noodls browser compatibility check

The security settings of your browser are blocking the execution of scripts.

To use noodls, javascript support must be enabled. Please change your browser's security settings to enable javascript.

If you have changed your browser's security settings, you can click here.

related announcements

Company News

Briar Hall Management LLC

Initial Quarterly Holdings Report by Institutional Manager Form 13F HR
OrthoPediatrics Corporation

Regulation FD Presentation Form 8 K
Community Trust Bancorp Inc.

Amendment to Statement of Changes in Beneficial Ownership - Form 4/A

Financial Services

Victory Capital Holdings Inc.

09/08/2024 | Press release | Distributed by Public on 09/08/2024 13:18

Quarterly Report for Quarter Ending June 30, 2024 (Form 10-Q)

10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)


☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2024


☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ______ to ______

Commission file number 001-38388

Victory Capital Holdings, Inc.

(Exact name of registrant as specified in its charter)


Delaware		32-0402956
(State or other jurisdiction of		(I.R.S. Employer
incorporation or organization)		Identification No.)

15935 La Cantera Parkway, San Antonio, Texas		78256
(Address of principal executive offices)		(Zip Code)

(216) 898-2400

(Registrant's telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:



Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $0.01 Par Value	VCTR	The NASDAQ Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.


Large accelerated filer☒	Accelerated filer ☐	Non-accelerated filer ☐	Smaller reporting company ☐
			Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

The number of outstanding shares of the registrant's Common Stock, par value $0.01 per share as of July 31, 2024 was 64,875,913.

Auditor's PCAOB ID Number: 42 Auditor Name: Ernst & Young LLP Auditor Location: Cleveland, Ohio

TABLE OF CONTENTS


PART I -FINANCIAL INFORMATION

Item 1.	Financial Information	3
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	24
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	40
Item 4.	Controls and Procedures	41

PART II -OTHER INFORMATION

Item 1.	Legal Proceedings	42
Item 1A.	Risk Factors	42
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	42
Item 3.	Defaults Upon Senior Securities	42
Item 4.	Mine Safety Disclosures	43
Item 5.	Other Information	43
Item 6.	Exhibits	43
	Signatures	44

Forward-Looking Statements

This report includes forward-looking statements, including in the sections entitled "Risk Factors," "Management's Discussion and Analysis of Financial Condition and Results of Operations" and "Business." These forward-looking statements include, without limitation, statements regarding our industry, business strategy, plans, goals and expectations concerning our market position, future operations, margins, profitability, future efficiencies, capital expenditures, liquidity and capital resources and other financial and operating information. When used in this discussion, the words "may," "believes," "intends," "seeks," "anticipates," "plans," "estimates," "expects," "should," "assumes," "continues," "could," "will," "future" and the negative of these or similar terms and phrases are intended to identify forward-looking statements in this report.

Forward-looking statements reflect our current expectations regarding future events, results or outcomes. These expectations may or may not be realized. Although we believe the expectations reflected in the forward-looking statements are reasonable, we can give no assurance that these expectations will prove to have been correct. Some of these expectations may be based upon assumptions, data or judgments that prove to be incorrect. Actual events, results and outcomes may differ materially from our expectations due to a variety of known and unknown risks, uncertainties and other factors. Although it is not possible to identify all of these risks and factors, they include, among others, the following; risks that the conditions to closing the Amundi Transaction will be satisfied and such transaction will close on the anticipated timeline, if at all; risks associated with the expected benefits or impact on our business; reductions in assets under management ("AUM") based on investment performance, client withdrawals, difficult market conditions and other factors such as the conflicts in Ukraine and Israel or a pandemic; the nature of our contracts and investment advisory agreements; our ability to maintain historical returns and sustain our historical growth; our dependence on third parties to market our strategies and provide products or services for the operation of our business; our ability to retain key investment professionals or members of our senior management team; our reliance on the technology systems supporting our operations; our ability to successfully acquire and integrate new companies; the concentration of our investments in long only small- and mid-cap equity and U.S. clients; risks and uncertainties associated with non-U.S. investments; our efforts to establish and develop new teams and strategies; the ability of our investment teams to identify appropriate investment opportunities; our ability to limit employee misconduct; our ability to meet the guidelines set by our clients; our exposure to potential litigation (including administrative or tax proceedings) or regulatory actions; our ability to implement effective information and cyber security policies, procedures and capabilities; our substantial indebtedness; the potential impairment of our goodwill and intangible assets; disruption to the operations of third parties whose functions are integral to our exchange traded fund ("ETF") platform; our determination that we are not required to register as an "investment company" under the 1940 Act; the fluctuation of our expenses; our ability to respond to recent trends in the investment management industry; the level of regulation on investment management firms and our ability to respond to regulatory developments; the competitiveness of the investment management industry; the level of control over us retained by Crestview Partners II GP, L.P.; our status as an emerging growth company ("EGC"); and other risks and factors included, but not limited to, those listed under the caption "Risk Factors" in Item 1A of the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2023, filed with the Securities and Exchange Commission (the "SEC") on February 29, 2024, which is accessible on the SEC's website at www.sec.gov.

In light of these risks, uncertainties and other factors, the forward-looking statements contained in this report might not prove to be accurate. All forward-looking statements speak only as of the date made and we undertake no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise.

Table of Contents

PART I-FINANCIAL INFORMATION

Item 1. Financial Statements

Victory Capital Holdings, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets (Unaudited)

(In thousands, except shares data)


	June 30, 2024			December 31, 2023
Assets
Cash and cash equivalents	$	118,970			$	123,547
Receivables		100,660				87,570
Prepaid expenses		6,979				5,785
Investments, at fair value		33,759				31,808
Property and equipment, net		15,599				19,578
Goodwill		981,805				981,805
Other intangible assets, net		1,271,200				1,281,832
Other assets		12,309				10,691
Total assets	$	2,541,281			$	2,542,616

Liabilities and stockholders' equity
Accounts payable and accrued expenses	$	54,528			$	56,477
Accrued compensation and benefits		54,020				55,456
Consideration payable for acquisition of business		141,200				217,200
Deferred tax liability, net		142,418				128,714
Other liabilities		44,579				42,499
Long-term debt, net		981,724				989,269
Total liabilities		1,418,469				1,489,615

Stockholders' equity
Common stock, $0.01par value per share: 2024 - 600,000,000shares authorized, 83,454,313shares issued and 64,808,655shares outstanding; 2023 -600,000,000shares authorized, 82,404,305shares issued and 64,254,714shares outstanding		835				824
Additional paid-in capital		741,490				728,283
Treasury stock, at cost: 2024 - 18,645,658shares; 2023 - 18,149,591shares		(464,944	)			(444,286	)
Accumulated other comprehensive income		25,024				31,328
Retained earnings		820,407				736,852
Total stockholders' equity		1,122,812				1,053,001
Total liabilities and stockholders' equity	$	2,541,281			$	2,542,616

See the accompanying notes to the unaudited condensed consolidated financial statements.

Table of Contents

Victory Capital Holdings, Inc. and Subsidiaries

Condensed Consolidated Statements of Operations (Unaudited)

(In thousands, except per share data)


	Three Months Ended June 30,			Six Months Ended June 30,
	2024			2023			2024		2023
Revenue
Investment management fees	$	173,163			$	159,410		$	342,948		$	316,246
Fund administration and distribution fees		46,458				44,816			92,530			89,300
Total revenue		219,621				204,226			435,478			405,546

Expenses
Personnel compensation and benefits		55,660				54,940			115,114			112,542
Distribution and other asset-based expenses		36,474				37,344			72,737			74,998
General and administrative		14,385				13,250			28,397			25,638
Depreciation and amortization		7,551				9,650			15,152			21,330
Change in value of consideration payable for acquisition of business		(8,200	)			1,500			4,000			8,900
Acquisition-related costs		3,049				16			4,075			18
Restructuring and integration costs		105				-			597			29
Total operating expenses		109,024				116,700			240,072			243,455

Income from operations		110,597				87,526			195,406			162,091

Other income (expense)
Interest income and other income (expense)		1,557				1,971			5,122			3,515
Interest expense and other financing costs		(16,279	)			(14,902	)		(32,765	)		(29,141	)
Loss on debt extinguishment		(100	)			-			(100	)		-
Total other expense, net		(14,822	)			(12,931	)		(27,743	)		(25,626	)

Income before income taxes		95,775				74,595			167,663			136,465

Income tax expense		(21,524	)			(17,924	)		(37,721	)		(30,521	)

Net income	$	74,251			$	56,671		$	129,942		$	105,944

Earnings per share of common stock
Basic	$	1.15			$	0.85		$	2.01		$	1.58
Diluted	$	1.12			$	0.83		$	1.97		$	1.53

Weighted average number of shares outstanding
Basic		64,734				66,466			64,561			66,874
Diluted		66,075				68,500			66,025			69,037

Dividends declared per share of common stock	$	0.37			$	0.32		$	0.705		$	0.64

See the accompanying notes to the unaudited condensed consolidated financial statements.

Table of Contents

Victory Capital Holdings, Inc. and Subsidiaries

Condensed Consolidated Statements of Comprehensive Income (Unaudited)

(In thousands)


	Three Months Ended June 30,			Six Months Ended June 30,
	2024			2023			2024		2023
Net income	$	74,251			$	56,671		$	129,942		$	105,944

Other comprehensive income (loss), net of tax
Net unrealized income (loss) on cash flow hedges		-				3,919			-			(1,169	)
Net amortization of deferred gain on terminated cash flow hedges		(3,139	)			-			(6,278	)		-
Net unrealized income (loss) on foreign currency translation		(1	)			(6	)		(26	)		14
Total other comprehensive income (loss), net of tax		(3,140	)			3,913			(6,304	)		(1,155	)

Comprehensive income	$	71,111			$	60,584		$	123,638		$	104,789

See the accompanying notes to the unaudited condensed consolidated financial statements.

Table of Contents

Victory Capital Holdings, Inc. and Subsidiaries

Condensed Consolidated Statements of Changes in Stockholders' Equity (Unaudited)

(In thousands)


								Accumulated
						Additional		Other
	Common		Treasury			Paid-In		Comprehensive		Retained
	Stock		Stock			Capital		Income (Loss)		Earnings			Total
Balance, December 31, 2023	$	824		$	(444,286	)	$	728,283		$	31,328			$	736,852		$	1,053,001
Issuance of common stock		-			-			75			-				-			75
Shares withheld related to net settlement of equity awards		-			(13,253	)		-			-				-			(13,253	)
Vesting of restricted share grants		4			-			(4	)		-				-			-
Exercise of options		4			-			3,193			-				-			3,197
Other comprehensive loss		-			-			-			(3,164	)			-			(3,164	)
Share-based compensation		-			-			3,970			-				-			3,970
Dividends paid		-			-			-			-				(22,384	)		(22,384	)
Net income		-			-			-			-				55,691			55,691
Balance, March 31, 2024		832			(457,539	)		735,517			28,164				770,159			1,077,133
Issuance of common stock		-			-			63			-				-			63
Shares withheld related to net settlement of equity awards		-			(7,405	)		-			-				-			(7,405	)
Exercise of options		3			-			2,143			-				-			2,146
Other comprehensive loss		-			-			-			(3,140	)			-			(3,140	)
Share-based compensation		-			-			3,767			-				-			3,767
Dividends paid		-			-			-			-				(24,003	)		(24,003	)
Net income		-			-			-			-				74,251			74,251
Balance, June 30, 2024	$	835		$	(464,944	)	$	741,490		$	25,024			$	820,407		$	1,122,812


								Accumulated
						Additional		Other
	Common		Treasury			Paid-In		Comprehensive		Retained
	Stock		Stock			Capital		Income (Loss)		Earnings			Total
Balance, December 31, 2022	$	805		$	(285,425	)	$	705,466		$	35,442			$	609,122			1,065,410
Issuance of common stock		-			-			60			-				-			60
Repurchase of shares		-			(32,903	)		-			-				-			(32,903	)
Shares withheld related to net settlement of equity awards		-			(11,656	)		-			-				-			(11,656	)
Vesting of restricted share grants		7			-			(7	)		-				-			-
Exercise of options		3			-			1,707			-				-			1,710
Other comprehensive loss		-			-			-			(5,068	)			-			(5,068	)
Share-based compensation		-			-			4,252			-				-			4,252
Dividends paid		-			-			-			-				(22,524	)		(22,524	)
Net income		-			-			-			-				49,273			49,273
Balance, March 31, 2023		815			(329,984	)		711,478			30,374				635,871			1,048,554
Issuance of common stock		-			-			51			-				-			51
Repurchase of shares		-			(44,496	)		-			-				-			(44,496	)
Shares withheld related to net settlement of equity awards		-			(3,190	)		-			-				-			(3,190	)
Exercise of options		2			-			1,437			-				-			1,439
Other comprehensive income		-			-			-			3,913				-			3,913
Share-based compensation		-			-			4,242			-				-			4,242
Dividends paid		-			-			-			-				(21,083	)		(21,083	)
Net income		-			-			-			-				56,671			56,671
Balance, June 30, 2023	$	817		$	(377,670	)	$	717,208		$	34,287			$	671,459		$	1,046,101

See the accompanying notes to the unaudited condensed consolidated financial statements.

Table of Contents

Victory Capital Holdings, Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows (Unaudited)

(In thousands)


	Six Months Ended June 30,
	2024			2023
Cash flows from operating activities
Net income	$	129,942			$	105,944
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for deferred income taxes		15,741				12,003
Depreciation and amortization		15,152				21,330
Deferred financing costs, accretion expense and derivative gains/losses		(6,149	)			2,104
Stock-based and deferred compensation		10,131				11,356
Change in fair value of contingent consideration obligations		4,000				8,900
Unrealized (appreciation) depreciation on investments		(1,161	)			(1,375	)
Loss on debt extinguishment		100				-
Changes in operating assets and liabilities:
Receivables		(14,836	)			(8,491	)
Prepaid expenses		(1,194	)			(928	)
Other assets		(479	)			(1,999	)
Accounts payable and accrued expenses		(223	)			5,388
Accrued compensation and benefits		(1,919	)			(12,279	)
Other liabilities		(717	)			(391	)
Net cash provided by operating activities		148,388				141,562

Cash flows from investing activities
Purchases of property and equipment		(725	)			(2,572	)
Purchases of investments		(1,879	)			(4,292	)
Sales of investments		1,089				2,942
Net cash used in investing activities		(1,515	)			(3,922	)

Cash flows from financing activities
Issuance of common stock		5,481				3,260
Repurchase of common stock		(5,090	)			(79,912	)
Payments of taxes related to net share settlement of equity awards		(15,081	)			(11,775	)
Payment of debt financing fees		(813	)			-
Repayments of long-term senior debt		(9,519	)			-
Payment of dividends		(46,387	)			(43,607	)
Payment of consideration for acquisition		(80,000	)			-
Net cash used in financing activities		(151,409	)			(132,034	)

Effect of changes of foreign exchange rate on cash and cash equivalents		(41	)			3

Net increase (decrease) in cash and cash equivalents		(4,577	)			5,609
Cash and cash equivalents, beginning of period		123,547				38,171
Cash and cash equivalents, end of period	$	118,970			$	43,780

Supplemental cash flow information
Cash paid for interest	$	39,766			$	32,729
Cash paid for income taxes		30,108				24,465
Noncash items
Operating lease right-of-use assets obtained in exchange for new operating lease liabilities	$	2,862			$	-

See the accompanying notes to the unaudited condensed consolidated financial statements.

