Victory Capital Q1 2025 Earnings Call Transcript

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May 8, 2025

Key Takeaways

  • Gross sales improved 41% from Q4 to $9.3 billion, the highest quarterly level in three years, driven by strong ETF sales momentum.
  • Long-term net flows were negative due to two one-time redemptions totaling $2.7 billion, which reversed an otherwise positive quarterly flow trend.
  • Adjusted EPS reached $1.36, the second-highest in company history and a record for any first-quarter period, with adjusted EBITDA margin at 53%.
  • Amundi transaction closed on April 1, doubling fixed income AUM share to 28%, adding $44 billion in non-U.S. assets, and increasing net expense synergy targets to $110 million.
  • Balance sheet strengthened with leverage reduced into the low 1x range, $176 million in cash, a $200 million share repurchase plan still available, and the quarterly dividend raised to $0.49 per share.
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Earnings Conference Call
Victory Capital Q1 2025
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Operator

Good morning and welcome to the Victory Capital First Quarter 2025 earnings conference call. All callers are on a listen-only mode. Following the company's prepared remarks, there will be a question-and-answer session. I will now turn the call over to Mr. Matthew Dennis, Chief of Staff and Director of Investor Relations. Please go ahead, Mr. Dennis.

Matthew Dennis
Matthew Dennis
Chief of Staff and Director of Investor Relations at Victory Capital

Thank you. Before I turn the call over to David Brown, I would like to remind you that during today's conference call, we may make a number of forward-looking statements. Victory Capital's actual results may differ materially from these statements. Please refer to our SEC filings for a list of some of the risk factors that may cause actual results to differ materially from those expressed on today's call. Victory Capital assumes no duty and does not undertake any obligation to update any forward-looking statements. Our press release, which was issued after the market closed yesterday, disclosed both GAAP and non-GAAP financial results. We believe the non-GAAP measures enhance the understanding of our business and our performance.

Matthew Dennis
Matthew Dennis
Chief of Staff and Director of Investor Relations at Victory Capital

Reconciliations between these non-GAAP measures and the most comparable GAAP measures are included in tables that can be found in our earnings press release and in the slides accompanying this call, both of which are available on the Investor Relations section of our website at ir.vcm.com. It is now my pleasure to turn the call over to David Brown, Chairman and CEO. David.

David Brown
David Brown
Chairman and CEO at Victory Capital

Thanks, Matt. Good morning and welcome to Victory Capital's First Quarter 2025 earnings call. I'm joined today by Michael Policarpo, our President, Chief Financial and Administrative Officer, as well as Matt Dennis, our Chief of Staff and Director of Investor Relations. I will start today with an overview of our first quarter results. Then I'll provide an update regarding the closing and integration of the Amundi transaction. After that, I will turn the call over to Mike to review the financial results in greater detail. Following our prepared remarks, Mike, Matt, and I will be available to answer your questions. The quarterly business overview begins on Slide Five. We ended March with $171 billion of total client assets. That was down slightly from the start of the year. An average AUM was approximately 1% lower versus the fourth quarter.

David Brown
David Brown
Chairman and CEO at Victory Capital

Gross sales improved for a third consecutive quarter, an increase of 41% from the last quarter, reaching $9.3 billion and was the highest level of quarterly gross sales in three years. Long-term net flows also improved for the second quarter in a row. Our net flows were negatively impacted by two large redemptions that totaled $2.7 billion, which were one-time in nature. Without this, our net flows would have flipped to positive this quarter. We view the underlying activity around flows as extremely healthy and believe these two redemptions should not distort the continuous progress we are making around our organic growth profile. A good example of this progress is we continue to generate strong sales of our ETFs. We highlighted the history of our ETF platform on our last call, and by the end of the first quarter, our total ETF AUM increased to more than $13 billion.

David Brown
David Brown
Chairman and CEO at Victory Capital

This was a 28% increase during the quarter and was up 67% versus the same time last year. Looking ahead, we see the momentum continuing with our current product lineup. We also have several ETF launches planned for 2025 and are continuing to invest in resources dedicated to accelerating momentum on this platform. Stepping back and looking at results on a year-over-year basis, we achieved wider margins along with higher revenue and earnings on both a GAAP and non-GAAP basis. Adjusted earnings per diluted share with tax benefit was $1.36 per share, which was the second highest quarterly EPS in company history and a record high for any first quarter period. Adjusted EBITDA was $116 million, and adjusted EBITDA margin remained very strong at 53%. We continue to strategically invest in all distribution channels.

