UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2023 or ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ______ to ______ Commission file number 001-38388 Victory Capital Holdings, Inc. (Exact name of registrant as specified in its charter) (State or other ju ...

Financial Data and Key Metrics Changes - Long-term net flows improved with outflows of $1 billion compared to $1.2 billion in the first quarter, excluding a passive mandate redemption [6][8] - Average AUM was flat quarter-over-quarter, while average fee realization rose to 52.1 basis points, contributing to higher revenue [6][20] - Revenue increased to $204.2 million in the second quarter from $201.3 million in the first quarter, driven by higher fee rate realization [20] - GAAP operating income was $87.5 million, and adjusted EBITDA was $104 million, both up from the previous quarter [20] - Adjusted net income rose to $75.9 million or $1.11 per diluted share, up from $1.08 in the previous quarter [8][20] Business Line Data and Key Metrics Changes - Investment performance remained strong, with 42 mutual funds and ETFs rated four or five stars by Morningstar, accounting for nearly two-thirds of AUM [10][11] - Positive net flows were recorded in five franchises, including Integrity and New Energy Capital, with WestEnd showing consistent net flow positivity since its acquisition [22][23] - The fee rate increased by 0.4 basis points, marking the highest fee rate realization in the past four quarters [24] Market Data and Key Metrics Changes - AUM increased nearly 2% from $158.6 billion at the end of March to $161.6 billion by the end of June [19][21] - Industry-wide softness in gross sales persisted, with investors hesitant to enter the market due to volatility, leading to a preference for cash holdings [22][43] Company Strategy and Development Direction - The company continues to invest in organic growth initiatives and strategic acquisitions, with a focus on enhancing shareholder value [14][55] - The launch of a new brokerage platform aims to cross-sell investment strategies and improve client engagement [29][30] - The company is optimistic about capturing inflows into fixed income products as the Fed's tightening cycle subsides [12][35] Management's Comments on Operating Environment and Future Outlook - Management anticipates a shift from money market investments to longer-duration fixed income as investor confidence returns [35][43] - The company remains patient and selective in evaluating acquisition opportunities, with expectations of increased M&A activity in the industry [37][56] - Management noted that gross flows have been soft due to investor caution, but they expect a significant movement of funds once clarity on the Fed's direction is achieved [43][44] Other Important Information - The company celebrated its 10th anniversary as an independent entity, highlighting significant growth in AUM and revenue since its management buyout [15][16] - The net leverage ratio improved to 2.3 times at the end of June, reflecting growth in earnings and a higher cash position [27] Q&A Session Summary Question: Opportunity to cross-sell strategies with the new brokerage platform - Management expressed optimism about cross-selling investment strategies to both current and new clients, emphasizing the importance of product choice [29][30] Question: Scale potential and investor interest in New Energy Capital - Management indicated that New Energy Capital is in its early stages, with positive net flows and plans for launching new funds [31][32] Question: Expectations for fixed income flows in the second half of the year - Management believes that as investor confidence grows, there will be a pivot from money market investments to longer-duration fixed income products [34][35] Question: Changes in M&A valuation multiples and financing conditions - Management noted that sellers have adjusted their expectations, leading to more conversations about potential acquisitions [36][37] Question: Comments on margin results and future guidance - Management reaffirmed their long-term margin guidance of 49%, citing a strong operating platform and consistent performance [40][42] Question: Broader investor sentiment and flow trends - Management acknowledged soft gross flows but noted potential for movement as clarity on the Fed and the economy improves [43][44] Question: Capital allocation strategy and focus areas for inorganic growth - Management emphasized a balanced approach to capital allocation, prioritizing inorganic growth while maintaining flexibility [50][53][54]

Second Quarter 2023 Earnings Presentation August 4, 2023 Forward Looking Statements This presentation may contain "forward-looking" statements that are based on our beliefs and assumptions and on information currently available to us. Forward-looking statements include information concerning our possible or assumed future results of operations, business strategies, competitive position and potential organic and inorganic growth opportunities. Forward-looking statements include all statements that are not hi ...

