February 29, 2024

Victory Capital Reports Strong Fourth-Quarter and Full-Year 2023 Results

Fourth-Quarter 2023 Highlights

  • Total Assets Under Management (AUM) of $166.6 billion1
  • Long-term gross flows of $6.6 billion in the quarter
  • Long-term net flows of ($1.1) billion in the quarter
  • GAAP operating margin of 41.9%
  • Adjusted EBITDA margin of 52.3% in the quarter2
  • GAAP net income of $0.82 per diluted share
  • Adjusted net income with tax benefit of $1.15 per diluted share2
  • Board increased regular quarterly cash dividend by 5% to $0.335

Contacts

Investors:

Matthew Dennis, CFA

Chief of Staff

Director, Investor Relations

216-898-2412

[email protected]

Media:

Jessica Davila

Director, Global Communications

210-694-9693

[email protected]

Victory Capital Holdings, Inc. (NASDAQ: VCTR) (“Victory Capital” or “the Company”) today reported financial results for the quarter and year ended December 31, 2023.

“We made significant progress in our strategic growth initiatives during 2023 and continued to validate the effectiveness and resiliency of our unique operating platform,” said David Brown, Chairman and Chief Executive Officer. “We invested in our business via the launching of several new products, enhancing our investment capabilities in several areas, and expanding our technology resources across the platform. Concurrently, we also expanded our profit margin with adjusted EBITDA margin rising 130 basis points to 50.9% for the year.

“In the final quarter of 2023, both long-term gross and net flows improved to their best levels in more than a year, which is encouraging as we begin 2024.

“Our Franchises continued to deliver excellent investment performance for clients. At year end, the percentage of our AUM outperforming benchmarks over the respective 3-, 5-, and 10-year periods was 62%, 84%, and 79%. In addition, 70% of our AUM in mutual funds and ETFs were rated four or five stars overall by Morningstar.

“During the fourth quarter, we repurchased an additional 1.8 million shares, increasing the capital returned to shareholders from repurchases during the year to $158 million. Combined with cash dividends, we returned $243 million to shareholders in 2023, an increase of 21% over the previous year, and the most we have ever returned to our shareholders in our Company’s history.

“Our M&A diligence activities have progressed, and entering the new year we are optimistic about the prospects for executing on a transaction aligned with our strategic growth objectives.

“As always, we continue to focus on serving our clients, which is our top priority.”

1

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

2

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

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

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

For the Three Months Ended

 

For the Year Ended

December 31,

 

September 30,

 

December 31,

 

December 31,

 

December 31,

2023

 

2023

 

2022

 

2023

 

2022

Assets Under Management1
Ending$

166,611

 

$

153,506

 

$

152,952

 

$

166,611

 

$

152,952

 

Average

156,734

 

161,147

 

154,632

 

158,268

 

164,025

 

 
Long-term Flows2
Long-term Gross$

6,557

 

$

5,255

 

$

6,502

 

$

23,251

 

$

33,313

 

Long-term Net

(1,134

)

(1,700

)

(4,405

)

(6,176

)

(2,545

)

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

188

 

$

193

 

$

179

 

$

853

 

$

621

 

Money Market / Short-term Net

(47

)

(19

)

(62

)

(391

)

(187

)

 
Total Flows
Total Gross$

6,745

 

$

5,449

 

$

6,681

 

$

24,104

 

$

33,934

 

Total Net

(1,181

)

(1,719

)

(4,466

)

(6,567

)

(2,732

)

 
Consolidated Financial Results (GAAP)
Revenue$

205.8

 

$

209.7

 

$

201.5

 

$

821.0

 

$

854.8

 

Revenue realization (in bps)

52.1

 

51.6

 

51.7

 

51.9

 

52.1

 

Operating expenses

119.5

 

129.6

 

121.9

 

492.6

 

455.7

 

Income from operations

86.3

 

80.0

 

79.6

 

328.5

 

399.1

 

Operating margin

41.9

%

38.2

%

39.5

%

40.0

%

46.7

%

Net income

55.2

 

52.0

 

52.3

 

213.2

 

275.5

 

Earnings per diluted share$

0.82

 

$

0.77

 

$

0.74

 

$

3.12

 

$

3.81

 

Cash flow from operations

97.1

 

91.6

 

67.1

 

330.3

 

335.2

 

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

107.6

 

