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Michael Policarpo

Thanks, Dave, and good morning, everyone. The financial results review begins on slide 12.
Revenue for the first quarter came in at $219.6 million, which was down approximately 5% from the fourth quarter as a result of slightly lower average AUM, fewer days in the quarter as well as product, vehicle and channel mix shift. Year-over-year, revenue, earnings, adjusted EBITDA and adjusted EBITDA margin were all higher in this year's first quarter versus last year.
Adjusted net income with tax benefit per diluted share of $1.36 achieved in the quarter was our second highest of all time. We ended March with $176 million in cash, which was up $49 million from year-end. At quarter end, our net leverage ratio was unchanged at 1.7 times. During the first quarter, we returned $39 million to shareholders. Additionally, the Board authorized a cash dividend increase to $0.49 per share payable on June 25 to shareholders of record at the close of business on June 10.
We would like to note here that going forward, we will continue to review our dividend every quarter with our Board, but anticipate moving back to an annual increase cycle with our first quarter results. As expected, during April, sufficient consents were received from Pioneer clients, resulting in a post-closing adjustment whereby we will issue an additional 5.4 million shares to Amundi. This will bring their total diluted equity interest up to 26.1% with a 4.9% voting interest. Owing to the transaction, our diluted share count will increase to approximately 88.3 million shares.
Turning to slide 13. Total client assets declined by less than 3% during the quarter, driven primarily by market action. Our AUM continues to be diversified from both a distribution channel perspective, as well as by investor type within each channel and by asset class and investment vehicle. As mentioned on a prior call and beginning next quarter, we will add a new category to this chart to illustrate the non-US client portion of our total AUM.
As a result of the Amundi transaction, we began the second quarter with $44 billion of AUM from clients outside of the US. Having a significant portion of AUM from investors outside the US provides another dimension of diversification for our business.
On slide 14, we cover long-term asset flows. 2025 is off to a strong start. Gross flows were higher during the quarter, increasing by 41% over the prior quarter and 33% from Q1 2024. RS Global and Victory Income Investors have seen strong activity given their strong investment performance and asset classes they invest in.
We are continuing to see great investor interest in our ETFs, which are active and rules based and carry an active-type investment advisory fee for such products and also have strong margins. Through mid-March, we were net flow positive for the quarter. We had two large redemptions totaling approximately $2.7 billion that more than offset the positive net flows up to that point.
Despite these onetime items, our underlying positive flow momentum is strong, and these redemptions should not take away from that point. We are encouraged by the trajectory we are on, particularly given our newly enlarged sales force and the added resources we are dedicating to distribution efforts while also adding the Pioneer franchise products to our offerings.
Our one but not yet funded pipeline remains sizable indeed from a product, franchise and channel perspective. Finally, Pioneer Investments products generated positive long-term net flows of $1.7 billion during the first quarter, and that momentum has continued.
Slide 15 shows the sequential revenue over the past four quarters. Our average fee rate was 51.2 basis points in the period. This is within our expected range but the decrease from prior quarter primarily attributed to product, vehicle and channel mix shift. Additionally, lower average AUM from negative market action in the first quarter and two fewer days in the quarter also impacted total revenue. Keep in mind, as an organization, our focus is on margins, while our fee rate will fluctuate from quarter-to-quarter.
On slide 16, we detail our expenses for the quarter. Total GAAP expenses were $138.6 million in the first quarter. The uptick in GAAP expenses is due to higher acquisition, restructuring and integration costs from the Amundi transaction. which were offset by lower distribution and other AUM-based expenses, which calibrated with lower average AUM for the quarter. On a cash basis, our compensation expense was 24.3%, which is in line with our guidance and is inclusive of seasonally higher payroll tax and employee benefits that reset at the start of each year.
On slide 17, we highlight our non-GAAP metrics. We reported $1.36 adjusted net income with tax benefit per diluted share. Adjusted EBITDA and adjusted EBITDA margin were $116.4 million and 53%, respectively. These results include the impact of accelerated payroll tax and benefits that are typical for the first quarter. And I would highlight our EBITDA margin expanded 90 basis points from the first quarter of 2024.
Over the next several quarters, we expect to see our adjusted EBITDA margins decline slightly from its current level as we continue with our integration work and achieve our full net expense synergy target of $110 million. Once fully integrated, we anticipate no change in our long-term guidance of 49% margins.
Finally, turning to slide 18. We generated $81 million in cash from operations during the quarter, and our net leverage ratio remained steady at 1.7 times. We have positioned the balance sheet well as we enter Q2. We ended the period with $176 million of cash and post the Amundi transaction on April 1, our leverage ratio is in the low 1s.
Interest expense declined for the second consecutive quarter as our interest rate declined to 4.9% inclusive of the benefit from the interest rate hedge we crystallized in the fourth quarter of 2023. In the first quarter of 2024, our interest rate was above 6% so we have seen our quarterly interest expense decline by more than $3 million in the past year. Our $100 million credit facility remains undrawn.
That concludes our prepared remarks. I will now turn it over to the operator for questions.

