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00:03 Good morning, and welcome to the Victory Capital Fourth Quarter 2021 Earnings Conference Call. All callers are in a listen-only mode. Following the company's prepared remarks there will be a question-and-answer session.
00:20 I will now turn the call over to Mr. Matthew Dennis Chief of Staff and Director of Investor Relations. Please go ahead, Mr. Dennis.
00:31 Thank you. Before I turn the call over to David Brown, I'd like to remind you that during today's conference call, we may make a number of forward-looking statements. Please note that Victory Capital's actual results may differ materially from these statements. Please refer to our SEC filings for a list of some of the risk factors that may cause actual results to differ materially from those expressed on today's call. Victory Capital assumes no duty and does not undertake any obligation to update any forward-looking statements.
01:01 Our press release that was issued after the market close yesterday disclose both GAAP and non-GAAP financial results. We believe that non-GAAP measures enhance the understanding of our business and our performance. Reconciliations between these non-GAAP measures and the most comparable GAAP measures are included in tables that can be found in our earnings press release and in the slide presentation accompanying this call, both of which are available on the Investor Relations portion of our website at ir.vcm.com.
01:33 It is now my pleasure to turn the call over to David Brown, Chairman and CEO. David?
01:39 Thanks, Matt. Good morning, and welcome to Victory Capital's fourth Quarter 2021 earnings conference call. I'm joined today by Michael Policarpo, our President, Chief Financial and Administrative Officer, as well as Matt Dennis, our Chief of Staff and Director of Investor Relations.
01:58 I'll start today by providing a quick overview of the final quarter of 2021, then I will step back to provide a longer-term perspective on our growth, capital allocation strategy, accomplishment since becoming a public company in 2018 and where we are headed. After that I will cover our investment performance metrics before turning the call over to Mike, who will review the fourth quarter and full-year financial results in greater detail. Following our prepared remarks Mike, Matt, and I will be available to take your questions.
02:31 The quarterly overview begins on Slide 5. 2021 was a transformative year for Victory Capital in a number of different ways. In the final quarter of the year we closed 2 strategic growth acquisitions, New Energy Capital and WestEnd Advisors. With the New Energy Capital acquisition that closed in November, we launched another growth vertical by the creation of our alternative investments platform. The launching of this platform has many characteristics we like, including strong investor demand and healthy fees and margins. Additionally, the alternatives allocation plays an important long-term role in a well-diversified portfolio.
03:10 We've been looking for the right opportunity to enter this part of the industry for a number of years and began laying the ground work well in advance of last year. For example, we made investments to enhance our distribution resources, including investments in technology and procuring new datasets as well as recruiting a team of experienced professionals, focusing specifically on RIAs and family offices, which are both buyers of these products.
03:37 New Energy Capital's multi-decade track record as a specialist focusing exclusively in the renewable and clean energy sector also came with the added benefit of bringing new ESG and impact investing capabilities to our product set. As we add new franchises to our alternative investments platform we will use the same guiding principles that have led to our current success. For example, consistent with the investment franchise model on the traditional side of our business we created economic alignment with the New Energy Capital team through a number of different mechanisms in addition to providing technology, operating and distribution support.
04:16 At the very end of the fourth quarter, we also entered the rapidly growing model portfolio segment of the industry with the closing of our WestEnd Advisors acquisition. WestEnd Advisors is a fast-growing franchise whose products are primarily sold through intermediary platforms where we already have a strong presence. From the time the transaction was announced until it closed on December 31, both of our distribution teams began collaborating to be able to hit the ground running in New Year. We've already had early success engaging new financial advisors on existing platforms and securing new shelf space on platforms where WestEnd Advisors did not have a presence.
4:57 With these acquisitions, as well as the THB Asset Management acquisition that closed in the first quarter of 2021 we are excited by the prospects for each of these newly added investment franchises to contribute meaningfully to our organic growth in 2022 and beyond. Although we are only a little over a month into the quarter and understanding a lot that happened before the end of the quarter, I'm happy to report that we are seeing strong gross and net flows across our business and our net flow positive as a firm for the first quarter as of today. Our one but not yet funded book of business is very healthy and there are significant momentum across both the recently added product set from our new acquisitions, as well as a number of other products in our lineup.
