Q4 2021 Victory Capital Holdings Inc Earnings Call
Okay.
Speaker 1: Good morning and welcome to the Victory Capital fourth quarter 2021 earnings conference call. All callers are in a list.
Good morning, and welcome to the victory capital fourth quarter 2021 earnings Conference call.
All callers are in a listen only mode.
Speaker 1: Following the company's prepared remarks, there will be a question and answer session.
Following the company prepared remarks, there will be a question and answer session.
Speaker 1: I will now turn the call over to Mr. Matthew Dennis, Chief of Staff and Director of Investor Relations. Please go ahead, Mr. Dennis.
I will now turn the call over to Mr. Matthew Dennis Chief of staff and director of Investor Relations. Please go ahead Mr. Dennis.
Speaker 2: Thank you. Before I turn the call over to David Brown, I would like to remind you that during today's conference call, we may make a number of forward-looking statements. Please note that Victory Capital's actual results may differ materially from these statements. Please refer to our SEC filings for a list of some of the risk factors that may cause actual results to differ materially from those expressed on today's call. Victory Capital assumes no duty and does not undertake any obligation to update any forward-looking statements.
Thank you before I turn the call over to David Brown, I would like to remind you that during today's conference call. We may make a number of forward looking statements. Please note that victory capital's actual results may differ materially from these statements. Please refer to our SEC filings for a list of some of the risk factors that may cause actual results to differ.
Materially from those expressed on today's call victory capital assumes no duty and does not undertake any obligation to update any forward looking statements.
Speaker 2: Our press release that was issued after the market closed yesterday disclosed both GAAP and non-GAAP financial results.
Our press release that was issued after the market closed yesterday disclose both GAAP and non-GAAP financial results. We believe the non-GAAP measures enhance the understanding of our business and our performance reconciliations between these non-GAAP measures and the most comparable GAAP measures are included in tables that can be found in our earnings press release.
Speaker 2: We believe the non- GAAP measures enhance the understanding of our business and our performance. Reconciliations between these non- GAAP measures and the most comparable GAAP measures are included in tables that can be found in our earnings press release and in the slide presentation accompanying this call, both of which are available on the investor relations portion of our website at ir.vcm.com.
And then the slide presentation accompanying this call both of which are available on the Investor Relations portion of our website at IR Dot V. C. M. Dot com. It is now my pleasure to turn the call over to David Brown, Chairman and CEO David.
Speaker 2: It is now my pleasure to turn the call over to David Brown, Chairman and CEO . David.
Speaker 2: Thanks, Matt. Good morning and welcome to Victory Capital's fourth quarter 2021 earnings conference call.
Thanks, Matt Good morning, and welcome to victory Capital's fourth quarter 2021 earnings Conference call.
Speaker 2: I'm joined today by Michael Pellicarpo, our President, Chief Financial and Administrative Officer, as well as Matt Dennis, our Chief of Staff and Director of Investor Relations.
Im joined today by Michael Pehl of Carpool, our President Chief financial and administrative officer, as well as Matt Dennis our chief of staff and director of Investor Relations.
Speaker 2: I'll start today by providing a quick overview of the final quarter of 2021.
I'll start today by providing a quick overview of the final quarter of 2021.
Speaker 2: Then it will step back to provide a longer-term perspective on our growth, capital allocation strategy, accomplishments since becoming a public company in 2018, and where we are headed.
And then it will step back to provide a longer term perspective on our growth capital allocation strategy accomplishments since becoming a public company in 2018, and where we are headed.
Speaker 2: After that, I will cover our investment performance metrics before returning the call over to Mike, who will review the fourth quarter and full year financial results in greater detail.
After that I will cover our investment performance metrics before turning the call over to Mike who will review the fourth quarter and full year financial results in greater detail.
Speaker 2: Following our prepared remarks, Mike, Matt, and I will be available to take your questions.
Following our prepared remarks, Mike, Matt and I will be available to take your questions.
The quarterly overview begins on slide five two.
Speaker 2: 2021 was a transformative year for Victory Capital in a number of different ways.
2021 was a transformative year for victory capital and a number of different ways.
Speaker 2: In the final quarter of the year, we closed two strategic growth acquisitions, New Energy Capital and West End Advisors.
In the final quarter of the year, we closed two strategic growth acquisitions, New energy capital and West end advisers with the new energy capital acquisition that closed in November we launched another growth vertical by the creation of our alternative investments platform.
Speaker 2: With the new energy capital acquisition that closed in November , we launched another growth vertical by the creation of our Alternative Investments Platform.
Speaker 2: The launching of this platform has many characteristics we like, including strong investor demand and healthy fees and margins.
The launching of this platform has many characteristics, we like including strong investor demand and healthy fees and margins. Additionally, the alternatives allocation plays an important long term role in a well diversified portfolio.
Speaker 2: Additionally, the alternatives allocation plays an important long-term role in a well-diversified portfolio.
Speaker 2: We've been looking for the right opportunity to enter this part of the industry for a number of years and began laying the groundwork well in advance of last year.
We'd be looking for the right opportunity to enter this part of the industry for a number of years and began laying the groundwork well in advance of last year.
Speaker 2: For example, we made investments to enhance our distribution resources, including investments in technology and procuring new data sets, as well as recruiting a team of experienced professionals focusing specifically on RAAs and family offices, which are both buyers of these products.
For example, we made investments to enhance our distribution resources, including investments in technology, and procuring new datasets as well as recruiting a team of experienced professionals, focusing specifically on <unk> and family offices, which are both buyers of these products.
New energy Capital's multi decade track record as a specialist focusing exclusively in the renewable and clean energy sector also came with the added benefit of bringing new ESG and impacting best and capabilities to our product set.
Speaker 2: New Energy Capital's multi-decade track record as a specialist focusing exclusively in the renewable and clean energy sector also came with the added benefit of bringing new ESG and impacting vesting capabilities to our product set.
As we add new franchises to alternative investments platform will use the same guiding principles that have led to our current success. For example, consistent with the investment franchise model on the traditional side of our business, we created economic alignment with the new energy capital team through a number of different mechanisms and <unk>.
Speaker 2: As we add new franchises to our alternative investments platform, we'll use the same guiding principles that have led to our current success. For example, consistent with the investment franchise model on the traditional side of our business, we created economic alignment with the new energy capital team through a number of different mechanisms in addition to providing technology, operating, and distribution support.
And to providing technology operating and distribution support.
Speaker 2: At the very end of the fourth quarter, we also entered the rapidly growing model portfolio segment of the industry with the closing of our West End Advisors Acquisition.
At the very end of the fourth quarter. We also entered the rapidly growing model portfolio segment of the industry with the closing of our West end advisors acquisition.
Speaker 2: West End Advisors is a fast-growing franchise whose products are primarily sold through intermediary platforms where we already have a strong presence.
West end advisers is a fast growing franchise, whose products are primarily sold through intermediary platforms, where we already have a strong presence.
Speaker 2: From the time the transaction was announced until it closed on December 31st, both of our distribution teams began collaborating to be able to hit the ground running in the new year.
