VCTR
$16.37
Victory Capital Holdings Inc Cl A
$.07
.43%
Earnings Details
2nd Quarter June 2020
Wednesday, August 5, 2020 4:30:00 PM
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Summary

Victory Capital Holdings Inc Cl A (VCTR) Recent Earnings

Victory Capital Holdings Inc Cl A (VCTR) reported 2nd Quarter June 2020 earnings of $0.76 per share on revenue of $181.9 million. The consensus earnings estimate was $0.79 per share on revenue of $189.5 million. Revenue grew 99.1% on a year-over-year basis.

Results
Reported Earnings
$0.76
Earnings Whisper
-
Consensus Estimate
$0.79
Reported Revenue
$181.9 Mil
Revenue Estimate
$189.5 Mil
Growth
Earnings Growth
Revenue Growth
Power Rating
Grade
Earnings Release

Victory Capital Reports Second Quarter 2020 Financial Results

Second Quarter 2020 Highlights

  • Total Assets Under Management (AUM) of $129.1 billion
  • Long-term gross flows of $5.2 billion; long-term net outflows of $3.0 billion1
  • GAAP operating margin of 36.2% and adjusted EBITDA margin of 47.5%2
  • GAAP net income of $0.61 per diluted share, up 205% versus second quarter 2019
  • Adjusted net income with tax benefit of $0.89 per diluted share, up 135% vs. second quarter 20192
  • Board authorizes 20% increase in regular quarterly cash dividend

SAN ANTONIO, Texas--(BUSINESS WIRE)--Victory Capital Holdings, Inc. (NASDAQ:VCTR) (“Victory Capital” or “the Company”) today reported financial results for the quarter ended June 30, 2020.

“I am pleased to report that Victory Capital produced record financial results in a number of different areas for the second quarter and first half of the year,” said David Brown, Chairman and Chief Executive Officer. “Notwithstanding a challenging market environment and extreme volatility, we generated record revenue, profit margins and net earnings during the first six months of 2020. This is a testament not only to our business model, which is designed to deliver robust profitability in all market conditions, but also to our ability to successfully execute on our growth strategy.

“Our Investment Franchises generated outstanding investment performance during the second quarter, with 68% of total AUM outperforming benchmarks for the three-year period ended June 30, 2020. For the five-year period, 69% of our total AUM has outperformed associated benchmarks.

“The 20% cash dividend increase announced today by our Board, reflects strong current and projected cash flows. Our dividend and share repurchase program remain ancillary components of our capital allocation strategy. During the quarter, most of our free cash flow was used to reduce debt in preparation for potential acquisition opportunities that we are currently evaluating.

“To date, we have decreased outstanding debt by $240 million since the origination of our term loan in July of 2019. Rapid debt reduction, combined with lower interest rates and the successful repricing of the debt in January to reduce the interest rate spread by 75 basis points, resulted in a 15% decline in interest expense and other financing costs compared with the first quarter of 2020.

“Integration of the business we acquired from USAA remains on track and is nearing completion, as we pivot toward the future growth opportunity from the acquisition. We are currently in the process of launching a new digital experience to enhance service to members and elevate marketing opportunities in this direct-to-consumer channel.

“In July, Victory Capital became a signatory to the United Nations-supported Principles for Responsible Investment (PRI), broadening our commitment to responsible investing. This was an important milestone formalizing what our autonomous Investment Franchises and Solutions Platform have been doing for many years. Each of our Investment Franchises follows an approach to incorporating ESG considerations that best suits its own investment process or the objectives of its clients. As always, serving the needs of our clients remains our top priority.”

1Excludes asset flows directly related to the closing of the sale of USAA’s brokerage business.
2The Company reports its financial results in accordance with generally accepted accounting principles (“GAAP”). Adjusted EBITDA and Adjusted Net Income are not defined by GAAP and should not be regarded as an alternative to any measurement under GAAP. Please refer to the section “Information Regarding Non-GAAP Financial Measures” at the end of this press release for an explanation of Non-GAAP financial measures and a reconciliation to the nearest GAAP financial measure.

The table below presents AUM, and certain GAAP and non-GAAP (“adjusted”) financial results. Due to rounding, AUM values and other amounts in this press release may not add up precisely to the totals provided.