05:43 Shifting to the quarterly results. We ended the fourth quarter with total AUM of $183.7 billion, which was up 25% from the end of last year. We achieved record revenue and adjusted earnings in the fourth quarter, which also marked our sixth consecutive quarter with adjusted EBITDA margins above 50%. Adjusted net income with tax benefit per diluted share was $1.27 in the fourth quarter and $4.82 for the year, which was a 25% improvement from 2020. And yesterday we announced that our Board declared the seventh consecutive increase in our quarterly cash dividend raising at 47% to $0.25 per share. With our annualized rate now at $1 per share, we intend to evaluate future potential increases to our cash dividend on an annual basis as opposed to quarterly basis following the inclusion of each calendar year.
06:40 Turning to slide 6, our direct investor business continues to show material improvement with new account registrations steadily growing. The fourth quarter was our sixth consecutive quarter of improving net flows. For the fourth quarter and for all of 2021, the 529 plan has been net flow positive, which has also been the case since we acquired the plan in 2019. Plan assets have increased [Technical Difficulty] since we acquired it across the $5 billion milestone during 2021.
07:12 As I mentioned on our prior call, our mobile application was launched in the third quarter. The app is already been downloaded and installed by more than 110,000 users and we are receiving positive feedback. Our experience with app users is that they are more likely to buy products than sell products through the app and it also adds efficiency to our client service model.
07:33 I also want to highlight that we held a special meeting of stockholders in November where they overwhelmingly supported the board's recommendation to eliminate the dual-class share structure. This not only implemented best practices from a governance standpoint, but also positions our shares for inclusion in major indexes, which we expect may lead to net purchases buying that funds. Moreover, our previous share class structure was an impediment for some potential shareholders to own our stock as well, which is now being removed.
08:05 Moving to slide 8, while our industry continues to rapidly transform our vision and strategy have remained consistent. We defined our own strategic path that is grounded on delivering superior client service, maintaining investment excellence, earning fair margins and being efficient and [indiscernible] shareholder capital. The chart on the left illustrates our inorganic growth cycle and the chart on the right shows our philosophy and allocation of capital. We are at the beginning of a long-term secular trend of change and consolidation in the asset management industry. This evolution provides us with a great opportunity over a longer period of time to continue executing on our strategy to thoughtfully and profitably grow the company. Supported by tangible results and recurring proof points of success, we are extremely excited about the future and I personally look forward to continuing to implement our proven formula for success.
09:00 As a growth company our primary use of excess capital is always been to support our growth initiatives, and that will continue as we move forward. Given the growth we've had, our cash dividends and share repurchases have increased each year since we began these programs. This is not a change in strategy but a function of our business to become a larger, more competitive and diversified which has afforded us the ability to return capital to our shareholders through these mechanisms, while continuing to execute on our strategy.
09:29 Since our IPO the total capital return to shareholders through dividends and repurchases was more than $134 million at the end of 2021, $62 million of that was distributed in calendar year 2021. We continue to repurchase shares and the $0.25 per share cash dividend declared yesterday is 178% higher than the $0.09 per share dividend declared last February.
09:57 On slide 9, we step back to provide a wider perspective on the results this strategy has produced and the growth we have achieved. This slide does a good job of illustrating our progress in the full years since we became a public company. We think long-term when we make business decisions, which is why I think it makes sense to review our financial performance over a longer-term periods. Our strategy has been consistent despite a rapidly changing market environment. We refer to our business model as being next generation because we have a clear vision of where [Technical Difficulty] the industry is moving and we deliberately designed our business model with that direction in mind.