From the time, the transaction was announced and Joel closed on December 31, both of our distribution teams began collaborating to be able to hit the ground running in the new year we.
Speaker 2: We've already had early success engaging new financial advisors on existing platforms and securing new shelf space on platforms where West End advisors did not have a presence.
We've already had early success engaging new financial advisers on existing platforms, and securing new shelf space on platforms, where west end advisors did not have a presence.
Speaker 2: With these acquisitions, as well as the THB Asset Management Acquisition that closed in the first quarter of 2021, we are excited by the prospects for each of these newly added investment franchises to contribute meaningfully to our organic growth in 2022 and beyond.
With these acquisitions as well as the THB asset management acquisition that closed in the first quarter of 2021, we are excited by the prospects for each of these newly added investment franchises to contribute meaningfully to our organic growth in 2022 and beyond.
Speaker 2: Although we are only a little over a month into the quarter, and understanding a lot could happen before the end of the quarter.
Although we are only a little over a multi into the quarter and understanding a lot could happen before the end of the quarter.
Speaker 2: I'm happy to report that we are seeing strong growth and net flows across our business and our net flow positive as a firm for the first quarter as of today.
I'm happy to report that we are seeing strong gross and net flows across our business and our net flow positive as a firm for the first quarter as of today, our won but not yet funded book of business is very healthy and there is significant momentum across both the recently added product set from our new acquisitions as well as a number of other products in our lineup.
Speaker 2: Our one but not yet funded book of business is very healthy and there is significant momentum across both the recently added products set from our new acquisitions as well as a number of other products in our line of business.
Shifting to the quarterly results, we ended the fourth quarter with total AUM of $183 7 billion.
Speaker 2: Shifting to the quarterly results, we ended the fourth quarter with total AUM of $183.7 billion, which was up 25% from the end of last year.
Which was up 25% from the end of last year.
Speaker 2: We achieved record revenue and adjusted earnings in the fourth quarter, which also marked our sixth consecutive quarter with adjusted EBITDA margins above 50%.
We achieved record revenue and adjusted earnings in the fourth quarter, which also marked our sixth consecutive quarter with adjusted EBITDA margins above 50%.
Speaker 2: Adjusted net income with tax benefit per diluted share was $1.27 in the fourth quarter, and $4.82 for the year, which was a 25% improvement from 2020.
Adjusted net income with tax benefit per diluted share was $1 27 in the fourth quarter and $4 82 for.
For the year, which was a 25% improvement from 2020.
Speaker 2: And yesterday, we announced that our board declared the seventh consecutive increase in our quarterly cash dividend, raising it 47% to $0.25 per share. With our annualized rate now at $1 per share, we intend to evaluate future potential increases to our cash dividend on an annual basis as opposed to a quarterly basis following the collusion of each calendar year.
And yesterday, we announced that our board declared a seventh consecutive increase in our quarterly cash dividend raising it 47% to <unk> 25 per share with our annualized rate now at $1 per share, we intend to evaluate future potential increases to our cash dividend on an annual basis as opposed to a quarterly basis following the call.
<unk> of each calendar year.
Speaker 2: Turning to slide six, our direct investor business continues to show material improvement with new account registrations steadily growing. The fourth quarter was our sixth consecutive quarter of improving net flows.
Turning to slide six our direct Investor business continues to show material improvement with new account registration steadily growing the fourth quarter was our sixth consecutive quarter of improving net flows.
Speaker 2: For the fourth quarter and for all of 2021, the 529 plan has been net flow positive, which has also been the case since we acquired the plan in 2019.
For the fourth quarter and for all of 2021. The 529 plan has been net flow positive, which has also been the case since we acquired the plant in 2019.
Speaker 2: Planned assets have increased 28% since we acquired it and crossed the $5 billion milestone during 2021.
Plant assets have increased 28% since we acquired it and crossed the $5 billion milestone during 2021.
Speaker 2: As I mentioned on a prior call, our mobile application was launched in the third quarter. The app has already been downloaded and installed by more than 110,000 users and we are receiving positive feedback.
As I mentioned on our prior call our mobile application was launched in the third quarter.
The App has already been downloaded and installed by more than 110000 users and we are receiving positive feedback or experience with app users is that they are more likely to buy products and sell products through the App and is also adds efficiency to our client servicing model.
Speaker 2: Our experience with app users is that they are more likely to buy products than sell products through the app and it also adds efficiency to our client servicing model.
Speaker 2: I also want to highlight that we held a special meeting of stockholders in November where they overwhelmingly supported the board's recommendation to eliminate the dual class share structure.
I also want to highlight that we held a special meeting of stockholders in November where they overwhelmingly supported the board's recommendation to eliminate the dual class share structure.
Speaker 2: This not only implemented best practices from a governance standpoint, but also positions our shares for inclusion in major indexes, which we expect may lead to net purchases
This not only implemented best practices from a governance standpoint, but also positions our shares for inclusion in major indexes.
Which we expect may lead to net purchases by index funds.
Speaker 2: Moreover, our previous share class structure was an impediment for some potential shareholders to own our stock as well, which has now been removed.
Moreover, our previous share class structure was an impediment for some potential shareholders to own our stock as well, which has now been removed.
Yeah.
Speaker 2: Moving to slide eight, while our industry continues to rapidly transform, our vision and strategy have remained consistent.
Moving to slide eight while our industry continues to rapidly transform our vision and strategy have remained consistent.
Speaker 2: We defined our own strategic path that is grounded on delivering superior client service, maintaining investment excellence, earning fair margins, and being efficient and thoughtful custodians of shareholder capital.
Define their own strategic path that is grounded on delivering superior client service, maintaining investment excellence, earning fair margins and being efficient and thoughtful custodians of shareholder capital with.
Speaker 2: The chart on the left illustrates our inorganic growth cycle, and the chart on the right shows our philosophy on allocation of capital.
The chart on the left illustrates our inorganic growth cycle in the chart on the right shows our philosophy on allocation of capital.
Speaker 2: We are at the beginning of a long-term secular trend of change and consolidation in the asset management industry. This evolution provides us with a great opportunity over a longer period of time to continue executing on a strategy to thoughtfully and profitably grow the company.
We are at the beginning of a long term secular trend of change in consolidation in the asset management industry.
This evolution provides us with a great opportunity over a longer period of time to continue executing on our strategy to thoughtfully and profitably grow the company.
Speaker 2: Supported by tangible results and recurring proof points of success, we are extremely excited about the future, and I personally look forward to continuing to implement our proven formula for success.
Supported by tangible results and recurring proof points of success. We are extremely excited about the future and I personally look forward to continuing to implement our proven formula for success.
Speaker 2: As a growth company, our primary use of excess capital has always been to support our growth initiatives and that will continue as we move forward.
As a growth company our primary use of excess capital has always been to support our growth initiatives and that will continue as we move forward.
Speaker 2: Given the growth we have had, our cash dividends and share repurchases have increased each year since we began this program.
Given the growth we've had our cash dividends and share repurchases have increased each year. Since we began these programs.
Speaker 2: This is not a change in strategy, but a function of our business become larger, more competitive and diversified, which has afforded us the ability to return capital to our shareholders through these mechanisms while continuing to execute on our strategy.
