# Victory Capital Holdings, Inc.: Form 10-Q for the period ended Mar 31, 2025

- Company: [Victory Capital Holdings, Inc.](/companies/vctr.md) (CIK 1570827)
- Form: 10-Q
- Filed: 2025-05-09
- Accepted by EDGAR: May 9, 2025, 08:49 ET
- Period: 2025-03-31
- Accession: 0000950170-25-067558
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/1570827/000095017025067558/vctr-20250331.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/1570827/000095017025067558/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2025-03-31.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2025-01-01 to 2025-03-31 | $219.6m | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Operating income | 3 months, 2025-01-01 to 2025-03-31 | $92.9m | us-gaap:OperatingIncomeLoss |
| Income tax | 3 months, 2025-01-01 to 2025-03-31 | $18.4m | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2025-01-01 to 2025-03-31 | $62.0m | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2025-01-01 to 2025-03-31 | $0.96 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2025-01-01 to 2025-03-31 | $0.97 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2025-01-01 to 2025-03-31 | 64,714,000 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 3 months, 2025-01-01 to 2025-03-31 | $81.1m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 3 months, 2025-01-01 to 2025-03-31 | $1.6m | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Dividends paid | 3 months, 2025-01-01 to 2025-03-31 | $29.9m | us-gaap:PaymentsOfDividends |
| Share repurchases | 3 months, 2025-01-01 to 2025-03-31 | $451.0k | us-gaap:PaymentsForRepurchaseOfCommonStock |
| Cash and equivalents | at 2025-03-31 | $175.6m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Total assets | at 2025-03-31 | $2.58bn | us-gaap:Assets |
| Total liabilities | at 2025-03-31 | $1.44bn | us-gaap:Liabilities |
| Long-term debt | at 2025-03-31 | $964.8m | us-gaap:LongTermDebt |
| Shareholders' equity | at 2025-03-31 | $1.14bn | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 42,796 characters.

Unless the context otherwise requires, references in this Quarterly Report on Form 10-Q to the “Company,” “Victory,” or in the first-person notations of “we,” “us,” and “our” shall mean Victory Capital Holdings, Inc., a Delaware corporation, and its wholly-owned subsidiaries.

### Objective

The objective of this section of the Quarterly Report on Form 10-Q is intended to provide a discussion and analysis, from management’s perspective, of the key performance indicators and material information necessary to assess our financial condition and results of operations for the three months ended March 31, 2025 and 2024 and cash flows for the three months ended March 31, 2025 and 2024. In addition, we also discuss the Company’s contractual and off-balance sheet arrangements. This discussion and analysis should be read in conjunction with the unaudited condensed consolidated financial statements and related notes included elsewhere in this Quarterly Report on Form 10-Q and with our Annual Report on Form 10-K for the year ended December 31, 2024. This discussion and analysis contains forward-looking statements and should also be read in conjunction with the disclosures and information contained in “Forward-Looking Statements” included elsewhere in this Quarterly Report on Form 10-Q and in “Item 1A. Risk Factors” included in the Annual Report on Form 10-K for the year ended December 31, 2024.

### Overview

**Our Business –** Victory is a diversified global asset management firm with total client assets of $171.4 billion, assets under management of $167.5 billion and other assets of $4.0 billion as of March 31, 2025. The Company operates a next-generation business model combining boutique investment qualities with the benefits of an integrated, centralized operating and distribution platform.

The Company provides specialized investment strategies to institutions, intermediaries, retirement platforms and individual investors with 11 autonomous Investment Franchises and a Solutions Platform. Victory Capital offers a wide array of investment products, including actively and passively managed mutual funds, rules-based and active exchange traded funds (“ETFs”), institutional separate accounts, variable insurance products (“VIPs”), alternative investments, private closed end funds, and a 529 Education Savings Plan. Victory Capital’s strategies are also offered through third-party investment products, including mutual funds, third-party ETF model strategies, retail separately managed accounts (“SMAs”) and unified managed accounts (“UMAs”) through wrap account programs, Collective Investment Trusts (“CITs”), and undertakings for the collective investment in transferable securities (“UCITs”). As of March 31, 2025, our Franchises and our Solutions Platform collectively managed a diversified set of 125 investment strategies for a wide range of institutional and retail clients and direct investors.

**Franchises –** Our Franchises are largely operationally integrated but are separately branded and make investment decisions independently from one another within guidelines established by their respective investment mandates. Our largely integrated model creates a supportive environment in which our investment professionals, largely unencumbered by administrative and operational responsibilities, can focus on their pursuit of investment excellence. VCM employs all of our U.S. investment professionals across our Franchises, which are not separate legal entities.

**Solutions –** Our Solutions Platform consists of multi‑asset, multi-manager, quantitative, rules-based, factor-based, and customized portfolios. These strategies are designed to achieve specific return characteristics, with products that include values-based and thematic outcomes and exposures. We offer our Solutions Platform through a variety of vehicles, including separate accounts, mutual funds, UMA accounts, and rules-based and active ETFs under our VictoryShares ETF brand. Like our Franchises, our Solutions Platform is operationally integrated and supported by our centralized distribution, marketing, and operational support functions.

Professionals within our institutional and retail distribution channels, direct investor business and marketing organization sell our products through our centralized distribution model. Our institutional sales team focuses on cultivating relationships with institutional consultants, who account for the majority of the institutional market, as well as asset allocators seeking sub-advisers. Our retail sales team offers intermediary and retirement platform clients, including broker-dealers, retirement platforms and RIA networks, mutual funds and ETFs as well as SMAs through wrap fee programs and access to our investment models through UMAs. Our direct investor business serves the investment needs of individual clients.

We have grown our total client assets from $17.9 billion following the management-led buyout with Crestview GP in August 2013 to $171.4 billion at March 31, 2025. We attribute this growth to our success in sourcing acquisitions and evolving them into organic growers, generating strong investment returns, and developing institutional, retail, and direct investor channels with deep penetration.