Table of Contents

Victory Capital Holdings, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Unaudited)

NOTE 1. ORGANIZATION AND NATURE OF BUSINESS

Victory Capital Holdings, Inc., a Delaware corporation (along with its wholly-owned subsidiaries, collectively referred to as the "Company," "Victory," or in the first-person notations of "we," "us," and "our"), was formed on February 13, 2013 for the purpose of acquiring Victory Capital Management Inc. ("VCM") and Victory Capital Services, Inc. ("VCS"), formerly known as Victory Capital Advisers, Inc., which occurred on August 1, 2013. On February 12, 2018, the Company completed the initial public offering (the "IPO") of its Class A common stock, which trades on the NASDAQ under the symbol "VCTR."

Victory provides specialized investment strategies to institutions, intermediaries, retirement platforms and individual investors. With 11 autonomous Investment Franchises and a Solutions Platform, the Company 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. The Company'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").

VCM is a registered investment adviser and provides mutual fund administrative services for the Victory Portfolios, Victory Variable Insurance Funds, the mutual fund series of the Victory Portfolios II and the Victory Portfolios III (collectively, the "Victory Funds"), a family of open-end mutual funds, and the VictoryShares (the Company's ETF brand). Additionally, VCM employs all of the Company's United States investment professionals across its Franchises and Solutions, which are not separate legal entities. VCM's wholly-owned subsidiaries include RS Investment Management (Singapore) Pte. Ltd., RS Investments (UK) Limited, Victory Capital Digital Assets, LLC and NEC Pipeline LLC. VCM's other wholly-owned subsidiary, RS Investments (HK) Limited, ceased operations in May 2023, and was deregistered and dissolved in May 2024.

VCS is registered with the SEC as an introducing broker-dealer and serves as distributor and underwriter for the Victory Funds, which includes the mutual funds of the Victory Portfolios III (the "Victory Funds III") and a 529 Education Savings Plan. VCS offers brokerage services to individual investors through an open architecture brokerage platform launched in April 2023. VCS is also the placement agent for certain private funds managed by VCM. VCTA is registered with the SEC as a transfer agent for the Victory Funds III.

On July 1, 2019, the Company completed the acquisition (the "USAA AMCO Acquisition" or "USAA AMCO") of USAA Asset Management Company and Victory Capital Transfer Agency, Inc. ("VCTA"), formerly known as the USAA Transfer Agency Company d/b/a USAA Shareholder Account Services. The USAA AMCO Acquisition included USAA's mutual fund and ETF businesses and its 529 Education Savings Plan.

On November 1, 2021, the Company completed the acquisition of 100% of the equity interests in New Energy Capital Partners ("NEC"). Founded in 2004 and based in Hanover, New Hampshire, NEC is an alternative asset management firm focused on debt and equity investments in clean energy infrastructure projects and companies through private closed-end funds (the "NEC Funds"). AUM acquired in the NEC acquisition totaled $0.8billion as of November 1, 2021.

On December 31, 2021, the Company completed the acquisition ("WestEnd Acquisition") of 100% of the equity interests in WestEnd Advisors, LLC ("WestEnd"). Founded in 2004, and headquartered in Charlotte, North Carolina, WestEnd is an ETF strategist advisor that provides financial advisors with a turnkey, core model allocation strategy for either a holistic solution or complementary source of alpha. The firm offers four primary ETF strategies and one large cap core strategy, all in tax efficient Separately Managed Account (SMA) structures. AUM acquired in the WestEnd Acquisition totaled $19.3billion on December 31, 2021. WestEnd is a wholly-owned subsidiary of Victory Capital Holdings, Inc. and is the Company's second registered investment adviser.

On April 16, 2024, the Company and Amundi Asset Management S.A.S ("Amundi') announced that they had signed a non-binding Memorandum of Understanding to combine Amundi US into Victory, for Amundi to become a strategic shareholder of Victory, and to establish long-term global distribution agreements. On July 9, 2024, the Company announced that it had reached a definitive agreement with Amundi for their previously announced transaction. Refer to Note 15, Subsequent Events, for further information.

Table of Contents

NOTE 2. BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP") and applicable rules and regulations of the SEC regarding interim financial reporting. Accordingly, they do not include all of the information and notes required by GAAP for complete annual financial statements. As such, the information included in this quarterly report on Form 10-Q should be read in conjunction with the consolidated financial statements and notes thereto included in the Company's Annual Report on Form 10-K for the year ended December 31, 2023.

In the opinion of management, the consolidated financial statements reflect all adjustments, consisting only of normal recurring adjustments, necessary for the fair presentation of the financial condition, results of operations, and cash flows for the interim periods presented. Operating results for the three and six months ended June 30, 2024 are not necessarily indicative of the results that may be expected for the year ending December 31, 2024.

Principles of Consolidation

The unaudited condensed consolidated financial statements include the operations of the Company and its wholly-owned subsidiaries, after elimination of all intercompany balances and transactions. Our involvement with non-consolidated variable interest entities ("VIEs") includes sponsored investment funds.

For further discussion regarding VIEs, refer to Note 2, Significant Accounting Policies, to the consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2023.

Use of Estimates and Assumptions

The preparation of the unaudited condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts and disclosures in the financial statements and the notes. Actual results may ultimately differ materially from those estimates.

New Accounting Pronouncements

Recently Issued Accounting Standards

•

Segment Reporting: In November 2023, the FASB issued ASU 2023-07, "Segment Reporting: Improvements to Reportable Segment Disclosures" ("ASU 2023-07"). ASU 2023-07 expands annual and interim disclosure requirements for reportable segments, primarily through enhanced disclosures about significant segment expenses. ASU 2023-07 is effective for fiscal years beginning after December 15, 2023, and for interim periods beginning after December 15, 2024. We are currently evaluating the impact that ASU 2023-07 will have on the Company's consolidated financial statement disclosures.

•

Income Taxes: In December 2023, the FASB issued ASU 2023-09, "Income Taxes: Improvements to Income Tax Disclosures" ("ASU 2023-09"). ASU 2023-09 revises income tax disclosures primarily related to the rate reconciliation and income taxes paid information as well as the effectiveness of certain other income tax disclosures. The new standard is effective for annual periods beginning after December 15, 2024. Early adoption is permitted. The standard should be applied on a prospective basis, but retrospective application is permitted. We are currently evaluating the impact that ASU 2023-09 will have on the Company's consolidated financial statement disclosures.

Table of Contents

NOTE 3. Revenue RECOGNITION

In accordance with revenue recognition standard requirements, the following table disaggregates our revenue by type and product:


	Three Months Ended June 30,		Six Months Ended June 30,
(in thousands)	2024		2023			2024		2023
Investment management fees
Mutual funds (Victory Funds)	$	116,550		$	109,689		$	231,723	$	218,105
ETFs (VictoryShares)		5,515			5,260			10,694		10,701
Separate accounts and other vehicles		49,061			42,653			96,373		85,235
Performance-based fees
Mutual funds (Victory Funds III)		1,949			1,712			3,972		2,402
Separate accounts and other vehicles		88			96			186		(197	)
Total investment management fees		173,163			159,410			342,948		316,246

Fund administration and distribution fees
Administration fees
Mutual funds (Victory Funds)	$	26,775		$	24,927		$	53,109	$	49,303
ETFs (VictoryShares)		772			724			1,516		1,434
Distribution fees
Mutual funds (Victory Funds)		5,549			5,590			11,132		11,330
Transfer agent fees
Mutual funds (Victory Funds III)		13,362			13,575			26,773		27,233
Total fund administration and distribution fees		46,458			44,816			92,530		89,300

Total revenue	$	219,621		$	204,226		$	435,478	$	405,546

The following table presents balances of receivables:


(in thousands)	June 30, 2024		December 31, 2023
Customer receivables
Mutual funds (Victory Funds)	$	56,201		$	55,858
ETFs (VictoryShares)		2,233			2,079
Separate accounts and other vehicles		34,567			28,189
Receivables from contracts with customers		93,001			86,126
Non-customer receivables		7,659			1,444
Total receivables	$	100,660		$	87,570

Revenue

The Company's revenue includes fees earned from providing;

•

investment management services,

•

fund administration services,

•

fund transfer agent services, and

•

fund distribution services.

Revenue is recognized for each distinct performance obligation identified in customer contracts when the performance obligation has been satisfied by transferring services to a customer either over time or at the point in time when the customer obtains control of the service. Revenue is recognized in the amount of variable or fixed consideration allocated to the satisfied performance obligation that Victory expects to be entitled to in exchange for transferring services to a customer. Variable consideration is included in the transaction price only when it is probable that a significant reversal of such revenue will not occur when the uncertainty associated with the variable consideration is subsequently resolved.

Investment management, fund administration and fund distribution fees are generally considered variable consideration as they are typically calculated as a percentage of AUM. Fund transfer agent fees are also considered variable consideration as they are calculated as a percentage of AUM or based on the number of accounts in the fund. In such cases, the amount

Table of Contents

of fees earned is subject to factors outside of the Company's control including customer or underlying investor contributions and redemptions and financial market volatility. These fees are considered constrained and are excluded from the transaction price until the asset values or number of accounts on which the customer is billed are calculated and the value of consideration is measurable.

The Company has contractual arrangements with third parties to provide certain advisory, administration, transfer agent and distribution services. Management considers whether we are acting as the principal service provider or as an agent to determine whether revenue should be recorded based on the gross amount payable by the customer or net of payments to third-party service providers, respectively. Victory is considered a principal service provider if we control the service that is transferred to the customer. We are considered an agent when we arrange for the service to be provided by another party and do not control the service.

Investment Management Fees

Investment management fees are received in exchange for investment management services that represent a series of distinct incremental days of investment management service. Control of investment management services is transferred to the customers over time as these customers receive and consume the benefits provided by these services. Investment management fees are calculated as a contractual percentage of AUM and are generally paid in arrears on a monthly or quarterly basis.

AUM represents the financial assets the Company manages for clients on either a discretionary or non-discretionary basis. In general, AUM reflects the valuation methodology that corresponds to the basis used for determining revenue such as net asset value for the Victory Funds and certain other pooled funds and account market value for separate accounts. For the NEC Funds, AUM represents limited partner capital commitments during the commitment period of the fund. Following the earlier of the termination of the commitment period and the beginning of any commitment period for a successor fund, AUM generally represents, depending on the fund, the lesser of a) the net asset value of the fund and b) the aggregated adjusted cost basis of each unrealized portfolio investment or the limited partner capital commitments reduced by the amount of capital contributions used to make portfolio investments that have been disposed.

Investment management fees are recognized as revenue using a time-based output method to measure progress. Revenue is recorded at month end or quarter end when the value of consideration is measured. The amount of investment management fee revenue varies from one reporting period to another as levels of AUM change (from inflows, outflows and market movements) and as the number of days in the reporting period change.

The Company may waive certain fees for investment management services provided to the Victory Funds, VictoryShares and other pooled investment vehicles and may subsidize certain share classes of the Victory Funds, VictoryShares and other pooled investment vehicles to ensure that specified operating expenses attributable to such share classes do not exceed a specified percentage. These waivers and reimbursements reduce the transaction price allocated to investment management services and are recognized as a reduction to investment management fees revenue. The amounts due to the Victory Funds, VictoryShares and other pooled investment vehicles for waivers and expense reimbursements represent consideration payable to customers, which is recorded in accounts payable and accrued expenses in the unaudited Condensed Consolidated Balance Sheets, and no distinct services are received in exchange for these payments.

Performance-based investment management fees, which include fees under performance fee and fulcrum fee arrangements, are included in the transaction price for providing investment management services. Performance-based investment management fees are calculated as a percentage of investment performance on a client's account versus a specified benchmark or hurdle based on the terms of the contract with the customer. Performance-based investment management fees are variable consideration and are recognized as revenue when and to the extent that it is probable that a significant reversal of the cumulative revenue for the contractual performance period will not occur. Performance-based investment management fees recognized as revenue in the current period may pertain to performance obligations satisfied in prior periods. Fulcrum fee arrangements include a performance fee adjustment that increases or decreases the total investment management fee depending on whether the assets being managed experienced better or worse investment performance than the index specified in the customer's contract. The performance fee adjustment arrangement with certain equity and fixed income Victory Funds III is calculated monthly based on the investment performance of those funds relative to their specified benchmark indexes over the discrete performance period ending with that month.

Fund Administration Fees

The Company recognizes fund administration fees as revenue using a time-based output method to measure progress. Fund administration fees are determined based on the contractual rate applied to average daily net assets of the Victory Funds and VictoryShares for which administration services are provided. Revenue is recorded on a monthly basis when the value of consideration is measured using actual average daily net assets and constraints are removed. The Company's

Table of Contents

fund administration fee revenue is recorded in fund administration and distribution fees in the unaudited Condensed Consolidated Statements of Operations.

The Company has contractual arrangements with a third party to provide certain sub-administration services. We are the primary obligor under the contracts with the Victory Funds and VictoryShares and have the ability to select the service provider and establish pricing. As a result, fund administration fees and sub-administration expenses are recorded on a gross basis.

Fund Compliance Fees

The Company has an agreement to provide compliance design, administration and oversight services for the Victory Funds and the VictoryShares in accordance with Rule 38a-1 under the Investment Company Act. The Company furnishes a VCM employee to serve as the Chief Compliance Officer and provides other compliance personnel and resources reasonably necessary to perform the services under this agreement. The Company earns a fixed annual fee for these compliance services which is recorded in fund administration and distribution fees in the unaudited Condensed Consolidated Statements of Operations.

Fund Transfer Agent Fees

The Company recognizes fund transfer agent fees using a time-based output method to measure progress. Fund transfer agent fees are determined based on the contractual rate applied to either the average daily net assets of the Victory Funds III for which transfer agent services are provided or number of accounts in the Victory Funds III. Revenue is recorded on a monthly basis when the value of consideration is measured using actual average daily net assets or actual number of accounts and constraints are removed. The Company's fund transfer agent fee revenue is recorded in fund administration and distribution fees in the unaudited Condensed Consolidated Statements of Operations.

The Company also receives fees for sub-transfer agency services under contracts with the Victory Funds for member class shares. Sub-transfer agency fees are recognized and recorded in a manner similar to fund transfer agent fees and are recorded in fund administration and distribution fees in the unaudited Condensed Consolidated Statements of Operations.

The Company has contractual arrangements with a third party to provide certain sub-transfer agent services. As the Company is the primary obligor under the transfer agency contracts with the Victory Funds III and has the ability to select the service provider and establish pricing, fund transfer agent fees and sub-transfer agent expenses are recorded on a gross basis.

Fund Distribution Fees

The Company receives compensation for sales and sales-related services promised under distribution contracts with the Victory Funds. Revenue is measured in an amount that reflects the consideration to which the Company expects to be entitled in exchange for providing distribution services. Distribution fees are generally calculated as a percentage of average net assets in the Victory Funds. The Company's performance obligation is satisfied at the point in time when control of the services is transferred to customers, which is upon investor subscription or redemption.