(in millions except per share amounts or as otherwise noted)

For the Three Months Ended For the Six Months Ended
June 30,March 31,June 30,June 30,June 30,

2020

 

2020

 

2019

 

2020

 

2019

Assets Under Management
Ending$

129,070

 

$

123,779

 

$

64,077

 

$

129,070

 

$

64,077

 

Average

128,927

 

144,112

 

60,063

 

136,519

 

58,553

 

 
Long-term Flows(2)
Long-term Gross(2)$

5,166

 

$

7,273

 

$

7,514

 

$

12,439

 

$

10,552

 

Long-term Net(2)

(3,466

)

(3,101

)

3,694

 

(6,568

)

2,589

 

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

4,411

 

$

7,652

 

$

 

$

12,063

 

$

 

Money Market/Short-term Net

(8,416

)

201

 

 

(8,214

)

 

 
Total Flows
Total Gross$

9,577

 

$

14,925

 

$

7,514

 

$

24,502

 

$

10,552

 

Total Net

(11,882

)

(2,900

)

3,694

 

(14,782

)

2,589

 

 
Consolidated Financial Results (GAAP)
Revenue$

181.9

 

$

204.4

 

$

91.4

 

$

386.3

 

$

178.8

 

Revenue realization (in bps)

56.7

 

57.1

 

61.0

 

56.9

 

61.6

 

Operating expenses

116.1

 

113.8

 

68.6

 

229.9

 

134.0

 

Income from operations

65.8

 

90.6

 

22.7

 

156.4

 

44.9

 

Operating margin

36.2

%

44.3

%

24.9

%

40.5

%

25.1

%

Net income

44.7

 

57.2

 

14.4

 

101.9

 

28.9

 

Earnings per diluted share$

0.61

 

$

0.77

 

$

0.20

 

$

1.38

 

$

0.40

 

Cash flow from operations

69.0

 

51.9

 

31.4

 

120.9

 

49.3

 

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

86.3

 

$

91.5

 

$

36.6

 

$

177.8

 

$

70.2

 

Adjusted EBITDA margin

47.5

%

44.8

%

40.0

%

46.0

%

39.2

%

Adjusted net income

58.3

 

61.7

 

24.4

 

120.0

 

46.3

 

Tax benefit of goodwill and acquired intangible assets

6.7

 

6.7

 

3.4

 

13.5

 

6.7

 

Adjusted net income with tax benefit

65.1

 

68.5

 

27.7

 

133.5

 

53.0

 

Adjusted net income with tax benefit per diluted share$

0.89

 

$

0.92

 

$

0.38

 

$

1.81

 

$

0.73

 

____________________
1 The Company reports its financial results in accordance with GAAP. Adjusted EBITDA and Adjusted Net Income are not defined by GAAP and should not be regarded as an alternative to any measurement under GAAP. Please refer to the section “Information Regarding Non-GAAP Financial Measures” at the end of this press release for an explanation of Non-GAAP financial measures and a reconciliation to the nearest GAAP financial measure.

2 Long-term AUM is defined as total AUM excluding Money Market and short-term assets.

AUM, Flows and Investment Performance

Victory Capital’s total AUM increased by 4.3%, or $5.3 billion, to $129.1 billion at June 30, 2020, compared with $123.8 billion at March 31, 2020. The increase was attributable to positive market action of $17.2 billion, partially offset by net outflows of $11.9 billion that included asset flows related to the closing of the sale of USAA’s brokerage business in May 2020. Total gross flows were $9.6 billion for the second quarter and $24.5 billion for the year-to-date period. Long-term AUM increased by 12.3%, or $13.7 billion, to $125.3 billion at June 30, 2020, compared with $111.7 billion at March 31, 2020. For the year-to-date period, the Company reported long-term gross flows of $12.4 billion and net long-term outflows of $6.6 billion.

At June 30, 2020, Victory Capital offered 118 investment strategies through its nine autonomous Investment Franchises and Solutions Platform. The table below presents outperformance against benchmarks by AUM as of June 30, 2020.

Percentage of AUM Outperforming Benchmark

Trailing

 

Trailing

 

Trailing

 

Trailing

1-Year

 

3-Years

 

5-Years

 

10-Years

45%

 

68%

 

69%

 

78%

Second Quarter 2020 Compared with First Quarter 2020

Revenue decreased 11% to $181.9 million, in the second quarter, compared with $204.4 million in the first quarter, reflecting lower average AUM. GAAP operating margin contracted 810 basis points in the second quarter to 36.2%, down from 44.3% in the first quarter. The decrease was attributable to a $5.3 million expense increase in the fair value of contingent acquisition payments in the second quarter compared to an expense decrease of $5.5 million in the first quarter. Second quarter GAAP net income declined 22% to $44.7 million, down from $57.2 million in the prior quarter. On a per-share basis, GAAP net income declined 21% to $0.61 per diluted share in the second quarter, versus $0.77 per diluted share in the first quarter.

Adjusted net income with tax benefit decreased 5% to $65.1 million in the second quarter, down from $68.5 million in the first quarter. On a per-share basis, adjusted net income with tax benefit decreased 3% to $0.89 per diluted share in the second quarter, from $0.92 per diluted share in the prior quarter. Adjusted EBITDA decreased 6% to $86.3 million in the second quarter, versus $91.5 million in the first quarter. Adjusted EBITDA margin expanded 270 basis points in the second quarter of 2020 to a quarterly record high of 47.5% compared with 44.8% in the prior quarter.

