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Victory Capital Reports Record Fourth Quarter and Full Year 2020 Financial Results

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Fourth Quarter 2020 Highlights

  • Total Assets Under Management (AUM) of $147.2 billion
  • Long-term gross flows of $5.7 billion; long-term net outflows of $1.5 billion
  • GAAP operating margin of 39%
  • Record adjusted EBITDA margin of 52%1
  • GAAP net income of $0.75 per diluted share
  • Record adjusted net income with tax benefit of $1.07 per diluted share1
  • Board authorizes 29% increase in regular quarterly cash dividend

Victory Capital Holdings, Inc. (NASDAQ:VCTR) ("Victory Capital" or "the Company") today reported financial results for the quarter and twelve-months ended December 31, 2020.

"I am pleased to report that Victory Capital ended 2020 with record-breaking financial performance across a number of metrics, and we are entering the new year with excellent momentum," said David Brown, Chairman and Chief Executive Officer. "Our business performed well in a very challenging operating environment and drove adjusted EBITDA margin to a record 52% during the fourth quarter, resulting in record adjusted quarterly earnings of $1.07 per share1.

"We generated strong cash flow for the quarter. Consistent with prior guidance, most of the excess cash we generated in 2020 was allocated to reducing debt. This reduced our leverage ratio to 1.8x at year end, while enhancing our financial flexibility and balance sheet capacity for potential future acquisitions.

"Considering our strong financial condition, and no changes to our long-term capital allocation strategy, the Board authorized the third consecutive quarterly cash dividend increase. With this latest increase, our cash dividend has grown by 80% since the beginning of 2020, while we continued to rapidly de-lever. Taking into consideration the attractive interest rate on our debt and our projections for continuing to generate substantial excess cash flow, we are evaluating an optimal leverage level that balances our acquisition goals with returning more capital to shareholders in the form of dividends and share repurchases.

"Our Investment Franchises and Solutions platform continued to deliver strong investment performance during the quarter. For the one-, three-, and five-year periods ending December 31, more than two thirds of our AUM outperformed respective benchmarks. For the ten-year period, 76% of our AUM outperformed benchmarks.

"Looking ahead, we are on track to close the THB Asset Management acquisition later in the first quarter. We look forward to welcoming THB as our tenth Investment Franchise, and integrating their ESG-focused investment strategies into our integrated operating and distribution platform. As always, serving the needs of our clients remains our top priority."

1The 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 Year Ended

December 31,

 

September 30,

 

December 31,

 

December 31,

 

December 31,

2020

 

2020

 

2019

 

2020

 

2019

Assets Under Management
Ending

$

147,241

 

 

$

132,662

 

 

$

151,832

 

 

$

147,241

 

 

$

151,832

 

Average

 

139,552

 

 

 

133,096

 

 

 

147,867

 

 

 

136,422

 

 

 

102,719

 

 

 

 

 

 

 

 

 

 

Long-term Flows(2)

 

 

 

 

 

 

 

 

 

Long-term Gross(2)

$

5,696

 

 

$

5,067

 

 

$

5,284

 

 

$

23,201

 

 

$

23,293

 

Long-term Net(2)

 

(1,466

)

 

 

(2,878

)

 

 

(1,474

)

 

 

(10,911

)

 

 

1,840

 

 

 

 

 

 

 

 

 

 

Money Market/Short-term Flows

 

 

 

 

 

 

 

 

 

Money Market/Short-term Gross

$

226

 

 

$

367

 

 

$

4,371

 

 

$

12,656

 

 

$

8,820

 

Money Market/Short-term Net

 

(130

)

 

 

(96

)

 

 

85

 

 

 

(8,441

)

 

 

20

 

 

 

 

 

 

 

 

 

 

Total Flows

 

 

 

 

 

 

 

 

 

Total Gross

$

5,922

 

 

$

5,433

 

 

$

9,655

 

 

$

35,857

 

 

$

32,112

 

Total Net

 

(1,596

)

 

 

(2,974

)

 

 

(1,390

)

 

 

(19,352

)

 

 

1,860

 

 

 

 

 

 

 

 

 

 

Consolidated Financial Results (GAAP)

 

 

 

 

 

 

 

 

 

Revenue

$

200.4

 

 

$

188.7

 

 

$

218.6

 

 

$

775.4

 

 

$

612.4

 

Revenue realization (in bps)

 

57.1

 

 

 

56.4

 

 

 

58.7

 

 

 

56.8

 

 

 

59.6

 

Operating expenses

 

122.7

 

 

 

108.1

 

 

 

154.4

 

 

 

460.6

 

 

 

447.8

 

Income from operations

 

77.7

 

 

 

80.6

 

 

 

64.2

 

 

 

314.7

 

 

 

164.6

 

Operating margin

 

38.8

%

 

 

42.7

%

 

 

29.4

%

 

 

