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 and six months ended June 30, 2026 and 2025 and cash flows for the six months ended June 30, 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 $346.1 billion, assets under management of $342.5 billion and other assets of $3.6 billion as of June 30, 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 June 30, 2026, our Franchises and our Solutions Platform collectively managed a diversified set of 189 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 $346.1 billion at June 30, 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 and six months ended June 30, 2026 when compared to the comparable period. Refer to Note 3 of the condensed consolidated financial statements for further details related to the acquisition.

Business Highlights

Assets under management:

•
AUM at June 30, 2026 increased by $32.6 billion, or 10.5%, to $342.5 billion from $309.8 billion at March 31, 2026, driven by positive market action of $28.5 billion and net inflows of $4.1 billion. Total gross flows for the second quarter were $22.4 billion, including long-term gross flows of $22.1 billion.

•
AUM at June 30, 2026 and 2025 was $342.5 billion and $298.6 billion, respectively. We generated $22.4 billion in gross flows and $4.1 billion in net inflows for the three months ended June 30, 2026 compared to $15.7 billion in gross flows and $0.8 billion in net outflows for the same period in 2025.

•
AUM at June 30, 2026 and 2025 was $342.5 billion and $298.6 billion, respectively. We generated $41.6 billion in gross flows and $3.5 billion in net inflows for the six months ended June 30, 2026 compared to $25.2 billion in gross flows and $2.1 billion in net outflows for the same period in 2025. Net flows for the six months ended June 30, 2026 were comprised of $3.7 billion of net long-term inflows and $0.3 billion of short-term outflows.

Investment performance:

•
57 of our Victory Capital mutual funds and ETFs had overall Morningstar ratings of four or five stars and 60% 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, 68% over a three-year period, 65% over a five-year period and 81% over a ten-year period. On an equal-weighted basis, 66% of our strategies have outperformed their benchmarks over a one-year period, 64% over a three-year period, 67% over a five-year period and 69% over a ten-year period.

Financial highlights:

•
Total revenue for the three months ended June 30, 2026 was $435.4 million compared to $351.2 million for the same period in 2025. For the six months ended June 30, 2026 and 2025, total revenue was $823.4 million and $570.8 million, respectively.

•
Net income was $139.4 million for the three months ended June 30, 2026 compared to $58.7 million for the same period in 2025. For the six months ended June 30, 2026 and 2025, net income was $251.5 million and $120.7 million, respectively.

•
Adjusted EBITDA was $242.7 million for the three months ended June 30, 2026, or 55.8% of revenue, compared to $178.5 million, or 50.8% of revenue, for the same period in 2025. For the six months ended June 30, 2026, Adjusted EBITDA was $446.7 million, or 54.3% of revenue, compared to $294.9 million, or 51.7% 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 $182.9 million for the three months ended June 30, 2026 compared to $132.8 million for the three months ended June 30, 2025. For the six months ended June 30, 2026, Adjusted Net Income with tax benefit was $336.1 million compared to $220.9 million for the same period in 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

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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:

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