VCTR - Earnings call transcript Q1 2022 | Victory Capital Holdings, Inc.

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Operator

00:01 Good morning and welcome to the Victory Capital First Quarter 2022 Earnings Conference Call. All callers are in listen-only mode.

Following the company's prepared remarks, there will be a question-and-answer session. 00:13 I will now turn the call over to Mr. Matthew Dennis, Chief of Staff and Director of Investor Relations. Mr. ahead, go Please Dennis.

Matthew Dennis

you. Thank XX:XX

in Chairman GAAP of that business non-GAAP We in which and our financial issued pleasure the after can GAAP Please and between performance. most duty I those to Our both refer the filings turn would conference David portion and I on now non-GAAP comparable from forward-looking forward-looking Investor over be we Capital results non-GAAP Capital's results the may to differ actual that found may ir.vcm.com. our of for are It this a available our the of to remind cause enhance SEC Brown, call any materially statements. David? measures is market believe of the Victory and understanding our and like number the these Reconciliations included undertake both today's results. measures call in list not statements. statements. make close that call. of to presentation Relations materially that does some expressed you Victory that from obligation measures disclosed may accompanying actual tables turn XX:XX earnings Please Brown, David of my the website are and call, these at assumes a slide Before note CEO. any today's to to that call, no press the press risk factors update was on our differ to release XX:XX during over release yesterday

David Brown

equity Michael XXXX Administrative joined welcome Relations. XX:XX first buyback will Chief and touch morning, our I'm in financial further program. Capital's over results Investor today by well Policarpo, Mike Staff start call the an of Matt. new overview turn by greater Matt Director I’ll Officer, as our as quarter on in our call. which and conference the I and Dennis, Chief that, investment the President, Then detail. even and the quarter. performance, our quarter XX:XX I’ll of Thanks, Financial to today earnings Victory cover review providing first strengthened to of Good to After

I XX:XX quarter our quarterly to Matt, available overview of on and growth. begins remarks, The Mike, your X. We XXXX questions. be on take revenue will our a post as note Following consecutive seventh Slide prepared started we high

sales example, first results. vehicles the recent and acquisition. $X.X well-diversified alternative had XX:XX technology in acquisition offerings. our execution. our category, the recent its more while and The investments robust strategic also By and products. our positive AUM stars which fund is produce overall last Today, time positive in investment small million to and flows, quarter can acquisition of closed a currently Advisors was selling XX:XX platform sales top $XX the made launch had we market Morningstar approximately mix Victory also our $XX diversifying attributed than at by investment are and each ranked fund, channels. also we We growth investments past XX:XX the examples a and Morningstar. addition continuing five income the grown has have net to investment focused being XX:XX and few was diversified class vehicles, of asset our component WestEnd cumulation model are strategies the to fund of data year of neutral classes, Investments billion across the which this achieved in have in Over and our of growth years, of of The distribution business be strategies billion prior one XXXX, into and we distribution of asset new channels the CEMP of purposely recall relatively contributions

to first firm, replenish As to quarter, and XX:XX investments. progresses. the fund expected front, very to able across conditions. with decisions is our but the institutional current fundings but wins and client On are are we're additional a robust, that institutional number the of smarter yet during Our returning institutional had of data becoming business types. investment pipeline funded XX:XX not successfully only normalized we are more activities organization a driven year not these institutional book business one, through well-diversified more as franchises and also making We efficient a by

are progress last acquired year. with we making also early THP, We which

and to added at creates With to UMA solid a and recently foundation wirehouse XX:XX in top billion generate building platform like pipes of buy Just premium institutional of SMA the activity. in with performance, THP to distribution tier was strategy ratings shelf We've capacity a stimulating pipes obtaining investment playbook the core cap the $XX proven secured six approximately XX:XX consultants the sales we have small space and following building strong and activity. future sales past, we're March. already these for

Our for WestEnd direct during investor business that very wins our retail and momentum productive large activity Advisors. XX:XX the Positive are seeing continued quarter in This with channel strategic placements. acquisition. a best also of also number in intermediary of since a well. first quarter quarter franchise We newest encouraging channel net the this teams product our had resulted and with the as in flows

well. experienced marketing on seeing forward Plan are quarter the first to momentum results flows, net Savings quarter direct in the carrying The we XX:XX positive by targeting net second campaigns Education as Looking same the flows quarter. we bolstered in over were investors. had XXX integrated the Our

the a of with from encouraged quarter second are net perspective. We start flow the

million level to inflationary the as the markets and $XXX income the in lower exceeding operating of we environment, then margins. highest quarter. GAAP in model history operating attractive accelerating Despite maintain flexed XX:XX our very Lastly, our reported designed

