Victory Capital Holdings, Inc. (NASDAQ: VCTR) (“Victory Capital” or “the Company”) today reported financial results for the quarter ended June 30, 2021.

“During the second quarter and first half, we generated excellent investment performance for our clients and very strong financial results for our shareholders,” said David Brown, Chairman and Chief Executive Officer. “More than 70% of our AUM outperformed respective benchmarks for the 3-, 5-, and 10-year periods, and we recorded the fourth consecutive quarter of revenue and earnings growth, as well as adjusted EBITDA margin of greater than 50%.

“Our organic growth also improved quarter-over-quarter for the fourth quarter in a row reflecting healthy investor demand for our investment products. This led to record high gross sales during the second quarter and resulted in positive long-term net flows.

“Cash flow generated from operations remained robust. The cash dividend increase announced today marks the fifth consecutive quarterly increase and reflects our view of the strength of our business. Over the course of the last five quarters, we have tripled the cash dividend payable to shareholders. At the same time, we still allocated the majority of our excess cash flow to reducing debt as we paid down an additional $57 million of outstanding debt in the quarter. This was 14% more than in the first quarter of the year and resulted in our leverage ratio decreasing to 1.4 times at the end of the quarter.

“Our evaluation of acquisition targets continues and, with the strength of our balance sheet, we are financially well positioned to execute on a strategic transaction.

“We continue to make investments in the areas of technology, data, and distribution which are continuing to yield positive results. As always, serving our clients remains our top priority.”

¹ 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 Six Months Ended
		June 30,				March 31,				June 30,				June 30,				June 30,
		2021				2021				2020				2021				2020
Assets Under Management(2)
Ending		$	161,936			$	154,331			$	129,070			$	161,936			$	129,070
Average			158,471				151,090				128,927				154,781				136,519
Long-term Flows(3)
Long-term Gross		$	9,973			$	6,726			$	5,166			$	16,698			$	12,439
Long-term Net			302				(983	)			(3,466	)			(681	)			(6,568	)
Money Market/Short-term Flows
Money Market/Short-term Gross		$	102			$	108			$	4,411			$	209			$	12,063
Money Market/Short-term Net			(126	)			(191	)			(8,416	)			(317	)			(8,214	)
Total Flows
Total Gross		$	10,074			$	6,833			$	9,577			$	16,908			$	24,502
Total Net			176				(1,174	)			(11,882	)			(998	)			(14,782	)
Consolidated Financial Results (GAAP)
Revenue		$	221.9			$	212.9			$	181.9			$	434.9			$	386.3
Revenue realization (in bps)			56.2				57.2				56.7				56.7				56.9
Operating expenses			126.6				123.2				116.1				249.8				229.9
Income from operations			95.3				89.8				65.8				185.0				156.4
Operating margin			42.9	%			42.1	%			36.2	%			42.5	%			40.5	%
Net income			69.3				65.2				44.7				134.5				101.9
Earnings per diluted share		$	0.93			$	0.88			$	0.61			$	1.81			$	1.38
Cash flow from operations			84.5				79.6				69.0				164.2				120.9
Adjusted Performance Results (Non-GAAP)(1)
Adjusted EBITDA		$	112.2			$	106.8			$	86.3			$	219.1			$	177.8
Adjusted EBITDA margin			50.6	%			50.2	%			47.5	%			50.4	%			46.0	%
Adjusted net income			80.3				76.7				58.3				157.0				120.0
Tax benefit of goodwill and acquired intangible assets			6.9				6.9				6.7				13.8				13.5
Adjusted net income with tax benefit			87.2				83.6				65.1				170.8				133.5
Adjusted net income with tax benefit per diluted share		$	1.18			$	1.13			$	0.89			$	2.30			$	1.81

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.

² The three months ended June 30, 2021 includes $250 million of seed capital that USAA liquidated and $25 million related to Victory’s closure of two mutual funds and an ETF. The three months ended March 31, 2021 includes the transfer in of $547 million of assets associated with the THB Asset Management acquisition, which closed on March 1, 2021.

³ Long-term AUM is defined as total AUM excluding Money Market and Short-term assets.