$

107.2

 

$

100.1

 

$

418.0

 

$

424.2

 

Adjusted EBITDA margin

52.3

%

51.1

%

49.7

%

50.9

%

49.6

%

Adjusted net income

67.4

 

70.3

 

65.0

 

269.7

 

293.8

 

Tax benefit of goodwill and acquired intangible assets

9.7

 

9.5

 

9.5

 

38.3

 

37.5

 

Adjusted net income with tax benefit

77.0

 

79.8

 

74.5

 

307.9

 

331.2

 

Adjusted net income with tax benefit per diluted share$

1.15

 

$

1.18

 

$

1.05

 

$

4.51

 

$

4.58

 

_________________

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 8.5%, or $13.1 billion, to $166.6 billion at December 31, 2023, compared with $153.5 billion at September 30, 2023. The increase was attributable to $14.3 billion of positive market action partially offset by $1.2 billion in negative net flows.

Total gross flows were $6.7 billion in the fourth quarter and $24.1 billion for the year. Long-term AUM increased by 8.7%, or $13.0 billion, to $163.3 billion at December 31, 2023, compared with $150.3 billion at September 30, 2023. For the fourth quarter, the Company reported long-term gross flows of $6.6 billion and net long-term outflows of $1.1 billion. For the year-to-date period, the Company reported long-term gross flows of $23.3 billion and net long-term outflows of $6.2 billion.

At December 31, 2023, Victory Capital offered 118 investment strategies through its 11 autonomous Investment Franchises and Solutions Platform. The table below presents outperformance against benchmarks by AUM as of December 31, 2023.

Percentage of AUM Outperforming Benchmark

Trailing

 

Trailing

 

Trailing

 

Trailing

1-Year

 

3-Years

 

5-Years

 

10-Years

49%

 

62%

 

84%

 

79%

Fourth Quarter 2023 Compared with Third Quarter 2023

Revenue decreased 1.9% to $205.8 million, in the fourth quarter, compared with $209.7 million in the third quarter, primarily due to lower average AUM, which decreased 2.7% from $161.1 billion at September 30, 2023 to $156.7 billion at December 31, 2023. GAAP operating margin expanded 370 basis points in the fourth quarter to 41.9%, up from 38.2% in the third quarter. The increase was primarily due to the combination of a non-cash $6.3 million difference in amounts recorded to the change in the fair value of consideration payable for acquisitions and a decrease in depreciation and amortization expense as a result of a write-down of an intangible asset in the third quarter. Reflecting these lower non-cash expenses, fourth-quarter GAAP net income increased 6.2% to $55.2 million, up from $52.0 million in the prior quarter. On a per-share basis, GAAP net income increased 6.5% to $0.82 per diluted share in the fourth quarter, versus $0.77 per diluted share in the third quarter.

Adjusted net income with tax benefit decreased 3.5% to $77.0 million in the fourth quarter, down from $79.8 million in the third quarter. On a per-share basis, adjusted net income with tax benefit decreased 2.5% to $1.15 per diluted share in the fourth quarter, from $1.18 per diluted share in the prior quarter. Adjusted EBITDA was $107.6 million in the fourth quarter, compared to $107.2 million in the third quarter. Adjusted EBITDA margin expanded 120 basis points in the fourth quarter of 2023 to 52.3%, compared with 51.1% in the prior quarter.

Fourth Quarter 2023 Compared with Fourth Quarter 2022

Revenue for the three months ended December 31, 2023 increased 2.1% to $205.8 million, compared with $201.5 million in the same quarter of 2022. The increase was primarily due to higher average AUM, which increased 1.4% to $156.7 billion, compared with $154.6 billion in the same quarter last year. Also contributing was a slight increase in revenue realization due to a change in asset mix.

Operating expenses decreased 2.0% to $119.5 million, compared with $121.9 million in last year’s fourth quarter primarily due to a $4.9 million decrease in personnel compensation and benefits and a $3.2 million decrease in depreciation and amortization expense partially offset by a $4.0 million increase in non-cash difference in amounts recorded to the change in the fair value of consideration payable for acquisitions as well as a $3.3 million increase in general and administrative expense due to unwind costs associated with the monetization of the Company’s Swap. GAAP operating margin expanded 240 basis points to 41.9% in the fourth quarter, from 39.5% in the same quarter of 2022. GAAP net income increased 5.6% to $55.2 million, or $0.82 per diluted share, in the fourth quarter compared with $52.3 million, or $0.74 per diluted share, in the same quarter of 2022.

