VCTR - Earnings call transcript Q1 2024 | Victory Capital Holdings, Inc.

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Operator

Good morning, and welcome to the Victory Capital First Quarter 2024 Earnings Conference Call. [Operator Instructions] I will now turn the call over to Mr. Matthew Dennis, Chief of Staff and Director of Investor Relations. Please go ahead, Mr. Dennis.

Matthew Dennis

you. Thank

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

David Brown

Financial Administrative Director of our joined call. Matt as our quarter and officer; XXXX Matt. Policarpo, as of will Capital's Chief conference and Victory well Chief Michael by morning first start Relations.I and Good Thanks, President, today Investor Memorandum Staff I'm call welcome to before of announced review After Mike to Dennis, turn quarter. the the financial Amundi Understanding summary a provide quick greater overview I over detail. of I providing we last by that month, will results of in an the with today the that to earnings

remarks, Mike, begins available our Slide your be Following and overview X. business questions.The Matt will on I take prepared to quarterly

quarter, During were sales constructive sales on second market and operating on XXXX more close. across improving in rose client we making positive our in within basis than with testament we the client XX.X% are a the quarter, in our total the with platform. first outlook the reaching action. our of activity best we efficiency as quarter. us our entered and Adjusted point point jump-off XX The same was for providing the fee rate margin was year. for been EBITDA the basis consistently a level past of points AUM good from assets, we for to platform.Overall, industry-leading focused effectiveness investments our our execution, have an of to which and are realize combined is a been have and beginning the benefits business we optimistic year both has came a through and in X% net more net levels a environment more beginning ended the with long-term and assets This earnings last during We the their little positive quarter aided of seeing March to the our by $XXX as business continued call, the first gross quarter than momentum first XXXX.Our in quarter flows commented billion and a than dynamics, a

new franchise as growth second quarter platforms continue in attractive managed specifically numerous is a will for investment positive Income space carried shelf the For products Income such group, income to intermediary flow and first for off areas the our existing by channels, net retirement the impact to on work strategically example, in Investors and paying Victory Victory is over made on securing the positive that turned retail the generated strong strategies. wrappers and momentum Investors, in well.We products vehicle have fixed quarter. as invest as new the which

as a our positioning spending to lot products the are build continue associated on of We we momentum. time staffing, our ETF on our of lineup, and

people are we and our to technology, particularly, X. addition, to data making and In investments when comes in platform.Turning across it Slide analytics

broadly of performance the products, in investment XX X-or strong products our at from ratings. Our remained mutual or This different beginning overall the with X-star year. ETFs, up XX% funds AUM XX earning encompassing is of diversified,

first half to our of were that Morningstar throughout in quarter.On the ranked nearly We periods, strategy XX AUM our quarter. the respective a as years, XX% representing on and we see move stages by end flywheels. their progress a top X-year the record Amundi outperformed first transaction. returning our negotiations different categories the of can share of and funds through shareholders the Slide in from XXXX, benchmarks. ranking anticipate trailing critical Over we and funds relative the basis restricted the capital AUM X, of change capital mutual And X of respective total in the our X- quartile were the After of the repurchases year and XX% due for ETFs amount to with you to as allocation through conducting of

for and made us quarter, business As increase payment shareholder to for we earn-out reinvesting since WestEnd acquisition. first positive to WestEnd growth best deploy our a growth grow company, and flows the revenue to in net Advisors. has the generate [indiscernible] organic way are capital continued the value.During our acquisitions

