Victory Capital Holdings, Inc.

Victory Capital's actual results may differ materially from these statements. Furthermore, please note that the ultimate completion of a transaction with Amundi 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. 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. It is now my pleasure to turn the call over to David Brown, Chairman and CEO. David?

Thanks, Matt. Good morning and welcome to Victory Capital's fourth quarter 2024 earnings call. I'm joined today by Michael Pellecarpo, our President Chief Financial and Administrative Officer, as well as Matt Dennis, our Chief of Staff and Director of Investor Relations. 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. 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, VictoryShares. 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 $176.1 billion of total client assets, which was up $9.5 billion, or 6%, from the end of last year. During the fourth quarter, average assets rose compared to the third quarter, and 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 $126 million and 54% respectively. We are very pleased with our financial results in 2024, which was driven by our differentiated business platform and superior execution. 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 million 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 Amundi U.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 $2.6 billion in 2024. 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. Following the transactions close, our non-US AUM is projected to total more than $45 billion. Most of the non-US 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. Moreover, these assets are sitting in primarily usage 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 Victory Managed Strategies post-close to the product lineup, the broader product set is anticipated to accelerate growth of these non-U.S. assets. Investment performance at Amundi U.S. also remained very strong throughout the year. 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 billion. We started with less than $200 million 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. 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.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 $132.4 million to shareholders. After being restricted from executing open market share repurchases through the first nine months of the year, we repurchased 1.5 million shares during the fourth quarter. In December, our board authorized a new $200 million share repurchase program. thereby allowing us to remain flexible and opportunistic. Since our IPO, we have repurchased 18.2 million shares at an average price of $30.30 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, Our investment performance remained strong, with two-thirds of our AUM in mutual funds and ETFs earning overall four or 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, 59% and 73% 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?

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 billion, and our fee realization increased for the quarter, driving revenue up to $232.4 million, which is the highest quarterly revenue in our history. For the full year, we generated record high revenue of $893 million, which was a 9% increase from 2023. Fourth quarter GAAP operating income was $111.7 million, which was up 29% from the same quarter last year. 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 $125.5 million 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 $95.1 million in the quarter, This was up 7% from the third quarter and 24% higher than last year's fourth quarter. For the full year, we generated adjusted net income with tax benefit of $353.1 million, which was up 15% from the prior year. Turning to the balance sheet, our cash balance at the end of the year was $127 million, following the return of $132.4 million to shareholders in the form of share repurchases and cash dividends in the fourth quarter. Our net leverage ratio was unchanged at 1.7 times from Q3, driven by growth in earnings and a modest debt pay down of $20 million in December. Finally, yesterday we also announced that the Board authorized a 7% dividend increase, raising the quarterly dividend to 47 cents per share. The first quarter dividend will be paid on March 10th to shareholders of record at the close of business on February 18th. 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 $176.1 billion. 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-US client portion of our AUM. We believe having a significant portion of AUM from investors outside the US 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 Victory Shares ETF platform continue to generate positive long-term net flows in the quarter. 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. 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 four tenths of a basis point from the third quarter and remains within our expected range. For the full year, revenue rose by 9% from 2023. Slide 15 highlights expenses recorded during the quarter. Total gap expenses were $133.8 million 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 non-cash adjustment in Q3, total expenses increased less than $1 million quarter over quarter, and variable expenses calibrated with our increase in AUM and revenues. we incurred $2.8 million in acquisition-related expenses in the fourth quarter, predominantly related to the Monday transaction. 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. For the full year, Adjusted net income with tax benefit per diluted share was $5.36, 19% higher than $4.51 per diluted share in 2023. Adjusted EBITDA and adjusted EBITDA margin were also company records at $125.5 million and 54% respectively. On a year-over-year basis, our adjusted EBITDA grew by 14% to $476 million in 2024, and adjusted EBITDA margin expanded by 230 basis points to 53.2%. Finally, turning to slide 17, we generated $92 million in cash flow from operations during the quarter, and our leverage ratio remained at 1.7 times, which is down from 2.1 times at the beginning of the year. We paid down $20 million of debt in the quarter, and our $100 million credit facility remains undrawn. That concludes our prepared remarks. I will now turn it back over to the operator for questions.