Adjusted net income with tax benefit increased 3.4% to $77.0 million in the fourth quarter, up from $74.5 million in the same quarter last year. On a per share basis, adjusted net income with tax benefit increased 9.5% to $1.15 per diluted share in the fourth quarter, from $1.05 per diluted share in the same quarter last year. Adjusted EBITDA increased 7.4% to $107.6 million in the fourth quarter, compared with $100.1 million in last year’s same quarter. Year-over-year, adjusted EBITDA margin expanded 260 basis points to 52.3% in the fourth quarter of 2023, compared with 49.7% in the same quarter last year.

Year Ended December 31, 2023 Compared with Year Ended December 31, 2022

Revenue for the year ended December 31, 2023, declined 4.0% to $821.0 million, compared with $854.8 million in the same period of 2022. The decrease was primarily due to lower average AUM.

Operating expenses increased 8.1% to $492.6 million for year ended December 31, 2023, compared with $455.7 million in 2022 due to a non-cash $63.8 million difference in amounts recorded from the change in fair value of consideration payable for acquisitions partially offset by a decrease in variable operating expenses from lower average AUM and earnings. GAAP operating margin was 40.0% for the year ended December 31, 2023, a 670 basis point decrease from the 46.7% recorded in 2022. GAAP net income declined 22.6% to $213.2 million for the year ended 2023 compared with $275.5 million in the prior year. GAAP net earnings per share decreased to $3.12 per diluted share in 2023, down from $3.81 per diluted share in 2022.

Adjusted net income with tax benefit decreased 7.0% to $307.9 million for the year ended December 31, 2023, down from $331.2 million in 2022. On a per share basis, adjusted net income with tax benefit decreased 1.5% to $4.51 per diluted share for the year ended December 31, 2023, from $4.58 per diluted share in 2022. For the year ended December 31, 2023, adjusted EBITDA declined 1.5% to $418.0 million, compared with $424.2 million in 2022. Year-over-year, adjusted EBITDA margin expanded 130 basis points to 50.9% for the year ended December 31, 2023, compared with 49.6% in the previous year.

Balance Sheet / Capital Management

The Company ended the year with $124 million of cash on its balance sheet.

Total debt outstanding as of December 31, 2023 was approximately $1,002 million and consisted of an existing term loan balance of $631 million and the 2021 Incremental Term Loans balance of $371 million.

During the fourth quarter, the Company repurchased 1.7 million shares under the 10b-5 plan and net settled 0.1 million shares. For the year ended December 31, 2023, the Company repurchased 4.2 million shares under the 10b-5 plan and net settled 0.8 million shares.

The Company’s Board of Directors also approved a regular quarterly cash dividend of $0.335 per share. The dividend is payable on March 25, 2024, to shareholders of record on March 11, 2024.

Conference Call, Webcast and Slide Presentation

The Company will host a conference call tomorrow morning, February 9, 2024, 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 1-888-330-3571 (domestic) or 1-646-960-0657 (international), shortly before 8:00 a.m. ET and reference the Victory Capital Conference Call. A live, listen-only webcast will also be available via the investor relations section of the Company’s website at https://ir.vcm.com. Prior to the call, supplemental materials will be available on the investor relations section of the Company’s website at https://ir.vcm.com before the conference call begins. 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 $166.6 billion in assets under management as of December 31, 2023. The Company employs a next-generation business strategy that combines boutique investment qualities with the benefits of a fully integrated, centralized operating and distribution platform.

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

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

FORWARD-LOOKING STATEMENTS

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

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

2023

 

2023

 

2022

 

2023

 

2022

Revenue
Investment management fees$

160,677

 

$

163,953

 

$

156,346

 

$

640,876

 

$

664,710

 

Fund administration and distribution fees

45,117

 

45,735

 

45,169

 

180,152

 

190,090

 

Total revenue

205,794

 

209,688

 

201,515

 

821,028

 

854,800

 

 
Expenses
Personnel compensation and benefits

53,949

 

54,501

 

58,846

 

220,992

 

238,198

 

Distribution and other asset-based expenses

36,438

 

38,160

 

37,634

 

149,596

 

161,105

 

General and administrative

16,702

 