### Business Highlights

Assets under management:

- AUM at March 31, 2025 decreased by $4.5 billion, or 2.6%, to $167.5 billion from $171.9 billion at December 31, 2024, driven by negative market action of $3.2 billion net outflows of $1.2 billion. Total gross flows for the first quarter were $9.5 billion, including long-term gross flows of $9.3 billion.
- AUM at March 31, 2025 and 2024 was $167.5 billion and $170.3 billion, respectively. We experienced $3.2 billion in negative market action for the three months ended March 31, 2025 compared to $10.2 billion in market appreciation for the same period in 2024. We generated $9.5 billion in gross sales, including $9.3 billion in long-term gross sales, and $1.2 billion in total net outflows for the three months ended March 31, 2025 compared to $7.2 billion in gross sales, including $7.0 billion in long-term gross sales, and $1.1 billion in total net outflows for the same period in 2024.

Investment performance:

- 45 of our Victory Capital mutual funds and ETFs had overall Morningstar ratings of four or five stars and 67% of our fund and ETF AUM were rated four or five stars overall by Morningstar. 47% of our strategies by AUM had investment returns in excess of their respective benchmarks over a one-year period, 64% over a three-year period, 65% over a five-year period and 79% over a ten-year period. On an equal-weighted basis, 48% of our strategies have outperformed their benchmarks over a one-year period, 63% over a three-year period, 59% over a five-year period and 64% over a ten-year period.

Financial highlights:

- Total revenue for the three months ended March 31, 2025 was $219.6 million compared to $215.9 million for the same period in 2024.
- Net income was $62.0 million for the three months ended March 31, 2025 compared to $55.7 million for the same period in 2024.
- Adjusted EBITDA was $116.4 million for the three months ended March 31, 2025, or 53.0% of revenue, compared to $112.4 million, or 52.1% of revenue, for the same period in 2024. Refer to “Supplemental Non-GAAP Financial Information” for further information about the Adjusted EBITDA calculation and reconciliation of generally accepted accounting principles (“GAAP”) net income to Adjusted EBITDA.
- Adjusted Net Income with tax benefit was $88.1 million for the three months ended March 31, 2025 compared to $82.3 million for the three months ended March 31, 2024. Refer to “Supplemental Non-GAAP Financial Information” for further information about the Adjusted Net Income calculation and reconciliation of GAAP net income to Adjusted Net Income.

### Key Performance Indicators

The following table is a summary of key performance indicators utilized by management to assess results of operations:

*($ in millions, except for basis points and percentages)*

|  | Three Months Ended March 31, 2025 | 2024 |
| --- | ---: | ---: |
| AUM at period end | $167,468 | $170,342 |
| Average AUM | 173,789 | 163,533 |
| Gross flows | 9,486 | 7,187 |
| AUM net short term flows | (44) | (99) |
| AUM net long term flows | (1,205) | (1,028) |
| AUM net flows | (1,249) | (1,127) |
| Total revenue | 219.6 | 215.9 |
| Revenue realization on average AUM | 51.2 bps | 53.0 bps |
| Net income | 62.0 | 55.7 |
| Adjusted EBITDA(1) | 116.4 | 112.4 |
| Adjusted EBITDA Margin(2) | 53.0% | 52.1% |
| Adjusted Net Income(1) | 78.0 | 72.6 |
| Tax benefit of goodwill and acquired intangibles(3) | 10.1 | 9.7 |

26

(1) Management utilizes Adjusted EBITDA and Adjusted Net Income to measure the operating profitability of the business. These measures eliminate the impact of one‑time acquisition, restructuring and integration costs and demonstrate the ongoing operating earnings metrics of the business. These measures are explained in more detail and reconciled to net income calculated in accordance with GAAP in “Supplemental Non‑GAAP Financial Information.”

(2) Adjusted EBITDA margin represents Adjusted EBITDA as a percentage of total revenue.

(3) Represents the tax benefits associated with deductions allowed for intangibles and goodwill generated from prior acquisitions in which we received a step-up in basis for tax purposes. Acquired intangible assets and goodwill may be amortized for tax purposes, generally over a 15-year period. The tax benefit from amortization on these assets is included to show the full economic benefit of deductions for all acquired intangibles with a step-up in tax basis. Due to our acquisitive nature, tax deductions allowed on acquired intangible assets and goodwill provide us with a significant supplemental economic benefit.

The following table presents a reconciliation of our total client assets(1) as of the dates indicated:

*(in millions)*

|  | Three Months Ended March 31, 2025 | 2024 |
| --- | ---: | ---: |
| Beginning AUM | $171,930 | $161,322 |
| Beginning other assets | 4,165 | 5,289 |
| Beginning total client assets | 176,096 | 166,611 |
| AUM net cash flows | (1,249) | (1,127) |
| Other assets net cash flows | (277) | (524) |
| Total client assets net cash flows | (1,526) | (1,651) |
| AUM market appreciation (depreciation) | (3,172) | 10,178 |
| Other assets market appreciation (depreciation) | 78 | 352 |
| Total client assets market appreciation (depreciation) | (3,094) | 10,529 |
| AUM realizations and distributions | (21) | — |
| Acquired & divested assets / Net transfers | (20) | (31) |
| Ending AUM | 167,468 | 170,342 |
| Ending other assets | 3,967 | 5,117 |
| Ending total client assets | 171,435 | 175,459 |
| Average total client assets | 177,849 | 168,865 |

(1) Includes low-fee (2 to 4 bps) institutional assets, previously reported in the Solutions asset class within the by asset class table and in Separate Accounts and Other Pooled Vehicles within the by vehicle table. These assets are included as part of Victory’s Regulatory Assets Under Management reported in Form ADV Part 1.