[PART I — FINANCIAL INFORMATION](index=3&type=section&id=PART%20I%20%E2%80%94%20FINANCIAL%20INFORMATION) [Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements) This section presents Victory Capital Holdings, Inc.'s unaudited condensed consolidated financial statements, highlighting **$2.54 billion** in total assets, decreased revenue and net income, and significant cash used in financing activities [Condensed Consolidated Balance Sheets](index=3&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) As of June 30, 2023, total assets were **$2.538 billion**, slightly down from year-end 2022, with significant goodwill and intangible assets, while total liabilities increased to **$1.492 billion** Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | June 30, 2023 | December 31, 2022 | | :--- | :--- | :--- | | **Assets** | | | | Cash and cash equivalents | $43,780 | $38,171 | | Goodwill | $981,805 | $981,805 | | Other intangible assets, net | $1,297,574 | $1,314,637 | | **Total Assets** | **$2,538,421** | **$2,540,899** | | **Liabilities & Equity** | | | | Consideration payable for acquisition of business | $239,300 | $230,400 | | Long-term debt, net | $987,376 | $985,514 | | **Total Liabilities** | **$1,492,320** | **$1,475,489** | | **Total Stockholders' Equity** | **$1,046,101** | **$1,065,410** | [Condensed Consolidated Statements of Operations](index=4&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) Q2 2023 total revenue decreased to **$204.2 million** from **$216.0 million** in Q2 2022, with net income falling to **$56.7 million** due to lower fees and acquisition-related expense swings Q2 and H1 2023 vs 2022 Performance (in thousands, except per share data) | Metric | Q2 2023 | Q2 2022 | H1 2023 | H1 2022 | | :--- | :--- | :--- | :--- | :--- | | Total Revenue | $204,226 | $216,006 | $405,546 | $446,025 | | Income from Operations | $87,526 | $119,326 | $162,091 | $220,865 | | Net Income | $56,671 | $79,205 | $105,944 | $150,478 | | Diluted EPS | $0.83 | $1.09 | $1.53 | $2.05 | | Dividends Declared per Share | $0.32 | $0.25 | $0.64 | $0.50 | [Condensed Consolidated Statements of Cash Flows](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Net cash from operations decreased to **$141.6 million** in H1 2023, with **$132.0 million** used in financing activities, primarily for share repurchases and dividends Cash Flow Summary for Six Months Ended June 30 (in thousands) | Cash Flow Activity | 2023 | 2022 | | :--- | :--- | :--- | | Net cash provided by operating activities | $141,562 | $165,055 | | Net cash used in investing activities | ($3,922) | ($7,152) | | Net cash used in financing activities | ($132,034) | ($184,585) | | Net increase (decrease) in cash | $5,609 | ($26,815) | [Notes to Condensed Consolidated Financial Statements](index=8&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) Notes detail accounting policies, contingent consideration from acquisitions, fair value measurements, debt structure, a new **$100.0 million** share repurchase program, and interest rate swap hedging - Revenue primarily derives from investment management, fund administration, and distribution fees, recognized over time based on a percentage of **Assets Under Management (AUM)**[37](index=37&type=chunk)[38](index=38&type=chunk)[40](index=40&type=chunk) - Contingent consideration liabilities for USAA AMCO and WestEnd acquisitions, totaling **$239.3 million** as of June 30, 2023, are re-measured to fair value, impacting earnings[80](index=80&type=chunk)[85](index=85&type=chunk) - A new **$100.0 million** share repurchase program was approved in March 2023, with **$51.9 million** remaining available as of June 30, 2023[109](index=109&type=chunk)[111](index=111&type=chunk) - The company uses a floating-to-fixed interest rate swap with a notional value of **$450 million** to hedge long-term debt, fixing the rate at **3.149%** through July 2026[123](index=123&type=chunk)[124](index=124&type=chunk)[208](index=208&type=chunk) - On August 3, 2023, the Board declared a regular quarterly cash dividend of **$0.32 per share**[134](index=134&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=25&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses performance, noting AUM increased to **$161.6 billion** despite net outflows, while revenue and net income decreased year-over-year due to lower average AUM and