13,947

 

13,389

 

56,287

 

52,373

 

Depreciation and amortization

7,984

 

12,333

 

11,150

 

41,647

 

43,201

 

Change in value of consideration payable for acquisition of business

4,000

 

10,336

 

 

23,236

 

(40,600

)

Acquisition-related costs

83

 

116

 

85

 

217

 

534

 

Restructuring and integration costs

320

 

246

 

808

 

595

 

881

 

Total operating expenses

119,476

 

129,639

 

121,912

 

492,570

 

455,692

 

 
Income from operations

86,318

 

80,049

 

79,603

 

328,458

 

399,108

 

Operating margin

41.9

%

38.2

%

39.5

%

40.0

%

46.7

%

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

3,765

 

1,452

 

2,633

 

8,732

 

(2,463

)

Interest expense and other financing costs

(16,561

)

(15,580

)

(13,327

)

(61,282

)

(43,964

)

Loss on debt extinguishment

 

 

239

 

 

(2,648

)

Total other expense, net

(12,796

)

(14,128

)

(10,455

)

(52,550

)

(49,075

)

 
Income before income taxes

73,522

 

65,921

 

69,148

 

275,908

 

350,033

 

 
Income tax expense

(18,316

)

(13,914

)

(16,879

)

(62,751

)

(74,522

)

 
Net income$

55,206

 

$

52,007

 

$

52,269

 

$

213,157

 

$

275,511

 

 
Earnings per share of common stock
Basic$

0.85

 

$

0.79

 

$

0.77

 

$

3.22

 

$

4.02

 

Diluted

0.82

 

0.77

 

0.74

 

3.12

 

3.81

 

 
Weighted average number of shares outstanding
Basic

65,309

 

65,774

 

68,054

 

66,202

 

68,481

 

Diluted

66,935

 

67,676

 

70,685

 

68,214

 

72,266

 

 
Dividends declared per share$

0.32

 

$

0.32

 

$

0.25

 

$

1.28

 

$

1.00

 

 

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,

2023

 

2023

 

2022

 

2023

 

2022

Net income (GAAP)$

55,206

 

$

52,007

 

$

52,269

 

$

213,157

 

$

275,511

 

Income tax expense

(18,316

)

(13,914

)

(16,879

)

(62,751

)

(74,522

)

Income before income taxes$

73,522

 

$

65,921

 

$

69,148

 

$

275,908

 

$

350,033

 

Interest expense

15,532

 

14,660

 

12,006

 

57,820

 

41,024

 

Depreciation

2,273

 

2,302

 

1,959

 

8,842

 

8,045

 

Other business taxes

305

 

636

 

448

 

1,707

 

2,118

 

Amortization of acquisition-related intangible assets

5,711

 

10,032

 

9,191

 

32,805

 

35,160

 

Stock-based compensation

1,503

 

1,451

 

2,420

 

6,496

 

10,143

 

Acquisition, restructuring and exit costs

5,586

 

11,463

 

3,997

 

28,982

 

(28,722

)

Debt issuance costs

3,128

 

762

 

935

 

5,394

 

5,620

 

Losses from equity method investments

 

 

 

 

825

 

Adjusted EBITDA$

107,560

 

$

107,227

 

$

100,104

 

$

417,954

 

$

424,246

 

Adjusted EBITDA margin

52.3

%

51.1

%

49.7

%

50.9

%

49.6

%

 
 
Net income (GAAP)$

55,206

 

$

52,007

 

$

52,269

 

$

213,157

 

$

275,511

 

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

305

 

636

 

448

 

1,707

 

2,118

 

Amortization of acquisition-related intangible assets

5,711

 

10,032

 

9,191

 

32,805

 

35,160

 

Stock-based compensation

1,503

 

1,451

 

2,420

 

6,496

 

10,143

 

Acquisition, restructuring and exit costs

5,586

 

11,463

 

3,997

 

28,982

 

(28,722

)

Debt issuance costs

3,128

 

762

 

935

 

5,394

 

5,620

 

Tax effect of above adjustments

(4,061

)

(6,085

)

(4,247

)

(18,847

)

(6,080

)

Adjusted net income$

67,378

 

$

70,266

 

$

65,013

 

$

269,694

 

$

293,750

 

Adjusted net income per diluted share$

1.01

 

$

1.04

 

$

0.92

 