Question and Answer Session

Operator

(Operator Instructions)
Ken Worthington, JPMorgan.

Michael Cho

Hi. Good morning, guys. This is Michael Cho in for Ken. Thanks for taking my questions. I just wanted to start on kind of the top line here. You called out the development of a number of UCITS and to distribute Victory's strategy outside the US and you also talked about maybe considering Pioneer EPS going forward as well. And so I was hoping you can maybe touch on maybe the pace of these prospective rollouts and maybe the prioritization, if any, of the product lineup that you see out there. And if there's any strategy that you think might have more considerable adoption than maybe some of the others. Thanks.

Michael Policarpo

Hey, Michael. Good morning, how are you? It's Mike. Thanks for the question. Yes, I think as we said in the prepared remarks, we have been working with the distribution force at Amundi from a global perspective to identify products that are vintage victory that we think will have success outside the US. And we've spent time with them, formulating kind of a plan with respect to the product development. There'll be a handful of UCITS that we will work with them to create and they're kind of in that registration phase right now and would expect that they'll be launched towards the back half of 2025.
And as we think about the opportunity from which products, really, if you look at the product set that Victory has and some of the opportunities that weren't fulfilled, if you will, by the existing Pioneer product set, there's some small and mid-cap products from a US domestic perspective that we think will play very well there.
In addition, we've got some complementary fixed income offerings that, again, we think will play very nicely in the UCITS offerings for Amundi. And then there's also some pretty strong performers that we have in the global equity space that, again, we think will play very nicely in the UCITS offerings outside the US. And so what we've done over the last several months is really work on education of the Victory story, education of some of those products and franchises that manage those existing offerings here in the US and working to develop that rollout plan from a regulatory perspective to create those UCITS.
In addition, all of our products, all the vintage Victory products are available institutionally outside the US. And again, we're working on education of the Amundi global distribution sales force. Those products are available today. There's no structure needed for a large institutional client to access those. And we've had a number of conversations really across both the existing active products that we have and some of the ETF offerings.
And so we'll see momentum there as well as we move forward through 2025 and are excited about the opportunity set from the feedback that we've heard to date. So again, we're just getting going on that. But again, as we think about it, we see a tremendous opportunity in the back half of 2025 as those structured products or co-mingled vehicles are created and as we see momentum on the institutional side of the business.

Michael Cho

Great. Thanks, Mike. Appreciate all that color. If I could just follow up on the -- just on the margin and expense side. I mean, Victory's margin trajectory has been solid for some time now. And you noticed some initial margin headwind from Pioneer, but you also increased synergy targets and you just printed 63% margins.
And so I recognize you made a little bit of a comment during the prepared remarks on near-term margins. But just curious how you might flesh out a little bit more color in terms of how that trajectory might evolve near term relative to Victory's 49% long-term margin target. Thanks.

