Victory Capital Holdings, Inc. Class A Common Stock · NASDAQ:VCTR
Victory Capital Holdings, Inc. Class A Common Stock — Q2 2020 Earnings Presentation
33 slides from Victory Capital Holdings, Inc. Class A Common Stock's earnings presentation, Aug 6, 2020
Slide 1: Second Quarter 2020 Earnings Presentation
Second Quarter 2020 Earnings Presentation August 6, 2020
Slide 2: Forward Looking Statements
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 s
Slide 3: Agenda
Agenda Topics Business Overview Investment Performance Second Quarter 2020 Financial Results Appendix 3
Slide 4: Business Overview
Victory Business Overview
Slide 5: Business Overview
Business Overview • Total AUM of $129.1Bn at June 30, 2020 AUM & FLOWS ˃ Up 4% from March 31, 2020 ˃ Up 101% from June 30, 2019 • Total LT net flows -$3.0Bn* • $0.89 Adjusted Net Income with tax benefit per diluted share • Record high 47.5% Adjusted EBITDA Margin for the quarter 2Q OPERATING • Expan
Slide 6: Acquisition Integration & Platform Build Progress
Business Overview Acquisition Integration & Platform Build Progress August 2020 Growth Enhance Technology Integration Accelerate Direct Closing Digital Platform Marketing Campaign Genesys (Second half of 2020) Gained Outside IVR Shelf Space for Call System USAA Branded Pre-Closing Perfected Products
Slide 7: Acquisition Integration & Platform Build Progress
Business Overview Acquisition Integration & Platform Build Progress • 79,500 new account registrations since July 2019 close • ~30% increase in 1H 2020, versus 2H 2019 • ~28% of new mutual fund accounts electing Automatic Investment Plans (AIPs) • Exclusive provider of USAA 529 College Savings Plan
Slide 8: USAA Referral Process Example
USAA Referral Process Example • USAA Referral Agreement is working; 79,500 new USAA Mutual Fund and 529 Plan account registrations to date • USAA proactively marketing to broader membership on our behalf • Exclusive use of USAA brand, which creates strong connectivity for members 8
Slide 9: Investment Performance
Victory Investment Performance
Slide 10: Commitment to Long-Term Investment Performance
Commitment to Long-Term Investment Performance Total Mutual Total Mutual Funds 38 Funds and ETFs with 4- or 5-Star overall ratings 64% and ETFs AUM with 4- or 5-Star overall ratings % of AUM outperforming benchmarks % of strategies outperforming benchmarks 78% 80% 80% 68% 69% 67% 60% 60% 52% 52% 45%
Slide 11: Our Differentiated Integrated Model Delivers Significant Structural Advantages
Our Differentiated Integrated Model Delivers Significant Structural Advantages Integrated Platform with Autonomous and Specialized Investment Strategies Make us Unique… Low Level of integration High Multi-Boutique Fully Integrated Independent Branding Autonomous Investment Process Centra
Slide 12: Second Quarter 2020 Financial Results
Second Quarter 2020 Financial Results 12
Slide 13: Second Quarter 2020 Financial Results
Second Quarter 2020 Financial Results SECOND • $181.9MM revenue QUARTER ˃ Down 11% from 1Q 2020 ˃ Up 99% from 2Q 2019 FINANCIAL RESULTS • $0.61 GAAP Earnings per diluted share ˃ Down 21% from 1Q 2020 ˃ Up 205% from 2Q 2019 • $0.89 Adjusted Net Income with tax benefit per diluted share ˃ Down 3% from
Slide 14: Assets Under Management (End of Period)
Assets Under Management (End of Period) $Bn ($mm) • Total AUM of $129.1Bn, at June 30, 2020 Retail Institutional Direct ˃ Up 4% from March 31, 2020 ˃ Up 101% from June 30, 2019 $151.8 $145.8 • Diversified distribution channels $129.1 ˃ Retail $123.8 ˃ Institutional ˃ Direct 3Q19 4Q19 1Q20 2Q20 14
Slide 15: Long-Term Asset Flows
Long-Term Asset Flows $Bn For 2Q 2020 Gross LT Sales Gross LT Redemptions 3/31/18 • Gross LT($mm) sales of $5.2Bn $7.5 $7.3 • LT net outflows $3.0Bn* $5.3 $5.2 • Multiple franchises generated net long-term inflows in 2Q & 1H 2020 Operating Metrics 3Q19 4Q19 1Q20 2Q20* Net long-term flows ($MM) +$726
Slide 16: Revenues
Revenues ($mm) 3/31/18 $MM 9/30/17 • 2Q 2020 Revenue $182MM $215.0 $218.6 ˃ Down 11%, vs 1Q 2020 $204.4 $105.0 ˃ Up 99% vs 2Q 2019 $181.9 • Average fee rate of 57.7bps in June 2020 Operating Metrics 3Q19 4Q19 1Q20 2Q20 Average AUM ($Bn) $145.9 $147.9 $144.1 $128.9 Average Fee Rate (bps), as reported
Slide 17: Expenses
Expenses 3/31/18 • 2Q total expenses declined 6% from 1Q 2020 $MM 9/30/17 ˃ Operating expenses down 17% $180.9 $170.1 ˃ Non-operating expenses declined 60% $130.4 $122.7 Operating Metrics ($MM) 3Q19 4Q19 1Q20 2Q20 Personnel $55.6 $54.2 $47.6 $49.1 Operating 82.7 77.8 70.8 59.1 Non-Operating 21.5 15.
