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Michael Policarpo

Thanks, Dave, and good morning, everyone.
The financial results review begins on slide 11. Average assets under management rose 2% in the fourth quarter to $176 billion, and our fee realization increased for the quarter, driving revenue up to $232.4 million, which is the highest quarterly revenue in our history. For the full year, we generated record high revenue of $893 million, which was a 9% increase from 2023. Fourth-quarter GAAP operating income was $111.7 million, which was up 29% from the same quarter last year.
GAAP earnings per diluted share was $1.17 for the fourth quarter and $4.38 for the full year. Year over year, GAAP earnings rose more than 40% from $3.12 per diluted share for 2023. Adjusted EBITDA was $125.5 million in the fourth quarter, which was 3% higher than in the third quarter and adjusted EBITDA margin expanded 30 basis points to 54%.
Adjusted net income with tax benefit rose to a record $95.1 million in the quarter. This was up 7% from the third quarter and 24% higher than last year's fourth quarter. For the full year, we generated adjusted net income with tax benefit of $353.1 million, which was up 15% from the prior year.
Turning to the balance sheet. Our cash balance at the end of the year was $127 million, following the return of $132.4 million to shareholders in the form of share repurchases and cash dividends in the fourth quarter. Our net leverage ratio was unchanged at 1.7 times from Q3, driven by growth in earnings and a modest debt paydown of $20 million in December.
Finally, yesterday, we also announced that the Board authorized a 7% dividend increase, raising the quarterly dividend to $0.47 per share. The first-quarter dividend will be paid on March 10 to shareholders of record at the close of business on February 18.
Turning to slide 12. You can see that while average assets rose from the third quarter, total client assets declined by just under 3% during the period, driven primarily by market action to end the year at $176.1 billion. 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.
Post closing of the Amundi transaction, we intend to add a new category here that breaks out the non-US client portion of our AUM. We believe having a significant portion of AUM from investors outside the US provide another dimension of diversification and potential growth for our business.
On slide 13, we cover long-term asset flows. Several of our investment franchises and our VictoryShares ETF platform continued to generate positive long-term net flows in the quarter. Victory Income Investors posted its fourth consecutive quarter of positive net flows and its eighth consecutive quarter of positive net flows in the intermediary channel, where we have been gaining shelf space for the past several years. For the full year, Integrity, NEC, RS Global, our VictoryShares ETF platform also achieved positive net long-term flows. 2025 is off to a strong start.
Our long-term flows for the month of January have improved substantially and has flipped to be slightly positive. And our one but not yet funded pipeline is as large as it has ever been as we look forward. The majority of the one but not yet funded pipeline should fund in 2025, and it is well diversified from a franchise and channel perspective. Our outlook for organic growth is encouraging as we consider current business momentum and the closing of the Amundi transaction and what that will contribute to our organic growth profile.
Slide 14 shows a steady increase in sequential revenue during 2024. Our average fee rate was 52.5 basis points in the fourth quarter, which is up 4 basis points from the third quarter and remains within our expected range. For the full year, revenue rose by 9% from 2023.
Slide 15 highlights expenses recorded during the quarter. Total GAAP expenses were $133.8 million for the quarter. The increase from the third quarter was driven primarily by the reversal of earn-out accruals in the third quarter. Excluding this non-cash adjustment in Q3, total expenses increased less than $1 million quarter over quarter and variable expenses calibrated with our increase in AUM and revenues. We incurred $2.8 million in acquisition-related expenses in the fourth quarter, predominantly related to the Amundi transaction.
On a cash basis, our compensation expense was 23.8%, which is in line with our guidance. Consistent with lower interest rates, we experienced a decrease in interest expense during the fourth quarter. Our average interest rate declined by 33 basis points from 5.25% in the third quarter to 4.92% in the fourth quarter.
On slide 16, we highlight our non-GAAP metrics. Our reported $1.45 adjusted net income with tax benefit per diluted share is the highest level in our history, and is up 7% from the prior record of $1.35 per diluted share reported for the third quarter. For the full year, adjusted net income with tax benefit per diluted share was $5.36 and 19% higher than $4.51 per diluted share in 2023.
Adjusted EBITDA and adjusted EBITDA margin were also company records at $125.5 million and 54%, respectively. On a year-over-year basis, our adjusted EBITDA grew by 14% to $476 million in 2024. And adjusted EBITDA margin expanded by 230 basis points to 53.2%.
Finally, turning to slide 17. We generated $92 million in cash flow from operations during the quarter, and our leverage ratio remained at 1.7 times, which is down from 2.1 times at the beginning of the year. We paid down $20 million of debt in the quarter and our $100 million credit facility remains undrawn.
That concludes our prepared remarks. I will now turn it back over to the operator for questions.

