Victory Capital Q4 2024 Earnings Call Transcript

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Provided by Quartr
February 7, 2025
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Operator

Good morning, and welcome to the Victory Capital Fourth Quarter twenty twenty four Earnings Conference Call. All callers are in listen only mode. Following the company's prepared remarks, there will be a question and answer session. I will now turn the call over to Mr. Matthew Dennis, Chief of Staff and Director of Investor Relations.

Operator

Please go ahead, Mr. Dennis.

Matthew Dennis
Matthew Dennis
Chief of Staff & Director of Investor Relations at Victory Capital

Thank you. Before I turn the call over to David Brown, I would like to remind you that during today's conference call, we may make a number of forward looking statements. Victory Capital's actual results may differ materially from these statements. Furthermore, please note that the ultimate completion of a transaction with Amunde remains subject to certain closing conditions. Please refer to our SEC filings for a list of some of the factors that may cause actual results to differ materially from those expressed on today's call.

Matthew Dennis
Matthew Dennis
Chief of Staff & Director of Investor Relations at Victory Capital

Victory Capital assumes no duty and does not undertake any obligation to update any forward looking statements. Our press release that was issued after the market closed yesterday disclosed both GAAP and non GAAP financial results. We believe the non GAAP measures enhance the understanding of our business and our performance. Reconciliations between these non GAAP measures and the most comparable GAAP measures are included in tables that can be found in our earnings press release and in the slides accompanying this call, both of which are available on the Investor Relations portion of our website at ir.vcm.com.

Matthew Dennis
Matthew Dennis
Chief of Staff & Director of Investor Relations at Victory Capital

It is now my pleasure to turn the call over to David Brown, Chairman and CEO. David?

David Brown
David Brown
Chairman of the Board of Directors & CEO at Victory Capital

Thanks, Matt. Good morning, and welcome to Victory Capital's fourth quarter twenty twenty four earnings call. I'm joined today by Michael Policarpo, our President, Chief Financial and Administrative Officer as well as Matt Dennis, our Chief of Staff and Director of Investor Relations.

David Brown
David Brown
Chairman of the Board of Directors & CEO at Victory Capital

I will start today by providing an overview of the fourth quarter and the full year 2024. After that, I will turn the call over to Mike to review the financial results in greater detail. Following our prepared remarks, Mike, Matt and I will be available to answer your questions. The quarterly business overview begins on Slide five. Long term net flows improved in the fourth quarter, helped by accelerated gross sales.

David Brown
David Brown
Chairman of the Board of Directors & CEO at Victory Capital

Although there was improvement, we are not at the level the organization is fully capable of. That said, we are beginning to realize success from our prior investments in several areas with a good example being the acceleration of our growth in our ETF platform Victory shares. During the fourth quarter and throughout the entire year, we achieved strong sales of our rules based and active ETFs. These are high margin products for us that are priced competitively with reasonable cost to manufacture and distribute. We ended December with $176,100,000,000 of total client assets, which was up $9,500,000,000 or 6% from the end of last year.

David Brown
David Brown
Chairman of the Board of Directors & CEO at Victory Capital

During the fourth quarter, average assets rose compared to the third quarter

David Brown
David Brown
Chairman of the Board of Directors & CEO at Victory Capital

and

David Brown
David Brown
Chairman of the Board of Directors & CEO at Victory Capital

our fee rate remained strong resulting in record revenue for the quarter and full year. Our adjusted earnings per diluted share with tax benefit rose more than 7% to $1.45 in the quarter, which was also a record high and up 26% from $1.15 in last year's final quarter. Year over year adjusted earnings per diluted share rose 19% from $4.51 in 2023 to $5.36 in 2024. Adjusted EBITDA and adjusted EBITDA margin both set new quarterly records at 100 and $26,000,000 and 54% respectively. We are very pleased with our financial results in 2024, which was driven by our differentiated business platform and superior execution.

David Brown
David Brown
Chairman of the Board of Directors & CEO at Victory Capital

Underneath all of this is an employee base, which I continue to believe is the best at what they do in the industry. Turning to our multifaceted strategic partnership with Amundi, we remain on track to close our acquisition by the end of this quarter. Based on our ongoing integration work, we are reaffirming the prior guidance of realizing $100,000,000 in cost synergies by the end of our second year of ownership. These expense savings will be front end loaded with the majority being realized during the first year after closing. The Mundi U.

David Brown
David Brown
Chairman of the Board of Directors & CEO at Victory Capital

S. Business continues to perform very well across the board. Based on publicly available data, net long term flows into their U. S. Mutual funds totaled $2,600,000,000 in 2024.

