Victory Capital Holdings, Inc. (NASDAQ: NASDAQ:VCTR) has reported a robust financial performance for the first quarter of 2024, showcasing significant growth in client assets and a steady fee rate. The company's strategic collaboration with Amundi is poised to enhance its global reach and product offerings, with the transaction expected to conclude by the year's end. Victory Capital's financials reflect an increase in net income and a record-high adjusted EBITDA, while the company proceeds with shareholder returns and anticipates further growth from strategic investments and an expanding international presence.
Key Takeaways
- Victory Capital's net long-term flows became positive in March, with total client assets growing over 5%.
- The fee rate on AUM held steady at 53 basis points, and the adjusted EBITDA margin reached an industry-leading 52.1%.
- GAAP net income for the quarter rose to $55.7 million, with adjusted EBITDA growing by 4% to $112.4 million.
- Adjusted net income per diluted share increased by 9% from the previous quarter and 16% year-over-year to $1.25.
- The company made a significant earn-out payment for the WestEnd acquisition and returned $35 million to shareholders through dividends and share repurchases.
- The strategic partnership with Amundi is set to expand global distribution and increase non-U.S. client assets to 15%.
Company Outlook
- Victory Capital maintains a positive outlook, with a focus on new product development, including vehicle wrappers, ETFs, and data analytics.
- The company is confident in its investment strategies to support organic growth and competitive investment performance.
- The Amundi transaction is expected to close by the end of 2024, enhancing Victory Capital's international presence and distribution capabilities.
Bearish Highlights
- The company reported net long-term AUM outflows of $1 billion, despite overall growth in sales and assets.
- Approximately 97% of client assets are managed for U.S. clients, indicating a heavy reliance on the domestic market.
Bullish Highlights
- Victory Capital's strategic investments and the upcoming Amundi transaction are expected to drive long-term growth.
- The company's strong balance sheet flexibility, with $80 million in cash and a net leverage ratio of 2.0x, supports future growth initiatives.
Misses
- There were no significant misses reported in the earnings call.
Q&A Highlights
- Executives expressed confidence in maintaining a 49% margin post-Amundi acquisition, with a track record of successful integration and expense realization.
- Victory Capital is set to realize $100 million in expense synergies over two years from the Amundi deal.
- The company plans to leverage the distribution agreement with Amundi to sell their products in the U.S. and distribute Amundi U.S. products internationally.
In conclusion, Victory Capital's first quarter of 2024 has been marked by financial growth and strategic developments, with the company looking forward to the completion of its partnership with Amundi. The company remains focused on leveraging this transaction to expand its global footprint and diversify its product offerings, while also delivering value to shareholders and maintaining operational efficiency.
InvestingPro Insights
Victory Capital Holdings, Inc. (VCTR) continues to demonstrate financial resilience and strategic growth, as reflected in its recent quarterly earnings report. To further understand the company's performance and potential, let's delve into some key metrics and InvestingPro Tips that investors should consider:
- The company's Market Cap stands at a substantial $3.37 billion, underscoring its significant presence in the investment management industry.
- With a Price/Earnings (P/E) Ratio of 15.06, and an adjusted P/E Ratio for the last twelve months as of Q4 2023 at 13.2, Victory Capital shows a reasonable valuation compared to earnings, which may attract value-focused investors.
- The Dividend Yield as of early 2024 is 2.56%, reflecting the company's commitment to returning value to shareholders, a commitment further evidenced by Victory Capital having raised its dividend for 5 consecutive years—an InvestingPro Tip that highlights the company's shareholder-friendly practices.
Investors may find additional insights with InvestingPro, which lists 6 more InvestingPro Tips for Victory Capital, providing a comprehensive analysis of the company's performance and future outlook. To explore these valuable tips and gain a deeper understanding of Victory Capital's investment potential, consider using the coupon code PRONEWS24 for an additional 10% off a yearly or biyearly Pro and Pro+ subscription at InvestingPro.