it our model, that of margin and Our funds is This can ETFs mutual of first our AUM quarter Slide examples to or ETF a At XX.X%, largest how performs yesterday's executing over translates even history WestEnd allocation buyback make of XX:XX strategy The quarter. in quarter, this Although capital respectively. four announced to same a outperformed guidance point. performance end of EBITDA in is which their million good program want we for and the in the not the rose is the to the the on long-term rating year. our This and the On of during excess particularly five history, star this the with fund market Board XX% in the is program. periods, I of XX% star changed. end Morningstar. of XX:XX performance assets flexibility total percentage benchmarks, sure repurchase This has XX:XX asset A AUM firm-wide us be program program. approved few many gratified with press or time of of four in conditions. we our five-year for see QX ratings period. share you opportunistic I'm in well-diversified XX across Morningstar. time a improved strong clear the $XXX well of our were release, to Slide periods further benchmarks of X, AUM benchmarks We by mutual Turning of the vehicles. the our of are XX% our adjusted XX:XX example investment strategies outperforming and was XXX% had classes, products outperformance and power that largest In gives managed did and five with measurement in first Over XX:XX as as investment AUM respective to Advisors XX% quarter investments very achieve this was each the by the outperformed the XX%. X. for USAA operating our our

was have so ability by sheet to and to amounts acquisitions now by that I environment make execute XX:XX the have constructive capital to to the strategic As our increase cash multiple capital are our to and we prospective We benefit our on being flow. very drive strategy, sustainable We M&A diligence over business Mike, can larger while deals. I growth. remains able reducing to are dividends also the on of able committed allocation we to to conduct shareholders grown, of mention buybacks. will debt continuing return has it turn to Before and XX:XX being profitable balance flexibility, investments so

have wherewithal executing capital financial the continue XX:XX ones. we've impactful eight both smaller and as cadence well capacity forward. closed that to We In and years, the continue as expect large ample going transactions transformational past deals, eight to

better, XX:XX company for acquisitions have we'll our on I competitive. With it in will more strategic Mike? to Mike remains turn stronger, make focus financials. Our quarter's the more and element, a details over and that that,

Michael Policarpo

to quarter AUM income XX:XX Revenue consideration associated was due and Dave, the depreciation being everyone. amortization by momentarily. change $XXX.X million year. This our GAAP acquisition is asset through swing Slide in payments] with is these a by $X.X on at in quarter-end last rates [ph] quarter, [burnout contingent XX:XX reflecting the end quarterly which of a quarter, change statement. quarter. offsetting million first to XX:XX our non-cash morning, XX:XX and financial resulted sheet. NPV by inflows this the Advisors was was the market the and or was the billion balance in Most million time positively with million quarter. last had related the more we in operating XX% rose on applied costs. changes was reversed in Partially at related related contingent a XX:XX We million the in AUM $X.X will offset In cover quarter. the decrease EBITDA favorably positive Total increased by in begins driven first that discount and the during in good of valued by and positive liability the the quarter quarter, slightly closed quarter-over-quarter This the as the $XXX flowing acquired WestEnd it shifted results first fourth lower X% million difference Revenues of Adjusted a the impacted Thanks, to $X in income review $X.X expenses, the $XXX.X year. decreased action business rate by billion WestEnd in of acquisition, to income to XX. March. to NEC partially fourth of interest to mix the XX:XX the the to quarter-over-quarter expense During and impacted operating billion contribution the higher at quarter. calculation. I detail $X.X expense in was lower resulting a same $X.X non-cash than higher that The was acquisitions

we XX:XX was first associated a an fourth long-term or million quarter The and year's believe strong XX, designed is Slide XX:XX Long-term expenses billion margin that of This million of EBITDA from On to the have tax X% third diluted positive long-term positive first share long-term $XXX We two only $XXX.X acquisitions XX, was at to higher AUM maintained do, quarter model see totaled first dividend AUM operating And the at seasonal is adjusted XX:XX the XX.X%. net pleased the repurchases ANI and net This was $XXX quarter-end. QX, Our with an was client-based last had it in per benefit in was initiatives, advancing current our of made with to structure. sales in per XX:XX end and two-thirds end also as the billion incremental inflows calibrate closing capabilities, dividends. of flows the in cost see our franchises strong. and well-diversified resulted expected. has and at the yet of another for $X.XX been data, in income XX:XX of cash team well-diversified trailing $X.XX we're and Our have of multi-family Past our across quarter. described. channels office AUM positive from Slide results been $XX channel XX:XX per are shareholders Given to the is experienced at billion in the the capital resulting are quarter. share last The to one-third billion we we returned for very enhance share. total diluted distribution this expenses our the than and perspective. as was We benefits operating quarter. well. distribution our our specialists sales of $X.XX the variable four end quarter Dave a of marketing as variable This point and of Turning distribution $XX.X reminder, the flows RIA down share. activity we cash sales $X are ETF the of net includes net and of As the investments quarter. of approximately proof which out quarters XX-month GAAP model XX% yielding flows. our turning technology net expenses fixed. use of long-term addition all

positive flows. sixth quarter our with ETFs] our first in March, The consecutive month was [ph], [shares XXth consecutive positive net the Victory marking net quarter of of flows

