Victory Capital Holdings, Inc. (VCTR)·Q3 2024 Earnings Summary

Executive Summary

• Q3 2024 delivered record profitability: GAAP diluted EPS $1.24 and adjusted net income with tax benefit per diluted share $1.35; operating margin widened to 53.3% and adjusted EBITDA margin to 53.7% .
• Revenues rose to $225.6M (+2.7% QoQ, +7.6% YoY) on higher average AUM; cash from operations was $99.8M, and cash ended at $188.2M with net leverage down to 1.7x .
• Dividend was raised 7% to $0.44, reinforcing capital returns while Amundi transaction integration work continued; $100M annualized expense synergy target reiterated (majority in year one post-close) .
• Flows remained a headwind: long-term net outflows of ($2.6)B were offset by +$10.1B market action; management cited institutional rebalancing and improving pipeline into Q4 .
• S&P Global consensus estimates were unavailable at time of request; beat/miss cannot be assessed. Given strong margins and record EPS, near-term estimate revisions may skew upward (Street to reassess margin trajectory)*.

What Went Well and What Went Wrong

• What Went Well

  • “We achieved the highest quarterly adjusted earnings per diluted share with tax benefit, adjusted EBITDA, and adjusted EBITDA margin in the history of our firm” — David Brown (CEO) .
  • Operating leverage and expense control: GAAP operating margin expanded 290 bps QoQ to 53.3%, helped by a $12.4M decrease in compensation expense and favorable non‑cash earnout valuation shift .
  • Balance sheet strength and capital returns: cash rose to $188.2M (+$69M QoQ), net leverage improved to 1.7x; dividend increased to $0.44 .

• What Went Wrong

  • Net outflows persisted: long-term net flows were ($2.6)B in Q3 despite several franchises and ETFs showing positives; overall total net flows were ($2.636)B .
  • Fee rate modestly down: AUM revenue realization dipped to 52.1 bps (from 52.6 bps in Q2), reflecting product/asset class/channel mix .
  • Flow pressure in July/August (rebalance-related) with improvement in September; Victory Income Investors strong, but portfolio reallocations weighed on aggregate organic growth .

Financial Results

Segment and AUM by Vehicle

Key KPIs

Drivers and cross-references:

• QoQ margin expansion: reduced compensation expense by $12.4M; partially offset by a $6.6M non‑cash change in fair value of consideration payable for acquisitions .
• YoY margin expansion: operating expenses decreased 18.8% YoY, including an $11.9M favorable non‑cash earnout valuation and lower compensation; operating margin +1,510 bps YoY .
• AUM increase: +$7.4B QoQ to $176.1B, driven by +$10.1B market appreciation, offset by ($2.6)B net outflows .

Guidance Changes

Earnings Call Themes & Trends

Management Commentary

• “Integration work is proceeding… we are maintaining our guidance of $100 million in annualized expense synergies… fully realized within two years of closing with the majority achieved within the first year.” — David Brown, CEO .
• “Adjusted net income with tax benefit per diluted share is the highest level in our history… adjusted EBITDA margin widened to 53.7%.” — Michael Policarpo, President & CFO .
• “Our net leverage ratio improved to 1.7x… Board authorized a 7% dividend increase to $0.44 per share.” — Michael Policarpo .
• “We are exceptionally well positioned to make additional strategic accretive acquisitions… entering a period of acceleration in industry consolidation.” — David Brown .

Q&A Highlights

• Fixed income flows and outlook: Management “bullish” on Victory Income Investors, noting strong performance and multi-wrapper distribution (mutual funds, SMAs, ETFs) supporting demand .
• Consolidation/M&A capacity post-Amundi: Expect “golden era” of consolidation; superior positioning with scale, distribution, and proven integration; accretive deals targeted .
• Amundi distribution partnership execution: Infrastructure in place; priority work on Victory product selection, structuring, and education across regions (Europe/Asia/emerging markets) .
• ETF traction: Free cash flow ETFs (VFLO/SFLO) gaining momentum via advisor-focused selling; more products planned .
• Institutional pipeline: Larger mandates across multiple franchises; diversified by channel; improving funding cadence expected into Q4/Q1 .

Estimates Context

• S&P Global consensus estimates were unavailable at time of request due to an API limit, so beat/miss cannot be assessed*.
• Given record margins and EPS, sell-side may need to reassess near-term margin assumptions, even as management maintains the long-term 49% margin framework .

Key Takeaways for Investors

• Profitability inflecting: Operating and adjusted EBITDA margins reached company records; near-term earnings power stronger while long-term margin target remains 49% .
• Capital returns stepping up: Dividend increased to $0.44; buybacks could resume post-proxy—monitor authorization usage as restrictions lift .
• Organic growth watch: Despite Q3 outflows, institutional pipeline is robust and several franchises/ETFs are positive; monthly AUM updates indicate October AUM down vs September in market-driven move—track Q4 fundings .
• Amundi synergy path: $100M annualized expense synergies reiterated; majority in year one; revenue synergies guidance to come—closing anticipated Q1 2025 .
• Mix matters: Revenue realization dipped to 52.1 bps; management prioritizes margin over fee rate—assess product/channel mix shifts on revenue/AUM realization .
• Balance sheet flexibility: Cash build and lower leverage (1.7x) provide dry powder for M&A and returns; revolver remains undrawn .
• Trading lens: Near-term catalysts include dividend payment, potential buyback restart, and incremental disclosures on Amundi revenue synergies; strong margin prints are supportive in risk-on environments .

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* S&P Global consensus estimates were unavailable at time of request due to an API limit.