What changed in this filing

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Item 1. Financial Statements

2021-08-06 compared with 2021-05-07 · 184 added, 124 removed, 535 unchanged (37% of the section changed)

4 unchanged sentences

(In thousands, except shares data)

March 31, 2021

June 30, 2021

December 31, 2020

35 unchanged sentences

(In thousands, except per share data)

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

Investment management fees

10 unchanged sentences

Income from operations

Other income (expense)

Interest income and other income (expense)

Other (expense) income

Interest income and other (expense) income

Interest expense and other financing costs

Loss on debt extinguishment

Total other income (expense), net

Gain (loss) on debt extinguishment

Total other expense, net

Income before income taxes

8 unchanged sentences

(In thousands)

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

Other comprehensive income (loss), net of tax

10 unchanged sentences

Comprehensive

Income (Loss)

(Loss) Income

Balance, December 31, 2020

9 unchanged sentences

Balance, March 31, 2021

Issuance of common stock

Share conversion - Class B to A

Repurchase of shares

Shares withheld related to net settlement of equity awards

Vesting of restricted share grants

Exercise of options

Other comprehensive loss

Share-based compensation

Dividends paid

Balance, June 30, 2021

Treasury Stock

12 unchanged sentences

Balance, March 31, 2020

Issuance of common stock

Share conversion - Class B to A

Repurchase of shares

Shares withheld related to net settlement of equity awards

Vesting of restricted share grants

Exercise of options

Other comprehensive loss

Share-based compensation

Dividends paid

Balance, June 30, 2020

See the accompanying notes to the unaudited condensed consolidated financial statements.

3 unchanged sentences

(In thousands)

Three Months Ended March 31,

Six Months Ended June 30,

Cash flows from operating activities

5 unchanged sentences

Change in fair value of contingent consideration obligations

Unrealized depreciation (appreciation) on investments

Unrealized (appreciation) depreciation on investments

Loss on equity method investment

4 unchanged sentences

Accrued compensation and benefits

Deferred compensation plan liability

Other liabilities

11 unchanged sentences

Payments of taxes related to net share settlement of equity awards

Repayment of long-term senior debt

Repayments and repurchases of long-term senior debt

Payment of dividends

15 unchanged sentences

(“VCM”) and Victory Capital Services, Inc.

(“VCS”), formerly known as Victory Capital Advisers, Inc., on August 1, 2013.

(“VCS”), formerly known as Victory Capital Advisers, Inc., which occurred on August 1, 2013.

On February 12, 2018, the Company completed the initial public offering (the “IPO”) of its Class A common stock, which trades on the NASDAQ under the symbol “VCTR.”

20 unchanged sentences

In the opinion of management, the consolidated financial statements reflect all adjustments, consisting only of normal recurring adjustments, necessary for the fair presentation of the financial condition, results of operations, and cash flows for the interim periods presented.

Operating results for the three months ended March 31, 2021 are not necessarily indicative of the results that may be expected for the year ending December 31, 2021.

Operating results for the three- and six-month periods ending June 30, 2021 are not necessarily indicative of the results that may be expected for the year ending December 31, 2021.

Principles of Consolidation

The unaudited condensed consolidated financial statements include the operations of the Company and its wholly-owned subsidiaries, after elimination of all intercompany balances and transactions.

On September 20, 2020, the Company acquired a 15 % equity interest in Alderwood Partners LLP (“Alderwood”).

The Company owns a 15 % equity interest in Alderwood Partners LLP (“Alderwood”).

Alderwood’s operating entity, Alderwood Capital, is a London-based investment advisory firm focused on taking minority stakes in specialist boutique asset management businesses.

7 unchanged sentences

The global spread of COVID-19 has created significant volatility, uncertainty, and economic disruption.

COVID-19 did not have a material adverse effect on the Company’s reported results for the three months ended March 31, 2021.

COVID-19 did not have a material adverse effect on our reported results for the three and six months ended June 30, 2021.

New Accounting Pronouncements

11 unchanged sentences

In March 2020, the Financial Accounting Standards Board (the “FASB”) issued ASU 2020-04, (“ASU 2020-04”), “Reference Rate Reform (Topic 848):

Facilitation of the Effects of Reference Rate Reform on Financial Reporting.” ASU 2020-04 contains optional practical expedients and exceptions for applying GAAP to contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate expected to be discontinued because of reference rate reform.

The amendments in this guidance are effective for all entities through December 31, 2022.

The Company is currently evaluating the effect of this new standard on its consolidated financial statements.

The amendments in this guidance are effective for all entities from March 12, 2020 through December 31, 2022, and the amendments for contract modifications may be applied as of any date from the beginning of an interim period that includes or is subsequent to March 12, 2020.

