Document and Entity Information
Document and Entity Information - shares | 9 Months Ended | |
Sep. 30, 2019 | Oct. 31, 2019 | |
Document Type | 10-Q | |
Document Period End Date | Sep. 30, 2019 | |
Entity Registrant Name | Victory Capital Holdings, Inc. | |
Entity Current Reporting Status | Yes | |
Entity Filer Category | Non-accelerated Filer | |
Entity Interactive Data Current | Yes | |
Entity Small Business | false | |
Entity Emerging Growth Company | true | |
Entity Shell Company | false | |
Current Fiscal Year End Date | --12-31 | |
Document Fiscal Year Focus | 2019 | |
Document Fiscal Period Focus | Q3 | |
Entity Central Index Key | 0001570827 | |
Amendment Flag | false | |
Entity Ex Transition Period | false | |
Class A | ||
Entity Common Stock, Shares Outstanding | 16,325,352 | |
Class B | ||
Entity Common Stock, Shares Outstanding | 51,244,365 |
Condensed Consolidated Balance
Condensed Consolidated Balance Sheets - USD ($) $ in Thousands | Sep. 30, 2019 | Dec. 31, 2018 |
Assets | ||
Cash and cash equivalents | $ 78,963 | $ 51,491 |
Receivables | 86,446 | 44,120 |
Prepaid expenses | 4,606 | 2,664 |
Investments | 16,993 | 13,320 |
Property and equipment, net | 11,317 | 8,780 |
Goodwill | 391,515 | 284,108 |
Other intangible assets, net | 1,198,361 | 387,679 |
Other assets | 3,441 | 9,349 |
Total assets | 1,791,642 | 801,511 |
Liabilities and stockholders' equity | ||
Accounts payable and accrued expenses | 102,078 | 20,350 |
Accrued compensation and benefits | 44,629 | 30,228 |
Consideration payable for acquisition of business | 102,800 | 5,838 |
Deferred tax liability, net | 9,522 | 6,212 |
Other liabilities | 20,000 | 14,478 |
Long-term debt | 1,005,928 | 268,857 |
Total liabilities | 1,284,957 | 345,963 |
Stockholders' equity: | ||
Additional paid-in capital | 617,469 | 604,401 |
Accumulated other comprehensive loss | (45) | (86) |
Retained deficit | (68,853) | (119,709) |
Total stockholders’ equity | 506,685 | 455,548 |
Total liabilities and stockholders’ equity | 1,791,642 | 801,511 |
Class A | ||
Stockholders' equity: | ||
Common stock | 178 | 153 |
Treasury stock, at cost | (16,440) | (8,045) |
Class B | ||
Stockholders' equity: | ||
Common stock | 537 | 553 |
Treasury stock, at cost | $ (26,161) | $ (21,719) |
Condensed Consolidated Balanc_2
Condensed Consolidated Balance Sheets (Parenthetical) - $ / shares | Sep. 30, 2019 | Dec. 31, 2018 |
Class A | ||
Common stock, par value | $ 0.01 | $ 0.01 |
Common stock, shares authorized | 400,000,000 | 400,000,000 |
Common stock, shares issued | 17,806,125 | 15,280,833 |
Common stock, shares outstanding | 16,413,700 | 14,424,558 |
Treasury stock, shares | 1,392,425 | 856,275 |
Class B | ||
Common stock, par value | $ 0.01 | $ 0.01 |
Common stock, shares authorized | 200,000,000 | 200,000,000 |
Common stock, shares issued | 53,684,006 | 55,284,408 |
Common stock, shares outstanding | 51,283,669 | 53,137,428 |
Treasury stock, shares | 2,400,337 | 2,146,980 |
Condensed Consolidated Statemen
Condensed Consolidated Statements of Operations - USD ($) shares in Thousands, $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2019 | Sep. 30, 2018 | Sep. 30, 2019 | Sep. 30, 2018 | |
Revenue | ||||
Total revenue | $ 214,980 | $ 108,082 | $ 393,819 | $ 317,445 |
Expenses | ||||
Personnel compensation and benefits | 55,556 | 38,027 | 125,599 | 111,970 |
Distribution and other asset-based expenses | 57,202 | 24,269 | 89,151 | 73,557 |
General and administrative | 17,654 | 6,951 | 31,828 | 23,095 |
Depreciation and amortization | 7,768 | 5,574 | 18,253 | 17,917 |
Change in value of consideration payable for acquisition of business | (14) | (4) | ||
Acquisition-related costs | 16,386 | 1,451 | 21,950 | 1,446 |
Restructuring and integration costs | 4,841 | 6,629 | 702 | |
Total operating expenses | 159,407 | 76,272 | 293,396 | 228,683 |
Income from operations | 55,573 | 31,810 | 100,423 | 88,762 |
Other income (expense) | ||||
Interest income and other income/(expense) | 2,742 | (200) | 5,231 | (229) |
Interest expense and other financing costs | (16,856) | (4,458) | (26,000) | (16,256) |
Loss on debt extinguishment | (7,409) | (7,409) | (6,058) | |
Total other income (expense), net | (21,523) | (4,658) | (28,178) | (22,543) |
Income before income taxes | 34,050 | 27,152 | 72,245 | 66,219 |
Income tax expense | (8,058) | (6,562) | (17,343) | (16,430) |
Net income | $ 25,992 | $ 20,590 | $ 54,902 | $ 49,789 |
Earnings per share of common stock | ||||
Earnings per share—basic | $ 0.38 | $ 0.30 | $ 0.81 | $ 0.76 |
Earnings per share—diluted | $ 0.35 | $ 0.29 | $ 0.75 | $ 0.71 |
Weighted average number of shares outstanding | ||||
Weighted average shares outstanding—basic | 67,724 | 67,972 | 67,610 | 65,817 |
Weighted average shares outstanding—diluted | 73,671 | 71,864 | 73,300 | 70,168 |
Dividends declared per share of common stock | $ 0.05 | $ 0.05 | ||
Investment management fees | ||||
Revenue | ||||
Total revenue | $ 155,406 | $ 92,525 | $ 307,859 | $ 270,653 |
Fund administration and distribution fees | ||||
Revenue | ||||
Total revenue | $ 59,574 | $ 15,557 | $ 85,960 | $ 46,792 |
Condensed Consolidated Statem_2
Condensed Consolidated Statements of Comprehensive Income (Loss) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2019 | Sep. 30, 2018 | Sep. 30, 2019 | Sep. 30, 2018 | |
Condensed Consolidated Statements of Comprehensive Income (Loss) | ||||
Net income | $ 25,992 | $ 20,590 | $ 54,902 | $ 49,789 |
Other comprehensive income (loss), net of tax | ||||
Net unrealized gain on available-for-sale securities | 22 | 34 | ||
Net unrealized loss on foreign currency translation | (25) | (6) | (21) | (35) |
Total other comprehensive (loss) income, net of tax | (25) | 16 | (21) | (1) |
Comprehensive income | $ 25,967 | $ 20,606 | $ 54,881 | $ 49,788 |
Consolidated Statements of Chan
Consolidated Statements of Changes in Stockholders' Equity - USD ($) $ in Thousands | Common StockClass A | Common StockClass B | Common StockPre-IPO | Treasury StockClass A | Treasury StockClass B | Treasury StockPre-IPO | Additional Paid-In Capital | Accumulated Other Comprehensive Income (Loss) | Retained Deficit | Total |
Balance at beginning of period at Dec. 31, 2017 | $ 572 | $ (20,899) | $ 435,334 | $ 64 | $ (183,888) | $ 231,183 | ||||
Increase (Decrease) in Stockholders' Equity | ||||||||||
Issuance of common stock | $ 128 | 156,421 | 156,549 | |||||||
Class A common stock offering costs | (4,561) | (4,561) | ||||||||
Redesignation of common stock | $ 572 | (572) | $ (20,899) | 20,899 | ||||||
Share conversion - Class B to A | 1 | (1) | ||||||||
Exercise of options | 12 | 12 | ||||||||
Fractional shares retired | (2) | (2) | ||||||||
Cumulative effect of adoption of ASU | 512 | 1,306 | 1,818 | |||||||
Other comprehensive income (loss) | 34 | 34 | ||||||||
Share-based compensation | 3,322 | 3,322 | ||||||||
Dividends paid | (53) | (53) | ||||||||
Net income | 10,524 | 10,524 | ||||||||
Balance at end of period at Mar. 31, 2018 | 129 | 571 | (20,899) | 591,038 | 98 | (172,111) | 398,826 | |||
Balance at beginning of period at Dec. 31, 2017 | $ 572 | $ (20,899) | 435,334 | 64 | (183,888) | 231,183 | ||||
Increase (Decrease) in Stockholders' Equity | ||||||||||
Other comprehensive income (loss) | (1) | (1) | ||||||||
Net income | 49,789 | |||||||||
Balance at end of period at Sep. 30, 2018 | 148 | 556 | $ (3,542) | (21,719) | 599,875 | 63 | (133,487) | 441,894 | ||
Balance at beginning of period at Mar. 31, 2018 | 129 | 571 | (20,899) | 591,038 | 98 | (172,111) | 398,826 | |||
Increase (Decrease) in Stockholders' Equity | ||||||||||
Class A common stock offering costs | 5 | 5 | ||||||||
Share conversion - Class B to A | 1 | (1) | ||||||||
Repurchase of shares | (720) | (720) | ||||||||
Other comprehensive income (loss) | (51) | (51) | ||||||||
Share-based compensation | 4,148 | 4,148 | ||||||||
Dividends paid | (144) | (144) | ||||||||
Net income | 18,675 | 18,675 | ||||||||
Balance at end of period at Jun. 30, 2018 | 130 | 570 | (720) | (20,899) | 595,191 | 47 | (153,580) | 420,739 | ||
Increase (Decrease) in Stockholders' Equity | ||||||||||
Class A common stock offering costs | 3 | 3 | ||||||||
Share conversion - Class B to A | 18 | (18) | ||||||||
Repurchase of shares | (2,822) | (2,822) | ||||||||
Shares withheld related to net settlement of equity awards | (820) | (820) | ||||||||
Vesting of restricted share grants | 2 | (2) | ||||||||
Exercise of options | 2 | 667 | 669 | |||||||
Shares issued under 2018 ESPP | 12 | 12 | ||||||||
Other comprehensive income (loss) | 16 | 16 | ||||||||
Share-based compensation | 4,004 | 4,004 | ||||||||
Dividends paid | (497) | (497) | ||||||||
Net income | 20,590 | 20,590 | ||||||||
Balance at end of period at Sep. 30, 2018 | 148 | 556 | (3,542) | (21,719) | 599,875 | 63 | (133,487) | 441,894 | ||
Balance at beginning of period at Dec. 31, 2018 | 153 | 553 | (8,045) | (21,719) | 604,401 | (86) | (119,709) | 455,548 | ||
Increase (Decrease) in Stockholders' Equity | ||||||||||
Issuance of common stock | 13 | 13 | ||||||||
Share conversion - Class B to A | 4 | (4) | ||||||||
Repurchase of shares | (1,344) | (1,344) | ||||||||
Shares withheld related to net settlement of equity awards | (318) | (318) | ||||||||
Exercise of options | 1 | 220 | 221 | |||||||
Cumulative effect of adoption of ASU | 62 | (62) | ||||||||
Other comprehensive income (loss) | 12 | 12 | ||||||||
Share-based compensation | 1,547 | 1,547 | ||||||||
Dividends paid | (41) | (41) | ||||||||
Net income | 14,527 | 14,527 | ||||||||
Balance at end of period at Mar. 31, 2019 | 157 | 550 | (9,389) | (22,037) | 606,181 | (12) | (105,285) | 470,165 | ||
Balance at beginning of period at Dec. 31, 2018 | 153 | 553 | (8,045) | (21,719) | 604,401 | (86) | (119,709) | 455,548 | ||
Increase (Decrease) in Stockholders' Equity | ||||||||||
Cumulative effect of adoption of ASU | 62 | |||||||||
Other comprehensive income (loss) | (21) | (21) | ||||||||
Net income | 54,902 | |||||||||
Balance at end of period at Sep. 30, 2019 | 178 | 537 | (16,440) | (26,161) | 617,469 | (45) | (68,853) | 506,685 | ||
Balance at beginning of period at Mar. 31, 2019 | 157 | 550 | (9,389) | (22,037) | 606,181 | (12) | (105,285) | 470,165 | ||
Increase (Decrease) in Stockholders' Equity | ||||||||||
Issuance of common stock | 16 | 16 | ||||||||
Share conversion - Class B to A | 8 | (8) | ||||||||
Repurchase of shares | (1,948) | (1,948) | ||||||||
Shares withheld related to net settlement of equity awards | (123) | (123) | ||||||||
Exercise of options | 2 | 733 | 735 | |||||||
Other comprehensive income (loss) | (8) | (8) | ||||||||
Share-based compensation | 3,755 | 3,755 | ||||||||
Dividends paid | (24) | (24) | ||||||||
Net income | 14,383 | 14,383 | ||||||||
Balance at end of period at Jun. 30, 2019 | 165 | 544 | (11,337) | (22,160) | 610,685 | (20) | (90,926) | 486,951 | ||
Increase (Decrease) in Stockholders' Equity | ||||||||||
Issuance of common stock | 15 | 15 | ||||||||
Share conversion - Class B to A | 13 | (13) | ||||||||
Repurchase of shares | (5,103) | (5,103) | ||||||||
Shares withheld related to net settlement of equity awards | (4,001) | (4,001) | ||||||||
Vesting of restricted share grants | 1 | (1) | ||||||||
Exercise of options | 5 | 1,956 | 1,961 | |||||||
Other comprehensive income (loss) | (25) | (25) | ||||||||
Share-based compensation | 4,814 | 4,814 | ||||||||
Dividends paid | (3,919) | (3,919) | ||||||||
Net income | 25,992 | 25,992 | ||||||||
Balance at end of period at Sep. 30, 2019 | $ 178 | $ 537 | $ (16,440) | $ (26,161) | $ 617,469 | $ (45) | $ (68,853) | $ 506,685 |
Consolidated Statements of Ch_2
Consolidated Statements of Changes in Stockholders' Equity (Parenthetical) - $ / shares | 1 Months Ended | 3 Months Ended |
Sep. 30, 2019 | Sep. 30, 2019 | |
Consolidated Statements of Changes in Stockholders' Equity | ||
Dividends paid (in dollars per share) | $ 0.05 | $ 0.05 |
Condensed Consolidated Statem_3
Condensed Consolidated Statements of Cash Flows - USD ($) $ in Thousands | 9 Months Ended | |
Sep. 30, 2019 | Sep. 30, 2018 | |
Cash flows from operating activities | ||
Net income | $ 54,902 | $ 49,789 |
Adjustments to reconcile net income to net cash provided by operating activities: | ||
Provision for deferred income taxes | 3,310 | 4,951 |
Depreciation and amortization | 18,253 | 17,917 |
Deferred financing costs and accretion expense | 2,612 | 2,270 |
Stock-based and deferred compensation | 13,928 | 14,518 |
Change in fair value of contingent consideration obligations | (14) | (4) |
Loss on other receivable | 309 | |
Unrealized appreciation on investments | (1,409) | (261) |
Net (gain) loss on equity method investment | (2,683) | 506 |
Loss on debt extinguishment | 7,409 | 6,058 |
Changes in operating assets and liabilities: | ||
Receivables | (11,366) | 5,370 |
Prepaid expenses | (1,955) | (44) |
Other assets | (43) | 158 |
Accounts payable and accrued expenses | 74,713 | (2,687) |
Accrued compensation and benefits | 8,501 | 857 |
Other liabilities | 1,527 | 190 |
Net cash provided by operating activities | 167,685 | 99,897 |
Cash flows from investing activities | ||
Purchases of property and equipment | (2,920) | (1,742) |
Purchases of trading securities | (4,606) | (3,557) |
Sales of trading securities | 2,342 | 644 |
Purchases of available-for-sale securities | (104) | |
Sales of available-for-sale securities | 104 | |
Equity method investment | (3,000) | |
Sale of equity method investment | 10,572 | |
Acquisition of business | (851,276) | |
Net cash used in investing activities | (845,888) | (7,655) |
Cash flows from financing activities | ||
Repurchase of common stock | (9,342) | (3,681) |
Payment of Class A common stock deferred offering costs | (4,287) | |
Payments of taxes related to net share settlement of equity awards | (3,497) | (510) |
Proceeds from long-term senior debt | 1,088,503 | 359,100 |
Payment of debt financing fees | (19,820) | (2,507) |
Repayment of long-term senior debt | (343,000) | (579,750) |
Repayment of promissory note | (96) | (431) |
Payment of dividends | (3,984) | (694) |
Payment of consideration for acquisition | (6,017) | (4,448) |
Net cash provided by (used) in by financing activities | 705,708 | (79,968) |
Effect of changes of foreign exchange rate on cash and cash equivalents | (33) | (56) |
Net increase in cash and cash equivalents | 27,472 | 12,218 |
Cash and cash equivalents, beginning of period | 51,491 | 12,921 |
Cash and cash equivalents, end of period | 78,963 | 25,139 |
Supplemental cash flow information | ||
Cash paid for interest | 8,216 | 13,775 |
Cash paid for income taxes | 9,540 | 11,709 |
Class A | ||
Cash flows from financing activities | ||
Issuance of common stock, net of costs | 44 | 156,561 |
Class B | ||
Cash flows from financing activities | ||
Issuance of common stock, net of costs | $ 2,917 | $ 679 |
Organization and Nature of Busi
Organization and Nature of Business | 9 Months Ended |
Sep. 30, 2019 | |
Organization and Nature of Business | |
Organization and Nature of Business | Note 1. ORGANIZATION AND NATURE OF BUSINESS Victory Capital Holdings, Inc., a Delaware corporation (along with its wholly-owned subsidiaries, collectively referred to as the “Company,” “Victory,” or in the first-person notations of “we,” “us,” and “our”) was formed on February 13, 2013 for the purpose of acquiring Victory Capital Management Inc. (“VCM”) and Victory Capital Advisers, Inc. (“VCA”), which occurred on August 1, 2013. On February 12, 2018, the Company completed the initial public offering (the “IPO”) of its Class A common stock, which trades on the NASDAQ under the symbol “VCTR.” On and effective July 1, 2019, the Company completed the acquisition (the “USAA AMCO Acquisition”) of USAA Adviser and Victory Capital Transfer Agency, Inc. (“VCTA”), formally known as the USAA Transfer Agency Company d/b/a USAA Shareholder Account Services. VCTA is registered with the SEC. The USAA AMCO Acquisition includes USAA’s mutual fund and exchange traded fund (“ETF”) businesses and its 529 College Savings Plan (collectively, the “USAA Mutual Fund Business”). Refer to Note 4, Acquisitions, to the accompanying unaudited condensed consolidated financial statements (the “accompanying financial statements”) for further details on the acquisition. VCM is a registered investment adviser managing assets through open-end mutual funds, separately managed accounts, unified management accounts, ETFs, collective trust funds, wrap separate account programs and UCITs. VCM also provides mutual fund administrative services for the Victory Portfolios, Victory Variable Insurance Funds, Victory Institutional Funds and the mutual fund series of the Victory Portfolios II (collectively, the “Victory Funds”), a family of open-end mutual funds, the VictoryShares (the Company’s ETF brand), as well as the USAA Mutual Fund Business, which includes the USAA Mutual Fund Trust, a family of open-end mutual funds (the “USAA Funds”). Additionally, VCM employs all of the Company’s United States investment professionals across its Franchises and Solutions, which are not separate legal entities. VCA is registered with the SEC as an introducing broker-dealer and serves as distributor and underwriter for the Victory Funds and USAA Funds. |
