Attached files
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| 8-K - 8-K - Victory Capital Holdings, Inc. | a18-8859_18k.htm |
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News Release |
VICTORY CAPITAL REPORTS FOURTH QUARTER AND FULL YEAR 2017 RESULTS
Fourth Quarter 2017 Highlights and Recent Developments(1)
· Assets under management (“AUM”) of $61.8 billion as of December 31, 2017, a 12% year-over-year increase
· Strong investment performance, with 88% of AUM outperforming their respective benchmarks over the trailing one-year period, 84% over the three- and five-year periods, and 80% over the 10-year period ended December 31, 2017
· $294 million of net client cash inflows
· $106 million in revenue, an 8% year-over-year increase
· GAAP earnings of $0.19 per diluted share and Adjusted Net Income with tax benefit per diluted share of $0.39, a 25% increase over the Adjusted Net Income with tax benefit per diluted share for the fourth quarter of 2016
· Operating margin of 25.5%, up from 6.7% in the fourth quarter of 2016
· Adjusted EBITDA margin of 37.9%, up from 32.7% in the fourth quarter of 2016
· Subsequent to year-end 2017, paid down $177 million in debt, reducing debt outstanding to $323 million
Cleveland, Ohio, March 26, 2018 — Victory Capital Holdings, Inc. (NASDAQ: VCTR) (“Victory Capital” or the “Company”) today reported its results for the fourth quarter and year ended December 31, 2017.
“Our strong results for the fourth quarter and full-year 2017 are a direct reflection of our continued commitment to delivering superior risk-adjusted investment performance to our clients,” said David Brown, Chairman and Chief Executive Officer of Victory Capital. “We have evolved our business into a next-generation, integrated multi-boutique investment management firm with nine individually branded, largely autonomous Investment Franchises. Our focus is on attracting specialist managers and providing a centralized — not standardized — operating platform that enables them to focus on the pursuit of investment excellence.
“Our progress over the last several years has included the completion of three strategic acquisitions and the development of a suite of rules-based, strategic beta ETFs — branded VictoryShares — which we believe is resonating with our clients.
“During the fourth quarter, AUM increased to $61.8 billion, reflecting positive net flows, solid market returns and strong investment results from our Investment Franchises and our VictoryShares ETFs.
“Looking ahead, we are excited about the opportunity to create long-term value for our shareholders through the disciplined execution of our long-term corporate vision, which combines strategic acquisitions with organic growth. As in the past, serving the needs of our clients remains our top priority.”
(1) Adjusted measures are non-GAAP financial measures. An explanation of these non-GAAP financial measures is included under the heading “Information Regarding Non-GAAP Financial Measures” at the end of this press release. Please see the non-GAAP reconciliation tables.
The table below presents AUM, and certain GAAP and non-GAAP (“adjusted”) financial results.
(in millions except per share amounts or as otherwise noted)
|
|
|
For the Three Months Ended |
|
For the Years Ended |
| |||||||||||
|
|
|
December 31, |
|
September 30, |
|
December 31, |
|
December 31, |
|
December 31, |
| |||||
|
|
|
2017 |
|
2017 |
|
2016 |
|
2017 |
|
2016 |
| |||||
|
Assets Under Management |
|
|
|
|
|
|
|
|
|
|
| |||||
|
Ending |
|
$ |
61,771 |
|
$ |
58,997 |
|
$ |
54,965 |
|
$ |
61,771 |
|
$ |
54,965 |
|
|
Average |
|
60,354 |
|
57,875 |
|
52,022 |
|
57,823 |
|
41,756 |
| |||||
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
|
Flows |
|
|
|
|
|
|
|
|
|
|
| |||||
|
Gross |
|
$ |
4,371 |
|
$ |
3,879 |
|
$ |
6,224 |
|
$ |
16,929 |
|
$ |
16,037 |
|
|
Net |
|
294 |
|
(778 |
) |
1,622 |
|
(1,471 |
) |
875 |
| |||||
|
Net flows excluding Diversified Equity(1) |
|
— |
|
— |
|
1,854 |
|
(853 |
) |
2,266 |
| |||||
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
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Consolidated Financial Results (GAAP) |
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|
|
|
|
|
|
|
|
|
| |||||
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Revenue |
|
$ |
105.6 |
|
$ |
102.4 |
|
$ |
98.1 |
|
$ |
409.6 |
|
$ |
297.9 |
|
|
Operating expenses |
|
78.7 |
|
78.2 |
|
91.5 |
|
319.4 |
|
273.4 |
| |||||
|
Income from operations |
|
26.9 |
|
24.2 |
|
6.6 |
|
90.2 |
|
24.5 |
| |||||
|
Operating margin |
|
25.5 |
% |
23.7 |
% |
6.7 |
% |
22.0 |
% |
8.2 |
% | |||||
|
Net income/(loss) |
|
11.2 |
|
7.9 |
|
(2.7 |
) |
25.8 |
|
(6.1 |
) | |||||
|
Earnings per diluted share |
|
$ |
0.19 |
|
$ |
0.13 |
|
$ |
(0.05 |
) |
$ |
0.43 |
|
$ |
(0.12 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
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Adjusted Performance Results (Non-GAAP)(2) |
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|
|
|
|
|
|
|
|
|
| |||||
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Adjusted EBITDA |
|
$ |
40.0 |
|
$ |
39.3 |
|
$ |
32.1 |
|
$ |
149.1 |
|
$ |
98.1 |
|
|
Adjusted EBITDA margin |
|
37.9 |
% |
38.3 |
% |
32.7 |
% |
36.4 |
% |
32.9 |
% | |||||
|
Adjusted net income |
|
18.1 |
|
17.1 |
|
12.8 |
|
62.0 |
|
39.0 |
| |||||
|
Tax benefit of goodwill and acquired intangibles |
|
5.0 |
|
4.9 |
|
4.2 |
|
19.7 |
|
16.8 |
| |||||
|
Adjusted net income with tax benefit |
|
23.1 |
|
22.0 |
|
17.0 |
|
81.7 |
|
55.8 |
| |||||
|
Adjusted net income with tax benefit per diluted share |
|
$ |
0.39 |
|
$ |
0.37 |
|
$ |
0.31 |
|
$ |
1.37 |
|
$ |
1.12 |
|
(1) In May 2017, the Company made a decision to exit the Diversified Equity Franchise; all remaining AUM was transferred to the Munder Capital Management Franchise to manage beginning May 15, 2017.
