# Victory Capital Holdings, Inc.: Form 10-Q for the period ended Mar 31, 2020

- Company: [Victory Capital Holdings, Inc.](/companies/vctr.md) (CIK 1570827)
- Form: 10-Q
- Filed: 2020-05-11
- Accepted by EDGAR: May 11, 2020, 16:15 ET
- Period: 2020-03-31
- Accession: 0001564590-20-024199
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/1570827/000156459020024199/vctr-10q_20200331.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/1570827/000156459020024199/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2020-03-31.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2020-01-01 to 2020-03-31 | $204.4m | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Operating income | 3 months, 2020-01-01 to 2020-03-31 | $90.6m | us-gaap:OperatingIncomeLoss |
| Income tax | 3 months, 2020-01-01 to 2020-03-31 | $16.8m | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2020-01-01 to 2020-03-31 | $57.2m | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2020-01-01 to 2020-03-31 | $0.77 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2020-01-01 to 2020-03-31 | $0.84 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2020-01-01 to 2020-03-31 | 74,350,000 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 3 months, 2020-01-01 to 2020-03-31 | $51.9m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 3 months, 2020-01-01 to 2020-03-31 | $708.0k | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Dividends paid | 3 months, 2020-01-01 to 2020-03-31 | $3.5m | us-gaap:PaymentsOfDividends |
| Share repurchases | 3 months, 2020-01-01 to 2020-03-31 | $6.0m | us-gaap:PaymentsForRepurchaseOfCommonStock |
| Cash and equivalents | at 2020-03-31 | $37.1m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Total assets | at 2020-03-31 | $1.73bn | us-gaap:Assets |
| Total liabilities | at 2020-03-31 | $1.15bn | us-gaap:Liabilities |
| Long-term debt | at 2020-03-31 | $888.6m | us-gaap:LongTermDebt |
| Shareholders' equity | at 2020-03-31 | $581.1m | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 46,977 characters.

Unless the context otherwise requires, references in this Quarterly Report on Form 10-Q to the “Company,” “Victory,” or in the first-person notations of “we,” “us,” and “our” shall mean Victory Capital Holdings, Inc., a Delaware corporation, and its wholly-owned subsidiaries.

The following discussion is intended to assist in the understanding of our financial position at March 31, 2020 and December 31, 2019, results of operations for the three months ended March 31, 2020 and 2019, and cash flows for the three months ended March 31, 2020 and 2019, and should be read in conjunction with the unaudited condensed consolidated financial statements and related notes included elsewhere in this Quarterly Report on Form 10-Q and with our Annual Report on Form 10-K for the year ended

December 31, 2019. This discussion and analysis contains forward-looking statements and should also be read in conjunction with the disclosures and information contained in “Forward-Looking Statements” included elsewhere in this Quarterly Report on Form 10-Q and in “Item 1A. Risk Factors” included in the Annual Report on Form 10-K for the year ended December 31, 2019.

On March 11, 2020, the World Health Organization declared the outbreak of the novel coronavirus (“COVID-19”) a pandemic. The global spread of COVID-19 has created significant volatility, uncertainty and economic disruption. We are closely monitoring the impact of the outbreak of COVID-19 on all aspects of our business. While COVID-19 did not have a material adverse effect on our reported results for our first quarter, the extent to which the COVID-19 pandemic impacts our business, operations and financial results going forward will depend on numerous evolving factors that we may not be able to accurately predict, including: the duration and scope of the pandemic; governmental, business and individuals’ actions that have been and continue to be taken in response to the pandemic; the impact of the pandemic on economic activity and actions taken in response; and the effect on our ability to sell and provide our services.

### Overview

We are a diversified global asset management firm operating a next generation business model combining boutique investment qualities with the benefits of a fully integrated, centralized operating and distribution platform. We have $123.8 billion in assets under management (“AUM”) as of March 31, 2020. Our differentiated model features a scalable operating platform that provides centralized distribution, marketing and operations infrastructure to our Franchises and Solutions. Our earnings are primarily driven by asset-based fees charged for services related to the investment strategies we deliver and consist of investment management, fund administration and distribution fees.

#### Franchises

Our Franchises are operationally integrated, but are separately branded and make investment decisions independently from one another within guidelines established by their respective investment mandates. Our integrated model creates a supportive environment in which our investment professionals, largely unencumbered by administrative and operational responsibilities, can focus on their pursuit of investment excellence. Victory Capital Management Inc. (“VCM”) employs all of the Company’s United States investment professionals across our Franchises, which are not separate legal entities.

#### Solutions

Our Solutions Platform consists of multi-Franchise and customized solutions strategies that are primarily rules-based. We offer our Solutions Platform through a variety of vehicles, including separate accounts, mutual funds and VictoryShares which is our ETF brand. Like our Franchises, our Solutions Platform is operationally integrated and supported by our centralized distribution, marketing and operational support functions. Our approach furthers our commitment to rules‑based investing and includes single and multi‑factor strategies designed to provide a variety of outcomes, including maximum diversification, dividend income, downside mitigation, minimum volatility, thematic and targeted factor exposure.

#### Operations

Our centralized operations functions provide our Franchises and Solutions Platform with the support they need so that they can focus on their investment processes. Our centralized operations functions include trading platforms, risk and compliance, middle‑ and back‑office support, technology, finance, human resources, accounting and legal. Although our operations are centralized, we do allow our Franchises a degree of customization with respect to their desired investment support functions, which we believe helps them maintain their individualized investment processes and minimize undue disruptions.

We outsource certain middle‑ and back‑office activities, such as sub-transfer agent, trade settlement, portfolio analytics, custodian reconciliation, portfolio accounting, corporate action processing, performance calculation and client reporting, to scaled, recognized service providers, who provide their services to us on a variable‑cost basis. Systems and processes are customized as necessary to support our investment processes and operations. We maintain relationships with multiple vendors for the majority of our outsourced functions, which we believe mitigates vendor‑specific risk. We also have information security, business continuity and data privacy programs in place to help mitigate risk.

