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TABLE OF CONTENTS
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Table of Contents

Filed Pursuant to Rule 424(b)(4)
File No. 333-222509

11,700,000 Shares

LOGO

Class A Common Stock

        This is the initial public offering of shares of Class A common stock of Victory Capital Holdings, Inc. We are offering shares of our Class A common stock to be sold in the offering. Prior to this offering, there has been no public market for our shares of Class A common stock. The initial public offering price is $13.00 per share. We have been approved to list our Class A common stock on the NASDAQ Global Select Market, under the symbol "VCTR."

        Upon the completion of this offering, we will have two classes of common stock: Class A common stock and Class B common stock. The rights of the holders of Class A common stock and Class B common stock will be identical, except voting and conversion rights. Each share of Class A common stock will be entitled to one vote. Each share of Class B common stock will be entitled to ten votes and will be convertible at any time, at the option of the holder, into one share of Class A common stock.

        Upon the completion of this offering, funds controlled by Crestview Partners II GP, L.P. will continue to control a majority of the voting power of our capital stock. As a result we will be a "controlled company" within the meaning of the corporate governance rules of the NASDAQ Stock Market LLC, or NASDAQ.

        We are an "emerging growth company" under the federal securities laws and are subject to reduced public company reporting requirements.

        Investing in our Class A common stock involves risks. See "Risk Factors" beginning on page 30 of this prospectus.

 
  Per Share   Total

Initial public offering price

  $13.00   $152,100,000

Underwriting discounts and commissions

  $0.78   $9,126,000

Proceeds, before expenses, to us

  $12.22   $142,974,000

        The underwriters also may purchase up to 1,755,000 additional shares of Class A common stock from us at the initial offering price less the underwriting discounts and commissions for 30 days after the date of this prospectus.

        Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

        The underwriters expect to deliver the shares to purchasers on or about February 12, 2018.



Joint Book-Running Managers

J.P. Morgan

 

BofA Merrill Lynch

 

Morgan Stanley

Barclays

 

Goldman Sachs & Co. LLC

 

RBC Capital Markets
Co-Managers

Keefe, Bruyette & Woods
A Stifel Company

 

William Blair

 

Sandler O'Neill + Partners, L.P.

   

The date of this prospectus is February 7, 2018


Table of Contents


TABLE OF CONTENTS

 
  Page  

PROSPECTUS SUMMARY

    1  

SUMMARY CONSOLIDATED FINANCIAL AND OTHER DATA

    25  

RISK FACTORS

    30  

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

    53  

USE OF PROCEEDS

    55  

DIVIDEND POLICY

    56  

CAPITALIZATION

    57  

DILUTION

    59  

UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION

    61  

SELECTED CONSOLIDATED FINANCIAL DATA

    67  

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

    68  

BUSINESS

    96  

REGULATORY ENVIRONMENT AND COMPLIANCE

    116  

MANAGEMENT

    119  

EXECUTIVE COMPENSATION

    128  

CERTAIN RELATIONSHIPS AND RELATED-PARTY TRANSACTIONS

    144  

PRINCIPAL STOCKHOLDERS

    148  

DESCRIPTION OF CAPITAL STOCK

    150  

SHARES ELIGIBLE FOR FUTURE SALE

    156  

MATERIAL U.S. FEDERAL INCOME TAX AND ESTATE TAX CONSEQUENCES TO NON-U.S. HOLDERS

    158  

UNDERWRITING

    162  

LEGAL MATTERS

    170  

EXPERTS

    170  

WHERE YOU CAN FIND ADDITIONAL INFORMATION

    171  

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

    F-1  

        You should rely only on the information contained in this prospectus or any free writing prospectus prepared by or on behalf of us or to which we have referred you. Neither we nor any of the underwriters have authorized anyone to provide you with additional or different information. Neither this prospectus nor any free writing prospectus is an offer to sell anywhere or to anyone where or to whom we are not permitted to offer or to sell securities under applicable law. The information in this prospectus or any free writing prospectus is accurate only as of the date of this prospectus or such free writing prospectus, as applicable.

        Our design logos and the marks "Victory Capital," "Victory Capital Management," "Victory Capital Advisers," "Victory Funds," "VictoryShares," "Victory Connect," "CEMP," "CEMP Volatility Weighted Indexes," "Diversified," "Diversified Equity Management," "Expedition Investment Partners," "INCORE Capital Management," "Integrity," "Integrity Asset Management," "Munder," "Munder Capital Management," "The Munder Funds," "NewBridge," "NewBridge Asset Management," "RS Funds," "RS Investments," "Sophus Capital," "Sycamore Capital" and "Trivalent Investments," are owned by us or one of our subsidiaries. All other trademarks, service marks and trade names appearing in this prospectus are the property of their respective owners.

        In this prospectus, when we refer to:

    "CEMP," we are referring to Compass Efficient Model Portfolios, LLC;

    the "CEMP Acquisition," we are referring to our acquisition of the CEMP business in 2015;

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    "Cerebellum Capital," we are referring to Cerebellum Capital, LLC;

    "Crestview," we are referring to Crestview Advisors, L.L.C.;

    "Crestview GP," we are referring to Crestview Partners II GP, L.P.;

    "Crestview Victory," we are referring to Crestview Victory, L.P.;

    "ETFs," we are referring to exchange-traded funds;

    "Munder," we are referring to our Munder Capital Management Franchise;

    the "Munder Acquisition," we are referring to our acquisition of Munder Capital in 2014;

    "Munder Capital," we are referring to Munder Capital Management;

    "Reverence Capital," we are referring to Reverence Capital Partners;

    the "RS Acquisition," we are referring to our acquisition of RS Investments in 2016; and

    "RS Investments," we are referring to RS Investment Management Co. LLC.

        In this prospectus, we rely on and refer to certain market and industry data and forecasts related thereto. We obtained this information and these statistics from sources other than us, which we have supplemented where necessary with information from publicly available sources and our own internal estimates. We use these sources and estimates and believe them to be reliable, but we cannot give you any assurance that any of the projected results will be achieved.

        For investors outside the United States: neither we nor any of the underwriters have done anything that would permit this offering or possession or distribution of this prospectus in any jurisdiction where action for that purpose is required, other than in the United States. You are required to inform yourselves about and to observe any restrictions relating to this offering and the distribution of this prospectus outside of the United States.

    Non-GAAP Financial Measures

        This prospectus contains "non-GAAP financial measures" that are financial measures that either exclude or include amounts that are not excluded or included in the most directly comparable measures calculated and presented in accordance with generally accepted accounting principles in the United States, or GAAP. Specifically, we make use of the non-GAAP financial measures "Adjusted EBITDA" and "Adjusted Net Income."

        Adjustments we make to GAAP net income to calculate Adjusted EBITDA are:

    We add back interest paid on debt net of interest income;

    We add back depreciation on property and equipment;

    We add back other business taxes;

    We add back GAAP amortization of acquisition-related intangibles;

    We add back the expense associated with stock-based compensation associated with equity issued from pools that were created in connection with our management-led buyout with Crestview GP from KeyCorp, the Munder Acquisition and the RS Acquisition and as a result of any equity grants related to this initial public offering, or IPO;

    We add back direct incremental costs of acquisitions and this offering, including expenses associated with third-party advisors, proxy solicitations of mutual fund shareholders for transaction consents, vendor contract early termination costs, impairment of receivables recorded in connection with an acquisition and severance, retention and transaction incentive compensation;

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    We add back debt issuance costs;

    We add back pre-IPO governance expenses paid to Crestview and Reverence Capital (such payments will terminate as of the completion of this offering);

    We adjust for earnings/losses on equity method investments; and

    We add back annual incentive compensation paid in excess of expected levels due to acquisitions.

        Adjustments we make to GAAP net income to calculate Adjusted Net Income are:

    We add back other business taxes;

    We add back GAAP amortization of acquisition-related intangibles;

    We add back the expense associated with stock-based compensation associated with equity issued from pools that were created in connection with our management-led buyout with Crestview GP from KeyCorp, the Munder Acquisition and the RS Acquisition and as a result of any equity grants related to this IPO;

    We add back direct incremental costs of acquisitions and this offering, including expenses associated with third-party advisors, proxy solicitations of mutual fund shareholders for transaction consents, vendor contract early termination costs, impairment of receivables recorded in connection with an acquisition and severance, retention and transaction incentive compensation;

    We add back debt issuance costs;

    We add back pre-IPO governance expenses paid to Crestview and Reverence Capital (such payments will terminate as of the completion of this offering);

    We add back annual incentive compensation paid in excess of expected levels due to acquisitions;

    We subtract an estimate of income tax expense on the adjustments.

        Adjusted EBITDA and Adjusted Net Income are not recognized terms under GAAP and do not purport to be alternatives to net income (loss) attributable to us as a measure of operating performance. Non-GAAP financial measures are used to supplement GAAP results to provide a more complete understanding of the factors and trends affecting our business than GAAP results alone.

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

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

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PROSPECTUS SUMMARY

        The following summary highlights information contained elsewhere in this prospectus and does not contain all of the information that you should consider before investing in our Class A common stock. You should read this entire prospectus, including the sections entitled "Risk Factors," "Management's Discussion and Analysis of Financial Condition and Results of Operations" and our consolidated financial statements and the related notes to those statements before making an investment decision. Unless the context otherwise indicates or requires, the terms "we," "our," "us," "Victory" and the "Company," as used in this prospectus, refer to Victory Capital Holdings, Inc. and its consolidated subsidiaries, except where otherwise stated or where it is clear that the terms mean only Victory Capital Holdings, Inc. exclusive of its subsidiaries.


Our Business

        We are an independent investment management firm operating a next generation, integrated multi-boutique model with $59.0 billion in assets under management, or AUM, as of September 30, 2017. Our differentiated model features a scalable operating platform that provides centralized distribution, marketing and operations infrastructure to our select group of specialized and largely autonomous investment managers, which we refer to as "Franchises." As of September 30, 2017, our Franchises and our solutions platform collectively managed a diversified set of 70 investment strategies for a wide range of institutional and retail clients.

        Our Franchises are operationally integrated, but are separately branded and make investment decisions independently from one another within guidelines established by their respective investment mandates. Our integrated multi-boutique model creates a supportive environment in which our investment professionals, largely unencumbered by administrative and operational responsibilities, can focus on their pursuit of investment excellence. Victory Capital Management Inc., or VCM, our wholly owned registered investment adviser, employs all of our U.S. investment professionals across our Franchises, which are not separate legal entities.

        Our solutions platform consists of multi-Franchise and customized solutions strategies that are primarily rules-based. We offer our solutions platform through a variety of vehicles, including separate accounts, mutual funds and VictoryShares, which is our ETF brand. Like our Franchises, our solutions platform is operationally integrated and supported by our centralized distribution, marketing and operational support functions.

        Our centralized key functions include distribution, marketing, trading, middle- and back-office administration, legal, compliance and finance. Our integrated model aims to "centralize, not standardize." We believe by providing our Franchises with control over their portfolio management tools, risk analytics and other investment-related functions, we can minimize disruptions to their investment process and ensure that they are able to invest in the fashion that they find most optimal.

        In addition to our integrated multi-boutique business model, we believe there are four main attributes that differentiate us from other publicly traded investment management firms:

    We have constructed a set of distinct investment approaches in specialized asset classes where we believe active managers are well positioned to generate "alpha," or returns greater than the returns of an asset class's benchmark, over a full market cycle through security selection and portfolio construction. We believe our strategies in these specialized asset classes, which we refer to as our current focus asset classes, will drive our future growth. These strategies have experienced less fee compression than strategies in more commoditized asset classes, and we believe demand for them typically exceeds capacity. For the nine months ended September 30, 2017, we had an AUM-weighted average fee rate of 71 basis points, an increase of almost 12% from 2013 as we repositioned our business to focus on higher fee asset classes. We attribute part of our ability to attract flows and drive revenue growth—in the face of significant headwinds for active managers—to our selection of specialized asset classes and to the quality of our Franchises.

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    We have a track record of successfully sourcing, executing and integrating sizable acquisitions and making these acquisitions financially attractive by extracting significant synergies. We believe our differentiated platform combining scale and boutique-like qualities is appealing to investment professionals, making us an attractive acquirer to firms looking for a strategic partner.

    We have a diversified business that offers a suite of active products and hybrid rules-based products through our proprietary ETF brand, VictoryShares, across a wide range of asset classes and distinct investment approaches, to a broad and diverse group of institutional and retail clients. We offer our 70 investment strategies through nine Franchises and our solutions platform, with no Franchise accounting for more than 31% of total AUM as of September 30, 2017. Each of our Franchises employs a different investment approach, which we believe leads to diversification in investment return streams among Franchises, even when asset classes overlap. These factors also mitigate key man risk.

    We foster a culture that encourages long-term thinking through promoting meaningful employee ownership. We have a high degree of employee ownership, with over 70% of our employees beneficially owning approximately 27% of our shares as of January 29, 2018. Many of such employees have purchased their equity interests in our firm. In addition, our employees and directors collectively have invested over $125 million in products we manage, directly aligning their investment outcomes with those of our clients.

        Since our management-led buyout with Crestview GP from KeyCorp in August 2013, we have completed three acquisitions and a strategic minority investment and grown our AUM from $17.9 billion to $59.0 billion as of September 30, 2017. We believe there is a significant opportunity to further grow through additional acquisitions. We regularly evaluate potential acquisition candidates based on criteria developed through our extensive acquisition experience. We believe this experience enables us to identify financially attractive candidates that we can integrate with our next generation investment management platform. Through our acquisition strategy, we have added Franchises we believe have the ability to outperform the market, and where we have a strong understanding of the core business's ability to drive growth for those Franchises and our Company as a whole. We acquired Munder in 2014, adding $18.1 billion AUM and rebalancing our overall AUM to 55% small- and mid-cap equities as of December 31, 2014. With our acquisition of CEMP in 2015, we grew our AUM by $1.0 billion and added solutions-driven products and ETF capabilities. We acquired RS Investments in 2016, which added $16.7 billion in AUM across small cap, mid-cap and emerging markets equities and niche fixed income products, while strengthening our distribution capabilities. In 2016, we also acquired a minority interest in an investment firm that specializes in machine learning capabilities and that works with several of our Franchises to enhance their investment processes. These acquisitions have shifted our AUM mix from 38% in our current focus asset classes as of the time of our management-led buyout in 2013 to 75% in our current focus asset classes as of September 30, 2017. We believe our deliberate repositioning of our business through acquisitions has equipped us with stronger investment strategies in compelling asset classes, providing us with a next generation investment management platform.

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GRAPHIC

        We offer our clients an array of equity and fixed income strategies that encompass a diverse spectrum of market capitalization segments, investment styles and approaches. Our current focus asset classes—which consist of U.S. small- and mid-cap equities, global/non-U.S. equities and solutions—collectively comprised 75% of our AUM as of September 30, 2017. We believe strategies in these asset classes are better positioned to attract positive net flows and maintain stable fee rates over the long term. For example, U.S. large-cap equity funds launching in 2016 had fees that were on average 22 basis points lower than such funds launching in 2011, while U.S. small- and mid-cap equity funds launching in 2016 had fees that were on average 17 basis points and 10 basis points higher than such funds launching in 2011, respectively. Furthermore, we believe we are generally able to meet investor demand in these asset classes; as of September 30, 2017, we estimate we had approximately $120 billion of total excess capacity in our four- and five-star funds in these asset classes that were open to new investors (of which approximately $76 billion is in our solutions platform).

GRAPHIC


Data as of September 30, 2017.

(1)
Includes assets managed by our former Diversified Equity Management Franchise, or Diversified, which were transferred to Munder on May 15, 2017.

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        As outlined below, our business is diversified on multiple fronts, including by business, Franchise and solutions platform, client type and product wrapper.

GRAPHIC

Data as of September 30, 2017.

(1)
Includes assets managed by Diversified, which were transferred to Munder on May 15, 2017. See "Business—Our Franchises—Munder Capital Management."

        Within individual asset classes, our Franchises employ different investment approaches. This diversification reduces the correlation between return streams generated by multiple Franchises investing within the same asset class. For example, we have three Franchises focused on Emerging Markets within global / non-U.S. equity, each with a different investment approach. Trivalent primarily focuses on quantitative analysis. Sophus employs a front-end quantitative screen balanced with a fundamental overlay.

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Expedition pursues a fundamental bottoms-up approach. In this manner, we purposefully manage our Franchises to ensure that each has a distinct approach within its respective asset classes.

        Our multi-channel distribution capabilities provide another degree of diversification, with approximately 57% of our AUM from institutional clients and 43% from retail clients as of September 30, 2017. We believe this client diversification has a stabilizing effect on our revenue, as institutional and retail investors have shown to exhibit different demand patterns and respond to trends in different ways.

        We believe we have created a strong alignment of interests through employee ownership, our Franchise revenue share structure and employee investments in Victory products. Notably, the majority of our employee stockholders acquired their equity in connection with the management-led buyout with Crestview GP from KeyCorp, as well as in connection with the Munder Acquisition and the RS Acquisition. We believe the opportunity to own equity in a well-diversified company is attractive, both to existing employees and those who join as part of acquisitions. We principally compensate our investment professionals through a revenue share program, which we believe further incentivizes our investment professionals to focus on investment performance, while simultaneously minimizing potential distractions from the expense allocation process that would be involved in a profit-sharing program. In addition, our employees and directors collectively have invested over $125 million in products we manage, directly aligning their investment outcomes with those of our clients. We believe the combination of these mechanisms has promoted long-term thinking, an enhanced client experience and ultimately the creation of value for our stockholders.

        Our senior management team has an average of over 20 years of experience in the sector, each bringing significant expertise to his or her role. Our CEO and COO have been with us (and our predecessor) for 13 and 12 years, respectively, overseeing the transformation of the business from a bank subsidiary to an independent investment management firm. Our Franchises' Chief Investment Officers, or CIOs, are highly experienced, having an average of approximately 25 years of experience. Our sales leaders have had significant tenures, with an average of approximately 28 years of experience with us or a predecessor firm.

    Our Franchises

        Our integrated multi-boutique model allows our Franchises to focus primarily on investing and alpha generation. Our Franchises are independent from one another from an investment perspective, maintain their own separate brands and logos, which they have built over time, and are led by dedicated CIOs. We believe our model provides significant advantages in attracting and retaining high-quality investment talent, while offering the diversification of separate Franchises. As of September 30, 2017, seven of our nine Franchises managed over $1 billion in AUM, providing us with diversification across investment approaches, with no Franchise accounting for more than 31% of our AUM.

        We customize each Franchise's interactions with our centralized platform and the formula for its respective revenue share. Additionally, we enhance our investment professionals' compensation with equity compensation. We believe these structural elements—while providing economic alignment with the performance of their respective Franchise—align the interests of our Franchises with the broader Company.

        Our Franchises enjoy investment autonomy, whereby each Franchise CIO makes investment decisions relating to the CIO's portfolio independently of other Franchise CIOs and management and in a manner that each believes will maximize investment performance for its portfolios, provided that those decisions are made in accordance with the investment mandate of the applicable strategy as well as applicable regulations. Each Franchise CIO develops the investment mandate for a new product or strategy within his or her Franchise within the parameters of our overall firm goals and as approved by our management. As a registered investment adviser, we are responsible for ensuring that our Franchises comply with the investment mandates that they disclose to clients or to which they contractually agree. We use a common

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firm-wide platform for executing trades within our portfolios that enables our compliance team to monitor our Franchises' investment positions daily prior to the execution of a trade and post-trading to ensure investment decisions made by CIOs are in compliance with their stated investment mandates.

        Strong investment performance is an important component of our business model. On an AUM-weighted basis, approximately 89% of our mutual fund AUM was rated three stars or above by Morningstar for the five-year period ended September 30, 2017, with 66% designated as four- or five-stars. Our Franchises have established a long-term track record of benchmark-relative outperformance, including prior to their acquisition by us. As of September 30, 2017, 80% of our strategies by AUM had returns in excess of their respective benchmarks over a ten-year period, 85% over a five-year period and 81% over a three-year period.

    Our Solutions Platform

        Our solutions platform consists of multi-Franchise and customized solutions strategies that are primarily rules-based. We offer our solutions platform through a variety of vehicles, including separate accounts, mutual funds and VictoryShares, which is our ETF brand. Like our Franchises, our solutions platform is operationally integrated and supported by our centralized distribution, marketing and operational support functions. As of September 30, 2017, VictoryShares' investment management fees were generally between 30 and 45 basis points.

        We believe there is significant growth potential in solutions products through separate accounts, customized solutions and ETFs. Through our VictoryShares brand, we offer ETFs that seek to improve the risk, return and diversification profile of client portfolios. Our approach furthers our commitment to rules-based investing and includes single- and multi-factor strategies designed to provide a variety of outcomes, including maximum diversification, dividend income, downside mitigation, minimum volatility and targeted factor exposure. VictoryShares is designed to provide investors with rules-based solutions that bridge the gap between the active and passive elements of their portfolios.

        Since the CEMP Acquisition in 2015, our ETF products have grown by approximately 850% to approximately $1.9 billion in AUM as of September 30, 2017. As of September 30, 2017, we ranked among the top 20 U.S. ETF issuers by net sales for the preceding 12 months as a percentage of beginning of period assets and ranked #18 for annual growth for the preceding 12 months. Three of our ETFs are rated by Morningstar and all have a 5-star overall rating as of September 30, 2017. In January 2017, we announced plans to launch new ETFs that will track volatility weighted indexes developed in partnership with NASDAQ and launched three new ETFs in the nine months ended September 30, 2017.

    Integrated Distribution, Marketing and Operations

        We have centralized distribution and marketing across institutional and retail channels. Our distribution and marketing professionals collaborate closely with our Franchises' product specialists in order to attract new clients as well as service and generate additional sales from existing clients. We hire accomplished sales professionals and focus on training them on how to position each of our strategies. As of September 30, 2017, we had 61 employees in management and support functions, 100 sales and marketing professionals and 115 investment professionals. Our marketing and distribution efforts enhance the visibility of our brands in both the institutional and retail channels, as evidenced by our eVestment #1 ranking for Institutional Brand Awareness among asset managers with between $25 billion and $50 billion in AUM in 2015 and #4 ranking among asset managers with between $50 billion and $100 billion in 2016 as well as our rankings of #21, #25 and #15 in 2016, 2015 and 2014, respectively, in Barron's Top Fund Families ratings.

        Institutional Sales:    Our institutional sales team attracts and builds relationships with institutional clients, the largest institutional consultants and mutual fund complexes and other organizations seeking sub-advisers. Our institutional clientele includes corporations, public funds, non-profit organizations,

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Taft-Hartley plans, sub-advisory clients, international clients and insurance companies. Our institutional sales and client-service professionals manage existing client relationships, serve consultants and prospects and/or focus on specific segments. They have extensive experience and a comprehensive understanding of our investment activities. On average, each of our client-facing institutional sales professionals has over 20 years of industry tenure.