Michael Policarpo

That's a good question, and thanks for recognizing the prepared remarks on that. I think you're right. We did publish 53% margins here in the first quarter. We have not changed our long-term margin guidance of 49%. I think we have continued to say that we want to have the flexibility to make investments in the business.
The M&A transaction that we did with Amundi US really provides a significant opportunity to make some of those investments. And so the net expense synergies of $110 million that we referenced and confirmed really includes some additional investments that we want to make. Dave highlighted a number of areas in distribution that we're making investments, and we think those will pay off longer term.
But as we think about the margin profile going forward, the expense synergies will take a year to two years to recognize all $110 million. We mentioned we had about $50 million as of closing. We'll have another $30 million over the next six months. Expect $100 million in total in the first 12 months of ownership and then the remaining $10 million to get to $110 million over the two years post close. So if you look logically at some of that math as we phase some of that in, there's going to be some integration work in some different areas over the next several quarters.
That will see a small decline and a material decline in our margins as we work through some of those integration efforts. Again, I think we're still bullish on the 49% long term. As you mentioned, we've produced well above that over the last several quarters. But any decline in the short term until we complete the integration will be immaterial to the margins going forward.

Michael Cho

Great. Thank you so much.

Operator

Alexander Blostein, Goldman Sachs.

Alexander Blostein

Hi. Good morning, guys. Maybe just building on that last question around expense trajectory. You mentioned increased pace of investments. I was hoping you can just provide us with sort of an expense growth algorithm from here with Amundi now in the fold. In the past, I think Victory had a quite a variable expense model. So curious kind of to what extent does integrated money changes that? Kind of what's the mix between fixed and variable expense base from here? And at what pace the fixed fees is likely to grow over time as you kind of phase out some of the synergies?

Michael Policarpo

Alex, it's Mike. Good question. I think with respect to Victory's operating model, there will be no change. So as we think about the integration of the Pioneer Investments franchise in the Amundi US business, it fits very well into the existing operating model.
The Pioneer Investments team will be on a revenue share. We maintain a single operating platform. We maintain a centralized distribution sales force selling all of the product that Victory has. So there really is no change in the operating model for Victory post the completion of the integration.
And so as you think about the model, we've been pretty clear that greater than two-thirds of our expenses are variable. We expect that to continue as we move forward. There's no disruption in that as we think about how we're operating the business. We've got a highly scaled middle and back office that is a variable cost. We've got distribution and other AUM expenses, again, that are tied to the AUM and revenue of the business.
And then the compensation, the cash compensation will continue to be variable as a component of revenue as it has in the past. So we really see no difference in the expense makeup going forward. The scale will obviously increase as the business and the AUM and the revenue have increased, but there really is no significant change from a modeling perspective with greater than two-thirds of the expense being variable and then the other items being fixed components around some of the G&A.

Alexander Blostein

Okay. Great. And then, Dave, you mentioned the balance sheet capacity has obviously improved significantly with the deal. Your leverage level is quite low and it sounds like the deal pipeline remains quite active. Maybe just give us a bit of a mark-to-market in state of affairs and kind of how your acquisition pipelines have evolved over the last six to nine months since the time you announced the Amundi and also the composition of what's more sort of probable, either in terms of asset classes or size of the transaction.