higher decrease has the of increase AUM rate. illustrates and in up two expectations. management average grown ETF average the WestEnd to rate which our first due XX% in-line is and The distribution, include with have in fee Advisors market quarter quarter XX:XX realization fourth Our fourth an the drag a Slide the progressed, support through primarily quarter quarter-over-quarter the [indiscernible] average XX to XX:XX the our we Slide for increase rate the not a money of basis historic we quarter. rate rates in XX% agent interest points, fees result. over also past our the XX realize consistent average quarter. fulcrum investment growing business in basis Moreover, lower of revenue. yield point, million these due quarter associated Compensation WestEnd This in fee as the AUM from fourth in drag first does basis Advisors is needed compared half anticipate XX:XX the We steadily basis certain amortization years. support a and reduction quarter. end firm breakout as future a point, on several fee and year-over-year offset with eventually the Given we a in in point basis our mutual Funds in and rose. or on declined finance below our average fee Advisors XX:XX in one XX:XX our compared administration, life are are XX:XX result This benefited depreciation $XXX.X loan acquisition the reduced with interest with by improvements the fee the and the on was a money WestEnd in forecast the as Advisors market rate will USAA be associated On Total first acquisition. a rate experienced of charged improving on two-tenths term of WestEnd transfer fund resulted to XX:XX incremental higher point a expense to that our expenses. expense fund used yield any vehicles. Mutual quarter, of factors. four-tenths rose of This interest reduction XX, that the the first will a of quarter consolidated the by fees expenses expenses. As operating with from partially model of not the our hikes,

points the flows first fourth First, every associated calendar strong basis on quarter we closed impact with of X, taxes associated ratio. January the and was XX:XX quarter. the XXX we cash in compensation benefits in in year seasonality the had resetting acquisitions the the related prior growth normal quarter sales experienced and commissions experienced payroll of approximately and quarter to net full compensation Additionally, on QX the first the which

We the tax Acquisitions. we see maintain expenses As to and quarter, that expenses well to GAAP savings declined associated you making essentially to that’s XX:XX cash reported of our million technology, our these a benefit a simultaneously data, to was XX and income slightly Slide result asset are our and adjusted where acquisition other and related in we satisfied acquisitions. expenses and the scheduled today underpin XX:XX results absorbed on million graphic expenses, and leads a prior restructuring, operating breaking quarter way we this recorded model $X.X from performance margins. quarter. quarter based distribution variable NEC last metrics. Advisors as while appendix we healthy slide a success. $XX.X lower transparency. of higher WestEnd expenses primarily [full quarter. the Needless are can business That lower we non-GAAP predictable us WestEnd future cover also tax the in may the XX:XX increased our both compensation the have with recall to [ph] Consistent million expense result to the and result, the expenses the expense cash earnout intended next our cash the increases that growth, As deck, acquisition, by reducing invest in development slide non-concession lower margins. of as cost in operating general potential investments expenses continue over were administrative areas. it we million to in the quarter] the For here versus distribution, In automatically say, structure from into incurred Despite the $X.X to back are are the as chart example, the with support where other expenses, years. that operating in in intense in quarter, $X are noise in generating future to out We a XX:XX prior attractive product Advisors being with XX:XX out still investments, NEC million are GAAP all quarter-over-quarter. our of benefit the some $XX.X leads a included a This recorded the call proving realize of we XX as payments related to we compensation. based integration You

future million Slide savings. tax XX:XX to XX% rate, a Assuming Turning these $XXX approximately XX. cash total of

On the during $XX quarter. of the we management repaid debt million front, capital

$XX million to a date. additional blended the debt Our quarter, approximately of the $XX thus quarter was Our net for we leverage X.X%. on X.Xx, rate XX:XX total during ratio and year was interest far at second an million repaid in quarter-end

debt, As electing reduction, portion the on the X.X% interest our term in in our portion That loan the we We we original the via capital will hedged loan down for in In to operator of it dividends now I believe a environment. concludes on place shareholders million $XXX debt we back Currently, repurchases quarter. that remarks. XX:XX rate first. term paying to the pay the reduce we're cash we’re turn of that hedged share us to addition beneficial million incremental to debt. XX:XX rising and over have rate of prepared $XX returned questions. to is

Operator

Instructions] Siegenthaler with is Thank XX:XX Bank question from [Operator America. of first Craig Our you.

line Your is open.

Craig Siegenthaler

morning, XX:XX you're Hey, both well? good David, Hope doing Michael.

Michael Policarpo

morning, Good Craig. XX:XX

Craig Siegenthaler

my So XX:XX first through us strategic and these cross-sell is this recent can also Victory question you playing out update WestEnd. acquisition Can how is it on date? harvest to opportunities on that

David Brown

we So, on XX:XX of a off on drop we to momentum the seen XX:XX getting We've our in with there. script, We just acquired the good off we've product really playing date. relationships business, really different a are organic it's started how the since let seen not have said me and lot start we seen as that in growth.

cross-sell Victory and even to existing encouraged WestEnd the that this team of sell I big opportunity those be But year, products forward. is transaction, relationship are opportunity announced would we seen, product products we it's start to for a by us is opportunities move with the we've that the activity then when this the growth WestEnd imagine driver through take we we've think growth we're excellent said to end going seen, existing the very So, the would and and more and Victory as going they than shape. as materialize And with relationships to starting to we the today.

