Victory Capital Reports Strong Second Quarter Earnings

Second-Quarter 2023 Highlights

• Total Assets Under Management (AUM) of $161.6 billion¹
• Long-term gross flows of $5.6 billion
• Long-term net flows of ($2.1) billion
• GAAP operating margin of 42.9%
• Adjusted EBITDA margin of 50.9%²
• GAAP net income of $0.83 per diluted share
• Adjusted net income with tax benefit of $1.11 per diluted share²
• Board authorizes regular $0.32 quarterly cash dividend

SAN ANTONIO--(BUSINESS WIRE)-- Victory Capital Holdings, Inc. (NASDAQ: VCTR) (“Victory Capital” or “the Company”) today reported financial results for the quarter ended June 30, 2023.

“Our investment performance has remained very strong during the second quarter and first half of this year,” said David Brown, Chairman and Chief Executive Officer. “Through the end of June, the percentage of our AUM outperforming benchmarks over the respective 3-, 5-, and 10-year periods was 72%, 79%, and 77%.

“Adjusted EBITDA margin expanded to 50.9% in the second quarter. This was our 12th consecutive quarter above our 49% guidance, and the 8th out of the last 12 quarters that our margins were in excess of 50%.

“Overall, excluding the previously disclosed passive low-fee redemption in April, long-term net flows improved for the second consecutive quarter. Entering the year’s second half, we are encouraged about our net flow outlook through the end of this year and into next.

“We continued our strong capital return to shareholders during the quarter with the repurchase of 1.5 million shares, which is the most for any quarter in our history and we paid out $21 million in cash dividends. Additionally, our due diligence activities remain ongoing as we continue to evaluate inorganic growth opportunities.

“As always, we continue to focus on serving our clients, which is our top priority.”

1 Total AUM includes both discretionary and non-discretionary client assets.

2 The Company reports its financial results in accordance with generally accepted accounting principles (“GAAP”). Adjusted EBITDA and Adjusted Net Income are not defined by GAAP and should not be regarded as an alternative to any measurement under GAAP. Please refer to the section “Information Regarding Non-GAAP Financial Measures” at the end of this press release for an explanation of Non-GAAP financial measures and a reconciliation to the nearest GAAP financial measure.

The table below presents AUM, and certain GAAP and non-GAAP (“adjusted”) financial results. Due to rounding, AUM values and other amounts in this press release may not add up precisely to the totals provided.

(in millions except per share amounts or as otherwise noted)

		For the Three Months Ended												For the Six Months Ended
		June 30,				March 31,				June 30,				June 30,				June 30,
			2023				2023				2022				2023				2022
Assets Under Management1
Ending		$	161,622			$	158,621			$	154,947			$	161,622			$	154,947
Average			157,372				157,817				165,703				157,595				171,283
Long-term Flows2
Long-term Gross		$	5,591			$	5,848			$	9,198			$	11,439			$	20,210
Long-term Net			(2,106	)			(1,235	)			(630	)			(3,342	)			2,413
Money Market/Short-term Flows
Money Market/Short-term Gross		$	231			$	241			$	123			$	472			$	247
Money Market/Short-term Net			(316	)			(9	)			(53	)			(325	)			(106	)
Total Flows
Total Gross		$	5,822			$	6,089			$	9,321			$	11,911			$	20,457
Total Net			(2,422	)			(1,244	)			(683	)			(3,667	)			2,307
Consolidated Financial Results (GAAP)
Revenue		$	204.2			$	201.3			$	216.0			$	405.5			$	446.0
Revenue realization (in bps)			52.1				51.7				52.3				51.9				52.5
Operating expenses			116.7				126.8				96.7				243.5				225.2
Income from operations			87.5				74.6				119.3				162.1				220.9
Operating margin			42.9	%			37.0	%			55.2	%			40.0	%			49.5	%
Net income			56.7				49.3				79.2				105.9				150.5
Earnings per diluted share		$	0.83			$	0.71			$	1.09			$	1.53			$	2.05
Cash flow from operations			77.4				64.2				90.2				141.6				165.1
Adjusted Performance Results (Non-GAAP)3
Adjusted EBITDA		$	104.0			$	99.2			$	106.2			$	203.2			$	220.6
Adjusted EBITDA margin			50.9	%			49.3	%			49.2	%			50.1	%			49.5	%
Adjusted net income			66.4				65.6				71.4				132.1				152.5
Tax benefit of goodwill and acquired intangible assets			9.5				9.5				9.3				19.1				18.6
Adjusted net income with tax benefit			75.9				75.2				80.7				151.1				171.1
Adjusted net income with tax benefit per diluted share		$	1.11			$	1.08			$	1.11			$	2.19			$	2.34

_______________________

1 Total AUM includes both discretionary and non-discretionary client assets.

2 Long-term AUM is defined as total AUM excluding Money Market and Short-term assets.

3 The Company reports its financial results in accordance with GAAP. Adjusted EBITDA and Adjusted Net Income are not defined by GAAP and should not be regarded as an alternative to any measurement under GAAP. Please refer to the section “Information Regarding Non-GAAP Financial Measures” at the end of this press release for an explanation of Non-GAAP financial measures and a reconciliation to the nearest GAAP financial measure.

