Victory Capital Holdings, Inc. Class A Common Stock · NASDAQ:VCTR
Victory Capital Holdings, Inc. Class A Common Stock — Q2 2023 Earnings Presentation
29 slides from Victory Capital Holdings, Inc. Class A Common Stock's earnings presentation, Aug 4, 2023
Slide 1: Second Quarter 2023 Earnings Presentation
Second Quarter 2023 Earnings Presentation August 4, 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 Second-Quarter Financial Results Appendix 3
Slide 4: Quarterly Business Overview
Quarterly Business Overview
Slide 5: Business Overview
Business Overview Q2 2023 • Second-quarter long-term net flows of -$1.0Bn* OPERATING & • Adjusted EBITDA margin of 50.9% FINANCIAL HIGHLIGHTS • Adjusted Net Income with tax benefit per diluted share of $1.11 • Second-quarter share repurchases totaled 1.5MM shares, most ever in a quarter • Total capi
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 65% and ETFs AUM with 4- or 5-Star overall ratings % of AUM outperforming benchmarks % of strategies outperforming benchmarks 80% 79% 77% 69% 80% 72% 66% 62% 63% 60% 54%
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 Owners' Monetization
Private Equity Owners’ Monetization • Private Equity (PE) owners began monetizing investment in November 2021, through sale into open market • PE ownership has subsequently been reduced by 52% from 45MM shares to 22MM shares • Percentage of equity ownership has declined from 67% to ~32% currently %
Slide 10: Second-Quarter 2023 Financial Results
Second-Quarter 2023 Financial Results
Slide 11: Second-Quarter 2023 Financial Results
Second-Quarter 2023 Financial Results SECOND • AUM of $161.6Bn at June 30, 2023, up 2% from March 31 QUARTER Average assets under management flat in Q2 versus Q1 FINANCIAL • Fee rate up to 52.1 bps RESULTS • Revenue increased to $204MM • GAAP operating income rose to $87.5MM • Adjusted EBITDA incr
Slide 12: Assets Under Management
Assets Under Management $Bn (EOP) Retail Institutional Direct • Well-diversified ($mm)distribution channels and client base $158.6 $161.6 Retail $153.0 $147.3 Institutional Direct Q3 '22 Q4 '22 Q1 '23 Q2'23 12
Slide 13: Long-Term Asset Flows
Long-Term Asset Flows $Bn • Multiple franchises generated Gross Sales Gross Redemptions Net Flows positive long-term net flows for the 3/31/18 quarter: ($mm) $6.6 $6.5 $5.8 $5.6 Integrity New Energy Capital RS Global Sycamore WestEnd Advisors Operating Metrics Q3 ‘22 Q4 ‘22 Q1 ‘23 Q2 ‘23 N
Slide 14: Revenues
Revenues ($mm) 3/31/18 $MM $207.3 $201.5 $201.3 $204.2 • Average fee rate up 0.4bps in Q2 to $200 $105.0 52.1bps • Highest fee rate realization in last four quarters $150 $100 $50 $0 Operating Metrics Q3 ‘22 Q4 ‘22 Q1 ‘23 Q2 ‘23 Average AUM ($Bn) $158.9 $154.6 $157.8 $157.4 Average Fee Rate (bps) 51
Slide 15: Expenses
Expenses Compensation Operating Non-Operating Cash compensation, % of revenue $MM • Total expenses declined $9.9MM or by 7% 10 $139.5 from Q1 $132.4 $129.6 90 • GAAP operating expenses were $10.1MM $121.9 lower in Q2, declining 8% from Q1 80 70 60 50 40 24.7% 24.5% 25.4% 23.7% 30 20 10 0 ($MM) Q3 ‘2
Slide 16: Non-GAAP Metrics
Non-GAAP Metrics $MM except per-share data ($mm) 3/31/18 9/30/17 • Adjusted EBITDA Margin expanded 160 $125.0 ANI Tax Benefit ANI with tax benefit per diluted share $1.40 basis points from Q1 • Over last 12 quarters Adjusted EBITDA $1.19 $1.20 Margin: $1.05 $1.08 $1.11 $100.0 8 quarters above 50%
Slide 17: Capital Management
Capital Management Interest Expense and Other ($mm) 3/31/18 Debt ($MM) Financing Costs 9/30/17 ($MM) Selected Balance Sheet Items ($MM) 6/30/2023 $14.2 $14.9 $13.3 $1,017 $1,002 $1,002 $1,002 Cash / Cash Equivalents $44 $11.5 Debt $1,002 Stockholders' Equity $1,046 Diluted Shares Outstanding (MM) 68
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 $1.9 billion in total future tax amortization o $470MM 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) 6/30/2022 9/30/2022 12/31/2022 3/31/2023 6/30/2023 GAAP Net income $ 79,205 $ 72,764 $ 52,269 $ 49,273 $ 56,671 GAAP Income tax expense (25,790) (12,582) (16,879) (12,597) (17,924) GAAP income before taxes 104
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) 6/30/2022 9/30/2022 12/31/2022 3/31/2023 6/30/2023 GAAP Net Income $ 79,205 $ 72,764 $ 52,269 $ 49,273 $ 56,671 Other business taxes 541 539 448 384 382 GAAP amortization of acquisit
Slide 24: 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 25: 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 26: 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 27: 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 28: 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 29: 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 June 30, 2023. Past performance does not guarantee future results. A fund
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