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Victory Capital Reports Record Fourth-Quarter 2021 Financial Results

Fourth Quarter 2021 Highlights

  • Total Assets Under Management (AUM) of $183.7 billion1
  • Long-term gross flows of $5.5 billion
  • Long-term net outflows of $3.4 billion
  • GAAP operating margin of 39.2%
  • Adjusted EBITDA margin of 50.2%2
  • GAAP net income of $0.94 per diluted share
  • Adjusted net income with tax benefit of $1.27 per diluted share2
  • Board authorizes 47% increase in regular quarterly cash dividend

Victory Capital Holdings, Inc. (NASDAQ: VCTR) (“Victory Capital” or “the Company”) today reported record financial results for the quarter and full-year ended December 31, 2021.

“We ended 2021 with the closing of our third strategic acquisition of the year—WestEnd Advisors,” said David Brown, Chairman and Chief Executive Officer. “This acquisition positions us as a leader in the fast-growing model portfolio segment of the market, which is benefiting from multiple long-term industry tailwinds.

“Earlier in the quarter, we launched our alternative investment platform with the closing of our New Energy Capital acquisition. This strategic acquisition provides us with a new growth vertical in private markets and enhances our ESG and impact investing capabilities. Similarly, our first-quarter acquisition of THB Asset Management (“THB”) also expanded our responsible investing products.

“We achieved record revenue and earnings for both the fourth quarter and full-year periods. Revenue in 2021 increased 15% from the prior year and adjusted earnings with tax benefit per diluted share rose 25%. Consistent profitable growth and strong profit margins are a testament to the benefits of our business model, which combines high-quality autonomous Investment Franchises with an efficient shared operating and distribution platform.

“Investment performance also remained excellent during the fourth quarter and full year. A majority of our strategies outperformed their benchmarks over the 1-, 3-, 5-, and 10-year periods, through year-end 2021.

 

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.

“This strong investment performance supported a 20% year-over-year increase in gross long-term sales, which reached a record $27.9 billion for the year. Long-term net flows also substantially improved year over year. Entering 2022, this improvement in net flows—combined with our recent acquisitions and prior investments we have made in the business—position us well as we look forward.

“In support of our overall corporate strategy, we will continue allocating the majority of our free cash flow to lowering debt and enhancing balance sheet flexibility to support future acquisition opportunities. Given the current strength of our business, our Board declared a 47% increase in our quarterly cash dividend to $0.25 per share. Moving forward, we intend to shift to an annual cycle for evaluating potential increases to our quarterly cash dividends in the first quarter of each year.

“As always, we continue to focus on our top priority, which is generating strong investment performance and serving our clients.”

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,

2021

 

2021

 

2020

 

2021

 

2020

Assets Under Management1
Ending $

183,654

 

$

159,889

 

$

147,241

 

$

183,654

 

$

147,241

 

Average

162,295

 

162,469

 

139,552

 

158,590

 

136,422

 

 
Long-term Flows2
Long-term Gross $

5,481

 

$

5,689

 

$

5,696

 

$

27,869

 

$

23,201

 

Long-term Net

(3,402

)

131

 

(1,466

)

(3,952

)

(10,911

)

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

84

 

$

92

 

$

226

 

$

386

 

$

12,656

 

Money Market / Short-term Net

(98

)

(113

)

(130

)

(528

)

(8,441

)

 
Total Flows
Total Gross $

5,565

 

$

5,781

 

$

5,922

 

$

28,254

 

$

35,857

 

Total Net

(3,500

)

18

 

(1,596

)

(4,480

)

(19,352

)

 
Consolidated Financial Results (GAAP)
Revenue $

229.1

 

$

226.3

 

$

200.4

 

$

890.3

 

$

775.4

 

Revenue realization (in bps)

56.0

 

55.3

 

57.1

 

56.1

 

56.8

 

Operating expenses

139.3

 

127.3

 

122.7

 

516.4

 

460.6

 

Income from operations

89.8

 

99.0

 

77.7

 

373.8

 

314.7

 

Operating margin

39.2

%

43.7

%

38.8

%

42.0

%

40.6

%

Net income

69.7

 

74.2

 

54.9

 

278.4

 

212.5

 

Earnings per diluted share $

0.94

 

$

1.00

 