AUM, Flows and Investment Performance

Victory Capital’s total AUM increased by 4.9%, or $7.6 billion, to $161.9 billion at June 30, 2021, compared with $154.3 billion at March 31, 2021. The increase was primarily attributable to market action and positive net flows, partially offset by liquidated seed capital. Total gross flows reached a record $10.1 billion for the second quarter and $16.9 billion for the year-to-date period. Long-term AUM increased by 5.1%, or $7.7 billion, to $158.7 billion at June 30, 2021, compared with $151.0 billion at March 31, 2021. For the second quarter, the Company reported long-term gross flows of $10.0 billion and net long-term inflows of $0.3 billion. For the year-to-date period, the Company reported long-term gross flows of $16.7 billion and net long-term outflows of $0.7 billion.

At June 30, 2021, Victory Capital offered 124 investment strategies through its 10 autonomous Investment Franchises and Solutions Platform. The table below presents outperformance against benchmarks by AUM as of June 30, 2021.

Percentage of AUM Outperforming Benchmark
Trailing		Trailing		Trailing		Trailing
1-Year		3-Years		5-Years		10-Years
64%		71%		72%		71%

Second Quarter 2021 Compared with First Quarter 2021

Revenue increased 4.2% to $221.9 million, in the second quarter, compared with $212.9 million in the first quarter, primarily due to higher average AUM. GAAP operating margin expanded 80 basis points in the second quarter to 42.9%, up from 42.1% in the first quarter primarily due to seasonally higher compensation and benefit related items in the first quarter. Second quarter GAAP net income increased 6.2% to $69.3 million, up from $65.2 million in the prior quarter. On a per-share basis, GAAP net income increased 5.7% to $0.93 per diluted share in the second quarter, versus $0.88 per diluted share in the first quarter.

Adjusted net income with tax benefit increased 4.3% to $87.2 million in the second quarter, up from $83.6 million in the first quarter. On a per-share basis, adjusted net income with tax benefit increased 4.4% to $1.18 per diluted share in the second quarter, from $1.13 per diluted share in the prior quarter. Adjusted EBITDA increased 5.1% to $112.2 million in the second quarter, versus $106.8 million in the first quarter. Adjusted EBITDA margin expanded 40 basis points in the second quarter of 2021 to 50.6% compared with 50.2% in the prior quarter.

Second Quarter 2021 Compared with Second Quarter 2020

Revenue for the three months ended June 30, 2021, rose 22.0% to $221.9 million, compared with $181.9 million in the same quarter of 2020. The increase was primarily due to higher average AUM.

Illustrating the inherent operating leverage in the Company’s business model, operating expenses increased just 9.1% to $126.6 million, compared with $116.1 million in last year’s second quarter, reflecting variable operating expenses that rose as a result of the higher average AUM and earnings as well as continued investments to support future growth. Due to this improved operating leverage and a $2.2 million reduction in restructuring and integration costs in the current year, GAAP operating margin expanded 670 basis points to 42.9% in the second quarter, from 36.2% in the same quarter of 2020. GAAP net income rose 54.9% to $69.3 million, or $0.93 per diluted share, in the second quarter compared with $44.7 million, or $0.61 per diluted share, in the same quarter of 2020.

Adjusted net income with tax benefit advanced 34.0% to $87.2 million, or $1.18 per diluted share, in the second quarter, compared with $65.1 million, or $0.89 per diluted share in the same quarter last year. Adjusted EBITDA rose 30.0% to $112.2 million, compared with $86.3 million in last year’s same quarter. Year-over-year, adjusted EBITDA margin expanded 310 basis points to 50.6% in the second quarter of 2021, compared with 47.5% in the same quarter last year.

Six Months Ended June 30, 2021 Compared with Six Months Ended June 30, 2020

Revenue for the six months ended June 30, 2021, rose 12.6% to $434.9 million, compared with $386.3 million in the same period of 2020. The increase was primarily due to higher average AUM.

Displaying the inherent operating leverage in the Company’s business model, operating expenses increased just 8.7% to $249.8 million for the six months ended June 30, 2021, compared with $229.9 million in the same period in 2020, reflecting the Company’s variable operating expenses that rose as a result of the higher average AUM and earnings as well as continued investments to support future growth. GAAP operating margin was 42.5% for the six months ended June 30, 2021, a 200 basis point increase from the 40.5% recorded in the same period in 2020 primarily due to improved operating leverage. GAAP net income rose 32.0% to $134.5 million, or $1.81 per diluted share, in the first six months of 2021 compared with $101.9 million, or $1.38 per diluted share, in the same period in 2020.