contingent consideration changes [Overview](index=26&type=section&id=Overview) Victory Capital is a diversified global asset management firm with **$161.6 billion** in AUM, operating a next-generation model with 12 Investment Franchises and a new direct investor platform - Victory operates a business model combining boutique investment qualities with an integrated, centralized operating and distribution platform[138](index=138&type=chunk) - The company offers a wide array of investment products through **12 autonomous Investment Franchises** and a Solutions Platform, managing **126 investment strategies**[139](index=139&type=chunk) - In April 2023, the company launched 'Victory Capital InVest', a new brand for its direct investor business, including an open architecture brokerage platform[140](index=140&type=chunk) [Assets Under Management](index=29&type=section&id=Assets%20Under%20Management) Total AUM increased to **$161.6 billion** at June 30, 2023, driven by **$5.5 billion** in market appreciation despite **$2.4 billion** in net outflows, with Solutions and Retail as largest segments AUM and Flow Summary (in millions) | Metric | Q2 2023 | Q2 2022 | H1 2023 | H1 2022 | | :--- | :--- | :--- | :--- | :--- | | AUM at period end | $161,622 | $154,947 | $161,622 | $154,947 | | Average AUM | $157,372 | $165,703 | $157,595 | $171,283 | | Net flows | ($2,422) | ($683) | ($3,667) | $2,307 | AUM by Asset Class as of June 30, 2023 (in millions) | Asset Class | AUM | | :--- | :--- | | Solutions | $55,836 | | U.S. Mid Cap Equity | $30,007 | | Fixed Income | $26,098 | | U.S. Small Cap Equity | $15,664 | | Global / Non-U.S. Equity | $15,392 | | U.S. Large Cap Equity | $12,170 | | Alternative Investments | $3,301 | | Money Market & Short-Term | $3,152 | | **Total** | **$161,622** | [Results of Operations](index=33&type=section&id=Results%20of%20Operations) Q2 2023 revenue decreased **5.5%** to **$204.2 million** due to lower AUM, with operating income impacted by a **$28.1 million** unfavorable change in contingent consideration and increased interest expense - Q2 2023 investment management fees decreased **5.2%** year-over-year to **$159.4 million** due to lower average AUM[171](index=171&type=chunk) - Personnel compensation for Q2 2023 decreased by **$2.6 million** year-over-year, driven by lower incentive and sales-based compensation[175](index=175&type=chunk) - The 'Change in value of consideration payable for acquisition of business' was an expense of **$1.5 million** in Q2 2023, a significant negative swing from a **$26.6 million** benefit in Q2 2022[170](index=170&type=chunk)[183](index=183&type=chunk) - Interest expense increased to **$14.9 million** in Q2 2023 from **$9.9 million** in Q2 2022 due to higher average interest rates on debt[188](index=188&type=chunk) [Supplemental Non-GAAP Financial Information](index=36&type=section&id=Supplemental%20Non-GAAP%20Financial%20Information) Non-GAAP measures show Q2 2023 Adjusted EBITDA at **$104.0 million** with a **50.9%** margin, and Adjusted Net Income at **$66.4 million**, providing a clearer view of operating performance Non-GAAP Reconciliation Summary (in thousands) | Metric | Q2 2023 | Q2 2022 | H1 2023 | H1 2022 | | :--- | :--- | :--- | :--- | :--- | | Net Income (GAAP) | $56,671 | $79,205 | $105,944 | $150,478 | | Adjusted EBITDA | $104,015 | $106,189 | $203,167 | $220,564 | | Adjusted Net Income | $66,405 | $71,393 | $132,050 | $152,488 | - Adjusted EBITDA margin improved to **50.9%** in Q2 2023 from **49.2%** in Q2 2022[157](index=157&type=chunk)[158](index=158&type=chunk) [Liquidity and Capital Resources](index=38&type=section&id=Liquidity%20and%20Capital%20Resources) As of June 30, 2023, the company had **$43.8 million** in cash and a **$100.0 million** undrawn credit facility, using **$132.0 million** in H1 2023 financing activities for share repurchases and dividends - As of June 30, 2023, the company had **$43.8 million** in cash and access to a **$100.0 million** undrawn revolving credit facility[201](index=201&type=chunk)[204](index=204&type=chunk) - In H1 2023, the company used **$79.9 million** to repurchase common stock and **$43.6 million** to pay dividends[218](index=218&type=chunk) - Contingent consideration for the USAA AMCO and WestEnd acquisitions totaled an estimated **$239.3 million** as of June 30, 