; in millions)

 

For the 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, 2023
Beginning assets under management $

30,007

 

$

15,664

 

$

26,098

 

$

12,170

 

$

15,392

 

$

55,836

 

$

3,301

 

$

158,469

 

$

3,152

 

$

161,622

 

Gross client cash inflows

1,224

 

458

 

892

 

51

 

392

 

1,988

 

249

 

5,255

 

193

 

5,449

 

Gross client cash outflows

(1,769

)

(920

)

(1,343

)

(282

)

(519

)

(1,720

)

(402

)

(6,955

)

(213

)

(7,168

)

Net client cash flows

(545

)

(462

)

(451

)

(231

)

(126

)

268

 

(153

)

(1,700

)

(19

)

(1,719

)

Market appreciation (depreciation)

(1,224

)

(547

)

(460

)

(287

)

(451

)

(2,028

)

71

 

(4,927

)

39

 

(4,888

)

Realizations and distributions

 

 

 

 

 

 

 

 

 

 

Acquired & divested assets / Net transfers1

(2

)

(5

)

(1,397

)

(57

)

(8

)

(78

)

3

 

(1,545

)

37

 

(1,508

)

Ending assets under management $

28,235

 

$

14,650

 

$

23,790

 

$

11,596

 

$

14,807

 

$

53,998

 

$

3,222

 

$

150,298

 

$

3,208

 

$

153,506

 

 
June 30, 2023
Beginning assets under management $

29,035

 

$

15,648

 

$

26,535

 

$

11,425

 

$

14,868

 

$

54,416

 

$

3,317

 

$

155,244

 

$

3,377

 

$

158,621

 

Gross client cash inflows

1,259

 

743

 

873

 

87

 

559

 

1,622

 

449

 

5,591

 

231

 

5,822

 

Gross client cash outflows

(1,126

)

(1,128

)

(1,324

)

(290

)

(585

)

(2,834

)

(408

)

(7,697

)

(547

)

(8,244

)

Net client cash flows

132

 

(386

)

(451

)

(204

)

(26

)

(1,212

)

41

 

(2,106

)

(316

)

(2,422

)

Market appreciation (depreciation)

824

 

404

 

48

 

954

 

575

 

2,682

 

12

 

5,499

 

38

 

5,537

 

Realizations and distributions

 

 

 

 

 

 

(73

)

(73

)

 

(73

)

Acquired & divested assets / Net transfers

16

 

(2

)

(34

)

(4

)

(25

)

(49

)

4

 

(94

)

53

 

(41

)

Ending assets under management $

30,007

 

$

15,664

 

$

26,098

 

$

12,170

 

$

15,392

 

$

55,836

 

$

3,301

 

$

158,469

 

$

3,152

 

$

161,622

 

 
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 & divested 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

 

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

 

Victory Capital Holdings, Inc. and Subsidiaries

Assets Under Management by Asset Class

(unaudited; in millions)

 

For the Nine 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, 2023
Beginning assets under management $

27,892

 

$

15,103

 

$

26,353

 

$

10,973

 

$

14,160

 

$

51,507

 

$

3,663

 

$

149,649

 

$

3,302

 

$

152,952

 

Gross client cash inflows

4,083

 

2,186

 

2,952

 

222

 

1,329

 

4,827

 

1,095

 

16,694

 

666

 

17,359

 

Gross client cash outflows

(3,988

)

(2,921

)

(4,239

)

(957

)

(1,648

)

(6,332

)

(1,650

)

(21,735

)

(1,010

)

(22,745

)

Net client cash flows

95

 

(735

)

(1,287

)

(735

)

(319

)

(1,506

)

(555

)

(5,041

)

(345

)

(5,386

)

Market appreciation (depreciation)

237

 

280

 

203

 

1,488

 

1,044

 

4,020

 

180

 

7,452

 

111

 

7,563

 

Realizations and distributions

 

 

 

 

 

 

(73

)

(73

)

