Q1 2024 CI Financial Corp Earnings Call
All lines have been placed on mute during the presentation portion of the call with an opportunity for question and answer at the end if.
Speaker Change: If you would like to ask a question. Please press star followed by one on your telephone keypad I would now like to turn this conference call I thought twice cut Macalpine C. E. C. L financial Please go ahead.
Speaker Change: Good morning, everyone and welcome to <unk> Financial's first quarter earnings call.
Speaker Change: Joining me is our CFO Amit Muni.
Speaker Change: Together, we will cover the following.
Speaker Change: An overview of the highlights of the quarter a review of our financial performance during the quarter a discussion on our near term obligations and the progress separating our Canadian businesses and Koreans.
Speaker Change: An update on the progress against our 2024 strategic initiatives then we will take your questions.
Speaker Change: Our adjusted EPS of <unk> 86 per share is up 6% quarter over quarter, reflecting the strength in capital markets growth in the U S business and the benefit of recent share repurchases.
Speaker Change: Adjusted EBITDA per share attributable to shareholders increased 16% from the first quarter last year, and 6% quarter over quarter to a record of $1 60 per share.
Speaker Change: We generated free cash flow of $1 one per share.
Speaker Change: Yes.
Speaker Change: Capital allocation remained active during the quarter, we deployed $51 million to settle existing M&A liabilities.
Speaker Change: We returned $31 million to shareholders through our dividend and this was the first quarter that investors benefited from the 11% dividend increase that we announced last year.
Speaker Change: In April we completed the $85 million substantial issuer bid announced in February repurchasing approximately $4 9 million shares.
Speaker Change: The board also declared a dividend of <unk> 20 per share payable in October reflecting the normal cadence of declaring dividends one quarter ahead.
Speaker Change: Our Canadian retail asset management business experienced $1 $3 billion in redemptions in the quarter driven by three factors.
Speaker Change: 140% of our assets are and balanced funds, which is the category with the highest redemptions in the industry in the quarter.
Speaker Change: Two investors began to anticipate the bank of Canada, cutting rates, which resulted in slowing allocations to cash like products and.
Speaker Change: And three the first quarter is normally a slower flow quarter for Ci.
Speaker Change: Our wealth businesses in both Canada, and the U S continued to generate positive inflows in the first quarter.
Again, highlighting the strength and resiliency of those businesses.
Speaker Change: We continue to execute against our three strategic priorities to modernize asset management expand wealth management and globalize the company.
Speaker Change: Yes.
Speaker Change: Investment performance across the platform remains strong with nearly three quarters of our AUM outperforming our peers on a three year basis.
Speaker Change: The sustained strong performance highlights the impact that the transformation, we made from a series of competing boutiques into an integrated global asset manager has had for our clients.
Speaker Change: We improved the positioning of our product offering which resulted in 13 fund mergers and the launch of several innovative products, including our global AI ETF earlier this week.
Speaker Change: We continue.
Speaker Change: To have success growing and servicing high and ultra high net worth clients in Canada.
Speaker Change: <unk> Northwood family Office was named the best multifamily office in Canada by family Wealth report.
Speaker Change: Korean had another strong quarter, delivering adjusted EBITDA growth of 8% compared to the fourth quarter.
Speaker Change: I'll now turn the call over to Amit to discuss our financial results.
Amit Muni: Thank you Curt and good morning, everyone.
Amit Muni: Turning to slide four our global assets ended the quarter up 7% to 474 billion driven by positive markets across all three segments as well as net inflows into our U S and Canadian wealth segments.
Amit Muni: Turning to our financial results on the next slide I'll focus my comments on our adjusted results.
Amit Muni: Adjusted net income for the quarter increased to $133 million or <unk> 86 per share.
Amit Muni: Adjusted EBITDA also increased to $246 million for the quarter and our adjusted EBITDA margin was 41, 4%.
Turning to the next slide I'll highlight the segment results.
Amit Muni: Asset management, EBITDA increased to $160 million and margins were 61, 3%.
Amit Muni: Canada wealth EBITDA was roughly flat at $20 million and margins were nine 1%.
The slight decreases in margins were due to seasonal expenses related to compensation.
Speaker Change: Also recall, we noted last quarter that margins in Q4 was slightly elevated due to year end adjustments to incentive compensation.
Amit Muni: In the U S pre NCI, EBITDA increased 8% to $108 million and margins expanded to 43%.
Amit Muni: EBITDA increased 26% from the first quarter of last year, which is greater than the investor groups preferred return.