David Brown

Sure. Good morning, Alex. Let me start off with capacity to do a transaction. With the close, what we've done is we brought earnings on and we have not brought on additional debt. So our leverage level has reduced quite significantly. We have a lot of cash on our balance sheet, as you can see at the end of the quarter.
And we are in as good a position as we've ever been to really execute on a sizable transaction, and that's by design. Our discussions have been very productive. We are really excited about the opportunities we're seeing. And we are leaning towards larger scaled opportunities to continue to keep our business competitive and be ahead of the curve.
I would not be surprised for a 2025 event for us from another acquisition perspective, at least announcing. That's what we're planning for. Our balance sheet is ready for it. Obviously, you can't plan the timing of a transaction. But based on discussions and our capabilities to execute, I would anticipate that something in the short or medium term as opposed to a longer-term perspective, assuming markets are calm and the environment is conducive, which we are encouraged by what we're seeing lately.
As far as asset classes and what type of acquisitions, we always start off with, does the acquisition make our company better? Does it fit culturally? Does it include investment excellence? So we always lead with those attributes and our future acquisitions will be no different. I think as Mike talked about in the last question that he answered about keeping the integrity of our model around the expense infrastructure, around one integrated company, that's really important to us. We think that's part of what has made our acquisition successful in the past, and we anticipate keeping that model intact.

Alexander Blostein

Okay, great. Thank you.

Operator

Randy Binner, B. Riley.

Randy Binner

Good morning. Thank you. I have a couple that I think kind of get to how the platform with Amundi performs from a kind of growth and flows perspective if markets remain volatile. And so the first one is fixed income and solutions. I think those flows in the first quarter were kind of like kind of flat and then up for solutions. And I can generally expect those categories to do better in volatile markets. So is that the right way to think of it? And can you provide any kind of glimpse or update on how those types of strategies performed in this kind of pretty significant V-shaped market we've had so far since the early April?

David Brown

So it's Dave. I'd first say, our platform now going forward from a fixed income perspective, given Pioneer's capabilities around fixed income, has expanded. So we now have our Victory Income Investors, fixed income platform, and we have the Pioneer Investments fixed income platform. Both have excellent performance and it really widens and deepens our fixed income capabilities. So in the environment we're in today, I think we are really well positioned to grow our business there.
And if you looked at the first quarter for Pioneer, they had positive net flows and a good amount of those were in the fixed income portion of their business. And so we're excited about that given we have a wider and deeper offering.
The Victory Income Investors has ETFs which sell really well in this environment. And so we continue to have that. And we will look at launching fixed income ETFs for Pioneer as well. So I would imagine that when you think about the fixed income platform for all of Victory, we're very well positioned and better positioned today than we were before the close.
As far as solutions, a lot of the growth there you're seeing is through the ETF platform, the VictoryShares ETF platform. We have quite a few different offerings there. Our free cash flow series with a few ETFs have grown very nicely. We also have some other ETFs that are -- have been developed by our solutions team that continues to be in demand. And so when we look at that and we look at that going forward, again, those are really nice solutions for volatile markets.
And then as markets maybe calm down moving forward, we also have other products off of the solutions platform, off of our equities platform, which we think are really well positioned to satisfy investors' needs. And I think in our prepared remarks, I think there is a tone around an excitement to have a platform to potentially grow organically. We saw some really nice growth in the first quarter, both through Victory and also through Pioneer, and we think that will continue going forward with just a really deep product set, but also an enlarged sales force.

Randy Binner

Okay. That's great. But just is there any glimpse you can give us on kind of how the stability of those 2 areas with the volatility in April, like did flows hold up better there? Were they more stable than a lot of your equity strategies, equity mutual funds?

David Brown

I wouldn't say more stable or less stable. I think they've performed as expected. Nothing out of the ordinary. And as I think we look forward, I think investors have been pretty calm during some of the volatile times, at least on our platform. So there's been really nothing out of the ordinary either way.

Randy Binner

All right. I'll leave it there. Thanks for the time. I appreciate it.

Operator

Craig Siegenthaler, Bank of America.

Good morning. This is Ivory on for Craig. On the call, you mentioned two large redemptions of the $2.7 billion that are onetime in nature and the continued expense synergies that you're seeing. Just on thinking about the other side, have you seen any dis-synergy or notable redemptions from the Amundi US acquisition specifically?

