Victory Capital(US:VCTR)2021-02-11 19:27Financial Data and Key Metrics Changes - Victory Capital achieved record financial performance in Q4 2020, with adjusted EBITDA margin increasing to 52% and adjusted earnings of $1.07 per share, up 7% from Q3 2020 [7][39] - Total revenue for Q4 2020 was $200 million, a 6% increase from Q3, while full-year revenue reached a record $775 million, up 27% from $612 million in 2019 [39] - GAAP net income for Q4 was $54.9 million, a 46% increase year-over-year, while full-year GAAP net income jumped 130% to $213 million [42][43] Business Line Data and Key Metrics Changes - Firm-wide assets under management (AUM) rose to $147.2 billion at year-end, an 11% increase from Q3 2020, with long-term AUM at $143.7 billion [8][48] - Long-term growth flows increased by 12% quarter-over-quarter to $5.7 billion, indicating substantial improvement in net flow performance [9] - The direct investor business saw approximately 115,000 new funded account registrations since its launch in July 2019, with positive growth in the USAA 529 College Savings Plan [22] Market Data and Key Metrics Changes - Investment performance remained strong, with 67% of AUM outperforming respective benchmarks over one, three, and five-year periods [7] - The company established new institutional relationships and selling agreements, enhancing its market presence and distribution capabilities [10][28] Company Strategy and Development Direction - Victory Capital is focused on strategic acquisitions, including the pending acquisition of THB Asset Management, which will enhance its ESG investment strategies and broaden distribution opportunities [16][29] - The company aims to balance debt reduction with returning capital to shareholders through dividends and share buybacks, while continuing to invest in product development and digital transformation [12][15] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to navigate the post-pandemic environment, highlighting the potential for talented active managers to outperform in changing market conditions [37] - The outlook for 2021 includes expectations for continued growth in AUM and net flows, driven by strong investment performance and new product offerings [101] Other Important Information - The quarterly cash dividend was increased from $0.07 to $0.09, marking a 29% increase, reflecting the company's commitment to enhancing financial flexibility [12] - The company reduced its leverage ratio to 1.8 times at year-end, with plans for further debt repayments in 2021 [11][47] Q&A Session Summary Question: Insights on Optimal Leverage Level - Management clarified that evaluating optimal leverage does not indicate the size of potential acquisitions, emphasizing a strategic approach to acquisitions regardless of size [74] Question: Rollout of Separately Managed Accounts - Management confirmed the ability to offer a range of products to USAA members, including customized portfolios and fixed income estimates [76] Question: Solutions Business Outlook - Management indicated that the solutions business is expected to grow, with fluctuations in flows being a natural market occurrence [82] Question: Compensation Line Clarification - Management explained that the mark-to-market adjustment for the deferred compensation plan is offset in non-operating expenses, having no impact on the bottom line [83] Question: USAA Earnouts for 2021 - Management confirmed that there are up to three additional earnout payments expected over the next three years, based on revenue retention [85] Question: Intermediary Placement to Flows Timeline - Management indicated that it typically takes about a year to see significant flows from new intermediary placements [90] Question: M&A Opportunities and Valuations - Management noted a busy M&A environment, focusing on finding the right strategic partners rather than volume [92] Question: ESG Integration in Future Acquisitions - Management acknowledged the importance of ESG integration in future acquisitions, reflecting a commitment to responsible investment practices [118]