Basis of Presentation and Signi
Basis of Presentation and Significant Accounting Policies | 9 Months Ended |
Sep. 30, 2019 | |
Basis of Presentation and Significant Accounting Policies | |
Basis of Presentation and Significant Accounting Policies | NOTE 2. BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation The accompanying financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and applicable rules and regulations of the SEC regarding interim financial reporting. Accordingly, they do not include all of the information and notes required by GAAP for complete annual financial statements. As such, the information included in this quarterly report on Form 10-Q should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2018. In the opinion of management, the accompanying financial statements reflect all adjustments, consisting only of normal recurring adjustments, necessary for the fair presentation of the financial condition, results of operations, and cash flows for the interim periods presented. Operating results for the three and nine month period ended September 30, 2019 are not necessarily indicative of the results that may be expected for the year ending December 31, 2019. Principles of Consolidation The accompanying financial statements include the operations of the Company and its wholly-owned subsidiaries, after elimination of all intercompany balances and transactions. Our involvement with non-consolidated variable interest entities (“VIEs”) include sponsored investment funds and an equity method investment. For further discussion regarding VIEs, refer to Note 2, Significant Accounting Policies, to the consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2018. For further discussion on the equity method investment, refer to Note 13, Equity Method Investment, to the accompanying financial statements. Use of Estimates and Assumptions The preparation of the accompanying financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts and disclosures in the financial statements and the accompanying notes. Actual results may ultimately differ materially from those estimates. Retroactive Adjustment for Common Stock Split On February 1, 2018, the Company’s Stockholders and Board of Directors approved a 175.194 for 1 stock split of our common stock. The accompanying financial statements for the periods prior to the stock split and related amounts disclosed in the notes have been retroactively adjusted to reflect the effects of the stock split. Restructuring and Integration Costs In connection with business combinations, asset purchases and changes in business strategy, the Company incurs costs integrating investment platforms, products and personnel into existing systems, processes and service provider arrangements and restructuring the business to capture operating expense synergies. These costs include severance‑related expenses related to one‑time benefit arrangements, contract termination expense and integration costs, which are recorded in “Restructuring and integration costs” in the accompanying unaudited Condensed Consolidated Statements of Operations. The following table presents the rollforward of restructuring and integration liabilities for the three months and nine months ended September 30, 2019 and 2018: Three Months Ended September 30, Nine Months Ended September 30, (in millions) 2019 2018 2019 2018 Liability balance, beginning of period $ 1.5 $ 0.5 $ 0.1 $ 0.1 Severance expense USAA AMCO Acquisition 3.7 — 5.2 — Other — — — 0.7 Contract termination expense 0.1 — 0.1 — Integration costs 1.0 — 1.3 — Restructuring and integration costs 4.8 — 6.6 0.7 Settlement of liabilities (4.4) (0.2) (4.8) (0.5) Liability balance, end of period $ 1.9 $ 0.3 $ 1.9 $ 0.3 Accrued expenses $ 1.9 $ 0.3 $ 1.9 $ 0.3 Other liabilities — — — — Liability balance, end of period $ 1.9 $ 0.3 $ 1.9 $ 0.3 Changes in Accounting Policies The Company has consistently applied the accounting policies for the periods presented as described in Note 2, Significant Accounting Policies, to the consolidated financial statements contained in our Annual Report on Form 10-K for the year ended December 31, 2018. Effective January 1, 2019, Victory adopted Accounting Standards Update (“ASU”) 2014-09, “Revenue from Contracts with Customers” (“ASU 2014-09”). The adoption of ASU 2014-09 was not material to our financial condition, results of operations or cash flows, however, we have changed our accounting policy for revenue recognition as described below in New Accounting Pronouncements and Note 3, Revenue Recognition, to the accompanying financial statements. Effective January 1, 2019, Victory adopted ASU 2016-18, “Restricted Cash – Statement of Cash Flows” (“ASU 2016-18”) which addresses the presentation of restricted cash in the statement of cash flows and requires disclosure of the nature of restriction on such cash. ASU 2016-18 was not material to our financial condition, results of operations or cash flows, however we have changed our accounting policy for restricted cash as described below in New Accounting Pronouncements. New Accounting Pronouncements Accounting Standards Adopted in 2019 · Changes in Stockholders’ Equity for Interim Periods: Effective January 1, 2019, the Company adopted final SEC rules that extend to interim periods the annual disclosure requirement in Regulation S-X, Rule 3-04, of presenting the changes in stockholders’ equity for the current and comparative quarter in its accompanying financial statements. · Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income: Effective January 1, 2019, the Company adopted ASU 2018-02 which provides the optional election for the reclassification from accumulated other comprehensive income to retained earnings for stranded tax effects resulting from the Tax Cuts and Jobs Act of 2017. The adoption of ASU 2018-02 resulted in a reclassification between accumulated other comprehensive income/(loss) and retained earnings of $0.1 million, and had no impact on our unaudited Condensed Consolidated Statements of Operations. · Restricted Cash – Statement of Cash Flows: We early adopted ASU 2016-18 which requires that a statement of cash flows explain the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. When restricted cash is presented separately from cash and cash equivalents on the balance sheet, a reconciliation is required between the amounts presented on the statement of cash flows and the balance sheet, as well as a disclosure of information about the nature of the restrictions. We did not have restricted cash at September 30, 2019. Victory historically does not maintain or designate cash as restricted cash, however at June 30, 2019, we placed $71.9 million of balance sheet cash in an escrow account related to the USAA AMCO Acquisition that closed on July 1, 2019. The funds were released from the escrow account on July 1, 2019. · Statement of Cash Flows – Classification of Certain Cash Receipts and Cash Payments: Effective January 1, 2019, the Company adopted ASU 2016‑15 which addresses eight specific cash flow issues with the objective of reducing the existing diversity in practice. The application of this guidance did not have an impact on the presentation of our unaudited Condensed Consolidated Statements of Cash Flows. · Recognition and Measurement of Financial Assets and Liabilities: Effective January 1, 2019, the Company adopted ASU 2016‑01 which requires equity securities to be measured at fair value with the changes in fair value recognized in net income. The adoption of ASU 2016-01 did not have a material impact on our financial condition, results of operations or cash flows. · Revenue from Contracts with Customers: Effective January 1, 2019, the Company adopted ASU 2014-09 which requires the evaluation of contracts based on the following five-step model: (i) identify the contract with the customer; (ii) identify the performance obligation(s) in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligation(s) in the contract; and (v) recognize revenue (or as) each performance obligation is satisfied. The Company’s introducing broker-dealer VCA adopted ASU 2014-09 on January 1, 2018. We adopted ASU 2014-09 using the modified retrospective transition method. No cumulative effect adjustment was required to be recorded and the comparative information has not been restated. We determined that ASU 2014-09 did not have a material impact on the timing of revenue recognition. The most significant impact from adoption was a change to the net presentation of certain fund expense reimbursements which were previously presented on a gross basis. For further discussion on the effects of the changes in the presentation of fund expense reimbursements, refer to Note 3, Revenue Recognition, to the accompanying financial statements. Recently Issued Accounting Standards · Subsequent Measurement of Goodwill: In January 2017, the Financial Accounting Standards Board (the “FASB”) issued ASU 2017-04 which simplifies the test for goodwill impairment. ASU 2017-04 eliminates the requirement to calculate the implied fair value of goodwill (step two) to measure a goodwill impairment charge. Goodwill impairment will be based upon the results of step one of the impairment test, which is defined as the excess of the carrying amount of a reporting unit over its fair value, not to exceed the carrying amount of goodwill allocated to that reporting unit. The new guidance will be effective for the Company’s fiscal year that begins after December 15, 2020 and requires a prospective approach to adoption. Early adoption is permitted for interim or annual goodwill impairment tests. The impact of this new guidance will depend upon the performance of our one reporting unit and the market conditions impacting the fair value. · Leases: In February 2016, the FASB issued ASU 2016‑02, “Leases (Topic 842)” (the “New Lease Standard”) which supercedes previous lease guidance, Accounting Standards Codification (“ASC”) Topic 840. The New Lease Standard requires lessees to recognize a right-of-use asset and a lease liability for all leases (with the exception of short-term leases) on their balance sheet at the commencement date and recognize expenses on their income statement similar to ASC Topic 840 guidance. In addition, the FASB issued ASU 2018-11, “Leases Targeted Improvements” which provides a package of practical expedients for entities to apply upon adoption. The Company will adopt the New Lease Standard on January 1, 2020. We are currently assessing and evaluating our portfolio of active real estate leases and surveying our business for other leases. As outlined in our Annual Report on Form 10-K for the year ended December 31, 2018, we have approximately $17.0 million in undiscounted, future minimum cash commitments under operating leases. Subsequent to September 30, 2019, we relocated our Corporate headquarters for the global investment management business from Brooklyn, Ohio to San Antonio, Texas. The undiscounted, future minimum cash commitments related to the new San Antonio lease is approximately $12.0 million. We do not expect the adoption of the New Lease Standard to have a material effect on our consolidated balance sheets and results of operations. |
Revenue Recognition
Revenue Recognition | 9 Months Ended |
Sep. 30, 2019 | |
Revenue Recognition | |
Revenue Recognition | NOTE 3. Revenue RECOGNITION In accordance with the new revenue recognition standard requirements, the following table disaggregates our revenue by type and product: Three Months Ended September 30, Nine Months Ended September 30, (in thousands) 2019 2018 2019 2018 Investment management fees Mutual funds (Victory/USAA Funds) $ 125,928 $ 64,926 $ 228,855 $ 191,391 ETFs (VictoryShares) 3,116 2,457 7,172 6,523 Separate accounts and other vehicles 26,512 24,232 72,379 71,225 Performance-based fees Separate accounts and other vehicles (150) 910 (547) 1,514 Total investment management fees $ 155,406 $ 92,525 $ 307,859 $ 270,653 Fund administration and distribution fees Administration fees Mutual funds (Victory/USAA Funds) $ 30,098 $ 5,880 $ 40,734 $ 17,069 ETFs (VictoryShares) 378 278 924 667 Distribution fees Mutual funds (Victory/USAA Funds) 7,674 9,399 22,878 29,056 Transfer agent fees Mutual funds (USAA Funds) 21,424 — 21,424 — Total fund administration and distribution fees $ 59,574 $ 15,557 $ 85,960 $ 46,792 Total revenue $ 214,980 $ 108,082 $ 393,819 $ 317,445 Beginning on January 1, 2019, and as a result of adopting ASU 2014-09, fund expense reimbursements are presented as a reduction of investment management fees. This change in presentation reduced revenue, and operating expenses, by $5.2 million and $13.4 million, respectively for the three and nine months ended September 30, 2019. The following table presents balances of receivables: (in thousands) September 30, 2019 December 31, 2018 Customer receivables Mutual funds (Victory/USAA Funds) $ 61,348 $ 21,025 ETFs (VictoryShares) 1,271 909 Separate accounts and other vehicles 23,170 19,199 Receivables from contracts with customers 85,789 41,133 Non-customer receivables 657 2,987 Total receivables $ 86,446 $ 44,120 Revenue The Company’s revenue includes fees earned from providing; · investment management services, · fund administration services, · fund transfer agent services, and · fund distribution services. Revenue is recognized for each distinct performance obligation identified in customer contracts when the performance obligation has been satisfied by transferring services to a customer either over time or at the point in time when the customer obtains control of the service. Revenue is recognized in the amount of variable or fixed consideration allocated to the satisfied performance obligation that Victory expects to be entitled to in exchange for transferring services to a customer. Variable consideration is included in the transaction price only when it is probable that a significant reversal of such revenue will not occur when the uncertainty associated with the variable consideration is subsequently resolved. Investment management, fund administration and fund distribution fees are generally considered variable consideration as they are typically calculated as a percentage of AUM. Fund transfer agent fees are also considered variable consideration as they are calculated as a percentage of AUM or based on the number of accounts in the fund. In such cases, the amount of fees earned is subject to factors outside of the Company’s control including customer or underlying investor contributions and redemptions and financial market volatility. These fees are considered constrained and are excluded from the transaction price until the asset values or number of accounts on which the customer is billed are calculated and the value of consideration is measurable. The timing of when the Company bills its clients and related payment terms varies in accordance with the agreed upon contractual terms. Clients are generally billed after the service is performed which results in the recording of accounts receivable and accrued revenue. Deferred revenue is recorded in situations where a client is billed in advance. The Company has contractual arrangements with third parties to provide certain advisory, administration, transfer agent and distribution services. Management considers whether we are acting as the principal service provider or as an agent to determine whether revenue should be recorded based on the gross amount payable by the customer or net of payments to third-party service providers, respectively. Victory is considered a principal service provider if we control the service that is transferred to the customer. We are considered an agent when we arrange for the service to be provided by another party and do not control the service. Investment Management Fees Investment management fees are received in exchange for investment management services that represent a series of distinct incremental days of investment management service. Control of investment management services is transferred to the customers over time as these customers receive and consume the benefits provided by these services. Investment management fees are calculated as a contractual percentage of AUM and are generally paid in arrears on a monthly or quarterly basis. Investment management fees are recognized as revenue using a time-based output measure to measure progress. Revenue is recorded at month end or quarter end when the value of consideration is measured. The amount of investment management fee revenue varies from one reporting period to another as levels of AUM change (from inflows, outflows and market movements) and as the number of