Victory Capital's strategic initiatives, such as the partnership with Amundi, are set to enhance its global reach and product diversity. This forward-looking approach, combined with the company's solid financials and commitment to shareholder returns, positions Victory Capital favorably for future growth. Investors can stay informed and make data-driven decisions by accessing real-time metrics and professional insights on InvestingPro.
Full transcript - Victory Capital Holdings Inc (VCTR) Q1 2024:
Operator: Good morning, and welcome to the Victory Capital First Quarter 2024 Earnings Conference Call. All callers 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. Please go ahead, Mr. Dennis.
Matthew Dennis: 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. Please note that Victory Capital's actual results may differ materially from these statements. 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. 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. Reconciliation 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 slide presentation accompanying this call, both of which are available on the Investor Relations portion of our website at ir.vcm.com. It is now my pleasure to turn the call over to David Brown, Chairman and CEO. David?
David Brown: Thanks, Matt. Good morning and welcome to Victory Capital's first quarter 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. After that, I will provide a quick summary of the Memorandum of Understanding with Amundi that we announced last month before I 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. The quarterly business overview begins on Slide 5. During our last earnings call, we commented on our improving business dynamics in the beginning of a constructive environment we were seeing in sales activity as 2023 came to a close. This momentum continued through the first quarter with both gross and net sales reaching their best levels in more than a year during the first quarter of 2024. Our net long-term flows were positive in March and total client assets rose more than 5% in the first quarter, aided by positive market action. We ended the quarter with a little more than $175 billion in client assets, providing us a good jump-off point as we entered the second quarter. The fee rate on our AUM was 53 basis points and has been consistently within a basis point of the same level for the past year. Adjusted EBITDA margin was 52.1% for the quarter, which is industry-leading and a testament to our focused execution combined with the efficiency and effectiveness of our operating platform. Overall, we have an optimistic outlook for our business and are beginning to realize benefits from the investments we have been making across our platform. For example, the work and investment made securing attractive shelf space on numerous intermediary platforms for the products managed by our fixed income group, Victory Income Investors, is paying off as the franchise turned net flow positive in the first quarter. Victory Income Investors specifically generated strong momentum in the retail and retirement channels, which has carried over to the second quarter as well. 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. We are spending a lot of time on our ETF lineup, associated staffing, and the positioning of our products as we continue to build on our momentum. In addition, we are making investments in people and technology, particularly when it comes to data and analytics across our platform. Turning to Slide 7, our investment performance remained strong with 69% of our AUM and mutual funds or ETFs earning overall four or five-star ratings. This is broadly diversified, encompassing 45 different products, up from 42 products at the beginning of the year. Over the critical three and five-year periods, 61% and 85% of our total AUM outperformed their respective benchmarks. And on a relative ranking basis for the trailing three years, 34 funds representing nearly half of our AUM and mutual funds and ETFs were ranked in the top quartile of their respective categories by Morningstar as of the end of the first quarter. On Slide 8, you can see our capital allocation strategy flywheels. After returning a record amount of capital to shareholders in 2023, we were restricted from conducting share repurchases due to our negotiations with Amundi throughout the first quarter. We anticipate that to change as we move through the year and progress through the different stages of the transaction. As a growth company, reinvesting in our business for organic growth and [positive] acquisitions are the best way for us to deploy capital and increase shareholder value. During the quarter, we made our first earn-out payment to WestEnd Advisors. WestEnd has continued to generate positive net flows and grow revenue since the acquisition. With the addition of WestEnd's models onto new distribution platforms and with expanding the number of financial advisors that are using their products, we expect this success to be sustained and accelerate moving forward. We are projecting a much lower leverage ratio upon the close of the pending transaction with Amundi, given the transaction doesn't include any debt. This will give us more flexibility as we look out at future acquisition opportunities. Moreover, this will provide us with a great foundation return shareholder capital in multiple forms and even higher rate moving forward. One of the major objectives for the transaction is to provide Amundi's global distribution network with more U.S.