AP NEWS

Victory Capital Announces Acquisition of USAA Asset Management Company and Reports Third Quarter Results

November 6, 2018

Third Quarter 2018 Highlights and Recent Announcement1

-- Announced planned acquisition of USAA Asset Management Company -- Assets under management (“AUM”) of $63.6 billion -- Strong investment performance, with 69%, 66%, 75% and 88% of AUM outperforming its respective benchmarks over the trailing one year, three years, five years and 10 years, respectively -- Net outflows of $672 million -- Operating margin of 29.4%, adjusted EBITDA margin of 40.1% -- $0.29 per diluted share of GAAP earnings -- $0.45 per diluted share of adjusted net income with tax benefit -- $40.3 million of cash flow from operations

CLEVELAND, Nov. 06, 2018 (GLOBE NEWSWIRE) -- Victory Capital Holdings, Inc. (NASDAQ:VCTR) (“Victory Capital” or “the Company”) today announced that it has entered into a definitive purchase agreement to acquire USAA Asset Management Company (which includes its Mutual Fund and ETF businesses and 529 College Savings Plan). Victory Capital also reported financial results for the three months ended September 30, 2018.

Acquisition of USAA Asset Management Company

USAA Asset Management Company, based in San Antonio, Texas, was formed to serve the investment needs of the military community and their families. As of September 30, 2018, USAA Asset Management Company had $69.2 billion in assets under management and 53 investment funds. Based on AUM as of September 30, 2018, Victory Capital would have approximately $144.4 billion in firmwide AUM at the close of the transaction.2

USAA Asset Management Company will become Victory Capital’s 11th Investment Franchise and it will have the rights to offer products and services using the USAA brand.

The acquisition of USAA Asset Management Company represents a substantial expansion and diversification of Victory Capital’s investment platform, particularly in the fixed income and solutions asset classes. Based on AUM on September 30, 2018, Victory Capital’s AUM by asset class pro forma for the acquisition would be 48% equities, 26% solutions, 19% fixed income and 7% money market.2

The transaction also provides a new and unique opportunity for Victory Capital to offer its products to USAA members through a direct member-based channel with attractive organic growth and retention rates. USAA mutual funds have experienced an average 10-year organic growth rate of 3.4% compared with 1.1% for their active manager peers.3

“The acquisition of USAA Asset Management Company is a strong diversifier for us with the addition of quality investment teams and products and provides us entry into a new distribution channel with a loyal member base made up of members of the military community and their families,” said David Brown, Chairman and Chief Executive Officer of Victory Capital. “It increases our size and scale, enhances our ability to attract and retain top investment talent, and leverages our investments in critical components of our business, such as technology, operations, investment support and client service, across a broader base of assets.”

Under terms of the purchase agreement, Victory Capital will acquire USAA Asset Management Company for $850 million plus the opportunity for additional contingent payments based on future business performance. Victory Capital expects to finance the transaction through a combination of debt and cash on the balance sheet. It is expected to result in significant accretion to earnings per share as well as value creation for Victory Capital shareholders through expense synergies and the opportunity for meaningful organic growth. The acquisition is expected to close in the second quarter of 2019, and is subject to regulatory and other customary approvals, conditions and consents, including approval by USAA mutual fund and ETF shareholders and Board of Trustees.

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1.Adjusted measures are non-GAAP financial measures. An explanation of these non-GAAP financial measures is included under the heading “Information Regarding Non-GAAP Financial Measures” at the end of this press release. Please see the non-GAAP reconciliation tables. 2.Based on AUM as of September 30, 2018, for Victory Capital, USAA Asset Management Company and Harvest Volatility Management, LLC. Excludes $11.8 billion of AUM in the USAA mutual funds as of September 30, 2018 that are invested through the Managed Money product offered for customers of USAA’s brokerage business. Victory Capital is not acquiring the USAA brokerage business. Pro forma revenue and pro forma EBITDA do not include any revenue from AUM invested through the Managed Money product or related expenses 3.SimFunds as of September 30, 2018. Organic growth calculated as net new flows/beginning of period AUM. Market and USAA mutual fund figures exclude money market AUM.

Third Quarter 2018 Financial Results

Mr. Brown said, “I am pleased to report that Victory Capital delivered strong investment results and posted record highs across several financial operating metrics in the third quarter, in the midst of continued forceful headwinds for our industry.

“Our Investment Franchises and Solutions Platform delivered strong investment performance during the quarter, with 69% of our AUM outperforming its respective benchmarks over the trailing one-year, 66% over the three-year, 75% over the five-year, and 88% over the 10-year period.

“Total AUM grew to $63.6 billion as of September 30, 2018, an 8% year-over-year increase and the highest quarter-end total that we’ve reported in our history. We also achieved record high levels of quarterly revenue, EBITDA, and operating margins. Our free cash flow yield is at the top of our peer universe and our average fee rates continue to be healthy.

“Gross flows for the quarter were strong at $2.9 billion, while overall net flows were ($672) million. Net flows were impacted by client rebalancing activity during the quarter as well as delays in our “won-but-not-funded” pipeline. Overall, our pipeline is healthy as are our sales prospects, fueled by strong investment performance and a diverse product set.

“Momentum in our VictoryShares ETFs remained strong, with net flows of $287 million for the quarter and $939 million for the first nine months of 2018. Our ETFs have experienced positive net flows every quarter since we entered the ETF business in April 2015. Year over year, as of September 30, 2018, our ETF market share has increased by 49%, according to Morningstar.