Amit Muni: Turning to the next slide I'll walk through the changes in revenue.
Amit Muni: Revenues on a comparable basis increased 5% to $699 million.
Amit Muni: Asset management revenues were up $7 million as the effect of net outflows and fairly flat fee capture were offset by higher average AUM due to positive markets.
Amit Muni: Canada and U S wealth management fees increased due to higher asset levels from positive flows and positive markets.
Amit Muni: There are no acquisitions during the quarter.
Turning to the next slide we can review major changes in our expenses.
Amit Muni: On a comparable basis total expenses increased 5%.
SG&A increased primarily due to seasonal taxes from bonus payments for last year.
Amit Muni: Advisor and dealer fees increased due to higher revenue earned in our Canada wealth segment.
Amit Muni: Interest expense increased due to additional borrowings to fund acquisition related obligation payments and the substantial issuer bid.
Depreciation and amortization increased due to higher depreciation of hardware and computer equipment as part of integration and new leased office space at Corium.
Amit Muni: Looking forward for the next few quarters, we anticipate interest and lease finance expenses to be in the range of $50 million to $51 million in the second quarter due to higher balances on our credit facility due to settling of acquisition related payments and U S lease costs.
Amit Muni: We also anticipate higher depreciation and amortization, reflecting the impact from integration capital expenditures.
Lastly, SG&A costs, and our Canada wealth segment are expected to be in the $1 million to $2 million range higher in Q2 as part of investing in our custody platform.
Amit Muni: We expect cost synergies from these investments in early 2025.
More information is in the appendix of the presentation.
Amit Muni: Turning to slide nine we can review our debt and leverage.
Amit Muni: Net debt was $3 6 billion for the quarter due to payoffs of our acquisition related liabilities and negative noncash currency mark to market on our on our U S denominated debt.
Amit Muni: Our net leverage was three five times on a reported basis.
Amit Muni: The fair value market value of our debt at the end of the quarter was $2 9 billion, which resulted in a net leverage ratio of two eight times.
Amit Muni: Let me turn the call back to Kurt.
Speaker Change: Thanks, Amit as we highlighted last quarter Canada's obligations related to U S. M&A are rapidly running off.
Kurt: During the first quarter, we reduced the final outstanding obligations from 280 million to $235 million.
In the second quarter, we will reduce these obligations by over $100 million with the remainder being settled.
Speaker Change: By the end of January.
Canada will soon be in a position of having 100% of its cash flow to allocate across buybacks and debt reduction in addition to our dividend.
Speaker Change: On prior calls we've talked about our plans to fully separate our Canadian and U S businesses.
Speaker Change: As we discussed last quarter the debt is the final piece.
Speaker Change: We have already fully separated the equity the governance and the operations.
Speaker Change: Korean has established its own board and day to day operations are run by a dedicated management team in Miami.
Speaker Change: We continue to make progress in working through the final steps to fully separate the debt and have made significant progress in the last 90 days.
Speaker Change: In February we announced the establishment of a credit rating of Koreans were rated a minus stable by Kroll.
Speaker Change: This quarter, we received covenant relief on the 2025 and 2027 notes that had restrictive covenants preventing current from borrowings stand alone.
Speaker Change: Following the July maturity of our 2024 notes with similar covenants. The U S will be in a strong position to take on third party debt if we choose.
Speaker Change: Establishing access to independent Korean debt in the near term will help facilitate in organic growth opportunities.
Speaker Change: While we are only a few months into 2024, we continue to make strategic progress in each of our businesses.
In asset management, we've been active on the product front, both streamlining our existing lineup.
Speaker Change: And launching innovative new strategies, including the global AI, ETF, which started trading earlier this week.
Speaker Change: Our private market solution continues to gain traction as it is addressing an unmet need in the marketplace, while providing canadians with access to the world's leading alternatives managers.
Speaker Change: In addition.
Speaker Change: <unk>, we've maintained strong financial discipline with EBIT margins essentially flat in a quarter with seasonally higher expenses.
Speaker Change: In Canadian wealth, we continue to strengthen our position serving the high and ultra high net worth segments of the market.
As I mentioned <unk> Northwood family Office, which we acquired in 2022 remains a leader in this space winning the 2024 family Wealth Report award for the Best multifamily office.
Speaker Change: As I am Amit touched on in his remarks, we are investing to further scale, our custody platform and leverage technology to provide a better client experience.
Speaker Change: We continue to work towards Onboarding, the remainder of our wealth assets and are having constructive conversations with a number of third parties.