        Retail Sales:    Our retail sales team is split among regional external wholesalers, retirement specialists and national account specialists, all of whom are supported by an internal calling desk. In the retail channel, we focus on gathering assets through intermediaries, such as banks, broker-dealers, wirehouses, retirement platforms and Registered Investment Advisor, or RIA, networks. As of September 30, 2017, 65% of our retail AUM was through intermediaries, while 35% was through retirement platforms. We offer mutual funds and separately managed wrap and unified managed accounts on intermediary and retirement platforms. We have agreements with many of the largest platforms in our retail channel, which has provided an opportunity to place our retail products on those platforms. Further, to enhance our presence on large distribution platforms, we have focused our efforts on servicing intermediary home offices and research departments. These efforts have led to strong growth in platform penetration, as measured by investment products on approved and recommended lists, as well as our inclusion in model portfolios. This penetration provides the opportunity for us to sell more products through distribution platforms. As of September 30, 2017, we had at least two and as many as 13 products on the research recommended/model portfolios of the top ten U.S. intermediary platforms by AUM. These intermediary platforms included Morgan Stanley, Wells Fargo, Merrill Lynch and Raymond James. We also have agreements with all of the top 20 retirement platforms by AUM, including Fidelity, Vanguard, Voya and Merrill Lynch. As of September 30, 2017, we had at least one and as many as nine approved products on the recommended list of each of those top 20 retirement platforms that have recommended lists.

        Marketing:    Our distribution efforts are supplemented by our marketing function, which is primarily responsible for enhancing the visibility and quality of our portfolio of brands. They are specifically tasked with managing corporate, Franchise and solutions platform branding efforts, database management, the development of marketing materials, website design and the publishing of white papers. They are also a key component in our responses to requests for proposals sent over by prospective clients.

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

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

    Financial Summary

        For the nine months ended September 30, 2017, our net outflows were ($1.8) billion; excluding the impact of Diversified, net outflows were ($1.1) billion. As of September 30, 2017, our Franchises and solutions platform collectively managed $59.0 billion in AUM, of which $44.5 billion was in our current focus asset classes. Our revenues consist mainly of investment management fees, which are calculated as a percentage of average AUM on a daily or quarterly basis, depending on the investment product. For the nine months ended September 30, 2017, management fees comprised 83.8% of our revenues. The remaining 16.2% of our revenues in this time period consisted of distribution and administrative fees.

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        For the nine months ended September 30, 2017, our revenue was $304.0 million, an increase of 52.2% over our revenue of $199.8 million for the nine months ended September 30, 2016. RS Investments is included in our operating results for the nine months of 2017, but not for the first seven months of 2016. Our net income / (loss) was $14.6 million and ($3.4) million for the nine months ended September 30, 2017 and 2016, respectively. Our Adjusted EBITDA was $109.0 million for the nine months ended September 30, 2017, an increase of 65.1% over our Adjusted EBITDA of $66.0 million for the nine months ended September 30, 2016. Our Adjusted Net Income was $44.0 million for the nine months ended September 30, 2017, an increase of 67.9% over our Adjusted Net Income of $26.2 million for the nine months ended September 30, 2016.

        For the year ended December 31, 2016, our net inflows were $0.9 billion. As of December 31, 2016, our Franchises and solutions platform collectively managed $55.0 billion in AUM. For the year ended December 31, 2016, which includes five months of operating results from RS Investments, management fees comprised 83.4% of our revenues. The remaining 16.6% of our revenues in this time period consisted of distribution and administrative fees.

        Our 2016 revenue was $297.9 million, an increase of 23.7% over our 2015 revenue of $240.8 million. Our 2016 net income was ($6.1) million and our 2015 net income was $3.8 million. Our 2016 Adjusted EBITDA was $98.1 million, an increase of 19.4% over our 2015 Adjusted EBITDA of $82.1 million. Our 2016 Adjusted Net Income was $39.0 million, an increase of 13.6% over our 2015 Adjusted Net Income of $34.3 million.

        Our management uses these non-GAAP performance measures to evaluate the underlying operations of our business. Due to our acquisitive nature, there are a number of acquisition and restructuring related expenses included in GAAP measures that we believe distort the economic value of the organization and we believe that many investors use this information when assessing the financial performance of companies in the investment management industry. We have included these non-GAAP measures to provide investors with the same financial metrics used by management to assess the operating performance of our Company. The non-GAAP measures we report are Adjusted EBITDA and Adjusted Net Income. See "Management's Discussion and Analysis of Financial Condition and Results of Operations—Supplemental Non-GAAP Financial Information."


Recent Developments

    Preliminary 2017 Fourth Quarter and Year-End Highlights (Unaudited)

        Our financial statements for the year ended December 31, 2017 are not yet available. Except as stated below, the following preliminary unaudited financial and other information as of, and for, the three months and year ended December 31, 2017 is based solely on management's estimates reflecting currently available preliminary information and remains subject to our consideration of subsequent events, particularly as it relates to material estimates and assumptions used in preparing management's estimates as of and for the three months and year ended December 31, 2017.

        This summary is not a complete presentation of our financial results as of, and for, the three months and year ended December 31, 2017. We have provided below a range of our revenue, net income, Adjusted EBITDA and Adjusted Net Income, rather than specific amounts. Our final financial results as of, and for, the three months and year ended December 31, 2017 may materially differ from our estimates indicated below. In addition, the following estimates constitute forward-looking statements and are subject to risks and uncertainties, including those described under "Risk Factors" in this prospectus. See "Risk Factors—Risks Related to Our Business" and "Forward-Looking Statements." The following information should be read together with "Management's Discussion and Analysis of Financial Condition and Results of Operations" and our consolidated financial statements and notes thereto included elsewhere in this prospectus.

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    Assets Under Management at December 31, 2017

        Our AUM as of December 31, 2017 was $61.8 billion, an increase of $2.8 billion, or 4.7%, as compared to our AUM as of September 30, 2017. The change in AUM during the fourth quarter reflects net market appreciation of $2.6 billion, net inflows of $0.3 billion and a $0.1 billion reduction primarily related to mutual fund liquidations. Gross flows were $4.4 billion for the quarter.

 
  Three Months
Ended
December 31,
   
   
   
 
 
   
  Three Months Ended
September 30,
2017
   
 
($ in millions)
  2017   2016   Change   Change  

AUM at period end

  $ 61,771   $ 54,965     12.4 % $ 58,997     4.7 %

Average AUM

  $ 60,354   $ 52,022     16.0 % $ 57,875     4.3 %

Gross flows

  $ 4,371   $ 6,223     –29.8 % $ 3,879     12.7 %

Net flows

  $ 294   $ 1,622     –81.9 % $ (778 )   N/M  

Net flows (excl. Diversified)

  $ 294   $ 1,854     –84.1 % $ (778 )   N/M  

    N/M—Not Meaningful

        For the year ended December 31, 2017, our AUM increased $6.8 billion, or 12.4%, from AUM at December 31, 2016. The change in AUM during the year ended December 31, 2017 reflects net market appreciation of $8.4 billion, net outflows of ($1.5) billion and a $0.1 billion reduction primarily related to mutual fund liquidations. Excluding the impact of outflows from Diversified, net outflows would have been ($0.9) billion for the period. Gross flows were $16.9 billion for the year ended December 31, 2017.

        As of December 31, 2017, 24 of our mutual funds and ETFs have overall Morningstar ratings of four or five stars and 67% of our fund AUM was rated four or five stars by Morningstar. As of December 31, 2017, 80% of our strategies by AUM had returns in excess of their respective benchmarks over a ten-year period, 84% over a five-year period and 84% over a three-year period. On an equal-weighted basis, 75% of our strategies have outperformed their benchmarks over a ten-year period, 77% over a five-year period and 72% over a three-year period.

    Estimated Unaudited Results for the Three Months Ended December 31, 2017

        For the three months ended December 31, 2017, our revenue is estimated to be between $104.0 million and $107.0 million, an increase of between 6.0% and 9.1%, compared to the three months ended December 31, 2016. Our weighted-average fee rate is estimated to be between 68 basis points and 70 basis points, compared to 75 basis points for the same quarter last year. For this time period, our net income is estimated to be between $10.5 million and $12.2 million, compared to a net loss of ($2.7) million for the three months ended December 31, 2016.

        Our Adjusted EBITDA for this quarter is estimated to be between $38.0 million and $41.0 million, or an increase of between 18.4% and 27.7%, compared to the same period in 2016. Our Adjusted Net Income for this quarter is estimated to be between $17.4 million and $19.1 million, an increase of between 35.9% and 49.2%, compared to the same period in 2016. The tax benefit of goodwill and intangibles was $4.9 million for the three months ended December 31, 2017.

        Revenue increased due to an increase in AUM partially offset by a decrease in the realized fee rate due to a change in asset mix. Net income, Adjusted EBITDA and Adjusted Net Income increased due to the increase in revenue coupled with scale effects, the successful integration of RS Investments and, specific to net income and Adjusted Net Income, a decrease in interest expense primarily due to the August 2017 refinancing activity.

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    Estimated Unaudited Results for the Year Ended December 31, 2017

        For the year ended December 31, 2017, our revenue is estimated to be between $408.0 million and $411.0 million, an increase of between 37.0% and 38.0%, compared to the year ended December 31, 2016. Our weighted-average fee rate is estimated to be between 70 basis points and 71 basis points, compared to 71 basis points for last year. For this time period, our net income is expected to be between $25.1 million and $26.8 million, compared to a net loss of ($6.1) million for the year ended December 31, 2016.

        Our Adjusted EBITDA for the year ended December 31, 2017 is estimated to be between $147.0 million and $150.0 million, an increase of between 49.8% and 52.9%, compared to 2016. Our Adjusted Net Income for the year ended December 31, 2017 is estimated to be between $61.4 million and $63.1 million, an increase of between 57.4% and 61.8%, compared to 2016. The tax benefit of goodwill and intangibles was $19.4 million for the year ended December 31, 2017.

        Revenue increased due to an increase in AUM. Net income, Adjusted EBITDA and Adjusted Net Income increased due to the increase in revenue coupled with scale effects, the successful integration of RS Investments and, specific to net income and Adjusted Net Income, a decrease in interest expense primarily due to the August 2017 refinancing activity.

    Estimated Unaudited Select Balance Sheet Items as of December 31, 2017

        During the fourth quarter 2017, we paid down debt of $18.0 million, resulting in a decline of aggregate debt outstanding from $517.7 million as of September 30, 2017 to $499.7 million as of December 31, 2017. This repayment of debt represents an annualized interest expense savings of $1.2 million. Our revolving credit facility remains undrawn. As of December 31, 2017, our cash and cash equivalents totaled $12.9 million.

    Impact of Tax Reform

        On December 22, 2017, the Tax Cuts and Jobs Act ("Tax Act") was enacted. The Tax Act significantly revises the U.S. corporate income tax law by, among other things, decreasing the federal corporate income tax rate from 35% to 21% effective January 1, 2018. As of September 30, 2017, our U.S. net deferred tax liability was $1.4 million. As a result of the reduction in the corporate income tax rate, we are required to remeasure our U.S. net deferred taxes at December 31, 2017. We estimate the impact of the remeasurement will be a one-time credit to income tax expense of between $2.2 million to $2.6 million for the three months ended December 31, 2017.

        Effective January 1, 2018, the impact of the Tax Act will lower our combined statutory federal income tax rate plus an estimate for state, local and foreign income taxes from approximately 38% to 24% thus lowering our income tax expense beginning in calendar year 2018. The reduction in our combined statutory federal income tax rate plus an estimate for state, local and foreign income taxes from approximately 38% to 24% will also reduce the tax benefit of goodwill and acquired intangible assets beginning in 2018.

        Our management uses non-GAAP performance measures to evaluate the underlying operations of our business. Due to our acquisitive nature, there are a number of acquisition and restructuring related expenses included in GAAP measures that we believe distort the economic value of the organization and we believe that many investors use this information when assessing the financial performance of companies in the investment management industry. We have included these non-GAAP measures to provide investors with the same financial metrics used by management to assess the operating performance of our Company. See "Management's Discussion and Analysis of Financial Condition and Results of Operations—Supplemental Non-GAAP Financial Information."

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

 
  Three Months Ended
December 31,
   
   
  Year Ended December 31,    
   
 
 
  2017   2016   % Change   2017   2016   % Change  
($ in thousands)
  Low   High   Actual   Low   High   Low   High   Actual   Low   High  

Reconciliation of non-GAAP financial measures(1):

                                                             

Net income / (loss)

  $ 10,485   $ 12,165   $ (2,688 )   NM     NM   $ 25,102   $ 26,782   $ (6,071 )   NM     NM  

GAAP income tax (expense) / benefit(2)

    (2,515 )   (2,835 )   1,411     NM     NM     (11,835 )   (12,155 )   3,000     NM     NM  

Income / (loss) before taxes

  $ 13,000   $ 15,000   $ (4,099 )   NM     NM   $ 36,937   $ 38,937   $ (9,071 )   NM     NM  

Interest expense / (income)(3)

    9,300     9,400     10,324     –10 %   –9 %   44,302     44,402     31,286     42 %   42 %

Depreciation(4)

    850     950     930     –9 %   2 %   3,516     3,616     3,156     11 %   15 %

Other business taxes(5)

    400     450     397     1 %   13 %   1,859     1,909     1,137     64 %   68 %

GAAP amortization of acquisition-related intangibles(6)

    5,600     5,700     7,725     –28 %   –26 %   26,273     26,373     27,250     –4 %   –3 %

Stock-based compensation(7)

    1,650     1,850     2,221     –26 %   –17 %   11,662     11,862     8,827     32 %   34 %

Acquisition, restructuring and exit costs(8)

    5,900     6,150     6,729     –12 %   –9 %   14,940     15,190     23,025     –35 %   –34 %

Debt issuance costs(9)

    750     825     862     –13 %   –4 %   5,997     6,072     2,749     118 %   121 %

Pre-IPO governance expenses(10)

    325     375     300     8 %   25 %   1,226     1,276     1,181     4 %   8 %

Earnings/losses on equity method investments(11)

    200     275         NM     NM     308     383         NM     NM  

Compensation in excess of expected levels due to acquisitions(12)

            6,678     NM     NM             8,534     NM     NM  

Adjusted EBITDA

  $ 37,975   $ 40,975   $ 32,067     18 %   28 % $ 147,020   $ 150,020   $ 98,074     50 %   53 %

Adjusted EBITDA Margin

    36.5 %   38.3 %   32.7 %   12 %   17 %   36.0 %   36.5 %   32.9 %   9 %   11 %

 

 
  Three Months Ended
December 31,
   
   
  Year Ended December 31,    
   
 
 
  2017   2016   % Change   2017   2016   % Change  
($ in thousands)
  Low   High   Actual   Low   High   Low   High   Actual   Low   High  

Reconciliation of non-GAAP financial measures:

                                                             

Net income / loss

  $ 10,485   $ 12,165   $ (2,688 )   NM     NM   $ 25,102   $ 26,782   $ (6,071 )   NM     NM  

Adjustments to reflect the operating performance of the Company

                                                             

i. Other business taxes(5)

    400     450     397     1 %   13 %   1,859     1,909     1,137     64 %   68 %

ii. GAAP amortization of acquisition-related intangibles(6)

    5,600     5,700     7,725     –28 %   –26 %   26,273     26,373     27,250     –4 %   –3 %

iii. Stock-based compensation(7)

    1,650     1,850     2,221     –26 %   –17 %   11,662     11,862     8,827     32 %   34 %

iv. Acquisition, restructuring and exit costs(8)

    5,900     6,150     6,729     –12 %   –9 %   14,940     15,190     23,025     –35 %   –34 %

v. Debt issuance costs(9)

    750     825     862     –13 %   –4 %   5,997     6,072     2,749     118 %   121 %

vi. Pre-IPO governance expenses(10)

    325     375     300     8 %   25 %   1,226     1,276     1,181     4 %   8 %

vii. Compensation in excess of expected levels due to acquisition(12)

            6,678     NM     NM             8,534     NM     NM  

Tax effect of above adjustments(13)

    (5,557 )   (5,833 )   (9,467 )   –41 %   –38 %   (23,544 )   (23,819 )   (27,627 )   –15 %   –14 %

viii. Remeasurement of net deferred taxes(14)

    (2,165 )   (2,565 )       NM     NM     (2,165 )   (2,565 )       NM     NM  

Adjusted Net Income

  $ 17,388   $ 19,117   $ 12,757     36 %   50 % $ 61,350   $ 63,080   $ 39,005     57 %   62 %

Tax benefit of goodwill and acquired intangibles(15)

  $ 4,853   $ 4,853   $ 4,197     16 %   16 % $ 19,414   $ 19,414   $ 16,786     16 %   16 %

(1)
Non-GAAP measures should be considered in addition to, and not as a substitute for, financial measures prepared in accordance with GAAP. Our non-GAAP measures may differ from similar measures at other companies, even if similar terms are used to identify these measures.

(2)
Includes remeasurement of net deferred taxes. See footnote (14).

(3)
We add back interest paid on debt net of interest income; interest expense is included in "Interest expense and other financing costs" in our consolidated financial statements while interest income is shown in "Interest income and other income" in our consolidated financial statements.

(4)
We add back depreciation on property and equipment; included in "Depreciation and amortization" in our consolidated financial statements.

(5)
We add back other business taxes; other business taxes are included in "General and administrative" in our consolidated financial statements.

(6)
We add back GAAP amortization of acquisition-related intangibles; included in "Depreciation and amortization" in our consolidated financial statements.

(7)
We add back the expense associated with stock-based compensation associated with equity issued from pools that were created in connection with the management-led buyout with Crestview GP from KeyCorp, the Munder Acquisition and the RS Acquisition and as a result of IPO-related equity grants; included in "Personnel compensation and benefits" in our consolidated financial statements.

(8)
We add back direct incremental costs of acquisitions and this offering, including expenses associated with third-party advisors, proxy solicitations of mutual fund shareholders for transaction consents, vendor contract early termination costs, impairment of receivables recorded in connection with an acquisition and severance, retention and transaction incentive compensation. Severance, retention and transaction incentive

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    compensation is included in "Personnel compensation and benefits" in our consolidated financial statements, impairment of receivables recorded in connection with an acquisition is included in "Interest income and other income/(expense)", costs associated with professional services incurred in connection with IPO readiness are included in "General and administrative"; all other incremental costs are included in "Restructuring and integration costs" or "Acquisition-related costs".

   
  Three Months Ended   Year Ended  
   
  December 31,
2017
  December 31,
2016
  December 31,
2017
  December 31,
2016
 
  ($ in thousands)
  Low   High   Actual   High   Low   Actual  
 

Restructuring and integration costs

  $ 1,227   $ 1,279   $ 2,650   $ 6,139   $ 6,242   $ 10,012  
 

Interest income and other income / (expense)

  $ 2,356   $ 2,456       $ 4,383   $ 4,456      
 

Acquisition-related costs

  $ 699   $ 728     944   $ 2,130   $ 2,165     6,619  
 

General and administrative

  $ 135   $ 141       $ 724   $ 737      
 

Personnel compensation and benefits

  $ 1,483   $ 1,546     3,135   $ 1,564   $ 1,590     6,394  
(9)
We add back debt issuance costs, included in "Interest expense and other financing costs" and "General and administrative" in our consolidated financial statements. See "—Liquidity and Capital Resources" for more information.

(10)
We add back pre-IPO governance expenses paid to Crestview and Reverence Capital, included in "General and administrative" in our consolidated financial statements. These payments will terminate as of the completion of this offering.

(11)
We adjust for earnings/losses on equity method investments, included in "Interest income and other income / (expense)" in our consolidated financial statements.

(12)
Our compensation committee, together with our CEO, establishes a target percentage of our pre-bonus EBITDA to be allocated to employees as annual cash incentive compensation. If, as a result of a significant acquisition, we pay annual cash incentive compensation that is a greater percentage of pre-bonus EBITDA than our target percentage, we add back the amount of the annual incentive cash compensation in excess of the target percentage. For example, in 2016, as a result of the RS Acquisition, we paid incentive cash compensation at a greater percentage of pre-bonus EBITDA than our target percentage. We paid incentive cash compensation in 2016 at levels we considered appropriate taking into account the RS Acquisition (including the size of our Company post-acquisition) without the benefit of a full year of those earnings and before expense synergies were fully realized. We also paid incentive cash compensation on duplicative headcount while the integration of the RS Investments platform was being completed; included in "Personnel compensation and benefits" in our consolidated financial statements.

(13)
Reflects income taxes of 38% applied to the sum of line items i. to vii.; 38% represents statutory federal income tax rate of 35% plus an estimate for state, local and foreign income taxes.

(14)
On December 22, 2017, the Tax Act was enacted. The Tax Act significantly revised the U.S. corporate income tax by, among other things, decreasing the federal corporate income tax rate from 35% to 21% effective January 1, 2018. As of September 30, 2017, our U.S. net deferred tax liability was $1.4 million. As a result of the reduction in the corporate income tax rate, we are required to remeasure our U.S. net deferred taxes at December 31, 2017. We estimate the impact of the remeasurement will be a one-time credit to income tax expense of between $2.2 million to $2.6 million for the three months ended December 31, 2017.

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


Competitive Strengths

        We believe we have significant competitive strengths that position us for sustained growth over the long term.

    Integrated Multi-Boutique Model Providing Investment Autonomy, Centralized Distribution, Marketing and Support Functions to Investment Franchises

        We believe our integrated multi-boutique model allows us to achieve the benefits from both the scale of large managers and the focus of smaller managers. Our Franchises retain investment autonomy while benefiting from our centralized middle- and back-office functions. We have demonstrated an ability to successfully integrate our Franchises onto our flexible infrastructure without significantly increasing our incremental fixed costs, which is a key component to the scalability of our model. Our structure enables our Franchises to focus their efforts on the investment process, providing them the platform to enhance their investment performance and consequently their growth prospects. Our centralized operations allow our Franchises to customize their desired investment support functions in ways that are best suited for their investment workflow. Through our centralized distribution platform, our Franchises are able to sell their products to institutional investors, retirement plans, brokerages and wealth managers to which it is challenging for smaller managers to gain access.

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        Within our model, each Franchise retains its own brand and logo, which they have built over time. Unlike other models with unified branding, there is no requirement for newly acquired Franchises to adjust their product set due to pre-existing products on our platform; they are simply marketed under their own brand as they were previously. Because of this dynamic, we have the flexibility to add new Franchises either to gain greater exposure to certain asset classes or increase capacity in places where we already have exposure.

    Proven Acquirer with Compelling Proposition

        We believe our platform will allow us to continue to be a consolidator within the investment management industry, providing us with an opportunity to further grow and scale our business. Through several transactions, we have demonstrated an ability to successfully source, execute and integrate new Franchises.

        We believe our integrated multi-boutique model is compelling for potential Franchises with entrepreneurial leaders. Under our model, Franchises retain the brands they have built as well as autonomy over their investment decisions, while simultaneously benefiting from the ability to leverage our centralized distribution, marketing and operations platform. Our model further relieves our Franchises of much of their administrative burdens and allows them to instead focus on the investment process, which we believe provides them a platform to enhance their performance. By offering a platform on which Franchises can focus on their core competencies, grow their own brand faster and participate in a revenue share program focused on investment performance rather than expense allocation, we believe we are providing an attractive proposition. Furthermore, we believe transaction-related grants of Victory equity are attractive to Franchise investment personnel, as these personnel receive the advantage of sharing in the potential upside of the entirety of our diversified investment management business.