The following table presents a reconciliation of our total AUM(1) as of the dates indicated:

*(in millions)*

|  | Three Months Ended March 31, 2025 | 2024 |
| --- | ---: | ---: |
| Beginning AUM | $171,930 | $161,322 |
| Gross client cash inflows | 9,486 | 7,187 |
| Gross client cash outflows | (10,736) | (8,314) |
| Net client cash flows | (1,249) | (1,127) |
| Market appreciation (depreciation) | (3,172) | 10,178 |
| Realizations and distributions | (21) | — |
| Acquired & divested assets / Net transfers | (20) | (31) |
| Ending AUM | 167,468 | 170,342 |
| Average AUM | 173,789 | 163,533 |

27

(1) Total AUM includes both discretionary assets under management and non-discretionary assets under advisement and excludes other assets.

The following table presents a reconciliation of our other assets (institutional)(1) as of the dates indicated:

*(in millions)*

|  | Three Months Ended March 31, 2025 | 2024 |
| --- | ---: | ---: |
| Beginning other assets (institutional) | $4,165 | $5,289 |
| Gross client cash inflows | — | — |
| Gross client cash outflows | (277) | (524) |
| Net client cash flows | (277) | (524) |
| Market appreciation (depreciation) | 78 | 352 |
| Realizations and distributions | — | — |
| Acquired & divested assets / Net transfers | — | — |
| Ending other assets (institutional) | 3,967 | 5,117 |
| Average other assets (institutional) | 4,060 | 5,332 |

(1) Includes low-fee (2 to 4 bps) institutional assets, previously reported in the Solutions asset class within the by asset class table and in Separate Accounts and Other Pooled Vehicles within the by vehicle table. These assets are included as part of Victory’s Regulatory Assets Under Management reported in Form ADV Part 1.

### Assets Under Management

Our profitability is largely affected by the level and composition of our AUM (including asset class and distribution channel) and the effective fee rates on our products. The amount and composition of our AUM are, and will continue to be, influenced by a number of factors, including; (i) investment performance, including fluctuations in the financial markets and the quality of our investment decisions; (ii) client flows into and out of our various strategies and investment vehicles; (iii) industry trends toward products or strategies that we either do or do not offer; (iv) our ability to attract and retain high quality investment, distribution, marketing and management personnel; (v) our decision to close strategies or limit growth of assets in a strategy when we believe it is in the best interest of our clients or conversely to re‑open strategies in part or entirely; and (vi) general investor sentiment and confidence. Our goal is to establish and maintain a client base that is diversified by Franchise and Solutions, asset class, distribution channel and vehicle. Due to rounding, AUM numbers presented in the tables below may not add up precisely to the totals provided.

The following table presents our total AUM by asset class as of the dates indicated:

*(in millions)*

|  | As of March 31, 2025 | 2024 |
| --- | ---: | ---: |
| Solutions | $63,378 | $57,833 |
| U.S. Mid Cap Equity | 28,964 | 32,918 |
| Fixed Income | 24,157 | 24,481 |
| Global / Non-U.S. Equity | 18,334 | 18,200 |
| U.S. Small Cap Equity | 13,182 | 16,297 |
| U.S. Large Cap Equity | 13,104 | 13,895 |
| Alternative Investments | 2,945 | 3,465 |
| **Total Long-Term Assets** | **$164,064** | **$167,089** |
| Money Market & Short-Term Assets | 3,404 | 3,253 |
| **Total AUM(1)** | **$167,468** | **$170,342** |

(1) Total AUM includes both discretionary assets under management and non-discretionary assets under advisement and excludes other assets.

The following tables summarize our total AUM asset flows by asset class for the periods indicated:

*(in millions)*

| For the Three Months Ended March 31, 2025 | U.S. Mid Cap Equity | U.S. Small Cap Equity | Fixed Income | U.S. Large Cap Equity | Global / Non-U.S. Equity | Solutions | Alternative Investments | Total Long-term | Money Market / Short-term | Total AUM(1) |
| --- | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: |
| Beginning AUM | $30,584 | $14,785 | $24,402 | $14,148 | $19,095 | $62,593 | $2,980 | $168,586 | $3,344 | $171,930 |
| Gross client cash inflows | 1,098 | 445 | 928 | 82 | 2,137 | 4,363 | 256 | 9,309 | 177 | 9,486 |
| Gross client cash outflows | (1,733) | (847) | (1,545) | (469) | (3,251) | (2,318) | (351) | (10,514) | (222) | (10,736) |
| Net client cash flows | (635) | (402) | (617) | (386) | (1,114) | 2,045 | (96) | (1,205) | (44) | (1,249) |
| Market appreciation / (depreciation) | (979) | (1,194) | 328 | (630) | 396 | (1,202) | 79 | (3,202) | 30 | (3,172) |
| Realizations and distributions | — | — | — | — | — | — | (21) | (21) | — | (21) |
| Acquired & divested assets / Net transfers | (6) | (7) | 44 | (27) | (44) | (57) | 2 | (94) | 75 | (20) |
| Ending AUM | $28,964 | $13,182 | $24,157 | $13,104 | $18,334 | $63,378 | $2,945 | $164,064 | $3,404 | $167,468 |
| **For the Three Months Ended March 31, 2024** |  |  |  |  |  |  |  |  |  |  |
| Beginning AUM | $30,604 | $15,959 | $24,355 | $12,635 | $16,772 | $54,296 | $3,431 | $158,051 | $3,271 | $161,322 |
| Gross client cash inflows | 1,371 | 507 | 1,298 | 68 | 1,090 | 2,165 | 452 | 6,952 | 236 | 7,187 |
| Gross client cash outflows | (1,845) | (925) | (1,367) | (332) | (751) | (2,410) | (349) | (7,980) | (335) | (8,314) |
| Net client cash flows | (474) | (418) | (69) | (264) | 339 | (245) | 103 | (1,028) | (99) | (1,127) |
| Market appreciation / (depreciation) | 2,795 | 801 | 176 | 1,555 | 1,133 | 3,749 | (75) | 10,135 | 42 | 10,178 |
| Realizations and distributions | — | — | — | — | — | — | — | — | — | — |
| Acquired & divested assets / Net transfers | (7) | (45) | 18 | (31) | (44) | 33 | 5 | (69) | 38 | (31) |
| Ending AUM | $32,918 | $16,297 | $24,481 | $13,895 | $18,200 | $57,833 | $3,465 | $167,089 | $3,253 | $170,342 |

(1) Total AUM includes both discretionary assets under management and non-discretionary assets under advisement and excludes other assets.