40.6

%

 

 

26.9

%

Net income

 

54.9

 

 

 

55.7

 

 

 

37.6

 

 

 

212.5

 

 

 

92.5

 

Earnings per diluted share

$

0.75

 

 

$

0.76

 

 

$

0.51

 

 

$

2.88

 

 

$

1.26

 

Cash flow from operations

 

67.9

 

 

 

61.8

 

 

 

59.7

 

 

 

250.6

 

 

 

227.4

 

 

 

 

 

 

 

 

 

 

Adjusted Performance Results (Non-GAAP)(1)

 

 

 

 

 

 

 

 

 

Adjusted EBITDA

$

103.8

 

 

$

95.6

 

 

$

102.3

 

 

$

377.3

 

 

$

268.8

 

Adjusted EBITDA margin

 

51.8

%

 

 

50.7

%

 

 

46.8

%

 

 

48.7

%

 

 

43.9

%

Adjusted net income

 

71.8

 

 

 

66.7

 

 

 

66.0

 

 

 

258.5

 

 

 

172.8

 

Tax benefit of goodwill and acquired intangible assets

 

6.8

 

 

 

6.7

 

 

 

6.8

 

 

 

27.0

 

 

 

20.3

 

Adjusted net income with tax benefit

 

78.6

 

 

 

73.4

 

 

 

72.8

 

 

 

285.5

 

 

 

193.1

 

Adjusted net income with tax benefit per diluted share

$

1.07

 

 

$

1.00

 

 

$

0.99

 

 

$

3.87

 

 

$

2.63

 

____________________

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 11.0%, or $14.6 billion, to $147.2 billion at December 31, 2020, compared with $132.7 billion at September 30, 2020. The increase was attributable to positive market action of $16.2 billion, slightly offset by net outflows of $1.6 billion. Total gross flows were $5.9 billion for the fourth quarter and $35.9 billion for the year. Long-term AUM increased by 11.4%, or $14.7 billion, to $143.7 billion at December 31, 2020, compared with $129.0 billion at September 30, 2020. For the year, the Company reported long-term gross flows of $23.2 billion and net long-term outflows of $10.9 billion.

At December 31, 2020, Victory Capital offered 117 investment strategies through its nine autonomous Investment Franchises and Solutions Platform. The table below presents outperformance against benchmarks by AUM as of December 31, 2020.

Percentage of AUM Outperforming Benchmark
Trailing Trailing Trailing Trailing
1-Year 3-Years 5-Years 10-Years

67%

 

67%

 

67%

 

76%

Fourth Quarter 2020 Compared with Third Quarter 2020

Revenue increased 6.2% to $200.4 million, in the fourth quarter, compared with $188.7 million in the third quarter, reflecting an increase in average AUM and higher revenue realization as a result of a change in asset mix. GAAP operating margin retracted 390 basis points in the fourth quarter to 38.8%, down from 42.7% in the third quarter. The decrease was attributable to a $9.5 million expense in the fair value of contingent acquisition payments in the fourth quarter compared to an expense of $2.0 million in the third quarter. Fourth quarter GAAP net income decreased 1.5% to $54.9 million, down from $55.7 million in the prior quarter. On a per-share basis, GAAP net income decreased 1.3% to $0.75 per diluted share in the fourth quarter, versus $0.76 per diluted share in the third quarter.

Adjusted net income with tax benefit increased 7% to $78.6 million in the fourth quarter, up from $73.4 million in the third quarter. On a per-share basis, adjusted net income with tax benefit increased 7% to $1.07 per diluted share in the fourth quarter, from $1.00 per diluted share in the prior quarter. Adjusted EBITDA increased 8.6% to $103.8 million in the fourth quarter, versus $95.6 million in the third quarter. Adjusted EBITDA margin expanded 110 basis points in the fourth quarter of 2020 to 51.8% compared to 50.7% in the prior quarter.

Fourth Quarter 2020 Compared with Fourth Quarter 2019

Revenue for the three months ended December 31, 2020, decreased 8.3% to $200.4 million, compared to $218.6 million in the same quarter of 2019. The decrease was primarily due to the combination of lower average AUM and lower revenue realization rates. GAAP operating margin was 38.8% in the fourth quarter, a 940 basis point increase from the 29.4% recorded in the same quarter of 2019 primarily due to the combination of improved operating leverage and a $10.4 million reduction in expense recorded in the change in the fair value of contingent acquisition payments from $19.9 million expense in the fourth quarter 2019 compared to a $9.5 million expense in the fourth quarter 2020. Operating expenses decreased 20.5% to $122.7 million, compared with $154.4 million in last year's fourth quarter. GAAP net income rose 46% to $54.9 million, or $0.75 per diluted share, in the fourth quarter compared to $37.6 million, or $0.51 per diluted share, in the same quarter of 2019.

