Victory Capital(VCTR) - 2025 Q2 - Quarterly Results

Second-Quarter Highlights & Management Commentary Victory Capital achieved record Q2 2025 financial results, driven by the Pioneer Investments acquisition, strong synergy realization, improved net flows, solid investment performance, and enhanced capital return initiatives - Successfully closed the acquisition of Pioneer Investments (from Amundi), achieving approximately $70 million of the expected $110 million in net expense synergies by the end of June[4] - Long-term net flows continued to improve for the third consecutive quarter, with net outflows at just ($660) million, representing less than 1% of AUM on an annualized basis[5][10] - The Board increased the share repurchase authorization to $500 million. In Q2, the company returned approximately $71 million to shareholders through buybacks (439,000 shares) and cash dividends[7][10] - The company's net debt to leverage ratio improved to 1.2x, its lowest level since becoming a public company[7] - The Board authorized a regular quarterly cash dividend of $0.49 per share[10] Financial & Operational Performance Summary Q2 2025 financial performance, significantly impacted by the Amundi US acquisition, saw ending AUM surge to $298.6 billion, with strong adjusted (Non-GAAP) growth despite GAAP pressures from acquisition costs Q2 2025 Financial & AUM Snapshot | Metric | Q2 2025 | Q1 2025 | Q2 2024 | | :--- | :--- | :--- | :--- | | Ending AUM | $298.6B | $167.5B | $168.7B | | Average AUM | $285.0B | $173.8B | $167.5B | | Long-term Net Flows | ($660)M | ($1,205)M | ($1,701)M | | Revenue | $351.2M | $219.6M | $219.6M | | GAAP Operating Margin | 26.8% | 42.3% | 50.4% | | GAAP EPS (Diluted) | $0.68 | $0.96 | $1.12 | | Adjusted EBITDA | $178.5M | $116.4M | $116.5M | | Adjusted EBITDA Margin | 50.8% | 53.0% | 53.0% | | Adj. Net Income w/ Tax Benefit per Diluted Share | $1.57 | $1.36 | $1.31 | Detailed Financial Analysis The Amundi US acquisition significantly drove financial results, boosting revenue and adjusted metrics while GAAP operating margins and net income contracted due to increased acquisition and restructuring costs Second Quarter 2025 vs. First Quarter 2025 (QoQ) Revenue grew 59.9% sequentially to $351.2 million driven by the Amundi US acquisition, while GAAP operating margin declined due to increased costs, yet adjusted net income rose 50.7% to $132.8 million Q2 2025 vs Q1 2025 Performance | Metric | Q2 2025 | Q1 2025 | Change | | :--- | :--- | :--- | :--- | | Revenue | $351.2M | $219.6M | +59.9% | | GAAP Operating Margin | 26.8% | 42.3% | -1,550 bps | | GAAP Net Income | $58.7M | $62.0M | -5.2% | | Adjusted Net Income w/ Tax Benefit | $132.8M | $88.1M | +50.7% | | Adjusted EBITDA | $178.5M | $116.4M | +53.4% | Second Quarter 2025 vs. Second Quarter 2024 (YoY) Year-over-year revenue grew 59.9% to $351.2 million due to higher AUM, while GAAP operating margin contracted significantly, yet adjusted net income and EBITDA increased robustly Q2 2025 vs Q2 2024 Performance | Metric | Q2 2025 | Q2 2024 | Change | | :--- | :--- | :--- | :--- | | Revenue | $351.2M | $219.6M | +59.9% | | GAAP Operating Margin | 26.8% | 50.4% | -2,360 bps | | GAAP Net Income | $58.7M | $74.3M | -21.0% | | Adjusted Net Income w/ Tax Benefit | $132.8M | $86.6M | +53.3% | | Adjusted EBITDA | $178.5M | $116.5M | +53.2% | Six Months Ended June 30, 2025 vs. 2024 First-half 2025 revenue increased 31.1% to $570.8 million, while GAAP operating margin declined due to higher costs, yet adjusted net income and EBITDA grew significantly First Half 2025 vs First Half 2024 Performance | Metric | H1 2025 | H1 2024 | Change | | :--- | :--- | :--- | :--- | | Revenue | $570.8M | $435.5M | +31.1% | | GAAP Operating Margin | 32.8% | 44.9% | -1,210 bps | | GAAP Net Income | $120.7M | $129.9M | -7.1% | | Adjusted Net Income w/ Tax Benefit | $220.9M | $169.0M | +30.7% | | Adjusted EBITDA | $294.9M | $228.9M | +28.9% | Assets Under Management (AUM) Analysis Total AUM surged to $298.6 billion by June 30, 2025, primarily from the Amundi US acquisition, significantly altering asset class and client mix while maintaining strong investment performance AUM, Flows, and Investment Performance Total AUM reached $298.6 billion at quarter-end, driven by the Amundi US acquisition and market action, with solid investment performance across various long-term periods AUM Outperformance vs. Benchmark (as of June 30, 2025) | Trailing 1-Year | Trailing 3-Years | Trailing 5-Years | Trailing 10-Years | | :--- | :--- | :--- | :--- | | 56% | 58% | 67% | 73% | - 