Victory Capital Holdings, Inc.

Previous wording

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 and nine months ended September 30, 2025 and 2024 and cash flows for the nine months ended September 30, 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.

Current wording

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, 2026 and 2025 and cash flows for the three months ended March 31, 2026 and 2025. 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, 2025 (the "2025 Annual Report"). 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 2025 Annual Report.

Previous wording

Our Business –Victory is a diversified global asset management firm with total client assets of $313.4 billion, assets under management of $310.6 billion and other assets of $2.7 billion as of September 30, 2025. The Company operates a next-generation business model combining boutique investment qualities with the benefits of an integrated, centralized operating and distribution platform.

Current wording

Our Business –Victory is a diversified global asset management firm with total client assets of $313.1 billion, assets under management of $309.8 billion and other assets of $3.3 billion as of March 31, 2026. The Company operates a next-generation business model combining boutique investment qualities with the benefits of an integrated, centralized operating and distribution platform.

Previous wording

The Company provides specialized investment strategies to institutions, intermediaries, retirement platforms and individual investors with multiple 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”) and other pooled funds. As of September 30, 2025, our Franchises and our Solutions Platform collectively managed a diversified set of 189 investment strategies for a wide range of institutional and retail clients and direct investors.

Current wording

The Company provides specialized investment strategies to institutions, intermediaries, retirement platforms and individual investors with multiple 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, 2026, our Franchises and our Solutions Platform collectively managed a diversified set of 179 investment strategies for a wide range of institutional and retail clients and direct investors.

Previous wording

We have clients spanning 60 countries and manage approximately $52 billion in AUM for non-US investors. Through our exclusive global distribution agreement with Amundi, we have access to 35 countries and 1,000 third-party distributors in 20 countries. 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.

Current wording

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.

Previous wording

We have grown our total client assets from $17.9 billion following the management-led buyout with Crestview GP in August 2013 to $313.4 billion at September 30, 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.

Current wording

We have grown our total client assets from $17.9 billion following the management-led buyout in August 2013 to $313.1 billion at March 31, 2026. We attribute this growth to our success in sourcing acquisitions and evolving them into organic growers, generating strong investment returns, and developing institutional, retail, international, and direct investor channels with deep penetration.

Previous wording

On July 8, 2024, the Company, Amundi Asset Management S.A.S ("Amundi'), and, solely for certain provisions thereof, Amundi S.A., (“Amundi Parent,” and together with Amundi, the “Amundi Parties”) entered into the Contribution Agreement (the “Contribution Agreement”) to combine Amundi’s U.S. business into the Company. The addition of Amundi U.S. as the Company's largest Investment Franchise meaningfully enhances the Company's scale, expands its global client base and further diversifies its investment capabilities.

Current wording

Pioneer Investments -On April 1, 2025, the Company completed the transactions contemplated by the Contribution Agreement to combine Amundi’s U.S. business into the Company and reintroduced the brand Pioneer Investments for the acquired business and investment products. The addition of Pioneer Investments as the Company's largest Investment Franchise meaningfully enhances the Company's scale, expands its global client base and further diversifies its investment capabilities. The sequential results reflect Pioneer Investments as of April 1, 2025, which significantly impacted our financial results for the three months ended March 31, 2026 when compared to the comparable period. Refer to Note 3 of the consolidated financial statements for further details related to the acquisition.

Previous wording

56 of our Victory Capital mutual funds and ETFs had overall Morningstar ratings of four or five stars and 64% of our fund and ETF AUM were rated four or five stars overall by Morningstar. 54% 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 77% over a ten-year period. On an equal-weighted basis, 53% of our strategies have outperformed their benchmarks over a one-year period, 63% over a three-year period, 68% over a five-year period and 65% over a ten-year period.

Current wording

58 of our Victory Capital mutual funds and ETFs had overall Morningstar ratings of four or five stars and 68% of our fund and ETF AUM were rated four or five stars overall by Morningstar. 71% of our strategies by AUM had investment returns in excess of their respective benchmarks over a one-year period, 67% over a three-year period, 68% over a five-year period and 81% over a ten-year period. On an equal-weighted basis, 69% of our strategies have outperformed their benchmarks over a one-year period, 67% over a three-year period, 70% over a five-year period and 70% over a ten-year period.

