Core Viewpoint - Victory Portfolios II has announced the liquidation of three ETFs due to a regular review of its product lineup to better meet client needs [1]. Group 1: Liquidation Details - The ETFs affected are the VictoryShares WestEnd Economic Cycle Bond ETF (BMDL), VictoryShares Hedged Equity Income ETF (HEJD), and VictoryShares International Volatility Wtd ETF (CIL) [1]. - After January 28, 2026, the ETFs will stop accepting purchase orders for Creation Units, and shareholders can sell their holdings on the Nasdaq Stock Market until January 29, 2026 [2]. - The ETFs will cease trading at the end of January 29, 2026, with liquidation anticipated around February 4, 2026 [2]. Group 2: Financial Implications - Victory Capital Management Inc. will cover all fees and expenses related to the liquidation and distribution of cash proceeds to investors, excluding brokerage fees [3]. - Shareholders will recognize a capital gain or loss for tax purposes based on the amount received for their shares compared to their adjusted basis [3].

Core Insights - Merion Road Capital Management's third-quarter 2025 investor letter indicates a 5.0% return for the Merion Road Small Cap Fund, underperforming the Russell 2000 Index's 12.4% return, while the long-only portfolio achieved a 10.1% return compared to the S&P 500's 8.1% [1] - The strong performance of Kratos significantly contributed to the portfolio's results [1] Company Focus: Victory Capital Holdings, Inc. (NASDAQ:VCTR) - Victory Capital Holdings, Inc. has experienced a one-month return of -2.89% and a 52-week loss of 9.70%, with a market capitalization of $4.123 billion as of November 20, 2025 [2] - The company has successfully closed the acquisition of the Amundi US business, now managing over $300 billion in assets, with positive net flows reported for 2024 and year-to-date 2025 [3] - Victory Capital's management has increased their cost synergy target to $110 million, with historical performance exceeding guidance, and projected free cash flow of at least $7.00 per share next year, indicating a valuation discount compared to peers [3] Market Position and Performance - Victory Capital Holdings, Inc. was held by 22 hedge fund portfolios at the end of the second quarter, an increase from 16 in the previous quarter [4] - The company's third-quarter revenue rose by 3% from the second quarter to $361.2 million [4] - Despite the potential of Victory Capital, the company is viewed as having less upside compared to certain AI stocks, which are considered to carry greater potential and lower downside risk [4]

Core Insights - Victory Capital Holdings, Inc. (VCTR) reported assets under management (AUM) of $313 billion for October 2025, reflecting an increase of nearly 1% from September 2025 [1][8] - The performance of U.S. large-cap and global equity assets grew, while mid-cap and small-cap segments experienced declines [8] - The company’s integrated multi-boutique business model and effective distribution platform are expected to enhance performance in the near term [3] AUM Breakdown - U.S. mid-cap equity AUM decreased by 3.7% to $30.7 billion [1] - U.S. small-cap equity AUM declined by 3.9% to $12.2 billion [1] - Global/non-U.S. equity AUM increased by 2.6% to $29.7 billion [1] - U.S. large-cap equity AUM rose by 2.1% to $61.9 billion [1] - Solutions AUM increased by 2% to $88.7 billion [2] - Fixed-income AUM totaled $80.5 billion, showing a marginal increase [2] - Money market/short-term assets rose by 2.3% to $3.7 billion [2] Market Performance - Over the past six months, VCTR shares have lost 3.7%, compared to the industry's decline of 2.1% [4] - Victory Capital currently holds a Zacks Rank 3 (Hold) [5] Comparison with Peers - Franklin Resources, Inc. (BEN) reported preliminary AUM of $1.69 trillion as of October 31, 2025, which increased by 1.7% from the prior month [6][9]