Outsourcing these functions enables us to grow our AUM, both organically and through acquisitions, without the incremental capital expenditures and working capital that would typically be needed. Under our direction and oversight, our outsourced model enhances our ability to integrate our acquisitions, as we are experienced in working with our vendors to efficiently bring additional Franchises onto our platform in a cost‑efficient manner.

We believe both the scalability of our business and our cost structure, in which approximately two‑thirds of our operating expenses are variable, should drive industry-leading margins and facilitate free cash flow conversion. Additionally, we believe having a majority of our expenses tied to AUM and the number of client accounts provides downside margin protection should there be sustained net outflows or adverse market conditions.

Professionals within our institutional, retail and direct member distribution channels and marketing organization sell our products through our centralized distribution model. Our institutional sales team focuses on cultivating relationships with institutional consultants, who account for the majority of the institutional market, as well as asset allocators seeking sub-advisers. Our retail sales team offers intermediary and retirement platform clients, including broker-dealers, retirement platforms and RIA networks, mutual funds and ETFs as well as SMAs through wrap fee programs and access to our investment models through UMAs. Our direct member channel serves the investment needs of individual clients including USAA members and the military community.

We have grown our AUM from $17.9 billion following the management-led buyout with Crestview GP in August 2013 to $123.8 billion at March 31, 2020. We attribute this growth to our success in sourcing acquisitions and evolving them into organic growers, generating strong investment returns, and developing institutional, retail, and direct member distribution channels with deep penetration.

### USAA AMCO Acquisition

Effective July 1, 2019, the Company completed the USAA AMCO Acquisition, a transformative acquisition that increased AUM by $81.1 billion and significantly impacted our financial results for the three month period ended March 31, 2020. The acquisition not only increased AUM and revenue, but also introduced additional personnel expenses and new and additional operating expenses such as third party distribution costs, expenses related to a transfer services agreement with USAA, 529 College Savings Plan, and direct member channel expenses that the Company did not incur prior to the acquisition. In conjunction with the USAA AMCO Acquisition, the Company entered into the 2019 Credit Agreement, dated July 1, 2019, and obtained a seven-year term loan in an aggregate principal amount of $1.1 billion. All indebtedness outstanding under the previous credit agreement was repaid and terminated as 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 for a period of time and the opportunity to offer its products to USAA members through a direct member channel. In addition, we have entered into a referral agreement with USAA for members that are interested in investing in USAA Funds or the USAA 529 College Savings Plan.

Total consideration for the USAA AMCO Acquisition was $949.4 million, comprising of $851.3 million of cash paid at closing plus $98.8 million as the estimated fair value of contingent consideration as of the acquisition date less $0.7 million in net working capital adjustments settled in the first quarter of 2020. 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 date.

The estimated fair value of contingent consideration arrangements as of March 31, 2020 was $113.2 million and consist of the USAA AMCO earn-out payment liability, which is included in consideration payable for acquisition of business in the unaudited Condensed Consolidated Balance Sheets. Refer to Note 4, Acquisitions, to the unaudited condensed consolidated financial statements for further details on the USAA AMCO Acquisition.

### Business Highlights

Assets under management:

- AUM at March 31, 2020 decreased by $28.1 billion, or 18.5%, to $123.8 billion from $151.8 billion at December 31, 2019, driven by negative market action and net outflows of $25.2 billion and $2.9 billion, respectively.
- AUM at March 31, 2020 and 2019 was $123.8 billion and $58.1 billion, respectively. We generated $14.9 billion in gross flows and $2.9 billion in negative net flows for the three months ended March 31, 2020 compared to $3.0 billion in gross flows and $1.1 billion in negative net flows for the same period in 2019.

Investment performance:

- 39 of our Victory Capital mutual funds and ETFs had overall Morningstar ratings of four or five stars and 61% of our fund and ETF AUM were rated four or five stars overall by Morningstar. 44% of our strategies by AUM had investment returns in excess of their respective benchmarks over a one-year period, 55% over a three-year period, 69% over a five-year period and 79% over a ten-year period. On an equal-weighted basis, 31% of our strategies have outperformed their benchmarks over a one-year period, 41% over a three-year period, 48% over a five-year period and 67% over a ten-year period.

Industry achievements and recognition:

- We ranked 7th in “*Barron’s Best Fund Families of 2019”* for the five-year period and 10th for the 10-year period ended December 31, 2019. We ranked 17th overall on a one-year basis for 2019. This is the 3rd consecutive year that we have

been ranked among the top 10 best fund families and the 6th consecutive year that we have been ranked among the top 25 best fund families by *Barron’s.*

Financial highlights:

- Total revenue for the three months ended March 31, 2020 was $204.4 million compared to $87.5 million for the same period in 2019.
- Net income was $57.2 million for the three months ended March 31, 2020 compared to $14.5 million for the same period in 2019.
- Adjusted EBITDA was $91.5 million for the three months ended March 31, 2020, or 44.8% of revenue, compared to $33.6 million, or 38.4% of revenue, for the same period in 2019. Refer to “Supplemental Non-GAAP Financial Information” for further information about the Adjusted EBITDA calculation and reconciliation of generally accepted accounting principles (“GAAP”) net income to Adjusted EBITDA.
- Adjusted Net Income was $61.7 million for the three months ended March 31, 2020 compared to $21.9 million for the three months ended March 31, 2019. Refer to “Supplemental Non-GAAP Financial Information” for further information about the Adjusted Net Income calculation and reconciliation of GAAP net income to Adjusted Net Income.

### Key Performance Indicators

The following table is a summary of key performance indicators utilized by management to assess results of operations:

*($ in millions, except for basis points and percentages)*

|  | Three Months Ended March 31, 2020 | 2019 |
| --- | ---: | ---: |
| AUM at period end | $123,779 | $58,119 |
| Average AUM | 144,112 | 57,043 |
| Gross flows | 14,925 | 3,038 |
| Net flows | (2,900) | (1,105) |
| Total revenue | 204.4 | 87.5 |
| Revenue on average AUM | 57 bps | 62 bps |
| Net income | 57.2 | 14.5 |
| Adjusted EBITDA(1) | 91.5 | 33.6 |
| Adjusted EBITDA Margin(2) | 44.8% | 38.4% |
| Adjusted Net Income(1) | 61.7 | 21.9 |
| Tax benefit of goodwill and acquired intangibles(3) | 6.7 | 3.4 |

(1) Management utilizes Adjusted EBITDA and Adjusted Net Income to measure the operating profitability of the business. These measures eliminate the impact of one‑time acquisition, restructuring and integration costs and demonstrate the ongoing operating earnings metrics of the business. These measures are explained in more detail and reconciled to net income calculated in accordance with GAAP in “Supplemental Non‑GAAP Financial Information.”

