CI Financial Corp.

Hello and welcome to today's CI Financial Q4 2023 earnings call. My name is Jordan and I'll be coordinating your call today. If you'd like to register any audio questions, you may do so by pressing star followed by one on your telephone keypad. I'm now going to hand over to Kurt McAlpine, CEO of CI Financial. Kurt, please go ahead.

Good morning, everyone, and welcome to CI Financial's fourth quarter earnings call. Joining me 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 on our near-term obligations and go-forward capital management priorities, a recap of our 2023 accomplishments, business positioning, and 2024 priorities. Then we will take your questions. Our adjusted earnings of 81 cents per share is unchanged sequentially, reflecting top line pressure on our business and increased depreciation and amortization offset by the benefit of recent share repurchases. Adjusted EBITDA per share attributable to shareholders increased 2% from Q3 to a record of $1.51 per share, while free cash flow of $1.08 per share was down just 2 cents from the record level of Q3. Capital allocation remained active during the quarter. We deployed $223 million towards M&A, including deferred and earn-out payments. In December, we completed a $100 million substantial issuer bid, repurchasing 6.5 million shares. Today, we announced another substantial issuer bid of up to $85 million at a fixed purchase price of $1,750 per share, and we returned $31 million to shareholders through our dividend. The Board also declared a dividend of 20 cents per share payable in July, reflecting our normal cadence of declaring dividends one quarter ahead. Over 2023, our capital deployment was nearly perfectly balanced between debt reduction, M&A, and returning capital to shareholders through buybacks and dividends. Risk-averse sentiment continued during the quarter, which was consistent with 2023 overall. While our retail channel endured outflows for the quarter, we managed to generate 340 million of inflows for the full year. This is against the backdrop of nearly 20 billion of combined industry mutual fund and ETF outflows, the worst year on record for the Canadian mutual fund industry. Our wealth businesses in both Canada and the U.S. generated positive inflows throughout the year, which continued through the final quarter. again highlighting the strength of those businesses. We also continued to execute against our three strategic priorities to modernize asset management, expand wealth management, and globalize the company. The significant improvement in investment performance since integrating our investment platform was recognized with an industry-leading number of fund-grade and LIBOR awards. We completed the previously announced acquisitions of Coriell Capital in Canada and Indianapolis-based Windsor Wealth Advisors, which was rebranded as Corient at closing. Later in the presentation, we will review in more detail some of our 2023 strategic accomplishments and discuss our 2024 priorities. I'll now turn the call over to Ahmed to discuss our financial results.