Second Quarter 2020 Compared with Second Quarter 2019

Year-over-year results reflect the acquisition of the USAA Asset Management Company, which closed on July 1, 2019. The acquisition significantly impacted our financial results for the three months ended June 30, 2020 when compared to the three months ended June 30, 2019. Revenue for the three months ended June 30, 2020, rose 99% to $181.9 million, compared with $91.4 million in the same quarter of 2019. The increase was primarily due to higher average AUM as a result of the acquisition.

GAAP operating margin was 36.2% in the second quarter, a 1,130 basis point increase from the 24.9% recorded in the same quarter of 2019 primarily due to improved operating leverage. Operating expenses increased 69% to $116.1 million, compared with $68.6 million in last year’s second quarter, reflecting the Company’s larger scale and new call center dedicated to serving our direct channel. GAAP net income rose 211% to $44.7 million, or $0.61 per diluted share, in the second quarter compared with $14.4 million, or $0.20 per diluted share, in the same quarter of 2019.

Adjusted net income with tax benefit advanced 135% to $65.1 million, or $0.89 per diluted share, in the second quarter, compared with $27.7 million, or $0.38 per diluted share in the same quarter last year. Adjusted EBITDA rose 136% to $86.3 million, compared with $36.6 million in last year’s same quarter. Year-over-year, adjusted EBITDA margin expanded 750 basis points to 47.5% in the second quarter of 2020, compared with 40.0% in the same quarter last year.

Six Months Ended June 30, 2020 Compared with Six Months Ended June 30, 2019

Year-over-year results reflect the acquisition of the USAA Asset Management Company, which closed on July 1, 2019. The acquisition significantly impacted our financial results for the year-to-date period ended June 30, 2020 when compared to the year-to-date period ended June 30, 2019. Revenue for the six months ended June 30, 2020, rose 116% to $386.3 million, compared with $178.8 million in the same period of 2019. The increase was primarily due to higher average AUM as a result of the acquisition.

GAAP operating margin was 40.5% for the six months ended June 30, 2020, a 1,540 basis point increase from the 25.1% recorded in the same period in 2019 primarily due to improved operating leverage. Operating expenses increased 72% to $229.9 million at June 30, 2020, compared with $134.0 million in the same period in 2019, reflecting the Company’s larger scale and new call center dedicated to serving our direct channel. GAAP net income rose 252% to $101.9 million, or $1.38 per diluted share, in the first six months of 2020 compared with $28.9 million, or $0.40 per diluted share, in the same period in 2019.

Adjusted net income with tax benefit advanced 152% to $133.5 million, or $1.81 per diluted share, in the first six months of 2020, compared with $53.0 million, or $0.73 per diluted share in the same period in 2019. For the six months ended June 30, 2020, adjusted EBITDA rose 153% to $177.8 million, compared with $70.2 million for the same period in 2019. Year-over-year, adjusted EBITDA margin expanded 680 basis points to 46.0% in the first six months of 2020, compared with 39.2% in the same period last year.

Balance Sheet / Capital Management

On March 27, 2020, the Company executed a floating-to-fixed interest rate swap transaction to effectively fix the interest rate at 3.465% on $450 million of its outstanding Term Loan.

On May 26, 2020, the Company announced that its Board of Directors approved a new common stock repurchase program authorizing the repurchase of up to $15 million of its Class A Common Stock through December 31, 2021. During the second quarter, the Company repurchased 456,868 shares, at an average price of $15.73 per share, for a total cost of $7.2 million.

During the first six months of 2020, the Company reduced outstanding debt by an additional $71 million. Subsequent to June 30, 2020, we reduced outstanding term loan principal by $20.5 million through open market term loan debt repurchases and prepayments, for a total debt reduction of $239.8 million since July 1, 2019.

Today, the Company’s Board of Directors declared a $0.06 per share quarterly cash dividend, a 20% increase over the second quarter 2020. The dividend is payable on September 25, 2020, to shareholders of record on September 10, 2020.

Conference Call, Webcast and Slide Presentation

The Company will host a conference call tomorrow morning, August 6, at 8:00 a.m. ET to discuss the results. Analysts and investors may participate in the question-and-answer session. To participate in the conference call, please call (877) 823-8673 (domestic) or (647) 689-4067 (international), shortly before 8:00 a.m. ET and reference the Victory Capital Conference Call. A live, listen-only webcast will also be available via the investor relations section of the Company’s website at https://ir.vcm.com. Prior to the call, a supplemental slide presentation that will be used during the conference call will be available on the Events and Presentations page of the Company’s investor relations website. For anyone who is unable to join the live event, an archive of the webcast will be available for replay shortly after the call concludes.