AUM, Flows and Investment Performance

Victory Capital’s total AUM increased by 1.9%, or $3.0 billion, to $161.6 billion at June 30, 2023, compared with $158.6 billion at March 31, 2023. The increase was attributable to positive market action of $5.5 billion partially offset by net outflows of $2.4 billion. Total gross flows were $5.8 billion for the second quarter and $11.9 billion for the year-to-date period. For the second quarter and year-to-date periods, the Company reported total net outflows of $2.4 billion and $3.7 billion, respectively.

As of June 30, 2023, Victory Capital offered 126 investment strategies through its 12 autonomous Investment Franchises and Solutions Platform. The table below presents outperformance against benchmarks by AUM as of June 30, 2023.

Percentage of AUM Outperforming Benchmark
Trailing		Trailing		Trailing		Trailing
1-Year		3-Years		5-Years		10-Years
63%		72%		79%		77%

Second Quarter 2023 Compared with First Quarter 2023

Revenue increased 1.4% to $204.2 million in the second quarter, compared with $201.3 million in the first quarter, primarily due to an increase in revenue realization and one extra day in the quarter. GAAP operating margin expanded 590 basis points in the second quarter to 42.9%, up from 37.0% in the first quarter primarily due to the combination of a non-cash $5.9 million difference in amounts recorded to the change in the fair value of consideration payable for acquisitions as well as a decrease in compensation related expenses. Second quarter GAAP net income increased 15.0% to $56.7 million, up from $49.3 million in the prior quarter. On a per-share basis, GAAP net income increased 17.1% to $0.83 per diluted share in the second quarter, versus $0.71 per diluted share in the first quarter.

Adjusted net income with tax benefit increased 1.0% to $75.9 million in the second quarter, up from $75.2 million in the first quarter. On a per-share basis, adjusted net income with tax benefit increased 2.8% to $1.11 per diluted share in the second quarter, from $1.08 per diluted share in the prior quarter. Adjusted EBITDA increased 4.9% to $104.0 million in the second quarter, versus $99.2 million in the first quarter. Adjusted EBITDA margin expanded 160 basis points in the second quarter of 2023 to 50.9% compared with 49.3% in the prior quarter.

Second Quarter 2023 Compared with Second Quarter 2022

Revenue for the three months ended June 30, 2023, declined 5.5% to $204.2 million, compared with $216.0 million in the same quarter of 2022 as a result of lower average AUM over the comparable period.

Operating expenses increased 20.7% to $116.7 million, compared with $96.7 million in last year’s second quarter due to a non-cash $28.1 million difference in amounts recorded to the change in the fair value of consideration payable for acquisitions, partially offset by a reduction in compensation expense as well as distribution and other asset-based expenses. GAAP operating margin contracted 1,230 basis points to 42.9% in the second quarter, from 55.2% in the same quarter of 2022. GAAP net income declined 28.5% to $56.7 million, or $0.83 per diluted share, in the second quarter compared with $79.2 million, or $1.09 per diluted share, in the same quarter of 2022.

Adjusted net income with tax benefit decreased 5.9% to $75.9 million, or $1.11 per diluted share, in the second quarter, compared with $80.7 million, or $1.11 per diluted share in the same quarter last year. Adjusted EBITDA decreased 2.0% to $104.0 million, compared with $106.2 million in last year’s same quarter. Year-over-year, adjusted EBITDA margin expanded 170 basis points to 50.9% in the second quarter of 2023, compared with 49.2% in the same quarter last year.

Six Months Ended June 30, 2023 Compared with Six Months Ended June 30, 2022

Revenue for the six months ended June 30, 2023, decreased 9.1% to $405.5 million, compared with $446.0 million in the same period of 2022. The decrease was primarily due to lower average AUM.

Operating expenses increased 8.1% to $243.5 million for the six months ended June 30, 2023, compared with $225.2 million in the same period in 2022 due to a non-cash $39.0 million difference in amounts recorded to the change in the fair value of consideration payable for acquisitions, partially offsetting was a decrease in variable expenses including compensation, distribution and other asset-based expenses. GAAP operating margin was 40.0% for the six months ended June 30, 2023, a 950 basis point decrease from the 49.5% recorded in the same period in 2022. GAAP net income decreased 29.6% to $105.9 million, or $1.53 per diluted share, in the first six months of 2023 compared with $150.5 million, or $2.05 per diluted share, in the same period in 2022.

