Victory Capital Holdings, Inc. Q1 FY2025 earnings call

• First quarter results: Total client assets $171B, gross sales $9.3B (up 41% QoQ), net flows impacted by $2.7B one-time redemptions but underlying activity healthy. - Amundi transaction: Post-closing, assets over $286B, fixed income AUM doubled, net expense synergy projections increased to $110M ( $50M achieved at closing, $50M by April 1, 2026). - Financial results: Revenue down 5% QoQ due to AUM and mix shifts, but YoY revenue, earnings, adjusted EBITDA, and margin higher. Adjusted EBITDA margin 53%. - ETFs: Total ETF AUM over $13B, up 28% QoQ and 67% YoY, with plans to launch several ETFs in 2025. - Distribution: Augmented institutional and intermediary sales forces, invested in data, technology, marketing, and intermediary partnerships. Outside U.S., clients in over 60 countries, strategies available via Amundi's global network. - Investment performance: 67% of AUM in mutual funds/ETFs with 4/5-Star Morningstar ratings, 64%/65% of assets outperformed benchmarks over 3/5-year periods, and eight 2025 U.S. LSEG Lipper Fund Awards.

Total client assets ended March at $171 billion, down slightly from the start of the year. Gross sales improved for a third consecutive quarter, reaching $9.3 billion (a 41% increase from the last quarter and the highest level in three years). ETF AUM increased to over $13 billion, a 28% increase during the quarter and 67% higher vs. same time last year. Adjusted earnings per diluted share with tax benefit was $1.36 (second highest quarter in company history). Adjusted EBITDA was $116 million with a 53% margin. Fixed income AUM doubled to 28% of total assets post-Amundi transaction. Retail assets under management rose, and assets from outside the U.S. were $44 billion (15% of total AUM).

• Net expense synergies: Target $110M, with $50M achieved at closing, $50M by April 1, 2026. - Margins: Near-term margin decline expected due to integration work, but long-term target 49% remains. - Balance sheet: Strengthened, leverage ratio improved, financial flexibility enables strategic growth opportunities. $200M share repurchase plan available for opportunistic execution.

• Actual results may differ materially from forward-looking statements. - Market volatility could impact client flows. - Regulatory challenges in launching UCITS products and other vehicle wrappers. - Integration risks from the Amundi acquisition, though net flows and performance post-acquisition have been positive so far.

Q: On UCITS rollouts and Pioneer ETFs, pace and prioritization.

A: Mike Policarpo says UCITS products are in registration phase, launching in back half of 2025, focusing on small/mid-cap, fixed income, global equity products.

Q: Margin trajectory near-term vs long-term.

A: Mike Policarpo says margins were 53% in Q1, long-term target 49%, expense synergies take 1-2 years to realize $110 million, near-term margin decline due to integration but immaterial.

Q: Expense growth algorithm with Amundi.

A: Mike Policarpo says no change in operating model, greater than two thirds of expenses are variable, compensation expense 24.3% cash basis.

Q: Balance sheet capacity and acquisition pipeline.

A: David Brown says balance sheet ready for acquisitions, looking for larger scaled opportunities, 2025 event possible, leading with investment excellence and cultural fit.

Q: Fixed income and solutions flows in volatile markets.

A: David Brown says fixed income capabilities expanded with Pioneer, positive net flows in Q1, VictoryShares ETFs perform well in volatile markets.

Q: WestEnd net flows update.

A: Michael Policarpo says WestEnd is net flow positive, had softer 2024 but performance strong in 2025, excited about asset classes and distribution.

Q: Investments in data, technology, marketing.

A: David Brown talks about adding salespeople, marketing professionals, data professionals, increasing platform partnerships, success measured by organic growth.

Q: Alternative investment products and pipeline.

A: David Brown says alternatives are important, evaluating acquisitions/partnerships, will have alternatives offerings.

Q: Dividend change and capital deployment.

A: David Brown says capital deployment prioritizes inorganic growth, then buybacks and dividends, dividend review quarterly but anticipated annual increase.

Q: Victory ETF net flows and new products.

A: David Brown says solid ETF net flows, plans to launch additional ETFs, including from Pioneer platform, well armed in field with sales force.