David Brown
David Brown
Chairman of the Board of Directors & CEO at Victory Capital

Their institutional business in The U. S. As well as their non U. S. Business also posted very strong sales for calendar year 2024 and both were net flow positive.

David Brown
David Brown
Chairman of the Board of Directors & CEO at Victory Capital

Following the transactions close, our non U. S. AUM is projected to total more than $45,000,000,000 Most of the non U. S. Assets can be segmented into the following buckets: third party distribution platforms, institutional investors or various large banking and financial networks spread throughout the world.

David Brown
David Brown
Chairman of the Board of Directors & CEO at Victory Capital

Moreover, these assets are sitting in primarily USITS or institutional separately managed accounts. The Non U. S. Business has been a consistent strong area of organic growth, registering positive net flows since Amundi acquired the business in 2017. With the addition of VictoryManage strategies post close to the product lineup, the broader product set is anticipated to accelerate growth of these Non U.

David Brown
David Brown
Chairman of the Board of Directors & CEO at Victory Capital

S. Assets. Investment performance at Amundi U. S. Also remained very strong throughout the year.

David Brown
David Brown
Chairman of the Board of Directors & CEO at Victory Capital

At year end, 61% of mutual fund AUM was rated four or five stars overall by Morningstar. On Slide six, we provide an update on VictoryShares, our ETF platform. To date, we have increased our ETF AUM to close to $12,000,000,000 We started with less than $200,000,000 of ETF AUM when we acquired the capability in 2015. Since then, AUM has increased primarily as a result of organic growth as we have launched innovative new products and increased our distribution reach on various intermediary platforms over the years. You can see from the graphic on this slide that this AUM growth has accelerated recently and we look forward to continuing accelerating this momentum.

David Brown
David Brown
Chairman of the Board of Directors & CEO at Victory Capital

Increasing investor demand for solutions oriented and active ETFs aligns perfectly with our core strength of delivering alpha and or targeted outcomes through proven investment capabilities. We will continue to grow AUM by leveraging the portfolio management expertise of our investment franchises and solutions platform coupled with our deep distribution coverage, which now includes dedicated ETF sales and marketing resources. Our active ETFs provide investors with access to fixed income and equity strategies and a tax efficient and liquid ETF structure. These active ETF products are net flow positive, meet our margin criteria and we look forward to continue launching new products to maintain our momentum. Additionally, Amundi U.

David Brown
David Brown
Chairman of the Board of Directors & CEO at Victory Capital

S. Currently has no ETF offerings and we are evaluating which of their investment strategies have the best opportunity to be successful within an ETF wrapper and view this as an additive growth opportunity post the close of the acquisition. Turning to Slide seven, you can see our updated capital allocation details. During the fourth quarter, we returned a total of $132,400,000 to shareholders. After being restricted from executing open market share repurchases through the first nine months of the year, we repurchased 1,500,000.0 shares during the fourth quarter.

David Brown
David Brown
Chairman of the Board of Directors & CEO at Victory Capital

In December, our Board authorized a new $200,000,000 share repurchase program, thereby allowing us to remain flexible and opportunistic. Since our IPO, we have repurchased 18,200,000.0 shares at an average price of $30.3 per share. Based on today's share price, our repurchase activity has resulted in an extremely attractive return for shareholders. We also announced a 7% increase in our quarterly cash dividend. Moving to Slide nine.

David Brown
David Brown
Chairman of the Board of Directors & CEO at Victory Capital

Our investment performance remained strong with two thirds of our AUM in mutual funds and ETFs earning overall four five star ratings by Morningstar for the period ending on December 31. This is broadly diversified, encompassing 45 distinct products. Over the key three and five year periods, fifty nine percent and seventy three percent of our total AUM outperformed their respective benchmarks. With that, I will turn the call over to Mike to go through the quarter and full year financial results in greater detail. Mike?

Michael Policarpo
Michael Policarpo
President, CFO & Chief Administrative Officer at Victory Capital

Thanks, Dave, and good morning, everyone. The financial results review begins on Slide 11. Average assets under management rose 2% in the fourth quarter to $176,000,000,000 and our fee realization increased for the quarter driving revenue up to $232,400,000 which is the highest quarterly revenue in our history. For the full year, we generated record high revenue of $893,000,000 which was a 9% increase from 2023. Fourth quarter GAAP operating income was $111,700,000 which was up 29% from the same quarter last year.

