Victory Capital(US:VCTR)2022-08-06 04:08Financial Data and Key Metrics Changes - Total AUM decreased by $23.2 billion or 13% in the quarter to $154.9 billion at the end of June, bringing the year-to-date decline in AUM to $28.7 billion or 16% lower than at the beginning of the year [19][20] - Revenue of $216 million in the second quarter was 6% lower than in the first quarter and down 3% from the same quarter last year [20][26] - Adjusted EBITDA was $106.2 million in the second quarter, resulting in an adjusted EBITDA margin of 49.2% [22][31] - GAAP net income was $79.2 million or $1.09 per diluted share [23] Business Line Data and Key Metrics Changes - Gross long-term flows totaled $9.2 billion in the quarter, with record first half gross flows of $20.2 billion, up 21% from the first half of last year [9][25] - The Market Neutral Income Fund generated significant positive net asset flows, contributing to the overall positive net long-term flows year-to-date [11][54] - The ETF platform has seen positive flows for seven consecutive quarters, indicating strong demand for diversified investment strategies [10] Market Data and Key Metrics Changes - The first half of 2022 was noted as the worst first half period for public markets in over half a century, yet the company managed to achieve strong performance [7] - The diversification strategy has positioned the company well to manage through the current volatile environment, with a wide range of products suitable for various market conditions [10] Company Strategy and Development Direction - The company continues to invest in growth initiatives despite lower AUM and revenue, maintaining a long-term growth strategy focused on data, technology, marketing, distribution, and personnel [8][31] - The M&A environment remains constructive, with the company actively conducting diligence on multiple prospective deals, emphasizing that every acquisition must enhance the company's capabilities [12][13] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to navigate the current market environment, highlighting strong investment performance and a robust pipeline of potential new business [11][15] - The focus on active management is expected to play a larger role in client portfolios moving forward, as clients reassess their investment strategies in light of changing market conditions [46] Other Important Information - The company returned a total of $34 million to shareholders through share repurchases and dividends, marking a 26% increase from the previous quarter [18] - The company has maintained a flexible approach to capital allocation, balancing debt repayment and share buybacks based on market conditions [19][66] Q&A Session Summary Question: Update on M&A appetite and focus - Management reiterated that their M&A strategy remains unchanged, focusing on transactions that enhance the company [38][41] Question: Current excess capital and deal capacity - Management indicated they do not feel constrained in terms of deal capacity, with various financing options available [42] Question: Client interest and demand rebound - Management noted that clients are rethinking their portfolios and focusing on active management strategies [45][46] Question: Performance of direct investor business - The direct investor business has shown resilience during market disruptions, with positive net flows in the 529 education savings plan [68] Question: Retail separately managed accounts (SMAs) performance - Management highlighted strong performance in retail SMAs, with significant contributions from the WestEnd acquisition [74][77] Question: Inorganic opportunities and pricing - Management observed that bid-ask spreads have narrowed, with sellers more open to structuring deals that share future risks [82]