$

0.75

 

$

3.75

 

$

2.88

 

Cash flow from operations

112.1

 

99.9

 

67.9

 

376.2

 

250.6

 

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

114.9

 

$

115.0

 

$

103.8

 

$

449.0

 

$

377.3

 

Adjusted EBITDA margin

50.2

%

50.8

%

51.8

%

50.4

%

48.7

%

Adjusted net income

86.4

 

85.6

 

71.8

 

329.0

 

258.5

 

Tax benefit of goodwill and acquired intangible assets

7.3

 

6.9

 

6.8

 

28.0

 

27.0

 

Adjusted net income with tax benefit

93.7

 

92.6

 

78.6

 

357.1

 

285.5

 

Adjusted net income with tax benefit per diluted share $

1.27

 

$

1.25

 

$

1.07

 

$

4.82

 

$

3.87

 

______________________________

1 Total AUM includes both discretionary and non-discretionary client assets.

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

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

AUM, Flows and Investment Performance

Victory Capital’s total AUM increased by 14.9%, or $23.8 billion, to $183.7 billion at December 31, 2021, compared with $159.9 billion at September 30, 2021. The increase was attributable to $20.0 billion of acquired assets associated with the WestEnd Advisors (“WestEnd”) and New Energy Capital (“NEC”) acquisitions that closed on December 31, 2021 and November 1, 2021, respectively. The acquired assets associated with the WestEnd acquisition had no economic impact on operations and no effect on asset flows, average assets, revenues, or earnings in the fourth-quarter or full-year periods ended December 31, 2021.

Total gross flows were $5.6 billion in the fourth quarter and $28.3 billion for the year. Long-term AUM increased by 15.2%, or $23.8 billion, to $180.6 billion at December 31, 2021, compared with $156.7 billion at September 30, 2021. For the fourth quarter, the Company reported long-term gross flows of $5.5 billion and net long-term outflows of $3.4 billion. For the year-to-date period, the Company reported long-term gross flows of $27.9 billion and net long-term outflows of $4.0 billion.

At December 31, 2021, Victory Capital offered 130 investment strategies through its 12 autonomous Investment Franchises and Solutions Platform. The table below presents outperformance against benchmarks by AUM as of December 31, 2021.

Percentage of AUM Outperforming Benchmark

Trailing

 

Trailing

 

Trailing

 

Trailing

1-Year

 

3-Years

 

5-Years

 

10-Years

64%

 

77%

 

82%

 

77%

Fourth Quarter 2021 Compared with Third Quarter 2021

Revenue increased 1.3% to $229.1 million, in the fourth quarter, compared with $226.3 million in the third quarter, primarily due to a higher average fee rate realization, partially offset by lower average AUM. GAAP operating margin contracted 450 basis points in the fourth quarter to 39.2%, down from 43.7% in the third quarter. The decline was driven by one-time acquisition-related costs related to transactions that closed in the fourth quarter. In addition, higher intangible asset amortization and transaction incentive compensation associated with the NEC acquisition also contributed to the quarter-over-quarter GAAP margin compression. This resulted in fourth-quarter GAAP net income decreasing 6.0% to $69.7 million, down from $74.2 million in the prior quarter. On a per-share basis, GAAP net income decreased 6.0% to $0.94 per diluted share in the fourth quarter, versus $1.00 per diluted share in the third quarter.

Adjusted net income with tax benefit increased 1.2% to $93.7 million in the fourth quarter, up from $92.6 million in the third quarter. On a per-share basis, adjusted net income with tax benefit increased 1.6% to $1.27 per diluted share in the fourth quarter, from $1.25 per diluted share in the prior quarter. Adjusted EBITDA was $114.9 million in the fourth quarter, compared to $115.0 million in the third quarter. Adjusted EBITDA margin contracted 60 basis points in the fourth quarter of 2021 to 50.2%, compared with 50.8% in the prior quarter.

Fourth Quarter 2021 Compared with Fourth Quarter 2020

Revenue for the three months ended December 31, 2021, rose 14.3% to $229.1 million, compared with $200.4 million in the same quarter of 2020. The increase was primarily due to higher average AUM.