This is not a change in strategy, but a function of our business become a larger more competitive and diversified which has afforded us the ability to return capital to our shareholders through these mechanisms while continuing to execute on our strategy.
Since our IPO, but total capital returned to shareholders through dividends and repurchases was more than $134 million at the end of 2021 $62 million of that was distributed in calendar year 2021.
Speaker 2: Since our IPO, the total capital returned to shareholders through dividends and repurchases was more than $134 million at the end of 2021. $62 million of that was distributed in calendar year 2021.
Speaker 2: We continue to repurchase shares and the $0.25 per share cash dividend declared yesterday is 178% higher than the $0.09 per share dividend declared last February .
We continue to repurchase shares and a <unk> 25 per share cash dividend declared yesterday is 178% higher than the <unk> <unk> per share dividend declared last February .
Speaker 2: On slide nine, we step back to provide a wider perspective on the results this strategy has produced and the growth we have achieved.
On slide nine we step back to provide a wider perspective on the results. This strategy has produced and the growth we have achieved.
Speaker 2: This slide does a good job of illustrating our progress in the four years since we became a public company. We think long-term when we make business...
This slide does a good job of illustrating our progress in the four years since we became a public company. We think long term when we make business decisions, which is why I think it makes sense to review our financial performance over longer term periods.
Speaker 2: which is why I think it makes sense to review our financial performance over longer-term periods.
Our strategy is the consistent despite a rapidly changing market environment, we refer to our business model is being next generation because we have a clear vision of where we believe the industry is moving and we've deliberately designed our business model with that direction in mind.
Speaker 2: Our strategy has been consistent despite a rapidly changing market environment. We refer to our business model as being next generation because we have a clear vision of where we believe the industry is moving, and we've deliberately designed our business model with that direction in mind.
Speaker 2: This slide shows the consistency in the growth of our revenue and earnings trajectories, as well as the margin expansion achieved through efficiencies afforded by our centralized operating platform and our increasing scale.
This slide shows the consistency and the growth of our revenue and earnings trajectories as well as the margin expansion achieved through efficiencies afforded by a centralized operating platform and our increasing scale.
Speaker 2: Our shareholders have also been well-rewarded over this period with attractive capital appreciation and a history of increasing cash dividends.
Our shareholders have also been well rewarded over this period with attractive capital appreciation and a history of increasing cash dividends.
Speaker 2: As some of you are aware, each year Fortune Magazine analyzes the growth rates of revenue, earnings, and shareholder returns for public issuers over a three-year period to rank the top 100 fastest-growing companies in the U.S.
As some of you are aware each year Fortune magazine analyzes the growth rates of revenue earnings and shareholder returns for public issuers over a three year period to rank the top 100 fastest growing companies in the U S.
Speaker 2: In 2021, their analysis concluded with Victory Capital ranking as the ninth fastest-growing public company in the U.S. and the number one fastest-growing public asset management
2021, the analysis concluded with victory capital ranking as the 19th fastest growing public company in the U S and the number one fastest growing public asset management firm.
I've always referred to culture is one of victory Capital's main competitive advantages.
Speaker 2: I have always referred to culture as one of Victory Capital's main competitive advantages.
Speaker 2: While we have been increasing employee headcounts to support growth, we continually reinforce what we call our ownership culture, which means approaching business decisions with a long-term and client-centric view. Today, close to three-quarters of our employees own VCTR Stack and collectively own approximately 20% of the company.
While we have been increasing employee head count to support the growth we continually reinforced what we call our ownership culture, which means approaching business decisions with a long term and client centric view.
Today close to three quarters of our employees on V Ctr stack and collectively own approximately 20% of the company.
Speaker 2: In addition, our employees continue to invest alongside our clients by investing in Victory products. As of December 31st, our employees had approximately a quarter of a billion dollars invested in our own products.
In addition, our employees continue to invest alongside our clients by investing in victory products as of December 31, our employees had approximately a quarter of a $1 billion invested in our own products piece.
Speaker 2: These metrics are substantial, particularly given that our total headcount stood at only 485 full-time employees at ERS.
These metrics are substantial particularly given that our total head count stood at only 485 full time employees at year end.
Speaker 2: The two aforementioned statistics are the result of an engaged employee base that cares very much about our clients and our shareholders and approaches their work every day with a commitment and dedication that I believe is second to none in the industry.
284 mentioned statistics are the result of an engaged employee base that cares very much about our clients and our shareholders and approaches to work every day with their commitment and dedication that I believe is second to none in the industry.
On Slide 11, you can see our strong investment performance continued through the end of the year.
Speaker 2: On slide 11, you can see our strong investment performance continue through the end of the year.
Speaker 2: At the end of the fourth quarter, we had 43 mutual funds in ETFs with a 4 or 5 star overall rating for Morningstar, and 64% of our AUM in our mutual funds in ETFs was ranked 4 or 5 star by Morningstar.
At the end of the fourth quarter, we had 43 mutual funds and Etfs with a four or five star overall ratings for Morningstar and 64% of our AUM in our mutual funds and Etfs was ranked four or five star by Morningstar.
Speaker 2: 27 of our mutual funds and 11 of our ETFs ranked in the top quartile for the 2021 period.
27 of our mutual funds and 11 of our Etfs ranked in the top quartile for the 2021 period.
Speaker 2: Lastly, we continue to see the acquisition environment as extremely constructive.
Lastly, we continue to see the acquisition environment is extremely constructive our intention in 2022 is to continue at the same pace that we have historically with the acquisitions.
Speaker 2: Our intention in 2022 is to continue at the same pace that we have historically with the acquisition.
Speaker 2: We're well-experienced in executing acquisitions and have the capital flexibility to execute as well. Our focus will continue to be on acquisitions that will make our company better and more competitive.
We are well experiencing executing acquisitions and have the capital flexibility to execute as well our focus will continue to be on acquisitions that will make our company better and more competitive.
Speaker 2: I anticipate that the acquisitions will continue to range in size from small to large and we will be focusing on products that are part of a well-diversified portfolio that we can be competitive in and that earn a fair fee and margin.
I anticipate that the acquisitions will continue to range in size from small to large and we will be focusing on products that are part of a well diversified portfolio that we can be competitive in and earn a fair fee and margin.
Speaker 2: We currently are in a number of discussions that are in various stages of the process and as I've said many times in the past, the exact timing and the likelihood to close is hard to predict. What I can say is we are patient, yet ready immediately should the right opportunity present itself.
We currently are in a number of discussions that are in various stages of the process and as I've said many times in the past the exact timing and the likelihood to close is hard to predict what I can say is we are patient yet ready immediately should the right opportunity presented itself.
Speaker 2: With that, I will turn it over to Michael for more color on the financials. Michael.
With that I will turn it over to Michael for more color on the financials Michael.
Speaker 3: Thanks, Dave, and good morning, everyone. The financial results review begins on slide 13.
Thanks, Dave and good morning, everyone. The financial results review begins on slide 13.
Speaker 3: Total AUM increased $24 billion, or 15%, from the end of the third quarter to $183.7 billion at year-end.