Previous wording

Total revenue for the three months ended September 30, 2025 was $361.2 million compared to $225.6 million for the same period in 2024. For the nine months ended September 30, 2025 and 2024, total revenue was $932.0 million and $661.1 million, respectively.

Current wording

Total revenue for the three months ended March 31, 2026 was $388.0 million compared to $219.6 million for the same period in 2025.

Previous wording

Adjusted EBITDA was $190.5 million for the three months ended September 30, 2025, or 52.7% of revenue, compared to $121.3 million, or 53.7% of revenue, for the same period in 2024. For the nine months ended September 30, 2025, Adjusted EBITDA was $485.4 million, or 52.1% of revenue, compared to $350.1 million, or 53.0% 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.

Current wording

Adjusted EBITDA was $204.0 million for the three months ended March 31, 2026, or 52.6% of revenue, compared to $116.4 million, or 53.0% of revenue, for the same period in 2025. 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.

Previous wording

Adjusted Net Income with tax benefit was $141.3 million for the three months ended September 30, 2025 compared to $89.0 million for the three months ended September 30, 2024. For the nine months ended September 30, 2025, Adjusted Net Income with tax benefit was $362.2 million compared to $258.0 million for the same period in 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.

Current wording

Adjusted Net Income with tax benefit was $153.2 million for the three months ended March 31, 2026 compared to $88.1 million for the three months ended March 31, 2025. 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.

Previous wording

(4) The Company includes participating securities in its computation of adjusted earnings per diluted share, including 19.8 million shares of Series A Non-Voting Convertible Preferred Stock.

Current wording

The Company includes participating securities in its computation of adjusted earnings per diluted share, including shares of series A Non-Voting Convertible Preferred stock for the three months ended March 31, 2026.

Previous wording

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

Current wording

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

Previous wording

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

Current wording

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

Previous wording

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

Current wording

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

Previous wording

September 30, 2025 AUM compared to June 30, 2025 AUM. At September 30, 2025, our total AUM was $310.6 billion, an increase of $12.1 billion, or 4.1%, from $298.6 billion at June 30, 2025, driven by $14.5 billion of market appreciation partially offset by $0.3 billion of net outflows.

Current wording

March 31, 2026 AUM compared to December 31, 2025 AUM. At March 31, 2026, our total AUM was $309.8 billion, a decrease of $3.9 billion, or 1.3%, from $313.8 billion at December 31, 2025, primarily due to negative market action of $2.8 billion and net outflows of $0.7 billion.

Previous wording

Net outflows were driven by our U.S. mid cap, U.S. small cap, and U.S. large cap equity strategies, our fixed income strategies, and alternative investments of $2.8 billion, $1.9 billion, $3.5 billion, $0.3 billion, and $0.1 billion, respectively, partially offset by net inflows of $5.4 billion and $1.0 billion in our Solutions platform and global/non-US equity strategies, respectively.

Current wording

Net outflows were driven by our U.S. mid cap, U.S. small cap, and U.S. large cap equity strategies as well as our fixed income strategies of $1.6 billion, $1.1 billion, $0.9 billion, and $0.6 billion, respectively, partially offset by net inflows from our global non-U.S. equity strategies and Solutions platform of $1.0 billion and $2.8 billion, respectively.

Previous wording

The following table presents our GAAP results of operations for the three and nine months ended September 30, 2025 and 2024.

Current wording

The following table presents our GAAP results of operations for the three months ended March 31, 2026 and 2025.

Previous wording

Three months ended September 30, 2025 compared to September 30, 2024. Fund administration and distribution fees increased by $24.9 million, or 52.0%, to $72.7 million for the three months ended September 30, 2025 compared to $47.8 million for the same period in 2024 due primarily to higher mutual fund average net assets.

Current wording

Fund administration and distribution fees increased by $25.3 million, or 54.7%, to $71.6 million for the three months ended March 31, 2026 from $46.3 million for the same period in 2025 primarily due to an increase in fund administration fees as a result of higher mutual fund average net assets.