The following table presents our total AUM by distribution channel as of the dates indicated:

*(in millions)*

|  | As of March 31, 2025 Amount | % of total | 2024 Amount | % of total |
| --- | ---: | ---: | ---: | ---: |
| Retail | $71,143 | 43% | $66,700 | 39% |
| Direct | 57,170 | 34% | 59,893 | 35% |
| Institutional | 39,155 | 23% | 43,749 | 26% |
| Total AUM(1)(2) | $167,468 | 100% | $170,342 | 100% |

(1) The allocation of AUM by distribution channel involves the use of estimates and the exercise of judgment.

(2) Total AUM includes both discretionary assets under management and non-discretionary assets under advisement and excludes other assets.

The following tables summarize our asset flows by vehicle for the periods indicated:

*(in millions)*

| Three Months Ended March 31, 2025 | Mutual Funds(1) | ETFs(2) | Separate Accounts and Other Pooled Vehicles(3) | Total AUM(4) |
| --- | ---: | ---: | ---: | ---: |
| Beginning AUM | $113,645 | $7,508 | $50,777 | $171,930 |
| Gross client cash inflows | 3,323 | 3,061 | 3,102 | 9,486 |
| Gross client cash outflows | (6,328) | (251) | (4,156) | (10,736) |
| Net client cash flows | (3,006) | 2,810 | (1,053) | (1,249) |
| Market appreciation (depreciation) | (2,243) | (50) | (880) | (3,172) |
| Realizations and distributions | — | — | (21) | (21) |
| Acquired & divested assets / Net transfers | (5) | (15) | — | (20) |
| Ending AUM | $108,392 | $10,253 | $48,823 | $167,468 |
| **Three Months Ended March 31, 2024** |  |  |  |  |
| Beginning AUM | $108,802 | $4,970 | $47,551 | $161,322 |
| Gross client cash inflows | 4,303 | 451 | 2,434 | 7,187 |
| Gross client cash outflows | (5,956) | (449) | (1,909) | (8,314) |
| Net client cash flows | (1,653) | 2 | 525 | (1,127) |
| Market appreciation (depreciation) | 6,796 | 215 | 3,167 | 10,178 |
| Realizations and distributions | — | — | — | — |
| Acquired & divested assets / Net transfers | (48) | 43 | (26) | (31) |
| Ending AUM | $113,897 | $5,229 | $51,217 | $170,342 |

(1) Includes institutional and retail share classes, money market and Variable Insurance Products or VIP funds.

(2) Represents only ETF assets held by third parties. Excludes ETF assets held by other Victory Capital products.

(3) Includes collective trust funds, wrap program accounts, UMAs, UCITS, private funds and non-U.S. domiciled pooled vehicles.

(4) Total AUM includes both discretionary assets under management and non-discretionary assets under advisement and excludes other assets.

*March 31, 2025 AUM compared to December 31, 2024 AUM.* At March 31, 2025, our total AUM was $167.5 billion, a decrease of $4.5 billion, or 2.6%, from $171.9 billion at December 31, 2024, primarily due to negative market action of $3.2 billion and net outflows of $1.2 billion.

Net outflows were driven by our global non-U.S., U.S. mid cap, U.S. small cap, and U.S. large cap equity strategies as well as our fixed income strategies and Alternative investments platform of $1.1 billion, $0.6 billion, $0.4 billion, $0.4 billion, $0.6 billion, and $0.1 billion, respectively, partially offset by net inflows from our Solutions platform of $2.0 billion.

### GAAP Results of Operations

The following table presents our GAAP results of operations for the three months ended March 31, 2025 and 2024.

*(in thousands, except per share data)*

| Revenue | Three Months Ended March 31, 2025 | 2024 |
| --- | ---: | ---: |
| Investment management fees | $173,301 | $169,785 |
| Fund administration and distribution fees | 46,301 | 46,072 |
| **Total revenue** | **219,602** | **215,857** |
| **Expenses** |  |  |
| Personnel compensation and benefits | 56,136 | 59,454 |
| Distribution and other asset-based expenses | 35,477 | 36,263 |
| General and administrative | 14,328 | 14,012 |
| Depreciation and amortization | 7,432 | 7,601 |
| Change in value of consideration payable for acquisition of business | 3,406 | 12,200 |
| Acquisition-related costs | 8,750 | 1,026 |
| Restructuring and integration costs | 1,165 | 492 |
| **Total operating expenses** | **126,694** | **131,048** |
| **Income from operations** | **92,908** | **84,809** |
| **Other income (expense)** |  |  |
| Interest income and other income | 704 | 3,565 |
| Interest expense and other financing costs | (13,211) | (16,486) |
| **Total other expense, net** | **(12,507)** | **(12,921)** |
| **Income before income taxes** | **80,401** | **71,888** |
| **Income tax expense** | **(18,426)** | **(16,197)** |
| **Net income** | **$61,975** | **$55,691** |
| **Earnings per share of common stock** |  |  |
| Basic | $0.97 | $0.86 |
| Diluted | $0.96 | $0.84 |
| **Weighted average number of shares outstanding** |  |  |
| Basic | 63,711 | 64,389 |
| Diluted | 64,714 | 65,972 |
| **Dividends declared per share of common stock** | $0.47 | $0.335 |

### Investment Management Fees

*Three months ended March 31, 2025 compared to March 31, 2024.* Investment management fees increased by $3.5 million, or 2.1%, to $173.3 million for the three months ended March 31, 2025 from $169.8 million for the same period in 2024 due to an increase in average AUM year over year. Average AUM was $173.8 billion for the three months ended March 31, 2025 compared to $163.5 billion for the same period in 2024.

### Fund Administration and Distribution Fees

*Three months ended March 31, 2025 compared to March 31, 2024.* Fund administration and distribution fees increased by $0.2 million, or 0.5%, to $46.3 million for the three months ended March 31, 2025 from $46.1 million for the same period in 2024 mostly due to an increase in fund administration fees partially offset by a decrease in transfer agent fees.

