- Record annual revenue of $354
million, an increase of 8%, highlighting stability in
fee-based revenue and diversity in revenue streams
- Record annual Adjusted EBITDA1 of $62 million, an increase of 21% over 2021,
reflecting operating leverage
- Increased recruiting pipeline to almost $23 billion, up $8
billion year-over-year
2022 Financial
Highlights
|
|
|
|
Revenue Growth
- Fee revenue
increased 5% to $255 million, consistent with the 4% increase in
Average AUA
- Interest revenue up
137% due to increasing benchmark rates
- Insurance revenue
up 232% due to strategic focus on revenue opportunities
- Corporate finance
revenue down 60%, attributable to capital markets
volatility
|
AUA1,2 of $34.9 billion
- Year-end AUA down
5% due to capital markets volatility
- Annual average AUA
up 4% largely because of recruiting efforts and new assets brought
in by advisors
- S&P/TSX
Composite and the S&P 500 indices were down 8.7% and
19.5%
|
Adjusted
EBITDA1
- Increased 21% to
$62 million
- Adjusted EBITDA
margin1 of 17.4%
- Adjusted operating
expenses1 increased 5%, partly due to return to
office and travel
|
Balance sheet
- Working
capital1 of $95 million
- $200 million
revolving credit facility, $81 million drawn which is consistent
with year-end 2021
|
Normal Course Issuer Bid
- Purchased 61,102
common shares for a total investment of $844k in the buyback
program
|
TORONTO, March 2,
2023 /CNW/ - RF Capital Group Inc. (RF Capital or the
Company) (TSX: RCG) today reported record annual revenue of
$354 million and record Adjusted
EBITDA1 of $62 million in
fiscal year 2022. The 8% increase in revenue relative to 2021 was
achieved by a 4% increase in average AUA1,2 resulting
from new client assets and recruiting efforts, in addition to
significant growth in both interest and insurance revenue. The 21%
increase in Adjusted EBITDA1 was aided by operating
leverage; Adjusted operating expenses1 increased 5%,
reflecting the economies of scale in the business.
Fourth quarter revenue of $89
million was up 3% and Adjusted EBITDA1 of
$17 million increased 38% relative to
the prior year, with the Company now achieving three consecutive
quarters of record Adjusted EBITDA1. The drivers of
fourth quarter performance are consistent with those for the full
year.
__________________________
|
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 at the end of this
press release.
|
2.
|
Assets under
administration (AUA) is a measure of client assets and is common to
the wealth management business. AUA represents the market value of
client assets managed and administered by Richardson Wealth from
which it earns commissions and fee revenue.
|
Kish Kapoor,
President and Chief Executive Officer, commented, "Our
financial results demonstrate resilience and profitable growth in a
period characterized by volatility in the capital markets. Fee
revenue grew in-line with average AUA, and we benefited from
revenue diversification through interest and insurance revenues.
These results were achieved because of the progress we have made
against our three-pillar strategy and the commitment from our
entire team to making Richardson Wealth the brand of choice among
financial advisors and their clients. Despite the early challenges
in transitioning our 162 advisor teams to Fidelity's carrying
broker platform in 2023, challenges that are normal with a
conversion of this size, we remain steadfast in our belief that our
arrangement with a global player like Fidelity (together with our
shared commitment to continuous improvement) gives us access to the
scale, expertise, and technology required to serve our advisors and
their clients ‒ and to achieve our ambitious goal of unlocking
significant long-term shareholder value."
|
|
Fiscal 2022 – Consolidated Financial Performance
The following table presents the Company's consolidated
financial results for fiscal 2022 and the two preceding
periods.
|
|
|
2022 vs.
2021
|
2021 vs.
2020
|
($000s, except as
otherwise indicated)
|
2022
|
2021
|
2020
|
%
Increase/(decrease)
|
Key Performance
Drivers1,2:
|
|
|
|
|
|
AUA - ending ($
millions)3
|
34,948
|
36,847
|
30,846
|
(5)
|
19
|
Fee revenue
|
254,802
|
242,916
|
n/a
|
5
|
n/a
|
Fee based revenue
(%)4
|
88
|
86
|
n/a
|
+162 bps
|
n/a
|
Adjusted operating
expense ratio5 (%)
|
69.8
|
72.7
|
n/a
|
(289) bps
|
n/a
|
Adjusted EBITDA
margin (%)
|
17.4
|
15.4
|
n/a
|
+197 bps
|
n/a
|
Asset yield
(%)6
|
0.85
|
0.82
|
n/a
|
+3 bps
|
n/a
|
Operating
Performance1
|
|
|
|
|
|
Reported
Results:
|
|
|
|
|
|
Revenue
|
353,972
|
328,519
|
84,119
|
8
|
n.m.
