Title

Presentation

Operator: Good morning, and welcome to the Victory Capital’s First Quarter 2025 Earnings Conference Call. All callers are on 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. 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, which 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. 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 2025 earnings 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 with an overview of our first quarter results, then I’ll provide an update regarding the closing and integration of the Amundi transaction. 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 answer your questions. The quarterly business overview begins on Slide 5. We ended March with $171 billion of total client assets that was down slightly from the start of the year and average AUM was approximately 1% lower versus the fourth quarter.

Gross sales improved for a third consecutive quarter and increased 41% from the last quarter, reaching $9.3 billion and with the highest level of quarterly gross sales in three years. Long-term net flows also improved for the second quarter in a row. Our net flows were negatively impacted by two large redemptions that totaled $2.7 billion which were one-time in nature. Without this, our net flows would have flipped to positive this quarter. We view the underlying activity around flows as extremely healthy and believe these two redemptions should not distort the continuous progress we are making around our organic growth profile. A good example of this progress is we continue to generate strong sales of our ETFs. We highlighted the history of our ETF platform on our last call, and by the end of the first quarter our total ETF AUM increased to more than $13 billion.

This was a 28% increase during the quarter and was up 67% versus the same time last year. Looking ahead, we see the momentum continuing with our current product lineup. We also have several ETF launches planned for 2025 and are continuing to invest in resources dedicated to accelerating our momentum on this platform. Stepping back and looking at results on a year-over-year basis, we achieved wider margins along with higher revenue and earnings on both a GAAP and non-GAAP basis. Adjusted earnings per diluted share with tax benefit was $1.36 per share, which was the second highest quarter of EPS in company’s history and a record high for any first quarter period. Adjusted EBITDA was $116 million and adjusted EBITDA margin remained very strong at 53%.

We continue to strategically invest in all distribution channels. With our enhanced scale as a result of the Amundi acquisition, we are increasing investment in areas to enhance our organic growth. In addition to more sales people in the field selling, we are significantly increasing our investment in data, technology, marketing and intermediary partnerships. Our balance sheet continued to strengthen during the quarter and our leverage ratio improved significantly following the transaction’s closing on April 1st, given that we brought on a sizable amount of earnings with no additional debt. This greatly increases our financial flexibility and enables us to act on additional strategic growth opportunities which we believe is the best use of shareholder capital.

Ongoing diligence activities are progressing quickly and we are very encouraged by some of our discussions. During the quarter, we accumulated cash, increased our quarterly dividend again and have the entire $200 million share repurchase plan still available for our use, which we will execute on in an opportunistic way. On Slide 7, we highlight the results of our acquisition and strategic partnership with Amundi. Upon closing, we are much more scaled, diversified and better positioned organization for the long-term. With assets of just over $286 billion as of April 1st, our fixed income AUM doubled as a percentage of our total assets from 14% to 28%. We have also further diversified our investment vehicles with $26.5 billion of assets under management and UCITS.

We plan to launch several vintage Victory strategies in this vehicle wrapper that are designed to be distributed to investors outside of the U.S. The proportion of retail assets under management in our channel mix rose and we also now have $44 billion of assets under management sourced from clients outside of the U.S., representing 15% of assets under management compared with less than 5% previously. Last month, we increased our net expense synergy projections to a total of $110 million and had $50 million of that goal achieved as of closing. We expect another $50 million by April 1, 2026, and much of that coming before the end of 2025. The Amundi U.S. business we acquired has continued to perform exceptionally well, generating positive net long-term flows of $1.7 billion in the first quarter of 2025, which as a reminder is not included in our numbers given we did not close the transaction until April 1st.

The investment team now branded Pioneer Investments generated excellent investment performance on behalf of clients for the first quarter of 2025. As of March 31, more than 74% of their mutual fund assets under management at either a 4- or 5-Star Morningstar rating. Turning to Slide 8, our U.S. distribution organization is positioned well for consistent organic growth as we move forward. We have substantially augmented our institutional and intermediary sales forces with additional sales professionals, allowing us to provide enhanced coverage across the U.S. Market. In addition, we have added marketing and other sales related resources to further support growth. When it comes to data, we are now able to benefit more broadly from data investments we are making.