Craig Siegenthaler

my fees then fee] you And segment] timing [ph] just and translate through any flows we any this incremental how through net And think [off [ph] follow-up, us forecasting on fundraising XX:XX pipeline? about will magnitude your also, as Thanks, can David. for growth? into color walk [management

David Brown

help So, further plan. through NEC as our and NEC, imagined relationships that and we far that LP we're grow growth XX:XX always executing existing as would plan. are executing on had our on We

plans grown in As I'm I'll magnitude, but in be, a the to growing that. not that far fees, will As as position what our of XX:XX management more far aggressively the had original let they've growth take been past. than sizing Mike say as

Michael Policarpo

firm XX:XX with point Yes. The with consistent range. management is you see as in levels have which the is alternatives, fee rate above a seen we obviously NEC that basis the what XX for

expansion Dave the And accumulate the said, the out. is our in of will the we Dave as overall expect growth as expect as AUM compared said, segment. across go overall Currently, fee see alternative As to we increase rate the rates. to overall fee relatively the size to that drive small segment we'll the do business, we incremental but grow

Craig Siegenthaler

the XX:XX congratulate to Thanks, Michael. strong flows. And for a on just despite backdrop quarter guys want you

strongest think was your second ever. it I slow quarter

Michael Policarpo

XX:XX Correct. you, Thank Craig.

Operator

from Markets. XX:XX with Our is next Capital question Kenneth Lee RBC

open. is line Your

Kenneth Lee

the XX:XX Hi. the my mentioned, being greater I taking historical Thanks for institutional level. than remarks pipeline question. prepared you mean

bit wondering color, contribution there? you Just provide more or which traction gaining making strategies are could if little just Thanks. a you seeing

David Brown

morning. good So, XX:XX

in yet quarter, had our Our able that. institutional not to were we the first things that but rebuild We've been funded number pipeline. activity one, a funded in of

some solutions sitting what funded not international to pipeline, products set pretty to quarter. XX:XX spans some in really broad. is similar U.S. replenish yet pipeline but far products. but we're that's with what and we've not our very institutional product it's of from As one, yet It first as of one, global the the in and to our So, had even that funded products today

and can motion as So, market has you our the we're a pretty of excited about usually quarter. different is in has from lot money money people types tell a seeks turned motion have big in and it out in their money activity. portfolios, motion of we've There flow benefit from and as rethought seen put strategies that over the

Kenneth Lee

of would up growth? start Thanks. some institutional Very franchise? ratings steps when just I you one distribution franchise kind you consultants, this some we buy helpful. from the mentioned getting follow-up, to [indiscernible] to can THP organic ramp the continue seeing Great. some, may, if that And And XX:XX that as expect next you

David Brown

as the other about the a pipes. acquisition, our and close with distribution really to of build into strategy So, THP is XX:XX with the acquisitions year we’re

And pipes. process of now building the so, in we're those distribution

consultants. ratings forward. one we're from and XX:XX We next have to And that of more the shelf going as work there step allocations. to the will on platforms start space major mentioned one six with distributors, good actually institutional We securing of products see then the move of those and those buy platform really to to be we consultants get at

the XXXX through So, I we go has as back our think XXXX, model. in been of acquisition script, to a and the in you'll in see XXXX. Market at and XX:XX plan the did is, growth our great I mentioned And it acquisitions and of THP. and CEMP you move that into we – think Neutral that really product, Income I the the if been CEMP has been way that acquisition the think look has growth

million. that over XX are Here billion $X out and product the we has of in and that today with first actually started XXXX, quarter

time, So, it path you as it I over franchises same build takes we've THP going once take acquired. to think is of the grows to have and some time And, the pipes. distribution but distribution other our the either

Kenneth Lee

XX:XX very again. helpful. Thanks Right,

Operator

Alex XX:XX question The Blostein Sachs. with Goldman is next from

open. Your line is

Alex Blostein

Obviously sounds environment? bit morning, seen a it different cycle, expand stole we've of of And out your Have fairly Dave, the you to your in sum the Good comment Does bit. the landscape around so multiples as little well kind why? activity conversations come be seen wondering both to like and continues feel if in to smaller maybe deals larger a on healthy reflected prior as I things little guys. then we of comments down these deals. well? in tend was periods broadly, it and Thanks. XX:XX you could around could multiples if on M&A volatility

David Brown

Good Alex. morning, XX:XX

right would and for different So, I of unique industry. you this time, at volatility, did if period time periods is back a say that go things in this look are slow least we're at And at things the our now. very down.