Adjusted net income with tax benefit advanced 7.9% to $78.6 million, or $1.07 per diluted share, in the fourth quarter, compared to $72.8 million, or $0.99 per diluted share in the same quarter last year. Adjusted EBITDA was relatively flat, increasing 1.5% to $103.8 million, compared with $102.3 million in last year's same quarter. Year-over-year, Adjusted EBITDA margin expanded 500 basis points to 51.8% in the fourth quarter of 2020, compared with 46.8% in the same quarter last year.

Year Ended December 31, 2020 Compared with Year Ended December 31, 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 ended December 31, 2020 when compared to the year ended December 31, 2019. Revenue for the year ended December 31, 2020, rose 26.6% to $775.4 million, compared with $612.4 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 40.6% for the year ended December 31, 2020, a 1,370 basis point increase from the 26.9% recorded in the prior year primarily due to improved operating leverage. Operating expenses increased 2.9% to $460.6 million for the year ended December 31, 2020, compared with $447.8 million in the same period in 2019, reflecting the Company's larger scale and new contact center dedicated to serving our direct investor business. During 2020, GAAP net income rose 130% to $212.5 million, or $2.88 per diluted share compared with $92.5 million, or $1.26 per diluted share, in the prior year.

Adjusted net income with tax benefit advanced 47.8% to $285.5 million, or $3.87 per diluted share, for the year ended December 31, 2020, compared with $193.1 million, or $2.63 per diluted share in the prior year. During 2020, adjusted EBITDA rose 40.4% to $377.3 million, compared with $268.8 million in 2019. Year-over-year, adjusted EBITDA margin expanded 480 basis points to 48.7% in 2020, compared with 43.9% in the prior year.

Balance Sheet / Capital Management

During the year ended December 31, 2020, the Company reduced outstanding debt by an additional $163.8 million. Subsequent to December 31, 2020, the Company reduced outstanding term loan principal by $32.5 million, for a total debt reduction of $344.3 million since July 1, 2019.

During the fourth quarter, the Company repurchased 271,580 shares, at an average price of $19.72 per share, for a total cost of $5.4 million.

Today, the Company's Board of Directors declared a $0.09 per share quarterly cash dividend, a 29% increase from the $0.07 declared in the prior quarter and the third increase in the past year. The dividend is payable on March 25, 2021, to shareholders of record on March 10, 2021.

Conference Call, Webcast and Slide Presentation

The Company will host a conference call tomorrow morning, February 11, 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 $146.2 billion in assets under management as of January 31, 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 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 Year Ended

December 31,

 

September 30,

 

December 31,

 

December 31,

 

December 31,

2020

 

2020

 

2019

 

2020

 

2019

Revenue
Investment management fees

$

147,883

 

 

$

137,240

 

 

$

158,943

 

 

$

562,036

 

 

$

466,802

 

Fund administration and distribution fees

 

52,505

 

 

 

51,416

 

 

 

59,611

 

 

 

213,315

 

 

 

145,571

 

Total revenue

 

200,388

 

 

 

188,656

 

 

 

218,554

 

 

 

775,351

 

 

 

612,373

 

 

 

 

 

 

 

 

 

 

Expenses

 

 

 

 

 

 

 

 

 

Personnel compensation and benefits

 

53,107

 

 

 

47,375

 

 

 

54,210

 

 

 

197,158

 

 

 

179,809

 

Distribution and other asset-based expenses

 

40,074

 

 

 

39,123

 

 

 

57,471

 

 

 

175,687

 

 

 

146,622

 

General and administrative

 

12,845

 

 

 

13,196

 

 

 

14,740

 

 

 

51,218

 

 

 

46,568

 

Depreciation and amortization

 

4,229

 

 

 

3,936

 

 

 

5,620

 

 

 

16,381

 

 

 

23,873

 

Change in value of consideration payable for acquisition of business

 

9,500

 

 

 

2,000

 

 

 

19,900

 

 

 

11,300

 

 

 

19,886

 

Acquisition-related costs

 

52

 

 

 

1,148

 

 

 

367

 

 

 

1,108

 

 

 

22,317

 

Restructuring and integration costs

 

2,898

 

 

 

1,285

 

 

 

2,049

 

 

 

7,786

 

 

 

8,678

 

Total operating expenses

 

122,705

 

 

 

108,063

 

 

 

154,357

 

 

 

460,638

 

 

 

447,753

 

 

 

 

 

 

 

 

 

 

Income from operations

 

77,683

 

 

 

80,593

 

 

 

64,197

 

 

 

314,713

 

 

 

164,620

 

Operating margin

 

38.8

%

 

 

42.7

%

 

 

29.4

%

 

 

40.6

%

 

 

26.9

%

 

 

 

 

 

 

 

 

 

Other income (expense)

 

 

 

 

 

 

 

 

 

Interest income and other income (expense)

 

3,789

 

 

 

1,120

 

 