-managed investment products and strategies. This perfectly aligns with our inorganic growth strategy of bringing new products onto our platform through acquisitions, and these new products will be distributed through their global distribution network. Turning to Slide 9, I will quickly recap our MOU with Amundi. This is a strategic and multidimensional transaction that will materially and positively transform our company in many ways. The exclusive 15-year global and reciprocal distribution agreements will greatly enhance the globalization of our firm by both expanding our distribution reach outside of the U.S. market and by obtaining access to a wider range of high-quality investment products managed outside of the U.S. to distribute in the U.S. The ability to feature Victory Capital's products in and sell through arguably one of the top global distribution networks in the world is extremely exciting and powerful. Through these agreements, Amundi will become the exclusive distributor of all Victory Capital products outside of the U.S., and Victory Capital will be the exclusive distributor of Amundi products in the U.S. Victory Capital will also be the exclusive provider of U.S.-managed active asset management products for Amundi's distribution network outside of the U.S., thereby opening a large and robust international distribution channel for our products to reach clients around the world. As a reminder, Amundi has a local presence in 35 countries and relationships with 1,000 third-party distributors reaching more than 100 million retail clients and more than 1,500 institutional clients. Another important aspect of the transaction is the contribution of Amundi's U.S. business into Victory Capital in exchange for a 26.1% economic interest in Victory Capital that carries voting rights of 4.9%. This ownership stake in our firm is intended to align incentives and sets the foundation for success with the reciprocal distribution agreements. The combination of the Amundi U.S. business into our business adds significant size, scale, along with complementary investment capabilities in fixed income, equity, and solution strategies. It also immediately diversifies our client base with an increased international presence as more than a third of Amundi U.S.'s AUM is currently from non-U.S. clients. While the transaction is dynamically strategic, it is also very attractive financially. The combination of the Amundi U.S. business onto our platform aligns very well with our proven acquisition and integration playbook. We anticipate the low double-digit EPS accretion by the end of the first full year of ownership and to achieve $100 million of expense synergies within the first two years of ownership, with the majority of that realized within the first year. Just to be clear, that doesn't include any revenue synergies. Since we are not using cash or debt as consideration, the incremental earnings will significantly reduce our leverage ratio and provide additional strategic and capital flexibility. This will allow us to continue reinvesting in our business to drive organic growth, as well as continue pursuing our inorganic growth initiatives while returning capital shareholders in multiple forms, all of which is consistent with our long-term strategy. On Slide 10, we highlight publicly available data from Morningstar on the Amundi U.S. mutual funds, illustrating recent net flows and fund ratings. This information represents approximately $45 billion. Keep in mind that the total AUM for the Amundi U.S. business is approximately $104 billion, and the total U.S. portion is $70 billion. So the $45 billion is just a piece of the overall total, but it does give some valuable insight into flows and investment performance. Moreover, note that we disclosed in our analyst call announcing the MOU that the non-U.S. portion of their business has had an average of $12 billion of annual gross flows a year over the last five years, and that each year has been net flow positive for this segment of their business over that same timeframe. Net flows are shown by asset class. As you can see, their total U.S. fund complex has been net flow positive for year-to-date 2024. With net inflows and fixed income and solutions products being partially offset by net outflows in equity funds. Given Amundi U.S.'s strong investment performance and the fact that 77 percent of their mutual funds are rated four or five stars overall by Morningstar, we are projecting that the net flow profile of the business will continue to improve and benefit further from our added distribution resources and relationships post the close of the transaction. We are continuing to work through the final pieces to get to a definitive agreement and expect to announce the completion by the end of June with the closing expected by year end. With that, I will turn the call over to Mike to go through the quarter's financial results in greater detail. Mike?
Matthew Dennis: Thanks, Dave, and good morning, everyone. The financial results review begins on Slide 12. Average AUM increased 8% quarter-over-quarter and revenue rose $10.1 million to $215.9 million. Revenue realization remains steady with any quarter-over-quarter change the result of asset and/or vehicle mix. GAAP operating income was $84.8 million and GAAP net income rose slightly to $55.7 million or $0.84 per diluted share, up from $0.82 per share in the prior quarter. Adjusted EBITDA rose 4% to $112.4 million in the quarter, marking the highest quarterly level in over a year. This was more than 13% higher than in the first quarter of last year. Margins were 52.1% for the quarter, which includes the impact of seasonally higher payroll tax and benefits that reset at the start of the year. We continue to guide to a long-term adjusted EBITDA margin of 49%. Adjusted net income with tax benefit per diluted share increased 9% from the fourth quarter and by 16% from the same quarter in 2023, reaching $1.25. We continue to hold elevated cash balances to enhance our flexibility and ended the quarter with $80 million in cash. During the quarter, we made an earn-out payment of $80 million for the WestEnd acquisition, reducing the overall earn-out liability on our balance sheet. Our net leverage ratio remained at a modest 2.0x at quarter end. We returned $35 million to shareholders in cash dividends and share repurchases in the quarter and announced a 10% increase in our quarterly cash dividend to $0.37 per share in the second quarter, which will be paid on June 25 to holders of record on June 10. Turning to Slide 13, our total client assets remain balanced from a distribution channel perspective with the channel mix remaining very consistent over time. I would highlight that approximately 97% of our AUM is being managed for U.S. clients. Enhancing our geographic diversification is one of the benefits of the Amundi transaction. On a pro forma basis, post the close of the Amundi transaction, approximately 15% of our assets will immediately come from non-U.S. clients and the global distribution agreement to promote and sell our products through the Amundi distribution engine is expected to increase the proportion of assets that we manage for non-U.S. clients over time. Slide 14 illustrates our flows. Long-term growth and net flows improved quarter-over-quarter and year-over-year, reaching their best levels in more than a year, with long-term growth sales of $7 billion and net long-term AUM outflows of $1 billion. Positive momentum accelerated towards the end of the quarter with long-term net flows turning positive during March. We have continued confidence that our investments to support organic growth have us well positioned. We have very competitive investment performance and five of our investment franchises were net flow positive for the quarter. That list includes Victory Income Investors, WestEnd Advisors, Integrity, Sophus, and RS Global. Moreover, our institutional channel continues to be an area of strength as it posted another quarter of positive net flows. Revenues are highlighted on Slide 15. To enhance transparency, we began breaking out other assets in the first quarter, because these assets are managed uniquely and carry unusually low fees that are not representative of our typical client assets. For consistency, prior periods have been restated. Firm-wide, the average fee rate on total AUM remains steady at 53 basis points, which is within our expected range. This 53 basis points excludes the $5.1 billion of other assets that had an average fee rate, of just 3.5 basis points. Turning to expenses on Slide 16, on a GAAP basis, operating expenses rose mainly due to higher non-cash expenses. In particular, the change in valuation of contingent earn-out payments rose to $12.2 million, which was more than $8 million higher than the fourth quarter. We also incurred over $1 million more of acquisition-related expenses in the quarter, and had higher compensation expenses related to the higher level of earnings and the seasonal resetting of employment taxes and benefits in the first quarter. These increases offset lower general and administrative expenses, and depreciation and amortization in the quarter. Non-operating expenses were essentially flat on a quarter-over-quarter basis. On Slide 17, we cover our non-GAAP metrics. Adjusted net income with tax benefit, was $82.3 million. Adjusted EBITDA was $112.4 million, representing the highest level in over a year. Adjusted EBITDA margin was 52.1% and 51.6% for the trailing 12-month period, which is ahead of our long-term guidance of 49%. We are maintaining our current guidance at 49%, which continues to provide us with the flexibility to invest in our platform. Moreover, as we have stated in the past, the margin will fluctuate quarter-to-quarter based on the timing, and nature of investments. Finally, turning to Slide 18, we continue to demonstrate strong balance sheet flexibility as we end the quarter with $80 million in cash. Our debt level remains the same, with our $100 million revolver undrawn. That concludes our prepared remarks. I will now turn it back over to the operator for questions.
Operator: [Operator Instructions] Your first question comes from the line of Alex Bolstein with Goldman Sachs. Please go ahead.