Adjusted net income with tax benefit decreased 11.7% to $151.1 million, or $2.19 per diluted share, in the first six months of 2023, compared with $171.1 million, or $2.34 per diluted share in the same period in 2022. For the six months ended June 30, 2023, adjusted EBITDA declined 7.9% to $203.2 million, compared with $220.6 million for the same period in 2022. Year-over-year, adjusted EBITDA margin expanded 60 basis points to 50.1% in the first six months of 2023, compared with 49.5% in the same period last year.

Balance Sheet / Capital Management

The total debt outstanding as of June 30, 2023 was approximately $1,002 million and consisted of an existing term loan balance of $631 million and the 2021 Incremental Term Loans balance of $371 million.

During the second quarter, the Company repurchased 1.4 million shares under its current share repurchase program and net settled 0.1 million shares.

The Company’s Board of Directors approved a regular quarterly cash dividend of $0.32 per share. The dividend is payable on September 25, 2023, to shareholders of record on September 11, 2023.

Conference Call, Webcast and Slide Presentation

The Company will host a conference call tomorrow morning, August 4, at 8:00 a.m. ET to discuss the results. Analysts and investors may participate in the question-and-answer session. To participate in the conference call, please call (888) 330-3571 (domestic) or (646) 960-0657 (international), shortly before 8:00 a.m. ET and reference the Victory Capital Conference Call. A live, listen-only webcast will also be available via the investor relations section of the Company’s website at https://ir.vcm.com. Prior to the call, a supplemental slide presentation that will be used during the conference call will be available on the Events and Presentations page of the Company’s investor relations website. For anyone who is unable to join the live event, an archive of the webcast will be available for replay shortly after the call concludes.

About Victory Capital

Victory Capital is a diversified global asset management firm with $161.6 billion in assets under management as of June 30, 2023. It was ranked No. 55 on the Fortune 100 Fastest-Growing Companies list for 2022 and is one of only 24 companies to make the list for the second consecutive year. The Company employs a next-generation business strategy that combines boutique investment qualities with the benefits of a fully integrated, centralized operating and distribution platform.

Victory Capital provides specialized investment strategies to institutions, intermediaries, retirement platforms and individual investors. With 12 autonomous Investment Franchises and a Solutions Business, Victory Capital offers a wide array of investment products and services, including mutual funds, ETFs, separately managed accounts, alternative investments, third-party ETF model strategies, collective investment trusts, private funds, a 529 Education Savings Plan, and brokerage services.

Victory Capital is headquartered in San Antonio, Texas, with offices nationwide and investment professionals in the U.S. and abroad. To learn more please visit www.vcm.com or follow Victory Capital on Twitter and LinkedIn.

FORWARD-LOOKING STATEMENTS

This press release may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements may include, without limitation, any statements preceded by, followed by or including words such as “target,” “believe,” “expect,” “aim,” “intend,” “may,” “anticipate,” “assume,” “budget,” “continue,” “estimate,” “future,” “objective,” “outlook,” “plan,” “potential,” “predict,” “project,” “will,” “can have,” “likely,” “should,” “would,” “could” and other words and terms of similar meaning or the negative thereof. Such forward-looking statements involve known and unknown risks, uncertainties and other important factors beyond Victory Capital’s control such as the conflict in Ukraine and its effect on our business, operations and financial results going forward, as discussed in Victory Capital’s filings with the SEC, that could cause Victory Capital’s actual results, performance or achievements to be materially different from the expected results, performance or achievements expressed or implied by such forward-looking statements.

Although it is not possible to identify all such risks and factors, they include, among others, the following: reductions in AUM based on investment performance, client withdrawals, difficult market conditions and other factors such as a pandemic; the nature of the Company’s contracts and investment advisory agreements; the Company’s ability to maintain historical returns and sustain its historical growth; the Company’s dependence on third parties to market its strategies and provide products or services for the operation of its business; the Company’s ability to retain key investment professionals or members of its senior management team; the Company’s reliance on the technology systems supporting its operations; the Company’s ability to successfully acquire and integrate new companies; the concentration of the Company’s investments in long-only small- and mid-cap equity and U.S. clients; risks and uncertainties associated with non-U.S. investments; the Company’s efforts to establish and develop new teams and strategies; the ability of the Company’s investment teams to identify appropriate investment opportunities; the Company’s ability to limit employee misconduct; the Company’s ability to meet the guidelines set by its clients; the Company’s exposure to potential litigation (including administrative or tax proceedings) or regulatory actions; the Company’s ability to implement effective information and cyber security policies, procedures and capabilities; the Company’s substantial indebtedness; the potential impairment of the Company’s goodwill and intangible assets; disruption to the operations of third parties whose functions are integral to the Company’s ETF platform; the Company’s determination that Victory Capital is not required to register as an "investment company" under the 1940 Act; the fluctuation of the Company’s expenses; the Company’s ability to respond to recent trends in the investment management industry; the level of regulation on investment management firms and the Company’s ability to respond to regulatory developments; the competitiveness of the investment management industry; the level of control over the Company retained by Crestview GP; the Company’s status as an emerging growth company and a controlled company; and other risks and factors listed under "Risk Factors" and elsewhere in the Company’s filings with the SEC.