Operating expenses increased 13.5% to $139.3 million, compared with $122.7 million in last year’s fourth quarter primarily due to the combination of an increase in acquisition-related costs as a result of the WestEnd and NEC acquisitions as well as an increase in variable operating expenses that rose as a result of higher average AUM and earnings as well as continued investments to support future growth. GAAP operating margin expanded 40 basis points to 39.2% in the fourth quarter, from 38.8% in the same quarter of 2020. GAAP net income rose 27.0% to $69.7 million, or $0.94 per diluted share, in the fourth quarter compared with $54.9 million, or $0.75 per diluted share, in the same quarter of 2020.

Adjusted net income with tax benefit advanced 19.2% to $93.7 million, or $1.27 per diluted share, in the fourth quarter, compared with $78.6 million, or $1.07 per diluted share in the same quarter last year. Adjusted EBITDA rose 10.7% to $114.9 million in the fourth quarter, compared with $103.8 million in last year’s same quarter. Year-over-year, adjusted EBITDA margin contracted 160 basis points to 50.2% in the fourth quarter of 2021, compared with 51.8% in the same quarter last year.

Year Ended December 31, 2021 Compared with Year Ended December 31, 2020

Revenue for the year ended December 31, 2021, rose 14.8% to $890.3 million, compared with $775.4 million in the same period of 2020. The increase was primarily due to higher average AUM.

Operating expenses increased 12.1% to $516.4 million for year ended December 31, 2021, compared with $460.6 million in 2020 primarily due to a combination of an increase in variable operating expenses that rose as a result of higher average AUM and earnings as well as continued investments to support future growth and an increase in acquisition-related costs as a result of the WestEnd, NEC and THB acquisitions that closed in 2021. GAAP operating margin was 42.0% for the year ended December 31, 2021, a 140 basis point increase from the 40.6% recorded in 2020. GAAP net income rose 31.0% to $278.4 million, or $3.75 per diluted share, for the year ended 2021 compared with $212.5 million, or $2.88 per diluted share, in the prior year.

Adjusted net income with tax benefit advanced 25.1% to $357.1 million, or $4.82 per diluted share, for the year ended December 31, 2021, compared with $285.5 million, or $3.87 per diluted share in 2020. For the year ended December 31, 2021, adjusted EBITDA rose 19.0% to $449.0 million, compared with $377.3 million in 2020. Year-over-year, adjusted EBITDA margin expanded 170 basis points to 50.4% for the year ended December 31, 2021, compared with 48.7% in the previous year.

Balance Sheet / Capital Management

On December 31, 2021, the Company entered into the Third Amendment to the Credit Agreement and obtained incremental term loans (the “2021 Incremental Term Loans”) in an aggregate principal amount of $505 million and used the proceeds to fund the acquisition of 100% of the equity interests of WestEnd and to pay fees and expenses incurred in connection therewith. The 2021 Incremental Term Loans will mature in 2028 and will bear interest at an annual rate equal to, at the option of the Company, either LIBOR (adjusted for reserves and subject to a 50 basis point floor) plus a margin of 2.25% or an alternate base rate plus a margin of 1.25%. The 2021 Incremental Term Loans will amortize at a rate of 1.00% per annum.

Total debt outstanding as of December 31, 2021 was $1,151 million and consisted of an existing term loan balance of $646 million and the 2021 Incremental Term Loans balance of $505 million.

Subsequent to December 31, 2021, the Company reduced outstanding debt on the 2021 Incremental Term Loans by $55.0 million.

During the fourth quarter, the Company repurchased 122 thousand shares under the 10b-5 plan.

Today, the Company’s Board of Directors declared another increase in our quarterly cash dividend, which was raised to $0.25 per share, a 47% increase over the dividend declared in the prior quarter. The dividend is payable on March 25, 2022, to shareholders of record on March 10, 2022. In the future, potential increases to the Company’s cash dividend rate will be assessed annually.

The December 31, 2021 balance sheet is pending the completion of the provisional WestEnd purchase price allocation and will be included in the 2021 Form 10-K.

Conference Call, Webcast and Slide Presentation

The Company will host a conference call tomorrow morning, February 11, 2022, 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 $183.7 billion in assets under management as of December 31, 2021. It was ranked ninth on Fortune’s list of the 100 Fastest Growing Companies for 2021. The Company operates a next-generation business model combining boutique investment qualities with the benefits of a fully integrated, centralized operating and distribution platform.

