Victory Capital Holdings, Inc. Q2 FY2025 earnings call

Business Overview

• Total client assets reached record high; sales momentum with gross long-term flows $15.4B, net outflows $660M.
• Amundi transaction closed, Pioneer Investments acquired; integration progressing with $70M in synergies.

Product Expansion

• Launched VictoryShares Pioneer Asset-Based Income ETF, International Free Cash Flow ETFs; ETF AUM up 90% YoY.
• Ongoing creation of vintage Victory strategies in UCITS vehicles for non-U.S. distribution.

Expense Management

• GAAP expenses increased, but integration efforts achieved $70M of $110M net expense synergies run rate, with $30M more expected in next 3 quarters and $10M over next 12 months.

Share Repurchase

• Board authorized increase of share repurchase plan to $500M.

Total client assets increased by 76% quarter-over-quarter, reaching over $300 billion, a record high. Quarterly gross long-term flows were $15.4 billion, with net outflows at $660 million (third consecutive quarter of improving flows). Adjusted EBITDA was $179 million (margin 50.8%), and adjusted net income was $133 million or $1.57 per diluted share. The ETF platform had positive net flows >$4 billion in the first half, with AUM at $15 billion (up 90% YoY). The acquisition of Amundi U.S. business and reintroduction of Pioneer Investments led to achieving $70 million of net expense synergies (2/3 of $110 million target). The NewBridge, Sophus, and THB investment franchises were closed (managing <$1B AUM, 0.3% of total).

Adjusted EBITDA

• Margin guidance maintained at 49%.

Fee Rate

• Expected to be 46-47 basis points for Q3 and beyond.

Share Repurchase

• Plan increased to $500M; anticipate continued growth in client assets, product expansion, and net flows.

• Victory Capital's actual results may differ materially from forward-looking statements.
• Integration of Amundi U.S. business and Pioneer Investments involves execution risks.
• Market volatility, interest rate uncertainty, and industry competition could impact performance and flows.

Q: Randy Binner asked about nonrecurring expenses and fixed income view A: Michael Policarpo discussed nonrecurring costs (deal-related, synergy extraction, deferred comp), and David Brown highlighted fixed income as an important growth area with diverse product set Q: Michael Cho asked about Amundi partnership and margins A: David Brown discussed non-U.S. distribution potential and margin guidance, while Michael Policarpo talked about margin impact from fee events and near-term margin outlook Q: Alex Blostein asked about organic growth and fee realization A: David Brown spoke about organic growth aspirations, and Michael Policarpo explained nature of onetime fee realization and margin impact Q: Ben Budish asked about fee realization nature and flow momentum A: Michael Policarpo discussed nature of onetime fee realization, and David Brown talked about flow momentum and integration ramp-up