Victory Capital (VCTR) 8 Nov 24 2024 Q3 Earnings call transcript

Matthew Dennis, the Chief of Staff and Director of Investor Relations at Victory Capital, began the earnings call by reminding investors of the company's forward-looking statements and the potential impact of regulatory approvals on the strategic transaction with Amundi. He then handed over the call to David Brown, the Chairman and CEO, who provided an overview of the quarter's performance and updates on the Amundi transaction.

David Brown highlighted Victory Capital's strong business performance, with total client assets of over $181 billion, the second-highest quarter-end level in the company's history. The company achieved new records for earnings per share, adjusted EBITDA, and margin, expanding to 53.7% in the quarter. Brown also reported that the Amundi U.S. business, which is expected to become Victory Capital's 12th investment franchise upon close, has had a very strong year with approximately $2 billion of positive net long-term flows in 2024 as of the end of the third quarter.

Michael Policarpo, the President, Chief Financial and Administrative Officer, presented a detailed review of the financial results. He noted that revenue rose 3% to $225.6 million, with third-quarter GAAP operating income reaching a record $120.4 million. Policarpo also mentioned that the company accumulated $69 million in cash during the quarter and had a net leverage ratio of 1.7x, down from 2.1x at the beginning of the year.

During the Q&A session, Benjamin Budish asked about Victory's fixed income flows and the outlook for the franchise. Brown expressed confidence in the franchise's performance and distribution access, with a positive outlook for the future. When asked about the industry's consolidation trend, Brown expressed optimism, emphasizing the need for consolidation and Victory Capital's readiness to take advantage of the opportunities that may arise.

Etienne Ricard questioned the distribution strategy for Victory's products in emerging economies, with Amundi's significant presence in these markets. Brown clarified that the distribution agreement does not distinguish between regions and that Victory Capital plans to work with Amundi's teams to structure products for different regions.

The earnings call concluded with Policarpo discussing the strong inflows into VictoryShares, the company's free cash flow ETFs. He mentioned that the company's distribution force, which sells ETFs, has been instrumental in gaining traction for these products. Policarpo also emphasized the importance of understanding advisors' issues and tailoring products to their needs.

Overall, the earnings call highlighted Victory Capital's strong financial performance, strategic acquisitions, and optimistic outlook for the future. The company's focus on distribution and product development, particularly in the ETF space, positions it well for growth. The successful execution of the Amundi transaction, subject to regulatory approvals, is expected to further enhance the company's scale and diversification.