Victory Capital(US:VCTR)2025-05-09 12:49Part I — Financial Information This section presents Victory Capital Holdings, Inc.'s unaudited condensed consolidated financial statements for Q1 2025, covering balance sheets, operations, cash flows, and notes Financial Statements Presents Victory Capital Holdings, Inc.'s unaudited condensed consolidated financial statements for Q1 2025, covering balance sheets, operations, cash flows, and notes Condensed Consolidated Balance Sheets Total assets increased to $2.58 billion as of March 31, 2025, driven by cash, with liabilities rising to $1.44 billion and equity to $1.14 billion Condensed Consolidated Balance Sheet Highlights (Unaudited) | (Amounts in thousands) | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $175,607 | $126,731 | | Goodwill | $981,805 | $981,805 | | Other intangible assets, net | $1,255,351 | $1,260,614 | | Total assets | $2,583,486 | $2,547,591 | | Liabilities & Stockholders' Equity | | | | Long-term debt, net | $964,763 | $963,862 | | Total liabilities | $1,438,920 | $1,425,954 | | Total stockholders' equity | $1,144,566 | $1,121,637 | Condensed Consolidated Statements of Operations Total revenue increased to $219.6 million in Q1 2025, driving net income to $62.0 million, or $0.96 per diluted share, supported by higher revenue and lower expenses Statement of Operations Summary (Unaudited) | (Amounts in thousands, except per share data) | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :--- | :--- | :--- | | Total revenue | $219,602 | $215,857 | | Total operating expenses | $126,694 | $131,048 | | Income from operations | $92,908 | $84,809 | | Net income | $61,975 | $55,691 | | Diluted EPS | $0.96 | $0.84 | | Dividends declared per share | $0.47 | $0.335 | Condensed Consolidated Statements of Cash Flows Net cash from operations increased to $81.1 million in Q1 2025, with financing cash outflow decreasing, leading to a $48.9 million increase in cash Cash Flow Summary (Unaudited) | (Amounts in thousands) | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $81,094 | $68,684 | | Net cash used in investing activities | ($1,684) | ($910) | | Net cash used in financing activities | ($30,713) | ($111,342) | | Net increase (decrease) in cash | $48,876 | ($43,610) | | Cash and cash equivalents, end of period | $175,607 | $79,937 | Notes to Condensed Consolidated Financial Statements Detailed notes explain accounting policies and financial results, covering business, revenue, acquisitions, fair value, debt, equity, and subsequent events - On April 1, 2025, the Company completed the acquisition of Amundi US and reintroduced the brand Pioneer Investments for the acquired business32 Disaggregated Revenue by Type and Product (Q1 2025 vs Q1 2024) | (Amounts in thousands) | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :--- | :--- | :--- | | Total investment management fees | $173,301 | $169,785 | | Mutual funds (Victory Funds) | $114,341 | $115,173 | | ETFs (VictoryShares) | $8,729 | $5,179 | | Total fund administration and distribution fees | $46,301 | $46,072 | | Total revenue | $219,602 | $215,857 | - The estimated fair value of contingent consideration payable to sellers for the WestEnd acquisition was $143.3 million as of March 31, 2025, with a $3.4 million increase in fair value for Q1 20257071 - On May 8, 2025, the Board of Directors approved a regular quarterly cash dividend of $0.49 per share, payable on June 25, 2025135 Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) Management discusses financial condition and operations, noting AUM decreased to $167.5 billion due to market action and outflows, yet Q1 2025 revenue and net income increased Overview and Key Performance Indicators Victory Capital's AUM decreased to $167.5 billion due to market depreciation and net outflows, yet financial performance improved with Adjusted EBITDA rising - As of March 31, 2025, the company had total client assets of $171.4 billion, including $167.5 billion in AUM138 Key Performance Indicators (Q1 2025 vs Q1 2024) | (Amounts in millions, except for bps and %) | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | AUM at period end | $167,468 | $170,342 | | Average AUM | $173,789 | $163,533 | | AUM net flows | ($1,249) | ($1,127) | | Total revenue | $219.6 | $215.9 | | Revenue realization on average AUM | 51.2 bps | 53.0 bps | | Net income | $62.0 | $55.7 | | Adjusted EBITDA | $116.4 | $112.4 | | Adjusted EBITDA Margin | 53.0% | 52.1% | Assets Under Management (AUM) Total AUM decreased to $167.5 billion due to $1.2 billion in net outflows and $3.2 billion in market depreciation, with varied flows across vehicles AUM Roll-Forward (Q1 2025) | (Amounts in millions) | Amount | | :--- | :--- | | Beginning AUM (Jan 1, 2025) | $171,930 | | Net client cash flows | ($1,249) | | Market appreciation (depreciation) | ($3,172) | | Realizations and distributions | ($21) | | Acquired & divested assets / Net transfers | ($20) | | Ending AUM (Mar 31, 2025) | $167,468 | AUM Net Flows by Vehicle (Q1 2025) | (Amounts in millions) | Net Client Cash Flows | | :--- | :--- | | Mutual Funds | ($3,006) | | ETFs | $2,810 | | Separate Accounts and Other | ($1,053) | | Total AUM | ($1,249) | GAAP Results of Operations Q1 2025 total revenue grew 1.7% to $219.6 million, driven by higher AUM, while personnel compensation decreased and acquisition-related costs significantly increased - Investment management fees increased by $3.5 million (2.1%) year-over-year