Based on the nature of the calculation, the revenue for these services is accounted for as variable consideration. The Company may recognize distribution fee revenue in the current period that pertains to performance obligations satisfied in prior periods as variable consideration is recognized only when uncertainties are resolved. The Company's distribution fee revenue is recorded in fund administration and distribution fees in the unaudited Condensed Consolidated Statements of Operations.

The Company has contractual arrangements with third parties to provide certain distribution services. The Company is the primary obligor under the contracts with the Victory Funds and has the ability to select the service provider and establish pricing. Substantially all of the Company's revenue is recorded gross of payments made to third parties.

Included in fund distribution fees are transaction and account-level fees paid by VCS brokerage platform customers for trade execution, cash transfer and other services.

Costs Incurred to Obtain or Fulfill Customer Contracts

The Company is required to capitalize certain costs directly related to the acquisition or fulfillment of a contact with a customer. Victory has not identified any sales-based compensation or similar costs that meet the definition of an incremental cost to acquire a contract and as such we have no intangible assets related to contract acquisitions.

Direct costs incurred to fulfill services under the Company's distribution contracts include sales commissions paid to third party dealers for the sale of Class C Shares. The Company may pay upfront sales commissions to dealers and institutions that sell Class C shares of the participating Victory Funds at the time of such sale. Upfront sales commission payments with

Table of Contents

respect to Class C shares equal 1.00% of the purchase price of the Class C shares sold by the dealer or institution. When the Company makes an upfront payment to a dealer or institution for the sale of Class C shares, the Company capitalizes the cost of such payment, which is recorded in prepaid expenses in the unaudited Condensed Consolidated Balance Sheets and amortizes the cost over a 12-month period, the estimated period of benefit.

Valuation of AUM and fund investments

The fair value of assets under management of the Victory Funds and VictoryShares is primarily determined using quoted market prices or independent third-party pricing services or broker price quotes. In certain circumstances, a quotation or price evaluation is not readily available from a pricing service. In these cases, pricing is determined by management based on a prescribed valuation process that has been approved by the directors/trustees of the sponsored products. The same prescribed valuation process is used to price securities in separate accounts and the Company's other non-alternative investment vehicles for which a quotation or price evaluation is not readily available from a pricing service.

The fair value of Level III assets held by alternative investment vehicles is determined under the respective valuation policy for each fund. The valuation policies address the fact that substantially all the investments of a fund may not have readily available market information and therefore the fair value for these assets is typically determined using unobservable inputs and models that may include subjective assumptions. AUM reported by the Company for alternative investment vehicles may not necessarily equal the funds' net asset values or the total fair value of the funds' portfolio investments as AUM represents the basis for calculating management fees.

For the periods presented, less than one percent of the Company's total AUM were Level III assets priced without using a quoted market price, broker price quote or pricing service quotation.

NOTE 4. ACQUISITIONS

USAA AMCO Acquisition

In the fourth quarter of 2023, the Company made the fourth and final earn-out payment due to sellers under the terms of the USAA AMCO purchase agreement.

For the three and six months ended June 30, 2023, the increase in the USAA AMCO contingent consideration liability of $1.7million and $6.0million, respectively, was recorded in change in value of consideration payable for acquisition of business in the unaudited Condensed Consolidated Statements of Operations.

NEC Acquisition

Under the terms of the NEC purchase agreement, the Company will pay up to an additional $35.0million in cash based on NEC's net revenue growth over a six-yearperiod following the closing date. The purchase agreement specifies net revenue and payment targets for the 36-month, 48-month and 60-month periods beginning on November 30, 2021 (the "Start Date") for the contingent payments. It also provides for advance payments and catch-up payments to be made based on actual NEC net management fee revenue, as defined in the purchase agreement, as measured at the end of each 12-month anniversary of the Start Date over a six year period. The maximum amount of contingent payments, less any contingent payments previously paid, is due upon the occurrence of certain specified events within a five year period following the Start Date.

The Company determined that substantially all of the contingent payments payable per the NEC purchase agreement represent compensation for post-closing services. The Company records compensation expense over the estimated service period in an amount equal to the total contingent payments currently forecasted to be paid.

For the three and six months ended June 30, 2024, the Company recorded $0.5million and $1.5million in NEC contingent payment compensation expense, which is included in personnel compensation and benefits in the unaudited Condensed Consolidated Statements of Operations. Expense recorded for the three and six months ended June 30, 2023 was $1.4million and $3.0million, respectively.

The liability for NEC contingent payments totaled $15.2million and $13.7million as of June 30, 2024 and December 31, 2023, respectively, which is included in accrued compensation and benefits in the unaudited Condensed Consolidated Balance Sheets.

WestEnd Acquisition

Under the terms of the WestEnd purchase agreement, a maximum of $320.0million ($80.0million per year) of contingent payments is payable to sellers. Contingent earn-out payments are based on net revenue of the WestEnd business during

Table of Contents

each of the first four yearsfollowing the WestEnd Closing, subject to certain "catch-up" provisions over a five and one-half yearperiod following the WestEnd Closing.

The estimated fair value of contingent consideration payable to sellers was $141.2million as of June 30, 2024 and $217.2million as of December 31, 2023, respectively. In the first quarter of 2024, the Company paid $80.0million in cash to sellers as a catch-up payment for the first earn-out period.

For the three and six months ended June 30, 2024, the change in the liability was a decrease of $8.2million and an increase of $4.0million, respectively. For the three and six months ended June 30, 2023, the change in the liability was a decrease of $0.2million and an increase of $2.9million, respectively. The impact of decreasing or increasing the valuation of the contingent consideration liability is recorded in change in value of consideration payable for acquisition of business in the unaudited Condensed Consolidated Statements of Operations.

The estimated fair value of contingent consideration payable to sellers is estimated using the real options method. WestEnd net revenue growth is simulated in a risk-neutral framework to calculate expected probability-weighted earn out payments, which are then discounted from the expected payment dates at the relevant cost of debt. Significant assumptions and inputs include the WestEnd net revenue projected annual growth rate, the market price of risk adjustment for revenue, which adjusts the projected revenue growth rate to a risk-neutral expected growth rate, revenue volatility and discount rate. The market price of risk adjustment for revenue and revenue volatility are based on data for comparable companies. As the contingent consideration represents a subordinate, unsecured claim of the Company, the Company assesses a discount rate which incorporates adjustments for credit risk and the subordination of the contingent consideration.

Significant inputs to the valuation of contingent consideration payable to sellers as of June 30, 2024 and December 31, 2023 are as follows and are approximate values:




	June 30, 2024			December 31, 2023
Net revenue 5year average annual growth rate		17	%		22	%
Market price of risk adjustment for revenue (continuous)		7	%		7	%
Revenue volatility		21	%		21	%
Discount rate		7	%		7	%
Years remaining in earn out period		3.3			3.8
Undiscounted estimated remaining earn out payments $ millions	$160- $240			$243- $320

Amundi US Acquisition

On April 16, 2024, the Company and Amundi announced a non-binding Memorandum of Understanding to combine Amundi US into Victory, for Amundi to become a strategic shareholder of Victory, and to establish long-term global distribution agreements. In exchange, Amundi would receive a 26.1% economic stake in Victory, with no cash payment involved, and would have two of its representatives joining the Company's Board of Directors when the transaction closes. Refer to Note 15, Subsequent Events, for developments related to the Amundi US Acquisition subsequent to June 30, 2024.

Acquisition-related costs

Acquisition-related costs include legal fees, advisory services, mutual fund proxy voting costs and other one-time expenses related to business combinations. The Company expensed $3.1million and $4.1million in acquisition-related costs in the three and six months ended June 30, 2024 ($0.0million in 2023), respectively. These amounts are included in acquisition-related costs in the unaudited Condensed Consolidated Statements of Operations and relate primarily to the Amundi US Acquisition.

NOTE 5. Fair Value Measurements

The Company determines the fair value of certain financial and nonfinancial assets and liabilities. Fair value is determined based on the price that would be received for an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Fair value determinations utilize a valuation hierarchy based upon the transparency of inputs used in the valuation of an asset or liability.

Classification within the fair value hierarchy contains three levels:

•

Level 1-Valuation inputs are unadjusted quoted market prices for identical assets or liabilities in active markets.

•

Level 2-Valuation inputs are quoted prices for identical assets or liabilities in markets that are not active, quoted market prices for similar assets and liabilities in active markets and other observable inputs directly or indirectly related to the asset or liability being measured.

Table of Contents

•

Level 3-Valuation inputs are unobservable and significant to the fair value measurement. These inputs reflect management's own assumptions about the assumptions a market participant would use in pricing the asset or liability.

The following table presents assets and liabilities measured at fair value on a recurring basis:


	As of June 30, 2024
(in thousands)	Total			Level 1			Level 2		Level 3
Financial Assets
Money market fund	$	103,148			$	103,148		$	-	$	-
Investments in proprietary funds		561				561			-		-
Deferred compensation plan investments		33,198				33,198			-		-
Total Financial Assets	$	136,907			$	136,907		$	-	$	-
Financial Liabilities
Contingent consideration arrangements		(141,200	)			-			-		(141,200	)
Total Financial Liabilities	$	(141,200	)		$	-		$	-	$	(141,200	)


	As of December 31, 2023
(in thousands)	Total			Level 1			Level 2		Level 3
Financial Assets
Money market fund	$	109,183			$	109,183		$	-	$	-
Investments in proprietary funds		534				534			-		-
Deferred compensation plan investments		31,274				31,274			-		-
Total Financial Assets	$	140,991			$	140,991		$	-	$	-
Financial Liabilities
Contingent consideration arrangements		(217,200	)			-			-	$	(217,200	)
Total Financial Liabilities	$	(217,200	)		$	-		$	-	$	(217,200	)

Level 1 assets consist of money market funds and open-end mutual funds. The fair values for these assets are determined utilizing quoted market prices for identical assets.

Contingent consideration arrangements represent the WestEnd earn-out payment liability, which is included in consideration payable for acquisition of business in the unaudited Condensed Consolidated Balance Sheets.

Significant unobservable inputs for the option pricing model used to determine the estimated fair value of the WestEnd Acquisition earn-out payment liability include the WestEnd net revenue projected growth rate, revenue volatility, market price of risk and discount rate. An increase in the projected growth rate for net revenue results in a higher fair value for the earn-out payment liability while an increase in the discount rate results in a lower fair value for the earn-out payment liability. An increase in the market price of risk and revenue volatility results in a lower fair value. Refer to Note 4, Acquisitions, for further details related to the valuation of contingent consideration payable related to the WestEnd Acquisition.

Changes in the fair value of contingent consideration arrangement liabilities, realized or unrealized, are recorded in earnings and are included in change in value of consideration payable for acquisition of business in the unaudited Condensed Consolidated Statements of Operations.

The following table presents the balance of the change in contingent consideration arrangement liabilities for the six months ended June 30, 2024:


(in thousands)	Contingent Consideration Liabilities
Balance, December 31, 2023	$	217,200
WestEnd earn-out payment		(80,000	)
WestEnd change in fair value measurement		4,000
Balance, June 30, 2024	$	141,200

There were notransfers between any of the Level 1, 2 and 3 categories in the fair value measurement hierarchy from December 31, 2023 to June 30, 2024. The Company recognizes transfers at the end of the reporting period.

The net carrying value of accounts receivable and accounts payable approximates fair value due to the short-term nature of these assets and liabilities. The fair value of our long-term debt as of June 30, 2024 is considered to be its carrying value

Table of Contents

as the interest rate on the bank debt is variable and approximates current market rates. As a result, Level 2 inputs are utilized to determine the fair value of our long-term debt.

NOTE 6. Related-Party Transactions

The Company considers certain funds that it manages, including the Victory Funds, the VictoryShares, collective trust funds that it sponsors (the "Victory Collective Funds"), the NEC Funds and other pooled investment vehicles that it sponsors, to be related parties as a result of its advisory relationship.

The Company receives investment management, administrative, distribution and compliance fees in accordance with contracts that VCM and VCS have with the Victory Funds and has invested a portion of its balance sheet cash in the Victory Treasury Money Market Trust and earns interest on the amount invested in this fund.

The Company receives investment management, administrative and compliance fees in accordance with contracts that VCM has with the VictoryShares.

We also receive investment management fees from the Victory Collective Funds, the NEC Funds and other pooled investment vehicles under VCM's advisory contracts with these funds. In addition, VCTA receives fees for transfer agency services under contracts with the Victory Funds III and sub-transfer agency services under contracts with the Victory Funds for member class shares.

Director fees payable by the Company in cash and contributions made under the Director Deferred Compensation Plan for non-employee members of our Board of Directors are included in general and administrative expense in the unaudited Condensed Consolidated Statements of Operations.

The table below presents balances and transactions involving related parties included in the unaudited Condensed Consolidated Balance Sheets and unaudited Condensed Consolidated Statements of Operations.

•

Included in cash and cash equivalents is cash held in the Victory Treasury Money Market Trust.

•

Included in receivables (investment management fees) are amounts due from the Victory Funds, the VictoryShares, the Victory Collective Funds, the NEC Funds and other pooled investment vehicles for investment management services.

•

Included in receivables (fund administration and distribution fees) are amounts due from the Victory Funds for fund administration services and compliance services, amounts due from the VictoryShares for fund administration services, amounts due from the Victory Funds III for transfer agent services and amounts due from the Victory Funds for sub-transfer agent services.

•

Included in prepaid expenses are amounts paid by VCM that will be invoiced to the NEC Funds in subsequent periods.

•

Included in revenue (investment management fees) are amounts earned for investment management services provided to the Victory Funds, the VictoryShares, the Victory Collective Funds, the NEC Funds and other pooled investment vehicles.

•

Included in revenue (fund administration and distribution fees) are amounts earned for fund administration and compliance services, transfer agent services and sub-transfer agent services.

•

Realized and unrealized gains and losses and dividend income on investments in the Victory Funds classified as investments in proprietary funds and deferred compensation plan investments and dividend income on investments in the Victory Treasury Money Market Trust are recorded in interest income and other income (expense) in the unaudited Condensed Consolidated Statements of Operations.

•

Amounts due to the Victory Funds, the VictoryShares and other pooled investment vehicles for waivers of investment management fees and reimbursements of fund operating expenses are included in accounts payable and accrued expenses in the unaudited Condensed Consolidated Balance Sheets and represent consideration payable to customers.

Table of Contents


(in thousands)	June 30, 2024		December 31, 2023
Related party assets
Cash and cash equivalents	$	103,148		$	109,183
Receivables (investment management fees)		47,432			46,217
Receivables (fund administration and distribution fees)		14,775			14,238
Prepaid expenses		1,281			730
Investments (investments in proprietary funds, fair value)		561			534
Investments (deferred compensation plan investments, fair value)		33,063			31,143
Total	$	200,260		$	202,045

Related party liabilities
Accounts payable and accrued expenses (fund reimbursements)	$	5,664		$	5,641


	Three Months Ended June 30,		Six Months Ended June 30,
(in thousands)	2024		2023			2024		2023
Related party revenue
Investment management fees	$	131,182		$	121,910		$	259,517	$	241,893
Fund administration and distribution fees		46,458			44,816			92,530		89,300
Total	$	177,640		$	166,726		$	352,047	$	331,193

Related party expense
General and administrative	$	106		$	127		$	218	$	249

Related party other income (expense)
Interest income and other income (expense)	$	1,282		$	1,331		$	4,568	$	2,795

NOTE 7. Investments

As of June 30, 2024 and December 31, 2023, the Company had investments in proprietary funds and deferred compensation plan investments. Investments in proprietary funds consist entirely of seed capital investments in certain Victory Funds. Deferred compensation plan investments are held under deferred compensation plans and consist of investments in Victory Funds.

