Victory Capital(US:VCTR)2023-05-05 17:10Financial Data and Key Metrics Changes - Assets under management (AUM) increased by 3.7% from $153 billion at the beginning of the year to $158.6 billion at quarter end [19] - Adjusted net income with tax benefit rose to $1.08 per diluted share, up from $1.05 per diluted share in the previous quarter [10] - Revenue was essentially flat at $201.3 million compared to $201.5 million in the previous quarter [19] - GAAP operating income was $74.6 million, and adjusted EBITDA was $99.2 million [20] - The company returned $66 million of capital to shareholders in the first quarter, which was ahead of last year's quarterly average [20] Business Line Data and Key Metrics Changes - Long-term growth flows were $5.8 billion in the quarter, reflecting top industry-wide sales despite market hesitance [22] - Positive net flows were achieved in active domestic equity products, particularly in U.S. mid and small cap strategies [23] - The fee rate held steady at 51.7 basis points in the first quarter, consistent with the previous quarter [24] Market Data and Key Metrics Changes - The company experienced a significant institutional redemption of approximately $1.1 billion in April, impacting AUM [8] - The overall market environment remains challenging, with investors hesitant to enter due to heightened volatility [22] Company Strategy and Development Direction - The company launched Victory Capital InVest, a new open architecture brokerage platform aimed at expanding product choice and flexibility for clients [12] - Strategic investments are being made to enhance technology capabilities, distribution, and marketing resources [12] - The long-term margin guidance remains unchanged at 49%, factoring in ongoing strategic investments [11][27] Management's Comments on Operating Environment and Future Outlook - Management noted that margins remained strong at 49.3%, demonstrating resilience in a challenging market [9] - The company is optimistic about the growth opportunities in fixed income as market conditions improve [15][41] - Management emphasized a flexible capital allocation strategy, remaining opportunistic with share repurchases and potential acquisitions [18][35] Other Important Information - The Board increased the cash dividend by 28% in the first quarter, maintaining the same rate for the current quarter [10][21] - The average interest rate on debt rose to 5.24%, impacting interest expenses [28] Q&A Session Summary Question: Positive net flows in U.S. midcap and small cap areas - Management noted strength in specific franchises like Sycamore and positive trends in the institutional channel [32] Question: Priorities for free cash flow and share repurchases - Management stated that capital allocation strategy remains flexible, with a focus on acquisitions while also being opportunistic with share repurchases [34][35] Question: Trends in fixed income and money markets - Management explained that money market outflows were due to its captive channel and that fixed income flows are expected to improve as distribution capabilities grow [39][40] Question: Launch of digital investing platform - Management confirmed that the new platform will expand product offerings and is part of ongoing investments factored into margin guidance [43][44] Question: Strength of Sycamore and capacity constraints - Management indicated that Sycamore is currently closed to new investors but is accepting new dollars from existing clients [48]