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Victory Capital Reports Strong Second Quarter Results and Record Earnings Per Share

Second-Quarter Highlights

  • Total Client Assets of $173.8 billion
  • Long-term gross flows of $5.8 billion
  • Long-term net flows of ($1.7) billion
  • GAAP operating margin of 50.4%
  • GAAP net income per diluted share of $1.12
  • Adjusted EBITDA margin of 53.0%
  • Adjusted net income with tax benefit per diluted share of $1.31
  • Board authorizes an 11% increase in regular quarterly cash dividend to $0.41

Victory Capital Holdings, Inc. (NASDAQ: VCTR) (“Victory Capital” or “the Company”) today reported financial results for the quarter ended June 30, 2024.

“Our most significant development during the first half of 2024 was forging the long-term agreement to become strategic partners with Amundi,” said David Brown, Chairman and Chief Executive Officer. “Upon closing, we will be combining Amundi’s US business into Victory Capital and have reciprocal global exclusive 15-year distribution agreements. This transaction is extremely compelling with multiple strategic elements that will make our Company even better. It is also financially attractive with anticipated double-digit earnings accretion within a year, and it will immediately provide us with greater financial flexibility resulting from the strengthening of our balance sheet.

“During the second quarter, our business continued to perform exceptionally well. We generated the highest adjusted earnings per diluted share with tax benefit, adjusted EBITDA, and adjusted EBITDA margin, for any quarter in our history.

“Our Investment Franchises continued to deliver excellent investment performance for our clients. Through the end of June, the percentage of our AUM outperforming benchmarks over the respective 3-, 5-, and 10-year periods was 60%, 77%, and 79%. In addition, 68% of our AUM in mutual funds and ETFs was rated four or five stars overall by Morningstar.

“As a result of our strong cash flow generation, the amount of cash on our balance sheet increased by 49% during the quarter, reaching $119 million at the end of June. This combined with the higher earnings resulted in our net debt to EBITDA ratio declining to 1.9X. In addition, the Board authorized another 11% increase in our quarterly cash dividend from $0.37 to $0.41, which will be paid in September.

“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 Six Months Ended

June 30,

 

March 31,

 

June 30,

 

June 30,

 

June 30,

2024

 

2024

 

2023

 

2024

 

2023

Assets Under Management1
Ending $

168,681

 

$

170,342

 

$

157,161

 

$

168,681

 

$

157,161

 

Average

167,484

 

163,533

 

152,925

 

165,508

 

152,729

 

 
AUM Long-term Flows2
Long-term Gross $

5,813

 

$

6,952

 

$

5,491

 

$

12,764

 

$

11,339

 

Long-term Net

(1,701

)

(1,028

)

(1,110

)

(2,729

)

(2,250

)

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

255

 

$

236

 

$

231

 

$

491

 

$

472

 

Money Market / Short-term Net

(43

)

(99

)

(316

)

(142

)

(325

)

 
AUM Total Flows
Total Gross $

6,067

 

$

7,187

 

$

5,722

 

$

13,255

 

$

11,811

 

Total Net

(1,744

)

(1,127

)

(1,426

)

(2,871

)

(2,576

)

 
Consolidated Financial Results (GAAP)
Revenue $

219.6

 

$

215.9

 

$

204.2

 

$

435.5

 

$

405.5

 

AUM revenue realization (in bps)

52.6

 

53.0

 

53.6

 

52.8

 

53.4

 

Operating expenses

109.0

 

131.0

 

116.7

 

240.1

 

243.5

 

Income from operations

110.6

 

84.8

 

87.5

 

195.4

 

162.1

 

Operating margin

50.4

%

39.3

%

42.9

%

44.9

%

40.0

%

Net income

74.3

 

55.7

 

56.7

 

129.9

 

105.9

 

Earnings per diluted share $

1.12

 

$

0.84

 

$

0.83

 

$

1.97

 

$

1.53

 

Cash flow from operations

79.7

 

68.7

 

77.4

 

148.4

 

141.6

 

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

116.5

 

$

112.4

 

$

104.0

 

$

228.9

 

$

203.2

 

Adjusted EBITDA margin

53.0

%

52.1

%

50.9

%

52.6

%

50.1

%

Adjusted net income

76.5

 

72.6

 

66.4

 

149.1

 

132.1

 

Tax benefit of goodwill and acquired intangible assets

10.1

 

9.7

 

9.5

 

19.9

 

19.1

 

Adjusted net income with tax benefit

86.6

 

82.3

 

75.9

 

169.0

 

151.1

 

Adjusted net income with tax benefit per diluted share $

1.31

 

$

1.25

 

$

1.11

 

$

2.56

 

$

2.19

 

 
_________________________________

1 Total AUM includes both discretionary assets under management and non-discretionary assets under advisement and excludes other 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

At June 30, 2024, Victory Capital had total client assets of $173.8 billion, assets under management of $168.7 billion, and other assets of $5.1 billion. Total AUM decreased by $1.7 billion to $168.7 billion at June 30, 2024, compared with $170.3 billion at March 31, 2024. The decrease was due to net outflows of $1.7 billion. Total gross flows for the second quarter were $6.1 billion, including long-term gross flows of $5.8 billion.