Unidentified Analyst: Good morning, all. This is Luke for Alex. Thanks for taking the question. With the products that you're set to onboard and integrate following the partnership with the Amundi and the acquisition of the Pioneer brand, how are you thinking about the organic growth trajectory of the business in the longer term? And are there any areas of the Pioneer business or aspects of the agreement that most excites you as it relates to potentially underwriting and improvement in organic growth? Thanks.
David Brown: Good morning. I'd start off by saying, the business today, as it sits, the Amundi U.S. business, is growing in 2024, as we showed, at least on the mutual fund side, on the publicly available data, is actually in a positive organic growth mode. They've got excellent investment performance, and they have a lot of momentum, and I don't see that changing throughout the year. So, we're pretty excited about, generally, the product set that they have and what they're doing today. And when you put that into our distribution network, coupled with their existing distribution network, I think that sets up to really accelerate the momentum. Specifically, their fixed income platform, given the environment that we're in and the environment I think we're going to be in over the next couple of years, is an exciting part of what they are bringing. Additionally, a third of their existing assets are outside of the U.S., so they have a pretty well-developed distribution infrastructure outside of the U.S. And then the ability for us, so the Legacy Victory products, to plug into that is really exciting. And then generally speaking, just having in the U.S. more distribution, marketing resources. And then the exclusivity outside of the U.S. through the Amundi Network really sets us up for an opportunity to have really good organic growth. And I would say that, given the environment that's coming around fixed income with our existing fixed income platform, I think we see, you know, we see the tide turning, at least from an organic growth perspective.
Unidentified Analyst: Got you. Awesome. Thank you. And one quick follow-up, if I can. Can you just give color on the asset mix and flow trends, Amundi, across the data that we can't see publicly through Morningstar? Thanks.
David Brown: I can't. It wouldn't be, it wouldn't, I don't have full transparency into it, and it wouldn't be appropriate. One thing I would add to what I had said before is keep in mind the Amundi, U.S. business does not have an ETF platform. One of the things we're anticipating is using our ETF platform, and their investment manufacturing capabilities and bringing those things together. So I think that that's another added component of what the opportunity is.
Unidentified Analyst: Appreciate the color.
Operator: Your next question comes from the line of Ken Worthington with JPMorgan. Please go ahead.
Michael Cho: Hello. Good morning. Thanks for taking my question. This is Michael Cho in for Ken Worthington today. I just want to touch on the Amundi distribution partnership here again. I realize, they have a clear economic stake to help incentivize that partnership, but can you also just talk through how some of the sales force, or the operating level incentives might be executed to just give you some confidence around that success, of the 15-year partnership?
David Brown: So outside of the U.S., we will be the exclusive provider of U.S.-manufactured active asset management capabilities. So all of the distribution outside of the U.S. that is drawing upon U.S. manufacturing, so any of the products, any of their clients that are desiring products that are manufactured in the U.S. will come from Victory Capital, the pro forma Victory Capital. So if you think about portfolios outside of the U.S. and the allocation to the U.S. markets, going forward, we will be the exclusive provider of all of those allocations. So that's pretty powerful given Amundi's $2.2 trillion and that they've got 1,500 institutional clients, really a local presence in 35 countries around the world, and I believe they're in about 1,000 distributor networks. So very, very powerful distribution, and we'll be providing them the U.S.-manufactured aspect of it. You know, as today, the Amundi U.S. businesses, and others will now have the exclusive right to do that.
Michael Cho: Okay. Great. Thank you. And then just to follow-up on some near-term trends, I think you called out net flows turn positive in March. I'm just curious, what was kind of the key driver for that inflection exiting the quarter? And then, any thoughts on flows that you saw in April and maybe into May as well? Thanks.
David Brown: So, we've seen a turn, as we highlighted in the prepared remarks, on the fixed income side. So Victory income investors, our ETF platform Victory shares, our institutional channel continues to be strong. And then generally speaking, our investment performance is really, really solid, and that's supporting good momentum. Looking into the second quarter, we don't give guidance quarter-by-quarter on flows, but we don't see any of that really changing, ex any market - change in market conditions.