Adjusted net income with tax benefit advanced 27.9% to $170.8 million, or $2.30 per diluted share, in the first six months of 2021, compared with $133.5 million, or $1.81 per diluted share in the same period in 2020. For the six months ended June 30, 2021, adjusted EBITDA rose 23.2% to $219.1 million, compared with $177.8 million for the same period in 2020. Year-over-year, adjusted EBITDA margin expanded 440 basis points to 50.4% in the first six months of 2021, compared with 46.0% in the same period last year.

Balance Sheet / Capital Management

During the second quarter, the Company reduced outstanding debt by an additional $57.0 million. Subsequent to June 30, 2021, the Company reduced outstanding debt by $35.0 million, for a total of $453.8 million, since July 1, 2019.

The 10b-5 plan expired on May 12, 2021 as it reached its authorized share repurchase limit of $15 million. On May 13, 2021, the Company announced that its Board of Directors approved a new 10b-5 plan authorizing the repurchase of up to $15 million of Class A common stock through December 31, 2022. During the second quarter, the Company repurchased 288 thousand shares.

Today, the Company’s Board of Directors declared a $0.15 per share quarterly cash dividend, a 25% increase over the dividend declared in the prior quarter. The dividend is payable on September 27, 2021, to shareholders of record on September 10, 2021.

Conference Call, Webcast and Slide Presentation

The Company will host a conference call tomorrow morning, August 6, 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 (877) 823-8673 (domestic) or (647) 689-4067 (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 $161.9 billion in assets under management as of June 30, 2021. The Company operates a next-generation business model combining 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 10 autonomous Investment Franchises and a Solutions Platform, Victory Capital offers a wide array of investment styles and investment vehicles including, actively managed mutual funds, separately managed accounts, rules-based and active ETFs, multi-asset class strategies, custom-designed solutions and a 529 College Savings Plan.

For more information, please visit www.vcm.com or follow us on: 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 COVID-19 pandemic 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 dual class structure of the Company’s common stock; 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.

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 Six Months Ended
		June 30,				March 31,				June 30,				June 30,				June 30,
		2021				2021				2020				2021				2020
Revenue
Investment management fees		$	168,033			$	160,284			$	130,032			$	328,317			$	276,913
Fund administration and distribution fees			53,871				52,665				51,854				106,536				109,394
Total revenue			221,904				212,949				181,886				434,853				386,307
Expenses
Personnel compensation and benefits			57,462				59,006				49,105				116,468				96,676
Distribution and other asset-based expenses			44,223				42,103				41,630				86,326				96,490
General and administrative			13,713				13,310				13,289				27,023				25,177
Depreciation and amortization			4,694				4,385				4,166				9,079				8,216
Change in value of consideration payable for acquisition of business			5,700				2,500				5,300				8,200				(200	)
Acquisition-related costs			422				(164	)			(23	)			258				(92	)
Restructuring and integration costs			422				2,053				2,605				2,475				3,603
Total operating expenses			126,636				123,193				116,072				249,829				229,870
Income from operations			95,268				89,756				65,814				185,024				156,437
Operating margin			42.9	%			42.1	%			36.2	%			42.5	%			40.5	%
Other income (expense)
Interest income and other income (expense)			1,932				2,734				2,966				4,666				(1,206	)
Interest expense and other financing costs			(6,155	)			(6,845	)			(9,710	)			(13,000	)			(21,118	)
Gain (loss) on debt extinguishment			(1,146	)			(2,781	)			137				(3,927	)			(917	)
Total other expense, net			(5,369	)			(6,892	)			(6,607	)			(12,261	)			(23,241	)
Income before income taxes			89,899				82,864				59,207				172,763				133,196
Income tax expense			(20,629	)			(17,662	)			(14,487	)			(38,291	)			(31,310	)
Net income		$	69,270			$	65,202			$	44,720			$	134,472			$	101,886
Earnings per share of common stock
Basic		$	1.02			$	0.96			$	0.66			$	1.98			$	1.50
Diluted			0.93				0.88				0.61				1.81				1.38
Weighted average number of shares outstanding
Basic			67,776				67,761				67,821				67,769				67,806
Diluted			74,166				74,108				73,204				74,155				73,818
Dividends declared per share		$	0.12			$	0.09			$	0.05			$	0.21			$	0.10