(2) Adjusted EBITDA margin represents Adjusted EBITDA as a percentage of total revenue.

(3) Represents the tax benefits associated with deductions allowed for intangibles and goodwill generated from prior acquisitions in which we received a step-up in basis for tax purposes. Acquired intangible assets and goodwill may be amortized for tax purposes, generally over a 15-year period. The tax benefit from amortization on these assets is included to show the full economic benefit of deductions for all acquired intangibles with a step-up in tax basis. Due to our acquisitive nature, tax deductions allowed on acquired intangible assets and goodwill provide us with a significant supplemental economic benefit.

### Assets Under Management

Our profitability is largely affected by the level and composition of our AUM (including asset class and distribution channel) and the effective fee rates on our products. The amount and composition of our AUM are, and will continue to be, influenced by a number of factors, including; (i) investment performance, including fluctuations in the financial markets and the quality of our investment decisions; (ii) client flows into and out of our various strategies and investment vehicles; (iii) industry trends toward products or strategies that we either do or do not offer; (iv) our ability to attract and retain high quality investment, distribution, marketing and management personnel; (v) our decision to close strategies or limit growth of assets in a strategy when we believe it is in the best interest of our clients or conversely to re‑open strategies in part or entirely; and (vi) general investor sentiment and confidence. Our goal is to establish and maintain a client base that is diversified by Franchise and Solutions, asset class, distribution channel and vehicle. Due to rounding, AUM numbers presented in the tables below may not add up precisely to the totals provided.

The following table presents our AUM by asset class as of the dates indicated:

*(in millions)*

|  | As of March 31, 2020 | 2019 |
| --- | ---: | ---: |
| Fixed Income | $35,402 | $6,973 |
| Solutions | 25,526 | 3,996 |
| U.S. Mid Cap Equity | 18,622 | 22,169 |
| U.S. Small Cap Equity | 11,885 | 14,714 |
| U.S. Large Cap Equity | 10,703 | 4,117 |
| Global / Non-U.S. Equity | 9,372 | 5,234 |
| Other | 140 | 918 |
| **Total Long-Term Assets** | **$111,650** | **$58,119** |
| Money Market & Short-Term Assets | 12,129 | — |
| **Total** | **$123,779** | **$58,119** |

The following tables summarize our asset flows by asset class for the periods indicated:

*(in millions)*

| For the Three Months Ended March 31, 2020 | U.S. Mid Cap Equity | U.S. Small Cap Equity | Fixed Income | U.S. Large Cap Equity | Global / Non-U.S. Equity | Solutions | Other | Total Long-term | Money Market / Short-term | Total |
| --- | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: |
| Beginning AUM | $26,347 | $17,346 | $37,973 | $14,091 | $12,603 | $31,649 | $236 | $140,245 | $11,587 | $151,832 |
| Gross client cash inflows | 1,474 | 1,233 | 1,951 | 238 | 671 | 1,695 | 11 | 7,273 | 7,652 | 14,925 |
| Gross client cash outflows | (2,265) | (1,310) | (2,890) | (807) | (684) | (2,394) | (24) | (10,374) | (7,451) | (17,825) |
| Net client cash flows | (791) | (77) | (939) | (569) | (13) | (699) | (12) | (3,101) | 201 | (2,900) |
| Market appreciation / (depreciation) | (6,907) | (5,325) | (1,361) | (2,828) | (3,245) | (5,436) | (86) | (25,187) | 34 | (25,153) |
| Net transfers | (28) | (59) | (272) | 9 | 27 | 12 | 3 | (307) | 307 | — |
| Ending AUM | $18,622 | $11,885 | $35,402 | $10,703 | $9,372 | $25,526 | $140 | $111,650 | $12,129 | $123,779 |
| **For the Three Months Ended March 31, 2019** |  |  |  |  |  |  |  |  |  |  |
| Beginning AUM | $20,019 | $12,948 | $6,836 | $3,759 | $4,610 | $3,767 | $824 | $52,763 | $— | $52,763 |
| Gross client cash inflows | 993 | 992 | 303 | 26 | 365 | 279 | 81 | 3,038 | — | 3,038 |
| Gross client cash outflows | (1,786) | (1,059) | (383) | (183) | (277) | (349) | (107) | (4,143) | — | (4,143) |
| Net client cash flows | (793) | (67) | (79) | (158) | 88 | (70) | (26) | (1,105) | — | (1,105) |
| Market appreciation / (depreciation) | 2,942 | 1,834 | 216 | 516 | 535 | 297 | 120 | 6,460 | — | 6,460 |
| Net transfers | 2 | (1) | — | (1) | — | 1 | (1) | — | — | — |
| Ending AUM | $22,169 | $14,714 | $6,973 | $4,117 | $5,234 | $3,996 | $918 | $58,119 | $— | $58,119 |

The following table presents our AUM by distribution channel as of the dates indicated:

*(in millions)*

|  | As of March 31, 2020 Amount | % of total | 2019 Amount | % of total |
| --- | ---: | ---: | ---: | ---: |
| Member | $64,188 | 52% | $— | 0% |
| Institutional | 30,235 | 24% | 32,714 | 56% |
| Retail | 29,356 | 24% | 25,405 | 44% |
| Total AUM(1) | $123,779 | 100% | $58,119 | 100% |

(1) The allocation of AUM by distribution channel involves the use of estimates and the exercise of judgment.