About Victory Capital

Victory Capital is a diversified global asset management firm with $129.1 billion in assets under management as of June 30, 2020. 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 nine autonomous Investment Franchises and a Solutions Platform, Victory Capital offers a wide array of investment styles and investment vehicles including, actively managed mutual funds, separately managed accounts, rules-based and active ETFs, multi-asset class strategies, custom-designed solutions and a 529 College Savings Plan.

For more information, please visit www.vcm.com or follow us on: Twitter and LinkedIn.

FORWARD-LOOKING STATEMENTS

This press release may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements may include, without limitation, any statements preceded by, followed by or including words such as “target,” “believe,” “expect,” “aim,” “intend,” “may,” “anticipate,” “assume,” “budget,” “continue,” “estimate,” “future,” “objective,” “outlook,” “plan,” “potential,” “predict,” “project,” “will,” “can have,” “likely,” “should,” “would,” “could” and other words and terms of similar meaning or the negative thereof. Such forward-looking statements involve known and unknown risks, uncertainties and other important factors beyond Victory Capital’s control such as the COVID-19 pandemic and its effect on our business, operations and financial results going forward, as discussed in Victory Capital’s filings with the SEC, that could cause Victory Capital’s actual results, performance or achievements to be materially different from the expected results, performance or achievements expressed or implied by such forward-looking statements.

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

Such forward-looking statements are based on numerous assumptions regarding Victory Capital’s present and future business strategies and the environment in which it will operate in the future. Any forward-looking statement made in this press release speaks only as of the date hereof. Except as required by law, Victory Capital assumes no obligation to update these forward-looking statements, or to update the reasons actual results could differ materially from those anticipated in the forward-looking statements, even if new information becomes available in the future.

Victory Capital Holdings, Inc. and Subsidiaries

Unaudited Consolidated Statements of Operations

(in thousands except per share data and percentages)

 

 

 

 

 

 

 

For the Three Months Ended

 

For the Six Months Ended

 

 

June 30,

 

March 31,

 

June 30,

 

June 30,

 

June 30,

 

 

2020

 

2020

 

2019

 

2020

 

2019

Revenue
Investment management fees$

130,032

 

$

146,881

 

$

78,042

 

$

276,913

 

$

152,453

 

Fund administration and distribution fees

51,854

 

57,540

 

13,318

 

109,394

 

26,386

 

Total revenue

181,886

 

204,421

 

91,360

 

386,307

 

178,839

 

 
Expenses
Personnel compensation and benefits

49,105

 

47,571

 

35,542

 

96,676

 

70,043

 

Distribution and other asset-based expenses

41,630

 

54,860

 

16,182

 

96,490

 

31,949

 

General and administrative

13,289

 

11,888

 

7,087

 

25,177

 

14,174

 

Depreciation and amortization

4,166

 

4,050

 

5,263

 

8,216

 

10,485

 

Change in value of consideration payable for acquisition of business

5,300

 

(5,500

)

(14

)

(200

)

(14

)

Acquisition-related costs

(23

)

(69

)

2,787

 

(92

)

5,564

 

Restructuring and integration costs

2,605

 

998

 

1,788

 

3,603

 

1,788

 

Total operating expenses

116,072

 

113,798

 

68,635

 

229,870

 

133,989

 

 
Income from operations

65,814

 

90,623

 

22,725

 

156,437

 

44,850

 

Operating margin

36.2

%

44.3

%

24.9

%

40.5

%

25.1

%

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

2,966

 

(4,172

)

656

 

(1,206

)

2,489

 

Interest expense and other financing costs

(9,710

)

(11,408

)

(4,520

)

(21,118

)

(9,144

)

Gain (loss) on debt extinguishment

137

 

(1,054

)

 

(917

)

 

Total other expense, net

(6,607

)

(16,634

)

(3,864

)

(23,241

)

(6,655

)

 
Income before income taxes

59,207

 

73,989

 

18,861

 

133,196

 

38,195

 

 
Income tax expense

(14,487

)

(16,823

)

(4,478

)

(31,310

)

(9,285

)

 
Net income$

44,720

 

$

57,166

 

$

14,383

 

$

101,886

 

$

28,910

 

 
Earnings per share of common stock
Basic$

0.66

 

$

0.84

 

$

0.21

 

$

1.50

 

$

0.43

 

Diluted

0.61

 

0.77

 

0.20

 

1.38

 

0.40

 

 
Weighted average number of shares outstanding
Basic

67,821

 

67,790

 

67,583

 

67,806

 

67,552

 

Diluted

73,204

 

74,350

 

73,521

 

73,818

 

72,962

 

 
Dividends declared per share$

0.05

 

$

0.05

 

