CI Financial Corp.

Good morning, ladies and gentlemen. At this time, I would like to welcome everyone to the CI Financial 2021 third quarter results webcast. All lines are in listen-only mode. After the speaker's remarks, there will be a question and answer session. If you wish to ask a question during this time, please press Start followed by 1 on your telephone keypad. Please take note of the cautionary language regarding forward-looking statements and non-IFRS measures on the second page of the presentation. I would now like to turn the call over to Mr. Kirk McAlpine, CEO of CI Financial. Mr. McAlpine, you may begin.

And welcome to CI Financial's third quarter earnings call. Before we begin, I'd like to take a moment to acknowledge Remembrance Day in Canada and Veterans Day in the U.S. On behalf of everyone at CI, I want to recognize everyone who courageously served and those who are currently serving in the armed forces in both countries. We thank you for your service and sacrifice. I also want to personally thank the veterans within the CI family. You have my respect and gratitude. And now turning to today's call. Joining me this morning is our CFO, Amit Meuni. Together we will cover the following topics. A discussion of the highlights of the quarter, a review of our financial performance during the quarter, an update on our sales to date for the fourth quarter, an update on the execution of select items of our corporate strategy, then we will take your questions. Growing contributions from our wealth management segment, further expansion of the positive net flows that emerged last quarter in asset management, and continued operational discipline drove another quarter with a number of record metrics, including record-adjusted EPS of 80 cents. We continue to take a dynamic approach to our capital allocation. During the quarter, we deployed $134 million towards M&A, returned $99 million to shareholders through the repurchases of 4 million shares, and $36 million through a regular $0.18 quarterly dividend. Asset management net sales accelerated during the quarter, and we delivered our strongest Canadian retail net sales results in six years. We will take a closer look at the flows in a moment, but it's undeniable the changes we've made to the business are gaining traction and driving improved sales results. Within wealth management, strong organic growth across both our Canadian and U.S. platforms continues to drive client assets to record levels. We also continue to make progress against our three strategic priorities. During the quarter, we closed two U.S. acquisitions, adding $10 billion of client assets, and expanding our capabilities and geographic footprint. Additionally, we announced and have since closed the acquisition of Ohio-based BRR and announced the acquisitions of McCutcheon Group, a Seattle-based ultra-high net worth RIA with $4 billion of assets, RH Blue Steam, a Detroit and New York City-based ultra-high net worth and high net worth RIA with $5 billion of assets, and Gopin and Glossberg, a Chicago-based high net worth RIA with $9 billion of client assets. All of these deals are expected to close by year-end. Last night, we also announced that we made a strategic investment in Glass Funds, a leading alternative investments execution platform that provides us with a pathway to majority ownership. Finally, we announced plans to open a U.S. headquarters in Miami. The decision reflects the importance of our U.S. expansion and the considerable scale we have built since launching our new strategic priorities. Just 18 months ago, CI was an entirely Canadian company And as we sit today, our U.S. wealth business is well on its way to being CI's largest business based on assets. I'll now turn the call over to Amit to review our financial results.

Thank you, Kurt, and good morning, everyone. I'll focus my comments on our adjusted numbers. Turning to slide four, our global assets increased to $320 billion at the end of September. The increase was from a combination of positive markets and net inflows across all our major businesses. In addition, we closed on the acquisition of two RIAs and $10 billion of client assets in the quarter. Turning to the next slide. Translated into adjusted revenue, increasing to $292 million, adjusted EBITDA, reaching a record $258 million, and adjusted net income of $159 million, or $0.80 a share, also a record result. Turning to slide six, we can take a deeper dive into revenue changes. Total adjusted revenues increased by $55 million as compared to the second quarter. Management fees were driven by our asset management business increased by $20 million due to higher average core asset management driven by a combination of positive market movement and positive debt inflows. Wealth management fees increased by $29 million primarily due to the acquisition during the quarter and the total quarter impact of the deals that closed at the end of April. Other incomes declined $15 million, primarily reflecting a swing in investment gains and losses and lower redemption fees. On the next slide, you can see the changes in our adjusted expenses. On a comparative basis, the four additional SG&A expenses from acquisitions not total expenses increased approximately 6%. driven largely by variable items due to our strong fundamentals. SG&A increased $10 million, primarily reflecting a combination of higher incentive compensation due to continued strong investment performance and accelerating net sales results. Higher T&E levels, as in-person activity levels, begin to revert, as well as technology consulting and one-time costs associated with new product launches. Dealer fees increased $11 million, providing higher payouts associated with stronger revenue generation from our Canadian health business. Interest expense increased $7 million due to the full quarter effect of the 30-year bonds we raised in June. We had $36 million in additional expenses from acquisitions completed in the second quarter and third quarter. We remain disciplined on costs and balanced with investing in the right areas to support our strategic initiatives. On slide eight, we can review our capital priorities. We generated strong free cash flows of $180 million for the quarter. We deployed $135 million for buybacks and $36 million for dividends. Over the last five years, we have repurchased nearly 100 million shares at an average price of just over $23, generating considerable value for shareholders. The buyback also represents a 37% reduction in our share count over that time period, driving significant earnings accretion. Our operating model allows us the benefit of generating strong cash flows, which we're able to invest back into our business to support our strategic initiatives, return excess capital to our shareholders, and manage our chiefs. On the next slide, we're going to review our debt statistics. As of September, we had approximately $3.4 billion of debt outstanding on a gross basis and $7 billion on a net basis, and our net leverage is 2.6 times based on our annualized third quarter adjusted EBITDA. The slight increase in gross debt during the quarter reflects the translation of our U.S. dollar bonds to CABS, while the net leverage is a combination of the translation and CABS deployed towards M&A during the quarter. Slide 10 looks at a breakdown of the $622 million of acquisition liabilities that sit on our balance sheet, primarily related to the build-out of our U.S. wealth platform. When we close on acquisitions, we usually defer a portion of the guaranteed proceeds for a period of 90 to 270 years. These outstanding deferrals total $198 million at the end of the third quarter. While generally paid in cash, in some cases a portion will be satisfied with shares of our public company stock, or beginning in January, partnership shares of CI private wealth, which Kirk will speak more of later on the call. Also part of the acquisition liabilities is $270 million of contingent consideration. This represents the estimated fair value of earn-out payments. Keep in mind, for a firm to be eligible for this payment, they must generate growth stronger than prior to joining CI. So while there is a potential additional payment, it comes as a result of faster growth and better financial results, which benefits CI. While we are showing the expense and liability from recording the estimated fair value of the earn-out, we are not yet showing the positive financial impact associated with the contingent consideration. Said plainly, higher contingent consideration means the RIAs are generating higher earnings than we had anticipated when we initially did the deals. A further proof point on the quality of the firms we are acquiring. Finally, we have $154 million of non-cash liability, which represents the fair value of options we have granted to the owners of the minority stakes in certain acquisitions. As Kurt will discuss in detail shortly, we have created a unique partnership structure for our USRA platform. Prior to the minority owners of these businesses having visibility into the features of the partnership, we structured certain acquisitions to provide liquidity for the remaining equity in their business. We expect this liability to be extinguished with the minority owners rolling their remaining equity positions into the CI Private Wealth Partnership around January 1st. Let me turn the call back to Kirk to give you an update on the progress we've made on our strategic priorities.