for clients. higher onto one inorganic access reciprocal the more new the these products of and ability our aligns quickly to to the exclusive give the acquisition given and a global world and of the many transaction distribution Capital sell-through be much network new this the transaction even by are in a major of leverage the provide around world.As projecting of presence and with of active and This close distribution more channel in Amundi management Amundi the Amundi's feature any managed enhance new Capital a global powerful.Through reminder, greatly will with bringing for an upon U.S. thereby ratio will forward.We these be out multiple large agreements provider platform through forward.One is shareholder and global be will provide the through with products to great the With multidimensional our doesn't products a our include forms all asset the perfectly to debt. distribution will a has exciting will arguably reach The return our network of market, with outside at investment U.S., the strategy XX-year exclusive high-quality also of us with capital Victory firm distribution Capital's the as strategies. managed we range distribute in recap for and U.S., us transaction platforms networks by look will products opportunities. to positively of and ways. to models and international products flexibility This distributors, obtaining global reach using strategic distributed managed globalization advisors in distribution products distribution our institutional growth MOU opening of investment U.S. relationships of moving acquisitions, in will we exclusive X,XXX rate XX Victory robust this products expanding wider the in onto and distributor a pending the the of transaction outside million moving of outside U.S. become than Amundi materially be of Amundi, X,XXX the to network.Turning third-party clients and both with Slide than lower to and Moreover, objectives the of Victory more clients This foundation our a exclusive more agreements, in products with and XXX number U.S. Victory the The that countries products is U.S. X. financial I Amundi. addition accelerate expect local expanding reaching of the their are distribution Amundi's Capital that U.S. our will and company transform sustained products, top is WestEnd's distributor extremely success and distribution their retail future will outside

U.S.'s size, currently It international also X/X agreements.The our adds the presence of foundation exchange scale, of immediately for along business that solution This an and U.S. XX.X% business in distribution stake AUM ownership base Victory a economic Victory our in as align of with business income, strategies. diversifies intended with interest for U.S. clients. in investment aspect in significant Amundi's equity Capital our Another Capital the from of non-U.S. with Amundi complementary is into fixed sets client capabilities firm increased contribution is than the important the of combination more the to is X.X%. and carries reciprocal transaction voting rights incentives success Amundi into

within very Amundi and playbook. combination of years full first financially.The While the proven first transaction of the well and the realized X within our We the onto the is first acquisition dynamically strategic, synergies is also attractive the end U.S. majority year our of ownership, anticipate the year. that $XXX achieve by aligns of double-digit expense integration accretion to of million EPS with with of platform very low business it the ownership

This strategic while and approximately is reduce business as strategy.On approximately net consideration, be our on shareholders of U.S. will our U.S. in billion. synergies.Since debt mind the ratio our in Morningstar available highlight doesn't long-term growth cash as Keep from we which with as multiple provide continue to pursuing growth portion the clear, ratings. AUM flows organic to inorganic revenue This $XX XX, reinvesting additional the funds, to total for all that billion, initiatives in publicly not us billion. allow and total represents recent drive that Amundi fund mutual capital illustrating the earnings forms, is U.S. capital will is data to flexibility. using any are include business Just $XXX or we consistent and Amundi $XX our leverage significantly the returning and incremental continue information well Slide

has total, does in their we call of of it non-U.S. this that shown last just average the that valuable been class. So the the year that over an and gross billion $XX into portion asset is some business of and flows same a the business flows are their note net $XX positive MOU but investment the give had disclosed a timeframe.Net that year flows each announcing performance. segment flow billion insight has analyst piece Moreover, for years, overall our annual by of over X of

As complex outflows equity in net U.S. funds. products has flow net see, for year-to-date being and total inflows by income XXXX, in fund been net with solutions you fixed their offset can positive partially

X stars strong of Given by their XX% fact funds investment rated Morningstar. is or that overall the Amundi U.S.'s performance X mutual are and

that We the the the further profile projecting are close to distribution our will of and improve relationships and benefit post resources continue from business of net flow added the transaction.

a by to agreement final quarter's turn will to completion closing end work year-end.With financial to the are by definitive pieces through the in continuing We get to detail. Mike? to I greater announce of the and the go call June the through with to the that, expect expected Mike results over