days in the reporting period change. The Company may waive certain fees for investment management services provided to the Victory Funds, USAA Funds and VictoryShares and may subsidize certain share classes of the Victory Funds, USAA Funds and VictoryShares to ensure that specified operating expenses attributable to such share classes do not exceed a specified percentage. These waivers and reimbursements reduce the transaction price allocated to investment management services and are recognized as a reduction to investment management fees revenue. The amounts due to the Victory Funds, USAA Funds and VictoryShares for waivers and expense reimbursements represent consideration payable to customers, which is recorded in “Accounts payable and accrued expenses” in the accompanying unaudited Condensed Consolidated Balance Sheets, and no distinct services are received in exchange for these payments. Performance‑based investment management fees, which include fees under performance fee and fulcrum fee arrangements, are included in the transaction price for providing investment management services. Performance-based investment management fees are calculated as a percentage of investment performance on a client’s account versus a specified benchmark or hurdle based on the terms of the contract with the customer. Performance-based investment management fees are variable consideration and are recognized as revenue when it is probable that a significant reversal of the cumulative revenue for the contractual performance period will not occur. Performance-based investment management fees recognized as revenue in the current period may pertain to performance obligations satisfied in prior periods. Fund Administration Fees The Company recognizes fund administration fees as revenue using a time-based output measure to measure progress. Fund administration fees are determined based on the contractual rate applied to average daily net assets of the Victory Funds, USAA Funds and VictoryShares for which administration services are provided. Revenue is recorded on a monthly basis when the value of consideration is measured using actual average daily net assets and constraints are removed. The Company has contractual arrangements with a third party to provide certain sub-administration services. We are the primary obligor under the contracts with the Victory Funds, USAA Funds and VictoryShares and have the ability to select the service provider and establish pricing. As a result, fund administration fees and sub-administration expenses are recorded on a gross basis. Fund Transfer Agent Fees The Company recognizes fund transfer agent fees as revenue using a time-based output measure to measure progress. Fund transfer agent fees are determined based on the contractual rate applied to either the average daily net assets of the USAA Funds for which transfer agent services are provided or number of accounts in the USAA Funds. Revenue is recorded on a monthly basis when the value of consideration is measured using actual average daily net assets or actual number of accounts and constraints are removed. The Company has contractual arrangements with a third party to provide certain sub-transfer agent services. We are the primary obligor under the contracts with the USAA Funds and have the ability to select the service provider and establish pricing. As a result, fund transfer agent fees and sub-transfer agent expenses are recorded on a gross basis. Fund Distribution Fees VCA receives compensation for sales and sales-related services promised under distribution contracts with the Victory Funds and USAA Funds. Revenue is measured in an amount that reflects the consideration to which VCA expects to be entitled in exchange for providing distribution services. Distribution fees are generally calculated as a percentage of average net assets in the Victory Funds and USAA Funds. VCA’s performance obligation is satisfied at the point in time when control of the services is transferred to customers, which is upon investor subscription or redemption. Based on the nature of the calculation, the revenue for these services is accounted for as variable consideration, VCA may recognize distribution fee revenue in the current period that pertains to performance obligations satisfied in prior periods, as it represents variable consideration and is recognized as uncertainties are resolved. VCA’s distribution fee revenue is recorded in “Fund administration and distribution fees” in the accompanying unaudited Condensed Consolidated Statements of Operations. VCA has contractual arrangements with third parties to provide certain distribution services. VCA is the primary obligor under the contracts with the Victory Funds and USAA Funds and has the ability to select the service provider and establish pricing. Substantially all of VCA’s revenue is recorded gross of payments made to third parties. Costs Related to Customer Contracts The Company is required to capitalize certain costs directly related to the acquisition or fulfillment of a contact with a customer. Victory has not identified any sales-based compensation or similar costs that meet the definition of an incremental cost to acquire a contract and as such we have no intangible assets related to contract acquisitions. Direct costs incurred to fulfill services under VCA’s distribution contracts include sales commissions paid to third party dealers for the sale of Class C Shares. VCA may pay upfront sales commissions to dealers and institutions that sell Class C shares of the participating Victory Funds at the time of such sale. Upfront sales commission payments with respect to Class C shares equal 1.00% of the purchase price of the Class C shares sold by the dealer or institution. When VCA makes an upfront payment to a dealer or institution for the sale of Class C shares, VCA capitalizes the cost of such payment, which is recorded in “Prepaid expenses” in the accompanying unaudited Condensed Consolidated Balance Sheets, and amortizes the cost over a 12-month period, the estimated period of benefit. Valuation of Assets Under Management The fair value of assets under management of the Victory Funds, USAA Funds (added this quarter) and VictoryShares is primarily determined using quoted market prices or independent third party pricing services or broker price quotes. In limited circumstances, a quotation or price evaluation is not readily available from a pricing service. In these cases, pricing is determined by management based on a prescribed valuation process that has been approved by the directors/trustees of the sponsored products. The same prescribed valuation process is used to price securities in separate accounts and other vehicles for which a quotation or price evaluation is not readily available from a pricing service. For the periods presented, a de minimis amount of the AUM was priced in this manner. |
Acquisitions
Acquisitions | 9 Months Ended |
Sep. 30, 2019 | |
Acquisitions | |
Acquisition | NOTE 4. ACQUISITIONS USAA AMCO Acquisition On and effective July 1, 2019, the Company completed the acquisition (the “USAA AMCO Acquisition”) of the USAA Acquired Companies, which includes USAA’s Mutual Fund and ETF businesses and its 529 College Savings Plan (collectively, the “USAA Mutual Fund Business”), as amended by Amendment No. 1 (the “Amendment”) to the stock purchase agreement (the “Stock Purchase Agreement”). The Amendment amended the Stock Purchase Agreement entered into on November 6, 2018 between the Company, USAA Investment Corporation, and for certain limited purposes, USAA Capital Corporation. T he assets acquired and liabilities assumed and the results of the USAA Acquired Companies’ operations are reflected in the accompanying financial statements from the closing date of July 1, 2019. The USAA AMCO Acquisition expands and diversifies our investment platform, particularly in the fixed income and solutions asset classes, and increases our size and scale. Additional products added to our investments platform include target date and target risk strategies, managed volatility mutual funds, active fixed income ETFs, sub-advised and multi-manager equity funds. We have also added to our lineup of asset allocation portfolios and smart beta equity ETFs. Through the acquisition, the Company has the rights to offer products and services using the USAA brand and provides an opportunity for Victory to offer its products to USAA members through a direct member-channel. Purchase Price The Company purchased 100% of the outstanding common stock of the USAA Acquired Companies. Total consideration was $954.1 million, comprised of $851.3 million of cash paid at closing (which included restricted cash of $71.9 million) and $102.8 million in contingent consideration due to sellers . The purchase price is subject to certain post-closing adjustments. A maximum of $150.0 million ($37.5 million per year) in contingent payments is payable to sellers based on the annual revenue of USAA Adviser attributable to all “non-managed money”-related AUM in each of the first four years following the closing. To receive any contingent payment in respect of “non-managed money”-related assets for a given year, annual revenue from “non-managed money”-related assets must be at least 80% of the revenue run-rate (as calculated under the Stock Purchase Agreement) of the USAA Adviser’s “non-managed money”-related assets under management as of the Closing, and to achieve the maximum contingent payment for a given year, such annual revenue must total at least 100% of that Closing revenue run-rate. Annual contingent payments in respect of “non-managed money”-related assets are subject to certain “catch-up” provisions set forth in the USAA Stock Purchase Agreement. The Company accounted for the acquisition in accordance with ASC 805, Business Combinations . Accordingly, the purchase price was allocated to the assets acquired and liabilities assumed based upon their estimated fair values at the date of the USAA AMCO Acquisition. Given the timing of this transaction and complexity of the purchase accounting, our estimate of the fair value adjustment specific to the acquired intangible assets and final tax position is preliminary. We intend to finalize the accounting for these items as soon as reasonably possible and may adjust the preliminary purchase price allocation, as necessary, during the measurement period of up to one year after the closing date as we obtain more information as to facts and circumstances existing as of the acquisition date. The excess purchase price over the estimated fair values of assets acquired and liabilities assumed of $107.4 million was recorded to “Goodwill” in the accompanying unaudited Condensed Consolidated Balance Sheets, all of which is expected to be deductible for tax purposes. The goodwill arising from the acquisition primarily results from expected future earnings and cash flows, as well as the synergies created by the integration of the USAA Acquired Companies within our organization. The following table summarizes the estimated amounts of identified acquired assets and liabilities assumed as of the acquisition date: (in thousands) Cash and cash equivalents $ 17,473 Receivables 30,359 Other intangible assets, net 827,070 Goodwill 107,407 Accounts payable and accrued expenses (4,853) Accrued compensation and benefits (5,907) Payable to members and custodians (17,473) Total purchase price consideration $ 954,076 The following table summarizes the change in the goodwill balance from December 31, 2018 to September 30, 2019: (in thousands) As of September 30, 2019 Balance, beginning of period $ 284,108 Goodwill recorded in acquisition 107,407 Balance, end of period $ 391,515 In connection with the allocation of the purchase price, we identified intangible assets with an estimated fair value of $827.1 million ($787.6 million indefinite-lived and $39.5 million definite-lived). The following table summarizes additional information for the intangible assets acquired: Weighted-Average Estimated Useful (in thousands) Estimated Life in Years Indefinite-Lived Investment advisory and administration service contracts $ 786,800 Indefinite Distribution services contract 800 Indefinite Total 787,600 Definite-Lived Use of tradename 39,100 4 Lease 370 8 Total 39,470 Total intangible assets $ 827,070 USAA Acquired Companies For the three months ended September 30, 2019, the Company incurred $4.8 million in restructuring and integration costs associated with the USAA AMCO Acquisition. Revenue of the USAA Acquired Companies subsequent to the effective closing date of July 1, 2019 within the three months ended September 30, 2019, was as follows: Three Months Ended (in millions) September 30, 2019 Revenue $ 121.3 The Company’s consolidated financial statements for the three months ended September 30, 2019 include the operating results of the USAA Acquired Companies. The historical consolidated financial information of Victory and the USAA Acquired Companies have been adjusted to give effect to pro forma events that are directly attributable to the transaction, factually supportable and expected to have continuing impact on the combined results. These amounts have been calculated after adjusting the results of the USAA Acquired Companies to reflect additional interest expense and income taxes as well as intangible asset amortization that would have been expensed assuming the fair value adjustments had been applied on January 1, 2018. In addition, Victory’s and the USAA Acquired Companies’ results were adjusted to remove incentive compensation, legal fees and mutual fund proxy costs directly attributable to the acquisition. The following Unaudited Pro Forma Condensed Combined Statements of Operations are provided for illustrative purposes only and assume that the acquisition occurred on January 1, 2018. This unaudited information should not be relied upon as indicative of historical results that would have been obtained if the acquisition had occurred on that date, nor of the results that may be obtained in the future. Three Months Ended Nine Months Ended Nine Months Ended (in thousands, except per share amount) September 30, 2018 September 30, 2019 September 30, 2018 Revenue $ 233,531 $ 632,886 $ 689,615 Net income 23,391 76,547 58,943 Earnings per share of common stock Basic $ 0.34 $ 1.13 $ 0.90 Diluted $ 0.33 $ 1.04 $ 0.84 Weighted average number of shares outstanding Basic 67,972 67,610 65,817 Diluted 71,864 73,300 70,168 New Credit Agreement The purchase price paid in cash at closing was financed using a combination of the 2019 Credit Agreement and the Company’s balance sheet resources. The 2019 Credit Agreement, dated as of July 1, 2019, was entered into among Victory, as borrower, the lenders from time to time party thereto and Barclays Bank PLC, as administrative agent and collateral agent, pursuant to which we obtained a seven-year term loan in an aggregate principal amount of $1.1 billion and established a five-year revolving credit facility (which was unfunded as of the closing date) with aggregate commitments of $100.0 million (with a $10.0 million sub-limit for the issuance of letters of credit). Amounts outstanding under the 2019 Credit Agreement bear interest at an annual rate equal to, at the option of the Company, either London Interbank Offered Rate (“LIBOR”) (adjusted for reserves) plus a margin of 3.25% or an alternate base rate plus a margin of 2.25%. Refer to Note 9, Debt, to the accompanying financial statements for further details on the 2019 Credit Agreement. Termination of Previous Credit Agreeement In connection with our entry into the 2019 Credit Agreement, we repaid all indebtedness outstanding under the previous credit agreement dated as of February 12, 2018. The previous credit agreement and the credit documents entered in connection therewith were terminated on the closing date. CEMP Acquisition Under the terms of the Compass Efficient Model Portfolios, LLC acquisition (the “CEMP Acquisition”), we pay cash related to base payments and contingent earnouts annually following each of the first four anniversaries of the CEMP Acquisition. During the three and nine months ended September 30, 2019, we paid the fourth and final payment of $6.0 million in cash to the sellers. Acquisition-Related Costs Costs related to acquisitions are summarized below and include legal and filing fees, advisory services, mutual fund proxy voting costs and other one-time expenses related to the transactions. These costs are included in “Acquisition-related costs” in the accompanying unaudited Condensed Consolidated Statements of Operations. Acquisition-related costs Three Months Ended September 30, Nine Months Ended September 30, (in thousands) 2019 2018 2019 2018 USAA AMCO Acquisition $ 16,235 $ 592 $ 21,043 $ 592 Harvest Acquisition 151 859 895 859 Other — — 12 (5) Total acquisition-related costs $ 16,386 $ 1,451 $ 21,950 $ 1,446 |
