Victory Capital Holdings, Inc. (VCTR)

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 months ended March 31, 2026 and 2025 and cash flows for the three months ended March 31, 2026 and 2025. In addition, we also discuss the Company’s contractual and off-balance sheet arrangements. This discussion and analysis should be read in conjunction with the unaudited condensed consolidated financial statements and related notes included elsewhere in this Quarterly Report on Form 10-Q and with our Annual Report on Form 10-K for the year ended December 31, 2025 (the "2025 Annual Report"). This discussion and analysis contains forward-looking statements and should also be read in conjunction with the disclosures and information contained in “Forward-Looking Statements” included elsewhere in this Quarterly Report on Form 10-Q and in “Item 1A. Risk Factors” included in the 2025 Annual Report.

Overview

Our Business – Victory is a diversified global asset management firm with total client assets of $313.1 billion, assets under management of $309.8 billion and other assets of $3.3 billion as of March 31, 2026. The Company operates a next-generation business model combining boutique investment qualities with the benefits of an integrated, centralized operating and distribution platform.

The Company provides specialized investment strategies to institutions, intermediaries, retirement platforms and individual investors with multiple autonomous Investment Franchises and a Solutions Platform. Victory Capital offers a wide array of investment products, including actively and passively managed mutual funds, rules-based and active exchange traded funds (“ETFs”), institutional separate accounts, variable insurance products (“VIPs”), alternative investments, private closed end funds, and a 529 Education Savings Plan. Victory Capital’s strategies are also offered through third-party investment products, including mutual funds, third-party ETF model strategies, retail separately managed accounts (“SMAs”) and unified managed accounts (“UMAs”) through wrap account programs, Collective Investment Trusts (“CITs”), and undertakings for the collective investment in transferable securities (“UCITS”). As of March 31, 2026, our Franchises and our Solutions Platform collectively managed a diversified set of 179 investment strategies for a wide range of institutional and retail clients and direct investors.

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 in August 2013 to $313.1 billion at March 31, 2026. We attribute this growth to our success in sourcing acquisitions and evolving them into organic growers, generating strong investment returns, and developing institutional, retail, international, and direct investor channels with deep penetration.

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Pioneer Investments - On April 1, 2025, the Company completed the transactions contemplated by the Contribution Agreement to combine Amundi’s U.S. business into the Company and reintroduced the brand Pioneer Investments for the acquired business and investment products. The addition of Pioneer Investments as the Company's largest Investment Franchise meaningfully enhances the Company's scale, expands its global client base and further diversifies its investment capabilities. The sequential results reflect Pioneer Investments as of April 1, 2025, which significantly impacted our financial results for the three months ended March 31, 2026 when compared to the comparable period. Refer to Note 3 of the consolidated financial statements for further details related to the acquisition.

Business Highlights

Assets under management:

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

•
AUM at March 31, 2026 and 2025 was $309.8 billion and $167.5 billion, respectively. We experienced $2.8 billion in negative market action for the three months ended March 31, 2026 compared to $3.2 billion in negative market action for the same period in 2025. We generated $19.2 billion in gross sales, including $18.9 billion in long-term gross sales, and $0.7 billion in total net outflows for the three months ended March 31, 2026 compared to $9.5 billion in gross sales, including $9.3 billion in long-term gross sales, and $1.2 billion in total net outflows for the same period in 2025.

Investment performance:

•
58 of our Victory Capital mutual funds and ETFs had overall Morningstar ratings of four or five stars and 68% of our fund and ETF AUM were rated four or five stars overall by Morningstar. 71% of our strategies by AUM had investment returns in excess of their respective benchmarks over a one-year period, 67% over a three-year period, 68% over a five-year period and 81% over a ten-year period. On an equal-weighted basis, 69% of our strategies have outperformed their benchmarks over a one-year period, 67% over a three-year period, 70% over a five-year period and 70% over a ten-year period.

Financial highlights:

•
Total revenue for the three months ended March 31, 2026 was $388.0 million compared to $219.6 million for the same period in 2025.

•
Net income was $112.1 million for the three months ended March 31, 2026 compared to $62.0 million for the same period in 2025.

•
Adjusted EBITDA was $204.0 million for the three months ended March 31, 2026, or 52.6% of revenue, compared to $116.4 million, or 53.0% of revenue, for the same period in 2025. Refer to “Supplemental Non-GAAP Financial Information” for further information about the Adjusted EBITDA calculation and reconciliation of generally accepted accounting principles (“GAAP”) net income to Adjusted EBITDA.

