Victory Capital Q2 2024 Earnings Call Transcript

Quartr
Provided by Quartr
August 9, 2024

There are 11 speakers on the call.

Operator

Good morning, and welcome to the Victory Capital Second Quarter 2024 Earnings Conference Call. All calls are in a listen only mode. Following the company's prepared remarks, there will be a question and answer session. I will now turn the call over to Mr. Matthew Dennis, Chief of Staff and Director of Investor Relations.

Operator

Please go ahead, Mr. Dennis.

Speaker 1

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 Amunde remains subject to certain closing conditions as well as regulatory approvals. Please refer to our SEC filings for a list of some of the risk factors that may cause actual results to differ materially from those expressed on today's call.

Speaker 1

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 section of our website at ir. Vcm.com.

Speaker 1

It is now my pleasure to turn the call over to David Brown, Chairman and CEO. David? Thanks, Matt.

Speaker 2

Good morning, and welcome to Victory Capital's Q2 2024 Earnings Conference Call. I'm joined today by Michael Policarpo, our President, Chief Financial and Administrative Officer as well as Matt Dennis, our Chief of Staff and Director of Investor Relations. I will start today by providing an overview of the quarter and first half of the year. After that, I will turn the call over to Mike to review the financial results in greater detail. Following our prepared remarks, Mike, Matt and I will be available to take your questions.

Speaker 2

The quarterly business overview begins on Slide 6. The Q2 of 2024 was highlighted by the announcement on April 16 of our intention to enter into a multi dimensional agreement to become strategic partners with Amundi. We worked through the rest of the quarter to complete diligence and negotiate the definitive agreement, which was signed in early July. We do not have much additional news to report since our conference call on July 9, discussing the formal signing. We are currently developing integration plans that will allow us to provide guidance in areas such as the pace of achieving the projected $100,000,000 of expense synergies post closing, which is expected to occur late in Q4 of this year or in the Q1 of 2025.

Speaker 2

We are also targeting to incorporate the potential revenue synergies from the reciprocal exclusive global distribution agreements in our guidance prior to closing. Turning to quarterly results. We had another exceptional quarter. We ended the quarter with total client assets of $174,000,000,000 and achieved a number of quarterly records including earnings per share, EBITDA and adjusted EBITDA margin, which expanded to 53% in the quarter. The momentum of our fixed income products managed by our Victory Income Investors franchise continued in the 2nd quarter, marking the 2nd consecutive quarter of positive net flows for that investment franchise.

Speaker 2

Additionally, our ETF platform had another positive quarter of net flows and is also net flow positive year to date. The average fee rate on our AUM was 52.6 basis points in the quarter and has been consistently within a basis point of that level over the past year. We continue to strategically invest in areas that will have a positive impact on growth such as new products and new vehicle wrappers for existing strategies. These product launches can be very effective and efficient for us and we have launched several new active ETFs recently and have more in our pipeline. Moreover, we are continuing to invest in our ETF platform by hiring dedicated resources and making investments in numerous distribution partnerships.

Speaker 2

In addition, we are continuing to make investments in people and technology, particularly when it comes to data and analytics across our platform. On slide 7, we've provided more detail here than in past quarters. As a growth company, it should come as no surprise that a majority of our capital is allocated to strategic inorganic growth initiatives designed to increase shareholder value. Since our IPO in 2018, we have deployed $1,600,000,000 for strategic acquisitions, resulting in significant growth in our earnings and free cash flow. Annual net cash generated from operations has increased from $134,000,000 in our first calendar year as a public company to $330,000,000 last year.

Speaker 2

GAAP earnings per diluted share have more than tripled from under $1 to more than $3 per share last year for a compound annual growth rate of 28%. At the same time, we've accelerated return of shareholder capital. As a reminder, the proceeds we received from our initial public offering totaled $156,500,000 and to date we've returned a total of $700,000,000 to shareholders through cash dividends and share repurchases since our listing. Starting from a position of strength today, our balance sheet will solidify even more from the planned Amunday transaction. We will have even greater capacity to execute on strategic inorganic initiatives and increase capital return to shareholders.