2023[210](index=210&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=40&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company's revenues are highly sensitive to market risk, with a **10%** AUM change impacting annualized revenue by **$84.2 million**, and exchange rate risk potentially affecting AUM by **$1.6 billion** and revenue by **$8.3 million** - A **10%** increase or decrease in AUM would cause an annualized revenue change of approximately **$84.2 million**, based on the Q2 2023 weighted-average fee rate of **52 basis points**[223](index=223&type=chunk) - A **10%** change in the U.S. dollar's value against other currencies would impact AUM by approximately **$1.6 billion**, causing an annualized revenue change of about **$8.3 million**[226](index=226&type=chunk) - Interest rate risk on floating-rate debt is managed through a swap that effectively fixes the rate on **$450 million** of term loan debt at **3.15%** through July 2026[227](index=227&type=chunk) [Controls and Procedures](index=41&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded the company's disclosure controls and procedures were effective as of June 30, 2023, with no material changes to internal control over financial reporting during the quarter - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of June 30, 2023[229](index=229&type=chunk) - No material changes to the company's internal control over financial reporting occurred during the second quarter of 2023[230](index=230&type=chunk) [PART II — OTHER INFORMATION](index=42&type=section&id=PART%20II%20%E2%80%94%20OTHER%20INFORMATION) [Legal Proceedings](index=42&type=section&id=Item%201.%20Legal%20Proceedings) The company is not currently a party to any material legal proceedings - The Company is not currently a party to any material legal proceedings[232](index=232&type=chunk) [Risk Factors](index=42&type=section&id=Item%201A.%20Risk%20Factors) There have been no material changes to the risk factors previously disclosed in the Annual Report on Form 10-K for the year ended December 31, 2022 - There have been no material changes to the risk factors in the Annual Report on Form 10-K for the year ended December 31, 2022[233](index=233&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=42&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) A new **$100.0 million** share repurchase program was approved in March 2023, with **1.4 million** shares repurchased for **$44.5 million** in Q2 2023, leaving **$51.9 million** available - A new **$100.0 million** share repurchase program was authorized in March 2023, effective through March 31, 2025[234](index=234&type=chunk) Issuer Purchases of Equity Securities (Q2 2023) | Period | Total Number of Shares Purchased | Average Price Paid Per Share | Approximate Dollar Value Remaining Under Program (in millions) | | :--- | :--- | :--- | :--- | | April 1-30, 2023 | — | $— | $95.8 | | May 1-31, 2023 | 685,001 | $31.38 | $74.4 | | June 1-30, 2023 | 694,708 | $33.11 | $51.9 | | **Total** | **1,379,709** | **$32.25** | **$51.9** | [Defaults Upon Senior Securities](index=42&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) No defaults upon senior securities were reported - None[238](index=238&type=chunk) [Mine Safety Disclosures](index=43&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This section is not applicable to the company's operations - Not applicable[239](index=239&type=chunk) [Other Information](index=43&type=section&id=Item%205.%20Other%20Information) No directors or officers adopted, modified, or terminated Rule 10b5-1 or non-Rule 10b5-1 trading arrangements during the fiscal quarter ended June 30, 2023 - None of the Company's directors or officers adopted, modified or terminated a Rule 10b5-1 or non-Rule 10b5-1 trading arrangement during the fiscal quarter ended June 30, 2023[239](index=239&type=chunk) [Exhibits](index=43&type=section&id=Item%206.%20Exhibits) This section lists filed exhibits, including CEO and CFO certifications under Sarbanes-Oxley Sections 302 and 906, and iXBRL interactive data files - Exhibits filed include certifications from the Principal Executive Officer and Principal Financial Officer under Sarbanes-Oxley Sections 302 and 906[241](index=241&type=chunk) - The filing includes financial statements and notes formatted in iXBRL (Inline eXtensible Business Reporting Language)[241](index=241&type=chunk)