“Finally, in September, we announced the acquisition of Harvest Volatility Management, LLC (“Harvest”), a leader in derivative investing, specializing in yield enhancement overlay, risk reduction, alternative beta and absolute return strategies.

“Harvest, which had approximately $12 billion in AUM as of September 30, 2018, is a high-quality business with a strong organic growth history and a differentiated product set that we believe will be well received by our clients. The transaction fits squarely into our integrated multi-boutique model and is financially compelling on many levels.

“We believe our planned acquisitions of two well-respected investment managers – USAA Asset Management Company and Harvest – demonstrate the value of our differentiated business model. We look forward to welcoming both firms on to our platform. As always, serving the needs of our clients remains our top priority.”

The acquisition of Harvest is expected to close by the end of the first quarter of 2019, and is subject to regulatory and other customary approvals, conditions and consents, including approval by Harvest’s clients.

The table below presents AUM, and certain GAAP and non-GAAP (“adjusted”) financial results.

(in millions except for share amounts or as otherwise noted) For the Three Months Ended For the Nine Months Ended ---------------------------------- ---------------------- September June 30, September September September 30, 30, 30, 30, 2018 2018 2017 2018 2017 ---------- ---------- ---------- ---------- -------- - Assets Under Management Ending $ 63,640 $ 62,256 $ 58,997 $ 63,640 $ 58,997 Average 63,447 61,617 57,875 62,361 56,979 Flows Gross $ 2,896 $ 3,521 $ 3,879 $ 10,102 $ 12,558 Net (672 ) (102 ) (778 ) (1,408 ) (1,765 ) Net flows excluding Diversified Equity(1) (672 ) (102 ) (778 ) (1,408 ) (1,146 ) Consolidated Financial Results (GAAP) Revenue $ 108.1 $ 104.4 $ 102.4 $ 317.4 $ 304.0 Revenue realization (in bps) 67.6 68.0 70.2 68.0 71.3 Operating expenses 76.3 74.7 78.1 228.7 240.7 Income from operations 31.8 29.7 24.2 88.8 63.2 Operating margin 29.4 % 28.4 % 23.7 % 28.0 % 20.8 % Net income 20.6 18.7 7.9 49.8 14.6 Earnings per diluted share $ 0.29 $ 0.26 $ 0.13 $ 0.71 $ 0.25 Cash flow from operations 40.3 33.7 32.3 99.9 59.4 Adjusted Performance Results (Non-GAAP)(2) Adjusted EBITDA $ 43.3 $ 40.7 $ 39.3 $ 123.8 $ 109.0 Adjusted EBITDA margin 40.1 % 39.0 % 38.3 % 39.0 % 35.9 % Adjusted net income 29.0 26.6 17.1 78.6 44.0 Tax benefit of goodwill and acquired intangibles 3.3 3.3 4.9 10.0 14.6 Adjusted net income with tax benefit 32.3 29.9 22.0 88.6 58.5 Adjusted net income with tax benefit per diluted $ 0.45 $ 0.41 $ 0.37 $ 1.26 $ 0.98 share (1) In May 2017, the Company made a decision to exit the Diversified Equity Franchise; all remaining AUM was transferred to the Munder Capital Management Franchise to manage beginning May 15, 2017. (2)Adjusted EBITDA and Adjusted Net Income are non-GAAP financial measures. Reconciliation of each of Adjusted EBITDA and Adjusted Net Income to net income have been provided in the non-GAAP reconciliation tables in this press release. An explanation of these non-GAAP financial measures is included below under the heading “Information Regarding Non-GAAP Financial Measures”.

AUM, Flows and Investment Performance

Victory Capital’s AUM increased by $1.3 billion to $63.6 billion at September 30, 2018, compared to $62.3 billion at June 30, 2018. The increase was due to market appreciation of $2.1 billion, partially offset by net outflows of $0.7 billion. Gross flows for the third quarter were $2.9 billion.

As of September 30, 2018, Victory Capital offered 71 investment strategies through its nine autonomous Investment Franchises and Solutions Platform. The table below presents outperformance against benchmarks by AUM and strategies as of September 30, 2018.

Investment Performance As of September 30, 2018 Trailing Trailing Trailing Trailing 1-Year 3-Years 5-Years 10-Years -------- -------- -------- -------- Percentage of AUM Outperforming Benchmark 69% 66% 75% 88% Percentage of Strategies Outperforming Benchmark 58% 64% 69% 78%

Third Quarter of 2018 Compared to Second Quarter of 2018

For the quarter ended September 30, 2018, GAAP net income increased 10% to $20.6 million, or $0.29 per diluted share, compared to GAAP net income of $18.7 million, or $0.26 per diluted share, for the second quarter of 2018. GAAP operating margin was 29.4% for the quarter compared to 28.4% for the second quarter of 2018. Adjusted Net Income with tax benefit increased 8% to $32.3 million, or $0.45 per diluted share comprised of $0.40 per diluted share in Adjusted Net Income and $0.05 per diluted share in tax benefit, compared to $29.9 million, or $0.41 per diluted share comprised of $0.37 per diluted share in Adjusted Net Income and $0.04 per diluted share in tax benefit, for the second quarter of 2018.

Adjusted EBITDA and Adjusted EBITDA margin were $43.3 million and 40.1%, respectively, for the third quarter of 2018, compared to $40.7 million and 39.0% in the second quarter of 2018. Net Income, Adjusted Net Income and Adjusted EBITDA increased due to higher revenue coupled with operational efficiencies.

