CI Financial Corp.

Welcome to CI Financial's third 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 of strategic progress across our operating segments, then we will take your questions. CI Financial reported strong third quarter results with records across several key metrics. Adjusted EPS grew 8% sequentially to a record 97 cents, reflecting top-line growth, well-controlled SG&A, and a lower share count, partially offset by higher interest costs. Adjusted EBITDA per share, attributable to shareholders, increased 10% from Q2 to a record of $1.85 per share, while free cash flow of $1.32 per share also represented a record. Capital allocation remained balanced and active during the quarter. We deployed $164 million towards M&A, including new deals and the settlement of existing acquisition obligations. We remained active with share repurchases, completing a $5 million share substantial issuer bid in July and buying back 680,000 shares with the restart of our NCIB. We continue to opportunistically reduce our debt with open market repurchases of $16 million of our 2051 notes at a sizable discount to par. And we returned $30 million to shareholders through our dividend. Investor sentiment and risk appetite appears to be gradually improving. Our Canadian retail channel net flows turned positive as we saw the benefit of reduced redemption activity across balance and equity funds. Our wealth businesses in both Canada and the U.S. continue to generate positive flows, highlighting their quality and resiliency. We also continue to execute against our three strategic priorities to modernize asset management, expand wealth management, and globalize the company. The significant improvements in investment performance since integrating our platform continues. Just last week, we were recognized with 16 LIPR awards. This marks the second consecutive year that CI has been the most awarded fund manager in Canada. We completed the previously announced acquisitions of Byron Financial and Emerald Multifamily Office at the end of July, adding over $8 billion of client assets to Corriant. In October, we added an additional $2.4 billion through the acquisition of Ensemble Capital, a San Francisco-based high and ultra high net worth wealth manager. The combination of M&A, underlying organic growth, and market tailwinds and margin expansion drove an 8% sequential increase in adjusted EBITDA for the segment. I'll now turn the call over to Amit to discuss our financial results in more detail.

Thank you, Kurt, and good morning, everyone. Turning to slide four, our global assets ended the quarter up 6% to $518 billion, driven by positive markets, flows across all three of our business segments and acquisitions in our U.S. segment. Turning to our financial results on the next slide, I'll focus my comments on our adjusted results. Adjusted net income was $141 million or $0.97 per share for the quarter. Adjusted EBITDA increased to $271 million for the quarter, and our adjusted EBITDA margin expanded to 42%. Included in the quarter was a performance fee for $7 million, or 4 cents a share, which was generated by our asset management segment. Turning to the next slide, I'll highlight the segment results and key drivers of EBITDA and margins. Asset management EBITDA increased to $172 million for the quarter, and margins expanded to 62.3%, partly due to the performance fee as well as controlled spending in the business. Canada wealth EBITDA increased to $19 million and margins expanded to 8.4% due to higher revenues. In the U.S., pre-NCI EBITDA increased to $123.7 million and margins expanded to 44%, reflecting operating leverage in the business. Compared to the third quarter of last year, U.S. EBITDA increased 24%, which is greater than the investor group's preferred return. 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 30% of U.S. segment adjusted EBITDA. Turning to the next slide, I'll walk through the changes in revenue. Revenues increased to $755 million in the quarter. Asset management revenues were a net $6 million due to positive markets and the performance fee, partly offset by fluctuations in other gains and losses. Canada and U.S. wealth management fees increased due to higher asset levels from positive flows and positive markets. Acquisitions in the U.S. added $8 million in revenue in the quarter. Turning to the next slide, we can review major changes in expenses. On a comparable basis, total expenses increased less than 1%. SG&A decreased due to lower discretionary-related spending reflecting operating discipline, partly offset by higher marketing to support our business segment's revenue growth. Advisor and dealer fees increased due to higher revenue earned in our Canada wealth segment. Interest expense increased due to the new bond offering, as well as borrowings to fund our acquisition-related obligation payments and stock buybacks. Looking forward to the next quarter, we anticipate interest and lease finance expenses to be in the range of $59 to $60 million in Q4. Also, a reminder from last quarter, we expect higher depreciation and amortization of 19 to 20 million in Q4, reflecting the impact from integration capital expenditures. Turning to slide 9, we can review debt and leverage. Net debt increased to $3.6 billion, reflecting the new bonds we issued in the quarter, partly offset by bond buybacks, maturities, lower borrowings on our credit facility, and positive FX movement on our U.S.-denominated bonds. Our net leverage declined to 3.3 times on a reported basis. Turning to slide 10, I'll review our segment obligations. As we have previously discussed, Canada and the U.S. have different capital priorities. The table on the right of the slide reflects the cash, debt and M&A obligations for Canada and the U.S. at the end of the third quarter. The U.S. has borrowed $175 million from Canada to primarily fund acquisition-related payments. The U.S. also has $154 million in contingent consideration obligations. Canada has 66 million remaining to pay off for U.S. acquisitions. These will be fully paid off early next year. Canada also has 74 million in other acquisition obligations, of which about half of that was already settled in October. Thank you, and let me turn the call back to Kurt.