Interest payable on the Company’s outstanding term loans under the 2019 Credit Agreement and amounts receivable or payable under the Company’s Swap are based on the three month LIBOR rate.

The Company is currently assessing the practical expedients and exceptions available under ASU 2020-04 as it prepares for the future discontinuance of this LIBOR rate.

Expected Credit Losses:

12 unchanged sentences

Management has assessed and evaluated the Company’s portfolio of active real estate leases and is currently surveying the business for other leases.

As outlined in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020, the Company has approximately $ 16.7 million in undiscounted, future minimum cash commitments under net operating leases.

The New Lease Standard is expected to result in a gross up on the Consolidated Balance Sheets and to have no material impact to the Consolidated Statements of Operations, liquidity or the Company’s debt covenant compliance under our current credit agreement.

As outlined in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020, the Company has approximately $ 16.7 million in undiscounted, future minimum cash commitments under net

operating leases.

Revenue RECOGNITION

In accordance with the revenue recognition standard requirements, the following table disaggregates our revenue by type and product:

Three Months Ended March 31,

In accordance with revenue recognition standard requirements, the following table disaggregates our revenue by type and product:

Three Months Ended June 30,

Six Months Ended June 30,

(in thousands)

19 unchanged sentences

(in thousands)

March 31, 2021

June 30, 2021

December 31, 2020

14 unchanged sentences

Variable consideration is included in the transaction price only when it is probable that a significant reversal of such revenue will not occur when the uncertainty associated with the variable consideration is subsequently resolved.

Investment management, fund administration and fund distribution fees are generally considered variable consideration as they are typically calculated as a percentage of AUM.

Investment management, fund adminis t ration and fund distribution fees are generally considered variable consideration as they are typically calculated as a percentage of AUM.

Fund transfer agent fees are also considered variable consideration as they are calculated as a percentage of AUM or based on the number of accounts in the fund.

In such cases, the amount of fees earned is subject to factors outside of the Company’s control including customer or underlying investor contributions and redemptions and financial

market volatility.

In such cases, the amount of fees earned is subject to factors outside of the Company’s control including customer or underlying investor contributions and redemptions and financial market volatility.

These fees are considered constrained and are excluded from the transaction price until the asset values or number of accounts on which the customer is billed are calculated and the value of consideration is measurable.

17 unchanged sentences

Performance-based investment management fees recognized as revenue in the current period may pertain to performance obligations satisfied in prior periods.

Fulcrum fee arrangements include a base investment management fee and a performance fee adjustment, increasing or decreasing the base investment management fee depending on whether the assets being managed experienced better or worse investment performance than the index specified in the customer’s contract.

Fulcrum fee arrangements include a performance fee adjustment, increasing or decreasing the total investment management fee depending on whether the assets being managed experienced better or worse investment performance than the index specified in the customer’s contract.

The performance fee adjustment arrangement with certain equity and fixed income USAA Funds took effect on July 1, 2020 and is calculated monthly based on the investment performance of those funds relative to their specified benchmark indexes over the discrete performance period ending with that month.

10 unchanged sentences

Fund transfer agent fees are determined based on the contractual rate applied to either the average daily net assets of the USAA Funds for which transfer agent services are provided or number of accounts in the USAA Funds.

Revenue is recorded on a monthly basis when the value of consideration is measured using actual average daily net assets or actual number of accounts and constraints are removed.

The Company’s fund transfer agent fee revenue is recorded in fund administration and distribution fees in the unaudited Condensed Consolidated Statements of Operations.

Revenue is recorded on a monthly basis when the value of

consideration is measured using actual average daily net assets or actual number of accounts and constraints are removed.

The Company’s fund transfer agent f ee revenue is recorded in fund administration and distribution fees in the unaudited Condensed Consolidated Statements of Operations.

The Company also receives fees for sub-transfer agency services under contracts with the Victory Funds for member class shares.

Sub-transfer agency fees are recognized and recorded in a manner similar to fund transfer agent fees and are recorded in fund administration and distribution fees in the unaudited Condensed Consolidated Statements of Operations.

The Company has contractual arrangements with a third party to provide certain sub-transfer agent services.

We are the primary obligor under the transfer agency contracts with the USAA Funds and have the ability to select the service provider and establish pricing.

As a result, fund transfer agent fees and sub-transfer agent expenses are recorded on a gross basis.

As the Company is the primary obligor under the transfer agency contracts with the USAA Funds and has the ability to select the service provider and establish pricing, fund transfer agent fees and sub-transfer agent expenses are recorded on a gross basis.