Client Assets and AUM Growth - Total client assets reached $313.4 billion, with assets under management (AUM) at $310.6 billion as of September 30, 2025, reflecting significant growth from $176.1 billion in 2024[175][188] - AUM increased by $12.1 billion, or 4.1%, from $298.6 billion at June 30, 2025, driven by $14.5 billion in market appreciation, partially offset by $0.3 billion in net outflows[188] - As of September 30, 2025, total Assets Under Management (AUM) reached $310,644 million, up from $176,113 million in 2024, reflecting a significant increase of 76.3% year-over-year[200] - Total Assets Under Management (AUM) as of September 30, 2025, reached $310.64 billion, an increase from $176.11 billion in 2024, representing a growth of 76%[208] - The total long-term assets under management as of September 30, 2025, were $306,985 million, compared to $172,720 million in 2024, reflecting an increase of 77.8%[200] - The company has grown total client assets from $17.9 billion in August 2013 to $313.4 billion as of September 30, 2025, attributed to successful acquisitions and strong investment returns[185] Revenue and Income - Total revenue for the three months ended September 30, 2025, was $361.2 million, up from $225.6 million in the same period in 2024, while total revenue for the nine months was $932.0 million compared to $661.1 million[191] - Net income for the three months ended September 30, 2025, was $96.5 million, compared to $82.0 million in 2024, with net income for the nine months at $217.3 million versus $211.9 million[191] - Adjusted EBITDA for the three months ended September 30, 2025, was $190.5 million, representing 52.7% of revenue, compared to $121.3 million, or 53.7% of revenue, in 2024[191] - Net income attributable to common shareholders for the nine months ended September 30, 2025, was $181.97 million, compared to $211.93 million for the same period in 2024[219] - Earnings per share (EPS) for the three months ended September 30, 2025, were $1.12, compared to $1.26 for the same period in 2024[219] Cash Flows and Financial Activities - The Company recorded a net cash provided by operating activities of $240.4 million for the nine months ended September 30, 2025, a decrease of 3.1% compared to $248.2 million for the same period in 2024[284] - Cash provided by investing activities was $77.7 million for the nine months ended September 30, 2025, primarily from cash acquired through acquisitions of $53.6 million[286] - Cash used in financing activities totaled $329.5 million for the nine months ended September 30, 2025, which included $63.7 million for acquisition consideration and $115.7 million for dividend payments[288] Market Performance and Client Flows - The company generated $17.3 billion in gross flows for the three months ended September 30, 2025, compared to $6.1 billion in 2024, with net outflows of $0.3 billion[188] - Gross client cash inflows for the three months ended September 30, 2025, were $17,296 million, compared to $6,120 million in the same period of 2024, indicating an increase of 182.5%[196] - Net client cash flows for the three months ended September 30, 2025, were negative at $(292) million, an improvement from $(2,636) million in the same period of 2024[196] - The company experienced net outflows of $2.3 billion for the nine months ended September 30, 2025, with significant outflows from U.S. equity strategies[217] Expenses and Costs - Personnel compensation and benefits for the three months ended September 30, 2025, increased by 124.3%, or $53.7 million, to $97.0 million, primarily due to higher salaries and acquisition-related compensation[225] - For the three months ended September 30, 2025, distribution and other asset-based expenses increased by $29.3 million, or 79.6%, to $66.2 million compared to $36.8 million for the same period in 2024, primarily due to higher broker-dealer and platform distribution fees[229] - General and administrative expenses for the three months ended September 30, 2025 increased by $9.4 million, or 67.3%, to $23.5 million compared to $14.0 million for the same period in 2024[231] - Depreciation and amortization for the three months ended September 30, 2025 increased by $14.5 million, or 193.4%, to $22.0 million from $7.5 million for the same period in 2024, due to the amortization of intangible assets from the Amundi US acquisition[233] Acquisitions and Strategic Developments - The acquisition of Amundi U.S. was completed on April 1, 2025, enhancing the company's scale and diversifying its investment capabilities[180][182] - Victory Capital's Solutions Platform manages approximately $52 billion in AUM for non-U.S. investors, supported by a global distribution agreement with Amundi[184] - The company experienced a divestment of approximately $1 billion in assets due to the closure of three Investment Franchises during the third quarter of 2025[202] - Acquisition-related costs for the nine months ended September 30, 2025 were $34.9 million, significantly higher than $9.2 million for the same period in 2024, related to the Amundi US acquisition[238] - Restructuring and integration costs for the nine months ended September 30, 2025 were $25.4 million, compared to $0.8 million for the same period in 2024, primarily related to personnel restructuring[240] Market and Currency Risks - Approximately 9% of AUM is invested in securities denominated in currencies other than the U.S. dollar, which exposes the company to exchange rate risk[295] - A 10% increase or decrease in the value of the U.S. dollar would affect the fair value of AUM by approximately $2.8 billion, impacting revenues by about $13.2 million at a weighted-average fee rate of 47 basis points[295] - The company has not adopted a corporate-level risk management policy for exchange rate risk or client asset management[295] Interest and Debt Management - The Repriced Term Loans, totaling $985.0 million, will mature on September 23, 2032, with an interest rate of SOFR plus a margin of 2.00%[264] - The Company had no outstanding borrowings under the revolving credit facility as of September 30, 2025, maintaining compliance with its financial performance covenants[266] - The company executed a floating-to-fixed interest rate swap to fix the interest rate at 3.465% on $450 million of its Term Loan[296]