Slide 18: Non-GAAP Metrics
Non-GAAP Metrics ($mm) 3/31/18 9/30/17 $MM except per share data • 2Q 2020 Adjusted Net Income (ANI) with tax benefit of $0.89 per diluted $1.20 ANI Tax Benefit ANI with tax benefit per diluted share share $100.0 ˃ Down 3% from 1Q 2020 $0.99 $1.00 ˃ Up 134% from 2Q 2019 $0.91 $0.92 $0.89 • 2Q 2020 A
Slide 19: Ongoing and Future Cash-Tax Benefits
Ongoing and Future Cash-Tax Benefits • Section 338(h)(10) Election ˃ Stepped up cost basis of acquired indefinite lived intangible assets is deductible for corporate income tax purposes over 15 years ˃ $1.8 billion in total future tax amortization ˃ $441 million in future cash tax savings, assuming
Slide 20: Capital Management
Capital Management ($mm) 3/31/18 9/30/17 • Returned $10.6MM to shareholders Selected Balance Sheet Items ($MM) 6/30/2020 in 2Q Cash / Cash Equivalents $55.2 ˃ Repurchased 457K shares in 2Q 2020 Debt (since quarter end, further reduced to $860MM) $880.7 • Increased cash dividend 20% Stockholders' Equ
Slide 21: Enhancing Shareholder Value with Balance Sheet Flexibility
Enhancing Shareholder Value with Balance Sheet Flexibility Interest Share Repurchases De-leveraging Dividends Cap Ex Enhancing Shareholder Value by: Maintaining Balance Sheet Flexibility with: • Improving platform with every strategic acquisition • Strategic capital allocation policy • Gaining effic
Slide 22: Appendix
Appendix 22
Slide 23: Notes and Disclosures
Notes and Disclosures Information Regarding Non-GAAP Financial Measures Victory Capital uses non-GAAP financial measures referred to as Adjusted EBITDA and Adjusted Net Income to measure the operating profitability of the Company. These measures eliminate the impact of one-time acquisition, restruct
Slide 24: Notes and Disclosures
Notes and Disclosures Information Regarding Non-GAAP Financial Measures (cont.) Adjusted Net Income Adjustments made to GAAP Net Income to calculate Adjusted Net Income, as applicable, are: • Adding back other business taxes; • Adding back amortization expense on acquisition-related intangible asset
Slide 25: Consolidated Reconciliations of Adjusted EBITDA
Consolidated Reconciliations of Adjusted EBITDA For the three months ended, (in thousands) 6/30/2019 9/30/2019 12/31/2019 3/31/2020 6/30/2020 GAAP Net income $ 14,383 $ 25,992 $ 37,589 $ 57,166 $ 44,720 GAAP Income tax expense (4,478) (8,058) (10,854) (16,823) (14,487) GAAP income before taxes 18,86
Slide 26: Consolidated Reconciliations of Adjusted Net Income
Consolidated Reconciliations of Adjusted Net Income For the three months ended, (in thousands, except per-share data) 6/30/2019 9/30/2019 12/31/2019 3/31/2020 6/30/2020 GAAP Net Income $ 14,383 $ 25,992 $ 37,589 $ 57,166 $ 44,720 Other business taxes 424 146 359 (3,296) 219 GAAP amortization of acqu
Slide 27: Detailed Reconciliation of 2Q20 Adjusted Net Income
Detailed Reconciliation of 2Q20 Adjusted Net Income GAAP to Non-GAAP Reconciliation Three months Ended June 30, 2020 (in thousands, except per-share amounts) Adjustments GAAP Amortization of Tax Benefit of Other Acquisition- Stock-Based Acquisition, Debt Goodwill and U.S. GAAP Business Related Compe
Slide 28: Detailed Reconciliation of YTD 2020 Adjusted Net Income
Detailed Reconciliation of YTD 2020 Adjusted Net Income GAAP to Non-GAAP Reconciliation Six months ended June 30, 2020 (in thousands, except per-share amounts) Adjustments GAAP Amortization of Tax Benefit of Acquisition- Acquisition, Goodwill and Other Business Related Stock-Based Restructuring and
Slide 29: Detailed Reconciliation of 1Q20 Adjusted Net Income
Detailed Reconciliation of 1Q20 Adjusted Net Income (in thousands, except per-share amounts) Adjustments GAAP Amortization Tax Benefit of Other of Acquisition- Acquisition, Goodwill and U.S. GAAP Business Related Stock-Based Restructuring and Debt Issuance Total Non-GAAP Acquired Basis Taxes Intangi
Slide 30: Detailed Reconciliation of 4Q19 Adjusted Net Income
Detailed Reconciliation of 4Q19 Adjusted Net Income Adjustments GAAP Amortization of Tax Benefit of Acquisition- Acquisition, Goodwill and U.S. GAAP Other Business Related Stock-Based Restructuring and Debt Issuance Total Non-GAAP Acquired Basis Taxes Intangibles Compensation Exit Costs Costs Adjust
Slide 31: Detailed Reconciliation of 3Q19 Adjusted Net Income
Detailed Reconciliation of 3Q19 Adjusted Net Income Three months ended September 30, 2019 Adjustments (in thousands, except per-share amounts) GAAP Amortization of Tax Benefit of Other Acquisition- Acquisition, Debt Goodwill and U.S. GAAP Business Related Stock-Based Restructuring and Issuance Total
Slide 32: Detailed Reconciliation of 2Q19 Adjusted Net Income
Detailed Reconciliation of 2Q19 Adjusted Net Income Three months ended June 30, 2019 Adjustments (in thousands except, per-share amounts) GAAP Amortization of Tax Benefit of Other Acquisition- Acquisition, Debt Goodwill and U.S. GAAP Business Related Stock-Based Restructuring and Issuance Total Non-
Slide 33: Notes and Disclosures
Notes and Disclosures 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 Capit
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