Fund Distribution Fees

29 unchanged sentences

On and effective July 1, 2019, the Company completed the USAA AMCO Acquisition which expanded and diversified the Company’s investment platform and increased the Company’s size and scale.

The acquisition also provided the Company the rights to

offer products and services using the USAA brand and the opportunity to offer its products to USAA members through a direct distribution channel.

The acquisition also provided the Company the rights to offer products and services using the USAA brand and the opportunity to offer its products to USAA members through a direct distribution channel.

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.

2 unchanged sentences

During the fourth quarter of 2020, the Company paid $ 37.5 million in cash to sellers for the first annual earn out period.

A maximum of $ 112.5 million in contingent consideration ($ 37.5 million per year for the remaining 3 years of the earn out period) was payable to sellers at March 31, 2021.

A maximum of $ 112.5 million in contingent consideration ($ 37.5 million per year for the remaining 3 years of the earn out period) was payable to sellers as of June 30, 2021.

The estimated fair value of contingent consideration payable to sellers is determined using the real options method.

3 unchanged sentences

As the contingent consideration represents a subordinate, unsecured claim of the Company, the Company assesses a discount rate which incorporates adjustments for credit risk and the subordination of the contingent consideration .

Significant inputs to the valuation of contingent consideration payable to sellers as of March 31, 2021 and December 31, 2020 are as follows and are approximate values:

March 31, 2021

Significant inputs to the valuation of contingent consideration payable to sellers as of June 30, 2021 and December 31, 2020 are as follows and are approximate values:

June 30, 2021

December 31, 2020

Non-managed money revenue average annual growth rate

Market price of risk

Market price of risk (continuous)

Revenue volatility

4 unchanged sentences

$97.7 - $112.5

The estimated fair value of contingent consideration payable to sellers is recorded in consideration payable for acquisition of business in the unaudited Condensed Consolidated Balance Sheets and was estimated at $ 95.0 million at March 31, 2021 as compared to $ 92.5 million at December 31, 2020.

The increase in the liability of $ 2.5 million in the first quarter of 2021 was recorded in change in value of consideration payable for acquisition of business in the unaudited Condensed Consolidated Statements of Operations.

The estimated fair value of contingent consideration payable to sellers is recorded in consideration payable for acquisition of business in the unaudited Condensed Consolidated Balance Sheets and was estimated at $ 100.7 million at June 30, 2021 as compared to $ 92.5 million at December 31, 2020.

The increase in the liability of $ 5.7 million and $ 8.2 million in the three and six months ended June 30, 2021, respectively, and an increase of $ 5.3 million and decrease of $ 0.2 million for the three and six months ended June 30, 2020, respectively, was recorded in change in value of consideration payable for acquisition of business in the unaudited Condensed Consolidated Statements of Operations .

Acquisition-Related Costs

2 unchanged sentences

Acquisition-related costs

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

(in thousands)

3 unchanged sentences

In connection with business combinations, asset purchases and changes in business strategy, the Company incurs costs integrating investment platforms, products and personnel into existing systems, processes and service provider arrangements and restructuring the business to capture operating expense synergies.

The following table presents the rollforward of restructuring and integration liabilities, which are recorded in accounts payable and accrued expenses in the unaudited Condensed Consolidated Balance Sheets, for the three months ended March 31, 2021 and 2020:

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

(in millions)

1 unchanged sentence

Severance Expense - USAA AMCO

Integration costs - THB

Severance Expense - THB

Integration costs - USAA AMCO

Integration costs - THB

Total restructuring and integration costs

10 unchanged sentences

These inputs reflect management’s own assumptions about the assumptions a market participant would use in pricing the asset or liability.

The table below shows liabilities measured at fair value on a recurring basis.

As of March 31, 2021

The table below shows assets and liabilities measured at fair value on a recurring basis.

As of June 30, 2021

(in thousands)

Financial Assets

Money Market Fund

Investments in Proprietary Funds

Deferred Compensation Plan Investments

Interest Rate Swap Asset

7 unchanged sentences

Financial Assets

Interest Rate Swap Asset

Money Market Fund

Investments in Proprietary Funds

Deferred Compensation Plan Investments

Total Financial Assets

3 unchanged sentences

Total Financial Liabilities

Level 1 assets consist of money market funds and open-end mutual funds.

The fair values for these assets are determined utilizing quoted market prices for identical assets.

The money market fund is included in cash and cash equivalents in the unaudited Condensed Consolidated Balance Sheets and proprietary fund investments and deferred compensation plan investments are included in investments in the unaudited Condensed Consolidated Balance Sheets.