Question and Answer Session

Operator

(Operator Instructions) Alex Blostein, Goldman Sachs.

This is Anthony on for Alex. It's nice to see the organic growth profile improving in January. And I guess as we look out into 2025, what strategies do you expect to be most in favor and contribute the most to organic growth?

David Brown

It's Dave. A couple of pieces to that question. The first piece, just Victory. As we said in our prepared remarks, our VictoryShares ETF platform is doing really well. We're seeing strong growth there.
And I would expect that to continue throughout the year. Additionally, in our institutional channel, we're seeing a lot of opportunities. We have a large one but not yet funded part of our pipeline is there in that channel in a few different franchises. And then bringing on Amundi and Amundi's organic growth profile, where they have had net flow positive in '24. They're off to a great start in '25 in really all of their channels, coupled with what we have -- the opportunities we have, we think putting that together will be where we see the growth.

That's helpful. And I guess as a follow-up, on the Amundi deal, I guess from a revenue perspective, like what sort of revenue synergies do you expect? And how soon do you expect to see like the flow benefits from the distribution partnership?

Michael Policarpo

It's Mike. I think with respect to the distribution agreement, just a reminder, we've really established a 15-year exclusive distribution agreement with Amundi where active traditional products will be pushed, if you will, through their global distribution network. As we mentioned in the prepared remarks, that channel exists today with the Amundi US products and is currently organic growth positive. As we think about the addition of Victory products to that distribution network, we're excited.
We're still working on the -- which products will be launched and which products will be pushed through that distribution channel, but we spent a lot of time really evaluating and understanding the needs of clients globally. And as we move forward, we know it will be additive to the overall growth profile, organic growth profile for Victory. We're not in a position today to provide specifics around that. But as we close the transaction, we'll come out with more specifics related to that. But again, we're excited about being able to add a strong Victory product through that sizable distribution network.

Operator

Ken Warrington, JPMorgan.

Michael Cho

This is Michael Cho in for Ken. I just wanted to touch on margins. Victory's margins just seem to continue to rise every quarter. So without asking about the new long-term targets or anything like that. I was just wondering if you could talk through any margin differences across the different products or vehicles.
And I think you called out in your comments that maybe the rules-based ETFs are higher-margin products. So I'm just kind of curious if you could flush that commentary out into kind of broader perspective of maybe margin differences or nuances that we should consider in light of the 2025 flows comment you just made as well.

Michael Policarpo

Sure, Michael. As we think about our operating platform and the business structure that we have, I think we've identified and said that greater than two-thirds of our expenses are variable. And that really comes with having a single operating platform to allow us to leverage and invest really once across all franchises, all vehicles, inclusive of our ETFs, mutual funds, institutional business, retail SMA and model delivery business. So that single platform really allows for significant scale.
And as we look at how we've derived that expense base with greater than two-thirds being variable, the ETF business is just as profitable as the rest of the business, despite having slightly lower revenue realization. And again, the ETFs that Dave mentioned in the prepared comments, they're not passive ETFs, they're active and rules based that have a fair revenue realization to them. And when we apply, if you will, the business infrastructure across that, we still maintain very strong margins competitive to any other distribution channel in any other product vehicle that we have.
So it really is that single platform and a variable expense model that we think drives the current margins that we have and continue to drive the investments that we're making to support future growth.

Michael Cho

Great. And if I could just quickly follow up. You mentioned pipeline or one not yet funded pipeline in terms of kind of the largest ever. I was wondering if you can kind of provide any context or color around the pipeline as it sits today? And any color on the composition of that institutional pipeline.