As of June 30, 2024, Victory Capital offered 122 investment strategies through its 11 autonomous Investment Franchises and Solutions Platform. The table below presents outperformance against benchmarks by AUM as of June 30, 2024.

 

Percentage of AUM Outperforming Benchmark

Trailing

 

Trailing

 

Trailing

 

Trailing

1-Year

 

3-Years

 

5-Years

 

10-Years

49%

 

60%

 

77%

 

79%

 

Second Quarter 2024 Compared with First Quarter 2024

Revenue increased 1.7% to $219.6 million in the second quarter, compared with $215.9 million in the first quarter, primarily due to higher average AUM over the comparable period. GAAP operating margin expanded 1,110 basis points in the second quarter to 50.4%, up from 39.3% in the first quarter primarily due to the combination of a non-cash $20.4 million difference in amounts recorded to the change in the fair value of consideration payable for acquisitions as well as a decrease in compensation related expenses. Second quarter GAAP net income increased 33.3% to $74.3 million, or $1.12 per diluted share, up from $55.7 million, or $0.84 per diluted share, in the prior quarter.

Adjusted net income with tax benefit increased 5.3% to $86.6 million, or $1.31 per diluted share in the second quarter, up from $82.3 million, or $1.25 per diluted share, in the first quarter. Adjusted EBITDA increased 3.7% to $116.5 million in the second quarter, versus $112.4 million in the first quarter. Adjusted EBITDA margin expanded 90 basis points in the second quarter of 2024 to 53.0% compared with 52.1% in the prior quarter.

Second Quarter 2024 Compared with Second Quarter 2023

Revenue for the three months ended June 30, 2024, increased 7.5% to $219.6 million, compared with $204.2 million in the same quarter of 2023 as a result of higher average AUM over the comparable period.

Operating expenses decreased 6.6% to $109.0 million, compared with $116.7 million in last year’s second quarter due to the combination of a non-cash $9.7 million difference in amounts recorded to the change in the fair value of consideration payable for acquisitions as well as a decrease in depreciation and amortization expense, partially offset by an increase in acquisition-related costs. GAAP operating margin expanded 750 basis points to 50.4% in the second quarter, from 42.9% in the same quarter of 2023. GAAP net income increased 31.0% to $74.3 million, or $1.12 per diluted share, in the second quarter compared with $56.7 million, or $0.83 per diluted share, in the same quarter of 2023.

Adjusted net income with tax benefit increased 14.1% to $86.6 million, or $1.31 per diluted share, in the second quarter, compared with $75.9 million, or $1.11 per diluted share in the same quarter last year. Adjusted EBITDA increased 12.0% to $116.5 million, compared with $104.0 million in the same quarter of last year. Year-over-year, adjusted EBITDA margin expanded 210 basis points to 53.0% in the second quarter of 2024, compared with 50.9% in the same quarter last year.

Six Months Ended June 30, 2024 Compared with Six Months Ended June 30, 2023

Revenue for the six months ended June 30, 2024, increased 7.4% to $435.5 million, compared with $405.5 million in the same period of 2023. The increase was primarily due to higher average AUM.

Operating expenses decreased 1.4% to $240.1 million for the six months ended June 30, 2024, compared with $243.5 million in the same period in 2023 due to the combination of a non-cash $4.9 million difference in amounts recorded to the change in the fair value of consideration payable for acquisitions as well as a decrease in depreciation and amortization expense, partially offsetting was an increase in acquisition-related costs. GAAP operating margin was 44.9% for the six months ended June 30, 2024, a 490 basis point increase from the 40.0% recorded in the same period in 2023. GAAP net income increased 22.7% to $129.9 million, or $1.97 per diluted share, in the first six months of 2024 compared with $105.9 million, or $1.53 per diluted share, in the same period in 2023.

Adjusted net income with tax benefit increased 11.8% to $169.0 million in the first six months of 2024 compared to $151.1 million in the same period in 2023. On a per-share basis, adjusted net income with tax benefit increased 16.9% to $2.56 per diluted share for the six months ended June 30, 2024 compared to $2.19 per diluted share in the same period in 2023. For the six months ended June 30, 2024, adjusted EBITDA increased 12.6% to $228.9 million, compared with $203.2 million for the same period in 2023. Year-over-year, adjusted EBITDA margin expanded 250 basis points to 52.6% in the first six months of 2024, compared with 50.1% in the same period last year.

Balance Sheet / Capital Management

The total debt outstanding as of June 30, 2024 was approximately $992 million and consisted of an existing term loan balance of $625 million and the 2021 Incremental Term Loans balance of $367 million.

The Company’s Board of Directors approved a regular quarterly cash dividend of $0.41 per share. The dividend is payable on September 25, 2024, to shareholders of record on September 10, 2024.