The following tables summarize our asset flows by vehicle for the periods indicated:

*(in millions)*

| Three Months Ended March 31, 2020 | Mutual Funds(1) | ETFs(2) | Separate Accounts and Other Vehicles(3) | Total |
| --- | ---: | ---: | ---: | ---: |
| Beginning AUM | $118,605 | $4,213 | $29,014 | $151,832 |
| Gross client cash inflows | 13,745 | 255 | 925 | 14,925 |
| Gross client cash outflows | (15,631) | (461) | (1,733) | (17,825) |
| Net client cash flows | (1,886) | (205) | (809) | (2,900) |
| Market appreciation (depreciation) | (18,413) | (830) | (5,910) | (25,153) |
| Net transfers | — | — | — | — |
| Ending AUM | $98,305 | $3,177 | $22,296 | $123,779 |
| **Three Months Ended March 31, 2019** |  |  |  |  |
| Beginning AUM | $30,492 | $2,956 | $19,315 | $52,763 |
| Gross client cash inflows | 2,379 | 242 | 417 | 3,038 |
| Gross client cash outflows | (2,887) | (299) | (957) | (4,143) |
| Net client cash flows | (508) | (58) | (540) | (1,105) |
| Market appreciation (depreciation) | 3,801 | 224 | 2,435 | 6,460 |
| Net transfers | — | — | — | — |
| Ending AUM | $33,786 | $3,123 | $21,210 | $58,119 |

(1) Includes institutional and retail share classes, money market and Variable Insurance Products or VIP funds.

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

(3) Includes collective trust funds, wrap program separate accounts and unified managed accounts or UMAs.

*March 31, 2020 AUM compared to December 31, 2019 AUM*. At March 31, 2020, our total AUM was $123.8 billion, a decrease of $28.1 billion, or 18.5%, from $151.8 billion at December 31, 2019, primarily driven by negative market action and net outflows of $25.2 billion and $2.9 billion, respectively. The negative market action was driven by pullback in the market as a result of the economic uncertainty due to the COVID-19 pandemic.

Net outflows were driven by our fixed income strategies, U.S. mid cap equity strategies and Solutions platform of $0.9 billion, $0.8 billion and $0.7 billion, respectively. Money market and short-term assets accounted for $12.1 billion, or 9.8%, of the total AUM of $123.8 billion at March 31, 2020.

### GAAP Results of Operations

The following table presents our GAAP results of operations for the three months ended March 31, 2020 and 2019. The financial results for the three months ended March 31, 2020 reflect the USAA AMCO Acquisition that closed on July 1, 2019. The acquisition significantly impacted our financial results for the three months ended March 31, 2020 when compared to the three months ended March 31, 2019.

*(in thousands, except per share data)*

| Revenue | Three Months Ended March 31, 2020 | 2019 |
| --- | ---: | ---: |
| Investment management fees | $146,881 | $74,411 |
| Fund administration and distribution fees | 57,540 | 13,068 |
| **Total revenue** | **204,421** | **87,479** |
| **Expenses** |  |  |
| Personnel compensation and benefits | 47,571 | 34,501 |
| Distribution and other asset-based expenses | 54,860 | 15,767 |
| General and administrative | 11,888 | 7,087 |
| Depreciation and amortization | 4,050 | 5,222 |
| Change in value of consideration payable for acquisition of business | (5,500) | — |
| Acquisition-related costs | (69) | 2,777 |
| Restructuring and integration costs | 998 | — |
| **Total operating expenses** | **113,798** | **65,354** |
| **Income from operations** | **90,623** | **22,125** |
| **Other (expense) income** |  |  |
| Interest income and other (expense) income | (4,172) | 1,833 |
| Interest expense and other financing costs | (11,408) | (4,624) |
| Loss on debt extinguishment | (1,054) | — |
| **Total other expense, net** | **(16,634)** | **(2,791)** |
| **Income before income taxes** | **73,989** | **19,334** |
| **Income tax expense** | **(16,823)** | **(4,807)** |
| **Net income** | **$57,166** | **$14,527** |
| **Earnings per share of common stock** |  |  |
| Basic | $0.84 | $0.22 |
| Diluted | $0.77 | $0.20 |
| **Weighted average number of shares outstanding** |  |  |
| Basic | 67,790 | 67,521 |
| Diluted | 74,350 | 72,282 |
| **Dividends declared per share of common stock** | $0.05 | $— |

### Investment Management Fees

*Three months ended March 31, 2020 compared to March 31, 2019.* Investment management fees increased by $72.5 million, or 97.4%, to $146.9 million for the three months ended March 31, 2020 from $74.4 million for the same period in 2019 due to an increase in average AUM year over year, partially offset by a decrease in the realized fee rate due to a shift in asset mix. Average AUM was $144.1 billion for the three months ended March 31, 2020 compared to $57.0 billion for the same period in 2019, largely attributable to acquired assets in the USAA AMCO Acquisition.

### Fund Administration and Distribution Fees

*Three months ended March 31, 2020 compared to March 31, 2019.* Fund administration and distribution fees increased by $44.5 million, or 340.3%, to $57.5 million for the three months ended March 31, 2020 from $13.1 million for the same period in 2019 due to an increase in average AUM year over year and the addition of $20.7 million in transfer agent fees with the USAA Funds related to the USAA AMCO Acquisition, partially offset by a shift in the mix of assets to lower 12b-1 paying share classes.

### Personnel Compensation and Benefits

The following table presents the components of GAAP personnel compensation and benefits expense for the three months ended March 31, 2020 and 2019:

*(in thousands)*

|  | Three Months Ended March 31, 2020 | 2019 |
| --- | ---: | ---: |
| Salaries, payroll related taxes and employee benefits | $16,562 | $14,904 |
| Incentive compensation | 20,504 | 14,662 |
| Sales-based compensation(1) | 3,919 | 3,388 |
| Equity awards granted to employees and directors(2) | 5,993 | 1,547 |
| Acquisition and transaction-related compensation | 593 | — |
| **Total personnel compensation and benefits expense** | **$47,571** | **$34,501** |

(1) Represents sales-based commissions paid to our distribution teams. Sales-based compensation varies based on gross client cash flows and revenue earned on sales.

(2) Equity awards typically vest over several years based on service and the achievement of specific business and financial targets. The value of the equity awards is recognized as compensation expense over the vesting period.