Michael Cho: Great. Thank you.
Operator: The next question comes from the line of Etienne Ricard with BMO Capital Markets. Please go ahead.
Etienne Ricard: Thank you and good morning, team. So clearly another strong margin quarter. As you look into closing the Amundi U.S. transaction. What gives you confidence that Victory can maintain its operating discipline and margin levels, considering the meaningful increase in AUM? In other words, we typically think of scale as an advantage for margins, but in Victory's case, up to what point in scale do you believe you can maintain the culture and operating efficiency?
David Brown: Well, I think we've guided towards keeping the 49% guidance we have today, and we reiterate that in the pro forma business. We've obviously exceeded the 49% guidance over the last few years, but we've also highlighted that it'll ebb and flow based on the investments we're making. So, we're very confident in the 49% in the pro forma organization. Our track record in history of integration, and when we talk about integration, we talk about smartly integrating, I think is top of the industry. And we have a lot of confidence that the principles of Victory Capital, are the right principles on how to run an investment management organization for the future. And we think that those principles will be able to partner with Amundi U.S. And those people that work for Amundi U.S. will adopt the principles we have to maintain our culture. I don't think that anything that we have seen, all the diligence we have done, and we have been working on this for a while, give us any reason to believe that we wouldn't be able to maintain our culture and the margins in our operating discipline going forward. And even as we think about additional acquisitions post Amundi U.S., it would be the same story.
Etienne Ricard: Okay. Great. And staying on the topic of expenses, how do you think about the pace of realizations on the $100 million of expense synergies for '25?
Michael Policarpo: Good morning. Yes, so I think as we had said in our prepared remarks, and Dave just highlighted, the level of the work that we've done, we're very confident in the $100 million expense synergy that we had put out there, and had commented on. We also said that we expected to realize them over two years, really with the majority of those coming in the first year. And as Dave mentioned, our track record and our history of integration and expense realization, I think kind of speaks for itself. And we have a pretty time-tested and well thought out plan with respect to integration. And we believe we'll execute on that with respect to the Amundi acquisition as well.
Etienne Ricard: Great. Thank you very much.
Operator: The next question comes from the line of Michael Cyprys with Morgan Stanley. Please go ahead.
Michael Cyprys: Great. Thank you. Just wanted to circle back to the distribution agreement that, you have with Amundi with respect to selling their products into the U.S. Just hoping you might be able to elaborate on how that might work. Maybe you could talk about the economics, what that can mean for Victory, and what strategies of Amundi's do you think could make the most sense to sell into the U.S. over time? How many products do you envision selling and how do you navigate prioritizing selling their products in the U.S. versus your products?
David Brown: Yes, I'd start off by saying is that they have a good - investment manufacturing capability outside of the U.S. There are a few products that today we think there's an opportunity to sell. One maybe example would be an emerging market debt product, or maybe a product that is like that maybe through an institutional channel. So, there will be a number of products that they have based on the market conditions that will move through different channels. As far as priorities, our sales force is used to selling, and has come up with a system of selling multiple products, different asset classes. So it isn't really about what the prioritization is. It's really about accepting what the client demand is. So, we're well, this is really part of what we do today. So we're well-schooled on how to do that. The economics of it will be very similar to what from our perspective, very similar to what we have today of selling our own products. So the margin requirements we have with products of our own will be the same, really will be the same margins, with products that we sell into the U.S. And it really just gives us another avenue to get closer to different clients by being able to offer them a wider range of investment solutions and capabilities.
Michael Cyprys: Great. And just a follow-up question on the margin profile. I hear you on reiterating the synergies coming through, you're sticking to the 49% margin profile, but just curious as you think about this large transaction, it seems like it can enhance your scale and revenues coming on at high incremental margins. So just hoping maybe you could elaborate on some of the moving pieces there, and offsets that lead you to maintain the margin outlook. Maybe you could talk about how much you're looking to spend. It seems like maybe there's an underlying net-net spend. How much you're looking to invest back in the business and what are the top areas?
