Victory Capital Holdings, Inc. Q1 FY2026 earnings call

• Q1 2026 was exceptional with record long-term gross flows, adjusted EBITDA, and adjusted earnings per share. - Achieved record long-term gross flows at $18.9 billion, up 11% from Q4 2025. - Adjusted EBITDA was $204 million with a margin of 52.6%. - ETF AUM growth with $20 billion at quarter end, up 7% QoQ and 53% YoY. - International distribution platform with $55 billion AUM across 60 countries, net flow positive since Pioneer acquisition. - Investment performance excellent with 58 funds/ETFs having four/five-star ratings and strong benchmark outperformance. - Capital allocation with $185 million returned to shareholders, board approved dividend increase, and strong balance sheet with net leverage ratio 1.1 times.

Total client assets ended March at $313 billion. Long-term gross flows reached $18.9 billion, up 11% from Q4 2025 and 104% higher than same quarter last year. Adjusted EBITDA was $204 million with a margin of 52.6%. Adjusted earnings per diluted share with tax benefit were $1.82, up 2% from Q4 and 34% higher than Q1 last year. ETF AUM ended the quarter at over $20 billion, up 7% quarter over quarter and 53% year over year, with net flows of $1.3 billion. International AUM was $55 billion across 60 countries with 29 having over $100 million in AUM. 58 mutual funds and ETFs earned four or five-star ratings from Morningstar, representing 68% of rated AUM, and performance across various periods was strong.

• Expect fee rate to remain in 46 to 47 basis point range. - Capital allocation philosophy grounded in flexibility and discipline, primary objective accretive strategic acquisitions, buyback program active, dividend provides consistent return. - One but not yet funded pipeline significant across multiple franchises and channels supports flow growth.

Q: Hi, good morning. Thanks for taking my question. I just wanted to touch on one of the areas you highlighted during your prepared remarks on ETFs. And so it's clearly seen extremely strong growth over the years, and you continue to launch. It's still less than 10% of AUM today. So I have a question. Are there opportunities that might further energize growth here in this successful segment that you've seen? And when you think about strategy, what are the priorities kind of over the launch, over the next 12 to 18 months?

A: Good morning, Michael. It's Dave. Let me start off and say we have seen great growth on our ETF platform. We've seen that in a number of different areas on the intermediary side, our client base and the platforms that we're on have been expanding. And then we're also getting additional products on those platforms. In our prepared remarks, I spoke about expanding the distribution outside the U.S. Today, our ETFs are available throughout Asia, and we're opening up some countries in Latin America. So that will help us with our growth. We're launching new products. We mentioned that we launched the first ETF off the Pioneer franchise platform. We'll launch additional ones. And we will expand out some other investment strategies as well into an ETF wrapper. So we'll have product expansion and development. We're putting distribution resources from a people perspective, from investment in our distribution partners perspective. And from a marketing perspective, so it'll be multifaceted on how we grow the business. We're super excited about it. There is industry tailwind as well. And then I think our product set really matches well with what's happening in the industry where people are looking for solutions and really moving away from just ETFs as beta exposure. And then lastly, and I always like to remind this is, you know, our average fee on our ETF platform is 35 basis points, which very much looks and acts like an active product. So it matches our fee rate requirements and really matches our margin requirements as well as a firm.

Q: Hi, this is Mason on for Ben. And just to follow up on the fee rate dynamic here, can you speak more about the annual fees that the firm has included? And just like the guidance around the total revenue, do you understand that it has been getting to its 46 to 47 for a while now, at least from Q2 and due to like asset mix and client mix. But it seems as if like the firm consistently outperforms this metric or the guidance. So, just want to have a little bit more color on what you guys are seeing the annual fee portion.

A: Yeah, thanks. We really, it's not much more to add from the last question. I would say the last answer that we provided. We're still comfortable with the 46 to 47 basis point range from a long term guidance perspective. And any of the annual fees that we record in a particular quarter are pretty material to the overall business. And again, those fees are really just getting us back to kind of our standard rack rates with some of the clients that we have. So nothing to add at this point in time. I think if we continue to see changes in the dynamics from an asset class or a vehicle perspective, we can evaluate it, but we're comfortable with the 46 to 47 basis points.

Q: Hey, good morning and thanks for taking my question. Just one on capital management and potential for inorganic growth opportunities there. Obviously very meaningful share purchases in the quarter. Should we interpret that as a signal that perhaps maybe an opportunity for inorganic growth is perhaps not really imminent or is that not the right takeaway there?

A: No, it's absolutely not the right takeaway. We are opportunistic with buying our shares. We want to own our shares. We think there's great value in owning our shares and the earnings power of our company. So when we have the cash available and we think we have the ability to do a lot of different things with our capital, we'll buy our shares. We've done it aggressively. We have a lot of capacity and a lot of dry powder. But as I said in the prepared remarks, our number one use is of our capital is to do strategic acquisitions. And we are in a really great environment from an acquisitive perspective. You know, there are lots of pressures on many traditional asset management firms and we are approve and acquire. So we're going to use our capital to buy businesses. And when we're not buying businesses or in coordination with buying businesses where we have extra capital, we will buy our shares because we think there's a lot of value in them.

Q: Hey, good morning. This is Anthony on for Alex. I wanted to click into the, like, M&A attempt of Janus earlier in the quarter. And I guess my question is, I guess, what was the rationale behind the deal, you know, just given the size and, you know, fairly similar overlap product mix of the two firms? And then maybe just as a follow up, like, on the forward pipeline, should we expect a similar size deal and maybe product mix?

A: I think the Janus opportunity was well covered in the press. We thought that the Janus opportunity buying that business would create a phenomenal business coming out the other side. And it was a business that we thought we could buy and it would make our company better. And as far as Looking forward, we've guided towards a trillion dollar goal of assets under management. We're looking at larger acquisitions. We're also looking at, I'd say, smaller strategic acquisitions, maybe to fill in certain products that we don't have or certain things we're trying to accomplish. But our acquisition focus is definitely on the larger side. But我们're going to be opportunistic. And as I said in my prepared remarks, we're extremely active. We have the ability to work on multiple things at the same time, and we have significant capacity. So we're in a great spot. We can do something very large, like a Janus. We can do something strategic that maybe is smaller. And we are talking to a lot of different people. But the number one thing for us is You know, any acquisition we're going to do, we start off from a strategic lens and it has to make our company better. And from there, we do our diligence and we have our KPIs that we need to hit to do it in acquisition.