Total AUM increased $24 billion or 15% from the end of the third quarter to $183 7 billion at year end.
Speaker 3: This increase was largely attributable to assets acquired in the West End Advisors and New Energy Capital acquisitions that totaled $20 billion.
This increase was largely attributable to assets acquired in the West and advisors and new energy capital acquisitions that totaled $20 billion.
Speaker 3: In addition, positive market action was partially offset by net outflows in the quarter.
In addition positive market action was partially offset by net outflows in the quarter.
Speaker 3: Q4 revenue rose 1% sequentially from the third quarter, reaching $229.1 million, which was a 14% increase from the prior year. Keep in mind, the West End Advisors acquisition closed on December 31, so there was no P&L impact in either the quarterly or full year period.
Q4 revenue rose, 1% sequentially from the third quarter, reaching $229 $1 million, which was a 14% increase from the prior year.
Keep in mind, the West end advisors acquisition closed on December 31, So there was no P&L impact in either the quarterly or full year period now.
Speaker 3: None of the operating results in this presentation include any West End Advisors financing.
None of the operating results in this presentation include any western advisors financials.
Speaker 3: For the year, revenue reached the record $890 million, which was 15% higher than in 2020.
For the year revenue reached a record $890 million, which was 15% higher than in 2020.
Speaker 3: Suggested EBITDA was $114.9 million in the fourth quarter and $449 million for the full year period.
Adjusted EBITDA was $114 9 million in the fourth quarter and $449 million for the full year period.
Speaker 3: The fourth quarter of 2021 represented our sixth consecutive quarter generating margins greater than 50% with an adjusted EBITDA margin at 50.2%.
The fourth quarter of 2021 represented our sixth consecutive quarter generating margins greater than 50%.
With an adjusted EBITDA margin at 52%.
Speaker 3: For the full year, adjusted EBITDA margin was 50.4%, which was up 170 basis points from the 2020.
For the full year adjusted EBITDA margin was 54%.
Was up 170 basis points from the 2020 full year period.
Speaker 3: Our gap net income was $69.7 million in the quarter, or $0.94 per diluted share.
Our GAAP net income was $69 $7 million in the quarter or <unk> 94 per diluted share.
Speaker 3: This was a decrease from $74.2 million, or $1 per diluted share in the third quarter, and was primarily due to higher acquisition-related restructuring and integration costs.
This was a decrease from $74 2 million or $1 per diluted share in the third quarter and was primarily due to higher acquisition related restructuring and integration costs.
Speaker 3: We also had higher compensation expenses in Q4, reflecting $1.9 million of transaction-related compensation, as well as higher variable comp expense. The move...
We also had higher compensation expenses in Q4, reflecting $1 $9 million of transaction related compensation as well as higher variable comp expense.
We're moving some of the noncash accounting noise.
Speaker 3: Q4 adjusted net income with tax benefit increased to a record $93.7 million, or $1.27 per diluted share, up 1% sequentially from the third quarter, and up 19% from Q4 2020.
Q4, adjusted net income with tax benefit increased to a record $93 $7 million or $1 27 per diluted share up 1% sequentially from the third quarter and up 19% from Q4 2020.
Speaker 3: For the full year 2021, Gap Net Income climbed 31%, with Gap EPS reaching $3.75 per diluted share.
For the full year 2021, GAAP net income climbed 31% with GAAP EPS, reaching $3 75 per diluted share.
Speaker 3: Adjusting that income with tax benefit was $357.1 million, or $4.82 per diluted share, an increase of 25% over 2020.
Adjusted net income with tax benefit was $357 1 million or $4 82 per diluted share.
An increase of 25% over 2020.
On the capital management front.
Speaker 3: We price the $505 million incremental term loan used to finance the West End Advisors acquisition at LIBOR plus 225 basis points.
We priced the $505 million incremental term loan used to finance the west end advisors acquisition at LIBOR, plus 225 basis points.
This is the same level at the original term loan.
Speaker 3: although the incremental portion carries a 50-basis point floor for libraries.
Although the incremental portion carries a 50 basis point floor for LIBOR.
Speaker 3: So far, in 2022, we have paid back $55 million of the debt that was outstanding at the start of the year.
So far in 2022, we have paid back $55 million of the debt that was outstanding at the start of the year.
Speaker 3: We returned a total of $16 million of capital to shareholders in the form of cash dividends and share repurchases in the quarter, which brings the year-to-date total capital return to just over $62 million.
We returned a total of $16 million of capital to shareholders in the form of cash dividends and share repurchases in the quarter.
Which brings the year to date total capital return to just over $62 million.
Speaker 3: This is a 48% increase compared to capital returns in 2020.
This is a 48% increase compared to capital returns in 2020.
Turning to slide 14, total AUM of $183 7 billion at year end was up 15% from $159 9 billion at the end of September .
Speaker 3: Turning to slide 14, total AUM of $183.7 billion at year-end was up 15% from $159.9 billion at the end of September .
Speaker 3: Year-over-year AUM increased 25% from the end of 2020.
Year over year, AUM increased 25% from the end of 2020.
The business continues to be highly diversified by client type as evidenced by the bar chart. On this page we have three deep distribution channels with each representing over 25% of our firm AUM.
Speaker 3: The business continues to be highly diversified by client type, as evidenced by the bar chart on this page.
Speaker 3: We have three deep distribution channels, with each representing over 25% of our firm AUM.
On slide 15, we cover long term asset flows.
Speaker 3: Gross long-term sales reached the record $27.9 billion in 2021.
Gross long term sales reached a record $27 9 billion in 2021.
Speaker 3: which was 20% above the prior record level achieved in 2020.
Which was 20% above the prior record level achieved in 2020.
Speaker 3: Net outflows in the fourth quarter of the year were impacted by two exceptionally large redemptions in October that were one time in nature.
Net outflows in the fourth quarter of the year were impacted by two exceptionally large redemption in October that were onetime in nature.
Speaker 3: We were net flow positive in November and then had modest net outflows in December .
We were net flow positive in November and then had modest net outflows in December .
Our long term net flows improved substantially in 2021 from the prior year as we had a 64% improvement.
Speaker 3: Our long-term net flows improved substantially in 2021 from the prior year, as we had a 64% improvement.
Speaker 3: As Dave guided, we expect the flow momentum to continue in 2022 and look forward to the first full year of incorporating asset flows from West End Advisors, New Energy Capital, and THP into our firm-wide flow plan.
As Dave guided we expect the flow momentum to continue in 2022 and look forward to the first full year of incorporating asset flows from west end advisors, New energy capital and THP into our firm wide flow picture.
Speaker 3: For perspective, West End advisors generated positive long-term net flows of $4.4 billion in 2021 while they were still an independent firm.
For perspective, Western advisors generated positive long term net flows of $4 4 billion in 2021, while they were still an independent firm.
Speaker 3: Lastly, the new year is off to a strong start across many of our products and channels from a flow perspective.
Lastly, the new year is off to a strong start across many of our products and channels from a flow perspective.
Speaker 3: Turning to slide 16, quarter over quarter revenues increased by 1%.
Turning to slide 16 quarter over quarter revenues increased by 1% driven.
