Q1 2025 Victory Capital Holdings Inc Earnings Call
Good morning, and welcome to victory Capital's first quarter 2025 earnings conference call.
Speaker Change: All callers are on a listen only mode. Following the company's prepared remarks, there will be a question and answer session. I will now turn the call over to Mr. Matthew Dennis Chief of staff and director of Investor Relations. Please go ahead Mr. Dennis.
Matthew Dennis: Thank you.
Speaker Change: I turn the call over to David Brown, I would like to remind you that during today's conference call. We may make a number of forward looking statements victory capital's actual results may differ materially from these statements. Please refer to our SEC filings for a list of some of the risk factors that may cause actual results to differ materially.
Matthew Dennis: Really from those expressed on today's call.
Matthew Dennis: Victory capital assumes no duty and does not undertake any obligation to update any forward looking statements.
Matthew Dennis: Our press release, which was issued after the market closed yesterday disclose both GAAP and non-GAAP financial results. We believe the non-GAAP measures enhance the understanding of our business and our performance reconciliations between these non-GAAP measures and the most comparable GAAP measures are included in tables that can be.
Matthew Dennis: Found in our earnings press release and in the slides accompanying this call both of which are available on the Investor Relations section of our website at IR Dot <unk> dot.
Matthew Dennis: Dot com.
Speaker Change: It is now my pleasure to turn the call over to David Brown, Chairman and CEO David.
Speaker Change: Thanks, Matt Good morning, and welcome to victory Capital's first quarter 2025 earnings call.
Speaker Change: I'm joined today by Michael <unk>, our President Chief financial and administrative officer, as well as Matt Dennis our chief of staff and director of Investor Relations.
Speaker Change: I will start today with an overview of our first quarter results then I'll provide an update regarding the closing and integration of the Monday transaction.
Speaker Change: After that I will turn the call over to Mike to review the financial results in greater detail.
Speaker Change: Following our prepared remarks, Mike, Matt and I will be available to answer your questions.
Speaker Change: The quarterly business overview begins on slide five.
Speaker Change: We ended March with $171 billion of total client assets that was down slightly from the start of the year and average AUM was approximately 1% lower versus the fourth quarter.
Speaker Change: Gross sales improved for a third consecutive quarter and increased 41% from the last quarter, reaching nine 3 billion and was the highest level of quarterly gross sales in three years long term net flows also improved for the second quarter in a row.
Speaker Change: Net flows were negatively impacted by two large redemptions totaled $2 7 billion.
Speaker Change: Which were onetime in nature without this our net flows would have flipped to positive this quarter.
Speaker Change: We view the underlying activity around flows is extremely healthy and believe these two redemption should not distort the continuous progress we are making around our organic growth profile.
Speaker Change: A good example of this progress as we continued to generate strong sales of our Etfs.
Speaker Change: We highlighted the history of our ETF platform on our last call.
Speaker Change: And by the end of the first quarter, our total ETF AUM increased to more than $13 billion.
Speaker Change: This was a 28% increase during the quarter and was up 67% versus the same time last year.
Speaker Change: Looking ahead, we see the momentum continuing with our current product lineup.
Speaker Change: We also have several ETF launches planned for 2025 and are continuing to invest in resources dedicated to accelerating our momentum on this platform.
Speaker Change: Stepping back and looking at results on a year over year basis, we achieve wider margins along with higher revenue and earnings on both a GAAP and non-GAAP basis.
Speaker Change: Adjusted earnings per diluted share with tax benefit was $1 36 per share, which was the second highest quarterly EPS in company history, and a record high for any first quarter period.
Speaker Change: Adjusted EBITDA was $116 million and adjusted EBITDA margin remained very strong at 53%.
Speaker Change: We continue to strategically invest in all distribution channels.
Speaker Change: With our enhanced scale as a result of the Monday acquisition, we are increasing investments in areas to enhance our organic growth.
Speaker Change: In addition to more salespeople in the field selling we're significantly increasing our investment in data technology marketing and intermediary partnerships.
Speaker Change: Our balance sheet continued to strengthen during the quarter and our leverage ratio improved significantly following the transaction's closing on April one given that we brought on a sizeable amount of earnings with no additional debt. This.
Speaker Change: This greatly increases our financial flexibility and enables us to act on additional strategic growth opportunities, which we believe is the best use of shareholder capital ongoing.
Speaker Change: Ongoing diligence activities are progressing quickly and we are very encouraged by some of our discussions.
Speaker Change: During the quarter, we accumulated cash increased our quarterly dividend again and have the entire $200 million share repurchase plan still available for us, which we will execute on in an opportunistic way.