(2) Adjusted EBITDA and Adjusted Net Income are non-GAAP financial measures. Reconciliation of each of Adjusted EBITDA and Adjusted Net Income to net income/(loss) have been provided in the non-GAAP reconciliation tables in this press release. An explanation of these non-GAAP financial measures is included below under the heading “Information Regarding Non-GAAP Financial Measures.”
AUM, Flows and Investment Performance
Victory Capital’s AUM increased $2.8 billion, or 5%, to $61.8 billion at December 31, 2017, compared to $59.0 billion at September 30, 2017. The increase was primarily due to $2.6 billion in net market appreciation and net inflows of $0.3 billion. Gross flows for the fourth quarter were $4.4 billion. For the year ended December 31, 2017, AUM increased $6.8 billion, or 12%, to $61.8 billion from $55.0 billion at December 31, 2016. The increase was primarily due to $8.4 billion in net market appreciation, partially offset by $1.5 billion of net outflows (or $0.9 billion excluding the Diversified Equity Franchise). Gross flows for the year were $16.9 billion.
As of December 31, 2017, Victory Capital offered 65 investment strategies through its nine autonomous Investment Franchises and Solutions Platform. The table below presents outperformance against benchmarks by AUM and strategies as of December 31, 2017.
|
|
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Trailing 1-Year |
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Trailing 3-Years |
|
Trailing 5-Years |
|
Trailing 10-Years |
|
|
Percentage of AUM Outperforming Benchmark |
|
88 |
% |
84 |
% |
84 |
% |
80 |
% |
|
Percentage of Strategies Outperforming Benchmark |
|
74 |
% |
72 |
% |
77 |
% |
75 |
% |
Fourth Quarter of 2017 Compared to Third Quarter of 2017
For the quarter ended December 31, 2017, net income increased 43% to $11.2 million, or $0.19 per diluted share, compared to net income of $7.9 million, or $0.13 per diluted share, for the third quarter of 2017. GAAP operating margin was 25.5% for the quarter compared to 23.7% for the third quarter of 2017. Adjusted Net Income with tax benefit increased 5% to $23.1 million, or $0.39 per diluted share comprised of $0.30 per diluted share in Adjusted Net Income and $0.09 per diluted share in tax benefit, compared to $22.0 million, or $0.37 per diluted share comprised of $0.29 per diluted share in Adjusted Net Income and $0.08 per diluted share in tax benefit, for the third quarter of 2017.
Adjusted EBITDA and Adjusted EBITDA margin were $40.0 million and 37.9%, respectively, for the fourth quarter of 2017, compared to $39.3 million and 38.3%, respectively, for the third quarter of 2017. The increases in net income, Adjusted Net Income and Adjusted EBITDA resulted from higher revenue coupled with scale effects in the business. The increases in net income and Adjusted Net Income also reflected lower interest expense, primarily due to refinancing activity in August 2017.
· Revenue increased 3% to $105.6 million, compared to $102.4 million for the third quarter of 2017 due to higher average AUM, partially offset by a decrease in the realized fee rate due to asset mix.
· Operating expenses were $78.7 million, compared to $78.2 million in the third quarter of 2017.
Fourth Quarter of 2017 Compared to Fourth Quarter of 2016
For the quarter ended December 31, 2017, net income was $11.2 million, or $0.19 per diluted share, compared to a net loss of $2.7 million, or $0.05 per basic and diluted share, in the fourth quarter of 2016. GAAP operating margin was 25.5% for the quarter compared to 6.7% for the fourth quarter of 2016. Adjusted Net Income with tax benefit increased 36% to $23.1 million, or $0.39 per diluted share comprised of $0.30 per diluted share in Adjusted Net Income and $0.09 per diluted share in tax benefit, in the fourth quarter of 2017, compared to $17.0 million, or $0.31 per diluted share comprised of $0.23 per diluted share in Adjusted Net Income and $0.08 per diluted share in tax benefit, in the fourth quarter of 2016.
Adjusted EBITDA and Adjusted EBITDA margin were $40.0 million and 37.9%, respectively, for the fourth quarter of 2017, compared to $32.1 million and 32.7%, respectively, for the fourth quarter a year ago. Net income, Adjusted Net Income and Adjusted EBITDA increased due to higher revenue coupled with scale effects, the successful integration of RS Investments and, specific to net income and Adjusted Net Income, a decrease in interest expense primarily due to refinancing activity in August 2017.
· Revenue increased 8% to $105.6 million, compared to $98.1 million for the fourth quarter of 2016, due to higher average AUM, partially offset by a decrease in the realized fee rate due to asset mix.
· Operating expenses decreased 14% to $78.7 million, compared to $91.5 million in the fourth quarter of 2016, primarily due to scale effects and the successful integration of RS Investments.
Year Ended December 31, 2017 Compared to Year Ended December 31, 2016
For the year ended December 31, 2017, net income was $25.8 million, or $0.43 per diluted share, compared to a net loss of $6.1 million, or $0.12 per basic and diluted share, for 2016. GAAP operating margin was 22.0% in 2017 compared to 8.2% in 2016. Adjusted Net Income with tax benefit increased 46% to $81.7 million, or $1.37 per diluted share comprised of $1.04 per diluted share in Adjusted Net Income and $0.33 per diluted share in tax benefit in 2017, compared to $55.8 million, or $1.12 per diluted share comprised of $0.78 per diluted share in Adjusted Net Income and $0.34 per diluted share in tax benefit, in 2016.
Adjusted EBITDA and Adjusted EBITDA margin were $149.1 million and 36.4%, respectively, in 2017, compared to $98.1 million and 32.9%, respectively, in 2016.
· Revenue for the year increased 38% to $409.6 million, compared to $297.9 million in 2016 as a result of higher AUM primarily due to the acquisition of RS Investments in July 2016.
· Operating expenses increased 17% to $319.4 million, compared to $273.4 million in 2016, primarily due to the acquisition of RS Investments in July 2016.
Balance Sheet / Capital Management
Cash and cash equivalents were $12.9 million at December 31, 2017, compared to $16.4 million at December 31, 2016. The Company paid down $18.0 million of debt during the fourth quarter, resulting in aggregate debt outstanding of $499.7 million at December 31, 2017, compared to $517.7 million at September 30, 2017. The repayment of debt resulted in annualized interest expense savings of $1.2 million.
