Victory Capital Reports Record Fourth-Quarter and Full-Year Earnings Per Share

Fourth-Quarter Highlights

• Total Client Assets of $176.1 billion
• Long-term gross flows of $6.6 billion
• Long-term net flows of ($1.7) billion
• GAAP operating margin of 48.1%
• GAAP net income per diluted share of $1.17
• Adjusted EBITDA margin of 54.0%
• Adjusted net income with tax benefit per diluted share of $1.45
• Board authorizes 7% increase in regular quarterly cash dividend to $0.47
• New $200 million share repurchase plan

Victory Capital Holdings, Inc. (NASDAQ:VCTR) ("Victory Capital" or "the Company") today reported financial results for the quarter ended December 31, 2024.

"2024 was a transformational year for Victory Capital," said David Brown, Chairman and Chief Executive Officer. "During 2024, we entered into a strategic relationship with Amundi Asset Management S.A.S ("Amundi") that will elevate our Company in several ways. Through the acquisition of its U.S. business, the former Pioneer Investments, we will further diversify and deepen our investment capabilities as well as strengthen our U.S. intermediary distribution efforts. Simultaneously, the 15-year exclusive distribution agreement will globalize our Company by substantially broadening and deepening our distribution reach outside of the U.S.

"We remain on track to close the acquisition by the end of the first quarter of 2025, and we are reaffirming our previous guidance of $100 million in expense synergies.

"Our business and financial performance for the fourth quarter and full year produced record results. We achieved the highest adjusted earnings per diluted share with tax benefit, adjusted EBITDA, and adjusted EBITDA margin in the history of our firm for both the quarterly and full-year periods.

"Our Investment Franchises and Solutions platform continued to deliver strong investment performance for our clients. The percentage of our AUM outperforming benchmarks over the respective 3-, 5-, and 10-year periods was 59%, 73%, and 79% at year end. In addition, 66% of our AUM in mutual funds and ETFs was rated four or five stars overall by Morningstar.

"We continued to return capital to our shareholders during the quarter. In December, the Board authorized a new $200 million share repurchase program expanding on the prior $100 million authorization that was completed during the quarter. The Board also authorized a 7% increase in our quarterly cash dividend to $0.47 per share, which will be paid in March and is the highest quarterly dividend payout in our Company history.

"As always, we continue to focus on serving our clients, which is our top priority."

The table below presents AUM, and certain GAAP and non-GAAP ("adjusted") financial results. Due to rounding, AUM values and other amounts in this press release may not add up precisely to the totals provided.

AUM, Flows and Investment Performance

At December 31, 2024, Victory Capital had total client assets of $176.1 billion, assets under management of $171.9 billion, and other assets of $4.2 billion. Total AUM decreased by $4.2 billion to $171.9 billion at December 31, 2024, compared with $176.1 billion at September 30, 2024. The decrease was due to negative market action of $2.2 billion and net outflows of $1.9 billion. Total gross flows for the fourth quarter were $6.8 billion, including long-term gross flows of $6.6 billion.

As of December 31, 2024, Victory Capital offered 124 investment strategies through its 11 autonomous Investment Franchises and Solutions Platform. The table below presents outperformance against benchmarks by AUM as of December 31, 2024.

Fourth Quarter 2024 Compared with Third Quarter 2024

Revenue increased 3.0% to $232.4 million in the fourth quarter, compared with $225.6 million in the third quarter, primarily due to higher average AUM over the comparable period. GAAP operating margin contracted 520 basis points in the fourth quarter to 48.1%, down from 53.3% in the third quarter primarily due to a $15.6 million increase in compensation related expenses partially offset by a $2.9 million decrease in acquisition-related costs. Fourth quarter GAAP net income decreased 6.2% to $76.9 million, or $1.17 per diluted share, down from $82.0 million, or $1.24 per diluted share, in the prior quarter.

Adjusted net income with tax benefit increased 6.8% to $95.1 million, or $1.45 per diluted share in the fourth quarter, up from $89.0 million, or $1.35 per diluted share, in the third quarter. Adjusted EBITDA increased 3.5% to $125.5 million in the fourth quarter, versus $121.3 million in the third quarter. Adjusted EBITDA margin expanded 30 basis points in the fourth quarter of 2024 to 54.0% compared with 53.7% in the prior quarter.

