Victory Capital Holdings, Inc. (VCTR) Q4 2025 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
The earnings call summary and Q&A reflect a positive sentiment. The company reported strong financial metrics, including record EBITDA and a low net leverage ratio, demonstrating financial health. Despite some net outflows, underlying growth areas showed positive net flows. The Q&A revealed optimism in international expansion and readiness for strategic acquisitions. Shareholder returns through dividends and buybacks further bolster the positive outlook. The market cap suggests a moderate reaction, leading to a predicted stock price increase of 2% to 8%.
Key Financial Performance
Annual Revenue Surpassed $1 billion for the first time in the company's history, marking a significant milestone. This growth underscores the strength of the diversified platform and momentum built for future growth.
Total Client Assets (AUM) Ended the year with $317 billion, an increase of $140.5 billion or 80% year-over-year. This growth was driven by the integration of Pioneer Investments and strong client engagement.
Long-term Gross Flows Achieved $17.1 billion, the highest level ever of quarterly gross sales, up 159% year-over-year from $6.6 billion in Q4 2024. Growth was supported by new products, expanded U.S. sales force, and international distribution.
Long-term Net Flows Reported minus $2.1 billion, reflecting several one-time items such as a $1 billion redemption by a large platform and year-end client reallocations. Despite this, underlying positive net flows were observed in key growth areas.
Adjusted EBITDA Reached a record $197.5 million, up 3.7% sequentially. This was supported by a strong fee rate and realization of $97 million in net expense synergies on a run rate basis.
Adjusted EBITDA Margin Achieved 52.8%, up from the previous quarter, demonstrating excellent profitability and execution.
Adjusted Earnings Per Diluted Share Recorded $1.78, reflecting a 21% compounded annual growth rate in EPS since the IPO in 2018. This growth highlights the resilience and quality of the platform.
Revenue Realization Rate Maintained at 47.4 basis points, at the high end of the guidance range, reflecting a favorable product mix.
Net Leverage Ratio Reduced to 1.0x, the lowest level since the company went public in 2018, supported by strong cash generation and disciplined capital management.
Shareholder Returns Returned $366 million to shareholders in 2025 through share repurchases and dividends, highlighting the cash-generative nature of the business.
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Operating Highlights
New UCITS products: Amundi launched 5 new UCITS products specific to Victory Capital during the fourth quarter. These products are designed for distribution outside the U.S. and include 3 UCITS managed by RS Global and RS Value investment teams and 2 managed by Pioneer Investments.
ETF platform growth: Victory Capital's ETF platform delivered $1 billion in positive net flows, bringing year-end assets to nearly $19 billion. The Free Cash Flow ETF series generated positive net flows every month in 2025.
International expansion: Victory Capital now has 17% of its AUM coming from clients outside the U.S., spanning over 60 countries. The international channel was net flow positive in Q4, and Amundi's sales force began selling U.S.-listed ETFs overseas.
New distribution channels: Victory Capital is expanding its international sales force and launching products suitable for international markets. This includes the launch of UCITS products and leveraging Amundi's sales force for overseas distribution.
Record AUM and client engagement: Victory Capital achieved record high AUM of $317 billion and long-term gross flows of $17.1 billion in Q4, the highest level of quarterly gross sales in the company's history.
Expense synergies: Achieved $97 million of the targeted $110 million in net expense synergies on a run rate basis by year-end 2025, with full realization expected in 2026.
Acquisition of Pioneer Investments: The acquisition of Pioneer Investments was transformational, enhancing scale, investment capabilities, and global presence. Pioneer Investments has been net flow positive in each quarter since the transaction's closing.
Capital allocation strategy: Victory Capital is focused on executing transformational acquisitions and aggressively buying back stock. The company returned $366 million to shareholders in 2025 through share repurchases and dividends.
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Risk or Challenges
Long-term net flows: The company experienced long-term net outflows of $2.1 billion in the fourth quarter, which was off-trend and attributed to one-time items such as a large platform redeeming a strategy worth close to $1 billion and year-end client reallocation redemptions. This could impact the company's ability to maintain consistent positive net flows.
