Yahoo Finance Fiera Capital Reports Third Quarter 2023 Results
MONTREAL, Nov. 8, 2023 /CNW/ - Fiera Capital Corporation (TSX: FSZ) ("Fiera Capital" or the "Company"), a leading independent asset management firm, today announced its financial results for the third quarter ended September 30, 2023. Financial references are in Canadian dollars unless otherwise indicated.
(in $ thousands except where | Q3 | Q2 | Q3 | YTD | YTD | |
2023 | 2023 | 2022 | 2023 | 2022 | ||
End of period AUM (in $ billions) | 155.3 | 164.2 | 158.3 | 155.3 | 158.3 | |
Average AUM (in $ billions) | 160.7 | 164.5 | 161.6 | 163.0 | 167.4 | |
IFRS Financial Measures | ||||||
Total revenues | 158,740 | 159,843 | 160,554 | 475,674 | 496,742 | |
Base management fees | 147,645 | 149,793 | 145,649 | 444,866 | 455,411 | |
Net earnings 1 | 11,067 | 10,484 | 8,666 | 19,034 | 22,844 | |
Non-IFRS Financial Measures | ||||||
Adjusted EBITDA 2 | 43,942 | 45,468 | 45,248 | 128,233 | 139,013 | |
Adjusted EBITDA margin 2 | 27.7 % | 28.4 % | 28.2 % | 27.0 % | 28.0 % | |
Adjusted net earnings 1,2 | 23,651 | 28,708 | 23,875 | 75,903 | 88,682 | |
LTM Free Cash Flow 2 | 98,056 | 45,198 | 92,472 | 98,056 | 92,472 | |
Note: Certain totals, subtotals and percentages may not reconcile due to rounding |
"The end of the third quarter saw a significant shift in market sentiment resulting in a reversal in equity market performance and a large shift in the yield curve impacting bond markets. Unfavorable markets resulted in a reduction of $4.7 billion in our AUM, of which $3 billion related to fixed income. In this weak market environment, we remain focused on our performance and dedicated to our clients. Our investment teams continue to execute on their mandates to be well positioned for when investors begin re-allocating capital." said Jean-Guy Desjardins, Chairman of the Board and Global Chief Executive Officer. "Our regional distribution model is almost fully implemented with the recently announced appointment of Eric Roberts, Executive Director and Chief Executive Officer, Fiera USA. The search for our fourth and final appointment, a Canadian CEO, is also in the final phases."
"We remain pleased with our operating performance in the face of market volatility, which has shown a year-over-year increase in base management fees. This performance along with our positive free cash flow enabled us to reduce our debt, as well as significantly improve our last twelve-month free cash flow in the third quarter." said Lucas Pontillo, Executive Director and Global Chief Financial Officer. "I am also announcing that the Board of Directors has approved a dividend of 21.5 cents per share, payable on December 18, 2023."
Assets Under Management (in $ millions, unless otherwise indicated)
By Platform | June 30, 2023 | New | Lost | Net Contributions | Net Organic | Market and Other4 | Strategic5 | September 30, |
Public Markets, excluding AUM | 95,208 | 438 | (391) | (412) | (365) | (3,159) | — | 91,684 |
Public Markets AUM sub-advised | 50,096 | 91 | (3,104) | (84) | (3,097) | (1,609) | (520) | 44,870 |
Public Markets - Total | 145,304 | 529 | (3,495) | (496) | (3,462) | (4,768) | (520) | 136,554 |
Private Markets | 18,893 | 215 | (163) | (248) | (196) | 66 | — | 18,763 |
Total | 164,197 | 744 | (3,658) | (744) | (3,658) | (4,702) | (520) | 155,317 |
By Distribution Channel | June 30, 2023 | New | Lost | Net Contributions | Net Organic | Market and Other4 | Strategic5 | September 30, |
Institutional | 89,857 | 351 | (2,358) | (360) | (2,367) | (3,181) | (520) | 83,789 |
Financial Intermediaries | 60,276 | 182 | (1,131) | (81) | (1,030) | (1,487) | — | 57,759 |
Private Wealth | 14,064 | 211 | (169) | (303) | (261) | (34) | — | 13,769 |
Total | 164,197 | 744 | (3,658) | (744) | (3,658) | (4,702) | (520) | 155,317 |
