Good morning and welcome to the Victory Capital fourth quarter 2024 earnings conference call. All callers are in listen-only mode. Following the company’s prepared remarks, there will be a question and answer session. I will now turn the call over to Mr. Matthew Dennis, Chief of Staff and Director of Investor Relations. Please go ahead, Mr. Dennis.

Thank you. Before I turn the call over to David Brown, I would like to remind you that during today’s conference call, we may make a number of forward-looking statements. Victory Capital’s actual results may differ materially from these statements. Furthermore, please note that the ultimate completion of a transaction with Amundi remains subject to certain closing conditions. Please refer to our SEC filings for a list of some of the factors that may cause actual results to differ materially from those expressed on today’s call. Victory Capital assumes no duty and does not undertake any obligation to update any forward-looking statements. Our press release that was issued after the market closed yesterday disclosed both GAAP and non-GAAP financial results. We believe the non-GAAP measures enhance the understanding of our business and our performance. Reconciliations between these non-GAAP measures and the most comparable GAAP measures are included in tables that can be found in our earnings press release and in the slides accompanying this call, both of which are available on the Investor Relations portion of our website at ir.vcm.com. It is now my pleasure to turn the call over to David Brown, Chairman and CEO. David?

Thanks Matt. Good morning and welcome to Victory Capital’s fourth quarter 2024 earnings call. I’m joined today by Michael Pilicarpo, our President, Chief Financial and Administrative Officer, as well as Matt Dennis, our Chief of Staff and Director of Investor Relations. I’ll start today by providing an overview of the fourth quarter and the full year 2024. After that, I will turn the call over to Mike to review the financial results in greater detail. Following our prepared remarks, Mike, Matt and I will be available to answer your questions. The quarterly business overview begins on Slide 5. Long term net flows improved in the fourth quarter, helped by accelerated gross sales. Although there was improvement, we are not at the level the organization is fully capable of. That said, we are beginning to realize success from our prior investments in several areas, with a good example being the acceleration of our growth in our ETF platform, Victory Shares. During the fourth quarter and throughout the entire year, we achieved strong sales of our rules-based and active ETFs. These are high margin products for us that are priced competitively with reasonable costs to manufacture and distribute. We ended December with $176.1 billion of total client assets, which was up $9.5 billion or 6% from the end of last year. During the fourth quarter, average assets rose compared to the third quarter and our fee rate remained strong, resulting in record revenue for the quarter and full year. Our adjusted earnings per diluted share with tax benefit rose more than 7% to $1.45 in the quarter, which was also a record high, and up 26% from $1.15 in last year’s final quarter. Year-over-year adjusted earnings per diluted share rose 19% from $4.51 in 2023 to $5.36 in 2024. Adjusted EBITDA and…

Thanks Dave, and good morning everyone. The financial results review begins on Slide 11. Average assets under management rose 2% in the fourth quarter to $176 billion and our fee realization increased for the quarter, driving revenue up to $232.4 million, which is the highest quarterly revenue in our history. For the full year, we generated record high revenue of $893 million, which was a 9% increase from 2023. Fourth quarter GAAP operating income was $111.7 million, which was up 29% from the same quarter last year. GAAP earnings per diluted share was $1.17 for the fourth quarter and $4.38 for the full year. Year-over-year GAAP earnings rose more than 40% from $3.12 per diluted share for 2023. Adjusted EBITDA was $125.5 million in the fourth quarter, which was 3% higher than in the third quarter, and adjusted EBITDA margin expanded 30 basis points to 54%. Adjusted net income with tax benefit rose to a record $95.1 million in the quarter. This was up 7% from the third quarter and 24% higher than last year’s fourth quarter. For the full year, we generated adjusted net income with tax benefit of $353.1 million, which was up 15% from the prior year. Turning to the balance sheet, our cash balance at the end of the year was $127 million following the return of $132.4 million to shareholders in the form of share repurchases and cash dividends in the fourth quarter. Our net leverage ratio was unchanged at 1.7 times from Q3, driven by growth in earnings and a modest debt pay down of $20 million in December. Finally, yesterday we also announced that the Board authorized a 7% dividend increase, raising the quarterly dividend to $0.47 per share. The first quarter dividends will be paid on March 10 to shareholders of record…

[Operator instructions] Your first question comes from the line of Alex Blostein with Goldman Sachs. Alex, please go ahead.

