Victory Capital Holdings, Inc. Class A Common Stock · NASDAQ:VCTR
Victory Capital Holdings, Inc. Class A Common Stock — Q4 2020 Earnings Presentation
35 slides from Victory Capital Holdings, Inc. Class A Common Stock's earnings presentation, Feb 11, 2021
Slide 1: Fourth Quarter 2020 Earnings Presentation
Fourth Quarter 2020 Earnings Presentation February 11, 2021
Slide 2: Forward Looking Statements
Forward Looking Statements This presentation may contain “forward-looking” statements that are based on our beliefs and assumptions and on information currently available to us. Forward-looking statements include information concerning our possible or assumed future results of operations, business s
Slide 3: Agenda
Agenda Quarterly Business Overview The Year 2020 in Review Investment Performance Fourth Quarter and Full–Year 2020 Financial Results Appendix 3
Slide 4: Quarterly Business Overview
Victory Quarterly Business Overview
Slide 5: Quarterly Business Overview
Quarterly Business Overview AUM & FLOWS • At Dec. 31, 2020, total AUM of $147.2Bn Up 11% from Sep. 30, 2020 • Record high long-term AUM at year end of $143.7Bn • Total LT gross flows up 12% to $5.7Bn in 4Q 2020, compared with 3Q 2020 Improving net flows vs. prior three quarters 4Q OPERATING • Re
Slide 6: The Year 2020 in Review
The Year 2020 in Review 6
Slide 7: The Year 2020 in Review
The Year 2020 in Review FULL-YEAR • Total AUM at year end 2020 was $147.2Bn OPERATING Ended year with record-high long-term AUM of $143.7Bn & FINANCIAL • Record gross flows and improving net flows, as year progressed HIGHLIGHTS • Record $3.87 Adjusted Net Income with tax benefit per diluted share
Slide 8: The Year 2020 in Review
The Year 2020 in Review STATED OBJECTIVES TANGIBLE RESULTS During 2018 IPO Today USAA® AMCO acquisition earnings accretion >100% Make Accretive Acquisitions & THB Asset Management closing in 1Q 2021 Increase Scale AUM up >100%, enhancing operating efficiencies Acquired Fixed Income, Solutions, and E
Slide 9: The Year 2020 in Review: Direct Business and USAA Investments Franchise
The Year 2020 in Review Direct Business and USAA® Investments Franchise DIGITAL • Referral agreement with USAA MARKETPLACE Approximately 115K new account registrations since acquisition • USAA 529 College Savings Plan Positive net new account growth and net asset inflows during 2020 and since th
Slide 10: THB Asset Management Acquisition
The Year 2020 in Review THB Asset Management Acquisition ACQUISITION • On schedule to close in 1Q 2021 UPDATE • Tenth Investment Franchise • Full ESG integration in investment process • All strategies outperformed benchmarks for 1-, 3-, and 5-year periods • Continued strong investment performance
Slide 11: Investment Performance
Victory Investment Performance 11
Slide 12: Commitment to Long-Term Investment Performance
Commitment to Long-Term Investment Performance Total Mutual Total Mutual Funds 44 Funds and ETFs with 4- or 5-Star overall ratings 64% and ETFs AUM with 4- or 5-Star overall ratings % of AUM outperforming benchmarks % of strategies outperforming benchmarks 80% 76% 80% 67% 67% 67% 65% 60% 60% 52% 47%
Slide 13: Fourth Quarter 2020 Financial Results
Fourth Quarter 2020 Financial Results 13
Slide 14: Fourth Quarter 2020 Financial Results