By Platform | December 31, | New | Lost | Net Contributions | Net Organic | Market and Other4 | Strategic5 | September 30, |
Public Markets, excluding AUM | 91,046 | 2,511 | (2,572) | (1,031) | (1,092) | 1,730 | — | 91,684 |
Public Markets AUM sub-advised | 49,219 | 122 | (6,698) | (955) | (7,531) | 3,702 | (520) | 44,870 |
Public Markets - Total | 140,265 | 2,633 | (9,270) | (1,986) | (8,623) | 5,432 | (520) | 136,554 |
Private Markets | 18,241 | 1,394 | (546) | (477) | 371 | 151 | — | 18,763 |
Total | 158,506 | 4,027 | (9,816) | (2,463) | (8,252) | 5,583 | (520) | 155,317 |
By Distribution Channel | December 31, | New | Lost | Net Contributions | Net Organic | Market and Other4 | Strategic5 | September 30, |
Institutional | 84,330 | 2,473 | (4,002) | (1,009) | (2,538) | 2,517 | (520) | 83,789 |
Financial Intermediaries | 60,275 | 737 | (5,024) | (632) | (4,919) | 2,403 | — | 57,759 |
Private Wealth | 13,901 | 817 | (790) | (822) | (795) | 663 | — | 13,769 |
Total | 158,506 | 4,027 | (9,816) | (2,463) | (8,252) | 5,583 | (520) | 155,317 |
AUM decreased by $8.9 billion or 5.4% compared to June 30, 2023:
An unfavourable market impact reduced AUM by $4.5 billion, which included $3.0 billion related to fixed income mandates. In addition, organic growth was negative $3.7 billion during the quarter. The sale of three Public Markets funds that were sub-advised by PineStone to New York Life Investments also reduced AUM by $0.5 billion and income distributions from Private Markets funds reduced AUM by $0.2 billion.
Included in the negative net organic growth of $3.7 billion was $3.1 billion of outflows related to AUM sub-advised by PineStone. Of this $3.1 billion of outflows, approximately $1.1 billion was transferred directly to PineStone and $1.8 billion related to lost mandates as a result of clients exiting these strategies entirely. The remaining $0.2 billion related to negative net contributions where clients rebalanced their portfolios to reduce their allocation to these strategies.
For the three months ended September 30, 2023, of the $1.8 billion related to lost mandates as a result of clients exiting their position entirely, approximately $0.7 billion related to National Bank Investments Inc.
AUM decreased by $3.2 billion or 2.0% compared to December 31, 2022:
While a favourable market impact increased AUM by $6.0 billion on a year-to-date basis, this amount was offset by negative net organic growth of $8.3 billion, primarily in Public Markets. In addition, the sale of three Public Markets funds that were sub-advised by PineStone to New York Life Investments impacted AUM by $0.5 billion, and income distributions from Private Markets funds reduced AUM by $0.4 billion.
Negative net organic growth included $7.5 billion of outflows connected to AUM sub-advised by PineStone, of which approximately $3.9 billion related to AUM that transferred directly to PineStone, while $2.6 billion related to lost mandates as a result of clients exiting these strategies entirely. The remaining $1.0 billion related to negative net contributions where clients rebalanced their portfolios to reduce their allocation to these strategies.
For the nine months ended September 30, 2023, of the $7.5 billion of outflows connected to AUM sub-advised by PineStone, $2.2 billion related to National Bank Investments Inc., of which approximately $1.0 billion was transferred directly to PineStone.
National Bank Investments Inc. is also expected to withdraw its remaining $5.6 billion in AUM sub-advised by PineStone by early 2025.
Going forward, excluding the AUM outflows related to National Bank Investments Inc., management expects the AUM reduction from lost mandates transferring directly to PineStone to be in the range of $1 to $3 billion per year.