Michael Policarpo
Michael Policarpo
President, CFO & Chief Administrative Officer at Victory Capital

GAAP earnings per diluted share was $1.17 for the fourth quarter and $4.38 for the full year. Year over year, GAAP earnings rose more than 40% from $3.12 per diluted share for 2023. Adjusted EBITDA was $125,500,000 in the fourth quarter, which was 3% higher than in the third quarter and adjusted EBITDA margin expanded 30 basis points to 54%. Adjusted net income with tax benefit rose to a record $95,100,000 in the quarter. This was up 7% from the third quarter and 24% higher than last year's fourth quarter.

Michael Policarpo
Michael Policarpo
President, CFO & Chief Administrative Officer at Victory Capital

For the full year, we generated adjusted net income with tax benefit of $353,100,000 which was up 15% from the prior year. Turning to the balance sheet. Our cash balance at the end of the year was $127,000,000 following the return of $132,400,000 to shareholders in the form of share repurchases and cash dividends in the fourth quarter. Our net leverage ratio was unchanged at 1.7x from Q3 driven by growth in earnings and a modest debt pay down of $20,000,000 in December. Finally, yesterday, we also announced that the Board authorized a 7% dividend increase, raising the quarterly dividend to 0.47 per share.

Michael Policarpo
Michael Policarpo
President, CFO & Chief Administrative Officer at Victory Capital

The first quarter dividend will be paid on March 10 to shareholders of record at the close of business on February 18. Turning to Slide 12, you can see that while average assets rose from the third quarter, total client assets declined by just under 3% during the period, driven primarily by market action to end the year at $176,100,000,000 Our AUM continues to be diversified from both a distribution channel perspective as well as by investor type within each channel and by asset class and investment vehicle. Post closing of the Amundi transaction, we intend to add a new category here that breaks out the non U. S. Client portion of our AUM.

Michael Policarpo
Michael Policarpo
President, CFO & Chief Administrative Officer at Victory Capital

We believe having a significant portion of AUM from investors outside The U. S. Provides another dimension of diversification and potential growth for our business. On Slide 13, we cover long term asset flows. Several of our investment franchises and our VictoryShares ETF platform continued to generate positive long term net flows in the quarter.

Michael Policarpo
Michael Policarpo
President, CFO & Chief Administrative Officer at Victory Capital

Victory Income Investors posted its fourth consecutive quarter of positive net flows and its eighth consecutive quarter of positive net flows in the intermediary channel, where we have been gaining shelf space for the past several years. For the full year, Integrity, NEC, RS Global and our VictoryShares ETF platform also achieved positive net long term flows. 2025 is off to a strong start. Our long term flows for the month of January have improved substantially and has flipped to be slightly positive. And our one but not yet funded pipeline is as large as it has ever been as we look forward.

Michael Policarpo
Michael Policarpo
President, CFO & Chief Administrative Officer at Victory Capital

The majority of the one but not yet funded pipeline should fund in 2025 and it is well diversified from a franchise and channel perspective. Our outlook for organic growth is encouraging as we consider current business momentum and the closing of the Amundi transaction and what that will contribute to our organic growth profile. Slide 14 shows a steady increase in sequential revenue during 2024. Our average fee rate was 52.5 basis points in the fourth quarter, which is up 0.4 basis point from the third quarter and remains within our expected range. For the full year, revenue rose by 9% from 2023.

Michael Policarpo
Michael Policarpo
President, CFO & Chief Administrative Officer at Victory Capital

Slide 15 highlights expenses recorded during the quarter. Total GAAP expenses were $133,800,000 for the quarter. The increase from the third quarter was driven primarily by the reversal of earn out accruals in the third quarter. Excluding this noncash adjustment in Q3, total expenses increased less than $1,000,000 quarter over quarter and variable expenses calibrated with our increase in AUM and revenues. We incurred $2,800,000 in acquisition related expenses in the fourth quarter, predominantly related to the Amundi transaction.

Michael Policarpo
Michael Policarpo
President, CFO & Chief Administrative Officer at Victory Capital

On a cash basis, our compensation expense was 23.8%, which is in line with our guidance. Consistent with lower interest rates, we experienced a decrease in interest expense during the fourth quarter. Our average interest rate declined by 33 basis points from 5.25% in the third quarter to 4.92% in the fourth quarter. On Slide 16, we highlight our non GAAP metrics. Our reported $1.45 adjusted net income with tax benefit per diluted share is the highest level in our history and is up 7% from the prior record of $1.35 per diluted share reported for the third quarter.

Michael Policarpo
Michael Policarpo
President, CFO & Chief Administrative Officer at Victory Capital

For the full year, adjusted net income with tax benefit per diluted share was $5.36 19 percent higher than $4.51 per diluted share in 2023. Adjusted EBITDA and adjusted EBITDA margin were also company records at 100 and $25,500,000 and 54%, respectively. On a year over year basis, our adjusted EBITDA grew by 14% to $476,000,000 in 2024, and adjusted EBITDA margin expanded by two thirty basis points to 53.2%. Finally, turning to Slide 17. We generated $92,000,000 in cash flow from operations during the quarter and our leverage ratio remained at 1.7x, which is down from 2.1x at the beginning of the year.