Such forward-looking statements are based on numerous assumptions regarding Victory Capital’s present and future business strategies and the environment in which it will operate in the future. Any forward-looking statement made in this press release speaks only as of the date hereof. Except as required by law, Victory Capital assumes no obligation to update these forward-looking statements, or to update the reasons actual results could differ materially from those anticipated in the forward-looking statements, even if new information becomes available in the future.

From Fortune. © 2022 Fortune Media IP Limited All rights reserved. Fortune is a registered trademark of Fortune Media IP Limited and is used under license. Fortune and Fortune Media IP Limited are not affiliated with, and do not endorse products or services of, Victory Capital Holdings, Inc.

The Fortune annual list ranks the top performing, publicly traded companies in revenues, profits and stock returns over the three-year period ended April 30, 2022.

Victory Capital Holdings, Inc. and Subsidiaries Unaudited Consolidated Statements of Operations (in thousands except per share data and percentages)
		For the Three Months Ended												For the Six Months Ended
		June 30,				March 31,				June 30,				June 30,				June 30,
			2023				2023				2022				2023				2022
Revenue
Investment management fees		$	159,410			$	156,836			$	168,129			$	316,246			$	347,594
Fund administration and distribution fees			44,816				44,484				47,877				89,300				98,431
Total revenue			204,226				201,320				216,006				405,546				446,025
Expenses
Personnel compensation and benefits			54,940				57,602				57,582				112,542				122,483
Distribution and other asset-based expenses			37,344				37,654				40,868				74,998				84,452
General and administrative			13,250				12,388				13,921				25,638				26,683
Depreciation and amortization			9,650				11,680				10,758				21,330				21,365
Change in value of consideration payable for acquisition of business			1,500				7,400				(26,600	)			8,900				(30,100	)
Acquisition-related costs			16				2				143				18				260
Restructuring and integration costs			—				29				8				29				17
Total operating expenses			116,700				126,755				96,680				243,455				225,160
Income from operations			87,526				74,565				119,326				162,091				220,865
Operating margin			42.9	%			37.0	%			55.2	%			40.0	%			49.5	%
Other income (expense)
Interest income and other income (expense)			1,971				1,544				(3,443	)			3,515				(3,650	)
Interest expense and other financing costs			(14,902	)			(14,239	)			(9,925	)			(29,141	)			(19,158	)
Loss on debt extinguishment			—				—				(963	)			—				(2,518	)
Total other income (expense), net			(12,931	)			(12,695	)			(14,331	)			(25,626	)			(25,326	)
Income before income taxes			74,595				61,870				104,995				136,465				195,539
Income tax expense			(17,924	)			(12,597	)			(25,790	)			(30,521	)			(45,061	)
Net income		$	56,671			$	49,273			$	79,205			$	105,944			$	150,478
Earnings per share of common stock
Basic		$	0.85			$	0.73			$	1.16			$	1.58			$	2.19
Diluted			0.83				0.71				1.09				1.53				2.05
Weighted average number of shares outstanding
Basic			66,466				67,288				68,521				66,874				68,633
Diluted			68,500				69,727				72,867				69,037				73,265
Dividends declared per share		$	0.32			$	0.32			$	0.25			$	0.64			$	0.50