•
Adjusted Net Income with tax benefit was $153.2 million for the three months ended March 31, 2026 compared to $88.1 million for the three months ended March 31, 2025. Refer to “Supplemental Non-GAAP Financial Information” for further information about the Adjusted Net Income calculation and reconciliation of GAAP net income to Adjusted Net Income.

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Key Performance Indicators

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

(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 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.

(4)
The Company includes participating securities in its computation of adjusted earnings per diluted share, including shares of series A Non-Voting Convertible Preferred stock for the three months ended March 31, 2026.

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

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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The objective of this section of the Annual Report on Form 10-K is to provide a discussion and analysis, from management’s perspective, of the key performance indicators and material information necessary to assess our financial condition, results of operations, liquidity and cash flows for the year ended December 31, 2025. The following discussion should be read in conjunction with the consolidated financial statements and related notes that appear in Part II – Item 8. Financial Statements and Supplementary Data of this Annual Report on Form 10-K.

Management's Discussion and Analysis of Financial Condition and Results of Operations included in this report discusses our financial condition and results of operations as of and for the years ended December 31, 2025 and 2024. A discussion related to our financial condition and results of operations for 2024 as compared to 2023 can be found in Part II - Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations of our Annual Report on Form 10-K for the year ended December 31, 2024, filed with the SEC on February 28, 2025.

In addition to historical information, this discussion and analysis contain forward‑looking statements that involve risks, uncertainties and assumptions, which could cause actual results to differ materially from management’s expectations. Please refer to the sections of this report entitled “Forward‑Looking Statements” and “Risk Factors.”

Overview

Our Business – Victory is a diversified global asset management firm with total client assets of $316.6 billion, assets under management of $313.8 billion and other assets of $2.8 billion as of December 31, 2025. 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 multiple autonomous Investment Franchises and a Solutions Platform. Victory Capital offers a wide array of investment products, including actively and passively managed mutual funds, rules-based and active exchange traded funds (“ETFs”), institutional separate accounts, variable insurance products (“VIPs”), alternative investments, private closed end funds, and a 529 Education Savings Plan. Victory Capital’s strategies are also offered through third-party investment products, including mutual funds, third-party ETF model strategies, retail separately managed accounts (“SMAs”) and unified managed accounts (“UMAs”) through wrap account programs, Collective Investment Trusts (“CITs”), and undertakings for the collective investment in transferable securities (“UCITS”). As of December 31, 2025, our Franchises and our Solutions Platform collectively managed a diversified set of 187 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

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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 in August 2013 to $316.6 billion at December 31, 2025. We attribute this growth to our success in sourcing acquisitions and evolving them into organic growers, generating strong investment returns, and developing institutional, retail, international, and direct investor channels with deep penetration.

Pioneer Investments - On April 1, 2025, the Company completed the transactions contemplated by the Contribution Agreement to combine Amundi’s U.S. business into the Company and reintroduced the brand Pioneer Investments for the acquired business and investment products. The addition of Pioneer Investments as the Company's largest Investment Franchise meaningfully enhances the Company's scale, expands its global client base and further diversifies its investment capabilities. The sequential results reflect Pioneer Investments as of April 1, 2025, which significantly impacted our financial results for the year ended December 31, 2025 when compared to the comparable periods. Refer to Notes 1 and 4 of the consolidated financial statements for further details related to the acquisition.

Business Highlights in 2025

Assets under management:

•
AUM at December 31, 2025 and 2024 was $313.8 billion and $171.9 billion, respectively. We generated $60.0 billion in gross flows and $4.5 billion in net outflows for the year ended December 31, 2025 compared to $26.2 billion in gross flows and $7.4 billion in net outflows for the same period in 2024. Net flows for the year ended December 31, 2025 were comprised of $4.2 billion and $0.3 billion of net long-term and short-term outflows, respectively.

Investment performance:

•
54 of our Victory Capital mutual funds and ETFs had overall Morningstar ratings of four or five stars and 65% of our fund and ETF AUM were rated four or five stars overall by Morningstar. 63% of our strategies by AUM had investment returns in excess of their respective benchmarks over a one-year period, 63% over a three-year period, 68% over a five-year period and 78% over a ten-year period. On an equal-weighted basis, 60% of our strategies have outperformed their benchmarks over a one-year period, 62% over a three-year period, 69% over a five-year period and 68% over a ten-year period.