UNITED STATES SECURITIES AND EXCHANGE COMMISSION or ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ______ to ______ Commission file number 001-38388 Victory Capital Holdings, Inc. Washington, D.C. 20549 FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2023 (Exact name of registrant as specified in its charter) (State or other jurisd ...

Financial Data and Key Metrics Changes - Assets under management (AUM) increased by 3.7% from $153 billion at the beginning of the year to $158.6 billion at quarter end [19] - Adjusted net income with tax benefit rose to $1.08 per diluted share, up from $1.05 per diluted share in the previous quarter [10] - Revenue was essentially flat at $201.3 million compared to $201.5 million in the previous quarter [19] - GAAP operating income was $74.6 million, and adjusted EBITDA was $99.2 million [20] - The company returned $66 million of capital to shareholders in the first quarter, which was ahead of last year's quarterly average [20] Business Line Data and Key Metrics Changes - Long-term growth flows were $5.8 billion in the quarter, reflecting top industry-wide sales despite market hesitance [22] - Positive net flows were achieved in active domestic equity products, particularly in U.S. mid and small cap strategies [23] - The fee rate held steady at 51.7 basis points in the first quarter, consistent with the previous quarter [24] Market Data and Key Metrics Changes - The company experienced a significant institutional redemption of approximately $1.1 billion in April, impacting AUM [8] - The overall market environment remains challenging, with investors hesitant to enter due to heightened volatility [22] Company Strategy and Development Direction - The company launched Victory Capital InVest, a new open architecture brokerage platform aimed at expanding product choice and flexibility for clients [12] - Strategic investments are being made to enhance technology capabilities, distribution, and marketing resources [12] - The long-term margin guidance remains unchanged at 49%, factoring in ongoing strategic investments [11][27] Management's Comments on Operating Environment and Future Outlook - Management noted that margins remained strong at 49.3%, demonstrating resilience in a challenging market [9] - The company is optimistic about the growth opportunities in fixed income as market conditions improve [15][41] - Management emphasized a flexible capital allocation strategy, remaining opportunistic with share repurchases and potential acquisitions [18][35] Other Important Information - The Board increased the cash dividend by 28% in the first quarter, maintaining the same rate for the current quarter [10][21] - The average interest rate on debt rose to 5.24%, impacting interest expenses [28] Q&A Session Summary Question: Positive net flows in U.S. midcap and small cap areas - Management noted strength in specific franchises like Sycamore and positive trends in the institutional channel [32] Question: Priorities for free cash flow and share repurchases - Management stated that capital allocation strategy remains flexible, with a focus on acquisitions while also being opportunistic with share repurchases [34][35] Question: Trends in fixed income and money markets - Management explained that money market outflows were due to its captive channel and that fixed income flows are expected to improve as distribution capabilities grow [39][40] Question: Launch of digital investing platform - Management confirmed that the new platform will expand product offerings and is part of ongoing investments factored into margin guidance [43][44] Question: Strength of Sycamore and capacity constraints - Management indicated that Sycamore is currently closed to new investors but is accepting new dollars from existing clients [48]