        Because we integrate a significant portion of each Franchise's distribution, operational and administrative functions, we have been able to extract significant expense synergies from our acquisitions, enabling us to create greater value from transactions. As of September 30, 2017, we had generated net annualized expense synergies of approximately $76 million from our three acquisitions. In our most recent acquisition of RS Investments, we successfully achieved net annual expense synergies of $52 million, which represents over 45% of RS Investments' expenses in the year prior to the acquisition. We incurred $9.9 million in one-time expenses as of September 30, 2017 to achieve those synergies.

        As a disciplined acquirer, we will seek to continue to augment our next generation investment management platform by focusing on acquisition candidates that provide capabilities that are complementary to our strategies in our current focus asset classes, including presence in distribution channels that would enhance our distribution platform. Since our management-led buyout with Crestview GP, our strategy of enhancing our capabilities within our current focus asset classes has driven strong organic growth within these asset classes and for our Company overall. Furthermore, the distribution channels obtained through acquisitions have enhanced our flows.

    Portfolio of Specialized Asset Classes with Potential for Outperformance

        In assembling our portfolio of Franchises, we have selected investment managers offering strategies in specialized asset classes where active managers have shown an established track record of outperformance relative to benchmarks through security selection and portfolio construction. We continue to build our platform to address the needs of clients who would like exposure to asset classes that have potential for alpha generation.

        We find that larger industry trends of flows moving from actively managed strategies to passive ones are not as pronounced in our current focus asset classes.

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    Diversified Platform Across Investment Strategies, Franchises and Client Type

        We have strategically built an investment platform that is diversified by investment strategy, Franchise and client type. Within each asset class, Franchises with overlapping investment mandates still contribute to our diversification by pursuing different investment philosophies and/or processes. For example, U.S. small-cap equities, which accounted for approximately 25% of our AUM as of September 30, 2017, consists of four Franchises, each following a different investment strategy. We believe the diversity in investment styles reduces the correlation between the return profiles of strategies within the same asset class, and consequently provides an additional layer of diversification and AUM and revenue stability.

        We believe our AUM is well diversified at the Franchise level, with no Franchise accounting for more than 31% of AUM, and the median Franchise comprising 7% of AUM, as of September 30, 2017. Furthermore, we believe our Franchises' brand independence reduces the impact of each individual Franchise's performance on clients' perceptions of the other Franchises. The distribution of AUM by Franchise, as well as succession planning, mitigates the level of key man risk typically associated with investment management businesses.

        We believe our client base serves as another important diversifying element, as different client segments have shown to have distinct characteristics, including asset class and product preferences, sales and redemptions trends, and exposure to secular trends. We strive to maintain a balance between institutional and retail clients, with 57% and 43% of our AUM as of September 30, 2017 in each of these channels, respectively. We also have the capability to deliver our strategies in product wrappers designed to meet the needs and preferences of investors in each channel. These product wrappers include mutual funds with channel-specific share classes, institutional separate accounts, separately managed accounts, or SMAs, unified managed accounts, or UMAs, common trust funds, or CTFs, and ETFs.

    Attractive Financial Profile

        Our revenues have shown to be recurring in nature, as they are based on the level of client assets we manage. The fees we earn have remained high relative to industry averages, as the majority of our strategies are in asset classes that are in higher demand and typically command higher fee rates. From 2013 through the nine-month period ended September 30, 2017, our AUM-weighted average fee rate increased by almost 12%, primarily due to changes in asset class, product and client mix as we repositioned our business to focus on higher-fee asset classes. However, we anticipate that the average fee rate is likely to decline as our solutions platform (which has a lower fee rate than other products) continues to grow. In addition, our fee revenue is generated from strategies with differing return profiles, thus diversifying our revenue stream.

        Because we largely outsource our middle- and back-office functions, as well as technology support, we have relatively minimal capital expenditure requirements. Approximately two-thirds of our expenses are variable in nature, consisting of the incentive compensation pool for employees, sales commissions, third-party distribution costs, sub-advising and the fees we pay to certain of our vendors.

    Economic and Structural Alignment of Interests Promotes Owner-Centric Culture

        Through our revenue share compensation model and broad employee ownership, we have structurally aligned our employees' interests with those of our clients and other stockholders and have created an owner-centric culture that encourages employees to act in the best interests of clients and our Company, as well as to think long term. Additionally, our employees invest in products managed by our Franchises and solutions platform, providing direct alignment with the interests of our clients.

        We directly align the compensation paid to our investment teams with the performance of their respective Franchises by structuring formula-based revenue sharing on the products they manage. We believe that compensation based on revenue rather than profits encourages investment professionals to

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focus their attention on investment performance, while encouraging them to provide good client service, focus on client retention and attract new flows. We believe the formula-based, client-aligned nature of our revenue sharing fosters a culture of transparency where Franchises understand how and on what terms they are being measured to earn compensation.

        We believe both the high percentage of employee ownership and employees' purchase of a significant percentage of their equity creates a collective alignment with our success. Further, we believe granting equity is attractive to potential new employees and is a retentive mechanism for current employees. As of January 29, 2018, our employees beneficially owned approximately 27% of our shares, having purchased approximately 40% of this equity. In addition to being aligned with our financial success through their equity ownership, our employees and directors collectively have invested over $125 million in products we manage.


Our Growth Strategy

        We have a purposeful strategy aimed to achieve continued growth and success for our Company and our Franchises. The growth we pursue is both organic and inorganic. We seek to grow organically by offering our clients strategies with strong performance track records in specialized asset classes. We intend to continue to supplement our growth through disciplined acquisitions. We primarily seek to acquire investment management firms that strengthen capabilities in our current focus asset classes and/or complement our existing capabilities. We intend for our acquisitions to diversify our business by investment approach and asset class. We believe one of our key advantages in a competitive sale process is our ability to provide access to new distribution channels. We believe that our centralized distribution and marketing platform drives organic growth at our acquired Franchises both by opening new distribution channels to them and providing them with the support of our sales and marketing professionals while allowing them to focus on investment performance.

    Organic Growth

        A key driver of our growth strategy lies in enhancing the strength of each of our existing Franchises. We primarily do this by providing them with access to our centralized distribution, marketing and operations platform. Largely unencumbered by the burdens of administrative and operational tasks, our investment professionals can focus on delivering investment excellence and maintaining strong client relationships, thus driving net flows. We also expect to help our Franchises through fund and share class launches and product development. We believe we are well positioned to help our Franchises grow their product offerings and diversify their investor base, with the ability to offer their strategies in multiple product wrappers to meet clients' needs.

        Our platform provides significant operating leverage to our Franchises and is a key factor in our continued success. As we continue to grow and expand, we will continue to look for ways to invest in our operations, in order to achieve greater economies of scale and provide better products to our Franchises. We continue to expand our distribution capabilities as well, demonstrated by our entry in 2016 into an exclusive distribution agreement with an independent investment management firm in Japan, as well as our launch during the first quarter of 2017 of two emerging market Undertaking for Collective Investment in Transferable Securities funds, or UCITS, with a global financial advisory firm.

        We continually look to the future, and as a result, our infrastructure investments can range from the immediate to the long term. As an example, we have acquired a minority interest in Cerebellum Capital, an investment management firm that specializes in machine learning. Cerebellum Capital's techniques help to design, execute and improve investment programs and the firm is working with a number of our Franchises to help them optimize their investment processes. We believe investments like these provide tools that can provide enhancements to our Franchises' investment processes, give our Franchises access to proprietary technology that can give them an advantage and help position our Franchises for the future.

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        We believe there is significant growth potential in solutions products, most notably in ETFs. Through our VictoryShares brand, we offer ETFs that seek to improve the risk, return and diversification profile of client portfolios. Our approach furthers our commitment to rules-based investing and includes single-and multi-factor strategies designed to provide a variety of outcomes, including maximum diversification, dividend income, downside mitigation, minimum volatility and targeted factor exposure. VictoryShares is designed to provide investors with rules-based solutions that bridge the gap between the active and passive elements of their portfolios.

        Since the CEMP Acquisition in 2015, our ETF products have grown by approximately 850% to approximately $1.9 billion in AUM as of September 30, 2017. As of September 30, 2017, we ranked among the top 20 U.S. ETF issuers by net sales for the preceding 12 months as a percentage of beginning of period assets and ranked #18 for annual growth for the preceding 12 months. In January 2017, we announced plans to launch new ETFs that will track volatility weighted indexes developed in partnership with NASDAQ and launched three new ETFs in the nine months ended September 30, 2017.

    Growth through Acquisitions

        We intend to continue to accelerate growth through disciplined acquisitions. We regularly evaluate potential acquisition candidates and maintain a strong network among industry participants and advisors that provide opportunities to establish potential target relationships and source transactions. We seek targets that can provide us with enhanced investment offerings, complementary products/investing strategies, additional financial strength and/or a broader distribution footprint. We have a preference for investing in asset classes where we have intimate knowledge, provided that further acquisitions must continue to diversify our portfolio in terms of investment strategy. Our focus is not only on U.S. investment managers but also on investment styles that have an international or emerging market presence.

        We believe the universe of potential acquisition targets has grown as a result of the evolution of the distribution landscape, the increasing cost of regulatory compliance, management fee compression and outflows from actively managed funds to passive products. We believe our integrated multi-boutique model makes us an attractive acquirer. Further, our centralized distribution, marketing and operations platform allows us to achieve synergies.

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Current Structure and Organization*

GRAPHIC


*
Chart omits intermediate holding companies and other insignificant subsidiaries.

(1)
Calculated on the basis of beneficial ownership as described in "Principal Stockholders." Victory employees and directors hold in the aggregate 22% of the total voting power of the outstanding common stock and the unvested restricted stock (which votes). Crestview GP holds 61% of such total voting power, and Reverence Capital holds 17% of such total voting power.

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Post-Offering Structure and Organization*

GRAPHIC


*
Chart omits intermediate holding companies and other insignificant subsidiaries. Assumes no exercise of the underwriters' option.

(1)
Calculated on the basis of beneficial ownership as described in "Principal Stockholders." Victory employees and directors will hold in the aggregate 21% of the total voting power of the outstanding common stock and the unvested restricted stock (which votes). Crestview GP will hold 60% of such total voting power, Reverence Capital will hold 17% of such total voting power and the investors in this offering will hold in the aggregate 2% of such total voting power.

(2)
A substantial majority of our employee shareholders have entered into the Employee Shareholders' Agreement pursuant to which they have granted an irrevocable voting proxy to the Employee Shareholders Committee with respect to their shares. These shares represent 21% of the beneficial ownership and 16% of the total voting power of our outstanding common stock and unvested restricted shares. See "Principal Stockholders" and "Certain Relationships and Related-Party Transactions-Employee Shareholders' Agreement".


Our Stockholders

        Our stockholders currently consist of: Victory employees and directors, Crestview GP and Reverence Capital.

        Founded in 2004, Crestview is a value-oriented private equity firm focused on the middle market. The firm is based in New York and manages funds with over $7 billion of aggregate capital commitments. The firm is led by a group of partners who have complementary experience and distinguished backgrounds in private equity, finance, operations and management. Crestview's senior investment professionals primarily focus on sourcing and managing investments in each of the specialty areas of the firm: financial services, media, energy and industrials. For additional information regarding Crestview's ownership in us after this offering see "Principal Stockholders."

        Reverence Capital is a private investment firm focused on thematic investing in leading global middle-market financial services businesses through control and influence-oriented investments. The firm was founded in 2013, by Milton Berlinski, Peter Aberg and Alexander Chulack, after distinguished careers advising and investing in a broad array of financial services businesses. The partners collectively bring over 100 years of advisory and investing experience across a wide range of financial services sectors, including asset management, banks and specialty finance, capital markets, financial technology and insurance. For

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additional information regarding Reverence Capital's ownership in us after this offering see "Principal Stockholders."


Summary Risk Factors

        Investing in our Class A common stock involves substantial risk. The risks described under the heading "Risk Factors" immediately following this summary may cause us to not realize the full benefits of our strengths or may cause us to be unable to successfully execute all or part of our strategy. Some of the more significant challenges include the following:

    Adverse market conditions could negatively impact our business in several ways, reducing the market value of our assets under management, which could reduce earnings.

    Assets under management could be withdrawn for several reasons, including poor investment performance, a reduction in market demand for asset classes our Franchises are invested in and investment vehicles offered by our Franchises, general price declines in the securities markets, turnover of investment personnel, or changes in client preferences, which would reduce earnings.

    Our revenue is derived substantially from contracts and relationships that may be terminated upon short or no notice.

    The historical returns of our existing investment strategies may not be indicative of their future results or of the results of investment strategies we may develop in the future.

    The loss of key investment professionals and members of senior management could have a material adverse effect on our business.

    Our growth strategy is dependent in part upon continued growth of our existing Franchises and our ability to successfully acquire or invest in new strategic transactions.

    Our substantial indebtedness may expose us to material risks, including by making it more difficult for us to withstand or respond to adverse or changing business, regulatory and economic conditions, take advantage of new business opportunities or make necessary capital expenditures.

    Trends in the investment management industry have led to lower fees in certain asset classes of the investment management market. A reduction in the fees charged by our Franchises, or limited opportunities to increase fees, will reduce or limit our revenues.

    The investment management industry is intensely competitive, with competition based on a variety of factors, including investment performance, investment management fee rates and continuity of investment professionals.

    The dual class structure of our common stock will have the effect of concentrating voting control with those stockholders who held our capital stock prior to the completion of this offering.

    Crestview GP controls us and its interests may conflict with ours or yours in the future.

        You should carefully consider all of the information included in this prospectus, including matters set forth under the headings "Risk Factors" and "Special Note Regarding Forward-Looking Statements," before deciding to invest in our Class A common stock.


Corporate History and Other Information

        Victory Capital Holdings, Inc. was incorporated as a Delaware corporation in February 2013 for the purpose of acquiring VCM and Victory Capital Advisers, Inc., or VCA, our broker-dealer subsidiary registered with the Securities and Exchange Commission, or SEC, from KeyCorp, which occurred on August 1, 2013. VCM was previously a subsidiary of KeyCorp. Originally founded as Cleveland Trust in

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1894, it was ultimately rebranded as VCM in 2001, and served as the investment management division of KeyCorp.

        In 2014, we completed the Munder Acquisition, acquiring Munder Capital and its wholly owned subsidiary Integrity Asset Management and increasing our AUM by $18.1 billion. Reverence Capital made its initial investment in us in 2014 in connection with the Munder Acquisition.

        In 2015, we completed the CEMP Acquisition. CEMP is a rules-based, smart beta manager that, at the time of the acquisition, managed 16 mutual funds and offered five ETFs, with total AUM of $1.0 billion.

        In 2016, we completed the RS Acquisition, increasing our AUM by $16.7 billion and bringing our then total AUM to approximately $53 billion.

        In 2016, we also acquired a minority interest in Cerebellum Capital, an investment management firm that specializes in machine learning, a form of artificial intelligence that allows computers to learn without being explicitly programmed.

        For more details, see "Management's Discussion and Analysis of Financial Condition and Results of Operation—Company History."

        Our principal business office is located at 4900 Tiedeman Road 4th Floor, Brooklyn, OH 44144. Our website address is www.vcm.com. We do not incorporate the information contained on, or accessible through, our corporate website into this prospectus, and you should not consider it to be part of this prospectus.


Implications of Being an Emerging Growth Company

        As a company with less than $1.07 billion in revenue during our last fiscal year, we qualify as an "emerging growth company" as defined in the Jumpstart Our Business Startups Act of 2012, or the JOBS Act.

        An emerging growth company may take advantage of specified reduced reporting and other requirements that are otherwise generally applicable to public companies. As an emerging growth company:

    we are required to have only two years of audited financial statements and only two years of related Management's Discussion and Analysis of Financial Condition and Results of Operations disclosure;

    we are not required to engage an auditor to report on our internal controls over financial reporting pursuant to Section 404(b) of the Sarbanes-Oxley Act of 2002, or the Sarbanes-Oxley Act;

    we are not required to comply with any requirement that may be adopted by the Public Company Accounting Oversight Board (PCAOB) regarding a supplement to the auditor's report providing additional information about the audit and the financial statements (i.e., an auditor discussion and analysis);

    we are not required to submit certain executive compensation matters to stockholder advisory votes, such as "say-on-pay," "say-on-frequency" and "say-on-golden parachutes";

    we are not required to disclose certain executive compensation-related items, such as the correlation between executive compensation and performance and comparisons of the Chief Executive Officer's compensation to median employee compensation; and

    we may take advantage of an extended transition period for complying with new or revised accounting standards, allowing us to delay the adoption of some accounting standards until those standards would otherwise apply to private companies.

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        We have elected to take advantage of these reduced reporting and other requirements available to us as an emerging growth company. As a result of these elections, the information that we provide in this prospectus may be different from the information you may receive from other public companies in which you hold equity interests. In addition, it is possible that certain investors will find our Class A common stock less attractive as a result of our elections, which may result in a less active trading market for our shares and more volatility in our stock price.

        We may take advantage of these provisions until we are no longer an emerging growth company. We could remain an emerging growth company for up to five years, or until the earliest of (i) the last day of the first fiscal year in which our annual gross revenues is at least $1.07 billion, (ii) the date that we become a "large accelerated filer" as defined in Rule 12b-2 under the Securities and Exchange Act of 1934, as amended, or the Exchange Act, which would occur if, among other things, the market value of our common equity securities held by non-affiliates exceeds $700 million as of the last business day of our most recently completed second fiscal quarter, or (iii) the date on which we have issued more than $1 billion in nonconvertible debt securities during the preceding three-year period.


Controlled Company

        Upon the completion of this offering, Crestview GP will continue to control a majority of the voting power of our common stock. As a result we expect to be considered a "controlled company" under NASDAQ rules. Under these rules, a "controlled company" may elect not to comply with certain corporate governance requirements, including the requirement to have a board of directors that is composed of a majority of independent directors and to form independent compensation and nominating and corporate governance committees. We intend to take advantage of these exemptions following the completion of this offering for so long as Crestview GP holds a majority of our voting power. These exemptions do not modify the independence requirements for our audit committee, and we intend to comply with the applicable requirements of the Sarbanes-Oxley Act and rules with respect to our audit committee within the applicable time frame. See "Management—Corporate Governance."

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The Offering

Class A common stock offered by us

  11,700,000 shares.

Underwriters' option to purchase additional shares of Class A common stock

 

The underwriters have a 30-day option to purchase up to an additional 1,755,000 shares of our Class A common stock from us.

Class A common stock to be outstanding after this offering

 

11,700,000 shares (or 13,455,000 shares if the underwriters exercise in full their option to purchase additional shares).

Class B common stock to be outstanding after this offering

 

55,118,673 shares.

Total common stock to be outstanding after this offering

 

66,818,673 shares (or 68,573,673 shares if the underwriters exercise in full their option to purchase additional shares).

Use of proceeds

 

We estimate that the net proceeds to us from this offering, after deducting underwriting discounts and estimated offering expenses, will be approximately $137.5 million (or approximately $158.9 million if the underwriters exercise in full their option to purchase additional shares of Class A common stock).

 

We intend to use the net proceeds from this offering, together with cash on hand, to repay a portion of the outstanding loans under our existing senior credit agreement. We intend to refinance the remaining portion of those outstanding loans with proceeds from the Proposed Debt Refinancing (as defined below). If the underwriters exercise their option to purchase additional shares, we intend to use those net proceeds for general corporate purposes, which may include the repayment of debt. See "Use of Proceeds."

Concurrent proposed debt refinancing

 

Concurrently with the closing of this offering, we intend to enter into a new senior secured credit agreement to replace our existing senior secured credit agreement, which we refer to as the Proposed Debt Refinancing. We expect to use the net proceeds from this offering and borrowings under the new senior credit agreement to repay all amounts outstanding under the existing senior credit agreement. We expect that the new senior credit agreement will include a $360.0 million term loan maturing in seven years and a $50.0 million revolving credit facility.

 

This offering is not conditioned on the closing of the new senior credit agreement or the repayment of the existing senior credit agreement. If we do not enter into the new senior credit agreement, the existing senior credit agreement will remain in place. Certain of the underwriters in this offering or their affiliates are expected to be lenders under the new senior credit agreement.

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Risk factors

 

See "Risk Factors" for a discussion of factors you should carefully consider before deciding whether to invest in our Class A common stock.

Reserved share program

 

At our request, the underwriters have reserved for sale, at the initial public offering price, up to 5% of the shares of Class A common stock offered by this prospectus for sale to certain of our directors, officers, employees, business associates and related persons. See "Underwriting."

Voting and conversion rights

 

Upon the completion of this offering, shares of Class A common stock will be entitled to one vote per share and shares of Class B common stock will be entitled to ten votes per share. Holders of our Class A common stock and Class B common stock will generally vote together as a single class, unless otherwise required by law or our amended and restated certificate of incorporation.

 

Each share of our Class B common stock will be convertible into one share of our Class A common stock at any time, at the option of the holder, and will convert automatically upon transfers (subject to certain exceptions), a termination of employment by an employee stockholder and upon the date the number of shares of Class B common stock then outstanding (including unvested restricted shares) is less than 10% of the aggregate number of shares of Class A common stock and Class B common stock outstanding (including unvested restricted shares).

 

Upon the completion of this offering, assuming no exercise of the underwriters' option to purchase additional shares, (1) holders of our Class A common stock will hold 2% of the total voting power of our outstanding common stock and unvested restricted stock and beneficially own approximately 18% of the total common stock and (2) holders of our Class B common stock will hold 98% of the total voting power of our outstanding common stock and unvested restricted stock and beneficially own approximately 91% of the total common stock. See "Post-Offering Structure and Organization."

 

If the underwriters exercise in full their option to purchase additional shares, (1) holders of our Class A common stock will hold 2% of the total voting power of our outstanding common stock and unvested restricted stock and beneficially own approximately 20% of the total common stock and (2) holders of our Class B common stock will hold 98% of the total voting power of our outstanding common stock and unvested restricted stock and beneficially own approximately 89% of the total common stock.

 

As the holder of a majority of our outstanding Class B common stock, Crestview GP will have the ability to control the outcome of matters submitted to our stockholders for approval, including the election of our directors and the approval of any change-in-control transaction. See "Principal Stockholders" and "Description of Capital Stock" for additional information.

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Proposed trading symbol

 

"VCTR"

        On a pro forma basis as adjusted for the offering, the weighted average shares outstanding on a diluted basis as of September 30, 2017 were 71,217,606. See "Summary Consolidated Financial and Other Data—Unaudited Pro Forma Balance Sheet Data and Basic and Diluted Earnings Per Share."

