Power Corporation of Canada

Good morning, ladies and gentlemen, and welcome to the Power Corporation third quarter 2024 earnings conference call. At this time, all lines are in listen-only mode. Following the presentation, we will conduct a question and answer session. Analysts who wish to join the question queue may press star then 1 at any point throughout the call. If anyone has any difficulties hearing the conference, please press star then zero for operator assistance at any time. I would like to remind everyone that this call is being recorded on Wednesday, November 13th, 2024. I would now like to turn the conference over to Mr. Jeffrey Orr, President and Chief Executive Officer of Power Corporation. Please go ahead, sir.

Thank you, operator, and welcome to everyone. Thanks for joining us this morning for our results call. With me is Jake Lawrence, who is the EVP and CFO of Power Corporation. And we'll walk through the presentation and open it up for questions. Just draw your attention to the cautionary statements on pages two and three regarding forward-looking information and non-IFRS information. I won't draw your attention to page four, which is our mug shots, but you can admire those later at your leisure. I'm going to walk right forward to page seven if we could, which is overall summary of the quarter. Listen, I'm really pleased with the performance of the businesses across the portfolio of businesses in the third quarter. First of all, Great West Life and IGM, which are the producers of Power's ongoing and repeatable earnings. Each enjoys strong earnings growth, 12% on an earnings per share basis for each of them year over year. They also contributed to strong increases in our net asset value and really great developments across the rest of the portfolio, what we sometimes refer to as the NAV part of the portfolio. and a number of developments we'll talk about through the presentation, including the sale of Peak, which is a substantial step in the monetization of our standalone businesses. Progress at Cigar being recognized with a 39% increase in the value of the general partner recognized in the quarter. Wealthsimple continues to expand its a client base in a very, very meaningful way in Canada and increased the depth and the breadth of the relationships it has with its clients. So a big increase in the value of our stake in Wealthsimple. And it was offset with a couple of reductions in our NAV at Lumen Pulse and Lion, but overall strong growth in NAV of 15% across the portfolio. And that's continued at least in the public parts, which are visible since the quarter end. continued growth and strong NAV rate up through the month of October and November. So really happy about the quarter, excited to tell you about it. I'm going to then turn it over to Jake to walk through some of the financials and the NAV, and I'll pick it up in a few minutes. Jake, over to you. Great.

Thanks, Jeff, and good morning, everyone. I'll start on slide eight. As Jeff noted, PowerCorp reflected strong results, and it really came from our main operating businesses, Great West and IGM Financial. And there was a few non-cash items, which I'm going to detail in a moment. As Jeff reminded everyone, Great West and IGM are our main earnings contributors, and this quarter we're pleased to report the double-digit earnings growth from both businesses. Adjusted net earnings from continuing operations was $542 million. That compared to $1 billion in the same quarter last year. I'll address the breakdown of these results on the following slide, but we'll note that both the current and comparative quarters include one-time items. On a per-share basis, adjusted net earnings were $0.84, and that's compared with $1.52 in the same quarter last year. We remained active buying back shares, and the year-over-year reduction in average share count contributed to approximately a $0.02 improvement in our earnings per share. We've spoken about NAV a little bit. The adjusted NAV was $57.92 per share at the end of the quarter, or September 30th. That was up 15% compared to the end of Q2, and it does reflect growth both in our earnings and NAV-focused businesses. As Jeff just noted a moment ago, the share price momentum in our group companies has continued post-quarter end since our opcos reported results last week, both Great West and IGM. And our NAV per share as of yesterday's close was up an additional 6% to $61.33. Finally, it's worth noting this quarter the Board of Directors declared a quarterly dividend of 56.25 cents per share, and this is in line with what we had declared last quarter. Turning to slide 9 to break down the earnings, Great West once again delivered strong base earnings of over $1 billion with both momentum and growth from each of its four segments. I would like to highlight that this marks the sixth consecutive quarter of base earnings increases at Great West, and the 12% year-over-year growth reflects the actions taken by Great West to support and accelerate their strategies to grow both in the U.S. and in Canada. IGM Financial. reported strong year-over-year earnings growth, and Power's share of its earnings were also up 12%, with increased contribution from both wealth and asset management, as these two segments each reported record-ending average assets at the end of the period. GBL's results, they do have non-recurring items in both the current and the comparative quarter from last year. In Q3 2024, GBL's portfolio company, Emeryus, disposed of certain assets, and as a result, recognized a non-cash loss related to the reclassification of currency translation and earnings, or CTA. In last year's comparative period, GBL's contribution also included a significant gain on the decon consolidation of WebHelp following its merger with Concentrix. Moving to our alternative investment platform, Power Sustainable's results were comprised of fee-related losses consistent with the prior year. as well as some acquisition costs related to its newest investment strategy, as well as power share of losses on its consolidated energy assets. Cigar and Power Sustainable continue to deliver solid fundraising despite some headwinds in the alternative asset space, with year-to-date having raised a combined $1.9 billion in new commitments. This quarter, we further refined our presentation by showing standalone businesses as its own line item while grouping corporate operations and other, which includes charges such as our operating expenses, financing charges, depreciation, income taxes, as well as our dividends on preferred shares. We believe this enhanced disclosure will help investors better see through our results. In Q3, the contribution from standalone businesses primarily included non-cash impairment charges that Jeff referred to, and that was both at LMPG as well as Leon. I'll note that while we expect to generate a gain of almost $200 million U.S. on the sale of Peak, This will only be reflected in our P&L upon closing, which we expect to happen next quarter. Now turning to slide 10. Here we break down the $57.92 of net asset value per share as at the end of the quarter. Our growth in NAV and our growth in NAV per share were headlined by the strong share price performance in our publicly traded operating companies, notably Great West and IGM. Our alternative asset investment platforms also contributed to the NAV growth this quarter, as the fair value increases of both Wealthsimple and Cigar's asset management business led to a roughly $400 million increase in Power Corporation's net asset value. As Jeff mentioned, in addition to the announced sale of Peak this quarter, Peak also previously announced the sale of Rawlings. This generated about $83 million in proceeds, which we did receive during the quarter. The proceeds from this sale are reflected in the cash and cash equivalents line, and the combination of this cash, the increase in peaks valuation, and the impairments at LMPG in line essentially result in a flat contribution from the standalone businesses quarter over quarter. Looking a bit closer at the balance sheet, Power's cash and cash equivalents ended slightly lower at $1.4 billion as we remained active in buying back shares this quarter. We transacted over $120 million of repurchases under our NCIB program. Of this current $1.4 billion balance, approximately $1 billion is available cash when we consider dividends declared but not yet paid. And I'd also note that this $1 billion does not include the approximate $440 million of proceeds from the sales peak that we do expect to receive in Q4. They overall were pleased to report NAV growth that was driven by contributions across the portfolio. I'll now turn it back over to Jeff to continue the call.