Subsequent to year-end, the Company issued 11.7 million shares of Class A common stock in an initial public offering, or IPO, for an aggregate of $143.0 million in net proceeds. The Company used the net proceeds from its IPO, together with cash on hand, to pay down debt and entered into a new $360.0 million syndicated senior credit facility. In March 2018, the Company issued an additional 1.1 million shares of Class A common stock pursuant to an underwriters’ option to purchase additional shares in the IPO for $13.5 million in net proceeds. Victory Capital used the net proceeds from the option exercise, as well as cash on hand, to repay $37.0 million of the outstanding term loan, resulting in annualized interest expense savings of approximately $1.6 million. As of March 26, 2018, aggregate debt outstanding is $323.0 million.
Impact of Tax Reform
On December 22, 2017, the Tax Cuts and Jobs Act (“Tax Act”) was enacted. The Tax Act significantly revises the U.S. corporate income tax law by, among other things, decreasing the federal corporate income tax rate from 35% to 21% effective January 1, 2018. As a result of the reduction in the corporate income tax rate, the Company is required to remeasure its U.S. net deferred taxes at December 31, 2017. The impact of the remeasurement is a one-time credit to income tax expense of $2.4 million for the three months and year ended December 31, 2017.
Effective January 1, 2018, Victory Capital estimates the impact of the Tax Act will lower the Company’s combined statutory federal income tax rate plus an estimate for state, local and foreign income taxes from approximately 38% to approximately 24%, thus lowering its income tax expense beginning in calendar year 2018. The reduction in the combined statutory federal income tax rate plus an estimate for state, local and foreign income taxes, from approximately 38% to approximately 24%, will reduce the tax benefit of goodwill and acquired intangible assets beginning in 2018.
About Victory Capital
Victory Capital is an independent investment management firm operating a next-generation, integrated multi-boutique business model with $61.8 billion in assets under management and advisement as of December 31, 2017.
Victory Capital’s differentiated model is comprised of nine Investment Franchises, each with an independent culture and investment approach. Additionally, the Company offers a rules-based Solutions Platform, featuring the VictoryShares ETF brand, as well as custom and multi-asset class solutions. The Company’s Investment Franchises and Solutions Platform are supported by a centralized distribution, marketing and operational environment, in which the investment professionals can focus on the pursuit of investment excellence.
Victory Capital provides institutions, financial advisors and retirement platforms with a variety of asset classes and investment vehicles, including separately managed accounts, collective trusts, mutual funds, ETFs and UMA/SMA vehicles.
For more information, please visit www.vcm.com.
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, 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; 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 we are not required to register as an “investment company” under the 1940 Act; the fluctuation of the Company’s expenses; the Company’s ability to respond to recent trends in the investment management industry; the level of regulation on investment management firms and the Company’s ability to respond to regulatory developments; the competitiveness of the investment management industry; the dual class structure of the Company’s common stock; the level of control over the Company retained by Crestview GP; the Company’s status as an emerging growth company and a controlled company; and other risks and factors listed under “Risk Factors” and elsewhere in the Company’s filings with the SEC.
Such forward-looking statements are based on numerous assumptions regarding Victory Capital’s present and future business strategies and the environment in which it will operate in the future. Any forward-looking statement made in this press release speaks only as of the date hereof. Except as required by law, Victory Capital assumes no obligation to update these forward-looking statements, or to update the reasons actual results could differ materially from those anticipated in the forward-looking statements, even if new information becomes available in the future.
INVESTOR RELATIONS WEBSITE
Victory Capital may use the Investor Relations section of its website, https://ir.vcm.com, to disclose material information to investors and the marketplace as a means of disclosing material, non-public information and for complying with disclosure obligations under Regulation Fair Disclosure (“Reg FD”). Victory Capital encourages investors, the media and other interested parties to visit its investor relations website regularly.
