Earnings Call Transcript - VCTR Q4 2024

Operator, Operator

Good morning and welcome to the Victory Capital fourth quarter 2024 earnings conference call. All callers are in 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, Chief of Staff and Director of Investor Relations

Thank you. Before 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. Furthermore, please note that the ultimate completion of a transaction with Amundi remains subject to certain closing conditions. Please refer to our SEC filings for a list of some of the factors that may cause actual results to differ materially from those expressed on today’s call. Victory Capital assumes no duty and does not undertake any obligation to update any forward-looking statements. Our press release that was issued after the market closed yesterday disclosed 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 found in our earnings press release and in the slides accompanying this call, both of which are available on the Investor Relations portion of our website at ir.vcm.com. It is now my pleasure to turn the call over to David Brown, Chairman and CEO. David?

David Brown, Chairman and CEO

Thanks, Matt. Good morning and welcome to Victory Capital’s fourth quarter 2024 earnings call. I’m joined today by Michael Pilicarpo, our President, Chief Financial and Administrative Officer, as well as Matt Dennis, our Chief of Staff and Director of Investor Relations. I’ll start today by providing an overview of the fourth quarter and the full year 2024. After that, I will turn the call over to Mike to review the financial results in greater detail. The quarterly business overview begins on Slide 5. Long term net flows improved in the fourth quarter, helped by accelerated gross sales. Although there was improvement, we are not at the level the organization is fully capable of. That said, we are beginning to realize success from our prior investments in several areas, with a good example being the acceleration of our growth in our ETF platform, Victory Shares. During the fourth quarter and throughout the entire year, we achieved strong sales of our rules-based and active ETFs. These are high margin products for us that are priced competitively with reasonable costs to manufacture and distribute. We ended December with $176.1 billion of total client assets, which was up $9.5 billion or 6% from the end of last year. During the fourth quarter, average assets rose compared to the third quarter and our fee rate remained strong, resulting in record revenue for the quarter and full year. Our adjusted earnings per diluted share with tax benefit rose more than 7% to $1.45 in the quarter, which was also a record high, and up 26% from $1.15 in last year’s final quarter. Year-over-year adjusted earnings per diluted share rose 19% from $4.51 in 2023 to $5.36 in 2024. Adjusted EBITDA and adjusted EBITDA margin both set new quarterly records at $126 million and 54% respectively. We are very pleased with our financial results in 2024, which was driven by our differentiated business platform and superior execution. Underneath all of this is an employee base which I continue to believe is the best at what they do in the industry. Turning to our multi-faceted strategic partnership with Amundi, we remain on track to close our acquisition by the end of this quarter. Based on our ongoing integration work, we are reaffirming the prior guidance of realizing $100 million in cost synergies by the end of our second year of ownership. These expense savings will be front-end loaded with the majority being realized during the first year after closing. The Amundi U.S. business continues to perform very well across the board. Based on publicly available data, net long term flows into their U.S. mutual funds totaled $2.6 billion in 2024. Their