Victory Capital (VCTR) Q1 FY26 earnings call: guidance and Q&A

What opportunities exist to further energize ETF growth, and what are the product launch priorities for the next 12-18 months?

Management highlighted expanding international distribution into Asia and Latin America, launching new ETF products (including from the Pioneer franchise), and increasing distribution resources (people, marketing). They noted the average ETF fee rate of 35 bps aligns with firm-wide margin requirements.

“In our prepared remarks, I spoke about expanding the distribution outside the U.S. Today, our ETFs are available throughout Asia, and we're opening up some countries in Latin America. So that will help us with our growth.”

asked by Y. Cho · answered by David Brown

What supported the fee rate expansion in Q1, and why is it expected to compress to the 46-47 basis point range going forward?

Management explained that Q1 included annual fees recorded to align with standard rack rates, which contributed to the higher fee rate. They reiterated comfort with the 46-47 basis point range as a long-term guidance, emphasizing that all business areas meet the firm's margin requirements.

“In Q1, we did have some annual fees that we record that really are fees that get us to our standard rack rates. There's just an accounting that we record them in the first quarter. And so we look at that over the course of a normalized period, and we're still in that long-term 46 to 47 basis point range.”

asked by Y. Cho · answered by Michael Policarpo

Can management provide more details or size the 'won but unfunded' channel?

Management stated they do not guide on a specific number for the won but unfunded business but noted it is widespread across various franchises (ETF, global products, Pioneer, Trivalent, WestEnd Advisors) and distribution channels, supporting the positive flow trajectory.

“Our won but not yet funded business, we don't guide on a number, but I can tell you that it's widespread on a number of different franchises and platforms and a number of different channels.”

asked by Unknown Analyst · answered by David Brown

Should the significant share repurchases in Q1 be interpreted as a signal that inorganic growth opportunities are not imminent?

Management clarified that share repurchases are opportunistic and complementary, not a substitute for strategic acquisitions, which remain the primary use of capital. They emphasized an active M&A pipeline, significant capacity, and the ability to pursue large deals.

“No, it's absolutely not the right takeaway. We are opportunistic with buying our shares. We want to own our shares. We think there's great value in owning our shares and the earnings power of our company. So when we have the cash available, and we think we have the ability to do a lot of different things with our capital, we'll buy our shares.”

asked by Kenneth Lee · answered by David Brown

What is driving the addition of sales and marketing resources across various channels?

Management explained that resource additions are multifaceted, driven by the expansion of the international channel and intermediary distribution. This includes adding field resources, marketing, digital marketing, and technology support across different channels, as an ongoing investment strategy.

“It's really on a number of different fronts. First, as we see our international channel expand, we're adding resources to support the growth there. And so we're adding resources in the field and really also from a support structure.”

asked by Kenneth Lee · answered by David Brown

What was the rationale behind the Janus opportunity, and should similar-sized deals be expected in the future pipeline?

Management stated that the Janus opportunity was seen as creating a 'phenomenal business' and would have made their company better. They confirmed a focus on larger acquisitions to reach their $1 trillion AUM goal, while also remaining opportunistic for smaller strategic deals, noting an extensive and active M&A pipeline.

“So I think the Janus opportunity was well covered in the press. We thought that the Janus opportunity, buying that business would create a phenomenal business coming out the other side, and it was a business that we thought we could buy and it would make our company better.”

asked by Anthony Corbin · answered by David Brown