Third Quarter Financial Highlights
The Company's financial highlights reflect the following major items for the third quarter of 2023:
Revenue decreased by $1.1 million, or 0.7% compared to Q2 2023. The decrease was due to lower base management fees in Public Markets and lower commitment and transaction fees, which were partly offset by higher performance fees in Public and Private Markets, higher other revenues, and higher base management fees in Private Markets.
Revenue decreased by $1.9 million, or 1.2% compared to Q3 2022. The decrease was primarily due to lower share of earnings in joint ventures and associates, and lower commitment and transaction fees from lower deal activity, which were partly offset by higher base management fees, performance fees, and other revenues.
Adjusted EBITDA decreased by $1.6 million or 3.5% compared to Q2 2023, primarily due to lower revenues, which were offset by lower associated sub-advisory fees and continued curbed discretionary spending holding selling, general and administration expenses relatively flat.
Adjusted EBITDA decreased by $1.3 million or 2.9% compared to Q3 2022, primarily due to lower revenues and slightly higher overall selling, general and administration expenses which were muted by lower sub-advisory fees and contained discretionary spending.
Adjusted net earnings decreased by $5.0 million, or 17.4% compared to Q2 2023, primarily due to lower revenues, unfavourable foreign exchange, and higher interest on long-term debt, which were partly offset by lower income tax expense.
Adjusted net earnings was essentially flat compared to Q3 2022, as lower revenues and higher interest on long-term debt and debentures were offset by lower income tax expense and lower foreign exchange expense.
Net earnings attributable to the Company's shareholders increased by $0.6 million compared to Q2 2023, primarily due to a gain on sale of funds in connection with the New York Life Investments partnership and lower income tax expense, which were partly offset by unfavourable foreign exchange and lower revenues.
Net earnings attributable to the Company's shareholders increased by $2.4 million compared to Q3 2022 primarily due to the gain on sale of funds and lower income tax expense, which were partly offset by higher interest on long-term debt, higher accretion and fair value change on purchase price obligations, and lower revenues.
LTM free cash flow increased by $5.6 million compared to Q3 2022. The increase was mainly due to higher cash generated by operating activities, primarily from changes in non-cash working capital, which was partly offset by lower LTM net earnings. In addition, lower cash was used in the settlement of purchase price obligations, which was partly offset by higher interest on debt and lower distributions from joint ventures and associates.
Year-to-Date Financial Highlights
The Company's financial highlights reflect the following major items for the nine-month period ended September 30, 2023 compared to the nine-month period ended September 30, 2022:
Revenue decreased by $21.0 million or 4.2%, primarily due to lower base management fees in Public Markets from lower average AUM, lower share of earnings in joint ventures and associates, and lower commitment and transaction fees, partly offset by higher base management fees in Private Markets.
Adjusted EBITDA decreased by $10.8 million, or 7.8% primarily due to lower revenues, partly offset by lower employee compensation costs and sub-advisory fees.
Adjusted net earnings decreased by $12.8 million, or 14.4% primarily due to lower revenues and higher interest on long-term debt and debentures, partly offset by lower SG&A, excluding share-based compensation, favourable foreign exchange revaluation, and lower income tax expense.
Net earnings attributable to the Company's shareholders decreased by $3.8 million. Items which impacted the nine-month period ended September 30, 2023 compared to the same period last year included:
A lower contribution from adjusted EBITDA of $10.8 million;
A provision of $6.3 million related to certain claims in the current year; and
A $10.3 million increase in interest on long-term debt, due to rising interest rates
Partly offset by:
A gain on sale of funds of $5.1 million in connection with the New York Life Investments partnership; and
favourable foreign exchange.
Third Quarter Business Highlights
Strategic Transactions
In connection with the Company's previously announced strategic distribution partnership with New York Life Investments ("NYLIM"), on September 13, 2023, the Company sold four funds to NYLIM which were brought into its MainStay Funds lineup. A gain on sale of funds of $5.1 million was recognized during the quarter.
Subsequent to September 30, 2023
Leadership Announcements
As part of the Company's global expansion strategy, the Company appointed Eric Roberts as Executive Director and CEO, Fiera USA, effective November 13, 2023. Mr. Roberts will directly lead the marketing and distribution teams across the United States and provide executive leadership for all employees in the region. This follows the previously announced appointments of Klaus Schuster and Rob Petty as Executive Director and CEO of Fiera EMEA (Europe, Middle East and Africa) and Fiera Asia, respectively.