Unrealized and realized gains and losses on investments in proprietary funds and deferred compensation plan investments are recorded in earnings as interest income and other income (expense).

Investments in Proprietary Funds

The following table presents a summary of the cost and fair value of investments in proprietary funds:


			Gross Unrealized			Fair
(in thousands)	Cost		Gains			(Losses)		Value
As of June 30, 2024	$	572		$	70		$	(81	)	$	561
As of December 31, 2023		569			55			(90	)		534

There were no sales of investments in proprietary funds and realized gains and losses during the three and six months ended June 30, 2024. The following table presents proceeds from sales of investments in proprietary funds and realized gains and losses recognized during the three and six months ended June 30, 2023.


	Sale		Realized
(in thousands)	Proceeds		Gains			(Losses)
For the three months ended June 30, 2023	$	32		$	4		$	-
For the six months ended June 30, 2023		32			4			-

Table of Contents

Deferred Compensation Plan Investments

The following table presents a summary of the cost and fair value of deferred compensation plan investments:


			Gross Unrealized			Fair
(in thousands)	Cost		Gains			(Losses)		Value
As of June 30, 2024	$	30,957		$	2,492		$	(251	)	$	33,198
As of December 31, 2023		30,109			1,610			(445	)		31,274

The following table presents proceeds from sales of deferred compensation plan investments and realized gains and losses recognized during the three and six months ended June 30, 2024 and 2023:


	Sale		Realized
(in thousands)	Proceeds		Gains			(Losses)
For the three months ended June 30, 2024	$	790		$	59		$	(17	)
For the three months ended June 30, 2023	$	939		$	3		$	(31	)


	Sale		Realized
(in thousands)	Proceeds		Gains			(Losses)
For the six months ended June 30, 2024	$	1,089		$	81		$	(22	)
For the six months ended June 30, 2023	$	2,910		$	4		$	(232	)

NOTE 8. Income Taxes

The effective tax rate for the three and six months ended June 30, 2024 and 2023 differs from the United States federal statutory rate primarily as a result of state and local income taxes, excess tax benefits on share-based compensation and certain non-deductible expenses.

For the three months ended June 30, 2024 and 2023, the provision for income taxes was $21.5million and $17.9million, or 22.5% and 24.0%, of pre-tax income respectively. The effective tax rate for the three months ended June 30, 2024 was lower than the effective tax rate for the same period in 2023 due primarily to increased excess tax benefits on share-based compensation.

For the six months ended June 30, 2024 and 2023, the provision for income taxes was $37.7million and $30.5million, or 22.5% and 22.4%, of pre-tax income respectively.

Novaluation allowance was recorded for deferred tax assets in the period ended June 30, 2024 and 2023.

The Organization for Economic Co-operation and Development has released a framework ("Pillar 2") to introduce a global minimum tax of 15% for companies with global revenues and profits above certain thresholds. Certain aspects of Pillar 2 are effective January 1, 2024 and other aspects are effective January 1, 2025. Although the U.S. has not yet enacted legislation to adopt Pillar 2, certain countries have already adopted, or are in the process of adopting, legislation to implement Pillar 2. The Company continues to analyze Pillar 2 but does not currently expect it to have a material impact on our effective tax rate or on our consolidated balance sheet, statement of operations or statement of cash flows.

NOTE 9. Debt

On June 7, 2024, the Company entered into the Fifth Amendment to the 2019 Credit Agreement, extending the maturity date of the $100,000,000senior secured first lien revolving facility from July 1, 2024 to March 31, 2026, and decreasing the drawn interest rate margin by 0.50% per annum. The revolving facility otherwise remains subject to substantially the same terms as those set forth in the 2019 Credit Agreement. The Company incurred $1.0million in upfront fees, arranger fees and other third party costs related to the Fifth Amendment to the 2019 Credit Agreement, which were recorded to revolving credit facility debt issuance cost in other assets.

Table of Contents

The following table presents the components of long-term debt in the unaudited Condensed Consolidated Balance Sheets as of June 30, 2024 and December 31, 2023.


	June 30,			December 31,			Interest Rate	Effective Interest Rate
(in thousands)	2024			2023			2024	2023	2024	2023
Term Loans
Due July 2026	$	624,693			$	630,680		7.65%	7.77%	8.05%	8.17%
Due December 2028		367,496				371,028		7.65%	7.77%	7.98%	8.10%
Term loan principal outstanding		992,189				1,001,708
Unamortized debt issuance costs		(7,412	)			(8,753	)
Unamortized debt discount		(3,053	)			(3,686	)
Long-term debt, net	$	981,724			$	989,269

The Company elects to use three-month Term SOFR plus a ten-point credit spread adjustment plus the margin on SOFR required by the 2019 Credit Agreement to pay interest on its debt.

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 3.80to 1.00. As of June 30, 2024, there were no outstanding borrowings under the revolving credit facility and the Company was in compliance with its financial performance covenant.

Repayments of outstanding term loans under the 2019 Credit Agreement totaled $9.5million for the three and six months ended June 30, 2024. The Company recognized a loss on debt extinguishment of $0.1million in the three and six months ended June 30, 2024, due to the repayments of term loan principal.

There were norepayments of outstanding term loans under the 2019 Credit Agreement during the three and six months ended June 30, 2023, and no loss on debt extinguishment was recorded in these periods.

The following table presents the components of interest expense and other financing costs on the unaudited Condensed Consolidated Statements of Operations for the periods ended June 30, 2024 and 2023.


	For the Three Months Ended June 30,			For the Six Months Ended June 30,
(in thousands)	2024			2023			2024		2023
Interest expense	$	19,202			$	18,406		$	38,665		$	35,683
Amortization of debt issuance costs		802				756			1,557			1,504
Amortization of debt discount		301				302			603			600
Interest rate swap (income) expense		-				(4,683	)		-			(8,889	)
Amortization of deferred gain on terminated interest rate swap		(4,155	)			-			(8,309	)		-
Other		129				121			249			243
Total	$	16,279			$	14,902		$	32,765		$	29,141

Refer to Note 15, Subsequent Events, for developments related to the 2019 Credit Agreement subsequent to June 30, 2024.

Table of Contents

NOTE 10. Equity

Shares Rollforward

The following tables present the changes in the number of shares of common stock issued and repurchased (in thousands):


	Shares of Common Stock Issued		Shares of Treasury Stock
Balance, December 31, 2023		82,404		(18,150	)
Issuance of shares		2		-
Vesting of restricted share grants		382		-
Exercise of options		378		-
Shares withheld related to net settlement of equity awards		-		(345	)
Balance, March 31, 2024		83,166		(18,495	)
Issuance of shares		1		-
Vesting of restricted share grants		18		-
Exercise of options		269		-
Shares withheld related to net settlement of equity awards		-		(151	)
Balance, June 30, 2024		83,454		(18,646	)


	Shares of Common Stock Issued		Shares of Treasury Stock
Balance, December 31, 2022		80,528		(13,203	)
Issuance of shares		3		-
Repurchase of shares		-		(1,032	)
Vesting of restricted share grants		680		-
Exercise of options		295		-
Shares withheld related to net settlement of equity awards		-		(390	)
Balance, March 31, 2023		81,506		(14,625	)
Issuance of shares		2		-
Repurchase of shares		-		(1,380	)
Vesting of restricted share grants		27		-
Exercise of options		191		-
Shares withheld related to net settlement of equity awards		-		(102	)
Balance, June 30, 2023		81,726		(16,107	)

Shares Repurchased and Withheld

Share Repurchase Programs

In December 2023, the Company's Board of Directors approved a new share repurchase program (the "2024 Share Repurchase Program") authorizing the repurchase of up to $100.0million of the Company's Common Stock through December 31, 2025. Under the 2024 Share Repurchase Program, which took effect in December 2023, the Company may purchase its shares from time to time in privately negotiated transactions, through block trades, pursuant to open market purchases, or pursuant to any trading plan that may be adopted in accordance with Rule 10b5-1 of the SEC. The amount and timing of purchases under the 2024 Share Repurchase Program will depend on a number of factors including the price and availability of the Company's shares, trading volume, capital availability, Company performance and general economic and market conditions. The 2024 Share Repurchase Program can be suspended or discontinued at any time.

Noshares were repurchased by the Company during the three and six months ended June 30, 2024. For the same periods in 2023, the Company repurchased 1.4million and 2.4million, respectively, shares of Common Stock at a total cost of $44.5million and $77.4million, which included $0.2million and $0.6million of excise taxes payable on shares repurchased, for an average price of $32.25and $32.09per share.

As of June 30, 2024, $95.2million was available for future repurchases under the 2024 Share Repurchase Program, and a cumulative total of 11.3million shares of Common Stock had been repurchased under programs authorized by the Company's Board of Directors at a total cost of $295.8million for an average price of $26.26per share.

Shares Withheld for net settlement of employee equity awards

Table of Contents

During the three months ended June 30, 2024, the Company net settled 0.2million shares of Common Stock for $7.4million to satisfy $5.3million in employee tax obligations and $2.1million in employee stock option exercise prices. During the same period in 2023, 0.1million shares were net settled for $3.2million to satisfy $1.8million of employee tax obligations and $1.4million of employee stock option exercise prices.

During the six months ended June 30, 2024, the Company net settled 0.5million shares of Common Stock for $20.7million to satisfy $15.6million in employee tax obligations and $5.1million in employee stock option exercise prices. During the same period in 2023, 0.5million shares were net settled for $14.8million to satisfy $11.8million of employee tax obligations and $3.0million of employee stock option exercise prices.

Dividend Payments

Dividends paid or payable for the six months ended June 30, 2024 totaled $46.4million and included quarterly dividends of $45.6million and $0.8million in cash bonuses and distributions related to dividends previously declared upon vesting of restricted stock. During the same period in 2023, dividends paid or payable totaled $43.6million and included quarterly dividends of $42.5million and $1.1million in cash bonuses and distributions related to dividends previously declared upon vesting of restricted stock.

As of June 30, 2024 and December 31, 2023, the amount of cash bonuses and distributions related to dividends previously declared on unvested and outstanding restricted share awards and stock options totaled $1.0million and $1.2million, respectively, which was not recorded as a liability as of the balance sheet date. A liability will be recorded for these cash bonuses and dividends when the restricted shares and options vest.

NOTE 11. Share-Based Compensation

Amendment to the 2018 Stock Incentive Plan

On May 8, 2024, the Company's stockholders approved an amendment to the Company's 2018 Stock Incentive Plan (the "2018 Plan") which increased the number of shares of Common Stock, par value $0.01per share, authorized for issuance under the 2018 Plan by 2,800,000shares to 6,172,484shares. As of December 31, 2023, 799,111shares remained available for grant of the 3,372,484shares originally authorized for issuance under the 2018 Plan.

Current Period Activity

During the three months ended June 30, 2024, the Company issued restricted stock awards for 7,661shares of Common Stock, of which awards for 5,747shares were fully vested on the grant date, awards for 1,394shares vest over two years, and awards for 520shares cliff vest after two years.

For the six months ended June 30, 2024, the Company issued restricted stock awards for 473,633shares of Common Stock, of which awards for 14,096shares were fully vested on the grant date, awards for 73,794shares vest over two years, awards for 1,534shares cliff vest after two years, awards for 92,875shares vest overthree years, and awards for 291,334shares vest over four years.

Stock option award and restricted stock award activity during the six months ended June 30, 2024 and 2023 was as follows:


	Shares Subject to Stock Option Awards
	Six Months Ended June 30,
	2024		2023
	Avg wtd		Avg wtd				Avg wtd		Avg wtd
	grant-date		exercise				grant-date		exercise
	fair value		price			Units	fair value		price		Units
Outstanding at beginning of period	$	4.68		$	8.76		1,801,853		$	4.31		$	7.57	2,884,180
Exercised		4.44			8.26		(646,698	)		3.89			6.48	(486,176	)
Outstanding at end of the period	$	4.82		$	9.04		1,155,155		$	4.40		$	7.79	2,398,004
Vested	$	4.81		$	9.01		978,957		$	4.36		$	7.68	2,221,806
Unvested		4.85			9.23		176,198			4.85			9.23	176,198

Table of Contents


	Restricted Stock Awards
	Six Months Ended June 30,
	2024		2023
	Avg wtd grant-				Avg wtd grant-
	date fair value		Units		date fair value		Units
Unvested at beginning of period	$	30.39		853,748		$	25.38	1,153,515
Granted		40.11		473,633			29.88	480,562
Vested		30.72		(400,037	)		22.60	(707,556	)
Forfeited		33.76		(8,041	)		28.24	(3,240	)
Unvested at end of period	$	35.23		919,303		$	29.81	923,281

Share-Based Compensation Expense

The Company recorded $3.7million and $4.2million of share-based compensation expense in the three months ended June 30, 2024 and 2023, respectively, and $7.7million and $8.5million of share-based compensation expense in the six months ended June 30, 2024 and 2023, respectively, in personnel compensation and benefits in the unaudited Condensed Consolidated Statements of Operations.

NOTE 12. Earnings Per Share

The following table sets forth the reconciliation of basic earnings per share and diluted earnings per share from net income for the three and six months ended June 30, 2024 and 2023:


	Three Months Ended June 30,		Six Months Ended June 30,
(in thousands except per share amounts)	2024		2023			2024		2023
Net income	$	74,251		$	56,671		$	129,942	$	105,944
Shares:
Basic: Weighted average number of shares outstanding		64,734			66,466			64,561		66,874
Plus: Incremental shares from assumed conversion of dilutive instruments		1,341			2,034			1,464		2,163
Diluted: Weighted average number of shares outstanding		66,075			68,500			66,025		69,037
Earnings per share
Basic:	$	1.15		$	0.85		$	2.01	$	1.58
Diluted:	$	1.12		$	0.83		$	1.97	$	1.53

Outstanding instruments excluded from the computation of weighted average shares for diluted earnings per share because the effect would be anti-dilutive were de minimis for the three and six months ended June 30, 2024 and 2023. Holders of non-vested share-based compensation awards do not have rights to receive nonforfeitable dividends on the shares covered by the awards.

Table of Contents

NOTE 13. Accumulated Other Comprehensive Income (Loss)

The following table presents changes in accumulated other comprehensive income (loss) by component for the six months ended June 30, 2024 and 2023.