Financial Data and Key Metrics Changes - The company achieved record-high gross flows and net flows finished just under flat for the quarter, with total assets reaching $313 billion [5] - Adjusted EBITDA set a new all-time quarterly high at $191 million, resulting in an adjusted EBITDA margin of 52.7% [5][22] - Adjusted earnings per diluted share rose to a record $1.63, up 4% from the second quarter and 20% higher than the quarter immediately preceding the Amundi transaction [5][22] Business Line Data and Key Metrics Changes - Long-term gross flows rose 10% quarter over quarter to $17 billion, reflecting the expanded U.S. distribution team and strong sales outside the U.S. [5][21] - Multiple investment franchises generated positive net long-term flows, including Victory Income Investors, Pioneer Investments, RS Global, Trivalent, and the Victory Shares ETF platform [24] Market Data and Key Metrics Changes - The company currently manages $52 billion of AUM from clients outside the U.S. from 60 countries, where net flows remain positive [7] - 17% of total AUM was from investors outside the United States as of quarter end [23] Company Strategy and Development Direction - The company aims to be a trillion-dollar firm, focusing on strategic acquisitions that enhance its competitive position and shareholder value [34] - The integration process at Pioneer Investments is ahead of plan, with approximately $86 million of net expense synergies achieved on a run-rate basis [6][25] - The company is investing in expanding its distribution capacity outside the U.S. and launching new UCITS products [8][9] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the distribution opportunities outside the U.S. and the potential for significant growth in 2026 and beyond [11][46] - The company anticipates a phase of intense consolidation in the industry, which it is well-positioned to navigate [35] Other Important Information - The company repurchased 1.8 million shares during the quarter and has $355 million of capacity remaining on its repurchase authorization [6][27] - The balance sheet remains strong with $116 million of cash and a net leverage ratio of 1.1 times, providing financial flexibility for growth initiatives [27] Q&A Session Summary Question: M&A Strategy and Focus - Management emphasized that all acquisitions will be strategic, aiming for size and scale while also considering smaller, highly strategic deals [34] Question: Pioneer Acquisition Synergies - The company is ahead of synergy targets due to conservative planning and the discovery of operational efficiencies during integration [36][38] Question: Non-U.S. Business Performance - Positive net sales have primarily come from the Pioneer franchise, with expectations for increased flows from legacy Victory products in 2026 [45][46] Question: Inorganic Pipeline and Risks - The inorganic pipeline is full, with active discussions ongoing, and the environment for acquisitions has improved [71][72] Question: Integration Challenges with Alternatives - Management is aware of cultural integration challenges and has been patient in observing the market before pursuing acquisitions in the alternatives space [76]