David Brown
David Brown
Chairman and CEO at Victory Capital

With our enhanced scale as a result of the Amundi acquisition, we are increasing investment in areas to enhance our organic growth. In addition to more salespeople in the field selling, we are significantly increasing our investment in data, technology, marketing, and intermediary partnerships. Our balance sheet continued to strengthen during the quarter, and our leverage ratio improved significantly following the transaction's closing on April 1, given that we brought on a sizable amount of earnings with no additional debt. This greatly increases our financial flexibility and enables us to act on additional strategic growth opportunities, which we believe is the best use of shareholder capital. Ongoing diligence activities are progressing quickly, and we are very encouraged by some of our discussions.

David Brown
David Brown
Chairman and CEO at Victory Capital

During the quarter, we accumulated cash, increased our quarterly dividend again, and have the entire $200 million share repurchase plan still available for our use, which we will execute on in an opportunistic way. On slide seven, we highlight the results of our acquisition and strategic partnership with Amundi. Upon closing, we are a much more scaled, diversified, and better positioned organization for the long term. With assets of just over $286 billion as of April 1, our fixed income AUM doubled as a percentage of our total assets from 14% to 28%. We have also further diversified our investment vehicles with $26.5 billion of assets under management in UCITS. We plan to launch several vintage Victory strategies in this vehicle wrapper that are designed to be distributed to investors outside of the U.S.

David Brown
David Brown
Chairman and CEO at Victory Capital

The proportion of retail assets under management in our channel mix rose, and we also now have $44 billion of assets under management sourced from clients outside of the U.S., representing 15% of assets under management compared with less than 5% previously. Last month, we increased our net expense synergy projections to a total of $110 million and had $50 million of that goal achieved as of closing. We expect another $50 million by April 1, 2026, and much of that coming before the end of 2025. The Amundi U.S. business we acquired has continued to perform exceptionally well, generating positive net long-term flows of $1.7 billion in the first quarter of 2025, which, as a reminder, is not included in our numbers given we did not close the transaction until April 1.

David Brown
David Brown
Chairman and CEO at Victory Capital

The investment team, now branded Pioneer Investments, generated excellent investment performance on behalf of clients for the first quarter of 2025. As of March 31, more than 74% of their mutual fund assets under management had either a four or five-star Morningstar rating. Turning to Slide Eight, our U.S. distribution organization is positioned well for consistent organic growth as we move forward. We have substantially augmented our institutional and intermediary sales forces with additional sales professionals, allowing us to provide enhanced coverage across the US market. In addition, we have added marketing and other sales-related resources to further support growth. When it comes to data, we are now able to benefit more broadly from data investments we are making. These investments will now be used by a larger sales force, enhancing the results we are seeking to achieve.

David Brown
David Brown
Chairman and CEO at Victory Capital

We are also leveraging existing intermediary platform relationships with our broader product set. For example, Amundi US had partner status relationships with certain intermediary platforms, and we are now a benefactor of those, which will give us the opportunity to add vintage Victory products on these platforms. Outside of the U.S., we now have clients in more than 60 countries, and our strategies are currently available for sale via Amundi's vast global distribution network. This includes sizable distribution partners within Europe and JVs in Asia and India. During the closing process, together with Amundi's distribution team, we identified several initial vintage Victory products to launch in the UCITS format and other vehicle wrappers for sales by Amundi's global distribution sales force outside of the U.S. We are expeditiously working through the regulatory and registration process to get these products launched.

David Brown
David Brown
Chairman and CEO at Victory Capital

In addition, we are utilizing our VictoryShares ETF platform to develop ETFs for the Pioneer Investments franchise. As many of you are aware, Pioneer has never had any of their strategies available in an ETF vehicle. Overall, we have never been so well positioned for organic growth and look forward to reporting on our progress. Moving to Slide 10, our investment performance remained strong, with 67% of our assets under management in mutual funds and ETFs earning four or five-star overall ratings by Morningstar for the period ending on March 31. This is broadly diversified, encompassing numerous distinct products. Over the key three and five-year periods, 64% and 65% of our total assets under management outperformed their respective benchmarks. We were also recognized during the first quarter with eight 2025 U.S. LSEG Lipper Fund awards based on risk-adjusted returns.

David Brown
David Brown
Chairman and CEO at Victory Capital

These awards represented several categories and performance over various time periods and are a testament to our investment professionals and what we strive to deliver for clients every day. With that, I will turn the call over to Mike to go through the quarterly results in greater detail. Mike.

Michael Policarpo
Michael Policarpo
President and CFO at Victory Capital

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.