        The number of shares of our Class A common stock and Class B common stock to be outstanding after this offering is based on no shares of our Class A common stock and 55,118,673 shares of our Class B common stock outstanding as of December 31, 2017 and excludes:

    9,078,718 shares of our Class B common stock issuable upon the exercise of options outstanding as of December 31, 2017 under the Victory Capital Holdings, Inc. Equity Incentive Plan, as amended, or the 2013 Plan, at a weighted-average exercise price of $5.71 per share, of which 5,731,725 shares were underlying vested options, at a weighted-average exercise price of $4.19 per share;

    2,971,794 restricted shares of our Class B common stock issued that are subject to future vesting based on time or performance criteria;

    357,255 shares of our Class B common stock issuable upon the exercise of outstanding unvested options granted after December 31, 2017 under the 2013 Plan at a weighted-average exercise price of $14.27 per share;

    1,678,743 restricted shares of Class B common stock granted after December 31, 2017 under the 2013 Plan that are subject to future vesting based on time or performance criteria; and

    3,722,872 shares of our common stock reserved for future issuance under our equity compensation plans, consisting of:

    3,372,484 shares of Class A common stock and Class B common stock reserved for future issuance under the Victory Capital Holdings, Inc. 2018 Stock Incentive Plan, or the 2018 Plan, which will become effective on the date of this prospectus; and

    350,388 shares of Class A common stock reserved for future issuance under the Victory Capital Holdings, Inc. 2018 Employee Stock Purchase Plan, or the 2018 ESPP, which will become effective on the date of this prospectus.

        Unless we indicate otherwise, the information in this prospectus assumes:

    the amendment and restatement of our certificate of incorporation to redesignate our outstanding common stock as Class B common stock and create a new class of Class A common stock to be offered and sold in this offering and to effect a 175.194-for-1 split of our common stock;

    the filing and effectiveness of our amended and restated certificate of incorporation and the effectiveness of our amended and restated bylaws, each of which will occur immediately prior to the completion of this offering; and

    no exercise by the underwriters of their option to purchase additional shares of our Class A common stock.

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SUMMARY CONSOLIDATED FINANCIAL AND OTHER DATA

        The following tables set forth our summary consolidated financial and other data as of and for the periods indicated. The summary consolidated financial and other data as of and for the years ended December 31, 2016 and 2015 have been derived from our audited consolidated financial statements and the notes thereto included elsewhere in this prospectus. Our historical results for any prior period are not necessarily indicative of results expected in any future period.

        The summary consolidated financial and other data as of and for the nine months ended September 30, 2017 and 2016 have been derived from our unaudited consolidated financial statements and notes thereto included elsewhere in this prospectus. The unaudited consolidated balance sheet data as of September 30, 2017 and unaudited statements of operations data for the nine months ended September 30, 2017 and 2016 have been prepared on substantially the same basis as our consolidated financial statements that were audited in accordance with GAAP and include all adjustments we consider necessary for a fair statement of our consolidated statements of operations and balance sheets for the periods and as of the dates presented therein. Our results for the nine months ended September 30, 2017 are not necessarily indicative of our results for a full year.

        The following data should be read together with our consolidated financial statements and the related notes thereto, as well as the section entitled "Management's Discussion and Analysis of Financial Condition and Results of Operations" and "Selected Consolidated Financial Data" included elsewhere in this prospectus.

 
  Nine Months Ended
September 30,
  Years Ended
December 31,
 
($ in thousands, except per share data as noted)
  2017(1)   2016(1)   2016   2015  

GAAP Statement of Operations Data:

                         

Investment management fees

  $ 254,605   $ 166,452   $ 248,482   $ 201,553  

Fund administration and distribution fees

    49,378     33,352     49,401     39,210  

Total revenue

    303,983     199,804   $ 297,883   $ 240,763  

Income/(loss) from operations

  $ 63,242   $ 17,915   $ 24,485   $ 33,220  

Interest expense / (income)

    39,305     22,887     33,556     25,998  

Income/(loss) before income taxes

    23,937     (4,972 )   (9,071 )   7,222  

Net income/(loss)

    14,617     (3,383 )   (6,071 )   3,800  

GAAP operating margin

    20.8 %   9.0 %   8.2 %   13.8 %

Basic earnings per share

  $ 0.27   $ (0.07 ) $ (0.12 ) $ 0.08  

Diluted earnings per share

  $ 0.25   $ (0.07 ) $ (0.12 ) $ 0.08  

 

 
  Nine Months Ended
September 30,
  Years Ended
December 31,
 
($ in thousands, except AUM in millions)
  2017(1)   2016(1)   2016   2015  

Non-GAAP Statement of Operations Data and Other Data:

                         

Adjusted EBITDA

  $ 109,045   $ 66,007   $ 98,074   $ 82,118  

Adjusted EBITDA margin(2)

    35.9 %   33.0 %   32.9 %   34.1 %

Adjusted Net Income

  $ 43,963   $ 26,248   $ 39,005   $ 34,327  

Tax benefit of goodwill and acquired intangibles(3)

  $ 14,561   $ 12,589     16,786     14,813  

Other Operating Data

                         

AUM at period end

  $ 58,977   $ 51,356   $ 54,965   $ 33,111  

(1)
Unaudited.

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

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

        Our management uses non-GAAP performance measures to evaluate the underlying operations of our business. Due to our acquisitive nature, there are a number of acquisition and restructuring related expenses included in GAAP measures that we believe distort the economic value of the organization and we believe that many investors use this information when assessing the financial performance of companies in the investment management industry. We have included these non-GAAP measures to provide investors with the same financial metrics used by management to assess the operating performance of our Company. See "Management's Discussion and Analysis of Financial Condition and Results of Operation—Supplemental Non-GAAP Financial Information."

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

 
  Nine Months Ended
September 30,
  Years Ended
December 31,
 
($ in thousands)
  2017   2016   2016   2015  

Reconciliation of non-GAAP financial measures(1):

                         

Net income / (loss)

  $ 14,617   $ (3,383 ) $ (6,071 ) $ 3,800  

GAAP income tax (expense)/benefit

    (9,320 )   1,589     3,000     (3,422 )

Income/(loss) before taxes

  $ 23,937   $ (4,972 ) $ (9,071 ) $ 7,222  

Interest expense / (income)(2)

    35,002     20,962     31,286     23,397  

Depreciation(3)

    2,666     2,226     3,156     2,262  

Other business taxes(4)

    1,459     740     1,137     1,008  

GAAP amortization of acquisition-related intangibles(5)

    20,673     19,525     27,250     25,029  

Stock-based compensation(6)

    10,012     6,606     8,827     5,726  

Acquisition, restructuring and exit costs(7)

    9,040     16,296     23,025     13,393  

Debt issuance costs(8)

    5,247     1,887     2,749     2,188  

Pre-IPO governance expenses(9)

    901     881     1,181     1,199  

Earnings/losses on equity method investments(10)

    108     0     0     0  

Compensation in excess of expected levels due to acquisitions(11)

    0     1,856     8,534     694  

Adjusted EBITDA

  $ 109,045   $ 66,007   $ 98,074   $ 82,118  

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  Nine Months Ended
September 30,
  Years Ended
December 31,
 
($ in thousands)
  2017   2016   2016   2015  

Reconciliation of non-GAAP financial measures(1):

                         

Net income / (loss)

  $ 14,617   $ (3,383 ) $ (6,071 ) $ 3,800  

Adjustments to reflect the operating performance of the Company:

                         

i

 

Other business taxes(4)

    1,459     740     1,137     1,008  

ii

 

GAAP amortization of acquisition-related intangibles(5)

    20,673     19,525     27,250     25,029  

iii

 

Stock-based compensation(6)

    10,012     6,606     8,827     5,726  

iv

 

Acquisition, restructuring and exit costs(7)

    9,040     16,296     23,025     13,393  

v

 

Debt issuance costs(8)

    5,247     1,887     2,749     2,188  

vi

 

Pre-IPO governance expenses(9)

    901     881     1,181     1,199  

vii

 

Compensation in excess of expected levels due to acquisitions(11)

    0     1,856     8,534     694  

Tax effect of above adjustments(12)

    (17,986 )   (18,160 )   (27,627 )   (18,710 )

Adjusted Net Income

  $ 43,963   $ 26,248   $ 39,005   $ 34,327  

Tax benefit of goodwill and acquired intangibles(13)

  $ 14,561   $ 12,589     16,786     14,813  

(1)
Non-GAAP measures should be considered in addition to, and not as a substitute for, financial measures prepared in accordance with GAAP. Our non-GAAP measures may differ from similar measures at other companies, even if similar terms are used to identify these measures.

(2)
We add back interest paid on debt net of interest income; interest expense is included in "Interest expense and other financing costs" in our consolidated financial statements while interest income is shown in "Interest income and other income" in our consolidated financial statements.

(3)
We add back depreciation on property and equipment; included in "Depreciation and amortization" in our consolidated financial statements.

(4)
We add back other business taxes; other business taxes are included in "General and administrative" in our consolidated financial statements.

(5)
We add back GAAP amortization of acquisition-related intangibles; included in "Depreciation and amortization" in our consolidated financial statements.

(6)
We add back the expense associated with stock-based compensation associated with equity issued from pools that were created in connection with the management-led buyout with Crestview GP from KeyCorp, the Munder Acquisition and the RS Acquisition and as a result of IPO-related equity grants; included in "Personnel compensation and benefits" in our consolidated financial statements.

(7)
We add back direct incremental costs of acquisitions and this offering, including expenses associated with third-party advisors, proxy solicitations of mutual fund shareholders for transaction consents, vendor contract early termination costs, impairment of receivables recorded in connection with an acquisition, and severance, retention and transaction incentive compensation. Severance, retention and transaction incentive compensation is included in "Personnel compensation and benefits" in our consolidated financial statements, impairment of receivables recorded in connection with an acquisition is included in "Interest income and other income/(expense)", costs associated with professional services incurred in connection with IPO readiness are included in "General and

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    administrative"; all other incremental costs are included in "Restructuring and integration costs" or "Acquisition-related costs".

 
  Nine Months
Ended
September 30,
  Years Ended
December 31,
 
($ in thousands)
  2017   2016   2016   2015  

Restructuring and integration costs

  $ 4,944   $ 7,362   $ 10,012   $ 8,613  

Interest income and other income/(expense)

    2,011              

Acquisition-related costs

    1,435     5,675     6,619     3,187  

General and administrative

    592              

Personnel compensation and benefits

    58     3,259     6,394     1,593  
(8)
We add back debt issuance costs, included in "Interest expense and other financing costs" and "General and administrative" in our consolidated financial statements. See "—Liquidity and Capital Resources" for more information.

(9)
We add back pre-IPO governance expenses paid to Crestview and Reverence Capital, included in "General and administrative" in our consolidated financial statements. These payments will terminate as of the completion of this offering.

(10)
We adjust for earnings/losses on equity method investments, included in "Interest income and other income/(expenses)" in our consolidated financial statements.

(11)
Our compensation committee, together with our CEO, establishes a target percentage of our pre-bonus EBITDA to be allocated to employees as annual cash incentive compensation. If, as a result of a significant acquisition, we pay annual cash incentive compensation that is a greater percentage of pre-bonus EBITDA than our target percentage, we add back the amount of the annual incentive cash compensation in excess of the target percentage. For example, in 2016, as a result of the RS Acquisition, we paid incentive cash compensation at a greater percentage of pre-bonus EBITDA than our target percentage. We paid incentive cash compensation in 2016 at levels we considered appropriate taking into account the RS Acquisition (including the size of our Company post-acquisition) without the benefit of a full year of those earnings and before expense synergies were fully realized. We also paid incentive cash compensation on duplicative headcount while the integration of the RS Investments platform was being completed; included in "Personnel compensation and benefits" in our consolidated financial statements.

(12)
Reflects income taxes of 38% applied to the sum of line items i. to vii.; 38% represents statutory federal income tax rate of 35% plus an estimate for state, local and foreign income taxes. See "—Recent Developments—Impact of Tax Reform."

(13)
Represents the tax benefits associated with deductions allowed for intangibles and goodwill generated from prior acquisitions in which we received a step-up in basis for tax purposes. Acquired intangible assets and goodwill may be amortized for tax purposes, generally over a 15-year period. The tax benefit from amortization on these assets is included to show the full economic benefit of deductions for all acquired intangibles with a step-up in tax basis. Due to our acquisitive nature, tax deductions allowed on acquired intangible assets and goodwill provide us with a significant supplemental economic benefit. See "—Recent Developments—Impact of Tax Reform."

Unaudited Pro Forma Balance Sheet Data and Basic and Diluted Earnings Per Share

        The unaudited pro forma balance sheet data and basic and diluted net earnings per share below reflect the $125.0 million in incremental debt incurred in February 2017 under the term loans under our existing senior credit agreement to pay a $119.9 million special dividend to our stockholders, referred to herein as the 2017 Debt Recapitalization, and the accrual of the $12.6 million dividend paid in

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December 2017, referred to herein as the December 2017 Dividend. Pro forma net income per share gives effect to the number of shares of Class A common stock issued in this offering that would be necessary to fund the February 2017 and December 2017 dividend payments and to pay down debt per the Proposed Debt Refinancing. The number of shares of Class A common stock was calculated using the initial public offering price of $13.00 per share.

Supplemental Pro Forma Balance Sheet Data and
Net Income Per Share
(Unaudited)
($ in thousands, except per share amounts)

  Victory Capital
Holdings, Inc.
as of and for the
nine months
ended
September 30,
2017
  As Adjusted for
the Offering, the
2017 Debt
Recapitalization,
the December 2017
Dividend and the
Proposed Debt
Refinancing(1)
 

Balance Sheet Data

             

Total assets

  $ 799,510   $ 791,592  

Dividend payable

        12,622  

Total liabilities

    567,633     363,489  

Common stock

    551     668  

Retained deficit

    (181,055 )   (198,525 )

Total liabilities and stockholders' equity

    799,510     791,592  

 

 
  Victory Capital
Holdings, Inc. for
the year ended
December 31, 2016
(as reported)
  As Adjusted for
the RS
Acquisition,
the Offering,
the 2017 Debt
Recapitalization,
the December 2017
Dividend and
Proposed Debt
Refinancing(1)
 

Earnings per share Data:

             

Basic earnings (loss) per share

  $ (0.12 ) $ (0.09 )

Diluted earnings (loss) per share

  $ (0.12 ) $ (0.09 )

Weighted average shares outstanding

             

Basic

    50,017,712     61,717,712  

Diluted

    50,017,712     61,717,712  

 

 
  Victory Capital
Holdings, Inc. for
the nine months
ended
September 30, 2017
(as reported)
  As Adjusted for
the Offering,
the 2017 Debt
Recapitalization,
the December 2017
Dividend and the
Proposed Debt
Refinancing
Pro Forma(1)
 

Earnings per share Data:

             

Basic earnings (loss) per share

  $ 0.27   $ 0.44  

Diluted earnings (loss) per share

  $ 0.25   $ 0.41  

Weighted average shares outstanding

             

Basic

    54,867,257     66,567,257  

Diluted

    59,517,606     71,217,606  

(1)
Gives effect to the completion of this offering, including the application of the estimated net proceeds received by us as described under "Use of Proceeds" and to make payment of the dividends as part of the 2017 Debt Recapitalization and the December 2017 Dividend, as if the transactions were completed on September 30, 2017 for the pro forma balance sheet and on January 1, 2016 for the pro forma earnings per share.

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RISK FACTORS

        Investing in our Class A common stock involves a high degree of risk. You should consider and read carefully all of the risks and uncertainties described below, as well as other information included in this prospectus, including our consolidated financial statements and related notes appearing at the end of this prospectus, before making an investment decision. The risks described below are not the only ones facing us. The occurrence of any of the following risks or additional risks and uncertainties not presently known to us or that we currently believe to be immaterial could materially and adversely affect our business, financial condition or results of operations. In such case, the trading price of our Class A common stock could decline, and you may lose all or part of your original investment. This prospectus also contains forward-looking statements and estimates that involve risks and uncertainties. Our actual results could differ materially from those anticipated in the forward-looking statements as a result of specific factors, including the risks and uncertainties described below.

Risks Relating to Our Business

We earn substantially all of our revenues based on AUM, and any reduction in AUM would reduce our revenues and profitability. AUM fluctuates based on many factors, including investment performance, client withdrawals and difficult market conditions.

        We earn substantially all of our revenues from asset-based fees from investment management products and services to individuals and institutions. Therefore, if our AUM declines, our fee revenue will decline, which will reduce our profitability as certain of our expenses are fixed. There are several reasons that AUM could decline:

    The performance of our investment strategies is critical to our business, and any real or perceived negative absolute or relative performance could negatively impact the maintenance and growth of AUM. Net flows related to our strategies can be affected by investment performance relative to other competing strategies or to established benchmarks. Our investment strategies are rated, ranked, recommended or assessed by independent third parties, distribution partners, and industry periodicals and services. These assessments may influence the investment decisions of our clients. If the performance or assessment of our strategies is seen as underperforming relative to peers, it could result in an increase in the withdrawal of assets by existing clients and the inability to attract additional commitments from existing and new clients. In addition, certain of our strategies have or may have capacity constraints, as there is a limit to the number of securities available for the strategy to operate effectively. In those instances, we may choose to limit access to those strategies to new or existing investors, which we have recently done for two mutual funds managed by Sycamore Capital, or Sycamore, which had an aggregate of $15.4 billion in AUM as of September 30, 2017.

    General domestic and global economic and political conditions can influence AUM. Changes in interest rates, the availability and cost of credit, inflation rates, economic uncertainty, changes in laws, trade barriers, commodity prices, currency exchange rates and controls and national and international political circumstances (including wars, terrorist acts and security operations) and other conditions may impact the equity and credit markets, which may influence our AUM. If the security markets decline or experience volatility, our AUM and our revenues could be negatively impacted. In addition, diminishing investor confidence in the markets and/or adverse market conditions could result in a decrease in investor risk tolerance. Such a decrease could prompt investors to reduce their rate of commitment or to fully withdraw from markets, which could lower our overall AUM.

    Capital and credit markets can experience substantial volatility. The significant volatility in the markets in the recent past has highlighted the interconnection of the global markets and demonstrated how the deteriorating financial condition of one institution may materially adversely

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      impact the performance of other institutions. In the event of extreme circumstances, including economic, political or business crises, such as a widespread systemic failure in the global financial system or failures of firms that have significant obligations as counterparties, we may suffer significant declines in AUM and severe liquidity or valuation issues.

    Changes in interest rates can have adverse effects on our AUM. Increases in interest rates from their historically low present levels may adversely affect the net asset values of our AUM. Furthermore, increases in interest rates may result in reduced prices in equity markets. Conversely, decreases in interest rates could lead to outflows in fixed income assets that we manage as investors seek higher yields.

        Any of these factors could reduce our AUM and revenues and, if our revenues decline without a commensurate reduction in our expenses, would lead to a reduction in our net income.

We derive substantially all of our revenues from contracts and relationships that may be terminated upon short or no notice.

        We derive substantially all of our revenues from investment advisory and sub-advisory agreements, all of which are terminable by clients upon short notice or no notice.

        Our investment advisory agreements with registered funds, which are funds registered under the Investment Company Act of 1940, as amended, or the 1940 Act, including mutual funds and ETFs, are generally terminable by the funds' boards or a vote of a majority of the funds' outstanding voting securities on not more than 60 days' written notice, as required by law. After an initial term (not to exceed two years), each registered fund's investment advisory agreement must be approved and renewed annually by that fund's board, including by its independent members. In addition, all of our separate account clients and certain of the mutual funds that we sub-advise have the ability to re-allocate all or any portion of the assets that we manage away from us at any time with little or no notice. When a sub-adviser terminates its sub-advisory agreement to manage a fund that we advise there is a risk that investors in the fund could redeem their assets in the fund, which would cause our AUM to decrease.

        These investment advisory agreements and client relationships may be terminated or not renewed for any number of reasons. The decrease in revenues that could result from the termination of a material client relationship or group of client relationships could have a material adverse effect on our business.

Investors in certain funds that we advise can redeem their assets from those funds at any time without prior notice.

        Investors in the mutual funds and certain other pooled investment vehicles that we advise or sub-advise may redeem their assets from those funds at any time on fairly limited or no prior notice, thereby reducing our AUM. These investors may redeem for any number of reasons, including general financial market conditions, the absolute or relative investment performance we have achieved, or their own financial conditions and requirements. In a declining stock market, the pace of redemptions could accelerate. Poor investment performance relative to other funds tends to result in decreased client commitments and increased redemptions. For the nine months ended September 30, 2017, we generated approximately 86% of our revenues from mutual funds and other pooled investment vehicles that we advise (including our proprietary mutual funds, or the Victory Funds, VictoryShares, and other entities for which we are adviser or sub-adviser). The redemption of assets from those funds could adversely affect our revenues and have a material adverse effect on our earnings.

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If our strategies perform poorly, clients could redeem their assets and we could suffer a decline in our AUM, which would reduce our earnings.

        The performance of our strategies is critical in retaining existing client assets as well as attracting new client assets. If our strategies perform poorly for any reason, our earnings could decline because:

    our existing clients may redeem their assets from our strategies or terminate their relationships with us;

    the Morningstar and Lipper ratings and rankings of mutual funds and ETFs we manage may decline, which may adversely affect the ability of those funds to attract new or retain existing assets; and

    third-party financial intermediaries, advisors or consultants may remove our investment products from recommended lists due to poor performance or for other reasons, which may lead our existing clients to redeem their assets from our strategies or reduce asset inflows from these third parties or their clients.

        Our strategies can perform poorly for a number of reasons, including: general market conditions; investor sentiment about market and economic conditions; investment styles and philosophies; investment decisions; the performance of the companies in which our strategies invest and the currencies in which those investment are made; the fees we charge; the liquidity of securities or instruments in which our strategies invest; and our inability to identify sufficient appropriate investment opportunities for existing and new client assets on a timely basis. In addition, while we seek to deliver long-term value to our clients, volatility may lead to under-performance in the short term, which could adversely affect our results of operations.

        In addition, when our strategies experience strong results relative to the market, clients' allocations to our strategies typically increase relative to their other investments and we sometimes experience withdrawals as our clients rebalance their investments to fit their asset allocation preferences despite our strong results.

        While clients do not have legal recourse against us solely on the basis of poor investment results, if our strategies perform poorly, we are more likely to become subject to litigation brought by dissatisfied clients. In addition, to the extent clients are successful in claiming that their losses resulted from fraud, negligence, willful misconduct, breach of contract or other similar misconduct, these clients may have remedies against us, the mutual funds and other pooled investment vehicles we advise and/or our investment professionals under various U.S. and non-U.S. laws.

The historical returns of our existing strategies may not be indicative of their future results or of the strategies we may develop in the future.

        The historical returns of our strategies and the ratings and rankings we or the mutual funds and ETFs that we advise have received in the past should not be considered indicative of the future results of these strategies or of any other strategies that we may develop in the future. The investment performance we achieve for our clients varies over time and the variance can be wide. The ratings and rankings we or the mutual funds and ETFs we advise have received are typically revised monthly. Our strategies' returns have benefited during some periods from investment opportunities and positive economic and market conditions. In other periods, general economic and market conditions have negatively affected investment opportunities and our strategies' returns. These negative conditions may occur again, and in the future we may not be able to identify and invest in profitable investment opportunities within our current or future strategies.

