Fiera Capital Reports Fourth Quarter 2023 Results
MONTREAL, Feb. 28, 2024 /CNW/ - Fiera Capital Corporation (TSX: FSZ) ("Fiera Capital" or the "Company"), a leading independent asset management firm, today announced its financial results for the fourth quarter and fiscal year ended December 31, 2023. Financial references are in Canadian dollars unless otherwise indicated.
(in $ thousands except where | Q4 | Q3 | Q4 | FY | FY | |
2023 | 2023 | 2022 | 2023 | 2022 | ||
End of period AUM (in $ billions) | 161.7 | 155.3 | 158.5 | 161.7 | 158.5 | |
Average AUM (in $ billions) | 158.4 | 160.7 | 159.7 | 161.5 | 162.0 | |
IFRS Financial Measures | ||||||
Total revenues | 210,972 | 158,740 | 184,697 | 686,646 | 681,439 | |
Base management fees | 147,371 | 147,645 | 147,390 | 592,237 | 602,801 | |
Net earnings 1 | 39,418 | 11,067 | 2,509 | 58,452 | 25,353 | |
Non-IFRS Financial Measures | ||||||
Adjusted EBITDA 2 | 77,621 | 43,942 | 52,825 | 205,854 | 191,838 | |
Adjusted EBITDA margin 2 | 36.8 % | 27.7 % | 28.6 % | 30.0 % | 28.2 % | |
Adjusted net earnings 1,2 | 50,163 | 23,651 | 33,083 | 126,066 | 121,765 | |
LTM Free Cash Flow 2 | 89,212 | 98,056 | 58,944 | 89,212 | 58,944 | |
Note: Certain totals, subtotals and percentages may not reconcile due to rounding. |
"Although 2023 started with uncertain headwinds, we are very pleased with full year results and the improvement over the previous fiscal year with assets under management ending $6.4 billion higher than the previous quarter and $3.2 billion higher year-on-year. Impressively, 98% of our Public Market assets exceeded their 5-year performance benchmarks, and we wrapped up the year by being recognized as a Top Performer, at the 2023 Global Manager Research Awards." said Jean-Guy Desjardins, Chairman of the Board and Global Chief Executive Officer. We have already started 2024 with a solid plan for growth and increased sales and distribution resources in each of our four key regions as we look to develop new business opportunities including opening additional offices as we enter new markets."
"The strength in financial markets in the fourth quarter combined with outperformance in several of our investment strategies resulted in a year-over-year increase in total revenues. Driven in part by strong performance fees during the quarter, we saw an improvement in our adjusted EBITDA margin to 30% for the year. The significant increase in our adjusted EBITDA and adjusted net earnings also enabled us to further reduce our net debt in the fourth quarter and to generate a last twelve-month free cash flow which covered our dividend payments for 2023." said Lucas Pontillo, Executive Director and Global Chief Financial Officer. "With that, I am pleased to report that the Board of Directors has approved a dividend of 21.5 cents per share, payable on April 11, 2024."
Assets Under Management (in $ millions, unless otherwise indicated)
By Platform | September 30, | New | Lost | Net Contributions | Net Organic Growth3 | Market and Other4 | December 31, |
Public Markets, excluding AUM | 91,684 | 1,271 | (1,519) | (1,518) | (1,766) | 8,066 | 97,984 |
Public Markets AUM sub-advised | 44,870 | 30 | (2,626) | (606) | (3,202) | 3,563 | 45,231 |
Public Markets - Total | 136,554 | 1,301 | (4,145) | (2,124) | (4,968) | 11,629 | 143,215 |
Private Markets | 18,763 | 298 | (182) | (174) | (58) | (227) | 18,478 |
Total | 155,317 | 1,599 | (4,327) | (2,298) | (5,026) | 11,402 | 161,693 |
By Distribution Channel | September 30, | New | Lost | Net Contributions | Net Organic | Market and Other4 | December 31, |
Institutional | 83,789 | 1,059 | (1,230) | (1,369) | (1,540) | 6,356 | 88,605 |
Financial Intermediaries | 57,759 | 353 | (2,971) | (534) | (3,152) | 4,477 | 59,084 |
Private Wealth | 13,769 | 187 | (126) | (395) | (334) | 569 | 14,004 |
Total | 155,317 | 1,599 | (4,327) | (2,298) | (5,026) | 11,402 | 161,693 |
By Platform | December 31, | New | Lost | Net Contributions | Net Organic | Market and Other4 | Strategic5 | December 31, |
Public Markets, excluding AUM | 91,046 | 3,781 | (4,093) | (2,549) | (2,861) | 9,799 | — | 97,984 |
Public Markets AUM sub-advised by PineStone | 49,219 | 153 | (9,324) | (1,562) | (10,733) | 7,265 | (520) | 45,231 |
Public Markets - Total | 140,265 | 3,934 | (13,417) | (4,111) | (13,594) | 17,064 | (520) | 143,215 |
Private Markets | 18,241 | 1,690 | (727) | (649) | 314 | (77) | — | 18,478 |
Total | 158,506 | 5,624 | (14,144) | (4,760) | (13,280) | 16,987 | (520) | 161,693 |
By Distribution Channel | December 31, | New | Lost | Net Contributions | Net Organic Growth3 | Market and Other4 | Strategic5 | December 31, |
Institutional | 84,330 | 3,532 | (5,232) | (2,379) | (4,079) | 8,874 | (520) | 88,605 |
Financial Intermediaries | 60,275 | 1,089 | (7,996) | (1,165) | (8,072) | 6,881 | — | 59,084 |
Private Wealth | 13,901 | 1,003 | (916) | (1,216) | (1,129) | 1,232 | — | 14,004 |
Total | 158,506 | 5,624 | (14,144) | (4,760) | (13,280) | 16,987 | (520) | 161,693 |
AUM increased by $6.4 billion or 4.1% compared to September 30, 2023:
A favourable market impact for both fixed income and equity mandates in the second half of the quarter of $11.6 billion was partly offset by negative net organic growth of $5.0 billion during the quarter.
