RF Capital Reports Third Quarter 2024 Results
Q3 2024 Financial Highlights(as compared to Q3 2023)
AUA1,2 and Revenue
Ending AUA1,2 increased to $39.0 billion, up 12% or $4.3 billion, primarily driven by strong equity markets and recruiting
Total revenue increased 5% to $91.9 million, led by a 7% increase in fee revenue
Profitability and Cash Flow
Net loss from continuing operations was $2.3 million compared to $0.2 million
Adjusted EBITDA1 of $12.5 million down $4.4 million, as revenue growth was offset by higher adjusted operating expenses
Cash from operating activities was $16.0 million, down 4%
Free cash flow available for growth1 declined 44% to $6.2 million
Free cash flow1 was down by $2.3 million to $3.9 million, primarily due to higher advisor recruiting payments
Balance sheet
Net working capital1 was $94.9 million, effectively unchanged
TORONTO, Nov. 7, 2024 /CNW/ - RF Capital Group Inc. (RF Capital or the Company) (TSX:RCG) today reported revenue of $91.9 million in the third quarter of 2024, up 5% as compared to the prior year. The increase in revenue was driven by 12% growth in AUA,1,2 as strong equity markets and recruiting over the past 12 months offset advisor attrition. In the most recent quarter, the Company recruited three advisor teams representing $590 million of expected AUA.1,2 Adjusted EBITDA1 was down $4.4 million, as revenue growth was offset by higher adjusted operating expenses driven by costs related to our leadership transition.
For more detail on the Company's results, please refer to its MD&A and unaudited interim condensed consolidated financial statements for the period ending September 30, 2024.
1.
Considered to be non-GAAP or supplemental financial measures, which do not have any standardized meaning prescribed by GAAP under IFRS and are therefore unlikely to be comparable to similar measures presented by other issuers. For further information, please see the "Non-GAAP and Supplemental Financial Measures" section of this release.
2.
AUA is a measure of client assets and is common in the wealth management industry. It represents the market value of client assets that we administer.
Dave Kelly, President and Chief Executive Officer, commented, "We experienced another record this quarter with our AUA1,2 reaching $39.0 billion."
Mr. Kelly continued, "As the Company's newly appointed CEO, I am confident we will continue to build on this momentum through the steadfast efforts of our dedicated advisory teams, our talented corporate team and our strong platform, leading us to become the best independent choice in Canada."
Outlook and Key Performance Drivers
Our current view on the drivers of our financial performance and profitability for the remainder of 2024 is as follows:
AUA1,2 is highly correlated with equity market movements but will also be supported by growth in our existing advisors' client assets and by recruiting. We expect to maintain recruiting momentum over the coming quarters
Interest revenue is impacted by prime rate trends, which economists expect to continue declining from current levels throughout the rest of this year
Transaction activity underlying our corporate finance revenue could rebound later this year but is more likely to remain subdued
We expect inflation to remain in the target range for the rest of the year, and we remain committed to finding operating cost savings and efficiencies in our business
Free cash flow available for growth1 is expected to be deployed towards advisor recruitment
Preferred Share Dividend
On November 7, 2024, the Board of Directors approved a cash dividend of $0.233313 per Series B Preferred Share for a total of $1,073, payable on December 30, 20243, to preferred shareholders of record on December 13, 2024.
Q3 2024 Conference Call
A conference call and live audio webcast to discuss RF Capital's third quarter 2024 financial results will be held on Friday, November 8, 2024, at 10:00 a.m. (EST). Interested parties are invited to access the earnings conference call on a listen-only basis by dialing 416-340-2217 or 1-800-806-5484 (toll free) and entering participant passcode: 7715540#, or via live audio webcast at https://www.richardsonwealth.com/investor-relations/financial-information. A recording of the conference call will be available until Sunday, December 8, 2024, by dialing 905-694-9451 or 1-800-408-3053 (toll free) and entering access code 2618170#. The audio webcast will be archived at https://www.richardsonwealth.com/investor-relations/financial-information.
1.
Considered to be non-GAAP or supplemental financial measures, which do not have any standardized meaning prescribed by GAAP under IFRS and are therefore unlikely to be comparable to similar measures presented by other issuers. For further information, please see the "Non-GAAP and Supplemental Financial Measures" section of this release.
2.
AUA is a measure of client assets and is common in the wealth management industry. It represents the market value of client assets that we administer.
3.
In the event that the payment date is not a business day, such dividend shall be paid on the next succeeding day that is a business day.
Select Financial Information
The following table presents the Company's financial results for Q3 2024, Q2 2024 and Q3 2023.