Integration of Pioneer Investments: While the integration of Pioneer Investments is close to completion, there are ongoing efforts to fully integrate sales forces and achieve the full $110 million target in net expense synergies. Delays or challenges in this integration could impact operational efficiency and growth momentum.
International expansion: The company is expanding internationally, with 17% of AUM now coming from clients outside the U.S. However, this expansion requires significant resources to handle international RFPs and launch new products, which could strain operational capacity and financial resources.
Acquisition strategy: The company is heavily focused on acquisitions, describing the current environment as conducive for such activities. However, the timing and successful execution of acquisitions remain uncertain, and any missteps could impact financial performance and strategic objectives.
Revenue realization rate: The company expects its revenue realization rate to remain consistent within a 46 to 47 basis point range. Any deviation from this expectation due to unfavorable product mix or market conditions could impact revenue stability.
Debt and leverage: The company has a net leverage ratio of 1.0x and has extended its debt maturity to 2032. However, reliance on debt for acquisitions or other strategic initiatives could increase financial risk, especially in a rising interest rate environment.
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Guidance & Outlook
Growth Trajectory: The company anticipates maintaining the same growth trajectory experienced since its IPO in 2018 for the upcoming years.
International Expansion: Victory Capital plans to continue expanding its international presence, with 17% of AUM currently from clients outside the U.S. across 60 countries. The company expects this to be a sustainable source of growth, supported by new UCITS product launches and integration of international sales forces.
UCITS Product Launches: Amundi launched 5 new UCITS products specific to Victory Capital in Q4 2025, with plans for additional launches in 2026 to support international growth.
ETF Platform Growth: The ETF platform is expected to continue its growth trajectory, with $1 billion in positive net flows in Q4 2025 and new distribution channels being added, including Amundi's sales force selling U.S.-listed ETFs overseas.
Revenue Realization Rate: The company expects its revenue realization rate to remain consistent within the 46 to 47 basis point guidance for 2026.
Net Expense Synergies: Victory Capital is on track to achieve the full $110 million target in net expense synergies during the 2026 calendar year, ahead of the original timeline.
Acquisition Strategy: The company is actively pursuing acquisitions, with a strong focus on transformational opportunities. The environment for acquisitions in the sector is described as conducive, and the company is well-positioned to execute with size and scale.
Capital Allocation: Victory Capital plans to aggressively buy back its stock and execute transformational acquisitions, viewing both as beneficial outcomes for shareholders.
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Shareholder Return Plan
Quarterly cash dividend: The Board declared a regular quarterly cash dividend of $0.49 per share, to be paid on March 25 to shareholders of record at the close of business on March 10.
Total dividends in 2025: For the full year 2025, the company returned $366 million to shareholders, which includes dividends.
Share repurchase in Q4 2025: Repurchased 814,000 shares under repurchase plans, deploying $51.6 million at an average price of approximately $63 per share.
Total share repurchase in 2025: For the full year 2025, the company returned $366 million to shareholders, which includes share repurchases.
Remaining repurchase capacity: At year-end, the company had more than $300 million in remaining capacity under the current $500 million authorization.
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Key Q&A
Q:As legacy Victory strategies begin to be registered into UCITS vehicles and distributed through Amundi's global network in 2026, what should we expect in terms of UCITS product additions and platform approvals? And how quickly could these contribute to an improvement in non-U.S. flows?
A:David Brown stated that they have already launched a few new UCITS (5 in total, with 3 being legacy Victory and 2 Pioneer). They plan to launch more in 2026, with the impact expected to take effect towards the end of the year. He highlighted that outside the U.S., they have been net flow positive since the acquisition in April and are optimistic about the international distribution channel. Over the years, they plan to launch more products into the system.
Q:As you evaluate a pipeline that stands well above and below the $50 billion to $200 billion target range, what characteristics would make a larger deal actionable for you in the near term versus one you prefer to defer?
A:David Brown explained that they evaluate acquisitions based on whether they enhance the company’s platform in terms of distribution, product, size, and scale. If an acquisition fits these criteria, they will execute it. He mentioned that they are not in a position to defer acquisitions but rather assess opportunities based on their alignment with company goals.
Q:How should we think about the potential cadence of M&A? Could things be happening more frequently given the urgency in the industry and your appetite, or is Amundi a different type of acquisition requiring more internal integration?