institutional business in the U.S. as well as their non-U.S. business also posted very strong sales for calendar 2024 and both were net flow positive. Following the transaction’s close, our non-U.S. AUM is projected to total more than $45 billion. Most of the non-U.S. assets can be segmented into the following buckets: third-party distribution platforms, institutional investors, or various large banking and financial networks spread throughout the world. Moreover, these assets are sitting in primarily UCITS or institutional separately managed accounts. The non-U.S. business has been a consistent strong area of organic growth, registering positive net flows since Amundi acquired the business in 2017. With the addition of Victory managed strategies post-close to the product lineup, the broader product set is anticipated to accelerate growth of these non-U.S. assets. Investment performance in Amundi U.S. also remained very strong throughout the year. At year-end, 61% of the assets under management was rated four or five stars overall by Morningstar. On Slide 6, we provide an update on Victory Shares, our ETF platform. To date, we have increased our ETF AUM to close to $12 billion. We started with less than $200 million of ETF AUM when we acquired the capability in 2015. Since then, AUM has increased primarily as a result of organic growth as we have launched innovative new products and increased our distribution reach on various intermediary platforms over the years. You can see from the graphic on this slide that this AUM growth has accelerated recently and we look forward to continuing this momentum. Increasing investor demand for solutions-oriented and active ETFs aligns perfectly with our core strength of delivering alpha and/or targeted outcomes through proven investment capabilities. We will continue to grow AUM by leveraging the portfolio management expertise of our investment franchises and solutions platform, coupled with our deep distribution coverage which now includes dedicated ETF sales and marketing resources. Our active ETFs provide investors with access to fixed income and equity strategies in a tax-efficient and liquid ETF structure. These active ETF products are net flow positive, meet our margin criteria, and we look forward to continuing to launch new products to maintain our momentum. Additionally, Amundi U.S. currently has no ETF offerings, and we are evaluating which of their investment strategies have the best opportunity to be successful within an ETF wrapper and view this as an additive growth opportunity post the close of the acquisition. Turning to Slide 7, you can see our updated capital allocation details. During the fourth quarter, we returned a total of $132.4 million to shareholders. After being restricted from executing open market share repurchases through the first nine months of the year, we repurchased 1.5 million shares during the fourth quarter. In December, our Board authorized a new $200 million share repurchase program, thereby allowing us to remain flexible and opportunistic. Since our IPO, we have repurchased 18.2 million shares at an average price of $30.30 per share. Based on today’s share price, repurchase activity has resulted in an extremely attractive return for shareholders. We also announced a 7% increase in our quarterly cash dividend. Moving to Slide 9, our investment performance remained strong with ETFs earning overall four or five-star ratings by Morningstar for the period ending on December 31. This is broadly diversified, encompassing 45 distinct products. Over the key three- and five-year periods, 59% and 73% of our total AUM outperformed their respective benchmarks. With that, I will turn the call over to Mike to go through the quarter and full year financial results in greater detail. Mike?