These investments will now be used by a larger sales force, enhancing the results we are seeking to achieve. We are also leveraging the existing intermediary platform relationships with our broader product set. For example, Amundi U.S. had partner status relationships with certain intermediary platforms and we are now a benefactor of those which will give us the opportunity to add vintage Victory products on these platforms. Outside of the U.S., we now have clients in more than 60 countries and our strategies are currently available for sale via Amundi’s vast global distribution network. This includes sizable distribution partners within Europe and JVs in Asia and India. During the closing process, together with the Amundi’s distribution team, we identified several initial vintage Victory products to launch in the UCITS format and other vehicle wrappers for sales by Amundi’s global distribution sales force outside of the U.S. We are expeditiously working through the regulatory and registration process to get these products launched.

In addition, we are utilizing our VictoryShares ETF platform to develop ETFs for the Pioneer investment franchise. As many of you are aware, Pioneer has never had any of their strategies available in an ETF vehicle. Overall, we have never been so well positioned for organic growth and look forward to reporting on our progress. Moving to Slide 10, our investment performance remains strong with 67% of our assets under management in mutual funds and ETFs, earning 4- or 5-Star overall ratings by Morningstar for the period ending on March 31. This is broadly diversified, encompassing numerous distinct products. Over the key three-year and five-year periods, 64% and 65% of our total assets under management outperformed their respective benchmarks.

We were also recognized during the first quarter with eight 2025 U.S. LSEG Lipper Fund Awards based on risk adjusted returns. These awards represented several categories and performance over various time periods and are a testament to our investment professionals and what we strive to deliver for clients every day. With that, I will turn the call over to Mike to go through the quarterly results in greater detail. Mike?

Michael Policarpo: Thanks, Dave, and good morning, everyone. The financial results review begins on Slide 12. Revenue for the first quarter came in at $219.6 million, which was down approximately 5% from the fourth quarter as a result of slightly lower average AUM, fewer days in the quarter, as well as product, vehicle, and channel mix shift. Year-over-year revenue, earnings, adjusted EBITDA, and adjusted EBITDA margin were all higher in this year’s first quarter versus last year. Adjusted net income with tax benefit per diluted share of $1.36 achieved in the quarter was our second highest of all time. We ended March with $176 million in cash which was up $49 million from year end. At quarter end, our net leverage ratio was unchanged at 1.7 times.

During the first quarter, we returned $39 million to shareholders. Additionally, the Board authorized a cash dividend increase to $0.49 per share payable on June 25th to shareholders of record at the close of business on June 10th. We would like to note here that going forward we will continue to review our dividend every quarter with our Board, but anticipate moving back to an annual increase cycle with our first quarter results. As expected during April, sufficient consents were received from Pioneer clients, resulting in a post-closing adjustment whereby we will issue an additional 5.4 million shares to Amundi. This will bring their total diluted equity interest up to 26.1% with a 4.9% voting interest. Owing to the transaction, our diluted share count will increase to approximately 88.3 million shares.

Turning to Slide 13. Total client assets declined by less than 3% during the quarter, driven primarily by market action. Our AUM continues to be diversified from both a distribution channel perspective as well as by investor type within each channel and by asset class and investment vehicle. As mentioned on a prior call and beginning next quarter, we will add a new category to this chart to illustrate the non-U.S. client portion of our total AUM. As a result of the Amundi transaction, we begin the second quarter with $44 billion of AUM from clients outside of the U.S. Having a significant portion of AUM from investors outside the U.S. provides another dimension of diversification for our business. On Slide 14 we cover long-term asset flows.

2025 is off to a strong start. Gross flows were higher during the quarter, increasing by 41% over the prior quarter and 33% from Q1 2024 RS Global and Victory Income investors have seen strong activity given their strong investment performance and asset classes they invest in. We are continuing to see great investor interest in our ETFs which are active and rules based and carry an active type investment advisory fee for such products and also have strong margins. Through mid-March, we were net flow positive for the quarter. We had two large redemptions totaling approximately $2.7 billion that more than offset the positive net flows up to that. Despite these one-time items, our underlying positive flow momentum is strong and these redemptions should not take away from that point.

We are encouraged by the trajectory we are on, particularly given our newly enlarged sales force and the added resources we are dedicating to distribution efforts while also adding the Pioneer franchise products to our offerings. Our one, but not yet funded pipeline remains sizable indeed from a product, franchise and channel perspective. Finally, Pioneer Investments products generated positive long-term net flows of $1.7 billion during the first quarter and that momentum has continued. Slide 15 shows the sequential revenue over the past four quarters. Our average fee rate was 51.2 basis points in the period. This is within our expected range, but the decrease from prior quarter primarily attributed to product, vehicle and channel mix shift.