*Three months ended March 31, 2020 compared to March 31, 2019.* Personnel compensation and benefits were $47.6 million for the three months ended March 31, 2020, an increase of $13.1 million, or 37.9%, from $34.5 million for the same period in 2019 primarily attributable to an increase in the headcount due to the USAA AMCO Acquisition. Incentive compensation and equity awards granted to employees and directors were $20.5 million and $6.0 million, respectively, for the three months ended March 31, 2020, compared to $14.7 million and $1.5 million, respectively, for the same period in 2019. Salaries, payroll related taxes and employee benefits were $16.6 million and $14.9 million, respectively, for the three months ended March 31, 2020 and 2019.

### Distribution and Other Asset‑Based Expenses

The following table presents the components of distribution and other asset-based expenses for the three months ended March 31, 2020 and 2019:

*(in thousands)*

|  | Three Months Ended March 31, 2020 | 2019 |
| --- | ---: | ---: |
| Broker-dealer distribution fees | $6,108 | $6,979 |
| Platform distribution fees | 38,992 | 4,583 |
| Sub-administration | 4,082 | 1,682 |
| Sub-advisory | 3,237 | 847 |
| Middle-office | 2,441 | 1,676 |
| **Total distribution and other asset-based expenses** | **$54,860** | **$15,767** |

*Three months ended March 31, 2020 compared to March 31, 2019.* Distribution and other asset-based expenses are primarily based on AUM. For the three months ended March 31, 2020, distribution and other asset-based expenses were $54.9 million, an increase of $39.1 million, or 247.9%, from $15.8 million for the same period in 2019, primarily due to the USAA AMCO Acquisition. The acquisition introduced new operating expenses that the Company did not incur prior to the acquisition, such as platform distribution costs paid to third parties and USAA, sub-transfer agent service costs and 529 College Savings Plan expenses.

### General and Administrative

*Three months ended March 31, 2020 compared to March 31, 2019*. General and administrative expenses were $11.9 million for the three months ended March 31, 2020 compared to $7.1 million for the same period in 2019. The increase of $4.8 million, or 67.7%, was primarily due to the addition of transition service agreement costs related to the USAA AMCO Acquisition partially offset by $3.5 million in Ohio Commercial Activity Tax refunds received for tax years 2015-2019.

### Depreciation and Amortization

*Three months ended March 31, 2020 compared to March 31, 2019.* Depreciation and amortization decreased by $1.2 million, or 22.4%, to $4.1 million for the three months ended March 31, 2020 from $5.2 million for the same period in 2019, due to a reduction in amortization expense related to definite-lived intangible assets in connection with the Munder Capital Management acquisition that became fully amortized in the fourth quarter of 2019.

### Change in Value of Consideration Payable for Acquisition of Business

*Three months ended March 31, 2020 compared to March 31, 2019.* The fair value of the contingent consideration associated with the USAA AMCO acquisition decreased by $5.5 million, resulting in a change in the estimated fair value of consideration payable of $5.5 million for the three months ended March 31, 2020. Refer to Note 4, Acquisitions, for further details on the fair value of contingent consideration payable.

### Acquisition‑Related Costs

*Three months ended March 31, 2020 compared to March 31, 2019.* Acquisition-related costs for the three months ended March 31, 2020 were ($0.1) million and $2.8 million for the three months ended March 31, 2019. The March 31, 2019 acquisition related costs were related to the USAA AMCO acquisition.

### Restructuring and Integration Costs

*Three months ended March 31, 2020 compared to March 31, 2019.* Restructuring and integration costs for the three months ended March 31, 2020 was $1.0 million compared to no such costs for the same period in 2019. The increase is primarily due integration and conversion costs related to the USAA AMCO Acquisition.

### Interest Income and Other Income/(Expense)

*Three months ended March 31, 2020 compared to March 31, 2019.* Interest income and other income/(expense) was expense of $4.2 million for the three months ended March 31, 2020 compared to income of $1.8 million for the same period in 2019. The expense for the three months ended March 31, 2020 was primarily due to a $4.8 million reduction in the net unrealized fair value of deferred compensation plan investments partially offset by interest income on cash and cash equivalents.

### Interest Expense and Other Financing Costs

*Three months ended March 31, 2020 compared to March 31, 2019.* Interest expense and other financing costs increased $6.8 million to $11.4 million for the three months ended March 31, 2020, compared to $4.6 million for the same period in 2019 due an increase in interest payments as a result of a higher debt principal balance over the comparable period as a result of the Company entering into the 2019 Credit Agreement, dated July 1, 2019, in conjunction with the USAA AMCO Acquisition.

### Loss on Debt Extinguishment

*Three months ended March 31, 2020 compared to March 31, 2019*. Loss on debt extinguishment was $1.1 million and $0.0 million, respectively, for the three months ended March 31, 2020 and 2019. The Company wrote-off a pro-rata portion of the unamortized debt issuance costs and unamortized debt discount due to accelerating the paydown of debt principal under the 2019 Credit Agreement. The Company paid down $38.0 million of debt during the first quarter of 2020. Refer to Note 9, Debt, for further details on the 2019 Credit Agreement.

### Income Tax Expense

*Three months ended March 31, 2020 compared to March 31, 2019.* The effective tax rate for the three months ended March 31, 2020 and 2019 was 22.7% and 24.9%, respectively. The decrease in the effective tax rate was primarily due to higher excess tax benefits on share-based compensation.

### Supplemental Non‑GAAP Financial Information

We use non-GAAP performance measures to evaluate the underlying operations of our business. Due to our acquisitive nature, there are a number of acquisition and restructuring related expenses included in GAAP measures that we believe distort the economic value of our organization and we believe that many investors use this information when assessing the financial performance of companies in the investment management industry. We have included these non-GAAP measures to provide investors with the same financial metrics used by management to assess the operating performance of our Company. The non-GAAP measures we report are Adjusted EBITDA and Adjusted Net Income.