        New strategies that we launch or acquire in the future may present new and different investment, regulatory, operational, distribution and other risks than those presented by our current strategies. New

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strategies may invest in instruments with which we have no or limited experience, create portfolios that present new or different risks or have higher performance expectations that are more difficult to meet. Any real or perceived problems with future strategies or vehicles could cause a disproportionate negative impact on our business and reputation.

We depend on third parties to market our strategies.

        Our ability to attract additional assets to manage is highly dependent on our access to third-party intermediaries. We gain access to investors in the Victory Funds and VictoryShares primarily through consultants, 401(k) platforms, broker-dealers, financial advisors and mutual fund platforms through which shares of the funds are sold. We have relationships with certain third-party intermediaries through which we access clients in multiple distribution channels. Our 10 largest intermediary relationships across multiple distribution channels represented approximately 32% of our total AUM as of September 30, 2017.

        We compensate most of the intermediaries through which we gain access to investors in the Victory Funds and VictoryShares by paying fees, most of which are a percentage of assets invested in the Victory Funds and VictoryShares through that intermediary and with respect to which that intermediary provides stockholder and administrative services. The allocation of such fees between us and the Victory Funds and VictoryShares is determined by the board of the Victory Funds and VictoryShares, based on information and a recommendation from us, with the intent of allocating to us all costs attributable to marketing and distribution of (i) shares of the Victory Funds not otherwise covered by distribution fees paid pursuant to a distribution and service plan adopted in accordance with Rule 12b-1 under the 1940 Act and (ii) VictoryShares.

        In the future, our expenses in connection with those intermediary relationships could increase if the portion of those fees determined to be in connection with marketing and distribution, or otherwise allocated to us, increased. Clients of these intermediaries may not continue to be accessible to us on terms we consider commercially reasonable, or at all. The absence of such access could have a material adverse effect on our results of operations.

        We access institutional clients primarily through consultants. Our institutional business is dependent upon referrals from consultants. Many of these consultants review and evaluate our products and our firm from time to time. As of September 30, 2017, 40% of our institutional separate accounts AUM was acquired through consultants. Poor reviews or evaluations of either a particular strategy or us as an investment management firm may result in client withdrawals or may impair our ability to attract new assets through these consultants.

The loss of key investment professionals or members of our senior management team could have a material adverse effect on our business.

        We depend on the skills and expertise of our portfolio managers and other investment professionals and our success depends on our ability to retain the key members of our investment teams, who possess substantial experience in investing and have been primarily responsible for the historical investment performance we have achieved.

        Because of the tenure and stability of our portfolio managers, our clients may attribute the investment performance we have achieved to these individuals. The departure of a portfolio manager could cause clients to withdraw assets from the strategy, which would reduce our AUM, investment management fees and our net income. The departure of a portfolio manager also could cause consultants and intermediaries to stop recommending a strategy, clients to refrain from allocating additional assets to the strategy or delay such additional assets until a sufficient new track record has been established, and could also cause the departure of other portfolio managers or investment professionals. We have instituted succession planning at our Franchises in an attempt to minimize the disruption resulting from these potential changes, but we cannot predict whether such efforts will be successful (for example, we recently made the strategic decision to wind down our Diversified Franchise due to the retirement of both its CIOs).

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        We also rely upon the contributions of our senior management team to establish and implement our business strategy and to manage the future growth of our business. The loss of any of the senior management team could limit our ability to successfully execute our business strategy or adversely affect our ability to retain existing and attract new client assets and related revenues.

        Any of our investment or management professionals may resign at any time, join our competitors or form a competing company. Although many of our portfolio managers and each of our named executive officers are subject to post-employment non-compete obligations, these non-competition provisions may not be enforceable or may not be enforceable to their full extent. In addition, we may agree to waive non-competition provisions or other restrictive covenants applicable to former investment or management professionals in light of the circumstances surrounding their relationship with us. We do not generally carry "key man" insurance that would provide us with proceeds in the event of the death or disability of any of the key members of our investment or management teams.

        Competition for qualified investment and management professionals is intense and we may fail to successfully attract and retain qualified personnel in the future. Our ability to attract and retain these personnel will depend heavily on the amount and structure of compensation and opportunities for equity ownership we offer. Any cost-reduction initiative or adjustments or reductions to compensation or changes to our equity ownership culture could cause instability within our existing investment teams and negatively impact our ability to retain key personnel. In addition, changes to our management structure, corporate culture and corporate governance arrangements could negatively impact our ability to retain key personnel.

We rely on third parties to provide products or services for the operation of our business, and a failure or inability by such parties to provide these products or services could materially adversely affect our business.

        We have determined, based on an evaluation of various factors that it is more efficient to use third parties for certain functions and services. As a result, we have contracted with a limited number of third parties to provide critical operational support, such as middle- and back-office functions, information technology services and various fund administration and accounting roles, and the funds contract with third parties in custody and transfer agent roles. We have a limited ability to monitor or control the performance of these third parties and our business would be disrupted if key service providers fail or become unable to continue to perform those services. We are also limited in our ability to ensure such providers have appropriate back-up and system redundancies in place to ensure their continuous operation. Moreover, to the extent our third-party providers increase their pricing, our financial performance will be negatively impacted. In addition, upon termination of a third-party contract, we may encounter difficulties in replacing the third party on favorable terms, transitioning services to another vendor, or in assuming those responsibilities ourselves, which may have a material adverse effect on our business.

Operational risks may disrupt our business, result in losses or limit our growth.

        We are heavily dependent on the capacity and reliability of the communications, information and technology systems supporting our operations, whether developed, owned and operated by us or by third parties. We also rely on manual workflows and a variety of manual user controls. Operational risks such as trading or other operational errors or interruption of our financial, accounting, trading, compliance and other data processing systems, whether caused by human error, fire, other natural disaster or pandemic, power or telecommunications failure, cyber-attack or viruses, act of terrorism or war or otherwise, could result in a disruption of our business, liability to clients, regulatory intervention or reputational damage, and thus materially adversely affect our business. The potential for some types of operational risks, including, for example, trading errors, may be increased in periods of increased volatility, which can magnify the cost of an error. Insurance and other safeguards might not be available or might only partially reimburse us for our losses.

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        Although we have backup systems in place, our backup procedures and capabilities in the event of a failure or interruption may not be adequate. As our client base, number and complexity of strategies and client relationships increase, developing and maintaining our operational systems and infrastructure may become increasingly challenging.

        We may also suffer losses due to employee negligence, fraud or misconduct. Non-compliance with policies, employee misconduct, negligence or fraud could result in regulatory sanctions and serious reputational or financial harm. In recent years, a number of multinational financial institutions have suffered material losses due to the actions of "rogue traders" or other employees. It is not always possible to deter or detect employee misconduct and the precautions we take to prevent and detect this activity may not always be effective. Employee misconduct could have a material adverse effect on our business.

The significant growth we have experienced over the past few years may be difficult to sustain and our growth strategy is dependent in part upon our ability to make and successfully integrate new strategic acquisitions.

        Our AUM has increased from $17.9 billion following our 2013 management-led buyout with Crestview GP from KeyCorp to $59.0 billion as of September 30, 2017, primarily as a result of acquisitions. The absolute measure of our AUM represents a significant rate of growth that has been and may continue to be difficult to sustain. The continued long-term growth of our business will depend on, among other things, successfully making new acquisitions, retaining key investment professionals, maintaining existing strategies and selectively developing new, value-added strategies. There is no certainty that we will be able to identify suitable candidates for acquisition at prices and terms we consider attractive, consummate any such acquisition on acceptable terms, have sufficient resources to complete an identified acquisition or that our strategy for pursuing acquisitions will be effective. In addition, any acquisition can involve a number of risks, including the existence of known, unknown or contingent liabilities. An acquisition may impose additional demands on our staff that could strain our operational resources and require expenditure of substantial legal, investment banking and accounting fees. We may be required to issue additional shares of common stock or spend significant cash to consummate an acquisition, resulting in dilution of ownership or additional debt leverage, or spend additional time and money on facilitating the acquisition that otherwise would be spent on the development and expansion of our existing business.

        We may not be able to successfully manage the process of integrating an acquired company's people and other applicable assets to extract the value and synergies projected to be realized in connection with the acquisition. The process of integrating operations could cause an interruption of, or loss of momentum in, the activities of one or more of our combined businesses and the possible loss of key personnel and AUM. The diversion of management's attention and any delays or difficulties encountered in connection with acquisitions and the integration of an acquired company's operations could have an adverse effect on our business.

        Our business growth will also depend on our success in achieving superior investment performance from our strategies, as well as our ability to maintain and extend our distribution capabilities, to deal with changing market and industry conditions, to maintain adequate financial and business controls and to comply with new legal and regulatory requirements arising in response to both the increased sophistication of the investment management industry and the significant market and economic events of the last decade.

        We may not be able to manage our growing business effectively or be able to sustain the level of growth we have achieved historically.

A majority of our existing AUM is managed in long-only equity investments. We have also historically derived a substantial portion of our revenues from fees on investments in small- and mid-cap equities and substantially all of our revenues from U.S. clients.

        As of September 30, 2017, approximately 79% of our AUM was invested in U.S. and international equity. Under market conditions in which there is a general decline in the value of equity securities, the

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AUM in each of our equity strategies is likely to decline. Unlike some of our competitors, we do not currently offer strategies that invest in privately held companies or take short positions in equity securities, which could offset some of the poor performance of our long-only equity strategies under such market conditions. Even if our investment performance remains strong during such market conditions relative to other long-only equity strategies, investors may choose to withdraw assets from our management or allocate a larger portion of their assets to non-long-only or non-equity strategies. In addition, the prices of equity securities may fluctuate more widely than the prices of other types of securities, making the level of our AUM and related revenues more volatile.

        As of September 30, 2017, approximately 65% of our total AUM was concentrated in small- and mid-cap equities. As a result, a substantial portion of our operating results depends upon the performance of those investments, and our ability to retain client assets in those investments. If a significant portion of the investors in such investments decided to withdraw their assets or terminate their investment advisory agreements for any reason, including poor investment performance or adverse market conditions, our revenues from those investments would decline, which would have a material adverse effect on our earnings and financial condition.

        In addition, we have historically derived substantially all of our revenue from clients in the United States. If economic conditions weaken or slow, particularly in the United States, this could have a substantial adverse impact on our results of operations.

Our efforts to establish and develop new teams and strategies may be unsuccessful and could negatively impact our results of operations and could negatively impact our reputation and culture.

        We seek to add new investment teams that invest in a way that is consistent with our philosophy of offering high value-added strategies. We also look to offer new strategies managed by our existing teams. We expect the costs associated with establishing a new team and/or strategy initially to exceed the revenues generated, which will likely negatively impact our results of operations. If new strategies, whether managed by a new team or by an existing team, invest in instruments, or present operational issues and risks, with which we have little or no experience, it could strain our resources and increase the likelihood of an error or failure.

        In addition, the historical returns of our existing strategies may not be indicative of the investment performance of any new strategy, and the poor performance of any new strategy could negatively impact the reputation of our other strategies.

        We may support the development of new strategies by making one or more seed investments using capital that would otherwise be available for our general corporate purposes and acquisitions. Making such a seed investment could expose us to potential capital losses.

The performance of our strategies or the growth of our AUM may be constrained by unavailability of appropriate investment opportunities.

        The ability of our investment teams to deliver strong investment performance depends in large part on their ability to identify appropriate investment opportunities in which to invest client assets. If the investment team for any of our strategies is unable to identify sufficient appropriate investment opportunities for existing and new client assets on a timely basis, the investment performance of the strategy could be adversely affected. In addition, if we determine that sufficient investment opportunities are not available for a strategy, we may choose to limit the growth of the strategy by limiting the rate at which we accept additional client assets for management under the strategy, closing the strategy to all or substantially all new investors or otherwise taking action to limit the flow of assets into the strategy. If we misjudge the point at which it would be optimal to limit access to or close a strategy, the investment performance of the strategy could be negatively impacted. The risk that sufficient appropriate investment opportunities may be unavailable is influenced by a number of factors, including general market

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conditions, but is particularly acute with respect to our strategies that focus on small- and mid-cap equities, and is likely to increase as our AUM increases, particularly if these increases occur very rapidly. By limiting the growth of strategies, we may be managing the business in a manner that reduces the total amount of our AUM and our investment management fees over the short term.

An assignment could result in termination of our investment advisory agreements to manage SEC-registered funds and could trigger consent requirements in our other investment advisory agreements.

        Under the 1940 Act, each of the investment advisory agreements between registered funds and our subsidiary, VCM, and investment sub-advisory agreements between the investment adviser to a registered fund and VCM, will terminate automatically in the event of its assignment, as defined in the 1940 Act.

        Assignment, as generally defined under the 1940 Act and the Investment Advisers Act of 1940, as amended, or the Advisers Act, includes direct assignments as well as assignments that may be deemed to occur, under certain circumstances, upon the direct or indirect transfer of a "controlling block" of our outstanding voting securities. A transaction is not an assignment under the 1940 Act or the Advisers Act, however, if it does not result in a change of actual control or management of VCM.

        Upon the occurrence of such an assignment, VCM could continue to act as adviser or sub-adviser to any such registered fund only if that fund's board and shareholders approved a new investment advisory agreement, except in the case of certain of the registered funds that we sub-advise for which only board approval would be necessary pursuant to a manager-of-managers SEC exemptive order. In addition, as required by the Advisers Act, each of the investment advisory agreements for the separate accounts and pooled investment vehicles we manage provides that it may not be assigned, as defined in the Advisers Act, without the consent of the client. If an assignment were to occur, we cannot be certain that we would be able to obtain the necessary approvals from the boards and shareholders of the registered funds we advise or the necessary consents from our separate account or pooled investment vehicle clients.

        If an assignment of an investment advisory agreement is deemed to occur, and our clients do not consent to the assignment or enter into a new agreement, our results of operations could be materially and adversely affected.

Reputational harm could result in a loss of AUM and revenues.

        The integrity of our brands and reputation is critical to our ability to attract and retain clients, business partners and employees and maintain relationships with consultants. We operate within the highly regulated financial services industry and various potential scenarios could result in harm to our reputation. They include internal operational failures, failure to follow investment or legal guidelines in the management of accounts, intentional or unintentional misrepresentation of our products and services in offering or advertising materials, public relations information, social media or other external communications, employee misconduct or investments in businesses or industries that are controversial to certain special interest groups. Any real or perceived conflict between our and our stockholders' interests and our clients' interests, as well as any fraudulent activity or other exposure of client assets or information, may harm our reputation. The negative publicity associated with any of these factors could harm our reputation and adversely impact relationships with existing and potential clients, third-party distributors, consultants and other business partners and subject us to regulatory sanctions or litigation. Damage to our brands or reputation could negatively impact our standing in the industry and result in loss of business in both the short term and the long term.

        Additionally, while we have ultimate control over the business activities of our Franchises, they generally have the autonomy to manage their day-to-day operations, and if we fail to intervene in potentially serious matters that may arise, our reputation could be damaged and our results of operations could be materially adversely affected.

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Our failure to comply with investment guidelines set by our clients, including the boards of registered funds, and limitations imposed by applicable law, could result in damage awards against us and a loss of AUM, either of which could adversely affect our results of operations or financial condition.

        When clients retain us to manage assets on their behalf, they generally specify certain guidelines regarding investment allocation and strategy that we are required to follow in managing their assets. The boards of registered funds we manage generally establish similar guidelines regarding the investment of assets in those funds. We are also required to invest the registered funds' assets in accordance with limitations under the 1940 Act and applicable provisions of the Internal Revenue Code of 1986, as amended, or the Internal Revenue Code. Other clients, such as plans subject to the Employee Retirement Income Security Act of 1974, as amended, or ERISA, or non-U.S. funds, require us to invest their assets in accordance with applicable law. Our failure to comply with any of these guidelines and other limitations could result in losses to clients or investors in a fund which, depending on the circumstances, could result in our obligation to make clients or fund investors whole for such losses. If we believed that the circumstances did not justify a reimbursement, or clients and investors believed the reimbursement we offered was insufficient, they could seek to recover damages from us or could withdraw assets from our management or terminate their investment advisory agreement with us. Any of these events could harm our reputation and materially adversely affect our business.

If our techniques for managing risk are ineffective, we may be exposed to material unanticipated losses.

        In order to manage the significant risks inherent in our business, we must maintain effective policies, procedures and systems that enable us to identify, monitor and mitigate our exposure to operational, legal and reputational risks, including from the investment autonomy of our Franchises. Our risk management methods may prove to be ineffective due to their design or implementation, or as a result of the lack of adequate, accurate or timely information or otherwise. If our risk management efforts are ineffective, we could suffer losses that could have a material adverse effect on our financial condition or operating results. Additionally, we could be subject to litigation, particularly from our clients or investors, and sanctions or fines from regulators.

        Our techniques for managing operational, legal and reputational risks in client portfolios may not fully mitigate the risk exposure in all economic or market environments, including exposure to risks that we might fail to identify or anticipate. Because our clients invest in our strategies in order to gain exposure to the portfolio securities of the respective strategies, we have not adopted corporate-level risk management policies to manage market, interest rate or exchange rate risks that could affect the value of our overall AUM.

We provide a broad range of services to the Victory Funds, VictoryShares and sub-advised mutual funds which may expose us to liability.

        We provide a broad range of administrative services to the Victory Funds and VictoryShares, including providing personnel to the Victory Funds and VictoryShares to serve as directors and officers, the preparation or supervision of the preparation of the Victory Funds' and VictoryShares' regulatory filings, maintenance of board calendars and preparation or supervision of the preparation of board meeting materials, management of compliance and regulatory matters, provision of stockholder services and communications, accounting services, including the supervision of the activities of the Victory Funds' and VictoryShares' accounting services provider in the calculation of the funds' net asset values, supervision of the preparation of the Victory Funds' and VictoryShares' financial statements and coordination of the audits of those financial statements, tax services, including calculation of dividend and distribution amounts and supervision of tax return preparation, supervision of the work of the Victory Funds' and VictoryShares' other service providers and VCA acting as a distributor. If we make a mistake in the provision of those services, the Victory Funds or VictoryShares could incur costs for which we might be liable. In addition, if it were determined that the Victory Funds or VictoryShares failed to comply with

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applicable regulatory requirements as a result of action or failure to act by our employees, we could be responsible for losses suffered or penalties imposed. In addition, we could have penalties imposed on us, be required to pay fines or be subject to private litigation, any of which could decrease our future income or negatively affect our current business or our future growth prospects. Although less extensive than the range of services we provide to the Victory Funds and VictoryShares, we also provide a limited range of services, in addition to investment management services, to sub-advised mutual funds.

        In addition, we from time to time provide information to the funds for which we act as sub-adviser (or to a person or entity providing administrative services to such a fund), and to UCITS, for which we act as investment manager (or to the promotor of the UCITS or a person or entity providing administrative services to such a UCITS), which is used by those funds or UCITS in their efforts to comply with various regulatory requirements. If we make a mistake in the provision of those services, the sub-advised fund or UCITS could incur costs for which we might be liable. In addition, if it were determined that the sub-advised fund or UCITS failed to comply with applicable regulatory requirements as a result of action or failure to act by our employees, we could be responsible for losses suffered or penalties imposed. In addition, we could have penalties imposed on us, be required to pay fines or be subject to private litigation, any of which could decrease our future income or negatively affect our current business or our future growth prospects.

Failure to implement effective information and cyber security policies, procedures and capabilities could disrupt operations and cause financial losses.

        Our operations rely on the effectiveness of our information and cyber security policies, procedures and capabilities to provide secure processing, storage and transmission of confidential and other information in our computer systems, networks and mobile devices and on the computer systems, networks and mobile devices of third parties on which we rely. Although we take protective measures and endeavor to modify them as circumstances warrant, our computer systems, software, networks and mobile devices may be vulnerable to cyber-attacks, sabotage, unauthorized access, computer viruses, worms or other malicious code, and other events that have a security impact. We also cannot directly control any cyber security plans and systems put in place by third-party service providers, on whom we rely. An externally caused information security incident, such as a hacker attack, virus or worm, or an internally caused issue, such as failure to control access to sensitive systems, could materially interrupt business operations or cause disclosure or modification of sensitive or confidential client or competitive information and could result in material financial loss, loss of competitive position, regulatory actions, breach of client contracts, reputational harm or legal liability. If one or more of such events occur, it potentially could jeopardize our or our clients', employees' or counterparties' confidential and other information processed and stored in, and transmitted through, our or third-party computer systems, networks and mobile devices, or otherwise cause interruptions or malfunctions in our, our clients', our counterparties' or third parties' operations. As a result, we could experience material financial loss, loss of competitive position, regulatory actions, breach of client contracts, reputational harm or legal liability, which, in turn, could cause a decline in our earnings. Additionally, some of our client contracts require us to indemnify clients in the event of a cyber breach if our systems do not meet minimum security standards. We may be required to spend significant additional resources to modify our protective measures or to investigate and remediate vulnerabilities or other exposures, and we may be subject to litigation and financial losses that are either not insured against fully or not fully covered through any insurance that we maintain.

Certain of our strategies invest principally in the securities of non-U.S. companies, which involve foreign currency exchange, tax, political, social and economic uncertainties and risks.

        As of September 30, 2017, approximately 6% of our total AUM was invested in strategies that primarily invest in securities of non-U.S. companies and securities denominated in currencies other than the U.S. dollar. Fluctuations in foreign currency exchange rates could negatively affect the returns of our

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clients who are invested in these securities. In addition, an increase in the value of the U.S. dollar relative to non-U.S. currencies is likely to result in a decrease in the U.S. dollar value of our AUM, which, in turn, would likely result in lower revenue and profits.

        Investments in non-U.S. issuers may also be affected by tax positions taken in countries or regions in which we are invested as well as political, social and economic uncertainty. Declining tax revenues may cause governments to assert their ability to tax the local gains and/or income of foreign investors (including our clients), which could adversely affect client interests in investing outside their home markets. Many financial markets are not as developed, or as efficient, as the U.S. financial markets, and, as a result, those markets may have limited liquidity and higher price volatility, and may lack established regulations. Liquidity may also be adversely affected by political or economic events, government policies, and social or civil unrest within a particular country, and our ability to dispose of an investment may also be adversely affected if we increase the size of our investments in smaller non-U.S. issuers. Non-U.S. legal and regulatory environments, including financial accounting standards and practices, may also be different, and there may be less publicly available information about such companies. These risks could adversely affect the performance of our strategies that are invested in securities of non-U.S. issuers and may be particularly acute in the emerging or less developed markets in which we invest. In addition to our Trivalent, Sophus and Expedition Franchises, certain of our other Franchises invest in emerging or less developed markets.

The expansion of our business outside of the United States raises tax and regulatory risks, may adversely affect our profit margins and places additional demands on our resources and employees.

        We have expanded and intend to continue to expand our distribution efforts into non-U.S. markets through partnered distribution efforts and product offerings, including Europe, Japan, Singapore and Hong Kong. For example, we organized and serve as investment manager of two Ireland-domiciled UCITS, the Victory Sophus Emerging Markets UCITS Fund and the Victory Expedition Emerging Markets Small Cap UCITS Fund, each of which launched during the first quarter of 2017. Clients outside the United States may be adversely affected by political, social and economic uncertainty in their respective home countries and regions, which could result in a decrease in the net client cash flows that come from such clients. This expansion has required and will continue to require us to incur a number of up-front expenses, including those associated with obtaining and maintaining regulatory approvals and office space, as well as additional ongoing expenses, including those associated with leases, the employment of additional support staff and regulatory compliance.