Michael Policarpo
Michael Policarpo
President, CFO & Chief Administrative Officer at Victory Capital

We paid down $20,000,000 of debt in the quarter and our $100,000,000 credit facility remains undrawn. That concludes our prepared remarks. I will now turn it back over to the operator for questions.

Operator

And your first question comes from the line of Alex Blostein with Goldman Sachs. Alex, please go ahead.

Anthony Corbin
Anthony Corbin
Equity Research Analyst at Goldman Sachs

Hey, everybody. This is Anthony on for Alex. It's nice to see the organic growth profile improving in January. And I guess as we look out into 2025, what strategies do you expect to be most in favor and contribute the most to organic growth?

David Brown
David Brown
Chairman of the Board of Directors & CEO at Victory Capital

Hi. Good morning. It's Dave. A couple of pieces to that question. The first piece, just Victory.

David Brown
David Brown
Chairman of the Board of Directors & CEO at Victory Capital

As we said in our prepared remarks, our Victory shares ETF platform is doing really well. We're seeing strong growth there and I would expect that to continue throughout the year. Additionally, in our institutional channel, we're seeing a lot of opportunities. We have a large one, but not yet funded. Part of our pipeline is there in that channel in a few different franchises.

David Brown
David Brown
Chairman of the Board of Directors & CEO at Victory Capital

And then bringing on Amundi and Amundi's organic growth profile where they have had net flow positive in 2024, they're off to a great start in 2025 in really all of their channels, coupled with what we have, the opportunities we have, we think putting that together will be where we see the growth.

Anthony Corbin
Anthony Corbin
Equity Research Analyst at Goldman Sachs

Thanks. Yes, that's helpful. And I guess as a follow-up on the Amundi deal, I guess from a revenue perspective, what sort of revenue synergies do you expect? And how soon do you expect to see like the flow benefits from the distribution partnership?

Michael Policarpo
Michael Policarpo
President, CFO & Chief Administrative Officer at Victory Capital

Good morning. It's Mike. I think with respect to the distribution agreement, just a reminder, we've really established a fifteen year exclusive distribution agreement with the Mundy where active traditional products will be pushed, if you will, through their global distribution network. As we mentioned in the prepared remarks, that channel exists today with the Amundi U. S.

Michael Policarpo
Michael Policarpo
President, CFO & Chief Administrative Officer at Victory Capital

Products and is currently organic growth positive. As we think about the addition of Victory products to that distribution network, we're excited. We're still working on which products will be launched and which products will be pushed through that distribution channel. But we spent a lot of time really evaluating and understanding the needs of clients globally. And as we move forward, we know it will be additive to the overall Victory.

Michael Policarpo
Michael Policarpo
President, CFO & Chief Administrative Officer at Victory Capital

We're not in a position today to provide specifics around that. But as we close the transaction, we'll come out with more specifics related to that. But again, we're excited about being able to add strong Victory product through that sizable distribution network.

Anthony Corbin
Anthony Corbin
Equity Research Analyst at Goldman Sachs

Okay. Thank you.

Operator

And your next question comes from the line of Ken Worthington with JPMorgan. Ken, please go ahead.

Michael Cho
Michael Cho
Analyst at JP Morgan

Hi, good morning. This is Michael Cho in for Ken. Thanks for taking my question. I just wanted to touch on margins. Victory's margins just seem to continue to rise every quarter.

Michael Cho
Michael Cho
Analyst at JP Morgan

So without, you know, asking about the new long term targets or anything like that, I was just wondering if you could talk through any margin differences across the different products or vehicles? I think you've called out in your comments that, you know, maybe the rules based ETFs are higher margin products. So I'm just kind of curious if you could flesh that commentary out into kind of broader perspective of, maybe margin differences or nuances that we should consider, in light of the 2025 flows comment you just made as well.

Michael Cho
Michael Cho
Analyst at JP Morgan

So thanks.

Michael Policarpo
Michael Policarpo
President, CFO & Chief Administrative Officer at Victory Capital

Sure, Michael. As we think about our operating platform and the business structure that we have, I think we've identified and said that greater than two thirds of our expenses are variable. And that really comes with having a single operating platform to allow us to leverage and invest really once across all franchises, all vehicles inclusive of our ETFs, mutual funds, institutional business, retail SMA and model delivery business. So that single platform really allows for significant scale. And as we look at how we've derived that expense base, with greater than two thirds being variable, the ETF business is just as profitable, as the rest of the business despite having slightly lower revenue realization.