At <unk>, we are making progress against our strategic plan.
Speaker Change: And the investments we've made to scale and fully integrate our business are showing in our financial results.
Speaker Change: Our EBIT grew 8% quarter over quarter. Our net flows remained strong and our solutions such as tax and trust are growing rapidly.
Speaker Change: In addition, it has created growth opportunities for us that were not present in the early stages of building Korea.
Speaker Change: We are very excited about what the remainder of 2024 holds for all three of our business lines.
Speaker Change: By executing over the last few years, our three stage strategic priorities, we've been able to transform each segment of our business and position them for success.
Speaker Change: We expect to continue to see the benefits of that transformation in 2024 and beyond.
Speaker Change: We thank you for your interest in <unk> and we'd be happy to take your questions.
Speaker Change: If you'd like to register a question. Please press star followed by one on your telephone keypad, ensuring your line is on mute locally.
Speaker Change: To withdraw your question at any time, you can do sign for my question.
Speaker Change: That's fine.
Speaker Change: Our last question comes from the line of Kyle Voigt of KC Duffy. Your line is now open. Please go ahead.
Speaker Change: Hi, Good morning, maybe first question just on the separation of the two businesses.
Speaker Change: Good incremental progress in the quarter, including amending the debt covenants.
Speaker Change: Can you just clarify what else needs to occur to fully separate the businesses and the expected timing around that is it just the roll off of the debt.
Speaker Change: You mentioned, which I think happens in July and then given that we have a schedule for the remaining M&A liabilities.
Speaker Change: For the asset management segment and since the U S business is now in a position to take on debt can you just remind us how youre thinking about target leverage in the U S business, specifically and where you are comfortable taking that to should you find the right acquisition opportunity.
Speaker Change: Sure. So thanks, Kyle so kind of as it relates to the first question that is the final piece of the separation of Canada from the U S business as I mentioned Board management day to day operations that the business is fully.
Speaker Change: Separate of all now or essentially IPO ready kind of put otherwise.
Speaker Change: But we continue to make progress against growing the business to strategic priorities and things like that.
Speaker Change: As it relates to the debt having access to that at Korean on a standalone basis is important to us.
Speaker Change: Haven't given guidance.
Speaker Change: Yet as it relates to how we think about leverage at Koreans, but if you look at the earnings generated by the business.
Speaker Change: The transactions that take place kind of in the industry and our spending patterns I think you'd see that we have great free cash flow being generated by the U S plus access to a modest amount of leverage will allow us to grow at a very good pace inorganically as well. So we'll provide more color as we get a little bit little bit closer to it.
Speaker Change: But I wouldn't anticipate.
Speaker Change: Korea running at high leverage.
Speaker Change: Understood and then just a second question on the Canadian wealth business.
Speaker Change: Some of the incremental investment that you're making within a ramp G&A a bit into <unk> and through the remainder of this year. I guess can you just provide a little bit more details on what you are investing in their near term and then maybe could you frame the size of the cost or the revenue synergy opportunity from those investments if you look out to 2025 and beyond.
Speaker Change: Sure So just.
As a reminder for everybody. So when we initiated the strategy we had a custody business in Canada that had about $1 billion of assets with limited capacity for scale and growth and obviously, a servicing and support infrastructure that was reflective of the $1 billion of assets not the aspiration. So a few years ago, we made some investments in.
Speaker Change: That business to grow and scale it and <unk> seen two our results that in a short period of time through external and internal conversions, we've grown from a $1 billion to north of 25 billion and we're now positioning the business to effectively grow from $25 billion to north of $100 billion and as a result of that there is some incremental investments as it relates to.
Speaker Change: Servicing and technology that we're making in advance of those upcoming conversions. So some of those expenses are temporary as it relates to preparing for the transition in some of those well.
Speaker Change: Remain expenses to service a much larger asset base, that's poised for growth overall.
Speaker Change: We haven't given guidance as it relates to the revenue impact, but you've obviously seen.
Speaker Change: The revenue and the earnings of our wealth business increase as the custody has been.
Speaker Change: Implemented and scaled up and we'd expect to see similar ish.
Speaker Change: Experiences as we continue to scale the assets.
Speaker Change: Great. Thank you very much.
Paul: Thanks, Paul.
Speaker Change: Our next question comes from the line of Graham Ryding of TD Securities. Your line is now open.
Speaker Change: Please go ahead.
Speaker Change: Just wanted to touch on the credit side I know that your intention here. It sounds like is to raise debt at the corrugate level and you have got.