-- Revenue was $108.1 million, an increase from $104.4 million for the second quarter of 2018 due to an increase in average AUM, partially offset by a decrease in the realized fee rate due to asset mix. -- Operating expenses increased to $76.3 million, compared to $74.7 million in the second quarter of 2018 due to higher AUM, revenue and EBITDA levels which drive certain variable expenses.

Third Quarter of 2018 Compared to Third Quarter of 2017

For the quarter ended September 30, 2018, GAAP net income was $20.6 million, or $0.29 per diluted share, compared to $7.9 million, or $0.13 per diluted share, in the third quarter of 2017. GAAP operating margin increased to 29.4% for the quarter from 23.7% for the third quarter of 2017. Adjusted Net Income with tax benefit increased 48% to $32.3 million, or $0.45 per diluted share comprised of $0.40 per diluted share in Adjusted Net Income and $0.05 per diluted share in tax benefit in the third quarter of 2018, compared to $22.0 million, or $0.37 per diluted share comprised of $0.29 per diluted share in Adjusted Net Income and $0.08 per diluted share in tax benefit, in the third quarter of 2017.

Adjusted EBITDA and Adjusted EBITDA margin were $43.3 million and 40.1%, respectively, for the third quarter of 2018, compared to $39.3 million and 38.3%, respectively, for the third quarter a year ago. Net Income, Adjusted Net Income and Adjusted EBITDA increased due to higher revenue coupled with operational efficiencies and, specific to Net Income and Adjusted Net Income, lower interest expense in the third quarter of 2018 as a result of refinancing activities and debt pre-payments and lower tax expense.

-- Revenue increased $5.7 million to $108.1 million, compared to $102.4 million for the third quarter of 2017, due to higher average AUM, partially offset by a decrease in the realized fee rate due to asset mix. -- Operating expenses decreased 2% to $76.3 million, compared to $78.1 million in the third quarter of 2017, primarily due to operational efficiencies.

Nine Months Ended September 30, 2018 Compared to Nine Months Ended September 30, 2017

For the nine months ended September 30, 2018, GAAP net income was $49.8 million, or $0.71 per diluted share, compared to $14.6 million, or $0.25 per diluted share, for the comparable nine months of 2017. GAAP operating margin increased to 28.0% for the nine months ended September 30, 2018 from 20.8% for nine months ended September 30, 2017. Adjusted Net Income with tax benefit increased 51% to $88.6 million, or $1.26 per diluted share comprised of $1.12 per diluted share in Adjusted Net Income and $0.14 per diluted share in tax benefit for the nine months ended September 30, 2018, compared to $58.5 million, or $0.98 per diluted share comprised of $0.74 per diluted share in Adjusted Net Income and $0.24 per diluted share in tax benefit, for the nine months ended September 30, 2017.

Adjusted EBITDA and Adjusted EBITDA margin were $123.8 million and 39.0%, respectively, for the nine months ended September 30, 2018, compared to $109.0 million and 35.9%, respectively, for the comparable nine months a year ago. Net Income, Adjusted Net Income and Adjusted EBITDA increased due to higher revenue coupled with operational efficiencies, the successful integration of RS Investments and, specific to Net Income and Adjusted Net Income, lower interest expense as a result of refinancing activities and debt pre-payments and lower tax expense.

-- Revenue increased $13.4 million to $317.4 million for the nine months ended September 30, 2018, compared to $304.0 million for the nine months ended September 30, 2017, due to higher average AUM, partially offset by a decrease in the realized fee rate due to asset mix. -- Operating expenses for the nine months ended September 30, 2018 decreased 5% to $228.7 million, compared to $240.7 million for the nine months ended September 30, 2017, primarily due to operational efficiencies and the successful integration of RS Investments.

Balance Sheet / Capital Management

Cash and cash equivalents were $25.1 million at September 30, 2018, compared to $12.9 million at December 31, 2017. During the quarter, the Company pre-paid $20.0 million of debt with cash on hand. The term loan balance at September 30, 2018 was $280.0 million, a 7% reduction during the quarter.

During the quarter, the Company repurchased 291,585 shares at an average price of $9.68 per share.

Conference Call, Webcast and Slide Presentation

The Company will host a conference call and webcast at 8:00 a.m. Eastern Time tomorrow, November 7, 2018. Analysts and investors may participate in the question-and-answer session. The call can be accessed via telephone at (866) 465-5145 (domestic) or (409) 220-9945 (international). Please reference the Victory Capital Conference Call. A recorded replay of the conference call will be available shortly after the conclusion of the live call and can be accessed through November 21, 2018 by dialing (855) 859-2056 (domestic) or (404) 537-3406 (international) and enter the Conference ID Number 2746159.

The slide presentation and webcast of the conference call can be accessed on the Events and Presentations page of the Company’s investor relations website at https://ir.vcm.com.

About Victory Capital

Victory Capital is a global investment management firm operating a next-generation, integrated multi-boutique business model with $63.6 billion in assets under management as of September 30, 2018.

Victory Capital’s differentiated model is comprised of nine Investment Franchises*, each with an independent culture and investment approach. Additionally, the Company offers a rules-based Solutions Platform, featuring the VictoryShares ETF brand, as well as custom and multi-asset class solutions. The Company’s Investment Franchises and Solutions Platform are supported by a centralized distribution, marketing and operational environment, in which the investment professionals can focus on the pursuit of investment excellence.