$

 

$

0.10

 

$

 

Victory Capital Holdings, Inc. and Subsidiaries

Reconciliation of GAAP to Non-GAAP Measures

(unaudited; in thousands except per share data and percentages)

 

 

 

 

 

 

 

For the Three Months Ended

 

For the Six Months Ended

 

 

June 30,

 

March 31,

 

June 30,

 

June 30,

 

June 30,

 

 

2020

 

2020

 

2019

 

2020

 

2019

Net income (GAAP)$

44,720

 

$

57,166

 

$

14,383

 

$

101,886

 

$

28,910

 

Income tax expense

(14,487

)

(16,823

)

(4,478

)

(31,310

)

(9,285

)

Income before income taxes$

59,207

 

$

73,989

 

$

18,861

 

$

133,196

 

$

38,195

 

Interest expense

8,267

 

10,528

 

3,613

 

18,795

 

7,466

 

Depreciation

746

 

884

 

612

 

1,630

 

1,183

 

Other business taxes

219

 

(3,296

)

424

 

(3,077

)

979

 

Amortization of acquisition-related intangible assets

3,420

 

3,166

 

4,651

 

6,586

 

9,302

 

Stock-based compensation

3,068

 

5,372

 

3,321

 

8,440

 

4,799

 

Acquisition, restructuring and exit costs

10,105

 

(1,542

)

4,575

 

8,563

 

7,352

 

Debt issuance costs

1,312

 

2,389

 

366

 

3,701

 

730

 

Earnings from equity method investments

 

 

150

 

 

154

 

Adjusted EBITDA$

86,344

 

$

91,490

 

$

36,573

 

$

177,834

 

$

70,160

 

Adjusted EBITDA margin

47.5

%

44.8

%

40.0

%

46.0

%

39.2

%

 
 
Net income (GAAP)$

44,720

 

$

57,166

 

$

14,383

 

$

101,886

 

$

28,910

 

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

219

 

(3,296

)

424

 

(3,077

)

979

 

Amortization of acquisition-related intangible assets

3,420

 

3,166

 

4,651

 

6,586

 

9,302

 

Stock-based compensation

3,068

 

5,372

 

3,321

 

8,440

 

4,799

 

Acquisition, restructuring and exit costs

10,105

 

(1,542

)

4,575

 

8,563

 

7,352

 

Debt issuance costs

1,312

 

2,389

 

366

 

3,701

 

730

 

Tax effect of above adjustments

(4,531

)

(1,522

)

(3,334

)

(6,053

)

(5,790

)

Adjusted net income$

58,313

 

$

61,733

 

$

24,386

 

$

120,046

 

$

46,282

 

Adjusted net income per diluted share$

0.80

 

$

0.83

 

$

0.33

 

$

1.63

 

$

0.63

 

 
Tax benefit of goodwill and acquired intangible assets$

6,745

 

$

6,728

 

$

3,361

 

$

13,473

 

$

6,722

 

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

0.09

 

$

0.09

 

$

0.05

 

$

0.18

 

$

0.09

 

 
Adjusted net income with tax benefit$

65,058

 

$

68,461

 

$

27,747

 

$

133,519

 

$

53,004

 

Adjusted net income with tax benefit per diluted share$

0.89

 

$

0.92

 

$

0.38

 

$

1.81

 

$

0.73

 

Victory Capital Holdings, Inc. and Subsidiaries

Unaudited Condensed Consolidated Balance Sheets

(In thousands, except for shares)

 

June 30, 2020

December 31, 2019

Assets
Cash and cash equivalents$

55,184

 

$

37,121

 

Receivables

74,805

 

95,093

 

Prepaid expenses

6,252

 

4,852

 

Investments

18,507

 

19,076

 

Property and equipment, net

16,009

 

13,240

 

Goodwill

404,750

 

404,750

 

Other intangible assets, net

1,168,885

 

1,175,471

 

Other assets

3,448

 

3,706

 

Total assets$

1,747,840

 

$

1,753,309

 

 
Liabilities and stockholders' equity
Accounts payable and accrued expenses$

78,265

 

$

89,203

 

Accrued compensation and benefits

33,944

 

54,842

 

Consideration payable for acquisition of business

118,500

 

118,700

 

Deferred tax liability, net

14,785

 

5,486

 

Other liabilities

30,273

 

22,668

 

Long-term debt, net(1)

857,233

 

924,539

 

Total liabilities

1,133,000

 

1,215,438

 

 
Stockholders' equity
Class A common stock, $0.01 par value per share: 2020 - 400,000,000 shares authorized, 18,717,074 shares issued and 16,335,021 shares outstanding; 2019 - 400,000,000 shares authorized, 18,099,772 shares issued and 16,414,617 shares outstanding

187

 

181

 