Michael Policarpo
Michael Policarpo
President, CFO & Chief Administrative Officer at Victory Capital

And again, the ETFs that Dave mentioned in the prepared comments, they're not passive ETFs. They're active and rules based that have a fair revenue realization to them. And when we apply, if you will, the business infrastructure across that, we still maintain very strong margins competitive to to any other distribution channel and any other product vehicle that we have. So, it really is that single platform and the variable expense model that we think drives the current margins that we have and continue to drive the investments that we're making to support future growth.

Michael Cho
Michael Cho
Analyst at JP Morgan

Great. Thanks for that. And if I could just quickly follow-up, you mentioned pipeline or one not yet funded pipeline in terms of kind of the largest ever. I was wondering if you can kind of provide any context or color around the pipeline as it sits today and any color on the composition of that institutional pipeline? Thank you.

Michael Policarpo
Michael Policarpo
President, CFO & Chief Administrative Officer at Victory Capital

Sure. It's Mike. Yeah, we don't necessarily provide the specifics. But I think in Dave's comments, he mentioned it's as large as we've ever seen it in the history of the business, which is very compelling as we sit here today. It's also not just a particular product or franchise, it stems across a number of different franchises, as well as different channels.

Michael Policarpo
Michael Policarpo
President, CFO & Chief Administrative Officer at Victory Capital

So both intermediary and institutional business and then within institutional, the sub channels are also represented. We expect that the pipeline, from a OneNote funded perspective, most, if not all of that, will fund in 2025. And it again is broad based across a number of different franchises and products within franchises.

Michael Cho
Michael Cho
Analyst at JP Morgan

Great. Thank you.

Operator

And your next question comes from the line of Kenneth Lee with RBC Capital Markets. Kenneth, please go ahead.

Kenneth Lee
Kenneth Lee
Vice President at RBC Capital Markets

Hey, good morning. Thanks for taking my question. Just following up on the Amundi and the potential introduction of Victory products in the Non U. S. Distribution.

Kenneth Lee
Kenneth Lee
Vice President at RBC Capital Markets

Assuming you've selected certain products, how rapidly in terms of time frames could you potentially introduce products? What are the key gating factors? Is there any kind of regulatory or product design or vehicle selection things that we should think about? Thanks.

David Brown
David Brown
Chairman of the Board of Directors & CEO at Victory Capital

Yes. That will happen really throughout 2025 and into 2026 for the Victory products. I would expect after we close, most of the flow will come through the existing or the legacy of Mondi U. S. Products that are already into the channels, already have the products registered, established, sales force educated on them.

David Brown
David Brown
Chairman of the Board of Directors & CEO at Victory Capital

And so that will continue and accelerate with our investment in that channel. And then as 2025 moves through, I would anticipate that we have the legacy Victory product registered, educating the sales force, and then getting momentum in the different geographies and really seeing a benefit as we end 2025 and go into 2026. Each geography is going to have its own set of regulatory rules. We'll be registering different products. On the institutional side, it'll be educating the sales force.

David Brown
David Brown
Chairman of the Board of Directors & CEO at Victory Capital

So it'll be a large effort around that. But the great part about this is today as a Monday U. S. Stands, they have the infrastructure, they're successful in selling the products outside The U. S.

David Brown
David Brown
Chairman of the Board of Directors & CEO at Victory Capital

It has been growing, I think I referenced in my prepared remarks, since the acquisition of AMUNDY in 2017 AMUNDY U. S. They have been positive from a sales perspective. So we'll just be plugging into that and really accelerating that and then introducing our products. But as we look out and we get out of the quarters and we start to look in the future from a year's perspective, we think it's going to be a really compelling growth opportunity for us, diversify our business and really differentiate us from many other U.

David Brown
David Brown
Chairman of the Board of Directors & CEO at Victory Capital

S. Managers to have this kind of distribution channel outside The U. S. For a U. S.

David Brown
David Brown
Chairman of the Board of Directors & CEO at Victory Capital

Based manager.

Kenneth Lee
Kenneth Lee
Vice President at RBC Capital Markets

Great. Very helpful there. And then just changing over to another topic and on the M and A opportunity there. You previously mentioned that there could be some additional opportunities over the near term. Just wanted to get a little bit more color in terms of how active is the discussions pipeline that you're having?

Kenneth Lee
Kenneth Lee
Vice President at RBC Capital Markets

And what are your thoughts in terms of the outlook for potential M and A this year? Thanks.