The following table sets forth a reconciliation from GAAP financial measures to non-GAAP measures for the periods indicated:

*(in thousands)*

| Reconciliation of non-GAAP financial measures: | Three Months Ended March 31, 2020 | 2019 |
| --- | ---: | ---: |
| **Net income (GAAP)** | **$57,166** | **$14,527** |
| Income tax expense | (16,823) | (4,807) |
| **Income before income taxes** | **$73,989** | **$19,334** |
| Interest expense(1) | 10,528 | 3,853 |
| Depreciation(2) | 884 | 571 |
| Other business taxes(3) | (3,296) | 555 |
| Amortization of acquisition-related intangible assets(4) | 3,166 | 4,651 |
| Stock-based compensation(5) | 5,372 | 1,478 |
| Acquisition, restructuring and exit costs(6) | (1,542) | 2,777 |
| Debt issuance costs(7) | 2,389 | 364 |
| Earnings/losses from equity method investments(8) | — | 4 |
| **Adjusted EBITDA** | **$91,490** | **$33,587** |

*(in thousands)*

| Reconciliation of non-GAAP financial measures: | Three Months Ended March 31, 2020 | 2019 |
| --- | ---: | ---: |
| **Net income (GAAP)** | **$57,166** | **$14,527** |
| Adjustments to reflect the operating performance of the Company: |  |  |
| i. Other business taxes(3) | (3,296) | 555 |
| ii. Amortization of acquisition-related intangible assets(4) | 3,166 | 4,651 |
| iii. Stock-based compensation(5) | 5,372 | 1,478 |
| iv. Acquisition, restructuring and exit costs(6) | (1,542) | 2,777 |
| v. Debt issuance costs(7) | 2,389 | 364 |
| Tax effect of above adjustments(9) | (1,522) | (2,456) |
| **Adjusted Net Income** | **$61,733** | **$21,896** |
| Tax benefit of goodwill and acquired intangibles(10) | $6,728 | $3,361 |

Adjustments made to GAAP Net Income to calculate Adjusted EBITDA and Adjusted Net Income, as applicable, are:

(1) Adding back interest paid on debt and other financing costs, net of interest income.

(2) Adding back depreciation on property and equipment.

(3) Adding back other business taxes.

(4) Adding back amortization expense on acquisition‑related intangible assets.

(5) Adding back stock‑based compensation associated with equity awards issued from pools created in connection with the management‑led buyout and various acquisitions and as a result of equity grants related to the IPO.

(6) Adding back direct incremental costs of acquisitions, including restructuring costs.

*(in thousands)*

|  | Three Months Ended March 31, 2020 | 2019 |
| --- | ---: | ---: |
| Acquisition-related costs | $(69) | $2,777 |
| Restructuring and integration costs | 998 | — |
| Change in value of consideration payable for acquisition of business | (5,500) |  |
| General and administrative | 2,436 | — |
| Personnel compensation and benefits | 593 | — |
| **Total acquisition, restructuring and exit costs** | **$(1,542)** | **$2,777** |

(7) Adding back debt issuance costs.

(8) We adjust for earnings/losses on equity method investments.

(9) Subtracting an estimate of income tax expense applied to the sum of the adjustments above.

(10) Represents the tax benefits associated with deductions allowed for intangible assets and goodwill generated from prior acquisitions in which we received a step-up in basis for tax purposes. Acquired intangible assets and goodwill may be amortized for tax purposes, generally over a 15-year period. The tax benefit from amortization on these assets is included to show the full economic benefit of deductions for all acquired intangible assets with a step-up in tax basis. Due to our acquisitive nature, tax deductions allowed on acquired intangible assets and goodwill provide us with a significant supplemental economic benefit.

Non-GAAP measures should be considered in addition to, and not as a substitute for, financial measures prepared in accordance with GAAP. Our non-GAAP measures may differ from similar measures at other companies, even if similar terms are used to identify these measures.

### Liquidity and Capital Resources

Our primary uses of cash relate to repayment of our debt obligations, funding of acquisitions and working capital needs, repurchasing of shares and payment of dividends, which are all expected to be met through cash generated from our operations and available capital resources.

We cannot predict the duration or scope of the COVID-19 pandemic, its impact on our business, and the potential negative financial impact to our results, but the Company has actively positioned itself so that our cash flows from operations and financing sources will be sufficient to meet our needs. During the period of uncertainty related to the COVID-19 pandemic, we will continue to monitor our liquidity.

The following table shows our liquidity position as of March 31, 2020 and December 31, 2019.

*(in thousands)*

|  | March 31, 2020 | December 31, 2019 |
| --- | ---: | ---: |
| Cash and cash equivalents | $37,130 | $37,121 |
| Accounts and other receivables | 77,610 | 95,093 |
| Undrawn commitment on revolving credit facility | 100,000 | 100,000 |
| Accounts and other payables | (112,655) | (144,045) |

We manage our cash balances in order to fund our day-to-day operations. Our accounts receivable consists primarily of investment management fees that have been earned but not yet received from clients, income and other taxes receivable, and amounts receivable from the funds. We perform a review of our receivables on a monthly basis to assess collectability. We continue to actively monitor the impact of the COVID-19 pandemic on the collectability of certain receivables. We maintained a $100.0 million revolving credit facility at March 31, 2020 and December 31, 2019 (under the 2019 Credit Agreement) which had $100.0 million undrawn as of March 31, 2020 and December 31, 2019.

### 2019 Credit Agreement and 2020 Debt Repricing

In conjunction with the USAA AMCO Acquisition, the Company entered into the 2019 Credit Agreement, dated July 1, 2019, and obtained a seven-year term loan in an aggregate principal amount of $1.1 billion. All indebtedness outstanding under the previous credit agreement was repaid and terminated as of July 1, 2019. As of March 31, 2020, the Company has repaid $186.0 million of the outstanding term loans under the 2019 Credit Agreement. As of March 31, 2020, we were in compliance with our financial performance covenant. Refer to Note 4, Acquisitions, to the unaudited condensed consolidated financial statements for further details on the USAA AMCO Acquisition, as well as Note 9, Debt, for further information on the 2019 Credit Agreement.

