Victory Capital Holdings, Inc.

Good morning and welcome to the Victory Capital fourth quarter 2021 earnings conference call. All callers are in a listen-only mode. Following the company's prepared remarks, there will be a question and answer session. I will now turn the call over to Mr. Matthew Dennis, Chief of Staff and Director of Investor Relations. Please go ahead, Mr. Dennis.

Thank you. Before I turn the call over to David Brown, I would like to remind you that during today's conference call, we may make a number of forward-looking statements. Please note that Victory Capital's actual results may differ materially from these statements. Please refer to our SEC filings for a list of some of the risk factors that may cause actual results to differ materially from those expressed on today's call. Victory Capital assumes no duty and does not undertake any obligation to update any forward-looking statements. Our press release that was issued after the market closed yesterday disclosed both GAAP and non-GAAP financial results. We believe the non-GAAP measures enhance the understanding of our business and our performance. Reconciliations between these non-GAAP measures and the most comparable GAAP measures are included in tables that can be found in our earnings press release and in the slide presentation accompanying this call, both of which are available on the investor relations portion of our website at ir.vcm.com. It is now my pleasure to turn the call over to David Brown, Chairman and CEO. David. David Brown Thanks, Matt.

Good morning and welcome to Victory Capital's fourth quarter 2021 earnings conference call. I'm joined today by Michael Pelicarpo, our President, Chief Financial and Administrative Officer, as well as Matt Dennis, our Chief of Staff and Director of Investor Relations. I'll start today by providing a quick overview of the final quarter of 2021. Then I will step back to provide a longer-term perspective on our growth, capital allocation strategy, accomplishments since becoming a public company in 2018, and where we are headed. After that, I will cover our investment performance metrics before turning the call over to Mike, who will review the fourth quarter and full-year financial results in greater detail. Following our prepared remarks, Mike, Matt, and I will be available to take your questions. The quarterly overview begins on slide five. 2021 was a transformative year for Victory Capital in a number of different ways. In the final quarter of the year, we closed two strategic growth acquisitions, New Energy Capital and West End Advisors. With the New Energy Capital acquisition that closed in November, we launched another growth vertical via the creation of our alternative investments platform. The launching of this platform has many characteristics we like, including strong investor demand and healthy fees and margins. Additionally, the alternatives allocation plays an important long-term role in a well-diversified portfolio. We've been looking for the right opportunity to enter this part of the industry for a number of years and began laying the groundwork well in advance of last year. For example, we made investments to enhance our distribution resources, including investments in technology and procuring new data sets as well as recruiting a team of experienced professionals focusing specifically on RAAs and family offices, which are both buyers of these products. New Energy Capital's multi-decade track record as a specialist focusing exclusively in the renewable and clean energy sector also came with the added benefit of bringing new ESG and impact investing capabilities to our product set. As we add new franchises to our alternative investments platform, we'll use the same guiding principles that have led to our current success. For example, consistent with the investment franchise model on the traditional side of our business, we created economic alignment with the new energy capital team through a number of different mechanisms in addition to providing technology, operating, and distribution support. At the very end of the fourth quarter, we also entered the rapidly growing model portfolio segment of the industry with the closing of our West End Advisors acquisition. West End Advisors is a fast-growing franchise whose products are primarily sold through intermediary platforms where we already have a strong presence. From the time the transaction was announced until it closed on December 31st, both of our distribution teams began collaborating to be able to hit the ground running in the new year. We've already had early success engaging new financial advisors on existing platforms and securing new shelf space on platforms where West End advisors did not have a presence. With these acquisitions, as well as the THB asset management acquisition that closed in the first quarter of 2021, we are excited by the prospects for each of these newly added investment franchises to contribute meaningfully to our organic growth in 2022 and beyond. Although we are only a little over a month into the quarter and understanding a lot could happen before the end of the quarter, I am happy to report that we are seeing strong growth and net flows across our business and are net flow positive as a firm for the first quarter as of today. Our one but not yet funded book of business is very healthy, and there is significant momentum across both the recently added product set from our new acquisitions as well as a number of other products in our lineups. Shifting to the quarterly results, we ended the fourth quarter with total AUM of $183.7 billion, which was up 25% from the end of last year. We achieved record revenue and adjusted earnings in the fourth quarter, which also marked our sixth consecutive quarter with adjusted EBITDA margins above 50%. Adjusting net income with tax benefit per diluted share was $1.27 in the fourth quarter and $4.82 for the year, which was a 25% improvement from 2020. And yesterday, we announced that our board declared the seventh consecutive increase in our quarterly cash dividend, raising it 47% to $0.25 per share. With our annualized rate now at $1 per share, we intend to evaluate future potential increases to our cash dividend on an annual basis as opposed to a quarterly basis following the inclusion of each calendar year. Turning to slide six, our direct investor business continues to show material improvement with new account registration steadily growing. The fourth quarter was our sixth consecutive quarter of improving net flows. For the fourth quarter and for all of 2021, the 529 plan has been net flow positive, which has also been the case since we acquired the plan in 2019. Plan assets have increased 28% since we acquired it and crossed the $5 billion milestone during 2021. As I mentioned on a prior call, our mobile application was launched in the third quarter. The app has already been downloaded and installed by more than 110,000 users, and we are receiving positive feedback. Our experience with app users is that they are more likely to buy products than sell products through the app, and it also adds efficiency to our client servicing model. I also want to highlight that we held a special meeting of stockholders in November where they overwhelmingly supported the board's recommendation to eliminate the dual-class share structure. This not only implemented best practices from a governance standpoint, but also positions our shares for inclusion in major indexes. which we expect may lead to net purchases by index funds. Moreover, our previous share class structure was an impediment for some potential shareholders to own our stock as well, which has now been removed. Moving to slide eight, while our industry continues to rapidly transform, our vision and strategy have remained consistent. We defined our own strategic path that is grounded on delivering superior client service, maintaining investment excellence, earning fair margins, and being efficient and thoughtful custodians of shareholder capital. The chart on the left illustrates our inorganic growth cycle, and the chart on the right shows our philosophy and allocation of capital. We are at the beginning of a long-term secular trend of change and consolidation in the asset management industry. This evolution provides us with a great opportunity over a longer period of time to continue executing on our strategy to thoughtfully and profitably grow the company. Supported by tangible results and recurring proof points of success, we are extremely excited about the future, and I personally look forward to continuing to implement our proven formula for success. As a growth company, our primary use of excess capital has always been to support our growth initiatives, and that will continue as we move forward. Given the growth we have had, our cash dividends and share repurchases have increased each year since we began these programs. This is not a change in strategy, but a function of our business becoming larger, more competitive and diversified, which has afforded us the ability to return capital to our shareholders through these mechanisms while continuing to execute on our strategy. Since our IPO, the total capital returned to shareholders through dividends and repurchases was more than $134 million at the end of 2021. $62 million of that was distributed in calendar year 2021. We continue to repurchase shares, and the 25 cents per share cash dividend declared yesterday is 178% higher than the 9 cents per share dividend declared last February. On slide 9, we step back to provide a wider perspective on the results this strategy has produced and the growth we have achieved. This slide does a good job of illustrating our progress in the four years since we became a public company. We think long-term when we make business decisions, which is why I think it makes sense to review our financial performance over longer-term periods. Our strategy has been consistent despite a rapidly changing market environment. We refer to our business model as being next generation because we have a clear vision of where we believe the industry is moving, and we've deliberately designed our business model with that direction in mind. This slide shows the consistency and the growth of our revenue and earnings trajectories, as well as the margin expansion achieved through efficiencies afforded by our centralized operating platform and our increasing scale. Our shareholders have also been well rewarded over this period with attractive capital appreciation and a history of increasing cash dividends. As some of you are aware, each year Fortune Magazine analyzes the growth rates of revenue, earnings, and shareholder returns for public issuers over a three-year period to rank the top 100 fastest-growing companies in the U.S. In 2021, their analysis concluded with Victory Capital ranking as the ninth fastest-growing public company in the U.S. and the number one fastest-growing public asset management firm. I have always referred to culture as one of Victory Capital's main competitive advantages. While we have been increasing employee headcount to support growth, we continually reinforce what we call our ownership culture, which means approaching business decisions with a long-term and client-centric view. Today, close to three-quarters of our employees own DCTR stock and collectively own approximately 20% of the company. In addition, our employees continue to invest alongside our clients by investing in Victory products. As of December 31st, our employees had approximately a quarter of a billion dollars invested in our own products. These metrics are substantial, particularly given that our total headcount stood at only 485 full-time employees at year-end. The two aforementioned statistics are the result of an engaged employee base that cares very much about our clients and our shareholders and approaches their work every day with a commitment and dedication that I believe is second to none in the industry. On slide 11, you can see our strong investment performance continue through the end of the year. At the end of the fourth quarter, we had 43 mutual funds in ETFs with a four- or five-star overall rating for Morningstar, and 64% of our AUM in our mutual funds and ETFs was ranked four or five star by Morningstar. 27 of our mutual funds and 11 of our ETFs ranked in the top quartile for the 2021 period. Lastly, we continue to see the acquisition environment as extremely constructive. Our intention in 2022 is to continue at the same pace that we have historically with acquisitions. We're well experienced in executing acquisitions and have the capital flexibility to execute as well. Our focus will continue to be on acquisitions that will make our company better and more competitive. I anticipate that the acquisitions will continue to range in size from small to large, and we will be focusing on products that are part of a well-diversified portfolio that we can be competitive in and that earn a fair fee and margin. We currently are in a number of discussions that are in various stages of the process and As I've said many times in the past, the exact timing and the likelihood to close is hard to predict. What I can say is we are patient, yet ready immediately should the right opportunity present itself. With that, I will turn it over to Michael for more color on the financials. Michael?