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Gluskin Sheff + Associates Inc. Announces Second Quarter Fiscal 2019 Results

TORONTO--(BUSINESS WIRE)--

Gluskin Sheff + Associates Inc. (the “Company”) announced today its results for the three and six months ended December 31, 2018.

Financial Highlights:

Assets Under Management     As At   As At
($ in millions)               Dec 31, 2018   Dec 31, 2017
 
 
$ 8,191     $ 8,978  
 
                 
Income Statement Information 3 Months 3 Months 6 Months 6 Months
($ in thousands except for per share amounts) Ended Ended Ended Ended
    Dec 31, 2018   Dec 31, 2017   Dec 31, 2018   Dec 31, 2017
 
 
Revenue:
Base Management Fees $ 26,606 $ 27,688 $ 54,731 $ 54,359
Performance Fees 264 28,404 852 29,666
Investment & Other Income 763 636 1,397 1,278
Reimbursement From Pooled Funds   739         905     1,684         1,779
Total Revenue $ 28,372 $ 57,633 $ 58,664 $ 87,082
 
Net Income attributable to shareholders $ 7,552 $ 19,095 $ 15,386 $ 24,896
Amortization of Restricted Share Units (RSUs) 848 2,984 2,433 5,130
Other amortization 1,432 1,634 3,588 3,326
RSU portion of current period's Base bonus (268 ) (952 ) (865 ) (1,632 )
Special RSUs - - (150 ) -
Stock option and post-retirement obligation / Founders' retirement obligation provision 39 1,696 78 2,107
Performance fees net of related cash bonus (153 ) (18,750 ) (522 ) (19,312 )
Provision for income taxes   2,885         6,928     5,878         10,185
Base EBITDA $ 12,335 $ 12,635 $ 25,826 $ 24,700
 
Basic Earnings per Share $ 0.25 $ 0.63 $ 0.51 $ 0.82
 
Diluted Earnings per Share   $ 0.24     $ 0.61     $ 0.49     $ 0.80

The Company’s revenues are derived from Base Management Fees, calculated as a percentage of Assets Under Management (“AUM”), Performance Fees, which are earned when the Company exceeds pre-specified rates of return, Other Income and Reimbursement from Pooled Funds.

During the quarter, AUM decreased by $700 million to $8.2 billion as at December 31, 2018, from $8.9 billion as at September 30, 2018, due to negative net investment performance of $592 million and net withdrawals of $108 million. High net worth clients comprise 89% of AUM as at December 31, 2018, unchanged from September 30, 2018.

Base Management Fees for the three months ended December 31, 2018, decreased year-over-year to $26.6 million from $27.7 million in the prior period as Average AUM for the quarter decreased to $8.4 billion from $9.1 billion, partially offset by an increase in the Average Base Management Fee Percentage to 1.24% from 1.20% for the same quarter last year.

Performance Fees for the three months ended December 31, 2018, were $0.3 million, compared to $28.4 million for the three months ended December 30, 2017.

For the three months ended December 31, 2018, net income was $7.6 million, and represented earnings per share, basic and diluted, of $0.25 and $0.24, respectively. Net income for the three months ended December 31, 2017, was $19.1 million, and represented earnings per share, basic and diluted, of $0.63 and $0.61, respectively.

Total expenses decreased $13.7 million from the prior fiscal period due primarily to a decrease in accrued bonuses of $8.6 million due to lower Performance Fees earned, lower RSU amortization of $2.1 million, the absence of a $1.7 million adjustment to the Founders related obligations to reflect the final arbitration settlement amount in the year ago quarter, decreases in research and technology spending, lower recruitment expenses, lower directors deferred share unit expenses arising from mark-to-market of the obligation, and lower derecognition of client relationship intangible assets.

Base EBITDA eliminates the effect of Performance Fees, Performance Fee related expenses, post-retirement obligations, stock option expense and amortization of RSU awards, and deducts the dollar value of the base bonus RSUs to be awarded in respect of the current period and special RSUs awarded in the period. Base EBITDA was $12.3 million for the three months ended December 31, 2018, compared with $12.6 million for the three months ended December 31, 2017. The decrease was primarily due to lower Base revenues, partially offset by lower Base operating expenses.

“As we have seen so many times over our firm’s history, times such as this can offer some of the best opportunities to deliver returns to clients and grow our assets under management,” commented Jeff Moody, President & Chief Executive Officer. “We remain confident in our experienced and proven team to continue to build upon our long-term track record for the benefit of both our clients and our shareholders.”

Gluskin Sheff + Associates Inc. is one of Canada’s pre-eminent wealth management firms. Founded in 1984 and serving high net worth private clients and institutional investors, the Company is dedicated to meeting clients’ needs by delivering strong risk-adjusted returns together with the highest level of personalized client service. The Company's Common Shares are listed on the Toronto Stock Exchange under the symbol "GS". For more information about the Company, please visit our website at www.gluskinsheff.com.

This press release may contain forward-looking statements relating to Gluskin Sheff + Associates Inc.’s business and the environment in which it operates. These statements are based on the Company’s expectations, estimates, forecasts and projections. They are not guarantees of future performance and involve risks and uncertainties that are difficult to control or predict. These risks and uncertainties are discussed in the Company’s regulatory filings available on the Company’s website at www.gluskinsheff.com or at www.sedar.com. Actual outcomes and results may differ materially from those expressed in these forward-looking statements. Readers, therefore, should not place undue reliance on any such forward-looking statements. Further, a forward-looking statement speaks only as of the date on which such statement is made. The Company undertakes no obligation to publicly update any such statement or to reflect new information or the occurrence of future events or circumstances; except as required by applicable law.

Non-IFRS Measures

Included in this press release are certain financial terms (including Base EBITDA and AUM) that the Company utilizes to assess the financial performance of its business that are not measures recognized under International Financial Reporting Standards (IFRS). These non-IFRS measures do not have any standardized meanings prescribed by IFRS and should not be considered alternatives to net income or any other measure of performance determined in accordance with IFRS. Therefore, these non-IFRS measures are unlikely to be comparable to similar measures presented by other issuers. For additional information regarding the Company’s use of non-IFRS measures, including the calculation of these measures, please refer to the “Non-IFRS financial measures” section of the Company’s Management’s Discussion and Analysis and its financial statements available on the Company’s website and on the SEDAR website located at www.sedar.com.

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