|
Variable advisor
compensation
|
149,748
|
142,611
|
23,726
|
5
|
n.m.
|
Gross
margin7
|
204,224
|
185,908
|
60,393
|
10
|
n.m.
|
Operating
expenses2,8
|
151,207
|
156,543
|
60,553
|
(3)
|
n.m.
|
Share of loss of
associate
|
—
|
—
|
(2,365)
|
n.m.
|
n.m.
|
Gain on investment in
associate
|
—
|
—
|
45,734
|
n.m.
|
n.m.
|
EBITDA2
|
53,017
|
29,365
|
43,209
|
81
|
n.m.
|
Income (loss) before
income taxes
|
(3,111)
|
(19,805)
|
33,533
|
(84)
|
n.m.
|
Net income
(loss)
|
(4,803)
|
(20,152)
|
28,747
|
(76)
|
n.m.
|
Earnings per common
share - diluted
|
(0.95)
|
(3.33)
|
2.65
|
n.m.
|
n.m.
|
Adjusting
Items9:
|
|
|
|
|
|
Transformation costs
and other provisions (pre-tax)
|
8,634
|
21,390
|
n/a
|
(60)
|
n.m.
|
Amortization of
acquired intangibles (pre-tax)
|
13,052
|
13,052
|
n/a
|
0
|
n.m.
|
Transformation costs
and other provisions (after-tax)
|
6,309
|
17,835
|
n/a
|
(65)
|
n.m.
|
Amortization of
acquired intangibles (after-tax)
|
9,594
|
9,673
|
n/a
|
(1)
|
n.m.
|
Adjusted
Results2:
|
|
|
|
|
|
Operating
expenses8
|
142,573
|
135,153
|
53,889
|
5
|
n.m.
|
EBITDA
|
61,651
|
50,755
|
4,139
|
21
|
n.m.
|
Income (loss) before
income taxes
|
18,575
|
14,637
|
(529)
|
27
|
n.m.
|
Net income
(loss)
|
11,100
|
7,356
|
(6,001)
|
51
|
n.m.
|
Adjusted earnings per
common share - diluted
|
0.43
|
0.20
|
(1.39)
|
n.m.
|
n.m.
|
- Operating results
pre-October 20, 2020 are shown for reference purposes only as
Richardson Wealth was not fully consolidated into RF Capital's
financial statements.
- 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
document.
- AUA is a measure of
client assets and is common to the wealth management business. It
represents the market value of client assets managed and
administered by us
- Calculated as fee
revenue divided by commissionable revenue. Commissionable revenue
includes Wealth management revenue and commissions earned in
connection with the placement of new issues and the sale of
insurance products.
- Calculated as
adjusted operating expenses divided by gross margin
- Calculated as
Wealth management revenue plus interest on cash divided by average
AUA
- Gross margin is
calculated as revenue less advisor variable
compensation.
- 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.
- For further
information, please see "2022 – Items of Note" in this press
release.
|
Strategic Milestones
- Launched Envestnet
Portfolio Management tool
- Converted to
Fidelity Clearing Canada's carrying broker platform
- Launched a new
succession planning framework aimed at cultivating the firm's 'next
generation' of advisors
- Launched a renewed
website that has already received five Platinum AVA Digital
Awards
- Hosted a 'Back to
the Future' themed best practices conference with outstanding
reviews from advisors
- Completed the
rollout of our Richardson Wealth Masterclass practice management
and training series
- Completed the build
out of our flagship Toronto office and renovated our Calgary
office
- Consolidated our
previous locations in Mississauga and Oakville into a new
Burlington office
- David Porter
elected by our people as the new advisor representative to our
Board of Directors
- Increased
recruiting pipeline to almost $23 billion, from $15 billion last
year
- Recruited four new
advisor teams to our platform, before pausing our recruiting
activities in late spring ahead of our Fidelity
conversion
- Were rated by 93%
of our advisors as a great place to work, up from 86% last
year
|
Release of Escrowed Shares
On October 20, 2022, in accordance
with the terms of the Richardson Wealth share purchase agreement
and related escrow agreement, 30% of Common Shares subject to
escrow were released and delivered to the vendor
shareholders. This release increased the public float to 44%
of total common shares outstanding. The final 30% of Common Shares
subject to escrow will be released in October 2023.
Preferred Share Dividend
On March 2, 2023, the board of
directors approved a quarterly cash dividend of $0.233313 per Cumulative 5-Year Rate Reset
Preferred Share, Series B, payable on March
31, 2023, to preferred shareholders of record on
March 15, 2023.
