Victory Capital(VCTR)2023-02-10 16:03Financial 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]