 

1,598

 

 

 

3,703

 

 

 

6,829

 

Interest expense and other financing costs

 

(7,700

)

 

 

(8,187

)

 

 

(14,901

)

 

 

(37,005

)

 

 

(40,901

)

Loss on debt extinguishment

 

(1,196

)

 

 

(758

)

 

 

(2,451

)

 

 

(2,871

)

 

 

(9,860

)

Total other income (expense), net

 

(5,107

)

 

 

(7,825

)

 

 

(15,754

)

 

 

(36,173

)

 

 

(43,932

)

 

 

 

 

 

 

 

 

 

Income before income taxes

 

72,576

 

 

 

72,768

 

 

 

48,443

 

 

 

278,540

 

 

 

120,688

 

 

 

 

 

 

 

 

 

 

Income tax expense

 

(17,681

)

 

 

(17,027

)

 

 

(10,854

)

 

 

(66,018

)

 

 

(28,197

)

 

 

 

 

 

 

 

 

 

Net income

$

54,895

 

 

$

55,741

 

 

$

37,589

 

 

$

212,522

 

 

$

92,491

 

 

 

 

 

 

 

 

 

 

Earnings per share of common stock

 

 

 

 

 

 

 

 

 

Basic

$

0.81

 

 

$

0.82

 

 

$

0.56

 

 

$

3.14

 

 

$

1.37

 

Diluted

 

0.75

 

 

 

0.76

 

 

 

0.51

 

 

 

2.88

 

 

 

1.26

 

 

 

 

 

 

 

 

 

 

Weighted average number of shares outstanding

 

 

 

 

 

 

 

 

 

Basic

 

67,489

 

 

 

67,743

 

 

 

67,633

 

 

 

67,710

 

 

 

67,616

 

Diluted

 

73,682

 

 

 

73,437

 

 

 

73,856

 

 

 

73,719

 

 

 

73,466

 

 

 

 

 

 

 

 

 

 

Dividends declared per share

$

0.07

 

 

$

0.06

 

 

$

0.05

 

 

$

0.23

 

 

$

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 Year Ended

December 31,

 

September 30,

 

December 31,

 

December 31,

 

December 31,

2020

 

2020

 

2019

 

2020

 

2019

Net income (GAAP)

$

54,895

 

 

$

55,741

 

 

$

37,589

 

 

$

212,522

 

 

$

92,491

 

Income tax expense

 

(17,681

)

 

 

(17,027

)

 

 

(10,854

)

 

 

(66,018

)

 

 

(28,197

)

Income before income taxes

$

72,576

 

 

$

72,768

 

 

$

48,443

 

 

$

278,540

 

 

$

120,688

 

Interest expense

 

7,432

 

 

 

7,497

 

 

 

14,852

 

 

 

33,724

 

 

 

40,706

 

Depreciation

 

1,107

 

 

 

814

 

 

 

1,130

 

 

 

3,551

 

 

 

2,995

 

Other business taxes

 

265

 

 

 

256

 

 

 

359

 

 

 

(2,556

)

 

 

1,484

 

Amortization of acquisition-related intangible assets

 

3,122

 

 

 

3,122

 

 

 

4,490

 

 

 

12,830

 

 

 

20,878

 

Stock-based compensation

 

3,774

 

 

 

2,806

 

 

 

5,724

 

 

 

15,020

 

 

 

14,849

 

Acquisition, restructuring and exit costs

 

13,904

 

 

 

6,996

 

 

 

24,947

 

 

 

29,463

 

 

 

56,751

 

Debt issuance costs

 

1,459

 

 

 

1,386

 

 

 

2,387

 

 

 

6,546

 

 

 

13,119

 

Losses (earnings) from equity method investments

 

193

 

 

 

 

 

 

 

 

 

193

 

 

 

(2,683

)

Adjusted EBITDA

$

103,832

 

 

$

95,645

 

 

$

102,332

 

 

$

377,311

 

 

$

268,787

 

Adjusted EBITDA margin

 

51.8

%

 

 

50.7

%

 

 

46.8

%

 

 

48.7

%

 

 

43.9

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income (GAAP)

$

54,895

 

 

$

55,741

 

 

$

37,589

 

 

$

212,522

 

 

$

92,491

 

Adjustment to reflect the operating performance of the Company

 

 

 

 

 

 

 

 

 

Other business taxes

 

265

 

 

 

256

 

 

 

359

 

 

 

(2,556

)

 

 

1,484

 

Amortization of acquisition-related intangible assets

 

3,122

 

 

 

3,122

 

 

 

4,490

 

 

 

12,830

 

 

 

20,878

 

Stock-based compensation

 

3,774

 

 

 

2,806

 

 

 

5,724

 

 

 

15,020

 

 

 

14,849

 

Acquisition, restructuring and exit costs

 

13,904

 

 

 

6,996

 

 

 