Fair Value Measurements
Fair Value Measurements | 9 Months Ended |
Sep. 30, 2019 | |
Fair Value Measurements | |
Fair Value Measurements | NOTE 5 . Fair Value Measurements The Company determines the fair value of certain financial and nonfinancial assets and liabilities. Fair value is determined based on the price that would be received for an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Fair value determinations utilize a valuation hierarchy based upon the transparency of inputs used in the valuation of an asset or liability. Classification within the fair value hierarchy contains three levels: · Level 1—Valuation inputs are unadjusted quoted market prices for identical assets or liabilities in active markets. · Level 2—Valuation inputs are quoted prices for identical assets or liabilities in markets that are not active, quoted market prices for similar assets and liabilities in active markets and other observable inputs directly or indirectly related to the asset or liability being measured. · Level 3—Valuation inputs are unobservable and significant to the fair value measurement. These inputs reflect management’s own assumptions about the assumptions a market participant would use in pricing the asset or liability. As of September 30, 2019, the Company had $102.8 million in contingent consideration arrangement liabilities that were measured at fair value on a recurring basis. These liabilities represent the USAA AMCO Acquisition earn-out payment liability, which is included in “Consideration payable for acquisition of business” in the accompanying unaudited Condensed Consolidated Balance Sheets. Refer to Note 4, Acquisitions, for further details related to the contingent consideration arrangement. Significant unobservable inputs for the option pricing model used to determine the fair value of the USAA AMCO Acquisition earn-out payment liabilities include discount rates and non-managed money net revenue growth assumptions. The discount rate used, which is based on the Company’s pre-tax cost of debt, was 7%. Non-managed money net revenue growth assumptions were 2-3% per year. Changes in the fair value of the liability, realized or unrealized, are recorded in earnings and are included in “Change in value of consideration payable for acquisition of business” in the accompanying unaudited Condensed Consolidated Statements of Operations. (in thousands) Contingent Consideration Liabilities Balance, December 31, 2018 $ 716 CEMP change in fair value measurement (14) CEMP year 4 earn-out payment (702) USAA AMCO Acquisition earn-out payments 102,800 Balance, September 30, 2019 $ 102,800 There were no transfers between any of the Level 1, 2 and 3 categories in the fair value measurement hierarchy from December 31, 2018 to September 30, 2019. The Company recognizes transfers at the end of the reporting period.The net carrying values of cash and cash equivalents, restricted cash, receivables and accounts payable and accrued expenses approximate fair value due to the short-term nature of these assets and liabilities. The carrying amount of the Company’s long-term debt at September 30, 2019 approximates fair value. Level 2 inputs are utilized to determine the fair value of the Company’s long-term debt. The fair value of investments measured using the net asset value practical expedient at September 30, 2019 and December 31, 2018 totaled $17.0 million and $13.3 million, respectively. |
Related Party Transactions
Related Party Transactions | 9 Months Ended |
Sep. 30, 2019 | |
Related Party Transactions | |
Related Party Transactions | NOTE 6 . Related-Party Transactions The Company considers certain funds that it manages, including the Victory Funds, the USAA Funds, the VictoryShares and collective trust funds that it sponsors (the “Victory Collective Funds”), to be related parties as a result of our advisory relationship. The Company receives investment management, administrative, distribution and compliance fees in accordance with contracts that VCM and VCA have with the Victory Funds and the USAA Funds. The Company also receives investment management fees from the VictoryShares and Victory Collective Funds under VCM’s advisory contracts with these funds and administrative fees under VCM’s administration contract with the VictoryShares. In addition, the Company receives transfer agent fees in accordance with a contract that VCTA has with the USAA Funds. During the third quarter of 2019, the Company invested a portion of its balance sheet cash in the USAA Treasury Money Market Fund and earns interest on the amount invested in this fund. Under the terms of monitoring agreements with affiliates of two shareholders of the Company, the Company paid fees for monitoring services, which are included in “General and administrative” in the accompanying unaudited Condensed Consolidated Statements of Operations. These monitoring agreements terminated upon the completion of the IPO. Balances and transactions involving related parties included in the accompanying unaudited Condensed Consolidated Balance Sheets and accompanying unaudited Condensed Consolidated Statements of Operations are summarized below. Included in cash and cash equivalents is cash held in the USAA Treasury Money Market Fund. Included in receivables (fund administration and distribution fees) are amounts due from the Victory Funds and USAA Funds for compliance services and amounts due from the USAA Funds for transfer agent services. Included in revenue (fund administration and distribution fees) are amounts earned for compliance services and transfer agent services. Realized and unrealized gains and losses and dividend income on investments in the Victory Funds classified as available-for-sale securities and investments in the Victory Funds and USAA Funds classified as trading securities and interest income on investments in the USAA Treasury Money Market Fund are recorded in “Interest income and other income/(expense)” in the accompanying unaudited Condensed Consolidated Statements of Operations. Amounts due to the Victory Funds, USAA Funds and VictoryShares for waivers of investment management fees and reimbursements of fund operating expenses are included in “Accounts payable and accrued expenses” in the accompanying unaudited Condensed Consolidated Balance Sheets and represent consideration payable to customers. Included in other liabilities at December 31, 2018 is the remaining amount payable for a promissory note for amounts due upon repurchase of Company common stock from a shareholder. (in thousands) September 30, 2019 December 31, 2018 Related party assets Cash and cash equivalents $ 10,025 $ — Receivables (investment management fees) 45,044 19,612 Receivables (fund administration and distribution fees) 18,938 3,153 Investments (available-for-sale securities, fair value) 698 601 Investments (trading securities, fair value) 15,943 12,343 Total $ 90,648 $ 35,709 Related party liabilities Accounts payable and accrued expenses (fund reimbursements) $ 6,073 $ 2,300 Other liabilities (promissory note) — 96 Total $ 6,073 $ 2,396 Three Months Ended September 30, Nine Months Ended September 30, (in thousands) 2019 2018 2019 2018 Related party revenue Investment management fees (1) $ 130,361 $ 68,386 $ 239,869 $ 200,728 Fund administration and distribution fees 59,574 15,557 85,960 46,792 Total $ 189,935 $ 83,943 $ 325,829 $ 247,520 Related party expense Distribution and other asset-based expenses (fund reimbursements) (1) $ — $ 3,072 $ — $ 9,352 General and administrative — — — 135 Total $ — $ 3,072 $ — $ 9,487 Related party other income (expense) Interest income/(expense) and other income/(expense) $ (342) $ — $ 1,474 $ — Interest income/(expense) and other financing costs (promissory note) — (5) (1) (16) Total $ (342) $ (5) $ 1,473 $ (16) (1) Effective January 1, 2019, upon the adoption of ASU 2014-09, expense reimbursements have been reclassified to investment management fees . |
Investments
Investments | 9 Months Ended |
Sep. 30, 2019 | |
Investments. | |
Investments | NOTE 7. Investments As of September 30, 2019 and December 31, 2018, the Company held both available-for-sale securities and trading securities. Available-for-sale investments consist entirely of seed capital investments in certain Victory Funds. Trading securities are held under a deferred compensation plan and include Victory Funds, USAA Funds and third party mutual funds. Available‑For‑Sale Securities A summary of the cost and fair value of investments classified as available-for-sale were as follows: Gross Unrealized Fair (in thousands) Cost Gains (Losses) Value As of September 30, 2019 $ 670 $ 46 $ (18) $ 698 As of December 31, 2018 666 6 (71) 601 Unrealized and realized gains and losses on available‑for‑sale investments are recognized in the accompanying unaudited Condensed Consolidated Statements of Operations as “Interest income and other income/(expense).” There were no proceeds from sales and realized gains or losses on available-for-sale investments in the three months ended September 30, 2019 and 2018. Proceeds from sales and realized gains and losses from available-for-sale securities in the nine months ended September 30, 2019 and 2018 were as follows: Sale Realized (in thousands) Proceeds Gains (Losses) For the nine months ended September 30, 2019 $ 104 $ 4 $ — For the nine months ended September 30, 2018 — — — Trading Securities A summary of the cost and fair value of investments classified as trading securities were as follows: Gross Unrealized Fair (in thousands) Cost Gains (Losses) Value As of September 30, 2019 $ 17,093 $ 332 $ (1,130) $ 16,295 As of December 31, 2018 14,874 5 (2,160) 12,719 Unrealized and realized gains and losses on trading securities are recorded in “Interest income and other income/(expense)” in the accompanying unaudited Condensed Consolidated Statements of Operations. Proceeds from sales and realized gains and losses from trading securities in the periods ended September 30, 2019 and 2018 were as follows: Sale Realized (in thousands) Proceeds Gains (Losses) For the three months ended September 30, 2019 $ 908 $ 1 $ (29) For the three months ended September 30, 2018 16 2 — For the nine months ended September 30, 2019 $ 2,342 $ 15 $ (60) For the nine months ended September 30, 2018 644 34 (5) |
Income Taxes
Income Taxes | 9 Months Ended |
Sep. 30, 2019 | |
Income Taxes | |
Income Taxes | NOTE 8 . Income Taxes The effective tax rate for the three and nine months ended September 30, 2019 and 2018 differs from the United States federal statutory rate primarily as a result of state and local income taxes, excess tax benefits on share-based compensation, certain non-deductible expenses and for the periods in 2019, expense related to recognizing a liability for unrecorded tax benefits. For the three months ended September 30, 2019 and 2018, the provision for income taxes was $8.1 million and $6.6 million, or 23.7% and 24.2%, of pre-tax income respectively. For the nine months ended September 30, 2019 and 2018, the provision for income taxes was $17.3 million and $16.4 million, or 24.0% and 24.8% of pre-tax income, respectively. The effective tax rates for the periods in 2019 were lower than the effective tax rates for the same periods in 2018 due mainly to higher excess tax benefits on share-based compensation net of expense related to recognizing a liability for unrecorded tax benefits. No valuation allowance was recorded for deferred tax assets in the periods ended September 30, 2019 and 2018. During the three months ended September 30, 2019, the Company recorded a liability for $2.3 million ($1.8 million net of federal benefit) for unrecognized tax benefits, which included $0.2 million of interest and penalties. The gross unrecognized tax benefits and interest and penalties of $2.3 million at September 30, 2019 are included in “Other liabilities” in the accompanying unaudited Condensed Consolidated Balance Sheets. It is expected that the amount of unrecognized tax benefits will change in the next 12 months; however, the Company does not expect the change to have a material impact on its consolidated financial statements. |
Debt
Debt | 9 Months Ended |
Sep. 30, 2019 | |
Debt | |
Debt | NOTE 9 . Debt 2019 Credit Agreement On July 1, 2019, concurrent with the USAA AMCO Acquisition, the Company (i) entered into the 2019 Credit Agreement, (ii) repaid all indebtedness outstanding under the previous credit agreement (dated February 2018), and (iii) terminated the previous credit agreement. The following table summarizes the components of “Long-term debt” under the 2019 Credit Agreement (due June 2026) and the previous credit agreement in the accompanying unaudited Condensed Consolidated Balance Sheets at September 30, 2019 and December 31, 2018: (in thousands) September 30, 2019 December 31, 2018 Term loan principal outstanding $ 1,037,000 $ 280,000 Unamortized debt issuance costs (19,495) (7,629) Unamortized debt discount (11,577) (3,514) Long-term debt $ 1,005,928 $ 268,857 The 2019 Credit Agreement was entered into among Victory, as borrower, the lenders from time to time party thereto and Barclays Bank PLC, as administrative agent and collateral agent, pursuant to which we obtained a seven-year term loan in an aggregate principal amount of $1.1 billion and established a five-year revolving credit facility (which was unfunded as of the closing date) with aggregate commitments of $100.0 million (with a $10.0 million sub-limit for the issuance of letters of credit). Amounts outstanding under the 2019 Credit Agreement bear interest at an annual rate equal to, at the option of the Company, either LIBOR (adjusted for reserves) plus a margin of 3.25% or an alternate base rate plus a margin of 2.25%. The obligations of the Company under the 2019 Credit Agreement are guaranteed by the USAA Acquired Companies and all of the Company’s other domestic subsidiaries (other than VCA) (the “Guarantors”) and secured by substantially all of the assets of the Company and the Guarantors, subject in each case to certain customary exceptions. The 2019 Credit Agreement contains customary affirmative and negative covenants, including covenants that affect, among other things, the ability of the Company and its subsidiaries to incur additional indebtedness, create liens, merge or dissolve, make investments, dispose of assets, engage in sale and leaseback transactions, make distributions and dividends and prepayments of junior indebtedness, engage in transactions with affiliates, enter into restrictive agreements, amend documentation governing junior indebtedness, modify its fiscal year and modify its organizational documents, subject to customary exceptions, thresholds, qualifications and “baskets.” In addition, the 2019 Credit Agreement contains a financial performance covenant, requiring a maximum first lien leverage ratio, measured as of the last day of each fiscal quarter on which outstanding borrowings under the revolving credit facility exceed 35.0% of the commitments thereunder (excluding certain letters of credit), of no greater than 3.80 to 1.00. As of September 30, 2019, we were in compliance with our financial performance covenant. Original issue discount was $11.5 million for the term loans under the 2019 Credit Agreement and $1.5 million for the revolving credit facility under the 2019 Credit Agreement. The Company incurred a total of $22.8 million in other third party costs related to the 2019 Credit Agreement and recorded $18.0 million as term loan debt issuance costs, $0.3 million as revolving credit facility debt issuance cost and $4.5 million as expense related to modified debt in “General and administrative” in the accompanying unaudited Condensed Consolidated Statements of Operations. A total of $63.0 million of the outstanding term loans under the 2019 Credit Agreement was repaid in the third quarter of 2019. Subsequent to September 30, 2019 and through October 31, 2019, we repaid an additional $40.0 million, for a total principal debt reduction of $103.0 million since July 1, 2019, thus satisfying the required principal amortization of 1.00% per annum through the term of the loan, June 2026. During the three months ended September 30, 2019, we recognized a $7.4 million loss on debt extinguishment, which consisted of the write-off of $4.7 million and $2.7 million of unamortized debt issuance costs and debt discount due to the termination of the previous credit agreement and term loan repayments under the 2019 Credit Agreement. Interest Expense As of September 30, 2019, the term loans under the 2019 Credit Agreement had an interest period of three months and an interest rate of 5.57%. Including the impact of amortization of debt issuance costs and original issue discount described herein, the effective yield for term loans under the 2019 Credit Agreement as of September 30, 2019 was 6.02%. The following table summarizes the components of “Interest expense and other financing costs” in the accompanying unaudited Condensed Consolidated Statements of Operations for the periods ended September 30, 2019 and 2018: For the Three Months Ended September 30, For the Nine Months Ended September 30, (in thousands) 2019 2018 2019 2018 Interest expense $ 15,308 $ 3,673 $ 22,931 $ 13,610 Amortization of debt issuance costs 920 373 1,650 1,337 Amortization of debt discount 475 150 768 551 Other 153 160 458 375 CEMP base payment accretion expense — 102 193 383 Total $ 16,856 $ 4,458 $ 26,000 $ 16,256 |
