Victory Capital(US:VCTR)2025-08-08 13:11PART I — FINANCIAL INFORMATION This section provides the unaudited condensed consolidated financial statements and management's discussion of financial condition and results of operations Item 1. Financial Statements This section presents the unaudited condensed consolidated financial statements, highlighting significant asset growth and revenue increase driven by the Pioneer Investments acquisition, despite a decline in net income due to higher operating expenses Condensed Consolidated Financial Statements Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | June 30, 2025 ($ thousands) | December 31, 2024 ($ thousands) | Change | | :--- | :--- | :--- | :--- | | Total Assets | $4,249,447 | $2,547,591 | +66.8% | | Goodwill | $1,232,800 | $981,805 | +25.6% | | Other intangible assets, net | $2,515,005 | $1,260,614 | +99.5% | | Total Liabilities | $1,784,322 | $1,425,954 | +25.1% | | Long-term debt, net | $965,674 | $963,862 | +0.2% | | Total Stockholders' Equity | $2,465,125 | $1,121,637 | +119.8% | Condensed Consolidated Statements of Operations Highlights (in thousands, except per share data) | Metric | Q2 2025 ($ thousands) | Q2 2024 ($ thousands) | YTD 2025 ($ thousands) | YTD 2024 ($ thousands) | | :--- | :--- | :--- | :--- | :--- | | Total Revenue | $351,212 | $219,621 | $570,814 | $435,478 | | Income from Operations | $94,214 | $110,597 | $187,122 | $195,406 | | Net Income | $58,734 | $74,251 | $120,709 | $129,942 | | Net Income Attributable to Common | $46,076 | $74,251 | $105,702 | $129,942 | | Diluted EPS ($) | $0.68 | $1.12 | $1.59 | $1.97 | Condensed Consolidated Statements of Cash Flows Highlights (Six Months Ended June 30, in thousands) | Cash Flow Activity | 2025 ($ thousands) | 2024 ($ thousands) | | :--- | :--- | :--- | | Net cash provided by operating activities | $74,502 | $148,388 | | Net cash provided by (used in) investing activities | $78,116 | $(1,515) | | Net cash used in financing activities | $(171,979) | $(151,409) | Note 3. Revenue Recognition Revenue by Type and Product (Three Months Ended June 30, in thousands) | Revenue Source | 2025 ($ thousands) | 2024 ($ thousands) | | :--- | :--- | :--- | | Investment management fees | $282,306 | $173,163 | | Mutual funds (Victory Funds) | $175,308 | $116,550 | | ETFs (VictoryShares) | $9,834 | $5,515 | | Separate accounts and other | $78,103 | $49,061 | | Performance-based fees | $19,061 | $2,037 | | Fund administration and distribution fees | $68,906 | $46,458 | | Total Revenue | $351,212 | $219,621 | Note 4. Acquisitions - The company completed the acquisition of Amundi's U.S. business, rebranded as Pioneer Investments, on April 1, 2025, marking its largest investment franchise addition3078 - The Amundi US acquisition had a total purchase price of approximately $1.328 billion, settled entirely through the issuance of 3.3 million Common Stock shares and 19.7 million Preferred Stock shares7981 Preliminary Purchase Price Allocation for Amundi US (in thousands) | Account | Amount ($ thousands) | | :--- | :--- | | Goodwill | $250,995 | | Other intangible assets | $1,278,000 | | Total purchase price consideration | $1,328,339 | - The fair value of contingent consideration for the WestEnd acquisition decreased to $80.7 million as of June 30, 2025, from $139.9 million at year-end 2024, following a $63.7 million cash payment73 Note 10. Equity - The Board approved the 2025 Share Repurchase Program in December 2024, authorizing up to $200.0 million in common stock repurchases through December 31, 2026125 - In Q2 2025, the company repurchased 0.3 million shares for $21.4 million, with $178.6 million remaining available under the program as of June 30, 2025126127 - The Amundi US acquisition involved the issuance of 3.3 million shares of Common Stock and 19.7 million shares of newly issued Preferred Stock132 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the significant impact of the Pioneer Investments acquisition on AUM and revenue, noting increased operating expenses and the use of non-GAAP metrics to illustrate operational profitability Assets Under Management AUM Roll-Forward (in millions) | Period | Beginning AUM ($ millions) | Acquired Assets ($ millions) | Net Flows ($ millions) | Market Appreciation ($ millions) | Ending AUM ($ millions) | | :--- | :--- | :--- | :--- | :--- | :--- | | Q2 2025 | $167,468 | $111,654 | $(804) | $20,247 | $298,563 | | Q2 2024 | $170,342 | $(1) | $(1,744) | $83 | $168,681 | - AUM increased by 78.3% to $298.6 billion at June 30, 2025, primarily due to $114 billion from the Pioneer Investments acquisition and $20.2 billion in market appreciation, partially offset by $0.8 billion in net outflows182207 AUM by Asset Class (as of June 30, in millions) | Asset Class | 2025 ($ millions) | 2024 ($ millions) | | :--- | :--- | | Solutions | $79,988 | $58,936 | | Fixed Income | $79,752 | $24,398 | | U.S. Large Cap Equity | $61,844 | $13,983 | | U.S. Mid Cap Equity | $31,643 | $31,015 | | Global / Non-U.S. Equity | $25,576 | $18,459 | | U.S. Small Cap Equity | $13,140 | $15,182 | | Alternative Investments | $2,986 | $3,390 | | Total Long-Term Assets | $294,930 | $165,362 | Results of Operations - Total revenue for Q2 2025 increased 59.9% to $351.2 million from $219.6 million in Q2 2024, driven by a 69.0% increase in average AUM post-Pioneer acquisition213214 - Personnel compensation and benefits for Q2 2025 rose 95.7% to $108.9 million, primarily due to increased staff from the acquisition and $13.1 million in acquisition-related compensation costs219221 - Acquisition-related costs of $25.8 million and restructuring costs of $14.0 million in Q2 2025, primarily from the Amundi US transaction, significantly impacted operating income231233 - The effective tax rate for Q2 2025 increased to 32.5% from 22.5% in Q2 2024, mainly due to non-deductible transaction costs from the Amundi US acquisition239 Supplemental Non-GAAP Financial Information Reconciliation of Net Income to Adjusted EBITDA (in thousands) | Metric | Q2 2025 ($ thousands) | Q2 2024 ($ thousands) | | :--- | :--- | :--- | | Net income (GAAP) | $58,734 | $74,251 | | Adjustments (Interest, Taxes, D&A, etc.) | $119,791 | $42,251 | | Adjusted EBITDA (Non-GAAP) | $178,525 | $116,502 | Reconciliation of Net Income to Adjusted Net Income (in thousands) | Metric | Q2 2025 ($ thousands) | Q2 2024 ($ thousands) | | :--- | :--- | :--- | | Net income (GAAP) | $58,734 | $74,251 | | Adjustments (Amortization, Stock Comp, etc.) | $63,773 | $2,254 | | Adjusted Net Income (Non-GAAP) | $122,507 | $76,505 | Liquidity and Capital Resources - As of June 30, 2025, the company held $107.9 million in cash and cash equivalents and maintained a fully undrawn $100.0 million revolving credit facility248251 - Net cash used in financing activities for the first six months of 2025 totaled $172.0 million, primarily for $73.6 million in dividend payments, $63.7 million in acquisition consideration, and $26.4 million in common stock repurchases268 - Net cash provided by operating activities decreased to $74.5 million in the first half of 2025 from $148.4 million in the same period of 2024, primarily due to working capital changes and lower net income264 Item 3. Quantitative and Qualitative Disclosures About Market Risk This section details the company's exposure to market risk, including AUM sensitivity, foreign exchange fluctuations, and interest rate risk from variable-rate debt - A 10% change in AUM is estimated to result in an annualized revenue change of approximately $146.5 million, based on the Q2 2025 weighted-average fee rate of 49 basis points271 - A 10% change in the U.S. dollar's value against other currencies would impact AUM by approximately $2.7 billion, leading to an estimated annualized revenue change of $13.2 million274 - The company monetized its interest rate swap in Q4 2023 and remains exposed to interest rate risk from its variable-rate term loans under the 2019 Credit Agreement as of June 30, 2025276 Item 4. Controls and Procedures Management concluded that the company's disclosure controls and procedures were effective as of June 30, 2025, with no material changes to internal controls - The Chief Executive Officer and Chief Financial Officer concluded that the company's disclosure controls and procedures are effective as of June 30, 2025278 - No material changes occurred in the company's internal control over financial reporting during the most recent fiscal quarter279 PART II — OTHER INFORMATION This section covers legal proceedings, risk factors, and details on unregistered sales of equity securities and use of proceeds Item 1. Legal Proceedings The company reports on stockholder litigation related to the Amundi US acquisition, which was voluntarily discontinued after supplemental disclosures - Stockholder litigation was filed in September 2024 against the company and its board concerning the Amundi US transaction, alleging incomplete and misleading proxy statements281282 - The company voluntarily made supplemental disclosures to avoid litigation risk and potential transaction delays, while denying any wrongdoing283 - Plaintiffs in the stockholder litigation filed notices of voluntary discontinuance on April 4, 2025, effectively ending the actions283 Item 1A. Risk Factors This section states that there have been no material changes to the risk factors previously disclosed in the company's Annual Report on Form 10-K - No material changes have occurred to the risk factors disclosed in the company's Annual Report on Form 10-K for the year ended December 31, 2024285 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds This section details the company's share repurchase activity under its 2025 Share Repurchase Program, including shares purchased and remaining authorization Share Repurchase Activity (Q2 2025) | Metric | Value | | :--- | :--- | | Total Shares Purchased | 341,830 | | Average Price Paid Per Share | $62.53 | | Total Cost ($ millions) | $21.4 | | Remaining Authorization ($ millions) | $178.6 |