Speaker 2

Turning to Slide 8, over the same period, our shareholders have been rewarded with a more than 300% increase in stock price from our initial public offering price of $13 per share, which excludes the $3.85 per share returned in quarterly cash dividends. Our dividends have grown more than 700% since we began paying dividends, which was exactly 5 years ago this quarter. Total shareholder return, including the impact of dividends, is 3 57% through the end of July. Our history of value creation is attributable to our unwavering principles and a unique and differentiated business model coupled with industry leading execution capabilities. The platform we have is highly scalable and provides best in class technology and operational systems for our investment franchises and solutions platform.

Speaker 2

This provides our investment professionals with a platform to focus on managing portfolios and providing the best possible service to clients. On slide 10, our investment performance remains strong with 68% of our AUM in mutual funds and ETFs earning overall 4 or 5 star ratings. This is broadly diversified encompassing 44 different products. Over the key 3 5 year periods, 60% and 77% of our total AUM outperformed their respective benchmarks. 15 of the 16 fixed income funds managed by the Victory Income Investors franchise representing 93% or about $22,000,000,000 in AUM are rated either 4 or 5 stars overall by Morningstar.

Speaker 2

Stepping back for a moment and looking at the macro environment, we are encouraged by the recent market action that is potentially signaling the start of a rotation out of just a few stocks into the broader market. The Russell 2,000 Index outperformed the large cap weighted indices to start the Q3, which may reflect the anticipated easing of interest rates by the Fed, which would bode well for many of the asset classes we manage. Should small cap and mid cap sectors narrow the valuation gap with large cap issuers, it could create a nice tailwind for many of our strategies. With that, I will turn the call over to Mike to go through the quarter's financial results in greater detail.

Speaker 3

Mike? Thanks, Dave, and good morning, everyone. The financial results review begins on Slide 12. Our average AUM in the quarter rose 2% from the Q1 to $167,500,000,000 which resulted in revenue also growing by 2% sequentially. For the first half of the year, revenues of $436,000,000 were 7% higher than the first half of last year.

Speaker 3

For the second quarter, we generated $110,600,000 in GAAP operating income with a margin of 50.4%, both of which are quarterly record highs and were supported by lower non cash operating expenses. Removing that impact, adjusted net income with tax benefit rose 5% in the quarter to $86,600,000 and $1.31 per diluted share, which is another company record. Adjusted EBITDA margin expanded by 90 basis points to 53%. Cash grew on the balance sheet to $119,000,000 during the quarter. This, along with our record high quarterly EBITDA, helped reduce our net leverage ratio to just below 1.9 times.

Speaker 3

We did not make any open market share repurchases for the 2nd consecutive quarter. We returned $32,000,000 to shareholders via our quarterly cash dividend and net settlement of shares for taxes holding for our employees. The dividend was increased by 10% in the prior quarter and the Board announced an 11% increase this quarter. This latest dividend of $0.41 per share will be paid on September 25 to shareholders of record at the close of business on September 10. Turning to Slide 13.

Speaker 3

While average AUM rose quarter over quarter, you can see that point to point AUM was lower at the end of June at $173,800,000,000 compared with the end of March. This is why we recently increased AUM. On Slide 14, we cover long term asset flows. Several of our investment franchises and our ETF platform generated positive net long term flows in the Q2. Victory Income Investors posted its 2nd consecutive quarter of positive net flows in RS Global, Integrity and NEC also had positive net long term flows in the quarter.

Speaker 3

A significant portion of redemptions in the first half of this year were out of equity strategies as investors rebalanced portfolio weightings. Despite this rebalancing activity, many of these equity strategies have even higher levels of AUM as a result of market action. Slide 15 shows a modest 2% uptick in sequential revenue compared with the 1st quarter, consistent with the higher average AUM. Our average fee rate remained steady at 52.6 basis points. Slide 16 highlights expenses recorded during the quarter.

