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 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.

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 and six months ended June 30, 2026 and 2025 and cash flows for the six months ended June 30, 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 $313.1 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.

Current wording

Our Business –Victory is a diversified global asset management firm with total client assets of $346.1 billion, assets under management of $342.5 billion and other assets of $3.6 billion as of June 30, 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”). 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.

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 June 30, 2026, 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.

Previous 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.

Current wording

We have grown our total client assets from $17.9 billion following the management-led buyout in August 2013 to $346.1 billion at June 30, 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

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.

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 and six months ended June 30, 2026 when compared to the comparable period. Refer to Note 3 of the condensed consolidated financial statements for further details related to the acquisition.

Previous wording

AUM at March 31, 2026 decreased by $3.9 billion, or 1.3%, to $309.8 billion from $313.8 billion at December 31, 2025, driven by negative market action of $2.8 billion and net outflows of $0.7 billion. Total gross flows for the first quarter were $19.2 billion, including long-term gross flows of $18.9 billion.

Current wording

AUM at June 30, 2026 increased by $32.6 billion, or 10.5%, to $342.5 billion from $309.8 billion at March 31, 2026, driven by positive market action of $28.5 billion and net inflows of $4.1 billion. Total gross flows for the second quarter were $22.4 billion, including long-term gross flows of $22.1 billion.

Previous 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.

Current wording

57 of our Victory Capital mutual funds and ETFs had overall Morningstar ratings of four or five stars and 60% 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, 68% over a three-year period, 65% over a five-year period and 81% over a ten-year period. On an equal-weighted basis, 66% of our strategies have outperformed their benchmarks over a one-year period, 64% over a three-year period, 67% over a five-year period and 69% over a ten-year period.

Previous 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.

Current wording

Total revenue for the three months ended June 30, 2026 was $435.4 million compared to $351.2 million for the same period in 2025. For the six months ended June 30, 2026 and 2025, total revenue was $823.4 million and $570.8 million, respectively.

Previous 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.

Current wording

Adjusted EBITDA was $242.7 million for the three months ended June 30, 2026, or 55.8% of revenue, compared to $178.5 million, or 50.8% of revenue, for the same period in 2025. For the six months ended June 30, 2026, Adjusted EBITDA was $446.7 million, or 54.3% of revenue, compared to $294.9 million, or 51.7% 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 $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.

Current wording

Adjusted Net Income with tax benefit was $182.9 million for the three months ended June 30, 2026 compared to $132.8 million for the three months ended June 30, 2025. For the six months ended June 30, 2026, Adjusted Net Income with tax benefit was $336.1 million compared to $220.9 million for the same period in 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

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.

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 and six months ended June 30, 2026 and 2025.

Previous 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.

Current wording

June 30, 2026 AUM compared to March 31, 2026 AUM. At June 30, 2026, our total AUM was $342.5 billion, an increase of $32.6 billion, or 10.5%, from $309.8 billion at March 31, 2026, primarily due to positive market action of $28.5 billion and net inflows of $4.1 billion.

Previous 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.

Current wording

Net inflows were driven by our fixed income strategies, global non-U.S. equity strategies, Solutions platform, and alternative investments of $2.7 billion, $2.0 billion, $3.0 billion, $0.3 billion, respectively, partially offset by net outflows from our U.S. mid cap, U.S. small cap, and U.S. large cap equity strategies of $1.7 billion, $1.0 billion, and $1.0 billion, respectively.

Previous wording

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

Current wording

The following table presents our GAAP results of operations for the three and six months ended June 30, 2026 and 2025.

Previous wording

Investment management fees increased by $143.1 million, or 82.6%, to $316.4 million for the three months ended March 31, 2026 from $173.3 million for the same period in 2025 due to an increase in average AUM year over year. Average AUM was $318.7 billion for the three months ended March 31, 2026 compared to $173.8 billion for the same period in 2025.

Current wording

Three months ended June 30, 2026 compared to June 30, 2025. Investment management fees increased by $79.9 million, or 28.3%, to $362.2 million for the three months ended June 30, 2026 from $282.3 million for the same period in 2025 due to an increase in average AUM year over year. Average AUM was $331.3 billion for the three months ended June 30, 2026 compared to $285.0 billion for the same period in 2025.

Previous 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.

Current wording

Three months ended June 30, 2026 compared to June 30, 2025. Fund administration and distribution fees increased by $4.2 million, or 6.1%, to $73.1 million for the three months ended June 30, 2026 from $68.9 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 months ended March 31, 2026 and 2025:

Current wording

The following table presents the components of GAAP personnel compensation and benefits expense for the three and six months ended June 30, 2026 and 2025:

Previous wording

Personnel compensation and benefits were $105.9 million for the first quarter of 2026, an increase of $49.7 million, or 88.6%, from $56.1 million for the same period in 2025. Salaries, payroll related taxes and employee benefits expense, incentive compensation expense, sales-based compensation, and equity awards granted to employees and directors increased $16.9 million, $20.0 million, $4.5 million, and $3.9 million, respectively, primarily due to an expanded business. Acquisition and transaction-related compensation increased $4.4 million due to an increase contingent payment compensation expense.

Current wording

Three months ended June 30, 2026 compared to June 30, 2025. Personnel compensation and benefits were $125.5 million for the second quarter of 2026, an increase of $16.6 million, or 15.2%, from $108.9 million for the same period in 2025. Incentive compensation expense and equity awards granted to employees and directors increased $17.6 million and $10.1 million, respectively, primarily due to an increase in operating results. Salaries, payroll related taxes and employee benefits expense, sales-based compensation, and acquisition and transaction-related compensation decreased $2.1 million, $0.5 million, and $8.4 million.