Contacts
Investors:
Lauren Crawford, 310-622-8239
lcrawford@finprofiles.com
Media:
Tricia Ross, 310-622-8226
tross@finprofiles.com
Victory Capital Holdings, Inc. and Subsidiaries
Consolidated Statements of Operations
(unaudited; in thousands except shares)
|
|
|
For the Three Months Ended |
|
For the Years Ended |
| |||||||||||
|
|
|
December 31, |
|
September 30, |
|
December 31, |
|
December 31, |
|
December 31, |
| |||||
|
|
|
2017 |
|
2017 |
|
2016 |
|
2017 |
|
2016 |
| |||||
|
Revenue |
|
|
|
|
|
|
|
|
|
|
| |||||
|
Investment management fees |
|
$ |
89,206 |
|
$ |
86,016 |
|
$ |
82,030 |
|
$ |
343,811 |
|
$ |
248,482 |
|
|
Fund administration and distribution fees |
|
16,440 |
|
16,372 |
|
16,049 |
|
65,818 |
|
49,401 |
| |||||
|
Total revenue |
|
105,646 |
|
102,388 |
|
98,079 |
|
409,629 |
|
297,883 |
| |||||
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
|
Expenses |
|
|
|
|
|
|
|
|
|
|
| |||||
|
Personnel compensation and benefits |
|
37,339 |
|
36,097 |
|
44,331 |
|
144,111 |
|
122,615 |
| |||||
|
Distribution and other asset-based expenses |
|
25,213 |
|
24,801 |
|
26,951 |
|
103,439 |
|
77,497 |
| |||||
|
General and administrative |
|
7,947 |
|
8,867 |
|
8,282 |
|
33,996 |
|
26,628 |
| |||||
|
Depreciation and amortization |
|
6,570 |
|
7,055 |
|
8,654 |
|
29,910 |
|
30,405 |
| |||||
|
Change in value of consideration payable for acquisition of business |
|
(269 |
) |
— |
|
(303 |
) |
(294 |
) |
(378 |
) | |||||
|
Acquisition-related costs |
|
659 |
|
844 |
|
944 |
|
2,094 |
|
6,619 |
| |||||
|
Restructuring and integration costs |
|
1,261 |
|
483 |
|
2,650 |
|
6,205 |
|
10,012 |
| |||||
|
Total operating expenses |
|
78,720 |
|
78,147 |
|
91,509 |
|
319,461 |
|
273,398 |
| |||||
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
|
Income from operations |
|
26,926 |
|
24,241 |
|
6,570 |
|
90,168 |
|
24,485 |
| |||||
|
Operating margin |
|
25.5 |
% |
23.7 |
% |
6.7 |
% |
22.0 |
% |
8.2 |
% | |||||
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
|
Other income (expense) |
|
|
|
|
|
|
|
|
|
|
| |||||
|
Interest income and other income/(expense) |
|
(2,097 |
) |
753 |
|
596 |
|
(2,913 |
) |
1,086 |
| |||||
|
Interest expense and other financing costs |
|
(10,308 |
) |
(12,018 |
) |
(11,265 |
) |
(48,797 |
) |
(34,642 |
) | |||||
|
Total other income (expense), net |
|
(12,405 |
) |
(11,265 |
) |
(10,669 |
) |
(51,710 |
) |
(33,556 |
) | |||||
|
Income/(loss) before income taxes |
|
14,521 |
|
12,976 |
|
(4,099 |
) |
38,458 |
|
(9,071 |
) | |||||
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
|
Income tax (expense)/benefit |
|
(3,312 |
) |
(5,126 |
) |
1,411 |
|
(12,632 |
) |
3,000 |
| |||||
|
Net income/(loss) |
|
$ |
11,209 |
|
$ |
7,850 |
|
$ |
(2,688 |
) |
$ |
25,826 |
|
$ |
(6,071 |
) |
|
Earnings per share - basic |
|
$ |
0.20 |
|
$ |
0.14 |
|
$ |
(0.05 |
) |
$ |
0.47 |
|
$ |
(0.12 |
) |
|
Earnings per share - diluted |
|
0.19 |
|
0.13 |
|
(0.05 |
) |
0.43 |
|
(0.12 |
) | |||||
|
Weighted average shares outstanding - basic |
|
55,119,711 |
|
54,961,161 |
|
54,824,510 |
|
54,930,852 |
|
50,017,712 |
| |||||
|
Weighted average shares outstanding - diluted |
|
59,768,134 |
|
59,738,176 |
|
54,824,510 |
|
59,577,348 |
|
50,017,712 |
| |||||
|
Dividends declared per share |
|
$ |
0.23 |
|
$ |
— |
|
$ |
— |
|
$ |
2.42 |
|
$ |
— |
|
Victory Capital Holdings, Inc. and Subsidiaries
Reconcilation of GAAP to Non-GAAP Measures
(unaudited; in thousands except shares)
|
|
|
For the Three Months Ended |
|
For the Years Ended |
| |||||||||||
|
|
|
December 31, |
|
September 30, |
|
December 31, |
|
December 31, |
|
December 31, |
| |||||
|
|
|
2017 |
|
2017 |
|
2016 |
|
2017 |
|
2016 |
| |||||
|
Net income / (loss) |
|
$ |
11,209 |
|
$ |
7,850 |
|
$ |
(2,688 |
) |
$ |
25,826 |
|
$ |
(6,071 |
) |
|
GAAP income tax (expense) / benefit |
|
(3,312 |
) |
(5,126 |
) |
1,411 |
|
(12,632 |
) |
3,000 |
| |||||
|
Income / (loss) before taxes |
|
$ |
14,521 |
|
$ |
12,976 |
|
$ |
(4,099 |
) |
$ |
38,458 |
|
$ |
(9,071 |
) |
|
Interest expense / (income) |
|
9,328 |
|
10,648 |
|
10,324 |
|
44,330 |
|
31,286 |
| |||||
|
Depreciation |
|
895 |
|
858 |
|
930 |
|
3,561 |
|
3,156 |
| |||||
|
Other business taxes |
|
428 |
|
619 |
|
397 |
|
1,887 |
|
1,137 |
| |||||
|
GAAP amortization of acquisition-related intangibles |
|
5,676 |
|
6,197 |
|
7,725 |
|
26,349 |
|
27,250 |
| |||||
|
Stock-based compensation |
|
1,740 |
|
4,060 |
|
2,221 |
|
11,752 |
|
8,827 |
| |||||
|
Acquisition, restructuring and exit costs |
|
6,001 |
|
1,241 |
|
6,729 |
|
15,041 |
|
23,025 |
| |||||
|
Debt issuance costs |
|
788 |
|
2,419 |
|
862 |
|
6,035 |
|
2,749 |
| |||||
|
Pre-IPO governance expenses |
|
347 |
|
301 |
|
300 |
|
1,248 |
|
1,181 |