One at amount do really and it. all. seen sellers what's from other that not slowdown the there's will think wait XX:XX see sellers with happening a actually I into seeing, accelerate and back reactions smaller environment a some you lot we're a sellers. We have I seeing pull say today of in two that's you're but is,

really one people the accelerating extreme So, it's or into a transaction. and other, more there's

we're I slow financing I a expect the of I I transaction. to come we in seen uptick, depending which than conditions, as is down multiples, the think a will. yet. not different anticipate down. So, the the little the don't but different XX:XX they the come little market seen them be currently the from far at of and season, an acquisition There with least that we've anticipate we've market as think slow conversations, but that actually multiples could as bit starts XX:XX on As I them things the in activity a than haven't that other multiples it far pulling in activity challenges away times yet, down down the down seen past. today, but bit will come past, could as the

Alex Blostein

the of how position extra business. few pick-up course the franchise we've dislocation income And channel? over last obviously market, your environment? an fixed be of My Very core, income of legacy USAA in fixed to around with months, Great. is particularly helpful. share, opportunity specifically in seen fixed the Could lot a this core was there XX:XX type the question products second plus

David Brown

XX:XX Yes.

investment These of from done we're markets from performance. are do So, the two performance. So, perspective. income super which performance investment and very of actually XX:XX investment types our one excited USAA well excellent our can has fixed the franchise, an they is franchise see about markets investment any you

I been we be always from very perspective as disruption performance. perspective, to able would in well in income with market anticipate market peers that of money of industry lot with of with to I capture that base performance I'm to pickup thought and encouraged. that would and a the fixed great a our of up not a relative pick retention some a to think ours, up also as really the period when competitors is our we've a we performance, market share motion to time there a existing would and excellent think world good of has I that lot done investment anticipate has has today. which I then share. do client in fixed in with have and some money think I flow money And income our We've it So, over from some do motion and there's in the of a opportunity motion XX:XX

Alex Blostein

Awesome. XX:XX Great.

maybe as cleanup effective related, quarter fees Alex. given both and about question given Thanks, the be kind Just around quarter, rate forward all in thinking how a roll you fulcrum quick fee the business? your we this second of modeling takes puts the fee the the into waivers and one better, getting and should comments the

Michael Policarpo

XX:XX Yes. Thanks, Alex.

I impact think the points. phase that hikes, money waivers With in the basis in market to script XX the of first expect out we said that in quarter. the rate was quarter second the recent we

expect the where the the kind full business. market money see on we’ll of making, So, pickup to we will fee

think to expand X.X it two. that USA The basis USAA which on said in that fund mutual were overall or perspective product has to the one points. we mutual products. the XX:XX points also opportunity was We I basis drag And highlighted which span the our the the by quarter what fund there, select on fulcrum my fees, products in covers with

level XX:XX in we've [indiscernible] XX, continue to expansion point continues there well, statistics elements. infusion acquisition a engaged perspective. move move start the asset income to see some is we but mix the from USA to with And with mix, strong really of XX on the little the opportunity performance improve. that basis is product as So, see will if fixed those base investment of strong So, but [indiscernible] as continue think that range continuously going and XX:XX do to see then products, some got some we bit, going mix, you about opportunity a around of that the upside course client We using on forward performance forward, forward.

David Brown

about the first think That Alex entirely the of additional our quarter on is some a just fee of last WestEnd rate the function purely math. quarter historical is fee or revenue revenue. XX:XX the fourth And point in you the from almost and they rates, one drop the to that the amount primarily quarter if because point of earn is,

Alex Blostein

Got Yes. it. weekend have Thanks and clarifying that for good a XX:XX guys.

Operator

XX:XX The Ken Worthington JPMorgan. from is next question with

Your line is open.

Ken Worthington

XX:XX Hi, question. morning. modeling Maybe good with start

acquisition what big it? profitability, the going XQ is is compensation, maybe related it drives and is be the of quarter XQ to unusually of profitability down? Is next, time it there XQ Is is is small in AUM, terms that sales to rest the up sales, seasonality AUM it to it or there, pretty of over even is, it we throughout? the be that then or almost out about paid be thinking given like that's it? going drives that And figure ultimately whatever an accrued should In level

Michael Policarpo

Sure. XX:XX

that compensation finance the will sellers less That's recorded had year. So QX There's retention element this smaller component it. end paid that be associated incentives two some at in related than the for really a of of acquisition was out components. an

out. taking is years we're of be The element And being taking investment perspective, estimated the on composition accounting over taken through item. NEC the to five it line The $XX is is which other paid years. the XX:XX ratably five and the really P&L that earn over about earn out, we're million

this hit at million about future paid out and perspective be That of in incentives first I think quarter some out short-term So, And the a $X.X So, in I growth expense retention place the through you as is will course again that be $X.X over in NEC. is expect be will a really purposes quarter. then there really it's said elements of periods. from for time, million point we've non-cash the are targets XX:XX should as revenue paid XXXX. for that WestEnd, what put a are think in will modeling accrued but the