Speaker 3

Total expenses declined by 14% to $123,800,000 compared with $144,000,000 in the Q1. The primary driver of this was a $22,000,000 reduction in operating expenses that was largely due to a change in value of consideration payable for potential earn out payments for prior acquisitions. It also reflects the return to normalized payroll tax and benefit expenses following the seasonal uptick in the Q1 of the year when minimums are reset. We have also started to incur expenses related to the Amundi transaction in the first half of the year, which partially offsets some of the overall decline. On Slide 17, we removed some of the accounting noise from these non cash items as well as acquisition related expenses and highlight our non GAAP metrics.

Speaker 3

We reported $1.31 adjusted net income with tax benefit per diluted share, which is the highest level in our history and is up 5% from $1.25 per diluted share we reported from the Q1. Adjusted EBITDA and adjusted EBITDA margin were also company records at $116,500,000 and 53%, respectively. Finally, turning to Slide 18, we generated This reduced our net debt to EBITDA leverage ratio for the 2nd consecutive quarter. As Dave covered in detail, we carefully manage our balance sheet to maintain flexibility and have a capital allocation strategy that directly supports our growth strategy. During the quarter, we extended our $100,000,000 revolver by 2 years.

Speaker 3

With the extension, we amended the agreement to reduce the draw pricing by 50 basis points. The facility remains undrawn. That concludes our prepared remarks. I will now turn it back over to the operator for questions.

Operator

Thank you. We will now begin the question and answer Your first question comes from the line of Etienne Ricard from BMO Capital Markets. Your line is open.

Speaker 4

Thank you very much. Dave, to circle back on product development, you've been quite active launching new products and you plan to do more. So I'm curious, in the past, what has worked well for you in terms of product design and distribution? And how is this guiding your process for new product launches? Good morning.

Speaker 2

ETFs have really been a focus for us over the last few months and will be a focus for us going forward. We've been able to launch a few new ETFs that have really caught momentum fairly quickly. And as we've designed our ETFs, we've really looked at what the market is today, what clients are looking for and how they're trying to solve issues within their portfolios. One of the ETFs we've launched recently, VFLO, V FLO, is a pretty effective vehicle for clients to get large cap exposure in this environment. And so we'll use the same process we've used in the past, which really is input from our clients, our sales professionals and some of the work we do in house to drive what kind of products we're going to launch in the future.

Speaker 4

Okay. And on capital allocation, we all know the Amundi transaction will bring leverage down. If we look over the next couple of quarters before closing, how are you thinking about the trade off between share repurchases versus adding to your cash position? And the reason I'm asking is, I presume another M and A transaction is more of a late 2025 story given the near term focus on the integration of Amundi? Thank you.

Speaker 2

So we'll use the same principles we've used in the past and we'll balance out shareholder return with allocating capital for strategic M and A. At the quarters to come, as soon as we are permitted and allowed to buy shares back, we will continue with our share repurchase program. That's an important element to our shareholder return strategy. As far as M and A, we are quite encouraged by the environment and think post the close of the Amundae transaction, we will be back really having discussions and would imagine that the environment is going to be really ripe for consolidation in the industry. And as I've said in the past, I think we are a great partner.

Speaker 2

We're still having conversations as we've always had, and we are quite encouraged by those. But in the meantime, we'll go back to share repurchases when we're permitted. We'll continue with our dividend strategy. We have pretty high levels of cash today. As you mentioned, our balance sheet will only get stronger post the Amundi transaction with more earnings and more cash flow.

Speaker 2

And so we feel like we're in a really good position to balance out dividends, share repurchases and then continue on our M and A path.

Speaker 4

And when would you expect to be allowed to resume share repurchases?

Speaker 2

That's to be determined. When we're permitted to and allowed to, we will.

Speaker 4

Thank you very much.

Operator

Your next question comes from the line of Alex Blostein from Goldman Sachs. Your line is open.

Speaker 5

Hi, good morning everybody. Can we get an update on the Mundy both kind of strategically and also get a mark to market on a couple of metrics that you guys highlighted in the past? So one, I guess, are you able to start to pursue any of the cross revenue synergies and distribution opportunities you talked about ahead of the deal? And if so, kind of how is that tracking? And then secondly, you pointed out and gave pretty explicit guidance on kind of where the EBITDA for Amundi run rates back when you announced the deal.

