Victory Capital Holdings, Inc. Class A Common Stock · NASDAQ:VCTR
Victory Capital Holdings, Inc. Class A Common Stock — Q4 2022 Earnings Presentation
29 slides from Victory Capital Holdings, Inc. Class A Common Stock's earnings presentation, Feb 10, 2023
Slide 1: Fourth Quarter 2022 Earnings Presentation
Fourth Quarter 2022 Earnings Presentation February 10, 2023
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 Financial Results Appendix 3
Slide 4: Quarterly Business Overview
Quarterly Business Overview
Slide 5: 2022 Business Overview
2022 Business Overview • Superior execution and our differentiated operating model continue to produce exceptional results Q4 2022 AND • 2022 long-term gross flows of $33.3Bn FULL-YEAR up 20% over 2021 OPERATING & • Q4 long-term gross flows of $6.5Bn FINANCIAL Record for any Q4 period HIGHLIGHTS
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 44 Funds and ETFs with 4- or 5-Star overall ratings 62% and ETFs AUM with 4- or 5-Star overall ratings % of AUM outperforming benchmarks % of strategies outperforming benchmarks 84% 80% 79% 79% 70% 80% 67% 63% 59% 60% 60%
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: Fourth-Quarter 2022 Financial Results
Fourth-Quarter 2022 Financial Results
Slide 10: Fourth-Quarter & Full-Year 2022 Financial Results
Fourth-Quarter & Full-Year 2022 Financial Results FOURTH • AUM of $153.0Bn as of December 31, 2022 QUARTER • Q4 Revenue of $201.5MM; $854.8MM in FY 2022 FINANCIAL • Q4 GAAP operating income of $79.6MM, $399.1MM in FY 2022 RESULTS • Q4 Adjusted EBITDA of $100.1MM; $424.2MM in FY 2022 • Q4 GAAP Net In
Slide 11: Assets Under Management
Assets Under Management $Bn Retail Institutional Direct • Well diversified ($mm)distribution and client base $178.1 Retail $154.9 $153.0 Institutional $147.3 Direct Q1 '22 Q2 '22 Q3 '22 Q4 '22 Assets under management are as of the end of the respective periods shown. 11
Slide 12: Long-Term Asset Flows
Long-Term Asset Flows $Bn Gross Sales Gross Redemptions Net Flows • Multiple franchises, strategies and $33.3 vehicles generated positive long- 3/31/18 term net inflows for the quarter ($mm) and/or full year period including: RS Global Sophus $11.0 $9.2 Sycamore $6.6 $6.5 WestEnd VictorySh
Slide 13: Revenues
Revenues ($mm) 3/31/18 $MM $250 • Average fee rate realization in 2022 $230.0 reflects mix shift primarily due to $105.0 $216.0 $207.3 $201.5 market action $200 $150 $100 $50 $0 Operating Metrics Q1 ‘22 Q2 ‘22 Q3 ‘22 Q4 ‘22 Average AUM ($Bn) $176.9 $165.7 $158.9 $154.6 Average Fee Rate (bps) 52.7 52
Slide 14: Expenses
Expenses Compensation Operating Non-Operating Cash compensation, % of revenue* • Q4 2022 total GAAP expenses increased $10.5MM vs Q3 2022, due to non-cash $MM 10 expenses $139.5 $132.4 90 Non-cash change in valuation of $121.9 contingent consideration had no $111.0 80 impact in Q4, vs a $10.5MM 70
Slide 15: Non-GAAP Metrics
Non-GAAP Metrics $MM except per-share data ($mm) 3/31/18 9/30/17 $125.0 • Margin strength continued during ANI Tax Benefit ANI with tax benefit per diluted share $1.40 market volatility $1.23 $1.19 • Margins are inclusive of ongoing $1.11 $1.20 strategic investments in: $1.05 $100.0 Data for knowl
Slide 16: Capital Management
Capital Management Interest Expense and Other ($mm) 3/31/18 Debt ($MM) Financing Costs 9/30/17 ($MM) Selected Balance Sheet Items ($MM) 12/31/2022 $13.3 Cash / Cash Equivalents $38.2 $11.5 $1,081 $1,036 $9.9 $1,017 $1,002 $9.2 Debt $1,002 Stockholders' Equity $1,065 Diluted Shares Outstanding (MM) 7
Slide 17: Appendix
Appendix
Slide 18: 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 $1.9 billion in total future tax amortization o $490MM in future cash tax savings, assuming 25% tax
Slide 19: 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 20: 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 21: Consolidated Reconciliations of Adjusted EBITDA
Consolidated Reconciliations of Adjusted EBITDA For the three months ended, (in thousands) 12/31/2021 3/31/2022 6/30/2022 9/30/2022 12/31/2022 GAAP Net income $ 69,742 $ 71,273 $ 79,205 $ 72,764 $ 52,269 GAAP Income tax expense (15,781) (19,271) (25,790) (12,582) (16,879) GAAP income before taxes 85
Slide 22: Consolidated Reconciliations of Adjusted Net Income
Consolidated Reconciliations of Adjusted Net Income For the three months ended, (in thousands, except per-share data) 12/31/2021 3/31/2022 6/30/2022 9/30/2022 12/31/2022 GAAP Net Income $ 69,742 $ 71,273 $ 79,205 $ 72,764 $ 52,269 Other business taxes 383 590 541 539 448 GAAP amortization of acquisi
Slide 23: 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 24: Detailed Reconciliation of Q3 '22 Adjusted Net Income
Detailed Reconciliation of Q3 ‘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 25: Detailed Reconciliation of Q2 '22 Adjusted Net Income
Detailed Reconciliation of Q2 ‘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 26: Detailed Reconciliation of Q1 '22 Adjusted Net Income
Detailed Reconciliation of Q1 ‘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 27: Detailed Reconciliation of Q4 '21 Adjusted Net Income
Detailed Reconciliation of Q4 ‘21 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 28: 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, 2022. Past performance does not guarantee future results. A
Slide 29: Notes and Disclosures
Notes and Disclosures Victory Capital means Victory Capital Management Inc., the investment adviser of the Victory Capital mutual funds, USAA Mutual Funds, VictoryShares ETFs, VictoryShares USAA ETFs, and USAA 529 Education Savings Plan (Plan). Victory Capital mutual funds, USAA Mutual Funds, and th