Victory Capital Holdings, Inc. Class A Common Stock · NASDAQ:VCTR
Victory Capital Holdings, Inc. Class A Common Stock — Q2 2019 Earnings Presentation
35 slides from Victory Capital Holdings, Inc. Class A Common Stock's earnings presentation, Aug 13, 2019
Slide 1: Second Quarter 2019 Earnings Presentation
Second Quarter 2019 Earnings Presentation August 13, 2019
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 USAA Asset Management Company Integration Update Second Quarter 2019 Financial Results Appendix 3
Slide 4: Business Overview
Business Overview 4
Slide 5: Business Overview
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
Slide 6: Investment Performance
Investment Performance 6
Slide 7: Commitment to Long-Term Investment Performance
Commitment to Long-Term Investment Performance Victory Mutual Victory Mutual Fund 27 Funds and ETFs with 4- or 5-Star overall ratings 71% and ETF AUM with 4- or 5-Star overall ratings Percentage of AUM that has outperformed its benchmark: Over a Over a Over a Over a 74% one-year period 81% three-yea
Slide 8: Long-term Outperformance Over Benchmarks
Long-term Outperformance Over Benchmarks Percentage of AUM that has outperformed benchmark 100% 88% 88% 90% 89% 74% 75% 81% 75% 74% 74% 84% 80% 69% 66% 68% 57% 60% 60% 40% 20% 0% 1-Year 3-Year 5-Year 10-Year 3Q18 4Q18 1Q19 2Q19 Percentage of strategies that has outperformed benchmark 100% 78% 81% 81
Slide 9: 71% of AUM in Mutual Funds and ETFs Ranked 4- or 5-Stars Overall by Morningstar
71% of AUM in Mutual Funds and ETFs Ranked 4- or 5-Stars Overall by Morningstar 2% 3% 11% 13% 16% 50% Overall 13% 3-Year 60% 11% 21% 4/5 Star = 71% 4/5 Star = 71% 2% 2% 11% 5% 12% 15% 5-Year 58% 10-Year 70% 11% 14% 4/5 Star = 72% 4/5 Star = 81% 5-Star 4-Star 3-Star 2-Star 1-Star 9
Slide 10: USAA Asset Management Company Integration Update
USAA Asset Management Company Integration Update 10
Slide 11: Unique Direct Member Distribution Channel
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
Slide 12: Victory Capital AUM by Asset Class
Victory Capital AUM by Asset Class June 30, 2019 July 31, 2019 $64.1Bn in AUM $147.8Bn in AUM Domestic Equity 9% 1% 8% 8% 11% Fixed Income 39% 11% 20% Solutions 68% Global/Non US Equity 25% Money Market June 30, 2019 ($Bn) July 31, 2019 ($Bn) Asset Class Legacy Victory Post USAA AM Co. Close Domesti
Slide 13: Solutions Platform Update
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 SOLUTIONS • Multi-Asset • Global Dividend • Customized Thematic • Total AUM increased
Slide 14: Successful Execution … Promises Kept
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 Divers
Slide 15: Second Quarter 2019 Financial Results
Second Quarter 2019 Financial Results 15
Slide 16: Second Quarter 2019 Financial Results
Second Quarter 2019 Financial Results 2Q FLOWS AND • As of June 30, 2019, AUM increased to $64.1Bn, with 2Q net positive flows of $3.7Bn AUM • June 30 AUM up 21% from $52.8Bn at December 31, 2018 • YTD net flows +$2.6Bn FINANCIAL • $91.4MM Revenue, includes impact of the adoption of ASU 2014-09 RESU
Slide 17: Assets Under Management (End of Period)
Assets Under Management (End of Period) $Bn • At July 31, consolidated AUM totaled $147.8Bn ($mm) 3/31/18 Retail Institutional $64.1 $63.6 $62.3 $58.1 $52.8 2Q18 3Q18 4Q18 1Q19 2Q19 17
Slide 18: Asset Flows
Asset Flows • 2Q 2019 positive net flows of $3.7Bn $Bn 3/31/18 ($mm) • YTD positive net flows through June 30 of $2.6Bn Gross Sales Gross Redemptions Net Flows $7.5 $3.5 $4.0 $2.9 $3.0 Operating Metrics 2Q18 3Q18 4Q18 1Q19 2Q19 YTD 6/30 Gross Sales (%) 5.7% 4.7% 6.3% 5.7% 12.9% 20.0% Net Flows ($MM)
Slide 19: Revenues
Revenues ($mm) 3/31/18 9/30/17 $MM QoQ reported revenue increased 4% $104.4 $108.1 • Higher average AUM QoQ $3.3 $3.1 $105.0 $96.0 $101.1 $3.5 $91.4 $87.5 $92.5 Operating Metrics 2Q18 3Q18 4Q18 1Q19 2Q19 Average AUM ($Bn) $61.6 $63.4 $58.5 $57.0 $60.1 Average Fee Rate (bps), as reported 68.0 67.6 65
Slide 20: Expenses
Expenses $MM $81.0 • Expenses increased 6% $79.4 $77.3 QoQ, due primarily to higher 3/31/18 9/30/17 $72.5 restructuring/integration costs and higher asset- $68.1 based operating expenses • YoY decline of 9% due to flexible business model and the adoption of ASU 2014-09 $3.3 $3.1 $3.5 Operating Metri