Speaker 5

So maybe you can help us update kind of where things stand today on the revenue and EBITDA perspective? Thanks.

Speaker 2

Good morning, Alex. I'll take the first part and then I'll have Mike take the second part. We are working on finalizing really the synergy plan on the revenue side. We feel really good about the expense synergies. We are reiterating our guidance of 100,000,000 dollars that to be realized within a lot within the 1st year and a lot within the closing timeframe and total within 2 years.

Speaker 2

So we've reiterated that. On the revenue side, we're developing those plans. We have a good idea and we'll roll those out before close. A Monday, the U. S.

Speaker 2

Business of a Monday is having a fantastic year. They've got strong investment performance. You can see from the publicly available data on their mutual fund complex, they're in positive flows for the year. And we're quite happy with how their business is tracking and how their business is performing.

Speaker 3

And I'll add to that with respect to kind of an update on kind of a mark to market. The AUM for Amundi U. S. Is in the $104,000,000,000 to $106,000,000,000 range based on kind of the last available information that we provided. We've also mentioned that their revenue realization is in the high 40s from a basis point perspective and that their current margins are in the mid-20s from an EBITDA perspective.

Speaker 3

So that frames out at least where they are today. As Dave mentioned, we're reaffirming the $100,000,000 synergies that we went out with and are working with. And those are net expense synergies. They're not inclusive of any revenue synergies. We will come back on that as we get closer to close as the plans that Dave mentioned are further refined.

Speaker 3

And we've also mentioned kind of post synergy, the long term margin guidance that we provided of 49% is still where we are and we think is highly attainable and achievable based on the growth in the business and the efficiency and the leverage that the business will have. So those are kind of the metrics that we kind of point to and really reiterate some kind of previous conversations.

Speaker 2

Yes. And one more thing to add, Alex, is the leverage post the close of the transaction should be in the low ones as we have talked about in the past.

Speaker 5

Got it. Great. That's helpful. Thanks. And then on the Victory side of things, I was hoping to maybe just dig in a little bit more into the organic growth dynamics that you guys have seen.

Speaker 5

So obviously still continued outflows. You talked about some things that are likely to improve. So on a kind of back book basis without kind of considering anything from a Mundy, What seems most interesting and exciting where you guys could see an acceleration in inflows over the next couple of quarters?

Speaker 2

Yes. So we've seen some, as Mike mentioned in his prepared remarks, we've seen some rebalancing from clients in some of our strategies that where we have not been fired or the client has not left, but really have just rebalanced given some of the market action. We've seen a little bit of a delay in institutional fundings, which we should see pick up in the 3rd Q4. But where we've seen some really nice activity is in our ETF business, in our fixed income business, in our global product and we're quite excited about some of the different areas where we're seeing growth as we think the market is getting ready to change and as the Fed is getting ready to reduce rates, we think we're going to be a beneficiary in in some of those products.

Operator

Your next question comes from the line of Kenneth Lee from RBC Capital Markets. Your line is open.

Speaker 6

Hey, good morning. Thanks for taking my question. I think in the prepared remarks, you talked about incurring some Amundi related expenses. Just wondering if you could just quantify that and whether that's sort of like an ongoing expense to Eclipse transaction? Thanks.

Speaker 3

Yes. Thanks, Ken. Yes, I think the expenses that we've incurred to date really have been around getting the transaction to where it is today. So think about it as signing the definitive agreement. So most of that has been around advisor and legal expenses.

Speaker 3

It's been a couple of $1,000,000 that we've incurred to date. I think we'll see some incremental costs related to the transaction as we move through the rest of the year until closing. Nothing that we expect to be significant or out of the norm with respect to transactions like this. Got

Speaker 6

you. Very helpful there. And then just one follow-up, if I may. Thanks for the color around institutional investor allocation across the clients you're speaking with and whether we could see some increased pickup there? Thanks.

Speaker 2

Yes. There's a real interest from a lot of our clients, both on the intermediary side and on the institutional side around fixed income. As I think the Fed people anticipate the Fed is going to lower rates. And so we're pretty well positioned there with our Victory Income Investors franchise with their active ETFs. And so we're encouraged.

Speaker 2

There's a lot of discussions. And I think as we move to the next Fed meeting, I think you'll see a lot more activity there and a lot more allocations coming out of cash and going into various fixed income vehicles.

Speaker 6

Great. Very helpful there. Thanks again.

Operator

Your next question comes from the line of Ken Worthington from JPMorgan. Your line is open.

Speaker 7

Hi, good morning, Dave and Mike. Thanks for taking my question. This is Michael Cho in for Ken Worthington. My first question, I just wanted to talk through and follow-up on some of the comments you made. You talked about the potential market rotation possibly helping Victory's midcap equity product valuation performance ahead.

Speaker 7

I mean, if we just look at the midcap product performance over the last year or so, how much of an impact do you think that's had on net flows into your SMID cap equity products? And I guess conversely, when might you expect or if there's any lag in terms of inflection and flows if any of those valuation gaps narrow ahead?

Speaker 2

Yes. I think the market has been pretty narrow and has been focused on the large cap side. And so small caps and mid caps have been undervalued when you look at historical multiples. And so we think the broadening out of the market is really encouraging. Our small and mid cap performance when you look at it in total is really competitive.

Speaker 2

And I think when clients look at where dollars are going, where valuations are, I think small and mid cap become a pretty appealing big become pretty appealing asset classes. So we think we're going to have some tailwinds there. I think with the market broadening out, I think will help active managers, and I think we will participate in that. But we have excellent teams. We have a number of different small and mid cap managers that all have their own style and all have their own edge in the market.

Speaker 2

And so we're pretty encouraged by that. And we also just think generally that those are asset classes that are going to have good market action, which we should just benefit from just having assets in those asset classes.

Speaker 7

Okay, great. Thanks for all the color. My follow-up, I just want

Speaker 3

to touch on fee rate.

Speaker 7

I realize there's always some nuance with mix in terms of assets and vehicle channels. But headline fee rates are down a touch again this quarter. Can you just talk for any sort of underlying trends and curate that the product or strategy levels?

Speaker 2

There's really no trend. It's really just asset mix and distribution channel mix. We have been pretty consistent with our fee rate within a basis point when you go back and look historically. And it's going to ebb and flow each quarter depending on market action and where we see inflows and outflows. But there's no pricing pressure to speak about in any of parts of our business other than what's the general normal constraints of traditional asset management.

Speaker 2

But it's been within the one basis point when you go back and look historically. The only change we've had really in the fee rate was when we did the Westend acquisition, which just was a lower basis point type platform and really just brought our fee rate down. But you can see, I think most importantly for us, the way we look at it is we are very margin focused and you can see that our margins have held up and actually have expanded during times where fee rates have dipped a little bit or where they've gone up. I think we look at our business really from a margin lens and not necessarily from a fee rate lens.

Speaker 3

Okay, great. Thank you so much.

Operator

Your next question comes from the line of Matt Howlett from B. Riley Financial. Your line is open.

Speaker 8

Okay, thanks. Good morning. Real quick, is the pro form a fixed income for the deal still around 24% or is that nudging up here a bit with the strong performance?

Speaker 3

Yes, really no change. It's in that same range of about a quarter of the pro form a business going forward.

Speaker 8

Got you. Okay, good. I just wanted to check that. And then the second thing, new energy capital, I haven't seen that sort of pop up here. I look like we had a good quarter.

Speaker 8

Can you just talk about what's going on? And then, of course, what the appetite is for your more alts in the portfolio? Just how you're thinking about that?

Speaker 3

Yes. I think what you saw in the quarter really was they completed a raise of their 6 funds, which was really the first fund under the Victory ownership has been completed. I think the appetite is still strong. We're seeing demand. I think some of the constraints just with respect to private markets and capital allocation are impacting that.