Michael Pilicarpo, President, Chief Financial and Administrative Officer

Thanks, Dave, and good morning everyone. The financial results review begins on Slide 11. Average assets under management rose 2% in the fourth quarter to $176 billion and our fee realization increased for the quarter, driving revenue up to $232.4 million, which is the highest quarterly revenue in our history. For the full year, we generated record high revenue of $893 million, which was a 9% increase from 2023. Fourth quarter GAAP operating income was $111.7 million, which was up 29% from the same quarter last year. GAAP earnings per diluted share was $1.17 for the fourth quarter and $4.38 for the full year. Year-over-year GAAP earnings rose more than 40% from $3.12 per diluted share for 2023. Adjusted EBITDA was $125.5 million in the fourth quarter, which was 3% higher than in the third quarter, and adjusted EBITDA margin expanded 30 basis points to 54%. Adjusted net income with tax benefit rose to a record $95.1 million in the quarter. This was up 7% from the third quarter and 24% higher than last year’s fourth quarter. For the full year, we generated adjusted net income with tax benefit of $353.1 million, which was up 15% from the prior year. Turning to the balance sheet, our cash balance at the end of the year was $127 million following the return of $132.4 million to shareholders in the form of share repurchases and cash dividends in the fourth quarter. Our net leverage ratio was unchanged at 1.7 times from Q3, driven by growth in earnings and a modest debt pay down of $20 million in December. Finally, yesterday we also announced that the Board authorized a 7% dividend increase, raising the quarterly dividend to $0.47 per share. The first quarter dividends will be paid on March 10 to shareholders of record at the close of business on February 18. Turning to Slide 12, you can see that while average assets rose from the third quarter, total client assets declined by just under 3% during the period, driven primarily by market actions to end the year at $176.1 billion. 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. Post closing of the Amundi transaction, we intend to add a new category here that breaks out the non-U.S. client portion of our AUM. We believe having a significant portion of AUM from investors outside the U.S. provides another dimension of diversification and potential growth for our business. On Slide 13, we cover long term asset flows. Several of our investment franchises and our Victory Shares ETF platform continued to generate positive long term net flows in the quarter. Victory income investors posted its fourth consecutive quarter of positive net flows and its eighth consecutive quarter of positive net flows in the intermediary channel, where we have been gaining shelf space for the past several years. For the full year, Integrity, NEC, RS Global and our Victory Shares ETF platform also achieved positive net long term flows. 2025 is off to a strong start. Our long term flows for the month of January have improved substantially and have flipped to be slightly positive, and our won but not yet funded pipeline is as large as it has ever been as we look forward. The majority of the won but not yet funded pipeline should fund in 2025, and it is well diversified from a franchise and channel perspective. Our outlook for organic growth is encouraging as we consider current business momentum and the closing of the Amundi transaction and what that will contribute to our organic growth profile. Slide 14 shows a steady increase in sequential revenue during 2024. Our average fee rate was 52.5 basis points in the fourth quarter, which is up four-tenths of a basis point from the third quarter and remains within our expected range. For the full year, revenue rose by 9% from 2023. Slide 15 highlights expenses recorded during the quarter. Total GAAP expenses were $133.8 million for the quarter. The increase from the third quarter was driven primarily by the reversal of earn-out accruals in the third quarter. Excluding this non-cash adjustment in Q3, total expenses increased less than $1 million quarter-over-quarter and variable expenses calibrated with our increase in AUM and revenues. We incurred $2.8 million in acquisition-related expenses in the fourth quarter, predominantly related to the Amundi transaction. On a cash basis, our compensation expense was 23.8%, which is in line with our guidance. Consistent with lower interest rates, we experienced a decrease in interest expense during the fourth quarter. Our average interest rate declined by 33 basis points from 5.25% in the third quarter to 4.92% in the fourth quarter. On Slide 16, we highlight our non-GAAP metrics. Our reported $1.45 adjusted net income with tax benefit per diluted share is the highest level in our history and is up 7% from the prior record of $1.35 per diluted share reported for the third quarter. For the full year, adjusted net income with tax benefit per diluted share was $5.36, 19% higher than $4.51 per diluted share in 2023. Adjusted EBITDA and adjusted EBITDA margin were also company records at $125.5 million and 54% respectively. On a year-over-year basis, our adjusted EBITDA grew by 14% to $476 million in 2024, and adjusted EBITDA margin expanded by 230 basis points to 53.2%. Finally, turning to Slide 17, we generated $92 million in cash flow from operations during the quarter and our leverage ratio remained at 1.7 times, which is down from 2.1 times at the beginning of the year. We paid down $20 million of debt in the quarter and our $100 million credit facility remains undrawn. That concludes our prepared remarks. I will now turn it back over to the Operator for questions.

Operator, Operator

Your first question comes from the line of Alex Blostein with Goldman Sachs. Alex, please go ahead.

Anthony, Analyst

Hey everybody, this is Anthony on for Alex. It’s nice to see the organic growth profile improving in January, and I guess as we look out into 2025, what strategies do you expect to be most in favor and contribute the most to organic growth?

David Brown, Chairman and CEO

Good morning, it’s Dave. To address that question, I'd like to highlight a few points. Firstly, our Victory Shares ETF platform is performing exceptionally well, showing strong growth that I anticipate will continue throughout the year. In addition, we are identifying numerous opportunities within our institutional channel, where we have a significant portion of our pipeline that has been secured but not yet funded across several franchises. Furthermore, with Amundi's inclusion and their positive net flow in 2024, they are off to an excellent start in 2025 across all their channels. We believe that by leveraging these opportunities, we will see substantial growth.

Anthony, Analyst

Thanks, that’s helpful. I guess as a follow-up, on the Amundi deal, just from a revenue perspective, what sort of revenue synergies do you expect and how soon do you expect to see the flow benefits from the distribution partnership?