David Brown: Yes. So we've guided towards $100 million of synergies and then the 49%. The $100 million of synergies is a net number. We will invest a significant amount of money into the platform. And a lot of that will be into the U.S. intermediary portion of our business, distribution portion of our business. And so, we will continue to invest on our platform. I think one of the major advantages we have is the way our platform is set up. Is we have the ability to invest, and invest in a way where it's very efficient. And I think you can see that by the margins. So a lot of what we're going to be doing is investing, even though you see $100 million of cost synergies, it'll be a net number. And we will be investing heavily back into the platform as we are today.
Michael Cyprys: Great. Thank you. [Operator Instructions] Your next question comes from the line of Adam Beatty with UBS. Please go ahead.
Adam Beatty: Thank you and good morning. First, I wanted to focus in on solutions a little bit. Obviously, WestEnd doing well. The Amundi U.S. business had positive flows in their solutions business. So hoping to get maybe a fuller picture of the solutions business that Amundi U.S. will bring in, the complementary nature of it versus what Victory already has, and whether or not those businesses will be kind of integrated into one sort of solutions provider, or remain somewhat separate? Thank you.
Michael Policarpo: Good morning, Adam. The solutions business for the Amundi U.S. business is really a multi-asset offering. So very similar to the offering, some of the offerings that Victory has. Within Victory, our solutions include multi-asset. It also includes some risk-based as well as target date product, as well as our rules-based ETF business. We don't envision consolidating the Amundi U.S. solutions business into our platform. They are distinct enough and will remain under the kind of current Amundi U.S. investment team platform. We are excited about the opportunity to take on additional solutions offerings. And we think there's an opportunity, as Dave had mentioned earlier, to take some of the products that Amundi U.S. offers and package those into ETF offerings that we think will have a tremendous opportunity to see organic growth going forward that they currently don't have an ETF offering.
Adam Beatty: Great. That's helpful. That fills it out. Thanks. And then just as a follow-up, kind of the reverse of Mike's question around distribution, in terms of Victory and Amundi U.S. products being distributed through Amundi outside the U.S., just wondering, you mentioned that a lot of those products right now obviously come from Amundi U.S., but that there are also other providers. So just wanted to get a sense of kind of the asset mix within those other providers where Victory might be kind of taking some share there? Thank you.
David Brown: I think there's a couple elements to it. First is, there's probably an under-allocation from the Amundi client into U.S. products. So part of this is actually open space that we'll be taking. And you think about the evolving platform that they have, where they are in China, they are in India, and what's happening in some of those countries, around allocation to US markets over a longer period of time. So some of this is perspective on what is, we anticipate happening. So that's the first piece. I think the second piece is, there are other solutions that are on their platform outside the U.S. I would say that we'll probably take some of that market share, I would presume. And they'll have an economic incentive to want to do that, because they'll have a 26.1% economic stake in our business. And I would also just reiterate that the Amundi U.S. business, if you average it over the last five years, its $12 billion a year in gross flows. That part of their business has been net flow positive over the last five years. And then, I think with our added product set, and then as I mentioned before, our desire and ability to reinvest in the platform, I would imagine that would only accelerate as we think about going forward. And then, you put just underneath all of that is, we have excellent investment performance from a firm wide perspective. So the products we would be able to offer the Amundi clients would have really good investment performance. And then, we also have the ability to create new product, and go out and acquire new product.
Adam Beatty: Great. So it sounds like, yes, more of a bigger pie situation than straight substitute. Thanks a lot. Appreciate it.
David Brown: Correct.
Operator: I'll now turn the call back over to David Brown for closing remarks. Please go ahead.
David Brown: Thank you. And again, thank you for your interest in Victory Capital. We look forward to keeping you updated on the Amundi transaction as we move forward and to the definitive agreement that we anticipate by the end of the second quarter. Have a wonderful day.
Operator: This concludes today's call. Thank you all for joining, and you may now disconnect your lines.
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