Fourth Quarter 2020 Financial Results FOURTH • $200.4MM revenue QUARTER Up 6% from 3Q 2020 FINANCIAL • Record high Adjusted EBITDA Margin of 52% • GAAP operating margin of 39% RESULTS Down 390 bps from 3Q 2020 Up 940 bps from 4Q 2019 • GAAP Earnings per diluted share of $0.75 Down $0.01 from
Slide 15: Assets Under Management
Assets Under Management $Bn • Total AUM of $147.2Bn at Dec. 31, 2020 ˃ Up($mm) 11% from Sep. 30, 2020 Retail Institutional Direct • Diversified distribution channels ˃ Retail $147.2 ˃ Institutional $129.1 $132.7 ˃ Direct $123.8 1Q20 2Q20 3Q20 4Q20 Assets under management are as of the end of the res
Slide 16: Long-Term Asset Flows
Long-Term Asset Flows $Bn 4Q 2020 Gross LT Sales Gross LT Redemptions • Gross LT sales of $5.7Bn 3/31/18 ($mm) • LT net outflows $1.5Bn $7.3 $5.2 $5.7 • Multiple franchises/strategies $5.1 generated long-term net inflows in 4Q & FY2020: ˃ INCORE ˃ Trivalent ˃ Sophus ˃ RS Global Operating Metrics 1Q2
Slide 17: Revenues
Revenues ($mm) 3/31/18 $MM 9/30/17 • 4Q 2020 revenue $200MM Up 6%, vs 3Q 2020 $204.4 $200.4 • FY2020 record high revenue of $775MM $105.0 $188.7 $181.9 Up 27% vs 2019 • Average FY2020 fee rate of 56.8bps Operating Metrics 1Q20 2Q20 3Q20 4Q20 Average AUM ($Bn) $144.1 $128.9 $133.1 $139.6 Average
Slide 18: Expenses
Expenses 3/31/18 $MM • 4Q 2020 Total expenses increased $11.9 million vs 3Q 9/30/17 Driven primarily by $8.1 million $130.4 increase in acquisition-related, $122.7 $127.8 restructuring and integration $115.9 expenses o Non-cash accounting adjustment of book value for contingent earnout payments to
Slide 19: Annual Incentive Compensation Trends
Annual Incentive Compensation Trends 3/31/18 • IC has declined as a percentage of Pre-IC EBITDA as business $100 45% has scaled up • Another attribute of our scalable $90 40% platform $80 35% $70 30% $60 (In Millions) 25% $50 20% $40 15% $30 10% $20 $10 5% $0 0% 2014 2015 2016 2017 2018 2019 2020 IC
Slide 20: Non-GAAP Metrics
Non-GAAP Metrics ($mm) 3/31/18 9/30/17 $MM except per share data ANI Tax Benefit ANI with tax benefit per diluted share $1.20 • 4Q 2020 Adjusted Net Income $100.0 (ANI) with tax benefit of $1.07 per diluted $1.07 share $1.00 $0.92 $1.00 Up 7% from 3Q 2020 $0.89 $78.6 Up 8% from 4Q 2019 $75.0 $73
Slide 21: Capital Management
Capital Management Interest Expense and Other ($mm) 3/31/18 Debt ($MM) Financing Costs 9/30/17 ($MM) Selected Balance Sheet Items ($MM) 12/31/2020 $1,100 $16.9 Cash / Cash Equivalents $23 Debt (1Q to-date, further reduced to $756MM) $788 $914 $11.4 $881 $9.7 $837 $788 $8.2 $7.7 Stockholders' Equity
Slide 22: Ongoing and Future Cash-Tax Benefits
Ongoing and Future Cash-Tax Benefits • Section 338(h)(10) Election ˃ Stepped up cost basis of acquired indefinite lived intangible assets is deductible for corporate income tax purposes over 15 years ˃ $1.8 billion in total future tax amortization ˃ $441 million in future cash tax savings, assuming
Slide 23: Appendix
Appendix 23
Slide 24: Notes and Disclosures
Notes and Disclosures 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, restruct
Slide 25: Notes and Disclosures
Notes and Disclosures Information Regarding Non-GAAP Financial Measures (cont.) 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 asset
Slide 26: Consolidated Reconciliations of Adjusted EBITDA
Consolidated Reconciliations of Adjusted EBITDA For the three months ended, (in thousands) 12/31/2019 3/31/2020 6/30/2020 9/30/2020 12/31/2020 GAAP Net income $ 37,589 $ 57,166 $ 44,720 $ 55,741 $ 54,895 GAAP Income tax expense (10,854) (16,823) (14,487) (17,027) (17,681) GAAP income before taxes 48