Q4 2022 Conference Call
A conference call and live audio webcast to discuss RF
Capital's fourth quarter and fiscal 2022 financial results will be
held on Friday, March 3, 2023 at
10:00 a.m. (EST). Interested parties
are invited to access the quarterly conference call on a
listen-only basis by dialing 416-406-0743 or 1-800-898-3989 (toll
free) and entering participant passcode 2802125#, or via live audio
webcast at
https://www.richardsonwealth.com/investor-relations/financial-information.
A recording of the conference call will be available until
Monday, April 3, 2023, by dialing
905-694-9451 or 1-800-408-3053 and entering access code 3725330#.
The audio webcast will be archived at
https://www.richardsonwealth.com/investor-relations/financial-information.
2022 - Items of Note
Pre-Tax Adjustments
The adjusted financial results presented in this document
exclude the impact of transformation program expenses and the
amortization of acquired intangibles.
2022 included the following $21.7
million in pre-tax adjusting items ($15.9 million after-tax), and were down by
$12.7 million or 37% compared with
2021:
- $8.6 million of pre-tax charges
related to our ongoing transformation ($6.3
million after-tax). These charges relate largely to
outsourcing our carrying broker operations, revitalizing our real
estate footprint, and realigning our workforce.
- $13.1 million of pre-tax
amortization of intangible assets ($9.6
million after-tax). The amortization arises from intangible
assets created on the acquisition of Richardson Wealth. It will
continue through 2035.
2021 included the following $34.4
million in pre-tax adjusting items ($27.5 million after-tax):
- $14.9 million in pre-tax charges
related to our ongoing transformation ($11.6
million after-tax). This amount includes charges in
connection with refining our organizational structure, developing
and implementing our new strategy, and realigning parts of our real
estate footprint.
- $6.4 million of pre-tax charges
in connection with outsourcing our carrying broker operations
($6.2 million after-tax). These
charges relate realigning our workforce and exiting certain
technology provider relationships early.
- $13.1 million of pre-tax
amortization of acquired intangible assets ($9.7 million after-tax)
Revenue Categorization
In 2022, we recategorized certain revenue lines during the year,
for example those associated with securities lending activity, to
provide more relevant disclosure to the readers of this document.
Comparative periods were realigned to conform to the current period
presentation. Total revenue is unchanged in all periods.
Non-GAAP and Supplemental Financial Measures
In addition to GAAP prescribed measures, we use a variety of
non-GAAP financial measures, non-GAAP ratios and supplemental
financial measures to assess our performance. We use these non-GAAP
financial measures and supplementary financial measures (SFM)
because we believe that they provide useful information to
investors regarding our performance and results of operations.
Readers are cautioned that non-GAAP financial measures, including
non-GAAP ratios, and supplemental financial measures often do not
have any standardized meaning and therefore may not be comparable
to similar measures presented by other issuers. Non-GAAP measures
are reported in addition to, and should not be considered
alternatives to, measures of performance according to IFRS.
Non-GAAP Financial Measures
A non-GAAP financial measure is a financial measure used to
depict our historical or expected future financial performance,
financial position or cash flow and, with respect to its
composition, either excludes an amount that is included in, or
includes an amount that is excluded from, the composition of the
most directly comparable financial measure disclosed in our 2022
Annual Financial Statements. A non-GAAP ratio is a financial
measure disclosed in the form of a ratio, fraction, percentage, or
similar representation and that has a non-GAAP financial measure as
one or more of its components.
The primary non-GAAP financial measures (including non-GAAP
ratios) used in this document are:
EBITDA
The use of EBITDA is common in the wealth management industry.
We believe it provides a more accurate measure of our core
operating results, is a proxy for operating cash flow, and is a
commonly used basis for enterprise valuation. EBITDA is used to
evaluate core operating performance by adjusting net income/(loss)
to exclude:
- Interest expense, which we record primarily in connection with
term debt;
- Income tax expense/(benefit);
- Depreciation and amortization expense, which we record
primarily in connection with intangible assets, leases, equipment,
and leasehold improvements; and
- Amortization in connection with investment advisor transition
and loan programs. We view these loans as an effective recruiting
and retention tool for advisors, the cost of which is assessed by
management upfront when the loan is provided rather than over its
term.
Operating Expenses
Operating expenses include:
- Employee compensation and benefits.
- Selling, general, and administrative expenses.
- Transformation costs and other provisions.
These are the expense categories that factor into the EBITDA
calculation discussed above.
Commissionable Revenue
Commissionable revenue includes Wealth management revenue,
commission revenue in connection with the placement of new issues
and revenue earned on the sale of insurance products. We use
commissionable revenue to evaluate advisor compensation paid on
that revenue.