### Personnel Compensation and Benefits

The following table presents the components of GAAP personnel compensation and benefits expense for the three months ended March 31, 2025 and 2024:

*(in thousands)*

|  | Three Months Ended March 31, 2025 | 2024 |
| --- | ---: | ---: |
| Salaries, payroll related taxes and employee benefits | $21,745 | $24,476 |
| Incentive compensation | 23,667 | 23,943 |
| Sales-based compensation(1) | 7,220 | 6,079 |
| Equity awards granted to employees and directors(2) | 3,504 | 3,969 |
| Acquisition and transaction-related compensation | — | 987 |
| **Total personnel compensation and benefits expense** | **$56,136** | **$59,454** |

(1) Represents sales-based commissions paid to our distribution teams. Sales-based compensation varies based on gross and net client cash flows and revenue earned on sales.

(2) Equity awards typically vest over several years based on service and the achievement of specific business and financial targets. The value of the equity awards is recognized as compensation expense over the vesting period.

*Three months ended March 31, 2025 compared to March 31, 2024.* Personnel compensation and benefits were $56.1 million for the first quarter of 2025, a decrease of $3.4 million, or 5.6%, from $59.5 million for the same period in 2024. Salaries, payroll related taxes and employee benefits decreased $2.7 million primarily due lower unrealized gains relating to our deferred compensation plans. Acquisition and transaction-related compensation decreased $1.0 million due to lower contingent payment compensation expense.

### Distribution and Other Asset‑Based Expenses

The following table presents the components of distribution and other asset-based expenses for the three months ended March 31, 2025 and 2024:

*(in thousands)*

|  | Three Months Ended March 31, 2025 | 2024 |
| --- | ---: | ---: |
| Broker-dealer distribution fees | $4,800 | $5,042 |
| Platform distribution fees | 21,611 | 22,128 |
| Sub-administration | 4,390 | 4,101 |
| Sub-advisory | 1,872 | 2,336 |
| Middle-office | 2,804 | 2,656 |
| **Total distribution and other asset-based expenses** | **$35,477** | **$36,263** |

*Three months ended March 31, 2025 compared to March 31, 2024.* Distribution and other asset-based expenses were $35.5 million for the three months ended March 31, 2025, compared to $36.3 million for the same period in 2024. The decrease of $0.8 million, or 2.2% was primarily due to lower platform distribution and sub-advisory fees over the comparable period.

### General and Administrative

*Three months ended March 31, 2025 compared to March 31, 2024*. General and administrative expenses were $14.3 million for the three months ended March 31, 2025 compared to $14.0 million for the same period in 2024. The increase of $0.3 million, or 2.3%, was primarily due to increases in technology related expenses.

### Depreciation and Amortization

*Three months ended March 31, 2025 compared to March 31, 2024.* Depreciation and amortization decreased $0.2 million, or 2.2%, to $7.4 million for the three months ended March 31, 2025 from $7.6 million for the same period in 2024, primarily due to a decrease in depreciation expense related to information technology equipment.

### Change in Value of Consideration Payable for Acquisition of Business

*Three months ended March 31, 2025 compared to March 31, 2024.* The change in value of consideration payable for acquisition of business decreased $8.8 million as a result of an increase of $3.4 million in the fair value of contingent consideration associated with the WestEnd Acquisition for the three months ended March 31, 2025 compared to an increase of $12.2 million for the three months ended March 31, 2024. Refer to Note 4, Acquisitions, for further details on the fair value of contingent consideration payable.

### Acquisition‑Related Costs

*Three months ended March 31, 2025 compared to March 31, 2024.* Acquisition-related costs were $8.8 million for the three months ended March 31, 2025, compared to $1.0 million for the same period in 2024. The increase of $7.7 million was primarily due to legal, professional, and proxy solicitation related to the Amundi US acquisition.

### Restructuring and Integration Costs

*Three months ended March 31, 2025 compared to March 31, 2024.* Restructuring and integration costs for the three months ended March 31, 2025 and 2024 were $1.2 million and $0.5 million, respectively. Restructuring and integration costs for the three months ended March 31, 2025 and 2024 were primarily due to personnel restructuring.

### Interest Income and Other Income (Expense)

*Three months ended March 31, 2025 compared to March 31, 2024.* Interest income and other income/(expense) was income of $0.7 million and $3.6 million for the three months ended March 31, 2025 and 2024, respectively. The decrease is primarily due to a decrease in the net unrealized fair value of deferred compensation plan investments over the comparable period.

### Interest Expense and Other Financing Costs

*Three months ended March 31, 2025 compared to March 31, 2024.* Interest expense and other financing costs decreased $3.3 million to $13.2 million for the three months ended March 31, 2025, compared to $16.5 million for the same period in 2024 as a result of a lower debt principal balance and lower average interest rate over the comparable period.

### Income Tax Expense

*Three months ended March 31, 2025 compared to March 31, 2024.* The effective tax rate for the three months ended March 31, 2025 and 2024 was 22.9% and 22.5%, respectively. The higher effective tax rate in 2025 is mainly due to lower excess tax benefits on share-based compensation when compared to the comparable period.

### Supplemental Non‑GAAP Financial Information

We use non-GAAP performance measures to evaluate the underlying operations of our business. Due to our acquisitive nature, there are a number of acquisition and restructuring related expenses included in GAAP measures that we believe distort the economic value of our organization and we believe that many investors use this information when assessing the financial performance of companies in the investment management industry. We have included these non-GAAP measures to provide investors with the same financial metrics used by management to assess the operating performance of our Company. The non-GAAP measures we report are Adjusted EBITDA and Adjusted Net Income.