Speaker 3

But again, they were successful in raising their first fund underneath Victory. I think you saw that in some of the information that we provided, which was why they had a net flow positive quarter. And we're continuing to be bullish on the asset class. Their performance remains very strong. And they're doing exactly what we expected them to do.

Speaker 3

They're good investors in a really good asset class and we're bullish on the future.

Speaker 8

You're going to have a lot of excess capital here coming out of the deal. When you think about doing future deals, David, I mean, how do you think about the interplay by doing I mean, you can issue debt, your currency is going to have a much higher valuation presumably. I mean, what do you think about how you look at the balance sheet for M and A going forward? And then, can I ask sort of what you're targeting now with that distribution agreement?

Speaker 2

Yes. I think post the close of the Amunde acquisition, the environment is going to be I think it's going to be the golden era of consolidation in the asset management business. I think you're going to see an acceleration of consolidation and we are going to have a really flexible balance sheet where our leverage will be low, we'll be generating a lot of cash and we have lots of different tools to do acquisitions. I think we've shown that over the years where we've done, we've issued debt, we've issued equity with the Abunde transaction. We've done earn outs.

Speaker 2

And I think we're going to be in a great position to do acquisitions and we're as part of our strategic plan to be part of the consolidation. We're going to be targeting larger transactions as you've seen over the years where the transactions have grown as our business has grown. And I think we'll continue to do that and that will be our focus. The distribution agreement that we have with the Monday outside the U. S, I think will make us a really desirable partner for many because it will open up not just a sizable U.

Speaker 2

S. Intermediary effort, which we'll have, but it will open up the rest of the world.

Speaker 8

And any sort of target now? Are you just looking for the best value? Or is there any geography or any type of asset class you'd want to target? Obviously, alternatives could be a big area for you guys over time?

Speaker 2

Yes. I think we always start off with we're looking for great companies that fit with us and that make our company better and match us culturally. Monday is a great example of that. The USAA Investment Management business was a great example of that. The RS Investments business was a great example of that.

Speaker 2

And so we'll continue down the path we have. We never start with a specific asset class we're looking at. We're really looking at can we do a transaction that's going to make our business better, create shareholder value and that will be the guiding principles for us going forward.

Speaker 8

Certainly got a great playbook. Thanks a lot.

Operator

Your next question comes from the line of Michael Cyprys from Morgan Stanley. Your line is open.

Speaker 9

Hey, good morning. Thanks for taking the question. Maybe just circling back on ETFs, I'm just hoping you could maybe update us a little bit on your ETF strategy, how you're thinking about potentially launching new products and putting marketing muscle behind that? And as you think about new products to launch, how are you thinking about smart data versus active versus even clones of existing strategies that you have, including maybe even introducing an ETF share class for existing strategies and funds? Thank you.

Speaker 2

So we are investing in our ETF platform. We've hired some dedicated resources around the sales side of it. We're partnering with different distribution platforms to be exclusive or premier ETF providers. We've really leaned into training our sales group as well. So it's an area of focus for us because we think that we have a great platform.

Speaker 2

We think we have a great product set. As far as product launches going forward, I think all of the categories you just listed are all within the queue of things that we're evaluating. Each one of those areas has its own nuances that we will look at. Some of those things we'll just come out with. We want to make sure that we do our work and we want to make sure that we don't do anything that's not saleable.

Speaker 2

But there really isn't anything I'm willing to share an open forum on what exactly we're going to do. But I would tell you all of those items you listed out are things that we're evaluating.

Speaker 9

Okay, great. And then just a follow-up question on capital management. So you hiked the dividend. I think that implies around a 30%, 32 payout or so on at least this quarter's earnings. So just curious how you're thinking about sizing the dividend here and particularly as you look forward pro form a statement, how you're thinking about capital allocation.

Speaker 9

Clearly, the dividend has moved up significantly over the years. I remember in years past, there was a view to skew more of the capital towards either buybacks or even M and A. So curious how you're thinking about that? And then on buybacks, you mentioned that you'd resume once permitted. Can you just elaborate on what the restriction is you have in place and what would cause that restriction to lapse and any thoughts on the timeframe from when you'd expect that restriction to lapse?