Victory Capital provides institutions, financial advisors and retirement platforms with a variety of asset classes and investment vehicles, including separately managed accounts, collective trusts, mutual funds, ETFs, UCITs and UMA/SMA vehicles.

For more information, please visit www.vcm.com.

*Harvest Volatility Management, LLC will become Victory Capital’s 10th Investment Franchise.

FORWARD-LOOKING STATEMENTS

This press release may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements may include, without limitation, any statements preceded by, followed by or including words such as “target,” “believe,” “expect,” “aim,” “intend,” “may,” “anticipate,” “assume,” “budget,” “continue,” “estimate,” “future,” “objective,” “outlook,” “plan,” “potential,” “predict,” “project,” “will,” “can have,” “likely,” “should,” “would,” “could” and other words and terms of similar meaning or the negative thereof. Such forward-looking statements involve known and unknown risks, uncertainties and other important factors beyond Victory Capital’s control, as discussed in Victory Capital’s filings with the SEC, that could cause Victory Capital’s actual results, performance or achievements to be materially different from the expected results, performance or achievements expressed or implied by such forward-looking statements.

Although it is not possible to identify all such risks and factors, they include, among others, the following: reductions in AUM based on investment performance, client withdrawals, difficult market conditions and other factors; the nature of the Company’s contracts and investment advisory agreements; the Company’s ability to maintain historical returns and sustain its historical growth; the Company’s dependence on third parties to market its strategies and provide products or services for the operation of its business; the Company’s ability to retain key investment professionals or members of its senior management team; the Company’s reliance on the technology systems supporting its operations; the Company’s ability to successfully acquire and integrate new companies; the concentration of the Company’s investments in long-only small- and mid-cap equity and U.S. clients; risks and uncertainties associated with non-U.S. investments; the Company’s efforts to establish and develop new teams and strategies; the ability of the Company’s investment teams to identify appropriate investment opportunities; the Company’s ability to limit employee misconduct; the Company’s ability to meet the guidelines set by its clients; the Company’s exposure to potential litigation (including administrative or tax proceedings) or regulatory actions; the Company’s ability to implement effective information and cyber security policies, procedures and capabilities; the Company’s substantial indebtedness; the potential impairment of the Company’s goodwill and intangible assets; disruption to the operations of third parties whose functions are integral to the Company’s ETF platform; the Company’s determination that Victory Capital is not required to register as an “investment company” under the 1940 Act; the fluctuation of the Company’s expenses; the Company’s ability to respond to recent trends in the investment management industry; the level of regulation on investment management firms and the Company’s ability to respond to regulatory developments; the competitiveness of the investment management industry; the dual class structure of the Company’s common stock; the level of control over the Company retained by Crestview GP; the Company’s status as an emerging growth company and a controlled company; and other risks and factors listed under “Risk Factors” and elsewhere in the Company’s filings with the SEC.

Such forward-looking statements are based on numerous assumptions regarding Victory Capital’s present and future business strategies and the environment in which it will operate in the future. Any forward-looking statement made in this press release speaks only as of the date hereof. Except as required by law, Victory Capital assumes 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.

Investor Relations Website

Victory Capital may use the Investor Relations section of its website, https://ir.vcm.com, to disclose material information to investors and the marketplace as a means of disclosing material, non-public information and for complying with disclosure obligations under Regulation Fair Disclosure (“Reg FD”). Victory Capital encourages investors, the media and other interested parties to visit its investor relations website regularly.

ContactsInvestors:Lisa Mueller, 310-622-8231 lmueller@finprofiles.com

Media: Tricia Ross, 310-622-8226 tross@finprofiles.com

Victory Capital Holdings, Inc. and Subsidiaries Unaudited Condensed Consolidated Statements of Operations (in thousands, except for shares) For the Three Months Ended For the Nine Months Ended ---------------------------------------------- ------------------------------ September 30, June 30, September 30, September 30, September 30, 2018 2018 2017 2018 2017 -------------- -------------- -------------- -------------- ------------ - Revenue Investment management fees $ 92,525 $ 88,998 $ 86,016 $ 270,653 $ 254,605 Fund administration and 15,557 15,401 16,372 46,792 49,378 distribution fees - ---------- - - ---------- - - ---------- - - ---------- - - ---------- - Total revenue 108,082 104,399 102,388 317,445 303,983 Expenses Personnel compensation and 38,027 37,140 36,097 111,970 106,772 benefits Distribution and other 24,269 24,127 24,801 73,557 78,226 asset-based expenses General and administrative 6,951 7,088 8,867 23,095 26,049 Depreciation and amortization 5,574 5,931 7,055 17,917 23,340 Change in value of consideration payable for - (4 ) - (4 ) (25 ) acquisition of business Acquisition-related costs 1,451 (5 ) 844 1,446 1,435 Restructuring and integration - 438 483 702 4,944 costs Total operating expenses 76,272 74,715 78,147 228,683 240,741 - ---------- - - ---------- - - ---------- - - ---------- - - ---------- - Income from operations 31,810 29,684 24,241 88,762 63,242 Operating margin 29.4 % 28.4 % 23.7 % 28.0 % 20.8 % Other income (expense) Interest income and other (200 ) 8 753 (229 ) (816 ) income/(expense) Interest expense and other (4,458 ) (4,706 ) (11,688 ) (16,256 ) (38,159 ) financing costs Loss on debt extinguishment - - (330 ) (6,058 ) (330 ) Total other income (expense), (4,658 ) (4,698 ) (11,265 ) (22,543 ) (39,305 ) net - ---------- - - ---------- - - ---------- - - ---------- - - ---------- - Income before income taxes 27,152 24,986 12,976 66,219 23,937 Income tax expense (6,562 ) (6,311 ) (5,126 ) (16,430 ) (9,320 ) - ---------- - - ---------- - - ---------- - - ---------- - - ---------- - Net income $ 20,590 $ 18,675 $ 7,850 $ 49,789 $ 14,617 - ---------- - - ---------- - - ---------- - - ---------- - - ---------- - Earnings per share of common stock Basic $ 0.30 $ 0.27 $ 0.14 $ 0.76 $ 0.27 Diluted $ 0.29 $ 0.26 $ 0.13 $ 0.71 $ 0.25 Weighted average number of shares outstanding Basic 67,972,313 67,948,732 54,961,161 65,816,557 54,867,257 Diluted 71,863,566 72,135,290 59,738,176 70,168,116 59,517,606 Dividends declared per share of $ - $ - $ - $ - $ 2.19 common stock

Victory Capital Holdings, Inc. and Subsidiaries Reconcilation of GAAP to Non-GAAP Measures (unaudited; in thousands, except for shares) For the Three Months Ended For the Nine Months Ended ---------------------------------- ------------------------ September June 30, September September September 30, 30, 30, 30, 2018 2018 2017 2018 2017 ---------- ---------- ---------- ----------- --------- - Net income (GAAP) $ 20,590 $ 18,675 $ 7,850 $ 49,789 $ 14,617 Income tax expense (6,562 ) (6,311 ) (5,126 ) (16,430 ) (9,320 ) - ------ - - ------ - - ------ - - ------- - - ------- - Income before taxes $ 27,152 $ 24,986 $ 12,976 $ 66,219 $ 23,937 Interest expense 4,053 4,229 10,648 16,376 35,002 Depreciation 775 736 858 2,247 2,666 Other business taxes 350 443 619 1,168 1,459 Amortization of acquisition-related intangibles 4,799 5,195 6,197 15,670 20,673 Stock-based compensation 4,005 3,968 4,060 11,295 10,012 Acquisition, restructuring and exit costs 1,647 560 1,241 2,725 9,040 Debt issuance costs 373 361 2,419 7,436 5,247 Pre-IPO governance expenses - (3 ) 301 138 901 Earnings/losses from equity method investments 167 202 (65 ) 506 108 Adjusted EBITDA $ 43,321 $ 40,677 $ 39,254 $ 123,780 $ 109,045 - ------ - - ------ - - ------ - - ------- - - ------- - Adjusted EBITDA margin 40.1 % 39.0 % 38.3 % 39.0 % 35.9 % Net income (GAAP) $ 20,590 $ 18,675 $ 7,850 $ 49,789 $ 14,617 Adjustments to reflect the operating performance of the Company: Other business taxes 350 443 619 1,168 1,459 Amortization of acquisition-related intangibles 4,799 5,195 6,197 15,670 20,673 Stock-based compensation 4,005 3,968 4,060 11,295 10,012 Acquisition, restructuring and exit costs 1,647 560 1,241 2,725 9,040 Debt issuance costs 373 361 2,419 7,436 5,247 Pre-IPO governance expenses - (3 ) 301 138 901 Tax effect of above adjustments (2,794 ) (2,631 ) (5,638 ) (9,608 ) (17,986 ) Adjusted net income $ 28,970 $ 26,568 $ 17,049 $ 78,613 $ 43,963 - ------ - - ------ - - ------ - - ------- - - ------- - Adjusted net income per diluted share $ 0.40 $ 0.37 $ 0.29 $ 1.12 $ 0.74 - ------ - - ------ - - ------ - - ------- - - ------- - Tax benefit of goodwill and acquired intangibles $ 3,318 $ 3,320 $ 4,901 $ 9,958 $ 14,561 - ------ - - ------ - - ------- - - ------- - Tax benefit of goodwill and acquired intangibles $ 0.05 $ 0.04 $ 0.08 $ 0.14 $ 0.24 per diluted share - ------ - - ------ - - ------ - - ------- - - ------- - Adjusted net income with tax benefit $ 32,288 $ 29,888 $ 21,950 $ 88,571 $ 58,524 - ------ - - ------ - - ------- - - ------- - Adjusted net income with tax benefit per diluted $ 0.45 $ 0.41 $ 0.37 $ 1.26 $ 0.98 share - ------ - - ------ - - ------ - - ------- - - ------- -

Victory Capital Holdings, Inc. and Subsidiaries Unaudited Condensed Consolidated Balance Sheets (In thousands, except for shares) September December 31, 30, 2018 2017 ------------ ------------ Assets Cash and cash equivalents $ 25,139 $ 12,921 Receivables 50,421 55,917 Prepaid expenses 2,494 5,441 Investments 14,557 11,336 Property and equipment, net 8,632 8,844 Goodwill 284,108 284,108 Other intangible assets, net 392,331 408,000 Other assets 8,519 6,055 - -------- - - -------- - Total assets $ 786,201 $ 792,622 - -------- - - -------- - Liabilities and stockholders’ equity Accounts payable and accrued expenses $ 16,854 $ 21,996 Accrued compensation and benefits 30,326 29,305 Consideration payable for acquisition of business 5,788 9,856 Deferred tax liability, net 7,153 4,068 Other liabilities 15,803 12,989 Long-term debt(1) 268,383 483,225 - -------- - - -------- - Total liabilities 344,307 561,439 Stockholders’ equity: Common stock, $0.01 par value per share: 2018 - no shares authorized, – 572 issued and outstanding; 2017 - 78,837,300 shares authorized, 57,182,730 issued and 55,118,673 shares outstanding Class A common stock, $0.01 par value per share: 2018 - 400,000,000 148 – shares authorized, 14,787,264 shares issued and 14,429,567 shares outstanding; 2017 - no shares authorized, issued and outstanding Class B common stock, $0.01 par value per share: 2018 - 200,000,000 556 – shares authorized, 55,639,613 shares issued and 53,492,633 shares outstanding; 2017 - no shares authorized, issued and outstanding Additional paid-in capital 599,875 435,334 Class A treasury stock, at cost: 2018 - 357,697 shares; 2017 - no shares (3,542 ) – Class B treasury stock, at cost: 2018 - 2,146,980 shares; 2017 - 2,064,057 shares (21,719 ) (20,899 ) Accumulated other comprehensive income 63 64 Retained deficit (133,487 ) (183,888 ) Total stockholders’ equity 441,894 231,183 - -------- - - -------- - Total liabilities and stockholders’ equity $ 786,201 $ 792,622 - -------- - - -------- - (1)Balance at September 30, 2018 is shown net of unamortized loan discount and debt issuance costs in the amount of $11.6 million. The gross amount of the debt outstanding was $280.0 million.

Victory Capital Holdings, Inc. and Subsidiaries Assets Under Management (unaudited; in millions) For the Three Months Ended % Change from ------------------------------------ ---------------------------- September June 30, September June 30, September 30, 30, 30, 2018 2018 2017 2018 2017 ----------- ----------- ---------- ------------- ------------- Beginning assets under $ 62,256 $ 60,855 $ 56,973 2% 9% management Gross client cash inflows 2,896 3,521 3,879 -18% -25% Gross client cash outflows (3,568 ) (3,623 ) (4,657 ) -2% -23% - ------- - - ------- - - ------ - Net client cash flows (672 ) (102 ) (778 ) 559% -14% Market appreciation 2,056 1,503 2,801 37% -27% (depreciation) Net transfers - - - n/m n/m - ------- - - ------- - - ------ - Ending assets under $ 63,640 $ 62,256 $ 58,997 2% 8% management Average assets under $ 63,447 $ 61,617 $ 57,875 3% 10% management Net client cash flows excluding Diversified $ (672 ) $ (102 ) $ (778 ) 559% -14% Equity For the Nine Months % Change from Ended ------------------------ ------------- September September September 30, 30, 30, 2018 2017 2017 ----------- ----------- ------------- Beginning assets under $ 61,771 $ 54,965 12% management Gross client cash inflows 10,102 12,558 -20% Gross client cash outflows (11,510 ) (14,323 ) -20% - ------- - - ------- - Net client cash flows (1,408 ) (1,765 ) -20% Market appreciation 3,285 5,796 -43% (depreciation) Net transfers (8 ) - n/m - ------- - - ------- - Ending assets under $ 63,640 $ 58,997 8% management Average assets under $ 62,361 $ 56,979 9% management Net client cash flows excluding Diversified $ (1,408 ) $ (1,146 ) 23% Equity

Victory Capital Holdings, Inc. and Subsidiaries Assets Under Management by Asset Class (unaudited; in millions) For the Three By Asset Class Months Ended -------------- -------------------------------------------------------------------------------------------------- U.S. U.S. Global U.S. Mid Small Fixed Large / Solutions Commodity Other Total Cap Equity Cap Income Cap Non-U.S. Equity Equity Equity ---------- -------- - ------- - ------- - ------- - --------- --------- ------- ---------- September 30, 2018 Beginning assets under $ 24,485 $ 15,971 $ 6,978 $ 4,577 $ 4,705 $ 3,815 $ 1,291 $ 434 $ 62,256 management Gross client 964 740 449 42 307 321 27 46 2,896 cash inflows Gross client (1,660 ) (860 ) (346 ) (179 ) (193 ) (61 ) (238 ) (31 ) (3,568 ) cash outflows - ------ - - ------ - - ----- - - ----- - - ----- - - ----- - - ----- - - --- - - ------ - Net client (696 ) (120 ) 103 (137 ) 114 260 (211 ) 15 (672 ) cash flows Market appreciation 1,225 587 67 204 (81 ) 149 (114 ) 19 2,056 (depreciation) Net transfers - - 1 - - - - (1 ) - Ending assets under $ 25,014 $ 16,438 $ 7,149 $ 4,644 $ 4,738 $ 4,224 $ 966 $ 467 $ 63,640 management - ------ - - ------ - - ----- - - ----- - - ----- - - ----- - - ----- - - --- - - ------ - June 30, 2018 Beginning assets under $ 24,205 $ 15,095 $ 7,311 $ 4,635 $ 4,334 $ 3,563 $ 1,298 $ 414 $ 60,855 management Gross client 1,125 867 303 103 669 381 46 27 3,521 cash inflows Gross client (1,422 ) (745 ) (652 ) (287 ) (182 ) (169 ) (133 ) (33 ) (3,623 ) cash outflows - ------ - - ------ - - ----- - - ----- - - ----- - - ----- - - ----- - - --- - - ------ - Net client (297 ) 122 (349 ) (184 ) 487 212 (87 ) (6 ) (102 ) cash flows Market appreciation 558 773 16 113 (116 ) 40 80 39 1,503 (depreciation) Net transfers 19 (19 ) - 13 - - - (13 ) - Ending assets under $ 24,485 $ 15,971 $ 6,978 $ 4,577 $ 4,705 $ 3,815 $ 1,291 $ 434 $ 62,256 management - ------ - - ------ - - ----- - - ----- - - ----- - - ----- - - ----- - - --- - - ------ - September 30, 2017 Beginning assets under $ 22,390 $ 14,453 $ 7,708 $ 4,825 $ 3,605 $ 2,227 $ 1,421 $ 344 $ 56,973 management Gross client 1,771 996 485 36 195 332 56 8 3,879 cash inflows Gross client (1,766 ) (1,612 ) (512 ) (185 ) (348 ) (58 ) (144 ) (32 ) (4,657 ) cash outflows - ------ - - ------ - - ----- - - ----- - - ----- - - ----- - - ----- - - --- - - ------ - Net client 5 (616 ) (27 ) (149 ) (153 ) 274 (88 ) (24 ) (778 ) cash flows Market appreciation 993 996 80 130 283 90 199 28 2,801 (depreciation) Net transfers - - 16 - - 34 (15 ) (35 ) - Ending assets under $ 23,388 $ 14,833 $ 7,777 $ 4,806 $ 3,735 $ 2,625 $ 1,517 $ 314 $ 58,997 management - ------ - - ------ - - ----- - - ----- - - ----- - - ----- - - ----- - - --- - - ------ -

Victory Capital Holdings, Inc. and Subsidiaries Assets Under Management by Asset Class (unaudited; in millions) For the Nine By Asset Class Months Ended -------------- ------------------------------------------------------------------------------------------------------ U.S. Mid U.S. U.S. Global / Cap Small Fixed Large Non-U.S. Solutions Commodity Other Total Equity Cap Income Cap Equity Equity Equity -------- - -------- - -------- - -------- - -------- - --------- --------- ------- ----------- September 30, 2018 Beginning assets under $ 25,185 $ 15,308 $ 7,551 $ 4,789 $ 4,105 $ 3,028 $ 1,419 $ 386 $ 61,771 management Gross client 3,292 2,383 1,145 200 1,420 1,307 200 155 10,102 cash inflows Gross client (5,162 ) (2,527 ) (1,637 ) (677 ) (594 ) (307 ) (517 ) (89 ) (11,510 ) cash outflows - ------ - - ------ - - ------ - - ------ - - ------ - - ----- - - ----- - - --- - - ------- - Net client (1,870 ) (144 ) (492 ) (477 ) 826 1,000 (317 ) 66 (1,408 ) cash flows Market appreciation 1,680 1,293 89 320 (185 ) 156 (136 ) 68 3,285 (depreciation) Net transfers 19 (19 ) 1 12 (8 ) 40 - (53 ) (8 ) Ending assets under $ 25,014 $ 16,438 $ 7,149 $ 4,644 $ 4,738 $ 4,224 $ 966 $ 467 $ 63,640 management - ------ - - ------ - - ------ - - ------ - - ------ - - ----- - - ----- - - --- - - ------- - September 30, 2017 Beginning assets under $ 20,083 $ 14,090 $ 7,726 $ 5,921 $ 3,460 $ 1,602 $ 1,882 $ 202 $ 54,965 management Gross client 6,287 2,897 1,375 173 558 978 234 56 12,558 cash inflows Gross client (5,480 ) (3,849 ) (1,586 ) (1,419 ) (1,123 ) (161 ) (624 ) (81 ) (14,323 ) cash outflows - ------ - - ------ - - ------ - - ------ - - ------ - - ----- - - ----- - - --- - - ------- - Net client 807 (952 ) (211 ) (1,246 ) (565 ) 817 (390 ) (25 ) (1,765 ) cash flows Market appreciation 2,497 1,695 319 137 840 206 25 75 5,796 (depreciation) Net transfers 1 - (57 ) (6 ) - - - 62 - Ending assets under $ 23,388 $ 14,833 $ 7,777 $ 4,806 $ 3,735 $ 2,625 $ 1,517 $ 314 $ 58,997 management - ------ - - ------ - - ------ - - ------ - - ------ - - ----- - - ----- - - --- - - ------- -

Victory Capital Holdings, Inc. and Subsidiaries Assets Under Management by Vehicle (unaudited; in millions) For the Three Months Ended By Vehicle --------------------------- ------------------------------------------------- Separate Mutual Funds(1) ETFs Accounts Total and Other Vehicles(2) --------------- --------- ----------- ---------- September 30, 2018 Beginning assets under $ 37,818 $ 2,906 $ 21,532 $ 62,256 management Gross client cash inflows 2,098 305 493 2,896 Gross client cash outflows (2,950 ) (18 ) (600 ) (3,568 ) - ------ - - ----- - - ------ - - ------ - Net client cash flows (852 ) 287 (107 ) (672 ) Market appreciation 1,223 102 731 2,056 (depreciation) Net transfers - - - - - ------ - Ending assets under $ 38,189 $ 3,295 $ 22,156 $ 63,640 management - ------ - - ----- - - ------ - - ------ - June 30, 2018 Beginning assets under $ 36,989 $ 2,674 $ 21,192 $ 60,855 management Gross client cash inflows 2,555 296 670 3,521 Gross client cash outflows (2,708 ) (96 ) (819 ) (3,623 ) - ------ - - ----- - - ------ - - ------ - Net client cash flows (153 ) 200 (149 ) (102 ) Market appreciation 963 32 508 1,503 (depreciation) Net transfers 19 - (19 ) - - ------ - Ending assets under $ 37,818 $ 2,906 $ 21,532 $ 62,256 management - ------ - - ----- - - ------ - - ------ - September 30, 2017 Beginning assets under $ 36,133 $ 1,578 $ 19,262 $ 56,973 management Gross client cash inflows 2,759 237 883 3,879 Gross client cash outflows (3,479 ) (2 ) (1,176 ) (4,657 ) - ------ - - ----- - - ------ - - ------ - Net client cash flows (720 ) 235 (293 ) (778 ) Market appreciation 1,928 62 811 2,801 (depreciation) Net transfers - - - - - ------ - Ending assets under $ 37,341 $ 1,875 $ 19,780 $ 58,997 management - ------ - - ----- - - ------ - - ------ - (1)Includes institutional and retail share classes and VIP funds. (2) Includes collective trust funds, wrap program separate accounts and unified managed accounts or UMAs.