Class B common stock, $0.01 par value per share: 2020 - 200,000,000 shares authorized, 54,504,294 shares issued and 51,360,645 shares outstanding; 2019 - 200,000,000 shares authorized, 53,937,394 shares issued and 51,281,512 shares outstanding

545

 

539

 

Additional paid-in capital

636,386

 

624,766

 

Class A treasury stock, at cost: 2020 - 2,382,053 shares; 2019 - 1,685,155 shares

(33,104

)

(21,524

)

Class B treasury stock, at cost: 2020 - 3,143,649 shares; 2019 - 2,655,882 shares

(40,912

)

(31,386

)

Accumulated other comprehensive loss

(8,403

)

 

Retained earnings (deficit)

60,141

 

(34,705

)

Total stockholders' equity

614,840

 

537,871

 

Total liabilities and stockholders' equity$

1,747,840

 

$

1,753,309

 

1 Balances at June 30, 2020 and December 31, 2019 are shown net of unamortized loan discount and debt issuance costs in the amount of $23.5 million and $27.5 million, respectively. The gross amount of the debt outstanding was $880.7 million as of June 30, 2020 and $952 million as of December 31, 2019.

Victory Capital Holdings, Inc. and Subsidiaries

Assets Under Management

(unaudited; in millions except for percentages)

 

For the Three Months Ended

 

% Change from

June 30,

 

March 31,

 

June 30,

 

March 31,

 

June 30,

2020

 

2020

 

2019

 

2020

 

2019

Beginning assets under management$

123,779

 

$

151,832

 

$

58,119

 

-18

%

113

%

Gross client cash inflows

9,577

 

14,925

 

7,514

 

-36

%

27

%

Gross client cash outflows

(21,459

)

(17,825

)

(3,819

)

20

%

462

%

Net client cash flows

(11,882

)

(2,900

)

3,694

 

310

%

-422

%

Market appreciation (depreciation)

17,173

 

(25,153

)

2,269

 

168

%

657

%

Acquired assets / Net transfers

 

 

(4

)

0

%

0

%

Ending assets under management

129,070

 

123,779

 

64,077

 

4

%

101

%

Average assets under management

128,927

 

144,112

 

60,063

 

-11

%

115

%

 

For the Six Months Ended

 

 

 

 

% Change from

June 30,

 

June 30,

 

 

 

 

June 30,

2020

 

2019

 

 

 

 

2019

Beginning assets under management$

151,832

 

$

52,763

 

188

%

Gross client cash inflows

24,502

 

10,552

 

132

%

Gross client cash outflows

(39,284

)

(7,963

)

393

%

Net client cash flows

(14,782

)

2,589

 

-671

%

Market appreciation (depreciation)

(7,979

)

8,729

 

-191

%

Acquired assets / Net transfers

 

(4

)

0

%

Ending assets under management

129,070

 

64,077

 

101

%

Average assets under management

136,519

 

58,553

 

133

%

Victory Capital Holdings, Inc. and Subsidiaries

Assets Under Management by Asset Class

(unaudited; in millions)

 
For the Three Months Ended By Asset Class

Global /

U.S. Mid

 

U.S. Small

 

Fixed

 

U.S. Large

 

Non-U.S.

 

 

 

 

 

 

 

Total

 

Money Market /

 

 

 

Cap Equity

 

Cap Equity

 

Income

 

Cap Equity

 

Equity

 

Solutions

 

Other

 

Long-term

 

Short-term

 

Total

June 30, 2020
Beginning assets under management$

18,622

 

$

11,885

 

$

35,402

 

$

10,703

 

$

9,372

 

$

25,526

 

$

140

 

$

111,650

 

$

12,129

 

$

123,779

 

Gross client cash inflows

943

 

997

 

1,498

 

216

 

436

 

1,067

 

10

 

5,166

 

4,411

 

9,577

 

Gross client cash outflows

(1,511

)

(1,393

)

(2,775

)

(599

)

(575

)

(1,767

)

(12

)

(8,632

)

(12,826

)

(21,459

)

Net client cash flows

(568

)

(396

)

(1,278

)

(383

)

(138

)

(700

)

(3

)

(3,466

)

(8,416

)

(11,882

)

Market appreciation (depreciation)

4,428

 

2,592

 

1,503

 

2,207

 

1,898

 

4,479

 

55

 

17,159

 

14

 

17,173

 

Acquired assets / Net transfers

2

 

2

 

(4

)

(2

)

(1

)

 

3

 

 

 

 

Ending assets under management$

22,483

 

$

14,083

 

$

35,622

 

$

12,524

 

$

11,130

 

$

29,305

 

$

195

 

$

125,343

 

$

3,727

 

$

129,070

 

 
March 31, 2020
Beginning assets under management$

26,347

 

$

17,346

 