Michael Pilicarpo, President, Chief Financial and Administrative Officer

Morning, it’s Mike. I think with respect to the distribution agreement, just a reminder, we’ve really established a 15-year exclusive distribution agreement with Amundi, where active traditional products will be pushed, if you will, through their global distribution network. As we mentioned in the prepared remarks, that channel exists today with the Amundi U.S. products and is currently organic growth positive. As we think about the addition of Victory products to that distribution network, we’re excited. We’re still working on which products will be launched and which products will be pushed through that distribution channel, but we’ve spent a lot of time really evaluating and understanding the needs of clients globally, and as we move forward, we know it will be additive to the overall growth profile, organic growth profile for Victory. We’re not in a position today to provide specifics around that, but as we close the transaction, we’ll come out with more specifics related to that; but again, we’re excited about being able to add strong Victory product through that sizeable distribution network.

Anthony, Analyst

Okay, thank you.

Operator, Operator

Your next question comes from the line of Ken Worthington with JP Morgan. Ken, please go ahead.

Michael Cho, Analyst

Hi, good morning. This is Michael Cho in for Ken. Thanks for taking my question. I just wanted to touch on margins - you know, Victory’s margins just seem to continue to rise every quarter, so without asking about the new long term targets or anything like that, I was just wondering if you could talk through any margin differences across the different products or vehicles. I think you called out in your comments that maybe the rules-based ETFs are higher margin products, so I’m just kind of curious if you can flesh that commentary out to kind of a broader perspective of maybe margin differences, or nuances we should consider in light of the 2025 flows comment you made as well. Thank you.

Michael Pilicarpo, President, Chief Financial and Administrative Officer

Sure, Michael. As we think about our operating platform and the business structure that we have, I think we have identified and said that greater than two-thirds of our expenses are variable, and that really comes with having a single operating platform to allow us to leverage and invest really once across all franchises, all vehicles inclusive of our ETFs, mutual funds, institutional business, retail SMA and model delivery business. That single platform really allows for significant scale, and as we look at how we’ve derived that expense base with greater than two-thirds being variable, the ETF business is just as profitable as the rest of the business, despite having slightly lower revenue realization. Again, the ETFs that Dave mentioned in the prepared comments, they’re not passive ETFs; they’re active and rules-based that have a fair revenue realization to them, and when we apply, if you will, the business infrastructure across that, we still maintain very strong margins competitive to any other distribution channel and any other product vehicle that we have, so it really is that single platform and the variable expense model that we think drives the current margins that we have and continues to drive the investments that we’re making to support future growth.

Michael Cho, Analyst

Great, thanks for that. If I could just quickly follow up, you mentioned a pipeline, or won not yet funded pipeline in terms of the largest ever. I was wondering if you can provide any context or color around the pipeline as it sits today, and any color on the composition of that institutional pipeline. Thank you.

Michael Pilicarpo, President, Chief Financial and Administrative Officer

Sure, it’s Mike. We don’t necessarily provide the specifics, but I think in Dave’s comments, he mentioned it’s as large as we’ve ever seen it in the history of the business, which is very compelling as we sit here today. It’s also not just a particular product or franchise; it stems across a number of different franchises as well as different channels, so both intermediary and institutional business, and then within institutional, the sub-channels are also represented. We expect that the pipeline from a won not funded perspective, most if not all of that will fund in 2025, and it again is broad-based across a number of different franchises and products within franchises.

Michael Cho, Analyst

Great, thank you.

Operator, Operator

Your next question comes from the line of Kenneth Lee with RBC Capital Markets. Kenneth, please go ahead.

Kenneth Lee, Analyst

Hey, good morning. Thanks for taking my question. Just following up on Amundi and the potential introduction of Victory products in the non-U.S. distribution, assuming you’ve selected certain products, how rapidly in terms of time frames could you potentially introduce products? What are the key gating factors? Is there any kind of regulatory or product design or vehicle selection things that we should think about? Thanks.

David Brown, Chairman and CEO

Yes, that will happen really throughout 2025 and into ’26 for the Victory products. I would expect after we close, most of the flow will come through the existing or the legacy Amundi U.S. products that are already into the channels, already have the products registered, established, sales force educated on them, and so that will continue and accelerate with our investment in that channel. Then as ’25 moves through, I would anticipate that we have the legacy Victory products registered, educating the sales force, and then getting momentum in the different geographies and really seeing a benefit as we end ’25 and go into ’26. Each geography is going to have its own set of regulatory rules. We’ll be registering different products. On the institutional side, it will be educating the sales force, so there will be a large effort around that. But the great part about this is today as Amundi U.S. stands, they have the infrastructure, they’re successful in selling the products outside the U.S. It has been growing, I think I referenced in my prepared remarks, since the acquisition of Amundi in 2017 - Amundi U.S., they have been positive from a sales perspective, so we’ll just be plugging into that and really accelerating that, and then introducing our products. But as we look out and we get out of the quarter and we start to look in the future from a year’s perspective, we think it’s going to be a really compelling growth opportunity for us, diversify our business, and really differentiate us from many other U.S. managers that have this kind of distribution channel outside the U.S. for a U.S.-based manager.

Kenneth Lee, Analyst

Great, very helpful there. Then just changing over to another topic, on the M&A opportunity there, you previously mentioned there could be some additional opportunities over the near term. Just wanted to get a little bit more color in terms of how active is the discussion pipeline that you’ve having and what are your thoughts in terms of the outlook for potential M&A this year? Thanks.

David Brown, Chairman and CEO

I believe, building on my previous comments, that we are very busy with discussions. The industry is ready for significant consolidation, which you are beginning to observe. I expect this will accelerate in 2025 and beyond, and we intend to be involved. Once we complete the acquisition, our leverage will decrease significantly, placing our balance sheet in a strong position, and I anticipate that we will be very active in the sector. Our platform is very appealing to the right partners, and we are eager to participate in the consolidation. I foresee that we will continue on the path we have followed over the years, which has been quite acquisitive. We are very enthusiastic about our current discussions and the opportunities we are exploring are the most compelling I have encountered in my career.

Kenneth Lee, Analyst

Great, very helpful there. Thanks again.

Operator, Operator

Our next question comes from the line of Etienne Ricard with BMO Capital Markets. Etienne, please go ahead.

Etienne Ricard, Analyst

Okay, thank you and good morning. Just to circle back on operating margins, I’m curious to hear relative to the 49% target that you have, in what areas of the organization have you seen better than expected operating leverage, and just to circle back on Amundi, what’s giving you the confidence that current systems in place can handle a much larger AUM base? Thank you.

Michael Pilicarpo, President, Chief Financial and Administrative Officer

Hey Etienne, good morning, it’s Mike. I would say that our operating platform is world-class and highly scalable because of how we designed it. We have strong partnerships that have enabled us to onboard and integrate mergers and acquisitions since we started our business model in 2013. This gives us confidence, along with our experienced team, that we can assess the current Amundi U.S. business and integrate it into our platform. We will make necessary investments in areas where we can differentiate, both from a product and client perspective, and we plan to maintain our business long-term at the strong margins we’ve identified, which are among the best in the industry. Our long-term guidance of 49% remains intact even after onboarding the Amundi transaction. There isn’t anything significantly differentiated in the Amundi U.S. business; we are essentially a traditional active asset management firm. Therefore, we are confident that after the integration, we can operate the business at our established long-term margins while continuing to invest in areas that we believe will foster long-term organic growth. The investments we have made, as Dave mentioned, support our data and technology needs as well as our marketing and distribution efforts, including the intermediary distribution channel. All these investments are designed to keep us well-prepared for further mergers and acquisitions as well as organic growth.

Etienne Ricard, Analyst

Great, I appreciate the details. Switching on net flows, you’ve seen demand for some of your global strategies on the non-U.S. side. Can you share more details as to what explains this relatively stronger performance?