| |||||
|
Earnings/losses from equity method investments |
|
319 |
|
(65 |
) |
— |
|
427 |
|
— |
| |||||
|
Compensation in excess of expected levels due to acquisitions |
|
— |
|
— |
|
6,678 |
|
— |
|
8,534 |
| |||||
|
Adjusted EBITDA |
|
$ |
40,043 |
|
$ |
39,254 |
|
$ |
32,067 |
|
$ |
149,088 |
|
$ |
98,074 |
|
|
Adjusted EBITDA margin |
|
37.9 |
% |
38.3 |
% |
32.7 |
% |
36.4 |
% |
32.9 |
% | |||||
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
|
Net income / loss |
|
$ |
11,209 |
|
$ |
7,850 |
|
$ |
(2,688 |
) |
$ |
25,826 |
|
$ |
(6,071 |
) |
|
Adjustment to reflect the operating performance of the Company |
|
|
|
|
|
|
|
|
|
|
| |||||
|
i. Other business taxes |
|
428 |
|
619 |
|
397 |
|
1,887 |
|
1,137 |
| |||||
|
ii. GAAP amortization of acquisition-related intangibles |
|
5,676 |
|
6,197 |
|
7,725 |
|
26,349 |
|
27,250 |
| |||||
|
iii. Stock-based compensation |
|
1,740 |
|
4,060 |
|
2,221 |
|
11,752 |
|
8,827 |
| |||||
|
iv. Acquisition, restructuring and exit costs |
|
6,001 |
|
1,241 |
|
6,729 |
|
15,041 |
|
23,025 |
| |||||
|
v. Debt issuance costs |
|
788 |
|
2,419 |
|
862 |
|
6,035 |
|
2,749 |
| |||||
|
vi. Pre-IPO governance expenses |
|
347 |
|
301 |
|
300 |
|
1,248 |
|
1,181 |
| |||||
|
vii. Compensation in excess of expected levels due to acquisition |
|
— |
|
— |
|
6,678 |
|
— |
|
8,534 |
| |||||
|
Tax effect of above adjustments |
|
(5,692 |
) |
(5,638 |
) |
(9,467 |
) |
(23,678 |
) |
(27,627 |
) | |||||
|
viii. Remeasurement of net deferred taxes |
|
(2,422 |
) |
— |
|
— |
|
(2,422 |
) |
— |
| |||||
|
Adjusted net income |
|
$ |
18,075 |
|
$ |
17,049 |
|
$ |
12,757 |
|
$ |
62,038 |
|
$ |
39,005 |
|
|
Adjusted net income per diluted share |
|
$ |
0.30 |
|
$ |
0.29 |
|
$ |
0.23 |
|
$ |
1.04 |
|
$ |
0.78 |
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
|
Tax benefit of goodwill and acquired intangibles |
|
$ |
4,998 |
|
$ |
4,901 |
|
$ |
4,197 |
|
$ |
19,691 |
|
$ |
16,786 |
|
|
Tax benefit of goodwill and acquired intangibles per diluted share |
|
$ |
0.09 |
|
$ |
0.08 |
|
$ |
0.08 |
|
$ |
0.33 |
|
$ |
0.34 |
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
|
Adjusted net income with tax benefit |
|
$ |
23,073 |
|
$ |
21,950 |
|
$ |
16,954 |
|
$ |
81,729 |
|
$ |
55,791 |
|
|
Adjusted net income with tax benefit per diluted share |
|
$ |
0.39 |
|
$ |
0.37 |
|
$ |
0.31 |
|
$ |
1.37 |
|
$ |
1.12 |
|
Victory Capital Holdings, Inc. and Subsidiaries
Consolidated Balance Sheets
(In thousands, except for shares)
|
|
|
December 31, 2017 |
|
December 31, 2016 |
| ||
|
ASSETS |
|
|
|
|
| ||
|
Cash and cash equivalents |
|
$ |
12,921 |
|
$ |
16,441 |
|
|
Investment management fees receivable |
|
42,264 |
|
43,597 |
| ||
|
Fund administration and distribution fees receivable |
|
3,925 |
|
4,604 |
| ||
|
Other receivables |
|
9,728 |
|
35,669 |
| ||
|
Prepaid expenses |
|
5,441 |
|
4,208 |
| ||
|
Available-for-sale securities, at fair value |
|
677 |
|
525 |
| ||
|
Trading securities, at fair value |
|
10,659 |
|
5,638 |
| ||
|
Property and equipment, net |
|
8,844 |
|
9,544 |
| ||
|
Goodwill |
|
284,108 |
|
284,108 |
| ||
|
Other intangible assets, net |
|
408,000 |
|
434,349 |
| ||
|
Deferred tax asset, net |
|
— |
|
7,452 |
| ||
|
Other assets |
|
6,055 |
|
4,816 |
| ||
|
Total assets |
|
$ |
792,622 |
|
$ |
850,951 |
|
|
|
|
|
|
|
| ||
|
LIABILITIES AND STOCKHOLDERS’ EQUITY |
|
|
|
|
| ||
|
Accounts payable |
|
$ |
327 |
|
$ |
3,712 |
|
|
Accrued compensation and benefits |
|
29,305 |
|
40,539 |
| ||
|
Accrued expenses |
|
21,669 |
|
27,535 |
| ||
|
Consideration payable for acquisition of business |
|
9,856 |
|
17,267 |
| ||
|
Deferred compensation plan liability |
|
10,659 |
|
5,638 |
| ||
|
Deferred tax liability, net |
|
4,068 |
|
— |
| ||
|
Other liabilities |
|
2,330 |
|
6,734 |
| ||
|
Long-term debt(1) |
|
483,225 |
|
418,528 |
| ||
|
Total liabilities |
|
561,439 |
|
519,953 |
| ||
|
|
|
|
|
|
| ||
|
Stockholders’ equity: |
|
|
|
|
| ||
|
Common stock, par value $0.01 per share; 2017— 78,837,300 shares authorized, 57,182,730 shares issued and 55,118,673 shares outstanding; 2016—78,837,300 shares authorized, 56,505,321 shares issued and 54,785,792 shares outstanding |
|
572 |
|
565 |
| ||
|
Additional paid-in capital |
|
435,334 |
|
421,747 |
| ||
|
Treasury stock, at cost: 2017— 2,064,057 shares; 2016— 1,719,529 shares |
|
(20,899 |
) |
(16,245 |
) | ||
|
Accumulated other comprehensive loss |
|
64 |
|
(537 |
) | ||
|
Retained deficit |
|
(183,888 |
) |
(74,532 |
) | ||
|
Total stockholders’ equity |
|
231,183 |
|
330,998 |
| ||
|
Total liabilities and stockholders’ equity |
|
$ |
792,622 |
|
$ |
850,951 |
|
(1) Balance at December 31, 2017 is shown net of unamortized loan discount and debt issuance costs in the amount of $16.5 million. The gross amount of the debt outstanding was $499.7 million.