The following table sets forth a reconciliation from GAAP financial measures to non-GAAP measures for the periods indicated:

*(in thousands)*

| Reconciliation of non-GAAP financial measures: | Three Months Ended March 31, 2025 | 2024 |
| --- | ---: | ---: |
| **Net income (GAAP)** | **$61,975** | **$55,691** |
| Income tax expense | (18,426) | (16,197) |
| **Income before income taxes** | **$80,401** | **$71,888** |
| Interest expense(1) | 12,521 | 15,711 |
| Depreciation(2) | 2,168 | 2,269 |
| Other business taxes(3) | 922 | 369 |
| Amortization of acquisition-related intangible assets(4) | 5,264 | 5,332 |
| Stock-based compensation(5) | 1,053 | 1,327 |
| Acquisition, restructuring and exit costs(6) | 13,321 | 14,705 |
| Debt issuance costs(7) | 749 | 755 |
| **Adjusted EBITDA** | **$116,399** | **$112,356** |

33

*(in thousands)*

| Reconciliation of non-GAAP financial measures: | Three Months Ended March 31, 2025 | 2024 |
| --- | ---: | ---: |
| **Net income (GAAP)** | **$61,975** | **$55,691** |
| Adjustments to reflect the operating performance of the Company: |  |  |
| i. Other business taxes(3) | 922 | 369 |
| ii. Amortization of acquisition-related intangible assets(4) | 5,264 | 5,332 |
| iii. Stock-based compensation(5) | 1,053 | 1,327 |
| iv. Acquisition, restructuring and exit costs(6) | 13,321 | 14,705 |
| v. Debt issuance costs(7) | 749 | 755 |
| Tax effect of above adjustments(8) | (5,327) | (5,621) |
| **Adjusted Net Income** | **$77,957** | **$72,558** |
| Tax benefit of goodwill and acquired intangibles(9) | $10,141 | $9,748 |

Adjustments made to GAAP Net Income to calculate Adjusted EBITDA and Adjusted Net Income, as applicable, are:

(1) Adding back interest paid on debt and other financing costs, net of interest income.

(2) Adding back depreciation on property and equipment.

(3) Adding back other business taxes.

(4) Adding back amortization expense on acquisition‑related intangible assets.

(5) Adding back share-based compensation associated with equity awards issued from pools created in connection with the management‑led buyout and various acquisitions and as a result of equity grants related to the IPO.

(6) Adding back direct incremental costs of acquisitions, including restructuring costs.

*(in thousands)*

|  | Three Months Ended March 31, 2025 | 2024 |
| --- | ---: | ---: |
| Acquisition-related costs | $8,750 | $1,026 |
| Restructuring and integration costs | 1,165 | 492 |
| Change in value of consideration payable for acquisition of business | 3,406 | 12,200 |
| Personnel compensation and benefits | — | 987 |
| **Total acquisition, restructuring and exit costs** | **$13,321** | **$14,705** |

(7) Adding back debt issuance costs.

(8) Subtracting an estimate of income tax expense applied to the sum of the adjustments above.

(9) Represents the tax benefits associated with deductions allowed for intangible assets and goodwill generated from prior acquisitions in which we received a step-up in basis for tax purposes. Acquired intangible assets and goodwill may be amortized for tax purposes, generally over a 15-year period. The tax benefit from amortization on these assets is included to show the full economic benefit of deductions for all acquired intangible assets with a step-up in tax basis. Due to our acquisitive nature, tax deductions allowed on acquired intangible assets and goodwill provide us with a significant supplemental economic benefit.

Non-GAAP measures should be considered in addition to, and not as a substitute for, financial measures prepared in accordance with GAAP. Our non-GAAP measures may differ from similar measures at other companies, even if similar terms are used to identify these measures.

### Liquidity and Capital Resources

Our primary uses of cash relate to repayment of our debt obligations, funding of acquisitions and working capital needs, repurchasing of shares and payment of dividends, which are all expected to be met through cash generated from our operations and available capital resources.

The following table shows our liquidity position as of March 31, 2025 and December 31, 2024.

*(in thousands)*

|  | March 31, 2025 | December 31, 2024 |
| --- | ---: | ---: |
| Cash and cash equivalents | $175,607 | $126,731 |
| Accounts and other receivables | 95,823 | 100,667 |
| Undrawn commitment on credit facility(1) | 100,000 | 100,000 |
| Accounts and other payables | (113,425) | (109,599) |

34

(1) The balance at March 31, 2025 represents the Company’s $99.9 million revolving credit facility and a $0.1 million standby letter of credit used as collateral for THB’s real estate location.

We manage our cash balances in order to fund our day-to-day operations. Our accounts receivable consists primarily of investment management fees that have been earned but not yet received from clients, income and other taxes receivable, and amounts receivable from the funds. We perform a review of our receivables on a monthly basis to assess collectability. We maintained a $100.0 million revolving credit facility at March 31, 2025 and December 31, 2024 (under the 2019 Credit Agreement) which had approximately $100.0 million undrawn as of March 31, 2025 and December 31, 2024.

### 2021 Debt Repricing

On February 18, 2021, the Company entered into the Second Amendment (the “Second Amendment”) to the 2019 Credit Agreement with the other loan parties thereto, Barclays Bank PLC, as administrative agent, and the Royal Bank of Canada as fronting bank. Pursuant to the Second Amendment, the Company repriced the existing term loans with replacement term loans in an aggregate principal amount of $755.7 million (the “Repriced Term Loans”). The Repriced Term Loans have substantially the same terms as the previously existing term loans, including the same maturity date of July 2026, except that the Repriced Term Loans provided for a reduced applicable margin on LIBOR of 25 basis points. After the Second Amendment, the applicable margin on LIBOR under the Repriced Term Loans was 2.25%.

### 2021 Incremental Term Loans

On December 31, 2021, the Company entered into the Third Amendment (the “Third Amendment”) to the 2019 Credit Agreement with the guarantors party thereto, Barclays Bank PLC, as administrative agent, and the lenders party thereto from time to time. Pursuant to the Third Amendment, the Company obtained incremental term loans (the “2021 Incremental Term Loans”) in an aggregate principal amount of $505.0 million and used the proceeds to fund the WestEnd Acquisition and to pay fees and expenses incurred in connection therewith. The 2021 Incremental Term Loans mature in December 2028 and bear interest at an annual rate equal to, at the option of the Company, either LIBOR (adjusted for reserves and subject to a 50 basis point floor) plus a margin of 2.25% or an alternate base rate plus a margin of 1.25%.