Previous wording

The following table presents the components of GAAP personnel compensation and benefits expense for the three and nine months ended September 30, 2025 and 2024:

Current wording

The following table presents the components of GAAP personnel compensation and benefits expense for the three months ended March 31, 2026 and 2025:

Previous wording

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

Current wording

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.

Previous wording

(2) Share-based compensation typically vests 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.

Current wording

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.

Previous wording

The following table presents the components of distribution and other asset-based expenses for the three and nine months ended September 30, 2025 and 2024:

Current wording

The following table presents the components of distribution and other asset-based expenses for the three months ended March 31, 2026 and 2025:

Previous wording

Three months ended September 30, 2025 compared to September 30, 2024. Distribution and other asset-based expenses are primarily based on AUM. For the three months ended September 30, 2025, distribution and other asset-based expenses were $66.2 million, an increase of $29.3 million, or 79.6%, from $36.8 million for the same period in 2024. The increase is primarily due to higher broker-dealer and platform distribution fees over the comparable period.

Current wording

Distribution and other asset-based expenses were $67.4 million for the three months ended March 31, 2026, compared to $35.5 million for the same period in 2025. The increase of $31.9 million, or 90.0% was primarily due to higher broker-dealer and platform distribution fees over the comparable period as a result of higher average AUM and an expanded business.

Previous wording

Three months ended September 30, 2025 compared to September 30, 2024. Depreciation and amortization increased by $14.5 million, or 193.4%, to $22.0 million for the three months ended September 30, 2025 from $7.5 million for the same period in 2024, due to the amortization of definite-lived intangible assets associated with the Amundi US acquisition in the third quarter of 2025.

Current wording

Depreciation and amortization increased $13.2 million, or 176.9%, to $20.6 million for the three months ended March 31, 2026 from $7.4 million for the same period in 2025, primarily due to the amortization of definite-lived intangible assets associated with the Amundi US acquisition.

Previous wording

Three months ended September 30, 2025 compared to September 30, 2024. The change in value of consideration payable for acquisition of business increased $5.4 million as a result of a decrease of $1.6 million in the fair value of the contingent consideration associated with the WestEnd Acquisition for the three months ended September 30, 2024, compared to an increase of $3.8 million for the WestEnd Acquisition for the three months ended September 30, 2025. Refer to Note 4, Acquisitions, for further details on the fair value of contingent consideration payable.

Current wording

The change in value of consideration payable for acquisition of business increased $0.1 million as a result of an increase of $3.5 million in the fair value of contingent consideration associated with the WestEnd Acquisition for the three months ended March 31, 2026 compared to an increase of $3.4 million for the three months ended March 31, 2025. Refer to Note 3, Acquisitions, for further details on the fair value of contingent consideration payable.

Previous wording

Three months September 30, 2025 compared to September 30, 2024. For the three months ended September 30, 2025 and 2024, interest income and other income was income of $4.9 million and $3.6 million, respectively. The increase over the comparable period is primarily due to an increase in the net unrealized fair value of deferred compensation plan investments.

Current wording

Interest income and other income/(expense) was income of $2.8 million and $0.7 million for the three months ended March 31, 2026 and 2025, respectively. The increase is primarily due to an increase in the net unrealized fair value of deferred compensation plan investments over the comparable period.

Previous wording

Three months ended September 30, 2025 compared to September 30, 2024. The effective tax rate for the three months ended September 30, 2025 and 2024 was 25.3% and 23.7%, respectively. The effective tax rate for the three months ended September 30, 2025 was higher than the effective tax rate for the same period in 2024 due to decreased excess tax benefits on share-based compensation.

Current wording

The effective tax rate for the three months ended March 31, 2026 and 2025 was 24.2% and 22.9%, respectively. The higher effective tax rate in 2026 is mainly due to a reduction in excess tax benefits on share-based compensation and higher non-deductible expenses, partially offset by a lower state and local tax rate.

Previous wording

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

Current wording

Adding back direct incremental costs of acquisitions, including restructuring costs. The following table presents the components of acquisition, restructuring and exit costs for the periods indicated:

Previous wording

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.