Speaker Change: On slide seven we highlight the results of our acquisition and strategic partnership with the Monday.
Speaker Change: Upon closing we are much more scaled diversified and better positioned organization for the long term.
Speaker Change: With assets of just over $286 billion as of April one.
Speaker Change: Our fixed income AUM doubled as a percentage of our total assets from 14% to 28%.
Speaker Change: We have also further diversified our investment vehicles with $26 5 billion of.
Speaker Change: Of assets under management and usage.
Speaker Change: We plan to launch several vintage victory strategies and this vehicle wrapper that are designed to be distributed to investors outside of the U S.
Speaker Change: The proportion of retail assets under management in our channel mix Rose and we also now have $44 billion of assets under management sourced from clients outside of the U S representing 15% of assets under management compared with less than 5% previously.
Speaker Change: Last month, we increased our net expense synergy projections to a total of $110 million and had $50 million of that goal achieved as of closing.
Speaker Change: We expect another $50 million by April one 2026, and much of that coming before the end of 2025.
Speaker Change: The Monday U S business. We acquired has continued to perform exceptionally well generating positive net long term flows of $1 7 billion in the first quarter of 2025, which as a reminder is not included in our numbers given we did not close the transaction until April one.
Speaker Change: The investment team now branded pioneer investments generated excellent investment performance on behalf of clients for the first quarter of 2025.
Speaker Change: As of March 31, more than 74% of their mutual fund assets under management had either a four or five star Morningstar rating.
Speaker Change: Turning to slide eight our U S distribution organization is positioned well for consistent organic growth as we move forward.
Speaker Change: We have substantially augmented our institutional and intermediary sales forces with additional sales professionals, allowing us to provide enhanced coverage across the U S market.
Speaker Change: In addition, we've added marketing and other sales related resources to further support growth.
Speaker Change: When it comes to data we are now able to benefit more broadly from data investments we are making these.
Speaker Change: These investments will now be used by our larger sales force enhancing the results we are seeking to achieve.
Speaker Change: We are also leveraging existing intermediary platform relationships with a broader product set for example.
Speaker Change: Monday U S had partner status relationships with certain intermediary platforms and we are now a benefactor of those which will give us the opportunity to add vintage victory products on these platforms.
Speaker Change: Outside of the U S. We now have clients in more than 60 countries and our strategies are currently available for sale would be our Mondays vast global distribution network.
Speaker Change: This includes sizable distribution partners within Europe, and <unk> in Asia and India.
Speaker Change: During the closing process together with a Monday distribution team.
Speaker Change: Identified several initial vintage victory products to launch in the UCITS format and other vehicle wrappers for sales by Monday's Global's distribution sales force outside of the U S. We are expeditiously working through the regulatory and registration process to get these products launched in.
Speaker Change: In addition, we are utilizing our victory shares ETF platform to develop Etfs for the pioneer investment franchise. As many of you are aware pioneer has never had any of their strategies available in an ETF vehicle.
Speaker Change: Overall, we.
Speaker Change: We have never been so well positioned for organic growth and look forward to reporting on our progress.
Speaker Change: Moving to slide 10, our investment performance remains strong with 67% of our assets under management in mutual funds and Etfs, earning four or five star overall ratings by Morningstar for the period ending on March 31.
Speaker Change: This is broadly diversified encompassing numerous distinct products.
Speaker Change: Over the key three and five year periods, 64% and 65% of our total assets under management outperformed their respective benchmarks.
Speaker Change: We were also recognized during the first quarter with a 2025 U S.
Speaker Change: EG Lipper Fund awards based on risk adjusted returns.
Speaker Change: These awards represented several categories and performance over various time periods and are a testament to our investment professionals and what we strive to deliver for clients every day.
Speaker Change: With that I will turn the call over to Mike to go through the quarterly results in greater detail Mike.
Mike: Thanks, Dave and good morning, everyone.
Speaker Change: Our financial results review begins on slide 12.
Speaker Change: Revenue for the first quarter came in at $219 6 million.
Speaker Change: Which was down approximately 5% from the fourth quarter as a result of slightly lower average AUM fewer days in the quarter as well as product vehicle and channel mix shift year over year revenue earnings adjusted EBITDA and adjusted EBITDA margin were all higher in this year's first quarter versus last year.
Speaker Change: Adjusted net income with tax benefit per diluted share of $1 36.
Speaker Change: In the quarter was our second highest of all time.
Speaker Change: We ended March with $176 million in cash, which was up $49 million from yearend.
Speaker Change: At quarter end, our net leverage ratio was unchanged at one seven times.
Speaker Change: During the first quarter, we returned $39 million to shareholders. Additionally, the board authorized a cash dividend increased to 49 per share payable on June 25 to shareholders of record at the close of business on June 10th.