Financial highlights:

•
Total revenue for the year ended December 31, 2025 was $1.3 billion compared to $893.5 million for the year ended December 31, 2024.

•
Net income was $330.1 million and $288.9 million, respectively, for the years ended December 31, 2025 and 2024. Adjusted Net Income was $472.6 million for the year ended December 31, 2025 compared to $312.9 million for the year ended December 31, 2024. Refer to “Supplemental Non‑GAAP Financial Information” for more information about how we calculate Adjusted Net Income and a reconciliation of net income to Adjusted Net Income.

•
GAAP earnings per diluted share was $4.08 for the year ended December 31, 2025 compared to $4.38 for the same period in 2024. Adjusted net income with tax benefit per diluted share was $6.38 and $5.36, respectively, for the years ended December 31, 2025 and 2024. Refer to “Supplemental Non‑GAAP Financial Information” for more information about how we calculate Adjusted Net Income and a reconciliation of net income to Adjusted Net Income.

•
Adjusted EBITDA and Adjusted EBITDA margin were $682.9 million and 52.3%, respectively, for the year ended December 31, 2025 compared to $475.6 million and 53.2%, respectively, for the year ended December 31, 2024. Refer to “Supplemental Non‑GAAP Financial Information” for more information about how we calculate Adjusted EBITDA and a reconciliation of net income to Adjusted EBITDA.

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Key Performance Indicators

The following table presents the key performance indicators we focus on when reviewing our results:

(1)
Our management uses 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 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 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:

(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.

(2)
The year ended December 31, 2025 includes the impact of Pioneer Investments as of April 1, 2025, increasing the Company’s AUM by $114.6 billion, partially offset by assets divested due to the closure of four Investment Franchises.

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

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

(2)
The year ended December 31, 2025 includes the impact of Pioneer Investments as of April 1, 2025, increasing the Company’s AUM by $114.6 billion, partially offset by assets divested due to the closure of four Investment Franchises.

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

(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.

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 Platform, asset class, distribution channel, vehicle and geography.

Valuation of Assets Under Management

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.

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For certain alternative investment vehicles, including 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. 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.

AUM by Asset Class – the following table presents our AUM by asset class as of the dates indicated:

(1)
Includes the impact of Pioneer Investments, partially offset by assets divested due to the closure of four Investment Franchises.

(2)
Beginning in January 2022, the Company's "Other" asset class has been categorized to Solutions, Fixed Income, Global / Non-U.S. Equity, or Alternative Investments based on the underlying investment strategy. Additionally, all assets managed using alternative investment strategies are now included in the Company's Alternative Investments asset class. Prior-period figures have been adjusted accordingly.

(3)
Includes the impact of acquired assets from the THB, NEC and WestEnd Acquisitions, which closed on March 1, 2021, November 1, 2021 and December 31, 2021, respectively, and increased our AUM by approximately $547 million, $795 million and $19.3 billion, at closing, respectively. The WestEnd acquired assets had no economic impact on operations in 2021 and no effect on asset flows, average assets, revenues or earnings in the full-year period ended December 31, 2021.

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Asset Flows by Asset Class – the following table summarizes our asset flows by asset class for the periods indicated:

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

(2)
Includes the impact of Pioneer Investments, partially offset by assets divested due to the closure of four Investment Franchises.

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Total AUM by Distribution Channel – the following table presents our total AUM by distribution channel as of the dates indicated:

(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.

(3) December 31, 2025 includes the impact of Pioneer Investments, partially offset by assets divested due to the closure of four Investment Franchises.

Total AUM by Region – the following table presents our total AUM by region as of the dates indicated:

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

(2) December 31, 2025 includes the impact of Pioneer Investments, partially offset by assets divested due to the closure of four Investment Franchises.

Assets Flows by Vehicle – the following table summarizes our asset flows by vehicle for the periods indicated:

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(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)
Includes the impact of Pioneer Investments, partially offset by assets divested due to the closure of four Investment Franchises.

Our total AUM at December 31, 2025 increased by $141.8 billion, or 82.5%, to $313.8 billion from $171.9 billion at December 31, 2024. The increase was primarily due to AUM acquired from Amundi US totaling $114.6 billion and positive market action of $37.7 billion partially offset by net outflows of $4.5 billion.

Net outflows were driven by $4.5 billion in our U.S. mid cap equity strategies, $3.5 billion in our U.S. small cap equity strategies, $4.5 billion in our U.S. large cap equity strategies, $0.5 billion in fixed income strategies, and $0.3 billion in money market and short-term strategies, partially offset by $1.3 billion in net inflows into our global/non-U.S. equity strategies and $7.5 billion in our Solutions Platform.

