Second Quarter 2019 Earnings Presentation August 13, 2019
Forward Looking Statements This presentation may contain “forward - looking” statements that are based on our beliefs and assumptions and on information currently available to us. Forward-looking statements include information concerning our possible or assumed future results of operations, business strategies, competitive position and potential organic and inorganic growth opportunities. Forward-looking statements include all statements that are not historical facts and can be identified by terms such as “anticipate,” “believe,” “could,” “seek,” “estimate,” “intend,” “may,” “plan,” “potential,” “predict,” “project,” “should,” “will,” “would” or similar expressions and the negatives of those terms. Forward-looking statements involve known and unknown risks, uncertainties and other important factors that may cause our actual results, performance or achievements to be materially different from the expected results, performance or achievements expressed or implied by the forward-looking statements. Forward-looking statements represent our beliefs and assumptions only as of the date of this presentation. Except as required by law, we assume no obligation to update these forward-looking statements, or to update the reasons actual results could differ materially from those anticipated in the forward-looking statements, even if new information becomes available in the future. Victory Capital uses non-GAAP financial measures referred to as Adjusted EBITDA and Adjusted Net Income to measure the operating profitability of the business. These measures eliminate the impact of one-time acquisition, restructuring and integration costs and demonstrate the ongoing operating earnings metrics of the business. The Company has included these non-GAAP measures to provide investors with the same financial metrics used by management to assess the operating performance of the Company. Reconciliations of non-GAAP metrics to their closest comparable GAAP metrics can be found in the Appendix that accompanies this presentation. 2
Agenda Topics Business Overview Investment Performance USAA Asset Management Company Integration Update Second Quarter 2019 Financial Results Appendix 3
Business Overview 4
Business Overview • AUM increased to $64.1Bn at June 30, 2019, with 2Q net flows of +$3.7Bn, YTD net flows of +$2.6Bn AUM & FLOWS • Combined with USAA Asset Management, AUM increased to $147.8Bn at July 31, 2019 • Commencing monthly AUM reporting routine beginning in August 2019 • $0.38 Adjusted Net Income with tax benefit per diluted share comprised of $0.33 per 2Q FINANCIAL diluted share in Adjusted Net Income and $0.05 per diluted share in tax benefit HIGHLIGHTS • 40.0% Adjusted EBITDA Margin for the quarter • Ended the quarter with $280MM of debt and cash of $95MM • Board authorizes initiation of $0.05 per share quarterly cash dividend • USAA Asset Management acquisition closed on July 1, 2019 ACQUISITION • $75 million of annual cost synergies realized at close; another $25 million within six INTEGRATION months; with total run-rate synergies of $120MM realized in 12-15 months from close UPDATE • Direct investment channel for USAA members reopened July 1, 2019 5
Investment Performance 6
Commitment to Long-Term Investment Performance Victory Mutual Victory Mutual Fund 27 71% Funds and ETFs and ETF AUM with with 4- or 5-Star 4- or 5-Star overall overall ratings ratings Percentage of AUM that has outperformed its benchmark: Over a Over a Over a Over a 74% period 89% 84% 81% ten-year one-year five-year three-year period period period 5 CONSECUTIVE YEARS in the BARRON’S Top 25 Best Fund Families #9 Overall ranking for 2018 #10 Overall ranking for 2017 #25 Overall ranking for 2015 #21 Overall ranking for 2016 #15 Overall ranking for 2014 7
Long-term Outperformance Over Benchmarks Percentage of AUM that has outperformed benchmark 100% 90% 88% 88% 89% 81% 84% 75% 75% 74% 74% 74% 80% 69% 68% 66% 60% 57% 60% 40% 20% 0% 1-Year 3-Year 5-Year 10-Year 3Q18 4Q18 1Q19 2Q19 Percentage of strategies that has outperformed benchmark 100% 81% 81% 78% 75% 80% 70% 69% 64% 63% 63% 62% 59% 59% 58% 55% 55% 60% 46% 40% 20% 0% 1-Year 3-Year 5-Year 10-Year 3Q18 4Q18 1Q19 2Q19 8