Speaker Change: U S rating now, but there was also recently an update from Moody's on your credit rating for Ci financials. So I just wanted to get your thoughts on.
Speaker Change: How much of a priority is it for you to maintain your investment grade at the financial level or do you feel like that is going to have any impact on your.
Speaker Change: Desires to sort of raise debt down in the U S.
Speaker Change: So I would say.
Speaker Change: As it relates to we've talked about at length kind of the priorities of the business and I would say, we look at each business effectively on a standalone basis right. So for Canada.
Speaker Change: The priorities are two to settle the remaining obligations as it relates to.
Speaker Change: Koreans, which are in the final stages of being fully met.
Speaker Change: And then we have priorities. So then Canada's cash flow will be singularly focused.
Speaker Change: On share.
Speaker Change: Share buybacks and debt reduction.
Speaker Change: As always we take a dynamic approach to capital allocation and where our shares are trading today.
Speaker Change: Buyback would take precedent over deleveraging right now, but as you've seen we've been able to rapidly reduce our share count.
Speaker Change: The opportunity to buy shares with every.
Speaker Change: The substantial issuer bid that passes the overall pool that opportunity gets gets reduced.
Speaker Change: And then from Koreans perspective.
Speaker Change: The goal is obviously to not have Koreans rely on Canada's cash flow as it relates to <unk>.
Funding future acquisitions, and effectively we had a couple of structural impediments ultimately in place.
Speaker Change: On that.
Speaker Change: That.
Speaker Change: Prevented us from doing so which we're effectively at the final stages of doing right now.
Speaker Change: So.
Speaker Change: Credit rating well I guess, it will be a function of how the credit agencies kind of view the deleveraging.
Speaker Change: And then the impact that borrowing at corium ultimately has on the ratings. So we are running the business to deliver the best possible return for our shareholders kind of balancing those priorities and then the rating itself, obviously will be a function of how people assess those priorities, but what I would say is we're getting near the end of the obligations for core.
Speaker Change: Orient and NCI will be singularly focused on its Canadian obligations and then Koreans.
Speaker Change: We'll be we'll be focused on its obligations.
Speaker Change: Okay.
Speaker Change: Okay understood.
Speaker Change: At the.
Speaker Change: You flagged that towards organic growth both in Canadian wealth and.
Speaker Change: U S well in the quarter as anything you could sort of quantify for us to give us some sort of context.
Nothing to report I guess, specifically thanks was strong in both businesses.
Speaker Change: And we highlighted it just to show the resiliency, obviously, the asset management business products being sold through intermediaries.
Speaker Change: Our products come in and out of favor.
Speaker Change: Market cycles, but when you're in the wealth management business Youre, obviously owning the client relationship. So the relationship stays in the use of products will increase our.
Speaker Change: Our decrease in so we're growing the businesses despite the.
Speaker Change: The market volatility of the impact.
Speaker Change: Okay.
Speaker Change: And my last question just would be on the asset management side.
Speaker Change: You flagged here.
Speaker Change: Alternatives.
Speaker Change: Product offering.
Speaker Change: In the in the retail channel can you just give us some context with sort of how that's progressing.
Speaker Change: How many platforms you've been improved on or just some color on the progress on that product launch.
Speaker Change: Sure so.
Speaker Change: Kind of the basis for the product just as a reminder for everybody. So.
Speaker Change: If you look at the Canadian marketplace institutions are typically allocating some balance of 60% of their investments to public markets, 40% of private markets or 70, 30 or something in that context.
Speaker Change: <unk> retail, which is obviously the same end consumers of the pensions.
Speaker Change: Typically allocating zero.
Speaker Change: In our opinion a function.
Speaker Change: Not of.
Speaker Change: The product, making sense in one channel and not in another but it was effectively a structure a wrapper and administration process plus access to the world's leading managers that were prohibiting that from happening in retail.
Speaker Change: So as you know we launched the first private markets fund to fund in this space as soon as we launch the fund we immediately started our marketing efforts everywhere.
Speaker Change: Where we had platform approvals. So it's really a two pronged approach of growing the fund.
Speaker Change: And funds from the platforms that we're on today and we continue to be very active.
Speaker Change: Dialog, but also working towards getting those approvals on the national platforms as well. So it's really a two pronged approach. We do have a dedicated alternatives team was 12 people on that team that are entirely focused on our private market strategies, and we're making really good progress. So I will keep everyone posted as we continue to grow.
Speaker Change: And scale and innovate that business line.
Okay. That's it for me thank you.
Speaker Change: Thanks.
