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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

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.

Contacts

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

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