The interest rate swap (the “Swap”) asset and liability represent amounts receivable or payable under a floating-to-fixed interest rate swap transaction entered into by the Company on March 27, 2020.

The Swap effectively fixes the interest rate at 3.465 % on $ 450

million of the outstanding Term Loan balance through the Term Loan’s maturity in July 2026.

The fair value of the Swap is included in the unaudited Condensed Balance Sheets in other assets at March 31, 202 1 and in other liabilities as of December 31, 2020 .

The Swap effectively fixes the interest rate at 3.465 % on $ 450 million of the outstanding Term Loan balance through the Term Loan’s maturity in July 2026.

The fair value of the Swap is included in the unaudited Condensed Balance Sheets in other assets at June 30, 2021 and in other liabilities as of December 31, 2020.

Pricing is determined based on a third party, model-derived valuation in which all significant inputs are observable in active markets (Level 2).

6 unchanged sentences

Changes in the fair value of contingent consideration arrangement liabilities, realized or unrealized, are recorded in earnings and are included in change in value of consideration payable for acquisition of business in the unaudited Condensed Consolidated Statements of Operations.

The following table presents the change in contingent consideration arrangement liabilities for the three months ended March 31, 2021.

The following table presents the change in contingent consideration arrangement liabilities for the six months ended June 30, 2021.

(in thousands)

2 unchanged sentences

USAA AMCO change in fair value measurement

Balance, March 31, 2021

There were no transfers between any of the Level 1, 2 and 3 categories in the fair value measurement hierarchy from December 31, 2020 to March 31, 2021.

Balance, June 30, 2021

There were no transfers between any of the Level 1, 2 and 3 categories in the fair value measurement hierarchy from December 31, 2020 to June 30, 2021.

The Company recognizes transfers at the end of the reporting period.

The net carrying value of accounts receivable and accounts payable approximates fair value due to the short‑term nature of these assets and liabilities.

The fair value of our long-term debt at March 31, 2021 is considered to be its carrying value as the interest rate on the bank debt is variable and approximates current market rates.

The fair value of our long-term debt at June 30, 2021 is considered to be its carrying value as the interest rate on the bank debt is variable and approximates current market rates.

As a result, Level 2 inputs are utilized to determine the fair value of our long‑term debt.

The fair value of the Company’s money market investment ($ 10.1 million within cash and cash equivalents), investments in proprietary funds and deferred compensation plan investments are measured using Level 1 inputs, which are the market prices for shares in these open-end mutual funds .

Related-Party Transactions

The Company considers certain funds that it manages, including the Victory Funds, the USAA Funds, the VictoryShares, collective trust funds that it sponsors (the “Victory Collective Funds”) and certain other pooled investment vehicles, to be related parties as a result of our advisory relationship.

The Company receives investment management, administrative, distribution and compliance fees in accordance with contracts that VCM and VCS have with the Victory Funds and the USAA Funds and has invested a portion of its balance sheet cash in the USAA Treasury Money Market Fund and earns interest on the amount invested in this fund.

The Company receives investment management, administrative, distribution and compliance fees in accordance with contracts that VCM and VC S have with the Victory Funds and the USAA Funds and has invested a portion of its balance sheet cash in the USAA Treasury Money Market Fund and earns interest on the amount invested in this fund.

The Company receives investment management, administrative and compliance fees in accordance with contracts that VCM has with the VictoryShares.

9 unchanged sentences

(in thousands)

March 31, 2021

June 30, 2021

December 31, 2020

3 unchanged sentences

Receivables (fund administration and distribution fees)

Investment in proprietary funds, fair value

Deferred compensation plan investments, fair value

Investments (investments in proprietary funds, fair value)

Investments (deferred compensation plan investments, fair value)

Related party liabilities

Accounts payable and accrued expenses (fund reimbursements)

Three Months Ended

Three Months Ended June 30,

Six Months Ended June 30,

(in thousands)

4 unchanged sentences

General and administrative

Related party other (expense) income

Interest income and other (expense) income

At March 31, 2021 and December 31, 2020, the Company had investments in proprietary funds and deferred compensation plan investments.

Related party other income (expense)

Interest income and other income (expense)

At June 30, 2021 and December 31, 2020, the Company had investments in proprietary funds and deferred compensation plan investments.

Investments in proprietary funds consist entirely of seed capital investments in certain Victory Funds and USAA Funds.