Alex Blostein

a assume you. in bunch. a Thank just I which remarks, this there. is brands brilliant. talked little the the pipeline wanted on success picked Okay, the to into prepared bit. XX:XX mid-cap And up dig then institutional your Gross about are you guys in that in solutions mid-cap driving inflows fundings

you which brands here, the you've choose color ones think different couple and we but give are more the can solutions, which and driving got a from, any of within are could that then success that I us part we the pop of Sycamore was then It strong in during gross like doing impact And the franchise the the looks in the saw quarter. is quarter. great. driving sales market just solutions mid-cap, be the to in seems

exposure it got be like might gas, an strong is it and in there? over could to results driving it, oil but off seems What gas. the and You've oil some mid-cap? it exposure to be again, ultimately Is

Michael Policarpo

in number a there. So, XX:XX questions of

me Let to unpack one one. them try by

think a flows actually, about in way is I first, different you've think oil and some that about can't think So, to well-diversified a class, performance. to of asset as when or excellent more they’ve performance. it's It's one by the mid-cap say point the don't Sycamore. driving driving I'd long-term number And investment our through a think less They which XX:XX oil. point I that's is portfolio. of sectors. short it. what's portfolio, in to it stated, They've I good you probably led of exposure So, the exposure

I their think process. just really around it's investment

So, there's is say their not piece driving I would of portfolio, one that.

WestEnd think a And are see are Advisors, Victory last half, new if was As in net flow to our shares, some those it. driving there, within buckets driving solutions which about our think resides ETF bucket, what's solutions that positive and far you're big the business flows the franchise of I on acquisition XX:XX as that's over probably has been that our what mentioned first, and the able and you for probably two driving growth. year

just Advisors, performance, our the as quarter-over-quarter, WestEnd USAA, go think an of performance think business, generally ETF overall you As investment look and our investment far RS you We of our firm. Product, back improved as Sycamore, Global doing the allow we at Value managers well RS the active and really first the are to Have challenging to to are going in good do These Product, quarter well. well. done markets, volatile believe all markets, continue those XX:XX really our shine.

we're performance. excited what and franchisees we're the in far quarter these up saw so, And quarter. that's competitive second put maneuver have the seeing that's in markets what our strong to so And we and first really through

Alex Blostein

all Thank Awesome. I questions. answering it. for appreciate the you Okay. XX:XX

Operator

Lee The XX:XX question next KBW. is with Robert from

is Your line open.

Robert Lee

kind my taking perspective? you XX:XX Great. hovering but maybe Good everyone economic color that the of or if is really of organic that more morning. basis or well? it how the rate, obviously questions. better given to you mean, contribution, get organic around X% think Hope little of on Could no annualized, sense I doing we revenue EBITDA put think more Thank the So, of as is we is of flow that flow, to kind revenue a think contribution an just similar an and moderate bit fee on the is for is WestEnd flows contribution half? you some it's trying should from contribution. kind EBITDA an

Michael Policarpo

Good XX:XX morning.

So, me as saying, have a number we start let years, are we said over focused. off of by margin

We looked and we've operating So, operating model a unique have always at think our business. we platform.

I and when and of a In average challenging that our rates I it's XX%. – to the quarters a what of fee exceeded fee number We close guided think We've are actually really growth it to volatile over So, this the focused. a is. growth, organic rate and our XX:XX quarter quarter. quarter. think of margin We've close is really exceeded

fee and fee what fee of losing low In if your very around is is. XX:XX product our general, product and it's very average there where So, selling rate some we're scenario a selling that's question. high part or growing

WestEnd Specifically, So, exceeds in margin all of basis I Advisors our about WestEnd in actually our average points. probably if is WestEnd Advisors That margin is, drop fee additive. fee the it's not but, rate, said XX XX:XX average amount Advisors, earlier, a material as mind keep margin.

an rate our have or I go focused necessarily our rate XXX% off fee less we not from to it's platform, rates, model do and But product we from I'll overall fee unique are operating with is back we that. because to fee Although a perspective. us margins operating what on allow perspective, that than start just think

Robert Lee

buybacks. great. Okay, And maybe management on a follow-up just and capital XX:XX

of part you owners position, the So, PE knows think you're what obviously near-term, started of have how do monetize you majority who have is buyback, their over and the monetize to to to do how your of intention come to between stock companies deleverage market, where but desire the you trade-off kind they the is were think and given trading, of the reload. to if plus to that

quarters slow you reduction the cheap how be through of something if a available it at So, a your to what's advantage debt that? pace thoughts would that, that was in there current on of would take stock a couple for maneuver price, you