$

3.95

 

$

4.06

 

 
Tax benefit of goodwill and acquired intangible assets$

9,655

 

$

9,536

 

$

9,513

 

$

38,252

 

$

37,490

 

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

0.14

 

$

0.14

 

$

0.13

 

$

0.56

 

$

0.52

 

 
Adjusted net income with tax benefit$

77,033

 

$

79,802

 

$

74,526

 

$

307,946

 

$

331,240

 

Adjusted net income with tax benefit per diluted share$

1.15

 

$

1.18

 

$

1.05

 

$

4.51

 

$

4.58

 

 

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

Victory Capital Holdings, Inc. and Subsidiaries

Unaudited Consolidated Balance Sheets

(In thousands, except for shares)

 

December 31, 2023

December 31, 2022

Assets
Cash and cash equivalents$

123,547

 

$

38,171

 

Investment management fees receivable

71,888

 

68,347

 

Fund administration and distribution fees receivable

14,238

 

14,379

 

Other receivables

1,444

 

1,747

 

Prepaid expenses

5,785

 

8,443

 

Investments in proprietary funds, at fair value

534

 

466

 

Deferred compensation plan investments, at fair value

31,274

 

26,800

 

Property and equipment, net

19,578

 

21,146

 

Goodwill

981,805

 

981,805

 

Other intangible assets, net

1,281,832

 

1,314,637

 

Other assets

10,691

 

64,958

 

Total assets$

2,542,616

 

$

2,540,899

 

 
Liabilities and stockholders' equity
Accounts payable and accrued expenses$

56,477

 

$

50,862

 

Accrued compensation and benefits

55,456

 

58,458

 

Consideration payable for acquisition of business

217,200

 

230,400

 

Deferred compensation plan liability

31,274

 

26,800

 

Deferred tax liability, net

128,714

 

108,138

 

Other liabilities

11,225

 

15,317

 

Long-term debt(1)

989,269

 

985,514

 

Total liabilities

1,489,615

 

1,475,489

 

 
Stockholders' equity:
Common stock; $0.01 par value per share: 2023 - 600,000,000 shares authorized, 82,404,305 shares issued and 64,254,714 shares outstanding; 2022 - 600,000,000 shares authorized, 80,528,137 shares issued and 67,325,534 shares outstanding

824

 

805

 

Additional paid-in capital

728,283

 

705,466

 

Treasury stock, at cost: 2023 - 18,149,591 shares; 2022 - 13,202,603 shares

(444,286

)

(285,425

)

Accumulated other comprehensive income

31,328

 

35,442

 

Retained earnings

736,852

 

609,122

 

Total stockholders' equity

1,053,001

 

1,065,410

 

Total liabilities and stockholders’ equity$

2,542,616

 

$

2,540,899

 

 

1 Balances at December 31, 2023 and December 31, 2022 are shown net of unamortized loan discount and debt issuance costs in the amount of $12.4 million and $16.2 million, respectively. The gross amount of the debt outstanding was $1,001.7 million as of December 31, 2023 and 2022, respectively.

 

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,

2023

 

2023

 

2022

 

2023

 

2022

Beginning assets under management$

153,506

 

$

161,622

 

$

147,257

 

-5%

 

4%

Gross client cash inflows

6,745

 

5,449

 

6,681

 

24%

 

1%

Gross client cash outflows

(7,926

)

(7,168

)

(11,147

)

11%

 

-29%

Net client cash flows

(1,181

)

(1,719

)

(4,466

)

-31%

 

-74%

Market appreciation (depreciation)

14,315

 

(4,888

)

10,492

 

N/A

 

36%

Realizations and distributions

(27

)

 

(295

)

N/A

 

N/A

Acquired & divested assets / Net transfers1

(2

)

(1,508

)

(36

)

N/A

 

N/A

Ending assets under management

166,611

 

153,506

 

152,952

 

9%

 

9%

Average assets under management

156,734

 

161,147

 

154,632

 

-3%

 

1%

 

 

 

For the Year Ended

% Change from

 

 

December 31,

 

December 31,

December 31,

 

 

2023

 

2022

2022

 

 

Beginning assets under management$

152,952

 

$

183,654

 

-17%

 

 

Gross client cash inflows

24,104

 

33,934

 

-29%

 

 

Gross client cash outflows

(30,671

)

(36,666

)

-16%

 