Hey everybody, this is Anthony on for Alex. It’s nice to see the organic growth profile improving in January, and I guess as we look out into 2025, what strategies do you expect to be most in favor and contribute the most to organic growth?

Good morning, it’s Dave. A couple pieces to that question. The first piece, just Victory, as we said in our prepared remarks, our Victory Shares ETF platform is doing really well. We’re seeing strong growth there, and I would expect that to continue throughout the year. Additionally in our institutional channel, we’re seeing a lot of opportunities. We have a large won but not yet funded part of our pipeline is there in that channel in a few different franchises, and then bringing on Amundi and Amundi’s organic growth profile, where they have had net flow positive in ’24, they’re off to a great start in ’25 in really all of their channels, coupled with what we have--you know, the opportunities we have, we think, putting that together will be where we see the growth.

Thanks, that’s helpful. I guess as a follow-up, on the Amundi deal just from a revenue perspective, what sort of revenue synergies do you expect and how soon do you expect to see the flow benefits from the distribution partnership?

Morning, it’s Mike. I think with respect to the distribution agreement, just a reminder, we’ve really established a 15-year exclusive distribution agreement with Amundi, where active traditional products will be pushed, if you will, through their global distribution network. As we mentioned in the prepared remarks, that channel exists today with the Amundi U.S. products and is currently organic growth positive. As we think about the addition of Victory products to that distribution network, we’re excited. We’re still working on which products will be launched and which products will be pushed through that distribution channel, but we’ve spent a lot of time really evaluating and understanding the needs of clients globally, and as we move forward, we know it will be additive to the overall growth profile, organic growth profile for Victory. We’re not in a position today to provide specifics around that, but as we close the transaction, we’ll come out with more specifics related to that; but again, we’re excited about being able to add strong Victory product through that sizeable distribution network.

Okay, thank you.

Your next question comes from the line of Ken Worthington with JP Morgan. Ken, please go ahead.

Hi, good morning. This is Michael Cho in for Ken. Thanks for taking my question. I just wanted to touch on margins - you know, Victory’s margins just seem to continue to rise every quarter, so without asking about the new long term targets or anything like that, I was just wondering if you could talk through any margin differences across the different products or vehicles. I think you called out in your comments that maybe the rules-based ETFs are higher margin products, so I’m just kind of curious if you can flesh that commentary out to kind of a broader perspective of maybe margin differences, or nuances we should consider in light of the 2025 flows comment you made as well. Thank you.

Sure Michael. As we think about our operating platform and the business structure that we have, I think we have identified and said that greater than two-thirds of our expenses are variable, and that really comes with having a single operating platform to allow us to leverage and invest really once across all franchises, all vehicles inclusive of our ETFs, mutual funds, institutional business, retail SMA and model delivery business. That single platform really allows for significant scale, and as we look at how we’ve derived that expense base with greater than two-thirds being variable, the ETF business is just as profitable as the rest of the business, despite having slightly lower revenue realization. Again, the ETFs that Dave mentioned in the prepared comments, they’re not passive ETFS, they’re active and rules-based that have a fair revenue realization to them, and when we apply, if you will, the business infrastructure across that, we still maintain very strong margins competitive to any other distribution channel and any other product vehicle that we have, so it really is that single platform and the variable expense model that we think drives the current margins that we have and continues to drive the investments that we’re making to support future growth.

Great, thanks for that. If I could just quickly follow up, you mentioned pipeline, or won not yet funded pipeline in terms of the largest ever. I was wondering if you can provide any context or color around the pipeline as it sits today, and any color on the composition of that institutional pipeline. Thank you.

Sure, it’s Mike. We don’t necessarily provide the specifics, but I think in Dave’s comments, he mentioned it’s as large as we’ve ever seen it in the history of the business, which is very compelling as we sit here today. It’s also not just a particular product or franchise, it stems across a number of different franchises as well as different channels, so both intermediary and institutional business, and then within institutional, the sub-channels are also represented. We expect that the pipeline from a won not funded perspective, most if not all of that will fund in 2025, and it again is broad-based across a number of different franchises and products within franchises.