10:35 This slide shows the consistency in the growth of our revenue and earnings trajectories as well as the margin expansion achieved through efficiencies afforded by our centralized operating platform and our increasing scale. Our shareholders have also been well rewarded over this period with attractive capital appreciation and a history of increase in cash dividends. As some of you are aware, each year [Fortune] (ph) Magazine analyze the growth rates of revenue, earnings and shareholder returns for public issuers over a 3-year period to ranked the top 100 fastest growing companies in the US. 2021 their analysis concluded with Victory Capital ranking as the 9th fastest growing public company in the US and the number 1 fastest growing public asset management firm.
11:21 I've always referred to culture is one of Victory Capitals main competitive advantages. While we have been increasing employee headcount to support growth, we continue to reinforce what we call our ownership culture, which means approaching business decisions with the long-term and client-centric view. Today close to 3 quarters of our employees own VCTR stock and collectively own approximately 20% of the company.
11:47 In addition, our employees continue to invest alongside our clients by investing in Victory products. As of December 31 our employees had approximately a quarter of $1 billion invested in our own products. These metrics are substantial, particularly given that our total headcount stood at only 485 full-time employees at year-end. The 2 aforementioned statistics of the result of engaged employee base that cares very much about our clients and our shareholders and approaches to work every day with the commitment and dedication that I believe is second to none in the industry.
12:23 On Slide 11 you can see our strong investment performance continue through the end of the year. At the end of the fourth quarter, we had 43 mutual funds and ETFs with a 4 or 5 star overall rating from Morningstar and 64% of our AUM in our mutual funds and ETFs was ranked 4 or 5 star by Morningstar. 27 of our mutual funds and 11 of our ETFs ranked in the top quartile for the 2021 period.
12:51 Lastly, we continue to see the acquisition environment as extremely constructive. Our intention in 2022 is to continue at the same pace that we have historically with the acquisitions. We are well experienced in executing acquisitions and have the capital flexibility to execute as well. Our focus will continue to be on acquisitions that will make our company better and more competitive. I anticipate that the acquisitions will continue to range in size from small to large and we will be focusing on products that are part of a well-diversified portfolio that we can be competitive in and earn a fair fee and margin. We currently are in a number of discussions that are in various stages of the process.
13:32 And as I've said many times in the past these timing and the likelihood to close is hard to predict. What I can say is, we are patient, yet ready immediately should the right opportunity present itself.
13:45 With that I will turn it over to Michael for more color on the financials. Michael?
13:51 Thanks, Dave, and good morning everyone. The financial results review begins on Slide 13. Total AUM increased $24 billion or 15% from the end of the third quarter to $183.7 billion at year-end. This increase was largely attributable to assets acquired in the WestEnd Advisors and New Energy Capital acquisitions that totaled $20 billion. In addition, positive market action was partially offset by net outflows in the quarter. Q4 revenue rose 1% sequentially from the third quarter, reaching $229.1 million, which is a 14% increase from the prior year. Keep in mind the WestEnd Advisors acquisition closed on December 31. So there is no P&L impact in either the quarterly or full year period. None of the operating results in this presentation include any WestEnd Advisors financials.
14:50 For the year, revenue reached a record $890 million, which was 15% higher than in 2020. Adjusted EBITDA was $114.9 million in the fourth quarter and $449 million for the full year period. The fourth quarter of 2021 represented our 6th consecutive quarter generating margins greater than 50% with an adjusted EBITDA margin at 50.2%. For the full-year, adjusted EBITDA margin was 50.4%, which was up 170 basis points from the 2020 full-year period.
15:31 Our GAAP net income was $69.7 million in the quarter or $0.94 per diluted share. This was a decrease from $74.2 million or $1 per diluted share in the third quarter and was primarily due to higher acquisition related restructuring and integration costs. We also had higher compensation expenses in Q4, reflecting $1.9 million of transaction-related compensation, as well as higher variable comp expense.