Victory Capital provides specialized investment strategies to institutions, intermediaries, retirement platforms and individual investors. With 12 autonomous Investment Franchises and a Solutions Platform, Victory Capital offers a wide array of investment products, including mutual funds, ETFs, separately managed accounts, alternative investments, third-party ETF model strategies, collective investment trusts, private funds, and a 529 Education Savings Plan.

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

FORWARD-LOOKING STATEMENTS

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

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

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

©2021 Fortune Media IP Limited All rights reserved. Fortune is a registered trademark of Fortune Media IP Limited and is used under license. Fortune and Fortune Media IP Limited are not affiliated with, and do not endorse products or services of, Victory Capital Management, Inc.

Fortune’s annual list ranks the top performing, publicly traded companies in revenues, profits and stock returns over the three-year period ended April 30, 2021.

 
 

Victory Capital Holdings, Inc. and Subsidiaries

Unaudited Consolidated Statements of Operations

(in thousands except per share data and percentages)

 

 

 

 

 

 

 

For the Three Months Ended

 

For the Year Ended

 

 

December 31,

 

September 30,

 

December 31,

 

December 31,

 

December 31,

 

 

2021

 

2021

 

2020

 

2021

 

2020

Revenue
Investment management fees $

174,867

 

$

171,355

 

$

147,883

 

$

674,539

 

$

562,036

 

Fund administration and distribution fees

54,255

 

54,935

 

52,505

 

215,726

 

213,315

 

Total revenue

229,122

 

226,290

 

200,388

 

890,265

 

775,351

 

 
Expenses
Personnel compensation and benefits

62,528

 

55,837

 

53,107

 

234,833

 

197,158

 

Distribution and other asset-based expenses

45,200

 

44,859

 

40,074

 

176,385

 

175,687

 

General and administrative

12,904

 

13,795

 

12,845

 

53,722

 

51,218

 

Depreciation and amortization

5,384

 

4,377

 

4,229

 

18,840

 

16,381

 

Change in value of consideration payable for acquisition of business

3,200

 

2,400

 

9,500

 

13,800

 

11,300

 

Acquisition-related costs

9,997

 

6,007

 

52

 

16,262

 

1,108

 

Restructuring and integration costs

85

 

18

 

2,898

 

2,578

 

7,786

 

Total operating expenses

139,298

 

127,293

 

122,705

 

516,420

 

460,638

 

 
Income from operations

89,824

 

98,997

 

77,683

 

373,845

 

314,713

 

Operating margin

39.2

%

43.7

%

38.8

%

42.0

%

40.6

%

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

1,498

 

(119

)

3,789

 

6,045

 

3,703

 

Interest expense and other financing costs

(5,799

)

(5,853

)

(7,700

)

(24,652

)

(37,005

)

Loss on debt extinguishment

 

(669

)

(1,196

)

(4,596

)

(2,871

)

Total other expense, net

(4,301

)

(6,641

)

(5,107

)

(23,203

)

(36,173

)

 
Income before income taxes

85,523

 

92,356

 

72,576

 

350,642

 

278,540

 

 
Income tax expense

(15,781

)

(18,181

)

(17,681

)

(72,253

)

(66,018

)

 
Net income $

69,742

 

$

74,175

 

$

54,895

 

$

278,389

 

$

212,522

 

 
Earnings per share of common stock
Basic $

1.02

 

$

1.09

 

$

0.81

 

$

4.10

 

$

3.14

 

Diluted

0.94

 

1.00

 

0.75

 

3.75

 

2.88

 

 
Weighted average number of shares outstanding
Basic

68,378

 

67,980

 

67,489

 

67,976

 

67,710

 

Diluted

73,973

 

74,053

 

73,682

 

74,151

 

73,719

 

 
Dividends declared per share $

0.17

 

$

0.15

 

$

0.07

 

$

0.53

 

$

0.23

 

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 Year Ended

 

 

December 31,

 

September 30,

 

December 31,

 

December 31,

 

December 31,

 

 

2021

 

2021

 

2020

 

2021

 

2020

Net income (GAAP) $

69,742

 

$

74,175

 

$

54,895

 

$

278,389

 

$

212,522

 

Income tax expense

(15,781

)