Speaker 9

Thank you.

Speaker 2

Yes. So let me start off with the dividend. I don't think we're targeting a specific payout ratio. We look at it every quarter. We look at the facts and circumstances.

Speaker 2

The dividend has grown as our stock price has grown as we listed out on our presentation. So I think it's grown kind of in line with that. And then as far as the repurchases, we have balanced out repurchasing our stock and our dividends, I think quite nicely over the years. The primary use of our balance sheet and our capital is to do strategic acquisitions. I think we referenced a $1,600,000,000 number that we've allocated to strategic acquisitions since our IPO.

Speaker 2

So the capital allocation is really still to balance out strategic acquisitions where most of the capital will go and then dividends and share repurchases. The share repurchases, the restriction around share repurchases is really around the ability to buy shares when you're closing a transaction. And so there'll be facts and circumstances when windows open up, whether we can buy shares back. I don't have a date for you on that or a quarter, but as soon as we're permitted to, we will resume it. The Board has authorized a $100,000,000 plan and we're not too far into that plan.

Speaker 2

So we have plenty of capacity there. It is part of our capital allocation. It's an important part of our capital allocation strategy as well.

Speaker 9

Great. Thank you.

Operator

Your next question comes from the line of Adam Beattie from UBS. Your line is open.

Speaker 10

Thank you and good morning. I want to ask about flows by channel and the trend there. We've had some discussion around institutional. Sounds like it's been a little bit sluggish just given some reallocations, but the clients have been retained. So, maybe improving ahead.

Speaker 10

But just on the other channels, retail and direct, what the trends you've seen there are? And some of your peers have actually mentioned that retail tends to come back a little bit sooner, a little bit less friction maybe than institutional. So just wondering to the extent that the rotation and broadening of the market persists, whether that's been your experience in the retail channel and whether you would expect that in future? Thank you.

Speaker 2

A lot of the rebalancing has come out of the institutional channel. The institutional channel has historically been an organic grower for us. This year, we've seen in this quarter, we've seen a number of rebalances out of sub larger clients. So as you said, we've retained the client, but they rebalanced or reallocated some dollars away. We've also seen a little bit of a delay in fundings on the institutional side, which we expect to pick up in the 3rd Q4.

Speaker 2

So we're still pretty bullish on that channel. On the intermediary channel, we've seen some outflows in our mutual fund business. I think just generally speaking, giving the market environment, but we've also seen nice momentum in certain mutual funds and we've seen nice momentum into our ETF business and we see that picking up and gaining momentum as the year progresses. The direct business has been pretty steady from a gross and net perspective, and we really have not seen a change there. As the market broadens out, we would expect that all of the channels would grow.

Speaker 2

It is in our experience that one channel comes back faster than another. I think it's very client specific on the institutional side. And then on the intermediary side, we haven't seen any real distinction with that channel versus other channels.

Speaker 10

No, that's helpful. Appreciate the detail. And then maybe a bit of an admin check on the Amundi deal. During the quarter, we had a couple of ad hoc announcements and developments. So just wondering what the next milestone is that you would expect and if possible maybe broad timing around that?

Speaker 10

Thank you.

Speaker 2

Yes. So the next milestone would be the close, which we have publicly said would be the end of 2024 or the early part of 2025. And that's really the next milestone for the transaction. Okay. So no more interim steps?

Speaker 2

None. Not material anyway. Yes. Yes, correct.

Speaker 3

Okay.

Speaker 2

Thank you very much. Appreciate it.

Operator

And that concludes our question and answer session. I will now turn the call back over to Mr. David Brown for some final closing remarks.

Speaker 2

Thank you. And thank you for your interest in Victory Capital. We look forward to keeping you updated during the second half of the year on the business as well as the progress we're making as we work towards closing the Amundi transaction. Have a wonderful day. Thank you.

Operator

This concludes today's conference call. Thank you for your participation. You may now disconnect.

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Earnings Conference Call
Victory Capital Q2 2024
00:00 / 00:00