### 2022 LIBOR to Term SOFR Rate Transition

On September 23, 2022, the Company entered into the Fourth Amendment (the “Fourth Amendment”) to the 2019 Credit Agreement to change the interest rate on the Repriced Term Loans and 2021 Incremental Term Loans from LIBOR to a rate based on SOFR plus a ten-basis point credit spread adjustment. There was no change to the applicable margin on the referenced rate as a result of the Fourth Amendment.

The LIBOR rate loans outstanding as of the Fourth Amendment’s effective date continued as LIBOR rate loans until the end of their then current interest periods. The 2021 Incremental Term Loans converted into Term SOFR loans on September 30, 2022, while the Repriced Term Loans converted into Term SOFR loans on October 6, 2022. Also on October 6, 2022, the interest periods for the Repriced Term Loans and 2021 Incremental Term Loans were aligned and the three-month Term SOFR rate was elected for all the Company’s term loans.

### Fifth Amendment

On June 7, 2024, the Company entered into the Fifth Amendment (the "Fifth Amendment") to the 2019 Credit Agreement, extending the maturity date of the $100.0 million senior secured first lien revolving facility from July 1, 2024 to March 31, 2026, and decreasing the drawn interest rate margin by 0.50% per annum. The revolving facility otherwise remains subject to substantially the same terms as those set forth in the 2019 Credit Agreement. The Company incurred $1.0 million in upfront fees, arranger fees and other third party costs related to the Fifth Amendment to the 2019 Credit Agreement, which were recorded to revolving credit facility debt issuance cost in other assets.

On July 1, 2024, the Company executed an agency succession agreement, by and among Barclays Bank PLC as the resigning administrative agent and collateral agent under the 2019 Credit Agreement and Royal Bank of Canada, as the successor administrative agent and collateral agent.

### 2020 Swap Transaction

In the fourth quarter of 2023, the Company monetized the gain on the floating-to-fixed interest rate swap transaction (“Swap”) entered into in 2020 to effectively fix the interest rate on $450 million of its outstanding Term Loan through the Term Loan maturity date of July 2026.

The deferred gain on the termination of the Swap is being amortized on a straight-line basis through July 1, 2026 and is included in interest expense and other financing costs on the unaudited Condensed Consolidated Statements of Operations.

For the three months ended March 31, 2025 and 2024, the Company recorded $4.1 million and $4.2 million, respectively, in amortization of deferred gain on Swap monetization. As of March 31, 2025 and December 31, 2024, the unamortized deferred gain on Swap monetization was $20.8 million and $24.9 million, respectively, before tax.

The Swap was designated as a cash flow hedge. Prior to its termination, the Swap was measured at fair value with mark-to-market gains or losses deferred and included in AOCI(L), net of tax, to the extent the hedge was determined to be effective. Gains or losses were reclassified to interest expenses and other financing costs on the unaudited Condensed Consolidated Statements of Operations in the same period during which the hedged transaction affected earnings.

Due to the termination of the Swap, there was no amount receivable from the Swap counterparty at March 31, 2025 and December 31, 2024. Refer to Note 14, Derivatives, for further information on the Swap.

### Contingent Consideration

At March 31, 2025, the Company had $143.3 million in contingent consideration that is estimated to be payable over the next year and two years resulting from the WestEnd Acquisition. For the three months ended March 31, 2025, the Company recorded an increase of $3.4 million in the contingent payment liability associated with the WestEnd Acquisition, which is included in consideration payable for acquisition of business in the unaudited Condensed Consolidated Balance Sheets. At March 31, 2025, the estimated fair value of the WestEnd Acquisition contingent payments was $143.3 million, and a maximum of $240.0 million in contingent consideration ($80.0 million per year) is potentially payable to sellers.

There were no other significant changes to our contractual obligations as reported in our Annual Report on Form 10-K for the year ended December 31, 2024.

### Capital Requirements

Victory Capital Services is a registered broker-dealer subject to the Uniform Net Capital requirements under the Exchange Act, which requires maintenance of certain minimum net capital levels. In addition, we have certain non-U.S. subsidiaries that have minimum capital requirements. As a result, such subsidiaries of our Company may be restricted in their ability to transfer cash to their parents.

### Cash Flows

The following table is derived from our unaudited Condensed Consolidated Statements of Cash Flows:

*(in thousands)*

|  | Three Months Ended March 31, 2025 | 2024 |
| --- | ---: | ---: |
| Net cash provided by operating activities | $81,094 | $68,684 |
| Net cash used in investing activities | (1,684) | (910) |
| Net cash used in financing activities | (30,713) | (111,342) |

***Operating Activities –*** Cash provided by operating activities during the three months ended March 31, 2025 was $81.1 million, compared to $68.7 million of cash provided by operating activities for the same period in 2024. The $12.4 million increase in cash provided by operating activities was primarily due to increases of $6.3 million and $12.6 million in net income and working capital items, respectively, partially offset by a decrease of $8.8 million in the change in the fair value of contingent consideration.

***Investing Activities –*** Cash used in investing activities during the three months ended March 31, 2025 was $1.7 million and consisted of net trading activity of $0.1 million and $1.6 million of property and equipment purchases. The nature of our trading activities is further described in Note 2, Significant Accounting Policies, to the consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2024.

***Financing Activities –*** Cash used in financing activities during the three months ended March 31, 2025 was $30.7 million, compared to $111.3 million of cash used in financing activities for the same period in 2024. The $80.6 million decrease was primarily due to timing of payment relating to WestEnd contingent consideration.

## Market risk

As filed, 6,143 characters.