				Cumulative
	Cash Flow			Translation
(in thousands)	Hedges (1)(2)			Adjustment			Total
Balance, December 31, 2023	$	31,460			$	(132	)	$	31,328
Other comprehensive income before reclassification and tax		-				(34	)		(34	)
Tax impact		-				8			8
Reclassification adjustments, before tax		(8,309	)			-			(8,309	)
Tax impact		2,031				-			2,031
Net current period other comprehensive income (loss)		(6,278	)			(26	)		(6,304	)
Balance, June 30, 2024	$	25,182			$	(158	)	$	25,024
Balance, December 31, 2022	$	35,614			$	(172	)	$	35,442
Other comprehensive income (loss) before reclassification and tax		7,345				19			7,364
Tax impact		(1,783	)			(5	)		(1,788	)
Reclassification adjustments, before tax		(8,889	)			-			(8,889	)
Tax impact		2,158				-			2,158
Net current period other comprehensive income (loss)		(1,169	)			14			(1,155	)
Balance, June 30, 2023	$	34,445			$	(158	)	$	34,287

(1)

Reclassifications out of accumulated other comprehensive income (loss) related to cash flow hedges are recorded in interest expense and other financing costs.

(2)

On October 30, 2023, the Company terminated the Swap. The termination resulted in a $44.4 million deferred gain recorded in AOCI, before tax, which is being amortized on a straight-line basis over the remaining term of the hedged debt (through July 1, 2026). Please refer to Note 14, Derivatives, for further information on the monetization of the gain on the Swap.

NOTE 14. DERIVATIVES

Interest Rate Swaps

In the fourth quarter of 2023, the Company monetized the gain on the floating-to-fixed interest rate swap transaction ("Swap") entered into in 2020 to effectively fix the interest rate on $450million of its outstanding Term Loan through the Term Loan maturity date of July 2026.

The deferred gain on the termination of the Swap is being amortized on a straight-line basis through July 1, 2026 and is included in interest expense and other financing costs on the unaudited Condensed Consolidated Statements of Operations. As of June 30, 2024 and December 31, 2023, the unamortized deferred gain on Swap monetization was $33.3million and $41.6million, respectively, before tax.

The Swap was designated as a cash flow hedge. Prior to its termination, the Swap was measured at fair value with mark-to-market gains or losses deferred and included in AOCI(L), net of tax, to the extent the hedge was determined to be effective. Gains or losses were reclassified to interest expenses and other financing costs on the unaudited Condensed Consolidated Statements of Operations in the same period during which the hedged transaction affected earnings.

The following tables summarize the classification of the Swap in our consolidated financial statements (in thousands):


		Three Months Ended		Six Months Ended
		June 30,		June 30,
Statement of Operations	Description	2024		2023			2024		2023
Interest income (expense) and other financing costs	Reclassification from AOCI - Swap income	$	-		$	4,683		$	-	$	8,889
Interest income (expense) and other financing costs	Reclassification from AOCI - Amortization of Swap deferred gain		4,155			-			8,309		-
Total		$	4,155		$	4,683		$	8,309	$	8,889

Table of Contents


		Three Months Ended			Six Months Ended
		June 30,			June 30,
Statements of Comprehensive Income	Description	2024			2023			2024		2023
Other comprehensive income (loss)	Income (loss) recognized in AOCI(L), net of tax	$	-			$	3,919		$	-		$	(1,169	)
Other comprehensive income (loss)	Amortization of deferred gain on terminated Swap, net of tax		(3,139	)			-			(6,278	)		-
Total		$	(3,139	)		$	3,919		$	(6,278	)	$	(1,169	)

NOTE 15. SUBSEQUENT EVENTS

On July 1, 2024, the Company executed an agency succession agreement, by and among Barclays Bank PLC as the resigning administrative agent and collateral agent under the 2019 Credit Agreement and Royal Bank of Canada, as the successor administrative agent and collateral agent.

On July 9, 2024, the Company issued a press release announcing that it has entered into definitive agreements with Amundi whereby Amundi's U.S. business (formerly Pioneer Investments) will be combined into the Company in exchange for a 26.1% economic stake in the Company, composed of newly issued shares of the Company's Common Stock representing 4.9% of the number of issued and outstanding shares of Company Common Stock, after giving effect to that issuance, and the balance in newly issued shares of Company Preferred Stock. The parties have also entered into reciprocal 15-yeardistribution agreements, which will be effective upon closing of the transaction. The closing of the contemplated transaction is subject to customary closing conditions and regulatory approvals.

On August 8, 2024, the Company's Board of Directors approved a regular quarterly cash dividend of $0.41per share. The dividend is payable on September 25, 2024, to shareholders of record on September 10, 2024.

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

Unless the context otherwise requires, references in this Quarterly Report on Form 10-Q to the "Company," "Victory," or in the first-person notations of "we," "us," and "our" shall mean Victory Capital Holdings, Inc., a Delaware corporation, and its wholly-owned subsidiaries.

Objective

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, 2024 and 2023 and cash flows for the six months ended June 30, 2024 and 2023. 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, 2023. 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, 2023.

Overview

Our Business - Victory is a diversified global asset management firm with total client assets of $173.8 billion, assets under management of $168.7 billion and other assets of $5.1 billion as of June 30, 2024. The Company operates a next-generation business model combining boutique investment qualities with the benefits of an integrated, centralized operating and distribution platform.

The Company provides specialized investment strategies to institutions, intermediaries, retirement platforms and individual investors with 11 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

Table of Contents

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, 2024, our Franchises and our Solutions Platform collectively managed a diversified set of 122 investment strategies for a wide range of institutional and retail clients and direct investors.

Franchises- Our Franchises are largely operationally integrated but are separately branded and make investment decisions independently from one another within guidelines established by their respective investment mandates. Our largely integrated model creates a supportive environment in which our investment professionals, largely unencumbered by administrative and operational responsibilities, can focus on their pursuit of investment excellence. VCM employs all of our U.S. investment professionals across our Franchises, which are not separate legal entities.

Solutions- Our Solutions Platform consists of multi-asset, multi-manager, quantitative, rules-based, factor-based, and customized portfolios. These strategies are designed to achieve specific return characteristics, with products that include values-based and thematic outcomes and exposures. We offer our Solutions Platform through a variety of vehicles, including separate accounts, mutual funds, UMA accounts, and rules-based and active ETFs under our VictoryShares ETF brand. Like our Franchises, our Solutions Platform is operationally integrated and supported by our centralized distribution, marketing, and operational support functions.

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.

We have grown our total client assets from $17.9 billion following the management-led buyout with Crestview GP in August 2013 to $173.8 billion at June 30, 2024. 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.

WestEnd Acquisition (the "WestEnd Acquisition")- On December 31, 2021, the Company completed the acquisition of 100% of the equity interests of WestEnd Advisors, LLC ("WestEnd") pursuant to the WestEnd purchase agreement (as amended, the "WestEnd Purchase Agreement"). Founded in 2004, and headquartered in Charlotte, NC, WestEnd is an ETF strategist advisor that provides financial advisors with a turnkey, core model allocation strategy for either a holistic solution or complementary source of alpha. The firm offers four primary ETF strategies and one large cap core strategy, all in tax efficient SMA structures. Refer to Note 4, Acquisitions, for further details on the WestEnd Acquisition.

NEC Acquisition (the "NEC Acquisition")- On November 1, 2021, the Company completed the acquisition of 100% of the equity interests in New Energy Capital ("NEC"). Founded in 2004 and based in Hanover, NH, NEC is an alternative asset management firm focused on debt and equity investments in clean energy infrastructure projects and companies. Refer to Note 4, Acquisitions, for further details on the NEC Acquisition.

USAA AMCO Acquisition- On July 1, 2019, the Company completed the acquisition (the "USAA AMCO Acquisition") of USAA Asset Management and Victory Capital Transfer Agency ("VCTA"), formally known as the USAA Transfer Agency Company. The acquisition expanded and diversified the Company's investment platform and increased the Company's size and scale. Refer to Note 4, Acquisitions, for further details on the USAA AMCO Acquisition.

Business Highlights

Assets under management:

•

AUM at June 30, 2024 decreased by $1.7 billion, or 1.0%, to $168.7 billion from $170.3 billion at March 31, 2024, driven by net outflows of $1.7 billion.

•

AUM at June 30, 2024 and 2023 was $168.7 billion and $157.2 billion, respectively. We generated $6.1 billion in gross flows and $1.7 billion in net outflows for the three months ended June 30, 2024 compared to $5.7 billion in gross flows and $1.4 billion in net outflows for the same period in 2023.

•

AUM at June 30, 2024 and 2023 was $168.7 billion and $157.2 billion, respectively. We generated $13.3 billion in gross flows and $2.9 billion in net outflows for the six months ended June 30, 2024 compared to $11.8 billion in

Table of Contents

gross flows and $2.6 billion in net outflows for the same period in 2023. Net flows for the six months ended June 30, 2024 were comprised of $2.7 billion and $0.1 billion of net long-term and short-term outflows, respectively.

Investment performance:

•

44 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. 49% of our strategies by AUM had investment returns in excess of their respective benchmarks over a one-year period, 60% over a three-year period, 77% over a five-year period and 79% over a ten-year period. On an equal-weighted basis, 58% of our strategies have outperformed their benchmarks over a one-year period, 62% over a three-year period, 63% over a five-year period and 64% over a ten-year period.

Financial highlights:

•

Total revenue for the three months ended June 30, 2024 was $219.6 million compared to $204.2 million for the same period in 2023. For the six months ended June 30, 2024 and 2023, total revenue was $435.5 million and $405.5 million, respectively.

•

Net income was $74.3 million for the three months ended June 30, 2024 compared to $56.7 million for the same period in 2023. For the six months ended June 30, 2024 and 2023, net income was $129.9 million and $105.9 million, respectively.

•

Adjusted EBITDA was $116.5 million for the three months ended June 30, 2024, or 53.0% of revenue, compared to $104.0 million, or 50.9% of revenue, for the same period in 2023. For the six months ended June 30, 2024, Adjusted EBITDA was $228.9 million, or 52.6% of revenue, compared to $203.2 million, or 50.1% of revenue, for the same period in 2023. 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.

•

Adjusted Net Income with tax benefit was $86.6 million for the three months ended June 30, 2024 compared to $75.9 million for the three months ended June 30, 2023. For the six months ended June 30, 2024, Adjusted Net Income with tax benefit was $169.0 million compared to $151.1 million for the same period in 2023. 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.

Key Performance Indicators

The following table is a summary of key performance indicators utilized by management to assess results of operations:


	Three Months Ended June 30,			Six Months Ended June 30,
($ in millions, except for basis points and percentages)	2024			2023			2024		2023
AUM at period end	$	168,681			$	157,161		$	168,681		$	157,161
Average AUM		167,484				152,925			165,508			152,729
Gross flows		6,067				5,722			13,255			11,811
AUM net short-term flows		(43	)			(316	)		(142	)		(325	)
AUM net long-term flows		(1,701	)			(1,110	)		(2,729	)		(2,250	)
AUM net flows		(1,744	)			(1,426	)		(2,871	)		(2,576	)
Total revenue		219.6				204.2			435.5			405.5
Revenue realization on average AUM	52.6 bps			53.5 bps			52.8bps		53.4 bps
Net income		74.3				56.7			129.9			105.9
Adjusted EBITDA(1)		116.5				104.0			228.9			203.2
Adjusted EBITDA Margin(2)		53.0	%			50.9	%		52.6	%		50.1	%
Adjusted Net Income(1)		76.5				66.4			149.1			132.1
Tax benefit of goodwill and acquired intangibles(3)		10.1				9.5			19.9			19.1

(1) Management utilizes Adjusted EBITDA and Adjusted Net Income to measure the operating profitability of the business. These measures eliminate the impact of one-time acquisition, restructuring and integration costs and demonstrate the ongoing operating earnings metrics of the business. These measures are explained in more detail and reconciled to net income calculated in accordance with GAAP in "Supplemental Non-GAAP Financial Information."

(2) Adjusted EBITDA margin represents Adjusted EBITDA as a percentage of total revenue.

(3) Represents the tax benefits associated with deductions allowed for intangibles and goodwill generated from prior acquisitions in which we received a step-up in basis for tax purposes. Acquired intangible assets and goodwill may be amortized for tax purposes, generally

Table of Contents

over a 15-year period. The tax benefit from amortization on these assets is included to show the full economic benefit of deductions for all acquired intangibles with a step-up in tax basis. Due to our acquisitive nature, tax deductions allowed on acquired intangible assets and goodwill provide us with a significant supplemental economic benefit.

The following table presents a reconciliation of our total client assets(1)as of the dates indicated:


	Three Months Ended June 30,			Six Months Ended June 30,
(in millions)	2024			2023			2024		2023
Beginning AUM	$	170,342			$	153,356		$	161,322		$	147,762
Beginning other assets		5,117				5,265			5,289			5,190
Beginning total client assets		175,459				158,621			166,611			152,952

AUM net cash flows		(1,744	)			(1,426	)		(2,871	)		(2,576	)
Other assets net cash flows		18				(996	)		(506	)		(1,091	)
Total client assets net cash flows		(1,727	)			(2,422	)		(3,377	)		(3,667	)

AUM market appreciation (depreciation)		83				5,346			10,261			12,089
Other assets market appreciation (depreciation)		(40	)			192			311			362
Total client assets market appreciation (depreciation)		43				5,537			10,572			12,451

AUM realizations and distributions		-				(73	)		-			(73	)
Acquired & divested assets / Net transfers		-				(41	)		(31	)		(42	)

Ending AUM		168,681				157,161			168,681			157,161
Ending other assets		5,094				4,461			5,094			4,461
Ending total client assets		173,775				161,622			173,775			161,622
Average total client assets		172,392				157,372			170,629			157,595

(1) Includes low-fee (2 to 4 bps) institutional assets, previously reported in the Solutions asset class within the by asset class table and in Separate Accounts and Other Pooled Vehicles within the by vehicle table. These assets are included as part of Victory's Regulatory Assets Under Management reported in Form ADV Part 1.

The following table presents a reconciliation of our total AUM(1)as of the dates indicated:


	Three Months Ended June 30,			Six Months Ended June 30,
(in millions)	2024			2023			2024		2023
Beginning AUM	$	170,342			$	153,356		$	161,322		$	147,762
Gross client cash inflows		6,067				5,722			13,255			11,811
Gross client cash outflows		(7,812	)			(7,148	)		(16,126	)		(14,386	)
Net client cash flows		(1,744	)			(1,426	)		(2,871	)		(2,576	)
Market appreciation (depreciation)		83				5,346			10,261			12,089
Realizations and distributions		-				(73	)		-			(73	)
Acquired & divested assets / Net transfers		-				(41	)		(31	)		(42	)
Ending AUM		168,681				157,161			168,681			157,161
Average AUM		167,484				152,925			165,508			152,729

(1) Total AUM includes both discretionary assets under management and non-discretionary assets under advisement and excludes other assets.