Michael Policarpo

Sure. It's Mike. We don't necessarily provide the specifics. But I think in Dave's comments, he mentioned it's as large as we've ever seen it in the history of the business, which is very compelling as we sit here today. It's also not just a particular product or franchise.
It stems across a number of different franchises as well as different channels, so both intermediary and institutional business. And then within institutional, the sub channels are also represented. We expect that the pipeline from a one-not-funded perspective, most, if not all of that, will fund in 2025. And it, again, is broad-based across a number of different franchises and products within franchises.

Operator

Kenneth Lee, RBC Capital Markets.

Kenneth Lee

Just following up on the Amundi and the potential introduction of Victory products in the non-US distribution. Assuming you've selected certain products, how rapidly in terms of time frames, could you potentially introduce products? What are the key gating factors? Is there any kind of regulatory or product design or vehicle selection that we should think about?

David Brown

Yes. That will happen really throughout 2025 and into '26 for the Victory products. I would expect after we close, most of the flow will come through the existing or the legacy Amundi US products that are already into the channels already have the products registered, established, sales force educated on them. And so that will continue and accelerate with our investment in that channel.
And then as '25 moves through, I would anticipate that we have the legacy Victory products registered, educating the sales force, and then getting momentum in the different geographies and really seeing a benefit as we end '25 and go into '26.
Each geography is going to have its own set of regulatory rules, we'll be registering different products. On the institutional side, it will be educating the sales force. So it will be a large effort around that. But the great part about this is today, as Amundi US stands, they have the infrastructure, they're successful in selling the products outside the US.
It has been growing. I think I referenced in my prepared remarks, since the acquisition of Amundi in 2017, Amundi US. They have been positive from a sales perspective. So we'll just be plugging into that and really accelerating that and then introducing our products. But as we look out and we get out of the quarters when we start to look in the future from a year's perspective, we think it's going to be a really compelling growth opportunity for us, diversify our business and really differentiate us from many other USanagers to have this kind of distribution channel outside the US for a US-based manager.

Kenneth Lee

Great. Very helpful there. And then just changing over to another topic on the M&A opportunity there. You previously mentioned that there could be some additional opportunities over the near term. Just wanted to get a little bit more color in terms of how active is the discussions pipeline that you're having?
And what are your thoughts in terms of the outlook for potential M&A this year?

David Brown

I think building on some of the comments I've made over the previous quarters, we are very busy from a discussion perspective, I think the industry is primed for a lot of consolidation. And I think you're starting to see that, and I think it will accelerate in '25 and really in the out years. And we will participate in that after we closed the acquisition, our balance sheet, our leverage will go down quite significantly. Our balance sheet will be primed. And I would anticipate that we would be as active as anybody in the industry.
I think our platform is super attractive for the right kind of partner, and we are willing participant in the consolidation.
And so my anticipation is that we are going to continue down the path we've had over the years. and that has been -- really been very acquisitive. And so that's where we are today. And we're super excited about it as well. The discussions we're having, the opportunities are as compelling as I've ever seen in my career when I look at the opportunities and the discussions we're having.

Operator

Étienne Ricard, BMO Capital Markets.

Étienne Ricard

Okay. Just to circle back on operating margins. I'm curious to hear relative to the 49% target that you have, in what areas of the organization have you seen better-than-expected operating leverage? And just to circle back on Amundi, what's giving you the confidence that current systems in place can handle a much larger AUM base?