Fourth Quarter 2024 Compared with Fourth Quarter 2023

Revenue for the three months ended December 31, 2024, increased 12.9% to $232.4 million, compared with $205.8 million in the same quarter of 2023 as a result of higher average AUM over the comparable period. Operating expenses increased 1.0% to $120.6 million, compared with $119.5 million in last year's fourth quarter due to the combination of increases in compensation and acquisition related expenses, partially offset by a non-cash difference in amounts recorded to the change in the fair value of consideration payable for acquisitions as well as a decrease in general and administrative expenses. GAAP operating margin expanded 620 basis points to 48.1% in the fourth quarter, from 41.9% in the same quarter of 2023. GAAP net income increased 39.4% to $76.9 million, or $1.17 per diluted share, in the fourth quarter compared with $55.2 million, or $0.82 per diluted share, in the same quarter of 2023.

Adjusted net income with tax benefit increased 23.5% to $95.1 million, or $1.45 per diluted share, in the fourth quarter, compared with $77.0 million, or $1.15 per diluted share in the same quarter last year. Adjusted EBITDA increased 16.7% to $125.5 million, compared with $107.6 million in the same quarter of last year. Year-over-year, adjusted EBITDA margin expanded 170 basis points to 54.0% in the fourth quarter of 2024, compared with 52.3% in the same quarter last year.

Year Ended December 31, 2024 Compared with Year Ended December 31, 2023

Revenue for the year ended December 31, 2024, increased 8.8% to $893.5 million, compared with $821.0 million in the same period of 2023. The increase was primarily due to higher average AUM.

Operating expenses decreased 5.4% to $466.0 million for the year ended December 31, 2024, compared with $492.6 million in the same period in 2023 due to the combination of a non-cash $20.5 million difference in amounts recorded to the change in the fair value of consideration payable for acquisitions as well as a decreases in compensation related expenses, distribution and other asset based expenses, and depreciation and amortization expense, partially offset by an increase in acquisition-related costs. GAAP operating margin was 47.8% for the year ended December 31, 2024, a 780 basis point increase from the 40.0% recorded in the same period in 2023. GAAP net income increased 35.5% to $288.9 million, or $4.38 per diluted share, in 2024 compared with $213.2 million, or $3.12 per diluted share, in 2023.

Adjusted net income with tax benefit increased 14.7% to $353.1 million for the year ended December 31, 2024, up from $307.9 million in 2023. On a per-share basis, adjusted net income with tax benefit increased 18.8% to $5.36 per diluted share for the year ended December 31, 2024 compared to $4.51 per diluted share in 2023. For the year ended December 31, 2024, adjusted EBITDA increased 13.8% to $475.6 million, compared with $418.0 million for the same period in 2023. Year-over-year, adjusted EBITDA margin expanded 230 basis points to 53.2% for the year ended December 31, 2024, compared with 50.9% in the previous year.

Balance Sheet / Capital Management

The total debt outstanding as of December 31, 2024 was approximately $972 million and consisted of an existing term loan balance of $625 million and the 2021 Incremental Term Loans balance of $347 million.

The Company's Board of Directors approved a regular quarterly cash dividend of $0.47 per share. The dividend is payable on March 10, 2025, to shareholders of record on February 18, 2025.

Conference Call, Webcast and Slide Presentation

The Company will host a conference call tomorrow morning, February 7, at 8:00 a.m. ET to discuss the results. Analysts and investors may participate in the question-and-answer session. To participate in the conference call, please call 1-800-715-9871 (domestic) or 1-646-307-1963 (international), shortly before 8:00 a.m. ET and reference the Victory Capital Conference Call. A live, listen-only webcast will also be available via the investor relations section of the Company's website at https://ir.vcm.com. Prior to the call, a supplemental slide presentation that will be used during the conference call will be available on the Events and Presentations page of the Company's investor relations website. For anyone who is unable to join the live event, an archive of the webcast will be available for replay shortly after the call concludes.