24,947

 

 

 

29,463

 

 

 

56,751

 

Debt issuance costs

 

1,459

 

 

 

1,386

 

 

 

2,387

 

 

 

6,546

 

 

 

13,119

 

Tax effect of above adjustments

 

(5,631

)

 

 

(3,642

)

 

 

(9,477

)

 

 

(15,326

)

 

 

(26,770

)

Adjusted net income

$

71,788

 

 

$

66,665

 

 

$

66,019

 

 

$

258,499

 

 

$

172,802

 

Adjusted net income per diluted share

$

0.97

 

 

$

0.91

 

 

$

0.89

 

 

$

3.51

 

 

$

2.35

 

 

 

 

 

 

 

 

 

 

Tax benefit of goodwill and acquired intangible assets

$

6,774

 

 

$

6,745

 

 

$

6,801

 

 

$

26,992

 

 

$

20,324

 

Tax benefit of goodwill and acquired intangible assets per diluted share

$

0.09

 

 

$

0.09

 

 

$

0.09

 

 

$

0.37

 

 

$

0.28

 

 

 

 

 

 

 

 

 

 

Adjusted net income with tax benefit

$

78,562

 

 

$

73,410

 

 

$

72,820

 

 

$

285,491

 

 

$

193,126

 

Adjusted net income with tax benefit per diluted share

$

1.07

 

 

$

1.00

 

 

$

0.99

 

 

$

3.87

 

 

$

2.63

 

 
 

Victory Capital Holdings, Inc. and Subsidiaries

Unaudited Consolidated Balance Sheets

(In thousands, except for shares)

 
December 31, 2020 December 31, 2019
Assets
Cash and cash equivalents

$

22,744

 

 

$

37,121

 

Investment management fees receivable

 

67,957

 

 

 

74,321

 

Fund administration and distribution fees receivable

 

16,971

 

 

 

19,313

 

Other receivables

 

3,254

 

 

 

1,459

 

Prepaid expenses

 

6,082

 

 

 

4,852

 

Investments in proprietary funds, at fair value

 

922

 

 

 

771

 

Deferred compensation plan investments, at fair value

 

22,571

 

 

 

18,305

 

Property and equipment, net

 

18,747

 

 

 

13,240

 

Goodwill

 

404,750

 

 

 

404,750

 

Other intangible assets, net

 

1,162,641

 

 

 

1,175,471

 

Other assets

 

4,090

 

 

 

3,706

 

Total assets

$

1,730,729

 

 

$

1,753,309

 

 

 

 

Liabilities and stockholders' equity

 

 

 

Accounts payable

$

1,358

 

 

$

271

 

Accrued compensation and benefits

 

47,278

 

 

 

54,842

 

Accrued expenses

 

40,786

 

 

 

88,932

 

Consideration payable for acquisition of business

 

92,500

 

 

 

118,700

 

Deferred compensation plan liability

 

22,571

 

 

 

18,305

 

Deferred tax liability, net

 

37,684

 

 

 

5,486

 

Other liabilities

 

12,002

 

 

 

4,363

 

Long-term debt(1)

 

769,009

 

 

 

924,539

 

Total liabilities

 

1,023,188

 

 

 

1,215,438

 

 

 

 

Stockholders' equity:

 

 

 

Class A common stock, $0.01 par value per share: 2020 - 400,000,000 shares authorized, 19,388,671 shares issued and 16,205,689 shares outstanding; 2019 - 400,000,000 shares authorized, 18,099,772 shares issued and 16,414,617 shares outstanding

 

194

 

 

 

181

 

Class B common stock, $0.01 par value per share: 2020 - 200,000,000 shares authorized, 54,766,934 shares issued and 51,336,177 shares outstanding; 2019 - 200,000,000 shares authorized, 53,937,394 shares issued and 51,281,512 shares outstanding

 

548

 

 

 

539

 

Additional paid-in capital

 

647,602

 

 

 

624,766

 

Class A treasury stock, at cost: 2020 - 3,182,982 shares; 2019 - 1,685,155 shares

 

(47,844

)

 

 

(21,524

)

Class B treasury stock, at cost: 2020 - 3,430,757 shares; 2019 - 2,655,882 shares

 

(47,080

)

 

 

(31,386

)

Accumulated other comprehensive loss

 

(7,460

)

 

 

 

Retained earnings (deficit)

 

161,581

 

 

 

(34,705

)

Total stockholders' equity

 

707,541

 

 

 

537,871

 

Total liabilities and stockholders' equity

$

1,730,729

 

 

$

1,753,309

 

 

1 Balances at December 31, 2020 and December 31, 2019 are shown net of unamortized loan discount and debt issuance costs in the amount of $19.2 million and $27.5 million, respectively. The gross amount of the debt outstanding was $788.2 million as of December 31, 2020 and $952.0 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

December 31,

 

September 30,

 