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 Six Months Ended
		June 30,				March 31,				June 30,				June 30,				June 30,
		2021				2021				2020				2021				2020
Net income (GAAP)		$	69,270			$	65,202			$	44,720			$	134,472			$	101,886
Income tax expense			(20,629	)			(17,662	)			(14,487	)			(38,291	)			(31,310	)
Income before income taxes		$	89,899			$	82,864			$	59,207			$	172,763			$	133,196
Interest expense			6,086				7,310				8,267				13,396				18,795
Depreciation			1,524				1,246				746				2,770				1,630
Other business taxes			524				374				219				898				(3,077	)
Amortization of acquisition-related intangible assets			3,171				3,138				3,420				6,309				6,586
Stock-based compensation			3,124				4,636				3,068				7,760				8,440
Acquisition, restructuring and exit costs			6,544				4,389				10,105				10,933				8,563
Debt issuance costs			1,304				2,793				1,312				4,097				3,701
Losses from equity method investments			65				92				—				157				—
Adjusted EBITDA		$	112,241			$	106,842			$	86,344			$	219,083			$	177,834
Adjusted EBITDA margin			50.6	%			50.2	%			47.5	%			50.4	%			46.0	%
Net income (GAAP)		$	69,270			$	65,202			$	44,720			$	134,472			$	101,886
Adjustment to reflect the operating performance of the Company
Other business taxes			524				374				219				898				(3,077	)
Amortization of acquisition-related intangible assets			3,171				3,138				3,420				6,309				6,586
Stock-based compensation			3,124				4,636				3,068				7,760				8,440
Acquisition, restructuring and exit costs			6,544				4,389				10,105				10,933				8,563
Debt issuance costs			1,304				2,793				1,312				4,097				3,701
Tax effect of above adjustments			(3,667	)			(3,832	)			(4,531	)			(7,499	)			(6,053	)
Adjusted net income		$	80,270			$	76,700			$	58,313			$	156,970			$	120,046
Adjusted net income per diluted share		$	1.08			$	1.03			$	0.80			$	2.12			$	1.63
Tax benefit of goodwill and acquired intangible assets		$	6,918			$	6,918			$	6,745			$	13,836			$	13,473
Tax benefit of goodwill and acquired intangible assets per diluted share		$	0.09			$	0.09			$	0.09			$	0.19			$	0.18
Adjusted net income with tax benefit		$	87,188			$	83,618			$	65,058			$	170,806			$	133,519
Adjusted net income with tax benefit per diluted share		$	1.18			$	1.13			$	0.89			$	2.30			$	1.81

¹ Refer to page 15 for further information regarding the Company’s non-GAAP financial measures.

Victory Capital Holdings, Inc. and Subsidiaries
Unaudited Condensed Consolidated Balance Sheets
(In thousands, except for shares)
		June 30, 2021				December 31, 2020
Assets
Cash and cash equivalents		$	31,622			$	22,744
Receivables			98,684				88,182
Prepaid expenses			6,230				6,082
Investments, at fair value			29,566				23,493
Property and equipment, net			24,290				18,747
Goodwill			404,750				404,750
Other intangible assets, net			1,156,919				1,162,641
Other assets			4,014				4,090
Total assets		$	1,756,075			$	1,730,729
Liabilities and stockholders' equity
Accounts payable and accrued expenses		$	51,153			$	42,144
Accrued compensation and benefits			38,885				47,278
Consideration payable for acquisition of business			100,700				92,500
Deferred tax liability, net			51,022				37,684
Other liabilities			30,620				34,573
Long-term debt, net1			667,539				769,009
Total liabilities			939,919				1,023,188
Stockholders' equity
Class A common stock, $0.01 par value per share: 2021 - 400,000,000 shares authorized, 19,816,767 shares issued and 16,059,105 shares outstanding; 2020 - 400,000,000 shares authorized, 19,388,671 shares issued and 16,205,689 shares outstanding			198				194
Class B common stock, $0.01 par value per share: 2021 - 200,000,000 shares authorized, 55,782,820 shares issued and 51,761,697 shares outstanding; 2020 - 200,000,000 shares authorized, 54,766,934 shares issued and 51,336,177 shares outstanding			558				548
Additional paid-in capital			659,920				647,602
Class A treasury stock, at cost: 2021 - 3,757,662 shares; 2020 - 3,182,982 shares			(63,290	)			(47,844	)
Class B treasury stock, at cost: 2021 - 4,021,123 shares; 2020 - 3,430,757 shares			(62,925	)			(47,080	)
Accumulated other comprehensive income (loss)			351				(7,460	)
Retained earnings			281,344				161,581
Total stockholders' equity			816,156				707,541
Total liabilities and stockholders' equity		$	1,756,075			$	1,730,729

¹ Balances at June 30, 2021 and December 31, 2020 are shown net of unamortized loan discount and debt issuance costs in the amount of $13.7 million and $19.2 million, respectively. The gross amount of the debt outstanding was $681.2 million as of June 30, 2021 and $788.2 million as of December 31, 2020.