Victory Capital Holdings, Inc. and Subsidiaries
Assets Under Management
(unaudited; in millions)
|
|
|
For the Three Months Ended |
|
% Change from |
| |||||||||
|
|
|
December 31, |
|
September 30, |
|
December 31, |
|
September 30, |
|
December 31, |
| |||
|
|
|
2017 |
|
2017 |
|
2016 |
|
2017 |
|
2016 |
| |||
|
Beginning assets under management |
|
$ |
58,997 |
|
$ |
56,973 |
|
$ |
51,356 |
|
4 |
% |
15 |
% |
|
Gross client cash inflows |
|
4,371 |
|
3,879 |
|
6,224 |
|
13 |
% |
-30 |
% | |||
|
Gross client cash outflows |
|
(4,077 |
) |
(4,658 |
) |
(4,602 |
) |
-12 |
% |
-11 |
% | |||
|
Net client cash flows |
|
294 |
|
(778 |
) |
1,622 |
|
N/M |
|
-82 |
% | |||
|
Market appreciation (depreciation) |
|
2,575 |
|
2,802 |
|
2,044 |
|
-8 |
% |
26 |
% | |||
|
Net transfers |
|
(95 |
) |
(0 |
) |
(56 |
) |
N/M |
|
70 |
% | |||
|
Ending assets under management |
|
61,771 |
|
58,997 |
|
54,965 |
|
5 |
% |
12 |
% | |||
|
Average assets under management |
|
60,354 |
|
57,875 |
|
52,022 |
|
4 |
% |
16 |
% | |||
|
Net client cash flows excluding Diversified Equity |
|
294 |
|
(778 |
) |
1,854 |
|
N/M |
|
-84 |
% | |||
|
|
|
For the Years Ended |
|
% Change from |
| ||||
|
|
|
December 31, |
|
December 31, |
|
December 31, |
| ||
|
|
|
2017 |
|
2016 |
|
2016 |
| ||
|
Beginning assets under management |
|
$ |
54,965 |
|
$ |
33,111 |
|
66 |
% |
|
Gross client cash inflows |
|
16,929 |
|
16,037 |
|
6 |
% | ||
|
Gross client cash outflows |
|
(18,400 |
) |
(15,162 |
) |
21 |
% | ||
|
Net client cash flows |
|
(1,471 |
) |
875 |
|
N/M |
| ||
|
Market appreciation (depreciation) |
|
8,372 |
|
4,393 |
|
91 |
% | ||
|
Net transfers |
|
(95 |
) |
16,587 |
|
N/M |
| ||
|
Ending assets under management |
|
61,771 |
|
54,965 |
|
12 |
% | ||
|
Average assets under management |
|
57,823 |
|
41,756 |
|
38 |
% | ||
|
Net client cash flows excluding Diversified Equity |
|
(853 |
) |
2,266 |
|
N/M |
| ||
Victory Capital Holdings, Inc. and Subsidiaries
Assets Under Management by Asset Class
(unaudited; in millions)
|
|
|
By Asset Class |
| |||||||||||||||||||||||||
|
For the Three Months Ended |
|
U.S. Large |
|
U.S. Mid |
|
U.S. Small |
|
Global / |
|
Fixed |
|
Commodity |
|
Solutions |
|
Other |
|
Total |
| |||||||||
|
December 31, 2017 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
|
Beginning assets under management |
|
$ |
4,806 |
|
$ |
23,389 |
|
$ |
14,833 |
|
$ |
3,735 |
|
$ |
7,777 |
|
$ |
1,517 |
|
$ |
2,591 |
|
$ |
349 |
|
$ |
58,997 |
|
|
Gross client cash inflows |
|
57 |
|
2,335 |
|
716 |
|
366 |
|
403 |
|
71 |
|
377 |
|
46 |
|
4,371 |
| |||||||||
|
Gross client cash outflows |
|
(282 |
) |
(1,819 |
) |
(873 |
) |
(211 |
) |
(654 |
) |
(154 |
) |
(62 |
) |
(22 |
) |
(4,077 |
) | |||||||||
|
Net client cash flows |
|
(225 |
) |
515 |
|
(158 |
) |
155 |
|
(251 |
) |
(83 |
) |
315 |
|
24 |
|
294 |
| |||||||||
|
Market appreciation (depreciation) |
|
210 |
|
1,281 |
|
633 |
|
232 |
|
68 |
|
(16 |
) |
150 |
|
18 |
|
2,575 |
| |||||||||
|
Net transfers |
|
(1 |
) |
0 |
|
0 |
|
(18 |
) |
(43 |
) |
0 |
|
(28 |
) |
(5 |
) |
(95 |
) | |||||||||
|
Ending assets under management |
|
4,789 |
|
25,185 |
|
15,308 |
|
4,105 |
|
7,551 |
|
1,419 |
|
3,028 |
|
386 |
|
61,771 |
| |||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
|
September 30, 2017 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
|
Beginning assets under management |
|
$ |
4,825 |
|
$ |
22,390 |
|
$ |
14,452 |
|
$ |
3,606 |
|
$ |
7,708 |
|
$ |
1,421 |
|
$ |
2,230 |
|
$ |
340 |
|
$ |
56,973 |
|
|
Gross client cash inflows |
|
36 |
|
1,772 |
|
997 |
|
195 |
|
484 |
|
55 |
|
324 |
|
17 |
|
3,879 |
| |||||||||
|
Gross client cash outflows |
|
(185 |
) |
(1,766 |
) |
(1,612 |
) |
(348 |
) |
(512 |
) |
(145 |
) |
(52 |
) |
(39 |
) |
(4,658 |
) | |||||||||
|
Net client cash flows |
|
(149 |
) |
6 |
|
(615 |
) |
(153 |
) |
(28 |
) |
(89 |
) |
272 |
|
(22 |
) |
(778 |
) | |||||||||
|
Market appreciation (depreciation) |
|
131 |
|
993 |
|
995 |
|
283 |
|
95 |
|
185 |
|
88 |
|
31 |
|
2,802 |
| |||||||||
|
Net transfers |
|
(0 |
) |
0 |
|
0 |
|
0 |
|
1 |
|
0 |
|
0 |
|
(1 |
) |
(0 |
) | |||||||||
|
Ending assets under management |
|
4,806 |
|
23,389 |
|
14,833 |
|
3,735 |
|
7,777 |
|
1,517 |
|
2,591 |
|
349 |
|
58,997 |
| |||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
|
December 31, 2016 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
|
Beginning assets under management |
|
$ |
6,320 |
|
$ |
16,934 |
|
$ |
13,010 |
|
$ |
3,581 |
|
$ |
7,969 |
|
$ |
1,865 |
|
$ |
1,436 |
|
$ |
241 |
|
$ |
51,356 |
|
|
Gross client cash inflows |
|
64 |
|
3,953 |
|
1,068 |
|
203 |
|
578 |
|
107 |
|
244 |
|
6 |
|
6,224 |
| |||||||||
|
Gross client cash outflows |
|
(447 |
) |
(1,570 |
) |
(1,357 |
) |
(138 |
) |
(762 |
) |
(209 |
) |
(104 |
) |
(17 |
) |
(4,602 |
) | |||||||||
|
Net client cash flows |
|
(382 |
) |
2,383 |
|
(289 |
) |
65 |
|
(184 |
) |
(101 |
) |
140 |
|
(10 |
) |
1,622 |
| |||||||||
|
Market appreciation (depreciation) |
|
(16 |
) |
768 |
|
1,368 |
|
(187 |
) |
(62 |
) |
118 |
|
55 |
|
(1 |
) |
2,044 |
| |||||||||
|
Net transfers |