Great, thank you.

Your next question comes from the line of Kenneth Lee with RBC Capital Markets. Kenneth, please go ahead.

Hey, good morning. Thanks for taking my question. Just following up on Amundi and the potential introduction of Victory products in the non-U.S. distribution, assuming you’ve selected certain products, how rapidly in terms of time frames could you potentially introduce products? What are the key gating factors? Is there any kind of regulatory or product design or vehicle selection things that we should think about? Thanks.

Yes, that will happen really throughout 2025 and into ’26 for the Victory products. I would expect after we close, most of the flow will come through the existing or the legacy Amundi U.S. products that are already into the channels, already have the products registered, established, sales force educated on them, and so that will continue and accelerate with our investment in that channel. Then as ’25 moves through, I would anticipate that we have the legacy Victory products registered, educating the sales force, and then getting momentum in the different geographies and really seeing a benefit as we end ’25 and go into ’26. Each geography is going to have its own set of regulatory rules. We’ll be registering different products. On the institutional side, it will be educating the sales force, so there will be a large effort around that. But the great part about this is today as Amundi U.S. stands, they have the infrastructure, they’re successful in selling the products outside the U.S. It has been growing, I think I referenced in my prepared remarks, since the acquisition of Amundi in 2017 - Amundi U.S., they have been positive from a sales perspective, so we’ll just be plugging into that and really accelerating that, and then introducing our products. But as we look out and we get out of the quarter and we start to look in the future from a year’s perspective, we think it’s going to be a really compelling growth opportunity for us, diversify our business, and really differentiate us from many other U.S. managers that have this kind of distribution channel outside the U.S. for a U.S.-based manager.

Great, very helpful there. Then just changing over to another topic, on the M&A opportunity there, you previously mentioned there could be some additional opportunities over the near term. Just wanted to get a little bit more color in terms of how active is the discussion pipeline that you’ve having and what are your thoughts in terms of the outlook for potential M&A this year? Thanks.

Yes, I think building on some of the comments I’ve made over the previous quarters, we are very busy from a discussion perspective. I think the industry is primed for a lot of consolidation and I think you’re starting to see that, and I think it will accelerate in ’25 and really in the out years, and we will participate in that. After we close the acquisition, our balance sheet--our leverage will go down quite significantly. Our balance sheet will be primed, and I would anticipate that we would be as active as anybody in the industry. I think our platform is super attractive for the right kind of partner, and we are a willing participant in the consolidation, so my anticipation is that we are going to continue down the path we’ve had over the years, and that has been really--been very acquisitive, so that’s where we are today. We’re super excited about it as well. The discussions we’re having, the opportunities are as compelling as I’ve ever seen in my career when I look at the opportunities and the discussions we’re having.

Great, very helpful there. Thanks again.

Our next question comes from the line of Etienne Ricard with BMO Capital Markets. Etienne, please go ahead.

Okay, thank you and good morning. Just to circle back on operating margins, I’m curious to hear relative to the 49% target that you have, in what areas of the organization have you seen better than expected operating leverage, and just to circle back on Amundi, what’s giving you the confidence that current systems in place can handle a much larger AUM base? Thank you.

Hey Etienne, good morning, it’s Mike. Yes, I would say we are--as I mentioned before, kind of the single operating platform that we run, it is world-class, it is highly scalable in the nature of how we have designed it. We leverage significant partner relationships that allow us to on-board and integrate M&A and have done so since the beginning of the business model back in 2013. That gives us the confidence, along with the people and the experience that we have, that we can and have assessed, if you will, the current Amundi U.S. business to be able to put that onto the platform, make the investments that we need to for areas where there is differentiation from a product perspective or a client perspective, and continue to operate the business long term at the margins that we’ve identified, that are robust and probably at the top of the industry. That long term 49% guidance is still something that we’re confident in, even post on-boarding the Amundi transaction. There’s really nothing in the Amundi U.S. business that is significantly differentiated - you know, we’re a traditional active asset management business, and so we feel very confident that post the integration, we’ll be able to operate the business at the long term margins, still making the investments in areas that we believe will provide long term organic growth. Those investments that we’ve made and continue to make support data, Dave mentioned ETF specialists with respect to distribution and marketing, technology support. We’re continuing to invest in the intermediary distribution channel, and really all of those investments that we’re making and will continue to make through the Amundi U.S. transaction will continue to position us to be--to be well positioned for continued M&A as well as organic growth.