16:03 Moving to some of the [Technical Difficulty] accounting noise, Q4 adjusted net income with tax benefit increased to a record $93.7 million or $1.27 per diluted share, up 1% sequentially from the third quarter and up 19% from Q4 2020. For the full year 2021 GAAP net income climbed 31% with GAAP EPS reaching $3.75 per diluted share. Adjusted net income with tax benefit was $357.1 million or $4.82 per diluted share, an increase of 25% over 2020.
16:48 On the capital management front, we price the $505 million incremental term loan used to finance the WestEnd Advisors acquisition at LIBOR plus 225 basis points. This is the same level at the original term loan although the incremental portion carries a 50 basis point floor for LIBOR. So far in 2022 we have paid back $55 million of the debt that was outstanding at the start of the year. We returned a total of $16 million of capital to shareholders in the form of cash dividends and share repurchases in the quarter, which brings the year-to-date total capital return to just over $62 million, this is a 48% increase compared to capital returns in 2020.
17:42 Turning to Slide 14. Total AUM of $183.7 billion at year end was up 15% from $159.9 billion at the end of September. Year-over-year AUM increased 25% from the end of 2020. The business continues to be highly diversified by client type as evidenced by the bar chart on this page. We have 3 deep distribution channels with each representing over 20% of our firm AUM.
18:17 On slide 15 we cover long-term asset flows. Gross long-term sales reached a record $27.9 billion in 2021 which was 20% above the prior record level achieved in 2020, net outflows in the fourth quarter of the year were impacted by 2 exceptionally large redemptions in October that were one-time in nature. We were net flow positive in November and then had modest net outflows in December. Our long-term net flows improved substantially in 2021 from the prior year as we had a 64% improvement.
18:58 As Dave guided, we expect the flow of momentum to continue in 2022 and look forward to the first full year of incorporating asset flows from WestEnd Advisors, New Energy Capital and THP into our firm wide flow picture. For perspective, WestEnd Advisors generated positive long-term net flows of $4.4 billion in 2021, while they were still an independent firm. Lastly, the new year is off to a strong start across many of our products and channels from a flow perspective.
19:36 Turning to slide 16 quarter-over-quarter revenues increased by 1% driven by a higher average realized fee rate in the fourth quarter of 56.0 basis points, which was the result of 2 months of NECs results, firm wide asset mix and a slight uptick in annual performance fees. Money market yield support negatively impacted fee rates and accounted for a drag of approximately 0.8 basis points on our consolidated average fee rate in the fourth quarter.
20:12 Should interest rates increase during the year? I would expect this drag would lessen and eventually go away depending on the level and timing of the interest rate increases. Year-over-year revenue was up 15%, in line with the 16% increase in average AUM. We anticipate our firm wide average fee rate to decrease going forward, solely due to the acquisition of WestEnd Advisors as their average realized fee rate is 30 basis point. Although there average realized fee rate is lower than our firm wide average realized fee rate we do expect our overall business to be additive to our margins as their business is both highly profitable and scalable.
20:57 Moving to slide 17 you can see our total expenses increased $9.7 million from the third quarter. Higher acquisition related restructuring and integration expenses related to the closing of our 2 acquisitions accounted for most of this increase. We had acquisition and transaction related compensation expenses totaling $1.9 million in the fourth quarter, which we broke out in the table here to help with transparency. This expense rolls up into compensation rather than into the acquisition related line item as it represents one-time transaction related compensation as well as non-cash accruals related to potential performance based earn-out payments. As a percentage of revenue, cash compensation rose slightly on higher incentive compensation accruals in the fourth quarter compared with prior quarters. For the full year 2021 cash compensation was 23.6% of revenue and in the range of expectations.
22:01 Shifting to our non-GAAP metrics for the quarter, please turn to slide 18. Adjusted net income with tax benefit per diluted share increased to $1.27, up from $1.25 in the third quarter and up 19% from $1.7 per diluted share in last year's fourth quarter. Adjusted net income of $93.7 million generated in the quarter included a $7.3 million tax benefit. For the full year, adjusted net income with tax benefit grew 25% to $357.1 million or $4.82 per diluted share. Adjusted EBITDA margin contracted slightly compared with the third quarter. We are continuing to make investments in the business and thus we are maintaining our adjusted EBITDA margin guidance of approximately 49% for 2022. As we have stated previously this will fluctuate quarter-over-quarter and even year-over-year depending on AUM levels and the timing of investments being made to drive and support future growth. For the full year 2021 adjusted EBITDA margin was 50.4%.
23:14 Lastly, we do not expect any of the current inflationary pressures to materially impact our overall expense base or specifically, our compensation expense. Keep in mind that approximately 2/3 of our overall expense base is variable and is linked to revenue and/or assets and the other 1/3 is fixed. Given this, we believe we are well positioned to operate our business in an effective and efficient manner, while continuing to reinvest, despite the current volatile market an inflationary environment.
23:52 Looking at our financial condition on Slide 19, you can see that entering into the incremental term loan increased leverage by 2.2 times at year-end. Syndication of the incremental loan was oversubscribed and we greatly appreciate the strong show of confidence by our lenders. Our cost of debt is very manageable and we still have to hedge fixing the interest rate on nearly half of our total debt. Our $100 million revolving credit facility remains undrawn. And as in the past, we intend to deploy the majority of our excess capital to reducing debt for the flexibility to do future acquisitions. As of today, we've already paid down $55 million of debt, which demonstrates our commitment and ability to delever quickly.
24:40 Our primary cash uses for the business in 2022 include reducing debt and the potential third earn-out payment to USAA, which has a maximum liability of $37.5 million. This will be due in the latter part of the third quarter or the early part of the fourth quarter. We also announced another increase in our quarterly cash dividend yesterday. As Dave highlighted, moving forward, we intend to evaluate additional increases to the cash dividend on an annual basis.
25:11 That concludes our prepared remarks. I would now like to turn it back over to the operator for questions.
25:18 Thank you, sir. [Operator Instructions] Your first question comes from the line of Craig Siegenthaler of Bank of America Securities.
25:36 Good morning, David and Michael. Hope you both doing well. So my first question is on WestEnd Advisors. Can you update us on the very early progress in that acquisition? And if you're finding new cross-sell opportunities given really their unique relationships with RIAs, which I know isn’t very easy for many active managers to break into.
26:02 It's Dave. Thanks for the question. The acquisition is going phenomenally. WestEnd kind of pre-acquisition was a fantastic company, they had great products, great investment performance and great relationships. We are really just highlighting a lot of that. The cross selling is working as we're going through and working with them. We're exploring other platforms to get their products on and that's going very well. And I would just say the momentum going into the close of the acquisition has continued as they become part of our company.
26:42 And as we look forward, the thesis has always been that we were going to accelerate what they had already started doing through accelerated distribution opportunities through cross-selling and through really allowing them to focus on serving clients and then getting more clients. So we couldn't be happier with what we've seen in the first month and a half the acquisition.
27:12 Thank you, David. And just for my follow-up, given the elimination of the dual share-class structure that you guys just decided at the special meeting. Can you update us on the potential for large index ETF and fund buying over the near term? And I'm thinking the big one is like, Russell 2000, Vanguard [Crash] (ph).
27:36 Yeah. Hi, Craig, this is Matt. Yeah, we definitely think that the objects that inhibited us from the Russell and some of the S&P indexes have been removed. The Russell does their reconstitution once a year and so we anticipate in the second quarter that we would be eligible for inclusion in that and then we would obviously be also in the Russell 2000 if we got into the larger universe. As far as S&P and some of the other ones, they do those on an adhoc basis and they have a committee structure that does it. We know that we have removed the impediment. And it's really kind of up to the committees on timing, but we do believe that the net result will include a lot of index funds that will be buying our shares on a net basis in the next year.
28:28 That's great news. Thanks for taking my questions.
28:33 Your next question comes from the line of Ken Worthington of JPMorgan.
28:39 Hi, good morning. It looks like maybe one or both of the unusual outflows in October were in the direct channel, maybe even out of the USAA Income Fund. And I'm trying to understand how this works in the direct channel. So can you give us a bit more color here?
28:57 I'll start off, Ken. It's Dave and then I'll let Mike to finish off. We're not going to go into the details of where the 2 large outflows were and kind of what products, we don't give that level of detail. I would just direct you to say that they were one-time in nature. And as we've moved into 2022 we have a lot of momentum. I think in the script, I talked about that we were net flow positive as of today. And I think we have a ton of momentum going into 2002. And I look at those outflows really as we said, one-time in nature. And Mike, I don't know if you want to add anything to that.
29:43 Yeah. I think you picked it up. I think if you look at, you can see where the asset classes are, in kind of a roll forward and it was in mid-cap and in fixed income, that's all I would add.
29:53 Okay, great. And I know you gave us some color on M&A, but just given the market volatility, has anything changed in -- has the volatility been pronounced enough to have any impact at all on conversations just yet? Or is everything sort of continuing normally as you would expect in sort of the beginning of the calendar year.
30:19 It's Dave, Ken. I would start off by saying if you really think about why there are conversations happening with M&A and the consolidation that's going to occur. None of those core issues have changed. So the conversations are around making businesses better, giving business access to additional distribution, the ability to scale and reinvest and the market volatility hasn't really impacted that. Our discussions typically are over a longer periods of time, so some of the groups we've been talking to, we've been talking to for longer periods and they've been through good times and through volatile times.
31:05 I would -- I guess some saying that we haven't seen an impact. We have done 4 transactions in 4 years as a public company, plus a minority investment. We've guided that we don't see any difference going forward from a cadence perspective. And I think we stand by that. And I think the market volatility in a way might actually cause firms to want to do more or do more from an acquisition standpoint as opposed to less.
31:43 Great. Thank you very much.
31:45 Your next question comes from the line of Cullen Johnson of B. Riley.
31:52 Hey, good morning and thanks for taking my questions. Just sticking with the topic of M&A, is there a leverage level above which maybe you would consider another large debt finance acquisition, I guess recognizing the pace of M&A could slow some from the heightened pace we saw last year in the short term, but if we think longer term, does there exist a threshold under which a larger transformational acquisition again becomes more viable and your perspective?
32:23 It's Dave. Thanks for the question. We have so many levers to pull on financing acquisitions from debt, as you referenced from cash on hand, from generating cash from announce to close, from structuring around revenue share and earn. And each transaction is really around the current facts and circumstances, we are mindful of our leverage level, we are at 2.2 times at the end of the year, and I think we have disclosed that we have started to pay down that debt pretty aggressively. We are going to use most of our free cash flow, excess capital to pay down debt to give our balance sheet flexibility to do additional deals.
33:14 I don't really see any constraints going forward. We're doing a large transformational deal and also keeping leverage at an acceptable level, we have not come out and said, we will not do a deal above a certain level of leverage, but we're mindful of it. We understand that leverage is -- the leverage levels are important and we're going to be mindful of it, but we don't have a cap on it, but by no means, does it mean that we are going to go to absorb it in that leverage levels.
33:49 Got it. Thank you. That's helpful. And then kind of looking at some of the crypto related assets that were introduced in the last couple of quarters, do you guys break out the level of AUM in that line item specifically or the level of growth or do you can have any visibility into how that's going to taken off in the last couple of quarters?
34:12 We don't break it out, but what I can tell you is, we have a lot of interest from potential investors, it's a lot of education at this point to really educate the market on how this fits into a well-diversified portfolio. We're encouraged by the interest, the interest has not yet converted into large level of assets. I think that will be over time as the institutional investor, the retail investor really get comfortable with it as an allocation in the portfolio. We love our product that we're offering today and we think over time there's a real chance for it to grow, but we're spending a lot of time with investors around education today.
35:00 Great. Thanks. That's helpful. Those are all my questions.
35:05 [Operator Instructions] Your next question comes from the line of Kenneth Lee of RBC.