Speaker Change: We would like to note here that going forward, we will continue to review our dividend every quarter with our board, but anticipate moving back to an annual increase cycle with our first quarter results.
As expected during April sufficient consents were received from pioneer clients.
Speaker Change: <unk> in a post closing adjustment whereby we will issue an additional $5 4 million shares to a Monday.
Speaker Change: This will bring their total diluted equity interest up to 26, 1% with a four 9% voting interest.
Speaker Change: Owing to the transaction our diluted share count will increase to approximately $88 3 million shares.
Speaker Change: Turning to slide 13.
Speaker Change: Total client assets declined by less than 3% during the quarter driven primarily by market action. Our AUM continues to be diversified from both a distribution channel perspective, as well as by Investor type within each channel and by asset class and investment vehicle.
Speaker Change: As mentioned on our prior call and beginning next quarter, we will.
Speaker Change: A new category to this chart to illustrate the non U S client portion of our total AUM.
Speaker Change: As a result of the Monday transaction, we begin the second quarter with 44 billion of AUM from clients outside of the U S.
Speaker Change: Having a significant portion of AUM from investors outside the U S provides another dimension of diversification for our business.
Speaker Change: On slide 14, we cover long term asset flows.
Speaker Change: 2025 is off to a strong start.
Gross flows were higher during the quarter.
Speaker Change: Increasing by 41% over the prior quarter and 33% from Q1 2024.
Speaker Change: RF global and victory income investors have seen strong activity given their strong investment performance and asset classes they invest in.
Speaker Change: We're continuing to see great investor interest in our Etfs, which are active and rules based and carrying active type investment advisory fee for such products and also have strong margins.
Speaker Change: Through mid March we were net flow positive for the quarter.
Speaker Change: Had two large redemptions totaling approximately $2 $7 billion that more than offset the positive net flows up to that point.
Speaker Change: Despite these onetime items, our underlying positive flow momentum is strong and these redemptions should not take away from that point we.
Speaker Change: We are encouraged by the trajectory, we're on particularly given our newly enlarged sales force and the added resources. We are dedicating to distribution efforts, while also adding the pioneer franchise products to our offerings are.
Speaker Change: Our won but not yet funded pipeline remains sizable and deep from a product franchise and channel perspective.
Speaker Change: Finally pioneer investments products generated positive long term net flows of $1 $7 billion during the first quarter and that momentum has continued.
Speaker Change: Slide 15 shows the sequential revenue over the past four quarters.
Speaker Change: Our average fee rate was 51 two basis points in the period.
Speaker Change: This is within our expected range, but the decrease from prior quarter, primarily attributed to product vehicle and channel mix shift.
Additionally, lower average AUM from negative market action in the first quarter and two fewer days in the quarter.
Speaker Change: So impacted total revenue.
Speaker Change: Keep in mind as an organization our focus is on margins, while our fee rate will fluctuate from quarter to quarter.
Speaker Change: On slide 16, we detail our expenses for the quarter.
Speaker Change: Total GAAP expenses were $138 6 million in the first quarter.
Speaker Change: The uptick in GAAP expenses is due to higher acquisition restructuring and integration costs from the Monday transaction.
Speaker Change: Which were offset by lower distribution and other AUM based expenses, what's calibrated with lower average AUM for the quarter.
Speaker Change: On a cash basis, our compensation expense was 24, 3%, which is in line with our guidance and it's inclusive of seasonally higher payroll tax and employee benefits that reset at the start of each year.
Speaker Change: On slide 17, we highlight our non-GAAP metrics, we reported $1 36, adjusted net income with tax benefit per diluted share.
Speaker Change: Adjusted EBITDA, and adjusted EBITDA margin or $116 4 million and 53% respectively.
Speaker Change: These results include the impact of accelerated payroll tax and benefits that are typical for the first quarter.
Speaker Change: And I would highlight our EBITDA margin expanded 90 basis points from the first quarter of 2024.
Speaker Change: Over the next several quarters, we expect to see our adjusted EBIT margin declined slightly from its current level as we continue with our integration work and achieve our full net expense synergy target of $110 million.
Speaker Change: Once fully integrated we anticipate no change in our long term guidance of 49% margins.
Speaker Change: Finally, turning to slide 18, we generated $81 million in cash from operations during the quarter and our net leverage ratio remained steady at one seven times.
Speaker Change: We have positioned the balance sheet well as we entered Q2.
Speaker Change: We ended the period with $176 million of cash and post the Monday transaction on April one our leverage ratio is in the low ones.