5 unchanged sentences

(in thousands)

As of March 31, 2021

As of June 30, 2021

As of December 31, 2020

Proceeds from sales of investments in proprietary funds and realized gains and losses recognized during the three months ended March 31, 2021 and 2020 are as follows:

Unrealized and realized gains and losses on investments in proprietary funds are recognized in the accompanying unaudited Condensed Consolidated Statements of Operations as “Interest income and other income (expense).” Proceeds from sales and realized gains and losses from investments in proprietary funds in the periods ended June 30, 2021 and 2020 were as follows:

(in thousands)

For the three months ended March 31, 2021

For the three months ended March 31, 2020

For the three months ended June 30, 2021

For the three months ended June 30, 2020

(in thousands)

For the six months ended June 30, 2021

For the six months ended June 30, 2020

Deferred Compensation Plan Investments

2 unchanged sentences

(in thousands)

As of March 31, 2021

As of June 30, 2021

As of December 31, 2020

Proceeds from sales of deferred compensation plan investments and realized gains and losses recognized during the three months ended March 31, 2021 and 2020 are as follows:

Proceeds from sales of deferred compensation plan investments and realized gains and losses recognized during the three and six months ended June 30, 2021 and 2020 are as follows :

(in thousands)

For the three months ended March 31, 2021

For the three months ended March 31, 2020

The effective tax rate for the three months ended March 31, 2021 and 2020 differs from the United States federal statutory rate primarily as a result of state and local income taxes, excess tax benefits on share-based compensation and certain non-deductible expenses, and for 2020, expense related to increasing the liability for previously unrecorded state tax benefits.

For the three months ended March 31, 2021 and 2020, the provision for income taxes was $ 17.7 million and $ 16.8 million, or 21.3 % and 22.7 %, of pre-tax income respectively.

The effective tax rate for the three months ended March 31, 2021 was lower than the effective tax rate for the same period in 2020 mainly due to higher excess tax benefits on share-based compensation.

No valuation allowance was recorded for deferred tax assets in the period ended March 31, 2021 and 2020.

For the three months ended June 30, 2021

For the three months ended June 30, 2020

(in thousands)

For the six months ended June 30, 2021

For the six months ended June 30, 2020

The effective tax rate for the three and six months ended June 30, 2021 and 2020 differs from the United States federal statutory rate primarily as a result of state and local income taxes and excess tax benefits on share-based compensation.

For the three months ended June 30, 2021 and 2020, the provision for income taxes was $ 20.6 million and $ 14.5 million, or 22.9 % and 24.5 %, of pre-tax income respectively.

For the six months ended June 30, 2021 and 2020, the provision for income taxes was $ 38.3 million and $ 31.3 million, or 22.2 % and 23.5 % of pre-tax income, respectively.

The effective tax rate for the three and six months ended June 30, 2021 was lower than the effective tax rate for the same periods in 2020 mainly due to higher excess tax benefits on share-based compensation.

No valuation allowance was recorded for deferred tax assets in the periods ended June 30, 2021 and 2020.

2020 Debt Repricing

5 unchanged sentences

Pursuant to the Second Amendment, the Company repriced the existing term loans (the “Existing Term Loans”) with replacement term loans in an aggregate principal amount of $ 755.7 million (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 25 basis points.

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 25 basis points.

The applicable margin on LIBOR under the Repriced Term Loans is 2.25 %, compared to 2.50 % under the Existing Term Loans.

The following table summarizes the components of long-term debt in the unaudited Condensed Consolidated Balance Sheets at March 31, 2021 and December 31, 2020:

During the six months ended June 30, 2021 and 2020, the Company incurred costs of $ 0.4 million and $ 0.9 million related to the Second Amendment and First Amendment, respectively, which were recorded in general and administrative expense in the unaudited Condensed Consolidated Statements of Operations ($ 0 for the three months ended June 30, 2021 and 2020).

The following table summarizes the components of long-term debt in the unaudited Condensed Consolidated Balance Sheets at June 30, 2021 and December 31, 2020:

(in thousands)

March 31, 2021

June 30, 2021

December 31, 2020

7 unchanged sentences

The 2019 Credit Agreement contains customary affirmative and negative covenants, including covenants that affect, among other things, the ability of the first lien leverage ratio, measured as of the last day of each fiscal quarter on which outstanding borrowings under the revolving credit facility exceed 35.0 % of the commitments thereunder (excluding certain letters of credit), of no greater than 3.80 to 1.00.

As of March 31, 2021, there were no outstanding borrowings under the revolving credit facility and the Company was in compliance with its financial performance covenant.

A total of $ 50.0 million of the outstanding term loans under the 2019 Credit Agreement was repaid in the first quarter of 2021.

Refer to Note 16, Subsequent Events, for information related to term loan activity subsequent to March 31, 2021.

During the three months ended March 31, 2020 and 2021, the Company incurred costs of $ 0.9 million and $ 0.4 million related to the First Amendment and Second Amendment, respectively, which were recorded in general and administrative expense in the unaudited Condensed Consolidated Statements of Operations.