(18,181

)

(17,681

)

(72,253

)

(66,018

)

Income before income taxes $

85,523

 

$

92,356

 

$

72,576

 

$

350,642

 

$

278,540

 

Interest expense

5,328

 

5,561

 

7,432

 

24,285

 

33,724

 

Depreciation

1,746

 

1,693

 

1,107

 

6,209

 

3,551

 

Other business taxes

383

 

376

 

265

 

1,657

 

(2,556

)

Amortization of acquisition-related intangible assets

3,638

 

2,684

 

3,122

 

12,631

 

12,830

 

Stock-based compensation

2,499

 

2,851

 

3,774

 

13,110

 

15,020

 

Acquisition, restructuring and exit costs

15,188

 

8,425

 

13,904

 

34,546

 

29,463

 

Debt issuance costs

532

 

960

 

1,459

 

5,589

 

6,546

 

Losses from equity method investments

104

 

70

 

193

 

331

 

193

 

Adjusted EBITDA $

114,941

 

$

114,976

 

$

103,832

 

$

449,000

 

$

377,311

 

Adjusted EBITDA margin

50.2

%

50.8

%

51.8

%

50.4

%

48.7

%

 
 
Net income (GAAP) $

69,742

 

$

74,175

 

$

54,895

 

$

278,389

 

$

212,522

 

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

383

 

376

 

265

 

1,657

 

(2,556

)

Amortization of acquisition-related intangible assets

3,638

 

2,684

 

3,122

 

12,631

 

12,830

 

Stock-based compensation

2,499

 

2,851

 

3,774

 

13,110

 

15,020

 

Acquisition, restructuring and exit costs

15,188

 

8,425

 

13,904

 

34,546

 

29,463

 

Debt issuance costs

532

 

960

 

1,459

 

5,589

 

6,546

 

Tax effect of above adjustments

(5,560

)

(3,824

)

(5,631

)

(16,883

)

(15,326

)

Adjusted net income $

86,422

 

$

85,647

 

$

71,788

 

$

329,039

 

$

258,499

 

Adjusted net income per diluted share $

1.17

 

$

1.16

 

$

0.97

 

$

4.44

 

$

3.51

 

 
Tax benefit of goodwill and acquired intangible assets $

7,258

 

$

6,918

 

$

6,774

 

$

28,012

 

$

26,992

 

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

0.10

 

$

0.09

 

$

0.09

 

$

0.38

 

$

0.37

 

 
Adjusted net income with tax benefit $

93,680

 

$

92,565

 

$

78,562

 

$

357,051

 

$

285,491

 

Adjusted net income with tax benefit per diluted share $

1.27

 

$

1.25

 

$

1.07

 

$

4.82

 

$

3.87

 

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

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,

 

 

2021

 

2021

 

2020

 

2021

 

2020

Beginning assets under management $

159,889

 

$

161,936

 

$

132,662

 

-1

%

21

%

Gross client cash inflows

5,565

 

5,781

 

5,922

 

-4

%

-6

%

Gross client cash outflows

(9,065

)

(5,763

)

(7,518

)

57

%

21

%

Net client cash flows

(3,500

)

18

 

(1,596

)

N/A

 

119

%

Market appreciation (depreciation)

7,224

 

(2,062

)

16,207

 

N/A

 

-55

%

Acquired assets / Net transfers1

20,042

 

(3

)

(33

)

N/A

 

N/A

 

Ending assets under management

183,654

 

159,889

 

147,241

 

15

%

25

%

Average assets under management

162,295

 

162,469

 

139,552

 

0

%

16

%

 

For the Year Ended

 

 

 

 

% Change from

December 31,

 

December 31,

 

 

 

 

December 31,

2021

 

2020

 

 

 

 

2020

Beginning assets under management $

147,241

 

$

151,832

 

-3

%

Gross client cash inflows

28,254

 

35,857

 

-21

%

Gross client cash outflows

(32,734

)

(55,209

)

-41

%

Net client cash flows

(4,480

)

(19,352

)

-77

%

Market appreciation (depreciation)

20,583

 

14,794

 

39

%

Acquired assets / Net transfers2

20,310

 

(33

)

N/A

 

Ending assets under management

183,654

 

147,241

 

25

%

Average assets under management

158,590

 

136,422

 

16

%

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

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

Victory Capital Holdings, Inc. and Subsidiaries

Assets Under Management by Asset Class

(unaudited; in millions)

 
For the Three Months Ended By Asset Class
Global /

U.S. Mid

 

U.S. Small

 

Fixed

 

U.S. Large

 

Non-U.S.