David Brown
David Brown
Chairman of the Board of Directors & CEO at Victory Capital

Yes. I think building on some of the comments I've made over the previous quarters, we are very busy from a discussion perspective. I think the industry is primed for a lot of consolidation and I think you're starting to see that and I think it will accelerate in 2025 and really in the out years and we will participate in that. After we close the acquisition, our balance sheet, our leverage will go down quite significantly. Our balance sheet will be primed.

David Brown
David Brown
Chairman of the Board of Directors & CEO at Victory Capital

And I would anticipate that we would be as active as anybody in the industry. I think our platform is super attractive for the right kind of partner and we are a willing participant in the consolidation. And so my anticipation is that we are going to continue down the path we've had over the years and that has been really been very acquisitive. And so that's where we are today. And we're super excited about it as well.

David Brown
David Brown
Chairman of the Board of Directors & CEO at Victory Capital

The discussions we're having, the opportunities are as compelling as I've ever seen in my career when I look at the opportunities and the discussions we're having.

Kenneth Lee
Kenneth Lee
Vice President at RBC Capital Markets

Great. Very helpful there. Thanks again.

Operator

And our next question comes from the line of Etienne Ricard with BMO Capital Markets. Etienne, please go ahead.

Etienne Ricard
Etienne Ricard
Equity Research Analyst at BMO Capital Markets

Okay. Thank you and good morning. Just to circle back on operating margins, I'm curious to hear relative to the 49% target that you have, in what areas of the organization have you seen better than expected operating leverage? And just to circle back on a Monday, what's giving you the confidence that current systems in place can handle a much larger AUM base? Thank you.

Michael Policarpo
Michael Policarpo
President, CFO & Chief Administrative Officer at Victory Capital

Hey, Tim. Good morning. It's Mike. Yes, I would say we are, I mentioned before kind of the single operating platform that we run. It is world class.

Michael Policarpo
Michael Policarpo
President, CFO & Chief Administrative Officer at Victory Capital

It is highly scalable in the nature of how we have designed it. We leverage significant partner relationships that allow us to onboard and integrate M and A and have done so since the beginning of the business model back in 2013. So that gives us the confidence along with the people and the experience that we have that we can and have assessed, if you will, the current Amundi U. S. Business, to be able to put that on to the platform, make the investments that we need to for areas where there is differentiation from a product perspective or a client perspective and continue to operate the business long term at the margins that we've identified that are robust and probably at the top of the industry.

Michael Policarpo
Michael Policarpo
President, CFO & Chief Administrative Officer at Victory Capital

So that long term 49% guidance is still something that we're confident in even post onboarding the Amundi transaction. There's really nothing in the Amundi U. S. Business that is significantly differentiated. We're a traditional active asset management business.

Michael Policarpo
Michael Policarpo
President, CFO & Chief Administrative Officer at Victory Capital

And so we feel very confident that post the integration, we'll be able to operate the business at the long term margins, still making the investments in areas that we believe will provide long term organic growth. Those investments that we've made and continue to make support data. Dave mentioned ETF specialists with respect to distribution and marketing, technology support. We're continuing to invest in the intermediary distribution channel. And really all of those investments that we're making and will continue to make through the Amundi U.

Michael Policarpo
Michael Policarpo
President, CFO & Chief Administrative Officer at Victory Capital

S. Transaction will continue to position us to be well positioned for continued M and A as well as organic growth.

Etienne Ricard
Etienne Ricard
Equity Research Analyst at BMO Capital Markets

Great. I appreciate the details. Switching on net flows, you've seen demand for some of your global strategies on the Non U. S. Side.

Etienne Ricard
Etienne Ricard
Equity Research Analyst at BMO Capital Markets

Can you share more details as to what explains this relatively stronger performance?

Michael Policarpo
Michael Policarpo
President, CFO & Chief Administrative Officer at Victory Capital

Yes. So the where we've seen strength in the global equity and international equity segment of our business really has been with respect to the RS Global product. That product has outstanding short and long term investment performance. They've got a very differentiated investment process that has allowed them to continue to perform excellently throughout all market cycles over the last decade plus. And we're seeing significant opportunities both on the institutional side as well as on the intermediary side with respect to that product offering, because of the strong performance, because of the depth of the team, because of the strength of the team, and really they've just continued to perform very well, which has led to a significant amount of opportunities.

Operator

Our next question comes from the line of Benjamin Bodish with Barclays. Benjamin, please go ahead.

Analyst

Good morning. This is Mason on for Ben. Can you provide a mark to market on Amundi since our last update? What does AUM look like and how are flows trending?