        Non-U.S. clients may be less accepting of the U.S. practice of payment for certain research products and services through soft dollars ("soft dollars" are a means of paying brokerage firms for their services through commission revenue, rather than through direct payments) or such practices may not be permissible in certain jurisdictions, which could have the effect of increasing our expenses. In addition, the European Commission recently adopted several acts under the revised Markets in Financial Instruments Directive (known as "MiFID II") that would prevent the "bundling" of the cost of research together with trading commissions. As a result, clients subject to MiFID II will be unable to use soft dollars to pay for research services once MiFID II becomes effective in the United Kingdom and in Europe in 2018.

        Our U.S.-based employees routinely travel outside the United States as a part of our investment research process or to market our services and may spend extended periods of time in one or more non-U.S. jurisdictions. Their activities outside the United States on our behalf may raise both tax and regulatory issues. If and to the extent we are incorrect in our analysis of the applicability or impact of non-U.S. tax or regulatory requirements, we could incur costs or penalties or be the subject of an enforcement or other action. Operating our business in non-U.S. markets is generally more expensive than in the United States. In addition, costs related to our distribution and marketing efforts in non-U.S. markets generally have been more expensive than comparable costs in the United States. To the extent that our revenues do not increase to the same degree as our expenses increase in connection with our continuing expansion outside the United States, our profitability could be adversely affected. Expanding

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our business into non-U.S. markets may also place significant demands on our existing infrastructure and employees.

        We are also subject to a number of laws and regulations governing payments and contributions to political persons or other third parties, including restrictions imposed by the Foreign Corrupt Practices Act, or the FCPA, as well as trade sanctions administered by the Office of Foreign Assets Control, or OFAC, the U.S. Department of Commerce and the U.S. Department of State. Similar laws in non-U.S. jurisdictions may also impose stricter or more onerous requirements and implementing them may disrupt our business or cause us to incur significantly more costs to comply with those laws. Different laws may also contain conflicting provisions, making compliance with all laws more difficult. Any determination that we have violated the FCPA or other applicable anti-corruption laws or sanctions could subject us to, among other things, civil and criminal penalties, material fines, profit disgorgement, injunctions on future conduct, securities litigation and a general loss of investor confidence, any one of which could adversely affect our business prospects, financial condition, results of operations or the market value of our Class A common stock. While we have developed and implemented policies and procedures designed to ensure strict compliance by us and our personnel with the FCPA and other anti-corruption laws or sanctions in jurisdictions in which we operate, such policies and procedures may not be effective in all instances to prevent violations.

        On June 23, 2016, United Kingdom citizens voted in a referendum to leave the European Union, and on March 29, 2017, the United Kingdom provided formal notice to the European Union of its intent to withdraw. The consequence of the exit of the United Kingdom, together with what may be protracted negotiations around the terms of the exit, are uncertain and may have adverse effects on the United Kingdom, European and worldwide economy and market conditions and contribute to currency exchange fluctuations. Any negative impact to overall investor confidence or instability in the global macroeconomic environment could have an adverse economic impact on our results of operations.

Our substantial indebtedness may expose us to material risks.

        As of September 30, 2017, we had $517.7 million aggregate principal amount of outstanding term loans under our existing senior credit agreement. Even assuming we use the net proceeds from this offering to repay indebtedness and/or if we complete the Proposed Debt Refinancing, we will continue to have substantial indebtedness outstanding. Our substantial indebtedness may make it more difficult for us to withstand or respond to adverse or changing business, regulatory and economic conditions or to take advantage of new business opportunities or make necessary capital expenditures. In addition, our existing senior credit agreement contains, and we expect our new senior credit agreement will contain, financial and operating covenants that may limit our ability to conduct our business. While we are currently in compliance in all material respects with the financial and operating covenants under our existing senior credit agreement, we cannot assure you that at all times in the future we will satisfy all such financial and operating covenants (or any such covenants applicable at the time) or obtain any required waiver or amendment, in which event all outstanding indebtedness could become immediately due and payable. This could result in a substantial reduction in our liquidity and could challenge our ability to meet future cash needs of the business.

        To the extent we service our debt from our cash flow, such cash will not be available for our operations or other purposes. Because of our significant debt service obligations, the portion of our cash flow used to service those obligations could be substantial if our revenues decline, whether because of market declines or for other reasons. Any substantial decrease in net operating cash flows or any substantial increase in expenses could make it difficult for us to meet our debt service requirements or force us to modify our operations. Our ability to repay the principal amount of any outstanding loans under our existing senior credit agreement, to refinance our debt or to obtain additional financing through debt or the sale of additional equity securities will depend on our performance, as well as financial, business and other general economic factors affecting the credit and equity markets generally or our business in particular,

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many of which are beyond our control. Any such alternatives may not be available to us on satisfactory terms or at all.

Potential impairment of goodwill and intangible assets could reduce our assets.

        As of September 30, 2017, our goodwill and intangible assets totaled $697.8 million. The value of these assets may not be realized for a variety of reasons, including, but not limited to, significant redemptions, loss of clients, damage to brand name and unfavorable economic conditions. In accordance with the guidance under Financial Accounting Standards Board, or FASB, ASC 350-20 "Intangibles—Goodwill and Other," we review the carrying value of goodwill and intangible assets not subject to amortization on an annual basis, or more frequently if indications exist suggesting that the fair value of our intangible assets may be below their carrying value. Determining goodwill and intangible assets, and evaluating them for impairment, requires significant management estimates and judgment, including estimating value and assessing useful life in connection with the allocation of purchase price in the acquisition creating them. We evaluate the value of intangible assets subject to amortization whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Should such reviews indicate impairment, a reduction of the carrying value of the intangible asset could occur, resulting in a charge that may, in turn, adversely affect our AUM, results of operations and financial condition.

Disruption to the operations of third parties whose functions are integral to our ETF platform may adversely affect the prices at which VictoryShares trade, particularly during periods of market volatility.

        Shares of ETFs, such as VictoryShares, trade on stock exchanges at prices at, above or below the ETF's most recent net asset value. While ETFs utilize a creation/redemption feature and arbitrage mechanism designed to make it more likely that the ETF's shares normally will trade at prices close to the ETF's net asset value, exchange prices may deviate significantly from the ETF's net asset value. ETF market prices are subject to numerous potential risks, including trading halts invoked by a stock exchange, inability or unwillingness of market makers, authorized participants, settlement systems or other market participants to perform functions necessary for an ETF's arbitrage mechanism to function effectively, or significant market volatility. If market events lead to incidences where ETFs trade at prices that deviate significantly from an ETF's net asset value, or trading halts are invoked by the relevant stock exchange or market, investors may lose confidence in ETF products and redeem their holdings, which may cause our AUM, revenue and earnings to decline.

If we were deemed an investment company required to register under the 1940 Act, we would become subject to burdensome regulatory requirements and our business activities could be restricted.

        Generally, a company is an "investment company" required to register under the 1940 Act if, absent an applicable exception or exemption, it (i) is, or holds itself out as being, engaged primarily, or proposes to engage primarily, in the business of investing, reinvesting or trading in securities; or (ii) engages, or proposes to engage, in the business of investing, reinvesting, owning, holding or trading in securities and owns or proposes to acquire "investment securities" having a value exceeding 40% of the value of its total assets (exclusive of U.S. government securities and cash items) on an unconsolidated basis.

        We hold ourselves out as an investment management firm and do not propose to engage primarily in the business of investing, reinvesting or trading in securities. We believe we are engaged primarily in the business of providing investment management services and not in the business of investing, reinvesting or trading in securities. We also believe our primary source of income is properly characterized as income earned in exchange for the provision of services. We believe less than 40% of our total assets (exclusive of U.S. government securities and cash items) on an unconsolidated basis comprise assets that could be considered investment securities.

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        We intend to conduct our operations so that we will not be deemed an investment company required to register under the 1940 Act. However, if we were to be deemed an investment company required to register under the 1940 Act, restrictions imposed by the 1940 Act, including limitations on our capital structure and our ability to transact with our affiliates, could make it impractical for us to continue our business as currently conducted and could have a material adverse effect on our financial performance and operations.

Our expenses are subject to fluctuations that could materially impact our results of operations.

        Our results of operations are dependent upon the level of our expenses, which can vary from period to period. We have certain fixed expenses that we incur as a going concern, and some of those expenses are not subject to adjustment. If our revenues decrease, without a corresponding decrease in expenses, our results of operations would be negatively impacted. While a majority of our expenses are variable and we attempt to project expense levels in advance, there is no guarantee that an unforeseen expense will not arise or that we will be able to adjust our variable expenses quickly enough to match a declining asset base. Consequently, either event could have either a temporary or permanent negative impact on our results of operations.

Risks Relating to Our Industry

Recent trends in the investment management industry could reduce our AUM, revenues and net income.

        Certain passive products and asset classes, such as index and certain types of ETFs, are becoming increasingly popular with investors, including institutional investors. In recent years, across the investment management industry, passive products have experienced inflows and traditional actively managed products have experienced outflows, in each case, in the aggregate. In order to maintain appropriate fee levels in a competitive environment, we must be able to continue to provide clients with investment products and services that are viewed as appropriate in relation to the fees charged, which may require us to demonstrate that our strategies can outperform such passive products. If our clients, including our funds' boards, were to view our fees as being high relative to the market or the returns provided by our investment products, we may choose to reduce our fee levels or existing clients may withdraw their assets in order to invest in passive products, and we may be unable to attract additional commitments from existing and new clients, which would lead to a decline in our AUM and market share. To the extent we offer such passive products, we may not be able to compete with other firms offering similar products.

        Our revenues and net income are dependent on our ability to maintain current fee levels for the products and services we offer. The competitive nature of the investment management industry has led to a trend toward lower fees in certain segments of the investment management market. Although our AUM-average weighted average fee rate increased from 2013 through the third quarter of 2017 as we repositioned our business to focus on higher-fee asset classes, we anticipate that the average fee rate is likely to decline as our solutions platform (which has a lower fee rate than other products) continues to grow. Our ability to sustain fee levels depends on future growth in specific asset classes and distribution channels. These factors, as well as regulatory changes, could further inhibit our ability to sustain fees for certain products. A reduction in the fees charged by us could reduce our revenues and net income.

        Our fees vary by asset class and produce different revenues per dollar of AUM based on factors such as the type of assets being managed, the applicable strategy, the type of client and the client fee schedule. Institutional clients may have significant negotiating leverage in establishing the terms of an advisory relationship, particularly with respect to the level of fees paid, and the competitive pressure to attract and retain institutional clients may impact the level of fee income earned by us. We may decline to manage assets from potential clients who demand lower fees even though such assets would increase our revenue and AUM in the short term.

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As an investment management firm, we are subject to extensive regulation.

        Investment management firms are subject to extensive regulation in the United States, primarily at the federal level, including regulation by the SEC under the 1940 Act and the Advisers Act, by the U.S. Department of Labor, or the DOL, under ERISA, by the Commodity Futures Trading Commission, or the CFTC, by the National Futures Association, or NFA, under the Commodity Exchange Act, and by the Financial Industry Regulatory Authority, Inc., or FINRA. The U.S. mutual funds and ETFs we manage are registered with and regulated by the SEC as investment companies under the 1940 Act. The Advisers Act imposes numerous obligations on investment advisers, including recordkeeping, advertising and operating requirements, disclosure obligations and prohibitions on fraudulent activities. The 1940 Act imposes similar obligations, as well as additional detailed operational requirements, on registered funds, which must be adhered to by their investment advisers. We have also expanded our distribution effort into non-U.S. markets through partnered distribution efforts and product offerings, including Europe, Japan, Singapore and Hong Kong. In the future, we may further expand our business outside of the United States in such a way or to such an extent that we may be required to register with additional foreign regulatory agencies or otherwise comply with additional non-U.S. laws and regulations that do not currently apply to us and with respect to which we do not have compliance experience. Our lack of experience in complying with any such non-U.S. laws and regulations may increase our risk of being subject to regulatory actions and becoming party to litigation in such non-U.S. jurisdictions, which could be more expensive. Moreover, being subject to regulation in multiple jurisdictions may increase the cost, complexity and time required for engaging in transactions that require regulatory approval.

        Accordingly, we face the risk of significant intervention by regulatory authorities, including extended investigation and surveillance activity, adoption of costly or restrictive new regulations and judicial or administrative proceedings that may result in substantial penalties. Among other things, we could be fined, lose our licenses or be prohibited or limited from engaging in some of our business activities or corporate transactions. The requirements imposed by our regulators are designed to ensure the integrity of the financial markets and to protect clients and other third parties who deal with us, and are not designed to protect our stockholders. Consequently, these regulations often serve to limit our activities, including through net capital, client protection and market conduct requirements.

The regulatory environment in which we operate is subject to continual change and regulatory developments designed to increase oversight may materially adversely affect our business.

        We operate in a legislative and regulatory environment that is subject to continual change, the nature of which we cannot predict. We may be adversely affected as a result of new or revised legislation or regulations imposed by the SEC, other U.S. or non-U.S. governmental regulatory authorities or self-regulatory organizations that supervise the financial markets. For example, the DOL's fiduciary rule and related exemptions began a phased implementation with the fiduciary rule becoming applicable on June 9, 2017 and certain related exemptions becoming applicable July 1, 2019. These rules substantially expand the definition of "investment advice" and thereby broaden the circumstances under which product distributors could be considered fiduciaries under ERISA or the Internal Revenue Code. Under the fiduciary rule, certain communications with plans, plan participants and individual retirement account, or IRA, holders, including the marketing of products, and marketing of investment management or advisory services, could be deemed fiduciary investment advice, causing increased exposure to fiduciary liability if the distributor does not recommend what is in the client's best interests. The DOL also issued amendments to certain of its prohibited transaction exemptions, and issued a new exemption that applies more onerous disclosure and contract requirements to, and increases fiduciary requirements and fiduciary liability exposure in respect of, transactions involving ERISA plans, plan participants and IRAs. To the extent that the fiduciary rule and exemptions lead to changes in financial intermediary and retirement plan investment preferences, and increased pressure on product fees and expenses, such changes could have a material adverse effect on our financial performance and operations.

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        The requirements imposed by our regulators (including both U.S. and non-U.S. regulators) are designed to ensure the integrity of the financial markets and to protect clients and other third parties who deal with us, and are not designed to protect our stockholders. Consequently, these regulations often serve to limit our activities and/or increase our costs, including through client protection and market conduct requirements. New laws or regulations, or changes in the enforcement of existing laws or regulations, applicable to us and our clients may adversely affect our business. Our ability to function in this environment will depend on our ability to constantly monitor and promptly react to legislative and regulatory changes. There have been a number of highly publicized regulatory inquiries that have focused on the investment management industry. These inquiries already have resulted in increased scrutiny of the industry and new rules and regulations for mutual funds and investment managers. This regulatory scrutiny may limit our ability to engage in certain activities that might be beneficial to our stockholders.

        We also may be adversely affected by changes in the interpretation or enforcement of existing laws and rules by these governmental authorities and self-regulatory organizations, as well as by courts. It is impossible to determine the extent of the impact of any new U.S. or non-U.S. laws, regulations or initiatives that may be proposed, or whether any of the proposals will become law. Compliance with any new laws or regulations could be more difficult and expensive and affect the manner in which we conduct business. See "Regulatory Environment and Compliance."

The investment management industry is intensely competitive.

        The investment management industry is intensely competitive, with competition based on a variety of factors, including investment performance, fees, continuity of investment professionals and client relationships, the quality of services provided to clients, corporate positioning and business reputation, continuity of selling arrangements with intermediaries and differentiated products. A number of factors, including the following, serve to increase our competitive risks:

    a number of our competitors have greater financial, technical, marketing and other resources, more comprehensive name recognition and more personnel than we do;

    potential competitors have a relatively low cost of entering the investment management industry;

    certain investors may prefer to invest with an investment manager that is not publicly traded based on the perception that a publicly traded asset manager may focus on the manager's own growth to the detriment of investment performance for clients;

    other industry participants, hedge funds and alternative asset managers may seek to recruit our investment professionals; and

    certain competitors charge lower fees for their investment management services than we do.

        Additionally, intermediaries through which we distribute our funds may also sell their own proprietary funds and investment products, which could limit the distribution of our strategies. If we are unable to compete effectively, our earnings could be reduced and our business could be materially adversely affected.

Risks Relating to this Offering and Owning Our Class A Common Stock

An active trading market for our Class A common stock may not develop and the market price for our Class A common stock may decline below the initial public offering price.

        Prior to this offering, there has not been a public market for our Class A common stock. An active trading market for our Class A common stock may never develop or be sustained, which could adversely impact your ability to sell your shares and could depress the market price of your shares. In addition, the public offering price for our Class A common stock has been determined through negotiations among us and the representatives of the underwriters and may not be indicative of prices that will prevail in the open

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market upon the completion of this offering. Consequently, you may be unable to sell your shares of our Class A common stock at prices equal to or greater than the price you paid for them.

The market price of our Class A common stock is likely to be volatile and could decline following this offering, resulting in a substantial loss of your investment.

        The stock market in general has been highly volatile. As a result, the market price and trading volume for our Class A common stock may also be highly volatile, and investors in our Class A common stock may experience a decrease in the value of their shares, including decreases unrelated to our operating performance or prospects. Factors that could cause the market price of our Class A common stock to fluctuate significantly include:

    our operating and financial performance and prospects and the performance of other similar companies;

    our quarterly or annual earnings or those of other companies in our industry;

    conditions that impact demand for our products and services;

    the public's reaction to our press releases, financial guidance and other public announcements, and filings with the SEC;

    changes in earnings estimates or recommendations by securities or research analysts who track our Class A common stock;

    market and industry perception of our level of success in pursuing our growth strategy;

    strategic actions by us or our competitors, such as acquisitions or restructurings;

    changes in government and other regulations;

    changes in accounting standards, policies, guidance, interpretations or principles;

    departure of key personnel;

    the number of shares to be publicly traded after this offering;

    investor scrutiny of our dual-class structure, including new rules adopted by certain index providers, such as S&P Dow Jones and FTSE Russell, that limit or preclude inclusion of companies with multiple-class capital structure in certain indices;

    sales of common stock by us, our investors or members of our management team; and

    changes in general market, economic and political conditions in the U.S. and global economies or financial markets, including those resulting from natural disasters, telecommunications failures, cyber-attacks, civil unrest in various parts of the world, acts of war, terrorist attacks or other catastrophic events.

        Any of these factors may result in large and sudden changes in the trading volume and market price of our Class A common stock and may prevent you from being able to sell your shares at or above the price you paid for them.

        Following periods of volatility in the market price of a company's securities, stockholders often file securities class-action lawsuits against such company. Our involvement in a class-action lawsuit could divert our senior management's attention and, if adversely determined, could have a material and adverse effect on our business, financial condition and results of operations.

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The dual class structure of our common stock will have the effect of concentrating voting control with those stockholders who held our capital stock prior to the completion of this offering, which will limit or preclude your ability to influence corporate matters.

        Our Class B common stock will have ten votes per share, and our Class A common stock, which is the stock we are offering in this offering, will have one vote per share. Following this offering, our directors, executive officers and holders of more than 5% of our common stock, and their respective affiliates, will hold in the aggregate 96.2% of the total voting power of our outstanding common stock and the unvested restricted stock. Because of the ten-to-one voting ratio between our Class B common stock and Class A common stock, the holders of our Class B common stock collectively will continue to control a majority of the voting power of our common stock and therefore will be able to control all matters submitted to our stockholders for approval. Our Class B common stock will be converted into shares of Class A common stock, which conversion will occur automatically, in the case of each share of Class B common stock, upon transfers (subject to limited exceptions, such as certain transfers effected for estate planning purposes), a termination of employment by an employee stockholder or upon the date the number of shares of Class B common stock then outstanding (including unvested restricted shares) is less than 10% of the aggregate number of shares of Class A common stock and Class B common stock then outstanding (including unvested restricted shares). We may issue additional shares of our Class B common stock in the future, including in connection with acquisitions or equity grants to employees. This concentrated control will limit or preclude your ability to influence corporate matters for the foreseeable future, including the election of directors, amendments of our organizational documents, and any merger, consolidation, sale of all or substantially all of our assets, or other major corporate transaction requiring stockholder approval. In addition, this may prevent or discourage unsolicited acquisition proposals or offers for our capital stock that you may feel are in your best interest as one of our stockholders.

        The conversion of Class B common stock to Class A common stock will have the effect, over time, of increasing the relative voting power of those holders of Class B common stock who retain their shares in the long term, including the holders of newly issued shares of Class B common stock and the holders of Class B common stock subject to the Employee Shareholders' Agreement, whose shares will be voted by the Employee Shareholders Committee. See "Certain Relationships and Related-Party Transactions—Employee Shareholders' Agreement."

Crestview GP controls us and its interests may conflict with ours or yours in the future.

        Immediately following this offering of Class A common stock, Crestview GP will not hold any of our Class A common stock, but will beneficially own 52.8% of our common stock through its beneficial ownership of our Class B common stock and 60% of the total voting power of our outstanding common stock and unvested restricted stock. As a result, Crestview GP will have the ability to elect a majority of the members of our board of directors and thereby control our policies and operations, including the appointment of management, future issuances of our common stock or other securities, the payment of dividends, if any, on our common stock (including the Class A common stock), the incurrence of debt by us, amendments to our amended and restated certificate of incorporation and amended and restated bylaws, and the entering into of extraordinary transactions. Crestview GP will also be able to determine the outcome of all matters requiring stockholder approval and will be able to cause or prevent a change in control of us or a change in the composition of our board of directors and could preclude any acquisition of us. This concentration of voting control could deprive you of an opportunity to receive a premium for your shares of Class A common stock as part of a sale of us and ultimately might affect the market price of our Class A common stock. Further, the interests of Crestview GP may not in all cases be aligned with your interests.

        In addition, Crestview GP may have an interest in pursuing acquisitions, divestitures and other transactions that, in its judgment, could enhance its investment, even though such transactions might involve risks to you. For example, Crestview GP could cause us to make acquisitions that increase our

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indebtedness or cause us to sell revenue-generating assets. Crestview GP is in the business of making investments in companies and may from time to time acquire and hold interests in businesses that compete directly or indirectly with us. Our amended and restated certificate of incorporation will provide that none of Crestview GP or Reverence Capital or any of their respective affiliates will have any duty to refrain from engaging, directly or indirectly, in the same business activities or similar business activities or lines of business in which we operate. Crestview GP or Reverence Capital also may pursue acquisition opportunities that may be complementary to our business, and, as a result, those acquisition opportunities may not be available to us, which could have an adverse effect on our growth prospects.

Future sales of shares by stockholders could cause our stock price to decline.