Table of Contents

The following table presents a reconciliation of our other assets (institutional)(1)as of the dates indicated:


	Three Months Ended June 30,			Six Months Ended June 30,
(in millions)	2024			2023			2024		2023
Beginning other assets (institutional)	$	5,117			$	5,265		$	5,289		$	5,190
Gross client cash inflows		467				100			467			100
Gross client cash outflows		(449	)			(1,096	)		(973	)		(1,191	)
Net client cash flows		18				(996	)		(506	)		(1,091	)
Market appreciation (depreciation)		(40	)			192			311			362
Realizations and distributions		-				-			-			-
Acquired & divested assets / Net transfers		-				-			-			-
Ending other assets (institutional)		5,094				4,461			5,094			4,461
Average other assets (institutional)		4,909				4,447			5,120			4,866

Assets Under Management

Our profitability is largely affected by the level and composition of our AUM (including asset class and distribution channel) and the effective fee rates on our products. The amount and composition of our AUM are, and will continue to be, influenced by a number of factors, including; (i) investment performance, including fluctuations in the financial markets and the quality of our investment decisions; (ii) client flows into and out of our various strategies and investment vehicles; (iii) industry trends toward products or strategies that we either do or do not offer; (iv) our ability to attract and retain high quality investment, distribution, marketing and management personnel; (v) our decision to close strategies or limit growth of assets in a strategy when we believe it is in the best interest of our clients or conversely to re-open strategies in part or entirely; and (vi) general investor sentiment and confidence. Our goal is to establish and maintain a client base that is diversified by Franchise and Solutions, asset class, distribution channel and vehicle. Due to rounding, AUM numbers presented in the tables below may not add up precisely to the totals provided.

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


	As of
	June 30,
(in millions)	2024		2023
Solutions	$	58,936		$	51,375
Fixed Income		24,398			26,098
U.S. Mid Cap Equity		31,015			30,007
U.S. Small Cap Equity		15,182			15,664
Global / Non-U.S. Equity		18,459			15,392
U.S. Large Cap Equity		13,983			12,170
Alternative Investments		3,390			3,301
Total Long-Term Assets		165,362			154,009
Money Market & Short-Term Assets		3,320			3,152
Total AUM(1)	$	168,681		$	157,161

(1) Total AUM includes both discretionary assets under management and non-discretionary assets under advisement and excludes other assets.

Table of Contents

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



	U.S. Mid			U.S. Small					U.S. Large		Global /										Money
	Cap			Cap			Fixed		Cap		Non-U.S.						Alternative		Total		Market /
(in millions)	Equity			Equity			Income		Equity		Equity			Solutions			Investments		Long-term		Short-term			Total AUM(1)
For the Three Months Ended June 30, 2024
Beginning AUM	$	32,918			$	16,297		$	24,481		$	13,895			$	18,200		$	57,833		$	3,465			$	167,089		$	3,253		$	170,342
Gross client cash inflows		1,007				559			1,283			67				558			2,035			303				5,813			255			6,067
Gross client cash outflows		(1,659	)			(778	)		(1,508	)		(309	)			(635	)		(2,184	)		(442	)			(7,514	)		(298	)		(7,812	)
Net client cash flows		(652	)			(218	)		(225	)		(241	)			(77	)		(150	)		(139	)			(1,701	)		(43	)		(1,744	)
Market appreciation / (depreciation)		(1,247	)			(893	)		116			350				367			1,273			58				24			60			83
Realizations and distributions		-				-			-			-				-			-			-				-			-			-
Acquired & divested assets / Net transfers		(4	)			(4	)		26			(21	)			(32	)		(21	)		6				(50	)		50			-
Ending AUM	$	31,015			$	15,182		$	24,398		$	13,983			$	18,459		$	58,936		$	3,390			$	165,362		$	3,320		$	168,681
For the Three Months Ended June 30, 2023
Beginning AUM	$	29,035			$	15,648		$	26,535		$	11,425			$	14,868		$	49,151		$	3,317			$	149,979		$	3,377		$	153,356
Gross client cash inflows		1,259				743			873			87				559			1,522			449				5,491			231			5,722
Gross client cash outflows		(1,126	)			(1,128	)		(1,324	)		(290	)			(585	)		(1,738	)		(408	)			(6,601	)		(547	)		(7,148	)
Net client cash flows		132				(386	)		(451	)		(204	)			(26	)		(216	)		41				(1,110	)		(316	)		(1,426	)
Market appreciation / (depreciation)		824				404			48			954				575			2,490			12				5,307			38			5,346
Realizations and distributions		-				-			-			-				-			-			(73	)			(73	)		-			(73	)
Acquired & divested assets / Net transfers		16				(2	)		(34	)		(4	)			(25	)		(49	)		4				(95	)		53			(41	)
Ending AUM	$	30,007			$	15,664		$	26,098		$	12,170			$	15,392		$	51,375		$	3,301			$	154,009		$	3,152		$	157,161

(1) Total AUM includes both discretionary assets under management and non-discretionary assets under advisement and excludes other assets.

Table of Contents


				U.S.					U.S.
	U.S. Mid			Small					Large		Global /										Money
	Cap			Cap			Fixed		Cap		Non-U.S.						Alternative		Total		Market /
(in millions)	Equity			Equity			Income		Equity		Equity			Solutions			Investments		Long-term		Short-term			Total AUM(1)
Six Months Ended June 30, 2024
Beginning AUM	$	30,604			$	15,959		$	24,355		$	12,635			$	16,772		$	54,296		$	3,431			$	158,051		$	3,271		$	161,322
Gross client cash inflows		2,378				1,066			2,581			136				1,648			4,200			755				12,764			491			13,255
Gross client cash outflows		(3,504	)			(1,703	)		(2,874	)		(641	)			(1,386	)		(4,595	)		(791	)			(15,493	)		(632	)		(16,126	)
Net client cash flows		(1,126	)			(637	)		(294	)		(505	)			262			(394	)		(36	)			(2,729	)		(142	)		(2,871	)
Market appreciation / (depreciation)		1,548				(92	)		292			1,905				1,501			5,022			(17	)			10,159			102			10,261
Realizations and distributions		-				-			-			-				-			-			-				-			-			-
Acquired & divested assets / Net transfers		(11	)			(49	)		44			(51	)			(76	)		12			11				(119	)		88			(31	)
Ending AUM	$	31,015			$	15,182		$	24,398		$	13,983			$	18,459		$	58,936		$	3,390			$	165,362		$	3,320		$	168,681
Six Months Ended June 30, 2023
Beginning AUM	$	27,892			$	15,103		$	26,353		$	10,973			$	14,160		$	46,317		$	3,663			$	144,460		$	3,302		$	147,762
Gross client cash inflows		2,858				1,728			2,060			170				936			2,739			846				11,339			472			11,811
Gross client cash outflows		(2,219	)			(2,001	)		(2,896	)		(675	)			(1,129	)		(3,421	)		(1,248	)			(13,589	)		(797	)		(14,386	)
Net client cash flows		640				(273	)		(836	)		(504	)			(192	)		(683	)		(403	)			(2,250	)		(325	)		(2,576	)
Market appreciation / (depreciation)		1,461				827			663			1,775				1,495			5,687			108				12,017			72			12,089
Realizations and distributions		-				-			-			-				-			-			(73	)			(73	)		-			(73	)
Acquired & divested assets / Net transfers		15				7			(82	)		(74	)			(71	)		55			6				(144	)		103			(42	)
Ending AUM	$	30,007			$	15,664		$	26,098		$	12,170			$	15,392		$	51,375		$	3,301			$	154,009		$	3,152		$	157,161

(1) Total AUM includes both discretionary assets under management and non-discretionary assets under advisement and excludes other assets.

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


	As of June 30,
	2024		2023
(in millions)	Amount		% of total		Amount		% of total
Investor	$	60,290		36	%	$	56,324	36	%
Institutional		42,310		25	%		40,489	26	%
Retail		66,081		39	%		60,348	38	%
Total AUM(1)(2)	$	168,681		100	%	$	157,161	100	%

(1) The allocation of AUM by distribution channel involves the use of estimates and the exercise of judgment.

(2) Total AUM includes both discretionary assets under management and non-discretionary assets under advisement and excludes other assets.

Table of Contents

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


							Separate
							Accounts and
							Other Pooled
(in millions)	Mutual Funds (1)			ETFs (2)			Vehicles (3)		Total AUM(4)
Three Months Ended June 30, 2024
Beginning AUM	$	113,897			$	5,229		$	51,217		$	170,342
Gross client cash inflows		3,553				480			2,034			6,067
Gross client cash outflows		(5,061	)			(178	)		(2,573	)		(7,812	)
Net client cash flows		(1,508	)			302			(539	)		(1,744	)
Market appreciation (depreciation)		385				(91	)		(211	)		83
Realizations and distributions		-				-			-			-
Acquired & divested assets / Net transfers		(190	)			-			190			-
Ending AUM	$	112,584			$	5,440		$	50,657		$	168,681
Three Months Ended June 30, 2023
Beginning AUM	$	103,246			$	5,555		$	44,554		$	153,356
Gross client cash inflows		3,639				175			1,908			5,722
Gross client cash outflows		(4,863	)			(421	)		(1,864	)		(7,148	)
Net client cash flows		(1,224	)			(246	)		44			(1,426	)
Market appreciation (depreciation)		3,923				(117	)		1,540			5,346
Realizations and distributions		-				-			(73	)		(73	)
Acquired & divested assets / Net transfers		(28	)			-			(13	)		(41	)
Ending AUM	$	105,916			$	5,193		$	46,052		$	157,161


							Separate
							Accounts and
							Other Pooled
(in millions)	Mutual Funds (1)			ETFs (2)			Vehicles (3)		Total AUM(4)
Six Months Ended June 30, 2024
Beginning AUM	$	108,802			$	4,970		$	47,551		$	161,322
Gross client cash inflows		7,856				930			4,468			13,255
Gross client cash outflows		(11,017	)			(627	)		(4,482	)		(16,126	)
Net client cash flows		(3,161	)			304			(14	)		(2,871	)
Market appreciation (depreciation)		7,181				124			2,956			10,261
Realizations and distributions		-				-			-			-
Acquired & divested assets / Net transfers		(238	)			43			164			(31	)
Ending AUM	$	112,584			$	5,440		$	50,657		$	168,681
Six Months Ended June 30, 2023
Beginning AUM	$	99,447			$	5,627		$	42,688		$	147,762
Gross client cash inflows		8,185				393			3,233			11,811
Gross client cash outflows		(10,269	)			(655	)		(3,463	)		(14,386	)
Net client cash flows		(2,084	)			(262	)		(230	)		(2,576	)
Market appreciation (depreciation)		8,573				(164	)		3,680			12,089
Realizations and distributions		-				-			(73	)		(73	)
Acquired & divested assets / Net transfers		(19	)			(9	)		(13	)		(42	)
Ending AUM	$	105,916			$	5,193		$	46,052		$	157,161

(1) Includes institutional and retail share classes, money market and Variable Insurance Products or VIP funds.

(2) Represents only ETF assets held by third parties. Excludes ETF assets held by other Victory Capital products.

(3) Includes collective trust funds, wrap program accounts, UMAs, UCITS, private funds and non-U.S. domiciled pooled vehicles.

(4) Total AUM includes both discretionary assets under management and non-discretionary assets under advisement and excludes other assets.

Table of Contents

June 30, 2024 AUM compared to March 31, 2024 AUM. At June 30, 2024, our total AUM was $168.7 billion, a decrease of $1.7 billion, or 1.0%, from $170.3 billion at March 31, 2024, driven by net outflows $1.7 billion.

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 our Solutions platform of $0.7 billion, $0.2 billion, $0.2 billion, $0.2 billion, and $0.2 billion, respectively.

June 30, 2024 AUM compared to December 31, 2023 AUM. Total AUM increased by $7.4 billion, or 4.6%, to $168.7 billion at June 30, 2024 compared to $161.3 billion at December 31, 2023. The increase in AUM was due to positive market action of $10.3 billion partially offset by net outflows of $2.9 billion.

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 our Solutions platform of $1.1 billion, $0.6 billion, $0.5 billion, $0.3 billion, and $0.4 billion, respectively, partially offset by net inflows of $0.3 billion in our global/non-US equity strategies.

GAAP Results of Operations

The following table presents our GAAP results of operations for the three and six months ended June 30, 2024 and 2023.


	Three Months Ended June 30,			Six Months Ended June 30,
(in thousands, except per share data)	2024			2023			2024		2023
Revenue
Investment management fees	$	173,163			$	159,410		$	342,948		$	316,246
Fund administration and distribution fees		46,458				44,816			92,530			89,300
Total revenue		219,621				204,226			435,478			405,546

Expenses
Personnel compensation and benefits		55,660				54,940			115,114			112,542
Distribution and other asset-based expenses		36,474				37,344			72,737			74,998
General and administrative		14,385				13,250			28,397			25,638
Depreciation and amortization		7,551				9,650			15,152			21,330
Change in value of consideration payable for acquisition of business		(8,200	)			1,500			4,000			8,900
Acquisition-related costs		3,049				16			4,075			18
Restructuring and integration costs		105				-			597			29
Total operating expenses		109,024				116,700			240,072			243,455

Income from operations		110,597				87,526			195,406			162,091

Other income (expense)
Interest income and other income (expense)		1,557				1,971			5,122			3,515
Interest expense and other financing costs		(16,279	)			(14,902	)		(32,765	)		(29,141	)
Loss on debt extinguishment		(100	)			-			(100	)		-
Total other income (expense), net		(14,822	)			(12,931	)		(27,743	)		(25,626	)

Income before income taxes		95,775				74,595			167,663			136,465

Income tax expense		(21,524	)			(17,924	)		(37,721	)		(30,521	)

Net income	$	74,251			$	56,671		$	129,942		$	105,944

Earnings per share of common stock
Basic	$	1.15			$	0.85		$	2.01		$	1.58
Diluted	$	1.12			$	0.83		$	1.97		$	1.53

Weighted average number of shares outstanding
Basic		64,734				66,466			64,561			66,874
Diluted		66,075				68,500			66,025			69,037

Dividends declared per share of common stock	$	0.37			$	0.32		$	0.705		$	0.64

Table of Contents

Investment Management Fees

Three months ended June 30, 2024 compared to June 30, 2023.Investment management fees increased 8.6%, or $13.8 million, to $173.2 million for the three months ended June 30, 2024 from $159.4 million for the same period in 2023 due to an increase in average AUM over the comparable period.

Six months ended June 30, 2024 compared to June 30, 2023. Investment management fees increased by $26.7 million, or 8.4%, to $342.9 million for the six months ended June 30, 2024 from $316.2 million due to same factor discussed above in the quarterly section.

Fund Administration and Distribution Fees

Three months ended June 30, 2024 compared to June 30, 2023. Fund administration and distribution fees increased by $1.6 million, or 3.7%, to $46.5 million for the three months ended June 30, 2024 compared to $44.8 million for the same period in 2023 due primarily to higher mutual fund average net assets.

Six months ended June 30, 2024 compared to June 30, 2023. Fund administration and distribution fees increased by $3.2 million, or 3.6%, to $92.5 million for the six months ended June 30, 2024 from $89.3 million for the same period in 2023 due to the same factors as discussed above in the quarterly section.

Personnel Compensation and Benefits

The following table presents the components of GAAP personnel compensation and benefits expense for the three and six months ended June 30, 2024 and 2023:


	Three Months Ended June 30,		Six Months Ended June 30,
(in thousands)	2024		2023			2024		2023
Salaries, payroll related taxes and employee benefits	$	21,248		$	22,848		$	45,724	$	47,305
Incentive compensation		24,505			21,315			48,448		43,234
Sales-based compensation(1)		5,616			5,102			11,695		10,522
Equity awards granted to employees and directors(2)		3,765			4,241			7,734		8,494
Acquisition and transaction-related compensation		526			1,434			1,513		2,987
Total personnel compensation and benefits expense	$	55,660		$	54,940		$	115,114	$	112,542

(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.