The Company recognized a $ 1.1 million loss on debt extinguishment in the first quarter of 2020 due to repayments of term loan principal, consisting of the write-off of $ 0.7 million and $ 0.4 million of unamortized debt issuance costs and debt discount, respectively.

The Company recognized a $ 2.8 million loss on debt extinguishment in the first quarter of 2021 due to the Second Amendment and repayments of term loan principal, consisting of the write-off of $ 1.8 million and $ 1.0 million of unamortized debt issuance costs and debt discount, respectively.

As of June 30, 2021, there were no outstanding borrowings under the revolving credit facility and the Company was in compliance with its financial performance covenant.

Repayments of outstanding term loans under the 2019 Credit Agreement totaled $ 57.0 million and $ 107.0 million for the three and six months ended June 30, 2021, respectively.

Refer to Note 16, Subsequent Events, for information related to term loan activity subsequent to June 30, 2021.

The Company recognized a loss on debt extinguishment of $ 1.1 million and $ 3.9 million in the three and six months ended June 30, 2021, respectively, due to repayments of term loan principal and entering into the Second Amendment.

A total of $ 33.3 million and $ 71.3 million of the outstanding term loans under the 2019 Credit Agreement was repaid or repurchased and retired during the three and six months ended June 30, 2020 , respectively .

The Company recognized a net gain on debt extinguishment of $ 0.1 million and a net loss on debt extinguishment of $ 0.9 million in the three and six months ended June 30, 2020 due to term loan repurchases and repayments and entering into the First Amendment.

Interest Expense

The following table summarizes the components of interest expense and other financing costs in the unaudited Condensed Consolidated Statements of Operations for the periods ended March 31, 2021 and 2020:

For the Three Months

Ended March 31,

For the Three Months Ended June 30,

For the Six Months Ended June 30,

(in thousands)

2 unchanged sentences

Amortization of debt discount

Interest rate swap expense

Interest rate swap expense (income)

Shares Rollforward

10 unchanged sentences

Balance, March 31, 2021

Issuance of shares

Share conversion - Class B to A

Repurchase of shares

Vesting of restricted share grants

Exercise of options

Shares withheld related to net settlement of equity awards

Balance, June 30, 2021

Shares of Common Stock Issued

8 unchanged sentences

Balance, March 31, 2020

Issuance of shares

Share conversion - Class B to A

Repurchase of shares

Vesting of restricted share grants

Exercise of options

Shares withheld related to net settlement of equity awards

Balance, June 30, 2020

Share Repurchase Program

In November 2020, the Company’s Board of Directors authorized a share repurchase program whereby the Company may repurchase up to an additional $ 15.0 million of the Company’s Class A common stock in the open market or in privately negotiated transactions.

The amount and timing of purchases under the share repurchase program authorized in November 2020 will depend on a number of factors, including the price and availability of the Company’s shares, trading volume, capital availability, Company performance and general economic and market conditions.

On May 13, 2021, the Company’s Board of Directors authorized a share repurchase program whereby the Company may repurchase up to an additional $ 15.0 million of the Company’s Class A common stock in the open market or in privately negotiated transactions.

The amount and timing of purchases under the share repurchase program authorized in May 2021 will depend on a number of factors, including the price and availability of the Company’s shares, trading volume, capital availability, Company performance and general economic and market conditions.

The program can be suspended or discontinued at any time and expires when $ 15 million shares of Class A common stock have been repurchased or on December 31, 2022.

During the three months ended March 31, 2021, the Company repurchased 286,550 shares of Class A common stock at a total cost of $ 7.1 million for an average price of $ 24.85 per share and $ 5.0 million was available for future repurchases under the current share repurchase program.

As of March 31, 2021, a cumulative total of 3,469,532 shares of Class A common stock had been repurchased under programs authorized by the Company’s Board of Directors at a total cost of $ 55.0 million for an average price of $ 15.84 per share.

During the three and six months ended June 30, 2021, the Company repurchased 288,130 and 574,680 shares of Class A common stock at a total cost of $ 8.3 million and $ 15.4 million for an average price of $ 28.89 and $ 26.88 per share.

At June 30, 2021, a total of $ 11.7 million was available for future repurchases under the current share repurchase program, and a cumulative total of 3,757,662 shares of Class A common stock had been repurchased under programs authorized by the Company’s Board of Directors at a total cost of $ 63.3 million for an average price of $ 16.84 per share.

Dividend Payments

Dividends paid during the three months ended March 31, 2021 totaled $ 6.5 million and included $ 6.1 million for the March 2021 quarterly dividend and $ 0.4 million in cash bonuses and distributions related to dividends previously declared upon vesting of restricted stock and stock option awards.