Equity
Equity | 9 Months Ended |
Sep. 30, 2019 | |
Equity | |
Equity | NOTE 10. Equity Shares Rollforward The following tables present the changes in the number of shares of common stock issued and repurchased: Shares of Common Stock Issued Shares of Treasury Stock Class A Class B Class A Class B Balance, December 31, 2018 15,280,833 55,284,408 (856,275) (2,146,980) Issuance of shares 952 – – – Share conversion - Class B to A 381,689 (381,689) – – Repurchase of shares – – (122,957) – Vesting of restricted share grants – 39,636 – – Exercise of options – 71,652 – – Shares withheld related to net settlement of equity awards – – – (29,108) Balance, March 31, 2019 15,663,474 55,014,007 (979,232) (2,176,088) Issuance of shares 975 – – – Share conversion - Class B to A 809,179 (809,179) – – Repurchase of shares – – (113,297) – Vesting of restricted share grants – 4,360 – – Exercise of options – 150,432 – – Shares withheld related to net settlement of equity awards – – – (7,749) Balance, June 30, 2019 16,473,628 54,359,620 (1,092,529) (2,183,837) Issuance of shares 1,085 – – – Share conversion - Class B to A 1,331,412 (1,331,412) – – Repurchase of shares – – (299,896) – Vesting of restricted share grants – 168,933 – – Exercise of options – 486,865 – – Shares withheld related to net settlement of equity awards – – – (216,500) Balance, September 30, 2019 17,806,125 53,684,006 (1,392,425) (2,400,337) Shares of Common Stock Issued Shares of Treasury Stock Class A Class B Pre-IPO Class A Class B Pre-IPO Balance, December 31, 2017 – – 57,182,730 – – (2,064,057) Issuance of Class A common stock 12,810,860 – – – – – Redesignation of common stock – 57,184,766 (57,184,766) (2,064,057) 2,064,057 Share conversion - Class B to A 88,455 (88,455) – – – – Vesting of restricted share grants – 14,794 2,036 – – – Exercise of options 5,000 Fractional shares retired – (263) – – – – Balance, March 31, 2018 12,899,315 57,115,842 – – (2,064,057) – Share conversion - Class B to A 72,195 (72,195) – – – – Repurchase of shares – – – (66,112) – – Vesting of restricted share grants – 16,198 – – – – Balance, June 30, 2018 12,971,510 57,059,845 – (66,112) (2,064,057) – Issuance of shares 1,332 – – – – – Share conversion - Class B to A 1,814,422 (1,814,422) – – – – Repurchase of shares – – – (291,585) (82,923) – Vesting of restricted share grants – 176,737 – – – – Exercise of options – 217,453 – – – – Balance, September 30, 2018 14,787,264 55,639,613 – (357,697) (2,146,980) – Share Repurchase Program The share repurchase program authorized in 2018 for $15.0 million of the Company’s Class A common stock was completed in September 2019. In August 2019, the Company’s Board of Directors authorized the Company to repurchase up to an additional $15.0 million of the Company’s Class A common stock in the open market or in privately negotiated transactions. The amount and timing of the purchases under the new program (“2019 Share Repurchase Program”) will depend on a number of factors including the price and availability of the Company’s shares, trading volume, capital availability, Company performance and general economic and market conditions. The 2019 Share Repurchase Program can be suspended or discontinued at any time. As of September 30, 2019, a total of 1,392,425 shares of Class A common stock have been repurchased under the initial share repurchase program and the 2019 Share Repurchase Program at a total cost of $16.4 million for an average price of $11.81 per share. As of September 30, 2019, $13.6 million was available for future repurchases. The 2019 Share Repurchase Program expires on December 31, 2020. Quarterly Dividends In August 2019, the Company announced the initiation of a quarterly cash dividend. The first quarterly cash dividend of $0.05 per share was declared in August and paid in September 2019. Dividends paid during the three months ended September 30, 2019 included $3.4 million for the September 2019 quarterly dividend and $0.5 million in cash bonuses and distributions related to dividends previously declared upon vesting of restricted stock and stock option awards. |
Share Based Compensation
Share Based Compensation | 9 Months Ended |
Sep. 30, 2019 | |
Share Based Compensation | |
Share Based Compensation | NOTE 11. Share‑Based Compensation Current Period Activity During the three months ended September 30, 2019, the Company issued restricted stock awards for 196,476 shares of common stock, of which awards for 3,660 shares were fully vested on the grant date and awards for 192,816 shares vest based on service over a three year period. The Company also issued stock option awards to purchase 31,178 shares of common stock which vest based on service over a three year period. Stock option award and restricted stock award activity during the nine months ended September 30, 2019 and 2018 was as follows: Shares Subject to Stock Option Awards Nine Months Ended September 30, 2019 2018 Avg wtd Avg wtd Avg wtd Avg wtd grant-date exercise grant-date exercise fair value price Units fair value price Units Outstanding at beginning of period $ 3.79 $ 6.12 9,070,052 $ 3.66 $ 5.71 9,078,728 Granted 7.25 17.64 31,178 6.51 14.25 359,618 Forfeited 5.00 9.63 (247,403) 6.28 13.77 (8,520) Exercised 3.15 4.11 (708,949) 2.81 3.06 (222,453) Outstanding at end of the period $ 3.82 $ 6.24 8,144,878 $ 3.79 $ 6.11 9,207,373 Vested $ 3.59 $ 5.51 6,860,289 $ 3.34 $ 4.74 6,447,462 Unvested 5.06 10.12 1,284,589 4.84 9.31 2,759,911 Restricted Stock Awards Nine Months Ended September 30, 2019 2018 Avg wtd grant- Avg wtd grant- date fair value Units date fair value Units Unvested at beginning of period $ 13.17 2,997,856 $ 11.82 1,293,107 Granted 16.27 1,192,145 13.81 1,904,595 Vested 11.06 (212,929) 10.48 (209,765) Forfeited 13.49 (433,549) — — Unvested at end of period $ 14.25 3,543,523 $ 13.18 2,987,937 For awards granted post-IPO, the Company used the Class A common stock closing price on the grant date as the grant date fair value of the stock. The fair value of stock option awards granted in the three months ended September 30, 2019 was determined using a number of inputs including expected volatility, which was based on a consideration of the average volatility of companies in the same or similar lines of business adjusted for differing levels of leverage and the Company’s volatility for the post-IPO period. The expected term was determined using the simplified method detailed in SEC Staff Accounting Bulletin No. 107. Dividend Payments In connection with dividends declared in February 2017 and December 2017, holders of restricted stock awards that were unvested at the time such dividends were declared are entitled to be paid the dividends as and when the restricted stock vests. Holders of stock options that were unvested at the time the December 2017 dividend was declared are entitled to receive a cash bonus equivalent of the December 2017 dividend as and when their stock options vest. The Company announced the initiation of quarterly cash dividends in August 2019 and paid the first quarterly dividend in September 2019. Holders of restricted stock awards that are unvested at the time the quarterly dividends are declared are entitled to be paid these dividends as and when the restricted stock vests. As of September 30, 2019 and December 31, 2018, the amount of cash bonuses and distributions related to dividends previously declared on unvested and outstanding restricted share awards and stock options totaled $1.2 million and $1.8 million, which was not recorded as a liability as of the balance sheet date. A liability will be recorded for these cash bonuses and dividends when the restricted shares and options vest. Share-Based Compensation Expense The Company recorded $4.8 million and $4.0 million of share-based compensation expense in the three months ended September 30, 2019 and 2018, respectively, and $10.1 million and $11.3 million of share-based compensation expense in the nine months ended September 30 , 2019 and 2018, respectively, in “Personnel compensation and benefits” in the accompanying unaudited Condensed Consolidated Statements of Operations. |
Earnings Per Share
Earnings Per Share | 9 Months Ended |
Sep. 30, 2019 | |
Earnings per Share | |
Earnings Per Share | NOTE 12. Earnings Per Share The following table sets forth the reconciliation of basic earnings per share and diluted earnings per share from net income for the three and nine months ended September 30, 2019 and 2018: Three Months Ended September 30, Nine Months Ended September 30, (in thousands except per share amounts) 2019 2018 2019 2018 Net income $ 25,992 $ 20,590 $ 54,902 $ 49,789 Shares: Basic : Weighted average number of shares outstanding 67,724 67,972 67,610 65,817 Plus : Incremental shares from assumed conversion of dilutive instruments 5,947 3,892 5,690 4,351 Diluted : Weighted average number of shares outstanding 73,671 71,864 73,300 70,168 Earnings per share Basic: $ 0.38 $ 0.30 $ 0.81 $ 0.76 Diluted: $ 0.35 $ 0.29 $ 0.75 $ 0.71 Outstanding instruments excluded from the computation of weighted average shares for diluted earnings per share because the effect would be anti-dilutive totaled 0.3 million and 3.0 million for the three months ended September 30, 2019 and 2018, respectively, and 1.3 million and 1.7 million for the nine months ended September 30, 2019 and 2018, respectively. Holders of non-vested share-based compensation awards do not have rights to receive nonforfeitable dividends on the shares covered by the awards. |
Equity Method Investment
Equity Method Investment | 9 Months Ended |
Sep. 30, 2019 | |
Equity Method Investment | |
Equity Method Investment | Note 13. Equity Method Investment On August 30, 2019, the Company sold 100% of its equity investment in Cerebellum Capital, LLC (“Cerebellum”) for $10.6 million in cash. The Company recognized $2.9 million on the gain on sale, which is recorded in “Interest income and other income/(expense)” in the accompanying unaudited Condensed Consolidated Statements of Operations. For the three and nine months ended September 30, 2019 and 2018, losses from equity method investments recorded in “Interest income and other income/(expense)” in the accompanying unaudited Condensed Consolidated Statements of Operations were not material to our consolidated results of operations. Equity method investments are recorded in “Other assets” in the accompanying unaudited Condensed Consolidated Balance Sheets. At September 30, 2019, the Company no longer held an equity investment in Cerebellum, compared to $7.9 million, net of cumulative losses of $1.1 million, as of December 31, 2018. |
Accumulated Other Comprehensive
Accumulated Other Comprehensive Loss | 9 Months Ended |
Sep. 30, 2019 | |
Accumulated Other Comprehensive Loss | |
Accumulated Other Comprehensive Loss | NOTE 14. Accumulated Other Comprehensive Income (Loss) The following table presents changes in accumulated other comprehensive income/(loss) by component for the nine months ended September 30, 2019 and 2018. Cumulative Available-for-sale Translation (in thousands) Securities Adjustment Total Balance, December 31, 2018 $ (59) $ (27) $ (86) Other comprehensive income/(loss) before reclassification and tax — (28) (28) Tax impact — 7 7 Net current period other comprehensive income/(loss) — (21) (21) Cumulative effect of adoption of ASU 2016-01 and 2018-02 59 3 62 Balance, September 30, 2019 $ — $ (45) $ (45) Balance, December 31, 2017 $ 51 $ 13 $ 64 Other comprehensive income/(loss) before reclassification and tax 46 (47) (1) Tax impact (12) 12 — Net current period other comprehensive income/(loss) 34 (35) (1) Balance, September 30, 2018 $ 85 $ (22) $ 63 |
Subsequent Events
Subsequent Events | 9 Months Ended |
Sep. 30, 2019 | |
Subsequent Events | |
Subsequent Events | NOTE 15. SUBSEQUENT EVENTS Subsequent to September 30, 2019, we repaid an additional $40.0 million of the outstanding term loans under the 2019 Credit Agreement, for a total debt reduction of $103.0 million since July 1, 2019. On November 4, 2019, our Board of Directors declared a quarterly cash dividend of $0.05 per share on Victory common stock. The dividend is payable on December 26, 2019, to stockholders of record on December 10, 2019. Victory entered into a lease agreement to occupy the premises at 15935 La Cantera Parkway, San Antonio, Texas 78256 (the “San Antonio lease”) in mid-November. In conjunction with the San Antonio lease, we relocated our Corporate headquarters for the global investment management business from Brooklyn, Ohio to this location in San Antonio, Texas. |
Significant Accounting Policies
Significant Accounting Policies (Policies) | 9 Months Ended |
Sep. 30, 2019 | |
Basis of Presentation and Significant Accounting Policies | |
Basis of Presentation | Basis of Presentation The accompanying financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and applicable rules and regulations of the SEC regarding interim financial reporting. Accordingly, they do not include all of the information and notes required by GAAP for complete annual financial statements. As such, the information included in this quarterly report on Form 10-Q should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2018. In the opinion of management, the accompanying financial statements reflect all adjustments, consisting only of normal recurring adjustments, necessary for the fair presentation of the financial condition, results of operations, and cash flows for the interim periods presented. Operating results for the three and nine month period ended September 30, 2019 are not necessarily indicative of the results that may be expected for the year ending December 31, 2019. |
Principles of Consolidation | Principles of Consolidation The accompanying financial statements include the operations of the Company and its wholly-owned subsidiaries, after elimination of all intercompany balances and transactions. Our involvement with non-consolidated variable interest entities (“VIEs”) include sponsored investment funds and an equity method investment. For further discussion regarding VIEs, refer to Note 2, Significant Accounting Policies, to the consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2018. For further discussion on the equity method investment, refer to Note 13, Equity Method Investment, to the accompanying financial statements. |
Use of Estimates and Assumptions | Use of Estimates and Assumptions The preparation of the accompanying financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts and disclosures in the financial statements and the accompanying notes. Actual results may ultimately differ materially from those estimates. |
Retroactive Adjustments for Common Stock Split | Retroactive Adjustment for Common Stock Split On February 1, 2018, the Company’s Stockholders and Board of Directors approved a 175.194 for 1 stock split of our common stock. The accompanying financial statements for the periods prior to the stock split and related amounts disclosed in the notes have been retroactively adjusted to reflect the effects of the stock split. |
Restructuring and Integration Costs | Restructuring and Integration Costs In connection with business combinations, asset purchases and changes in business strategy, the Company incurs costs integrating investment platforms, products and personnel into existing systems, processes and service provider arrangements and restructuring the business to capture operating expense synergies. These costs include severance‑related expenses related to one‑time benefit arrangements, contract termination expense and integration costs, which are recorded in “Restructuring and integration costs” in the accompanying unaudited Condensed Consolidated Statements of Operations. The following table presents the rollforward of restructuring and integration liabilities for the three months and nine months ended September 30, 2019 and 2018: Three Months Ended September 30, Nine Months Ended September 30, (in millions) 2019 2018 2019 2018 Liability balance, beginning of period $ 1.5 $ 0.5 $ 0.1 $ 0.1 Severance expense USAA AMCO Acquisition 3.7 — 5.2 — Other — — — 0.7 Contract termination expense 0.1 — 0.1 — Integration costs 1.0 — 1.3 — Restructuring and integration costs 4.8 — 6.6 0.7 Settlement of liabilities (4.4) (0.2) (4.8) (0.5) Liability balance, end of period $ 1.9 $ 0.3 $ 1.9 $ 0.3 Accrued expenses $ 1.9 $ 0.3 $ 1.9 $ 0.3 Other liabilities — — — — Liability balance, end of period $ 1.9 $ 0.3 $ 1.9 $ 0.3 |