Michael Pilicarpo, President, Chief Financial and Administrative Officer

Yes, so where we’ve seen strength in the global equity and international equity segment of our business really has been with respect to the RS Global product. That product has outstanding short and long term investment performance. They’ve got a very differentiated investment process that has allowed them to continue to perform excellently throughout all market cycles over the last decade-plus, and we’re seeing significant opportunities, both on the institutional side as well as on the intermediary side with respect to that product offering because of the strong performance, because of the depth of the team, because of the strength of the team, and really they’ve just continued to perform very well, which has led to a significant amount of opportunities.

Etienne Ricard, Analyst

Thank you very much.

Operator, Operator

Our next question comes from the line of Benjamin Budish with Barclays. Benjamin, please go ahead.

Mason, Analyst

Good morning, this is Mason on for Ben. Can you provide a mark-to-market on Amundi since our last update? What does AUM look like, and how are flows trending?

Michael Pilicarpo, President, Chief Financial and Administrative Officer

Yes, so as Dave mentioned in our prepared remarks, the Amundi U.S. business for 2024 was net flow positive. What you can see publicly in their mutual fund business, the flows were roughly $2.6 billion net flow positive across their fixed income, multi-asset and equity products. We also highlighted that their other distribution channel, which really was that global network, was positive organic growth as well, and those trends have continued into January. At year end, the AUM was approximately $114 billion for Amundi U.S., which again, as we mentioned, the performance of the Amundi U.S. business throughout 2024 really outpaced our expectations and what we diligenced, so we’re super excited to have tailwinds in that business as it comes onto our platform, and we continue to look at organic growth opportunities post the transaction.

David Brown, Chairman and CEO

I would add a few more things. Going into 2025, they still have positive net flows on the mutual fund side, and the investment performance remains strong as seen in January. I want to emphasize what Mike mentioned: this business has gained significant momentum in 2024 and is carrying that into 2025, exceeding our expectations. When we evaluated the business, we thought it was great, and it has surpassed that, which makes us very excited about integrating it into our platform. By combining our efforts, we believe we can create a more positive trajectory for net flows. A major advantage of this transaction is that it will enhance our U.S. intermediary sales capabilities. From a team size perspective, partnership opportunities, and marketing efforts, this will benefit our entire platform, not just the legacy Amundi U.S. and selected products, but across all of our offerings.

Mason, Analyst

Thank you. Can you also provide an update on flows at Sycamore in particular? I recall that the franchise was the source of some your outflows last year, so can you just remind us of some of the dynamics there? Thank you.

David Brown, Chairman and CEO

We don’t provide specific flows on each franchise. Sycamore is one of our larger franchises. It has excellent long-term investment performance and it has a really big client following on the intermediary side and on the institutional side. It is a franchise that has had some outflows, but long term we’re not concerned with the franchise at all. It is an excellent investment team, they have an excellent investment process. It’s a deep team, and I’d say anything that’s going on at Sycamore is really just a small cycle in a much longer-term positive cycle for them.

Mason, Analyst

Thank you.

Operator, Operator

Our next question comes from the line of Bench Ruben with UBS. Bench, please go ahead.

Bench Ruben, Analyst

Hi, thanks for taking my questions. My first one is on the ETF business. Victory Shares had over $1 billion of flows in the fourth quarter, stronger than your recent quarters and a much better 2024 overall, which you called out in your prepared remarks. I’m just curious what products or strategies are driving that improvement, and then also, what are your expectations for active ETFs going into 2025? Thank you.