Financial Data and Key Metrics Changes - The company achieved record-high gross flows and net flows finished just under flat for the quarter, with total assets reaching $313 billion [5] - Adjusted EBITDA set a new all-time quarterly high at $191 million, resulting in an adjusted EBITDA margin of 52.7% [5][22] - Adjusted earnings per diluted share rose to a record $1.63, up 4% from the second quarter and 20% higher than the quarter preceding the Amundi transaction [5][22] - Revenue increased 3% from the second quarter to $361.2 million, with average assets for the quarter rising 7% quarter over quarter [21] - The company returned a total of $163 million to shareholders in the quarter, marking an all-time high [22][28] Business Line Data and Key Metrics Changes - Long-term gross flows rose 10% quarter over quarter to $17 billion, reflecting the expanded U.S. distribution team and strong sales outside the U.S. [5][24] - Multiple investment franchises generated positive net long-term flows, including Victory Income Investors, Pioneer Investments, RS Global, Trivalent, and the VictoryShares ETF platform [24] - Year-to-date positive net flows for the ETF platform reached $5.4 billion, representing a 53% organic growth rate [13] Market Data and Key Metrics Changes - The company currently manages $52 billion of AUM from clients outside the U.S. across 60 countries, with net flows remaining positive [7] - 17% of total AUM was from investors outside the United States as of quarter end [23] Company Strategy and Development Direction - The company aims to be a $1 trillion firm, focusing on strategic acquisitions that enhance its competitive position and shareholder value [34][36] - The integration process at Pioneer Investments is ahead of plan, with $86 million of net expense synergies achieved on a run-rate basis [6][40] - The company is investing in expanding its distribution capacity outside the U.S. and launching new UCITS products [8][9] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the distribution opportunities outside the U.S. and the potential for significant growth in 2026 [11][48] - The company anticipates a transformational opportunity in the non-U.S. segment, with strong sales expected from legacy Victory products [48] - Management highlighted the importance of strategic acquisitions in a fragmented industry, emphasizing the need for firms to partner to grow [36][72] Other Important Information - The company has achieved $86 million of net expense synergies and expects to reach a total of $110 million [6][25] - The balance sheet remains strong with $116 million of cash and a net leverage ratio of 1.1x, providing financial flexibility for growth [22][28] Q&A Session Summary Question: M&A Strategy and Focus - Management aims for strategic acquisitions rather than purely financial transactions, with a focus on enhancing the company's capabilities and shareholder value [34][36] Question: Pioneer Acquisition Synergies - The company is ahead of synergy targets due to conservative planning and the identification of operational efficiencies [38][40] Question: Non-U.S. Business Performance - Positive net sales have primarily come from the Pioneer franchise, with expectations for increased flows from legacy Victory products in 2026 [46][48] Question: Inorganic Pipeline and Risks - The inorganic pipeline is full, with active discussions ongoing, and the environment for acquisitions has improved [72][73] Question: Integration Challenges with Alternatives - Management is aware of cultural integration challenges and has been patient in observing the market before pursuing acquisitions in the alternatives space [77]

Financial Data and Key Metrics Changes - Victory Capital achieved record-high gross flows and net flows finished just under flat for the quarter, with total assets reaching $313 billion [4] - Adjusted EBITDA set a new all-time quarterly high at $191 million, resulting in an adjusted EBITDA margin of 52.7% [4][22] - Adjusted earnings per diluted share rose to a record $1.63, up 4% from the second quarter and 20% higher than the quarter immediately preceding the Amundi transaction [4][22] Business Line Data and Key Metrics Changes - Long-term gross flows rose 10% quarter over quarter to $17 billion, reflecting the expanded U.S. distribution team and strong sales outside the U.S. [4] - The ETF business, Victory Shares, saw year-to-date positive net flows of $5.4 billion, representing a 53% organic growth rate through the first nine months of the year [12] - Nearly half of the mutual fund and ETF AUM ranks in the top quartile based on Morningstar's three-year rankings [14] Market Data and Key Metrics Changes - 17% of total AUM was from investors outside the United States, indicating meaningful diversification into non-U.S. geographies [23] - The company currently manages $52 billion of AUM from clients outside the U.S. from 60 countries, where net flows remain positive [6] Company Strategy and Development Direction - The company aims to be a trillion-dollar firm, focusing on strategic acquisitions that enhance its competitive position and satisfy growth objectives [30][31] - The integration process at Pioneer Investments is ahead of plan, with approximately $86 million of net expense synergies achieved on a run-rate basis [5][25] - The company is investing in expanding its distribution capacity outside the U.S. and launching new UCITS products [8][9] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the distribution opportunities outside the U.S., particularly in Asia and the Middle East, where there is high demand for U.S. dollar-denominated products [10][11] - The company anticipates that the integration of Pioneer Investments will lead to significant growth in the non-U.S. segment starting in 2026 [38] Other Important Information - The company repurchased 1.8 million shares during the quarter and has $355 million of capacity remaining on its existing repurchase authorization [5][22] - The balance sheet remains strong with $116 million of cash and a net leverage ratio of 1.1 times, providing financial flexibility for growth initiatives [27] Q&A Session Summary Question: M&A Strategy and Focus - Management emphasized that all acquisitions will be strategic, aiming for size and scale to compete effectively in the long term [30][31] Question: Pioneer Acquisition Synergies - The company is ahead of synergy targets due to conservative planning and the identification of operational efficiencies [32][34] Question: Non-U.S. Business Performance - Positive net sales have primarily come from the Pioneer franchise, with expectations for increased flows into legacy Victory products in 2026 [38] Question: Inorganic Pipeline and Opportunities - The inorganic pipeline is full, with active discussions ongoing, and the environment for acquisitions has improved [50][51] Question: Integration Challenges with Alternatives - Management acknowledged the cultural differences between traditional and alternative investments and emphasized a careful approach to integration [52]