 

 

 

 

Alternative

 

 

 

 

Total

 

Money Market /

 

 

 

Cap Equity

 

Cap Equity

 

Income

 

Cap Equity

 

Equity

 

Solutions

 

Investments

 

Other

 

Long-term

 

Short-term

 

Total

December 31, 2021
Beginning assets under management $

29,798

 

$

19,863

 

$

36,897

 

$

14,803

 

$

15,570

 

$

39,376

 

$

 

$

416

 

$

156,722

 

$

3,166

 

$

159,889

 

Gross client cash inflows

1,564

 

762

 

1,381

 

96

 

496

 

1,138

 

 

44

 

5,481

 

84

 

5,565

 

Gross client cash outflows

(2,617

)

(1,205

)

(3,072

)

(367

)

(549

)

(1,038

)

 

(35

)

(8,883

)

(182

)

(9,065

)

Net client cash flows

(1,053

)

(443

)

(1,691

)

(271

)

(53

)

100

 

 

9

 

(3,402

)

(98

)

(3,500

)

Market appreciation (depreciation)

1,840

 

942

 

133

 

1,025

 

277

 

2,974

 

 

22

 

7,213

 

10

 

7,224

 

Acquired assets / Net transfers1

(8

)

(269

)

(219

)

209

 

(37

)

19,553

 

795

(4

)

20,020

 

22

 

20,042

 

Ending assets under management $

30,578

 

$

20,094

 

$

35,119

 

$

15,766

 

$

15,757

 

$

62,003

 

$

795

 

$

442

 

$

180,554

 

$

3,100

 

$

183,654

 

 
September 30, 2021
Beginning assets under management $

30,340

 

$

20,617

 

$

36,410

 

$

15,284

 

$

15,931

 

$

39,640

 

$

 

$

460

 

$

158,682

 

$

3,254

 

$

161,936

 

Gross client cash inflows

1,217

 

1,491

 

1,588

 

79

 

514

 

774

 

 

26

 

5,689

 

92

 

5,781

 

Gross client cash outflows

(1,332

)

(1,315

)

(1,262

)

(359

)

(481

)

(734

)

 

(75

)

(5,558

)

(205

)

(5,763

)

Net client cash flows

(114

)

175

 

326

 

(281

)

34

 

41

 

 

(49

)

131

 

(113

)

18

 

Market appreciation (depreciation)

(449

)

(898

)

57

 

(115

)

(374

)

(289

)

 

6

 

(2,061

)

(1

)

(2,062

)

Acquired assets / Net transfers

21

 

(32

)

103

 

(85

)

(21

)

(15

)

 

(1

)

(30

)

27

 

(3

)

Ending assets under management $

29,798

 

$

19,863

 

$

36,897

 

$

14,803

 

$

15,570

 

$

39,376

 

$

 

$

416

 

$

156,722

 

$

3,166

 

$

159,889

 

 
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

 

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

Victory Capital Holdings, Inc. and Subsidiaries

Assets Under Management by Asset Class

(unaudited; in millions)

 
For the Year Ended By Asset Class

 

 

 

 

 

 

 

 

 

 

 

 

Global /

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Mid

 

U.S. Small

 

Fixed

 

U.S. Large

 

Non-U.S.

 

 

 

 

Alternative

 

 

 

 

Total

 

Money Market /

 

 

 

Cap Equity

 

Cap Equity

 

Income

 

Cap Equity

 

Equity

 

Solutions

 

Investments

 

Other

 

Long-term

 

Short-term

 

Total

December 31, 2021
Beginning assets under management $

26,230

 

$

18,368

 

$

36,599

 

$

14,230

 

$

13,982

 

$

34,041

 

$

 

$

257

 

$

143,706

 

$

3,534

 

$

147,241

 

Gross client cash inflows

5,935

 

4,562

 

6,743

 

364

 

2,674

 

7,426

 

 

165

 

27,869

 

386

 

28,254

 

