Victory Capital(US:VCTR)2022-02-11 15:32Financial Data and Key Metrics Changes - Total AUM increased to $183.7 billion, up 25% year-over-year and 15% from the previous quarter [12][32] - Record revenue of $890 million for the year, a 15% increase from 2020, with Q4 revenue reaching $229.1 million, a 14% increase year-over-year [28][36] - Adjusted net income with tax benefit per diluted share was $1.27 in Q4 and $4.82 for the year, reflecting a 25% improvement from 2020 [12][30] Business Line Data and Key Metrics Changes - The direct investor business showed material improvement with new account registrations growing steadily, achieving net flow positive for the 529 plan since its acquisition in 2019 [13][14] - Gross long-term sales reached a record $27.9 billion in 2021, a 20% increase from the previous record in 2020, with long-term net flows improving by 64% year-over-year [33][34] Market Data and Key Metrics Changes - The company experienced net outflows in Q4 due to two large one-time redemptions, but was net flow positive in November and had modest outflows in December [33][52] - The average realized fee rate was 56.0 basis points in Q4, with expectations of a decrease due to the acquisition of WestEnd Advisors, which has a lower average fee rate [35][36] Company Strategy and Development Direction - The company aims to continue its growth strategy through acquisitions, having closed two strategic acquisitions in Q4 2021, and plans to maintain a similar pace in 2022 [7][25] - The elimination of the dual-class share structure is expected to enhance eligibility for inclusion in major indexes, potentially leading to increased buying from index funds [15][48] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the current operating environment, noting that market volatility could benefit active managers and create opportunities for capturing assets in motion [72] - The company plans to maintain its adjusted EBITDA margin guidance of approximately 49% for 2022, despite ongoing investments in growth initiatives [38][75] Other Important Information - The company returned over $134 million to shareholders since its IPO, with a 178% increase in the cash dividend declared [19][41] - Employee ownership is significant, with approximately 20% of the company owned by employees, reflecting a strong ownership culture [22][23] Q&A Session Summary Question: Update on WestEnd Advisors acquisition and cross-sell opportunities - The acquisition is progressing well, with successful cross-selling and distribution opportunities being explored [44][45] Question: Potential for large index ETF and fund buying post dual-class structure elimination - The company anticipates eligibility for inclusion in the Russell 2000 and expects net buying from index funds in the next year [47][48] Question: Clarification on unusual outflows in October - Management indicated that the outflows were one-time events and expressed confidence in the momentum moving into 2022 [52][52] Question: Impact of market volatility on M&A conversations - Management noted that market volatility has not impacted M&A discussions, which are focused on improving business access and scalability [55][56] Question: Capital deployment priorities and dividend increase interpretation - The dividend increase is not indicative of a change in policy; excess capital will primarily be used for debt reduction [66][67] Question: Incremental margins for WestEnd Advisors - Integration onto the existing platform is expected to yield margins at parity or higher than current margins [68][69] Question: Guidance on expense trends post-pandemic - The company maintains its margin guidance and expects expenses to remain consistent, with ongoing investments in growth [74][75]