On January 17, 2020, we entered into the First Amendment (the “First Amendment”) to the 2019 Credit Agreement with the other loan parties thereto, Barclays Bank PLC, as administrative agent, and the Royal Bank of Canada as fronting bank. Pursuant to the First Amendment, the Company repriced the existing term loans (the “Existing Term Loans”) with replacement term loans in an aggregate principal amount of $952.0 (the “Repriced Term Loans”). The Repriced Term Loans provide for substantially the same terms as the Existing Term Loans, including the same maturity date of July 2026, except that the Repriced Term Loans provide for a reduced applicable margin on LIBOR of 75 basis points. The applicable margin on LIBOR under the Repriced Term Loans is 2.50%, compared to 3.25% under the Existing Term Loans. Refer to Note 9, Debt, for further information on the repricing.

Subsequent to March 31, 2020, the Company established a trading account to opportunistically take advantage of potential short term trading arbitrage with respect to our term loan. An alternative to principal prepayments, this allows us to buy back our outstanding term loan in the open market and retire the debt. As we look to pay down our debt, this alternative is preferable at this time to principal prepayments when our debt trades at a discount to par. Subsequent to March 31, 2020, we have bought back $31 million of our term loan, for a total debt reduction of $217 million since July 1, 2019.

### 2020 Swap Transaction

On March 27, 2020, the Company executed a floating-to-fixed interest rate swap transaction (“Swap”) to effectively fix the interest rate at 3.465% on $450 million of its outstanding Term Loan through the Term Loan maturity date of July 2026. Refer to Note 14, Derivatives, for further information on the Swap.

### Capital Requirements

VCA is a registered broker-dealer subject to the Uniform Net Capital requirements under the Exchange Act, which requires maintenance of certain minimum net capital levels. In addition, we have certain non-U.S. subsidiaries that have minimum capital requirements. As a result, such subsidiaries of our Company may be restricted in their ability to transfer cash to their parents.

### Cash Flows

The following table is derived from our unaudited Condensed Consolidated Statements of Cash Flows:

*(in thousands)*

|  | Three Months Ended March 31, 2020 | 2019 |
| --- | ---: | ---: |
| Net cash provided by operating activities | $51,922 | $17,938 |
| Net cash used in investing activities | (2,234) | (1,447) |
| Net cash used in financing activities | (49,573) | (1,742) |

***Operating Activities –*** Cash provided by operating activities during the three months ended March 31, 2020 was $51.9 million, compared to $17.9 million of cash provided by operating activities for the same period in 2019. The $34.0 million increase in cash provided by operating activities was primarily due to a $42.6 million and $6.1 million increase in net income and non-cash items, partially offset by a $14.7 million net decrease in working capital source of cash.

The net decrease in working capital source of cash was primarily due to accounts payable and accrued expenses and compensation which was a $35.6 million use of cash for the three months ended March 31, 2020 compared to a $4.6 million use of cash for the same period last year, due to new and additional operating expenses that the Company did not incur prior to the USAA AMCO acquisition, such as distribution costs paid to third parties and USAA, sub-transfer agent service costs, 529 College Savings Plan expenses, and direct member channel expenses.

***Investing Activities –*** Cash used in investing activities during the three months ended March 31, 2020 was $2.2 million and consisted of net trading activity of $1.5 million and $0.7 million of property and equipment purchases. The nature of our trading activities is further described in 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, 2019.

For the three months ended March 31, 2019, cash used in investing activities was $1.4 million and consisted of $1.0 million of net trading activity and $0.5 million of property and equipment purchases.

***Financing Activities –*** Cash used in financing activities during the three months ended March 31, 2020 was $49.6 million and was mostly attributable to repayment of long-term debt under the 2019 Credit Agreement, repurchases of common stock, and payment of dividends of $38.0 million, $6.0 million and $3.5 million, respectively.

Cash used in financing activities for the same period in 2019 was $1.7 million and consisted primarily of the repurchase of common stock of $1.6 million.

### Contractual Obligations

On January 17, 2020, we entered into the First Amendment to the 2019 Credit Agreement with the other loan parties thereto, Barclays Bank PLC, as administrative agent, and the Royal Bank of Canada as fronting bank. Pursuant to the First Amendment, the Company repriced its Term Loan, lowering the interest rate spread by 75 basis points, from 3.25% over LIBOR, to 2.50% over LIBOR. On March 27, 2020, the Company executed a floating-to-fixed interest rate swap transaction to effectively fix the interest rate at 3.465% on $450 million of its outstanding Term Loan through the Term Loan maturity date of July 2026. As of March 31, 2020, the Company recorded a $6.3 million liability, which is included in other liabilities in the unaudited Condensed Consolidated Balance Sheets. Refer to Note 14, Derivatives, for further discussion regarding the swap transaction.

For the three month period ended March 31, 2020, the Company recorded a $5.5 million reduction in contingent consideration arrangement liabilities representing the USAA AMCO Acquisition earn-out payment liability, which is included in consideration payable for acquisition of business in the unaudited Condensed Consolidated Balance Sheets. 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.

There were no other significant changes to our contractual obligations as reported in our Annual Report on Form 10-K for the year ended December 31, 2019.

### Off‑Balance Sheet Arrangements

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. 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 March 31, 2020 and December 31, 2019, 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 $1.3 million, respectively, 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.

### Critical Accounting Policies and Estimates

Our consolidated financial statements and the notes are prepared in accordance with accounting principles generally accepted in the United States of America, which require the use of estimates. Actual results will vary from these estimates. A discussion of our critical accounting policies and estimates is included in Management’s Discussion and Analysis of Financial Condition and Results of Operations in the Company’s Annual Report on Form 10-K. A complete description of our significant accounting policies is included in our Annual Report on Form 10-K.

## Market risk

As filed, 5,835 characters.

### Market Risk

Substantially all of our revenues are derived from investment management, fund administration and distribution fees, which are primarily based on the market value of our AUM. Accordingly, our revenues and net income may decline as a result of our AUM decreasing due to depreciation of our investment portfolios. In addition, such depreciation could cause our clients to withdraw their assets in favor of other investment alternatives that they perceive to offer higher returns or lower risk, which could cause our revenues and net income to decline further.

