Victory Capital(US:VCTR)2025-05-09 13:02Financial Data and Key Metrics Changes - Total client assets at the end of March were $171 billion, slightly down from the start of the year, with average AUM approximately 1% lower compared to the fourth quarter [6] - Revenue for the first quarter was $219.6 million, down about 5% from the fourth quarter due to lower average AUM and fewer days in the quarter, but year-over-year revenue was higher [21][22] - Adjusted earnings per diluted share with tax benefit was $1.36, marking the second highest quarterly EPS in company history and a record for any first quarter [9][30] - Adjusted EBITDA was $116 million with a margin of 53%, reflecting a 90 basis point expansion from the first quarter of the previous year [30] Business Line Data and Key Metrics Changes - Gross sales increased by 41% from the last quarter, reaching $9.3 billion, the highest level of quarterly gross sales in three years [6] - The ETF AUM increased to over $13 billion, a 28% increase during the quarter and up 67% year-over-year [8] - The Amundi acquisition resulted in a doubling of fixed income AUM as a percentage of total assets from 14% to 28% [11] Market Data and Key Metrics Changes - The company ended the quarter with $44 billion of AUM sourced from clients outside the U.S., representing 15% of total AUM, compared to less than 5% previously [12][24] - Pioneer Investments generated positive net long-term flows of $1.7 billion in the first quarter, which is not included in the company's numbers due to the transaction closing on April 1 [13][27] Company Strategy and Development Direction - The company is strategically investing in distribution channels, data, technology, marketing, and intermediary partnerships to enhance organic growth [10][19] - Plans for several ETF launches in 2025 are underway, with a focus on expanding the product lineup [9][19] - The company aims to maintain a long-term margin target of 49%, despite short-term integration costs from the Amundi acquisition [45] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the underlying activity around flows, viewing the two large redemptions as one-time events that should not distort organic growth progress [7] - The company is well-positioned for organic growth with a larger sales force and enhanced resources dedicated to distribution efforts [19][66] - Management anticipates a potential acquisition announcement in 2025, leveraging the improved balance sheet and cash position [58] Other Important Information - The company returned $39 million to shareholders during the first quarter and increased the quarterly dividend to $0.49 per share [22] - The net leverage ratio remained steady at 1.7 times, with cash on hand increasing to $176 million [22][31] Q&A Session Summary Question: Can you elaborate on the rollout of new products outside the U.S.? - Management indicated that they are working with Amundi to identify successful products for international markets, with launches expected in the latter half of 2025 [35][38] Question: How will margins evolve in the near term? - Management confirmed that while margins are currently at 53%, they expect a slight decline during integration efforts, but remain bullish on achieving long-term targets of 49% [42][45] Question: What is the state of the acquisition pipeline? - Management stated that the company is in a strong position to execute sizable transactions and is leaning towards larger scaled opportunities [56][58] Question: How are fixed income and solutions performing in volatile markets? - Management noted that the fixed income platform has expanded and performed well, with positive net flows observed in the first quarter [64][66] Question: Have there been any dissynergies from the Amundi acquisition? - Management reported no dissynergies from the Amundi acquisition, highlighting positive net flows from Pioneer Investments [72][74] Question: What investments are being made to enhance organic growth? - Management detailed significant investments in sales, marketing, and data technology to support organic growth, with success measured by growth in business [84][87] Question: How important are alternative investment products for future acquisitions? - Management acknowledged the importance of alternative investments and is evaluating various strategies to incorporate them into the platform [90][92] Question: What is the rationale behind the change in dividend policy? - Management explained that the change allows for more opportunistic increases while prioritizing capital for acquisitions and growth [96][98]