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GAAP Results of Operations

The following table presents our GAAP results of operations for the years ended December 31, 2025 and 2024:

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Our GAAP revenues principally consist of: (i) investment management fees, which are based on our overall weighted average fee rate charged to our clients and our level of AUM and (ii) fund administration and distribution fees, which are asset‑based fees earned from open‑end mutual funds for administration and distribution services. Fund administration and fund distribution fees also include fund transfer agent fees, which are based on a contractual rate applied to average AUM or the number of accounts in these funds.

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 earned from managing clients’ assets. Our investment management fee revenue fluctuates based on a number of factors, including the total value of our AUM, the composition of AUM across investment strategies and vehicles, changes in the investment management fee rates on our products and the extent to which we enter into fee arrangements that differ from our standard fee schedule as well as the extent to which our fund expenses exceed fund caps. Investment management fees are earned based on a percentage of AUM as delineated in the respective investment management agreements. Our investment management fees are calculated based on daily average AUM, monthly average AUM or point in time AUM.

Investment management fees increased $340.9 million, or 48.4%, to $1.0 billion in 2025 from $704.6 million in 2024 due to an increase in average AUM. Average AUM was $268.8 billion in 2025 compared to $169.7 billion in 2024.

Fund Administration and Distribution Fees – Fund administration fees are primarily asset‑based fees earned from open‑end funds for administration services. Fund administration fees fluctuate based on the level of average open‑end fund AUM and the fee rates charged for these services.

Fund distribution fees are asset‑based fees earned from open‑end funds for distribution services. Fund distribution fees fluctuate based on the level of average open‑end fund AUM and the composition of those assets across share classes that pay varying levels of fund distribution fees.

Fund administration and distribution fees increased $71.8 million, or 38.0%, to $260.7 million in 2025 compared to $188.9 million in 2024. The increase is due primarily to higher mutual fund average net assets.

GAAP Expenses

Our GAAP expenses principally consist of: (i) personnel compensation and benefits; (ii) distribution and other asset‑based expenses; (iii) general and administrative expenses; (iv) depreciation and amortization charges; and (v) acquisition‑related expenses comprising of changes in the fair value of contingent acquisition payments and restructuring and acquisition costs.

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Personnel Compensation and Benefits – Personnel compensation and benefits is our most significant category of expense. Personnel compensation and benefits consists of (i) salaries, payroll related taxes and employee benefits, (ii) incentive compensation, (iii) sales‑based compensation, (iv) compensation expense related to equity awards granted to employees and directors and (v) acquisition‑related compensation in the form of cash retention bonuses and certain transaction-related compensatory payment arrangements.

Incentive compensation is the largest component of the total compensation of our employees. The aggregate amount of cash incentive compensation is funded by a pool that is based on a percentage of total Company earnings (before taking into account incentive compensation). This incentive pool is used to pay the investment teams a percentage of the revenue earned by their respective Franchise on a quarterly basis. This incentive pool is also used to pay incentive compensation to senior management and other non‑investment employees on an annual basis. Incentive compensation paid to senior management and to other non‑investment employees is discretionary and subjectively determined based on Company and individual performance and the total amount of the incentive compensation pool.

The following table presents the components of GAAP compensation expense for the years ended December 31, 2025 and 2024:

(1)
Represents sales‑based commissions paid to our distribution teams. Sales‑based compensation varies based on gross and net client cash flows and revenue earned on sales.

(2)
Share-based compensation typically vests over several years based on service and the achievement of specific business and financial targets. The value of share-based compensation is recognized as compensation expense over the vesting period.

Personnel compensation and benefits were $363.0 million in 2025, an increase of $145.8 million, or 67.1%, from $217.2 million in 2024 mostly attributable to increases in salaries, payroll related taxes and employee benefits, incentive compensation expense and acquisition and transaction-related compensation of $47.6 million, $37.4 million, and $41.2 million, respectively.

Distribution and Other Asset‑based Expenses – Distribution and other asset‑based expenses consists of: (i) broker‑dealer distribution fees and platform distribution fees and (ii) sub‑administration, sub-transfer agent, sub‑advisory expenses and middle‑office expenses.

Broker‑dealer distribution fees are paid by VCS as the broker‑dealer for the Victory Funds to third‑party distributors. The Victory Funds pay VCS for distribution services and VCS, in turn, pays third‑party distributors.

Platform distribution fees are paid by VCM as the investment adviser to the Victory Funds. Platform distribution fees are paid to financial advisors, retirement plan providers and intermediaries for servicing and administering accounts invested in shares of the Victory Funds. Distribution fees typically vary based on the level of AUM and the composition of those assets across share classes.

Sub‑administration, sub-transfer agent, sub‑advisory and middle‑office expenses consist of fees paid to our sub‑administrators of the Victory Funds and VictoryShares, fees paid to our sub-transfer agent for the Victory Funds III, fees paid to sub‑advisers on certain Victory Funds and fees paid to vendors to which we outsource middle‑office functions.

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The following table presents the components of distribution and other asset‑based expenses for the years ended December 31, 2025 and 2024:

Distribution and other asset‑based expenses are primarily based on AUM. Distribution and other asset-based expenses increased $85.5 million, or 58.4%, to $232.0 million in 2025 compared to $146.5 million in 2024, primarily due to an increase in broker dealer and platform distribution fees over the comparable period.

General and Administrative Expenses – General and administrative expenses primarily consist of investment research and technology costs, professional and marketing fees, travel, rent and insurance expenses.

General and administrative expenses were $83.3 million in 2025 compared to $56.7 million in 2024, an increase of $26.6 million, or 47.0%. The increase is primarily due to an increase facilities and data services and technology related expenses.

Depreciation and Amortization – Depreciation and amortization expense consists primarily of the depreciation of property and equipment as well as the amortization of acquired intangibles that have a definite life. These intangibles include customer relationships, investment advisory contracts, intellectual property and non‑compete clauses acquired in connection with a business or asset acquisition. Both depreciation and amortization are recorded ratably over the assets’ useful lives.

Depreciation and amortization increased by $42.7 million, or 141.4%, to $72.9 million in 2025, from $30.2 million in 2024, due to the amortization of definite-lived intangible assets associated with the Amundi US acquisition in 2025.

Change in Value of Consideration Payable for Acquisition of Business – The change in value of consideration payable for acquisition of business increased $8.7 million due the change in the fair value of the contingent consideration associated with the WestEnd Acquisition increasing $11.4 million for the year ending December 31, 2025 compared to $2.7 million in 2024. Refer to Note 5, Fair Value Measurements, for further details on the fair value of contingent consideration payable.

Acquisition‑Related Costs – Acquisition‑related costs include legal fees, advisory services, mutual fund proxy voting costs and other one‑time expenses related to acquisitions.

Acquisition-related costs increased $24.2 million to $35.5 million for the year ended December 31, 2025 compared to $11.3 million in the prior year. The expense for the year ended December 31, 2025 was primarily due to legal and professional fees associated with the Amundi US transaction.

Restructuring and Integration Costs – Restructuring and integration costs include costs incurred in connection with business combinations, asset purchases and changes in business strategy. These include severance expenses related to one‑time benefit arrangements, contract termination and other costs to integrate investment platforms, products and personnel into existing systems, processes and service provider arrangements and restructuring the business to capture operating expense synergies.

Restructuring and integration costs increased $28.3 million to $29.7 million for the year ended December 31, 2025 compared to $1.4 million in the prior year. The expense for the year ended December 31, 2025 primarily relates to personnel restructuring as well as integration and conversion costs related to the Amundi US transaction.

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Interest Income and Other Income (Expense) – Interest income and other income (expense) consists primarily of interest income, gains (losses) on investments and dividend income on investments. Interest income and other income (expense) was income of $15.3 million and $10.4 million in 2025 and 2024, respectively. The increase was primarily due to an increase in the net unrealized fair value of deferred compensation plan investments over the comparable period.

Interest Expense and Other Financing Costs – Interest expense and other financing costs consists primarily of interest expense attributable to long‑term debt. Interest expense and other financing costs decreased $9.0 million to $54.8 million in 2025 from $63.8 million in 2024 as a result of a lower average interest rate over the comparable period. Refer to “Liquidity and Capital Resources” for more information.

Loss on Debt Extinguishment – Loss on debt extinguishment consists of the write-off of unamortized debt issuance costs and unamortized debt discount as a result of debt refinancing, the acceleration of the paydown of debt principal and debt repurchased and retired in open market transactions. For the year ended December 31, 2025 and 2024, the Company had losses on debt extinguishment of $0.6 million and $0.4 million, respectively.

