Victory Capital Holdings, Inc. Class A Common Stock · NASDAQ:VCTR
Victory Capital Holdings, Inc. Class A Common Stock — Q4 2023 Earnings Presentation
29 slides from Victory Capital Holdings, Inc. Class A Common Stock's earnings presentation, Feb 9, 2024
Slide 1: Fourth Quarter 2023 Earnings Presentation
Fourth Quarter 2023 Earnings Presentation February 9, 2024
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 Investment Performance Fourth-Quarter 2023 Financial Results Appendix 3
Slide 4: Quarterly Business Overview
Quarterly Business Overview
Slide 5: Business Overview
Business Overview Q4 2023 • Ended year with $166.6Bn of AUM OPERATING & • Fourth-quarter long term gross sales and net flows were strongest of the year FINANCIAL • Quarterly revenue realization increased .5 bps to 52.1 bps HIGHLIGHTS • Adjusted EBITDA Margin rose to 52.3% in Q4 Increased to 50.9%
Slide 6: Investment Performance
Victory Ce Investment Performance
Slide 7: Commitment to Long-Term Investment Performance
Commitment to Long-Term Investment Performance Total Mutual Total Mutual Funds 42 Funds and ETFs with 4- or 5-Star overall ratings 70% and ETFs AUM with 4- or 5-Star overall ratings % of AUM outperforming benchmarks % of strategies outperforming benchmarks 84%* 80%* 100% 62%* 84% 79% 63% 62% 63% 80%
Slide 8: Long-term Growth & Capital Allocation Strategy
Long-term Growth & Capital Allocation Strategy Dividends De-leveraging Share Repurchases Enhancing Shareholder Value by: Maintaining Balance Sheet Flexibility with: • Improving platform with every strategic acquisition • Capital allocation policy that supports growth strategy • Evolving product set
Slide 9: Private Equity Shareholders Update
Private Equity Shareholders Update • Private Equity shareholders began monetizing investment in November 2021 • Ownership has subsequently been reduced by 33.4MM shares From 45.0MM shares to 11.6MM shares • Percentage of ownership has declined from 67% to 18% currently November 2021 February 2024
Slide 10: Fourth-Quarter 2023 Financial Results
Fourth-Quarter 2023 Financial Results
Slide 11: Fourth-Quarter 2023 Financial Results
Fourth-Quarter 2023 Financial Results FOURTH • AUM of $166.6Bn at December 31, 2023 QUARTER Up 9% from $153.0Bn at year-end 2022 FINANCIAL • Quarterly revenue of $205.8 million RESULTS • GAAP operating income of $86.3MM, an 8% increase from Q3 • GAAP Net Income of $0.82 per diluted share • Adjuste
Slide 12: Assets Under Management
Assets Under Management $Bn (EOP) Retail Institutional Direct • Well-diversified ($mm)distribution channels and client base $166.6 $158.6 $161.6 Retail $153.5 Institutional Direct • Significant diversification within each channel as well Q1 '23 Q2 '23 Q3 '23 Q4 '23 12
Slide 13: Long-Term Asset Flows
Long-Term Asset Flows $Bn • Best quarterly long-term gross Gross Sales Gross Redemptions Net Flows sales and net flows in more than 3/31/18 a year ($mm) $6.6 • Second consecutive quarter with $5.8 $5.6 $5.3 improving net flows • Multiple franchises generated positive long-term net flows for the four
Slide 14: Revenues
Revenues ($mm) 3/31/18 $MM • Q4 was equal to the $204.2 $209.7 $205.8 highest average fee rate in $201.3 past five quarters $200 • Q-o-Q average fee rate expanded .5 bps $150 • Consistent average fee rate realization: $100 51.9 bps in 2023 52.1 bps in 2022 $50 $0 Operating Metrics Q1 ‘23 Q2 ’23
Slide 15: Expenses
Expenses Compensation Operating Non-Operating Cash compensation, % of revenue • Compensation expenses declined from Q3 $MM $139.5 $143.8 10 • Total GAAP expenses declined, due to $129.6 $132.3 90 lower depreciation and amortization and lower change in consideration payable 80 compared with Q3 70 60
Slide 16: Non-GAAP Metrics
Non-GAAP Metrics $MM except per-share data 9/30/17 ($mm) $125.0 ANI Tax Benefit ANI with tax benefit per diluted share$1.30 • Highest Adjusted EBITDA in past seven quarters $1.18 $1.20 $1.15 • Q4 Adjusted EBITDA Margin $100.0 $1.11 expanded 120 bps from Q3 $1.08 $1.10 Full-year 2023 up 130 bps fro
Slide 17: Capital Management
Capital Management Interest Expense and Other ($mm) 3/31/18 Debt ($MM) Financing Costs 9/30/17 ($MM) Selected Balance Sheet Items ($MM) 12/31/2023 Cash / Cash Equivalents $124 $16.6 $1,002 $1,002 $1,002 $1,002 $14.9 $15.6 $14.2 Debt $1,002 Stockholders' Equity $1,053 Diluted Shares Outstanding (MM)
Slide 18: Appendix
Appendix
Slide 19: 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 o $1.7 billion in total future tax amortization o $436MM in future cash tax savings, assuming 25% tax
Slide 20: 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 21: 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 22: Consolidated Reconciliations of Adjusted EBITDA
Consolidated Reconciliations of Adjusted EBITDA For the three months ended, (in thousands) 12/31/2022 3/31/2023 6/30/2023 9/30/2023 12/31/2023 GAAP Net income $ 52,269 $ 49,273 $ 56,671 $ 52,007 $ 55,206 GAAP Income tax expense (16,879) (12,597) (17,924) (13,915) (18,316) GAAP income before taxes 69
Slide 23: Consolidated Reconciliations of Adjusted Net Income
Consolidated Reconciliations of Adjusted Net Income For the three months ended, (in thousands, except per-share data) 12/31/2022 3/31/2023 6/30/2023 9/30/2023 12/31/2023 GAAP Net Income $ 52,269 $ 49,273 $ 56,671 $ 52,007 $ 55,206 Other business taxes 448 384 382 636 305 GAAP amortization of acquisi
Slide 24: Detailed Reconciliation of Q4 '23 Adjusted Net Income
Detailed Reconciliation of Q4 ‘23 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 Intan
Slide 25: Detailed Reconciliation of Q3 '23 Adjusted Net Income
Detailed Reconciliation of Q3 ‘23 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 Intan
Slide 26: Detailed Reconciliation of Q2 '23 Adjusted Net Income
Detailed Reconciliation of Q2 ‘23 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 Intan
Slide 27: Detailed Reconciliation of Q1 '23 Adjusted Net Income
Detailed Reconciliation of Q1 ‘23 Adjusted Net Income (in thousands, except per-share amounts) 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 Intan
Slide 28: Detailed Reconciliation of Q4 '22 Adjusted Net Income
Detailed Reconciliation of Q4 ‘22 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 Intan
Slide 29: Notes and Disclosures
Notes and Disclosures Investing involves risk, including the potential loss of principal. There are no assurances that any fund or strategy will achieve its stated objective. All data in this presentation, unless otherwise noted, is as of December 31, 2023. Past performance does not guarantee future
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