Victory Capital Holdings, Inc. and Subsidiaries
Assets Under Management
(unaudited; in millions except for percentages)
		For the Three Months Ended												% Change from
		June 30,				March 31,				June 30,				March 31,			June 30,
		2021				2021				2020				2021			2020
Beginning assets under management		$	154,331			$	147,241			$	123,779			5	%		25	%
Gross client cash inflows			10,074				6,833				9,577			47	%		5	%
Gross client cash outflows			(9,898	)			(8,007	)			(21,459	)		24	%		-54	%
Net client cash flows			176				(1,174	)			(11,882	)		N/A			N/A
Market appreciation (depreciation)			7,703				7,718				17,173			0	%		-55	%
Acquired assets / Net transfers1			(275	)			547				—			N/A			N/A
Ending assets under management			161,936				154,331				129,070			5	%		25	%
Average assets under management			158,471				151,090				128,927			5	%		23	%
		For the Six Months Ended												% Change from
		June 30,				June 30,								June 30,
		2021				2020								2020
Beginning assets under management		$	147,241			$	151,832							-3	%
Gross client cash inflows			16,908				24,502							-31	%
Gross client cash outflows			(17,906	)			(39,284	)						-54	%
Net client cash flows			(998	)			(14,782	)						-93	%
Market appreciation (depreciation)			15,421				(7,979	)						N/A
Acquired assets / Net transfers2			272				—							N/A
Ending assets under management			161,936				129,070							25	%
Average assets under management			154,781				136,519							13	%

¹ The three months ended June 30, 2021 includes $250 million of seed capital that USAA liquidated and $25 million related to Victory’s closure of two mutual funds and an ETF. The three months ended March 31, 2021 includes the transfer in of $547 million of assets associated with the THB Asset Management acquisition, which closed on March 1, 2021.

² The six months ended June 30, 2021 includes the transfer in of $547 million of assets associated with the THB Asset Management acquisition, which closed on March 1, 2021 partially offset by $250 million of seed capital that USAA liquidated and $25 million related to Victory’s closure of two mutual funds and an ETF.

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.												Total				Money Market /
		Cap Equity				Cap Equity				Income				Cap Equity				Equity				Solutions				Other				Long-term				Short-term				Total
June 30, 2021
Beginning assets under management		$	29,156			$	20,230			$	36,776			$	14,448			$	14,652			$	35,356			$	341			$	150,958			$	3,373			$	154,331
Gross client cash inflows			1,412				1,238				1,750				91				1,072				4,370				40				9,973				102				10,074
Gross client cash outflows			(1,940	)			(1,428	)			(2,949	)			(407	)			(541	)			(2,380	)			(27	)			(9,671	)			(228	)			(9,898	)
Net client cash flows			(527	)			(190	)			(1,200	)			(316	)			531				1,991				13				302				(126	)			176
Market appreciation (depreciation)			1,745				616				677				1,253				928				2,419				62				7,700				3				7,703
Acquired assets / Net transfers1			(33	)			(39	)			156				(101	)			(180	)			(126	)			44				(278	)			3				(275	)
Ending assets under management		$	30,340			$	20,617			$	36,410			$	15,284			$	15,931			$	39,640			$	460			$	158,682			$	3,254			$	161,936
March 31, 2021
Beginning assets under management		$	26,230			$	18,368			$	36,599			$	14,230			$	13,982			$	34,041			$	257			$	143,706			$	3,534			$	147,241
Gross client cash inflows			1,741				1,072				2,024				98				593				1,143				55				6,726				108				6,833
Gross client cash outflows			(1,854	)			(1,696	)			(1,701	)			(432	)			(648	)			(1,350	)			(28	)			(7,709	)			(299	)			(8,007	)
Net client cash flows			(112	)			(624	)			323				(334	)			(55	)			(207	)			27				(983	)			(191	)			(1,174	)
Market appreciation (depreciation)			3,032				2,024				(219	)			604				700				1,521				57				7,720				(2	)			7,718
Acquired assets / Net transfers2			6				461				73				(52	)			25				1				—				515				32				547
Ending assets under management		$	29,156			$	20,230			$	36,776			$	14,448			$	14,652			$	35,356			$	341			$	150,958			$	3,373			$	154,331
June 30, 2020
Beginning assets under management		$	18,622			$	11,885			$	35,402			$	10,703			$	9,372			$	25,526			$	140			$	111,650			$	12,129			$	123,779
Gross client cash inflows			943				997				1,498				216				436				1,067				10				5,166				4,411				9,577
Gross client cash outflows			(1,511	)			(1,393	)			(2,775	)			(599	)			(575	)			(1,767	)			(12	)			(8,632	)			(12,826	)			(21,459	)
Net client cash flows			(568	)			(396	)			(1,278	)			(383	)			(138	)			(700	)			(3	)			(3,466	)			(8,416	)			(11,882	)
Market appreciation (depreciation)			4,428				2,592				1,503				2,207				1,898				4,479				55				17,159				14				17,173
Acquired assets / Net transfers			2				2				(4	)			(2	)			(1	)			—				3				—				—				—
Ending assets under management		$	22,483			$	14,083			$	35,622			$	12,524			$	11,130			$	29,305			$	195			$	125,343			$	3,727			$	129,070