Speaker Change: Interest expense declined for the second consecutive quarter as our interest rate declined to four 9% inclusive of the benefit from the interest rate hedge we crystallized in the fourth quarter of 2023.
Speaker Change: In the first quarter of 2020 for our interest rate was above 6%.
Speaker Change: So we have seen our quarterly interest expense declined by more than $3 million in the past year.
Speaker Change: Our $100 million credit facility remains undrawn.
Speaker Change: That concludes our prepared remarks, I will now turn it over to the operator for questions.
Speaker Change: At this time I would like to remind everyone in order to ask a question Chris Star then the number one on your telephone keypad.
Speaker Change: I will pause from all Mr. Compile the Q&A roster.
Speaker Change: Our first question comes from the line of Ken Worthington with JP Morgan. Please go ahead.
Michael Cho: Hi, Good morning, guys. This is Michael Cho in for Ken Thanks for taking my question.
Michael Cho: Wanted to start on kind of the top line here you called out the development of a number of new system to distribute.
Speaker Change: Victor any strategy outside the U S and you also talked about maybe considering.
Michael Cho: Pioneer Etfs.
Michael Cho: Going forward as well and so I was hoping you can maybe touch on maybe the <unk>.
Michael Cho: Of these prospective rollouts and maybe the prioritization if any of the product lineup that you see out there.
Michael Cho: If there is any strategies that you think might have more considered.
Michael Cho: Adoption.
Michael Cho: Maybe some of the others.
Michael Cho: Hey, Michael.
Speaker Change: How are you it's Mike Thanks for the question, Yes, I think as we said in the prepared remarks, we have been working with the distribution for us at a Monday from a global perspective to identify products that are vintage victory that we think we will have success outside the U S.
Michael Cho: And we've spent time with them.
Michael Cho: Formulating kind of a plan with respect to the product development there'll be a handful of UCITS that we will work with them to create and theyre kind of in that registration phase right now and would expect that there'll be launched towards the back half of 2025 and.
Michael Cho: And as we think about the opportunity from which products.
Michael Cho: Really if you look at the product set that victory has in some of the opportunities that.
Michael Cho: Werent fulfilled if you will by the existing pioneer product set.
Michael Cho: There is some small and mid cap products from a U S. Domestic perspective that we think will play very well there.
Michael Cho: In addition, we've got some complementary fixed income offerings.
Michael Cho: Again, we think will play very nicely in the UCITS offerings for Monday.
Michael Cho: And then there is also some pretty strong performers that we have in the global equity space that again.
Michael Cho: We think will play very nicely in the UCITS offerings outside the U S.
Michael Cho: And so what we've done over the last several months is really work on education of the victory story education of of some of those products and franchises that manage those existing offerings here in the U S.
Michael Cho: And working to develop that rollout plan from a regulatory perspective to create those UCITS and.
Michael Cho: In addition, all.
Michael Cho: All of our products that all the vintage victory products are available institutionally outside the U S and again, we're working on education.
Michael Cho: On.
Michael Cho: Our Monday global distribution sales force those products are available today, there is no structure needed for a large institutional clients to access those and we've had a number of conversations really across both the existing active products that we have in some of the ETF offerings and so we will see momentum there is.
Michael Cho: Well as we move forward through 2025 and are excited about the opportunity set from the feedback that we've heard.
Michael Cho: To date, so again, we're just getting going on that but again as we think about it we see a tremendous opportunity in the back half of 2025 as those structured products or co mingled vehicles are created.
Michael Cho: And as we see momentum on the institutional side of the business.
Speaker Change: Great. Thanks, Matt appreciate all that color.
Michael Cho: If I could just follow up on.
Michael Cho: On the margin and expense side, I mean victory margin trajectory has been solid for some time now.
Michael Cho: You noted some initial margin headwind from pioneer.
Michael Cho: Also increase in any targets.
Michael Cho: Clinton is 53% margins and so I recognize you made a little bit of a commentary in the prepared remarks on near term margins, but.
Mike: Hi, Mike.
Mike: Plus out all a bit more color in terms of how that trajectory might evolve near firm relative to victory is 49% longhorn margin target.
Mike: Yes, good question and thanks for recognizing the prepared remarks on that I think youre right. We did we did publish 53% margins here in the first quarter, we have not changed our long term margin guidance of 49% I think we have continued to say that we want to have the flexibility to make investments in the business.
Mike: The M&A transaction that we did with Monday.
Mike: It really provides a significant opportunity to make some of those investments and so the net expense synergies of $110 million that we referenced and confirms really includes some additional investments that we want to make Dave highlighted a number of areas and distribution that we're making investments and we think those will pay off longer term.
Mike: But as we think about the margin profile going forward.
Mike: Hence synergies will take it.
Mike: Year to two years to recognize all $110 million. We mentioned, we had about $50 million as of closing we will have another $30 million over the next six months.
Mike: <unk> $100 million in total in the first 12 months of ownership and then the remaining $10 million to get to 110 over the two years post close. So if you look logically at some of that math as we face some of that and theres going to be some integration work in some different areas over the next several quarters.
Mike: That will see a small.
Mike: Decline in a material decline in our margins as we work through some of those integration efforts.
Mike: Again, I think we're still.
Mike: Bullish on the 49% long term.
Mike: As you mentioned, we produced well above that over the last several quarters, but any decline in the short term until we complete the integration will be immaterial to the margins going forward.
Mike: Great. Thank you so much.
Alexander: Our next question comes from the line of Alexander <unk> with Goldman Sachs. Please go ahead.
Mike: Yeah.
Speaker Change: Hey, good morning, most of Friday.
Speaker Change: Maybe just building on that last question around expense trajectory.
Speaker Change: You mentioned increased pace of investments I.
Speaker Change: I was hoping you can just provide us with sort of an all in expense growth algorithm from here.
Speaker Change: With a monkey now all in the past I think victory quite a variable expense model. So curious kind of to what extent does integrating with the changes that kind of what's the mix between fixed and variable expense base from here and at what pace. The fixed piece is likely to grow over time as you kind of pieces of the series.
Mike: Hey, Alex its Mike good morning.
Alex: Good question I think with respect to victories operating model there will be no change. So as we think about the integration of the pioneer investments franchise in the Monday U S business.
Mike: Fifth.
Mike: Very well into the existing operating model.
Mike: The pioneer investments team will be on a revenue share.
Mike: Maintain a single operating platform.
Mike: We maintain a centralized distribution sales force selling all of the product that victory has.
Mike: So there really is no change in the operating model for victory post the completion of the integration and so as you think about the model, we've been pretty pretty clear that greater than two thirds of our expenses are variable we expect that to continue as we move forward.
Mike: No disruption in that as we.
Mike: We think about how we're operating the business.
Mike: We've got a highly scaled middle and back office.
Mike: That is a variable cost we've got distribution in other AUM expenses again that are tied to the AUM and revenue of the business and then the compensation.
Mike: The cash compensation will continue to be variable as a component of revenue.
Mike: As as it has in the past so.
Mike: We really see no difference in the expense makeup going forward the scale will obviously increase as the business and the AUM and the revenue have increased but there really is no significant change from a modeling perspective with greater than two thirds of the expense being variable and then the other items being fixed components around some of the G&A.
Mike: Okay, Great and then Dave you mentioned.
Mike: The balance sheet capacity is obviously improved significantly with the deal as your leverage level is quite low and it sounds like the deal pipeline remains quite active maybe.
Mike: Maybe just give us a bit of a mark to market in the state of affairs and kind of how your.
Mike: Acquisition pipelines have evolved over the last six to nine months since you announced them on video.
Mike: And also the composition of what's more probable either in terms of asset classes or size.
Mike: Thanks.
Mike: Sure.
Mike: Alex.
Speaker Change: Let me start off with capacity to do a transaction.
Speaker Change: With the close what we've done is we brought earnings on and we have not.
Speaker Change: Brought on additional debt so our leverage level has reduced quite significantly.
Speaker Change: We have a lot of cash on our balance sheet as you can see at the end of the quarter and we are in as good a position as we've ever been to really execute on a sizable transaction.
Speaker Change: And that's by design.
Speaker Change: Our discussions have been very productive.
Speaker Change: We are really excited about the opportunities we're seeing.
Speaker Change: And we are leaning towards larger scale opportunities.
Speaker Change: To continue to keep our business competitive and be ahead of the curve.
Speaker Change: I would not be surprised.
Speaker Change: For 2025 event for us from another acquisition perspective at least announcing.
Speaker Change: That's what we're planning for our balance sheet is ready for it obviously you can't plan the timing of a transaction, but based on discussions and our capabilities.
Speaker Change: To execute I would anticipate something in the in the short or medium term as opposed to a longer term perspective, assuming markets are.
Speaker Change: Come in.
Speaker Change: The environment is conducive, which we are encouraged by what we're seeing lately.
Speaker Change: As far as asset classes, and what type of acquisitions.
Speaker Change: We always start off with does the acquisition make our company better does it fit culturally.
Michael Cho: Does it include investment excellence, so we always lead with those attributes in our future acquisitions will be no different I think as Mike talked about in the last question that he answered about keeping the integrity of our model around the expense infrastructure around around one integrated company.
Michael Cho: That's really important to us we think that's part of what has made our acquisitions successful in the past and we anticipate keeping that model intact.
Michael Cho: Okay, great. Thank you.
Speaker Change: Our next question comes from the line of Randy Binner with B Riley. Please go ahead.
Randy Binner: Oh good morning, Thank you.
Randy Binner: I have a couple.
Randy Binner: I think kind of get to how the platform with a Monday.
Randy Binner: Performs from a kind of growth in flows perspective, if markets remain volatile.
Randy Binner: First one is on fixed income and solutions.
Randy Binner: I think the flows in the first quarter were kind of like kind of flat and then offshore solutions and Alex can generally expect those categories to do.
Randy Binner: You better in volatile markets. So that is that the right way to think of it and can you provide any kind of glimpse or.
Randy Binner: Update on how those types of strategies performed in this kind of.
Randy Binner: Pretty significant v-shaped market, we've had so far since the early April.
Randy Binner: Yes.
Dave: So it's Dave.
Randy Binner: Say.
Randy Binner: Our platform now going forward from a fixed income perspective given.
Randy Binner: Pioneers capabilities around fixed income has expanded.
Randy Binner: So we now have our victory income investors fixed income platform and we have the pioneer investments fixed income platform.
Randy Binner: We have excellent performance and it really widened and deepens our fixed income capabilities. So in the environment. We're in today.
Randy Binner: Think we're really well positioned.
Randy Binner: To grow our business there and if you looked at the first quarter for pioneer they had positive net flows and a good amount of those were in the fixed income portion of their business and so we're excited about that given we have a wider and deeper offering.
Randy Binner: The victory income investors has ETF.
Randy Binner: Etfs.
Randy Binner: Which sell really well in this environment.
Randy Binner: So we continue to have that and we will.
Randy Binner: Look at launching fixed income Etfs for pioneer as well so.
Randy Binner: So I would imagine that when you think about the fixed income platform for all of victory, we're very well positioned and better positioned today than we were before the close as far as solutions.
Randy Binner: A lot of the growth there youre seeing is through the ETF platform. The victory shares ETF platform, we have quite a few different offerings. There are free cash flow series with a few etfs have grown very nicely. We also have some other etfs that are developed have been developed by our solutions team.
Randy Binner: That continues to be in demand.
Randy Binner: And so when we look at that and we look at that going forward again, those are really nice solutions for volatile markets and then as.
Randy Binner: As markets may be come down moving forward. We also have other products off of this solutions platform off of our equities platform, which we think are really well positioned to satisfy investors' needs.
Randy Binner: And I think.
Randy Binner: In our prepared remarks, I think there is a tone around an excitement to have a platform to potentially grow organically.
Randy Binner: We saw some really nice growth in the first quarter, both through victory and also through pioneer and we think that will continue going forward with just a really deep product set but also in a large sales force.
Randy Binner: Okay, that's great.
Speaker Change: Is there is there any glimpse you can give us on kind of how the stability of those two areas.
Randy Binner: With the volatility in April that flows to hold up better there.
Randy Binner: Were they were they more stable than a lot of your equity strategies equity mutual funds.
Randy Binner: I wouldn't say more stable or less stable I think they've performed as expected.
Randy Binner: Nothing out of the ordinary.
Randy Binner: And as I think we look forward.
Randy Binner: I think investors have been pretty calm during some of the volatile times at least on our platform. So there's been really nothing out of the ordinary either way.
Alright ill leave it there. Thanks, thanks for the responses I appreciate it sure.
Randy Binner: Okay.
Speaker Change: Our next question comes from the line of Craig.
Speaker Change: <unk> with Bank of America. Please go ahead.
Speaker Change: Good morning. This is <unk> on for Craig on the call you mentioned two large redemptions of the $2 $7 billion that are onetime in nature and the continued expense synergies that youre seeing just in thinking about the other side have you seen any dis synergy or notable redemptions from the Monday U S acquisition specifically.
Speaker Change: Good morning, Yes, we did note that there were two.
Speaker Change: Sizable one time outflows in the first quarter those were on the victory platform.
Speaker Change: We believe very isolated to particular client events.
Speaker Change: With respect to dis synergies no we've not seen.
Speaker Change: Really any dis synergies I think as we went through the process.
Speaker Change: And the acquisitions that we do you have a client consent process and so all of the clients that have joined as part of victory have consented and it's almost a checkpoint for them as you think about it. So we have not seen any dis synergies from a revenue or a distribution perspective actually quite the opposite.
Speaker Change: I think as Dave highlighted we've made more investments.
Speaker Change: In distribution, we have expanded the platform and we're having more discussions today across the entire product scope.
Speaker Change: And different regions globally and different.
Speaker Change: Partners on the intermediary side and in different vehicles that really have have driven.