Michael Policarpo

Good morning, Ivory. Yes, we did denote that there were two. sizable onetime outflows in the first quarter. Those were on the Victory platform we believe very isolated to particular client events. With respect to dis-synergies, no, we've not seen really any dis-synergies. I think as we went through the process and the acquisitions that we do, you have a client consent process. And so all of the clients that have joined as part of Victory have consented, and it's almost a checkpoint for them as you think about it.
So we've not seen any dis-synergies from a revenue or a distribution perspective. Actually, quite the opposite. I think as Dave highlighted, we've made more investments in distribution. We've expanded the platform, and we're having more discussions today across the entire product scope in different regions globally in different partners on the intermediary side and in different vehicles that really have driven an opportunity set that we think is, as Dave mentioned, just now as exciting as we've seen. And I think it's definitely very telling that the Pioneer Investments business was net flow positive.
as we mentioned in the first quarter. So that obviously with knowledge that the transaction was occurring and they were positive in all of 2024 as well. So we think the combined business going forward has resonated well from a market perspective and a client perspective and are excited about the opportunities that lay ahead.

Great. Thank you. And just as a follow-up, could you give us an update on WestEnd? The macro backdrop has certainly evolved over the last couple of months. So what are you anticipating for net flows in the business going forward?

Michael Policarpo

Yeah, good question. So as we mentioned, WestEnd is net flow positive since we've acquired them. They did have some softer performance in 2024. As we look at the first quarter, some of the market dislocation and their positioning has actually allowed their performance to be very strong. And so we're excited as we move forward.
Obviously, the macro backdrop with respect to clients and they're accessing different asset classes right now is a little bit volatile, but their performance has come back very nicely, and we're excited. We are -- continued to be very bullish on the asset classes that they manage, the type of models that they deliver, the access to distribution. I think we've said a number of times, we're doing business now on more platforms with more advisers. So not to project kind of what we think, but we're excited about the opportunity set with the pickup in performance that we've seen with WestEnd.

David Brown

I would add one thing, Mike, on that is we have -- we've launched additional products off of their platform. So we've launched a number of ETFs, and we've seen growth on their ETFs. And so now if you're looking to access WestEnd, you can access it through their model delivery, but you can also access them through a number of ETFs as well.

Thank you.

Operator

Michael Cyprys, Morgan Stanley.

Michael Cyprys

Hey, good morning. Thanks for taking the question. You mentioned in your prepared remarks that you're making some investments to enhance organic growth. In particular, you mentioned investments in data, technology, marketing. I was hoping maybe you could elaborate on the steps that you're taking there, the quantum of investments that you're making and how you'll be measuring success.

David Brown

Hi, Michael, it's Dave. It's a great question. I appreciate you asking it. On the intermediary side for the US, we have added a significant number of salespeople. So think of them as external-facing salespeople, people supporting our external-facing salespeople.
We've added a sizable number of marketing professionals, of dedicated data professionals. And then we are purchasing more data programs from certain platforms, and we have also increased the number of partnerships, platform partnerships we have from the past. So we have made a pretty significant investment in really intermediary distribution.
All of those numbers are in our net expense synergy numbers. So when you hear the number of $110 million, it's netted into those numbers, all of those investments. We've done -- on a smaller level, we've done the same thing on the US institutional side, where we've added people and client service as well. And then the ultimate judge of our investments are going to be our organic growth profile.
We want to be in a position where we grow our business organically. And I think we are in as good a position as we've ever been to do that. And these investments that we're making, ultimately, the goal is to have organic growth, pretty simple from that perspective.

Michael Cyprys

Great. Thanks. And then just a follow-up question. As you've broadened out the platform and have further scaled it, just curious how you're thinking about alternative investment products. How important is that for you as you're thinking about M&A going forward to have that on the platform? I imagine it would be more of an acquisition.
Maybe just talk about the pipeline for alternative investment-related acquisitions, how those sort of conversations are progressing, and how you're thinking about some of the puts and takes there as it does add a bit more complexity. Do you feel that the organization, the platform is at a place to accommodate that sort of a product set at this point?

David Brown

Alternatives are important to us. When we speak with our clients, certain clients at certain levels inquire about it. We have great relationships from an intermediary and institutional perspective. And so over time, we will have those products for our salespeople to deliver to those clients and potentially new clients. Whether we access that through acquisitions or partnerships, we are evaluating.
I think there's pros and cons with each structure. But as we think about moving forward in our access from a distribution perspective and how deep we are into the various channels, we will absolutely have an alternatives offerings. And we're going to work through different ways of accomplishing that. And I think there have been a number of acquisitions in the industry.
There have been a number of partnerships in the industry and we have studied all of them, and we're going to execute in a way that's going to make the most sense for our platform. But when we think about the world going forward and look out, that is a product that we will absolutely be dialoguing and selling to our -- with our clients.

Michael Cyprys

Okay. Thank you.

Operator

Kenneth Lee, RBC Capital Markets.

Kenneth Lee

Hey, good morning. Thanks for taking the question. You mentioned in the prepared remarks around the common dividend, and it sounds as if it's going to be a slight change in terms of more of an annual review instead of a quarterly review. Wondering if you could just remind us again, you've been increasing the dividend at a pretty good clip more recently. What's driving the change there? And then perhaps could you give us an update, if there is any, in terms of longer-term priorities around capital deployment? Thanks.

David Brown

It's Dave. Let me start with the back end of that question. Our best use of capital, we think, to grow the business is really to think about capital from an acquisition perspective. So we want to make sure that we can execute on our strategic plan of growing through acquisitions, and we want to make sure that our balance sheet accommodates that. So we start there.
And I think as our business has grown over the years, we have also been able to balance that along with an equity buyback program and also a dividend. And so I would look at dividends and our buyback program as ancillary, but our ability to execute on them in a larger way is really a reward for us growing our business. So we'll continue to have that same viewpoint of capital.
And then from a dividend perspective, we have -- over the last three years, we have gone from an annual -- an anticipated annual increase to more quarterly increases just to be more opportunistic as our business has evolved as we've done acquisitions. I think as we think about going forward, we'll look at it every quarter, but the anticipation is that we will increase once a year.
That doesn't stop us from doing it quarterly. It's just really the guide to say that this is how we're going to look at it. But if you really take a step back, we are going to, first and foremost, make sure that we can execute on inorganic growth through our balance sheet, through our cash flow.
And then secondarily, it will be buybacks and dividends. But with the way our business looks and the cash flow that we anticipate and the margins we have and our earnings potential, we think we can satisfy the dividend and the buyback pretty nicely and balance all that out.

Kenneth Lee

Great. Very helpful there. Just one follow-up, if I may. In terms of the Victory ETF net flows in the quarter, very solid. I wonder if you could talk a little bit more about the cadence of newer ETF products that are expected to be launched later on this year.

David Brown

Sure. We have had really nice growth for the last few quarters on our ETF platform. We have launched a number of products over the last few years, and they have worked. And we have plans and are in the process of launching additional ETFs. We'll also launch ETFs off of the Pioneer platform in the future.
And we have a -- we have our entire US intermediary sales force can sell ETFs, but we also have a portion of our sales force that only sells ETFs. And we have a group that also trains on our ETFs. So we're well armed in the field. I think we have a really nice diversified existing ETF product set, and we'll continue to expand that.
And we think it's going to be an area for our business that's going to see accelerated growth. And so we will evaluate where we think the market is going from an ETF perspective and launch products to satisfy that. But I think our existing lineup today is pretty wholesome and has done pretty well, and I don't see that changing going forward.

Kenneth Lee

Great. Very helpful. Thanks again.

Operator

I will now turn the call back over to David Brown for closing remarks.

David Brown

Thank you. We hope to see you next month when we'll be attending the Morgan Stanley US Financials Conference in New York and look forward to keeping you updated on our progress. Again, thank you for joining us this morning.

Operator

Ladies and gentlemen, that concludes today's call. Thank you all for joining. You may now disconnect.