Speaker 3: driven by a higher average realized fee rate in the fourth quarter of 56.0 basis.
Driven by a higher average realized fee rate in the fourth quarter of 56.0 basis points.
Speaker 3: which was the result of two months of NEC's results.
Which was the result of two months of any <unk> results.
Speaker 3: firm-wide asset mix, and a slight uptick in annual performance.
Firm wide asset mix and a slight uptick in annual performance fees.
Speaker 3: Money market yield support negatively impacted fee rates and accounted for a drag of approximately 0.8 basis points on our consolidated average fee rate in the fourth quarter.
Money market yield support negatively impacted fee rates and accounted for a drag of approximately <unk> eight basis points on our consolidated average fee rate in the fourth quarter.
Speaker 3: Should interest rates increase during the year, I would expect this drag would lessen and eventually go away depending on the level and timing of the interest rate increase.
Should interest rates increased during the year I would expect this drag with lesson and eventually go away depending on the level and timing of the interest rate increases.
Year over year revenue was up 15% in line with the 16% increase in average AUM.
Speaker 3: Year over year, revenue was up 15% in line with the 16% increase in average AUM.
We anticipate our firm wide average fee rate to decrease going forward solely due to the acquisition of western advisers as their average realized fee rate is 30 basis points.
Speaker 3: We anticipate our firm-wide average fee rate to decrease going forward solely due to the acquisition of West End Advisors as their average realized fee rate is $30,000.
Speaker 3: Although their average realized fee rate is lower than our firm-wide average realized fee rate, we do expect their overall business to be additive to our margins as their business is both highly profitable and scalable.
Although their average realized fee rate is lower than our firm wide average realized fee rate. We do expect their overall business to be additive to our margins as their business is both highly profitable and scalable.
Speaker 3: Moving to slide 17, you can see our total expenses increased $9.7 million from the third quarter.
Moving to slide 17, you can see our total expenses increased $9 7 million from the third quarter.
Speaker 3: Higher acquisition-related, restructuring, and integration expenses related to the closings of our two acquisitions accounted for most of this increase.
Higher acquisition related restructuring and integration expenses related to the closings of our two acquisitions accounted for most of this increase.
Speaker 3: We had acquisition and transaction-related compensation expenses totaling $1.9 million in the fourth quarter, which we broke out in the table here to help with transparency.
We had acquisition and transaction related compensation expenses totaling $1 $9 million in the fourth quarter, which we broke out in the table here to help with transparency.
Speaker 3: This expense rolls up into compensation rather than into the acquisition-related line item as it represents one-time transaction-related compensation, as well as non-cash accruals related to potential performance-based earn-out payments.
This expense rolls up into compensation rather than into the acquisition related line item as it represents one time transaction related compensation as well as noncash accruals related to potential performance based earn out payments.
Speaker 3: As a percentage of revenue, cash compensation rose slightly on higher incentive compensation approvals in the fourth quarter compared with prior.
As a percentage of revenue cash compensation rose slightly on higher incentive compensation accruals in the fourth quarter compared with prior quarters.
Speaker 3: For the full year 2021, cash compensation was 23.6% of revenue and in the range of expectations.
For the full year 2021 cash compensation was 23, 6% of revenue and in the range of expectations.
Speaker 3: Shifting to our non-GAAP metrics for the quarter, please turn to slide 18.
Shifting to our non-GAAP metrics for the quarter, Please turn to slide 18.
Speaker 3: Adjusting that income with tax benefit per diluted share increased to $1.27.
Adjusted net income with tax benefit per diluted share increased to $1 27.
Speaker 3: up from $1.25 in the third quarter and up 19% from $1.07 per diluted share in last year's fourth quarter.
Up from $1 25.
In the third quarter and up 19% from $1 <unk> per diluted share in last year's fourth quarter.
Speaker 3: Adjusted net income of $93.7 million generated in the quarter included a $7.3 million tax benefit.
Adjusted net income of $93 $7 million generated in the quarter included a $7 $3 million tax benefit.
Speaker 3: For the full year, adjusted net income with tax benefit grew 25% to $357.1 million, or $4.82 per diluted share.
For the full year adjusted net income with tax benefit grew 25% to $357 1 million or $4 82 per diluted share.
Adjusted EBITDA margin contracted slightly compared with the third quarter.
Speaker 3: adjusted EBITDA margin contracted slightly compared with the third quarter. We are continuing to make investments in the business and thus we are maintaining our adjusted EBITDA margin guidance of approximately 49% for 2022.
We are continuing to make investments in the business and thus we are maintaining our adjusted EBITDA margin guidance of approximately 49% for 2022.
Speaker 3: As we have stated previously, this will fluctuate quarter over quarter and even year over year depending on AUM levels and the timing of investments being made to drive and support future growth.
As we have stated previously this will fluctuate quarter over quarter, and even year over year, depending on AUM levels and the timing of investments being made to drive and support future growth.
Speaker 3: For the full year 2021, adjusted EBITDA margin was 50.4%.
For the full year 2021, adjusted EBITDA margin was 54%.
Speaker 3: Lastly, we do not expect any of the current inflationary pressures to materially impact our overall expense base or specifically our compensation expense.
Lastly, we do not expect any of the current inflationary pressures to materially impact our overall expense base or specifically our compensation expense.
Speaker 3: Keep in mind that approximately two-thirds of our overall expense base is variable and is linked to revenue and or assets, and the other one-third is fixed.
Keep in mind that approximately two thirds of our overall expense base is variable and is linked to revenue and or assets and the other one third is fixed.
Speaker 3: Given this, we believe we are well positioned to operate our business in an effective and efficient manner while continuing to reinvest despite the current volatile market and inflationary environment.
Given this we believe we are well positioned to operate our business in an effective and efficient manner, while continuing to reinvest despite the current volatile market and inflationary environments.
Yeah.
Speaker 3: Looking at our financial condition on slide 19, you can see that entering into the incremental term loan increased leverage to 2.2 times at year end.
Looking at our financial condition on Slide 19, you can see that entering into the incremental term loan increased leverage to two two times at year end.
Speaker 3: This indication of the incremental loan was oversubscribed, and we greatly appreciate the strong show of confidence by our lenders.
Syndication of the incremental loan was oversubscribed and we greatly appreciate the strong show of confidence by our lenders.
Our cost of debt is very manageable and we still have to hedge fixing the interest rate on nearly half of our total debt.
Speaker 3: Our cost of debt is very manageable, and we still have to hedge, fixing the interest rate on nearly half of our total debt.
Speaker 3: our $100 million Revolving Credit Facility remains undrawn.
Our $100 million revolving credit facility remains undrawn.
Speaker 3: And, as in the past, we intend to deploy the majority of our excess capital to reducing debt for the flexibility to do future acquisitions.
And as in the past, we intend to deploy the majority of our excess capital to reducing debt for the flexibility to do future acquisitions.
Speaker 3: As of today, we have already paid down $55 million of debt, which demonstrates our commitment and ability to de-lever quickly.
As of today, we have already paid down $55 million of debt, which demonstrates our commitment and ability to delever quickly.