Michael Policarpo
Michael Policarpo
President and CFO at Victory Capital

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.

Michael Policarpo
Michael Policarpo
President and CFO at Victory Capital

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-U.S. client portion of our total AUM. As a result of the Amundi transaction, we begin the second quarter with $44 billion of AUM from clients outside of the U.S. Having a significant portion of AUM from investors outside the U.S. 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.

Michael Policarpo
Michael Policarpo
President and CFO at Victory Capital

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 one-time 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.

Michael Policarpo
Michael Policarpo
President and CFO at Victory Capital

Our one but not yet funded pipeline remains sizable and deep 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, with 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.

Michael Policarpo
Michael Policarpo
President and CFO at Victory Capital

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. I would highlight our EBITDA margin expanded 90 basis points from the first quarter of 2024.

Michael Policarpo
Michael Policarpo
President and CFO at Victory Capital

Over the next several quarters, we expect to see our Adjusted EBITDA margin 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 ones. 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.

Michael Policarpo
Michael Policarpo
President and CFO at Victory Capital

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.

Operator

At this time, I would like to remind everyone, in order to ask a question, press star, then the number one on your telephone keypad. We will pause for a moment to compile the Q&A roster. Our first question comes from the line of Ken Worthington with JPMorgan. Please go ahead.

Michael Cohen
Michael Cohen
Managing Director at JPMorgan

Hi, good morning, guys. This is Michael Cohen for Ken. Thanks for taking my question. 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 strategies outside of the U.S. You also talked about maybe considering Pioneer ETFs going forward as well. 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. If there's any strategies that you think might have more considerable adoption than maybe some of the others. Thanks.

Michael Cohen
Michael Cohen
Managing Director at JPMorgan

Hey, Michael. Good morning. How are you? It's Mike. Thanks for the question. Yeah, 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 U.S. We have spent time with them formulating kind of a plan with respect to the product development. There will be a handful of UCITS that we will work with them to create, and they are kind of in that registration phase right now and would expect that they will be launched towards the back half of 2025.

Michael Cohen
Michael Cohen
Managing Director at JPMorgan

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 were not fulfilled, if you will, by the existing Pioneer product set, there are some small and mid-cap products from a U.S. domestic perspective that we think will play very well there. In addition, we have some complementary fixed income offerings that, again, we think will play very nicely in the UCITS offerings for Amundi. There are 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 U.S.

Michael Cohen
Michael Cohen
Managing Director at JPMorgan

What we have 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 U.S., 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 U.S. We are working on education of the Amundi global distribution sales force. Those products are available today. There is no structure needed for a large institutional client to access those. We have had a number of conversations really across both the existing active products that we have and some of the ETF offerings. We will see momentum there as we move forward through 2025 and are excited about the opportunity set from the feedback that we have heard to date.

Michael Cohen
Michael Cohen
Managing Director at JPMorgan

Again, we're just getting going on that. But again, as we think about it, we see a tremendous opportunity. 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 Cohen
Michael Cohen
Managing Director at JPMorgan

Great. Thanks, Mike. Appreciate all that, color. If I could just follow up on just on the margin and expense side. I mean, Victory's margin trajectory has been solid for some time now. You noticed some initial margin headwind from Pioneer, but you also increased synergy targets and you just printed 53% margins. I recognize you made a little bit of a comment during the prepared remarks on near-term margins, but just curious to how you might flush 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
Michael Policarpo
President and CFO at Victory Capital

Yeah, that's a good question. 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. The net expense synergies of $110 million that we referenced and confirmed really include some additional investments that we want to make. They've highlighted a number of areas in distribution that we're making investments, and we think those will pay off longer term. As we think about the margin profile going forward, the expense synergies will take a year to two years to recognize all $110 million.

Michael Policarpo
Michael Policarpo
President and CFO at Victory Capital

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. 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 we'll see a small decline and immaterial 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. Any decline in the short term until we complete the integration will be immaterial to the margins going forward.

Michael Cohen
Michael Cohen
Managing Director at JPMorgan

Great. Thank you so much.

Operator

Our next question comes from the line of Alexander Blostein with Goldman Sachs. Please go ahead.

Alexander Blostein
Alexander Blostein
Analyst at Goldman Sachs

Hi, good morning, guys. Happy Friday. 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 all-in expense growth algorithm from here with Amundi now in the fold. In the past, I think Victory had quite a variable expense model. So curious kind of to what extent does integrated money change that? Kind of what's the mix between fixed and variable expense base from here and at what pace the fixed piece is likely to grow over time as you kind of phase in some of the synergies?