As at or for the three months ended
As at or for the nine months ended
September 30,
June 30,
Increase/
September 30,
Increase/
September 30,
September 30,
Increase/
($000s, except as otherwise indicated)
2024
2024
(decrease)
2023
(decrease)
2024
2023
(decrease)
Key performance drivers1:
AUA - ending2 ($ millions)
39,004
37,125
5 %
34,726
12 %
39,004
34,726
12 %
AUA - average2 ($ millions)
38,065
36,974
3 %
35,630
7 %
37,037
35,793
3 %
Fee revenue
70,906
67,514
5 %
66,046
7 %
204,566
193,670
6 %
Fee revenue3 (%)
91
90
+120 bps
92
(160) bps
91
90
+50 bps
Adjusted operating expense ratio4 (%)
75.8
71.9
+396 bps
67.3
+850 bps
74.0
71.0
+302 bps
Adjusted EBITDA margin5 (%)
13.6
16.5
(292) bps
19.3
(568) bps
15.1
17.0
(193) bps
Asset yield6 (%)
0.85
0.86
(1) bps
0.87
(2) bps
0.86
0.86
—
Advisory teams7 (#)
155
154
1 %
157
(1 %)
155
157
(1 %)
Operating Performance
Reported results:
Revenue
91,871
91,216
1 %
87,836
5 %
272,448
264,366
3 %
Operating expenses1,8
39,195
38,496
2 %
34,892
12 %
116,920
114,486
2 %
EBITDA1
12,493
15,070
(17 %)
16,932
(26 %)
41,102
40,468
2 %
Income (loss) before income taxes
(558)
2,462
n/m
2,092
n/m
1,967
(3,341)
n/m
Net income (loss) from continuing operations
(2,309)
2,714
n/m
(189)
n/m
(722)
(6,946)
(90 %)
Net income (loss) from discontinued operations9
—
—
n/a
—
n/a
—
(2,064)
(100 %)
Net loss per common share from continuing operations - diluted
(0.22)
0.10
n/m
(0.10)
120 %
(0.26)
(0.82)
(68 %)
Adjusted results1:
Operating expenses8
39,195
38,496
2 %
34,892
12 %
116,920
109,972
6 %
EBITDA
12,493
15,070
(17 %)
16,932
(26 %)
41,102
44,982
(9 %)
Income (loss) before income taxes
2,705
5,725
(53 %)
5,355
(49 %)
11,756
10,961
7 %
Net income (loss)
89
5,112
(98 %)
2,209
(96 %)
6,472
3,592
80 %
Adjusted earnings (loss) per common share - diluted
(0.06)
0.26
n/m
0.07
n/m
0.21
0.02
950 %
Select balance sheet information:
Total assets
1,402,410
1,424,915
(2 %)
1,390,770
1 %
1,402,410
1,390,770
1 %
Debt
110,922
110,922
—
110,922
—
110,922
110,922
—
Shareholders' equity
327,087
330,326
(1 %)
335,513
(3 %)
327,087
335,513
(3 %)
Net working capital1,10
94,941
92,268
3 %
90,949
4 %
94,941
90,949
4 %
Common share information:
Book value per common share ($)
13.65
13.85
(1 %)
14.15
(4 %)
13.65
14.15
(4 %)
Closing share price ($)
7.34
7.81
(6 %)
5.13
43 %
7.34
5.13
43 %
Common shares outstanding (millions)
15.7
15.8
(0 %)
15.8
(0 %)
15.7
15.8
(0 %)
Common share market capitalization ($ millions)
115
123
(7 %)
81
42 %
115
81
42 %
Cash flow:
Cash provided by (used in) operating activities
15,977
5,163
209 %
16,624
(4 %)
9,314
(271,333)
n/m
Free cash flow available for growth1
6,242
8,620
(28 %)
11,180
(44 %)
22,318
27,087
(18 %)
Free cash flow1
3,857
2,011
92 %
6,151
(37 %)
9,756
7,047
38 %
1.
Considered to be non-GAAP or supplementary financial measures, which do not have any standardized meaning prescribed by GAAP under IFRS and are therefore unlikely to be comparable to similar measures presented by other issuers. For further information, please see the "Non-GAAP and Supplementary Financial Measures" section of this release.
2.
AUA is a measure of client assets and is common in the wealth management industry. It represents the market value of client assets that we administer.
3.
Calculated as fee revenue divided by commissionable revenue. Commissionable revenue includes fee revenue, trading commissions, and commissions earned in connection with the placement of new issues and the sale of insurance products.
4.
Calculated as adjusted operating expenses divided by gross margin
5.
Calculated as Adjusted EBITDA divided by revenue
6.
Calculated as fee revenue, trading commissions, and interest on cash, divided by average AUA
7.
Prior periods have been revised to reflect the internal consolidation of certain teams
8.
Operating expenses include employee compensation and benefits, selling, general, and administrative expenses, and transformation costs and other provisions. Adjusted operating expenses are calculated as operating expenses less transformation costs and other provisions.
9.
In Q2 2023, we recorded a provision for a legacy employment litigation matter related to the 2019 sale of our capital markets business to Stifel Nicolaus Canada Inc. See Note 25 to the 2023 Annual Financial Statements.
10.
Calculated as current assets less current liabilities. For further information, please see the "Liquidity" section of the MD&A.
Quarterly Results
The following table presents selected quarterly financial information for our eight most recently completed financial quarters.
2024
2023
2022
($000s, except as otherwise indicated)
Q3
Q2
Q1
Q4
Q3
Q2
Q1
Q4
Key performance drivers