Michael Policarpo

$XXX.X Slide vehicle diluted and realization income to $X.XX change, from of quarter, and/or was year. than and per quarter-over-quarter on Average slightly than rose quarterly remained million GAAP begins with in marking any includes XX% $XX.X at were Dave, quarter.Adjusted mix. level million or which share, higher the prior the of XX.X% in $X.XX result in for rose to $XXX.X Margins was everyone. million. income morning, per payroll the quarter and and up Thanks, the in $XX.X rose revenue million EBITDA quarter-over-quarter operating million a highest increased X% quarter, start good the This first seasonally Revenue year. asset the to $XX.X that AUM more last share net GAAP reset over tax The the X% results of review higher financial of XX. benefits steady year. the impact the

quarter same X% a XXXX, adjusted long-term the margin net quarter of income diluted from XX%.Adjusted guide by fourth benefit in increased We $X.XX. from XX% and tax the continue to with per reaching EBITDA share to

We continue our enhance hold to ended cash the flexibility cash. and quarter elevated with million in to balances $XX

XX. made net at X.Xx ratio balance on we record earnout the of cash shareholders for to modest million the in on a sheet.Our $XX liability repurchases WestEnd at a $XX will on XX% share reducing We the dividend quarterly returned of announced increase the XX.Turning quarter, million end. Slide earnout the During June second and payment XX $X.XX cash dividends overall quarter to in our to share per June quarter, holders and leverage in be in quarter to our an which paid remains acquisition,

long-term their gross the proportion close billion. Amundi very distribution Positive of balanced channel of is for U.S. of flows March.We have flows. from being time. accelerated our the benefits that in non-U.S. assets organic transaction. AUM have gross with investments our and time.Slide net levels assets diversification mix our client through geographic engine a the channel year-over-year, Long-term long-term that quarter-over-quarter highlight the manage is the and us expected one XX support I continued the net managed best Amundi to XX% clients from perspective, that increase with is over immediately towards Enhancing illustrates than total we sell of of to flows remaining sales would assets global of the confidence more a distribution and approximately remained $X the well Our net with turning $X agreement improved non-U.S. our for products reaching a end our clients. of over Amundi to On long-term will XX% post the forma year, momentum of transaction, and clients the and distribution positive of outflows basis, during positioned. approximately promote quarter AUM growth come billion pro our consistent

low posted are quarter not breaking uniquely managed the strength in channel an We list net it and typical assets XX. quarter unusually flows.Revenues our of flow began investment includes positive were transparency, positive Advisors, Sophus of are client be on our highlighted performance, we out representative first area quarter. Global. have WestEnd Integrity, these Income net other investors, To a for RS Slide assets fees of of another as competitive to assets. in X enhance Victory our very institutional investment because and Moreover, continues the That that are carry franchises

the is periods that had average range. mainly XX points.Turning earnout fourth basis basis than average On basis quarter. expected at points XX. In For restated. Slide contingent operating than This $X.X XX rate points, rate a to expenses million, X.X valuation $XX.X expenses particular, of Firm-wide, within been change have assets consistency, on of noncash rose to expenses. which payments billion total the which basis, due higher prior steady GAAP remained the other on $X in was rose fee AUM the excludes an just our more to higher of fee million

for higher level was in resetting $X metrics. trailing expenses which essentially the is over income We expenses of flat were million acquisition-related highest general in the of also over of tax we non-GAAP and ahead of compensation and lower XX.X% offset in EBITDA $XX.X basis.On and margin the employment amortization quarter-over-quarter benefits earnings Nonoperating year. net expenses guidance long-term the seasonal the with period, quarter quarter. and and expenses the increases higher was more on XX%. XX, a incurred taxes benefit had cover Slide a related level of These our was Adjusted million. in XX.X% and to our and depreciation administrative EBITDA the million, first Adjusted Adjusted representing $XXX.X XX-month quarter.