64% of AUM in mutual funds and ETFs was rated four or five stars overall by Morningstar[6] AUM by Asset Class The Amundi US acquisition significantly shifted AUM mix, making Fixed Income and Solutions the largest asset classes, each approximately $80 billion, with strong net flows in Solutions Ending AUM by Asset Class (June 30, 2025) | Asset Class | AUM (in millions) | % of Total Long-term AUM | | :--- | :--- | :--- | | Solutions | $79,988 | 27.1% | | Fixed Income | $79,752 | 27.0% | | U.S. Large Cap Equity | $61,844 | 21.0% | | U.S. Mid Cap Equity | $31,643 | 10.7% | | Global / Non-U.S. Equity | $25,576 | 8.7% | | U.S. Small Cap Equity | $13,140 | 4.5% | | Alternative Investments | $2,986 | 1.0% | | Total Long-term AUM | $294,930 | 100.0% | AUM by Region The acquisition significantly expanded the international footprint, with non-U.S. client AUM growing from 3% to 16% of total AUM, reaching $48.5 billion by June 2025 AUM by Region Comparison | Region | June 30, 2025 | % of Total | June 30, 2024 | % of Total | | :--- | :--- | :--- | :--- | :--- | | U.S. | $250,035M | 84% | $163,146M | 97% | | Non-U.S. | $48,528M | 16% | $5,535M | 3% | | Total AUM | $298,563M | 100% | $168,681M | 100% | AUM by Vehicle Mutual Funds remain the largest AUM vehicle at $168.0 billion, while ETFs showed the strongest organic growth with $1.3 billion in net inflows during Q2 2025 Ending AUM by Vehicle (June 30, 2025) | Vehicle | AUM (in millions) | Q2 2025 Net Flows (in millions) | | :--- | :--- | :--- | | Mutual Funds | $167,973 | ($2,781) | | Separate Accounts and Other Vehicles | $118,615 | $672 | | ETFs | $11,975 | $1,305 | | Total AUM | $298,563 | ($804) | Balance Sheet and Capital Management As of June 30, 2025, total debt was approximately $972 million, with the Board approving a $0.49 per share quarterly dividend and increasing the share repurchase authorization to $500 million - Total debt outstanding was approximately $972 million as of June 30, 2025[27] - The Board approved a regular quarterly cash dividend of $0.49 per share, payable on September 25, 2025[27] - The Board increased the 2025 Share Repurchase Program authorization from $200 million to $500 million and extended it through December 31, 2027[28] Appendix: Financial Statements This appendix provides detailed unaudited financial statements for June 30, 2025, including Consolidated Statements of Operations, GAAP to Non-GAAP reconciliations, Condensed Consolidated Balance Sheets, and AUM breakdowns Consolidated Statements of Operations (Unaudited) Q2 2025 total revenue significantly increased to $351.2 million, but operating expenses, driven by acquisition and restructuring costs, led to GAAP net income of $58.7 million Q2 2025 Statement of Operations Highlights (in thousands) | Line Item | Q2 2025 | Q2 2024 | | :--- | :--- | :--- | | Total revenue | $351,212 | $219,621 | | Total operating expenses | $256,998 | $109,024 | | Acquisition-related costs | $25,780 | $3,049 | | Restructuring and integration costs | $13,994 | $105 | | Income from operations | $94,214 | $110,597 | | Net income | $58,734 | $74,251 | Reconciliation of GAAP to Non-GAAP Measures (Unaudited) This reconciliation details adjustments from GAAP Net Income to Adjusted EBITDA and Adjusted Net Income, highlighting $54.0 million in acquisition and restructuring costs and $18.6 million in intangible asset amortization for Q2 2025 Q2 2025 GAAP to Non-GAAP Reconciliation (in thousands) | Metric | Amount | | :--- | :--- | | Net income (GAAP) | $58,734 | | Acquisition, restructuring and exit costs | $53,990 | | Amortization of acquisition-related intangible assets | $18,558 | | Interest expense | $12,200 | | Other adjustments | $7,049 | | Adjusted EBITDA | $178,525 | | Adjusted net income | $122,507 | | Tax benefit of goodwill and acquired intangible assets | $10,255 | | Adjusted net income with tax benefit | $132,762 | Condensed Consolidated Balance Sheets (Unaudited) The June 30, 2025 balance sheet reflects the Amundi US acquisition, with total assets growing to $4.25 billion and total stockholders' equity doubling to $2.47 billion, driven by increased goodwill and intangible assets Balance Sheet Comparison (in thousands) | Asset/Liability/Equity | June 30, 2025 | Dec 31, 2024 | | :--- | :--- | :--- | | Total assets | $4,249,447 | $2,547,591 | | Goodwill | $1,232,800 | $981,805 | | Other intangible assets, net | $2,515,005 | $1,260,614 | | Long-term debt, net | $965,674 | $963,862 | | Total liabilities | $1,784,322 | $1,425,954 | | Total stockholders' equity | $2,465,125 | $1,121,637 |