December 31,

 

September 30,

 

December 31,

2020

 

2020

 

2019

 

2020

 

2019

Beginning assets under management

$

132,662

 

 

$

129,070

 

 

$

145,832

 

 

3

%

 

-9

%

Gross client cash inflows

 

5,922

 

 

 

5,433

 

 

 

9,655

 

 

9

%

 

-39

%

Gross client cash outflows

 

(7,518

)

 

 

(8,408

)

 

 

(11,045

)

 

-11

%

 

-32

%

Net client cash flows

 

(1,596

)

 

 

(2,974

)

 

 

(1,390

)

 

-46

%

 

15

%

Market appreciation (depreciation)

 

16,207

 

 

 

6,566

 

 

 

7,389

 

 

147

%

 

119

%

Acquired assets / Net transfers

 

(33

)

 

 

 

 

 

 

 

N/A

 

 

N/A

 

Ending assets under management

 

147,241

 

 

 

132,662

 

 

 

151,832

 

 

11

%

 

-3

%

Average assets under management

 

139,552

 

 

 

133,096

 

 

 

147,867

 

 

5

%

 

-6

%

 

For the Year Ended

 

 

 

% Change from

December 31,

 

December 31,

 

 

 

December 31,

2020

 

2019

 

 

 

2019

Beginning assets under management

$

151,832

 

 

$

52,763

 

 

 

 

188

%

Gross client cash inflows

 

35,857

 

 

 

32,112

 

 

 

 

12

%

Gross client cash outflows

 

(55,209

)

 

 

(30,252

)

 

 

 

82

%

Net client cash flows

 

(19,352

)

 

 

1,860

 

 

 

 

N/A

 

Market appreciation (depreciation)

 

14,794

 

 

 

16,065

 

 

 

 

-8

%

Acquired assets / Net transfers

 

(33

)

 

 

81,143

 

 

 

 

N/A

 

Ending assets under management

 

147,241

 

 

 

151,832

 

 

 

 

-3

%

Average assets under management

 

136,422

 

 

 

102,719

 

 

 

 

33

%

 

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

December 31, 2020
Beginning assets under management

$

22,540

 

 

$

14,453

 

 

$

35,848

 

 

$

13,242

 

 

$

11,974

 

 

$

30,767

 

 

$

207

 

 

$

129,031

 

 

$

3,631

 

 

$

132,662

 

Gross client cash inflows

 

968

 

 

 

1,167

 

 

 

1,581

 

 

 

94

 

 

 

897

 

 

 

981

 

 

 

8

 

 

 

5,696

 

 

 

226

 

 

 

5,922

 

Gross client cash outflows

 

(1,939

)

 

 

(1,323

)

 

 

(1,626

)

 

 

(472

)

 

 

(674

)

 

 

(1,119

)

 

 

(9

)

 

 

(7,161

)

 

 

(356

)

 

 

(7,518

)

Net client cash flows

 

(971

)

 

 

(156

)

 

 

(45

)

 

 

(377

)

 

 

222

 

 

 

(138

)

 

 

(1

)

 

 

(1,466

)

 

 

(130

)

 

 

(1,596

)

Market appreciation (depreciation)

 

4,657

 

 

 

4,102

 

 

 

756

 

 

 

1,415

 

 

 

1,803

 

 

 

3,413

 

 

 

53

 

 

 

16,198

 

 

 

9

 

 

 

16,207

 

Acquired assets / Net transfers

 

5

 

 

 

(31

)

 

 

40

 

 

 

(51

)

 

 

(17

)

 

 

 

 

 

(3

)

 

 

(57

)

 

 

24

 

 

 

(33

)

Ending assets under management

$

26,230

 

 

$

18,368

 

 

$

36,599

 

 

$

14,230

 

 

$

13,982

 

 

$

34,041

 

 

$

257

 

 

$

143,706

 

 

$

3,534

 

 

$

147,241

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

September 30, 2020

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Beginning assets under management

$

22,483

 

 

$

14,083

 

 

$

35,622

 

 

$

12,524

 

 

$

11,130

 

 

$

29,305

 

 

$

195

 

 

$

125,343

 

 

$

3,727

 

 

$

129,070

 

Gross client cash inflows

 

760

 

 

 

1,061

 

 

 

1,470

 

 

 

147

 

 

 

463

 

 

 

1,155

 

 

 

11

 

 

 

5,067

 

 

 

367

 

 

 

5,433

 

Gross client cash outflows

 

(1,890

)

 

 

(1,175

)

 

 

(1,850

)

 

 

(753

)

 

 

(568

)

 

 

(1,694

)

 

 

(16

)

 

 

(7,944

)

 

 

(463

)

 

 

(8,408

)

Net client cash flows

 

(1,129

)

 

 

(114

)

 

 

(380

)

 

 

(606

)

 

 

(105

)

 

 