Victory Capital Holdings, Inc. and Subsidiaries Reconciliation of GAAP to Non-GAAP Measures1 (unaudited; in thousands except per share data and percentages)
		For the Three Months Ended												For the Six Months Ended
		June 30,				March 31,				June 30,				June 30,				June 30,
			2023				2023				2022				2023				2022
Net income (GAAP)		$	56,671			$	49,273			$	79,205			$	105,944			$	150,478
Income tax expense			(17,924	)			(12,597	)			(25,790	)			(30,521	)			(45,061	)
Income before income taxes		$	74,595			$	61,870			$	104,995			$	136,465			$	195,539
Interest expense			14,146				13,482				9,499				27,628				18,223
Depreciation			2,296				1,971				2,102				4,267				4,056
Other business taxes			382				384				541				766				1,131
Amortization of acquisition-related intangible assets			7,353				9,709				8,656				17,062				17,312
Stock-based compensation			1,538				2,004				2,860				3,542				5,493
Acquisition, restructuring and exit costs			2,949				8,984				(24,033	)			11,933				(24,877	)
Debt issuance costs			756				748				1,560				1,504				3,621
Losses from equity method investments			—				—				9				—				66
Adjusted EBITDA		$	104,015			$	99,152			$	106,189			$	203,167			$	220,564
Adjusted EBITDA margin			50.9	%			49.3	%			49.2	%			50.1	%			49.5	%
Net income (GAAP)		$	56,671			$	49,273			$	79,205			$	105,944			$	150,478
Adjustment to reflect the operating performance of the Company
Other business taxes			382				384				541				766				1,131
Amortization of acquisition-related intangible assets			7,353				9,709				8,656				17,062				17,312
Stock-based compensation			1,538				2,004				2,860				3,542				5,493
Acquisition, restructuring and exit costs			2,949				8,984				(24,033	)			11,933				(24,877	)
Debt issuance costs			756				748				1,560				1,504				3,621
Tax effect of above adjustments			(3,244	)			(5,457	)			2,604				(8,701	)			(670	)
Adjusted net income		$	66,405			$	65,645			$	71,393			$	132,050			$	152,488
Adjusted net income per diluted share		$	0.97			$	0.94			$	0.98			$	1.91			$	2.08
Tax benefit of goodwill and acquired intangible assets		$	9,537			$	9,524			$	9,327			$	19,061			$	18,649
Tax benefit of goodwill and acquired intangible assets per diluted share		$	0.14			$	0.14			$	0.13			$	0.28			$	0.25
Adjusted net income with tax benefit		$	75,942			$	75,169			$	80,720			$	151,111			$	171,137
Adjusted net income with tax benefit per diluted share		$	1.11			$	1.08			$	1.11			$	2.19			$	2.34

1 The Company reports its financial results in accordance with GAAP. Adjusted EBITDA and Adjusted Net Income are not defined by GAAP and should not be regarded as an alternative to any measurement under GAAP. Please refer to the section “Information Regarding Non-GAAP Financial Measures” at the end of this press release for an explanation of Non-GAAP financial measures and a reconciliation to the nearest GAAP financial measure.

Victory Capital Holdings, Inc. and Subsidiaries Unaudited Condensed Consolidated Balance Sheets (In thousands, except for shares)
		June 30, 2023				December 31, 2022
Assets
Cash and cash equivalents		$	43,780			$	38,171
Receivables			92,964				84,473
Prepaid expenses			7,028				8,443
Investments, at fair value			29,991				27,266
Property and equipment, net			22,485				21,146
Goodwill			981,805				981,805
Other intangible assets, net			1,297,574				1,314,637
Other assets			62,794				64,958
Total assets		$	2,538,421			$	2,540,899
Liabilities and stockholders' equity
Accounts payable and accrued expenses		$	57,438			$	50,862
Accrued compensation and benefits			46,177				58,458
Consideration payable for acquisition of business			239,300				230,400
Deferred tax liability, net			119,757				108,138
Other liabilities			42,272				42,117
Long-term debt, net1			987,376				985,514
Total liabilities			1,492,320				1,475,489
Stockholders' equity
Common stock, $0.01 par value per share: 2023 - 600,000,000 shares authorized, 81,725,730 shares issued and 65,618,689 shares outstanding; 2022 - 600,000,000 shares authorized, 80,528,137 shares issued and 67,325,534 shares outstanding			817				805
Additional paid-in capital			717,208				705,466
Treasury stock, at cost: 2023 - 16,107,041 shares; 2022 - 13,202,603 shares			(377,670	)			(285,425	)
Accumulated other comprehensive income			34,287				35,442
Retained earnings			671,459				609,122
Total stockholders' equity			1,046,101				1,065,410
Total liabilities and stockholders' equity		$	2,538,421			$	2,540,899

1 Balances at June 30, 2023 and December 31, 2022 are shown net of unamortized loan discount and debt issuance costs in the amount of $14.3 million and $16.2 million, respectively. The gross amount of the debt outstanding was $1,001.7 million as of June 30, 2023 and December 31, 2022, respectively.