Income Tax Expense – The provision for income taxes includes U.S. federal, state and local taxes, and foreign income taxes payable by certain of our subsidiaries. The effective tax rate is primarily driven by state and local taxes, excess tax benefits on share-based compensation, and certain non-deductible expenses. The portion of the effective income tax rate attributable to state and local income taxes varies from year to year depending on amounts of income apportioned to each jurisdiction, whether we file income tax returns on a unitary or separate return basis and with changes in tax laws.

For the year ended December 31, 2025 and 2024, the effective tax rate was 24.7% and 22.7%, respectively. The year-over-year increase in the effective tax rate is due to decreased excess tax benefits on share-based compensation and increased non-deductible expenses. Refer to Note 10, Income Taxes, for further details on the Company's income taxes.

Effects of Inflation

Inflation did not have a material effect on our consolidated results of operations. Inflationary pressures can result in increases to our cost structure. Certain large expense components such as compensation and distribution expenses are predominately variable and move in tandem with revenues. To the degree that these expense increases are not recoverable or cannot be counterbalanced through price increases due to the competitive environment, our profitability could be negatively impacted. In addition, the value of the fixed income assets that we manage may be negatively impacted when inflationary expectations result in a rising interest rate environment. Declines in the values of AUM could lead to reduced revenues as investment management fees are generally earned as a percentage of AUM.

Supplemental Non‑GAAP Financial Information

We report our financial results in accordance with GAAP. Our management uses non‑GAAP performance measures to evaluate the underlying operations of our business. Non‑GAAP financial measures are used to supplement GAAP results to provide a more complete understanding of the factors and trends affecting our business than GAAP results alone. Due to our acquisitive nature, there are a number of acquisition and restructuring related expenses included in GAAP measures that we believe distort the underlying economics 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.

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. Specifically, we make use of the non‑GAAP financial measures “Adjusted EBITDA” and “Adjusted Net Income.”

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

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 share-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 initial public offering (the “IPO”).

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

(7)
Adding back debt issuance and Swap unwind cost expense.

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

(9)
Represents the tax benefits associated with deductions allowed for intangibles and goodwill generated from 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 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 economic benefit.

(10)
The Company includes participating securities in its computation of adjusted earnings per diluted share, including shares of series A Non-Voting Convertible Preferred stock for the year ended December 31, 2025.

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The following table presents the components of acquisition, restructuring and exit costs for the periods indicated:

Liquidity, Capital Resources and Contractual Obligations

Sources and Uses of Cash – We generate strong cash flows from operations that allow us to meet our cash requirements. Our primary uses of cash include: (i) repayment of our debt obligations, (ii) funding of acquisitions, (iii) payment of contingent consideration for previous acquisitions, and (iv) working capital needs. Cash flows from operations also allow us to meet certain other cash uses such as quarterly cash dividends and the repurchase of our Common Stock. We believe we have sufficient liquidity and capital resources to continue to paydown our debt obligations as well as to continue focusing on acquisition candidates.

The following table presents our liquidity position as of December 31, 2025 and 2024:

(1)
We manage our cash balances in order to fund our day-to-day operations and invest excess cash into money market funds and other short-term investments.

(2)
Our accounts receivables consist primarily of investment management, fund administrative and distribution fees that have been earned but not yet received from clients. We perform a review of our receivables on a monthly basis to assess collectability.

(3)
The balance at December 31, 2025 represents the Company's undrawn $100.0 million revolving credit facility. The balance at December 31, 2024 represents the Company’s undrawn $99.9 million revolving credit facility and a $0.1 million standby letter of credit used as collateral for THB’s real estate location.

(4)
Accounts and other payables consist primarily of various payables related to operations, transaction costs and interest payable on the term loan, as well as accrued compensation and benefits.

Excludes $39.3 million and $62.7 million at December 31, 2025 and 2024, respectively, related to the estimated fair value of the contingent consideration that is expected to be paid over the next twelve month period resulting from the WestEnd Acquisition.

2019 Credit Agreement

Since 2019, the Company is a party to a credit agreement (the "2019 Credit Agreement"), which includes both a revolving credit facility (the “Revolving Facility”) with aggregate commitments of $100.0 million (with a $10.0 million sub-limit for the issuance of letters of credit) and a term loan with an aggregate principal amount of $1.1 billion (the “2019 Term Loans”). Since originally entering the 2019 Credit Agreement, the Company has entered into various amendments to extend maturities, modify interest rates and modify other terms. Key provisions of the 2019 Credit Agreement and the nature of recent amendments are described below.