(2) 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.

Three months ended June 30, 2024 compared to June 30, 2023. Personnel compensation and benefits were $55.7 million for the three months ended June 30, 2024, an increase of $0.7 million, or 1.3%, from $54.9 million for the same period in 2023 due to an increase in incentive and sales based compensation partially offset by a decrease in salaries, payroll related taxes and employee benefits. Incentive compensation and equity awards granted to employees and directors were $24.5 million and $3.8 million, respectively, for the three months ended June 30, 2024, compared to $21.3 million and $4.2 million, respectively, for the same period in 2023. Salaries, payroll related taxes and employee benefits and sales-based compensation were $21.2 million and $5.6 million, respectively, for the three months ended June 30, 2024, compared to $22.8 million and $5.1 million, respectively, for the same period in 2023.

Six months ended June 30, 2024 compared to June 30, 2023. Personnel compensation and benefits increased by $2.6 million, or 2.3%, to $115.1 million for the six months ended June 30, 2024 from $112.5 million for the same period in 2023 due to an increase in variable costs such as incentive and sales-based compensation. Incentive compensation and equity awards granted to employees and directors were $48.4 million and $7.7 million, respectively, for the six months ended June 30, 2024, compared to $43.2 million and $8.5 million, respectively, for the same period in 2023. Salaries, payroll related taxes and employee benefits and sales-based compensation were $45.7 million and $11.7 million, respectively, for the six months ended June 30, 2024, compared to $47.3 million and $10.5 million, respectively, for the same period in 2023.

Table of Contents

Distribution and Other Asset-Based Expenses

The following table presents the components of distribution and other asset-based expenses for the three and six months ended June 30, 2024 and 2023:


	Three Months Ended June 30,		Six Months Ended June 30,
(in thousands)	2024		2023			2024		2023
Broker-dealer distribution fees	$	4,969		$	5,065		$	10,011	$	10,314
Platform distribution fees		22,287			23,067			44,415		46,190
Sub-administration		4,176			3,947			8,277		7,868
Sub-advisory		2,342			2,692			4,678		5,427
Middle-office		2,700			2,573			5,356		5,199
Total distribution and other asset-based expenses	$	36,474		$	37,344		$	72,737	$	74,998

Three months ended June 30, 2024 compared to June 30, 2023. Distribution and other asset-based expenses are primarily based on AUM. For the three months ended June 30, 2024, distribution and other asset-based expenses were $36.5 million, a decrease of $0.9 million, or 2.3%, from $37.3 million for the same period in 2023. The decrease is primarily due to lower platform distribution fees over the comparable period.

Six months ended June 30, 2024 compared to June 30, 2023.Distribution and other asset-based expenses were $72.7 million for the six months ended June 30, 2024, a decrease of $2.3 million, or 3.0%, from $75.0 million for the same period in 2023 primarily due to a decrease in the same factors as discussed above in the quarterly section.

General and Administrative

Three months ended June 30, 2024 compared to June 30, 2023.General and administrative expenses were $14.4 million for the three months ended June 30, 2024 compared to $13.3 million for the same period in 2023. The increase of $1.1 million, or 8.6%, was primarily due to an increase in technology and marketing-related expenses.

Six months ended June 30, 2024 compared to June 30, 2023. For the six months ended June 30, 2024 and 2023, general and administrative expenses were $28.4 million and $25.6 million, respectively, for a year over year increase of $2.8 million, or 10.8%. The increase was primarily due to the same factors as discussed above in the quarterly section.

Depreciation and Amortization

Three months ended June 30, 2024 compared to June 30, 2023.Depreciation and amortization decreased by $2.1 million, or 21.8%, to $7.6 million for the three months ended June 30, 2024 from $9.7 million for the same period in 2023, due to a decrease in amortization expense related to definite-lived intangible assets in connection with the USAA and NEC acquisitions.

Six months ended June 30, 2024 compared to June 30, 2023.Depreciation and amortization decreased by $6.2 million, or 29.0%, to $15.2 million for the six months ended June 30, 2024 from $21.3 million for the same period in 2023 due to the same factors as discussed above in the quarterly section.

Change in Value of Consideration Payable for Acquisition of Business

Three months ended June 30, 2024 compared to June 30, 2023.The change in value of consideration payable for acquisition of business decreased $9.7 million primarily due to a $8.2 million decrease in the fair value of contingent consideration associated with the WestEnd Acquisition for the three months ended June 30, 2024 compared to a decrease of $0.2 million for the three months ended June 30, 2023. Also contributing was a $1.7 million increase in the fair value of contingent consideration associated with the USAA AMCO Acquisition for the three months ended June 30, 2023. Refer to Note 4, Acquisitions, for further details on the fair value of contingent consideration payable.

Six months ended June 30, 2024 compared to June 30, 2023.The change in value of consideration payable for acquisition of business decreased $4.9 million as a result of an increase of $4.0 million in the fair value of the contingent consideration associated with the WestEnd Acquisition, for the six months ended June 30, 2024 compared to increases of $6.0 million and $2.9 million associated with the USAA AMCO and WestEnd Acquisitions, respectively, for the six months ended June 30, 2023. Refer to Note 4, Acquisitions, for further details on the fair value of contingent consideration payable.

Table of Contents

Acquisition-Related Costs

Three months ended June 30, 2024 compared to June 30, 2023.Acquisition-related costs were $3.0 million and $16 thousand for the three months ended June 30, 2024 and 2023, respectively. The acquisition-related costs for the three months ended June 30, 2024 related to legal and professional fees associated with the Amundi transaction.

Six months ended June 30, 2024 compared to June 30, 2023. Acquisition-related costs were $4.1 million and $18 thousand for the six months ended June 30, 2024 and 2023, respectively. The acquisition-related costs for the six months ended June 30, 2024 were related to the same factors discussed above in the quarterly section.

Restructuring and Integration Costs

Three months ended June 30, 2024 compared to June 30, 2023.Restructuring and integration costs were $0.1 million for the three months ended June 30, 2024 and were related to personnel restructuring. There were no restructuring and integration costs for the three months ended June 30, 2023.

Six months ended June 30, 2024 compared to June 30, 2023. Restructuring and integration costs were $0.6 million and $29 thousand for the six months ended June 30, 2024 and 2023, respectively. The restructuring and integration costs for the six months ended June 30, 2024 were related to the same factors discussed above in the quarterly section.

Interest Income and Other Income (Expense)

Three months ended June 30, 2024 compared to June 30, 2023.For the three months ended June 30, 2024 and 2023, interest income and other income/(expense) was income of $1.6 million and $2.0 million, respectively. The income for the three months ended June 30, 2024 and 2023 was primarily due to dividend income.

Six months ended June 30, 2024 compared to June 30, 2023. For the six months ended June 30, 2024 and 2023, interest income and other income/(expense) was income of $5.1 million and $3.5 million, respectively. The income for the six months ended June 30, 2024 and 2023 was primarily due to dividend income and an increase in the net unrealized fair value of deferred compensation plan investments.

Interest Expense and Other Financing Costs

Three months ended June 30, 2024 compared to June 30, 2023.Interest expense and other financing costs increased $1.4 million to $16.3 million for the three months ended June 30, 2024, compared to $14.9 million for the same period in 2023 due a higher average interest rate over the comparable period.

Six months ended June 30, 2024 compared to June 30, 2023. For the six months ended June 30, 2024 and 2023, interest expense and other financing costs were $32.8 million and $29.1 million, respectively. The year-over-year increase is primarily due to the same factors as discussed above in the quarterly section.

Income Tax Expense

Three months ended June 30, 2024 compared to June 30, 2023. The effective tax rate for the three months ended June 30, 2024 and 2023 was 22.5% and 24.0%, respectively. The effective tax rate for the three months ended June 30, 2024 was lower than the effective tax rate for the same period in 2023 due primarily to increased excess tax benefits on share-based compensation.

Six months ended June 30, 2024 compared to June 30, 2023. For the six months ended June 30, 2024 and 2023, the effective tax rate was 22.5% and 22.4%, respectively. Refer to Note 8, Income Taxes, for further details on the Company's income taxes.

Supplemental Non-GAAP Financial Information

We use non-GAAP performance measures to evaluate the underlying operations of our business. Due to our acquisitive nature, there are a number of acquisition and restructuring related expenses included in GAAP measures that we believe distort the economic value of our organization and we believe that many investors use this information when assessing the financial performance of companies in the investment management industry. We have included these non-GAAP measures to provide investors with the same financial metrics used by management to assess the operating performance of our Company. The non-GAAP measures we report are Adjusted EBITDA and Adjusted Net Income.

Table of Contents

The following table sets forth a reconciliation from GAAP financial measures to non-GAAP measures for the periods indicated:


	Three Months Ended June 30,			Six Months Ended June 30,
(in thousands)	2024			2023			2024		2023
Reconciliation of non-GAAP financial measures:
Net income (GAAP)	$	74,251			$	56,671		$	129,942		$	105,944
Income tax expense		(21,524	)			(17,924	)		(37,721	)		(30,521	)
Income before income taxes		95,775				74,595			167,663			136,465
Interest expense(1)		15,468				14,146			31,179			27,628
Depreciation(2)		2,252				2,296			4,521			4,267
Other business taxes(3)		414				382			783			766
Amortization of acquisition-related intangible assets(4)		5,299				7,353			10,631			17,062
Stock-based compensation(5)		940				1,538			2,267			3,542
Acquisition, restructuring and exit costs(6)		(4,520	)			2,949			10,185			11,933
Debt issuance costs(7)		874				756			1,629			1,504
Adjusted EBITDA	$	116,502			$	104,015		$	228,858		$	203,167


	Three Months Ended June 30,			Six Months Ended June 30,
(in thousands)	2024			2023			2024		2023
Reconciliation of non-GAAP financial measures:
Net income (GAAP)	$	74,251			$	56,671		$	129,942		$	105,944
Adjustments to reflect the operating performance of the Company:
i. Other business taxes(3)		414				382			783			766
ii. Amortization of acquisition-related intangible assets(4)		5,299				7,353			10,631			17,062
iii. Stock-based compensation(5)		940				1,538			2,267			3,542
iv. Acquisition, restructuring and exit costs(6)		(4,520	)			2,949			10,185			11,933
v. Debt issuance costs(7)		874				756			1,629			1,504
Tax effect of above adjustments(8)		(753	)			(3,244	)		(6,374	)		(8,701	)
Adjusted Net Income	$	76,505			$	66,405		$	149,063		$	132,050
Tax benefit of goodwill and acquired intangibles(9)	$	10,141			$	9,537		$	19,889		$	19,061

Adjustments made to GAAP Net Income to calculate Adjusted EBITDA and Adjusted Net Income, as applicable, are:

(1) Adding back interest paid on debt and other financing costs, net of interest income.

(2) Adding back depreciation on property and equipment.

(3) Adding back other business taxes.

(4) Adding back amortization expense on acquisition-related intangible assets.

(5) Adding back stock-based compensation associated with equity awards issued from pools created in connection with the management-led buyout and various acquisitions and as a result of equity grants related to the IPO.

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


	Three Months Ended June 30,			Six Months Ended June 30,
(in thousands)	2024			2023			2024		2023
Acquisition-related costs	$	3,049			$	16		$	4,075	$	18
Restructuring and integration costs		105				-			597		29
Change in value of consideration payable for acquisition of business		(8,200	)			1,500			4,000		8,900
Personnel compensation and benefits		526				1,433			1,513		2,986
Total acquisition, restructuring and exit costs	$	(4,520	)		$	2,949		$	10,185	$	11,933

(7) Adding back debt issuance costs.

(8) Subtracting an estimate of income tax expense applied to the sum of the adjustments above.

Table of Contents

(9) Represents the tax benefits associated with deductions allowed for intangible assets and goodwill generated from prior acquisitions in which we received a step-up in basis for tax purposes. Acquired intangible assets and goodwill may be amortized for tax purposes, generally over a 15-year period. The tax benefit from amortization on these assets is included to show the full economic benefit of deductions for all acquired intangible assets with a step-up in tax basis. Due to our acquisitive nature, tax deductions allowed on acquired intangible assets and goodwill provide us with a significant supplemental economic benefit.

Non-GAAP measures should be considered in addition to, and not as a substitute for, financial measures prepared in accordance with GAAP. Our non-GAAP measures may differ from similar measures at other companies, even if similar terms are used to identify these measures.

Liquidity and Capital Resources

Our primary uses of cash relate to repayment of our debt obligations, funding of acquisitions and working capital needs, repurchasing of shares and payment of dividends, which are all expected to be met through cash generated from our operations and available capital resources.

The following table shows our liquidity position as of June 30, 2024 and December 31, 2023.


	June 30,			December 31,
(in thousands)	2024			2023
Cash and cash equivalents	$	118,970			$	123,547
Accounts and other receivables		100,660				87,570
Undrawn commitment on revolving credit facility (1)		100,000				100,000
Accounts and other payables		(108,548	)			(111,933	)

(1) The balances at June 30, 2024 and December 31, 2023 represent the Company's $99.9 million revolving credit facility and a $0.1 million standby letter of credit used as collateral for THB's real estate location.

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 June 30, 2024 and December 31, 2023 (under the 2019 Credit Agreement) which had approximately $100.0 million undrawn as of June 30, 2024 and December 31, 2023. On June 7, 2024, the Company entered into the Fifth Amendment to the 2019 Credit Agreement, extending the maturity date of the $100,000,000 senior secured first lien revolving facility from July 1, 2024 to March 31, 2026, and decreasing the drawn interest rate margin by 0.50% per annum. The revolving facility otherwise remains subject to substantially the same terms as those set forth in the 2019 Credit Agreement. The Company incurred $1.0 million in upfront fees, arranger fees and other third party costs related to the Fifth Amendment to the 2019 Credit Agreement, which were recorded to revolving credit facility debt issuance cost in other assets.

2021 Debt Repricing

On February 18, 2021, the Company entered into the Second Amendment (the "Second Amendment") to the 2019 Credit Agreement with the other loan parties thereto, Barclays Bank PLC, as administrative agent, and the Royal Bank of Canada as fronting bank. Pursuant to the Second Amendment, the Company repriced the existing term loans with replacement term loans in an aggregate principal amount of $755.7 million (the "Repriced Term Loans"). The Repriced Term Loans have substantially the same terms as the previously existing term loans, including the same maturity date of July 2026, except that the Repriced Term Loans provided for a reduced applicable margin on LIBOR of 25 basis points. After the Second Amendment, the applicable margin on LIBOR under the Repriced Term Loans was 2.25%.

2021 Incremental Term Loans

On December 31, 2021, the Company entered into the Third Amendment (the "Third Amendment") to the 2019 Credit Agreement with the guarantors party thereto, Barclays Bank PLC, as administrative agent, and the lenders party thereto from time to time. Pursuant to the Third Amendment, the Company obtained incremental term loans (the "2021 Incremental Term Loans") in an aggregate principal amount of $505.0 million and used the proceeds to fund the WestEnd Acquisition and to pay fees and expenses incurred in connection therewith. The 2021 Incremental Term Loans mature in December 2028 and bear interest at an annual rate equal to, at the option of the Company, either LIBOR (adjusted for reserves and subject to a 50 basis point floor) plus a margin of 2.25% or an alternate base rate plus a margin of 1.25%.