 

Net client cash flows

(6,567

)

(2,732

)

140%

 

 

Market appreciation (depreciation)

21,878

 

(26,495

)

N/A

 

 

Realizations and distributions

(100

)

(376

)

-73%

 

 

Acquired & divested assets / Net transfers2

(1,552

)

(1,100

)

41%

 

 

Ending assets under management

166,611

 

152,952

 

9%

 

 

Average assets under management

158,268

 

164,025

 

-4%

 

 

 

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

2 The year ended December 31, 2023 reflects divested assets of $1.3 billion associated with the INCORE transaction.

 

Victory Capital Holdings, Inc. and Subsidiaries

Assets Under Management by Asset Class

(unaudited; in millions)

 
For the Three Months EndedBy Asset Class
Global /
U.S. MidU.S. SmallFixedU.S. LargeNon-U.S.AlternativeTotalMoney Market /
Cap EquityCap EquityIncomeCap EquityEquitySolutionsInvestmentsLong-termShort-termTotal
December 31, 2023
Beginning assets under management$

28,235

 

$

14,650

 

$

23,790

 

$

11,596

 

$

14,807

 

$

53,998

 

$

3,222

 

$

150,298

 

$

3,208

 

$

153,506

 

Gross client cash inflows

1,008

 

555

 

1,072

 

62

 

1,251

 

2,110

 

498

 

6,557

 

188

 

6,745

 

Gross client cash outflows

(1,548

)

(938

)

(1,890

)

(329

)

(657

)

(1,977

)

(352

)

(7,691

)

(234

)

(7,926

)

Net client cash flows

(541

)

(383

)

(818

)

(267

)

595

 

133

 

146

 

(1,134

)

(47

)

(1,181

)

Market appreciation (depreciation)

2,917

 

1,698

 

1,392

 

1,320

 

1,387

 

5,474

 

91

 

14,278

 

38

 

14,315

 

Realizations and distributions

 

 

 

 

 

 

(27

)

(27

)

 

(27

)

Acquired & divested assets / Net transfers

(8

)

(6

)

(8

)

(15

)

(16

)

(20

)

(1

)

(74

)

72

 

(2

)

Ending assets under management$

30,604

 

$

15,959

 

$

24,355

 

$

12,635

 

$

16,772

 

$

59,585

 

$

3,431

 

$

163,340

 

$

3,271

 

$

166,611

 

 
September 30, 2023
Beginning assets under management$

30,007

 

$

15,664

 

$

26,098

 

$

12,170

 

$

15,392

 

$

55,836

 

$

3,301

 

$

158,469

 

$

3,152

 

$

161,622

 

Gross client cash inflows

1,224

 

458

 

892

 

51

 

392

 

1,988

 

249

 

5,255

 

193

 

5,449

 

Gross client cash outflows

(1,769

)

(920

)

(1,343

)

(282

)

(519

)

(1,720

)

(402

)

(6,955

)

(213

)

(7,168

)

Net client cash flows

(545

)

(462

)

(451

)

(231

)

(126

)

268

 

(153

)

(1,700

)

(19

)

(1,719

)

Market appreciation (depreciation)

(1,224

)

(547

)

(460

)

(287

)

(451

)

(2,028

)

71

 

(4,927

)

39

 

(4,888

)

Realizations and distributions

 

 

 

 

 

 

 

 

 

 

Acquired & divested assets / Net transfers 1

(2

)

(5

)

(1,397

)

(57

)

(8

)

(78

)

3

 

(1,545

)

37

 

(1,508

)

Ending assets under management$

28,235

 

$

14,650

 

$

23,790

 

$

11,596

 

$

14,807

 

$

53,998

 

$

3,222

 

$

150,298

 

$

3,208

 

$

153,506

 

 
December 31, 2022
Beginning assets under management$

25,754

 

$

14,109

 

$

27,198

 

$

10,762

 

$

12,293

 

$

48,551

 

$

5,334

 

$

144,001

 

$

3,256

 

$

147,257

 

Gross client cash inflows

1,442

 

754

 

1,342

 

87

 

1,025

 

1,372

 

479

 

6,502

 

179

 

6,681

 

Gross client cash outflows

(2,259

)

(1,133

)

(2,694

)

(450

)

(767

)

(1,697

)

(1,907

)

(10,906

)

(241

)

(11,147

)