Speaker Change: And the opportunity set that we think as Dave mentioned, just now as exciting as what we've seen.
Speaker Change: And I think it's definitely.
Speaker Change: Very.
Speaker Change: Telling that the pioneer investments business was net flow positive as we mentioned in the first quarter. So.
Speaker Change: That obviously with knowledge that the transaction was occurring and they were positive in all of 2024 as well. So we think the combined business going forward has resonated well from a market perspective, and a client perspective and are excited about the opportunities that lay ahead.
Speaker Change: Great. Thank you and just as a follow up could you give us an update on western the macro backdrop has certainly evolved over the last couple of months. So what are you anticipating for net flows in the business going forward.
Speaker Change: Yes, good question.
Speaker Change: So as we mentioned.
Speaker Change: West end is net flow positive since we've acquired them. They did have some softer performance in 2024.
Speaker Change: Yes, we look at the first quarter some of the market dislocation and their positioning is actually allowed their performance to be very strong and.
Speaker Change: And so we're excited as we move forward.
Speaker Change: We see the macro backdrop with respect to clients and they're accessing different.
Speaker Change: Asset classes right now is a little bit volatile, but their performance has come back very nicely and we're excited we are continued to be very bullish on the asset classes that they manage the type of of.
Speaker Change: Models that they deliver the access to distribution I think we've said a number of times, we're doing business now on more platforms with more advisors.
Speaker Change: So.
Speaker Change: Lots of projects kind of what we think but we're excited about the opportunity set with the pickup in performance that we've seen with west end.
Speaker Change: And I would much I would add one thing Mike on that is we have a we've launched additional products off of their platform. So we've launched a number of Etfs.
Speaker Change: And we've seen growth on their Etfs and so now if youre looking to access west and you can access it through their motto delivery, but you can also access them through a number of Etfs as well.
Speaker Change: Okay.
Speaker Change: Thank you.
Speaker Change: Our next question comes from the line of Michael <unk> with Morgan Stanley. Please go ahead.
Michael Cho: Hey, good morning, Thanks for taking the question you mentioned in your prepared remarks that you are making some investments to enhance organic growth. In particular, you mentioned investments in data technology marketing I was hoping maybe you could elaborate on the steps that you're taking there the quantum of investments that you're making and how.
Speaker Change: Now you'll be measuring success.
Michael Cho: Yeah.
Michael Cho: Hi, Michael.
Michael Cho: Dave.
Michael Cho: It's a great question I appreciate you asking it.
Speaker Change: On the intermediary side for the U S.
Speaker Change: We have added a significant number of salespeople so think of them as external facing.
Speaker Change: Facing salespeople people supporting our external facing salespeople, we've added a sizable number of marketing professionals.
Speaker Change: Dedicated data professionals and then we are purchasing more.
Speaker Change: Data programs from certain platforms and we have also increased the number of partnerships.
Speaker Change: Form partnerships.
Speaker Change: We have from the past so we have made a pretty significant investment in.
Speaker Change: And really intermediary distribution all of those numbers are in our net expense synergy numbers. So when you hear the number of $110 million, it's netted into those numbers all of those investments.
Speaker Change: We have done us on a smaller level. We've done the same thing on the U S institutional side.
Speaker Change: Where we've added people and client service as well.
Speaker Change: And then the ultimate.
Speaker Change: Judge of our investments are going to be our organic growth profile.
Speaker Change: We want to be in a position, where we grow our business organically and <unk>.
Speaker Change: I think we are in as good a position as we've ever been to do that in these investments that we're making ultimately the goal is to have organic growth pretty simple from that perspective.
Speaker Change: Great. Thanks, and then just a follow up question as you've broadened out the platform and have further scaled it just curious how youre thinking about alternative investment products. How important is that for you as you're thinking about M&A going forward to have that on the platform I imagine.
Speaker Change: Would it be more of an acquisition, maybe just talk about the pipeline for alternative investment and related acquisitions, how those sort of conversations are progressing and how youre thinking about some of the puts and takes there as it does add more complexity do you feel that the organization the platform or is that a place to accommodate that sort of a product set at this point.
Speaker Change: Alternatives are important to us we speak with our clients.
Speaker Change: Certain clients at certain levels.
Speaker Change: Inquire about it we have great relationships from an intermediary and institutional perspective.
Speaker Change: And so over time, we will have those products for our salespeople to deliver to those clients and potentially new clients, whether we access that through acquisitions or partnerships.
Speaker Change: Our evaluating.
Speaker Change: I think theres pros and cons with each structure.
Speaker Change: But as we think about moving forward in our access from a distribution perspective, and how deep we are into the various channels. We will absolutely have an alternatives offerings.