Speaker Change: The next question comes from Nick <unk>.
Speaker Change: Your line is now open. Please go ahead.
Speaker Change: Okay. Thanks.
Speaker Change: Just wanted to drill into the pattern of Canadian retail flows.
Speaker Change: Thank you had partly attributed the outflows in the quarter too.
Speaker Change: Concentration of redemptions and balanced funds as well as cash products are you able to give us a general sense of.
Speaker Change: Whether those impacts were relatively balanced or was one a bit larger than the other I'm just wondering because those two product categories, obviously garner.
Speaker Change: Different margins.
Speaker Change: Yes, I would say balanced.
Speaker Change: Was a little more impactful I mean, both in terms of assets and obviously economics, just given the difference in fee rates.
Speaker Change: Okay. Okay, and then I think you also alluded to Q1 being a bit of a normally slower flow quarter.
Speaker Change: I just thought of it as a bit of a seasonally stronger period, just because of the RSP season can you just elaborate on the nuance.
Speaker Change: Around the first quarter that youre alluding to there.
Speaker Change: Yes, it's a great question. It is from an industry perspective seasonally stronger if you look at our flows historically for the first quarter tends to be seasonally lighter we.
Speaker Change: We attribute that to obviously, we're not a bank we don't we don't benefit from the call. It in branch seasonality of the RSP investments and then unlike some of our insurance peers.
Speaker Change: Appears we don't have a retirement platform, where you typically see kind of spikes in RSP investments kind of in and around bonus season, So for whatever reason.
Speaker Change: It just isn't.
Speaker Change: A quarter that historically, we benefited from the flows in the same way as you mentioned that the industry does or more specifically banks and those with retirement platforms.
Speaker Change: Got it Okay. That's interesting and then just last one for me how should we think about the dividend policy going forward like is there a kind of a target payout ratio.
Speaker Change: That youre contemplating is that something that's revisited at year end I'm, just kind of wondering how youre thinking about that.
Speaker Change: Yes, so we're constantly allocating or managing dynamically our capital allocation priorities.
Speaker Change: So let me say, we're fully fully committed to the dividend that we have in place today.
Speaker Change: And then the question becomes across three so as I mentioned, Canada really has three different priorities to do we buyback shares do we delever do we do we increase the dividend I'd say.
Speaker Change: You're asking where we stand today, we see the greatest value for shareholders of the three in the buyback.
Speaker Change: As you know things things change there are certainly opportunities.
Speaker Change: Or for dividends to increase I mean, if you look at the.
Speaker Change: The reductions that we've made in the share count the total dividend obligation.
Speaker Change: That we're making is smaller despite the increase just given the overall reduction in share count. So certainly if you were looking at it from a payout ratio as we continue to reduce the share count there certainly certainly room, even holding our payout ratio and then obviously room.
Speaker Change: To increase that payout ratio as we go but it's not like we have a set.
Speaker Change: Fixed percentage that we're managing too right now, we're really just trying to maximize shareholder value.
Speaker Change: Where we see the greatest opportunity. So we thought the dividend hike last year was important and we will continue to monitor it.
Speaker Change: Going forward.
Speaker Change: Got it okay, alright, thanks for taking my questions.
Nick: Thanks, Nick.
Speaker Change: As a reminder, if you'd like to ask a question. Please press star followed by one on your telephone keypad.
Speaker Change: Our next question comes from the line of Tom Mackinnon with BMO capital markets. Your line is now open. Please go ahead.
Tom Mackinnon: Yes, thanks, and good morning.
Speaker Change: Just looking at slide 10.
Speaker Change: The M&A obligations.
Speaker Change: Correct.
Speaker Change: In assuming that.
Speaker Change: Those are those obligations are essentially pay you raised debt and then you pay those obligations is that the primary that's what it would look like this happening with respect to your cash flow statement is that right.
Speaker Change: The payments of those had been funded largely by that.
Speaker Change: I mean, it's fungible, Tom I mean, we did a buyback as well so I guess, if youre looking at the debt slightly increasing I mean, you could attribute it to.
Speaker Change: Two the obligations are you could attributed to the buyback credits.
Speaker Change: Yes.
Speaker Change: Tom It cash is fungible right. So we use our credit facility to both fund our existing working capital needs. We have bonus payments that go out in the first quarter.
Speaker Change: So we use our credit facility and free cash flows to fund all of those.
Speaker Change: Obligations.
Speaker Change: At 106 next quarter is that large is that going to be.
