Victory Capital Holdings, Inc. (VCTR) Earnings Call Transcript & Summary

Good morning, and welcome to the Victory Capital 2020 Annual Meeting of Stockholders. I would now like to turn the call over to Mr. David Brown, Chairman and Chief Executive Officer, who will preside over today's meeting. Please go ahead, Mr. Chairman.

Good morning. I would like to thank you all for joining us this morning for our 2020 Annual Meeting of Stockholders. Before we get into today's formal agenda, I would like to thank all of our clients, stockholders and employees for their ongoing support in Victory Capital. 2019 was a transformational year for us on many fronts. We significantly increased our size and scale as well as enhanced the diversification of our asset classes, products, distribution channels and clients, all while generating record financial results and reinvesting into our platform to support future growth. At the same time, our clients benefited from award-winning investment performance. We ended the year with 68% of our mutual fund and ETF assets under management earning 4- or 5-star ratings from Morningstar. During 2019, our next-generation business model that combines investment boutique qualities with the efficiency of a fully integrated, centralized operating and distribution platform continued to perform as expected. Entering the new year, we further demonstrated the resiliency of our model. As the markets rapidly declined in the reaction to the COVID-19 pandemic, our operating costs automatically flexed lower resulting in exceptionally strong financial results for the first quarter of 2020. GAAP operating income and operating margin, both set new quarterly record highs. As we look ahead, we are continuing to raise the bar while remaining focused on our winning playbook. Moving on to this business portion of today's meeting. We will now attend to the matters outlined in the -- on our proxy statement. Following this portion of the meeting, we will answer questions that stockholders may have asked online. If you have a question, please enter in the question field of the meeting portal in the next few minutes. I'd like to also extend a special welcome to our Board Members who are also joining us online for today's Annual Meeting of Stockholders. The Victory Capital Holdings Board is comprised of the following members: Milton Berlinski, Alex Binderow, Lawrence Davanzo, Richard DeMartini, James Hawkes, Karin Hirtler-Garvey, Robert Hurst, Alan Rappaport, plus myself. This is a diverse group of professionals with deep and broad perspectives, who provide valuable counsel to our management team. Complete biographies for each director can be found in our 2020 proxy statement. The wide-ranging experience we can draw from our Board includes asset management, corporate leadership, investing, capital markets, operations management, client service, corporate governance, risk management, strategy, financial services, economics and public policy. We are very fortunate to be represented by such a talented and engaged group of directors. I would also like to say the same thing about our entire management team. Joining us this morning are our President, Chief Financial Officer and Chief Administrative Officer, Michael Policarpo; President of our Investment Franchises, Kelly Cliff; and our Chief Legal Officer and Corporate Secretary, Nina Gupta, among others. Please note that the polls are currently open. If you are a stockholder who has not yet voted or a stockholder who would like to change your vote, you may do so by clicking on the voting button on the web portal and following the instructions. Now I'll turn the meeting over to our President, Chief Financial Officer and Chief Administrative Officer, Michael Policarpo. Mike?

Thank you, David. I would like to add my welcome to our 2020 Annual Meeting of Stockholders and introduce Matthew Dennis, who will serve as our inspector of elections. And from our outside independent auditor, Ernst & Young LLP, we are joined by Kim Mecurio, and partner, Matt M. This is the formal part of our annual meeting where we address the matters set forth in the proxy statement provided to stockholders. When we are finished, I will turn the floor back to our Chairman for any questions that may have been submitted via the virtual meeting portal. [ Only ] the validated stockholders will be asked -- will be able to ask questions in the designated field on the web portal. Out of consideration for others, I ask that you please limit yourself to 1 question that is germane to the business being conducted at this meeting. This meeting is being recorded. However, no one attending via webcast is permitted to use any audio recording device. During the course of our discussions this morning, we may make forward-looking statements regarding the company's future performance. I want to remind everyone that actual results could differ materially from those discussed in our forward-looking statements due to a variety of risk factors. We encourage our investors to familiarize themselves with those risk factors, which are detailed in our Form 10-K, which has been filed with the Securities and Exchange Commission. We can now proceed with the business of today's Annual Meeting. Matthew Dennis will confirm our mailing procedures and registered stockholders.