Net client cash flows

(818

)

(379

)

(1,352

)

(362

)

258

 

(324

)

(1,427

)

(4,405

)

(62

)

(4,466

)

Market appreciation (depreciation)

2,963

 

1,378

 

601

 

680

 

1,628

 

3,166

 

48

 

10,464

 

28

 

10,492

 

Realizations and distributions

 

 

 

 

 

 

(295

)

(295

)

 

(295

)

Acquired & divested assets / Net transfers

(8

)

(6

)

(94

)

(106

)

(19

)

114

 

3

 

(116

)

80

 

(36

)

Ending assets under management$

27,892

 

$

15,103

 

$

26,353

 

$

10,973

 

$

14,160

 

$

51,507

 

$

3,663

 

$

149,649

 

$

3,302

 

$

152,952

 

 

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

 

Victory Capital Holdings, Inc. and Subsidiaries

Assets Under Management by Asset Class

(unaudited; in millions)

 
For the Year EndedBy Asset Class
Global /
U.S. MidU.S. SmallFixedU.S. LargeNon-U.S.AlternativeTotalMoney Market /
Cap EquityCap EquityIncomeCap EquityEquitySolutionsInvestmentsLong-termShort-termTotal
December 31, 2023
Beginning assets under management$

27,892

 

$

15,103

 

$

26,353

 

$

10,973

 

$

14,160

 

$

51,507

 

$

3,663

 

$

149,649

 

$

3,302

 

$

152,952

 

Gross client cash inflows

5,090

 

2,741

 

4,024

 

284

 

2,581

 

6,937

 

1,593

 

23,251

 

853

 

24,104

 

Gross client cash outflows

(5,536

)

(3,859

)

(6,129

)

(1,286

)

(2,304

)

(8,310

)

(2,002

)

(29,426

)

(1,245

)

(30,671

)

Net client cash flows

(446

)

(1,117

)

(2,105

)

(1,002

)

276

 

(1,373

)

(409

)

(6,176

)

(391

)

(6,567

)

Market appreciation (depreciation)

3,153

 

1,978

 

1,595

 

2,809

 

2,431

 

9,494

 

270

 

21,729

 

149

 

21,878

 

Realizations and distributions

 

 

 

 

 

 

(100

)

(100

)

 

(100

)

Acquired & divested assets / Net transfers1

5

 

(4

)

(1,487

)

(145

)

(96

)

(43

)

7

 

(1,763

)

211

 

(1,552

)

Ending assets under management$

30,604

 

$

15,959

 

$

24,355

 

$

12,635

 

$

16,772

 

$

59,585

 

$

3,431

 

$

163,340

 

$

3,271

 

$

166,611

 

 
December 31, 2022
Beginning assets under management$

30,578

 

$

20,094

 

$

35,154

 

$

15,766

 

$

16,050

 

$

60,364

 

$

2,548

 

$

180,554

 

$

3,100

 

$

183,654

 

Gross client cash inflows

6,859

 

3,162

 

5,524

 

406

 

4,149

 

8,169

 

5,045

 

33,313

 

621

 

33,934

 

Gross client cash outflows

(6,919

)

(5,214

)

(9,545

)

(1,498

)

(3,111

)

(6,247

)

(3,324

)

(35,858

)

(807

)

(36,666

)

Net client cash flows

(60

)

(2,053

)

(4,020

)

(1,093

)

1,038

 

1,921

 

1,721

 

(2,545

)

(187

)

(2,732

)

Market appreciation (depreciation)

(2,641

)

(2,965

)

(3,345

)

(3,328

)

(3,153

)

(10,887

)

(215

)

(26,533

)

39

 

(26,495

)

Realizations and distributions

 

 

 

 

 

 

(376

)

(376

)

 

(376

)

Acquired & divested assets / Net transfers

14

 

27

 

(1,436

)

(372

)

226

 

107

 

(16

)

(1,450

)

350

 

(1,100

)

Ending assets under management$

27,892

 

$

15,103

 

$

26,353

 

$

10,973

 

$

14,160

 

$

51,507

 

$

3,663

 

$

149,649

 

$

3,302

 

$

152,952

 

 

1 The year ended December 31, 2023 reflects divested assets of $1.3 billion associated with the INCORE transaction.

 

Victory Capital Holdings, Inc. and Subsidiaries

Assets Under Management by Vehicle

(unaudited; in millions)