(539

)

 

 

(5

)

 

 

(2,878

)

 

 

(96

)

 

 

(2,974

)

Market appreciation (depreciation)

 

1,259

 

 

 

591

 

 

 

607

 

 

 

1,141

 

 

 

948

 

 

 

2,001

 

 

 

19

 

 

 

6,566

 

 

 

1

 

 

 

6,566

 

Acquired assets / Net transfers

 

(73

)

 

 

(107

)

 

 

(2

)

 

 

182

 

 

 

1

 

 

 

 

 

 

(1

)

 

 

 

 

 

 

 

 

 

Ending assets under management

$

22,540

 

 

$

14,453

 

 

$

35,848

 

 

$

13,242

 

 

$

11,974

 

 

$

30,767

 

 

$

207

 

 

$

129,031

 

 

$

3,631

 

 

$

132,662

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31, 2019

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Beginning assets under management

$

25,479

 

 

$

16,266

 

 

$

37,784

 

 

$

13,488

 

 

$

11,532

 

 

$

29,579

 

 

$

243

 

 

$

134,371

 

 

$

11,460

 

 

$

145,832

 

Gross client cash inflows

 

1,007

 

 

 

838

 

 

 

1,608

 

 

 

266

 

 

 

433

 

 

 

1,118

 

 

 

15

 

 

 

5,284

 

 

 

4,371

 

 

 

9,655

 

Gross client cash outflows

 

(1,642

)

 

 

(1,142

)

 

 

(1,684

)

 

 

(610

)

 

 

(491

)

 

 

(1,139

)

 

 

(52

)

 

 

(6,758

)

 

 

(4,286

)

 

 

(11,045

)

Net client cash flows

 

(635

)

 

 

(304

)

 

 

(76

)

 

 

(344

)

 

 

(58

)

 

 

(21

)

 

 

(37

)

 

 

(1,474

)

 

 

85

 

 

 

(1,390

)

Market appreciation (depreciation)

 

1,505

 

 

 

1,384

 

 

 

262

 

 

 

946

 

 

 

1,129

 

 

 

2,091

 

 

 

32

 

 

 

7,348

 

 

 

41

 

 

 

7,389

 

Acquired assets / Net transfers

 

(3

)

 

 

 

 

 

3

 

 

 

 

 

 

 

 

 

1

 

 

 

 

 

 

 

 

 

 

 

 

 

Ending assets under management

$

26,347

 

 

$

17,346

 

 

$

37,973

 

 

$

14,091

 

 

$

12,603

 

 

$

31,649

 

 

$

236

 

 

$

140,245

 

 

$

11,587

 

 

$

151,832

 

 

Victory Capital Holdings, Inc. and Subsidiaries

Assets Under Management by Asset Class

(unaudited; in millions)

For the Year Ended By Asset Class
Global /
U.S. Mid U.S. Small Fixed U.S. Large Non-U.S. Total Money Market /
Cap Equity Cap Equity Income Cap Equity Equity Solutions Other Long-term Short-term Total
December 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

 

4,144

 

 

 

4,458

 

 

 

6,499

 

 

 

695

 

 

 

2,467

 

 

 

4,898

 

 

 

40

 

 

 

23,201

 

 

 

12,656

 

 

 

35,857

 

Gross client cash outflows

 

(7,605

)

 

 

(5,201

)

 

 

(9,140

)

 

 

(2,631

)

 

 

(2,501

)

 

 

(6,974

)

 

 

(60

)

 

 

(34,112

)

 

 

(21,097

)

 

 

(55,209

)

Net client cash flows

 

(3,460

)

 

 

(742

)

 

 

(2,641

)

 

 

(1,936

)

 

 

(34

)

 

 

(2,076

)

 

 

(21

)

 

 

(10,911

)

 

 

(8,441

)

 

 

(19,352

)

Market appreciation (depreciation)

 

3,436

 

 

 

1,959

 

 

 

1,505

 

 

 

1,935

 

 

 

1,403

 

 

 

4,457

 

 

 

40

 

 

 

14,736

 

 

 

58

 

 

 

14,794

 

Acquired assets / Net transfers

 

(93

)

 

 

(195

)

 

 

(239

)

 

 

139

 

 

 

10

 

 

 

10

 

 

 

3

 

 

 

(364

)

 

 

331

 

 

 

(33

)

Ending assets under management

$

26,230

 

 

$

18,368

 

 

$

36,599

 

 

$

14,230

 

 

$

13,982

 

 

$

34,041

 

 

$

257

 

 

$

143,706

 

 

$

3,534

 

 

$

147,241

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31, 2019

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Beginning assets under management

$

20,019

 

 

$

12,948

 

 

$

6,836

 

 

$

3,759

 

 

$

4,610

 

 

$

3,767

 

 

$

823

 

 

$

52,763

 

 

$

 

 

$

52,763

 