Conference Call, Webcast and Slide Presentation

The Company will host a conference call tomorrow morning, August 9, at 8:00 a.m. ET to discuss the results. Analysts and investors may participate in the question-and-answer session. To participate in the conference call, please call (888) 330-3571 (domestic) or (646) 960-0657 (international), shortly before 8:00 a.m. ET and reference the Victory Capital Conference Call. A live, listen-only webcast will also be available via the investor relations section of the Company’s website at https://ir.vcm.com. Prior to the call, a supplemental slide presentation that will be used during the conference call will be available on the Events and Presentations page of the Company’s investor relations website. For anyone who is unable to join the live event, an archive of the webcast will be available for replay shortly after the call concludes.

About Victory Capital

Victory Capital is a diversified global asset management firm with total assets under management of $168.7 billion, and $173.8 billion in total client assets, as of June 30, 2024. 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 earnings release may contain forward-looking statements within the meaning of applicable U.S. federal and non-U.S. securities laws. 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 and include, but are not limited to, statements regarding the proposed transaction and the outlook for Victory Capital’s or Amundi’s future business and financial performance. Such forward-looking statements involve known and unknown risks, uncertainties and other important factors beyond Victory Capital’s and Amundi’s control and could cause Victory Capital’s and Amundi’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: continued geopolitical uncertainty including the conflicts in Ukraine and Israel, risks that the conditions to closing the transaction with Amundi US will be satisfied and the transaction will close on the anticipated timeline, if at all; risks associated with expected benefits, or impact on our business, of the proposed transaction, including our ability to achieve any expected synergies; 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.

Important Additional Information and Where to Find It

This communication discusses the proposed acquisition of Amundi Holdings US, Inc. (“Amundi US”) by the Company. In connection with the transaction, the Company intends to file a proxy statement and certain other documents regarding the transaction with the SEC. The definitive version of the proxy statement (if and when available) will be mailed to the Company’s stockholders.

INVESTORS AND SECURITY HOLDERS ARE URGED TO READ THE PROXY STATEMENT (INCLUDING ANY AMENDMENTS OR SUPPLEMENTS THERETO) AND ANY OTHER RELEVANT DOCUMENTS THAT ARE FILED OR WILL BE FILED WITH THE SEC, CAREFULLY AND IN THEIR ENTIRETY WHEN THEY BECOME AVAILABLE BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION ABOUT THE TRANSACTIONS CONTEMPLATED BY THE CONTRIBUTION AGREEMENT AND RELATED MATTERS.

Investors and security holders may obtain, free of charge, copies of the proxy statement (when it is available) and other documents that are filed or will be filed with the SEC by the Company through the website maintained by the SEC at www.sec.gov or the Investor Relations portion of the Company's website at https://ir.vcm.com.

Participants in the Solicitation

The Company and certain of its directors, executive officers and other employees may be deemed to be “participants” in the solicitation of proxies from the Company’s stockholders with respect to the special meeting of stockholders that will be held to consider and vote upon the approval of the share issuance in connection with the proposed acquisition of Amundi US by the Company. Additional information regarding the identity of the participants, and their respective direct and indirect interests in the transaction, by security holdings or otherwise, will be set forth in the proxy statement and other materials to be filed with the SEC in connection with the transaction (if and when they become available). Information relating to the Company’s executive officers and directors can also be found in the Company’s proxy statement for its 2024 annual meeting of stockholders, which was filed with the SEC on March 28, 2024. Investors and security holders may obtain free copies of these documents using the sources indicated above.

 

Victory Capital Holdings, Inc. and Subsidiaries

Unaudited Consolidated Statements of Operations

(in thousands except per share data and percentages)

 

 

 

 

 

For the Three Months Ended

 

For the Six Months Ended

 

June 30,

 

March 31,

 

June 30,

 

June 30,

 

June 30,

 

2024

 

2024

 

2023

 

2024

 

2023

Revenue
Investment management fees $

173,163

 

$

169,785

 

$

159,410

 

$

342,948

 

$

316,246

 

Fund administration and distribution fees

46,458

 

46,072

 

44,816

 

92,530

 

89,300

 

Total revenue

219,621

 

215,857

 

204,226

 

435,478

 

405,546

 

 
Expenses
Personnel compensation and benefits

55,660

 

59,454

 

54,940

 

115,114

 

112,542

 

Distribution and other asset-based expenses

36,474

 

36,263

 

37,344

 

72,737

 

74,998

 

General and administrative

14,385

 

14,012

 

13,250

 

28,397

 

25,638

 

Depreciation and amortization

7,551

 

7,601

 

9,650

 

15,152

 

21,330

 

Change in value of consideration payable for acquisition of business

(8,200

)

12,200

 

1,500

 

4,000

 

8,900

 

Acquisition-related costs

3,049

 

1,026

 

16

 

4,075

 

18

 

Restructuring and integration costs

105

 

492

 

 

597

 

29

 

Total operating expenses

109,024

 

131,048

 

116,700

 

240,072

 

243,455

 

 
Income from operations

110,597

 

84,809

 

87,526

 

195,406

 

162,091

 