71% of AUM in Mutual Funds and ETFs Ranked 4- or 5-Stars Overall by Morningstar 2% 3% 11% 13% 16% 50% 13% 3-Year Overall 60% 11% 21% 4/5 Star = 71% 4/5 Star = 71% 2% 5% 2% 11% 12% 15% 10-Year 5-Year 70% 58% 11% 14% 4/5 Star = 72% 4/5 Star = 81% 5-Star 4-Star 3-Star 2-Star 1-Star 9
USAA Asset Management Company Integration Update 10
Unique Direct Member Distribution Channel • Fully operational USAA direct member call center reopened on July 1 • 50 USAA employees retained to serve as licensed call center representatives • 120 USAA employees retained by our outsourcing partner to provide member services and back office functions • Call center has direct connectivity to USAA member servicing platform • Approximately 80,000 member calls received since July 1 • Victory Capital distribution professionals are now selling USAA strategies through our well-established retail, retirement, and institutional channels • No disruption to USAA investment professionals, who are now managing money and trading on our integrated platform • 50 key investment professionals retained from USAA • Headquarters officially moved to San Antonio, Texas As of July 1, 2019, Victory Capital Management Inc. is the investment advisor for USAA Mutual Funds. USAA and the USAA logos are registered trademarks of United Services Automobile Association and are being used by Victory Capital and its affiliates under license. Victory Capital and its affiliates are not affiliated with USAA or its affiliates. Use of the term “member” or “membership” refers to membership in USAA Membership Services and does not convey any legal or ownership rights in USAA. 11
Victory Capital AUM by Asset Class June 30, 2019 July 31, 2019 $64.1Bn in AUM $147.8Bn in AUM 8% 9% 1% Domestic Equity 8% 11% Fixed Income 39% 20% 11% Solutions 68% Global/Non US Equity 25% Money Market June 30, 2019 ($Bn) July 31, 2019 ($Bn) Asset Class Legacy Victory Post USAA AM Co. Close Domestic Equity $ 43,589 68% $ 56,918 39% Fixed Income 7,300 11% 37,559 25% Solutions 6,919 11% 29,806 20% Global/Non-US Equity 5,498 9% 11,713 8% Commodity & Other 771 1% 332 0% Long-term Assets Under Management $ 64,077 100% 136,327 92% Money Market 0 0% 11,468 8% Total Assets Under Management $ 64,077 100% 147,795 100% Diversifies and balances our asset base: • Reduces domestic equity exposure to 39% from 68% and results in a more balanced AUM mix across asset classes • Enhances Solutions Platform to include Target Date and Target Risk Strategies, and new Rules Based and Active ETFs • Includes $10.0Bn of AUM in USAA mutual funds invested through the Managed Money product offered by USAA’s 12 brokerage business . Victory Capital did not acquire the USAA brokerage business.
Solutions Platform Update • Rules- and factor- based quantitative platform includes ETFs, mutual funds and institutional RULES-BASED separate accounts & FACTOR- • Multiple large mandates funded in 2Q 2019 ORIENTED • Multi-Asset SOLUTIONS • Global Dividend • Customized Thematic • Total AUM increased to $6.9Bn at June 30, 2019 • Added target date, target risk and completion portfolio capabilities with USAA Asset Management acquisition • VictoryShares ETF AUM has grown from $198MM in 2015 to $3.1Bn at June 30, 2019 ETFs • 4 ETFs ranked in the top decile for the trailing 1-year by Morningstar • 6 ETFs ranked in the top quartile for the trailing 1-year by Morningstar • 3 ETFs with AUM more than $500MM • 5 ETFs with AUM more than $100MM • 27 th in overall ETF AUM • Net flow positive 15 of the 17 quarters, since acquiring ETF capabilities in 2015 • Added active fixed income ETFs with USAA Asset Management acquisition Source: Morningstar Direct 13
Successful Execution … Promises Kept STATED OBJECTIVES TANGIBLE RESULTS During February 2018 IPO As of July 31, 2019 Make Accretive USAA Asset Management acquisition closed with Acquisitions proforma 2020 earnings accretion of >100% Increase Scale AUM up 143% , enhancing operating efficiencies Diversify Asset Acquired Fixed Income and Solutions Classes capabilities, and balanced asset class mix Broaden Distribution Opened unique Direct Member Channel Next Generation integrated multi-franchise Become the Industry’s platform provides distinct competitive advantages Consolidator of Choice for current trends in asset management industry 14
Second Quarter 2019 Financial Results 15 15
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