Fifth Amendment

On June 7, 2024, the Company entered into the Fifth Amendment to the 2019 Credit Agreement (the "Fifth Amendment"), extending the maturity date of the $100.0 million 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 remained 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

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Amendment to the 2019 Credit Agreement, which were recorded to revolving credit facility debt issuance cost in other assets.

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.

Sixth Amendment

On September 23, 2025, the Company entered into the Sixth Amendment to the 2019 Credit Agreement (the “Sixth Amendment”), among the Company, the other loan parties party thereto, the lenders party thereto, and Bank of America, N.A., as administrative agent, which amended the Credit Agreement dated as of July 1, 2019 (as amended through the Fifth Amendment, the “Existing Credit Agreement”), among the Company, the other loan parties party thereto from time to time, Bank of America, N.A, as administrative agent and collateral agent, and the lenders party thereto from time to time.

The Sixth Amendment extended the maturity date of the Revolving Facility from March 31, 2026 to September 23, 2030 and decreased the drawn interest rate margin by 0.25% per annum. The Revolving Facility otherwise remains subject to substantially similar terms to those set forth in the Existing Credit Agreement.

Pursuant to the Sixth Amendment, the Company also refinanced its existing term loans (the "Existing Term Loans") with replacement term loans (the "Repriced Term Loans") in an aggregate principal amount of $985.0 million. The Repriced Term Loans will mature on September 23, 2032 and will bear interest at an annual rate equal to, at the option of the Company, either SOFR plus a margin of 2.00% or an alternate base rate plus a margin of 1.00%. The Repriced Term Loans otherwise remain subject to substantially similar terms to those that were applicable to the Existing Term Loans.

The 2019 Credit Agreement contains customary affirmative and negative covenants, including covenants that affect, among other things, the ability of the first lien leverage ratio, measured as of the last day of each fiscal quarter on which outstanding borrowings under the revolving credit facility exceed 35.0% of the commitments thereunder (excluding certain letters of credit), of no greater than 4.00 to 1.00. As of December 31, 2025 and 2024, there were no outstanding borrowings under the revolving credit facility and the Company was in compliance with its financial performance covenant.

Contingent Consideration

At December 31, 2025 and 2024, the Company had $87.6 million and $139.9 million, respectively, in contingent consideration that is estimated to be payable over the next one to two years resulting from the WestEnd Acquisition. For the years ended December 31, 2025 and 2024, the Company recorded an increase of $11.4 million and $2.7 million, respectively in contingent payment liabilities associated WestEnd Acquisition, which is included in consideration payable for acquisition of business in the Consolidated Balance Sheets.

Advertising and Marketing Costs

In 2022, the Company entered into a long-term partnership with Spurs Sports & Entertainment and executed naming rights and partnership agreements for the team’s new performance center. The agreements, which end in 2033, grant the Company exclusive naming rights, sponsorship, signage, advertising and other promotional rights and benefits for the new performance center.

Payments made under the agreements are deferred and expensed on a straight-line basis over the term of the arrangement. The related advertising and marketing expense is recorded in general and administrative expense in the Consolidated Statements of Operations. The balance of amounts paid less amortized expense are included in the Consolidated Balance Sheets in other assets when cumulative payments exceed amortized expense and in other liabilities when amortized expense exceeds cumulative payments.

Capital Requirements

VCS 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. VCS and our non‑U.S. subsidiaries were in compliance with these requirements as of and for the years ended December 31, 2025 and 2024.

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Cash Flows – The following table is derived from our Consolidated Statements of Cash Flows for the years ended December 31, 2025 and 2024.

Operating Activities

Cash provided by operating activities was $385.5 million in 2025, compared to $340.0 million in 2024. The $45.5 million increase in cash provided by operating activities was due to the combination of a $41.2 million increase in net income and $76.6 million increase in non-cash items partially offset by a $72.3 million decrease in working capital.

Investing Activities

Cash provided by investing activities was $76.6 million in 2025 compared to cash used in investing activities of $4.0 million in 2024. For the year ended December 31, 2025, cash provided by investing activities was primarily due to the combination of $53.6 million of cash acquired from acquisition and $27.1 million of cash provided by net purchases and sales of deferred compensation plan investments.

Financing Activities

Cash used in financing activities increased $92.7 million to $425.5 million in 2025 from $332.8 million in 2024. The increase was primarily due to payment of consideration for acquisition, repurchases of Common Stock, payment of dividends and payment of taxes related to settlement of equity awards of $63.7 million, $195.6 million, $157.0 million, and $13.0 million, respectively, during 2025.