Victory Capital Holdings, Inc. and Subsidiaries Assets Under Management by Vehicle (unaudited; in millions) For the Nine Months Ended By Vehicle --------------------------- ----------------------------------------------- Separate Mutual Accounts Funds(1) ETFs and Other Total Vehicles (2) ----------- --------- ---------- ----------- September 30, 2018 Beginning assets under $ 37,967 $ 2,250 $ 21,555 $ 61,771 management Gross client cash inflows 7,279 1,082 1,741 10,102 Gross client cash outflows (8,924 ) (143 ) (2,443 ) (11,510 ) - ------- - - ----- - - ------ - - ------- - Net client cash flows (1,645 ) 939 (702 ) (1,408 ) Market appreciation 1,878 106 1,301 3,285 (depreciation) Net transfers (11 ) - 3 (8 ) - ------- - Ending assets under $ 38,189 $ 3,295 $ 22,156 $ 63,640 management - ------- - - ----- - - ------ - - ------- - September 30, 2017 Beginning assets under $ 33,975 $ 906 $ 20,085 $ 54,965 management Gross client cash inflows 9,658 833 2,067 12,558 Gross client cash outflows (10,138 ) (4 ) (4,181 ) (14,323 ) - ------- - - ----- - - ------ - - ------- - Net client cash flows (480 ) 829 (2,114 ) (1,765 ) Market appreciation 3,851 140 1,805 5,796 (depreciation) Net transfers (5 ) - 5 - Ending assets under $ 37,341 $ 1,875 $ 19,780 $ 58,997 management - ------- - - ----- - - ------ - - ------- - (1)Includes institutional and retail share classes and VIP funds. (2) Includes collective trust funds, wrap program separate accounts and unified managed accounts or UMAs.

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, restructuring and integration costs and demonstrate the ongoing operating earnings metrics of the Company. 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.

Adjusted EBITDA

Adjustments made to GAAP Net Income to calculate Adjusted EBITDA are:

-- Adding back income tax; -- Adding back interest paid on debt and other financing costs net of interest income; -- Adding back depreciation on property and equipment; -- Adding back other business taxes; -- Adding back amortization of acquisition-related intangibles; -- Adding back the expense associated with stock-based compensation associated with equity issued from pools that were created in connection with the management-led buyout with Crestview GP from KeyCorp, the Munder Acquisition and the RS Acquisition and as a result of any equity grants related to the IPO; -- Adding back direct incremental costs of acquisitions and the IPO, including expenses associated with third-party advisors, proxy solicitations of mutual fund shareholders for transaction consents, vendor contract early termination costs, loss on other receivable recorded in connection with an acquisition and severance, retention and transaction incentive compensation; -- Adding back debt issuance costs; -- Adding back pre-IPO governance expenses paid to the Company’s private equity partners that terminated as of the completion of the IPO; and -- Adjusting for earnings/losses on equity method investments.

Adjusted Net Income

Adjustments made to GAAP Net Income to calculate Adjusted Net Income are:

-- Adding back other business taxes; -- Adding back amortization of acquisition-related intangibles; -- Adding back the expense associated with stock-based compensation associated with equity issued from pools that were created in connection with the management-led buyout with Crestview GP from KeyCorp, the Munder Acquisition and the RS Acquisition and as a result of any equity grants related to the IPO; -- Adding back direct incremental costs of acquisitions and the IPO, including expenses associated with third-party advisors, proxy solicitations of mutual fund shareholders for transaction consents, vendor contract early termination costs, loss on other receivable recorded in connection with an acquisition and severance, retention and transaction incentive compensation; -- Adding back debt issuance costs; -- Adding back pre-IPO governance expenses paid to the Company’s private equity partners that terminated as of the completion of the IPO; and -- Subtracting an estimate of income tax expense on the adjustments.

Tax Benefit of Goodwill and Acquired Intangibles

Due to Victory Capital’s acquisitive nature, tax deductions allowed on acquired intangible assets and goodwill provide it with additional significant supplemental economic benefit. The tax benefit of goodwill and intangibles represents the tax benefits associated with deductions allowed for intangibles and goodwill generated from prior acquisitions in which the Company received a step-up in basis for tax purposes. Acquired intangible assets and goodwill may be amortized for tax purposes, generally over a 15-year period. The tax benefit from amortization on these assets is included to show the full economic benefit of deductions for all acquired intangibles with a step-up in tax basis.

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