Victory Capital Holdings, Inc. Q3 FY2024 earnings call

• Business performed well in Q3 with total client assets over $181 billion (second highest quarter end level in history). - Made progress toward closing the strategic transaction with Amundi, with proxy filed and anticipated close in Q1 %2025. - Amundi US Business had strong year with ~$2 billion of positive net long-term flows in mutual funds (excluding institutional and international). - Achieved significant operating leverage with increasing scale, growing annualized adjusted EBITDA by $320 million since 2018 and expanding adjusted EBITDA margin by over 1,500 basis points. - Investment performance strong: 67% of AUM in mutual funds/ETFs with 4 or 5-star ratings; 60% and 73% of total AUM outperformed benchmarks over 3 and 5 years respectively. - Cash balance at end of quarter was $188 million, up $69 million from end of June. - One but not yet funded pipeline is larger than over three years, diversified, expected to be funded in 4Q 2024 and early 2025.

Average assets under management for the quarter rose 3% from the second quarter to $172 billion. Revenue also rose 3% to $225.6 million. Third quarter GAAP operating income rose 9% from the second quarter to $120.4 million with a GAAP operating margin of 53.3%. Adjusted EBITDA was $121.3 million in the third quarter, up by 4% from the second quarter and with an adjusted EBITDA margin of $%7.3. The Victory Income Investors Investment Franchise had 14 of 16 fixed income funds rated 4 or %5 stars overall by Morningstar, representing 93% of their total AUM and had positive net flows year-to-date.

• Anticipates Amundi transaction to close in Q1 %2025. - Will evaluate resuming open market share repurchase activity now that proxy process is over. - Most pipeline mandates expected to be funded in 4Q 2024 with some in early 2025. - Maintains long-term guidance despite exceeding 49% margin goal in Q3. - Post-Amundi close, will be well-positioned for additional strategic accretive acquisitions with ~$300 billion AUM and stronger balance sheet.

• Ultimate completion of Amundi transaction subject to closing conditions and regulatory approvals. - Victory Capital's actual results may differ materially from forward-looking statements as noted in SEC filings.

Q: Ben Budish asked about fixed income flows and industry consolidation.

A: David Brown responded that fixed income flows are positive with good investment performance and distribution access, and industry consolidation is entering an acceleration phase with Victory well-positioned to take advantage.

Q: Etienne Ricard asked about Amundi distribution and VictoryShares.

A: David Brown said distribution agreement doesn't distinguish geographies, working on structuring products for regions, and VictoryShares ETFs gained traction via distribution and performance with salesforce engaging advisors; early stages but growing.

Q: Alex Blostein asked about Amundi US revenues/expenses and pipeline.

A: Michael Policarpo said Amundi US AUM not publicly disclosed, fee rates in high-40s, and pipeline is wide and deep with large unfunded book expected to be funded in 4Q 2024 and early 2025.

Q: Brennan Hawken asked about Amundi outperformance and accretion.

A: Michael Policarpo said still expect low double-digit accretion post first full-year of ownership, confirmed expense synergies, and focus on execution for Amundi transaction.

Q: Michael Cyprys asked about M&A and private markets.

A: David Brown said focus on size and scale, private markets is an area of growth, and observing partnerships/acquisitions to inform future moves.

Q: Kenneth Lee asked about M&A lessons and post-election sentiment.

A: David Brown talked about lessons learned from prior acquisitions being applied to Amundi transaction, and post-election uncertainty expected to drive more allocations.

Q: Michael Cho asked about Amundi distribution operational priorities and October flows.

A: Michael Policarpo said priorities are education, structuring, and product design for Victory products with flows in October likely closer to September's positive trend.