David Brown, Chairman and CEO

Sure, so in ’24, we had a few ETFs that really did well and I think started to emerge, and I would bucket them, first, our group of fixed income active ETFs run by our Victory Income Investors franchise. There are a number of ETFs there that were net flow positive and really, with the market tailwinds and our ability to get them across our distribution system, have really started to pay back and I expect that to continue in ’25. The launch really of our free cash flow series group of ETFs, led by what we call VFLO, which is V-F-L-O, S-F-L-O, which is SFLO, and then also a few other ones that we just launched and will be launching around our free cash flow series. We’ve seen very good flows from that perspective. Four of our five top sellers in ’24 were actually active, and even our passive ETFs really are not passive from a beta replication perspective. Our passive ETFs are really rules-based and thematic type ETFs that compete with active products. A good example is VFLO - it’s a 50-stock portfolio, it’s priced like an active product, acts like an active, we just rules to express our investment thesis. In ’25, we’re off to a tremendous start on the ETF side, and I anticipate that it’s going to accelerate as we move through the year. There’s great market tailwinds from what’s happening in the industry plus the way we’re positioned, and lastly I would add we have invested from a sales perspective on the ETF side. We now have ETF sales specialists, we’re focusing some of our marketing efforts there, we’re expanding our distribution platform relationships on the ETF side, so we really believe that Victory Shares is going to be a big part of our future and is going to help us drive organic growth.

Bench Ruben, Analyst

Great, thanks for that color.

Operator, Operator

Our final question comes from the line of Michael Cyprys with Morgan Stanley. Michael, please go ahead.

Annaleigh, Analyst

Hey, this is Annaleigh on for Mike. Just a question on capital allocation - how should we think about this going forward, just given the raised dividend and also with the new buyback program? How should we think about timing of completion of the program and how are you also thinking about debt pay-down and scope for the dividend over time? Thanks.

David Brown, Chairman and CEO

I’ll begin and then Mike can add more. Our primary focus for capital allocation is on making accretive acquisitions, which we consider the most important and strategic move for us, with potential for the greatest return for our shareholders. We've managed to balance this objective with increasing our dividend over the years and repurchasing our stock. Both stock buybacks and our dividend program serve as ways to return capital to our shareholders. We believe buying back our stock is beneficial since we think it is undervalued both now and in the future, and our historical record of increasing the dividend reflects our commitment to returning capital. As mentioned earlier, we will be engaged in acquisitions, and we are having compelling discussions regarding this. The primary goal for our balance sheet will be to facilitate these acquisitions. Depending on the outcomes, this will influence our buyback and dividend programs. We believe we can maintain a balance, as we have in the past, and I expect our Board has approved a $200 million program for stock repurchases. We will be opportunistic and evaluate the situation daily to make informed decisions. We also plan to continue increasing the dividend, provided we can manage our acquisition strategy effectively.

Annaleigh, Analyst

Great, thanks. Then maybe a follow-up on WestEnd, can you just update us on how the investment performance is trending there and how that’s contributing to flows, and then also maybe on how you’re expanding wallet with existing advisors and how that’s evolving. Thanks.

David Brown, Chairman and CEO

Since acquiring WestEnd, they have seen positive net flows. Their performance in 2024 fell short of our expectations, but they have made a stronger start in 2025. We have significantly increased the number of advisors they are working with and expanded the platforms available to them. We believe there is substantial potential for growth given the improved investment performance and market conditions for their products. We have also introduced several new products, including an ETF called M-O-D-L, which has gained considerable interest. We are optimistic about WestEnd's growth prospects, and we recognize their strong investment capabilities as we begin to see their performance return to our expected levels.

Annaleigh, Analyst

Great, thank you.

Operator, Operator

That concludes our Q&A session. I will now hand it over to David Brown for any closing remarks. David?

David Brown, Chairman and CEO

Thank you, and thank you for your interest in Victory Capital. Next week, we will be attending the UBS Financial Services Conference, as well as the BofA Securities 2025 Financial Services conference in Miami. Next month, we will be at the RBC 2025 Global Financial Institutions Conference in New York. We hope to see you at one of those events and hope you have a great rest of the day. In the interim, please, if you have any questions, feel free to contact us at any time. Thank you.

Operator, Operator

This concludes the meeting. Thank you all for joining. You may now disconnect.