Operating margin

50.4

%

39.3

%

42.9

%

44.9

%

40.0

%

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

1,557

 

3,565

 

1,971

 

5,122

 

3,515

 

Interest expense and other financing costs

(16,279

)

(16,486

)

(14,902

)

(32,765

)

(29,141

)

Gain (loss) on debt extinguishment

(100

)

 

 

(100

)

 

Total other expense, net

(14,822

)

(12,921

)

(12,931

)

(27,743

)

(25,626

)

 
Income before income taxes

95,775

 

71,888

 

74,595

 

167,663

 

136,465

 

 
Income tax expense

(21,524

)

(16,197

)

(17,924

)

(37,721

)

(30,521

)

 
Net income $

74,251

 

$

55,691

 

$

56,671

 

$

129,942

 

$

105,944

 

 
Earnings per share of common stock
Basic $

1.15

 

$

0.86

 

$

0.85

 

$

2.01

 

$

1.58

 

Diluted

1.12

 

0.84

 

0.83

 

1.97

 

1.53

 

 
Weighted average number of shares outstanding
Basic

64,734

 

64,389

 

66,466

 

64,561

 

66,874

 

Diluted

66,075

 

65,972

 

68,500

 

66,025

 

69,037

 

 
Dividends declared per share $

0.37

 

$

0.335

 

$

0.32

 

$

0.705

 

$

0.64

 

 

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 Six Months Ended

 

June 30,

 

March 31,

 

June 30,

 

June 30,

 

June 30,

 

2024

 

2024

 

2023

 

2024

 

2023

Net income (GAAP) $

74,251

 

$

55,691

 

$

56,671

 

$

129,942

 

$

105,944

 

Income tax expense

(21,524

)

(16,197

)

(17,924

)

(37,721

)

(30,521

)

Income before income taxes $

95,775

 

$

71,888

 

$

74,595

 

$

167,663

 

$

136,465

 

Interest expense

15,468

 

15,711

 

14,146

 

31,179

 

27,628

 

Depreciation

2,252

 

2,269

 

2,296

 

4,521

 

4,267

 

Other business taxes

414

 

369

 

382

 

783

 

766

 

Amortization of acquisition-related intangible assets

5,299

 

5,332

 

7,353

 

10,631

 

17,062

 

Stock-based compensation

940

 

1,327

 

1,538

 

2,267

 

3,542

 

Acquisition, restructuring and exit costs

(4,520

)

14,705

 

2,949

 

10,185

 

11,933

 

Debt issuance costs

874

 

755

 

756

 

1,629

 

1,504

 

Adjusted EBITDA $

116,502

 

$

112,356

 

$

104,015

 

$

228,858

 

$

203,167

 

Adjusted EBITDA margin

53.0

%

52.1

%

50.9

%

52.6

%

50.1

%

 
 
Net income (GAAP) $

74,251

 

$

55,691

 

$

56,671

 

$

129,942

 

$

105,944

 

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

414

 

369

 

382

 

783

 

766

 

Amortization of acquisition-related intangible assets

5,299

 

5,332

 

7,353

 

10,631

 

17,062

 

Stock-based compensation

940

 

1,327

 

1,538

 

2,267

 

3,542

 

Acquisition, restructuring and exit costs

(4,520

)

14,705

 

2,949

 

10,185

 

11,933

 

Debt issuance costs

874

 

755

 

756

 

1,629

 

1,504

 

Tax effect of above adjustments

(753

)

(5,621

)

(3,244

)

(6,374

)

(8,701

)

Adjusted net income $

76,505

 

$

72,558

 

$

66,405

 

$

149,063

 

$

132,050

 

Adjusted net income per diluted share $

1.16

 

$

1.10

 

$

0.97

 

$

2.26

 

$

1.91

 

 
Tax benefit of goodwill and acquired intangible assets $

10,141

 

$

9,748

 

$

9,537

 

$

19,889

 

$

19,061

 

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

0.15

 

$

0.15

 

$

0.14

 

$

0.30

 

$

0.28

 

 
Adjusted net income with tax benefit $

86,646

 

$

82,306

 

$

75,942

 

$

168,952

 

$

151,111

 

Adjusted net income with tax benefit per diluted share $

1.31

 

$

1.25

 

$

1.11

 

$

2.56

 

$

2.19

 

 

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

 

Victory Capital Holdings, Inc. and Subsidiaries

Unaudited Condensed Consolidated Balance Sheets

(In thousands, except for shares)

 

 

 

 

 

June 30, 2024

 

December 31, 2023

Assets
Cash and cash equivalents $

118,970

 

$

123,547

 

Receivables

100,660

 

87,570

 

Prepaid expenses

6,979

 

5,785

 

Investments, at fair value

33,759

 

31,808

 

Property and equipment, net

15,599

 

19,578

 

Goodwill

981,805

 

981,805

 

Other intangible assets, net

1,271,200

 

1,281,832

 

Other assets

12,309

 

10,691

 

Total assets $

2,541,281

 

$

2,542,616

 

 
Liabilities and stockholders' equity
Accounts payable and accrued expenses $

54,528

 

$

56,477

 

Accrued compensation and benefits

54,020

 

55,456

 

Consideration payable for acquisition of business

141,200

 

217,200

 

Deferred tax liability, net

142,418

 

128,714

 

Other liabilities

44,579

 

42,499

 

Long-term debt, net1

981,724

 

989,269

 

Total liabilities

1,418,469

 

1,489,615

 

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

2024 - 600,000,000 shares authorized, 83,454,313 shares issued and 64,808,655 shares outstanding; 2023 - 600,000,000 shares authorized, 82,404,305 shares issued and 64,254,714 shares outstanding

835

 

824

 

Additional paid-in capital

741,490

 

728,283

 

Treasury stock, at cost: 2024 - 18,645,658 shares; 2023 - 18,149,591 shares

(464,944

)

(444,286

)

Accumulated other comprehensive income

25,024

 

31,328

 

Retained earnings

820,407

 

736,852

 

Total stockholders' equity

1,122,812

 

1,053,001

 

Total liabilities and stockholders' equity $

2,541,281

 

$

2,542,616

 

 

1 Balances at June 30, 2024 and December 31, 2023 are shown net of unamortized loan discount and debt issuance costs in the amount of $10.5 million and $12.4 million, respectively. The gross amount of the debt outstanding was $992.2 million and $1,001.7 million as of June 30, 2024 and December 31, 2023, respectively.

 

Victory Capital Holdings, Inc. and Subsidiaries

Total Client Assets

(unaudited; in millions)

 

 

 

For the Three Months Ended

 

June 30,

 

March 31,

 

June 30,

 

2024

 

2024

 

2023

Beginning AUM $

170,342

 

$

161,322

 

$

153,356

 

Beginning other assets1

5,117

 

5,289

 

5,265

 

Beginning total client assets

175,459

 

166,611

 

158,621

 

 
AUM net cash flows

(1,744

)

(1,127

)

(1,426

)

Other assets net cash flows

18

 

(524

)

(996

)

Total client assets net cash flows

(1,727

)

(1,651

)

(2,422

)

 
AUM market appreciation (depreciation)

83

 

10,178

 

5,346

 

Other assets market appreciation (depreciation)

(40

)

352

 

192

 

Total client assets market appreciation (depreciation)

43

 

10,529

 

5,537

 

 
AUM realizations and distributions

 

 

(73

)

Acquired & divested assets / Net transfers

(1

)

(31

)

(41

)

 
Ending AUM

168,681

 

170,342

 

157,161

 

Ending other assets

5,094

 

5,117

 

4,461

 

Ending total client assets

173,775

 

175,459

 

161,622

 

Average total client assets2

172,392

 

168,865

 

157,372

 

 
 

For the Six Months Ended

June 30,

 

June 30,

2024

 

2023

Beginning AUM $

161,322

 

$

147,762

 

Beginning other assets1

5,289

 

5,190

 

Beginning total client assets

166,611

 

152,952

 

 
AUM net cash flows

(2,871

)

(2,576

)

Other assets net cash flows

(506

)

(1,091

)

Total client assets net cash flows

(3,377

)

(3,667

)

 
AUM market appreciation (depreciation)

10,261

 

12,089

 

Other assets market appreciation (depreciation)

311

 

362

 

Total client assets market appreciation (depreciation)

10,572

 

12,451

 

 
AUM realizations and distributions

 

(73

)

Acquired & divested assets / Net transfers

(31

)

(42

)

 
Ending AUM

168,681

 

157,161

 

Ending other assets

5,094

 

4,461

 

Ending total client assets

173,775

 

161,622

 

Average total client assets3

170,629

 

157,595

 

 

1 Includes low-fee (2 to 4 bps) institutional assets, previously reported in the Solutions asset class within the by asset class table and in Separate Accounts and Other Pooled Vehicles within the by vehicle table. These assets are included as part of Victory’s Regulatory Assets Under Management reported in Form ADV Part 1.

2 For the three-month periods ending June 30, 2024, March 31, 2024 and June 30, 2023 total client assets revenue realization was 51.2 basis points, 51.4 basis points and 52.1 basis points, respectively.

3 For the six-month periods ending June 30, 2024 and 2023 total client assets revenue realization was 51.3 basis points and 51.9 basis points, respectively.

 

Victory Capital Holdings, Inc. and Subsidiaries

Total Assets Under Management1

(unaudited; in millions except for percentages)

 

 

 

For the Three Months Ended

 

June 30,

 

March 31,

 

June 30,

 

2024

 

2024

 

2023

Beginning assets under management $

170,342

 

$

161,322

 

$

153,356

 

Gross client cash inflows

6,067

 

7,187

 

5,722

 

Gross client cash outflows

(7,812

)

(8,314

)

(7,148

)

Net client cash flows

(1,744

)

(1,127

)

(1,426

)

Market appreciation (depreciation)

83

 

10,178

 

5,346

 

Realizations and distributions

 

 

(73

)

Acquired & divested assets / Net Transfers

(1

)

(31

)

(41

)

Ending assets under management

168,681

 

170,342

 

157,161

 

Average assets under management

167,484

 

163,533

 

152,925

 

 

For the Six Months Ended

June 30,

 

June 30,

2024

 

2023

Beginning assets under management $

161,322

 

$

147,762

 

Gross client cash inflows

13,255

 

11,811

 

Gross client cash outflows

(16,126

)

(14,386

)

Net client cash flows

(2,871

)

(2,576

)

Market appreciation (depreciation)

10,261

 

12,089

 

Realizations and distributions

 

(73

)

Acquired assets / Net transfers

(31

)

(42

)

Ending assets under management

168,681

 

157,161

 

Average assets under management

165,508

 

152,729

 

 

1 Total AUM includes both discretionary assets under management and non-discretionary assets under advisement and excludes other assets.

 

Victory Capital Holdings, Inc. and Subsidiaries

Other Assets (Institutional)1

(unaudited; in millions)

 

 

 

For the Three Months

 

June 30,

 

March 31,

 

June 30,

 

2024

 

2024

 

2023

Beginning other assets (institutional) $

5,117

 

$

5,289

 

$

5,265

 

Gross client cash inflows

467

 

 

100

 

Gross client cash outflows

(449

)

(524

)

(1,096

)

Net client cash flows

18

 

(524

)

(996

)

Market appreciation (depreciation)

(40

)

352

 

192

 

Realizations and distributions

 

 

 

Acquired & divested assets / Net transfers

 

 

 

Ending other assets (institutional)

5,094

 

5,117

 

4,461

 

Average other assets (institutional)2

4,909

 

5,332

 

4,447

 

 

For the Six Months Ended

June 30,

 

June 30,

2024

 

2023

Beginning other assets (institutional) $

5,289

 

$

5,190

 

Gross client cash inflows

467

 

100

 

Gross client cash outflows

(973

)

(1,191

)

Net client cash flows

(506

)

(1,091

)

Market appreciation (depreciation)

311

 

362

 

Realizations and distributions

 

 

Acquired & divested assets / Net transfers

 

 

Ending other assets (institutional)

5,094

 

4,461

 

Average other assets (institutional)3

5,120

 

4,866

 

 

1 Includes low-fee (2 to 4 bps) institutional assets, previously reported in the Solutions asset class within the by asset class table and in Separate Accounts and Other Pooled Vehicles within the by vehicle table. These assets are included as part of Victory’s Regulatory Assets Under Management reported in Form ADV Part 1.

2 For the three-month periods ending June 30, 2024, March 31, 2024 and June 30, 2023 total other assets (institutional) revenue realization was 3.4 basis points, 3.5 basis points and 3.6 basis points, respectively.

3 For the six-month periods ending June 30, 2024 and 2023 total other assets (institutional) revenue realization was 3.5 basis points, respectively.

 

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 /

 

Total

 

Cap Equity

 

Cap Equity

 

Income

 

Cap Equity

 

Equity

 

Solutions

 

Investments

 

Long-term

 

Short-term

 

AUM1

June 30, 2024
Beginning assets under management $

32,918

 

$

16,297

 

$

24,481

 

$

13,895

 

$

18,200

 

$

57,833

 

$

3,465

 

$

167,089

 

$

3,253

 

$

170,342

 

Gross client cash inflows

1,007

 

559

 

1,283

 

67

 

558

 

2,035

 

303

 

5,813

 

255

 

6,067

 

Gross client cash outflows

(1,659

)

(778

)

(1,508

)

(309

)

(635

)

(2,184

)

(442

)

(7,514

)

(298

)

(7,812

)

Net client cash flows

(652

)

(218

)

(225

)

(241

)

(77

)

(150

)

(139

)

(1,701

)

(43

)

(1,744

)

Market appreciation (depreciation)

(1,247

)

(893

)

116

 

350

 

367

 

1,273

 

58

 

24

 

60

 

83

 

Realizations and distributions

 

 

 

 

 

 

 

 

 

 

Acquired assets / Net transfers

(4

)

(4

)

26

 

(21

)

(32

)

(21

)

6

 

(50

)

50

 

(1

)

Ending assets under management $

31,015

 

$

15,182

 

$

24,398

 

$

13,983

 

$

18,459

 

$

58,936

 

$

3,390

 

$

165,362

 

$

3,320

 

$

168,681

 

 
March 31, 2024
Beginning assets under management $

30,604

 

$

15,959

 

$

24,355

 

$

12,635

 

$

16,772

 

$

54,296

 

$

3,431

 

$

158,051

 

$

3,271

 

$

161,322

 

Gross client cash inflows

1,371

 

507

 

1,298

 

68

 

1,090

 

2,165

 

452

 

6,952

 

236

 

7,187

 

Gross client cash outflows

(1,845

)

(925

)

(1,367

)

(332

)

(751

)

(2,410

)

(349

)

(7,980

)

(335

)

(8,314

)

Net client cash flows

(474

)

(418

)

(69

)

(264

)

339

 

(245

)

103

 

(1,028

)

(99

)

(1,127

)

Market appreciation (depreciation)

2,795

 

801

 

176

 

1,555

 

1,133

 

3,749

 

(75

)

10,135

 

42

 

10,178

 

Realizations and distributions

 

 

 

 

 

 

 

 

 

 

Acquired assets / Net transfers

(7

)

(45

)

18

 

(31

)

(44

)

33

 

5

 

(69

)

38

 

(31

)

Ending assets under management $

32,918

 

$

16,297

 

$

24,481

 

$

13,895

 

$

18,200

 

$

57,833

 

$

3,465

 

$

167,089

 

$

3,253

 

$

170,342

 

 
June 30, 2023
Beginning assets under management $

29,035

 

$

15,648

 

$

26,535

 

$

11,425

 

$

14,868

 

$

49,151

 

$

3,317

 

$

149,979

 

$

3,377

 

$

153,356

 

Gross client cash inflows

1,259

 

743

 

873

 

87

 

559

 

1,522

 

449

 

5,491

 

231

 

5,722

 

Gross client cash outflows

(1,126

)

(1,128

)

(1,324

)

(290

)

(585

)

(1,738

)

(408

)

(6,601

)

(547

)

(7,148

)

Net client cash flows

132

 

(386

)

(451

)

(204

)

(26

)

(216

)

41

 

(1,110

)

(316

)

(1,426

)

Market appreciation (depreciation)

824

 

404

 

48

 

954

 

575

 

2,490

 

12

 

5,307

 

38

 

5,346

 

Realizations and distributions

 

 

 

 

 

 

(73

)

(73

)

 

(73

)

Acquired assets / Net transfers

16

 

(2

)

(34

)

(4

)

(25

)

(49

)

4

 

(95

)

53

 

(41

)

Ending assets under management $

30,007

 

$

15,664

 

$

26,098

 

$

12,170

 

$

15,392

 

$

51,375

 

$

3,301

 

$

154,009

 

$

3,152

 

$

157,161

 

 

1 Total AUM includes both discretionary assets under management and non-discretionary assets under advisement and excludes other assets.

 

Victory Capital Holdings, Inc. and Subsidiaries

Assets Under Management by Asset Class

(unaudited; in millions)

 

 

For the Six Months Ended

By Asset Class

 

 

 

 

 

 

 

 

 

 

 

 

 

Global /

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Mid

 

U.S. Small

 

Fixed

 

U.S. Large

 

Non-U.S.

 

 

 

 

Alternative

 

Total

 

Money Market /

 

Total

 

Cap Equity

 

Cap Equity

 

Income

 

Cap Equity

 

Equity

 

Solutions

 

Investments

 

Long-term

 

Short-term

 

AUM1

June 30, 2024
Beginning assets under management $

30,604

 

$

15,959

 

$

24,355

 

$

12,635

 

$

16,772

 

$

54,296

 

$

3,431

 

$

158,051

 

$

3,271

 

$

161,322

 

Gross client cash inflows

2,378

 

1,066

 

2,581

 

136

 

1,648

 

4,200

 

755

 

12,764

 

491

 

13,255

 

Gross client cash outflows

(3,504

)

(1,703

)

(2,874

)

(641

)

(1,386

)

(4,595

)

(791

)

(15,493

)

(632

)

(16,126

)

Net client cash flows

(1,126

)

(637

)

(294

)

(505

)

262

 

(394

)

(36

)

(2,729

)

(142

)

(2,871

)

Market appreciation (depreciation)

1,548

 

(92

)

292

 

1,905

 

1,501

 

5,022

 

(17

)

10,159

 

102

 

10,261

 

Realizations and distributions

 

 

 

 

 

 

 

 

 

 

Acquired assets / Net transfers

(11

)

(49

)

44

 

(51

)

(76

)

12

 

11

 

(119

)

88

 

(31

)

Ending assets under management $

31,015

 

$

15,182

 

$

24,398

 

$

13,983

 

$

18,459

 

$

58,936

 

$

3,390

 

$

165,362

 

$

3,320

 

$

168,681

 

 
June 30, 20231
Beginning assets under management $

27,892

 

$

15,103

 

$

26,353

 

$

10,973

 

$

14,160

 

$

46,317

 

$

3,663

 

$

144,460

 

$

3,302

 

$

147,762

 

Gross client cash inflows

2,858

 

1,728

 

2,060

 

170

 

936

 

2,739

 

846

 

11,339

 

472

 

11,811

 

Gross client cash outflows

(2,219

)

(2,001

)

(2,896

)

(675

)

(1,129

)

(3,421

)

(1,248

)

(13,589

)

(797

)

(14,386

)

Net client cash flows

640

 

(273

)

(836

)

(504

)

(192

)

(683

)

(403

)

(2,250

)

(325

)

(2,576

)

Market appreciation (depreciation)

1,461

 

827

 

663

 

1,775

 

1,495

 

5,687

 

108

 

12,017

 

72

 

12,089

 

Realizations and distributions

 

 

 

 

 

 

(73

)

(73

)

 

(73

)

Acquired assets / Net transfers

15

 

7

 

(82

)

(74

)

(71

)

55

 

6

 

(144

)

103

 

(42

)

Ending assets under management $

30,007

 

$

15,664

 

$

26,098

 

$

12,170

 

$

15,392

 

$

51,375

 

$

3,301

 

$

154,009

 

$

3,152

 

$

157,161

 

 

1 Total AUM includes both discretionary assets under management and non-discretionary assets under advisement and excludes other assets.