Additionally, lower average AUM from negative market action in the first quarter and two fewer days in the quarter also impacted total revenue. Keep in mind, as an organization our focus is on margins while our fee rate will fluctuate from quarter to quarter. On Slide 16 we detail our expenses for the quarter. Total GAAP expenses were $138.6 million in the first quarter. The uptick in GAAP expenses is due to higher acquisition restructuring and integration costs from the Amundi transaction, which were offset by lower distribution and other AUM-based expenses which calibrated with lower average AUM for the quarter. On a cash basis, our compensation expense was 24.3%, which is in line with our guidance and is inclusive of seasonally higher payroll tax and employee benefits that reset at the start of each year.

On Slide 17 we highlight our non-GAAP metrics. We reported $1.36 adjusted net income with tax benefit per diluted share. Adjusted EBITDA and adjusted EBITDA margin were $116.4 million and 53%, respectively. These results include the impact of accelerated payroll tax and benefits that are typical for the first quarter, and I would highlight our EBITDA margin expanded 90 basis points from the first quarter of 2024. Over the next several quarters we expect to see our adjusted EBITDA margin decline slightly from its current level as we continue with our integration work and achieve our full net expense synergy target of $110 million. Once fully integrated, we anticipate no change in our long-term guidance of 49% margins. Finally, turning to Slide 18.

We generated $81 million in cash from operations during the quarter and our net leverage ratio remains steady at 1.7 times. We have positioned the balance sheet well as we enter Q2. We ended the period with $176 million of cash and post the Amundi transaction on April 1st, our leverage ratio is in the low 1s. Interest expense declined for the second consecutive quarter as our interest rate declined to 4.9% inclusive of the benefit from the interest rate hedge we crystallized in the fourth quarter of 2023. In the first quarter of 2024, our interest rate was above 6%. So we have seen our quarterly interest expense decline by more than $3 million in the past year. Our $100 million credit facility remains undrawn. That concludes our prepared remarks.

I will now turn it over to the operator for questions.

Operator: [Operator Instructions] Our first question comes from the line of Ken Worthington with JPMorgan. Please go ahead.

Michael Cho: Hi, good morning, guys. This is Michael Cho in for Ken. Thanks for taking my questions. I just wanted to start on kind of the top-line here. You called out the development of number of UCITS and to distribute Victory strategies outside the U.S. and you also talked about maybe considering Pioneer ETFs going forward as well. And so I was hoping you can maybe touch on maybe the pace of these prospective rollouts and maybe the prioritization, if any of the product lineup that you see out there? And if there’s any strategies that you think might have more considerable adoption than maybe some of the others? Thanks.

Michael Policarpo: Hi, Michael, good morning. How are you? It’s Mike. Thanks for the question. Yes, I think as we’ve said in the prepared remarks, we have been working with the distribution force at Amundi from a global perspective to identify products that are vintage Victory that we think will have success outside the U.S., and we’ve spent time with them formulating kind of a plan with respect to the product development. There’ll be a handful of UCITS that we will work with them to create and they’re kind of in that registration phase right now and would expect that they’ll be launched towards the back half of 2025. And as we think about the opportunity from which products, really if you look at the product set that Victory has and some of the opportunities that weren’t fulfilled, if you will, by the existing Pioneer product set, there’s some small and mid-cap products from a U.S. domestic perspective that we think will play very well there.

In addition, we’ve got some complementary fixed income offerings that again we think will play very nicely in the UCITS offerings for Amundi. And then there’s also some pretty strong performers that we have in the global equity space that again we think will play very nicely in the UCITS offerings outside the U.S. And so what we’ve done over the last several months is really work on education of the Victory story, education of some of those products and franchises that manage those existing offerings here in the U.S. and working to develop that rollout plan from a regulatory perspective to create those UCITS. In addition, all of our products — all of the vintage Victory products are available institutionally outside the U.S. And again, we’re working on education of the Amundi global distribution sales force.