Adjusted Results
In periods that we determine adjusting items have a significant
impact on a user's assessment of ongoing business performance, we
may present adjusted results in addition to reported results by
removing these items from the reported results. Management
considers the adjusting items to be outside of our core operating
performance. We believe that adjusted results can enhance
comparability across reporting periods and provide the reader with
a better understanding of how management views core performance.
Adjusted results are also intended to provide the user with results
that have greater consistency and comparability to those of other
issuers.
Adjusted EBITDA Margin
Adjusted EBITDA margin is a non-GAAP ratio defined as Adjusted
EBITDA as a percentage of revenue.
Adjusting items in this document include the following:
- Transformation costs and other provisions: charges in
connection with the ongoing transformation of our business and
other matters. These charges have encompassed a range of
transformation initiatives, including refining our ongoing
operating model, outsourcing our carrying broker operations,
realigning parts of our real estate footprint, and rolling out our
new strategy across the Company.
- Amortization of acquired intangible assets: amortization of
intangible assets created on the acquisition of Richardson
Wealth.
All adjusting items affect reported expenses.
Adjusted Operating Expenses
The following table reconciles our reported operating expenses
to adjusted operating expenses:
($000s)
|
2022
|
2021
|
Total expenses -
reported
|
207,335
|
205,713
|
Interest
|
10,797
|
6,631
|
Advisor loan
amortization
|
17,267
|
17,734
|
Depreciation and
amortization
|
28,064
|
24,805
|
Operating
expenses
|
151,207
|
156,543
|
Transformation costs
and other provisions1
|
8,634
|
21,390
|
Adjusted operating
expenses
|
142,573
|
135,153
|
|
|
|
1.
|
Excludes $13.2 million
of amortization of acquired intangibles, which are categorized as
transformation costs but do not factor into our definition of
operating expenses
|
Adjusted Operating Expense Ratio
Adjusted Operating Expense Ratio is a non-GAAP ratio defined as
Adjusted Operating Expenses divided by gross margin.
Adjusted Net Income
The following table provides a reconciliation of our reported
net income/(loss) to adjusted net income/(loss):
($000s)
|
2022
|
2021
|
Net income (loss) -
reported
|
(4,803)
|
(20,152)
|
After-tax adjusting
items:
|
|
|
Transformation costs
and other provisions
|
6,309
|
17,835
|
Amortization of
acquired intangibles
|
9,594
|
9,673
|
Adjusted net income
(loss)
|
11,100
|
7,356
|
Earnings per common
share:
|
|
|
Basic
|
(0.95)
|
(3.33)
|
Diluted
|
(0.95)
|
(3.33)
|
Adjusted earnings per
common share:
|
|
|
Basic
|
0.71
|
0.43
|
Diluted
|
0.43
|
0.20
|
Supplemental Financial Measures
A supplementary financial measure (SFM) is a financial measure
that is not reported in our 2022 Annual Financial Statements, and
is, or is intended to be, reported periodically to represent
historical or expected future financial performance, financial
position, or cash flows. The Company's key SFMs disclosed in this
document include AUA, recruiting pipeline, and net new and
recruited assets. Management uses these measures to assess the
operational performance of the Company. These measures do not have
any definition prescribed under IFRS and do not meet the definition
of a non-GAAP measure or non-GAAP ratio and may differ from the
methods used by other companies and therefore these measures may
not be comparable to other companies. The composition and
explanation of a SFM is provided in this document where the measure
is first disclosed if the SFM's labelling is not sufficiently
descriptive.
About RF Capital Group Inc.
RF Capital Group Inc. is a TSX-listed (TSX: RCG) wealth
management-focused company. Operating under the Richardson Wealth
brand, the Company is one of the largest independent wealth
management firms in Canada with
$36.0 billion in assets under
administration (as of February 28,
2023) and 20 offices across the country. The firm's Advisor
teams are focused exclusively on providing strategic wealth advice
and innovative investment solutions customized for high net worth
or ultra-high net worth families and entrepreneurs. The Company is
committed to maintaining exceptional fiduciary standards and has
earned certification – determined annually – from the Center for
Fiduciary Excellence for its Separately Managed and Portfolio
Management Account platforms. Richardson Wealth has also been
recognized as a Great Place to Work™ for the past three years, a
Best Workplace for Women, a Best Workplace in Canada and Ontario, a Best Workplace for Mental Wellness,
for Financial Services and Insurance, and for Hybrid Work. For
further information, please visit
www.rfcapgroup.com and
www.RichardsonWealth.com.
SOURCE RF Capital Group Inc.