A:David Brown stated that they are almost complete with the integration of Amundi/Pioneer Investments and are ready for another acquisition. Historically, they have averaged an acquisition every 1.5 years, and he sees no reason for this cadence to change significantly. External factors may impact timing, but they are prepared financially and operationally for acquisitions.
Q:Can you talk about the build-out of Victory's sales force in addition to the preparation with the Amundi sales force? How much more hiring or training is required?
A:David Brown mentioned that they are 10 months into the acquisition, and the hiring and integration are complete. Training is ongoing, and the teams are well-prepared. He emphasized that the focus is now on educating clients and platforms about their products, with the expectation that investments in training and marketing will yield results in 2026.
Q:Can you elaborate on the benefits of intermediary partnerships for Victory, including market share dynamics and how they compare to traditional mutual fund platforms?
A:David Brown highlighted that VictoryShares' ETF platform is unique, averaging 34 basis points across 23 ETFs. They have invested in distribution platforms through partnerships, marketing, and education, which have shown positive results. He noted that such partnerships are crucial for competitiveness in ETFs and are similar to mutual fund platform partnerships but with unique characteristics.
Q:How would these partnerships extend to private markets, and does this give Victory an edge in shelf space for prospective private market partners?
A:David Brown stated that partnerships and close relationships with platforms make it easier to introduce new products, including private market products. He emphasized that these relationships provide comfort to platforms and create long-term opportunities to maximize business as new products are developed.
Q:Review of Unclear Management Responses
A:Management did not avoid any questions or provide unclear responses in this session. All answers were direct and addressed the questions asked.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
AUM client
Bond ETF
Cash Flow
ETF ticker
Flow ETF
Free Cash
IPO year
Morgan Stanley
Pioneer Investments
UCITS
USTB
base
buyback
distribution channel
example
force channel
fund AUM
globalization
income ETFs
investment capability
level sale
market environment
milestone
outcome
priority
quality
sale force
sale momentum
sector
shelf space
start
stock acquisition
strength platform
suite
value
win
VCTR Transcript
Victory Capital Holdings, Inc. (VCTR) Q4 2025 Earnings Call Transcript
Positive2-5
The earnings call summary and Q&A reflect a positive sentiment. The company reported strong financial metrics, including record EBITDA and a low net leverage ratio, demonstrating financial health. Despite some net outflows, underlying growth areas showed positive net flows. The Q&A revealed optimism in international expansion and readiness for strategic acquisitions. Shareholder returns through dividends and buybacks further bolster the positive outlook. The market cap suggests a moderate reaction, leading to a predicted stock price increase of 2% to 8%.
Victory Capital Holdings, Inc. (VCTR) Q3 2025 Earnings Call Transcript
Positive11-7
The earnings call summary and Q&A reveal strong financial performance, strategic global expansion, and a significant share repurchase increase. Despite some vague responses in the Q&A, the company's focus on strategic growth, successful synergy realization, and low leverage ratio are positive indicators. The market cap suggests a moderate reaction, leading to a positive stock price movement prediction.
Victory Capital Holdings, Inc. (VCTR) Q2 2025 Earnings Call Transcript
Positive8-8
The earnings call summary indicates strong financial performance with a 60% revenue increase and improved net leverage. The acquisition of Pioneer Investments and Amundi partnership are expected to drive growth. The increased share repurchase plan and optimistic outlook on fixed income assets further support a positive sentiment. Despite some concerns about nonrecurring expenses and unclear management responses, the overall sentiment is positive due to strong earnings, optimistic guidance, and strategic partnerships.
Victory Capital Holdings, Inc. (VCTR) Q1 2025 Earnings Call Transcript
Positive5-9
The earnings call highlights a mix of positive and cautious elements. The financial performance is strong with record high EPS for the first quarter and an increased dividend, suggesting confidence in financial health. The Q&A reveals strategic plans for growth through new product launches and acquisitions, although there are some uncertainties in integration costs and market conditions. Overall, the positive elements, including the dividend increase and strong EPS, outweigh the negatives, suggesting a likely positive stock price movement.
VCTR Slides
VCTR Report
Frequently Asked Questions
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