Current wording

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, 2026 and December 31, 2025 (under the 2019 Credit Agreement) which had approximately $100.0 million undrawn as of March 31, 2026 and December 31, 2025.

Previous wording

The 2019 Credit Agreement contains customary affirmative and negative covenants, including covenants that affect, among other things, the ability of the first lien leverage ratio, measured as of the last day of each fiscal quarter on which outstanding borrowings under the revolving credit facility exceed 35.0% of the commitments thereunder (excluding certain letters of credit), of no greater than 4.00 to 1.00. As of September 30, 2025, there were no outstanding borrowings under the revolving credit facility and the Company was in compliance with its financial performance covenant.

Current wording

Since 2019, the Company is a party to a credit agreement (the "2019 Credit Agreement"), which includes both a revolving credit facility (the “Revolving Facility”) with aggregate commitments of $100.0 million (with a $10.0 million sub-limit for the issuance of letters of credit) and a term loan with an aggregate principal amount of $985.0 billion (the “Repriced Term Loans”). The Revolving Facility matures on September 23, 2030 and the Repriced Term Loans mature on September 23, 2032. The Repriced Term Loans bear interest at an annual rate equal to, at the option of the Company, either SOFR plus a margin of 2.00% or an alternate base rate plus a margin of 1.00%. The 2019 Credit Agreement contains customary affirmative and negative covenants, including covenants that affect, among other things, the ability of the first lien leverage ratio, measured as of the last day of each fiscal quarter on which outstanding borrowings under the revolving credit facility exceed 35.0% of the commitments thereunder (excluding certain letters of credit), of no greater than 4.00 to 1.00. As of March 31, 2026 and December 31, 2025, there were no outstanding borrowings under the Revolving Facility and the Company was in compliance with its financial performance covenant.

Previous wording

At September 30, 2025 and December 31 2024, the estimated fair value of the contingent consideration payable to the sellers was $84.5 million and $139.9 million, respectively resulting from the WestEnd Acquisition. For the three months and nine months ended September 30, 2025, the Company recorded an increase of $3.8 million and $8.3 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. During the nine months ended September 30, 2025, the Company paid $63.7 million in cash to sellers for the second earn-out period.

Current wording

At March 31, 2026, the Company had $51.2 million in contingent consideration that is estimated to be payable over the next year resulting from the WestEnd Acquisition. For the three months ended March 31, 2026, the Company recorded an increase of $3.5 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, 2026, the estimated fair value of the WestEnd Acquisition contingent payments was $51.2 million, and a maximum of $80.0 million in contingent consideration is potentially payable to sellers.

Previous wording

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.

Current wording

There were no other significant changes to our contractual obligations as reported in our 2025 Annual Report.

Previous wording

Operating Activities – Cash provided by operating activities during the nine months ended September 30, 2025 was $240.4 million, compared to $248.2 million of cash provided by operating activities for the same period in 2024. The $7.8 million decrease in cash provided by operating activities is due to an $67.7 million increase in working capital items partially offset by a $54.6 million increase in non-cash items and a $5.3 million increase in net income.

Current wording

Operating Activities – Cash provided by operating activities during the three months ended March 31, 2026 was $121.0 million, compared to $81.1 million of cash provided by operating activities for the same period in 2025. The $39.9 million increase in cash provided by operating activities was primarily due to increases of $50.2 million in net income and $24.1 million in non-cash items, partially offset by a decrease of $34.4 million in working capital.

Previous wording

Financing Activities – Cash used in financing activities during the nine months ended September 30, 2025 was $329.5 million and was mostly attributable to payment of consideration for acquisition, payment of dividends, repurchases of common stock, and net activity related to stock-based equity awards of $63.7 million, $115.7 million, $144.9 million, and $10.0 million, respectively.

Current wording

Financing Activities – Cash used in financing activities during the three months ended March 31, 2026 was $225.4 million, compared to $30.7 million of cash used in financing activities for the same period in 2025. The $194.7 million increase was primarily due to higher activity and cash utilized for repurchases of common stock, net activity related to stock-based equity awards, payment of dividends, and payment of consideration for acquisition of $126.8 million, $15.2 million, $11.6 million, and $39.9 million, respectively.