35:16 Hi, good morning and thanks for taking my question. Just one on capital deployment priorities, how should we interpret the meaningful dividend increase? Should we think of this as a potential change in dividend policy going forward. Thanks.
35:34 Hi, Ken, it's Dave. No, you shouldn't interpret it as a change in our dividend policy. Our use of our excess capital and free cash flows again going to primarily go towards paying down our debt. The increase in the dividend, the share repurchases is really just a reward to our shareholders for our business becoming more scaled, stronger, more competitive. It's still an ancillary part of our capital and deployment. And if we go back our capital strategy has been consistent since we've been a public company. We have a capital strategy that’s going to support our overall corporate strategy which is a big part of that or a part of that is around acquisitions.
36:26 Great. And just one follow-up if I may, on the WestEnd Advisors. How should we think about incremental margins for the business. Thanks.
36:40 Hi, Ken. Good morning. It's Mike. Yeah, I think what we've said in kind of our prepared remarks was that, the fee rate on WestEnd was about 30 basis points. However, I think what we've also said is that, as we think about the integration onto our platform the margins will be at parity or even higher than our current margins. It's a very scalable platform. We have the leverage point of our existing distribution force coupled with WestEnd’s distribution force. So most of the investments that we've been making in the RIA space and the multifamily office space will be leverage for WestEnd as well.
37:22 Got you. Thank you very much.
37:27 Your next question comes from the line of Alex Murray of KBW.
37:32 Hey, good morning guys. Thanks for taking my questions. It seems like the year is off to a good start in terms of flows. But I'm curious if you expect the recent turbulence in the market to affect demand for any of the products, WestEnd products as well?
37:49 Yeah. I don't think that the recent volatility or I'd say, some of the changing of leadership from a stock perspective has really impacted our overall business. We have a really wide range of products from active equities to alternative income to international and US. So what we're seeing is, we're seeing that a lot of investors are rethinking their portfolios, and they are putting assets in motion and we are capturing some of those assets in motion. I actually think the current environment today is excellent for active managers and also has somewhat of a value tilt, if you will, which I think our firm is tilted a little bit towards value. But the assets in motion is a great thing for our company. And I also think the volatility today is a great thing for active managers.
38:51 Great. Thanks. And one more if I may. Would you be able to provide any guidance on expense trends as we hopefully start to emerge out of the pandemic.
39:03 Hi, Alex, it's Mike. Yeah. I think we see really with our business model and we've guided to the 49% margins in 2021 and we ended up slightly above that. And again, we're maintaining that 49% kind of EBITDA margin guidance for 2022 as well. What we've talked about is, because of the model that we have with 2/3 of our expenses being variable tied to AUM and revenues, that provides a really good look as we think about the expense projections and the business, the acquisitions that we've done have been really folded into our business model from a business and financial structure perspective. And I think if you think about what we've done in 2021 and 2020 we'll continue on that same pace from an expense trajectory. And I think it's pretty consistent when you look at the different pieces of our expenses, whether they be compensation or operating expenses. They're pretty well mapped out for us as we look into the future.
40:13 So really no change in our overall expense guidance, no change in our margin guidance as we look out. We are making investments in the business and we've spoken about where we're investing in the business, really to further the growth through distribution, data technology and our -- really our people. But again, those investments that we're making are baked into our margin guidance. It doesn't mean we won't see quarters or even years where we could be above or below those margins we've set up, but I think we're mindful of that and are managing those investments that we're making with the pretty keen eye towards growth.
40:48 Great. Thank you. Extremely helpful.
40:51 Sure.
40:53 This concludes today's Q&A session. I will now turn the call back over to Mr. Brown for closing remarks.
41:01 Thank you for joining this morning. We look forward to reporting our progress as the New Year unfolds. Next month, we will be attending the RBC Financial Services Conference and hope to see all of you there virtually. Have a great day.
41:16 Thank you for participating in today's conference call. You may now disconnect.