The value of our AUM was $123.8 billion at March 31, 2020. A 10% increase or decrease in the value of our AUM, if proportionately distributed over all of our strategies, products and client relationships, would cause an annualized increase or decrease in our revenues of approximately $70.6 million at our weighted-average fee rate of 57 basis points for the quarter ended March 31, 2020. Because of declining fee rates from larger relationships and differences in our fee rates across investment strategies, a change in the composition of our AUM, in particular, an increase in the proportion of our total AUM attributable to strategies, clients or relationships with lower effective fee rates, could have a material negative impact on our overall weighted-average fee rate. The same 10% increase or decrease in the value of our total AUM, if attributed entirely to a proportionate increase or decrease in the AUM of the Victory Funds and USAA Funds, to which we provide a range of services in addition to those provided to institutional separate accounts, would cause an annualized increase or decrease in our revenues of approximately $78.0 million at the Victory Funds’ and USAA Funds’ aggregate weighted-average fee rate of 63 basis points for the quarter ended March 31, 2020. If the same 10% increase or decrease in the value of our total AUM was attributable entirely to a proportionate increase or decrease in the assets of our institutional separate accounts, it would cause an annualized increase or decrease in our revenues of approximately $42.1 million at the weighted-average fee rate across all of our institutional separate accounts of 34 basis points for the quarter ended March 31, 2020.

As is customary in the investment management industry, clients invest in particular strategies to gain exposure to certain asset classes, which exposes their investment to the benefits and risks of those asset classes. We believe our clients invest in each of our strategies in order to gain exposure to the portfolio securities of the respective strategies and may implement their own risk management program or procedures. We have not adopted a corporate‑level risk management policy regarding client assets, nor have we attempted to hedge at the corporate level or within individual strategies the market risks that would affect the value of our overall AUM and related revenues. Some of these risks, such as sector and currency risks, are inherent in certain strategies, and clients may invest in particular strategies to gain exposure to particular risks. While negative returns in our strategies and net client cash outflows do not directly reduce the assets on our balance sheet (because the assets we manage are owned by our clients, not us), any reduction in the value of our AUM would result in a reduction in our revenues.

### Exchange Rate Risk

A portion of the accounts that we advise hold investments that are denominated in currencies other than the U.S. dollar. To the extent our AUM are denominated in currencies other than the U.S. dollar, the value of that AUM will decrease with an increase in the value of the U.S. dollar, or increase with a decrease in the value of the U.S. dollar. Each investment team monitors its own exposure to exchange rate risk and makes decisions on how to manage that risk in the portfolios they manage. We believe many of our clients invest in those strategies in order to gain exposure to non‑U.S. currencies, or may implement their own hedging programs. As a result, we generally do not hedge an investment portfolio’s exposure to non‑U.S. currency.

We have not adopted a corporate-level risk management policy to manage this exchange rate risk. Assuming 8% of our AUM are invested in securities denominated in currencies other than the U.S. dollar and excluding the impact of any hedging arrangement, a 10% increase or decrease in the value of the U.S. dollar would decrease or increase the fair value of our AUM by approximately $990.0 million, which would cause an annualized increase or decrease in revenues of approximately $5.6 million at our weighted-average fee rate for the business of 57 basis points for the quarter ended March 31, 2020.

We operate in several foreign countries and incur operating expenses associated with these operations. In addition, we have revenue and revenue-sharing arrangements that are denominated in non-U.S. currencies. We do not believe foreign currency fluctuations materially affect our results of operations.

### Interest Rate Risk

Interest rate risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market interest rates. On March 27, 2020, the Company executed the Swap, a floating-to-fixed interest rate swap transaction, to effectively fix the interest rate at 3.465% on $450 million of its outstanding Term Loan through the Term Loan maturity date of July 2026. Refer to Note 14, Derivatives, for further information on the Swap. At March 31, 2020, we were exposed to interest rate risk as a result of the unhedged amounts outstanding under the 2019 Credit Agreement. Refer to Note 9, Debt, for a description of the amounts outstanding as of such date and the applicable interest rate.

## Controls and procedures

As filed, 1,437 characters.

### Disclosure Controls and Procedures

We maintain disclosure controls and procedures, as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act, that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our principal executive and principal financial officers, as appropriate, to allow for timely decisions regarding required disclosure.

Our management, including our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures (as such term is defined in Rule 13a-15(f) and 15d-15(f) under the Exchange Act) at March 31, 2020. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures are effective.

### Changes in Internal Control over Financial Reporting

There has been no change in the Company’s internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the quarter ended March 31, 2020, that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

## Risk factors

As filed, 2,035 characters.

For a discussion of our potential risks and uncertainties, see the risk factors previously disclosed in our Annual Report on Form 10-K for the year ended December 31, 2019 as filed with the SEC and the information contained in this report. The declaration, payment and determination of the amount of our quarterly dividends may change at any time. In making decisions regarding our quarterly dividends, we consider general economic and business conditions, our strategic plans and prospects, our businesses and investment opportunities, our financial condition and operating results, working capital requirements and anticipated cash needs, contractual restrictions (including under the terms of our 2019 Credit Agreement as amended) and legal, tax, regulatory and such other factors as we may deem relevant. There have been no material changes, other than as described below, to the risk factors in our Annual Report on Form 10-K for the year ended December 31, 2019.

**Our results of operations could be materially adversely impacted by the COVID-19 pandemic.**

On March 11, 2020, the World Health Organization declared COVID-19 a pandemic. The global spread of COVID-19 has created significant volatility, uncertainty, and economic disruption. In particular, global financial markets have seen increased volatility and significant changes in the value of investments. The extent to which the COVID-19 pandemic impacts our business, operations, and financial results will depend on numerous evolving factors that are outside of our control and that we may not be able to accurately predict, including: the duration and scope of the pandemic, actions taken in response to the pandemic, the impact of the pandemic on economic activity, the impact on our vendors, and the effect on our employees’ productivity. Any of these events could cause or contribute to the risks and uncertainties enumerated in the Annual Report and could materially adversely affect our business, financial condition, results of operations and/or stock price.

Filed May 11, 2020.
Source: SEC EDGAR, the filing index for accession 0001564590-20-024199. Last ingested by Listed: Nov 4, 2026, 18:36 ET. No prices; not investment advice.