 

(73

)

Acquired & divested assets / Net transfers1

13

 

2

 

(1,479

)

(130

)

(79

)

(23

)

8

 

(1,689

)

140

 

(1,549

)

Ending assets under management $

28,235

 

$

14,650

 

$

23,790

 

$

11,596

 

$

14,807

 

$

53,998

 

$

3,222

 

$

150,298

 

$

3,208

 

$

153,506

 

 
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 & divested 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

 

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

 

Victory Capital Holdings, Inc. and Subsidiaries

Assets Under Management by Vehicle

(unaudited; in millions)

 

For the Three Months Ended

By Vehicle

 

 

 

 

 

 

Separate

 

 

 

 

 

 

 

 

 

Accounts and

 

 

 

Mutual

 

 

 

 

Other Pooled

 

 

 

Funds(1)

 

ETFs(2)

 

Vehicles(3)

 

Total

September 30, 2023
Beginning assets under management $

105,916

 

$

5,193

 

$

50,513

 

$

161,622

 

Gross client cash inflows

3,283

 

232

 

1,933

 

5,449

 

Gross client cash outflows

(5,119

)

(557

)

(1,492

)

(7,168

)

Net client cash flows

(1,836

)

(324

)

441

 

(1,719

)

Market appreciation (depreciation)

(2,925

)

(165

)

(1,799

)

(4,888

)

Realizations and distributions

 

 

 

 

Acquired & divested assets / Net transfers4

(17

)

6

 

(1,497

)

(1,508

)

Ending assets under management $

101,138

 

$

4,710

 

$

47,658

 

$

153,506

 

 
June 30, 2023
Beginning assets under management $

103,246

 

$

5,555

 

$

49,819

 

$

158,621

 

Gross client cash inflows

3,639

 

175

 

2,008

 

5,822

 

Gross client cash outflows

(4,863

)

(421

)

(2,960

)

(8,244

)

Net client cash flows

(1,224

)

(246

)

(952

)

(2,422

)

Market appreciation (depreciation)

3,923

 

(117

)

1,731

 

5,537

 

Realizations and distributions

 

 

(73

)

(73

)

Acquired & divested assets / Net transfers

(28

)

 

(13

)

(41

)

Ending assets under management $

105,916

 

$

5,193

 

$

50,513

 

$

161,622

 

 
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 & divested assets / Net transfers

(5

)

18

 

(13

)

 

Ending assets under management $

96,591

 

$

5,110

 

$

45,557

 

$

147,257

 

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

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

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

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

 

Victory Capital Holdings, Inc. and Subsidiaries

Assets Under Management by Vehicle

(unaudited; in millions)

 

For the Nine Months Ended

By Vehicle
Separate
Accounts
Mutual and Other
Funds(1) ETFs(2) Vehicles(3) Total
September 30, 2023
Beginning assets under management $

99,447

 

$

5,627

 

$

47,877

 

$

152,952

 

Gross client cash inflows

11,468

 

625

 

5,266

 

17,359

 

Gross client cash outflows

(15,388

)

(1,211

)

(6,146

)

(22,745

)

Net client cash flows

(3,921

)

(586

)

(880

)

(5,386

)

Market appreciation (depreciation)

5,648

 

(329

)

2,244

 

7,563

 

Realizations and distributions

 

 

(73

)

(73

)

Acquired & divested assets / Net transfers4

(36

)

(3

)

(1,510

)

(1,549

)

Ending assets under management $

101,138

 

$

4,710

 

$

47,658

 

$

153,506

 

 
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 & divested assets / Net transfers

(1,071

)

18

 

(11

)

(1,064

)

Ending assets under management $

96,591

 

$

5,110

 

$

45,557

 

$

147,257

 

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

Information Regarding Non-GAAP Financial Measures

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

Adjusted EBITDA

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

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

Adjusted Net Income

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

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

Tax Benefit of Goodwill and Acquired Intangible Assets

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

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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