Michael Policarpo

It's Mike. Yes, I would say we are -- I mentioned before kind of the single operating platform that we run. It is world-class. It is highly scalable in the nature of how we have designed it. We leverage significant partner relationships that allow us to onboard and integrate M&A and have done so since the beginning of the business model back in 2013.
So that gives us the confidence along with the people and the experience that we have that we can and have assessed, if you will, the current Amundi US business to be able to put that onto the platform, make the investments that we need to for areas where there is differentiation from a product perspective or a client perspective and continue to operate the business long term at the margins that we've identified that are robust and probably at the top of the industry.
So that long-term 49% guidance is still something that we're confident in, even post onboarding the Amundi transaction. There's really nothing in the Amundi US business that is significantly differentiated. We're a traditional active asset management business. And so we feel very confident that post the integration, we'll be able to operate the business at the long-term margins, still making the investments in areas that we believe will provide long-term organic growth.
Those investments that we've made and continue to make support data, Dave mentioned ETF specialists with respect to distribution and marketing, technology support. We're continuing to invest in the intermediary distribution channel.
And really, all of those investments that we're making and will continue to make through the Amundi US transaction will continue to position us to be well positioned for continued M&A as well as organic growth.

Étienne Ricard

Great. I appreciate the details. Switching on net flows. You've seen demand for some of your global strategies on the non-US side. Can you share more details as to what explains this relatively stronger performance?

Michael Policarpo

Yes. So the -- where we've seen strength in the global equity and international equity segment of our business really has been with respect to the RS Global product. That product has outstanding short- and long-term investment performance. They've got a very differentiated investment process that has allowed them to continue to perform excellently throughout all market cycles over the last decade plus. And we're seeing significant opportunities both on the institutional side as well as on the intermediary side with respect to that product offering because of the strong performance, because of the depth of the team, because of the strength of the team.
And really, they've just continued to perform very well, which has led to a significant amount of opportunities.

Operator

Benjamin Budish, Barclays.

This is Nathan on for Ben. Can you provide a mark-to-market on Amundi since our last update? What does AUM look like and how are flows trending?

Michael Policarpo

Yes. So as Dave mentioned in our prepared remarks, the Amundi US business for 2024 was net flow positive in what you can see publicly in their mutual fund business, the flows were roughly $2.6 billion net flow positive across their fixed income, multi-asset and equity products. We also highlighted that there are other distribution channels, which really was that global network was positive organic growth as well, and those trends have continued into January.
At year-end, the AUM was approximately $114 billion for Amundi US, which, again, as we mentioned, the performance of the Amundi US business throughout 2024 really outpaced our expectations and what we diligenced. So we're super excited to have tailwinds in that business as it comes on to our platform, and we continue to look at organic growth opportunities post the transaction.

David Brown

And I would add -- it's Dave. I would add a few more things. I'd say, one, going into '25, they still have that net flow positive. It's net flow positive on the mutual fund side. You can see that publicly for January.
The investment performance is still strong. And I would reiterate what Mike said, which is this is a business that has really picked up momentum in '24 and going into '25. And it is exceeding what we anticipated. So from our perspective, when we diligenced the business, we thought it was great and has now exceeded that, and we're super excited about that and really excited to bring it on to our platform, combined forces and really, I think, provide a trajectory that's much more positive from a net flow perspective, putting our organizations together.
One of the great benefits of this transaction is we are going to have a larger US intermediary sales effort. And from an FTE perspective, from a partnership with platform perspective, from a marketing perspective, and that should benefit our entire platform, not just the legacy Amundi US and not just a few products, but we should see it across our entire platform.

Can you also provide an update on flows at Sycamore in particular? I recall that the franchise was a source of some of your outflows last year. So can you just remind us of some of the dynamics there?

David Brown

We don't provide specific flows on each franchise. Sycamore is one of our larger franchises. It is an excellent long-term investment performance. And it has a really big client following on the intermediary side and on the institutional side. It is a franchise that has had some outflows.
But long term, we're not concerned with the franchise at all. It is an excellent investment team. They have an excellent investment process. It's a deep. And I'd say anything that's going on in Sycamore is really just a small cycle in a much longer-term positive cycle for them.

Operator

Ben Rubin, UBS.

Ben Rubin

My first one is on the ETF business. VictoryShares had over $1 billion of flows in fourth quarter, stronger than your recent quarters and a much better 2024 overall, which you brought in your prepared remarks. So I'm just curious what products or strategies are driving that improvement? And then also, what are your expectations for active ETFs going into 2025?

