10-K: Victory Capital Reports Strong 2024 Results, AUM Climbs to $171.9 Billion

Victory Capital Holdings reports a 6.6% increase in AUM to $171.9 billion for 2024, driven by positive market action and strategic acquisitions.

Summary

• Victory Capital Holdings, Inc. reported total assets under management (AUM) of $171.9 billion and total client assets of $176.1 billion as of December 31, 2024.
• The company's AUM increased by $10.6 billion, or 6.6%, from $161.3 billion at the end of 2023, primarily due to positive market action.
• Long-term gross inflows were $25.3 billion for 2024, compared to $22.7 billion in 2023, while long-term net outflows were $7.1 billion and $5.6 billion, respectively.
• Total revenue for 2024 was $893.5 million, up from $821.0 million in 2023.
• Net income increased to $288.9 million in 2024 from $213.2 million in the previous year.
• Adjusted EBITDA for 2024 was $475.6 million, with a margin of 53.2%, compared to $418.0 million and 50.9% in 2023.
• The company's Board of Directors approved a new share repurchase program authorizing the repurchase of up to $200.0 million of the company's common stock through December 31, 2026.
• The company declared $1.56 of cash dividends per share in 2024, a 22% increase from 2023.

Sentiment

Score: 8

Explanation: The document presents a positive outlook with strong financial results and strategic growth initiatives. While acknowledging risks, the overall tone is optimistic and confident in the company's ability to continue its success.

Positives

• AUM increased by 6.6% year-over-year, indicating growth in assets managed.
• Total revenue increased, reflecting higher earnings from investment management and fund administration.
• Net income increased, demonstrating improved profitability.
• Adjusted EBITDA and margin improved, showcasing operational efficiency.
• The new share repurchase program signals confidence in the company's financial position.
• The increase in dividends declared per share provides greater returns to shareholders.
• The company has a high percentage of strategies outperforming their benchmarks over long-term periods.

Negatives

• Long-term net outflows were $7.1 billion for the year ended December 31, 2024, indicating that more assets were redeemed than invested.
• The Sycamore Mid Cap Value strategy underperformed its benchmark by 2.29% over the one-year period.
• The WestEnd US Sector strategy underperformed its benchmark by 4.99% over the one-year period.

Risks

• AUM is subject to fluctuations based on market conditions, client withdrawals, and investment performance.
• The loss of key investment professionals or senior management could adversely affect the business.
• The company's contracts and relationships may be terminated upon short or no notice.
• The company's growth strategy depends on successful acquisitions and integrations.
• The company's substantial indebtedness may expose it to material risks.
• The market price of the company's common stock is likely to be volatile.
• The company is subject to extensive regulation as an investment management firm.
• Recent trends in the investment management industry could reduce AUM, revenues, and net income.
• The company depends on third parties to market Victory Funds and VictoryShares.
• Operational and cybersecurity risks may disrupt the business and cause financial losses.

Future Outlook

The company expects the Amundi US transaction to enhance its scale, expand its global client base, and further diversify its investment capabilities. The company also intends to continue growing through additional acquisitions.

Management Comments

• The company's management team leads and participates in the acquisition strategy, leveraging their many years of experience actively operating the company on a day-to-day basis to successfully source, execute, integrate, and ultimately operate acquired businesses.
• The company is committed to maintaining the same guiding principles with alternative Investment Franchises that led to success with our traditional Investment Franchises.

Industry Context

The document highlights the competitive nature of the investment management industry, with trends including the increasing popularity of passive products, fee pressure, and the need for specialized investment strategies. The company is positioning itself to compete effectively by offering value-added strategies, diversifying its platform, and expanding its distribution capabilities.

Comparison to Industry Standards

• The document mentions that Victory Capital competes with other managers offering similar strategies, some of which have greater financial resources and capabilities.
• The document also notes that the company competes with other potential acquirers of investment management firms, including independent, integrated investment management firms and multiboutique businesses, insurance companies, banks, and other financial institutions.
• The document does not provide specific comparisons to industry benchmarks or competitors' results.

Legal Proceedings

• Two complaints have been filed in the Supreme Court of the State of New York, New York County by purported Victory stockholders against Victory and the members of the Victory board of directors (the Board) in connection with the Contribution: Kent v. Victory Capital Holdings, Inc., et al., Index No. 654929/2024 (filed September 19, 2024) and Lawrence v. Victory Capital Holdings, Inc., et al., Index No. 654920/2024 (filed September 19, 2024) (collectively, the Stockholder Litigation).
• The complaints in the Stockholder Litigation include allegations that, among other things, the defendants caused to be filed a materially incomplete and misleading Proxy Statement with the SEC relating to the proposed Contribution and assert claims for alleged negligent misrepresentation and concealment and negligence under New York common law.
• Additionally, since the filing of the Preliminary Proxy Statement, Victory received five demand letters from purported Victory stockholders alleging similar insufficiencies in the disclosures in the Preliminary Proxy Statement and/or the Proxy Statement (such letters, the Demand Letters, and together with the Stockholder Litigation, the Litigation Matters).

Related Party Transactions

• The Company considers certain funds that it manages, including the Victory Funds, the VictoryShares, collective trust funds that it sponsors (the Victory Collective Funds), the NEC Funds and other pooled investment vehicles that it sponsors, to be related parties as a result of its advisory relationship.
• In the fourth quarter of 2024, Amundi US began providing subadvisory services to certain Victory Funds.

Stakeholder Impact

• Shareholders: Increased dividends and potential for share price appreciation through buybacks and growth.
• Employees: Potential for career growth and equity ownership.
• Clients: Access to diversified investment strategies and potential for outperformance.
• Acquired Companies: Access to multiple distribution channels and centralized support functions.

Next Steps

• The company expects the Amundi US transaction to close by the end of the first quarter of 2025.
• The company will continue to evaluate potential acquisition candidates.
• The company will continue to focus on organic growth through investments in AI, data and analytics, technology, distribution, and marketing.

Key Dates