Michael Policarpo
Michael Policarpo
President and CFO at Victory Capital

Yeah, this is Mike. Good morning. Good question. I think with respect to Victory's operating model, there will be no change. As we think about the integration of the Pioneer Investments franchise and 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. There really is no change in the operating model for Victory post the completion of the integration. 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.

Michael Policarpo
Michael Policarpo
President and CFO at Victory Capital

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. Then the compensation, the cash compensation will continue to be variable as a component of revenue as it has in the past. 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
Alexander Blostein
Analyst at Goldman Sachs

Yeah. Okay. Great. And then, Dave, you mentioned the balance sheet capacity has obviously improved significantly with this 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 and 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 deal and also the composition of what's more sort of probable, either in terms of asset classes or size of a transaction. Thanks.

David Brown
David Brown
Chairman and CEO at Victory Capital

Sure. Good morning, Alex. Let me start off with capacity to do a transaction. With the close, what we've done is we've brought earnings on, and we have not brought on additional debt. 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. That is 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 is what we're planning for. Our balance sheet is ready for it.

David Brown
David Brown
Chairman and CEO at Victory Capital

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 shorter 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? 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.

David Brown
David Brown
Chairman and CEO at Victory Capital

We think that's part of what has made our acquisition successful in the past, and we anticipate keeping that model intact.

Alexander Blostein
Alexander Blostein
Analyst at Goldman Sachs

Okay. Great. Thank you.

Operator

Our next question comes from the line of Randy Binner with B. Riley. Please go ahead.

Randy Binner
Randy Binner
Managing Director at B. Riley

Oh, 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. The first one is on fixed income and solutions. I think those flows in the first quarter were kind of flat and then up for solutions. I kind of generally expect those categories to do better in volatile markets. Is that the right way to think of it? 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 early April?

David Brown
David Brown
Chairman and CEO at Victory Capital

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. 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. In the environment we're in today, I think we're really well positioned to grow our business there. 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. 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.

David Brown
David Brown
Chairman and CEO at Victory Capital

We continue to have that, and we will look at launching fixed income ETFs for Pioneer as well. I would imagine that when you think about the fixed income platform for all of Victory, we are very well positioned and better positioned today than we were before the close. As far as solutions, a lot of the growth there you are 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 have been developed by our solutions team that continues to be in demand. When we look at that and we look at that going forward, again, those are really nice solutions for volatile markets.

David Brown
David Brown
Chairman and CEO at Victory Capital

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. 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. We think that will continue going forward with just a really deep product set, but also an enlarged sales force.

Randy Binner
Randy Binner
Managing Director at B. Riley

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

David Brown
David Brown
Chairman and CEO at Victory Capital

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

Michael Policarpo
Michael Policarpo
President and CFO at Victory Capital

All right. I'll leave it there. Thanks for the responses. Appreciate it.

Michael Policarpo
Michael Policarpo
President and CFO at Victory Capital

Sure.

Operator

Our next question comes from the line of Craig Sagatbalor with Bank of America. Please go ahead.

Ivory Gao
Ivory Gao
Analyst at 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 one-time in nature and the continued expense synergies that you're seeing. Just when thinking about the other side, have you seen any dyssynergy or notable redemptions from the Amundi US acquisition specifically?

Michael Policarpo
Michael Policarpo
President and CFO at Victory Capital

Good morning, Ivory. Yes, we did denote that there were two sizable one-time outflows in the first quarter. Those were on the Victory platform, we believe very isolated to particular client events. With respect to dyssynergies, no, we've not seen really any dyssynergies. I think as we went through the process and the acquisitions that we do, you have a client consent process. 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. We've not seen any dyssynergies from a revenue or a distribution perspective. Actually, quite the opposite, I think, as Dave highlighted, we've made more investments in distribution.

Michael Policarpo
Michael Policarpo
President and CFO at Victory Capital

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. I think it's definitely very telling that the Pioneer Investments business was net flow positive, as we mentioned in the first quarter. That obviously, with knowledge that the transaction was occurring, and they were positive in all of 2024 as well. 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.

Ivory Gao
Ivory Gao
Analyst at Bank of America

Great. Thank you. 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. What are you anticipating for net flows in the business going forward?

Michael Policarpo
Michael Policarpo
President and CFO at Victory Capital

Yeah. Good question. 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. We are excited as we move forward. Obviously, the macro backdrop with respect to clients and their accessing different asset classes right now is a little bit volatile, but their performance has come back very nicely. We are excited. We are continuing 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 advisors.

