Victory Capital’s Earnings Call Highlights Record Results

Victory Capital Holdings ((VCTR)) has held its Q1 earnings call. Read on for the main highlights of the call.

Victory Capital Holdings used its latest earnings call to spotlight a string of record-breaking metrics, signaling management’s confidence despite lingering headwinds. Executives stressed that new highs in revenue, gross sales, EBITDA, and EPS, alongside expanding ETF and international franchises, more than offset negative net flows and seasonally higher costs in the quarter.

Record Financial Results

Victory Capital reported total revenue of $388 million, up 4% sequentially and 77% year over year, underscoring the impact of its expanded platform. Adjusted EBITDA reached a record $204 million with a 52.6% margin, while adjusted net income with tax benefit climbed to $153.2 million, or $1.82 per diluted share, up 2% quarter over quarter and 34% from a year ago.

Record Long-Term Gross Flows

Long-term gross flows surged to a record $18.9 billion, up 11% versus the prior quarter and more than doubling year on year, reflecting strong sales momentum across strategies. Management highlighted that this equates to an annualized run-rate of roughly $76 billion, or about 24% of long-term AUM, supporting a thesis of positive organic growth over time.

Strong ETF Growth

The firm’s ETF franchise continued to scale, with assets under management surpassing $20 billion, up 7% sequentially and 53% from a year earlier. Net ETF flows totaled $1.3 billion in the quarter, and management pointed to a 28% compound annual growth rate in ETF AUM since 2017, with average fees near 35 basis points and margins in line with firm-wide benchmarks.

International Distribution Momentum

International assets reached $55 billion, spanning 60 countries and with 29 of those markets exceeding $100 million in AUM, underscoring a broad-based global footprint. The international channel was net-flow positive both in the quarter and since the Pioneer acquisition, aided by a long-term distribution pact and early traction selling U.S.-listed ETFs across Asia.

Capital Return and Share Repurchase

Shareholders saw sizable capital return, with $185 million distributed in the quarter through dividends and the repurchase of 2 million shares. Over the trailing 12 months, Victory Capital has returned $512 million, or more than $6 per share, and the board approved an increase in the quarterly dividend to $0.50 per share, reinforcing its shareholder-friendly posture.

Acquisition Integration and Synergies

The integration of the Pioneer acquisition is largely complete, with approximately $104 million of the expected $110 million in net expense synergies already realized, contributing to margin strength. Management expects the remaining synergies to be captured in 2026, suggesting further incremental efficiency gains even as the business continues to scale.

Investment Performance

Investment results remained a key selling point, with 58 mutual funds and ETFs earning 4- or 5-star ratings from Morningstar, representing 68% of rated assets. Over longer horizons, performance metrics remained robust, with 71% of AUM outperforming benchmarks over one year and 81% doing so over ten years, supporting the firm’s distribution and pricing power.

Healthy Balance Sheet and Lower Interest Cost

Victory Capital emphasized balance sheet strength, reporting a net leverage ratio of 1.1 times, $76 million in cash, $980 million in debt, and an undrawn $100 million credit facility. Cash interest expense declined to $14 million following prior refinancing activity, which reduced borrowing costs by roughly 35 basis points and freed up capacity for growth and capital return.

Firm-Wide Long-Term Net Flows Still Negative

Despite record gross sales, firm-wide long-term net flows remained in the red at negative $457 million for the quarter, though this was an improvement from previous periods. Management acknowledged that the gap between gross inflows and redemptions means the asset base is not yet fully benefiting from sales momentum, a key area of focus for turning growth into sustained net inflows.

Total Client Assets Slightly Below Record

Total client assets ended March at $313 billion, coming in just shy of the prior record quarter-end level despite strong gross flows and market support. The slight sequential decline underscores that, while sales and performance are robust, Victory Capital still needs consistently positive net flows to drive a clear upward trend in reported AUM.

Higher Operating Expenses in Q1

Operating expenses rose to $228.8 million from $220.9 million in the prior quarter, driven largely by seasonal payroll taxes and benefits. The company also cited a modest uptick in acquisition, restructuring, and integration costs, with cash compensation representing 24% of revenue, indicating that some of the cost pressure was temporary in nature.

ETF Penetration Still Relatively Small

Management noted that, even with strong growth, ETFs still account for under 10% of total assets, leaving ample runway for expansion within the broader platform. This underscores that the ETF business, while a fast-growing contributor to flows and diversification, remains a relatively small slice of Victory Capital’s overall asset base.

Fee Rate and Revenue Mix Variability

The firm’s average fee rate was 47.6 basis points in the quarter, at the high end of guidance, partially due to annual fees recognized in Q1. Management reiterated long-term expectations of 46 to 47 basis points and highlighted that modest fluctuations will reflect the mix of assets, clients, and products, as well as the timing of recurring annual fees.

Outlook and Forward Guidance

Looking ahead, Victory Capital expects to maintain a firm-wide fee rate in the 46 to 47 basis point range, consistent with its Q1 profile and ETF fee structure. Leadership reiterated a disciplined capital allocation framework that prioritizes M&A while maintaining buybacks and dividends, supported by a flexible balance sheet and plans to complete the remaining Pioneer synergies, fund new ETF and UCITS launches, and expand international distribution.

Victory Capital’s earnings call portrayed a company balancing rapid financial and strategic progress with a frank acknowledgment of lingering challenges in net flows and expenses. For investors, the story centers on whether record sales, strong performance, and a growing ETF and international footprint can ultimately translate into sustained AUM growth and continued shareholder returns.