8-K: Victory Capital Reports Record Q4 and Full-Year Earnings Per Share, Boosts Dividend and Share Repurchase Plan

Victory Capital announced record fourth-quarter and full-year earnings per share, a 7% increase in its quarterly cash dividend, and a new $200 million share repurchase plan.

Summary

• Victory Capital reported its financial results for the quarter and year ended December 31, 2024.
• The company achieved record adjusted earnings per diluted share with tax benefit, adjusted EBITDA, and adjusted EBITDA margin for both the quarterly and full-year periods.
• Total client assets reached $176.1 billion.
• Long-term gross flows were $6.6 billion, while long-term net flows were negative at ($1.7) billion.
• GAAP operating margin was 48.1%, and GAAP net income per diluted share was $1.17.
• Adjusted EBITDA margin was 54.0%, and adjusted net income with tax benefit per diluted share was $1.45.
• The board authorized a 7% increase in the regular quarterly cash dividend to $0.47.
• A new $200 million share repurchase plan was authorized.
• The company reaffirms its previous guidance of $100 million in expense synergies related to the Amundi US acquisition, expected to close by the end of Q1 2025.
• Revenue for the year ended December 31, 2024, increased 8.8% to $893.5 million, compared with $821.0 million in the same period of 2023.
• GAAP net income increased 35.5% to $288.9 million, or $4.38 per diluted share, in 2024 compared with $213.2 million, or $3.12 per diluted share, in 2023.

Sentiment

Score: 8

Explanation: The document presents a positive outlook with record earnings, increased dividend, and a new share repurchase plan. The strategic acquisition of Amundi US is also a positive development. However, negative net flows and a decrease in AUM temper the overall sentiment slightly.

Positives

• Record adjusted earnings per diluted share with tax benefit, adjusted EBITDA, and adjusted EBITDA margin were achieved for both the quarterly and full-year periods.
• The board authorized a 7% increase in the regular quarterly cash dividend to $0.47 per share.
• A new $200 million share repurchase plan was authorized.
• The company reaffirms its previous guidance of $100 million in expense synergies related to the Amundi US acquisition.
• Revenue increased 8.8% to $893.5 million for the year ended December 31, 2024.
• GAAP net income increased 35.5% to $288.9 million for the year ended December 31, 2024.
• Adjusted EBITDA increased 13.8% to $475.6 million for the year ended December 31, 2024.
• Operating expenses decreased 5.4% to $466.0 million for the year ended December 31, 2024.

Negatives

• Long-term net flows were negative at ($1.7) billion for the quarter.
• Total AUM decreased by $4.2 billion to $171.9 billion at December 31, 2024, compared with $176.1 billion at September 30, 2024, due to negative market action and net outflows.
• GAAP operating margin contracted 520 basis points in the fourth quarter to 48.1%, down from 53.3% in the third quarter primarily due to a $15.6 million increase in compensation related expenses.

Risks

• Continued geopolitical uncertainty including the conflicts in Ukraine and Israel could impact performance.
• There are risks that the conditions to closing the transaction with Amundi US will be satisfied and the transaction will close on the anticipated timeline, if at all.
• Reductions in AUM based on investment performance, client withdrawals, and difficult market conditions could negatively impact revenue.
• The company's dependence on third parties to market its strategies and provide products or services for the operation of its business poses a risk.
• The company's ability to successfully acquire and integrate new companies is not guaranteed.
• The company's substantial indebtedness could limit its financial flexibility.

Future Outlook

Victory Capital expects to close the acquisition of Amundi US by the end of the first quarter of 2025 and reaffirms its guidance of $100 million in expense synergies.

Management Comments

• 2024 was a transformational year for Victory Capital, said David Brown, Chairman and Chief Executive Officer.
• During 2024, we entered into a strategic relationship with Amundi Asset Management S.A.S that will elevate our Company in several ways.
• We remain on track to close the acquisition by the end of the first quarter of 2025, and we are reaffirming our previous guidance of $100 million in expense synergies.
• Our business and financial performance for the fourth quarter and full year produced record results.

Industry Context

The asset management industry is highly competitive, with firms constantly seeking to improve investment performance, expand distribution reach, and achieve economies of scale. Victory Capital's acquisition of Amundi US and its exclusive distribution agreement with Amundi are strategic moves to enhance its competitive position in the global market.

Comparison to Industry Standards

• Victory Capital's adjusted EBITDA margin of 53.2% is competitive with other asset managers such as T. Rowe Price (typically in the 45-50% range) and BlackRock (often above 40%).
• The company's AUM outperformance metrics (59%, 73%, and 79% over 3, 5, and 10 years, respectively) are strong compared to industry averages, where outperformance rates tend to decline over longer time horizons.
• The dividend yield, after the 7% increase, is a key metric for income-focused investors and should be compared against peers like Franklin Resources and Invesco.

Stakeholder Impact

• Shareholders will benefit from the increased dividend and share repurchase plan.
• Clients will benefit from the enhanced investment capabilities and distribution reach resulting from the Amundi US acquisition.
• Employees may experience opportunities for growth and development as the company expands its operations.

Next Steps

• Close the acquisition of Amundi US by the end of the first quarter of 2025.
• Pay the increased quarterly cash dividend of $0.47 per share on March 10, 2025.
• Execute the new $200 million share repurchase plan.
• Continue to focus on serving clients and delivering strong investment performance.

Key Dates