Thank you, Mike. I would like to present the affidavit of Broadridge Financial Solutions, pursuant to which Broadridge has confirmed that notice of this meeting and notice of Internet availability of proxy materials, including the 2020 proxy statement and our 2019 Annual Report were timely distributed to the stockholders of the company.

Thank you, Matt. The affidavit and proxy materials are directed to be filed with the records of the company.

I would also like to present a list of registered stockholders of the company's common shares as of March 25, 2020, the record date for this meeting.

Thank you. The list of registered stockholders is directed to be filed with the records of the company. Next, I would like to offer a final opportunity to any registered stockholder who has not yet voted to do so by clicking on the voting button on the web portal and following the instructions there. Stockholders who have voted and do not want to change their vote do not need to take any further action. [Voting]

Matt, please present your report regarding the number of common shares present at today's meeting.

There are a minimum of 63,742,490 shares or 90.1% of the company's common shares present in person or by proxy.

Thank you, Matt. The proxies, substitution of proxies and ballots presented to the meeting are hereby ordered to be filed with the records of the company. According to Matt's report, a quorum is present so that business may be properly conducted. As set forth in the proxy statement, the business of today's meeting includes 2 proposals. Proposal #1 is to elect 3 Class II Directors, each to serve for a 3-year term expiring at the Annual Meeting of Stockholders in the year 2023. Proposal #2 is to ratify the Audit Committee's selection of Ernst & Young LLP as the company's independent registered public accounting firm for the fiscal year ending December 31, 2020. Proceeding to Proposal #1, I recognize our Director of Finance, Lisa Seballos, for the purposes of nominating the 3 directors. Lisa?

Thank you, Mike. I hereby move that the following persons be elected as directors of the company, each to hold office until the Annual Meeting of Stockholders to be held in the year 2023 and until their successors are duly elected and qualified or until their earlier death, resignation or removal: James Hawkes, Robert Hurst and Alan Rappaport.

Is there a second to the motion?

I second the motion and move that voting for the election of directors be closed.

Is there a second to the motion to close the voting?

I second the motion. [Voting]

Voting for the election of directors is hereby closed. As a person appointed as an official proxy, I report that I have voted in accordance with proxies received from stockholders. Matt, may I have your results of the vote on the proposal of the election of the 3 Class II Directors?

Yes, I report that each of the 3 nominees for election as a Class II Director received not less than 542,790,373 votes or 97.3% of the total votes outstanding.

I hereby declare that James Hawkes, Robert Hurst and Alan Rappaport have been duly elected as Class II Directors of the company. The meeting will now proceed to consider -- consideration of Proposal #2. I recognize Lisa, again, for the purposes of presenting that proposal.

Thank you. I hereby move that the Audit Committee selection of Ernst & Young LLP as the company's independent registered public accounting firm for the fiscal year ending December 31, 2020, be ratified.

Is there a second to the motion?

I second the motion and move that voting on Proposal #2 be closed.

Is there a second to the motion to close the voting?

I second the motion. [Voting]

Voting on Proposal #2 is hereby closed. As a person appointed as an official proxy, I report that I have voted in accordance with proxies received from stockholders. Matt, may I have your results of the vote on the ratification of Ernst & Young LLP?

Yes. I report that the ratification of the Auditor -- Audit Committee's selection of Ernst & Young LLP as the company's independent registered public accounting firm for the fiscal year ending December 31, 2020, received not less than 547,895,249 votes or 98.2% of the total votes outstanding.

I hereby declare that the Audit Committee's selection of Ernst & Young LLP as the company's independent registered public accounting firm for the year ending December 31, 2020, has been ratified. Mr. Chairman, that is the formal business portion of the meeting.

Thank you, Mike. I'd like to open the meeting at this time for questions from stockholders. Please note that I will answer as many questions as time allows, but only questions germane to the meeting will be addressed.

At this time, there have been no questions submitted by shareholders, so I will turn the floor back to you, Mr. Chairman.

Thank you all very much for your continued support of Victory Capital. There being no further business to come before this meeting, 2020 Annual Meeting of Stockholders of Victory Capital Holdings is adjourned. Thank you.

Ladies and gentlemen, thank you for participating in today's conference. This concludes the program. You may now disconnect. Everyone, have a wonderful day.