Changes, Adoption of New Accounting Standards and Recent Accounting Pronouncements | Changes in Accounting Policies The Company has consistently applied the accounting policies for the periods presented as described in Note 2, Significant Accounting Policies, to the consolidated financial statements contained in our Annual Report on Form 10-K for the year ended December 31, 2018. Effective January 1, 2019, Victory adopted Accounting Standards Update (“ASU”) 2014-09, “Revenue from Contracts with Customers” (“ASU 2014-09”). The adoption of ASU 2014-09 was not material to our financial condition, results of operations or cash flows, however, we have changed our accounting policy for revenue recognition as described below in New Accounting Pronouncements and Note 3, Revenue Recognition, to the accompanying financial statements. Effective January 1, 2019, Victory adopted ASU 2016-18, “Restricted Cash – Statement of Cash Flows” (“ASU 2016-18”) which addresses the presentation of restricted cash in the statement of cash flows and requires disclosure of the nature of restriction on such cash. ASU 2016-18 was not material to our financial condition, results of operations or cash flows, however we have changed our accounting policy for restricted cash as described below in New Accounting Pronouncements. New Accounting Pronouncements Accounting Standards Adopted in 2019 · Changes in Stockholders’ Equity for Interim Periods: Effective January 1, 2019, the Company adopted final SEC rules that extend to interim periods the annual disclosure requirement in Regulation S-X, Rule 3-04, of presenting the changes in stockholders’ equity for the current and comparative quarter in its accompanying financial statements. · Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income: Effective January 1, 2019, the Company adopted ASU 2018-02 which provides the optional election for the reclassification from accumulated other comprehensive income to retained earnings for stranded tax effects resulting from the Tax Cuts and Jobs Act of 2017. The adoption of ASU 2018-02 resulted in a reclassification between accumulated other comprehensive income/(loss) and retained earnings of $0.1 million, and had no impact on our unaudited Condensed Consolidated Statements of Operations. · Restricted Cash – Statement of Cash Flows: We early adopted ASU 2016-18 which requires that a statement of cash flows explain the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. When restricted cash is presented separately from cash and cash equivalents on the balance sheet, a reconciliation is required between the amounts presented on the statement of cash flows and the balance sheet, as well as a disclosure of information about the nature of the restrictions. We did not have restricted cash at September 30, 2019. Victory historically does not maintain or designate cash as restricted cash, however at June 30, 2019, we placed $71.9 million of balance sheet cash in an escrow account related to the USAA AMCO Acquisition that closed on July 1, 2019. The funds were released from the escrow account on July 1, 2019. · Statement of Cash Flows – Classification of Certain Cash Receipts and Cash Payments: Effective January 1, 2019, the Company adopted ASU 2016‑15 which addresses eight specific cash flow issues with the objective of reducing the existing diversity in practice. The application of this guidance did not have an impact on the presentation of our unaudited Condensed Consolidated Statements of Cash Flows. · Recognition and Measurement of Financial Assets and Liabilities: Effective January 1, 2019, the Company adopted ASU 2016‑01 which requires equity securities to be measured at fair value with the changes in fair value recognized in net income. The adoption of ASU 2016-01 did not have a material impact on our financial condition, results of operations or cash flows. · Revenue from Contracts with Customers: Effective January 1, 2019, the Company adopted ASU 2014-09 which requires the evaluation of contracts based on the following five-step model: (i) identify the contract with the customer; (ii) identify the performance obligation(s) in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligation(s) in the contract; and (v) recognize revenue (or as) each performance obligation is satisfied. The Company’s introducing broker-dealer VCA adopted ASU 2014-09 on January 1, 2018. We adopted ASU 2014-09 using the modified retrospective transition method. No cumulative effect adjustment was required to be recorded and the comparative information has not been restated. We determined that ASU 2014-09 did not have a material impact on the timing of revenue recognition. The most significant impact from adoption was a change to the net presentation of certain fund expense reimbursements which were previously presented on a gross basis. For further discussion on the effects of the changes in the presentation of fund expense reimbursements, refer to Note 3, Revenue Recognition, to the accompanying financial statements. Recently Issued Accounting Standards · Subsequent Measurement of Goodwill: In January 2017, the Financial Accounting Standards Board (the “FASB”) issued ASU 2017-04 which simplifies the test for goodwill impairment. ASU 2017-04 eliminates the requirement to calculate the implied fair value of goodwill (step two) to measure a goodwill impairment charge. Goodwill impairment will be based upon the results of step one of the impairment test, which is defined as the excess of the carrying amount of a reporting unit over its fair value, not to exceed the carrying amount of goodwill allocated to that reporting unit. The new guidance will be effective for the Company’s fiscal year that begins after December 15, 2020 and requires a prospective approach to adoption. Early adoption is permitted for interim or annual goodwill impairment tests. The impact of this new guidance will depend upon the performance of our one reporting unit and the market conditions impacting the fair value. · Leases: In February 2016, the FASB issued ASU 2016‑02, “Leases (Topic 842)” (the “New Lease Standard”) which supercedes previous lease guidance, Accounting Standards Codification (“ASC”) Topic 840. The New Lease Standard requires lessees to recognize a right-of-use asset and a lease liability for all leases (with the exception of short-term leases) on their balance sheet at the commencement date and recognize expenses on their income statement similar to ASC Topic 840 guidance. In addition, the FASB issued ASU 2018-11, “Leases Targeted Improvements” which provides a package of practical expedients for entities to apply upon adoption. The Company will adopt the New Lease Standard on January 1, 2020. We are currently assessing and evaluating our portfolio of active real estate leases and surveying our business for other leases. As outlined in our Annual Report on Form 10-K for the year ended December 31, 2018, we have approximately $17.0 million in undiscounted, future minimum cash commitments under operating leases. Subsequent to September 30, 2019, we relocated our Corporate headquarters for the global investment management business from Brooklyn, Ohio to San Antonio, Texas. The undiscounted, future minimum cash commitments related to the new San Antonio lease is approximately $12.0 million. We do not expect the adoption of the New Lease Standard to have a material effect on our consolidated balance sheets and results of operations. |
Significant Accounting Polici_2
Significant Accounting Policies (Tables) | 9 Months Ended |
Sep. 30, 2019 | |
Basis of Presentation and Significant Accounting Policies | |
Summary of rollforward of restructuring and integration liabilities | Three Months Ended September 30, Nine Months Ended September 30, (in millions) 2019 2018 2019 2018 Liability balance, beginning of period $ 1.5 $ 0.5 $ 0.1 $ 0.1 Severance expense USAA AMCO Acquisition 3.7 — 5.2 — Other — — — 0.7 Contract termination expense 0.1 — 0.1 — Integration costs 1.0 — 1.3 — Restructuring and integration costs 4.8 — 6.6 0.7 Settlement of liabilities (4.4) (0.2) (4.8) (0.5) Liability balance, end of period $ 1.9 $ 0.3 $ 1.9 $ 0.3 Accrued expenses $ 1.9 $ 0.3 $ 1.9 $ 0.3 Other liabilities — — — — Liability balance, end of period $ 1.9 $ 0.3 $ 1.9 $ 0.3 |
Revenue Recognition (Tables)
Revenue Recognition (Tables) | 9 Months Ended |
Sep. 30, 2019 | |
Revenue Recognition | |
Schedule of disaggregation of revnue by type and product | Three Months Ended September 30, Nine Months Ended September 30, (in thousands) 2019 2018 2019 2018 Investment management fees Mutual funds (Victory/USAA Funds) $ 125,928 $ 64,926 $ 228,855 $ 191,391 ETFs (VictoryShares) 3,116 2,457 7,172 6,523 Separate accounts and other vehicles 26,512 24,232 72,379 71,225 Performance-based fees Separate accounts and other vehicles (150) 910 (547) 1,514 Total investment management fees $ 155,406 $ 92,525 $ 307,859 $ 270,653 Fund administration and distribution fees Administration fees Mutual funds (Victory/USAA Funds) $ 30,098 $ 5,880 $ 40,734 $ 17,069 ETFs (VictoryShares) 378 278 924 667 Distribution fees Mutual funds (Victory/USAA Funds) 7,674 9,399 22,878 29,056 Transfer agent fees Mutual funds (USAA Funds) 21,424 — 21,424 — Total fund administration and distribution fees $ 59,574 $ 15,557 $ 85,960 $ 46,792 Total revenue $ 214,980 $ 108,082 $ 393,819 $ 317,445 |
Schedule of balances of receivables from contracts with customers | (in thousands) September 30, 2019 December 31, 2018 Customer receivables Mutual funds (Victory/USAA Funds) $ 61,348 $ 21,025 ETFs (VictoryShares) 1,271 909 Separate accounts and other vehicles 23,170 19,199 Receivables from contracts with customers 85,789 41,133 Non-customer receivables 657 2,987 Total receivables $ 86,446 $ 44,120 |
Acquisitions (Tables)
Acquisitions (Tables) | 9 Months Ended |
Sep. 30, 2019 | |
Acquisitions | |
Summary of changes in goodwill | (in thousands) As of September 30, 2019 Balance, beginning of period $ 284,108 Goodwill recorded in acquisition 107,407 Balance, end of period $ 391,515 |
Summary of unaudited pro forma information | Three Months Ended Nine Months Ended Nine Months Ended (in thousands, except per share amount) September 30, 2018 September 30, 2019 September 30, 2018 Revenue $ 233,531 $ 632,886 $ 689,615 Net income 23,391 76,547 58,943 Earnings per share of common stock Basic $ 0.34 $ 1.13 $ 0.90 Diluted $ 0.33 $ 1.04 $ 0.84 Weighted average number of shares outstanding Basic 67,972 67,610 65,817 Diluted 71,864 73,300 70,168 |
Summary of acquisition related cost | Acquisition-related costs Three Months Ended September 30, Nine Months Ended September 30, (in thousands) 2019 2018 2019 2018 USAA AMCO Acquisition $ 16,235 $ 592 $ 21,043 $ 592 Harvest Acquisition 151 859 895 859 Other — — 12 (5) Total acquisition-related costs $ 16,386 $ 1,451 $ 21,950 $ 1,446 |
USAA AMCO | |
Acquisitions | |
Summary of allocation of the purchase price | (in thousands) Cash and cash equivalents $ 17,473 Receivables 30,359 Other intangible assets, net 827,070 Goodwill 107,407 Accounts payable and accrued expenses (4,853) Accrued compensation and benefits (5,907) Payable to members and custodians (17,473) Total purchase price consideration $ 954,076 |
Summary of intangible assets acquired | Weighted-Average Estimated Useful (in thousands) Estimated Life in Years Indefinite-Lived Investment advisory and administration service contracts $ 786,800 Indefinite Distribution services contract 800 Indefinite Total 787,600 Definite-Lived Use of tradename 39,100 4 Lease 370 8 Total 39,470 Total intangible assets $ 827,070 |
Summary of revenue subsequent to acquisition | Three Months Ended (in millions) September 30, 2019 Revenue $ 121.3 |
Fair Value Measurements (Tables
Fair Value Measurements (Tables) | 9 Months Ended |
Sep. 30, 2019 | |
Fair Value Measurements | |
Summary of contingent consideration | (in thousands) Contingent Consideration Liabilities Balance, December 31, 2018 $ 716 CEMP change in fair value measurement (14) CEMP year 4 earn-out payment (702) USAA AMCO Acquisition earn-out payments 102,800 Balance, September 30, 2019 $ 102,800 |
Related Party Transactions (Tab
Related Party Transactions (Tables) | 9 Months Ended |
Sep. 30, 2019 | |
Related Party Transactions | |
Summary of related party transactions | (in thousands) September 30, 2019 December 31, 2018 Related party assets Cash and cash equivalents $ 10,025 $ — Receivables (investment management fees) 45,044 19,612 Receivables (fund administration and distribution fees) 18,938 3,153 Investments (available-for-sale securities, fair value) 698 601 Investments (trading securities, fair value) 15,943 12,343 Total $ 90,648 $ 35,709 Related party liabilities Accounts payable and accrued expenses (fund reimbursements) $ 6,073 $ 2,300 Other liabilities (promissory note) — 96 Total $ 6,073 $ 2,396 Three Months Ended September 30, Nine Months Ended September 30, (in thousands) 2019 2018 2019 2018 Related party revenue Investment management fees (1) $ 130,361 $ 68,386 $ 239,869 $ 200,728 Fund administration and distribution fees 59,574 15,557 85,960 46,792 Total $ 189,935 $ 83,943 $ 325,829 $ 247,520 Related party expense Distribution and other asset-based expenses (fund reimbursements) (1) $ — $ 3,072 $ — $ 9,352 General and administrative — — — 135 Total $ — $ 3,072 $ — $ 9,487 Related party other income (expense) Interest income/(expense) and other income/(expense) $ (342) $ — $ 1,474 $ — Interest income/(expense) and other financing costs (promissory note) — (5) (1) (16) Total $ (342) $ (5) $ 1,473 $ (16) Effective January 1, 2019, upon the adoption of ASU 2014-09, expense reimbursements have been reclassified to investment management fees . |
Investments (Tables)
Investments (Tables) | 9 Months Ended |
Sep. 30, 2019 | |
Available For Sale Securities | |
Gain (Loss) on Securities [Line Items] | |
Summary of the cost and fair value of investments | Gross Unrealized Fair (in thousands) Cost Gains (Losses) Value As of September 30, 2019 $ 670 $ 46 $ (18) $ 698 As of December 31, 2018 666 6 (71) 601 |
Summary of proceeds and realized gains and losses | Sale Realized (in thousands) Proceeds Gains (Losses) For the nine months ended September 30, 2019 $ 104 $ 4 $ — For the nine months ended September 30, 2018 — — — |
Trading Securities. | |
Gain (Loss) on Securities [Line Items] | |
Cost and fair value of investments | Gross Unrealized Fair (in thousands) Cost Gains (Losses) Value As of September 30, 2019 $ 17,093 $ 332 $ (1,130) $ 16,295 As of December 31, 2018 14,874 5 (2,160) 12,719 |
Summary of proceeds and realized gains and losses | Sale Realized (in thousands) Proceeds Gains (Losses) For the three months ended September 30, 2019 $ 908 $ 1 $ (29) For the three months ended September 30, 2018 16 2 — For the nine months ended September 30, 2019 $ 2,342 $ 15 $ (60) For the nine months ended September 30, 2018 644 34 (5) |
Debt (Tables)
Debt (Tables) | 9 Months Ended |
Sep. 30, 2019 | |
Debt | |
Schedule of components of long-term debt | (in thousands) September 30, 2019 December 31, 2018 Term loan principal outstanding $ 1,037,000 $ 280,000 Unamortized debt issuance costs (19,495) (7,629) Unamortized debt discount (11,577) (3,514) Long-term debt $ 1,005,928 $ 268,857 |
Schedule of components of interest expense and other financing costs | For the Three Months Ended September 30, For the Nine Months Ended September 30, (in thousands) 2019 2018 2019 2018 Interest expense $ 15,308 $ 3,673 $ 22,931 $ 13,610 Amortization of debt issuance costs 920 373 1,650 1,337 Amortization of debt discount 475 150 768 551 Other 153 160 458 375 CEMP base payment accretion expense — 102 193 383 Total $ 16,856 $ 4,458 $ 26,000 $ 16,256 |
Equity (Tables)
Equity (Tables) | 9 Months Ended |
Sep. 30, 2019 | |
Equity | |
