Victory Capital (VCTR) Q2 Revenue Up 60%

Key Points

• Adjusted earnings per share rose to $1.57, beating analyst estimates by 6.1% (non-GAAP) and Adjusted earnings per share rose to $1.57 for the quarter ended June 30, 2025, up nearly 20% from the same period in 2024.

• Revenue (GAAP) surged 59.9% year over year, driven by the acquisition of Amundi US, but GAAP operating margin fell sharply to 26.8%.

• net organic flows remain negative and margin pressure continues.

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Victory Capital (NASDAQ:VCTR), a diversified global asset manager, released its earnings on August 7, 2025. The company posted standout financial results thanks to its acquisition of Amundi US, which nearly doubled assets under management and drove GAAP revenue to $351.2 million—exceeding analyst expectations by $14.4 million or 4.3% (GAAP revenue). Non-GAAP diluted earnings per share hit $1.57, also surpassing estimates. However, GAAP operating margin dropped to 26.8% from 50.4% in Q2 2024, as integration and restructuring costs weighed on profitability. The quarter was marked by record growth in scale, but also by sustained margin pressure and modest net outflows, making it a transformative but challenging period for the company.

Source: Analyst estimates for the quarter provided by FactSet.

Business Overview and Strategic Priorities

Victory Capital operates a global asset management platform offering equity, fixed income, alternative investments, and solutions strategies through multiple autonomous investment franchises. Its business is organized to minimize risk by diversifying assets across client types, investment vehicles like mutual funds and exchange-traded funds (ETFs), and geographic regions.

The company’s recent focus has been on broadening its platform organically and through acquisitions. The acquisition of Amundi US (bringing in the Pioneer Investments brand) significantly expanded its product lineup, increased international reach, and bolstered its position in fixed income and solutions products. Key priorities remain driving organic growth, integrating acquired franchises without losing operational flexibility, and advancing its ETF and alternative investment offerings. Success is measured by asset growth, net flows, investment performance, and efficient expense management.

Quarter Highlights: Growth, Integration, and Margin Trends

Assets under management (AUM) reached $298.6 billion as of June 30, 2025, compared to $167.5 billion as of March 31, 2025 and $168.7 billion in assets under management for Q2 2024. This jump was primarily due to the Amundi US acquisition, which added $114.6 billion in AUM, and market appreciation of $20.2 billion. Despite this milestone, the company recorded long-term net outflows of $660 million—an improvement from more significant outflows in earlier periods, with long-term net outflows of ($1.2) billion in Q1 2025 and ($1.7) billion in Q2 2024, but not yet a return to organic growth. Gross sales soared to $15.4 billion, well above $5.8 billion in the prior-year quarter.

Revenue (GAAP) rose 59.9% year over year, greatly accelerating with the recent acquisition. However, headlines masked underlying margin pressure. Operating expenses grew due to $17.0 million in acquisition costs and $12.8 million in restructuring and integration charges tied to the Amundi deal. This drove GAAP operating margin down to 26.8%, compared to 50.4% in Q2 2024. Fee realization rates—a measure of the average management fee collected—also continued to slip, down to 49.4 basis points from 52.6 basis points in Q2 2024, reflecting a mix shift toward lower-fee products and vehicles. Management reaffirmed a long-term operating margin target near 49%, suggesting margin normalization after synergy goals are met and integration costs subside.

Diversification emerged as a major theme. Notably, non-U.S. assets accounted for $48.5 billion (16% of total) as of June 30, 2025, far above the previous year’s $5.5 billion (3%). The investment platform is now more evenly spread—no single investment franchise makes up more than 20% of overall AUM as of December 31, 2024. On performance, 58% of AUM outperformed benchmarks over a three-year period as of Q2 2025, and 64% of mutual fund and ETF assets carried four- or five-star ratings from Morningstar as of June 30, 2025, underlining solid investment quality across product lines.

The company continued to build on its strength in ETFs, mutual funds that trade on exchanges. The ETF channel performed well, with ongoing launches and growing investor adoption. Alternatives—hedge fund-style strategies or investments outside mainstream stocks/bonds—remained a core development focus. Management continued to flag alternative investments as a key strategic priority with further expansion or acquisition possible.

Savings from integration are underway as Victory Capital realized $70 million of its $110 million synergy target by quarter-end, aiming for $100 million in net expense synergies by April 2026. Over two-thirds of operating expenses remain variable, helping the company better withstand revenue swings. No major dis-synergies—loss of key clients from the Amundi integration—were noted, indicating a successful transition so far. Management noted that expense discipline and full synergy capture remain in focus through 2026.

On capital management, net leverage improved to 1.2x EBITDA—the lowest level since becoming a public company. The company declared a quarterly dividend of $0.49 per share, and repurchased 439,000 shares during the period. Its board expanded share buyback authorization to $500 million, extended through 2027, with $71 million of total capital returned to shareholders.

Looking Ahead: Guidance and Key Watch Points

Management reaffirmed its long-term target of approximately 49% operating margins, despite short-term headwinds as integration and restructuring costs are absorbed. The company outlined continued investment in organic growth, global expansion, and digital capabilities, especially in ETF and alternative product development. It also hinted that the mergers and acquisitions pipeline remains active and that further expansion could be announced as soon as 2025 if market conditions allow.

Investors should monitor ongoing integration execution—especially as remaining synergy targets are captured—and track net flows for a return to consistent organic growth. Persistent fee pressures, margin normalization, and successful operation of the more globally diversified business will all be important in the coming quarters. The quarterly dividend was raised 32.4% from Q2 2024 to $0.49 per share.

Revenue and net income presented using U.S. generally accepted accounting principles (GAAP) unless otherwise noted.

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