        Sales of substantial amounts of our Class A common stock in the public market following this offering, or the perception that these sales could occur, could cause the market price of our Class A common stock to decline. After this offering, 11,700,000 shares of our Class A common stock and 55,118,673 shares of our Class B common stock, which are convertible, at the option of the holder, into an equal number of shares of Class A common stock, will be outstanding. Of these shares, all of the shares of Class A common stock sold in this offering will be freely tradable without restriction under the Securities Act, unless purchased by our "affiliates," as that term is defined in Rule 144 under the Securities Act. The 55,118,673 shares of our Class B common stock held by Crestview GP, Reverence Capital, our directors and officers and other existing stockholders, will be "restricted securities" within the meaning of Rule 144 under the Securities Act. Restricted securities may be sold in the public market only if they are registered under the Securities Act or are sold pursuant to an exemption from registration under Rule 144 or Rule 701 under the Securities Act. Subject to the lock-up agreements described below, restricted shares held by non-affiliates that have been owned for more than six months may be sold without regard to the provisions of Rule 144 (other than the current information requirement).

        We, our executive officers, directors, institutional shareholders and substantially all of our other existing security holders have agreed to a "lock-up," meaning that, subject to certain exceptions, neither we nor they will sell any shares without the prior consent of the representatives of the underwriters, for 180 days after the date of this prospectus. See "Underwriting." In addition, certain of our significant stockholders may distribute shares that they hold to their investors who themselves may then sell into the public market following the expiration of the lock-up period. Such sales may not be subject to the volume, manner of sale, holding period and other limitations of Rule 144. As resale restrictions end, the market price of our Class A common stock could decline if the holders of shares sell them or are perceived by the market as intending to sell them. In addition, holders of approximately 46,214,268 shares, or 83.8%, of our Class B common stock will have registration rights, subject to certain conditions, to require us to file registration statements covering the sale of their shares or to include their shares in registration statements that we may file for ourselves or other stockholders in the future. Once we register the shares for the holders of registration rights, they can be freely sold in the public market upon issuance, subject to the restrictions contained in the lock-up agreements. See "Shares Eligible for Future Sale."

        In the future, we may issue additional shares of common stock or other equity or debt securities convertible into common stock in connection with a financing, acquisition or employee arrangement, or in certain other circumstances. Any of these issuances could result in substantial dilution to our existing stockholders and could cause the trading price of our Class A common stock to decline.

If securities or industry analysts do not publish research or publish misleading or unfavorable research about our business, our stock price and trading volume could decline.

        The trading market for our Class A common stock will depend in part on the research and reports that securities or industry analysts publish about us or our business. We do not currently have and may never obtain research coverage by securities and industry analysts. If there is no coverage of us by securities or industry analysts, the trading price for our shares could be negatively impacted. In the event

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we obtain securities or industry analyst coverage and if one or more of these analysts downgrades our shares or publishes misleading or unfavorable research about our business, our stock price would likely decline. If one or more of these analysts ceases coverage of us or fails to publish reports on us regularly, demand for our shares could decrease, which could cause our stock price or trading volume to decline.

We are an "emerging growth company," and any decision on our part to comply with certain reduced disclosure requirements applicable to emerging growth companies could make our Class A common stock less attractive to investors.

        We are an "emerging growth company," as defined in the JOBS Act, enacted in April 2012, and, for as long as we continue to be an emerging growth company, we may choose to take advantage of exemptions from various reporting requirements applicable to other public companies, including, but not limited to, reduced disclosure obligations regarding executive compensation (including Chief Executive Officer pay ratio disclosure) in our periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved. As an emerging growth company, we have elected to use the extended transition period for complying with new or revised accounting standards until those standards would otherwise apply to private companies. As a result, our consolidated financial statements may not be comparable to the financial statements of issuers who are required to comply with the effective dates for new or revised accounting standards that are applicable to public companies.

        We may take advantage of these exemptions until such time that we are no longer an emerging growth company. Accordingly, the information contained herein may be different than the information you receive from other public companies in which you hold stock. We could remain an emerging growth company for up to five years, or until the earliest of (i) the last day of the first fiscal year in which our annual gross revenues are at least $1.07 billion, (ii) the date that we become a "large accelerated filer" as defined in Rule 12b-2 under the Exchange Act, which would occur if, among other things, the market value of our common equity securities held by non-affiliates exceeds $700 million as of the last business day of our most recently completed second fiscal quarter, or (iii) the date on which we have issued more than $1 billion in nonconvertible debt securities during the preceding three-year period.

        We cannot predict whether investors will find our Class A common stock less attractive if we choose to rely on one or more of the exemptions described above. If investors find our Class A common stock less attractive as a result of any decisions to reduce future disclosure, there may be a less active trading market for our Class A common stock and our stock price may be more volatile.

The requirements of being a public company may strain our resources and distract our management, which could make it difficult to manage our business, particularly after we are no longer an "emerging growth company."

        We have historically operated as a private company and have not been subject to the same financial and other reporting and corporate governance requirements as a public company. After this offering, we will be required to file annual, quarterly and other reports with the SEC. We will need to prepare and timely file financial statements that comply with SEC reporting requirements. We will also be subject to other reporting and corporate governance requirements under the listing standards of NASDAQ and the Sarbanes-Oxley Act, which will impose significant compliance costs and obligations upon us. The changes necessitated by becoming a public company will require a significant commitment of additional resources and management oversight, which will increase our operating costs. These changes will also place significant additional demands on our finance and accounting staff, which may not have prior public company experience or experience working for a newly public company, and on our financial accounting and information systems, and we may need to, in the future, hire additional accounting and financial staff with appropriate public company reporting experience and technical accounting knowledge. Other expenses associated with being a public company include increases in auditing, accounting and legal fees and expenses, investor relations expenses, increased directors' fees and director and officer liability

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insurance costs, registrar and transfer agent fees and listing fees, as well as other expenses. As a public company, we will be required, among other things, to:

    prepare and file periodic reports, and distribute other stockholder communications, in compliance with the federal securities laws and the NASDAQ rules;

    define and expand the roles and the duties of our board of directors and its committees;

    institute more comprehensive compliance, investor relations and internal audit functions; and

    evaluate and maintain our system of internal control over financial reporting, and report on management's assessment thereof, in compliance with rules and regulations of the SEC and the PCAOB.

        In particular, upon the completion of this offering, the Sarbanes-Oxley Act will require us to document and test the effectiveness of our internal control over financial reporting in accordance with an established internal control framework, and to report on our conclusions as to the effectiveness of our internal controls. Likewise, our independent registered public accounting firm will be required to provide an attestation report on the effectiveness of our internal control over financial reporting pursuant to Section 404(b) of the Sarbanes-Oxley Act unless we choose to utilize the exemption from such attestation requirement available to "emerging growth companies." As described in the previous risk factor, we expect to qualify as an emerging growth company upon the completion of this offering and could potentially qualify as an emerging growth company until December 30, 2023. In addition, upon the completion of this offering, we will be required under the Exchange Act to maintain disclosure controls and procedures and internal control over financial reporting. Any failure to implement required new or improved controls, or difficulties encountered in their implementation, could harm our operating results or cause us to fail to meet our reporting obligations. If we are unable to conclude that we have effective internal control over financial reporting, investors could lose confidence in the reliability of our financial statements. This could result in a decrease in the value of our Class A common stock. Failure to comply with the Sarbanes-Oxley Act could potentially subject us to sanctions or investigations by the SEC or other regulatory authorities.

We have broad discretion to use the proceeds from the offering and our investment of those proceeds may not yield favorable returns.

        We currently intend to use the net proceeds from this offering for the repayment of debt. Our management has broad discretion to spend the proceeds from this offering and you may not agree with the way the proceeds are spent. The failure of our management to apply these proceeds effectively could result in unfavorable returns. This could adversely affect our business, causing the price of our Class A common stock to decline.

We do not currently intend to pay regular cash dividends on our common stock and, consequently, your ability to achieve a return on your investment will depend on appreciation in the price of our Class A common stock.

        We have no current plans to declare and pay any cash dividends. We currently intend to retain all our future earnings, if any, to fund our growth. Therefore, you are not likely to receive any dividends on your Class A common stock in the near term and the success of an investment in our Class A common stock will depend upon any future appreciation in its value. There is no guarantee that our Class A common stock will appreciate in value or even maintain the price at which our stockholders have purchased their shares.

Future offerings of debt or equity securities may rank senior to our Class A common stock and may result in dilution of your investment.

        If we decide to issue debt securities in the future, which would rank senior to shares of our common stock, it is likely that they will be governed by an indenture or other instrument containing covenants restricting our operating flexibility. We and, indirectly, our stockholders will bear the cost of issuing and

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servicing such securities. We may also issue preferred equity, which will have superior rights relative to our common stock, including with respect to voting and liquidation.

        Furthermore, if we raise additional capital by issuing new convertible or equity securities at a lower price than the initial public offering price, your interest will be diluted. This may result in the loss of all or a portion of your investment. If our future access to public markets is limited or our performance decreases, we may need to carry out a private placement or public offering of our Class A common stock at a lower price than the initial public offering price.

        Because our decision to issue debt, preferred or other equity or equity-linked securities in any future offering will depend on market conditions and other factors beyond our control, we cannot predict or estimate the amount, timing or nature of our future offerings. Thus, holders of our Class A common stock will bear the risk of our future offerings reducing the market price of our Class A common stock and diluting the value of their shareholdings in us.

Purchasing our Class A common stock through this offering will result in an immediate and substantial dilution of your investment.

        The initial public offering price of our Class A common stock is substantially higher than the net tangible book value per share of our Class A common stock. Therefore, if you purchase our Class A common stock in this offering, your interest will be diluted immediately to the extent of the difference between the initial public offering price per share of our Class A common stock and the net tangible book value per share of our Class A common stock after this offering. See "Dilution."

We will be a "controlled company" within the meaning of the rules of NASDAQ, and, as a result, we will qualify for, and intend to rely on, exemptions from certain corporate governance requirements. You will not have the same protections afforded to stockholders of companies that are subject to such requirements.

        Upon the completion of this offering, Crestview GP will continue to control a majority of the voting power of our common stock. As a result, we will be a "controlled company" under NASDAQ's corporate governance listing standards. As a controlled company, we are exempt from the obligation to comply with certain corporate governance requirements, including the requirements:

    that a majority of our board of directors consist of independent directors, as defined under the rules of NASDAQ;

    that we have a corporate governance and nominating committee that is composed entirely of independent directors with a written charter addressing the committee's purpose and responsibilities; and

    that we have a compensation committee that is composed entirely of independent directors with a written charter addressing the committee's purpose and responsibilities.

        We intend to take advantage of these exemptions following the completion of this offering for so long as Crestview GP holds a majority of our voting power. Accordingly, our stockholders will not have the same protections afforded to stockholders of companies that are subject to all of NASDAQ's corporate governance requirements, which could make our stock less attractive to investors or otherwise harm our stock price.

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Provisions in our charter documents could discourage a takeover that stockholders may consider favorable.

        Certain provisions in our governing documents could make a merger, tender offer or proxy contest involving us difficult, even if such events would be beneficial to the interests of our stockholders. Among other things, these provisions:

    permit our board of directors to establish the number of directors and fill any vacancies and newly created directorships;

    authorize the issuance of "blank check" preferred stock that our board of directors could use to implement a stockholder rights plan;

    provide that our board of directors is expressly authorized to amend or repeal any provision of our bylaws;

    restrict the forum for certain litigation against us to Delaware;

    establish advance notice requirements for nominations for election to our board of directors or for proposing matters that can be acted upon by stockholders at annual stockholder meetings;

    provide for a dual-class common stock structure pursuant to which holders of our Class B common stock will have ten votes per share compared to the one vote per share of our Class A common stock and thereby will have the ability to control the outcome of matters requiring stockholder approval;

    establish a classified board of directors with three classes of directors and the removal of directors only for cause;

    require that actions to be taken by our stockholders be taken only at an annual or special meeting of our stockholders, and not by written consent, once Crestview GP owns 50% or less of the voting power of our outstanding capital stock;

    establish certain limitations on convening special stockholder meetings; and

    restrict business combinations with interested stockholders.

        These provisions may delay or prevent attempts by our stockholders to replace members of our management by making it more difficult for stockholders to replace members of our board of directors, which is responsible for appointing the members of our management. Anti-takeover provisions could depress the price of our Class A common stock by acting to delay or prevent a change in control of us.

        For information regarding these and other provisions, see "Description of Capital Stock."

Our amended and restated certificate of incorporation will provide that the Court of Chancery of the State of Delaware will be the exclusive forum for substantially all disputes between us and our stockholders, which could limit our stockholders' ability to obtain a favorable judicial forum for disputes with us or our directors, officers or employees.

        Our amended and restated certificate of incorporation will provide that the Court of Chancery of the State of Delaware is the exclusive forum for any derivative action or proceeding brought on our behalf, any action asserting a breach of fiduciary duty, any action asserting a claim against us arising pursuant to the Delaware General Corporation Law, our amended and restated certificate of incorporation or our amended and restated bylaws or any action asserting a claim against us that is governed by the internal affairs doctrine. This choice of forum provision may limit a stockholder's ability to bring a claim in a judicial forum that it finds favorable for disputes with us or our directors, officers or other employees and may discourage these types of lawsuits.

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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

        This prospectus includes forward-looking statements, including in the sections entitled "Prospectus Summary," "Risk Factors," "Management's Discussion and Analysis of Financial Condition and Results of Operations" and "Business." These forward-looking statements include, without limitation, statements regarding our industry, business strategy, plans, goals and expectations concerning our market position, future operations, margins, profitability, future efficiencies, capital expenditures, liquidity and capital resources and other financial and operating information. When used in this discussion, the words "may," "believes," "intends," "seeks," "anticipates," "plans," "estimates," "expects," "should," "assumes," "continues," "could," "will," "future" and the negative of these or similar terms and phrases are intended to identify forward-looking statements in this prospectus.

        Forward-looking statements reflect our current expectations regarding future events, results or outcomes. These expectations may or may not be realized. Although we believe the expectations reflected in the forward-looking statements are reasonable, we can give you no assurance that these expectations will prove to have been correct. Some of these expectations may be based upon assumptions, data or judgments that prove to be incorrect. Actual events, results and outcomes may differ materially from our expectations due to a variety of known and unknown risks, uncertainties and other factors. Although it is not possible to identify all of these risks and factors, they include, among others, the following:

    reductions in AUM based on investment performance, client withdrawals, difficult market conditions and other factors;

    the nature of our contracts and investment advisory agreements;

    our ability to maintain historical returns and sustain our historical growth;

    our dependence on third parties to market our strategies and provide products or services for the operation of our business;

    our ability to retain key investment professionals or members of our senior management team;

    our reliance on the technology systems supporting our operations;

    our ability to successfully acquire and integrate new companies;

    the concentration of our investments in long-only small- and mid-cap equity and U.S. clients;

    risks and uncertainties associated with non-U.S. investments;

    our efforts to establish and develop new teams and strategies;

    the ability of our investment teams to identify appropriate investment opportunities;

    our ability to limit employee misconduct;

    our ability to meet the guidelines set by our clients;

    our exposure to potential litigation (including administrative or tax proceedings) or regulatory actions;

    our ability to implement effective information and cyber security policies, procedures and capabilities;

    our substantial indebtedness;

    the potential impairment of our goodwill and intangible assets;

    disruption to the operations of third parties whose functions are integral to our ETF platform;

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    our determination that we are not required to register as an "investment company" under the 1940 Act;

    the fluctuation of our expenses;

    our ability to respond to recent trends in the investment management industry;

    the level of regulation on investment management firms and our ability to respond to regulatory developments;

    the competitiveness of the investment management industry;

    the dual class structure of our common stock;

    the level of control over us retained by Crestview GP;

    our status as an emerging growth company and a controlled company; and

    other risks and factors listed under "Risk Factors" and elsewhere in this prospectus.

        In light of these risks, uncertainties and other factors, the forward-looking statements contained in this prospectus might not prove to be accurate and you should not place undue reliance upon them. All forward-looking statements speak only as of the date made and we undertake no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise.

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USE OF PROCEEDS

        We estimate that the net proceeds from the sale of the Class A common stock that we are offering will be approximately $137.5 million after deducting estimated underwriting discounts and offering expenses. If the underwriters' option in this offering is exercised in full, we estimate that our net proceeds will be approximately $158.9 million.

        We intend to use the net proceeds of this offering, together with cash on hand, to repay a portion of the outstanding loans under our existing senior credit agreement. We intend to refinance the remaining portion of those outstanding loans with proceeds from the Proposed Debt Refinancing. If the underwriters exercise their option to purchase additional shares, we intend to use those net proceeds for general corporate purposes, which may include the repayment of debt. As of September 30, 2017, we had $517.7 million aggregate principal amount of outstanding term loans under our existing senior credit agreement. We incurred $125.0 million of this debt in February 2017 to pay a special dividend to our stockholders. These term loans mature on October 31, 2021 and, as of September 30, 2017, bore interest at a rate equal to 6.58% per annum. This offering is not conditioned on the closing of the new senior credit agreement or the repayment of the existing senior credit agreement. If we do not enter into the new senior credit agreement, the existing senior credit agreement will remain in place.

        Pending the use of proceeds from this offering as described above, we plan to invest the net proceeds we receive in this offering in short-term and intermediate-term interest-bearing obligations, investment-grade investments, certificates of deposit, or direct or guaranteed U.S. government obligations.

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DIVIDEND POLICY

        We paid aggregate special dividends of $50.0 million on May 8, 2015, $9.8 million on November 13, 2015, $119.8 million on February 9, 2017 and $12.6 million on December 5, 2017 to holders of our common stock. See "Management's Discussion and Analysis of Financial Condition and Results of Operations—Off-Balance Sheet Arrangements" for detail on unpaid amounts with respect to these dividends as of September 30, 2017.

        We do not currently intend to pay cash dividends on our common stock. Any future determinations relating to our dividend policies is limited by the terms of our indebtedness and will be made at the discretion of our board of directors, which will depend on conditions then existing, including our financial condition, results of operations, contractual restrictions, capital requirements, business prospects and other factors our board of directors may deem relevant.

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CAPITALIZATION

        The following table sets forth our cash and cash equivalents and capitalization as of September 30, 2017:

    on an actual basis; and

    on a pro forma as adjusted basis to reflect (i) the issuance and sale by us of 11,700,000 shares of our Class A common stock in this offering, (ii) the application of the estimated net proceeds from our sale of these shares at the initial public offering price of $13.00 per share after deducting estimated underwriting discounts and offering expenses as discussed in "Use of Proceeds" and (iii) the Proposed Debt Refinancing (including related issuance costs).

        The pro forma as adjusted information below is illustrative only, and our cash and cash equivalents, additional paid-in capital, total stockholders' equity and total capitalization following the completion of this offering will be adjusted based on the actual initial public offering price and other terms of the offering determined at the pricing of this offering. You should read this table in conjunction with the sections of this prospectus entitled "Selected Consolidated Financial Data," "Management's Discussion and Analysis of Financial Condition and Results of Operations," and our consolidated financial statements and related notes included elsewhere in this prospectus.

 
  As of September 30, 2017  
(in thousands except share data)
  Actual   Pro Forma  

Cash and cash equivalents(1)

  $ 11,535   $ 4,759  

Debt

             

Existing senior credit facility(1)(2)

    500,018      

New senior credit facility(3)

        363,489  

Total debt

    500,018     363,489  

Equity

             

Preferred stock, $0.01 par value: no shares authorized, issued and outstanding, actual; 10,000,000 authorized, no shares issued and outstanding, pro forma

         

Common stock, $0.01 par value per share: 78,837,300 shares authorized, 57,172,284 shares issued and 55,119,361 shares outstanding, actual; no shares authorized, issued and outstanding, pro forma(4)

    551      

Class A common stock, $0.01 par value; no shares authorized, issued and outstanding, actual; 400,000,000 shares authorized, 11,700,000 shares issued and outstanding, pro forma(4)

        117  

Class B common stock, $0.01 par value per share: no shares authorized, issued and outstanding, actual; 200,000,000 shares authorized, 57,172,284 shares issued and 55,119,361 shares outstanding, pro forma(4)

        551  

Additional paid-in capital

    433,227     570,584  

Treasury stock, at cost: 2,052,923 shares

    (20,749 )   (20,749 )

Accumulated other comprehensive loss

    (97 )   (97 )

Retained deficit

    (181,055 )   (198,525 )

Total stockholders' equity

    231,877     351,881  

Total capitalization

  $ 731,895   $ 715,370  

(1)
During the fourth quarter of 2017, we repaid $18.0 million outstanding on the term loan, resulting in a decline in the gross amount of principal outstanding from $517.7 million to $499.7 million, and increased our cash balances to $12.9 million as of December 31, 2017. Including fourth quarter cash

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    flow activity and our repayment of debt, ending pro forma cash and cash equivalents would increase by $1.4 million to $6.2 million and pro forma debt would decrease by $18.0 million to $345.5 million.

(2)
Shown net of unamortized loan discount and debt issuance costs in the amount of $17.7 million. The gross amount of the principal outstanding under the term loans under our existing senior credit agreement was $517.7 million as of September 30, 2017.

(3)
Shown net of any loan discount and debt issuance costs to be incurred in connection with the new senior credit agreement. Reflects our current expectations with respect to $360.0 million to initially be incurred under the new senior credit agreement. If we do not enter into the new senior credit agreement, the existing senior credit agreement will remain in place.

(4)
The information regarding our common stock takes into account a 175.194-for-1 split of our common stock that our board of directors and stockholders approved on February 1, 2018 and the pro forma information regarding our common stock also takes into account the filing of our amended and restated certificate of incorporation that will occur immediately prior to the closing of this offering.

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DILUTION

        If you invest in our Class A common stock in this offering, your interest will be diluted to the extent of the difference between the initial public offering price per share and the pro forma net tangible book value price per share of our Class A common stock immediately after this offering. Our net tangible book deficit as of September 30, 2017 was $466 million, or $8.45 per share of common stock. Net tangible book deficit per share is determined by dividing our total tangible assets less total liabilities by the total number of shares of common stock outstanding as of September 30, 2017.

        After giving effect to the sale by us of shares of Class A common stock in this offering, and after deducting estimated underwriting discounts and commissions and estimated offering expenses, our pro forma net tangible book deficit as of September 30, 2017 would have been approximately $345.9 million, or approximately $5.18 per share. This amount represents an immediate decrease in pro forma net tangible book deficit of $2.05 per share to our existing stockholders and an immediate dilution in pro forma net tangible book value of approximately $18.18 per share to new investors purchasing shares of Class A common stock in this offering at the assumed initial public offering price.

        The following table illustrates this per share dilution:

Initial public offering price per share

        $ 13.00  

Pro forma net tangible book value deficit per share as of September 30, 2017

  $ (7.23 )      

Decrease in pro forma net tangible book deficit per share attributable to new investors in this offering

  $ 2.05        

Pro forma net tangible book value deficit per share after this offering

        $ (5.18 )

Dilution per share to new investors

        $ (18.18 )

        If the underwriters exercise their option in full to purchase 1,755,000 additional shares of Class A common stock from us in this offering, the pro forma net tangible book deficit per share after the offering would be $4.73 per share, the decrease in the pro forma net tangible book deficit per share to existing stockholders would be $2.32 per share and the dilution to new investors purchasing Class A common stock in this offering would be $17.73 per share.