Thank you, Kurt, and good morning, everyone. Turning to slide four, our global assets ended the quarter up 5% to $445 billion. driven by positive markets, net inflows into our Canadian and U.S. wealth management businesses, and two acquisitions in the quarter. For the full year, our AUM was up $61 million, or 16%, due to a combination of flows, markets, our custody conversion, partly offset by the sale of one of our minority U.S. wealth management investments. Turning to our financial results on the next slide, I'll focus my comments on our adjusted results. Adjusted net income for the quarter was $128 million, or 81 cents per share. Adjusted EBITDA was $239 million for the quarter, and our adjusted EBITDA margin was 41.7%. Turning to the next slide, I'll highlight the segment results. Asset management EBITDA stayed roughly flat at $156 million and margins increased to 61.6%. The increase in margins was primarily due to a year-end true-up to full-year incentive compensation for the segment. Canada wealth EBITDA was also roughly flat at $20 million and margins were 9.7%. In the U.S., pre-NCI EBITDA increased to $100 million and margins expanded slightly to 42.3%. We experienced strong EBITDA growth of 33% for the year, more than double the investor group's preferred return. For purposes of modeling non-controlling interest for our U.S. segment for future quarters, we estimate non-controlling interest of 38% 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 percent of U.S. segment adjusted EBITDA. Turning to the next slide, I'll walk through the changes in revenue. Revenues on a comparable basis decreased slightly to $664 million. Asset management revenues declined by $10 million. This decrease was due to two factors. Continued mix shift to flows into lower fee short duration products. Second was due to fee adjustments we made to enhance our managed account program. The fee adjustments we made will be mostly offset during the year through cost reductions in running the program. Canada wealth management fees increased due to higher asset levels. US wealth revenues decreased slightly due to negative markets. and our method of billing. Approximately 50% of these revenues are based on asset levels at the beginning of the quarter. Given asset levels at the beginning of the fourth quarter, revenues were lower and didn't benefit from the market recovery. However, as we enter Q1 of this year, we started with higher asset levels and will now benefit from the market tailwinds. Acquisitions added $3 million in additional revenues in the quarter. Turning to expenses on the next slide. On a comparable basis, total expenses increased less than 1%. SG&A decreased primarily due to year-end true-ups and incentive compensation in our asset management segment. Advisor and dealer fees increased due to higher revenue earned in our Canada wealth segment. Interest expense increased due to additional borrowings to fund acquisition-related obligation and our substantial issuer bid. Depreciation and amortization increased due to higher depreciation of hardware and computer equipment as part of integration and new leased office space at Corian. Acquisitions added $2 million in expenses in the quarter. We anticipate interest expense to be in the range of $42 to $44 million in the first quarter of 24. Turning to the next slide, we can review our debt levels. During the quarter, we reduced our acquisition-related liabilities by over $200 million and closed on a $100 million substantial issuer bid, repurchasing 4% of our outstanding shares. We also renegotiated our credit facility and increased its capacity from $450 million to $800 million and extended its maturity to May 2025. The face value of net debt was $3.4 billion at the end of the year and our net leverage ratio increased modestly to 3.5 times on a reported basis. The fair value of our debt at the end of the year was $2.6 billion, which results in a net debt leverage ratio of 2.7 times. Turning to the next slide, I'd like to dig a little deeper on our bonds. As we have discussed previously, we have a very attractive 4.4% average rate on our debt as compared to today's rates. The timely issuances of long-term bonds in 2020 and 2021 has generated a $750 million unrealized gain for our shareholders. We could crystallize this significant gain if we decided to repurchase these long-dated bonds, which would reduce the face value of our debt without deploying an incremental dollar, which would lead to accelerated deleveraging. On the next few slides, I'll review our acquisition-related obligations by segment, and our plans for funding these payments. In May of last year, we separated the U.S. acquisition obligations between Canada and the U.S. Canada was obligated to pay any guaranteed related payments, which totaled $281 million in 2024. The U.S. assumed acquisition-related contingent obligations, which currently total $116 million in 2024. Going forward, the U.S. will be responsible for paying for its own future acquisitions. We anticipate that by the end of 2024, Canada will have fully repaid its U.S. obligations as reflected on the next slide. This chart reflects the uses of Canada's cash flows. As reflected on the previous slide, Canada has $281 million in U.S. acquisition related obligations, $118 million in projected dividend payments, and as announced this morning, a substantial issuer bid of up to $85 million. This generates 2024 obligations of $400 to $485 million, which we believe Canada can fund these obligations with its free cash flows. The expanded capacity of our credit facility can fill any temporary gaps. Once we get past 2024, Canada will have completed its U.S. acquisition obligations and will have considerable capital flexibility to rapidly deleverage, especially if the bonds with the greatest embedded gain for our shareholders are targeted first. On the next slide, I'd like to review Coriant's capital plans. Coriant has experienced strong growth and generated $1.5 billion for our shareholders from the sale of a minority stake and the sale of a minority-owned wealth manager as well as strong and growing EBITDA generation. On the back of the minority stake sale last year, we announced our intentions to fully separate the Canadian and U.S. business, which has largely been completed with the exception of the separation of our debt. To complete the next step, we announced this morning that Corient has obtained its own independent credit rating. Kroll has rated Coriant A- stable, which we believe is reflective of the growth and profitability profile of the business. We believe this significant rating advantage versus peers best positions Coriant to access capital to fund their future inorganic growth. Thank you, and let me turn the call back to Kurt.