Schedule of changes in the number of shares of common stock issued and repurchased | Shares of Common Stock Issued Shares of Treasury Stock Class A Class B Class A Class B Balance, December 31, 2018 15,280,833 55,284,408 (856,275) (2,146,980) Issuance of shares 952 – – – Share conversion - Class B to A 381,689 (381,689) – – Repurchase of shares – – (122,957) – Vesting of restricted share grants – 39,636 – – Exercise of options – 71,652 – – Shares withheld related to net settlement of equity awards – – – (29,108) Balance, March 31, 2019 15,663,474 55,014,007 (979,232) (2,176,088) Issuance of shares 975 – – – Share conversion - Class B to A 809,179 (809,179) – – Repurchase of shares – – (113,297) – Vesting of restricted share grants – 4,360 – – Exercise of options – 150,432 – – Shares withheld related to net settlement of equity awards – – – (7,749) Balance, June 30, 2019 16,473,628 54,359,620 (1,092,529) (2,183,837) Issuance of shares 1,085 – – – Share conversion - Class B to A 1,331,412 (1,331,412) – – Repurchase of shares – – (299,896) – Vesting of restricted share grants – 168,933 – – Exercise of options – 486,865 – – Shares withheld related to net settlement of equity awards – – – (216,500) Balance, September 30, 2019 17,806,125 53,684,006 (1,392,425) (2,400,337) Shares of Common Stock Issued Shares of Treasury Stock Class A Class B Pre-IPO Class A Class B Pre-IPO Balance, December 31, 2017 – – 57,182,730 – – (2,064,057) Issuance of Class A common stock 12,810,860 – – – – – Redesignation of common stock – 57,184,766 (57,184,766) (2,064,057) 2,064,057 Share conversion - Class B to A 88,455 (88,455) – – – – Vesting of restricted share grants – 14,794 2,036 – – – Exercise of options 5,000 Fractional shares retired – (263) – – – – Balance, March 31, 2018 12,899,315 57,115,842 – – (2,064,057) – Share conversion - Class B to A 72,195 (72,195) – – – – Repurchase of shares – – – (66,112) – – Vesting of restricted share grants – 16,198 – – – – Balance, June 30, 2018 12,971,510 57,059,845 – (66,112) (2,064,057) – Issuance of shares 1,332 – – – – – Share conversion - Class B to A 1,814,422 (1,814,422) – – – – Repurchase of shares – – – (291,585) (82,923) – Vesting of restricted share grants – 176,737 – – – – Exercise of options – 217,453 – – – – Balance, September 30, 2018 14,787,264 55,639,613 – (357,697) (2,146,980) – |
Share Based Compensation (Table
Share Based Compensation (Tables) | 9 Months Ended |
Sep. 30, 2019 | |
Share Based Compensation | |
Summary of activity related to stock option awards and restricted stock awards | Shares Subject to Stock Option Awards Nine Months Ended September 30, 2019 2018 Avg wtd Avg wtd Avg wtd Avg wtd grant-date exercise grant-date exercise fair value price Units fair value price Units Outstanding at beginning of period $ 3.79 $ 6.12 9,070,052 $ 3.66 $ 5.71 9,078,728 Granted 7.25 17.64 31,178 6.51 14.25 359,618 Forfeited 5.00 9.63 (247,403) 6.28 13.77 (8,520) Exercised 3.15 4.11 (708,949) 2.81 3.06 (222,453) Outstanding at end of the period $ 3.82 $ 6.24 8,144,878 $ 3.79 $ 6.11 9,207,373 Vested $ 3.59 $ 5.51 6,860,289 $ 3.34 $ 4.74 6,447,462 Unvested 5.06 10.12 1,284,589 4.84 9.31 2,759,911 Restricted Stock Awards Nine Months Ended September 30, 2019 2018 Avg wtd grant- Avg wtd grant- date fair value Units date fair value Units Unvested at beginning of period $ 13.17 2,997,856 $ 11.82 1,293,107 Granted 16.27 1,192,145 13.81 1,904,595 Vested 11.06 (212,929) 10.48 (209,765) Forfeited 13.49 (433,549) — — Unvested at end of period $ 14.25 3,543,523 $ 13.18 2,987,937 |
Earnings Per Share (Tables)
Earnings Per Share (Tables) | 9 Months Ended |
Sep. 30, 2019 | |
Earnings per Share | |
Summary of computation of basic and diluted earnings per share | Three Months Ended September 30, Nine Months Ended September 30, (in thousands except per share amounts) 2019 2018 2019 2018 Net income $ 25,992 $ 20,590 $ 54,902 $ 49,789 Shares: Basic : Weighted average number of shares outstanding 67,724 67,972 67,610 65,817 Plus : Incremental shares from assumed conversion of dilutive instruments 5,947 3,892 5,690 4,351 Diluted : Weighted average number of shares outstanding 73,671 71,864 73,300 70,168 Earnings per share Basic: $ 0.38 $ 0.30 $ 0.81 $ 0.76 Diluted: $ 0.35 $ 0.29 $ 0.75 $ 0.71 |
Accumulated Other Comprehensi_2
Accumulated Other Comprehensive Loss (Tables) | 9 Months Ended |
Sep. 30, 2019 | |
Accumulated Other Comprehensive Loss | |
Summary of changes in accumulated other comprehensive income/(loss) by component | Cumulative Available-for-sale Translation (in thousands) Securities Adjustment Total Balance, December 31, 2018 $ (59) $ (27) $ (86) Other comprehensive income/(loss) before reclassification and tax — (28) (28) Tax impact — 7 7 Net current period other comprehensive income/(loss) — (21) (21) Cumulative effect of adoption of ASU 2016-01 and 2018-02 59 3 62 Balance, September 30, 2019 $ — $ (45) $ (45) Balance, December 31, 2017 $ 51 $ 13 $ 64 Other comprehensive income/(loss) before reclassification and tax 46 (47) (1) Tax impact (12) 12 — Net current period other comprehensive income/(loss) 34 (35) (1) Balance, September 30, 2018 $ 85 $ (22) $ 63 |
Significant Accounting Polici_3
Significant Accounting Policies (Details) | Feb. 01, 2018 |
Retroactive Adjustments for Common Stock Split | |
Stock split | 175.194 |
Significant Accounting Polici_4
Significant Accounting Policies - Additional disclosures (Details) - USD ($) $ in Millions | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2019 | Sep. 30, 2018 | Sep. 30, 2019 | Sep. 30, 2018 | |
Rollforward of restructuring and integration liabilities | ||||
Liability balance, beginning of year | $ 1.5 | $ 0.5 | $ 0.1 | $ 0.1 |
Integration costs | 1 | 1.3 | ||
Restructuring and integration costs | 4.8 | 6.6 | 0.7 | |
Settlement of liabilities | (4.4) | (0.2) | (4.8) | (0.5) |
Liability balance, end of year | 1.9 | 0.3 | 1.9 | 0.3 |
Accrued expenses | ||||
Rollforward of restructuring and integration liabilities | ||||
Liability balance, end of year | 1.9 | $ 0.3 | 1.9 | 0.3 |
USAA AMCO | ||||
Rollforward of restructuring and integration liabilities | ||||
Integration costs | 4.8 | |||
Severance expense | ||||
Rollforward of restructuring and integration liabilities | ||||
Severance expense | $ 0.7 | |||
Severance expense | USAA AMCO | ||||
Rollforward of restructuring and integration liabilities | ||||
Severance expense | 3.7 | 5.2 | ||
Contract termination expense | ||||
Rollforward of restructuring and integration liabilities | ||||
Severance expense | $ 0.1 | $ 0.1 |
Significant Accounting Polici_5
Significant Accounting Policies - Recent Accounting Pronouncements (Details) - USD ($) $ in Thousands | Jan. 01, 2019 | Mar. 31, 2018 | Sep. 30, 2019 | Jun. 30, 2019 | Dec. 31, 2018 |
Recent Accounting Pronouncements | |||||
Cumulative effect of adoption of ASU | $ 1,818 | ||||
Restricted Cash | $ 71,900 | ||||
Future minimum cash commitments under operating leases | $ 12,000 | $ 17,000 | |||
ASU 2018-02 | |||||
Recent Accounting Pronouncements | |||||
Cumulative effect of adoption of ASU | $ 100 |
Revenue Recognition - Disaggreg
Revenue Recognition - Disaggregation of Revenue (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2019 | Sep. 30, 2018 | Sep. 30, 2019 | Sep. 30, 2018 | |
Disaggregation of revenue | ||||
Total revenue | $ 214,980 | $ 108,082 | $ 393,819 | $ 317,445 |
Operating expenses | 159,407 | 76,272 | 293,396 | 228,683 |
ASU 2014-09 | ||||
Disaggregation of revenue | ||||
Total revenue | (5,200) | (13,400) | ||
Investment management fees | ||||
Disaggregation of revenue | ||||
Total revenue | 155,406 | 92,525 | 307,859 | 270,653 |
Investment management fees | Mutual funds | ||||
Disaggregation of revenue | ||||
Total revenue | 125,928 | 64,926 | 228,855 | 191,391 |
Investment management fees | ETF's | ||||
Disaggregation of revenue | ||||
Total revenue | 3,116 | 2,457 | 7,172 | 6,523 |
Investment management fees | Separate accounts and other vehicles | ||||
Disaggregation of revenue | ||||
Total revenue | 26,512 | 24,232 | 72,379 | 71,225 |
Performance-based investment fees | Separate accounts and other vehicles | ||||
Disaggregation of revenue | ||||
Total revenue | (150) | 910 | (547) | 1,514 |
Fund administration and distribution fees | ||||
Disaggregation of revenue | ||||
Total revenue | 59,574 | 15,557 | 85,960 | 46,792 |
Administration fees | Mutual funds | ||||
Disaggregation of revenue | ||||
Total revenue | 30,098 | 5,880 | 40,734 | 17,069 |
Administration fees | ETF's | ||||
Disaggregation of revenue | ||||
Total revenue | 378 | 278 | 924 | 667 |
Fund distribution fees | Mutual funds | ||||
Disaggregation of revenue | ||||
Total revenue | 7,674 | $ 9,399 | 22,878 | $ 29,056 |
Transfer agent fees | Mutual funds | ||||
Disaggregation of revenue | ||||
Total revenue | $ 21,424 | $ 21,424 |
Revenue Recognition - Receivabl
Revenue Recognition - Receivables from Contracts with Customers (Details) - USD ($) $ in Thousands | Sep. 30, 2019 | Dec. 31, 2018 |
Disaggregation of revenue | ||
Receivables from contracts with customers | $ 85,789 | $ 41,133 |
Non-customer receivables | 657 | 2,987 |
Accounts Receivable, Net, Total | 86,446 | 44,120 |
Mutual funds | ||
Disaggregation of revenue | ||
Receivables from contracts with customers | 61,348 | 21,025 |
ETF's | ||
Disaggregation of revenue | ||
Receivables from contracts with customers | 1,271 | 909 |
Separate accounts and other vehicles | ||
Disaggregation of revenue | ||
Receivables from contracts with customers | $ 23,170 | $ 19,199 |
Acquisition - USAA Acquisition
Acquisition - USAA Acquisition (Details) - USD ($) $ in Thousands | Jul. 01, 2019 | Sep. 30, 2019 | Jun. 30, 2019 | Dec. 31, 2018 |
Acquisitions | ||||
Contingent consideration liability | $ 102,800 | $ 716 | ||
Restricted Cash | $ 71,900 | |||
Credit Agreement | Adjusted London Interbank Offered Rate (LIBOR) | ||||
Acquisitions | ||||
Base Spread (as a percent) | 3.25% | |||
Credit Agreement | Base Rate | ||||
Acquisitions | ||||
Base Spread (as a percent) | 2.25% | |||
Credit Agreement | London Interbank Offered Rate (LIBOR) | ||||
Acquisitions | ||||
Base Spread (as a percent) | 3.25% | |||
Revolving Credit Facility | ||||
Acquisitions | ||||
Maximum borrowing capacity | $ 100,000 | |||
Debt Instrument, Term | 5 years | |||
Letter of Credit | ||||
Acquisitions | ||||
Maximum borrowing capacity | $ 10,000 | |||
Term Loans | ||||
Acquisitions | ||||
Principal amount | $ 1,100,000 | |||
Debt Instrument, Term | 7 years | |||
USAA AMCO | ||||
Acquisitions | ||||
Percentage of outstanding common stock acquired | 100.00% | |||
Total consideration | $ 954,100 | |||
Payments to acquire business | 851,300 | |||
Payments to acquire business, restricted cash | 71,900 | |||
Contingent consideration liability | 102,800 | $ 102,800 | ||
Maximum aggregate contingent payment | 150,000 | |||
Maximum annual contingent payment | $ 37,500 | |||
Period of time over which contingent payments will be made | 4 years | |||
Contingent consideration threshold percentage | 80.00% | |||
Annual revenue percentage requirement to achieve the maximum contingent payment | 100.00% | |||
Post-closing adjustment period | 1 year |
Acquisition - USAA AMCO andCEMP
Acquisition - USAA AMCO andCEMP Acquisition (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands | Jul. 11, 2019 | Jul. 01, 2019 | Sep. 30, 2019 | Sep. 30, 2018 | Sep. 30, 2019 | Sep. 30, 2018 | Dec. 31, 2015 | Jul. 01, 2019 |
Acquisitions | ||||||||
Restructuring and integration costs | $ 1,000 | $ 1,300 | ||||||
Allocation of the purchase price | ||||||||
Goodwill. | $ 284,108 | 284,108 | 284,108 | |||||
Goodwill [Roll Forward] | ||||||||
Balance, beginning of period | $ 284,108 | 284,108 | 284,108 | |||||
Goodwill recorded in acquisition | 107,407 | |||||||
Balance, end of period | 391,515 | 391,515 | ||||||
Unaudited pro forma information | ||||||||
Revenue | $ 233,531 | 632,886 | $ 689,615 | |||||
Net income | $ 23,391 | $ 76,547 | $ 58,943 | |||||
Basic (in dollars per share) | $ 0.34 | $ 1.13 | $ 0.90 | |||||
Diluted (in dollars per share) | $ 0.33 | $ 1.04 | $ 0.84 | |||||
Basic (in shares) | 67,972 | 67,610 | 65,817 | |||||
Diluted (in shares) | 71,864 | 73,300 | 70,168 | |||||
USAA AMCO | ||||||||
Acquisitions | ||||||||
Post-closing adjustment period | 1 year | |||||||
Goodwill expected to be deductible for tax purposes | $ 107,400 | |||||||
Restructuring and integration costs | 4,800 | |||||||
Revenue since acquisition | $ 121,300 | |||||||
Allocation of the purchase price | ||||||||
Cash and cash equivalents | 17,473 | |||||||
Receivables | 30,359 | |||||||
Other intangibles assets, net | 827,070 | |||||||
Goodwill. | $ 107,407 | 107,407 | ||||||
Accounts payable and accrued expenses | (4,853) | |||||||
Accrued compensation and benefits | (5,907) | |||||||
Payable to members and custodians | (17,473) | |||||||
Total purchase price consideration | 954,076 | |||||||
Goodwill [Roll Forward] | ||||||||
Balance, end of period | $ 107,407 | |||||||
Indefinite and definite lived assets | ||||||||
Indefinite lived intangible assets | 787,600 | |||||||
Finite lived intangible assets | 39,470 | |||||||
Total intangible assets | 827,070 | |||||||
USAA AMCO | Trade Name | ||||||||
Indefinite and definite lived assets | ||||||||
Finite lived intangible assets | 39,100 | |||||||
Weighted Average Useful Life (years) | 4 years | |||||||
USAA AMCO | Lease | ||||||||
Indefinite and definite lived assets | ||||||||
Finite lived intangible assets | 370 | |||||||
Weighted Average Useful Life (years) | 8 years | |||||||
USAA AMCO | Investment Advisory and Administrative Service Contracts | ||||||||
Indefinite and definite lived assets | ||||||||
Indefinite lived intangible assets | 786,800 | |||||||
USAA AMCO | Distribution Services Contract | ||||||||
Indefinite and definite lived assets | ||||||||
Indefinite lived intangible assets | $ 800 | |||||||
CEMP | ||||||||
Acquisitions | ||||||||
Earnout period | 4 years | |||||||
Base and earn-out payments made | $ 6,000 |
Acquisitions - Acquisition-rela
Acquisitions - Acquisition-related costs (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2019 | Sep. 30, 2018 | Sep. 30, 2019 | Sep. 30, 2018 | |
Acquisitions | ||||
Acquisition related costs | $ 16,386 | $ 1,451 | $ 21,950 | $ 1,446 |
USAA AMCO | ||||
Acquisitions | ||||
Acquisition related costs | 16,235 | 592 | 21,043 | 592 |
Harvest | ||||
Acquisitions | ||||
Acquisition related costs | $ 151 | $ 859 | 895 | 859 |
Other | ||||
Acquisitions | ||||
Acquisition related costs | $ 12 | $ (5) |
Fair Value Measurements - Conti
Fair Value Measurements - Contingent Consideration (Details) - USD ($) $ in Thousands | 9 Months Ended | |||
Sep. 30, 2019 | Sep. 30, 2018 | Jul. 01, 2019 | Dec. 31, 2018 | |
Financial Liabilities | ||||
CEMP change in fair value measurement | $ (14) | $ (4) | ||
CEMP year 4 earn-out payment | (702) | |||
Contingent consideration liability | 102,800 | $ 716 | ||
Transfers between levels | 0 | 0 | ||
Investments, fair value | 17,000 | $ 13,300 | ||
USAA AMCO | ||||
Financial Liabilities | ||||
Contingent consideration liability | $ 102,800 | $ 102,800 | ||
Discount rate | 7.00% | |||
USAA AMCO | Minimum | ||||
Financial Liabilities | ||||
Growth rate assumption | 2.00% | |||
USAA AMCO | Maximum | ||||
Financial Liabilities | ||||
Growth rate assumption | 3.00% | |||
Recurring | ||||
Financial Liabilities | ||||
Contingent consideration liability | $ 102,800 |
Related Party Transactions (Det
Related Party Transactions (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | |||
Sep. 30, 2019 | Sep. 30, 2018 | Sep. 30, 2019 | Sep. 30, 2018 | Dec. 31, 2018 | |
Related party assets | |||||
Cash and cash equivalents | $ 78,963 | $ 78,963 | $ 51,491 | ||
Related party liabilities | |||||
Other liabilities (promissory note) | 20,000 | 20,000 | 14,478 | ||
Related party revenue | |||||
Total revenue | 214,980 | $ 108,082 | 393,819 | $ 317,445 | |
Investment management fees | |||||
Related party revenue | |||||
Total revenue | 155,406 | 92,525 | 307,859 | 270,653 | |
Fund administration and distribution fees | |||||
Related party revenue | |||||
Total revenue | 59,574 | 15,557 | 85,960 | 46,792 | |
VCH | |||||
Related party assets | |||||
Cash and cash equivalents | 10,025 | 10,025 | |||
Receivables (Investment management fees) | 45,044 | 45,044 | 19,612 | ||
Receivables (Fund administration and distribution fees) | 18,938 | 18,938 | 3,153 | ||
Investments (Available-for-sale securities, fair value) | 698 | 698 | 601 | ||
Investments (Trading securities, at fair value) | 15,943 | 15,943 | 12,343 | ||
Total | 90,648 | 90,648 | 35,709 | ||
Related party liabilities | |||||
Accounts payable and accrued expenses (fund reimbursements) | 6,073 | 6,073 | 2,300 | ||
Other liabilities (promissory note) | 96 | ||||
Total | 6,073 | 6,073 | $ 2,396 | ||
Related party revenue | |||||
Total revenue | 189,935 | 83,943 | 325,829 | 247,520 | |
Related party expense | |||||
Distribution and other asset-based expenses (fund reimbursements) | 3,072 | 9,352 | |||
General and administrative | 135 | ||||
Total | 3,072 | 9,487 | |||
Related party other income (expense) | |||||
Interest income/(expense) and other income/(expense) | (342) | 1,474 | |||
Interest income/(expense) and other financing costs (promissory note) | (5) | (1) | (16) | ||
Total | (342) | (5) | 1,473 | (16) | |
VCH | Investment management fees | |||||
Related party revenue | |||||
Total revenue | 130,361 | 68,386 | 239,869 | 200,728 | |
VCH | Fund administration and distribution fees | |||||
Related party revenue | |||||
Total revenue | $ 59,574 | $ 15,557 | $ 85,960 | $ 46,792 |
Investments (Details)
Investments (Details) - Available For Sale Securities - USD ($) $ in Thousands | 9 Months Ended | |
Sep. 30, 2019 | Dec. 31, 2018 | |
Investments | ||
Cost | $ 670 | $ 666 |
Gross unrealized gains | 46 | 6 |
Gross unrealized losses | (18) | (71) |
Available-for-sale securities, at fair value | 698 | $ 601 |
Proceeds and realized gains and losses recognized | ||
Sale Proceeds | 104 | |
Realized gains | $ 4 |