Speaker Change: Borrowed or is that going to be paid with free cash flow I'm, just trying to think of how to think about that going forward and the uses of the free cash flow here.
Speaker Change: Yes, so it'll be a combination of both.
Speaker Change: And as Curt said in his comments.
Curt: We take a dynamic approach to capital and we will figure out the right way of allocating that.
Speaker Change: Whether it's to delever or buy back stock or.
Speaker Change: And use our free cash flow to pay down these obligations.
Speaker Change: Okay.
Speaker Change: <unk>.
Speaker Change: And why.
Speaker Change: Why why not just take on additional debt to fund them why not.
Speaker Change: Just find them with free cash flow and maybe slow down share buyback just take us through some of the thought process with respect to that.
Speaker Change: Sure. So I mean, we're very comfortable with our debt levels as Amit had mentioned that was three five turns if you net out FX noise. It was $3 four and if you take a look at the market value of the debt, which is reflective of the price that we can buy back that debt were at $2 nine.
Speaker Change: Turns so kind of regardless of the lens that you look at it we're very very comfortable.
Speaker Change: With the debt levels that we have in place today, we believe the opportunity to buy our shares given where we're trading is much more accretive for our shareholders.
<unk> bancshares, so so from that standpoint, we're looking at it how do we deliver the best outcome possible for our shareholders and we feel that if we have an opportunity to buy shares at the price in and around where we're trading we feel that that's the best trade.
Speaker Change: For the shareholders.
Speaker Change: That we have but as we said thats dynamic right. So if the share price.
Speaker Change: Increases rapidly then the priorities.
Speaker Change: We will rapidly shift towards deleveraging through the through the buying back of our of our 2051.
Speaker Change: <unk> that have the greatest embedded gain for our shareholders. So we're constantly looking at it and monitoring it. We just struggled to see I mean, we look at the business performance that we've continued to generate the growth that we've experienced in our business segments. The outsized growth we have in the U S and just see a phenomenal opportunity to buy shares so with that as a back.
Speaker Change: Drop being comfortable.
Speaker Change: With the leverage that we have in place we see it as an easy decision to make that the primary capital allocation priority. So at times that will cause cause leverage to increase.
Speaker Change: Or decrease depending upon.
Speaker Change: How our stock is trading and the opportunity to buy the bonds.
Speaker Change: Yeah, understood and with respect to being able to raise debt at corium level do you see yourselves as.
Speaker Change: Using that to fund organic inorganic growth and and maybe you can talk about some of the opportunities youre seeing out there in the marketplace.
Speaker Change: Sure so.
Speaker Change: So ci is in the final stages of its obligations to Korea right. If we think of these as we do operationally separate businesses. So.
Speaker Change: Kind of on a go forward basis, when these obligations run off.
Which I think is the first week of January.
Speaker Change: Corning will be to the extent that korean's doing M&A Korea will be funding that M&A.
Speaker Change: From its free cash flow.
Speaker Change: And from that that we ultimately take on to grow the business I mean, we've I think we've proven.
Speaker Change: That we can acquire well, we can integrate well and drive growth across the integrated platform. So as long as exceptional businesses come to market that are ultra high and high net worth focus with great underlying fundamentals that see the value of our of our private partnership and highly differentiated approach.
Speaker Change: We're going to be in the market and to the extent that they are not we're not but for us. The most important piece was to make sure that Corey was ready to to kind of operate entirely on its own with the debt being the final piece. So I don't think of it as that readiness is the first step.
Speaker Change: Taking the debt is a function of the opportunities that are presented in front of us and I do see.
A good market.
Speaker Change: Our head for M&A I think that the market is opening up I think some high quality firms are starting to have conversations. It's so hard to tell obviously in M&A.
Speaker Change: How things how things break.
Speaker Change: Do anticipate having some good opportunities.
Speaker Change: In front of us in the coming months.
Speaker Change: Okay. Thanks.
Speaker Change: Sure.
Speaker Change: Your next question comes from the line of Stephen Volkmann.
Speaker Change: Raymond James Your line is now open. Please go ahead.
Speaker Change: Thanks, So just one follow up a little bit on Tom's question there in terms of.
Speaker Change: What comes first I mean, obviously, you know acquisition this quarter.
Speaker Change: But like you said your debt ready so.
Speaker Change: Would that be the first part of your go to market.
Speaker Change: Knowing that Youre closing on an acquisition or.
Speaker Change: You closed on an acquisition.
Speaker Change: And.
Speaker Change: Simultaneous you go out to the market with that.
Speaker Change: Is that a signal that if you raise debt in the U S that M&A is coming.
Speaker Change: Not necessarily no.
Speaker Change: It's really kind of we're working through the steps right so kind of.
Speaker Change #100: I guess, the easiest way to think of it as Canada right now.
Speaker Change #101: You mentioned, a few times, we see the greatest opportunity for shareholder value creation through our buyback and Thats given just strictly a function of where our stock is trading relative to the underlying fundamentals of our business. We've been actual buying we expect to continue to be active buying.
Speaker Change #102: That could change, but the Canadian cash flow is constrained to our buyback our deleveraging and our dividend depending upon.
Speaker Change #103: That mix in our core and its really entirely focused on delivering the business results and pursuing M&A. So I would say if you see a core and.
Speaker Change #104: Bond offering I guess, just very specifically answer your question I wouldn't necessarily imply that the bond offering is specifically tied to a particular opportunity it could be.
Speaker Change #105: But it wouldn't be.
Speaker Change #105: It wouldn't necessarily be tied to be tied to it also.
Speaker Change #105: One thing to note a lot of the acquisitions in the space right. It's a highly fragmented market, there's lots of different firms in this space.
Speaker Change #106: Tends to be frequency of acquisitions, but not a lot of extremely large acquisitions as well. So so a particular raise.
Speaker Change #107: We do might take into account opportunities for future acquisitions, and things like that as opposed to coming to market to specifically fund the single transaction.
Speaker Change #106: Yeah.
Speaker Change #106: Okay, and you mentioned there is some good possibilities out there.
Speaker Change #106: In the U S.
Speaker Change #106: All of this.
Speaker Change #106:
Speaker Change #108: Capital structuring it prevented you from.
Speaker Change #108: Senior deal that you wanted to do and you said now we're going to we're going to push back and we get.
Speaker Change #108: The business is separated and the balance sheets.
Speaker Change #109: Basically you just saw nothing that was what was it.
Speaker Change #108: Tractable enough to push the pull the trigger on in the quarter.
Speaker Change #108: Yes.
Speaker Change #108: We are active in the market I would say the priority has been.
Speaker Change #108: Finalizing the separation of the businesses, so we've effectively gone.
Speaker Change #110: Through call. It a series of steps. So we founded the Korean business four years ago first step was really around acquiring the highest quality firms in the industry period, we wanted to build an exceptional foundation of the best firms in the industry that was step one.
Speaker Change #110: Step two launching the private partnership and driving the integrated model.
Speaker Change #110: And today as I've talked about in previous quarters, we have a fully integrated model. So every element of our business is integrated and centralized which was obviously a heavy lift and we're we're there now the next step was as we pursue acquisitions people are coming into the fully integrated model on day, one so if we bought <unk>.
Speaker Change #110: Three or four years ago, we would assume it as is and then work to integrate it over time because of the efforts that the team has made across the business, we're able to integrate on day, one which is great. So so so all of that is in place and then the fourth piece was making sure that that Korea was ready.
Speaker Change #110: To take on debt when it makes sense, but I guess so.
Speaker Change #111: No there wasn't an acquisition I guess two very directly answer your question that said, we would've done this but we've opted not to do it because we wanted to wait there was there was nothing because we obviously have opportunities. If we wanted to Ci could temporarily lend money to corium and just clean it up with a bond raise so it wasn't necessarily that.
Speaker Change #111: Okay. That's.
Speaker Change #111: Thats all my questions. Thanks, Thanks, Robert.
Speaker Change #111: Thanks.
Speaker Change #111: Okay.
Speaker Change #111: Our next question comes from the line of Geoff Kwan.
Speaker Change #112: Your line is now open. Please go ahead.
Geoff Kwan: Hi, Good morning, maybe just tacking on to your comments on clients.
Speaker Change #114: I think to your point there may be just more smaller deals.
As opposed to bigger ones.
Speaker Change #114: From a debt perspective, then.
Speaker Change #115: Makes sense to have a credit facility.
Speaker Change #114: Yields kind of buildup.
Speaker Change #114: The leverage through the credit facility meant terming out with a bond deal or if it makes sense to do it.
Speaker Change #114: Vice versa to the bond deal.
Speaker Change #114: Yes, it's a great question Jeff.
Speaker Change #114: Yes, yes.
Speaker Change #114: Yes, it's a great question. It was really just depend I mean call. It the readiness factor most likely would involve having an established credit facility in place right. So so as we kind of work through the final steps that we're talking to establishing a facility where Korean can borrow on its own makes a lot of sense and then as you mentioned is the facility.
Speaker Change #114: Because of the nature of the deals starts to let's just say scale up to a certain level it would make sense for us to roll.
Speaker Change #114: Roll that debt. So that's likely what you would see unless there is lets just say a flurry of activity that coincides with the separation where there's clarity on how much. We are looking for and then we may we might prioritize.
Speaker Change #114: Yes.
Speaker Change #116: I turned out raises as you suggest instead.
Speaker Change #116: So it really just a function of the timing and then the.
Speaker Change #116: The pipeline and the obligations.
Speaker Change #117: Right, Okay and just my second question is just with the separation of Canada. The U S. Just wondering is there any rationale.
Speaker Change #117: In Canada wealth into Korea.
Speaker Change #119: Not only would you have the geographic separation, but you'd also have kind of a pure play asset.
Speaker Change #120: Separation of wealth and asset management or is there something synergistic or some other reason why it makes sense to have Canada wealth with with the asset management business.
Speaker Change #121: Yes, it's a good question I mean, I think of it as we have three different businesses, where the Canadian asset manager, a Canadian wealth manager and Koreans.
Speaker Change #121: So I really think of Korean just kind of set up as a separate entity, but Canadian wealth and separate from Canadian asset management as well and they are separate strategic priorities fully dedicated management teams initiatives that they're working on so so I guess.
Speaker Change #121: As long as the companies integrated.
Speaker Change #121: We think of them as three different business lines, and let's just say at the point of separation.
Speaker Change #122: Could you instead of splitting the business geographically could you split the business by business line sure.
Speaker Change #123: It could go either way today because of the efforts we've made to separate them into three different businesses.
Speaker Change #123: Okay. Thank you.
Speaker Change #123: Thanks.
Speaker Change #123: We now have a follow up question from Brian writing TD Securities. Your line is open. Please go ahead.
Speaker Change #123: Sure.
Brian: Yes, just one more if I could.
Speaker Change #124: Once you sort of get past these.
Speaker Change #126: <unk> liabilities payments that are largely due this year.
Speaker Change #127: You are going to have a fair amount of free cash flow you can decide to allocate towards either buybacks or paying down debt.
Speaker Change #127: If your shares are trading at that point, it's sort of a similar multiple as they are today.
Speaker Change #127: Allergy.
Speaker Change #128: Thank you would allocate that that free cash flow towards those two options I'm just wondering.
Speaker Change #129: If you feel it's worth testing the market towards paying down debt as opposed to buybacks and seeing if the multiple responds positively to that.
Speaker Change #130: Yes, it's just a sequencing thing so so.
Speaker Change #131: Again, if the scenario you are saying is fast forward a year.
Speaker Change #131: All of the obligations are met and the stock's trading where it's trading.
Speaker Change #131: And.
Speaker Change #131: The buying back opportunity in the bonds is the same we're buying the stock.
Speaker Change #131: And so it just becomes a sequencing thing right, there's not an unlimited number of shares.
Speaker Change #132: Saleable to buy and so we would say if the stock is trading where the stock is trading the priority would be the buyback and if the stock increases. So it's just a sequencing thing I mean, effectively we're going to do both like as we've said the Canadian business isn't funding U S acquisitions, and we're not interested in large acquisitions.
Speaker Change #132: In the Canadian marketplace, we feel great about the businesses, we have and the growth trajectories that we've put them on so then it's really just a sequencing thing so which one ultimately comes first but we didn't see it and we look at this through a lot of different lenses that a dollar today generated in Canada, the best place to deploy it at the share price today.
Speaker Change #133: <unk> is to reduce the share count in the second that changes to that dollar being more valuable to pay down the debt. We will we will pivot and focus on the debt I mean, we look at as Amit mentioned, we look at our debt as it relates to the fair market value right. I mean, that's the price to buy the bonds back today. So when we're looking at <unk>.
Speaker Change #133: <unk>, we're comparing today's share price to the ability to purchase the bonds at the current prices and we still see more value right now and the share buyback, but like I said once it changes.
Speaker Change #133: You'll quickly see our priorities changed from one to the other.
Speaker Change #133: Okay.
Speaker Change #133: Sure.
Speaker Change #134: And there are no additional questions at this time I'd like to hand, the conference back to Scott.
Speaker Change #134: Calpine for closing remarks.
Scott Calpine: Just wanted to thank everyone for their participation in today's call. We look forward to speaking with you all next quarter.
Speaker Change #137: Ladies and gentlemen. This concludes today's call. Thank you for joining you may now disconnect your line.