Dividends paid or payable for the three and six months ended June 30, 2021 totaled $ 8.2 million and $ 14.7 million, respectively, and included $ 8.1 million and $ 14.2 million for quarterly dividends and $ 0.1 million and $ 0.5 million in cash bonuses and distributions related to dividends previously declared upon vesting of restricted stock and stock option awards.

Share‑Based Compensation

During the three months ended March 31, 2021, the Company issued restricted stock awards for 231,568 shares of common stock, of which awards for 9,568 shares were fully vested on the grant date and awards for 222,000 shares vest based on service over a three year period.

Stock option award and restricted stock award activity during the three months ended March 31, 2021 and 2020 was as follows:

Current Period Activity

During the three months ended June 30, 2021, the Company issued restricted stock awards for 19,032 shares of common stock, of which awards for 9,536 shares were fully vested on the grant date, awards for 6,595 shares vest based on service over a two year period, and awards for 2,901 shares vest based on service over a three year period.

For the six months ended June 30, 2021, the Company issued restricted stock awards for 250,600 shares of common stock, of which awards for 19,104 shares were fully vested on the grant date, awards for 6,595 shares vest based on service over a two year period, and awards for 224,901 shares vest based on service over a three year period.

Stock option award and restricted stock award activity during the six months ended June 30, 2021 and 2020 was as follows:

Shares Subject to Stock Option Awards

Three Months Ended March 31,

Six Months Ended June 30,

Outstanding at beginning of period

Outstanding at end of period

Outstanding at end of the period

Restricted Stock Awards

Three Months Ended March 31,

Six Months Ended June 30,

Avg wtd grant-

4 unchanged sentences

Unvested at end of period

At March 31, 2021 and December 31, 2020, the amount of cash bonuses and distributions related to dividends previously declared on unvested and outstanding restricted share awards and stock options totaled $ 1.0 million and $ 1.2 million, respectively, which was not recorded as a liability as of the balance sheet date.

At June 30, 2021 and December 31, 2020, 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, 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.

The Company recorded $ 5.5 million and $ 6.0 million of share-based compensation expense during the three months ended March 31, 2021 and 2020, respectively, in personnel compensation and benefits in the unaudited Condensed Consolidated Statements of Operations.

The Company recorded $ 4.3 million and $ 3.9 million of share-based compensation expense in the three months ended June 30, 2021 and 2020, respectively, and $ 9.9 million of share-based compensation in the six months ended June 30, 2021 and 2020, in personnel compensation and benefits in the unaudited Condensed Consolidated Statements of Operations.

Earnings Per Share

The following table sets forth the reconciliation of basic earnings per share and diluted earnings per share from net income for the three months ended March 31, 2021 and 2020:

The following table sets forth the reconciliation of basic earnings per share and diluted earnings per share from net income for the three months ended June 30, 2021 and 2020:

Three Months Ended

Six Months Ended

(in thousands except per share amounts)

3 unchanged sentences

Earnings per share

There were no outstanding instruments excluded from the computation of weighted average shares for diluted earnings per share because the effect would be anti-dilutive for the three months ended March 31, 2021.

Outstanding instruments excluded from the computation of weighted average shares for diluted earnings per share because the effect would be anti-dilutive totaled 31 thousand shares for the three months ended March 31, 2020.

Outstanding instruments excluded from the computation of weighted average shares for diluted earnings per share because the effect would be anti-dilutive were de minimus in amount for the three months ended June 30, 2021 and for the six months ended June 30, 2021 and 2020.

Outstanding instruments excluded from the computation of weighted average shares for diluted earnings per share because the effect would be anti-dilutive was $ 0.6 million for the three months ended June 30, 2020.

Holders of non-vested share-based compensation awards do not have rights to receive nonforfeitable dividends on the shares covered by the awards.

Accumulated Other Comprehensive Income (Loss )

The following table presents changes in accumulated other comprehensive income (loss) by component for the three months ended March 31, 2021 and 2020.

The following table presents changes in accumulated other comprehensive income (loss) by component for the six months ended June 30, 2021 and 2020.

(in thousands)

1 unchanged sentence

Other comprehensive income (loss) before reclassification and tax

Reclassification adjustments, before tax

Reclassifications, before tax

Net current period other comprehensive income (loss)

Balance, March 31, 2021

Balance, June 30, 2021

Balance, December 31, 2019

Other comprehensive loss before reclassification and tax

Net current period other comprehensive loss

Balance, March 31, 2020

Other comprehensive income (loss) before reclassification and tax

Reclassifications, before tax

Net current period other comprehensive income (loss)

Balance, June 30, 2020

Reclassifications out of accumulated other comprehensive income (loss) related to cash flow hedges are recorded in interest expense and other financing costs.