Gross client cash outflows

(7,742

)

(5,644

)

(8,985

)

(1,565

)

(2,218

)

(5,501

)

 

(165

)

(31,820

)

(914

)

(32,734

)

Net client cash flows

(1,807

)

(1,082

)

(2,242

)

(1,202

)

456

 

1,925

 

 

 

(3,952

)

(528

)

(4,480

)

Market appreciation (depreciation)

6,169

 

2,685

 

649

 

2,766

 

1,532

 

6,625

 

 

146

 

20,573

 

10

 

20,583

 

Acquired assets / Net transfers1

(14

)

122

 

114

 

(28

)

(214

)

19,412

 

795

39

 

20,226

 

84

 

20,310

 

Ending assets under management $

30,578

 

$

20,094

 

$

35,119

 

$

15,766

 

$

15,757

 

$

62,003

 

$

795

 

$

442

 

$

180,554

 

$

3,100

 

$

183,654

 

 
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

 

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

Victory Capital Holdings, Inc. and Subsidiaries

Assets Under Management by Vehicle

(unaudited; in millions)

 
For the Three Months Ended

By Vehicle

 

 

 

 

 

 

Separate

 

 

 

 

 

 

 

 

 

Accounts

 

 

 

Mutual

 

 

 

 

and Other

 

 

 

Funds1

 

ETFs2

 

Vehicles3

 

Total

December 31, 2021
Beginning assets under management $

121,367

 

$

4,371

 

$

34,151

 

$

159,889

 

Gross client cash inflows

4,289

 

260

 

1,016

 

5,565

 

Gross client cash outflows

(6,925

)

(65

)

(2,075

)

(9,065

)

Net client cash flows

(2,635

)

195

 

(1,059

)

(3,500

)

Market appreciation (depreciation)

5,426

 

308

 

1,489

 

7,224

 

Acquired assets / Net transfers4

(15

)

(3

)

20,060

 

20,042

 

Ending assets under management $

124,142

 

$

4,871

 

$

54,641

 

$

183,654

 

 
September 30, 2021
Beginning assets under management $

123,164

 

$

4,354

 

$

34,418

 

$

161,936

 

Gross client cash inflows

4,256

 

109

 

1,416

 

5,781

 

Gross client cash outflows

(4,751

)

(23

)

(989

)

(5,763

)

Net client cash flows

(495

)

86

 

427

 

18

 

Market appreciation (depreciation)

(1,242

)

(41

)

(779

)

(2,062

)

Acquired assets / Net transfers

(60

)

(28

)

85

 

(3

)

Ending assets under management $

121,367

 

$

4,371

 

$

34,151

 

$

159,889

 

 
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

 

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

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

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

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

Victory Capital Holdings, Inc. and Subsidiaries

Assets Under Management by Vehicle

(unaudited; in millions)

 
For the Year Ended

By Vehicle

 

 

 

 

 

 

Separate

 

 

 

 

 

 

 

 

 

Accounts

 

 

 

Mutual

 

 

 

 

and Other

 

 

 

Funds1

 

ETFs2

 

Vehicles3

 

Total

December 31, 2021
Beginning assets under management $

112,998

 

$

3,976

 

$

30,267

 

$

147,241

 

Gross client cash inflows

19,070

 

849

 

8,335

 

28,254

 

Gross client cash outflows

(23,345

)

(375

)

(9,014

)

(32,734

)

Net client cash flows

(4,275

)

474

 

(678

)

(4,480

)

Market appreciation (depreciation)

15,638

 

828

 

4,117

 

20,583

 

Acquired assets / Net transfers4

(219

)

(407

)

20,936

 

20,310

 

Ending assets under management $

124,142

 

$

4,871

 

$

54,641

 

$

183,654

 

 
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

)

(1,705

)

(19,352

)

Market appreciation (depreciation)

11,746

 

183

 

2,864

 

14,794

 

Acquired assets / Net transfers

(127

)

 

94

 

(33

)

Ending assets under management $

112,998

 

$

3,976

 

$

30,267

 

$

147,241

 

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

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

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

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

Information Regarding Non-GAAP Financial Measures

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

Adjusted EBITDA

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

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

Adjusted Net Income

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

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

Tax Benefit of Goodwill and Acquired Intangible Assets

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

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