These appointments allow us to expand and strengthen our presence in the United States, EMEA and Asia respectively, as the Company continues to implement its new regionalized distribution model with a focus on building local capabilities.
Dividend Decared
On November 7, 2023, the Board of Directors declared a quarterly dividend of $0.215 per Class A Share and Class B Share, payable on December 18, 2023 to shareholders of record at the close of business on November 20, 2023. The dividend is an eligible dividend for income tax purposes.
Additional details relating to the company's operating results can be found on our Investor Relations web page under Financial Documents - Quarterly Results - Management's Discussion and Analysis.
Conference Call
Live
Fiera Capital will hold a conference call at 10:00 a.m. (ET) on Wednesday, November 8, 2023, to discuss its financial results. The dial-in number to access the conference call from Canada and the United States is 1-888-390-0620 (toll-free) and 1-416-764-8651 from outside North America.
The conference call will also be accessible via webcast in the Investor Relations section of Fiera Capital's website, under Events and Presentations.
Replay
An audio replay of the call will be available until November 15, 2023 by dialing 1-888-390-0541 (toll free), access code 896532 followed by the number sign (#).
The webcast will remain available for three months following the call and can be accessed in the Investor Relations section of Fiera Capital's website under Events and Presentations.
Footnotes
1) Attributable to the Company's shareholders.
2) Earnings before interest, taxes, depreciation and amortization ("EBITDA"), Adjusted EBITDA, Adjusted EBITDA margin and Adjusted EBITDA per share, Adjusted net earnings and Adjusted net earnings per share (basic and diluted), and Last Twelve Months ("LTM") Free Cash Flow are not standardized measures prescribed by International Financial Reporting Standards ("IFRS"), and are therefore unlikely to be comparable to similar measures presented by other companies. We have included non-IFRS measures to provide investors with supplemental measures of our operating and financial performance. We believe non-IFRS measures are important supplemental metrics of operating and financial performance because they highlight trends in our core business that may not otherwise be apparent when relying solely on IFRS measures. Securities analysts, investors and other interested parties frequently use non-IFRS measures in the evaluation of issuers, many of which present non-IFRS measures when reporting their results. Management also uses non-IFRS measures in order to facilitate operating and financial performance comparisons from period to period, to prepare annual budgets and to assess its ability to meet future debt service, capital expenditure and working capital requirements.
FOR THE THREE MONTHS ENDED | FOR THE NINE-MONTH | ||||
September 30, 2023 | June 30, 2023 | September 30, 2022 | September 30, 2023 | September 30, 2022 | |
Net earnings | 12,236 | 11,921 | 9,849 | 23,409 | 27,055 |
Income tax expense | 2,353 | 5,140 | 6,172 | 7,640 | 8,448 |
Amortization and depreciation | 13,381 | 13,435 | 13,679 | 40,529 | 42,548 |
Interest on long-term debt and | 12,485 | 11,215 | 8,550 | 34,293 | 24,015 |
Interest on lease liabilities, foreign | 3,805 | (2,370) | 6,039 | 2,225 | 6,964 |
EBITDA | 44,260 | 39,341 | 44,289 | 108,096 | 109,030 |
Restructuring, acquisition related | 1,511 | 3,448 | 2,772 | 12,969 | 11,933 |