Speaker Change: And we're going to work through.
Speaker Change: Different ways of accomplishing that I think there have been a number of acquisitions in the industry. There have been a number of partnerships in the industry and we have studied all of them.
Speaker Change: And we're going to execute.
Speaker Change: In a way that's going to make the most sense for our platform, but when we think about the world going forward and look out that that is a product that we will absolutely be dialogues and selling to our with our clients.
Speaker Change: Great. Thank you.
Speaker Change: And our final question comes from the line of Kenneth Lee with RBC capital markets. Please go ahead.
Kenneth Lee: Hey, good morning, Thanks for taking my question.
Kenneth Lee: You mentioned in the prepared remarks around the common dividend and it sounds as if it's going to be slight change in terms of a more of an annual review and so if a quarterly review.
Kenneth Lee: I'm wondering if you could just remind us again.
Kenneth Lee: <unk> been increasing the dividend.
Good clip more recently, what's driving that change and then perhaps could you give us an update if there is any in terms of longer term priorities around capital deployment.
Dave: It's Dave let me start with the back end of that question.
Kenneth Lee: Our best use of capital we think.
Kenneth Lee: To grow the business is really to think about capital.
Kenneth Lee: From an acquisition perspective, so we want to make sure that we can execute on our strategic plan.
Growing through acquisitions.
Kenneth Lee: And we want to make sure that our balance sheet accommodates that so we start there.
Kenneth Lee: And I think as our business has grown over the years, we have also been able to balance that along with.
Kenneth Lee: And equity buyback program and also the dividend and so I would look at dividends and our buyback program as ancillary.
Kenneth Lee: But our ability to execute on them in a larger way is really reward for us growing our business.
Kenneth Lee: So we will continue to have that same.
Kenneth Lee: Viewpoint of capital and then from a dividend perspective, we have.
Kenneth Lee: Over over the last few years, we have gone from an annual.
Kenneth Lee: And anticipated annual increase to a more quarterly increases.
Kenneth Lee: To be more opportunistic as our business has evolved as we've done acquisitions I think as we think about going forward.
Kenneth Lee: We will look at it every quarter, but the anticipation is is that we will we will increase once a year that doesn't stop us from doing it quarterly is just really to guide to say that this is how we're going to look at it.
Kenneth Lee: But if you really take a step back we're going to first and foremost make sure that we can execute on.
Kenneth Lee: Inorganic growth.
Kenneth Lee: Through our balance sheet through our cash flow and then secondarily, it will be buybacks and dividends, but with the way our business looks in the cash flow that we anticipate and the margins we have in our earnings potential. We think we can satisfy the dividend and the buyback pretty nicely and balance all that out.
Kenneth Lee: <unk>.
Kenneth Lee: Great very helpful. There.
Speaker Change: One follow up if I may in terms of the victory ETF flows in the quarter very solid I Wonder if you could talk a little bit more about the cadence of newer ETF products that are expected to be launched later this year.
Kenneth Lee: Sure.
Speaker Change: <unk> had really nice growth.
Speaker Change: For the last few quarters on our ETF platform.
Speaker Change: We have launched a number of products over the last few years and they have worked.
Speaker Change: And we have we have plans and are in the process of launching additional Etfs will also launch.
Speaker Change: Etfs offer the pioneer platform in the future.
Speaker Change: And we have a dedicated we have our entire U S. Intermediary sales force can sell Etfs, but we also have a portion of our salesforce that only sells etfs.
Speaker Change: And we have a and.
Speaker Change: And we have.
Speaker Change: Our group that also trains on our Etfs, So we're well armed in the field.
Speaker Change: We have a really nice diversified.
Speaker Change: Existing ETF product set and we will continue to expand that and we think it's going to be an area for our business that is going to see accelerated growth.
Speaker Change: And so we will we will evaluate.
Speaker Change: Where we think the market's growth going from an ETF perspective, and launch products to satisfy that but.
Speaker Change: But I think our existing lineup today is pretty wholesome.
Speaker Change: <unk> has done pretty well and I don't see that changing going forward.
Speaker Change: Great very helpful. There. Thanks again.
Speaker Change: Okay.
Speaker Change: I will now turn the call back over to Golden Brown for closing remarks.
Speaker Change: Thank you we.
Speaker Change: We hope to see next month, where we will be attending the Morgan Stanley U S financials conference in New York and look forward to keeping you updated on our progress again. Thank you for joining us this morning.
Speaker Change: Ladies and gentlemen that concludes today's call. Thank you all for joining you may now disconnect.
Speaker Change: Okay.
Speaker Change: Yeah.
Speaker Change: Okay.