Michael Policarpo
Michael Policarpo
President, CFO & Chief Administrative Officer at Victory Capital

Yes. So as Dave mentioned in our prepared remarks, the Amundi U. S. Business for 2024 was net flow positive. In what you can see publicly in their mutual fund business, the flows were roughly $2,600,000,000 net flow positive across their fixed income multi asset and equity products.

Michael Policarpo
Michael Policarpo
President, CFO & Chief Administrative Officer at Victory Capital

We also highlighted that their other distribution channels, which really was that global network was positive organic growth as well. And those trends have continued into January. At year end, the AUM was approximately $114,000,000,000 for Amundi US, which again, as we mentioned, the performance of the Amundi US business throughout 2024, really outpaced our expectations and what we diligence. So we're super excited to have tailwinds in that business as it comes on to our platform and we continue to look at organic growth opportunities post the transaction.

David Brown
David Brown
Chairman of the Board of Directors & CEO at Victory Capital

And I would add it, Steve, I would add a few more things. I'd say, one, going into '25, they still have that net flow positive it's net flow positive on the mutual fund side. You can see that publicly for January. The investment performance is still strong. And I would reiterate what Mike said, which is this is a business that has really picked up momentum in 2024 and going into 2025 and it is exceeding what we anticipated.

David Brown
David Brown
Chairman of the Board of Directors & CEO at Victory Capital

So from our perspective, when we diligenced the business, we thought it was great and it has now exceeded that and we're super excited about that and really excited to bring it on to our platform combined forces and really I think provide a trajectory that's much more positive from a net flow perspective putting our organizations together. One of the great benefits of this transaction is we are going to have a larger U. S. Intermediary sales effort. And from a FTE perspective, from a partnership with platform perspective, from a marketing perspective, And that should benefit our entire platform, not just the legacy Amundi U.

David Brown
David Brown
Chairman of the Board of Directors & CEO at Victory Capital

S. And not just a few products, but we should see that across our entire platform.

Analyst

Thank you. Can you also provide an update on flows at Sycamore in particular? I recall that the franchise was a source of some of your outflows last year. So can you just remind us of some of the dynamics there? Thank you.

David Brown
David Brown
Chairman of the Board of Directors & CEO at Victory Capital

We don't provide specific flows on each franchise. Sycamore is one of our larger franchises. It is an excellent long term investment performance and it has a really big client following on the intermediary side and on the institutional side. It is a franchise that has had some outflows, but long term we're not concerned with the franchise at all. It is an excellent investment team.

David Brown
David Brown
Chairman of the Board of Directors & CEO at Victory Capital

They have an excellent investment process. It's a deep team. And I'd say anything that's going on at Sycamore is really just a small cycle and a much longer term positive cycle for them.

Analyst

Thank you.

Operator

Our next question comes from the line of Ben Treuben with UBS. Ben Trebnch. Please go ahead.

Benjamin Rubin
Benjamin Rubin
Director, Equity Research at UBS Group

Hi. Thanks for taking my questions. My first one is on the ETF business. Victory shares had over $1,000,000,000 of flows in fourth quarter, stronger than your recent quarters and a much better 2024 overall, which you in your prepared remarks. So I'm just curious what products or strategies are driving that improvement?

Benjamin Rubin
Benjamin Rubin
Director, Equity Research at UBS Group

And then also what are your expectations for active ETFs going into 2025? Thank you.

David Brown
David Brown
Chairman of the Board of Directors & CEO at Victory Capital

Sure. So on in 2024, we had a few ETFs that really did well and I think started to emerge. And I would bucket them first our group of fixed income active ETFs run by our Victory Income Investors franchise. There are a number of ETFs there that were net flow positive and really with the market tailwinds and our ability to get them across our distribution system have really started to pay back and I expect that to continue in 2025. The launch really of our free cash flow series group of ETFs led by what we call VFLOW which is VFLO, SFLO which is ZESFLOW and then also a few other ones that we've just launched and we'll be launching around our free cash flow series.

David Brown
David Brown
Chairman of the Board of Directors & CEO at Victory Capital

We've had seen very good flows from that perspective. Four of our five top sellers in 2024 were actually active. And even our passive ETFs really are not passive from a beta replication perspective. Our passive ETFs are really rules based and thematic type ETFs that really compete with active products. A good example is Viflow.

David Brown
David Brown
Chairman of the Board of Directors & CEO at Victory Capital

It's a 50 stock portfolio. It's priced like an active product, acts like an active. We just use rules to express our investment thesis. And in 2025, we're off to a tremendous start on the ETF side and I anticipate that is going to accelerate as we move through the year. There's great market tailwinds from what's happening in the industry plus the way we're positioned.