        The following table sets forth as of September 30, 2017, on the pro forma basis described above, the differences between the number of shares of common stock purchased from us, the total consideration paid by or received from existing stockholders and the weighted-average price per share paid by existing stockholders and by investors purchasing shares of our Class A common stock in this offering at the initial public offering price of $13.00 per share, before deducting estimated underwriting discounts and commissions and estimated offering expenses:

 
   
   
  Total
Consideration
   
 
 
  Shares Purchased    
 
 
  Average
Price
Per Share
 
 
  Number   Percent   Number   Percent  

Existing stockholders

    54,843,968     82 % $ 398,160,269     72 % $ 7.26  

New investors

    11,700,000     18     152,100,000     28     13.00  

Total

    66,543,968     100.0   $ 550,260,269     100.0   $ 8.27  

        The number of shares of common stock reflected in the discussion and tables above is based on no shares of our Class A common stock and 55,106,759 shares of our Class B common stock outstanding as of September 30, 2017 and excludes as of such date the following potentially dilutive securities:

    9,078,718 shares of our Class B common stock issuable upon the exercise of options outstanding under the 2013 Plan, at a weighted-average exercise price of $5.71 per share;

    2,971,794 unvested restricted shares of our Class B common stock granted under the 2013 Plan; and

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    3,722,872 shares of our common stock reserved for future issuance under our equity compensation plans, consisting of:

    3,372,484 shares of our Class A common stock and Class B common stock reserved for future issuance of the 2018 Plan; and

    350,388 shares of our Class A common stock reserved for future issuance under the 2018 ESPP.

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UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION

        The following unaudited pro forma condensed combined statements of income for the nine months ended September 30, 2017 and the year ended December 31, 2016 present our combined results of operations giving effect to (i) the RS Acquisition on July 29, 2016 as if the transaction had occurred as of January 1, 2016 and (ii) the completion of this offering, including the application of the estimated net proceeds, the 2017 Debt Recapitalization, the December 2017 Dividend and the Proposed Debt Refinancing as if each had occurred on January 1, 2016. The unaudited pro forma condensed combined balance sheet as of September 30, 2017 gives pro forma effect to the transactions described above as if they had occurred as of September 30, 2017. For more information on the RS Acquisition, see "Management's Discussion and Analysis of Financial Condition and Results of Operations—Company History." For more information on the 2017 Debt Recapitalization and December 2017 Dividend, see "Prospectus Summary—Unaudited Pro Forma Balance Sheet Data and Basic and Diluted Earnings Per Share," and for more information on the Proposed Debt Refinancing, see "Management's Discussion and Analysis of Financial Condition and Results of Operations—Proposed Debt Refinancing."

        The assumptions underlying the pro forma adjustments are described in the accompanying notes, which should be read in conjunction with this unaudited pro forma condensed combined financial information. The pro forma adjustments described in the accompanying notes have been made based on available information and upon assumptions that we believe are reasonable in order to reflect, on a pro forma basis, the impact of these transactions on our historical financial information. The unaudited pro forma condensed combined financial information is presented for illustrative purposes only and does not necessarily indicate the financial results of the combined companies had the companies actually been combined at the beginning of the period presented. The unaudited pro forma condensed combined financial information also does not consider any potential impact of current market conditions on revenues, potential revenue enhancements, anticipated cost savings and expense efficiencies, or asset dispositions, among other factors.

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        Certain reclassifications have been made to the historical consolidated financial statements of RS Investments to conform to the presentation of our consolidated financial statements.

($ in thousands, except per share amounts)
  Victory Capital
Holdings, Inc. for
the year ended
December 31, 2016
(as reported)
  RS Investment
Management Co.,
LLC for the period
ended
July 29, 2016
(historical)
  Pro Forma
Adjustments for
RS Acquisition
  Pro Forma
Adjustments for
the Offering
and 2017 Debt
Recapitalization
  Pro Forma
Adjustments for
the Proposed
Debt
Refinancing
  Victory Capital
Holdings, Inc.
for the year
ended
December 31,
2016
(Pro Forma)
 

Revenue

                                     

Investment management fees

  $ 248,482   $ 65,281   $ (1)         $ 313,763  

Fund administration and distribution fees

    49,401     17,889                 67,290  

Total revenue

    297,883     83,170                 381,053  

Expenses

                                     

Personnel compensation and benefits

  $ 122,615   $ 62,637   $ (24,698) (2)         $ 160,554  

Distribution and other asset-based expenses

    77,497     28,710     (1)           106,207  

General and administrative

    26,628     11,755                 38,383  

Depreciation and amortization

    30,405     30,893     1,703 (3)           63,001  

Change in value of consideration payable for acquisition of business

    (378 )                   (378 )

Acquisition-related costs

    6,619     3,266     (9,685) (4)           200  

Restructuring and integration costs

    10,012         (5)           10,012  

Total operating expenses

    273,398     137,261     (32,680 )           377,979  

Income/(loss) from operations

    24,485     (54,091 )   32,680             3,074  

Other income (expense)

                                     

Interest income and other income

  $ 1,086   $ 7,007   $           $ 8,093  

Interest expense and other financing costs

    (34,642 )   (120 )   (9,407) (6)   927 (8)   23,895 (8)   (19,347 )

Total other income (expense), net

    (33,556 )   6,887     (9,407 )   927     23,895     (11,254 )

Income/(loss) before income taxes

    (9,071 )   (47,204 )   23,273     927     23,895     (8,180 )

Income tax benefit/(expense)

    3,000     (25 )   7,900 (7)   (307) (9)   (7,862) (9)   2,706  

Net income/(loss)

  $ (6,071 ) $ (47,229 ) $ 31,173   $ 620   $ 16,033   $ (5,474 )

Pro forma net income per share data(10):

                                     

Earnings per share—basic

                                $ (0.09 )

Earnings per share—diluted

                                $ (0.09 )

Weighted average shares outstanding—basic

                                  61,717,212  

Weighted average shares outstanding—diluted

                                  61,717,212  

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($ in thousands, except per share amounts)
  Victory Capital
Holdings, Inc.
for the nine
months ended
September 30, 2017
(as reported)
  Pro Forma
Adjustments for
the Offering
and 2017 Debt
Recapitalization
  Pro Forma
Adjustments for
the Proposed
Debt
Refinancing
  Victory Capital
Holdings, Inc.
for the nine
months ended
September 30, 2017
(Pro Forma)
 

Revenue

                         

Investment management fees

  $ 254,605           $ 254,605  

Fund administration and distribution fees

    49,378             49,378  

Total revenue

    303,983             303,983  

Expenses

                         

Personnel compensation and benefits

  $ 106,772           $ 106,772  

Distribution and other asset-based expenses

    78,226             78,226  

General and administrative

    26,049             26,049  

Depreciation and amortization

    23,340             23,340  

Change in value of consideration payable for acquisition of business

    (25 )           (25 )

Acquisition-related costs

    1,435             1,435  

Restructuring and integration costs

    4,944             4,944  

Total operating expenses

    240,741             240,741  

Income/(loss) from operations

    63,242             63,242  

Other income (expense)

                         

Interest income and other income

  $ (816 )         $ (816 )

Interest expense and other financing costs

    (38,489 )   7,950 (8)   15,608 (8)   (14,931 )

Total other income (expense), net

    (39,305 )   7,950     15,608     (15,747 )

Income/(loss) before income taxes

    23,937     7,950     15,608     47,495  

Income tax benefit/(expense)

    (9,320 )   (3,096) (9)   (6,077) (9)   (18,493 )

Net income/(loss)

  $ 14,617   $ 4,854   $ 9,531   $ 29,002  

Pro forma net income per share data(10):

                         

Earnings per share—basic

                    $ 0.44  

Earnings per share—diluted

                    $ 0.41  

Weighted average shares outstanding—basic

                      66,567,257  

Weighted average shares outstanding—diluted

                      71,217,606  

Notes to Unaudited Pro Forma Condensed Combined Financial Information

(1)
The unaudited condensed combined pro forma statement of operations does not reflect an adjustment for a change in classification of RS Investments mutual fund expense reimbursements. For the period from January 1, 2016 through July 29, 2016, mutual fund expense reimbursements of $4.3 million were recorded as a reduction in Investment management fees under the terms of the agreements in place at that time. New mutual fund servivce contracts were entered into upon closing the RS Acquisition, and under such terms, mutual fund expense reimbursements for the period from July 30, 2016 through December 31, 2016 of $3.0 million were recorded as Distribution and other asset based fee expenses.

(2)
In connection with the RS Acquisition, certain RS Investments employees received retention bonuses of $7.6 million that were payable upon the closing of the RS Acquisition. In addition, RS Investments recognized incremental compensation expense in 2016 of $17.1 million due to the automatic vesting of certain equity compensation awards under change of control provisions. These amounts have been eliminated from the pro forma statement of operations because they do not have a continuing impact.

(3)
This adjustment reflects incremental amortization of identifiable definite-lived intangible assets related to the RS Acquisition as if the transaction occurred on January 1, 2016.

(4)
This adjustment represents the elimination of non-recurring transaction costs incurred by us in the amount of $6.4 million and RS Investments in the amount of $3.3 million in 2016 directly related to the RS Acquisition, including legal and filing fees, advisory services and mutual fund proxy voting costs.

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(5)
The unaudited condensed combined pro forma statement of operations does not reflect the realization of expected cost savings and other synergies from the RS Acquisition, including synergies that may be realized as a result of integrating investment platforms, products and personnel into existing systems, processes and service provider arrangements and business restructuring. We currently estimate that synergies and planned restructuring activities will result in annual combined cost savings of approximately $50 million, which are not reflected in the unaudited condensed combined pro forma statement of operations. Although we believe such costs savings and other synergies will be realized (and a substantial portion has already been realized), there can be no assurance that these cost savings or any other synergies will be achieved in full. In addition, the unaudited condensed combined pro forma financial information does not reflect an adjustment for certain non-recurring restructuring and integration costs, which are included in the consolidated statement of operations for the Company related to actions taken by the Company in 2016.

(6)
This adjustment reflects incremental interest expense on $135 million of additional debt incurred by us to finance the RS Acquisition as if the transaction occurred on January 1, 2016 and assumes an interest rate of 8.5%, which was the interest rate in effect on our debt at the time of the RS Acquisition.

(7)
Because RS Investments was a partnership for federal and state income tax purposes, no tax provision was included in RS Investments' stand-alone financial statements for the period prior to the RS Acquisition. This adjustment increases the income tax benefit on the pro forma condensed combined statement of operations to the amount that would have resulted from applying the Company's effective income tax rate of 33.0% to the adjusted combined pro forma results and does not reflect any impact from recently enacted tax reform. See "Prospectus Summary—Recent Developments—Impact of Tax Reform."

(8)
The pro forma interest expense adjustment of $0.9 million and $8.0 million for the year ended December 31, 2016 and nine months ended September 30, 2017, respectively, related to this offering and the 2017 Debt Recapitalization comprises $10.9 million and $0.5 million of interest expense, respectively, from the $135 million debt incurred in the 2017 Debt Recapitalization at an interest rate of 8.5%, net of $11.8 million and $8.5 million, respectively, in interest savings from the $139.8 million pay down of debt using the proceeds of this offering at an assumed interest rate of 8.5%.

The Proposed Debt Refinancing interest adjustment of $23.9 million and $15.6 million for the year ended December 31, 2016 and nine months ended September 30, 2017, respectively, reflects lower interest expense due to the expected decrease in interest rate and debt balance for this transaction. The pro forma interest expense and other financing costs of $19.3 million and $14.9 million after the Proposed Debt Refinancing for the year ended December 31, 2016 and nine months ended September 30, 2017, respectively, assumes $360.0 million in outstanding debt and an interest rate of 4.32% and includes debt discount and debt issuance cost amortization expense of $2.1 million and $1.6 million, respectively. The assumed interest rate is based on management's current expectations for the terms of the new senior credit agreement. Each 0.125% change in the assumed interest rate for such indebtedness would increase or decrease pro forma interest expense by approximately $0.4 million and $0.3 million for the year ended December 31, 2016 and the nine months ended September 30, 2017, respectively. As of September 30, 2017, the term loans under our existing senior credit agreement bore interest at a rate equal to 6.58% per annum.

(9)
Represents the amount of income tax provision/benefit on the total adjustments to pre-tax income/(loss) at the Company's effective tax rate of 33.0% and 38.9% for the year ended December 31, 2016 and nine months ended September 30, 2017, respectively, and does not reflect any impact from recently enacted tax reform. See "Prospectus Summary—Recent Developments—Impact of Tax Reform."

(10)
Pro forma basic net income per share is computed by dividing net income available to common stockholders by the weighted-average shares of common stock outstanding during the period. Pro forma diluted net income per share is computed by adjusting the weighted-average shares of common stock outstanding to give effect to potentially dilutive securities. The following table sets forth a reconciliation of the numerators and denominators used to compute pro forma basic and diluted net income per share.
(in thousands, except share and per share amounts)
  Nine Months
Ended
September 30,
2017
  Year Ended
December 31,
2016
 

Pro forma basic net income/(loss) per share:

             

Numerator

             

Net Income/(Loss)

  $ 29,002   $ (5,474 )

Denominator

             

Shares of Class A common stock sold in this offering

    11,700,000     11,700,000  

Weighted-average shares of Class B common stock outstanding—basic

    54,867,257     50,017,712  

Weighted-average shares of common stock outstanding—basic

    66,567,257     61,717,712  

Pro forma basic net income/(loss) per share

  $ 0.44   $ (0.09 )

Pro forma diluted net income/(loss) per share:

             

Numerator

             

Net Income/(Loss)

  $ 29,002   $ (5,474 )

Denominator

             

Weighted-average shares of common stock outstanding—basic

    66,567,257     61,717,712  

Weighted-average effect of dilutive securities:

             

Assumed exercise of outstanding options and vesting of restricted shares

    4,650,349      

Weighted-average shares of common stock outstanding-diluted

    71,217,606     61,717,712  

Pro forma diluted net income/(loss) per share

  $ 0.41   $ (0.09 )

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($ in thousands)
  Victory Capital
Holdings, Inc. as of
September 30, 2017
(as reported)
  Pro Forma
Adjustments for
the Offering
and the
2017 December
Dividend
  Pro Forma
Adjustments for the
Proposed Debt
Refinancing
  Victory Capital
Holdings, Inc. as of
September 30, 2017
Pro Forma
 

ASSETS

                         

Cash and cash equivalents

  $ 11,535   $ (2,276 )(1) $ (4,500 )(2)(4)   4,759 (2)

Receivables

    59,964             59,964  

Prepaid expenses

    6,540     (2,637 )(1)       3,903  

Investments

    10,188             10,188  

Property and equipment, net

    7,802             7,802  

Goodwill

    284,108             284,108  

Other intangible assets, net

    413,676             413,676  

Deferred tax asset, net

            1,714 (3)   1,714  

Other assets

    5,697         (219) (4)   5,478  

Total assets

  $ 799,510   $ (4,913 ) $ (3,005 ) $ 791,592  

LIABILITIES AND STOCKHOLDERS' EQUITY

                         

Accounts payable and accrued expenses

  $ 22,101   $ (2,637 )(1) $     19,464  

Accrued compensation and benefits

    22,500             22,500  

Dividend payable

        12,622 (5)       12,622  

Consideration payable for acquisition of business

    9,985             9,985  

Deferred tax liability, net

    1,378         (1,378 )(3)    

Other liabilities

    11,651             11,651  

Long-term debt

                   

Principal amount

    517,750     (139,750) (1)       378,000  

Less: unamortized discount and debt issuance costs

    17,732         (3,221) (2)(3)   14,511  

Long-term debt, net

    500,018     (139,750 )   3,221     363,489  

Total liabilities

    567,633     (129,765 )   1,843     439,711  

Stockholders' equity:

   
 
   
 
   
 
   
 
 

Common stock

    551     (551 )(7)        

Class A common stock

        117 (6)       117  

Class B common stock

        551 (7)       551  

Additional paid-in capital

    433,227     137,357 (8)       570,584  

Treasury stock

    (20,749 )           (20,749 )

Accumulated other comprehensive loss

    (97 )           (97 )

Retained deficit

    (181,055 )   (12,622 )(5)   (4,848 )(9)   (198,525 )

Total stockholders' equity

    231,877     124,852     (4,848 )   351,881  

Total liabilities and stockholders' equity

  $ 799,510   $ (4,913 ) $ (3,005 ) $ 791,592  

See Note 2 to consolidated financial statements.

       

Notes to Unaudited Pro Forma Condensed Combined Balance Sheet

(1)
Reflects proceeds, net of underwriting discounts and offering expenses, of $137.5 million from this offering based on the issuance of 11,700,000 shares of Class A common stock and the initial public offering price of $13.00 per share with a corresponding increase to total stockholders' equity and the application of the net proceeds received by us in the offering as described under "Use of Proceeds." We are deferring $2.6 million in costs associated with this offering, including certain legal, accounting and other related expenses, which have been recorded in prepaid expenses and accounts payable and accrued expense on our consolidated balance sheet. Upon completion of this offering, these deferred costs will be charged against the proceeds from this offering with a corresponding reduction to additional paid-in capital.

(2)
Gives effect to the assumed incurrence of $360.0 million of indebtedness pursuant to the Proposed Debt Refinancing, net of $1.7 million assumed debt discount and debt issuance costs. The principal balance as reported on September 30, 2017 does not include $18.0 million of principal payments made in the fourth quarter of 2017. These

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    principal payments resulted in a decline in the gross amount of principal outstanding from $517.7 million to $499.7 million as of December 31, 2017. As of December 31, 2017, we increased our cash balances to $12.9 million. Including fourth quarter 2017 cash flow activity, ending pro forma cash and cash equivalents would increase by $1.4 million to $6.2 million. We assume that the Proposed Debt Refinancing will result in approximately 75% of the debt being treated as a modification and 25% as an extinguishment, with a writeoff of $5.0 million of unamortized debt discount and debt issuance costs. The writedown of unamortized debt discount and debt issuance costs is non-recurring in nature and, as such, has not been included as an adjustment in the unaudited pro forma consolidated statements of operations. An additional $2.5 million of third party costs associated with the Proposed Debt Financing are assumed to be immediately expensed as these costs relate to modified debt and are included in adjustment (9).

(in thousands)
  Pro Forma  

Writedown of debt discount and debt issuance costs

  $ (4,958 )

Debt discount and debt issuance costs on Proposed Debt Refinancing

    1,737  

Net change in unamortized debt discount and debt issuance costs

  $ (3,221 )
(3)
Reflects the income tax impact from the $5.0 million writedown of unamortized debt discount and debt issuance costs, $2.5 million in third party costs associated with the Proposed Debt Financing in note (2) and $0.5 million writedown of unamortized revolving credit costs in note (4) as an increase to net deferred tax assets at the effective tax rate of 38.9% for the nine months ended September 30, 2017 and does not reflect any impact from recently enacted tax reform. See "Prospectus Summary—Recent Developments—Impact of Tax Reform."

(4)
Gives effect to the writedown of $0.5 million of unamortized revolving credit costs and incurrence of $0.3 million in new revolving credit commitment costs under the Proposed Debt Refinancing. The writedown of unamortized revolving credit costs is non-recurring in nature and, as such, has not been included as an adjustment in the unaudited pro forma consolidated statements of operations. The $0.5 million writedown represents 100% of total unamortized revolving credit costs just prior to the Proposed Debt Refinancing.
(in thousands)
  Pro Forma  

Writeoff of revolving credit costs

  $ (469 )

Revolving credit costs on Proposed Debt Refinancing

    250  

Net change in other assets

  $ (219 )
(5)
Reflects the accrual of the $12.6 million dividend paid on December 5, 2017.

(6)
Reflects the $.01 par value of 11,700,000 shares of Class A common stock outstanding immediately after this offering.

(7)
In connection with this offering, we will designate the current outstanding shares of our common stock as Class B common stock at a one to one ratio.

(8)
The computation of the change in pro forma additional paid-in capital is below:
(in thousands)
  Pro Forma   Note

Proceeds from offering

  $ 152,100   (1)

Underwriting costs

  $ (9,126 ) (1)

Offering expenses

    (5,500 ) (1)

Par value of Class A common stock

    (117 ) (6)

Additional paid in capital

  $ 137,357    
(9)
The computation of the change in pro forma retained deficit is below:
(in thousands)
  Pro Forma   Note

Writedown of unamortized debt discount and debt issuance costs, net of tax

  $ (3,028 ) (2)

Writedown of unamortized revolving credit costs, net of tax

    (286 ) (4)

Expenses related to Proposed Debt Refinancing, net of tax

    (1,534 ) (2)

Change in retained deficit related to Proposed Debt Refinancing

  $ (4,848 )  

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SELECTED CONSOLIDATED FINANCIAL DATA

        The following tables set forth our historical consolidated financial data as of and for the periods indicated. The selected consolidated financial data for the years ended, and as of, December 31, 2016 and 2015 have been derived from our audited consolidated financial statements and the notes thereto included elsewhere in this prospectus. Our historical operating results are not necessarily indicative of future operating results.

        The selected consolidated financial data for the nine months ended September 30, 2017 and 2016 and as of September 30, 2017 have been derived from our unaudited consolidated financial statements included elsewhere in this prospectus. The unaudited consolidated balance sheet data as of September 30, 2017 and unaudited statements of operations data for the nine months ended September 30, 2017 and 2016 have been prepared on substantially the same basis as our consolidated financial statements that were audited in accordance with GAAP and include all adjustments we consider necessary for a fair statement of our consolidated statements of operations and balance sheets for the periods and as of the dates presented therein. Our results for the nine months ended September 30, 2017 are not necessarily indicative of our results for a full year.

        The following data should be read together with our consolidated financial statements and the related notes thereto, as well as the section entitled "Management's Discussion and Analysis of Financial Condition and Results of Operations," included elsewhere in this prospectus.

 
  Nine Months Ended
September 30,
  Years Ended
December 31,
 
($ in thousands, except per share data as noted)
  2017(1)   2016(1)   2016   2015  

Statement of Operations Data:

                         

Investment management fees

  $ 254,605   $ 166,452   $ 248,482     201,553  

Fund administration and distribution fees

    49,378     33,352     49,401     39,210  

Total revenue

    303,983     199,804     297,883     240,763  

Income/(loss) from operations

  $ 63,242   $ 17,915   $ 24,485   $ 33,220  

Interest expense / (income)

    39,305     22,887     33,556     25,998  

Income/(loss) before income taxes

    23,937     (4,972 )   (9,071 )   7,222  

Net income/(loss)

    14,617     (3,383 )   (6,071 )   3,800  

GAAP operating margin

    20.8 %   9.0 %   8.2 %   13.8 %

Basic earnings per share

  $ 0.27   $ (0.07 ) $ (0.12 ) $ 0.08  

Diluted earnings per share

  $ 0.25   $ (0.07 ) $ (0.12 ) $ 0.08  

 

 
  As of
September 30,
  Years Ended
December 31,
 
($ in thousands)
  2017(1)   2016   2015  

Balance Sheet Data:

                   

Total assets

  $ 799,510   $ 850,951