Previous wording

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

Current wording

The following table presents the components of distribution and other asset-based expenses for the three and six months ended June 30, 2026 and 2025:

Previous 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.

Current wording

Three months ended June 30, 2026 compared to June 30, 2025. Distribution and other asset-based expenses were $68.6 million for the three months ended June 30, 2026, compared to $62.0 million for the same period in 2025. The increase of $6.6 million, or 10.6% 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

General and administrative expenses were $20.6 million for the three months ended March 31, 2026 compared to $14.3 million for the same period in 2025. The increase of $6.3 million, or 43.9%, was primarily due to increases in professional fees and technology related expenses.

Current wording

Six months ended June 30, 2026 compared to June 30, 2025. General and administrative expenses were $43.5 million for the six months ended June 30, 2026 compared to $37.7 million for the same period in 2025. The increase of $5.8 million, or 15.4%, was primarily due to increases in professional fees and technology related expenses.

Previous 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.

Current wording

Six months ended June 30, 2026 compared to June 30, 2025. Depreciation and amortization increased $11.9 million, or 40.8%, to $41.2 million for the six months ended June 30, 2026 from $29.2 million for the same period in 2025, primarily due to six months worth of amortization expense of definite-lived intangible assets associated with the Amundi US acquisition in 2026 compared with three months worth of amortization expense of definite-lived intangible assets associated with Amundi US acquisition in 2025.

Previous 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.

Current wording

Three months ended June 30, 2026 compared to June 30, 2025. The change in value of consideration payable for acquisition of business increased $0.9 million as a result of an increase of $2.0 million in the fair value of contingent consideration associated with the WestEnd Acquisition for the three months ended June 30, 2026 compared to an increase of $1.1 million for the three months ended June 30, 2025. Refer to Note 3, Acquisitions, for further details on the fair value of contingent consideration payable.

Previous wording

Acquisition-related costs were $7.7 million for the three months ended March 31, 2026, compared to $8.8 million for the same period in 2025. The decrease of $1.1 million was primarily due to a decrease in legal and professional fees.

Current wording

Three months ended June 30, 2026 compared to June 30, 2025. Acquisition-related costs was income of $0.7 million for the three months ended June 30, 2026, compared to expense of $25.8 million for the same period in 2025. The decrease of $26.4 million was due to a decrease in legal and professional fees.

Previous wording

Restructuring and integration costs for the three months ended March 31, 2026 and 2025 were $3.2 million and $1.2 million, respectively. Restructuring and integration costs for the three months ended March 31, 2026 and 2025 were primarily due to integration and conversions related costs associated with the Amundi US acquisition.

Current wording

Three months ended June 30, 2026 compared to June 30, 2025. Restructuring and integration costs for the three months ended June 30, 2026 and 2025 were $2.6 million and $14.0 million, respectively. Restructuring and integration costs for the three months ended June 30, 2026 and 2025 were primarily due to integration and conversions related costs associated with the Amundi US acquisition.

Previous 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.

Current wording

Three months ended June 30, 2026 compared to June 30, 2025. Interest income and other income/(expense) was income of $7.7 million and $6.0 million for the three months ended June 30, 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

Interest expense and other financing costs increased $0.9 million to $14.1 million for the three months ended March 31, 2026, compared to $13.2 million for the same period in 2025 due a decrease in the deferred gain on the termination of the Swap. Refer to Note 13, Derivatives, for further details.

Current wording

Three months ended June 30, 2026 compared to June 30, 2025. Interest expense and other financing costs decreased $1.0 million to $12.2 million for the three months ended June 30, 2026, compared to $13.2 million for the same period in 2025 due a decrease in the average interest rate, partially offset by a decrease in the deferred gain on the termination of the Swap. Refer to Note 10, Debt, and Note 13, Derivatives, for further details.

Previous 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.

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 and six months ended June 30, 2026 and 2025.

Previous 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.

Current 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 June 30, 2026 and December 31, 2025, there were no outstanding borrowings under the revolving credit facility and the Company was in compliance with its financial performance covenant.

Previous 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.

Current wording

At June 30, 2026, the Company had $53.2 million in contingent consideration that is estimated to be payable over the next year resulting from the WestEnd Acquisition. For the three and six months ended June 30, 2026, the Company recorded an increase of $2.0 million and $5.6 million, respectively, 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 June 30, 2026, the estimated fair value of the WestEnd Acquisition contingent payments was $53.2 million, and a maximum of $80.0 million in contingent consideration is potentially payable to sellers.

Previous 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.

Current wording

Operating Activities – Cash provided by operating activities during the six months ended June 30, 2026 was $256.4 million, compared to $74.5 million of cash provided by operating activities for the same period in 2025. The $181.9 million increase in cash provided by operating activities was primarily due to increases of $130.8 million in net income, $32.5 million in non-cash items, and $18.6 million in working capital.

Previous wording

Investing Activities –Cash provided by investing activities during the three months ended March 31, 2026 was $16.7 million and consisted of net trading activity of $17.5 million offset by $0.8 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 2025 Annual Report.

Current wording

Investing Activities –Cash provided by investing activities during the six months ended June 30, 2026 was $13.6 million and consisted of net trading activity of $15.7 million offset by $2.1 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 2025 Annual Report.

Previous 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.

Current wording

Financing Activities – Cash used in financing activities during the six months ended June 30, 2026 was $363.4 million, compared to $172.0 million of cash used in financing activities for the same period in 2025. The $191.4 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 net activity related to long-term debt of $192.3 million, $8.7 million, $9.0 million, and $5.0 million, respectively, partially offset by a $23.8 million decrease in payment of consideration for acquisition.