Those products are available today. There’s no structure needed for a large institutional client to access those. And we’ve had a number of conversations really across both the existing active products that we have in some of the ETF offerings. And so we’ll see momentum there as well as we move forward through 2025, and are excited about the opportunity set from the feedback that we’ve heard to date. So, again, we’re just getting going on that. But again, as we think about it, we see a tremendous opportunity in the back half of 2025 as those structured products or co-mingled vehicles are created, and as we see momentum on the institutional side of the business.

Michael Cho: Great. Thanks Mike. Appreciate all that color.

Michael Policarpo: Sure.

Michael Cho: If I could just follow up on the — just on the margin and expense side, I mean Victory’s margin trajectory has been solid for some time now and you noticed some initial margin headwind from Pioneer, but you also increased synergy targets and you just printed 53% margins. And so I recognize you made a little bit of a comment during the prepared remarks on near-term margins, but just curious how you might flush out a little bit more color in terms of how that trajectory might evolve near-term relative to Victory’s 49% long-term margin target?

Michael Policarpo: A good question, and thanks for recognizing the prepared remarks on that. I think you’re right. We did publish 53% margins here in the first quarter. We have not changed our long-term margin guidance of 49%. I think we have continued to say that we want to have the flexibility to make investments in the business. The M&A transaction that we did with Amundi U.S. really provides a significant opportunity to make some of those investments. And so the net expense synergies of $110 million that we referenced and confirmed really includes some additional investments that we want to make. Dave highlighted a number of areas in distribution that we’re making investments and we think those will pay off longer term. But as we think about the margin profile going forward, the expense synergies will take a year to two years to recognize all $110 million.

We mentioned we had about $50 million as of closing. We’ll have another $30 million over the next six months. Expect $100 million in total in the first 12 months of ownership and then the remaining $10 million to get to $110 million over the two years post-close. So if you look logically at some of that math as we phase some of that in, there’s going to be some integration work in some different areas over the next several quarters that will see a small decline, and an immaterial decline in our margins as we work through some of those integration efforts. Again, I think we’re still bullish on the 49% long-term. As you mentioned, we’ve produced well above that over the last several quarters. But any decline in the short term until we complete the integration will be immaterial to the margins going forward.

Michael Cho: Great. Thank you so much.

Operator: Our next question comes from the line of with Alexander Blostein with Goldman Sachs. Please go ahead.

Alexander Blostein: Hi, good morning, guy. Happy Friday. Maybe just building on that last question around expense trajectory, you mentioned increased pace of investments. I was hoping you can just provide us with sort of an all-in expense growth algorithm from here, you know, with Amundi now in the fold. In the past I think Victory had quite a variable expense model. So curious kind of to what extent does integrated money changes that kind of, what’s the mix between fixed and variable expense based from here, and at what pace the fixed piece is likely to grow over time as you kind of phase in some of the synergies?.

Michael Policarpo: Alex, it’s Mike. Good morning. Good question. You know, I think with respect to Victory’s operating model, there will be no change. So as we think about the integration of the Pioneer Investments franchise and the Amundi U.S. Business, it fits very well into the existing operating model. The Pioneer Investments team will be on a revenue share. We maintain a single operating platform. We maintain a centralized distribution sales force selling all the product that Victory has. So there really is no change in the operating model for Victory post the completion of the integration. And so as you think about the model, we’ve been pretty — pretty clear that greater than two thirds of our expenses are variable. We expect that to continue as we move forward.

There’s no disruption in that. As we think about how we’re operating the business, we’ve got a highly scaled middle and back office that is a variable cost. We’ve got distribution and other AUM expenses, again, that are tied to the AUM and revenue of the business. And then the compensation — the cash compensation will continue to be variable as a component of revenue as it has in the past. So we really see no difference in the expense makeup going forward. The scale will obviously increase as the business and the AUM and the revenue have increased. But there really is no significant change from a modeling perspective with greater than two thirds of the expense being variable and then the other items being fixed components around some of the G&A.

Alexander Blostein: Yes. Okay, great. And then Dave, you mentioned, you know, the balance sheet capacity has obviously improved significantly with this deal. Your leverage level is quite low and it sounds like the deal pipeline remains quite active. Maybe just give us a bit of a mark-to-market in the state of affairs and kind of how your acquisition pipelines have evolved over the last six months to nine months since the time you announced the Amundi deal? And also the composition of what’s more sort of probable either in terms of asset classes or size of a transaction? Thanks.