¹ The three months ended June 30, 2021 includes $250 million of seed capital that USAA liquidated and $25 million related to Victory’s closure of two mutual funds and an ETF.

² The three months ended March 31, 2021 includes the transfer in of $547 million of assets associated with the THB Asset Management acquisition, which closed on March 1, 2021.

Victory Capital Holdings, Inc. and Subsidiaries
Assets Under Management by Asset Class
(unaudited; in millions)
For the Six Months Ended		By Asset Class
																		Global /
		U.S. Mid				U.S. Small				Fixed				U.S. Large				Non-U.S.												Total				Money Market /
		Cap Equity				Cap Equity				Income				Cap Equity				Equity				Solutions				Other				Long-term				Short-term				Total
June 30, 2021
Beginning assets under management		$	26,230			$	18,368			$	36,599			$	14,230			$	13,982			$	34,041			$	257			$	143,706			$	3,534			$	147,241
Gross client cash inflows			3,154				2,310				3,774				189				1,664				5,513				95				16,698				209				16,908
Gross client cash outflows			(3,794	)			(3,124	)			(4,651	)			(839	)			(1,188	)			(3,729	)			(55	)			(17,379	)			(526	)			(17,906	)
Net client cash flows			(640	)			(814	)			(877	)			(650	)			476				1,784				40				(681	)			(317	)			(998	)
Market appreciation (depreciation)			4,777				2,641				458				1,857				1,628				3,940				119				15,420				1				15,421
Acquired assets / Net transfers1			(27	)			423				229				(152	)			(155	)			(125	)			44				236				36				272
Ending assets under management		$	30,340			$	20,617			$	36,410			$	15,284			$	15,931			$	39,640			$	460			$	158,682			$	3,254			$	161,936
June 30, 2020
Beginning assets under management		$	26,347			$	17,346			$	37,973			$	14,091			$	12,603			$	31,649			$	236			$	140,245			$	11,587			$	151,832
Gross client cash inflows			2,416				2,230				3,449				454				1,107				2,762				21				12,439				12,063				24,502
Gross client cash outflows			(3,776	)			(2,703	)			(5,665	)			(1,406	)			(1,259	)			(4,161	)			(36	)			(19,007	)			(20,277	)			(39,284	)
Net client cash flows			(1,360	)			(473	)			(2,217	)			(952	)			(152	)			(1,399	)			(15	)			(6,568	)			(8,214	)			(14,782	)
Market appreciation (depreciation)			(2,479	)			(2,733	)			142				(621	)			(1,347	)			(956	)			(32	)			(8,027	)			48				(7,979	)
Acquired assets / Net transfers			(25	)			(57	)			(276	)			7				26				12				6				(307	)			307				—
Ending assets under management		$	22,483			$	14,083			$	35,622			$	12,524			$	11,130			$	29,305			$	195			$	125,343			$	3,727			$	129,070

¹ The six months ended June 30, 2021 includes the transfer in of $547 million of assets associated with the THB Asset Management acquisition, which closed on March 1, 2021 partially offset by $250 million of seed capital that USAA liquidated and $25 million related to Victory’s closure of two mutual funds and an ETF.