Great, I appreciate the details. Switching on net flows, you’ve seen demand for some of your global strategies on the non-U.S. side. Can you share more details as to what explains this relatively stronger performance?

Yes, so where we’ve seen strength in the global equity and international equity segment of our business really has been with respect to the RS Global product. That product has outstanding short and long term investment performance. They’ve got a very differentiated investment process that has allowed them to continue to perform excellently throughout all market cycles over the last decade-plus, and we’re seeing significant opportunities, both on the institutional side as well as on the intermediary side with respect to that product offering because of the strong performance, because of the depth of the team, because of the strength of the team, and really they’ve just continued to perform very well, which has led to a significant amount of opportunities.

Thank you very much.

Our next question comes from the line of Benjamin Budish with Barclays. Benjamin, please go ahead.

Good morning, this is Mason on for Ben. Can you provide a mark-to-market on Amundi since our last update? What does AUM look like, and how are flows trending?

Yes, so as Dave mentioned in our prepared remarks, the Amundi U.S. business for 2024 was net flow positive. What you can see publicly in their mutual fund business, the flows were roughly $2.6 billion net flow positive across their fixed income, multi-asset and equity products. We also highlighted that their other distribution channel, which really was that global network, was positive organic growth as well, and those trends have continued into January. At year end, the AUM was approximately $114 billion for Amundi U.S., which again as we mentioned, the performance of the Amundi U.S. business throughout 2024 really outpaced our expectations and what we diligenced, so we’re super excited to have tailwinds in that business as it comes onto our platform, and we continue to look at organic growth opportunities post the transaction.

I would add - it’s Dave, I would add a few more things. I’d say, one, going into ’25 they still have that net flow positive--it’s net flow positive on the mutual fund side, and you can see that publicly for January the investment performance is still strong. I would reiterate what Mike said, which is this is a business that has really picked up momentum in ’24 and going into ’25, and it is exceeding what we anticipated, so from our perspective when we diligenced the business, we thought it was great, and it’s now exceeded that and we’re super excited about that, and really excited to bring it onto our platform, combine forces and really, I think, provide a trajectory that’s much more positive from a net flow perspective, putting our organizations together. One of the great benefits of this transaction is we are going to have a larger U.S. intermediary sales effort, and from an FTE perspective, from a partnership with platform perspective, from a marketing perspective, and that should benefit our entire platform, not just the legacy Amundi U.S. and not just a few products but we should see it across our entire platform.

Thank you. Can you also provide an update on flows at Sycamore in particular? I recall that the franchise was the source of some your outflows last year, so can you just remind us of some of the dynamics there? Thank you.

We don’t provide specific flows on each franchise. Sycamore is one of our larger franchises. It has excellent long term investment performance and it has a really big client following on the intermediary side and on the institutional side. It is a franchise that has had some outflows, but long term we’re not concerned with the franchise at all. It is an excellent investment team, they have an excellent investment process. It’s a deep team, and I’d say anything that’s going on at Sycamore is really just a small cycle in a much longer term positive cycle for them.

Thank you.

Our next question comes from the line of Bench Ruben [ph] with UBS. Bench, please go ahead.

Hi, thanks for taking my questions. My first one is on the ETF business. Victory Shares had over $1 billion of flows in fourth quarter, stronger than your recent quarters and a much better 2024 overall, which you called out in your prepared remarks. I’m just curious what products or strategies are driving that improvement, and then also, what are your expectations for active ETFs going into 2025? Thank you.

Sure, so in ’24, we had a few ETFs that really did well and I think started to emerge, and I would bucket them, first, our group of fixed income active ETFs run by our Victory Income Investors franchise. There are a number of ETFs there that were net flow positive and really, with the market tailwinds and our ability to get them across our distribution system, have really started to pay back and I expect that to continue in ’25. The launch really of our free cash flow series group of ETFs, led by what we call VFLO, which is V-F-L-O, S-F-L-O, which is SFLO, and then also a few other ones that we just launched and will be launching around our free cash flow series. We’ve seen very good flows from that perspective. Four of our five top sellers in ’24 were actually active, and even our passive ETFs really are not passive from a beta replication perspective. Our passive ETFs are really rules-based and thematic type ETFs that really compete with active products. A good example is VFLO - it’s a 50 stock portfolio, it’s priced like an active product, acts like an active, we just rules to express our investment thesis. In ’25, we’re off to a tremendous start on the ETF side, and I anticipate that it’s going to accelerate as we move through the year. There’s great market tailwinds from what’s happening in the industry plus the way we’re positioned, and lastly I would add we have invested from a sales perspective on the ETF side. We now have ETF sales specialists, we’re focusing some of our marketing efforts there, we’re expanding our distribution platform relationships on the ETF side, so we really believe that Victory Shares is going to be a big part of our future and is going to help us drive organic growth.

Great, thanks for that color.

Our final question comes from the line of Michael Cyprys with Morgan Stanley. Michael, please go ahead.

Hey, this is Annaleigh [ph] on for Mike. Just a question on capital allocation - how should we think about this going forward, just given the raised dividend and also with the new buyback program? How should we think about timing of completion of the program and how are you also thinking about debt pay-down and scope for the dividend over time? Thanks.

I’ll start off on this and Mike can fill in afterwards. First and foremost, our use of capital is to do accretive acquisitions - I mean, that is the most important thing for us and the most strategic thing for us, and I think that has the potential for the highest shareholder return. We have been able to balance that while also increasing our dividend over the years and buying back our stock. Both buying back our stock and our dividend program are ancillary ways of returning capital. We love buying our stock. We think the stock is undervalued based on today and based on the future, and we also like returning capital through dividends, and you can see through our increase and really our historic history of increasing the dividend over the years. We are--as I said earlier, we are going to participate in acquisitions. We’re having really compelling discussions and our balance sheet is really--the first use of our balance sheet is going to be able to execute on those acquisitions. Depending on how that goes, that will drive our buyback program, that will drive our dividend program, but we believe that we can balance all of that out as we’ve done in the past, and I would anticipate looking forward, our Board put in a $200 million program to buy our stock. We’re going to be opportunistic, we’re going to look at the facts on a daily basis, and we’ll execute it where it makes sense. We’ll continue to look at increasing the dividend, assuming that we can balance out the acquisition side.

Great, thanks. Then maybe a follow-up on WestEnd, can you just update us on how the investment performance is trending there and how that’s contributing to flows, and then also maybe on how you’re expanding wallet with existing advisors and how that’s evolving. Thanks.

Sure, so since we acquired WestEnd, they have been net flow positive. Their performance in 2024 was not up to the standard that we had hoped. It is having a much better start in 2025. We have expanded quite significantly the number of advisors since we’ve acquired the business that they’re doing business with pretty extensively, and we’ve also expanded the number of platforms that they’re doing business on, so there’s a great opportunity there, we think, with the improvement in investment performance, the market dynamics for their products, and we’ve also launched a number of new products for them, including an ETF that has gotten a lot of traction. The ETF is M-O-D-L. We’re pretty bullish on the opportunity to grow WestEnd, and we’re also--you know, we also know from an investment perspective, they’re excellent at what they do and we’re starting to see some of the investment performance return to the levels that we expect of them.

Great, thank you.

That concludes our Q&A session. I will now hand it over to David Brown for any closing remarks. David?

Thank you, and thank you for your interest in Victory Capital. Next week, we will be attending the UBS Financial Services Conference, as well as the BofA Securities 2025 Financial Services conference in Miami. Next month, we will be at the RBC 2025 Global Financial Institutions Conference in New York. We hope to see you at one of those events and hope you have a great rest of the day. In the interim, please if you have any questions, please feel free to contact us at any time. Thank you.

This concludes the meeting. Thank you all for joining. You may now disconnect.