CI Financial Corp.

Hello and welcome to the CI Financial fourth quarter 2021 earnings call. My name is Emily and I'll be coordinating the call today. During the presentation, you'll have the opportunity to ask a question by pressing star followed by one on your telephone keypads. I'll now hand the call over to our host, Kurt McAlpine, CEO of CI Financial. Please go ahead, Kurt.

Good morning, everyone, and welcome to CI Financial's fourth quarter earnings 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 and the year, a review of our financial performance during the quarter and the year, an update on our sales to date for the first quarter, an update on the execution of select items of our corporate strategy. Then we will take your questions. 2021 was a record year for CI across every major financial metric. Initiatives tied to our strategic transformation are driving growth in all our business lines, resulting in significantly stronger earnings and cash flow metrics. Adjusted EPS was $0.87 for the quarter and $3.15 for the year, which is a $0.68 or 28% increase over 2020. We also delivered record revenues, record EBITDA, and record free cash flow. We continue to take a dynamic approach to capital allocation. During the quarter, we deployed $627 million towards M&A across 10 transactions. These heightened levels of activity were driven by two factors. We continue to be the preferred partner of choice for the highest quality RAs in the U.S., and there was a desire for many entrepreneurs to transact in advance of potential tax law changes, which pushed heightened deal activity into Q4 2021. We returned $20 million to shareholders through the repurchase of nearly 1 million shares and $36 million through our regular $0.18 quarterly dividend. For the full year, we balanced capital deployment between our strategic transformation tiebacks to take advantage of the valuation disconnect we see in our stock, and maintaining our existing dividend policy and credit ratings. 2021 was also a record year for asset gathering. Asset management net flows were roughly breakeven in the fourth quarter, but we finished the year with positive net sales for the first time since 2015. This $9 billion year-over-year improvement was a direct result of the transformation we've been undertaking in this business since 2019. Our wealth management businesses on both sides of the border generated strong organic growth, contributing $6.3 billion of net flows in 2021, a record year for our wealth businesses. We also continue to make progress against our three strategic priorities. During the fourth quarter, we closed eight U.S. RA acquisitions and made two strategic investments, adding $49 billion of client assets. These transactions have added scale to our U.S. business, deepened our capabilities in serving ultra-high net worth clients, and expanded our alternative investments offering. I'll now turn the call over to Ahmed to review our financial results.

Thank you, Kurt, and good morning, everyone. Turning to slide four, Our global assets increased to $384 billion at the end of December. The increase was from a combination of positive markets and net inflows into our wealth management segment. In addition, we closed on the acquisition of 10 RIAs, adding $49 billion of client assets in the quarter. Turning to the next slide, I'll focus my comments on our adjusted results. This asset growth translated into adjusted revenues increasing to $737 million, adjusted EBITDA reaching a record $277 million, and adjusted net income of $171 million. Our adjusted EPS was 87 cents per share for the quarter, up 9% from Q3, and up 23% from the quarter last year. On the next slide, we can review our annual results. Adjusted revenues increased 31% to a record $2.7 billion, and EBITDA grew to $1 billion. Adjusted net income grew 20% to $635 million, and adjusted EPS grew 28% to $3.15 for the year, reflecting the benefit of share buybacks. Turning to slide seven, we can take a deeper dive into revenue changes in a quarter. Total adjusted revenues increased by 45 million as compared to the third quarter. Fees from our asset management business increased slightly, and wealth management fees increased by 16 million, primarily due to higher AUM in the segment. Other income increased by 12 million, primarily due to year-end recognition of performance fees, as well as distributions from seed capital in our funds. On the next slide, you can see the changes in our adjusted expenses. On a comparative basis, before additional SG&A expenses from acquisitions not owned for the full periods, total expenses increased slightly from $492 million to $499 million. SG&A increased by $5 million, driven largely by year-end compensation true-ups, particularly on our US RIA side, and higher marketing and advertising costs to support our Canadian business. Dealer fees increased by $2 million, reflecting higher payouts associated with stronger revenue generation from our Canadian wealth management businesses. We had $10 million of additional expenses from acquisitions completed in the quarter. We remained disciplined on costs, balancing it with investments to support our strategic initiatives. On slide 9, we can review our capital priorities. We generated strong free cash flows of $179 million for the quarter. We deployed $20 million for buybacks and $36 million for dividends. Given our commitment to our investment-grade credit rating and in anticipation of the number of M&A transactions that were closing at the year end, we paused our share buybacks. The strong cash flows generated by our business allows our capital management strategy to remain flexible, balancing investments in our strategic priorities with share repurchases and debt repayment. Turning to the next slide, you can review our debt and leverage. At the end of the year, we had approximately $3.7 billion of debt outstanding on a gross basis, or $3.4 billion on net leverage. And our net leverage was 3.1 times based on our annualized fourth quarter adjusted EBITDA. As we discussed in our last call, we expected debt levels and leverage to increase given the number of transactions that closed during the quarter. However, we expect to deleverage over time as we generate earnings from the businesses we acquired as well as pay down debt. Currently, our net leverage is approximately 2.8 times down from year end. Slide 11 looks at a breakdown of our acquisition liability. When we close on an acquisition, we typically have deferred payments and earn-out considerations. Deferrals are generally paid in 90 to 270 days. Earn-outs are only paid if the acquisition generated growth stronger than prior to joining CI. We show the expense and liability from recording the earn-out. However, we are not yet showing the positive financial impact generated by the acquisitions. Lastly, as we discussed last quarter, we granted put options in certain transactions that can be settled for cash or equity. With the launch of the CIPW partnership, we estimate $375 million of the RIA obligations will be settled in CIPW units, leaving an estimated cash settlement amount of $536 million. Lastly, I'd like to update you on some financial reporting changes we will be making. Turning to the next slide, starting next quarter, we will be changing our reporting into three segments, Canada Asset Management, Canada Wealth Management, and our U.S. business. We believe this change better reflects how our business is currently being managed and provide more transparency into an important part of our growth strategy. In addition, we will be changing the reporting format of our income statements. Prior to our next earnings call, we will publish our 2021 results in our new reporting format and segments to allow for easier comparability. Thank you, and let me now turn the call back to Kurt.