Critical Accounting Estimates

The preparation of our consolidated financial statements in accordance with GAAP is based on the selection and application of accounting policies that require us to make significant estimates and assumptions that in certain circumstances affect amounts reported in the audited consolidated financial statements. In preparing these financial statements, our estimates and judgments are based on historical experience, information from third-party valuation professionals and various other assumptions, giving due consideration to materiality. We consider the accounting policy discussed below to be critical to the understanding of our consolidated financial statements. Actual results could differ from our estimates and assumptions, and any such difference could be material to our consolidated financial statements. This significant accounting policy is described more fully in Note 2, Accounting Policies, to the audited consolidated financial statements.

Contingent Consideration Payable for Acquisition of Business – We recognize and measure contingent consideration liabilities at fair value as of the acquisition date using an option pricing model and Monte Carlo simulation. These valuations require significant estimates and judgments related to the net revenue 5 year average annual growth rate, market price of risk adjustment for revenue (continuous), revenue volatility and discount rate. The fair value of contingent consideration liabilities is remeasured at each reporting period, generally using the same methodology used to determine the acquisition date fair value. We typically utilize an independent valuation expert to assist with these valuations. Any change in the fair value estimate subsequent to the acquisition date is recorded in the earnings of that period. As of December 31, 2025, the fair value of the contingent consideration payable was $87.6 million.

Goodwill and Intangible Assets – The Company accounts for business combinations under the acquisition method of accounting and allocates the purchase price to the assets acquired and liabilities assumed based on their estimated fair values on the date of acquisition. Any purchase consideration in excess of the fair value of net assets acquired is recorded as goodwill. The Company determines fair value of the tangible and identifiable intangible assets acquired and liabilities assumed, using the best available information which incorporates various estimates and assumptions, including, but not limited to, future expected cash flows, useful

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lives, and discount rates. These estimates are based on historical data, internal estimates, and external sources. Unanticipated events may affect the validity of these assumptions.

In 2025, the Company recorded $254.1 million of goodwill, $966.0 million of indefinite-lived intangible assets and $312.0 million of definite-lived intangible assets resulting from the Amundi US acquisition. The fair value of the intangible assets was determined based on the Multi-Period Excess Earning Method, which required applying significant assumptions including the discount rate, revenue projections, long-term growth rate, AUM growth and estimated useful life. While the Company believes these assumptions to be reasonable and appropriate, changes in these estimates could result in different fair value amounts.

Goodwill - Goodwill represents the excess cost of the acquisition over the fair value of net assets acquired in a business combination. Goodwill impairment testing is performed at least annually or whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. For goodwill impairment testing purposes, the Company has determined that there is one reporting unit. The Company conducted its annual impairment assessment as of October 1, 2025, and no impairment was identified. For purposes of this assessment, management considered various qualitative factors including, but not limited to, certain indicators of fair value (e.g., market capitalization and market multiples for asset managers) and determined that it was more likely than not that the fair value of the reporting unit was greater than its carrying value. As of December 31, 2025, the carrying value of goodwill was $1,235.9 million.

Indefinite-lived intangible assets - Indefinite‑lived intangible assets include trade names and contracts for fund advisory, distribution and transfer agent services. The Company conducted its annual impairment assessment as of October 1, 2025 using a qualitative approach, which required weighing positive and negative evidence across various factors to determine whether it is more likely than not that the asset is impaired, and no impairment was identified. Additionally, management periodically reassesses whether events or circumstances continue to support an indefinite useful life. Key indicators monitored by management in the assessment include significant declines in managed assets, changes to applicable legal, regulatory or contractual provisions and reductions in underlying operating cash flows. As of December 31, 2025, the carrying value of indefinite-lived intangible assets was $2,095.8 million.

Definite-lived intangible assets - Definite-lived intangible assets include customer relationships, fund advisory contracts and trade names that are expected to contribute to the future cash flows of the Company for a specified period of time. Definite-lived intangible assets are amortized on a straight-line basis over their remaining expected useful lives. Management periodically evaluates the remaining useful lives and carrying value of the intangible assets to determine whether events and circumstances indicate that a change in the useful life or impairment in value may have occurred. Indicators of impairment monitored by management include a decline in the level of managed assets, changes to applicable contractual provisions and reductions in underlying operating cash flows. As of December 31, 2025, the carrying value of definite-lived intangible assets was $381.8 million.