David Brown

flexible We've one our our ready. has number is strategy think accretive better. debt our in XX:XX lean To So, lower changed, history accretive, to down is in buyback do opportunities make are shareholders create value the only market be our that us buyback Our had levels approve cash over look be grown and has shareholder our our us of policy. flow. balance our our So, it to That pay to grown do it priority. there's years leverage fuel pay flow But the XX:XX our really number a one and we sheet policy. the and as us program million, the balance million Not and that they've allowed number to to dividend sheet, capital provide allocation flexible is think really And has from to buyback really in us interest our or our capital the expense, reward million lot company are, our to dividend being corporate market that in as our not cash is balance to as allocation, flow the go at of being we we're changed our a going to to I our this if $XXX does XX:XX and that's we to largest flexible a And at a of think so our able and go nothing’s at with balance. and priority going to nothing you and always it us have only XX:XX program capital profitable a really allow price. the at the the that allows provide far right levels acquisitions do for approval go very ability the mindset does of and down acquisitions, history amount, board at growth for out We gives a our our stock reduce opportunistic the advantageous and been really $XXX able use buy cash buyback that's in pay but $XXX how is this Although acquisitions. to conditions the doing additional debt. growth. our lot we and to

Robert Lee

And, just one quick management. capital thank you. XX:XX Maybe on follow-up great,

you a didn't the was the expected, but raises. a strategy, it that quarter to this some you’ve modest, about is a a dividend, every and increase dividend build first maybe increased [indiscernible]? from it's to now, and in long-term something increase modest XX while, you can companies increased one if you years even companies that mean, to I you the just was strategy. for every management – Is that this year have those be capital want actually decade long-term annual year So, able which payout [indiscernible] record XX, they your that’s can strategy ratio say, as of of think want is that, be means

Michael Policarpo

business and an every be dividend But We quarter outlook for increased that to we with we've we're into annual of continue increase earnings path circumstances continue is So have quarter. cash we the review. able based. our our now think a on to would that's going a business growth down that the same been flow, facts to and circumstances. and growing, our with cash quarter-over-quarter based went anticipate will XX:XX growing, convert XX:XX but be and We to ability I larger that's that's facts to be flow on, going that and free that. future With historically, we'll last doing our everything

Robert Lee

taking XX:XX Great. Thank you for questions. my

Operator

XX:XX Hawken The from next UBS. with is question Brennan

line Your open. is

Brennan Hawken

Thank that? the try fund that flows XX:XX strong that of launch sense as in a to Was [indiscernible] there Curious strategy the get flow, such Good contributor quarter. was chunky or my questions. morning. just not contributed and here like on you for this taking anything of really a what the or

Michael Policarpo

Nothing that's XX:XX morning. Good chunky.

ops I our income grower, fast we a neutral given our in its is was said as market that product script category. Our strategy. within think And

the And growth of that within of a most that driver bucket. so is

Brennan Hawken

see this how XX:XX – that in would appealing like Could market. that product Yeah. be

makes sense. that So

Okay.

sees that any business from here? flow cadence a line way second advisors pattern to recently, then, that adding of about there, linear on parabola that suggest when for based WestEnd, typical the that's to might that of bunch the a a So, product been trajectory I maybe they're up. we one, as dozen know flows some trajectory roughly WestEnd there is a platforms fairly Is think on platform. more sign and they've that is that you about is And from think what added When or this think is to that there platforms. a when about that

Michael Policarpo

XX:XX Sure.

a five they in billion the the from to acquisition, prior independent did net So, WestEnd, They about to up billion they over go XXXX. of on bit for to back flows years did they did little $X XXXX. were $X.X just that maybe

very XX:XX fast a do very, at over rate. They do historically across a the industry. advisors XXX,XXX today advisors. over So, grown business X,XXX they little have We with business

is an to the that they allocate more the have use typically Advisors. is relationships have expand that's they what over to they advisor and is there on, product they’re see XX:XX work the value is, on on XX:XX more going WestEnd their is to will going sell advisor, of focused happens reach start and on partially a when opportunity we platforms so, the product, and the and it what to to see of when to Getting a on of products you're lot Historically, new to platform, on advisor within they the time provided WestEnd get And we're an value what platforms being collateral use that them. existing platforms. those their of with that portfolio just seen that

time. is, as you’ve actually over over advisor, individual seen time, advisor the allocates an more with what them So, they have to worked

doesn't forward, would of those think be that use building as mind think have a about platform, a They're new XX:XX that of of pace all more necessarily that we growing distribution So, accelerated platform. at the when going they tried platforms to collateral. as they And the we're WestEnd advisors. their on that value an that advisor out tell franchise, because new see the the in of use new they new products out, and ceased on keep we product it, and you going as to WestEnd

Brennan Hawken

for you that color. Great. XX:XX Thank

Operator

XX:XX from Stanley. with The is Cyprys question Morgan next Michael

Your open. is line

Michael Cyprys

the guys good of years the question. channel. morning. Thanks Hi, number been XX:XX that a direct taking had It's for have you

the You you what broader know it what beyond network, the direct hold three, way? what direct a years maybe entice you in have you experience? doing So, does today learned from do just you that you extent USAA you to in from four curious I go to direct have would broader a right? had technology, way lessons known that you wish And ago? channel back from And much a guess platform, have what

Michael Policarpo

Mike. XX:XX Good morning,

had every progress First, or from and best our single seen quarter. I consistent the out that a quarter, actually quarter half perspective so. a we channel last We've in let direct this flow think the past me for point year

business that I training better of perspective, we we us our members. is that nothing are And on all. there accounts pleased people From on lot Today, what's have XX:XX gotten members. fact, now members a XX:XX from learned job – are lessons on a There are in and holding happening a have great and a have good the USAA is So, of think servicing in we're with anyway portion learned to available there. lessons doing at a there USAA USAA expanding back that really quite new job. done technology we non- a and not our been and is lot direct business

a business it plan have to and platform, expansion, know it's as we our if like So, direct ours firm going as you we a We marketing were the forward, about we it at think product expanding on through this capitalize our industry we think look forward going XX:XX to think campaigns. about we unique for capabilities.