Slide 27: Consolidated Reconciliations of Adjusted Net Income
Consolidated Reconciliations of Adjusted Net Income For the three months ended, (in thousands, except per-share data) 12/31/2019 3/31/2020 6/30/2020 9/30/2020 12/31/2020 GAAP Net Income $ 37,589 $ 57,166 $ 44,720 $ 55,741 $ 54,895 Other business taxes 359 (3,296) 219 256 265 GAAP amortization of acq
Slide 28: Detailed Reconciliation of 4Q20 Adjusted Net Income
Detailed Reconciliation of 4Q20 Adjusted Net Income GAAP Amortization Tax Benefit of Other of Acquisition- Acquisition, Goodwill and U.S. GAAP Business Related Stock-Based Restructuring and Debt Issuance Total Non-GAAP Acquired Basis Taxes Intangibles Compensation Exit Costs Costs Adjustments Basis
Slide 29: Detailed Reconciliation of 3Q20 Adjusted Net Income
Detailed Reconciliation of 3Q20 Adjusted Net Income (in thousands, except per-share amounts) Adjustments GAAP Amortization of Tax Benefit Other Acquisition- Acquisition, Debt of Goodwill U.S. GAAP Business Related Stock-Based Restructuring Issuance Total Non-GAAP and Acquired Basis Taxes Intangibles
Slide 30: Detailed Reconciliation of 2Q20 Adjusted Net Income
Detailed Reconciliation of 2Q20 Adjusted Net Income (in thousands, except per-share amounts) Adjustments GAAP Amortization of Tax Benefit Other Acquisition- Acquisition, Debt of Goodwill U.S. GAAP Business Related Stock-Based Restructuring Issuance Total Non-GAAP and Acquired Basis Taxes Intangibles
Slide 31: Detailed Reconciliation of 1Q20 Adjusted Net Income
Detailed Reconciliation of 1Q20 Adjusted Net Income (in thousands, except per-share amounts) Adjustments GAAP Amortization Tax Benefit of Other of Acquisition- Acquisition, Goodwill and U.S. GAAP Business Related Stock-Based Restructuring and Debt Issuance Total Non-GAAP Acquired Basis Taxes Intangi
Slide 32: Detailed Reconciliation of 4Q19 Adjusted Net Income
Detailed Reconciliation of 4Q19 Adjusted Net Income Adjustments GAAP Amortization of Tax Benefit of Acquisition- Acquisition, Goodwill and U.S. GAAP Other Business Related Stock-Based Restructuring and Debt Issuance Total Non-GAAP Acquired Basis Taxes Intangibles Compensation Exit Costs Costs Adjust
Slide 33: Detailed Reconciliation of 2020 Adjusted Net Income
Detailed Reconciliation of 2020 Adjusted Net Income (in thousands, except per-share amounts) Adjustments GAAP Amortization Tax Benefit of Other of Acquisition- Acquisition, Goodwill and U.S. GAAP Business Related Stock-Based Restructuring and Debt Issuance Total Non-GAAP Acquired Basis Taxes Intangi
Slide 34: Detailed Reconciliation of 2019 Adjusted Net Income
Detailed Reconciliation of 2019 Adjusted Net Income Adjustments GAAP Amortization of Tax Benefit of Acquisition- Acquisition, Goodwill and U.S. GAAP Other Business Related Stock-Based Restructuring and Debt Issuance Total Non-GAAP Acquired Basis Taxes Intangibles Compensation Exit Costs Costs Adjust
Slide 35: Notes and Disclosures
Notes and Disclosures Investing involves risk, including the potential loss of principal. There are no assurances that any fund will achieve its stated objective. All data in this presentation, unless otherwise noted, is as of December 31, 2020. Past performance does not guarantee future results. A
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