David Brown: Sure. Good morning, Alex. Let me start off with capacity to do a transaction. With the close, what we’ve done is we’ve brought earnings on and we have not brought on additional debt. So our leverage level has reduced quite significantly. We have a lot of cash on our balance sheet as you can see at the end of the quarter, and we are in as good a position as we’ve ever been to really execute on a sizable transaction, and that’s by design. Our discussions have been very productive. We are really excited about the opportunities we’re seeing and we are leaning towards larger scaled opportunities to continue to keep our business competitive and be ahead of the curve. I would not be surprised for a 2025 event for us from another acquisition perspective, at least announcing.

That’s what we’re planning for. Our balance sheet is ready for it. Obviously, you can’t plan the timing of a transaction, but based on discussions and our capabilities to execute, I would anticipate that something in the — in the shorter medium term as opposed to a longer term perspective, assuming markets are calm and the environment is conducive, which we are encouraged by what we’re seeing lately. As far as asset classes and what type of acquisitions, we always start off with, does the acquisition make our company better? Does it fit culturally? Does it include investment excellence? So we always lead with those attributes and our future acquisitions will be no different. I think as Mike talked about in the last question that he answered about keeping the integrity of our model around the expense infrastructure around one integrated company, that’s really important to us.

We think that’s part of what has made our acquisition successful in the past. And we anticipate, you know, keeping that model intact.

Alexander Blostein: Okay, great. Thank you.

Operator: Our next question comes from the line of Randy Binner with B. Riley. Please go ahead.

Randy Binner: Good morning. Thank you. I have a couple that, you know, I think kind of get to how the platform with Amundi performs from a kind of growth and flows perspective if markets remain volatile. So the first one is on fixed income and solutions. I think those flows in the first quarter were kind of like, you know, kind of flat and then up for solutions. And I can generally expect those categories to do better in volatile markets. So is that the right way to think of it? And can you provide any kind of glimpse or update on how those types of strategies performed in this kind of pretty significant V-shaped market we’ve had so far since the early April?

David Brown: So, it’s Dave. I’d first say, you know, our platform now going forward from a fixed income perspective given Pioneer’s capabilities around fixed income has expanded. So we now have our Victory Income investors fixed income platform and we have the Pioneer Investments fixed income platform. Both have excellent performance and it really widens and deepens our fixed income capabilities. So, you know, in the environment we’re in today, I think we are really well positioned to grow our business there. And if you looked at the first quarter for Pioneer, they had positive net flows and a good amount of those were in the fixed income portion of their business. And so we’re excited about that given we have a wider and deeper offering.

The Victory income investors has ETFs which sell really well in this environment, and so we continue to have that and we will look at launching fixed income ETFs for Pioneer as well. So I would imagine that when you think about the fixed income platform for all of Victory, we’re very well positioned and better positioned today than we were before the close. As far as solutions, a lot of the growth there you’re seeing is through the ETF platform, the VictoryShares ETF platform. We have quite a few different offerings there. Our free cash flow series with a few ETFs have grown very nicely. We also have some other ETFs that have been developed by our solutions team that continues to be in demand. And so when we look at that, and we look at that going forward, again, those are really nice solutions for volatile markets.

And then as markets maybe calm down moving forward, we also have other products off of the solutions platform, off of our equities platform, which we think are really well-positioned to satisfy investor’s needs. And I think in our prepared remarks I think there is a tone around an excitement to have a platform to potentially grow organically. We saw some really nice growth in the first quarter, both through Victory and also through Pioneer, and we think that will continue going forward with just a really deep product set, but also an enlarged sales force.

Randy Binner: Okay, that’s great. But is there any glimpse you can give us and kind of how the stability of those two areas with the volatility in April, like if the flows hold up better there? Were they more stable than a lot of your equity strategies — equity mutual funds?

David Brown: I wouldn’t say more stable or less stable. I think they’ve performed as expected, nothing out of the ordinary. And as I think we look forward, I think investors have been pretty calm during some of the volatile times, at least on our platform. So there’s been really nothing out of the ordinary either way.

Randy Binner: All right. I’ll leave it there. Thanks for the responses. Appreciate it.

David Brown A – David Brown: Sure.

Operator: Our next question comes from the line of Craig Seigenthaler with Bank of America. Please go ahead.

