Release Date: August 08, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- CI Financial Corp (CIXXF, Financial) achieved a record adjusted EPS of $0.90, marking a 5% increase from the previous quarter.
- The company reported strong free cash flow generation of $1.01 per share.
- CI Financial Corp (CIXXF) successfully executed share repurchases, buying back 9.9 million shares since April.
- The US wealth management business showed robust growth, with EBITDA increasing by 21% compared to the previous year.
- Investment performance remained strong, with over 70% of AUM outperforming peers on a three-year basis.
Negative Points
- The Canadian retail asset management business experienced net redemptions of $331 million in the quarter.
- Asset Management EBITDA margins were down due to seasonal compensation items.
- Interest expenses increased due to new bond offerings and borrowings for acquisitions and stock buybacks.
- Depreciation and amortization costs rose due to integration and new office space expenses.
- Net leverage remained unchanged at 3.5 times, with potential for it to increase in the next quarter due to capital uses.
Q & A Highlights
Q: Can you provide an update on the balance sheet strategy, particularly regarding Corient's ability to issue debt independently?
A: Kurt Macalpine, CEO: We've made significant progress in separating our Canadian and US businesses, including debt allocation. While Corient is ready to issue debt independently, we will decide based on what is most financially attractive for shareholders. Currently, there's no pressing need for Corient to issue debt independently.
Q: With the current focus on share buybacks, would you consider paying off some of the preferred equity given its higher cost?
A: Kurt Macalpine, CEO: Our capital allocation is dynamic. The growth rate we've achieved is double the expected return of the preferred equity, so paying it off isn't a priority in the short term. However, we will continue to monitor this as we approach the third anniversary of the investment.
Q: How are the recent RIA acquisitions funded, and how does this affect the debt allocation between CI and Corient?
A: Amit Muni, CFO: We borrow at the CI level and loan funds to the US business to finance acquisitions. The segmented balance sheet shows how much the US has borrowed from Canada for these acquisitions.
Q: Are you comfortable with the current leverage level of 3.5 times, and would you consider increasing it for further M&A?
A: Kurt Macalpine, CEO: We are comfortable with our current leverage. Our capital priorities differ between Canada and the US, focusing on buybacks and deleveraging in Canada, and strategic M&A in the US. We will assess opportunities dynamically for long-term value creation.
Q: What is your perspective on the emerging theme of cash sweeps for broker-dealers in the US, and could it impact Corient's fee structure?
A: Kurt Macalpine, CEO: Corient operates as a fee-only RIA without a broker-dealer, so cash sweeps are not relevant. Our revenue is entirely fee-based, adhering to the fiduciary standard, which is the highest care standard globally.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