and We are nature the margin current provide platform. to on invest have quarter-to-quarter which XX%, as XX. based with will maintaining of stated at the continues timing we flexibility the the us turning in in guidance our fluctuate our investments.Finally, to past, Slide Moreover, to

sheet with ended the in strong demonstrate We we continue balance to million flexibility cash. $XX quarter as

our remarks.I turn our level same operator over prepared to the million the will questions. That now debt Our it revolver undrawn. $XXX remains with for back concludes

Operator

Sachs. Alex Instructions] Blostein Goldman with line comes the of first question Operator Your from

Unknown Analyst

This Alex. is on Luke for

the or business growth? relates longer aspects and any potentially agreement and integrate Amundi, there of the you And in are that of following acquisition that as you're with partnership and areas are brand, business it organic most organic term? set products the Pioneer Pioneer excite of the the about underwriting the to to the improvement thinking the how you growth of onboard With trajectory

David Brown

business side Amundi changing they publicly got a I fund showed mutual U.S. in lot a have off least we performance actually sits, by mode. and year. investment it the see at the the on that and momentum, as throughout positive is saying as of data, start growth is organic today, available don't growing the in the on They've I'd business XXXX, excellent

up excited product distribution about sets what think that So the network, their generally distribution when that accelerate to we're pretty coupled into have really that set with And and they doing existing the today. I momentum. you they're put our network,

Specifically, environment be years, exciting they we're of their next part think their bringing.Additionally, of assets the X/X what is over of the I existing U.S. and that to are we're platform, fixed of couple income the outside going environment, in in given an the are

we they to generally ability marketing the then the pretty exclusivity distribution legacy is sets So U.S. platform, I have organic network victory organic a existing of more having growth plug outside the infrastructure opportunity really growth. that would say U.S., just through with the then income Amundi and at outside turning really fixed to our good U.S. that up an fixed the that's speaking, from of and for resources the us, distribution around income, really perspective. the -- coming think have least for then see given so tide And exciting. in I And the us well-developed products an environment the Victory into

Unknown Analyst

data I publicly we give flow trends Can the the if that see follow-up, on color just and mix quick you Amundi at one And can't across can. asset Morningstar? through

David Brown

had have said an business wouldn't transparency mind, it add U.S. have does Amundi One I before don't platform. and the not full thing in appropriate. ETF be is, wouldn't to keep I I -- It can't. wouldn't -- into it it, I would what be

our those bringing ETF and their is and investment together. capabilities of the manufacturing things using things One platform we're anticipating

So component the another I what think opportunity that, is. that's of added

Operator

Your JPMorgan. from Worthington of next question comes Ken the with line

Y. Cho

operating touch I Amundi or also This confidence XX-year partnership? Cho that the through distribution incentivize in they some partnership of a can here Worthington some talk partnership. the again. economic stake force be clear to how the realize just level just to around today. have executed the help sales is Michael success But you give you to that want on for might of Ken just I incentives

David Brown

be capabilities. the So of active asset of the U.S. we U.S., will exclusive outside manufactured provider management

outside distribution drawing the So all that is the U.S. U.S. of of manufacturing. upon

any that the U.S. desiring their forma clients from So pro come in will any Capital, products are of Capital. the that manufactured Victory products, are of Victory the

you Amundi's So the if the U.S. U.S. in all the allocation believe $X.X that a in markets, exclusive the trillion we countries they're provider X,XXX those will really about outside and powerful the given think about of got they're portfolios clients, and distributor allocations.So that's and world, pretty of in they've around presence be going institutional to forward, I XX -- local network. X,XXX

very, So the be distribution aspect very providing U.S. of powerful we'll then them and manufactured it.