Accretion and change in fair value | (537) | (2,024) | (2,626) | (3,042) | 983 |
Share-based compensation | 3,423 | 3,951 | 1,749 | 9,881 | 18,169 |
Loss (gain) on investments, net | 419 | 157 | (950) | (711) | 554 |
Gain on sale of funds | (5,139) | — | — | (5,139) | — |
Other expenses (income) | 5 | 595 | 14 | 6,179 | (1,656) |
Adjusted EBITDA | 43,942 | 45,468 | 45,248 | 128,233 | 139,013 |
Per share basic | 0.41 | 0.44 | 0.44 | 1.24 | 1.36 |
Per share diluted | 0.31 | 0.37 | 0.43 | 1.19 | 1.34 |
Weighted average shares | 105,921 | 103,720 | 102,906 | 103,646 | 102,382 |
Weighted average shares | 141,294 | 122,875 | 104,512 | 107,739 | 104,005 |
Reconciliation to Adjusted Net Earnings (in $ thousands)
FOR THE THREE MONTHS ENDED | FOR THE NINE-MONTH | ||||
September 30, 2023 | June 30, 2023 | September 30, 2022 | September 30, 2023 | September 30, 2022 | |
Net earnings attributable to the | 11,067 | 10,484 | 8,666 | 19,034 | 22,844 |
Amortization and depreciation | 13,381 | 13,435 | 13,679 | 40,529 | 42,548 |
Restructuring, acquisition related and | 1,511 | 3,448 | 2,772 | 12,969 | 11,933 |
Accretion and change in fair value of | (340) | (1,712) | (2,339) | (2,280) | 2,571 |
Share-based compensation | 3,423 | 3,951 | 1,749 | 9,881 | 18,169 |
Gain on sale of funds | (5,139) | — | — | (5,139) | — |
Other expenses (income) | 5 | 595 | 14 | 6,179 | (1,656) |
Tax effect of above-mentioned items | (257) | (1,493) | (666) | (5,270) | (7,727) |
Adjusted net earnings attributable | 23,651 | 28,708 | 23,875 | 75,903 | 88,682 |
Per share – basic | |||||
Net earnings | 0.10 | 0.10 | 0.08 | 0.18 | 0.22 |
Adjusted net earnings | 0.22 | 0.28 | 0.23 | 0.73 | 0.87 |
Per share – diluted | |||||
Net earnings | 0.09 | 0.09 | 0.08 | 0.18 | 0.22 |
Adjusted net earnings | 0.18 | 0.24 | 0.23 | 0.70 | 0.85 |
Weighted average shares | 105,921 | 103,720 | 102,906 | 103,646 | 102,382 |
Weighted average shares | 141,294 | 122,875 | 104,512 | 107,739 | 104,005 |
Reconciliation to LTM Free Cash Flow (in $ thousands)
FOR THE THREE MONTHS ENDED | ||||||||
Q3 | Q2 | Q1 | Q4 | Q3 | Q2 | Q1 | Q4 | |
2023 | 2023 | 2023 | 2022 | 2022 | 2022 | 2022 | 2021 | |
Net cash generated by (used in) operating | 79,708 | 14,123 | (13,463) | 66,722 | 25,686 | 46,853 | (25,951) | 97,226 |
Settlement of purchase price obligations and | — | (1,500) | — | — | (3,476) | (23,901) | — | — |
Proceeds on promissory note | 1,510 | 1,460 | 1,536 | 1,497 | 1,455 | 1,375 | 1,334 | 1,319 |
Distributions received from joint ventures and | 1,617 | 502 | 4,252 | 2,513 | 3,621 | 4,338 | 6,330 | 2,256 |
Dividends and other distributions to NCI | — | (5,895) | — | 10 | — | (1,753) | (1,425) | (19) |
Lease payments, net of lease inducements | (3,837) | (4,925) | (4,510) | (4,607) | (4,396) | (4,221) | (4,306) | (4,822) |
Interest paid on long-term debt and | (12,174) | (12,019) | (10,379) | (9,713) | (8,191) | (8,299) | (7,427) | (6,636) |
Other restructuring costs | 1,226 | 452 | 1,180 | 1,056 | 470 | 160 | 418 | 883 |
Acquisition related and other costs | 130 | 341 | 716 | 527 | 153 | 680 | 1,412 | 1,326 |
Free Cash Flow | 68,180 | (7,461) | (20,668) | 58,005 | 15,322 | 15,232 | (29,615) | 91,533 |
LTM Free Cash Flow | 98,056 | 45,198 | 67,891 | 58,944 | 92,472 | 109,828 | 145,257 | 135,012 |
3) Net Organic Growth represents the sum of New, Lost and Net Contributions.
4) Market and Other includes the impact of market changes, income distributions and foreign exchange.