Victory Capital Holdings, Inc. and Subsidiaries Assets Under Management (unaudited; in millions except for percentages)
		For the Three Months Ended												% Change from
		June 30,				March 31,				June 30,				March 31,		June 30,
			2023				2023				2022			2023		2022
Beginning assets under management		$	158,621			$	152,952			$	178,098			4%		-11%
Gross client cash inflows			5,822				6,089				9,321			-4%		-38%
Gross client cash outflows			(8,244	)			(7,333	)			(10,005	)		12%		-18%
Net client cash flows			(2,422	)			(1,244	)			(683	)		95%		255%
Market appreciation (depreciation)			5,537				6,914				(21,670	)		-20%		N/A
Realizations and distributions			(73	)			—				—			N/A		N/A
Acquired assets / Net transfers			(41	)			—				(797	)		N/A		-95%
Ending assets under management			161,622				158,621				154,947			2%		4%
Average assets under management			157,372				157,817				165,703			0%		-5%
		For the Six Months Ended												% Change from
		June 30,				June 30,								June 30,
			2023				2022							2022
Beginning assets under management		$	152,952			$	183,654							-17%
Gross client cash inflows			11,911				20,457							-42%
Gross client cash outflows			(15,577	)			(18,150	)						-14%
Net client cash flows			(3,667	)			2,307							N/A
Market appreciation (depreciation)			12,451				(29,921	)						N/A
Realizations and distributions			(73	)			(30	)						143%
Acquired assets / Net transfers			(42	)			(1,064	)						-96%
Ending assets under management			161,622				154,947							4%
Average assets under management			157,595				171,283							-8%

Victory Capital Holdings, Inc. and Subsidiaries Assets Under Management by Asset Class (unaudited; in millions)
For the Three Months Ended		By Asset Class
		U.S. Mid				U.S. Small				Fixed				U.S. Large				Global / Non-U.S.								Alternative				Total				Money Market/
		Cap Equity				Cap Equity				Income				Cap Equity				Equity				Solutions				Investments				Long-term				Short-term				Total
June 30, 2023
Beginning assets under management		$	29,035			$	15,648			$	26,535			$	11,425			$	14,868			$	54,416			$	3,317			$	155,244			$	3,377			$	158,621
Gross client cash inflows			1,259				743				873				87				559				1,622				449				5,591				231				5,822
Gross client cash outflows			(1,126	)			(1,128	)			(1,324	)			(290	)			(585	)			(2,834	)			(408	)			(7,697	)			(547	)			(8,244	)
Net client cash flows			132				(386	)			(451	)			(204	)			(26	)			(1,212	)			41				(2,106	)			(316	)			(2,422	)
Market appreciation (depreciation)			824				404				48				954				575				2,682				12				5,499				38				5,537
Realizations and distributions			—				—				—				—				—				—				(73	)			(73	)			—				(73	)
Acquired assets / Net transfers			16				(2	)			(34	)			(4	)			(25	)			(49	)			4				(94	)			53				(41	)
Ending assets under management		$	30,007			$	15,664			$	26,098			$	12,170			$	15,392			$	55,836			$	3,301			$	158,469			$	3,152			$	161,622
March 31, 2023
Beginning assets under management		$	27,892			$	15,103			$	26,353			$	10,973			$	14,160			$	51,507			$	3,663			$	149,649			$	3,302			$	152,952
Gross client cash inflows			1,600				986				1,187				84				378				1,217				397				5,848				241				6,089
Gross client cash outflows			(1,092	)			(873	)			(1,571	)			(384	)			(544	)			(1,778	)			(840	)			(7,083	)			(250	)			(7,333	)
Net client cash flows			508				113				(385	)			(300	)			(166	)			(561	)			(444	)			(1,235	)			(9	)			(1,244	)
Market appreciation (depreciation)			637				423				615				822				920				3,366				96				6,880				34				6,914
Realizations and distributions			—				—				—				—				—				—				—				—				—				—
Acquired assets / Net transfers			(1	)			9				(48	)			(69	)			(46	)			104				2				(50	)			50				—
Ending assets under management		$	29,035			$	15,648			$	26,535			$	11,425			$	14,868			$	54,416			$	3,317			$	155,244			$	3,377			$	158,621
June 30, 2022
Beginning assets under management		$	30,543			$	18,489			$	33,071			$	14,548			$	15,654			$	58,656			$	4,025			$	174,985			$	3,113			$	178,098
Gross client cash inflows			1,476				701				1,455				126				1,140				2,249				2,051				9,198				123				9,321
Gross client cash outflows			(1,649	)			(1,791	)			(2,743	)			(396	)			(1,090	)			(1,761	)			(397	)			(9,828	)			(177	)			(10,005	)
Net client cash flows			(174	)			(1,090	)			(1,288	)			(270	)			50				488				1,654				(630	)			(53	)			(683	)
Market appreciation (depreciation)			(4,011	)			(2,558	)			(1,575	)			(2,365	)			(2,437	)			(8,652	)			(70	)			(21,669	)			(2	)			(21,670	)
Realizations and distributions			—				—				—				—				—				—				—				—				—				—
Acquired assets / Net transfers			(2	)			(4	)			(809	)			(56	)			(10	)			(7	)			9				(879	)			82				(797	)
Ending assets under management		$	26,356			$	14,837			$	29,398			$	11,857			$	13,257			$	50,485			$	5,617			$	151,807			$	3,140			$	154,947