Amundi As right U.S. and do that. exclusive others the today, businesses to will have the now

Y. Cho

follow-up a some just then trends. And on near-term

you net March. in I flows think turned positive out called

for kind well. driver was in inflection and the any exiting what that curious of as that April Just thoughts And on May key you into the saw quarter? maybe then flows

David Brown

fixed the So income highlighted turn we've as seen on a prepared side. in we the remarks

VictoryShares, really supporting our solid, So really, our to momentum. is our institutional continues channel performance good be strong. and And that's ETF investment then platform, generally Income Victory speaking, investors,

we quarter, see don't don't -- of Looking into changing in we acts flows. on market any guidance give that quarter any quarter second market really But change the conditions. by

Operator

Markets. Your of with Etienne question line Ricard comes from BMO the Capital next

Etienne Ricard

quarter. margin So clearly, another strong

increase margins. other typically that as you into what do can operating the think U.S. you case, in in AUM? and believe gives up In margin and what efficiency? operating scale maintain the maintain an in discipline we closing for considering levels words, scale advantage Victory's transaction, As But the culture to of its you point look can meaningful Amundi confidence you Victory

David Brown

based highlighted and the making. exceeded the years, We've we've it that reiterate that in on obviously XX% over also we the guided and flow we have guidance today, think but I the ebb will investments last forma we're XX% the Well, we've pro keeping towards guidance business. few

confident So forma we're pro very XX% in in the the organization.

principles discipline and top record the the about we we of principles think, when and industry. have to this track while, maintain adopt have culture. don't Amundi is principles the of confidence smartly we be that organization Our all how a that the of diligence for right that and reason give for I the people think about future.And we principles U.S. history on seen, been I the work any done, our have we will a acquisitions us integration, Victory have of we have an partner to that working Capital anything integrating, we forward. those believe are management we margins talk maintain the same on that lot talk going we it with additional culture think integration, And as about run able even think Amundi wouldn't be be from our our able would U.S., to we the post-Amundi to to story. And that will and and investment those and operating U.S.

Etienne Ricard

staying you And do pace about expenses, the synergies million on the topic of $XXX on how the 'XX? expense of Great. for realizations think of

Michael Policarpo

we're $XXX that remarks, million have we the had we in I think the that in So expense there had on. we've highlighted, done, and prepared and the synergy confident commented put level of Dave very just our as work out said

realize we mentioned, our we in think, we a I plan and have well. we'll respect well respect integration, coming on out Amundi with that that X expected history thought execute to said with over itself. realization, for and as believe the acquisition to record kind speaks those of time-tested and And as year. to pretty also in of years, our the the of with track We first majority Dave expense integration really them And

Operator

from Morgan question of line with Your Michael next the Cyprys comes Stanley.

Michael Cyprys

agreement U.S. selling you back to I with products the respect have just Amundi to into the distribution with to that circle their wanted

that envision do Maybe what work? Just Victory? the into can the that And Amundi sense hoping over think most strategies products you time? versus do might mean U.S. How the of selling? how their navigate you you U.S., talk And prioritizing sell you the able products be you in do about products? might what for could economics, make many on selling to how to elaborate could your

David Brown

I'd manufacturing sell, of There think institutional we investment start emerging have they products an are product, market that few the be debt, an channel. maybe capability there's maybe off a by manufacturing to one example would that a today, opportunity U.S. be saying outside is a product good or that an through like may debt

will be that a So different have number they of that products there based move will on the conditions through market channels.

our As products, force to far multiple is as selling a with classes. system priorities, selling up asset has used and sales of come different

what So isn't really well about we're it's really what part client is.So what demand it the prioritization really -- do of the we about is, is today. this accepting

on that. what economics our -- very of of similar will from to The to So be similar we're to selling do products. how our we well-schooled perspective, own have it very what today

that sell able our and with own margin will be different the offer really the the them capabilities. investment of the same with we us have really same, by being get products products be of gives another a clients wider range just it will into requirements to to avenue to margins closer we So solutions And U.S.