Ivory Gao: Good morning, this is Ivory on for Craig. On the call you mentioned two large redemptions of the $2.7 billion that are one-time in nature and the continued expense synergies that you’re seeing. Just one thing about the other side. Have you seen any dis-synergy or notable redemptions from the Amundi U.S. acquisition specifically?

Michael Policarpo: Good morning, Ivory. Yes, we did denote that there were two sizable one-time outflows in the first quarter. Those were on the Victory platform. We believe very isolated to particular client events. With respect to dis-synergies, no, we’ve not seen really any dis-synergies. I think as we went through the process and the acquisitions that we do, you have a client consent process and so all of the clients that have joined as part of Victory have consented and it’s almost a checkpoint for them as you think about it. So we’ve not seen any dis-synergies from a revenue or a distribution perspective. Actually quite the opposite. I think as Dave highlighted, we’ve made more investments in distribution. We’ve expanded the platform and we’re having more discussions today across the entire product scope in different regions globally, in different partners on the intermediary side and in different vehicles that really have driven an opportunity set that we think is, as Dave mentioned just now, as exciting as we’ve seen.

And I think it’s definitely very telling that the Pioneer Investments business was net flow positive as we mentioned in the first quarter. So that obviously with knowledge that the transaction was occurring and they were positive in all of 2024 as well. So we think the combined business going forward has resonated well from a market perspective and a client perspective and are excited about the opportunities that lay ahead.

Ivory Gao: Great, thank you. And just as a follow-up, could you give us an update on WestEnd? The macro backdrop has certainly evolved over the last couple of months, so what are you anticipating for net flows in the business going forward?

Michael Policarpo: Yes, good question. So as we mentioned, WestEnd is net flow positive since we’ve acquired them. They did have some softer performance in 2024. As we look at the first quarter, some of the market dislocation and their positioning has actually allowed their performance to be very strong. And so we’re excited as we move forward. Obviously, the macro backdrop with respect to clients and their accessing different asset classes right now is a little bit volatile, but their performance has come back very nicely and we’re excited. We are — continue to be very bullish on the asset classes that they manage, the type of models that they deliver, the access to distribution. I think we’ve said a number of times we’re doing business now on more platforms with more advisors. So not to project kind of what we think, but we’re excited about the opportunity set with the pickup in performance that we’ve seen with WestEnd.

Ivory Gao: Thank you so much.

David Brown: I would add one thing, Mike, on that is we have — we’ve launched additional products off of their platform. So we’ve launched a number of ETFs and we’ve seen growth on their ETFs and so now if you’re looking to access WestEnd, you can access it through their model delivery, but you can also access them through a number of ETFs as well.

Ivory Gao: Thank you.

Operator: And our next question comes from the line of Michael Cyprys with Morgan Stanley. Please go ahead.

Michael Cyprys: Hi, good morning. Thanks for taking the question. You mentioned in your prepared remarks that you’re making some investments to enhance organic growth. In particular, you mentioned investments in data, technology, marketing. I was hoping maybe you could elaborate on the steps that you’re taking there, the quantum of investments that you’re making and how you’ll be measuring success?

David Brown: Hi Michael, it’s Dave. It’s a great question. I appreciate you asking it. On the intermediary side for the U.S., we have added a significant number of salespeople. So think of them as external facing salespeople — people supporting our external facing salespeople. We’ve added a sizable number of marketing professionals of dedicated data professionals, and then we are purchasing more data programs from certain platforms. And we have also increased the number of partnerships — platform partnerships we have from the past. So we have made a pretty significant investment in really intermediary distribution. All of those numbers are in our net expense synergy numbers. So when you hear the number of $110 million, it’s netted into those numbers, all of those investments.

We’ve done — on a smaller level we’ve done the same thing on the U.S. institutional side, where we’ve added people and client service as well. And then the ultimate judge of our investments are going to be our organic growth profile. We want to be in a position where we grow our business organically. And I think we are in as good a position as we’ve ever been to do that. And these investments that we’re making, ultimately the goal is to have organic growth, pretty simple from that perspective.

Michael Cyprys: Great, thanks. And then just a follow-up question. As you’ve broadened out the platform and have further scaled it, just curious how you’re thinking about alternative investment products? How important is that for you as you’re thinking about M&A going forward to have that on the platform, imagine it would be more of an acquisition. Maybe just talk about the pipeline for alternative investment related acquisitions, how those sort of conversations are progressing and how you’re thinking about some of the puts and takes there as it does add a bit more complexity, do you feel that the organization, the platform is at a place to accommodate that sort of a product set at this point?