Assets Under Management (AUM) - Assets under management (AUM) decreased by $30.7 billion, or approximately 16.7%, to $153.0 billion as of December 31, 2022, from $183.7 billion at the end of 2021, primarily due to negative market action of $26.5 billion [320]. - AUM by asset class showed a significant decrease in Fixed Income, dropping to $26,353 million in 2022 from $35,154 million in 2021, a decline of approximately 25% [333]. - Total long-term assets decreased to $149,640 million in 2022 from $180,550 million in 2021, reflecting a decline of about 17.1% [333]. - Total AUM decreased by $30.7 billion, or 16.7%, to $152.9 billion as of December 31, 2022, from $183.7 billion at the end of 2021, primarily due to negative market movement and net outflows [342]. - The beginning AUM for the year ended December 31, 2022, was $183.7 billion, with ending AUM at $152.9 billion [339]. - The ending AUM for Mutual Funds was $99.4 billion, for ETFs was $5.6 billion, and for other vehicles was $47.9 billion [339]. Financial Performance - Total revenue for the year ended December 31, 2022, was $854.8 million, compared to $890.3 million for the year ended December 31, 2021 [326]. - Net income for 2022 was $275.5 million, compared to $278.4 million in 2021, while adjusted net income was $293.8 million in 2022, down from $329.0 million in 2021 [326]. - GAAP earnings per diluted share were $3.81 for the year ended December 31, 2022, compared to $3.75 for the same period in 2021 [326]. - Adjusted EBITDA for 2022 was $424.2 million with an adjusted EBITDA margin of 49.6%, compared to $449.0 million and 50.4% in 2021 [326]. - Total revenue for 2022 was $854.8 million, down from $890.3 million in 2021, reflecting a decrease of about 4.9% [329]. - Net income for 2022 was $275.5 million, slightly down from $278.4 million in 2021, indicating a decrease of approximately 1% [329]. - Adjusted EBITDA margin for 2022 was 49.6%, compared to 50.4% in 2021, showing a decline of 0.8 percentage points [329]. - Adjusted Net Income for 2022 was $293,750,000, compared to $329,039,000 in 2021, reflecting a decrease of 10.7% [408]. Cash Flow and Capital Management - The company returned over $200 million to shareholders in 2022 through share repurchases and cash dividends, while reducing debt by $150 million [326]. - Cash provided by operating activities decreased by $41.0 million to $335.2 million in 2022, compared to $376.2 million in 2021, primarily due to a $24.0 million decrease in working capital and a $14.2 million decrease in non-cash items [429]. - Cash used in investing activities significantly decreased by $550.3 million to $6.3 million in 2022, from $556.6 million in 2021, mainly due to prior year cash payments related to acquisitions [431]. - Cash used in financing activities increased by $587.4 million to $360.2 million in 2022, compared to cash provided by financing activities of $227.2 million in 2021, driven by term loan prepayments and stock repurchases [433]. - The company had an undrawn commitment on a revolving credit facility of $100,000,000 as of December 31, 2022 [413]. Market and Client Activity - Long-term gross inflows were $33.3 billion for the year ended December 31, 2022, compared to $27.9 billion for 2021, while long-term net outflows were $2.5 billion in 2022, down from $4.0 billion in 2021 [320]. - Gross client cash inflows for the year ended December 31, 2022, totaled $33.9 billion, while gross client cash outflows were $36.7 billion, resulting in net client cash flows of $(2.7) billion [339]. - The company experienced net inflows of $1.9 billion into its Solutions Platform and $1.7 billion into alternative investment strategies, partially offsetting the outflows [343]. - The company reported gross client cash inflows of $21.2 billion from Mutual Funds, $2.0 billion from ETFs, and $10.7 billion from other vehicles for the year ended December 31, 2022 [339]. Acquisitions and Partnerships - The company completed the acquisition of WestEnd on December 31, 2021, for an estimated purchase price of $716.1 million, which included $475.8 million in cash paid at closing [309]. - The NEC Acquisition was completed on November 1, 2021, for a purchase price of $63.1 million, with potential additional payments of up to $35.0 million based on net revenue growth [312]. - The company entered into a long-term partnership with Spurs Sports & Entertainment in December 2022, granting exclusive naming rights for the new performance center until 2033 [424]. Expenses and Cost Management - Total operating expenses decreased to $455.7 million in 2022 from $516.4 million in 2021 [374]. - Personnel compensation and benefits increased to $238.2 million in 2022 from $234.8 million in 2021 [374]. - Total distribution and other asset-based expenses decreased by $15.3 million, or 8.7%, to $161.1 million in 2022 compared to $176.4 million in 2021 [384]. - General and administrative expenses decreased by $1.3 million, or 2.5%, to $52.4 million in 2022 compared to $53.7 million in 2021 [386]. - Interest expense and other financing costs increased by $19.3 million to $44.0 million in 2022 from $24.7 million in 2021, mainly due to higher debt principal balance [399]. Tax and Regulatory Considerations - The effective tax rate increased by 0.7% from 20.6% in 2021 to 21.3% in 2022, primarily due to increased non-deductible expenses [403]. - Inflation did not have a material effect on consolidated results, but could negatively impact profitability if expense increases are not recoverable [405].