 

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 AUM4

June 30, 2024
Beginning assets under management $

113,897

 

$

5,229

 

$

51,217

 

$

170,342

 

Gross client cash inflows

3,553

 

480

 

2,034

 

6,067

 

Gross client cash outflows

(5,061

)

(178

)

(2,573

)

(7,812

)

Net client cash flows

(1,508

)

302

 

(539

)

(1,744

)

Market appreciation (depreciation)

385

 

(91

)

(211

)

83

 

Realizations and distributions

 

 

 

 

Acquired assets / Net transfers

(190

)

 

190

 

(1

)

Ending assets under management $

112,584

 

$

5,440

 

$

50,657

 

$

168,681

 

 
March 31, 2024
Beginning assets under management $

108,802

 

$

4,970

 

$

47,551

 

$

161,322

 

Gross client cash inflows

4,303

 

451

 

2,434

 

7,187

 

Gross client cash outflows

(5,956

)

(449

)

(1,909

)

(8,314

)

Net client cash flows

(1,653

)

2

 

525

 

(1,127

)

Market appreciation (depreciation)

6,796

 

215

 

3,167

 

10,178

 

Realizations and distributions

 

 

 

 

Acquired assets / Net transfers

(48

)

43

 

(26

)

(31

)

Ending assets under management $

113,897

 

$

5,229

 

$

51,217

 

$

170,342

 

 
June 30, 2023
Beginning assets under management $

103,246

 

$

5,555

 

$

44,554

 

$

153,356

 

Gross client cash inflows

3,639

 

175

 

1,908

 

5,722

 

Gross client cash outflows

(4,863

)

(421

)

(1,864

)

(7,148

)

Net client cash flows

(1,224

)

(246

)

44

 

(1,426

)

Market appreciation (depreciation)

3,923

 

(117

)

1,540

 

5,346

 

Realizations and distributions

 

 

(73

)

(73

)

Acquired assets / Net transfers

(28

)

 

(13

)

(41

)

Ending assets under management $

105,916

 

$

5,193

 

$

46,052

 

$

157,161

 

 

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 Total AUM includes both discretionary assets under management and non-discretionary assets under advisement and excludes other assets.

 

Victory Capital Holdings, Inc. and Subsidiaries

Assets Under Management by Vehicle

(unaudited; in millions)

 

 

For the Six Months Ended

By Vehicle

 

 

 

 

 

 

 

Separate

 

 

 

 

 

 

 

 

 

 

Accounts

 

 

 

 

Mutual

 

 

 

 

and Other

 

 

 

 

Funds1

 

ETFs2

 

Vehicles3

 

Total

June 30, 2024
Beginning assets under management $

108,802

 

$

4,970

 

$

47,551

 

$

161,322

 

Gross client cash inflows

7,856

 

930

 

4,468

 

13,255

 

Gross client cash outflows

(11,017

)

(627

)

(4,482

)

(16,126

)

Net client cash flows

(3,161

)

304

 

(14

)

(2,871

)

Market appreciation (depreciation)

7,181

 

124

 

2,956

 

10,261

 

Realizations and distributions

 

 

 

 

Acquired assets / Net transfers

(238

)

43

 

164

 

(31

)

Ending assets under management $

112,584

 

$

5,440

 

$

50,657

 

$

168,681

 

 
June 30, 2023
Beginning assets under management $

99,447

 

$

5,627

 

$

42,688

 

$

147,762

 

Gross client cash inflows

8,185

 

393

 

3,233

 

11,811

 

Gross client cash outflows

(10,269

)

(655

)

(3,463

)

(14,386

)

Net client cash flows

(2,084

)

(262

)

(230

)

(2,576

)

Market appreciation (depreciation)

8,573

 

(164

)

3,680

 

12,089

 

Realizations and distributions

 

 

(73

)

(73

)

Acquired assets / Net transfers4

(19

)

(9

)

(13

)

(42

)

Ending assets under management $

105,916

 

$

5,193

 

$

46,052

 

$

157,161

 

 

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 Total AUM includes both discretionary assets under management and non-discretionary assets under advisement and excludes other assets.

Information Regarding Non-GAAP Financial Measures

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

Adjusted EBITDA

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

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

Adjusted Net Income

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

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

Tax Benefit of Goodwill and Acquired Intangible Assets

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

Contacts

Investors:

Matthew Dennis, CFA

Chief of Staff

Director, Investor Relations

216-898-2412

mdennis@vcm.com

Media:

Jessica Davila

Director, Global Communications

210-694-9693

jessica_davila@vcm.com

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