### Market Risk

Substantially all of our revenues are derived from investment management, fund administration and distribution fees, which are primarily based on the market value of our AUM. Accordingly, our revenues and net income may decline as a result of our AUM decreasing due to depreciation of our investment portfolios. In addition, such depreciation could cause our clients to withdraw their assets in favor of other investment alternatives that they perceive to offer higher returns or lower risk, which could cause our revenues and net income to decline further.

The value of our AUM was approximately $167 billion at March 31 2025. A 10% increase or decrease in the value of our AUM, if proportionately distributed over all of our strategies, products and client relationships, would cause an annualized increase or decrease in our revenues of approximately $85.2 million at our weighted-average fee rate of 51 basis points for the quarter ended March 31, 2025. Because of declining fee rates from larger relationships and differences in our fee rates across investment strategies, a change in the composition of our AUM, in particular, an increase in the proportion of our total AUM attributable to strategies, clients or relationships with lower effective fee rates, could have a material negative impact on our overall weighted-average fee rate. The same 10% increase or decrease in the value of our total AUM, if attributed entirely to a proportionate increase or decrease in the AUM of the Victory Funds, to which we provide a range of services in addition to those provided to institutional separate accounts, would cause an annualized increase or decrease in our revenues of approximately $98.5 million at the Victory Funds’ aggregate weighted-average fee rate of 59 basis points for the quarter ended March 31, 2025. If the same 10% increase or decrease in the value of our total AUM was attributable entirely to a proportionate increase or decrease in the assets of our institutional separate accounts, it would cause an annualized increase or decrease in our revenues of approximately $65.1 million at the weighted-average fee rate across all of our institutional separate accounts of 39 basis points for the quarter ended March 31, 2025.

As is customary in the investment management industry, clients invest in particular strategies to gain exposure to certain asset classes, which exposes their investment to the benefits and risks of those asset classes. We believe our clients invest in each of our strategies in order to gain exposure to the portfolio securities of the respective strategies and may implement their own risk management program or procedures. We have not adopted a corporate‑level risk management policy regarding client assets, nor have we attempted to hedge at the corporate level or within individual strategies the market risks that would affect the value of our overall AUM and related revenues. Some of these risks, such as sector and currency risks, are inherent in certain strategies, and clients may invest in particular strategies to gain exposure to particular risks. While negative returns in our strategies and net client cash outflows do not directly reduce the assets on our balance sheet (because the assets we manage are owned by our clients, not us), any reduction in the value of our AUM would result in a reduction in our revenues.

### Exchange Rate Risk

A portion of the accounts that we advise hold investments that are denominated in currencies other than the U.S. dollar. To the extent our AUM are denominated in currencies other than the U.S. dollar, the value of that AUM will decrease with an increase in the value of the U.S. dollar or increase with a decrease in the value of the U.S. dollar. Each investment team monitors its own exposure to exchange rate risk and makes decisions on how to manage that risk in the portfolios they manage. We believe many of our clients invest in those strategies in order to gain exposure to non‑U.S. currencies, or may implement their own hedging programs. As a result, we generally do not hedge an investment portfolio’s exposure to non‑U.S. currency.

We have not adopted a corporate-level risk management policy to manage this exchange rate risk. Assuming 11% of our AUM are invested in securities denominated in currencies other than the U.S. dollar and excluding the impact of any hedging arrangement, a 10% increase or decrease in the value of the U.S. dollar would decrease or increase the fair value of our AUM by approximately $1.8 billion, which would cause an annualized increase or decrease in revenues of approximately $9.4 million at our weighted-average fee rate for the business of 51 basis points for the quarter ended March 31, 2025.

### Interest Rate Risk

Interest rate risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market interest rates. On March 27, 2020, the Company executed the Swap, a floating-to-fixed interest rate swap transaction, to effectively fix the interest rate at 3.465% on $450 million of its outstanding Term Loan through the Term Loan maturity date of July 2026. On February 18, 2021, pursuant to the Second Amendment, the Company lowered the spread on the Term Loan by 0.25% resulting in a new fixed rate of 3.215% on the $450 million of Term Loan subject to the Swap. On September 26, 2022, the Company and the Swap counterparty executed an amendment to the Swap to update LIBOR conventions to SOFR conventions and to modify the fixed rate for the change from three-month LIBOR to three-month Term

SOFR effective on October 6, 2022. On October 30, 2023, the Company monetized the gain on the Swap and entered into an agreement to terminate the Swap, which was effective on October 30, 2023. Refer to Note 14, Derivatives, for further information on the Swap. At March 31, 2025, we were exposed to interest rate risk as a result of the amounts outstanding under the 2019 Credit Agreement, as amended. Refer to Note 9, Debt, for a description of the amounts outstanding as of such date and the applicable interest rate.

## Controls and procedures

As filed, 1,365 characters.

### Disclosure Controls and Procedures

We maintain disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act, that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our principal executive and principal financial officers, as appropriate, to allow for timely decisions regarding required disclosure.

Our management, including our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures (as such term is defined in Rule 13a-15(f) and 15d-15(f) under the Exchange Act) at March 31, 2025. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures are effective.

### Changes in Internal Control over Financial Reporting

There has been no change in the Company’s internal control over financial reporting during the Company’s most recent fiscal quarter, that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

## Risk factors

As filed, 936 characters.

For a discussion of our potential risks and uncertainties, see the risk factors previously disclosed in our Annual Report on Form 10-K for the year ended December 31, 2024 as filed with the SEC and the information contained in this report. The declaration, payment and determination of the amount of our quarterly dividends may change at any time. In making decisions regarding our quarterly dividends, we consider general economic and business conditions, our strategic plans and prospects, our businesses and investment opportunities, our financial condition and operating results, working capital requirements and anticipated cash needs, contractual restrictions (including under the terms of our 2019 Credit Agreement as amended) and legal, tax, regulatory and such other factors as we may deem relevant. There have been no material changes to the risk factors in our Annual Report on Form 10-K for the year ended December 31, 2024.

Filed May 9, 2025.
Source: SEC EDGAR, the filing index for accession 0000950170-25-067558. Last ingested by Listed: Oct 30, 2026, 14:15 ET. No prices; not investment advice.