due to a higher average AUM of $173.8 billion in Q1 2025 compared to $163.5 billion in Q1 2024167 - Personnel compensation and benefits decreased by $3.4 million (5.6%) year-over-year, primarily due to lower unrealized gains on deferred compensation plans and reduced contingent payment compensation expense171 - Acquisition-related costs rose by $7.7 million to $8.8 million in Q1 2025, primarily due to legal, professional, and proxy solicitation costs related to the Amundi US acquisition177 Supplemental Non-GAAP Financial Information Non-GAAP measures like Adjusted EBITDA ($116.4 million) and Adjusted Net Income ($78.0 million) show core operating performance, excluding non-recurring costs Reconciliation of GAAP Net Income to Adjusted EBITDA | (Amounts in thousands) | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :--- | :--- | :--- | | Net income (GAAP) | $61,975 | $55,691 | | Adjustments (Interest, Taxes, D&A, etc.) | $54,424 | $56,665 | | Adjusted EBITDA | $116,399 | $112,356 | Reconciliation of GAAP Net Income to Adjusted Net Income | (Amounts in thousands) | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :--- | :--- | :--- | | Net income (GAAP) | $61,975 | $55,691 | | Adjustments (Amortization, Stock Comp, etc.) | $21,309 | $22,488 | | Tax effect of adjustments | ($5,327) | ($5,621) | | Adjusted Net Income | $77,957 | $72,558 | Liquidity and Capital Resources The company maintains strong liquidity with cash increasing to $175.6 million, supported by an undrawn $100.0 million credit facility and increased operating cash flow - The company maintained a $100.0 million revolving credit facility which was undrawn as of March 31, 2025190 - Cash flow from operating activities increased by $12.4 million year-over-year to $81.1 million for Q1 2025205 - As of March 31, 2025, the company had a contingent consideration liability of $143.3 million related to the WestEnd Acquisition, with a maximum potential payout of $240.0 million202 Quantitative and Qualitative Disclosures About Market Risk Revenues are highly sensitive to market risk, with a 10% AUM change impacting annualized revenues by $85.2 million, alongside exchange rate and interest rate risks - A 10% increase or decrease in the value of AUM would cause an annualized change in revenues of approximately $85.2 million, based on the weighted-average fee rate of 51 basis points for Q1 2025209 - Approximately 11% of AUM is invested in securities denominated in currencies other than the U.S. dollar, where a 10% change in the U.S. dollar's value would impact annualized revenue by approximately $9.4 million211212 - The company monetized its interest rate swap in October 2023 and is now exposed to interest rate risk on its outstanding variable-rate debt under the 2019 Credit Agreement214 Controls and Procedures Management concluded that disclosure controls and procedures were effective as of March 31, 2025, with no material changes to internal control over financial reporting - Based on an evaluation as of March 31, 2025, the Chief Executive Officer and Chief Financial Officer concluded that the company's disclosure controls and procedures are effective216 - No changes in internal control over financial reporting occurred during the most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, the company's internal controls217 Part II — Other Information Legal Proceedings Stockholder litigation concerning the Amundi transaction, alleging misleading disclosures, was voluntarily discontinued by plaintiffs on April 4, 2025 - Stockholder litigation was filed in September 2024 concerning the Amundi transaction, alleging incomplete and misleading disclosures in the Proxy Statement220221 - On April 4, 2025, the plaintiffs in the stockholder litigation filed notices of voluntary discontinuance, effectively ending the actions222 Risk Factors There have been no material changes to the risk factors previously disclosed in the company's Annual Report on Form 10-K for the year ended December 31, 2024 - There have been no material changes to the risk factors in the Annual Report on Form 10-K for the year ended December 31, 2024224 Unregistered Sales of Equity Securities and Use of Proceeds The company has a share repurchase program authorizing up to $200.0 million through December 31, 2026, with no shares repurchased during Q1 2025 - In December 2024, the Board approved a new share repurchase program authorizing up to $200.0 million of Common Stock repurchases through December 31, 2026225 Issuer Purchases of Equity Securities (Q1 2025) | (Amounts in millions) | Total Number of Shares Purchased | Approximate Dollar Value That May Yet Be Purchased (in millions) | | :--- | :--- | :--- | | Jan 1-31, 2025 | — | $200.0 | | Feb 1-28, 2025 | — | $200.0 | | March 1-31, 2025 | — | $200.0 | | Total | — | $200.0 | Defaults Upon Senior Securities The company reports no defaults upon senior securities - None227 Other Information No directors or officers adopted, modified, or terminated Rule 10b5-1 or non-Rule 10b5-1 trading arrangements during Q1 2025 - No directors or officers adopted, modified, or terminated a Rule 10b5-1 trading arrangement during the quarter ended March 31, 2025227 Exhibits This section lists exhibits filed with Form 10-Q, including CEO and CFO certifications required by Sarbanes-Oxley Act, and iXBRL data - Exhibits filed include CEO and CFO certifications pursuant to Section 302 and Section 906 of the Sarbanes-Oxley Act of 2002229