Financial Data and Key Metrics Changes - Operating income increased by 7% from $374 million in 2021 to $399 million in 2022 [12] - Full year adjusted EBITDA margin was 49.6% in 2022, exceeding the long-term guidance of 49% [12][15] - Adjusted net income was $1.05 per diluted share in Q4 and $4.58 per diluted share for the full year 2022 [13][24] - Total AUM increased by $5.7 billion or 4% in Q4 to $153 billion, driven by over $10 billion of positive market actions [22] Business Line Data and Key Metrics Changes - Gross long-term flows in 2022 were $33.3 billion, a 20% increase from $27.9 billion in 2021 [9] - Net long-term outflows were $2.5 billion for the year, representing only 1.4% of the beginning of year AUM [10] - WestEnd Advisors, Sycamore, Sophus, and RS Global each had positive net flows for 2022 [27] Market Data and Key Metrics Changes - The company experienced elevated net long-term outflows in Q4 due to clients selling assets for various reasons [11] - Approximately 80% of total AUM outperformed benchmarks for the three, five, and ten-year periods as of year-end [16] Company Strategy and Development Direction - The company continues to invest in hiring, technology, data, and marketing, which are beginning to yield returns [8] - The strategy includes maintaining a flexible balance sheet to pursue acquisitions while balancing buybacks and dividends [34][36] - The company is well-positioned to capture market share in fixed income as investors rotate back into this asset class [18] Management's Comments on Operating Environment and Future Outlook - Management expressed a positive outlook for 2023, noting improved net long-term flows compared to Q4 2022 [11] - The company remains patient and selective regarding M&A opportunities, focusing on finding suitable targets [68] - Management highlighted the importance of maintaining a balanced approach to capital allocation, including debt reduction and shareholder returns [36] Other Important Information - The company returned over $200 million to shareholders in 2022, significantly higher than the $62 million returned in 2021 [13] - A new independent director, Vice Admiral Mary Jackson, was added to the corporate board [21] Q&A Session Summary Question: Thoughts on share buyback process in 2023 - Management indicated that share buybacks will be opportunistic and depend on market conditions, evaluating it week by week [34] Question: Purpose of dividend hike - The dividend increase was aimed at rewarding existing shareholders rather than attracting a specific type of investor [35] Question: Position to capture fixed income net flows - Management noted strong investment performance and a diverse range of fixed income products, positioning the company well for potential inflows [39] Question: Key growth opportunities for net flows - Management identified WestEnd Advisors, Victory Shares ETF platform, and fixed income as key growth areas [42][45] Question: Stability of fee rate - The fee rate has remained stable, with expectations to maintain it around 52 basis points moving forward [47] Question: Impact of recent acquisitions on flows - All mentioned acquisitions (WestEnd, THB, NEC) contributed positively to net flows, with WestEnd showing particularly strong performance [70]

Fourth Quarter 2022 Earnings Presentation February 10, 2023 Forward Looking Statements This presentation may contain "forward-looking" statements that are based on our beliefs and assumptions and on information currently available to us. Forward-looking statements include information concerning our possible or assumed future results of operations, business strategies, competitive position and potential organic and inorganic growth opportunities. Forward-looking statements include all statements that are not ...