Victory Capital Holdings, Inc. and Subsidiaries Assets Under Management by Asset Class (unaudited; in millions)
For the Six Months Ended		By Asset Class
		U.S. Mid				U.S. Small				Fixed				U.S. Large				Global / Non-U.S.								Alternative				Total				Money Market/
		Cap Equity				Cap Equity				Income				Cap Equity				Equity				Solutions				Investments				Long-term				Short-term				Total
June 30, 2023
Beginning assets under management		$	27,892			$	15,103			$	26,353			$	10,973			$	14,160			$	51,507			$	3,663			$	149,649			$	3,302			$	152,952
Gross client cash inflows			2,858				1,728				2,060				170				937				2,839				846				11,439				472				11,911
Gross client cash outflows			(2,219	)			(2,001	)			(2,896	)			(675	)			(1,129	)			(4,612	)			(1,248	)			(14,780	)			(797	)			(15,577	)
Net client cash flows			640				(273	)			(836	)			(504	)			(192	)			(1,774	)			(403	)			(3,341	)			(325	)			(3,667	)
Market appreciation (depreciation)			1,461				827				663				1,775				1,495				6,048				108				12,379				72				12,451
Realizations and distributions			—				—				—				—												(73	)			(73	)			—				(73	)
Acquired assets / Net transfers			15				7				(82	)			(74	)			(71	)			55				6				(144	)			103				(42	)
Ending assets under management		$	30,007			$	15,664			$	26,098			$	12,170			$	15,392			$	55,836			$	3,301			$	158,469			$	3,152			$	161,622
June 30, 2022
Beginning assets under management		$	30,578			$	20,094			$	35,154			$	15,766			$	16,050			$	60,364			$	2,548			$	180,554			$	3,100			$	183,654
Gross client cash inflows			3,909				1,819				3,060				251				2,382				5,051				3,739				20,210				247				20,457
Gross client cash outflows			(3,484	)			(3,143	)			(4,893	)			(779	)			(1,708	)			(3,236	)			(554	)			(17,797	)			(353	)			(18,150	)
Net client cash flows			425				(1,325	)			(1,833	)			(528	)			673				1,815				3,185				2,413				(106	)			2,307
Market appreciation (depreciation)			(4,666	)			(3,939	)			(3,116	)			(3,449	)			(3,533	)			(11,122	)			(98	)			(29,923	)			3				(29,921	)
Realizations and distributions			—				—				—				—				—				—				(30	)			(30	)			—				(30	)
Acquired assets / Net transfers			19				7				(806	)			68				67				(572	)			12				(1,206	)			143				(1,064	)
Ending assets under management		$	26,356			$	14,837			$	29,398			$	11,857			$	13,257			$	50,485			$	5,617			$	151,807			$	3,140			$	154,947

Victory Capital Holdings, Inc. and Subsidiaries Assets Under Management by Vehicle (unaudited; in millions)
For the Three Months Ended		By Vehicle
										Separate
										Accounts and
		Mutual								Other Pooled
		Funds(1)				ETFs(2)				Vehicles(3)				Total
June 30, 2023
Beginning assets under management		$	103,246			$	5,555			$	49,819			$	158,621
Gross client cash inflows			3,639				175				2,008				5,822
Gross client cash outflows			(4,863	)			(421	)			(2,960	)			(8,244	)
Net client cash flows			(1,224	)			(246	)			(952	)			(2,422	)
Market appreciation (depreciation)			3,923				(117	)			1,731				5,537
Realizations and distributions			—				—				(73	)			(73	)
Acquired assets / Net transfers			(28	)			—				(13	)			(41	)
Ending assets under management		$	105,916			$	5,193			$	50,513			$	161,622
March 31, 2023
Beginning assets under management		$	99,447			$	5,627			$	47,877			$	152,952
Gross client cash inflows			4,546				218				1,325				6,089
Gross client cash outflows			(5,406	)			(233	)			(1,694	)			(7,333	)
Net client cash flows			(860	)			(16	)			(369	)			(1,244	)
Market appreciation (depreciation)			4,650				(47	)			2,311				6,914
Realizations and distributions			—				—				—				—
Acquired assets / Net transfers			9				(9	)			—				—
Ending assets under management		$	103,246			$	5,555			$	49,819			$	158,621
June 30, 2022
Beginning assets under management		$	118,119			$	5,246			$	54,733			$	178,098
Gross client cash inflows			6,114				608				2,600				9,321
Gross client cash outflows			(7,678	)			(130	)			(2,196	)			(10,005	)
Net client cash flows			(1,565	)			478				404				(683	)
Market appreciation (depreciation)			(13,457	)			(568	)			(7,645	)			(21,670	)
Realizations and distributions			—				—				—				—
Acquired assets / Net transfers			(800	)			—				2				(797	)
Ending assets under management		$	102,297			$	5,155			$	47,494			$	154,947

1 Includes institutional and retail share classes, money market and VIP funds.

2 Represents only ETF assets held by third parties. Excludes ETF assets held by other Victory Capital products.

3 Includes collective trust funds, wrap program accounts, UMAs, UCITS, private funds and non-U.S. domiciled pooled vehicles.

Victory Capital Holdings, Inc. and Subsidiaries Assets Under Management by Vehicle (unaudited; in millions)
For the Six Months Ended		By Vehicle
										Separate
										Accounts
		Mutual								and Other
		Funds(1)				ETFs(2)				Vehicles(3)				Total
June 30, 2023
Beginning assets under management		$	99,447			$	5,627			$	47,877			$	152,952
Gross client cash inflows			8,185				393				3,333				11,911
Gross client cash outflows			(10,269	)			(655	)			(4,654	)			(15,577	)
Net client cash flows			(2,084	)			(262	)			(1,321	)			(3,667	)
Market appreciation (depreciation)			8,573				(164	)			4,042				12,451
Realizations and distributions			—				—				(73	)			(73	)
Acquired assets / Net transfers			(19	)			(9	)			(13	)			(42	)
Ending assets under management		$	105,916			$	5,193			$	50,513			$	161,622
June 30, 2022
Beginning assets under management		$	124,142			$	4,871			$	54,641			$	183,654
Gross client cash inflows			12,704				1,151				6,603				20,457
Gross client cash outflows			(14,061	)			(199	)			(3,890	)			(18,150	)
Net client cash flows			(1,357	)			952				2,712				2,307
Market appreciation (depreciation)			(19,421	)			(667	)			(9,832	)			(29,921	)
Realizations and distributions			—				—				(30	)			(30	)
Acquired assets / Net transfers			(1,066	)			—				2				(1,064	)
Ending assets under management		$	102,297			$	5,155			$	47,494			$	154,947

1 Includes institutional and retail share classes, money market and VIP funds.

2 Represents only ETF assets held by third parties. Excludes ETF assets held by other Victory Capital products.

3 Includes collective trust funds, wrap program accounts, UMAs, UCITS, private funds and non-U.S. domiciled pooled vehicles.

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, restructuring and integration costs and demonstrate the ongoing operating earnings metrics of the Company. The Company has included these non-GAAP measures to provide investors with the same financial metrics used by management to assess the operating performance of the Company.

Adjusted EBITDA

Adjustments made to GAAP Net Income to calculate Adjusted EBITDA, as applicable, are:

• Adding back income tax expense;
• Adding back interest paid on debt and other financing costs, net of interest income;
• Adding back depreciation on property and equipment;
• Adding back other business taxes;
• Adding back amortization expense on acquisition-related intangible assets;
• Adding back stock-based compensation expense associated with equity awards issued from pools created in connection with the management-led buyout and various acquisitions and as a result of equity grants related to the IPO;
• Adding back direct incremental costs of acquisitions, including restructuring costs;
• Adding back debt issuance cost expense;
• Adjusting for earnings/losses on equity method investments.

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 assets;
• Adding back stock-based compensation expense associated with equity awards issued from pools created in connection with the management-led buyout and various acquisitions and as a result of any equity grants related to the IPO;
• Adding back direct incremental costs of acquisitions, including restructuring costs;
• Adding back debt issuance cost expense;
• Subtracting an estimate of income tax expense applied to the sum of the adjustments above.

Tax Benefit of Goodwill and Acquired Intangible Assets

Due to Victory Capital’s acquisitive nature, tax deductions allowed on acquired intangible assets and goodwill provide it with additional significant supplemental economic benefit. The tax benefit of goodwill and intangible assets represent the tax benefits associated with deductions allowed for intangible assets and goodwill generated from prior acquisitions in which the Company received a step-up in basis for tax purposes. Acquired intangible assets and goodwill may be amortized for tax purposes, generally over a 15-year period. The tax benefit from amortization on these assets is included to show the full economic benefit of deductions for all acquired intangible assets with a step-up in tax basis.

View source version on businesswire.com: https://www.businesswire.com/news/home/20230803615782/en/

Investors:

Matthew Dennis, CFA

Chief of Staff

Director, Investor Relations

216-898-2412

mdennis@vcm.com

Media:

Jessica Davila

Director, Global Communications

210-694-9693

jessica_davila@vcm.com

Source: Victory Capital Holdings, Inc.