Michael Policarpo
Michael Policarpo
President and CFO at Victory Capital

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.

Ivory Gao
Ivory Gao
Analyst at Bank of America

Thank you so much.

David Brown
David Brown
Chairman and CEO at Victory Capital

I would add one thing, Mike, on that is we've launched additional products off of their platform. We've launched a number of ETFs, and we've seen growth on their ETFs. 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.

Ivory Gao
Ivory Gao
Analyst at Bank of America

Thank you.

Operator

Our next question comes from the line of Michael Cyprus with Morgan Stanley. Please go ahead.

Michael Cyprys
Michael Cyprys
Managing Director at Morgan Stanley

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
David Brown
Chairman and CEO at Victory Capital

Hi, Michael. It's Dave. It's a great question. I appreciate you asking it. On the intermediary side for the U.S., we have added a significant number of salespeople. 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. We are purchasing more data programs from certain platforms, and we have also increased the number of platform partnerships we have from the past. We have made a pretty significant investment in really intermediary distribution. All of those numbers are in our net expense synergy numbers. When you hear the number of $110 million, it's netted into those numbers, all of those investments. On a smaller level, we've done the same thing on the U.S. institutional side where we've added people and client service as well.

David Brown
David Brown
Chairman and CEO at Victory Capital

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. I think we are in as good a position as we've ever been to do that. These investments that we're making, ultimately, the goal is to have organic growth. Pretty simple from that perspective.

Michael Cyprys
Michael Cyprys
Managing Director at Morgan Stanley

Great. Thanks. 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 fits 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
David Brown
Chairman and CEO at Victory Capital

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. 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 are pros and cons with each structure. 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 alternatives offerings. We are going to work through different ways of accomplishing that. I think there have been a number of acquisitions in the industry. There have been a number of partnerships in the industry. We have studied all of them.

David Brown
David Brown
Chairman and CEO at Victory Capital

We're going to execute in a way that's going to make the most sense for our platform. When we think about the world going forward and look out, that is a product that we will absolutely be dialoguing and selling with our clients.

Michael Cyprys
Michael Cyprys
Managing Director at Morgan Stanley

Great. Thank you.

Operator

Our final question comes from the line of Kenneth Lee with RBC Capital Markets. Please go ahead.

Kenneth Lee
Kenneth Lee
VP and Senior Analyst at RBC Capital Markets

Hey, good morning. Thanks for taking my 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. I wonder 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? Perhaps could you give us an update, if there is any, in terms of longer-term priorities around capital deployment? Thanks.

David Brown
David Brown
Chairman and CEO at Victory Capital

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. We want to make sure that we can execute on our strategic plan of growing through acquisitions. We want to make sure that our balance sheet accommodates that. We start there. 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. I would look at dividends and our buyback program as ancillary. Our ability to execute on them in a larger way is really a reward for us growing our business. We will continue to have that same viewpoint of capital.

David Brown
David Brown
Chairman and CEO at Victory Capital

From a dividend perspective, we have over the last few years gone from an anticipated annual increase to more quarterly increases just to be more opportunistic as our business has evolved as we have done acquisitions. I think as we think about going forward, we will look at it every quarter, but the anticipation is that we will increase once a year. That does not stop us from doing it quarterly. It is just really the guide to say that this is how we are going to look at it. 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. Secondarily, it will be buybacks and dividends.

David Brown
David Brown
Chairman and CEO at Victory Capital

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.

Michael Cyprys
Michael Cyprys
Managing Director at Morgan Stanley

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. Thanks.

David Brown
David Brown
Chairman and CEO at Victory Capital

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. We have plans and are in the process of launching additional ETFs. We will also launch ETFs off of the Pioneer platform in the future. We have our entire U.S. intermediary salesforce that can sell ETFs, but we also have a portion of our salesforce that only sells ETFs. We have a group that also trains on our ETFs. We are well armed in the field. I think we have a really nice diversified existing ETF product set, and we will continue to expand that. We think it is going to be an area for our business that is going to see accelerated growth.

David Brown
David Brown
Chairman and CEO at Victory Capital

We will evaluate where we think the market's going from an ETF perspective and launch products to satisfy that. I think our existing lineup today is pretty wholesome and has done pretty well. I do not see that changing going forward.

Michael Cyprys
Michael Cyprys
Managing Director at Morgan Stanley

Great. Very helpful there. Thanks again.

Operator

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

David Brown
David Brown
Chairman and CEO at Victory Capital

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.

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