Financial Data and Key Metrics Changes - Total AUM decreased by $7.7 billion or 5% in the quarter to $147.3 billion, primarily driven by over $7 billion of negative market action [24] - Revenue of $207 million in the third quarter was down 4% from the second quarter due to lower AUM [25] - Adjusted EBITDA was $103.6 million in the third quarter, a 2% decline from the second quarter, resulting in an adjusted EBITDA margin of 50% [26][33] - GAAP net income was $72.8 million or $1.01 per diluted share, with adjusted net income increasing to $85.6 million or $1.19 per diluted share, up from $80.7 million or $1.11 per diluted share in the second quarter [26][33] Business Line Data and Key Metrics Changes - Gross long-term sales in the quarter totaled $6.6 billion, which is 16% higher than the same quarter last year [11] - Net long-term flows improved to a positive year-to-date net long-term flow of $1.9 billion, with WestEnd Advisors having positive long-term flows every month since the acquisition [13][30] - The VictoryShares ETF business recorded its eighth consecutive quarter of positive long-term flows [13] Market Data and Key Metrics Changes - The equity and debt markets continued to decline in the third quarter, with investors experiencing the largest drawdown since 1937 [8] - 81% and 79% of total AUM outperformed benchmarks for the critical three- and five-year measurement periods as of September 30 [18] Company Strategy and Development Direction - The company is focused on increasing capital return to shareholders while maintaining a flexible balance sheet for acquisitions [22] - The digital marketplace is being developed to enhance products and services available to direct investors, with enhancements expected to roll out next year [17] - The company is actively evaluating acquisition opportunities despite the current market environment [23] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in capturing market share once interest rates stabilize, particularly in the fixed income sector [15] - The company believes that the current market volatility presents opportunities for growth and acquisition [23] - Management anticipates a significant shift back into fixed income once bond prices stabilize, positioning the company favorably to capture those assets [50] Other Important Information - The company reduced debt by $30 million and returned a total of $67 million of capital to shareholders in the quarter, including share repurchases [27] - The cash dividend was maintained at $0.25 per share, representing an additional $17.4 million of capital return to shareholders [28] Q&A Session Summary Question: Performance of WestEnd in the current environment - Management noted that WestEnd has had positive net flows every month and has outperformed in a challenging asset class [42] Question: Capital deployment strategy moving forward - Management emphasized a flexible approach to capital deployment, balancing debt reduction and share repurchases based on market conditions [44] Question: Outlook for fixed income in 2023 - Management expects a significant shift back into fixed income once bond prices stabilize, highlighting the strong performance of their fixed income team [50] Question: M&A environment comparison to last year - Management indicated that while financing costs have risen, they remain open to acquisitions that enhance the company [52] Question: Willingness of companies to engage in M&A discussions - Management observed an increase in discussions, though the pace of transactions has slowed due to market volatility [58] Question: Expansion of VictoryShares ETF business - Management confirmed ongoing growth in the ETF franchise and plans for new product launches in the near term [60]