In the fourth quarter of 2023, the Company made the fourth and final earn-out payment due to sellers under the terms of the USAA AMCO purchase agreement.

For the three and nine months ended September 30, 2023, the increase in the USAA AMCO contingent consideration liability of $2.7 million and $8.7 million, respectively, was recorded in change in value of consideration payable for acquisition of business in the unaudited Condensed Consolidated Statements of Operations.

Under the terms of the NEC purchase agreement, the Company will pay up to an additional $35.0 million in cash based on NEC’s net revenue growth over a six-year period following the closing date. The purchase agreement specifies net revenue and payment targets for the 36-month, 48-month and 60-month periods beginning on November 30, 2021 (the “Start Date”) for the contingent payments. It also provides for advance payments and catch-up payments to be made based on actual NEC net management fee revenue, as defined in the purchase agreement, as measured at the end of each 12-month anniversary of the Start Date over a six year period. The maximum amount of contingent payments, less any contingent payments previously paid, is due upon the occurrence of certain specified events within a five year period following the Start Date.

The Company determined that substantially all of the contingent payments payable per the NEC purchase agreement represent compensation for post-closing services. The Company records compensation expense over the estimated service period in an amount equal to the total contingent payments currently forecasted to be paid.

At September 30, 2024, the Company determined that the contingent payments are no longer probable of occurring and reduced the liability for NEC contingent payments to zero. The liability for NEC contingent payments totaled $13.7 million as of December 31, 2023 which is included in accrued compensation and benefits in the unaudited Condensed Consolidated Balance Sheets.

For the three and nine months ended September 30, 2024, the net impact to the Condensed Consolidated Statement of Operations relating to the NEC contingent payment compensation expense was a decrease of $15.2 million and $13.7 million, respectively, in personnel compensation and benefits. Expense recorded for the three and nine months ended September 30, 2023 was $1.4 million and $4.4 million, respectively.

Under the terms of the WestEnd purchase agreement, a maximum of $320.0 million ($80.0 million per year) of contingent payments is payable to sellers. Contingent earn-out payments are based on net revenue of the WestEnd business during each of the first four years following the WestEnd Closing, subject to certain “catch-up” provisions over a five and one-half year period following the WestEnd Closing.

The estimated fair value of contingent consideration payable to sellers was $139.6 million as of September 30, 2024 and $217.2 million as of December 31, 2023, respectively. In the first quarter of 2024, the Company paid $80.0 million in cash to sellers as a catch-up payment for the first earn-out period.

For the three and nine months ended September 30, 2024, the change in the liability was a decrease of $1.6 million and an increase of $2.4 million, respectively. For the three and nine months ended September 30, 2023, the change in the liability was an increase of $7.6 million and $10.5 million, respectively. The impact of decreasing or increasing the valuation of the contingent consideration liability is recorded in change in value of consideration payable for acquisition of business in the unaudited Condensed Consolidated Statements of Operations.

The estimated fair value of contingent consideration payable to sellers is estimated using the real options method. WestEnd net revenue growth is simulated in a risk-neutral framework to calculate expected probability-weighted earn out payments, which are then discounted from the expected payment dates at the relevant cost of debt. Significant assumptions and inputs include the WestEnd net revenue projected annual growth rate, the market price of risk adjustment for revenue, which adjusts the projected revenue growth rate to a risk-neutral expected growth rate, revenue volatility and discount rate. The market price of risk adjustment for revenue and revenue volatility are based on data for comparable companies. As the contingent consideration represents a subordinate, unsecured claim of the Company, the Company assesses a discount rate which incorporates adjustments for credit risk and the subordination of the contingent consideration.

Significant inputs to the valuation of contingent consideration payable to sellers as of September 30, 2024 and December 31, 2023 are as follows and are approximate values:




	September 30, 2024			December 31, 2023
Net revenue 5 year average annual growth rate		13	%		22	%
Market price of risk adjustment for revenue (continuous)		7	%		7	%
Revenue volatility		21	%		21	%
Discount rate		6	%		7	%
Years remaining in earn out period		3.1			3.8
Undiscounted estimated remaining earn out payments $ millions	$153 - $240			$243 - $320

On July 8, 2024, the Company, Amundi and, solely for certain provisions thereof, Amundi S.A., (“Amundi Parent,” and together with Amundi, the “Amundi Parties”) entered into the Contribution Agreement, pursuant to which, upon the terms and subject to the conditions set forth therein, Amundi will contribute to the Company, all of the shares of Amundi US. The contribution will result in Amundi US becoming a wholly owned subsidiary of Victory.

Amundi US, based in Boston, Massachusetts, is a wholly owned subsidiary of Amundi, which is headquartered in Paris, France. Amundi US’s activities are principally conducted by its wholly owned subsidiary Amundi US, Inc. Amundi US, Inc. specializes in providing and distributing investment solutions to a wide range of clients and investors, including institutional investors, corporations, central banks, sovereign wealth funds, and individual investors.

At the closing of the transactions contemplated by the Contribution Agreement (the “Closing”), in exchange for the shares of Amundi US, Amundi will receive 26.1% of the Company’s fully diluted shares after giving effect to that issuance (the “Base Share Consideration”). This will be composed of newly issued shares of the Company Common Stock, par value $0.01, representing 4.9% of the number of issued and outstanding shares of Company Common Stock, after giving effect to that issuance, and the balance in newly issued shares of a new class of the Company Preferred Stock. The Base Share Consideration is subject to customary adjustments based on the level of client consents received, Amundi US’s net working capital, debt, cash and transaction expenses as described in the Contribution Agreement.

At the Closing, the Company and Amundi will enter into a shareholder agreement (the “Shareholder Agreement”), pursuant to which, among other things, Amundi will be (i) will be granted certain resale shelf and piggyback registration rights in respect of the shares of Company Preferred Stock and Company Common Stock issued to it under the Contribution Agreement (the “Acquired Shares”), and (ii) is entitled to nominate two members of the Board for so long as it holds a certain amount of the Acquired Shares. In addition, for a period of three years following the Closing, Amundi will be subject to a

customary “lock-up” of the Acquired Shares (subject to certain exceptions) and a standstill, which among other things, prohibits Amundi from acquiring additional equity securities of the Company (subject to certain exceptions).

The Amundi Parties, the Company, and VCM have also entered into an Off-Shore Master Distribution and Services Agreement and an On-Shore Master Distribution and Services Agreement which will become effective on the date of the Closing (except with respect to certain specified provisions set forth therein, which became effective as of the entry into such agreements).

The Closing of the transaction is expected to occur during the first quarter of 2025 and is subject to customary closing conditions, regulatory approvals and regulatory authorizations.

Acquisition-related costs include legal fees, advisory services, mutual fund proxy voting costs and other one-time expenses related to business combinations. The Company expensed $5.1 million and $9.2 million in acquisition-related costs in the three and nine months ended September 30, 2024 ($0.1 million in 2023), respectively. These amounts are included in acquisition-related costs in the unaudited Condensed Consolidated Statements of Operations and relate primarily to the Amundi US Acquisition.