CI Financial Corp.

Good morning and welcome to the CI Financial second quarter 2023 earnings call. My name is Carla and I will be the operator of today's call. If you would like to register a question for the Q&A portion of the call, please press start followed by one on your telephone keypad. When asking a question, please ensure your telephone is unmuted locally. And to revoke your question, you can press start followed by two. I would now like to pass the conference over to our host, Kurt McAlpine. CEO of CI Financial, to begin. Kurt, please go ahead when you're ready.

Good morning, everyone, and welcome to CI Financial's second quarter earnings call. Joining me this morning is our CFO, Amit Muni. Together we will cover the following, an overview of the highlights of the quarter, a review of our financial performance during the quarter, a discussion of several strategic actions recently taken, then we will take your questions. Our adjusted EPS of 76 cents a share is up 3% sequentially, reflecting growth in our U.S. wealth business, disciplined discretionary expense management, and the benefits from capital deployed during the quarter, partially offset by pressure from asset mix shift and higher non-controlling interest resulting from our minority sale. Adjusted EBITDA per share attributable to shareholders increased 1% from Q1 while free cash flow per share declined 5%, reflecting the seasonally higher bond coupon payments. It was an active quarter for capital allocation. We paid down $1 billion of debt and spent $229 million to repurchase 17 million shares. We deployed $212 million towards M&A, including deferred and earn-out payments, and $33 million towards our dividends. which today we announced plans to increase 11% to 20 cents per quarter. Our platform continues to generate net inflows, despite the more uncertain economic environment and market outlook. Though modest in Q2, our Canadian retail segment generated inflows for the fourth straight quarter, despite the industry continuing to endure outflows. While demand remains high for our high interest savings strategy, a range of our ETFs and our alternative strategies also generated inflows. Our wealth businesses in both Canada and the U.S. generated consistently positive inflows through the first half of the year. We also continued to execute against our three strategic priorities to modernize asset management, expand wealth management, and globalize the company. In May, we completed the minority sale in our U.S. wealth business, which accomplished the goals of our planned IPO. This provided us with complete flexibility for the business moving forward. We also completed the previously announced acquisitions of Avalon Advisors and LaFerla and welcomed them into the Corian Partnership, which is a new unified brand for our U.S. wealth. This morning, we're excited to announce the acquisition of Coriel Capital, a Montreal-based, woman-owned, ultra high net worth wealth manager. In July, we closed on the acquisition of Intercontinental Wealth Advisors, a San Antonio-based high net worth and ultra high net worth focused REA with 2.3 billion of client assets. 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 up 4% to $399 billion, a quarter-end record high due to positive flows in our Canadian and U.S. wealth management segments, as well as from two acquisitions during the quarter. Compared to this time last year, our AUM is up 20%. Turning to our financial results on the next slide, I'll focus my comments on our adjusted results. Adjusted net income was 136 million or 76 cents per share for the quarter. Net revenues increased to 655 million and adjusted EBITDA was 245 million for the quarter. Turning to the next slide, I'll highlight the EBITDA and margins for our three segments. Asset management EBITDA is down slightly due to stock-based compensation expense from our grant this quarter that was not in the previous quarter. Canada wealth EBITDA stayed relatively flat. In the U.S., we experienced strong EBITDA growth of 48% this quarter compared to the second quarter of last year and 42% growth for the first half of this year as compared to the first half of last year. Our margins also improved by 1.4 percentage points to 42.2% this quarter due to a combination of top line revenue growth and synergies from ongoing integration of our U.S. platform. For purposes of modeling non-controlling interest of our U.S. segment for future quarters, we estimate non-controlling interest of 37% of U.S. adjusted EBITDA when calculating our U.S. segment adjusted EBITDA. For purposes of modeling non-controlling interest for our U.S. segment's contribution to EPS, we estimate non-controlling interest of 32% of U.S. segment adjusted EBITDA. Turning to the next slide, I'll walk through the changes in revenue. Revenues were up 2.3% to $655 million and about 1% on a comparable basis to Q1. Asset management revenues were down slightly due to average fee rate declines from mixed shift due to flows into lower fee short duration funds. Canada and U.S. wealth revenues were up due to higher asset levels from solid organic growth. Our U.S. acquisitions added $9 million in revenues for the quarter. Turning to expenses on the next slide. Total expenses increased 1.9% and about 1% on a comparable basis. SG&A increased primarily due to higher stock-based compensation due to the annual granting of restricted stock awards to our employees, which were done in the second quarter. Interest expense declined due to lower debt levels. Acquisitions added $4 million in expenses in the quarter. Turning to slide nine. At the end of the quarter, our net debt declined to $2.9 billion from $4.1 billion last quarter, and our net leverage was 2.9 times. Using current market value of our debt, our net leverage would be approximately 2.1 times. As you can see from the chart on the bottom of this slide, we have an attractive profile for our remaining debt with an average maturity of just a little over 14 years at a 4% fixed rate. We anticipate interest expense to be in the range of 37 to 39 million in the third quarter. Turning to the next slide, the aggressive deployment of capital received from the sale of our stake in Congress Wealth Management and the 20% stake we sold of our U.S. business allowed us to deleverage. We spent $695 million to retire $713 million of par value bonds. We paid down our credit facility balance, which was $298 million at the end of the prior quarter, and we deployed $308 million for share buybacks from July. The results of these actions were several fold. $18 million in savings versus the par value of our bonds, $54 million of interest avoidance on those bonds, $23 million reduction in annual credit facility interest, and $17 million reduction in our annual dividend obligation as a result of canceling 22 million shares. Most importantly is the ongoing earnings accretion. We sold roughly 6% of our consolidated earnings through the 20% sale of our U.S. wealth business and bought back 12% of our shares outstanding through the end of July. Thank you, and let me turn the call back to Kurt.