|
$ |
(0 |
) |
$ |
(2 |
) |
$ |
0 |
|
$ |
0 |
|
$ |
3 |
|
$ |
0 |
|
$ |
(56 |
) |
$ |
(0 |
) |
(56 |
) | |
|
Ending assets under management |
|
5,921 |
|
20,083 |
|
14,090 |
|
3,460 |
|
7,726 |
|
1,882 |
|
1,575 |
|
229 |
|
54,965 |
| |||||||||
Victory Capital Holdings, Inc. and Subsidiaries
Assets Under Management by Asset Class
(unaudited; in millions)
|
|
|
By Asset Class |
| |||||||||||||||||||||||||
|
Years Ended |
|
U.S. Large |
|
U.S. Mid |
|
U.S. Small |
|
Global / |
|
Fixed |
|
Commodity |
|
Solutions |
|
Other |
|
Total |
| |||||||||
|
December 31, 2017 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
|
Beginning assets under management |
|
$ |
5,921 |
|
$ |
20,083 |
|
$ |
14,090 |
|
$ |
3,460 |
|
$ |
7,726 |
|
$ |
1,882 |
|
$ |
1,575 |
|
$ |
229 |
|
$ |
54,965 |
|
|
Gross client cash inflows |
|
230 |
|
8,622 |
|
3,613 |
|
924 |
|
1,777 |
|
305 |
|
1,342 |
|
116 |
|
16,929 |
| |||||||||
|
Gross client cash outflows |
|
(1,702 |
) |
(7,299 |
) |
(4,722 |
) |
(1,333 |
) |
(2,240 |
) |
(778 |
) |
(213 |
) |
(113 |
) |
(18,400 |
) | |||||||||
|
Net client cash flows |
|
(1,472 |
) |
1,323 |
|
(1,109 |
) |
(410 |
) |
(462 |
) |
(473 |
) |
1,129 |
|
3 |
|
(1,471 |
) | |||||||||
|
Market appreciation (depreciation) |
|
347 |
|
3,778 |
|
2,327 |
|
1,073 |
|
388 |
|
10 |
|
352 |
|
96 |
|
8,372 |
| |||||||||
|
Net transfers |
|
(7 |
) |
1 |
|
0 |
|
(18 |
) |
(101 |
) |
0 |
|
(28 |
) |
57 |
|
(95 |
) | |||||||||
|
Ending assets under management |
|
4,789 |
|
25,185 |
|
15,308 |
|
4,105 |
|
7,551 |
|
1,419 |
|
3,028 |
|
386 |
|
61,771 |
| |||||||||
|
Net client cash flows excluding Diversified Equity |
|
(854 |
) |
1,323 |
|
(1,109 |
) |
(410 |
) |
(462 |
) |
(473 |
) |
1,129 |
|
3 |
|
(853 |
) | |||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
|
December 31, 2016 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
|
Beginning assets under management |
|
$ |
5,763 |
|
$ |
12,396 |
|
$ |
6,500 |
|
$ |
2,114 |
|
$ |
5,058 |
|
$ |
— |
|
$ |
953 |
|
$ |
327 |
|
$ |
33,111 |
|
|
Gross client cash inflows |
|
276 |
|
8,965 |
|
3,263 |
|
1,021 |
|
1,639 |
|
169 |
|
691 |
|
12 |
|
16,037 |
| |||||||||
|
Gross client cash outflows |
|
(1,962 |
) |
(5,898 |
) |
(3,341 |
) |
(537 |
) |
(2,400 |
) |
(500 |
) |
(491 |
) |
(34 |
) |
(15,162 |
) | |||||||||
|
Net client cash flows |
|
(1,686 |
) |
3,067 |
|
(78 |
) |
484 |
|
(761 |
) |
(330 |
) |
201 |
|
(22 |
) |
875 |
| |||||||||
|
Market appreciation (depreciation) |
|
(243 |
) |
1,961 |
|
2,307 |
|
9 |
|
107 |
|
102 |
|
139 |
|
11 |
|
4,393 |
| |||||||||
|
Net transfers |
|
2,087 |
|
2,658 |
|
5,360 |
|
852 |
|
3,323 |
|
2,110 |
|
283 |
|
(87 |
) |
16,587 |
| |||||||||
|
Ending assets under management |
|
5,921 |
|
20,083 |
|
14,090 |
|
3,460 |
|
7,726 |
|
1,882 |
|
1,575 |
|
229 |
|
54,965 |
| |||||||||
|
Net client cash flows excluding Diversified Equity |
|
(295 |
) |
3,067 |
|
(78 |
) |
484 |
|
(761 |
) |
(330 |
) |
201 |
|
(22 |
) |
2,266 |
| |||||||||
Victory Capital Holdings, Inc. and Subsidiaries
Assets Under Management by Vehicle
(unaudited; in millions)
|
|
|
By Vehicle |
| ||||||||||
|
For the Three Months Ended |
|
Mutual |
|
ETFs |
|
Other(2) |
|
Total |
| ||||
|
December 31, 2017 |
|
|
|
|
|
|
|
|
| ||||
|
Beginning assets under management |
|
$ |
37,341 |
|
$ |
1,875 |
|
$ |
19,782 |
|
$ |
58,997 |
|
|
Gross client cash inflows |
|
2,264 |
|
278 |
|
1,829 |
|
4,371 |
| ||||
|
Gross client cash outflows |
|
(3,121 |
) |
(16 |
) |
(941 |
) |
(4,077 |
) | ||||
|
Net client cash flows |
|
(857 |
) |
262 |
|
889 |
|
294 |
| ||||
|
Market appreciation (depreciation) |
|
1,577 |
|
113 |
|
886 |
|
2,575 |
| ||||
|
Net transfers |
|
(93 |
) |
— |
|
(2 |
) |
(95 |
) | ||||
|
Ending assets under management |
|
37,967 |
|
2,250 |
|
21,555 |
|
61,771 |
| ||||
|
|
|
|
|
|
|
|
|
|
| ||||
|
September 30, 2017 |
|
|
|
|
|
|
|
|
| ||||
|
Beginning assets under management |
|
$ |
36,133 |
|
$ |
1,578 |
|
$ |
19,263 |
|
$ |
56,973 |
|
|
Gross client cash inflows |
|
2,759 |
|
238 |
|
883 |
|
3,879 |
| ||||
|
Gross client cash outflows |
|
(3,479 |
) |
(2 |
) |
(1,177 |
) |
(4,658 |
) | ||||
|
Net client cash flows |
|
(720 |
) |
236 |
|
(294 |
) |
(778 |
) | ||||
|
Market appreciation (depreciation) |
|
1,927 |
|
61 |
|
813 |
|
2,802 |
| ||||
|
Net transfers |
|
— |
|
— |
|
— |
|
— |
| ||||
|
Ending assets under management |
|
37,341 |
|
1,875 |
|
19,782 |
|
58,997 |
| ||||
|
|
|
|
|
|
|
|
|
|
| ||||
|
December 31, 2016 |
|
|
|
|
|
|
|
|
| ||||
|
Beginning assets under management |
|
$ |
32,301 |
|
$ |
664 |
|
$ |
18,392 |
|
$ |
51,356 |
|
|
Gross client cash inflows |
|
3,455 |
|
212 |
|
2,557 |
|
6,224 |
| ||||
|
Gross client cash outflows |
|
(3,189 |
) |
(2 |
) |
(1,412 |
) |
(4,602 |
) | ||||
|
Net client cash flows |
|
266 |
|
210 |
|
1,145 |
|
1,622 |
| ||||
|
Market appreciation (depreciation) |
|
1,486 |
|
32 |
|
526 |
|
557 |
| ||||
|
Net transfers |
|
(78 |
) |
— |
|
22 |
|
(56 |
) | ||||
|
Ending assets under management |
|
33,975 |
|
906 |
|
20,085 |
|
54,965 |
| ||||
(1) Includes institutional and retail share classes.
