Victory Capital Holdings, Inc. Q4 FY2025 earnings call

• 2025 was a landmark year with over $1 billion in annual revenue and record earnings. Successfully closed strategic partnership with Amundi and integrated Pioneer Investments. Ended Q4 with record AUM of $317 billion and long-term gross flows of $17.1 billion (highest quarterly gross sales).- Profitability was excellent with record adjusted EBITDA of $197.5 million. Adjusted EBITDA margin was 52.8% in Q4. Achieved $97 million of targeted $110 million in net expense synergies on a run rate basis.- ETF platform had $1 billion in positive net flows in Q4, year-end assets near $19 billion. Winning new shelf space at multiple U.S. intermediary platforms and Amundi's sales force started selling U.S.-listed ETFs overseas.- Investment performance improved with 54 mutual funds and ETFs (65% of rated fund AUM) achieving 4- or 5-star Morningstar ratings. Over 60% of AUM outperformed benchmarks across key time periods.- Capital allocation focus: Prioritize balance sheet to support inorganic growth, net leverage at 1.0x; active stock buyback program with $300 million remaining capacity under $500 million authorization.

In the fourth quarter, Victory Capital achieved record high AUM, ending the year with $317 billion in total client assets. The ETF platform delivered strong results with $1 billion in positive net flows, bringing year-end assets to nearly $19 billion. The international distribution channel was net flow positive since closing the Amundi partnership. Revenue for the fourth quarter was $374.1 million, up 3.6% sequentially. Adjusted EBITDA reached a record $197.5 million. Long-term gross sales were an all-time high of $17.1 billion in Q4, but long-term net outflows were $2.1 billion due to one-time items. The ETF platform, with an average fee rate of 34 basis points across 23 ETFs, contributes meaningfully to organic growth and profitability.

• Revenue realization rate expected to remain consistent within 46 to 47 basis point guidance for 2026.- On track to achieve full $110 million in net expense synergies by 2026, ahead of original timeline.- Confident in achieving consistent positive net flows due to product set, distribution reach, and investment performance.

None detailed in depth in the transcript beyond the initial reminder about forward-looking statements and referring to SEC filings for risk factors.

Q: As legacy Victory strategies begin to be registered into UCITS vehicles and distributed through Amundi's global network in 2026, what should we expect in terms of UCITS product additions and platform approvals? And how quickly could these contribute to an improvement in non-U.S. flows?

A: David Brown said they launched 5 new UCITS in Q4, plan more in 2026. Impact of new launches will take effect through the year. Outside U.S. has been net flow positive since April 2025 closing, and they expect more product launches to drive non-U.S. flows in coming years.

Q: When evaluating a pipeline for acquisitions, what characteristics make a larger deal actionable in the near term versus one to defer?

A: David Brown stated they look for deals that make the company better in distribution, product, size, and scale. If it fits those characteristics, they'll execute; it's about what's available and fits the company's betterment goals.

Q: After the Amundi transaction, how should we think about the potential cadence of M&A? Could things be happening more frequently?

A: David Brown said they are almost complete with Amundi/Pioneer integration. They have an average acquisition cadence of every 1.5 years since 2013/2018, and see no reason to change that cadence. They are ready to do an acquisition, balance sheet is ready with low leverage, and there are many opportunities to create shareholder value.

Q: Talk about the build-out of Victory's sales force and its impact on inflow outlook.

A: David Brown said about 10 months in since closing the acquisition, hiring and integration are done, teams are set and trained. Investments in training, marketing, and partnerships will pay off in 2026, with the hard work done and ready to reap benefits in inflows.

Q: Flesh out comments on ETF partnerships and benefits, including market share dynamics and private markets extension.

A: David Brown said the VictoryShares ETF platform is unique with 34 basis points average fee rate across 23 ETFs. Investments in distribution partnerships are paying off, with more opportunities. Partnerships help introduce new products, including private markets, as they make it easier to introduce new products off existing relationships, giving an edge in shelf space for private markets partners.