David Brown: Alternatives are important to us. When we speak with our clients, certain clients at certain levels inquire about it. We have great relationships from an intermediary and institutional perspective, and so over time we will have those products for our salespeople to deliver to those clients and potentially new clients. Whether we access that through acquisitions or partnerships, we are evaluating. I think there’s pros and cons with each structure. But as we think about moving forward in our access from a distribution perspective and how deep we are into the various channels, we will absolutely have an alternatives offerings and we’re going to work through different ways of accomplishing that. And I think there have been a number of acquisitions in the industry.

There have been a number of partnerships in the industry and we have studied all of them, and we’re going to execute in a way that’s going to make the most sense for our platform. But when we think about the world going forward and look out, that is — that is a product that we will absolutely be dialoguing and selling to our — with our clients.

Michael Cyprys: Great. Thank you.

Operator: And our final question comes from the line of Kenneth Lee with RBC Capital Markets. Please go ahead.

Kenneth Lee: Hi, good morning. Thanks for taking my question. You mentioned in the prepared remarks around the common dividend and it sounds as if its going to be slight change in terms of more of an annual review instead of a quarterly review. Wondering if you could just remind us again, you’ve been increasing the dividend at a pretty good clip more recently. What’s driving the change there? And then perhaps could you give us an update if there is any in terms of longer term priorities around capital deployment? Thanks.

David Brown: It’s Dave. Let me start with the back end of that question. Our best use of capital, we think to grow the business is really to think about capital from an acquisition perspective. So we want to make sure that we can execute on our strategic plan of growing through acquisitions and we want to make sure that our balance sheet accommodates that. So we start there. And I think as our business has grown over the years, we have also been able to balance that along with an equity buyback program and also a dividend. And so I would look at dividends and our buyback program as ancillary, but our ability to execute on them in a larger way is really a reward for us growing our business. So we’ll continue to have that same viewpoint of capital.

And then from a dividend perspective we have — over the last few years we have gone from an annual and anticipated annual increase to more quarterly increases just to be more opportunistic as our business has evolved as we’ve done acquisitions, I think as we think about going forward, we’ll look at it every quarter, but the anticipation is that we will increase once a year. That that doesn’t stop us from doing it quarterly. It’s just really to guide to say that this is how we’re going to look at it. But if you really take a step back, we are going to first and foremost make sure that we can execute on inorganic growth through our balance sheet, through our cash flow. And then secondarily it will be buybacks and dividends. But with the way our business looks and the cash flow that we anticipate and the margins we have in our earnings potential, we think we can satisfy the dividend and the buyback pretty nicely and balance all that out.

Kenneth Lee: Great. Very helpful there. Just one follow up if I may. In terms of the victory ETF net flows in the quarter, very solid. Wonder if you could talk a little bit more about the cadence of newer ETF products that are expected to be launched later on this year? Thanks.

David Brown: Sure. We have had really nice growth for the last few quarters on our ETF platform. We have launched a number of products over the last few years and they have worked, and we have plans and are in the process of launching additional ETFs. We’ll also launch ETFs off of the Pioneer platform in the future. And we have a dedicate — we have our entire U.S. intermediary sales force can sell ETFs, but we also have a portion of our sales force that only sells ETFs. And we have a — and we have a group that also trains on our ETFs. So we’re well armed in the field. I think we have a really nice diversified existing ETF product set and we’ll continue to expand that. And we think it’s going to be an area for our business that’s going to see accelerated growth.

And so we will evaluate where we think the market’s going from an ETF perspective and launch products to satisfy that. But I think our existing lineup today is pretty wholesome and has done pretty well and I don’t see that changing going forward.

Kenneth Lee: Great. Very helpful there. Thanks again.

Operator: I will now turn the call back over to David Brown for closing remarks.

David Brown: Thank you. We hope to see you next month when we’ll be attending the Morgan Stanley U.S. Financials Conference in New York, and look forward to keeping you updated on our progress. Again, thank you for joining us this morning.

Operator: Ladies and gentlemen, that concludes today’s call. Thank you all for joining. You may now disconnect.