$

37,973

 

$

14,091

 

$

12,603

 

$

31,649

 

$

236

 

$

140,245

 

$

11,587

 

$

151,832

 

Gross client cash inflows

1,474

 

1,233

 

1,951

 

238

 

671

 

1,695

 

11

 

7,273

 

7,652

 

14,925

 

Gross client cash outflows

(2,265

)

(1,310

)

(2,890

)

(807

)

(684

)

(2,394

)

(24

)

(10,374

)

(7,451

)

(17,825

)

Net client cash flows

(791

)

(77

)

(939

)

(569

)

(13

)

(699

)

(12

)

(3,101

)

201

 

(2,900

)

Market appreciation (depreciation)

(6,907

)

(5,325

)

(1,361

)

(2,828

)

(3,245

)

(5,436

)

(86

)

(25,187

)

34

 

(25,153

)

Acquired assets / Net transfers

(28

)

(59

)

(272

)

9

 

27

 

12

 

3

 

(307

)

307

 

 

Ending assets under management$

18,622

 

$

11,885

 

$

35,402

 

$

10,703

 

$

9,372

 

$

25,526

 

$

140

 

$

111,650

 

$

12,129

 

$

123,779

 

 
June 30, 2019
Beginning assets under management$

22,169

 

$

14,714

 

$

6,973

 

$

4,117

 

$

5,234

 

$

3,996

 

$

918

 

$

58,119

 

$

 

$

58,119

 

Gross client cash inflows

2,784

 

729

 

506

 

22

 

333

 

3,092

 

48

 

7,514

 

 

7,514

 

Gross client cash outflows

(1,840

)

(924

)

(330

)

(128

)

(205

)

(295

)

(97

)

(3,819

)

 

(3,819

)

Net client cash flows

944

 

(195

)

176

 

(106

)

128

 

2,797

 

(49

)

3,694

 

 

3,694

 

Market appreciation (depreciation)

1,090

 

760

 

152

 

101

 

137

 

126

 

(97

)

2,269

 

 

2,269

 

Acquired assets / Net transfers

 

 

(1

)

(4

)

 

 

 

(4

)

 

(4

)

Ending assets under management$

24,203

 

$

15,278

 

$

7,300

 

$

4,108

 

$

5,498

 

$

6,919

 

$

771

 

$

64,077

 

$

 

$

64,077

 

Victory Capital Holdings, Inc. and Subsidiaries

Assets Under Management by Asset Class

(unaudited; in millions)

For the Six Months EndedBy Asset Class

Global /

U.S. Mid

 

U.S. Small

 

Fixed

 

U.S. Large

 

Non-U.S.

 

 

 

 

 

 

 

Total

 

Money Market /

 

 

 

Cap Equity

 

Cap Equity

 

Income

 

Cap Equity

 

Equity

 

Solutions

 

Other

 

Long-term

 

Short-term

 

Total

June 30, 2020
Beginning assets under management$

26,347

 

$

17,346

 

$

37,973

 

$

14,091

 

$

12,603

 

$

31,649

 

$

236

 

$

140,245

 

$

11,587

 

$

151,832

 

Gross client cash inflows

2,416

 

2,230

 

3,449

 

454

 

1,107

 

2,762

 

21

 

12,439

 

12,063

 

24,502

 

Gross client cash outflows

(3,776

)

(2,703

)

(5,665

)

(1,406

)

(1,259

)

(4,161

)

(36

)

(19,007

)

(20,277

)

(39,284

)

Net client cash flows

(1,360

)

(473

)

(2,217

)

(952

)

(152

)

(1,399

)

(15

)

(6,568

)

(8,214

)

(14,782

)

Market appreciation (depreciation)

(2,479

)

(2,733

)

142

 

(621

)

(1,347

)

(956

)

(32

)

(8,027

)

48

 

(7,979

)

Acquired assets / Net transfers

(25

)

(57

)

(276

)

7

 

26

 

12

 

6

 

(307

)

307

 

 

Ending assets under management$

22,483

 

$

14,083

 

$

35,622

 

$

12,524

 

$

11,130

 

$

29,305

 

$

195

 

$

125,343

 

$

3,727

 

$

129,070

 

June 30, 2019
Beginning assets under management$

20,019

 

$

12,948

 

$

6,836

 

$

3,759

 

$

4,610

 

$

3,767

 

$

824

 

$

52,763

 

$

 

$

52,763

 

Gross client cash inflows

3,777

 

1,721

 

809

 

48

 

698

 

3,371

 

129

 

10,552

 

 

10,552

 

Gross client cash outflows

(3,626

)

(1,983

)

(713

)

(311

)

(482

)

(644

)

(204

)

(7,963

)

 

(7,963

)

Net client cash flows

151

 

(262

)

96

 