Slide 21: Non-GAAP Metrics
Non-GAAP Metrics ($mm) 3/31/18 9/30/17 $MM except per share data • 2Q19 Adjusted Net Income with tax benefit of $0.38 per diluted $0.80 ANI Tax Benefit ANI with tax benefit per diluted share share $32.3 $0.70 • ANI with tax benefit of $27.7MM $29.9 • 10% QoQ increase in Adjusted $27.7 $0.60 $27.0 Ne
Slide 22: Capital Management
Capital Management • Cash balance increased from $51.5MM Selected Balance Sheet Items ($MM) 6/30/19 at Dec. 31, 2018, to $95.3MM at June 30, 2019 Cash / Cash Equivalents $95.3 • Repurchased 113K shares in 2Q19, at Debt $280.0 an average price of $17.19 per share Stockholders' Equity $487.0 • As of J
Slide 23: Reaffirming Proforma Guidance
Reaffirming Proforma Guidance ANNUAL • $120 million in total cost synergies COST • $75 million of costs removed, as of July 1 close SYNERGIES • $100 million of costs removed by year-end • $120 million of costs removed 12-15 months after close ADJUSTED EPS • Greater than 40% in 2019 ACCRETION • Great
Slide 24: Appendix
Appendix 24
Slide 25: Diversified Platform Across Asset Classes, Investment Strategies, Client Types and Investment Vehicles
Diversified Platform Across Asset Classes, Investment Strategies, Client Types and Investment Vehicles Diverse Institutional and Retail Client Base… …Served by a Variety of Investment Solutions… Endowments/ Taft-Hartley VIP CTFs Family Plans CTFs 4% 2% 1% 1% 2% Insurance 10% Intermediary Mutual Fund
Slide 26: 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 27: 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 28: Reconciliation of Adjusted EBITDA Metrics
Reconciliation of Adjusted EBITDA Metrics For the three months ended, (in thousands) 6/30/2018 9/30/2018 12/18/2018 3/31/2019 6/30/2019 GAAP Net income $ 18,675 $ 20,590 $ 13,915 $ 14,527 $ 14,383 GAAP Income tax expense (6,311) (6,562) (4,777) (4,807) (4,478) GAAP income before taxes 24,986 27,152
Slide 29: Detailed Reconciliation of 2Q19 Adjusted Net Income
Detailed Reconciliation of 2Q19 Adjusted Net Income Three months Ended June 30, 2019 Adjustments (in thousands except 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-GAAP
Slide 30: Detailed Reconciliation of 2Q18 Adjusted Net Income
Detailed Reconciliation of 2Q18 Adjusted Net Income Three months Ended June 30, 2018 (in thousands except share amounts) Adjustments GAAP Amortization Tax Benefit of Other of Acquisition- Acquisition, Pre-IPO Goodwill and U.S. GAAP Business Related Stock-Based Restructuring and Debt Issuance Governa
Slide 31: Detailed Reconciliation of 1H19 Adjusted Net Income
Detailed Reconciliation of 1H19 Adjusted Net Income Six months Ended June 30, 2019 (in thousands except 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 Ac
Slide 32: Detailed Reconciliation of 1H18 Adjusted Net Income
Detailed Reconciliation of 1H18 Adjusted Net Income Six months Ended June 30, 2018 (in thousands except share amounts) Adjustments GAAP Amortization Tax Benefit of Other of Acquisition- Acquisition, Pre-IPO Goodwill and U.S. GAAP Business Related Stock-Based Restructuring and Debt Issuance Governanc
Slide 33: Reconciliation of Adjusted Net Income Metrics
Reconciliation of Adjusted Net Income Metrics For the three months ended, (in thousands, except share data) 6/30/2018 9/30/2018 12/18/2018 3/31/2019 6/30/2019 GAAP Net Income $ 18,675 $ 20,590 $ 13,915 $ 14,527 $ 14,383 Other business taxes 443 350 337 555 424 GAAP amortization of acquisition-relate
Slide 34: Notes and Disclosures
Notes and Disclosures Investing involves risk, including the potential loss of principal. There are no assurances that any fund will achieve its stated objective. All data in this presentation, unless otherwise noted, is as of June 30, 2019. Past performance does not guarantee future results. A fund
Slide 35: Notes and Disclosures
Notes and Disclosures Barron’s ranked Victory Capital 9th overall, 4th in the Mixed Asset category, and 5th in the Taxable Bond category out 57 fund families for the one-year period ended December 31, 2018; 10th out of 58 firms for the-one-year period ended December 31, 2017; 21st out of 61 firms fo
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