Thanks, Amit. We continue to rapidly scale our U.S. wealth management business. Since the minority investment in Coriant in May 2023, the business has grown EBITDA at a 27% compound annual growth rate. EBITDA growth has been driven by a combination of organic growth, our integration efforts driving synergy capture, a favorable market backdrop, and consecutive quarters of strong M&A. As we discussed in recent quarters, we are nearing the completion of major real estate integrations. Following the consolidation of our New York City offices last quarter, we moved into new space in Boston and Chicago this quarter. Consolidation of office space is important for elevating the client experience while driving collaboration, culture, and unity across Coriant. M&A has picked up in the last several months. We've now closed five transactions since April, including the previously announced additions of Byron Financial and Emerald Multifamily Office, as well as Ensemble Capital, which we closed at the end of October. As a result of the integration progress we've made, all of these deals were rebranded and fully integrated into CoriNet Close, driving benefits for clients and synergies for our business. Our investment team is generating consistently strong performance. This performance outcome is a result of the hard work we undertook to dismantle the multi-boutique structure and build a fully integrated at scale institutional grade investment platform. For the fifth quarter in a row, more than 70% of assets are outperforming peers on a three-year basis. Importantly, the strong performance is spread across numerous funds and several asset classes. Over 90 percent of our balance funds are outperforming peers, with a significant portion ranked in the top quartile. With redemption pressure easing, we are well positioned to grow disproportionately in that asset class. While CI has not been historically known for our standalone fixed income funds, performance has been excellent, with over 80 percent of assets beating peers over the three- and five-year periods, including 80 percent in the top quartile over five years. This strong performance is beginning to drive inflows, particularly into our unconstrained and global investment grade bond funds. The transformation of our investment business and the consistent results we are delivering are getting recognized. As I mentioned in my opening remarks, CI was the most awarded fund manager in Canada for the second consecutive year. We continue to make progress executing against our stated 2024 strategic priorities. In asset management, we've been active on the product front while streamlining our existing lineup and launching innovative new strategies, including the global AI ETF, which has quickly scaled to nearly $900 million in assets since it launched in May. During the quarter, we made enhancements to our innovative private market solution to further broaden its appeal as we continue to educate advisors on the merits of the asset class and garner platform approvals. In Canadian Wealth, we continue to have success recruiting advisors to both our Asante and Align Capital businesses. We also continue to scale our custody business and leverage technology to provide a better client experience. We are working towards onboarding the remainder of our wealth assets and are having conversations with a number of third parties. At Coriant, we're making progress against our strategic plan and the investments we've made to scale and fully integrate our business are reflected in our financial results. Our EBITDA grew 8% quarter over quarter, our net flows remain strong, and our solutions and alternatives offerings are growing rapidly. Margins in the business are also showing the benefit of our integration efforts with adjusted EBITDA margins up 158 basis points in the first three quarters of the year. We're proud of the recent progress we've made in each of our business segments and very excited about what the future holds. We thank you for your interest in CI, and we'd be happy to take your questions.