Our primary cash uses for the business in 2022 include reducing debt and the potential third earn out payment to USAA, which has a maximum liability of $37 5 million.
Speaker 3: Our primary cash uses for the business in 2022 include reducing debt and a potential third earn out payment to USAA, which has a maximum liability of $37.5 million.
Speaker 3: This will be due in the latter part of the third quarter or the early part of the fourth quarter.
This will be due in the latter part of the third quarter or the early part of the fourth quarter.
Speaker 3: We also announced another increase in our quarterly cash dividend yesterday. As Dave highlighted, moving forward, we intend to evaluate additional increases to the cash dividend on an annual basis.
We also announced another increase in our quarterly cash dividend yesterday as Dave highlighted moving forward, we intend to evaluate additional increases to the cash dividend on an annual basis.
Speaker 3: That concludes our prepared remarks. I would now like to turn it back over to the operator for questions.
That concludes our prepared remarks, I would now like to turn it back over to the operator for questions.
Thank you Sir at this time I would like to remind everyone. If you would like to ask a question simply press Star then the number one on your telephone keypad your.
Speaker 1: Thank you, sir. At this time, I would like to remind everyone, if you would like to ask a question, simply press star, then a number one on your telephone keypad. Your first question comes from the line of Craig Saigon Fowler of Bank of America Securities. Good morning, David, Michael.
First question comes from the line of Craig If I can.
<unk> of Bank of America Securities.
Good morning, David Michael Hope, you're both doing well.
How are you.
Speaker 4: So my first question is on Weston Advisors. Can you update us on the very early progress in that acquisition? And if you're finding new cross-op opportunities, given really their unique relationships with REAs, which I know isn't very easy for many active managers to break into.
So my first question is on Western advisors.
Can you update us on the very early progress in that acquisition and if you are finding new cross sell opportunities given really their unique relationships with <unk>, which I know isn't very easy for many active managers to break into.
Speaker 2: It's Dave. Thanks for the question. The acquisition is going phenomenally. You know, West End kind of pre-acquisition was a fantastic company. They had great products, great investment performance, and great relationships.
It's Dave.
Thanks for the question.
The acquisition is going phenomenally.
Western kind of pre acquisition was a fantastic company had great products, great investment performance and great relationships.
Speaker 2: We are really just highlighting a lot of that. The cross-selling is working as we're going through and working with them. You know, we're exploring other platforms to get their products on, and that's going very well. And I would just say the momentum going into the close of the acquisition has continued as they've become part of our company. And, you know, as we look forward, you know, the thesis has always been that we were going
We're really just highlighting a lot of that.
The cross selling is working.
As we're going through and working with them.
We're exploring other platforms to get their products on and Thats going very well and I would just say the momentum going into the close of the acquisition has continued.
As they become part of our company and as we look forward.
<unk> has always been that we were going to.
Speaker 2: accelerate what they had already started doing through accelerated distribution opportunities, through cross-selling, and through really allowing them to focus on serving clients and then getting more clients. So we couldn't be happier with what we've seen in the first month and a half of the acquisition.
Accelerate what they had already started doing through through accelerated distribution opportunities through cross selling and to really allowing them to focus on.
Serving clients.
And then getting more clients. So we couldnt be happier with what we've seen in the first mark and a half of.
The acquisition.
Speaker 4: Thank you, David. And just for my follow up, given the elimination of the dual share class structure that you guys just decided at the special meeting, can you update us on the potential for large index ETF and fund buying over the near term? And I'm thinking the big ones like Russell 2000, Vanguard Crisp.
Thank you David and just for my follow up given the elimination of the dual share class structure.
You guys just decided at a special meeting can you update us on the potential for large index ETF and fund buying over the over the near term and I'm thinking of the big ones like Russell 2000, and Vanguard crest.
Speaker 2: Yeah, hi, Craig. This is Matt. Yeah, we definitely think that, you know, the
Yes, Hi, Craig This is Matt, yes, we definitely think that.
The objects that inhibited us from the Russell and some of the S&P indexes have been removed the Russell does their reconstitution once a year and so we anticipate in the second quarter that we would be eligible for inclusion in that and then we would obviously be also in the Russell 2000, if we got into the.
Speaker 2: Objects that inhibited us from the Russell and some of the SMP indexes have been removed the Russell does their reconstitution once a year. And so we anticipate in the second quarter that we would be eligible for inclusion in that. And then we would obviously be also in the Russell 2000 if we got into the larger universe.
The larger universe.
Speaker 2: As far as S&P and some of the other ones, they do those on an ad hoc basis and they have a committee structure that does it. We know that we've removed the impediment and it's really kind of up to the committees on timing. But we do believe that the net result will include a lot of index funds that we'll be buying our shares on a net basis in the next year. Thank you.
As far as S&P and some of the other ones. They do those on an AD hoc basis or they have a committee structure that does it we know that we have removed the impediment and it's really kind of up to the committees on timing, but we do believe that.
The net result will include a lot of index funds that will be we'll be buying our shares on a net basis in the next year.
That's great news, thanks for taking my questions.
Speaker 1: Your next question comes from the line of Ken Worthington of JP Morgan.
Your next question comes from the line of Ken Worthington of Jpmorgan.
Speaker 5: Hi, good morning. Um, it looks like maybe one or both of the unusual outflows in October were in the direct channel, uh, maybe even out of the USA income fund. And I'm trying to understand how this works in the direct channel. So can you give us a bit more color here?
Hi, good morning.
It looks like maybe one or both of the unusual outflows in October were in the direct channel maybe even out of the USA income fund and I'm trying to understand how this works in the direct channel. So can you give us a bit more color here.
Speaker 2: I'll start off, Ken, it's Dave, and then I'll allow Mike to finish off. I, yeah, we're not going to go into the details of where.
I'll start off Kevin, It's Dave and then I'll ask Mike to finish off.
We're not going to go into the details of where the two large outflows were.
Speaker 2: the two large outflows were and kind of what products. We don't give that level of detail. I would just direct you to say that they were one time in nature.
And kind of what products, we don't give that level of detail I would just direct you to say that to say that they were onetime in nature.
Speaker 2: And, you know, as we've moved into 2022, you know, we have a lot of momentum. I think in the script, I talked about that we were net flow positive as of today. And I think we have a ton of momentum going into 22. And I look at those outflows.
And as we've moved into 2022.
We have a lot of momentum I think in the script I talked about that we were net flow positive as of today and I think we have a ton of momentum going into 'twenty, two and I look at those outflows really as as we've said onetime in nature and Mike I don't know if you want to add anything to that.
Speaker 2: Really, as as we've said one time in nature and Mike, I don't know if you want to add anything to that.
Speaker 3: Yeah, I think you picked it up. I think if you look at, you can see where the asset classes are in kind of our roll forwards than it was in mid-cap and in fixed income, but that's all I would.
Yes, I think you picked it up I think if you look at you can see where the asset classes are in kind of a roll forward than it was in mid cap and in fixed income, but thats all I would add.
Okay, Okay, great and I know you gave us some some color on on M&A, but just given the market volatility.