(263

)

216

 

2,727

 

(75

)

2,589

 

 

2,589

 

Market appreciation (depreciation)

4,032

 

2,594

 

368

 

617

 

672

 

424

 

23

 

8,729

 

 

8,729

 

Acquired assets / Net transfers

2

 

(1

)

 

(5

)

 

1

 

 

(4

)

 

(4

)

Ending assets under management$

24,203

 

$

15,278

 

$

7,300

 

$

4,108

 

$

5,498

 

$

6,919

 

$

771

 

$

64,077

 

$

 

$

64,077

 

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

 

 

 

Funds(1)

 

ETFs(2)

 

Vehicles(3)

 

Total

June 30, 2020
Beginning assets under management$

98,305

 

$

3,177

 

$

22,296

 

$

123,779

 

Gross client cash inflows

8,621

 

90

 

866

 

9,577

 

Gross client cash outflows

(19,726

)

(214

)

(1,519

)

(21,459

)

Net client cash flows

(11,104

)

(124

)

(653

)

(11,882

)

Market appreciation (depreciation)

13,229

 

409

 

3,535

 

17,173

 

Acquired assets / Net transfers

 

 

 

 

Ending assets under management$

100,430

 

$

3,462

 

$

25,179

 

$

129,070

 

 
March 31, 2020
Beginning assets under management$

118,605

 

$

4,213

 

$

29,014

 

$

151,832

 

Gross client cash inflows

13,745

 

255

 

925

 

14,925

 

Gross client cash outflows

(15,631

)

(461

)

(1,733

)

(17,825

)

Net client cash flows

(1,886

)

(205

)

(809

)

(2,900

)

Market appreciation (depreciation)

(18,413

)

(830

)

(5,910

)

(25,153

)

Acquired assets / Net transfers

 

 

 

 

Ending assets under management$

98,305

 

$

3,177

 

$

22,296

 

$

123,779

 

 
June 30, 2019
Beginning assets under management$

33,786

 

$

3,123

 

$

21,210

 

$

58,119

 

Gross client cash inflows

1,998

 

107

 

5,409

 

7,514

 

Gross client cash outflows

(2,874

)

(231

)

(714

)

(3,819

)

Net client cash flows

(876

)

(124

)

4,694

 

3,694

 

Market appreciation (depreciation)

1,352

 

94

 

823

 

2,269

 

Acquired assets / Net transfers

(4

)

 

 

(4

)

Ending assets under management$

34,258

 

$

3,093

 

$

26,726

 

$

64,077

 

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

(2) Excludes assets managed for other proprietary product (i.e. funds of funds) in order to adjust for double counting.

(3) Includes collective trust funds, wrap program separate accounts and unified managed accounts or UMAs.

Victory Capital Holdings, Inc. and Subsidiaries

Assets Under Management by Vehicle

(unaudited; in millions)

 
For the Six Months Ended By Vehicle

Separate

Accounts

Mutual

 

 

 

 

and Other

 

 

 

Funds(1)

 

ETFs(2)

 

Vehicles(3)

 

Total

June 30, 2020
Beginning assets under management$

118,605

 

$

4,213

 

$

29,014

 

$

151,832

 

Gross client cash inflows

22,366

 

345

 

1,790

 

24,502

 

Gross client cash outflows

(35,357

)

(675

)

(3,252

)

(39,284

)

Net client cash flows

(12,990

)

(330

)

(1,462

)

(14,782

)

Market appreciation (depreciation)

(5,185

)

(421

)

(2,374

)

(7,979

)

Acquired assets / Net transfers

 

 

 

 

Ending assets under management$

100,430

 

$

3,462

 

$

25,179

 

$

129,070

 

 
June 30, 2019
Beginning assets under management$

30,492

 

$

2,956

 

$

19,315

 

$

52,763

 

Gross client cash inflows

4,378

 

349

 

5,825

 

10,552

 

Gross client cash outflows

(5,761

)

(531

)

(1,671

)

(7,963

)

Net client cash flows

(1,383

)

(182

)

4,154

 

2,589

 

Market appreciation (depreciation)

5,153

 

318

 

3,258

 

8,729

 

Acquired assets / Net transfers

(4

)

 

 

(4

)

Ending assets under management$

34,258

 

$

3,093

 

$

26,726

 

$

64,077

 

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

(2) Excludes assets managed for other proprietary product (i.e. funds of funds) in order to adjust for double counting.

(3) Includes collective trust funds, wrap program separate accounts and unified managed accounts or UMAs.

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.

Investors:
Matthew Dennis, CFA
Chief of Staff
Director, Investor Relations
216-898-2412
mdennis@vcm.com

Media:
Tricia Ross
310-622-8226
tross@finprofiles.com

Source: Victory Capital Holdings, Inc.