3 unchanged sentences

Under the terms of the Swap, the Company pays interest at a fixed rate of interest on a quarterly basis and receives interest at the three-month LIBOR rate in effect for that quarter.

The notional value, fixed rate of interest and expiration date of the Swap as of March 31, 2021 were $ 450 million – 0.965 % – July 1, 2026 .

The notional value, fixed rate of interest and expiration date of the Swap as of June 30, 2021 were $ 450 million – 0.965 % – July 1, 2026 .

Refer to Note 5, Fair Value Measurements, for additional disclosures regarding fair value measurements.

3 unchanged sentences

The Swap is assessed for effectiveness and continued qualification for hedge accounting on a quarterly basis.

For the three months ended March 31, 2021 and since inception, the Swap was deemed to be highly effective.

For the three and six months ended June 30, 2021 and since inception, the Swap was deemed to be highly effective.

The Swap is designated as a cash flow hedge.

1 unchanged sentence

Gains or losses from the Swap are reclassified to interest expense in the same period during which the hedged transaction affects earnings.

The amount payable to the Swap counterparty at March 31, 2021 of $ 0.8 million is recorded in other liabilities on the unaudited Condensed Consolidated Balance Sheets.

All derivative instruments are recorded on the unaudited Condensed Consolidated Balance Sheets at fair value as an asset (if the derivative is in a gain position) or a liability (if the derivative is in a loss position).

On March 31, 2021, the Swap had a fair value of $ 4.2 million and was recorded in other assets.

On December 31, 2020, the Swap had a fair value of $ 10.0 million and was recorded in other liabilities.

The following table summarizes the classification of the Swap in the unaudited Condensed Consolidated Balance Sheets and the notional amount at March 31, 2021 and December 31, 2020 (in thousands):

The amount payable to the Swap counterparty at June 30, 2021 of $ 0.8 million is recorded in other liabilities in the unaudited Condensed Consolidated Balance Sheets.

The following table summarizes the classification of the Swap in the unaudited Condensed Consolidated Balance Sheets at June 30, 2021 (in thousands):

Balance Sheets

March 31, 2021

June 30, 2021

December 31, 2020

2 unchanged sentences

Notional amount

The following tables summarize the effects of the Swap in the unaudited Condensed Consolidated Statements of Operations and unaudited Condensed Consolidated Statements of Comprehensive Income (Loss) for the three months ended March 31, 2021 and 2020 (in thousands):

The following table summarizes the effects of the Swap in the unaudited Condensed Consolidated Statements of Comprehensive Income for the three and six months ended June 30, 2021 and 2020 (in thousands):

Three Months Ended

Six Months Ended

Statement of Operations

Interest expense and other financing costs

Loss reclassified from AOCI(L)

(Loss) gain reclassified from AOCI(L)

Three Months Ended

Six Months Ended

Statements of Comprehensive Income

9 unchanged sentences

Equity method investments are recorded in other assets in the unaudited Condensed Consolidated Balance Sheets.

At March 31, 2021 and December 31, 2020, the Company’s equity method investment in Alderwood totaled $ 1.4 million.

At June 30, 2021 and December 31, 2020, the Company’s equity method investment in Alderwood totaled $ 1.3 million and $ 1.4 million, respectively.

Gains and losses from equity method investments are recorded in interest income and other income (expense) in the unaudited Condensed Consolidated Statements of Operations.

For the three months ended March 31, 2021, losses from equity method investments were no t material to our consolidated results of operations ($ 0 for the three months ended March 31, 2020).

For the three and six months ended June 30, 2021, losses from equity method investments were $ 0.1 million ($ 0 for the three and six months ended June 30, 2020).

SUBSEQUENT EVENTS

Subsequent to March 31, 2021, the Company repaid $ 27 million of outstanding term loans for a total debt reduction of $ 388.8 million since July 1, 2019.

On May 6, 2021 , our Board of Directors declared a quarterly cash dividend of $ 0.12 per share on Victory common stock.

The dividend is payable on June 25, 2021 , to stockholders of record on June 10, 2021 .

Subsequent to June 30, 2021, the Company repaid $ 35 million of outstanding term loans for a total debt reduction of $ 453.8 million since July 1, 2019.

On August 5, 2021 , our Board of Directors declared a quarterly cash dividend of $ 0.15 per share on Victory common stock.

The dividend is payable on September 27, 2021 , to stockholders of record on September 10, 2021 .

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements