Victory Capital Holdings, Inc. Class A Common Stock · NASDAQ:VCTR
Victory Capital Holdings, Inc. Class A Common Stock — Q4 2019 Earnings Presentation
30 slides from Victory Capital Holdings, Inc. Class A Common Stock's earnings presentation, Feb 13, 2020
Slide 1: Fourth Quarter 2019 Earnings Presentation
Fourth Quarter 2019 Earnings Presentation February 13, 2020
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 Topics Business Overview Investment Performance USAA Asset Management Company Update Fourth Quarter and Full Year 2019 Financial Results Appendix 3
Slide 4: Business Overview
Business Overview 4
Slide 5: Business Overview
Business Overview AUM & FLOWS • Total AUM increased to $151.8Bn at December 31, 2019 ˃ Up 4% in 4Q ˃ Up 188% during 2019 4Q FINANCIAL • $0.99 Adjusted Net Income with tax benefit per diluted share HIGHLIGHTS • 46.8% Adjusted EBITDA Margin for the quarter; expanded 200 basis points from 3Q, and 890 b
Slide 6: Investment Performance
Investment Performance 6
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 68% and ETFs AUM with 4- or 5-Star overall ratings Percentage of AUM that has outperformed its benchmark 100% 88% 92% 95% 85% 85% 77% 79% 73% 71% 75% 67% 64% 60% 50% 25%
Slide 8: Percentage of Strategies Outperforming Benchmarks
Percentage of Strategies Outperforming Benchmarks Legacy Victory Capital 100% 82% 75% 63% 62% 48% 50% 25% 0% USAA Fixed Income 100% 83% 91% 71% 67% 75% 50% 25% 0% Total 100% 75% 66% 51% 53% 50% 43% 25% 0% 1-Year 3-Year 5-Year 10-Year 8 All figures as of December 31, 2019.
Slide 9: USAA Asset Management Company Update
USAA Asset Management Company Update 9
Slide 10: USAA Asset Management Acquisition Integration Update
USAA Asset Management Acquisition Integration Update Integration is on schedule • Moved into new San Antonio headquarters office in November 2019 • Mutual fund and 529 referral agreement in place and effective with USAA • Marketing to existing member accounts and new member prospects • Developing a
Slide 11: Enhancing Shareholder Value with Balance Sheet Flexibility
Enhancing Shareholder Value with Balance Sheet Flexibility Interest Share Repurchases Returns to Acquisitions Shareholders Dividends De-leveraging Cap Ex & Acquisitions De-leverage Enhancing Shareholder Value by: Maintaining Balance Sheet Flexibility with: • Improving platform with every strategic a
Slide 12: Fourth Quarter and Full Year 2019 Financial Results
Fourth Quarter and Full Year 2019 Financial Results 12
Slide 13: Fourth Quarter 2019 Financial Results
Fourth Quarter 2019 Financial Results RECORD • $219MM revenue QUARTERLY ˃ Up 2% from 3Q ˃ Up 128% from 4Q 2018 FINANCIAL RESULTS • $0.51 GAAP Earnings per diluted share ˃ Up 46% from 3Q ˃ Up 168% from 4Q 2018 • $0.99 Adjusted Net Income with tax benefit per diluted share ˃ Up 9% from 3Q ˃ Up 161% fr
Slide 14: Assets Under Management (End of Period)
Assets Under Management (End of Period) $Bn ($mm) • Total AUM of $151.8Bn, at December 31 Retail Institutional Member ➢ Up 4% from 3Q 4% $151.8 ➢ Up 188% from prior year $145.8 • Diversified distribution channels ➢ Retail ➢ Institutional 128% ➢ Member $64.1 $58.1 1Q19 2Q19 3Q19 4Q19 14
Slide 15: Long-Term Asset Flows
Long-Term Asset Flows $Bn For full-year 2019 Gross Sales Gross Redemptions Net Flows 3/31/18 • Gross LT($mm) sales of $23.3Bn, net LT inflows totaled +$1.8Bn $23.3 • 4 franchises and Solutions Platform generated long-term net inflows $7.5 $7.5 $5.3 $3.0 Operating Metrics 1Q19 2Q19 3Q19 4Q19 FY 2019
Slide 16: Revenues
Revenues ($mm) 3/31/18 9/30/17 $MM • Record quarterly and full-year revenue $218.6 $215.0 ˃ 4Q Revenue up 2%, vs 3Q $105.0 ˃ 4Q Revenue up 128% vs 4Q18 $101.1 $92.5 ˃ FY 2019 Revenue up 48% vs FY 2018 • Fee rate flat vs 3Q19 ˃ In place is a temporary waiver of fulcrum fees on acquired assets that ex
Slide 17: Expenses
Expenses $MM • Total 4Q expenses declined 6% from 3Q 3/31/18 $180.9 9/30/17 ˃ 27% reduction in non-operating $170.1 expenses due to: o Higher financing cost in 3Q from debt issuance o Lower interest expense due to debt reduction ˃ 17% reduction in general and $72.5 administrative expenses $68.1 Oper
Slide 18: Non-GAAP Metrics
Non-GAAP Metrics ($mm) 3/31/18 9/30/17 $MM except per share data • 4Q19 Adjusted Net Income (ANI) with tax benefit of $0.99 per diluted share ANI Tax Benefit ANI with tax benefit per diluted share ˃ Up 9% from 3Q $100.0 $0.99 $1.00 ˃ Up 161% from 4Q18 $0.91 0.99 • 4Q ANI with tax benefit of $72.8MM
Slide 19: Capital Management
Capital Management ($mm) 3/31/18 9/30/17 • Returned $9.6MM to shareholders in Selected Balance Sheet Items ($MM) 12/31/19 4Q, and $23.0MM during 2019 Cash / Cash Equivalents $37.1 ˃ Repurchased 293K shares in 4Q19 Debt (through Feb. 13, further reduced to $929) $952 ˃ Declared regular quarterly Stoc
Slide 20: Appendix
Appendix 20
Slide 21: 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 22: 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 23: Consolidated Reconciliations of Adjusted EBITDA
Consolidated Reconciliations of Adjusted EBITDA For the three months ended, (in thousands) 12/18/2018 3/31/2019 6/30/2019 9/30/2019 12/31/2019 GAAP Net income $ 13,915 $ 14,527 $ 14,383 $ 25,992 $ 37,589 GAAP Income tax expense (4,777) (4,807) (4,478) (8,058) (10,854) GAAP income before taxes 18,692
Slide 24: Consolidated Reconciliations of Adjusted Net Income
Consolidated Reconciliations of Adjusted Net Income For the three months ended, (in thousands, except per-share data) 12/18/2018 3/31/2019 6/30/2019 9/30/2019 12/31/2019 GAAP Net Income $ 13,915 $ 14,527 $ 14,383 $ 25,992 $ 37,589 Other business taxes 337 555 424 146 359 GAAP amortization of acquisi
Slide 25: 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 26: Detailed Reconciliation of 3Q19 Adjusted Net Income
Detailed Reconciliation of 3Q19 Adjusted Net Income Three months ended September 30, 2019 Adjustments (in thousands, except per-share amounts) GAAP Amortization of Tax Benefit of Other Acquisition- Acquisition, Debt Goodwill and U.S. GAAP Business Related Stock-Based Restructuring and Issuance Total
Slide 27: Detailed Reconciliation of 4Q18 Adjusted Net Income
Detailed Reconciliation of 4Q18 Adjusted Net Income Three months Ended December 31, 2018 (in thousands except share amounts) Adjustments GAAP Amortization Tax Benefit of Other of Acquisition- Acquisition, Pre-IPO Goodwill and U.S. GAAP Business Related Stock-Based Restructuring and Debt Issuance Gov
Slide 28: 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 29: Detailed Reconciliation of 2018 Adjusted Net Income
Detailed Reconciliation of 2018 Adjusted Net Income = 115,531 = $1.64 29
Slide 30: Notes and Disclosures
Notes and Disclosures As of July 1, 2019, Victory Capital Management Inc. is the investment advisor for USAA Mutual Funds. USAA and the USAA logos are registered trademarks of United Services Automobile Association and are being used by Victory Capital and its affiliates under license. Victory Capit
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