Victory Capital(US:VCTR)2021-05-10 05:02Financial Data and Key Metrics Changes - Total AUM reached $154.3 billion, with long-term AUM at $151 billion, both record highs [10] - Revenues increased by 6% quarter-over-quarter to $213 million, driven by higher AUM and improved average fee rates [11][43] - Adjusted earnings per share rose by 6% to $1.13, reflecting a tax benefit [12][56] - Adjusted EBITDA margins remained above 50% for the third consecutive quarter, recorded at 50.2% [12][44] - GAAP net income increased to $65.2 million or $0.88 per diluted share, up from $54.9 million or $0.75 per diluted share in the previous quarter [45] Business Line Data and Key Metrics Changes - Investment performance remained strong, with the majority of AUM outperforming benchmarks [14] - The acquisition of THB Asset Management added a 5-star rated Micro Cap Fund to the product lineup [15] - The number of mutual funds and ETFs with 4 or 5-star ratings by Morningstar grew to 45, representing 62% of AUM in mutual fund and ETF wrappers [16] Market Data and Key Metrics Changes - Long-term gross sales increased by 18% during the quarter, while net long-term outflows improved to $983 million, a 33% reduction from the previous quarter [49] - The floating rate fund and high-yield fund performed well, attracting positive net flows due to the evolving interest rate environment [20][104] Company Strategy and Development Direction - The company is optimistic about long-term organic growth, particularly through the integration of THB and investments in Alderwood [16][18] - Focus on expanding distribution channels and enhancing product offerings in response to changing market conditions [19][24] - Active pursuit of acquisitions to enhance scale and distribution capabilities, with a favorable environment for M&A [41][100] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about organic growth prospects, citing improved net flows and strong investment performance [49][76] - The company is well-positioned to benefit from shifts in investor preferences and potential changes in interest rates and tax policies [115] - The management highlighted the importance of maintaining a flexible balance sheet to capitalize on M&A opportunities [41][106] Other Important Information - The company paid down an additional $50 million in debt during the quarter, reducing the net debt to annualized adjusted EBITDA leverage ratio to 1.6 times [12][58] - A quarterly dividend of $0.12 per share was declared, representing a 140% increase since the same time last year [13] Q&A Session Summary Question: Can you elaborate on the components within compensation expense? - Management noted seasonal increases in payroll taxes and employee benefits, with a $2.9 million quarter-over-quarter increase attributed to seasonality [62][63] Question: What is the potential ramp-up of AUM within THB? - Management indicated that it will take time to fill the $15 billion capacity in THB products, with expectations for gradual growth starting in 2021 [66][67] Question: How do you quantify the shift from outflows to inflows? - Management acknowledged a lessening impact from the USAA Schwab transaction and highlighted investments in distribution as key contributors to improved flows [72][74] Question: Can you provide details on the impact of fulcrum fees? - The negative impact of fulcrum fees was noted as negative 0.4 basis points in the first quarter, with potential upside of 1 to 2 basis points as performance improves [78][80] Question: What is the current M&A environment like? - Management described the M&A environment as favorable, with many firms considering transactions due to ongoing industry challenges [99][100] Question: What drove positive net flows in fixed income this quarter? - Management attributed positive net flows in fixed income to strong product performance and increased distribution capabilities [104]