We looking quarters, at think here really have out not a have done we direct just managed platform. and built the And for along of having have we're learned it the looking a trends way the a slowly. think in we're we We've I we consumer see We've valuable phenomenal platform it. to years. lot a We asset future. and

Michael Cyprys

you on had And then you mentioned means that marketing, digital that what can was expand just just could Great. Victory? XX:XX for little you earlier, Maybe I a bit exactly hoping about about with marketing how you're on How digital you talk can success much elaborate and you're how return you measuring initiatives? on there? think the marketing digital about do spending much maybe having

David Brown

forced we the to period of marketing, part on digital I increase that. were marketing of of during firms and think capabilities So, most to forward amount digital the COVID gain really XX:XX the were really the

there. where part business. our of business e-mail large have have it marketing, lot other media the and direct a are do through through We marketing made think we we a about of I that's thing is, And social ways. unique consumer progress we through digital XX:XX and direct other a to our campaigns us –

are some internal business. costs, break We statistics use we unique the far our out have we as as measuring proprietary that that don't And costs. the to

the entire other direct And to year-out. be it bigger think direct can the and platform, a of not that we're and we on campaigns we're of principles services base channel which it's digital direct I and then we is, to think go best piece our but value-added. year-in operating our of in those all is model. industry, is what apply business, business really and really our a of business the direct of built parts I business. it doing we going applying with And have really our which really to to marketing other our learnings those larger refine have the again, shared is future We this benefit XX:XX the part So, of a to marketing, part and have about of parts out having and some

Michael Cyprys

Thanks taking my questions. XX:XX Great. for

Operator

Lau XX:XX is Owen final Oppenheimer. question with Our from

is open. line Your

Owen Lau

but you and your a out [indiscernible] morning, Good And or if auto historically of compared little take questions. going speaking, deeper, M&A you an this XX:XX thank taking maybe comment about feel make my it's uptick, and to back time Is time, put acquisition? more to for and conversation the activities earlier market bit Dave you like look what people why will and you. metrics this finally correction at else longer this it time a Thank anything different? because to start or to last trigger and would also

David Brown

XX:XX Yes.

has really industry. think I changed our what is

And so, changed. a the consolidation is to challenge not that cause themselves challenges or would Those manager have sell

could you have challenges. argue accelerates market today we a fact, In those that like actually

the themselves, the easier, accelerated you you've what's a long acceleration more. if weren't that investment highlighted, years any as Whether that's gotten I that So, that I even correction, not when facing at hard think think a those they've challenges actually weren't materially. market the from in to ago, don't different. wants sell I not into as fast or had short market disruption, or past, actually this kind have were this, is managers So, harder a today, firm are challenges is gotten of least plays that forward think of necessarily and correction XX:XX present

metric we work to says, start also we then or better? give As move market, have a at the our that simple today competitive? we us And we Does don't where down. it does and we company we we Does with certain way that competitive our generally? don't it we pricing XX:XX look off our at we make should start at And look this want far question do us does always there So, areas one certain competitive. it this us to evaluation, make have multiples, core so acquisition forward be transaction more of, or more not. we make us characteristics and in look always as

a does transaction. is concept make do and check We our always a really this have that of, core to better the company

Owen Lau

XX:XX follow-up Got, to then And along line. that

in versus too So, you had beginning I the Is about early passive quarter. you at current shift continues if market active inflow current environment? still obviously it of the or Thanks. the the to toward see first what investing say? in investing volatile do active a is mean, strong

David Brown

It's that. we're glad I'm I’d how an XX:XX active manager. answer

think markets look managers we're I'm the active I volatility, active so, like with and in glad this, that manager. good an

Owen Lau

XX:XX very All right. Thank you much.

Operator

remarks. XX:XX That any to David over session. I'll turn Brown the for concludes question-and-answer closing

David Brown

interest call. keeping day. be in to participating Victory month, forward in appreciate updated Thank Conference and hope great Thank and today's on Have look there. your We our see we for attending Angeles, in of the you XX:XX you progress. rest you a Annual you. this Capital Investor Los B. Later to all Riley your we'll

Operator

and Ladies this today's gentlemen, for XX:XX conference call. Thank participating. you concludes

disconnect. now may You

Victory Capital (VCTR) 6 May 222022 Q1 Earnings call transcript