Gross client cash inflows

 

5,663

 

 

 

3,338

 

 

 

6,489

 

 

 

480

 

 

 

1,457

 

 

 

5,696

 

 

 

171

 

 

 

23,293

 

 

 

8,820

 

 

 

32,112

 

Gross client cash outflows

 

(6,663

)

 

 

(4,194

)

 

 

(4,186

)

 

 

(1,419

)

 

 

(1,538

)

 

 

(3,079

)

 

 

(375

)

 

 

(21,453

)

 

 

(8,800

)

 

 

(30,252

)

Net client cash flows

 

(1,000

)

 

 

(856

)

 

 

2,303

 

 

 

(939

)

 

 

(81

)

 

 

2,617

 

 

 

(204

)

 

 

1,840

 

 

 

20

 

 

 

1,860

 

Market appreciation (depreciation)

 

5,511

 

 

 

3,728

 

 

 

1,158

 

 

 

1,263

 

 

 

1,609

 

 

 

2,739

 

 

 

(29

)

 

 

15,980

 

 

 

85

 

 

 

16,065

 

Acquired assets / Net transfers

 

1,817

 

 

 

1,526

 

 

 

27,677

 

 

 

10,007

 

 

 

6,465

 

 

 

22,525

 

 

 

(356

)

 

 

69,662

 

 

 

11,482

 

 

 

81,143

 

Ending assets under management

$

26,347

 

 

$

17,346

 

 

$

37,973

 

 

$

14,091

 

 

$

12,603

 

 

$

31,649

 

 

$

236

 

 

$

140,245

 

 

$

11,587

 

 

$

151,832

 

 
 

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
December 31, 2020
Beginning assets under management

$

102,921

 

 

$

3,488

 

 

$

26,254

 

 

$

132,662

 

Gross client cash inflows

 

4,555

 

 

 

129

 

 

 

1,238

 

 

 

5,922

 

Gross client cash outflows

 

(6,194

)

 

 

(98

)

 

 

(1,225

)

 

 

(7,518

)

Net client cash flows

 

(1,639

)

 

 

31

 

 

 

13

 

 

 

(1,596

)

Market appreciation (depreciation)

 

11,780

 

 

 

457

 

 

 

3,969

 

 

 

16,207

 

Acquired assets / Net transfers

 

(64

)

 

 

 

 

 

31

 

 

 

(33

)

Ending assets under management

$

112,998

 

 

$

3,976

 

 

$

30,267

 

 

$

147,241

 

 

 

 

 

 

 

 

September 30, 2020

 

 

 

 

 

 

 

Beginning assets under management

$

100,430

 

 

$

3,462

 

 

$

25,179

 

 

$

129,070

 

Gross client cash inflows

 

4,251

 

 

 

18

 

 

 

1,164

 

 

 

5,433

 

Gross client cash outflows

 

(6,847

)

 

 

(139

)

 

 

(1,421

)

 

 

(8,408

)

Net client cash flows

 

(2,596

)

 

 

(121

)

 

 

(257

)

 

 

(2,974

)

Market appreciation (depreciation)

 

5,151

 

 

 

147

 

 

 

1,269

 

 

 

6,566

 

Acquired assets / Net transfers

 

(63

)

 

 

 

 

 

63

 

 

 

 

Ending assets under management

$

102,921

 

 

$

3,488

 

 

$

26,254

 

 

$

132,662

 

 

 

 

 

 

 

 

December 31, 2019

 

 

 

 

 

 

 

Beginning assets under management

$

114,071

 

 

$

3,867

 

 

$

27,894

 

 

$

145,832

 

Gross client cash inflows

 

8,799

 

 

 

249

 

 

 

607

 

 

 

9,655

 

Gross client cash outflows

 

(9,835

)

 

 

(125

)

 

 

(1,085

)

 

 

(11,045

)

Net client cash flows

 

(1,036

)

 

 

124

 

 

 

(478

)

 

 

(1,390

)

Market appreciation (depreciation)

 

5,569

 

 

 

222

 

 

 

1,598

 

 

 

7,389

 

Acquired assets / Net transfers

 

 

 

 

 

 

 

 

 

 

 

Ending assets under management

$

118,605

 

 

$

4,213

 

 

$

29,014

 

 

$

151,832

 

 

(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 Year Ended By Vehicle
Separate
Accounts
Mutual and Other
Funds(1) ETFs(2) Vehicles(3) Total
December 31, 2020
Beginning assets under management

$

118,605

 

 

$

4,213

 

 

$

29,014

 

 

$

151,832

 

Gross client cash inflows

 

31,172

 

 

 

492

 

 

 

4,192

 

 

 

35,857

 

Gross client cash outflows

 

(48,398

)

 

 

(913

)

 

 

(5,898

)

 

 

(55,209

)

Net client cash flows

 

(17,226

)

 

 

(420

)