How the VFLO Index’s Free Cash Flow Screen Has Captured SaaS Resilience

Despite fears that artificial intelligence (AI) will disrupt the software-as-a-service (SaaS) business model, the approach of VFLO’s Index, centered on a free cash flow (FCF) screen, shows that mature software leaders like Adobe (ADBE), Salesforce (CRM), and Intuit (INTU) have been generating strong FCF. Skeptics often dub this market phenomenon the “SaaSpocalypse,” expecting traditional software business models to become obsolete in the face of generative automation.However, in our view, the underlying financial metrics of these industry leaders tell a fundamentally different story, one measured in FCF. FCF is the cash a company has left after covering expenses, available to reinvest, pay dividends, or reduce debt. That focus on cash generation is what has screened these names in the VictoryShares Free Cash Flow ETF (VFLO B+), and by that measure, software is far from dead.Key Takeaways VFLO’s Index counters fears of software obsolescence by targeting mature industry leaders, like Adobe, Salesforce and Intuit, that have continued to generate consistent free cash flow. VFLO’s Index pairs an expected free cash flow yield metric (average of trailing 12-month and forward 12-month FCF ÷ EV) with a growth filter, excluding structurally declining companies while maintaining a value-oriented tilt. This cash-generation screen is designed to isolate profitable software companies at a discount on expected FCF yield, indicating that core SaaS models have still been generating cash despite AI disruption concerns. See More: Quarterly Rebalance Ushers High-Quality Names Into GFLWVFLO tracks the Victory U.S. Large Cap Free Cash Flow Index (the Index), which targets high-quality, large-cap U.S. companies that trade at a discount while possessing favorable growth characteristics. That discount screen gives VFLO a value tilt, which may be of interest to investors in the current market environment where mega-cap names could be overstretched. The Index evaluates expected FCF rather than relying strictly on backward-looking data. Expected FCF is the average of trailing 12-month results and 12-month forward projections; the Index measures that average against enterprise value to derive expected FCF yield. By filtering for firms with high FCF yields and strong projected growth rates, the Index selects companies whose cash generation has held up across prior technology cycles. Additionally, the Index’s growth filter aims to remove structurally declining businesses, which can help the portfolio avoid value traps. The Index holds 50 stocks, giving VFLO a concentrated portfolio.How Software Cash Flow Held Up Through the AI ShiftWhen the screens isolate companies with high FCF yields and attractive projected growth, Adobe, Salesforce and Intuit have cleared the bar; evidence that these business models have kept generating cash through the current AI cycle. All three ranked among VFLO’s top 10 holdings as of August 31, 2026: Adobe at 3.96%, Salesforce at 3.92% and Intuit at 3.25%. See VFLO’s top 10 holdings below. Despite broad market anxiety over AI displacement, these companies have maintained market positions underpinned by deep customer integration and recurring revenue streams. Rather than funding speculative ventures, the Index screens for companies that can convert operational success into substantial FCF.Valuation Reality Beyond Disruption FearsThe inclusion of core software equities in VFLO’s portfolio pushes back on the disruption thesis. By anchoring on expected FCF and valuation rather than short-term sentiment, VFLO has held companies whose enterprise values were low relative to their expected FCF. It’s a classic case of the Index methodology’s ability to concentrate on the signal and mute the market noise. For more news, information, and analysis, visit the Free Cash Flow Content Hub VettaFi LLC (“VettaFi”) is the index provider for VFLO, for which it receives an index licensing fee. However, VFLO is not issued, sponsored, endorsed, or sold by VettaFi, and VettaFi has no obligation or liability in connection with the issuance, administration, marketing, or trading of VFLO.Disclosure InformationCarefully consider a fund’s investment objectives, risks, charges, and expenses before investing. To obtain a prospectus or summary prospectus containing this and other important information, visit https://www.vcm.com/prospectus. Read it carefully before investing. All investing involves risk, including the potential loss of principal. The Fund has the same risks as the underlying securities traded on the exchange throughout the day. ETFs may trade at a premium or discount to their net asset value. The market prices of securities may go up or down, sometimes rapidly or unpredictably, due to general market conditions, such as real or perceived adverse economic, political, or regulatory conditions, recessions, inflation, or changes in interest or currency rates. Investing in companies with high free cash flows could lead to underperformance when such investments are unpopular or during periods of industry disruptions. The Fund could also be affected by company-specific factors that could jeopardize the generation of free cash flow. Index Funds invest in securities included in, or representative of securities included in, the Index, regardless of their investment merits. The performance of the Fund may diverge from that of the Index. Large shareholders, including other funds advised by the Adviser, may own a substantial amount of the Fund’s shares. The actions of large shareholders, including large inflows or outflows of cash, may adversely affect other shareholders, including potentially increasing capital gains. Investments concentrated in an industry or group of industries may face more risks and exhibit higher volatility than investments that are more broadly diversified over industries or sectors. 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The Victory U.S. Large Cap Free Cash Flow Index aims to select high quality companies from its starting universe by applying profitability screens. It then selects companies with the strongest free cash flow yield that exhibit higher growth. The Index is rebalanced and reconstituted quarterly. This Index calculates free cash flow yield by dividing expected free cash flow by enterprise value. Expected free cash flow is the average of trailing 12-month FCF and next 12-month forward free cash flow. Enterprise value (EV) measures a company’s total value, often used as a more comprehensive alternative to equity market capitalization. Free cash flow yield is the ratio of a company’s free cash flow per share to its current enterprise value. Distributed by Victory Capital Services, Inc. (VCS). VCS is not affiliated with VettaFi. ©2026 Victory Capital Management Inc. All Rights Reserved. 20260916-5909522