Speaker 5: I know you gave us some color on M&A, but just given the market volatility, has the volatility been pronounced enough to have any impact at all on conversations just yet? Or is everything sort of continuing normally as you'd expect in sort of the beginning of the calendar year?
Has anything changed in how does the volatility been pronounced enough to have any impact at all on conversations just yet or is everything sort of continuing.
Normally.
As you would expect in sort of the beginning of the calendar year.
It's Dave Ken.
Speaker 2: It's Dave, Ken. I would start off by saying, if you really think about why there are conversations happening with M&A and the consolidation that's going to occur, none of those court issues have changed.
I would start off by saying if you really think about why there are conversations happening with M&A and the consolidation that's going to occur none of those core issues have changed so the conversations are around making businesses better giving.
Speaker 2: So the conversations are around, you know, making businesses better, giving, you know, businesses access to additional distribution, the ability to scale and reinvest and the market volatility hasn't really.
Businesses access to additional distribution.
The ability to scale and reinvest in the market volatility hasn't really.
Speaker 2: impacted that. Our discussions typically are over longer periods of time, so some of the groups we've been talking to, we've been talking to for longer periods and they've been through good times and through volatile times.
Impacted that.
Our discussions typically are over longer periods of time. So some of the groups we've been talking to we've been talking to for longer periods than they.
<unk> been through good times and through volatile times.
Speaker 2: I would I guess sum up saying that, you know, we haven't seen an impact, you know, we have done
I would guess some up saying that we haven't seen an impact.
We have done four transactions.
Speaker 2: transactions in four years as a public company plus a minority investment. We've guided that we don't see any difference going forward from a cadence perspective, and I think we stand by that. And I think the market volatility, you know, in a way might actually cause firms to wanna do more or do more from an acquisition standpoint as opposed to less.
For years as a public company plus a minority investment we guided that we don't see any difference going forward from a cadence perspective, and I think we stand by that.
I think the market volatility.
In a way might actually cause firms to want to do more or do more from an acquisition standpoint as opposed to less.
Okay, great. Thank you very much.
Speaker 1: Your next question comes from the line of Cullen Johnson of B Riley.
Your next question comes from the line of Cullen Johnson of B Riley.
Hey, good morning, Thanks for taking my questions.
Speaker 6: Just sticking with the topic of M&A, is there a leverage level above which maybe you wouldn't consider another large debt finance acquisition? I guess recognizing the pace of M&A could slow some from the heightened pace we saw last year in the short term, but if we think longer term, does there exist a threshold under which a larger transformational acquisition, again, becomes more viable in your perspective?
And just sticking with the topic of M&A is there is there a leverage level above which maybe you wouldn't consider another large debt finance acquisition I guess, recognizing the pace of M&A could slow some from the heightened pace, we saw last year in the short term but.
If we think longer term does there exist a threshold under which are larger.
Informational acquisition again becomes more viable.
Perspective.
It's Dave Thanks for the question.
Speaker 2: You know, we have so many levers to pull on financing acquisitions from debt, as you've referenced, from cash on hand, from generating cash from an ounce to close.
We have so many levers to pull on financing acquisitions from.
From that as you referenced.
From cash on hand from.
From generating cash from announce to close from structuring around revenue sharing earn out.
Speaker 2: from structuring around revenue, share, and earn out. You know, and each transaction is really around the current facts and circumstances.
And each transaction is really around the current facts and circumstances.
Speaker 2: We are mindful of our leverage level. We are at 2.2 times at the end of the year. And I think we have disclosed that we have started to pay down that debt pretty aggressively. We are going to use
We are mindful of our leverage level.
At two two.
<unk> at the end of the year and I think we have disclosed that we have started to pay down that debt pretty aggressively.
We're going to use.
Speaker 2: You know, most of our free cash flow, excess capital to pay down debt, to give our balance sheet flexibility to do additional deals.
Most of our free cash flow.
<unk> capital to pay down debt to give our balance sheet flexibility to do additional deals.
Speaker 2: I don't really see any constraints going forward with doing a large transformational deal and also keeping leverage at an acceptable level.
Not really see any constraints going forward.
We're doing a large transformational deal and also keeping leverage at an acceptable level, we have not come out and said, we will not do a deal above a certain level of leverage but we're mindful of it.
Speaker 2: We have not come out and said, we will not do a deal above a certain level of leverage, but we're mindful of it. You know, we, we understand that leverage is the leverage levels are important and we're going to be mindful of it, but we don't have a cap on it. But by no means, does it mean that we're going to go to exorbitant leverage level?
We understand.
That leverage.
Is the leverage levels are important and we're going to be mindful of it but we don't have a cap on it but by no means does it mean that we're going to go to exorbitant leverage levels.
Speaker 6: Got it. Thank you. That's helpful. And then kind of looking at some of the crypto-related assets that were introduced in the last couple of quarters, do you guys break out the level of AUM in that line item specifically or the level of growth, or do you kind of have any visibility into how that's kind of taken off in the last couple of quarters?
Got it. Thank you that's helpful and then kind of looking at.
Some of the crypto related assets.
Were introduced in the last couple of quarters do you guys break out that level of AUM.
And that line items, specifically or the level of growth or do you kind of have any visibility into how that's kind of taken off in the last couple of quarters.
Speaker 2: We don't break it out, but what I can tell you is we have a lot of interest from potential investors. It's a lot of education at this point.
We don't break it out but what I can tell you is we have a lot of interest from potential investors. Its a lot of education at this point.
Speaker 2: to really educate the market on, you know, how this fits into a well-diversified portfolio. We're encouraged by the...
To really educate the market on how this fits into a well diversified portfolio.
We're encouraged by the interest.
Speaker 2: The interest has not yet converted into a large level of assets. I think that'll be over time as the institutional investor, the retail investor really gets comfortable with it as an allocation in a portfolio. We love our product that we're offering today, and we think over time there's a real chance for it to grow, but we're spending a lot of time with investors around education today.
Interest has not yet converted into.
Large level of assets I think that'll be over time as the institutional investor the retail investor really gets comfortable with it as an allocation in our portfolio.
We love our product that we're offering today and we think over time.
Theres, a real transfer it to grow but we're spending a lot of time with investors around education today.
Great. Thanks, that's helpful. Those are all my questions.
Speaker 1: Again, if you would like to ask a question, simply press star then the number one on your telephone keypad. Your next question comes from the line of Kenneth Lee of RBC.
Again, if you would like to ask a question simply press Star then the number one on your telephone keypad. Your next question comes from the line of Kenneth Lee of RBC.
Speaker 2: Hi, good morning and thanks for taking my question. Just one on capital deployment priorities. How should we interpret the meaningful dividend increase?
Hi, good morning, and thanks for taking my question.
Just one on capital deployment priorities.
How should we interpret the meaningful dividend increase should we think of this as a subtle potential change in dividend policy going forward. Thanks.
Speaker 2: think of this as a subtle potential change in dividend policy going forward. Thanks.
Speaker 2: Hi, Ken, it's Dave. No, you shouldn't interpret it as a change in our dividend policy. You know, our use of our excess capital and free cash flows, again, going to primarily go towards
Hi, Ken It's Dave No you Shouldnt interpret as a change in our dividend policy.