Victory Capital Holdings, Inc. and Subsidiaries
Assets Under Management by Vehicle
(unaudited; in millions)
For the Three Months Ended		By Vehicle
										Separate
										Accounts
		Mutual								and Other
		Funds1				ETFs2				Vehicles3				Total
June 30, 2021
Beginning assets under management		$	117,830			$	4,441			$	32,061			$	154,331
Gross client cash inflows			5,060				239				4,775				10,074
Gross client cash outflows			(5,376	)			(169	)			(4,353	)			(9,898	)
Net client cash flows			(317	)			70				423				176
Market appreciation (depreciation)			5,879				218				1,606				7,703
Acquired assets / Net transfers4			(229	)			(375	)			329				(275	)
Ending assets under management		$	123,164			$	4,354			$	34,418			$	161,936
March 31, 2021
Beginning assets under management		$	112,998			$	3,976			$	30,267			$	147,241
Gross client cash inflows			5,465				240				1,128				6,833
Gross client cash outflows			(6,293	)			(117	)			(1,598	)			(8,007	)
Net client cash flows			(828	)			123				(469	)			(1,174	)
Market appreciation (depreciation)			5,575				343				1,801				7,718
Acquired assets / Net transfers5			85				—				462				547
Ending assets under management		$	117,830			$	4,441			$	32,061			$	154,331
June 30, 2020
Beginning assets under management		$	98,305			$	3,177			$	22,296			$	123,779
Gross client cash inflows			8,621				90				866				9,577
Gross client cash outflows			(19,726	)			(214	)			(1,519	)			(21,459	)
Net client cash flows			(11,104	)			(124	)			(653	)			(11,882	)
Market appreciation (depreciation)			13,229				409				3,535				17,173
Acquired assets / Net transfers			—				—				—				—
Ending assets under management		$	100,430			$	3,462			$	25,179			$	129,070

¹ Includes institutional and retail share classes, money market and VIP funds.

² Excludes assets managed for other proprietary product (i.e. funds of funds) in order to adjust for double counting.

³ Includes collective trust funds, wrap program accounts, UMAs, UCITS, private funds and non-U.S. domiciled pooled vehicles.

⁴ The three months ended June 30, 2021 includes $250 million of seed capital that USAA liquidated and $25 million related to Victory’s closure of two mutual funds and an ETF.

⁵ The three months ended March 31, 2021 includes the transfer in of $547 million of assets associated with the THB Asset Management acquisition, which closed on March 1, 2021.

Victory Capital Holdings, Inc. and Subsidiaries
Assets Under Management by Vehicle
(unaudited; in millions)
For the Six Months Ended		By Vehicle
										Separate
										Accounts
		Mutual								and Other
		Funds1				ETFs2				Vehicles3				Total
June 30, 2021
Beginning assets under management		$	112,998			$	3,976			$	30,267			$	147,241
Gross client cash inflows			10,525				479				5,904				16,908
Gross client cash outflows			(11,669	)			(286	)			(5,950	)			(17,906	)
Net client cash flows			(1,145	)			193				(46	)			(998	)
Market appreciation (depreciation)			11,454				561				3,406				15,421
Acquired assets / Net transfers4			(144	)			(375	)			791				272
Ending assets under management		$	123,164			$	4,354			$	34,418			$	161,936
June 30, 2020
Beginning assets under management		$	118,605			$	4,213			$	29,014			$	151,832
Gross client cash inflows			22,366				345				1,790				24,502
Gross client cash outflows			(35,357	)			(675	)			(3,252	)			(39,284	)
Net client cash flows			(12,990	)			(330	)			(1,462	)			(14,782	)
Market appreciation (depreciation)			(5,185	)			(421	)			(2,374	)			(7,979	)
Acquired assets / Net transfers			—				—				—				—
Ending assets under management		$	100,430			$	3,462			$	25,179			$	129,070

¹ Includes institutional and retail share classes, money market and VIP funds.

² Excludes assets managed for other proprietary product (i.e. funds of funds) in order to adjust for double counting.

³ Includes collective trust funds, wrap program accounts, UMAs, UCITS, private funds and non-U.S. domiciled pooled vehicles.

⁴ The six months ended June 30, 2021 includes the transfer in of $547 million of assets associated with the THB Asset Management acquisition, which closed on March 1, 2021 partially offset by $250 million of seed capital that USAA liquidated and $25 million related to Victory’s closure of two mutual funds and an ETF.

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.

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