Michael Cyprys

it on XX% Great. profile. and just sticking the curious, high seems your about transaction, incremental large scale through, hear enhance think you And coming just question margins. profile. like can at I reiterating the to follow-up you it the coming a But you're revenues on synergies margin as margin on this

could on like offset could you're you the to lead hoping It net spend? you of moving what seems maybe spend. the in there's are much that about So you're you an the back and some elaborate much pieces to maintain talk looking and underlying invest Maybe How to the areas? looking maybe outlook. margin business just top there how

David Brown

Yes.

of synergies we've net million then The So number. XX%. of a guided million $XXX $XXX synergies is the and towards

We our amount and the of the be a will of portion a business, distribution intermediary of platform, portion lot of invest significant U.S. into into that business. our will money

our invest to on continue will we so platform. And

think very see I way I where major is way that the is invest efficient. invest And we set of advantages a the the to is can one our the by you have it's in have platform we ability and think margins. up,

So are million it back a is we're today. lot we be be going will though the of net will of cost even doing platform heavily and synergies, we see $XXX number, to you investing into be what a as investing

Operator

of Instructions] comes the Your with line next Beatty [Operator UBS. Adam from question

Adam Beatty

wanted in on a their Obviously, solutions Amundi had First, WestEnd well. solutions in little I to positive flows focus U.S. doing bit. The business business.

somewhat picture of it Victory get hoping in, kind businesses not whether a of bring into provider of sort U.S. nature versus has, of complementary So solutions to the remain integrated Amundi business solutions will that be already will the what maybe and fuller separate? or or those one

Michael Policarpo

Amundi has. and Within our target They multi-asset. offering well as and will don't well a investment to offerings, the the of have about we the Amundi offerings growth are platform. The solutions ETF ETF into have our the Victory -- as multi-asset offerings offering. envision enough Victory, on some consolidating for are U.S. Amundi as U.S. those package under rules-based an business business, as solutions that see will think there's of remain earlier, currently don't forward U.S. as that think and excited tremendous going set they opportunity business opportunity we risk-based the to the include into product offers organic ETF includes We team some solutions our U.S. Dave as kind current additional the platform.We to of date business. Amundi distinct to take it's product a that solutions had It really offering, an similar also so very take opportunity, mentioned some

Adam Beatty

just as it distribution. the reverse question fills around And then of out. That of helpful. That's Mike's Great. follow-up, a kind

In terms of U.S. the being Amundi and products Amundi distributed through outside Victory U.S.

from mentioned U.S., come a Just also other those Amundi but you of are providers. that obviously right now that there wondering, lot products

So just sense within of there. some get Victory be kind where wanted kind of mix taking a to the asset of share other might providers those

David Brown

to couple a there's think elements it. I of

product. the an First is client Amundi U.S. from the probably there's under-allocation in

space China, are allocation open those what's actually you U.S. platform India, time. think in and we'll they over in that have, is around this of of taking. a the that countries markets where about to are longer in they part some of they evolving So And be happening period

some on anticipate So prospective is is we what of this happening.

think reinvest just a piece think on been investment I solutions first the Amundi $XX billion they'll the is I from has then flow I as I some part desire that the to their in And you to presume. the have ability performance our economic years, accelerate year incentive would that forward. an then firm-wide think going of in added that are a perspective. it share, that U.S. we business would economic and it's That X positive our X set years.And outside that that our business, imagine because piece.I platform, of stake excellent that's just last take have we all average would they'll a to say about and have XX.X% then would you as second underneath there product over we'll their with only And put net the market want So U.S. business. flows. reiterate last if mentioned other in would gross that of is the are before, platform I also do I probably over the And

and we be new product. the ability And clients create would out we So new good then really the have go Amundi the offer investment have would product and to performance. products acquire also able to

Adam Beatty

Great.

of So than situation like sounds straight bigger a pie substitute. more it

David Brown

Correct.

Operator

remarks. turn over go now to call for will closing ahead. back David the I Please Brown

David Brown

on to Have interest Thank again, day. that Amundi definitive second of anticipate we for forward by you. as thank And Victory Capital. agreement the We and quarter. forward keeping end a updated in we transaction to wonderful the move you your the you the look

Operator

today's for call. concludes This all and may lines. Thank your you now you joining, disconnect

Victory Capital (VCTR) 10 May 242024 Q1 Earnings call transcript