Our use of our excess capital and free cash flows again going to primarily go towards paying down our debt.
Speaker 2: paying down our debt, the increase in the dividend, the share repurchases.
The increase in the dividend the share repurchases is really just a reward to our shareholders for our business becoming.
Speaker 2: is really just a reward to our shareholders for our business becoming.
Speaker 2: more scaled, stronger, more competitive.
More scaled stronger more competitive.
Speaker 2: It's still an ancillary part of our capital and deployment.
It's still an ancillary part of our capital.
And the deployment and we go back our capital strategy has been consistent since we've been a public company. We have a capital strategy, that's going to support our overall corporate strategy, which a big part of that or.
Speaker 2: And we go back, our capital strategy has been consistent since we've been a public company.
Speaker 2: We have a capital strategy that's going to support our overall corporate strategy, which a big part of that, or a part of that is around.
We're a part of that is around acquisitions.
Great and just want one follow up if I may on on the West end advisors, how should we think about incremental margins.
Speaker 3: rate. And just one follow-up, if I may, on the West End advisors. How should we think about incremental margins?
Thanks.
Speaker 3: Good morning. It's Mike. Yeah, I think what we've said in kind of our prepared remarks was that the fee rate on less than was about 30 basis points. However, I think what we've also said is that as we think about the integration onto our platform, the margins will be at parity or even higher than our current margins.
Hey, Ken Good morning, It's Mike, Yes, I think what we've said and kind of our prepared remarks was that the fee rate on less than was about 30 basis points. However.
However, I think what we've also said is that as we think about the integration onto our platform.
Margins will be.
At parity or even higher than our current margins are.
Speaker 3: It's a very scalable platform. We have, you know, the leverage point of our existing distribution force coupled with West End's distribution force. So, most of the investments that we've been making in the RIA space and the multifamily office space will be leveraged for West End as well.
A very scalable platform we have.
The leverage point of our existing distribution force, coupled with west dense distribution force.
So most of the investments that we've been making.
In the RF space and the multifamily office space will be leveraged for west end as well.
Got you. Thank you very much.
Your next question comes from the line of Alex Murray of K B W.
Speaker 1: Your next question comes from the line of Alex Murray of KBW. Hey, good morning guys. Thanks for taking my questions. It seems like the year.
Hey, good morning, guys. Thanks for taking my questions.
It seems like the years after a good start in terms of flows I'm curious if you expect the <unk>.
Recent turbulence in the market to affect demand for any of the products or western products as well.
Yes.
Speaker 2: I don't think that the recent volatility or, I'd say, some of the changing of leadership from a stock perspective has really impacted our overall business. We have a really wide range of products, from active equities to alternative income.
I don't think that the recent volatility or I'd say some of the changing of leadership.
From from a stock perspective has really impacted our overall business, we have a really wide range of products from.
From active equities to alternative income too to international and U S. So what we're seeing is we're seeing that.
Speaker 2: to international and U.S. So what we're seeing is, we're seeing that a lot of investors are rethinking their portfolios.
A lot of investors are rethinking their portfolios and they are putting assets in motion and we are capturing some of those assets in motion.
Speaker 2: and they are putting assets in motion and we are capturing some of those assets in motion.
Speaker 2: I actually think the current environment today is excellent for active managers.
I actually think the current environment today is excellent for active managers and also has somewhat of a value. If you will which I think our firm is tilted a little bit towards value, but the assets in motion is a great thing for our company.
Speaker 2: and also has somewhat of a value tilt, if you will, which I think our firm is tilted a little bit towards value. But the assets in motion is a great thing for our company. And I also think the volatility today is a great thing for ActiveManager.
And I also think the volatility today is a great thing for active managers.
Great. Thanks, and one more if I may.
Speaker 7: Thanks. And one more, if I may, would you be able to provide any guidance?
Would you be able to provide any guidance on.
Inexpensive trends as we hopefully start to emerge out of the pandemic.
Speaker 3: Alex, it's Mike. Yeah, I think we see really, you know, with our business model, and we've guided to the 49% margins.
Alex It's Mike, Yes, I think we see really with our business model.
And we've guided to the 49% margins.
Speaker 3: in 2021, and we ended up, you know, slightly above that. And again, we're maintaining that 49% kind of EBITDA margin guidance for 2022 as well.
In 2021, and we ended up slightly above that and again, we're maintaining that 49% kind of EBITDA margin guidance for 2022 as well.
Speaker 3: What we've talked about is, you know, because of the model that we have with two-thirds of our expenses being variable, tied to AUM and revenues, that provides a really good look as we think about the expense projections in the business.
We've talked about is because of the model that we have with two thirds of our expenses being variable.
Tied to AUM and revenues that provides a really good look as we think about the expense projections in the business. The acquisitions that we've done have been really folded into our business model.
Speaker 3: The acquisitions that we've done have been really folded into our business model.
Speaker 3: from a business and financial structure perspective.
From a business and financial structure perspective.
Speaker 3: And I think if you think about what we've done in 2021 and 2020, we'll continue on that same pace from an expense trajectory.
And I think if you think about what we've done in 2021 and 2020, we will continue on that same pace from an expense trajectory.
Speaker 3: And I think it's pretty consistent when you look at the different pieces of our expenses, whether they be compensation or operating expenses.
And I think it's pretty consistent when you look at the different pieces of our expenses, whether they be compensation or operating expenses.
Speaker 3: They're pretty well mapped out for us as we look into the future. So really no change in our overall expense guidance, no change in our margin guidance as we look out. We are making investments in the business.
Theyre pretty well mapped out for us as we look into the future. So really no change in our overall expense guidance no change in our margin guidance as we look out we are making investments in the business and.
Speaker 3: And we've spoken about where we're investing in the business really to further the growth through distribution, data, technology, and really our people. But again, those investments that we're making are baked into our margin guidance. It doesn't mean we won't see quarters or even years where we could be above or below those margins we've set out, but I think we're mindful of that and are managing those investments that we're making with a pretty keen eye towards growth. For more UN videos visit www.un.org
And we've spoken about where we're investing in the business really to further the growth through distribution data technology and are really our people.
But again that those investments that we're making are baked into our margin guidance. It doesn't mean, we won't see quarters or even years, where we could be above or below those margins we've set up.
We're mindful of that and are managing those investments that we're making with a pretty keen eye towards growth.
Great. Thank you extremely helpful.
Sure.
Speaker 1: This concludes today's Q&A session. I will now turn the call back over to Mr. Brown for closing remarks.
This concludes today's Q&A session I will now turn the call back over to Mr. Brown for closing remarks.
Speaker 2: Thank you for joining this morning. We look forward to reporting our progress as the new year unfolds. Next month, we will be attending the RBC financial services conference and hope to see all of you there virtually. Have a great day.
Thank you for joining this morning, and we look forward to reporting our progress as the new year unfolds next month, we will be attending the RBC financial services conference and hope to see all of you there virtually have a great day.
Thank you for participating in today's conference call you may now disconnect.
Speaker 1: Thank you for participating in today's conference call. You may now disconnect.