Investments - Trading Securitie
Investments - Trading Securities (Details) - Trading Securities. - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | 12 Months Ended | ||
Sep. 30, 2019 | Sep. 30, 2018 | Sep. 30, 2019 | Sep. 30, 2018 | Dec. 31, 2018 | |
Investments | |||||
Cost | $ 17,093 | $ 17,093 | $ 14,874 | ||
Gross unrealized gains | 332 | 5 | |||
Gross unrealized losses | (1,130) | (2,160) | |||
Trading securities, at fair value | 16,295 | 16,295 | $ 12,719 | ||
Proceeds and realized gains and losses recognized | |||||
Sale Proceeds | 908 | $ 16 | 2,342 | $ 644 | |
Realized gains | 1 | $ 2 | 15 | 34 | |
Realized losses | $ (29) | $ (60) | $ (5) |
Income Taxes (Details)
Income Taxes (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2019 | Sep. 30, 2018 | Sep. 30, 2019 | Sep. 30, 2018 | |
Income Taxes | ||||
Federal income tax at U.S. statutory rate | 23.70% | 24.20% | 24.00% | 24.80% |
Income Tax Expense (Benefit) | $ 8,058 | $ 6,562 | $ 17,343 | $ 16,430 |
Valuation allowance, deferred tax assets | 0 | $ 0 | 0 | $ 0 |
Unrecognized tax benefits | 2,300 | 2,300 | ||
Unrecognized tax benefits, net of federal benefit | 1,800 | 1,800 | ||
Accrual for interest and penalties | $ 200 | $ 200 |
Debt - Component of Long Term D
Debt - Component of Long Term Debt (Details) - USD ($) $ in Thousands | Jul. 01, 2019 | Oct. 31, 2019 | Sep. 30, 2019 | Sep. 30, 2018 | Nov. 12, 2019 | Sep. 30, 2019 | Sep. 30, 2018 | Dec. 31, 2018 |
Debt | ||||||||
Principal outstanding | $ 1,037,000 | $ 1,037,000 | $ 280,000 | |||||
Unamortized debt issuance costs | (19,495) | (19,495) | (7,629) | |||||
Unamortized debt discount | (11,577) | (11,577) | (3,514) | |||||
Long-term debt | 1,005,928 | 1,005,928 | 268,857 | |||||
Original issue discount | 11,577 | 11,577 | $ 3,514 | |||||
Debt Issuance cost expensed | 920 | $ 373 | 1,650 | $ 1,337 | ||||
Loss on debt extinguishment | $ 7,409 | $ 7,409 | $ 6,058 | |||||
Standby Letters of Credit | ||||||||
Debt | ||||||||
Maximum borrowing capacity | $ 10,000 | |||||||
Credit Agreement | ||||||||
Debt | ||||||||
Maximum percentage of borrowings for revolving credit facility as a percent of total commitments | 35.00% | |||||||
Maximum first lien leverage ratio on last day of quarter (as a percent) | 380.00% | |||||||
Debt issuance costs, gross | $ 22,800 | |||||||
Debt Issuance cost expensed | $ 4,500 | |||||||
Average effective interest rate (as a percent) | 5.57% | |||||||
Effective interest rate (as a percent) | 6.02% | 6.02% | ||||||
Credit Agreement | London Interbank Offered Rate (LIBOR) | ||||||||
Debt | ||||||||
Base Spread (as a percent) | 3.25% | |||||||
Credit Agreement | Adjusted London Interbank Offered Rate (LIBOR) | ||||||||
Debt | ||||||||
Base Spread (as a percent) | 3.25% | |||||||
Credit Agreement | Base Rate | ||||||||
Debt | ||||||||
Base Spread (as a percent) | 2.25% | |||||||
Revolving Credit Facility | ||||||||
Debt | ||||||||
Debt Term | 5 years | |||||||
Maximum borrowing capacity | $ 100,000 | |||||||
Unamortized debt discount | (1,500) | |||||||
Original issue discount | 1,500 | |||||||
Debt issuance costs, gross | $ 300 | |||||||
Term Loans | ||||||||
Debt | ||||||||
Debt Term | 7 years | |||||||
Principal amount | $ 1,100,000 | |||||||
Unamortized debt discount | (11,500) | |||||||
Original issue discount | 11,500 | |||||||
Debt issuance costs, gross | $ 18,000 | |||||||
Annual amortization percentage | 1.00% | |||||||
Repayments of debt | $ 40,000 | $ 63,000 | $ 103,000 | |||||
Previous Credit Agreement | ||||||||
Debt | ||||||||
Loss on debt extinguishment | 4,700 | |||||||
Previous Term Loan | ||||||||
Debt | ||||||||
Loss on debt extinguishment | $ 2,700 |
Debt - Component of Interest Ex
Debt - Component of Interest Expense and Other Financing Costs (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2019 | Sep. 30, 2018 | Sep. 30, 2019 | Sep. 30, 2018 | |
Debt | ||||
Interest expense | $ 15,308 | $ 3,673 | $ 22,931 | $ 13,610 |
Amortization of debt issuance costs | 920 | 373 | 1,650 | 1,337 |
Amortization of debt discount | 475 | 150 | 768 | 551 |
CEMP base payment accretion expense | 153 | 160 | 458 | 375 |
Other | 102 | 193 | 383 | |
Total | $ 16,856 | $ 4,458 | $ 26,000 | $ 16,256 |
Equity (Details)
Equity (Details) - shares | 3 Months Ended | 9 Months Ended | 18 Months Ended | ||||||
Sep. 30, 2019 | Jun. 30, 2019 | Mar. 31, 2019 | Sep. 30, 2018 | Jun. 30, 2018 | Mar. 31, 2018 | Sep. 30, 2019 | Sep. 30, 2018 | Sep. 30, 2019 | |
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||||||
Repurchase of shares | 1,392,425 | ||||||||
Exercise of options (in shares) | 708,949 | 222,453 | |||||||
Class A | |||||||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||||||
Balance at beginning of period (in shares) | 14,424,558 | 14,424,558 | |||||||
Balance at end of period (in shares) | 16,413,700 | 16,413,700 | 16,413,700 | ||||||
Class B | |||||||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||||||
Balance at beginning of period (in shares) | 53,137,428 | 53,137,428 | |||||||
Balance at end of period (in shares) | 51,283,669 | 51,283,669 | 51,283,669 | ||||||
Common Stock | Class A | |||||||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||||||
Balance at beginning of period (in shares) | 16,473,628 | 15,663,474 | 15,280,833 | 12,971,510 | 12,899,315 | 15,280,833 | |||
Issuance of shares | 1,085 | 975 | 952 | 1,332 | 12,810,860 | ||||
Share conversion - Class B to A (in shares) | 1,331,412 | 809,179 | 381,689 | 1,814,422 | 72,195 | 88,455 | |||
Balance at end of period (in shares) | 17,806,125 | 16,473,628 | 15,663,474 | 14,787,264 | 12,971,510 | 12,899,315 | 17,806,125 | 14,787,264 | 17,806,125 |
Common Stock | Class B | |||||||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||||||
Balance at beginning of period (in shares) | 54,359,620 | 55,014,007 | 55,284,408 | 57,059,845 | 57,115,842 | 55,284,408 | |||
Redesignation of common stock, (in shares) | 57,184,766 | ||||||||
Share conversion - Class B to A (in shares) | (1,331,412) | (809,179) | (381,689) | (1,814,422) | (72,195) | (88,455) | |||
Vesting of restricted share grants (in shares) | 168,933 | 4,360 | 39,636 | 176,737 | 16,198 | 14,794 | |||
Exercise of options (in shares) | 486,865 | 150,432 | 71,652 | 217,453 | 5,000 | ||||
Fractional shares retired (in shares) | (263) | ||||||||
Balance at end of period (in shares) | 53,684,006 | 54,359,620 | 55,014,007 | 55,639,613 | 57,059,845 | 57,115,842 | 53,684,006 | 55,639,613 | 53,684,006 |
Common Stock | Pre-IPO | |||||||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||||||
Balance at beginning of period (in shares) | 57,182,730 | 57,182,730 | |||||||
Redesignation of common stock, (in shares) | (57,184,766) | ||||||||
Vesting of restricted share grants (in shares) | 2,036 | ||||||||
Treasury Stock | Class A | |||||||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||||||
Balance at beginning of period (in shares) | (1,092,529) | (979,232) | (856,275) | (66,112) | (856,275) | ||||
Repurchase of shares | (299,896) | (113,297) | (122,957) | (291,585) | (66,112) | ||||
Balance at end of period (in shares) | (1,392,425) | (1,092,529) | (979,232) | (357,697) | (66,112) | (1,392,425) | (357,697) | (1,392,425) | |
Treasury Stock | Class B | |||||||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||||||
Balance at beginning of period (in shares) | (2,183,837) | (2,176,088) | (2,146,980) | (2,064,057) | (2,064,057) | (2,146,980) | |||
Redesignation of common stock, (in shares) | (2,064,057) | ||||||||
Repurchase of shares | (82,923) | ||||||||
Shares withheld related to net settlement of equity awards | (216,500) | (7,749) | (29,108) | ||||||
Balance at end of period (in shares) | (2,400,337) | (2,183,837) | (2,176,088) | (2,146,980) | (2,064,057) | (2,064,057) | (2,400,337) | (2,146,980) | (2,400,337) |
Treasury Stock | Pre-IPO | |||||||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||||||
Balance at beginning of period (in shares) | (2,064,057) | (2,064,057) | |||||||
Redesignation of common stock, (in shares) | 2,064,057 |
Equity - Repurchase Program (De
Equity - Repurchase Program (Details) - USD ($) $ / shares in Units, $ in Millions | 1 Months Ended | 3 Months Ended | 9 Months Ended | 18 Months Ended | ||
Sep. 30, 2019 | Aug. 31, 2019 | Sep. 30, 2019 | Sep. 30, 2019 | Sep. 30, 2019 | Mar. 22, 2018 | |
Number of shares acquired | 1,392,425 | |||||
Average cost of acquired shares (in dollars per share) | $ 11.81 | |||||
Cost of acquired shares | $ 16.4 | |||||
Remaining authorized amount for share repurchase program | $ 13.6 | $ 13.6 | $ 13.6 | $ 13.6 | ||
Dividends declared per share of common stock | $ 0.05 | $ 0.05 | $ 0.05 | |||
Dividends paid (in dollars per share) | $ 0.05 | $ 0.05 | ||||
Dividends paid | $ 3.4 | |||||
Special dividends paid | $ 0.5 | |||||
Class A | ||||||
Authorized amount for share repurchase program | $ 15 | $ 15 |
Share Based Compensation (Detai
Share Based Compensation (Details) - $ / shares | 3 Months Ended | 9 Months Ended | |
Sep. 30, 2019 | Sep. 30, 2019 | Sep. 30, 2018 | |
Restricted shares | |||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
Total number of restricted shares granted | 196,476 | 1,192,145 | 1,904,595 |
Estimated fair value (in dollars per share) | $ 16.27 | $ 13.81 | |
Vested (in shares) | 3,660 | 212,929 | 209,765 |
Restricted shares | Vesting based on time | |||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
Total number of restricted shares granted | 192,816 | ||
Vesting period from grant date | 3 years | ||
Stock options | |||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
Granted (in shares) | 31,178 | 359,618 | |
Stock options | Vesting based on time | |||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||
Granted (in shares) | 31,178 | ||
Vesting period from grant date | 3 years |
Share Based Compensation - Stoc
Share Based Compensation - Stock Options (Details) - $ / shares | 9 Months Ended | |
Sep. 30, 2019 | Sep. 30, 2018 | |
Avgwtd grant-date fair value | ||
Exercised (in dollars per share) | $ 3.15 | $ 2.81 |
Avg wtd exercise price | ||
Exercised (in dollars per share) | $ 4.11 | $ 3.06 |
Units | ||
Exercised | (708,949) | (222,453) |
Stock options | ||
Avgwtd grant-date fair value | ||
Outstanding at the beginning of period | $ 3.79 | $ 3.66 |
Granted (in dollars per share) | 7.25 | 6.51 |
Forfeited (in dollars per share) | 5 | 6.28 |
Outstanding at the end of period | 3.82 | 3.79 |
Vested (in dollars per share) | 3.59 | 3.34 |
Nonvested (in dollars per share) | 5.06 | 4.84 |
Avg wtd exercise price | ||
Outstanding at the beginning of period | 6.12 | 5.71 |
Granted (in dollars per share) | 17.64 | 14.25 |
Forfeited (in dollars per share) | 9.63 | 13.77 |
Outstanding at the end of the period | 6.24 | 6.11 |
Vested (in dollars per share) | 5.51 | 4.74 |
Nonvested (in dollars per share) | $ 10.12 | $ 9.31 |
Units | ||
Outstanding at the beginning of period | 9,070,052 | 9,078,728 |
Granted (in shares) | 31,178 | 359,618 |
Forfeited (in shares) | (247,403) | (8,520) |
Outstanding at the end of the period | 8,144,878 | 9,207,373 |
Vested (in shares) | 6,860,289 | 6,447,462 |
Nonvested (in shares) | 1,284,589 | 2,759,911 |
Share Based Compensation - Rest
Share Based Compensation - Restricted Stock Awards (Details) - Restricted shares - $ / shares | 3 Months Ended | 9 Months Ended | |
Sep. 30, 2019 | Sep. 30, 2019 | Sep. 30, 2018 | |
Avg wtd grant-date fair value | |||
Unvested at beginning of period | $ 13.17 | $ 11.82 | |
Granted | 16.27 | 13.81 | |
Vested | 11.06 | 10.48 | |
Forfeited | 13.49 | ||
Unvested at end of period | $ 14.25 | $ 14.25 | $ 13.18 |
Units | |||
Unvested at beginning of period | 2,997,856 | 1,293,107 | |
Granted (in shares) | 196,476 | 1,192,145 | 1,904,595 |
Vested (in shares) | (3,660) | (212,929) | (209,765) |
Forfeited (in shares) | (433,549) | ||
Unvested at end of period | 3,543,523 | 3,543,523 | 2,987,937 |
Share Based Compensation - Divi
Share Based Compensation - Dividend Payments (Details) - USD ($) $ / shares in Units, $ in Millions | 1 Months Ended | 3 Months Ended | 9 Months Ended | |||
Sep. 30, 2019 | Sep. 30, 2019 | Sep. 30, 2018 | Sep. 30, 2019 | Sep. 30, 2018 | Dec. 31, 2018 | |
Share Based Compensation | ||||||
Special dividend paid | $ 0.05 | $ 0.05 | ||||
Stock based compensation expense | $ 4.8 | $ 4 | $ 10.1 | $ 11.3 | ||
Stock Options and Restricted Shares | ||||||
Share Based Compensation | ||||||
Amount of cash bonuses and distributions related to all dividends previously declared on unvested shares | $ 1.2 | $ 1.2 | $ 1.2 | $ 1.8 |
Earnings Per Share (Details)
Earnings Per Share (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2019 | Sep. 30, 2018 | Sep. 30, 2019 | Sep. 30, 2018 | |
Computation of basic and diluted earnings per share | ||||
Net income | $ 25,992 | $ 20,590 | $ 54,902 | $ 49,789 |
Shares: | ||||
Basic: Weighted average number of shares outstanding | 67,724 | 67,972 | 67,610 | 65,817 |
Plus: Incremental shares from assumed conversion of dilutive instruments | 5,947 | 3,892 | 5,690 | 4,351 |
Diluted: Weighted average number of shares outstanding | 73,671 | 71,864 | 73,300 | 70,168 |
Earnings per share: | ||||
Basic (in dollars per share) | $ 0.38 | $ 0.30 | $ 0.81 | $ 0.76 |
Diluted (in dollars per share) | $ 0.35 | $ 0.29 | $ 0.75 | $ 0.71 |
Number of shares excluded from the computations of weighted average shares for diluted EPS because the effects would be anti dilutive | 300 | 3,000 | 1,300 | 1,700 |
Equity Method Investment (Detai
Equity Method Investment (Details) - USD ($) $ in Thousands | Aug. 30, 2019 | Sep. 30, 2019 | Dec. 31, 2018 |
Equity Method Investment | |||
Proceeds from sale of equity method investment | $ 10,572 | ||
Cerebellum | |||
Equity Method Investment | |||
Proceeds from sale of equity method investment | $ 10,600 | ||
Percentage of equity method investment sold | 100.00% | ||
Equity method investment | $ 7,900 | ||
Cumulative losses of equity method investment | $ 1,100 | ||
Cerebellum | Interest Income and Other Income (Expense) | |||
Equity Method Investment | |||
Gain on sale of equity method investment | $ 2,900 |
Accumulated Other Comprehensi_3
Accumulated Other Comprehensive Income (Loss) (Details) - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||||||
Sep. 30, 2019 | Jun. 30, 2019 | Mar. 31, 2019 | Sep. 30, 2018 | Jun. 30, 2018 | Mar. 31, 2018 | Sep. 30, 2019 | Sep. 30, 2018 | |
Changes in accumulated other comprehensive income/(loss) by component | ||||||||
Balance at beginning of period | $ 486,951 | $ 470,165 | $ 455,548 | $ 420,739 | $ 398,826 | $ 231,183 | $ 455,548 | $ 231,183 |
Cumulative effect of adoption of ASU | 1,818 | |||||||
Net current period other comprehensive income/(loss) | (25) | (8) | 12 | 16 | (51) | 34 | (21) | (1) |
Balance at end of period | 506,685 | 486,951 | 470,165 | 441,894 | 420,739 | 398,826 | 506,685 | 441,894 |
Accumulated Other Comprehensive Income (Loss) | ||||||||
Changes in accumulated other comprehensive income/(loss) by component | ||||||||
Balance at beginning of period | (20) | (12) | (86) | 47 | 98 | 64 | (86) | 64 |
Other comprehensive income/(loss) before reclassification and tax | (28) | (1) | ||||||
Tax impact | 7 | |||||||
Cumulative effect of adoption of ASU | 62 | 62 | ||||||
Net current period other comprehensive income/(loss) | (25) | (8) | 12 | 16 | (51) | 34 | (21) | (1) |
Balance at end of period | (45) | $ (20) | (12) | 63 | $ 47 | 98 | (45) | 63 |
Available-for-sale Securities | ||||||||
Changes in accumulated other comprehensive income/(loss) by component | ||||||||
Balance at beginning of period | (59) | 51 | (59) | 51 | ||||
Other comprehensive income/(loss) before reclassification and tax | 46 | |||||||
Tax impact | (12) | |||||||
Cumulative effect of adoption of ASU | 59 | |||||||
Net current period other comprehensive income/(loss) | 34 | |||||||
Balance at end of period | 85 | 85 | ||||||
Cumulative Translation Adjustment | ||||||||
Changes in accumulated other comprehensive income/(loss) by component | ||||||||
Balance at beginning of period | $ (27) | $ 13 | (27) | 13 | ||||
Other comprehensive income/(loss) before reclassification and tax | (28) | (47) | ||||||
Tax impact | 7 | 12 | ||||||
Cumulative effect of adoption of ASU | 3 | |||||||
Net current period other comprehensive income/(loss) | (21) | (35) | ||||||
Balance at end of period | $ (45) | $ (22) | $ (45) | $ (22) |
Subsequent Events (Details)
Subsequent Events (Details) - USD ($) $ / shares in Units, $ in Millions | Nov. 04, 2019 | Oct. 31, 2019 | Aug. 31, 2019 | Sep. 30, 2019 | Nov. 12, 2019 | Sep. 30, 2019 |
Subsequent Events | ||||||
Dividends declared per share of common stock | $ 0.05 | $ 0.05 | $ 0.05 | |||
Term Loans | ||||||
Subsequent Events | ||||||
Repayments of debt | $ 40 | $ 63 | $ 103 | |||
Subsequent event | ||||||
Subsequent Events | ||||||
Dividends declared per share of common stock | $ 0.05 | |||||
Subsequent event | Term Loans | ||||||
Subsequent Events | ||||||
Repayments of debt | $ 40 |