Victory Capital Holdings, Inc. Q2 FY2026 earnings call

• Business Transformation & Diversification: • Since the 2013 management buyout, Victory Capital transformed from a concentrated U.S. equity manager (80% of AUM in U.S. equities with $18 billion total AUM) to a diversified multi-asset platform, achieving 1,834% AUM growth to $346 billion today. • The integration of the Pioneer acquisition is fully complete, with all $110 million in targeted net run-rate expense synergies fully realized ahead of expectations.

• Investment Performance: • As of June 30 2026, 60% of Morningstar-rated AUM carries 4 or 5-star ratings, compared to just 33% industry-wide. • 71% of AUM outperformed benchmarks over 1 year, 68% over 3 years, 65% over 5 years, and 81% over 10 years, showing broad-based outperformance across time horizons and asset classes.

• ETF Business Growth: • Victory's ETF platform generated $1.2 billion in net inflows in Q2, bringing year-to-date net inflows to $2.5 billion, with a 27% annualized organic growth rate. Flagship free cash flow ETF VFLO reached $7.8 billion in AUM and has outperformed major U.S. equity benchmarks since launch with zero Magnificent 7 exposure. • ETFs are now distributed across Asia and newly launched in Latin America, with global distribution supported by the Amundi partnership.

• International Partnership (Amundi) Traction: • The Amundi distribution partnership is performing above initial expectations, with international business net flow positive for the quarter, year-to-date, and cumulatively since the Pioneer acquisition. • 35 countries now hold over $100 million in Victory Capital AUM, and the majority of Amundi's client roadshows currently focus on Victory products, with 23 additional product usages planned for 2026 based on local demand.

• M&A Growth Strategy: • Management maintains a deliberate, disciplined consolidation strategy for the fragmented asset management industry, noting a deep pipeline of potential targets: over 110 firms manage $50-$200 billion AUM, and over 35 firms manage $200-$500 billion AUM. • Structural industry pressures (regulatory complexity, technology costs, distribution scale requirements) are intensifying, creating attractive acquisition opportunities for Victory's proven integration model. The firm's long-term target is $1 trillion in total AUM.

• Capital Allocation Framework: • Strategic acquisitions remain the top priority for capital allocation, followed by shareholder returns. • Since the 2018 IPO, the firm has delivered 800% total shareholder returns and 23% compound annual growth in adjusted EPS, having returned $1.6 billion to shareholders (including $1 billion in share repurchases).

• Balance Sheet Health: • The firm ended the quarter with $70 million in cash, an undrawn $100 million revolver, and a net leverage ratio of 1.0x adjusted EBITDA, after repricing its term loan B to cut annual interest expense by $2.5 million. • The board declared a $0.50 per share quarterly dividend, payable September 25.

Victory Capital's total client assets (AUM) reached $346 billion at the end of Q2 2026, broken down by business segment as follows: 1) U.S. Equity: $107.26 billion, representing 31% of total AUM; 2) Solutions (including ETFs): $110.72 billion, representing 32% of total AUM, with ETF AUM specifically reaching $23.2 billion (up 24% year-to-date and 54% year-over-year); 3) Fixed Income: $83.04 billion, representing 24% of total AUM; 4) Global and Non-U.S. Equity: $38.06 billion, representing 11% of total AUM. International AUM across 61 countries totaled $62.6 billion. Total company revenue for the quarter hit a record $435.4 million, up 12% quarter-over-quarter and 24% year-over-year. Adjusted EBITDA reached a record $243 million with a 55.8% adjusted EBITDA margin, while adjusted earnings per diluted share was $2.21, up 21% quarter-over-quarter and 41% year-over-year.

• Long-term adjusted EBITDA margin guidance was raised from 49% to 50%, reflecting completed Pioneer integration synergies, structural efficiency gains, and a conservative normalized margin expectation through a full market cycle that preserves capacity for ongoing growth investments.
• The average long-term fee rate is expected to remain in the 46-47 basis point range over a full market cycle, reflecting the company's diversified business mix.
• Cash compensation as a percentage of revenue is expected to remain in the low to mid-20% range on a normalized basis.
• Quarterly G&A expense is expected to remain in the $21-$23 million range, with the majority of total operating expenses (over two-thirds) variable to AUM and revenue.
• Sustained positive net flow momentum from Q2 has carried into Q3 2026, supported by a large, broad unfunded mandate pipeline.

No specific risks or operational failures were discussed explicitly on this call. Management only noted standard forward-looking statement caveats that actual results may differ materially from projections, with risk factors detailed in the company's SEC filings.

Q: How has the net flow outlook for the Amundi distribution partnership changed since inception, and is flow concentrated in a few markets or broad-based? How does Amundi's distribution of Victory products in the U.S. compare, and what are the underlying economics?

A: Flow momentum from the partnership is accelerating and broad-based across three regions: Asia, Europe, and the emerging Middle East. Products driving inflows are also diversified across fixed income, global equity, and multi-asset strategies. Amundi's distribution of Victory products outside the U.S. is far larger than Victory's distribution of Amundi products in the U.S., which has focused mostly on UCITS offerings in Latin America and is smaller in scale. The partnership uses symmetric revenue sharing that aligns incentives for both parties.

Q: The company's fixed income segment saw strong inflows this quarter. Is this driven by specific mandates or broad-based, and what is the flow trajectory into Q3 2026?

A: Positive fixed income inflows are broad-based across two investment franchises (Victory Income Investors and Pioneer), with particular strength in shorter-duration fixed income and active fixed income ETFs. Demand is also supported by strong non-U.S. interest in U.S. fixed income. Overall, positive flow momentum from Q2 has continued into Q3, as years of investments in product, distribution, technology, and integration have converged to drive sustained organic growth.

Q: What areas does Victory Capital still want to improve its competitiveness in via M&A, given its already diversified platform today?

A: The company does not target specific pre-defined asset classes for acquisitions. It evaluates every potential target based on whether it will improve the overall platform, enhance competitiveness, better serve clients, and add scale. There are many attractive opportunities that meet these criteria, and management is confident continued consolidation will help the firm reach its $1 trillion AUM goal.

Q: How is the M&A pipeline progressing for the trillion-dollar AUM target, and what are the key areas of investment to support future growth?

A: M&A conversations are progressing well, with the firm well positioned to pursue opportunities after completing the Pioneer integration and reaching a strong balance sheet with 1.0x net leverage. Industry structural pressures are creating more attractive opportunities for Victory's proven acquisition and integration model. Key ongoing investment priorities are product development, AI and technology, and distribution expansion. Management confirmed the firm can simultaneously deliver industry-leading margins and sustained growth.

Q: How should investors think about share repurchase trajectory when there is no near-term M&A?

A: Strategic M&A remains the top capital allocation priority, but the company's strong free cash flow allows it to also pursue opportunistic share repurchases alongside acquisitions. Repurchase activity was higher in the first half of 2026 than in all of 2025, and will remain opportunistic going forward. Share repurchases are the second capital priority, with the regular dividend as a smaller ancillary component.