5) Relates to the sale of three Public Markets funds that were sub-advised by PineStone to New York Life Investments, in connection with the strategic distribution partnership.
Forward-Looking Statements
This document contains forward-looking statements relating to future events or future performance and reflecting management's expectations or beliefs regarding future events including business and economic conditions and Fiera Capital's growth, results of operations, performance and business prospects and opportunities. Forward-looking statements may include comments with respect to Fiera Capital's objectives, strategies to achieve those objectives, expected financial results, and the outlook for Fiera Capital's businesses and for the Canadian, American, European, Asian and other global economies. Such statements reflect management's current beliefs and are based on factors and assumptions it considers to be reasonable based on information currently available to management and may typically be identified by terminology such as "believe", "expect", "aim", "goal", "plan", "anticipate", "estimate", "may increase", "may fluctuate", "predict", "potential", "continue", "target", "intend" or the negative of these terms or other comparable terminology and similar expressions of future or conditional verbs, such as "will", "should", "would" and "could."
By their very nature, forward-looking statements involve numerous assumptions, inherent risks and uncertainties, both general and specific, and the risk that predictions, forecasts, projections, expectations or conclusions will not prove to be accurate. As a result, the Company does not guarantee that any forward-looking statement will materialize and readers are cautioned not to place undue reliance on these forward-looking statements. A number of important factors, many of which are beyond Fiera Capital's control, could cause actual events or results to differ materially from the predictions, forecasts, projections, expectations, or conclusions expressed in such forward-looking statements which include, but are not limited to, risks related to investment performance and investment of the assets under management ("AUM"), AUM concentration related to strategies sub-advised by PineStone, reputational risk, regulatory compliance, information security policies, procedures and capabilities, privacy laws, litigation risk, insurance coverage, third-party relationships, growth and integration of acquired businesses, AUM growth, key employees, ownership structure and potential dilution, indebtedness, market risk, credit risk, inflation, interest rates and recession risks and other factors described in the Company's Annual Information Form for the year ended December 31, 2022 under the heading "Risk Factors" or discussed in other materials filed by the Company with applicable securities regulatory authorities from time to time which are available on SEDAR+ at www.sedarplus.ca.
The preceding list of important factors is not exhaustive. When relying on forward-looking statements in this document and any other disclosure made by Fiera Capital, investors and others should carefully consider the preceding factors, other uncertainties and potential events. Fiera Capital does not undertake to update or revise any forward-looking statements, whether written or oral, that may be made from time to time by it or on its behalf in order to reflect new events or circumstances, except as required by applicable laws.
About Fiera Capital Corporation
Fiera Capital is a leading independent asset management firm with a growing global presence. The Company delivers customized and multi-asset solutions across public and private market asset classes to institutional, financial intermediary and private wealth clients across North America, Europe and key markets in Asia. Fiera Capital's depth of expertise, diversified investment platform and commitment to delivering outstanding service are core to our mission of being at the forefront of investment management science to create sustainable wealth for clients. Fiera Capital trades under the ticker FSZ on the Toronto Stock Exchange.
Headquartered in Montreal, Fiera Capital, with its affiliates in various jurisdictions, has offices in over a dozen cities around the world, including New York (U.S.), London (UK), and Hong Kong (SAR).
Each affiliated entity (each an "Affiliate") of Fiera Capital only provides investment advisory or investment management services or offers investment funds in the jurisdictions where the Affiliate is authorized to provide services pursuant to an exemption from registration and/or the relevant product is registered.
Fiera Capital does not provide investment advice to U.S. clients or offer investment advisory services in the U.S. In the U.S., asset management services are provided by Fiera Capital's affiliates who are investment advisers that are registered with the U.S. Securities and Exchange Commission (SEC) or exempt from registration. Registration with the SEC does not imply a certain level of skill or training. For details on the particular registration of, or exemptions therefrom relied upon by, any Fiera Capital entity, please consult https://www.fieracapital.com/en/registrations-and-exemptions.
Additional information about Fiera Capital, including the Company's annual information form, is available on SEDAR+ at www.sedarplus.ca.
SOURCE Fiera Capital Corporation
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