MutualFundWire.com: From $64.1B to $145.8B In One Quarter

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Thursday, November 7, 2019

From $64.1B to $145.8B In One Quarter

A publicly traded asset manager more than doubled in size last quarter, thanks to a deal.

David C. Brown
Victory Capital Holdings, Inc.
Chairman, CEO

Dave Brown, chairman and chief executive officer of Victory Capital Management, states on the San Antonio, Texas-based multiboutique's Q3 2019 earnings call (as transcribed by Seeking Alpha) that, "We more than doubled the adjusted earnings and expanded margins, reinforcing the power of our unique business model. The total AUM grew from $64.1 billion as of June 30, 2019 to $145.8 billion as of the end of the quarter. Long-term net inflows were positive for the second consecutive quarter at $726 million and are $3.3 billion year-to-date. Revenue and adjusted net income more than doubled sequentially and adjusted EBITDA margin expanded by 480 basis points to a record high of 44.8% as of the end of the quarter. This marks our third consecutive quarter of meaningful margin expansion."

Brown puts that growth in the context of Victory's recent acquisition of USAA Asset Management, saying:

Our integration efforts following the close of the acquisition continue to progress well. And I'm pleased to announce that we expect to achieve our estimated cost synergies of $120 million faster than our previous guidance. The direct channel for USAA members was reopened on July 1, 2019 and our call center, which is staffed largely by former USAA employees, is actively serving members' investment needs. As of the end of the third quarter, the metrics we use to evaluate service were in line with those achieved by USAA prior to the acquisition. We believe our ability to drive these results is particularly notable, given USAA's well established reputation for providing exceptional service to its members. We also view this as a foundation for future success in this channel.

During Q&A, Brown points towards pursuing growth with USAA's member base: "As we've said in the past, there's potentially 12 million members that do not have an investment in our mutual funds or in our 529 plan. We're really just getting started to market to them."

According to Victory Capital Management's Earnings Presentation, the company brought in 3Q long-term net inflows of $726 million, and year-to-date long term net inflows of $3.3 billion. They also brought in $215 million in revenue, up 135 percent from 2Q. Total AUM of $145.8 billion is up 128 percent from June 30, 2019.

Overall, Victory Capital beats analyst's EPS expectations by $0.02 with a Q3 Non-GAAP EPS of $0.91. They did, however, have a GAAP EPS of $0.35, missing expectations by $0.25. Revenue of $214.98 million misses by $5.66 million.

Printed from: MFWire.com/story.asp?s=60478

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