Business Highlights - Total client assets reached $313 Billion[6] - Long-term gross flows amounted to $17 Billion[6] - Adjusted EBITDA stood at $190.5 Million with a margin of 52.7%[6] - Adjusted earnings per diluted share with tax benefit was $1.63[6] - Pioneer Investments realized over $86 Million of the projected $110 Million in net expense synergies since the transaction closed on April 1[6] ETF Growth - ETF AUM reached $17.2 Billion[18] - Year-to-date net flows for ETFs were $5.4 Billion, representing a 53% increase[17] Investment Performance - 64% of Total Mutual Funds and ETFs AUM with 4- or 5-Star overall ratings[23] - 63% of strategies outperformed benchmarks over a 3-year period[25] Capital Allocation - $1.1 Billion has been returned to shareholders since IPO[30] - Strategic acquisitions, share repurchases, and dividends totaled $0.2 Billion, $0.4 Billion, and $1.6 Billion respectively[28] Financial Results - Revenue for the quarter was $361.2 Million[35] - GAAP Operating Income was $138 Million[35] - Adjusted Net Income with tax benefit reached $141.3 Million, or $1.63 per diluted share[35]

Core Insights - Victory Capital Holdings (VCTR) reported a revenue of $361.2 million for the quarter ended September 2025, marking a year-over-year increase of 60.1% and an EPS of $1.63 compared to $1.35 a year ago [1] - The reported revenue was slightly below the Zacks Consensus Estimate of $361.76 million, resulting in a surprise of -0.16%, while the EPS exceeded expectations by 1.87% [1] Financial Performance - Victory Capital's shares have returned -7.2% over the past month, contrasting with the Zacks S&P 500 composite's +1.3% change, and the stock currently holds a Zacks Rank 3 (Hold) [3] - The company’s ending assets under management (AUM) totaled $310.64 billion, closely aligning with the average estimate of $310.65 billion from three analysts [4] - Specific AUM figures include: - Money Market/Short-term: $3.66 billion [4] - Alternative Investments: $3.02 billion [4] - U.S. Small Cap Equity: $12.72 billion [4] - U.S. Mid Cap Equity: $31.88 billion [4] - Solutions: $86.96 billion [4] - Global/Non-U.S. Equity: $28.96 billion [4] - Fixed Income: $80.39 billion [4] - U.S. Large Cap Equity: $63.06 billion [4] Revenue Breakdown - Investment management fees generated $288.51 million, surpassing the estimated $282.47 million and reflecting a year-over-year increase of 62.3% [4] - Fund administration and distribution fees amounted to $72.69 million, below the estimated $79.28 million, but still showing a year-over-year increase of 52% [4] - Net client cash flows for Money Market/Short-term were reported at -$48 million, contrasting with the average estimate of $15.44 million from two analysts [4]

Core Insights - Victory Capital Holdings (VCTR) reported quarterly earnings of $1.63 per share, exceeding the Zacks Consensus Estimate of $1.60 per share, and showing an increase from $1.35 per share a year ago, resulting in an earnings surprise of +1.87% [1] - The company posted revenues of $361.2 million for the quarter ended September 2025, which was slightly below the Zacks Consensus Estimate by 0.16%, and a significant increase from $225.63 million year-over-year [2] - Victory Capital has surpassed consensus EPS estimates three times over the last four quarters and has topped consensus revenue estimates two times in the same period [2] Earnings Outlook - The future performance of Victory Capital's stock will largely depend on management's commentary during the earnings call and the revisions of earnings estimates [3][4] - The current consensus EPS estimate for the upcoming quarter is $1.60, with expected revenues of $371.03 million, and for the current fiscal year, the EPS estimate is $6.22 on revenues of $1.3 billion [7] Industry Context - The Financial - Investment Management industry, to which Victory Capital belongs, is currently ranked in the top 26% of over 250 Zacks industries, indicating a favorable outlook compared to the bottom 50% [8] - Empirical research suggests a strong correlation between near-term stock movements and trends in earnings estimate revisions, which can be tracked using tools like the Zacks Rank [5][6]