 
For the Three Months EndedBy Vehicle
Separate
Accounts
Mutualand Other
Funds1ETFs2Vehicles3Total
December 31, 2023
Beginning assets under management$

101,138

 

$

4,710

 

$

47,658

 

$

153,506

 

Gross client cash inflows

4,126

 

343

 

2,276

 

6,745

 

Gross client cash outflows

(5,887

)

(356

)

(1,682

)

(7,926

)

Net client cash flows

(1,761

)

(13

)

593

 

(1,181

)

Market appreciation (depreciation)

9,466

 

273

 

4,577

 

14,315

 

Realizations and distributions

 

 

(27

)

(27

)

Acquired & divested assets / Net transfers

(41

)

 

39

 

(2

)

Ending assets under management$

108,802

 

$

4,970

 

$

52,840

 

$

166,611

 

 
September 30, 2023
Beginning assets under management$

105,916

 

$

5,193

 

$

50,513

 

$

161,622

 

Gross client cash inflows

3,283

 

232

 

1,933

 

5,449

 

Gross client cash outflows

(5,119

)

(557

)

(1,492

)

(7,168

)

Net client cash flows

(1,836

)

(324

)

441

 

(1,719

)

Market appreciation (depreciation)

(2,925

)

(165

)

(1,799

)

(4,888

)

Realizations and distributions

 

 

 

 

Acquired & divested assets / Net transfers4

(17

)

6

 

(1,497

)

(1,508

)

Ending assets under management$

101,138

 

$

4,710

 

$

47,658

 

$

153,506

 

 
December 31, 2022
Beginning assets under management$

96,591

 

$

5,110

 

$

45,557

 

$

147,257

 

Gross client cash inflows

4,217

 

378

 

2,087

 

6,681

 

Gross client cash outflows

(7,953

)

(178

)

(3,016

)

(11,147

)

Net client cash flows

(3,736

)

200

 

(930

)

(4,466

)

Market appreciation (depreciation)

6,620

 

327

 

3,546

 

10,492

 

Realizations and distributions

 

 

(295

)

(295

)

Acquired & divested assets / Net transfers

(27

)

(9

)

 

(36

)

Ending assets under management$

99,447

 

$

5,627

 

$

47,877

 

$

152,952

 

 

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

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

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

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

 

Victory Capital Holdings, Inc. and Subsidiaries

Assets Under Management by Vehicle

(unaudited; in millions)

 
For the Year EndedBy Vehicle
Separate
Accounts
Mutualand Other
Funds1ETFs2Vehicles3Total
December 31, 2023
Beginning assets under management$

99,447

 

$

5,627

 

$

47,877

 

$

152,952

 

Gross client cash inflows

15,594

 

969

 

7,542

 

24,104

 

Gross client cash outflows

(21,276

)

(1,567

)

(7,828

)

(30,671

)

Net client cash flows

(5,682

)

(599

)

(286

)

(6,567

)

Market appreciation (depreciation)

15,114

 

(56

)

6,820

 

21,878

 

Realizations and distributions

 

 

(100

)

(100

)

Acquired & divested assets / Net transfers4

(77

)

(3

)

(1,471

)

(1,552

)

Ending assets under management$

108,802

 

$

4,970

 

$

52,840

 

$

166,611

 

 
December 31, 2022
Beginning assets under management$

124,142

 

$

4,871

 

$

54,641

 

$

183,654

 

Gross client cash inflows

21,198

 

2,043

 

10,692

 

33,934

 

Gross client cash outflows

(27,703

)

(572

)

(8,391

)

(36,666

)

Net client cash flows

(6,505

)

1,472

 

2,302

 

(2,732

)

Market appreciation (depreciation)

(17,092

)

(724

)

(8,679

)

(26,495

)

Realizations and distributions

 

 

(376

)

(376

)

Acquired & divested assets / Net transfers5

(1,098

)

9

 

(11

)

(1,100

)

Ending assets under management$

99,447

 

$

5,627

 

$

47,877

 

$

152,952

 

 

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, 2023 reflects divested assets of $1.3 billion associated with the INCORE transaction.

 

Information Regarding Non-GAAP Financial Measures

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

Adjusted EBITDA

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

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

Adjusted Net Income

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

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

Tax Benefit of Goodwill and Acquired Intangible Assets

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

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