David Brown
David Brown
Chairman of the Board of Directors & CEO at Victory Capital

And lastly, I would add, we have invested from a sales perspective on the ETF side. We now have ETF sales specialists. We're focusing some of our marketing efforts there. We're expanding our distribution platform relationships on the ETF side. So we really believe that Victory shares is going to be a big part of our future, and it's going to help us drive organic growth.

Benjamin Rubin
Benjamin Rubin
Director, Equity Research at UBS Group

Great. Thanks for that color.

Operator

And our final question comes from the line of Michael Cyprys with Morgan Stanley. Michael, please go ahead.

Analyst

Hey, this is Anna Leon for Mike. Just a question on capital allocation. How should we think about this going forward just given the raised dividend and also new buyback program? How should we think about timing of completion of the program? And how are you also thinking about debt pay down and scope for the dividend over time?

Analyst

Thanks.

David Brown
David Brown
Chairman of the Board of Directors & CEO at Victory Capital

Yes. I'll start off on this and Mike can fill in afterwards. First and foremost, our use of capital is to do accretive acquisitions. I mean, that is the most important thing for us and the most strategic thing for us and I think that has the potential for the highest shareholder return. We have been able to balance that while also increasing our dividend over the years and buying back our stock.

David Brown
David Brown
Chairman of the Board of Directors & CEO at Victory Capital

Both buying back our stock and our dividend program are ancillary ways of returning capital. We love buying our stock. We think the stock is undervalued based on today and based on the future. And we also like returning capital through dividends. And you can see through our increase in our really our historic history of increasing the dividend over the years.

David Brown
David Brown
Chairman of the Board of Directors & CEO at Victory Capital

We are as I said earlier, we are going to participate in acquisitions. We're having really compelling discussions. And our balance sheet is really the first use of our balance sheet is going to be able to execute on those acquisitions. Depending on how that goes that will drive our buyback program, that will drive our dividend program. But we believe that we can balance all of that out as we've done in the past.

David Brown
David Brown
Chairman of the Board of Directors & CEO at Victory Capital

And I would anticipate looking forward, our Board put in a $200,000,000 program to buy our stock. We're going to be opportunistic. We're going to look at the facts on a daily basis and we'll execute it where it makes sense. And we'll continue to look at increasing the dividend assuming that we can balance out the acquisition side.

Analyst

Great. Thanks. And then maybe a follow-up on Westend. Can you just update us on how the investment performance is trending there and how that's contributing to flows? And then also maybe on how you're expanding wallet with existing advisors and how that's evolving?

Analyst

Thanks.

David Brown
David Brown
Chairman of the Board of Directors & CEO at Victory Capital

Sure. So since we acquired Westend, they have been net flow positive. Their performance in 2024 was not up to the standard that we had hoped. It is having a much better start in 2025. We have expanded quite significantly the number of advisors since we've acquired the business that they're doing business with pretty extensively.

David Brown
David Brown
Chairman of the Board of Directors & CEO at Victory Capital

And we've also expanded the number of platforms that they're doing business on. And so there's a great opportunity there. We think with the improvement in investment performance, the market dynamics for their products and we've also launched a number of new products for them including an ETF that has gotten a lot of traction. The ETF is MODL. We're pretty bullish on the opportunity to grow West End.

David Brown
David Brown
Chairman of the Board of Directors & CEO at Victory Capital

And also we also know from an investment perspective, they're excellent at what they do and we're starting to see some of the investment performance return to the levels that we expect of them.

Analyst

Great. Thank you.

Operator

And that concludes our Q and A session. I will now hand it over to David Brown for any closing remarks. David?

David Brown
David Brown
Chairman of the Board of Directors & CEO at Victory Capital

Thank you. And thank you for your interest in Victory Capital. Next week, we will be attending the UBS Financial Services Conference as well as the BofA Securities twenty twenty five Financial Services Conference in Miami. And next month, we will be at the RBC twenty twenty five Global Financial Institutions Conference in New York. We hope to see you at one of those events and hope you have a great rest of the day.

David Brown
David Brown
Chairman of the Board of Directors & CEO at Victory Capital

In the interim, please, if you have any questions, please feel free to contact us at any time. Thank you.

Operator

This concludes the meeting. Thank you all for joining. You may now disconnect.

Executives
    • Matthew Dennis
      Matthew Dennis
      Chief of Staff & Director of Investor Relations
    • David Brown
      David Brown
      Chairman of the Board of Directors & CEO
    • Michael Policarpo
      Michael Policarpo
      President, CFO & Chief Administrative Officer
Analysts
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Earnings Conference Call
Victory Capital Q4 2024
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