2022 LIBOR to Term SOFR Rate Transition

Table of Contents

On September 23, 2022, the Company entered into the Fourth Amendment (the "Fourth Amendment") to the 2019 Credit Agreement to change the interest rate on the Repriced Term Loans and 2021 Incremental Term Loans from LIBOR to a rate based on SOFR plus a ten-basis point credit spread adjustment. There was no change to the applicable margin on the referenced rate as a result of the Fourth Amendment.

The LIBOR rate loans outstanding as of the Fourth Amendment's effective date continued as LIBOR rate loans until the end of their then current interest periods. The 2021 Incremental Term Loans converted into Term SOFR loans on September 30, 2022, while the Repriced Term Loans converted into Term SOFR loans on October 6, 2022. Also on October 6, 2022, the interest periods for the Repriced Term Loans and 2021 Incremental Term Loans were aligned and the three-month Term SOFR rate was elected for all the Company's term loans.

2020 Swap Transaction

In the fourth quarter of 2023, the Company monetized the gain on the floating-to-fixed interest rate swap transaction ("Swap") entered into in 2020 to effectively fix the interest rate on $450 million of its outstanding Term Loan through the Term Loan maturity date of July 2026.

The deferred gain on the termination of the Swap is being amortized on a straight-line basis through July 1, 2026 and is included in interest expense and other financing costs on the unaudited Condensed Consolidated Statements of Operations. As of June 30, 2024 and December 31, 2023, the unamortized deferred gain on Swap monetization was $33.3 million and $41.6 million, respectively, before tax.

For the three and six months ended June 30, 2023, the Company reclassified income of $4.7 million and $8.9 million, respectively, from accumulated other comprehensive income (loss) to interest expense and other financing costs on the unaudited Condensed Consolidated Statements of Operations as a result of changes in the fair value of the Swap.

Due to the termination of the Swap, there was no amount receivable from the Swap counterparty at June 30, 2024 and December 31, 2023. Refer to Note 14, Derivatives, for further information on the Swap.

Contingent Consideration

At June 30, 2024, the Company had $141.2 million in contingent consideration that is estimated to be payable over the next year and three years resulting from the WestEnd Acquisition. For the three and six months ended June 30, 2024, the Company recorded a decrease of $8.2 million and an increase of $4.0 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. In March 2024, the Company paid $80.0 million in cash to sellers for the first WestEnd earn out period payment. At June 30, 2024, the estimated fair value of the WestEnd Acquisition contingent payments was $141.2 million, and a maximum of $240.0 million in contingent consideration ($80.0 million per year) is potentially payable to sellers.

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, 2023.

Capital Requirements

Victory Capital Services is a registered broker-dealer subject to the Uniform Net Capital requirements under the Exchange Act, which requires maintenance of certain minimum net capital levels. In addition, we have certain non-U.S. subsidiaries that have minimum capital requirements. As a result, such subsidiaries of our Company may be restricted in their ability to transfer cash to their parents.

Cash Flows

The following table is derived from our unaudited Condensed Consolidated Statements of Cash Flows:


	Six Months Ended June 30,
(in thousands)	2024			2023
Net cash provided by operating activities	$	148,388			$	141,562
Net cash used in investing activities		(1,515	)			(3,922	)
Net cash used in financing activities		(151,409	)			(132,034	)

Table of Contents

Operating Activities-Cash provided by operating activities during the six months ended June 30, 2024 was $148.4 million, compared to $141.6 million of cash provided by operating activities for the same period in 2023. The $6.8 million increase in cash provided by operating activities is due to a $24.0 million increase in net income partially offset by a $16.5 million decrease in non-cash items.

Cash provided by operating activities during the six months ended June 30, 2023 was $141.6 million and comprised of $105.9 million and $54.1 million of net income and non-cash items, respectively, partially offset by $18.5 million in working capital source of cash.

Investing Activities- Cash used in investing activities during the six months ended June 30, 2024 was $1.5 million and consisted of primarily of property and equipment purchases of $0.7 million and $0.8 million of net trading activity.

Cash used in investing activities during the six months ended June 30, 2023 was $3.9 million and consisted of primarily of property and equipment purchases of $2.6 million and $1.4 million of net trading activity.

Financing Activities-Cash used in financing activities during the six months ended June 30, 2024 was $151.4 million and was mostly attributable to payment of consideration for acquisition, payment of dividends, repayment of long-term debt, repurchases of common stock, and net activity related to stock-based equity awards of $80.0 million, $46.4 million, $9.5 million, $5.1 million, and $9.6 million, respectively.

Cash used in financing activities during the six months ended June 30, 2023 was $132.0 million and was mostly attributable to repurchases of common stock, payment of dividends, and net activity related to stock-based equity awards of $79.9 million, $43.6 million, and $8.5 million, respectively.

Critical Accounting Policies and Estimates

Our consolidated financial statements and the notes are prepared in accordance with accounting principles generally accepted in the United States of America, which require the use of estimates. Actual results will vary from these estimates. A discussion of our critical accounting policies and estimates is included in Management's Discussion and Analysis of Financial Condition and Results of Operations in the Company's Annual Report on Form 10-K. A complete description of our significant accounting policies is included in our Annual Report on Form 10-K.

Table of Contents

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Market Risk

Substantially all of our revenues are derived from investment management, fund administration and distribution fees, which are primarily based on the market value of our AUM. Accordingly, our revenues and net income may decline as a result of our AUM decreasing due to depreciation of our investment portfolios. In addition, such depreciation could cause our clients to withdraw their assets in favor of other investment alternatives that they perceive to offer higher returns or lower risk, which could cause our revenues and net income to decline further.

The value of our AUM was approximately $169 billion at June 30, 2024. A 10% increase or decrease in the value of our AUM, if proportionately distributed over all of our strategies, products and client relationships, would cause an annualized increase or decrease in our revenues of approximately $89.6 million at our weighted-average fee rate of 53 basis points for the quarter ended June 30, 2024. Because of declining fee rates from larger relationships and differences in our fee rates across investment strategies, a change in the composition of our AUM, in particular, an increase in the proportion of our total AUM attributable to strategies, clients or relationships with lower effective fee rates, could have a material negative impact on our overall weighted-average fee rate. The same 10% increase or decrease in the value of our total AUM, if attributed entirely to a proportionate increase or decrease in the AUM of the Victory Funds, to which we provide a range of services in addition to those provided to institutional separate accounts, would cause an annualized increase or decrease in our revenues of approximately $101.4 million at the Victory Funds' aggregate weighted-average fee rate of 60 basis points for the quarter ended June 30, 2024. If the same 10% increase or decrease in the value of our total AUM was attributable entirely to a proportionate increase or decrease in the assets of our institutional separate accounts, it would cause an annualized increase or decrease in our revenues of approximately $69.3 million at the weighted-average fee rate across all of our institutional separate accounts of 41 basis points for the quarter ended June 30, 2024.

As is customary in the investment management industry, clients invest in particular strategies to gain exposure to certain asset classes, which exposes their investment to the benefits and risks of those asset classes. We believe our clients invest in each of our strategies in order to gain exposure to the portfolio securities of the respective strategies and may implement their own risk management program or procedures. We have not adopted a corporate-level risk management policy regarding client assets, nor have we attempted to hedge at the corporate level or within individual strategies the market risks that would affect the value of our overall AUM and related revenues. Some of these risks, such as sector and currency risks, are inherent in certain strategies, and clients may invest in particular strategies to gain exposure to particular risks. While negative returns in our strategies and net client cash outflows do not directly reduce the assets on our balance sheet (because the assets we manage are owned by our clients, not us), any reduction in the value of our AUM would result in a reduction in our revenues.

Exchange Rate Risk

A portion of the accounts that we advise hold investments that are denominated in currencies other than the U.S. dollar. To the extent our AUM are denominated in currencies other than the U.S. dollar, the value of that AUM will decrease with an increase in the value of the U.S. dollar or increase with a decrease in the value of the U.S. dollar. Each investment team monitors its own exposure to exchange rate risk and makes decisions on how to manage that risk in the portfolios they manage. We believe many of our clients invest in those strategies in order to gain exposure to non-U.S. currencies, or may implement their own hedging programs. As a result, we generally do not hedge an investment portfolio's exposure to non-U.S. currency.

We have not adopted a corporate-level risk management policy to manage this exchange rate risk. Assuming 11% of our AUM are invested in securities denominated in currencies other than the U.S. dollar and excluding the impact of any hedging arrangement, a 10% increase or decrease in the value of the U.S. dollar would decrease or increase the fair value of our AUM by approximately $1.9 billion, which would cause an annualized increase or decrease in revenues of approximately $9.9 million at our weighted-average fee rate for the business of 53 basis points for the quarter ended June 30, 2024.

Interest Rate Risk

Interest rate risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market interest rates. On March 27, 2020, the Company executed the Swap, a floating-to-fixed interest rate swap transaction, to effectively fix the interest rate at 3.465% on $450 million of its outstanding Term Loan through the Term Loan maturity date of July 2026. On February 18, 2021, pursuant to the Second Amendment, the Company lowered the spread on the Term Loan by 0.25% resulting in a new fixed rate of 3.215% on the $450 million of Term Loan subject to the Swap. On September 26, 2022, the Company and the Swap counterparty executed an amendment to the Swap to update LIBOR conventions to SOFR conventions and to modify the fixed rate for the change from three-month LIBOR to three-month Term SOFR effective on October 6, 2022. On October 30, 2023, the Company monetized the gain on the Swap and entered into

Table of Contents

an agreement to terminate the Swap, which was effective on October 30, 2023. Refer to Note 14, Derivatives, for further information on the Swap. At June 30, 2024, we were exposed to interest rate risk as a result of the amounts outstanding under the 2019 Credit Agreement, as amended. Refer to Note 9, Debt, for a description of the amounts outstanding as of such date and the applicable interest rate.

Item 4. Controls and Procedures

Disclosure Controls and Procedures

We maintain disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act, that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms, and that such information is accumulated and communicated to our management, including our principal executive and principal financial officers, as appropriate, to allow for timely decisions regarding required disclosure.

Our management, including our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures (as such term is defined in Rule 13a-15(f) and 15d-15(f) under the Exchange Act) at June 30, 2024. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures are effective.

Changes in Internal Control over Financial Reporting

There has been no change in the Company's internal control over financial reporting during the Company's most recent fiscal quarter, that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting.

Table of Contents

PART II-OTHER INFORMATION

Item 1. Legal Proceedings

From time to time, the Company may be subject to legal proceedings and claims in the ordinary course of business. The Company is not currently a party to any material legal proceedings.

Item 1A. Risk Factors

For a discussion of our potential risks and uncertainties, see the risk factors previously disclosed in our Annual Report on Form 10-K for the year ended December 31, 2023 as filed with the SEC and the information contained in this report. The declaration, payment and determination of the amount of our quarterly dividends may change at any time. In making decisions regarding our quarterly dividends, we consider general economic and business conditions, our strategic plans and prospects, our businesses and investment opportunities, our financial condition and operating results, working capital requirements and anticipated cash needs, contractual restrictions (including under the terms of our 2019 Credit Agreement as amended) and legal, tax, regulatory and such other factors as we may deem relevant. There have been no material changes to the risk factors in our Annual Report on Form 10-K for the year ended December 31, 2023.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

In December 2023, the Company's Board of Directors approved a new share repurchase program (the "2024 Share Repurchase Program") authorizing the repurchase of up to $100.0 million of the Company's Common Stock through December 31, 2025. Under the 2024 Share Repurchase Program, which took effect in December 2023, the Company may purchase its shares from time to time in privately negotiated transactions, through block trades, pursuant to open market purchases, or pursuant to any trading plan that may be adopted in accordance with Rule 10b5-1 of the SEC. The amount and timing of purchases under the 2024 Share Repurchase Program will depend on a number of factors including the price and availability of the Company's shares, trading volume, capital availability, Company performance and general economic and market conditions. The 2024 Share Repurchase Program can be suspended or discontinued at any time.

No shares were repurchased by the Company during the three and six months ended June 30, 2024. For the same periods in 2023, the Company repurchased 1.4 million and 2.4 million, respectively, shares of Common Stock at a total cost of $44.5 million and $77.4 million, which included $0.2 million and $0.6 million of excise taxes payable on shares repurchased, for an average price of $32.25 and $32.09 per share.

As of June 30, 2024, $95.2 million was available for future repurchases under the 2024 Share Repurchase Program, and a cumulative total of 11.3 million shares of Common Stock had been repurchased under programs authorized by the Company's Board of Directors at a total cost of $295.8 million for an average price of $26.26 per share.

The following table sets out information regarding purchases of equity securities by the Company for the three months ended June 30, 2024.


							Approximate Dollar Value
	Total Number of					Total Number of Shares of	That May Yet Be Purchased
	Shares of		Average Price			Stock Purchased as Part of	Under Outstanding
	Common Stock		Paid Per Share			Publicly Announced	Plans or Programs
Period	Purchased		of Common Stock			Plans or Programs	(in millions)
April 1-30, 2024		-		$	-		-	$	95.2
May 1-31, 2024		-			-		-		95.2
June 1-30, 2024		-			-		-		95.2
Total		-		$	-		-

Item 3. Defaults Upon Senior Securities

None

Table of Contents

Item 4. Mine Safety Disclosures

Not applicable

Item 5. Other Information

None of the Company's directors or officers adopted, modifiedor terminateda Rule 10b5-1 trading arrangement or a non-Rule 10b5-1 trading arrangement during the Company's fiscal quarter ended June 30, 2024, as such terms are defined under Item 408(a) of Regulation S-K.

Item 6. Exhibits

EXHIBIT INDEX



Exhibit No.		Description
31.1		Certification of the Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2		Certification of the Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1		Certification of Principal Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2		Certification of Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101		The following information formatted in iXBRL (Inline eXtensible Business Reporting Language): (i) Unaudited Condensed Consolidated Balance Sheets as of June 30, 2024 and December 31, 2023, (ii) Unaudited Condensed Consolidated Statements of Operations for the three and six months ended June 30, 2024 and 2023, (iii) Unaudited Condensed Consolidated Statements of Comprehensive Income for the three and six months ended June 30, 2024 and 2023, (iv) Unaudited Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2024 and 2023, (v) Unaudited Condensed Consolidated Statements of Changes in Stockholders' Equity for the three months ended March 31, 2024 and 2023 and the three months ended June 30, 2024 and 2023 and, (vi) Notes to Unaudited Condensed Consolidated Financial Statements for the six months ended June 30, 2024 and 2023.
104		Cover Page Interactive Data File (embedded within the Inline XBRL document)

Table of Contents

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized on this 9thday of August, 2024.


VICTORY CAPITAL HOLDINGS, INC.


By:	/s/ MICHAEL D. POLICARPO
	Name:	Michael D. Policarpo
	Title:	President, Chief Financial Officer and Chief Administrative Officer

Sharing and Personal Tools

Please select the service you want to use: