Victory Capital Reports Strong Third Quarter Earnings

Victory Capital Holdings, Inc. (NASDAQ: VCTR) (“Victory Capital” or “the Company”) today reported financial results for the quarter ended September 30, 2023.

“Adjusted EBITDA margin expanded further to 51.1% in the third quarter,” said David Brown, Chairman and Chief Executive Officer. “This was the 13^th consecutive quarter above our target of 49%, and the 9^th quarter over that period that our margins were 50% or higher.

“Additionally, we recorded the highest level of quarterly revenue in more than a year, and the highest levels of quarterly Adjusted EBITDA and Adjusted Net Income this calendar year.

“Our firmwide investment performance continues to be strong. Through the end of September, the percentage of our AUM outperforming benchmarks for the one-year period rose to 70%, up from 63% at the end of June. For the respective 3-, 5-, and 10-year periods 65%, 82%, and 78% of our AUM outperformed their respective benchmarks.

“In the third quarter, net long-term outflows totaled $1.7 billion, which was an improvement from the second quarter.

“During the quarter we accumulated cash on our balance sheet, which rose to $108 million as of September 30. Subsequent to quarter-end, we monetized the floating-to-fixed swap on a portion of our debt generating an additional $43 million of cash. These actions are designed to increase our financial flexibility as we continue to conduct due diligence activities on multiple 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 Nine Months Ended
		September 30,				June 30,				September 30,				September 30,				September 30,
		2023				2023				2022				2023				2022
Assets Under Management1
Ending		$	153,506			$	161,622			$	147,257			$	153,506			$	147,257
Average			161,147				157,372				158,903				158,779				167,157
Long-term Flows2
Long-term Gross		$	5,255			$	5,591			$	6,601			$	16,694			$	26,812
Long-term Net			(1,700	)			(2,106	)			(553	)			(5,041	)			1,860
Money Market/Short-term Flows
Money Market/Short-term Gross		$	193			$	231			$	194			$	666			$	441
Money Market/Short-term Net			(19	)			(316	)			(19	)			(345	)			(125	)
Total Flows
Total Gross		$	5,449			$	5,822			$	6,796			$	17,359			$	27,253
Total Net			(1,719	)			(2,422	)			(573	)			(5,386	)			1,734
Consolidated Financial Results (GAAP)
Revenue		$	209.7			$	204.2			$	207.3			$	615.2			$	653.3
Revenue realization (in bps)			51.6				52.1				51.8				51.8				52.3
Operating expenses			129.6				116.7				108.6				373.1				333.8
Income from operations			80.0				87.5				98.6				242.1				319.5
Operating margin			38.2	%			42.9	%			47.6	%			39.4	%			48.9	%
Net income			52.0				56.7				72.8				158.0				223.2
Earnings per diluted share		$	0.77			$	0.83			$	1.01			$	2.30			$	3.07
Cash flow from operations			91.6				77.4				103.1				233.2				268.1
Adjusted Performance Results (Non-GAAP)3
Adjusted EBITDA		$	107.2			$	104.0			$	103.6			$	310.4			$	324.1
Adjusted EBITDA margin			51.1	%			50.9	%			50.0	%			50.5	%			49.6	%
Adjusted net income			70.3				66.4				76.2				202.3				228.7
Tax benefit of goodwill and acquired intangible assets			9.5				9.5				9.3				28.6				28.0
Adjusted net income with tax benefit			79.8				75.9				85.6				230.9				256.7
Adjusted net income with tax benefit per diluted share		$	1.18			$	1.11			$	1.19			$	3.36			$	3.53

_______________________

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 decreased by 5.0%, or $8.1 billion, to $153.5 billion at September 30, 2023, compared with $161.6 billion at June 30, 2023. The decrease was attributable to the combination of negative market action, net outflows and the divestiture of certain INCORE accounts of $4.9 billion, $1.7 billion and $1.3 billion, respectively. Total gross flows were $5.4 billion for the third quarter and $17.4 billion for the year-to-date period. For the third quarter and year-to-date periods, the Company reported total net outflows of $1.7 billion and $5.4 billion, respectively.

As of September 30, 2023, Victory Capital offered 116 investment strategies through its 11 autonomous Investment Franchises and Solutions Platform. The table below presents outperformance against benchmarks by AUM as of September 30, 2023.

Percentage of AUM Outperforming Benchmark
Trailing		Trailing		Trailing		Trailing
1-Year		3-Years		5-Years		10-Years
70%		65%		82%		78%

Third Quarter 2023 Compared with Second Quarter 2023

Revenue increased 2.7% to $209.7 million in the third quarter, compared with $204.2 million in the second quarter, primarily due to an increase in average AUM and one extra day in the quarter. GAAP operating margin contracted 470 basis points in the third quarter to 38.2%, down from 42.9% in the second quarter primarily due to the combination of a non-cash $8.8 million difference in amounts recorded to the change in the fair value of consideration payable for acquisitions and an increase in depreciation and amortization expense due to the write-down of an intangible asset. Reflecting these higher non-cash expenses, third quarter GAAP net income decreased 8.2% to $52.0 million, down from $56.7 million in the prior quarter. On a per-share basis, GAAP net income decreased 7.1% to $0.77 per diluted share in the third quarter, versus $0.83 per diluted share in the second quarter.

Adjusted net income with tax benefit increased 5.1% to $79.8 million in the third quarter, up from $75.9 million in the second quarter. On a per-share basis, adjusted net income with tax benefit increased 6.4% to $1.18 per diluted share in the third quarter, from $1.11 per diluted share in the prior quarter. Adjusted EBITDA increased 3.1% to $107.2 million in the third quarter, versus $104.0 million in the second quarter. Adjusted EBITDA margin expanded 20 basis points in the third quarter of 2023 to 51.1% compared with 50.9% in the prior quarter.

Third Quarter 2023 Compared with Third Quarter 2022

Revenue for the three months ended September 30, 2023, increased 1.2% to $209.7 million, compared with $207.3 million in the same quarter of 2022 as a result of higher average AUM over the comparable period.

GAAP operating expenses increased 19.4% to $129.6 million, compared with $108.6 million in last year’s third quarter due to a non-cash $20.8 million difference in amounts recorded to the change in the fair value of consideration payable for acquisitions as well as an increase in depreciation and amortization expense, partially offset by a reduction in compensation expense. GAAP operating margin contracted 940 basis points to 38.2% in the third quarter, from 47.6% in the same quarter of 2022. GAAP net income declined 28.5% to $52.0 million, or $0.77 per diluted share, in the third quarter compared with $72.8 million, or $1.01 per diluted share, in the same quarter of 2022.

Adjusted net income with tax benefit decreased 6.7% to $79.8 million, or $1.18 per diluted share, in the third quarter, compared with $85.6 million, or $1.19 per diluted share in the same quarter last year. Adjusted EBITDA increased 3.5% to $107.2 million, compared with $103.6 million in last year’s same quarter. Year-over-year, adjusted EBITDA margin expanded 110 basis points to 51.1% in the third quarter of 2023, compared with 50.0% in the same quarter last year.

Nine Months Ended September 30, 2023 Compared with Nine Months Ended September 30, 2022

Revenue for the nine months ended September 30, 2023, decreased 5.8% to $615.2 million, compared with $653.3 million in the same period of 2022. The decrease was primarily due to lower average AUM and a decrease in revenue realization.

GAAP operating expenses increased 11.8% to $373.1 million for the nine months ended September 30, 2023, compared with $333.8 million in the same period in 2022 due to a non-cash $59.8 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 39.4% for the nine months ended September 30, 2023, a 950 basis point decrease from the 48.9% recorded in the same period in 2022. GAAP net income decreased 29.3% to $158.0 million, or $2.30 per diluted share, in the first nine months of 2023 compared with $223.2 million, or $3.07 per diluted share, in the same period in 2022.

Adjusted net income with tax benefit decreased 10.0% to $230.9 million, or $3.36 per diluted share, in the first nine months of 2023, compared with $256.7 million, or $3.53 per diluted share in the same period in 2022. For the nine months ended September 30, 2023, adjusted EBITDA declined 4.2% to $310.4 million, compared with $324.1 million for the same period in 2022. Year-over-year, adjusted EBITDA margin expanded 90 basis points to 50.5% in the first nine months of 2023, compared with 49.6% in the same period last year.

Balance Sheet / Capital Management

The Company ended the third quarter with $108 million of cash on its balance sheet.

Total debt outstanding as of September 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.

On October 30, 2023, the Company monetized the floating-to-fixed swap on a portion of its debt generating an additional $43.4 million of cash net of costs.

The Company’s Board of Directors approved a regular quarterly cash dividend of $0.32 per share. The dividend is payable on December 22, 2023, to shareholders of record on December 11, 2023.

Conference Call, Webcast and Slide Presentation

The Company will host a conference call tomorrow morning, November 3, 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 [phone] (domestic) or [phone] (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 $153.5 billion in assets under management as of September 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 11 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 Facebook, 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 Israel 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 Nine Months Ended
		September 30,				June 30,				September 30,				September 30,				September 30,
		2023				2023				2022				2023				2022
Revenue
Investment management fees		$	163,953			$	159,410			$	160,770			$	480,199			$	508,364
Fund administration and distribution fees			45,735				44,816				46,490				135,035				144,921
Total revenue			209,688				204,226				207,260				615,234				653,285
Expenses
Personnel compensation and benefits			54,501				54,940				56,869				167,043				179,352
Distribution and other asset-based expenses			38,160				37,344				39,019				113,158				123,471
General and administrative			13,947				13,250				12,301				39,585				38,984
Depreciation and amortization			12,333				9,650				10,686				33,663				32,051
Change in value of consideration payable for acquisition of business			10,336				1,500				(10,500	)			19,236				(40,600	)
Acquisition-related costs			116				16				189				134				449
Restructuring and integration costs			246				—				56				275				73
Total operating expenses			129,639				116,700				108,620				373,094				333,780
Income from operations			80,049				87,526				98,640				242,140				319,505
Operating margin			38.2	%			42.9	%			47.6	%			39.4	%			48.9	%
Other income (expense)
Interest income and other income (expense)			1,452				1,971				(1,446	)			4,967				(5,096	)
Interest expense and other financing costs			(15,580	)			(14,902	)			(11,479	)			(44,721	)			(30,637	)
Loss on debt extinguishment			—				—				(369	)			—				(2,887	)
Total other income (expense), net			(14,128	)			(12,931	)			(13,294	)			(39,754	)			(38,620	)
Income before income taxes			65,921				74,595				85,346				202,386				280,885
Income tax expense			(13,914	)			(17,924	)			(12,582	)			(44,435	)			(57,643	)
Net income		$	52,007			$	56,671			$	72,764			$	157,951			$	223,242
Earnings per share of common stock
Basic		$	0.79			$	0.85			$	1.06			$	2.38			$	3.25
Diluted			0.77				0.83				1.01				2.30				3.07
Weighted average number of shares outstanding
Basic			65,774				66,466				68,609				66,504				68,625
Diluted			67,676				68,500				71,877				68,636				72,797
Dividends declared per share		$	0.32			$	0.32			$	0.25			$	0.96			$	0.75

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 Nine Months Ended
		September 30,				June 30,				September 30,				September 30,				September 30,
		2023				2023				2022				2023				2022
Net income (GAAP)		$	52,007			$	56,671			$	72,764			$	157,951			$	223,242
Income tax expense			(13,914	)			(17,924	)			(12,582	)			(44,435	)			(57,643	)
Income before income taxes		$	65,921			$	74,595			$	85,346			$	202,386			$	280,885
Interest expense			14,660				14,146				10,795				42,288				29,018
Depreciation			2,302				2,296				2,030				6,569				6,086
Other business taxes			636				382				539				1,402				1,670
Amortization of acquisition-related intangible assets			10,032				7,353				8,657				27,094				25,969
Stock-based compensation			1,451				1,538				2,230				4,993				7,723
Acquisition, restructuring and exit costs			11,463				2,949				(7,842	)			23,396				(32,719	)
Debt issuance costs			762				756				1,064				2,266				4,685
Losses from equity method investments			—				—				759				—				825
Adjusted EBITDA		$	107,227			$	104,015			$	103,578			$	310,394			$	324,142
Adjusted EBITDA margin			51.1	%			50.9	%			50.0	%			50.5	%			49.6	%
Net income (GAAP)		$	52,007			$	56,671			$	72,764			$	157,951			$	223,242
Adjustment to reflect the operating performance of the Company
Other business taxes			636				382				539				1,402				1,670
Amortization of acquisition-related intangible assets			10,032				7,353				8,657				27,094				25,969
Stock-based compensation			1,451				1,538				2,230				4,993				7,723
Acquisition, restructuring and exit costs			11,463				2,949				(7,842	)			23,396				(32,719	)
Debt issuance costs			762				756				1,064				2,266				4,685
Tax effect of above adjustments			(6,085	)			(3,244	)			(1,163	)			(14,786	)			(1,833	)
Adjusted net income		$	70,266			$	66,405			$	76,249			$	202,316			$	228,737
Adjusted net income per diluted share		$	1.04			$	0.97			$	1.06			$	2.95			$	3.14
Tax benefit of goodwill and acquired intangible assets		$	9,536			$	9,537			$	9,328			$	28,597			$	27,977
Tax benefit of goodwill and acquired intangible assets per diluted share		$	0.14			$	0.14			$	0.13			$	0.42			$	0.38
Adjusted net income with tax benefit		$	79,802			$	75,942			$	85,577			$	230,913			$	256,714
Adjusted net income with tax benefit per diluted share		$	1.18			$	1.11			$	1.19			$	3.36			$	3.53

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)
		September 30, 2023				December 31, 2022
Assets
Cash and cash equivalents		$	107,987			$	38,171
Receivables			95,174				84,473
Prepaid expenses			6,458				8,443
Investments, at fair value			29,858				27,266
Property and equipment, net			21,203				21,146
Goodwill			981,805				981,805
Other intangible assets, net			1,287,542				1,314,637
Other assets			61,778				64,958
Total assets		$	2,591,805			$	2,540,899
Liabilities and stockholders' equity
Accounts payable and accrued expenses		$	59,552			$	50,862
Accrued compensation and benefits			52,167				58,458
Consideration payable for acquisition of business			249,636				230,400
Deferred tax liability, net			124,995				108,138
Other liabilities			40,996				42,117
Long-term debt, net1			988,323				985,514
Total liabilities			1,515,669				1,475,489
Stockholders' equity
Common stock, $0.01 par value per share: 2023 - 600,000,000 shares authorized, 82,224,284 shares issued and 65,911,628 shares outstanding; 2022 - 600,000,000 shares authorized, 80,528,137 shares issued and 67,325,534 shares outstanding			822				805
Additional paid-in capital			723,252				705,466
Treasury stock, at cost: 2023 - 16,312,656 shares; 2022 - 13,202,603 shares			(384,462	)			(285,425	)
Accumulated other comprehensive income			34,220				35,442
Retained earnings			702,304				609,122
Total stockholders' equity			1,076,136				1,065,410
Total liabilities and stockholders' equity		$	2,591,805			$	2,540,899

1 Balances at September 30, 2023 and December 31, 2022 are shown net of unamortized loan discount and debt issuance costs in the amount of $13.4 million and $16.2 million, respectively. The gross amount of the debt outstanding was $1,001.7 million as of September 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
		September 30,				June 30,				September 30,				June 30,		September 30,
		2023				2023				2022				2023		2022
Beginning assets under management		$	161,622			$	158,621			$	154,947			2%		4%
Gross client cash inflows			5,449				5,822				6,796			-6%		-20%
Gross client cash outflows			(7,168	)			(8,244	)			(7,368	)		-13%		-3%
Net client cash flows			(1,719	)			(2,422	)			(573	)		-29%		200%
Market appreciation (depreciation)			(4,888	)			5,537				(7,066	)		N/A		-31%
Realizations and distributions			—				(73	)			(51	)		N/A		N/A
Acquired & divested assets / Net transfers1			(1,508	)			(41	)			—			3578%		N/A
Ending assets under management			153,506				161,622				147,257			-5%		4%
Average assets under management			161,147				157,372				158,903			2%		1%
		For the Nine Months Ended												% Change from
		September 30,				September 30,								September 30,
		2023				2022								2022
Beginning assets under management		$	152,952			$	183,654							-17%
Gross client cash inflows			17,359				27,253							-36%
Gross client cash outflows			(22,745	)			(25,518	)						-11%
Net client cash flows			(5,386	)			1,734							N/A
Market appreciation (depreciation)			7,563				(36,987	)						N/A
Realizations and distributions			(73	)			(80	)						-9%
Acquired & divested assets / Net transfers1			(1,549	)			(1,064	)						46%
Ending assets under management			153,506				147,257							4%
Average assets under management			158,779				167,157							-5%

1 The three and nine months ended September 30, 2023 reflects divested assets of $1.3 billion associated with the INCORE transaction.

Victory Capital Holdings, Inc. and Subsidiaries Assets Under Management by Asset Class (unaudited; in millions)
For the Three Months Ended		By Asset Class
																		Global /
		U.S. Mid				U.S. Small				Fixed				U.S. Large				Non-U.S.								Alternative				Total				Money Market/
		Cap Equity				Cap Equity				Income				Cap Equity				Equity				Solutions				Investments				Long-term				Short-term				Total
September 30, 2023
Beginning assets under management		$	30,007			$	15,664			$	26,098			$	12,170			$	15,392			$	55,836			$	3,301			$	158,469			$	3,152			$	161,622
Gross client cash inflows			1,224				458				892				51				392				1,988				249				5,255				193				5,449
Gross client cash outflows			(1,769	)			(920	)			(1,343	)			(282	)			(519	)			(1,720	)			(402	)			(6,955	)			(213	)			(7,168	)
Net client cash flows			(545	)			(462	)			(451	)			(231	)			(126	)			268				(153	)			(1,700	)			(19	)			(1,719	)
Market appreciation (depreciation)			(1,224	)			(547	)			(460	)			(287	)			(451	)			(2,028	)			71				(4,927	)			39				(4,888	)
Realizations and distributions			—				—				—				—				—				—				—				—				—				—
Acquired & divested assets / Net transfers1			(2	)			(5	)			(1,397	)			(57	)			(8	)			(78	)			3				(1,545	)			37				(1,508	)
Ending assets under management		$	28,235			$	14,650			$	23,790			$	11,596			$	14,807			$	53,998			$	3,222			$	150,298			$	3,208			$	153,506
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 & divested 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
September 30, 2022
Beginning assets under management		$	26,356			$	14,837			$	29,398			$	11,857			$	13,257			$	50,485			$	5,617			$	151,807			$	3,140			$	154,947
Gross client cash inflows			1,508				589				1,123				67				742				1,745				827				6,601				194				6,796
Gross client cash outflows			(1,176	)			(939	)			(1,958	)			(269	)			(636	)			(1,315	)			(863	)			(7,155	)			(214	)			(7,368	)
Net client cash flows			333				(349	)			(835	)			(203	)			107				430				(36	)			(553	)			(19	)			(573	)
Market appreciation (depreciation)			(938	)			(404	)			(829	)			(560	)			(1,248	)			(2,930	)			(165	)			(7,074	)			8				(7,066	)
Realizations and distributions			—				—				—				—				—				—				(51	)			(51	)			—				(51	)
Acquired & divested assets / Net transfers			3				26				(536	)			(333	)			178				566				(31	)			(127	)			127				—
Ending assets under management		$	25,754			$	14,109			$	27,198			$	10,762			$	12,293			$	48,551			$	5,334			$	144,001			$	3,256			$	147,257

1 The three months ended September 30, 2023 reflects divested assets of $1.3 billion associated with the INCORE transaction.

Victory Capital Holdings, Inc. and Subsidiaries Assets Under Management by Asset Class (unaudited; in millions)
For the Nine Months Ended		By Asset Class
																		Global /
		U.S. Mid				U.S. Small				Fixed				U.S. Large				Non-U.S.								Alternative				Total				Money Market/
		Cap Equity				Cap Equity				Income				Cap Equity				Equity				Solutions				Investments				Long-term				Short-term				Total
September 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			4,083				2,186				2,952				222				1,329				4,827				1,095				16,694				666				17,359
Gross client cash outflows			(3,988	)			(2,921	)			(4,239	)			(957	)			(1,648	)			(6,332	)			(1,650	)			(21,735	)			(1,010	)			(22,745	)
Net client cash flows			95				(735	)			(1,287	)			(735	)			(319	)			(1,506	)			(555	)			(5,041	)			(345	)			(5,386	)
Market appreciation (depreciation)			237				280				203				1,488				1,044				4,020				180				7,452				111				7,563
Realizations and distributions			—				—				—				—				—				—				(73	)			(73	)			—				(73	)
Acquired & divested assets / Net transfers1			13				2				(1,479	)			(130	)			(79	)			(23	)			8				(1,689	)			140				(1,549	)
Ending assets under management		$	28,235			$	14,650			$	23,790			$	11,596			$	14,807			$	53,998			$	3,222			$	150,298			$	3,208			$	153,506
September 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			5,417				2,408				4,183				318				3,124				6,796				4,566				26,812				441				27,253
Gross client cash outflows			(4,659	)			(4,082	)			(6,851	)			(1,048	)			(2,344	)			(4,551	)			(1,417	)			(24,952	)			(567	)			(25,518	)
Net client cash flows			758				(1,674	)			(2,668	)			(730	)			780				2,246				3,149				1,860				(125	)			1,734
Market appreciation (depreciation)			(5,604	)			(4,343	)			(3,945	)			(4,008	)			(4,781	)			(14,052	)			(263	)			(36,998	)			11				(36,987	)
Realizations and distributions			—				—				—				—				—				—				(80	)			(80	)			—				(80	)
Acquired & divested assets / Net transfers			22				33				(1,342	)			(266	)			245				(6	)			(19	)			(1,334	)			270				(1,064	)
Ending assets under management		$	25,754			$	14,109			$	27,198			$	10,762			$	12,293			$	48,551			$	5,334			$	144,001			$	3,256			$	147,257

1 The nine months ended September 30, 2023 reflects divested assets of $1.3 billion associated with the INCORE transaction.

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
September 30, 2023
Beginning assets under management		$	105,916			$	5,193			$	50,513			$	161,622
Gross client cash inflows			3,283				232				1,933				5,449
Gross client cash outflows			(5,119	)			(557	)			(1,492	)			(7,168	)
Net client cash flows			(1,836	)			(324	)			441				(1,719	)
Market appreciation (depreciation)			(2,925	)			(165	)			(1,799	)			(4,888	)
Realizations and distributions			—				—				—				—
Acquired & divested assets / Net transfers4			(17	)			6				(1,497	)			(1,508	)
Ending assets under management		$	101,138			$	4,710			$	47,658			$	153,506
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 & divested assets / Net transfers			(28	)			—				(13	)			(41	)
Ending assets under management		$	105,916			$	5,193			$	50,513			$	161,622
September 30, 2022
Beginning assets under management		$	102,297			$	5,155			$	47,494			$	154,947
Gross client cash inflows			4,277				515				2,003				6,796
Gross client cash outflows			(5,689	)			(196	)			(1,484	)			(7,368	)
Net client cash flows			(1,411	)			319				519				(573	)
Market appreciation (depreciation)			(4,290	)			(383	)			(2,393	)			(7,066	)
Realizations and distributions			—				—				(51	)			(51	)
Acquired & divested assets / Net transfers			(5	)			18				(13	)			—
Ending assets under management		$	96,591			$	5,110			$	45,557			$	147,257

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.

4 The three months ended September 30, 2023 reflects divested assets of $1.3 billion associated with the INCORE transaction.

Victory Capital Holdings, Inc. and Subsidiaries Assets Under Management by Vehicle (unaudited; in millions)
For the Nine Months Ended		By Vehicle
										Separate
										Accounts
		Mutual								and Other
		Funds(1)				ETFs(2)				Vehicles(3)				Total
September 30, 2023
Beginning assets under management		$	99,447			$	5,627			$	47,877			$	152,952
Gross client cash inflows			11,468				625				5,266				17,359
Gross client cash outflows			(15,388	)			(1,211	)			(6,146	)			(22,745	)
Net client cash flows			(3,921	)			(586	)			(880	)			(5,386	)
Market appreciation (depreciation)			5,648				(329	)			2,244				7,563
Realizations and distributions			—				—				(73	)			(73	)
Acquired & divested assets / Net transfers4			(36	)			(3	)			(1,510	)			(1,549	)
Ending assets under management		$	101,138			$	4,710			$	47,658			$	153,506
September 30, 2022
Beginning assets under management		$	124,142			$	4,871			$	54,641			$	183,654
Gross client cash inflows			16,981				1,666				8,606				27,253
Gross client cash outflows			(19,750	)			(394	)			(5,374	)			(25,518	)
Net client cash flows			(2,769	)			1,271				3,231				1,734
Market appreciation (depreciation)			(23,712	)			(1,051	)			(12,225	)			(36,987	)
Realizations and distributions			—				—				(80	)			(80	)
Acquired & divested assets / Net transfers			(1,071	)			18				(11	)			(1,064	)
Ending assets under management		$	96,591			$	5,110			$	45,557			$	147,257

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.

4 The nine months ended September 30, 2023 reflects divested assets of $1.3 billion associated with the INCORE transaction.

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/20231102912692/en/

The Victory Capital Holdings Registered (A) Stock at the time of publication of the news with a raise of +2,75 % to 30,96USD on Nasdaq stock exchange (02. November 2023, 21:02 Uhr).