David Brown

Sure. So in '24, we had a few ETFs that really did well, and I think started to emerge. And I would bucket them first, our group of fixed income active ETF run by our Victory Income Investors franchise. There are a number of ETFs there that were net flow positive. And really with the market tailwinds and our ability to get them across our distribution system, have really started to pay back.
And I expect that to continue in '25. The launch really of our free cash flow series, group of ETFs led by, what we call flow, which is VFLO SFLO, which is Slow and then also a few other ones that we've just launched and will be launching around our free cash flow series. We've had seen very good flows from that perspective. Four of our five top sellers in '24 were actually active. And even our passive ETFs really are not passive from a beta replication perspective.
Our passive ETFs are really rules-based and thematic type ETFs that really compete with active products. A good example is VFLO. It's a 50 stock portfolio. It's priced like an active product. Acts like an active, we just use rules to express our investment thesis.
And in '25, we're off to a tremendous start on the ETF side, and I anticipate that is going to accelerate as we move through the year. There's great market tailwinds from what's happening in the industry, plus the way we're positioned.
And lastly, I would add, we have invested from a sales perspective on the ETF side. We now have ETF sales specialists. We're focusing some of our marketing efforts there. We're expanding our distribution platform relationships on the ETF side. So we really believe that VictoryShares is going to be a big part of our future, and it's going to help us drive organic growth.

Operator

Michael Cyprys, Morgan Stanley.

This is Anna on for Mike. Just a question on capital allocation. How should we think about this going forward, just given the dividend and also the new buyback program? How should we think about timing of completion of the program? And how are you also thinking about debt paydown and scope for the dividend over time?

David Brown

Yes. I'll start off on this, and Mike can fill in afterwards. First and foremost, our use of capital is to do accretive acquisitions. I mean that is the most important thing for us and the most strategic thing for us, and I think that has the potential for the highest shareholder return. We have been able to balance that while also increasing our dividend over the years and buying back our stock.
Both buying back our stock and our dividend program are ancillary ways of returning capital. We love buying our stock. We think the stock is undervalued based on today and based on the future. And we also like returning capital through dividends, and you can see the increase in really our historic history of increasing the dividend over the years.
We are -- as I said earlier, we are going to participate in acquisitions. We're having really compelling discussions. And our balance sheet is really -- the first use of our balance sheet is going to be able to execute on those acquisitions. Depending on how that goes, that will drive our buyback program that will drive our dividend program. But we believe that we can balance all of that out as we've done in the past.
And I would anticipate looking forward, our Board put in a $200 million program to buy our stock. We're going to be opportunistic. We're going to look at the facts on a daily basis, and we'll execute it on where it makes sense. And we'll continue to look at increasing the dividend, assuming that we can balance out the acquisition side.

Great. And then maybe a follow-up on WestEnd. Can you just update us on how the investment performance is trending there? And how that's contributing to flows? And then also maybe on how you're expanding wallet with existing advisers and how that's evolving?

David Brown

Sure. So since we acquired WestEnd, they have been net flow positive. Their performance in 2024 was not up to the standard that we had hoped. It is having a much better start in 2025. We have expanded quite significantly the number of advisers since we've acquired the business that they're doing business with pretty extensively.
And we've also expanded the number of platforms that they're doing business on. And so there's a great opportunity there. We think with the improvement in investment performance the market dynamics for their products. And we've also launched a number of new products for them, including an ETF that has gotten a lot of traction.
The ETF is MODL. We're pretty bullish on the opportunity to grow WestEnd. And we're also -- we also know from an investment perspective, they're excellent at what they do, and we're starting to see some of the investment performance return to the levels that we expect of them.

Operator

And that concludes our Q&A session. I will now hand it over to David Brown for any closing remarks. David?

David Brown

Thank you, and thank you for your interest in Victory Capital. Next week, we will be attending the UBS Financial Services Conference as well as the BofA Securities 2025 Financial Services Conference in Miami. And next month, we will be at the RBC 2025 Global Financial Institutions Conference in New York. We hope to see you at one of those events and hope you have a great rest of the day. In the interim, please if you have any questions, please feel free to contact us at any time.
Thank you.

Operator

This concludes the meeting. Thank you all for joining. You may now disconnect.