(2) Includes institutional separate accounts, collective trust funds, wrap program separate accounts and unified managed accounts or UMAs.
Victory Capital Holdings, Inc. and Subsidiaries
Assets Under Management by Vehicle
(unaudited; in millions)
|
|
|
By Vehicle |
| ||||||||||
|
Years Ended |
|
Mutual |
|
ETFs |
|
Other(2) |
|
Total |
| ||||
|
December 31, 2017 |
|
|
|
|
|
|
|
|
| ||||
|
Beginning assets under management |
|
$ |
33,975 |
|
$ |
906 |
|
$ |
20,085 |
|
$ |
54,965 |
|
|
Gross client cash inflows |
|
11,922 |
|
1,111 |
|
3,896 |
|
16,929 |
| ||||
|
Gross client cash outflows |
|
(13,259 |
) |
(20 |
) |
(5,121 |
) |
(18,400 |
) | ||||
|
Net client cash flows |
|
(1,337 |
) |
1,091 |
|
(1,225 |
) |
(1,471 |
) | ||||
|
Market appreciation (depreciation) |
|
5,427 |
|
253 |
|
2,692 |
|
8,372 |
| ||||
|
Net transfers |
|
(98 |
) |
— |
|
3 |
|
(95 |
) | ||||
|
Ending assets under management |
|
37,967 |
|
2,250 |
|
21,555 |
|
61,771 |
| ||||
|
Net client cash flows excluding Diversified Equity |
|
(1,180 |
) |
1,091 |
|
(764 |
) |
(853 |
) | ||||
|
|
|
|
|
|
|
|
|
|
| ||||
|
December 31, 2016 |
|
|
|
|
|
|
|
|
| ||||
|
Beginning assets under management |
|
$ |
17,103 |
|
$ |
353 |
|
$ |
15,655 |
|
$ |
33,111 |
|
|
Gross client cash inflows |
|
10,388 |
|
536 |
|
5,112 |
|
16,037 |
| ||||
|
Gross client cash outflows |
|
(9,703 |
) |
(61 |
) |
(5,397 |
) |
(15,162 |
) | ||||
|
Net client cash flows |
|
685 |
|
475 |
|
(285 |
) |
875 |
| ||||
|
Market appreciation (depreciation) |
|
3,144 |
|
77 |
|
1,171 |
|
4,393 |
| ||||
|
Net transfers |
|
13,043 |
|
— |
|
3,543 |
|
16,587 |
| ||||
|
Ending assets under management |
|
33,975 |
|
906 |
|
20,085 |
|
54,965 |
| ||||
|
Net client cash flows excluding Diversified Equity |
|
1,127 |
|
475 |
|
664 |
|
2,266 |
| ||||
(1) Includes institutional and retail share classes.
(2) Includes institutional separate accounts, collective trust funds, wrap program separate accounts and unified managed accounts or UMAs.
Information Regarding Non-GAAP Financial Measures
Victory Capital uses non-GAAP financial measures referred to as Adjusted EBITDA and Adjusted Net Income to measure the operating profitability of the business. These measures eliminate the impact of one-time acquisition, restructuring and integration costs and demonstrate the ongoing operating earnings metrics of the business. 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 are:
· Adding back interest paid on debt net of interest income;
· Adding back depreciation on property and equipment;
· Adding back other business taxes;
· Adding back GAAP amortization of acquisition-related intangibles;
· Adding back the expense associated with stock-based compensation associated with equity issued from pools that were created in connection with the management-led buyout with Crestview GP from KeyCorp, the Munder Acquisition and the RS Acquisition and as a result of any equity grants related to the IPO;
· Adding back direct incremental costs of acquisitions and the IPO, including expenses associated with third-party advisors, proxy solicitations of mutual fund shareholders for transaction consents, vendor contract early termination costs, impairment of receivables recorded in connection with an acquisition and severance, retention and transaction incentive compensation;
· Adding back debt issuance costs;
· Adding back pre-IPO governance expenses paid to the Company’s private equity partners that terminated as of the completion of the IPO;
· Adjusting for earnings/losses on equity method investments; and
· Adding back annual incentive compensation paid in excess of expected levels due to acquisitions.
Adjusted Net Income
Adjustments made to GAAP net income to calculate Adjusted Net Income are:
· Adding back other business taxes;
· Adding back GAAP amortization of acquisition-related intangibles;
· Adding back the expense associated with stock-based compensation associated with equity issued from pools that were created in connection with the management-led buyout with Crestview GP from KeyCorp, the Munder Acquisition and the RS Acquisition and as a result of any equity grants related to the IPO;
· Adding back direct incremental costs of acquisitions and the IPO, including expenses associated with third-party advisors, proxy solicitations of mutual fund shareholders for transaction consents, vendor contract early termination costs, impairment of receivables recorded in connection with an acquisition and severance, retention and transaction incentive compensation;
· Adding back debt issuance costs;
· Adding back pre-IPO governance expenses paid to the Company’s private equity partners that terminated as of the completion of the IPO;
· Adding back annual incentive compensation paid in excess of expected levels due to acquisitions;
· Subtracting an estimate of income tax expense on the adjustments; and
· Subtracting the impact of remeasuring the U.S. net deferred taxes under the Tax Act.
Tax Benefit of Goodwill and Acquired Intangibles
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 intangibles represents the tax benefits associated with deductions allowed for intangibles 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 intangibles with a step-up in tax basis.