CI Financial Corp.

Hello everyone and welcome to the CI Financial first quarter 2023 earnings call. My name is Chach and I'll be the coordinator for this conference. After the presentation there'll be a Q&A session where you can ask a question by pressing star 4x1 on your telephone keypad. If you would like to withdraw your question you may press star 2. I'd now like to hand over to Kurt McAlpine, CEO of CI Financial to begin. Please go ahead.

Good morning, everyone, and welcome to CI Financial's first quarter earnings call. Joining me this morning is our CFO, Amit Muni. Together, we'll cover the following, an overview of the highlights of the quarter, a review of our financial performance during the quarter, a discussion of the minority investment in our U.S. wealth business announced this morning, and then we will take your questions. We produced solid core financial results in Q1, that represent a continuation of the strategic progress and momentum we've built since launching our new strategy. Our adjusted EPS of 74 cents is unchanged from Q4, reflecting another quarter of net inflows across all three of our businesses, disciplined discretionary expense management, and the realization of integration synergies in the U.S. Offset by fewer fee days in the quarter, asset makeshift in higher interest costs. Adjusted EBITDA per share increased 2% from Q4, while free cash flow per share declined 3%, reflecting the seasonally higher draws on our cash in Q1 related to bonus payments. Capital allocation during the quarter was balanced with $82 million of M&A payments, primarily related to prior deals in the U.S., $34 million towards our regular quarterly $0.18 per share dividend, and $22 million of debt paydown. As we will discuss in more detail later, this morning we launched a tender offer for a billion of our Canadian bonds and plan to fully pay down and shrink the size of our credit facility, driving a material reduction to our gross and net leverage on a go-forward basis. Our new net leverage of 2.7 turns is our lowest since 2021 and realizes meaningful progress to our stated leverage target of 1.5 to 2 turns for the Canadian business. Our platform continues to generate net inflows despite the more uncertain economic environment and market outlook. Within Canadian retail, our inflows of $800 million were once again a stark contrast to the break-even flows of the Canadian mutual fund industry. We continued to see demand for our high-interest savings strategy and a range of our ETFs. Asset gathering for our long-term strategies continued to outperform our peers, which we attribute to the strategic transformation of our investment management function from a series of multi-boutiques into an integrated global asset manager. Our wealth businesses in both Canada and the U.S. continue to generate consistent and strong positive inflows. We also continue to execute against our three strategic priorities to modernize asset management, expand wealth management, and globalize the company. We further enhanced our capabilities in the U.S. with the formal launch of our trust services. This is an important advancement to better meet the complex and distinct planning needs of our ultra high and high net worth clients. In late April, we announced the sale of our minority interest in Congress Wealth Management. Congress is a great firm. We had a strong working relationship with the team. However, the minority stake in their ownership structure precluded the firm from fully integrating into CI Private Wealth and maximizing the benefits for clients, employees, and CI. When it closes later this month, the sale will return three times our initial investment in less than three years. In May, we completed the acquisition of Avalon Advisors and welcomed them to CI Private Wealth. Avalon is a Houston-based ultra high net worth focused RIA with $11 billion of client assets and adds to our considerable scale in one of the fastest growing states in the country. Finally, as we will cover in detail at the end of the call, this morning we announced a minority investment by a group of leading global institutional investors valuing our U.S. business at more than three times the market cap of our entire company. This value is reflective of what we built in the U.S. since we initiated the strategy in 2020, but it also highlights the magnitude of the disconnect between how our stock trades from the underlying value of our business. To put the magnitude of the disconnect in perspective, the 20% minority stake of the business sold represents 5.5% of CI's Q1 consolidated adjusted EBITDA. For that 5.5%, we will receive $1.35 billion in proceeds. Yesterday, based on CI's stock price, we could have bought a 5.5% stake for less than $130 million, or less than one-tenth of the price. The proceeds from the transaction will be used to materially deleverage while maintaining significant strategic flexibility and further value creation potential for our shareholders. I'll now turn the call over to Ahmed.

Thank you, Kurt, and good morning, everyone. Turning to slide four, our global assets ended the quarter of 4% to 391 billion due to positive flows in all three segments, as well as rising markets. We had no acquisitions closed during the quarter. Turning to our financial results on the next slide, I'll focus my comments on our adjusted results. Adjusted net income was 137 million, or 74 cents per share for the quarter. Net revenues increased to $603 million and adjusted EBITDA was $250 million for the quarter. Turning to the next slide, I'll highlight the revenue drivers for our three segments. Revenues were up 4.1%, primarily driven by higher revenues in our Canada and U.S. wealth businesses. Asset management revenues were essentially flat compared to Q4. Higher average AUM must mostly offset by the change in mix shift due to flows into lower fee duration funds and two less trading days in the quarter. Turning to expenses on the next slide. Total expenses increased 4.8%. SG&A increased primarily due to higher seasonal payroll taxes. Advisor and dealer fees are up due to payouts in our Canadian wealth segment from higher revenues. Interest expense increased due to the full quarter effect of our recently issued bond, as well as higher interest rates. We expect to record higher stock-based compensation of approximately $17 million for the remainder of the year, given we were unable to make our annual employee-restricted stock award grants as we were in a blackout period pending the transaction announcement this morning. Turning to slide eight. We generated free cash flows of 153 million for the quarter and paid dividends of 34 million. Turning to the next slide, you can see our debt and leverage. At the end of the quarter, our net debt declined to 4.2 billion, and our net leverage was 4.0 times. Thank you. Let me turn it back to Kurt.