About Victory Capital

Victory Capital is a diversified global asset management firm with total assets under management of $171.9 billion, and $176.1 billion in total client assets, as of December 31, 2024. The Company employs a next-generation business strategy that combines boutique investment qualities with the benefits of a fully integrated, centralized operating and distribution platform.

Victory Capital provides specialized investment strategies to institutions, intermediaries, retirement platforms and individual investors. With 11 autonomous Investment Franchises and a Solutions Business, Victory Capital offers a wide array of investment products and services, including mutual funds, ETFs, separately managed accounts, alternative investments, third-party ETF model strategies, collective investment trusts, private funds, a 529 Education Savings Plan, and brokerage services.

Victory Capital is headquartered in San Antonio, Texas, with offices and investment professionals in the U.S. and around the world. To learn more please visit www.vcm.com or follow Victory Capital on Facebook, Twitter, and LinkedIn.

FORWARD-LOOKING STATEMENTS

This earnings release may contain forward-looking statements within the meaning of applicable U.S. federal and non-U.S. securities laws. These statements may include, without limitation, any statements preceded by, followed by or including words such as "target," "believe," "expect," "aim," "intend," "may," "anticipate," "assume," "budget," "continue," "estimate," "future," "objective," "outlook," "plan," "potential," "predict," "project," "will," "can have," "likely," "should," "would," "could" and other words and terms of similar meaning or the negative thereof and include, but are not limited to, statements regarding the proposed transaction and the outlook for Victory Capital's or Amundi's future business and financial performance. Such forward-looking statements involve known and unknown risks, uncertainties and other important factors beyond Victory Capital's and Amundi's control and could cause Victory Capital's and Amundi's actual results, performance or achievements to be materially different from the expected results, performance or achievements expressed or implied by such forward-looking statements.

Although it is not possible to identify all such risks and factors, they include, among others, the following: continued geopolitical uncertainty including the conflicts in Ukraine and Israel, risks that the conditions to closing the transaction with Amundi US will be satisfied and the transaction will close on the anticipated timeline, if at all; risks associated with expected benefits, or impact on our business, of the proposed transaction, including our ability to achieve any expected synergies; reductions in AUM based on investment performance, client withdrawals, difficult market conditions and other factors such as a pandemic; the nature of the Company's contracts and investment advisory agreements; the Company's ability to maintain historical returns and sustain its historical growth; the Company's dependence on third parties to market its strategies and provide products or services for the operation of its business; the Company's ability to retain key investment professionals or members of its senior management team; the Company's reliance on the technology systems supporting its operations; the Company's ability to successfully acquire and integrate new companies; the concentration of the Company's investments in long-only small- and mid-cap equity and U.S. clients; risks and uncertainties associated with non-U.S. investments; the Company's efforts to establish and develop new teams and strategies; the ability of the Company's investment teams to identify appropriate investment opportunities; the Company's ability to limit employee misconduct; the Company's ability to meet the guidelines set by its clients; the Company's exposure to potential litigation (including administrative or tax proceedings) or regulatory actions; the Company's ability to implement effective information and cyber security policies, procedures and capabilities; the Company's substantial indebtedness; the potential impairment of the Company's goodwill and intangible assets; disruption to the operations of third parties whose functions are integral to the Company's ETF platform; the Company's determination that Victory Capital is not required to register as an "investment company" under the 1940 Act; the fluctuation of the Company's expenses; the Company's ability to respond to recent trends in the investment management industry; the level of regulation on investment management firms and the Company's ability to respond to regulatory developments; the competitiveness of the investment management industry; the level of control over the Company retained by Crestview GP; and other risks and factors listed under "Risk Factors" and elsewhere in the Company's filings with the SEC.

Such forward-looking statements are based on numerous assumptions regarding Victory Capital's present and future business strategies and the environment in which it will operate in the future. Any forward-looking statement made in this press release speaks only as of the date hereof. Except as required by law, Victory Capital assumes no obligation to update these forward-looking statements, or to update the reasons actual results could differ materially from those anticipated in the forward-looking statements, even if new information becomes available in the future.