Included in the negative net organic growth of $5.0 billion was $3.2 billion of outflows related to AUM sub-advised by PineStone. To our knowledge, of this $3.2 billion of outflows, $2.6 billion related to a large Canadian Financial Intermediary client of which approximately $2.4 billion was transferred directly to PineStone and $0.2 billion related to lost mandates which did not transfer directly to PineStone, and $0.6 billion related to ongoing client relationships where clients simply rebalanced their overall investment in strategies sub-advised by PineStone. The large Financial Intermediary client in Canada is also expected to redirect an additional $3.1 billion of AUM sub-advised by PineStone during the first half of 2024, as part of their ongoing transfer of assets to PineStone.
AUM increased by $3.2 billion or 2.0% compared to December 31, 2022:
A favourable market impact increased AUM by $17.6 billion on a year-to-date basis, which was partly offset by negative net organic growth of $13.3 billion. Negative net organic growth for the year included $13.6 billion in Public Markets partly offset by positive net organic growth in Private Markets, primarily from net new mandates. 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 $0.6 billion.
Negative net organic growth included $10.7 billion of outflows connected to AUM sub-advised by PineStone, of which, to our knowledge, $6.3 billion related to AUM that transferred directly to PineStone, $3.0 billion related to lost mandates which did not transfer to PineStone and $1.4 billion ongoing client relationships where clients simply rebalanced their overall investment in strategies sub-advised by PineStone.
Of the $10.7 billion of outflows connected to AUM sub-advised by PineStone, $4.9 billion related to a large Canadian Financial Intermediary client, of which approximately $3.5 billion was transferred directly to PineStone. Excluding this client, management expects the AUM reduction from lost mandates transferring directly to PineStone to be in the range of $2 to $3 billion per year.
Fourth Quarter Financial Highlights
Revenue increased by $52.3 million, or 33.0% compared to Q3 2023. The increase was driven by higher performance fees in both Public and Private Markets, primarily from Europe, higher share of earnings in joint ventures, as well as higher commitment and transaction fees. Base management fees in Public Markets were slightly lower due to lower average AUM but were essentially offset by higher base management fees in Private Markets.
Revenue increased by $26.3 million, or 14.2% compared to Q4 2022. The increase was primarily due to higher performance fees in Public and Private Markets, higher other revenues, and higher share of earnings in joint ventures, partly offset by lower commitment and transaction fees. Base management fees were relatively flat.
Adjusted EBITDA increased by $33.7 million or 76.8% compared to Q3 2023, primarily due to higher revenue from performance fees, partly offset by the connected higher sub-advisory fees, higher variable compensation and higher professional fees.
Adjusted EBITDA increased by $24.8 million, or 47.0% compared to Q4 2022, primarily due to higher revenue from performance fees and lower professional fees, partly offset by higher variable compensation costs and sub-advisory fees.
Adjusted net earnings increased by $26.5 million compared to Q3 2023, primarily due to higher revenues and favourable foreign exchange revaluation, partly offset by higher SG&A, excluding share-based compensation and higher income tax expense.
Adjusted net earnings increased by $17.1 million, or 51.7% compared to Q4 2022, primarily due to higher revenues and favourable foreign exchange revaluation, partly offset by higher income tax expense, higher interest on long-term debt and debentures, and higher SG&A, excluding share-based compensation.
Net earnings attributable to the Company's shareholders increased by $28.3 million compared to Q3 2023, primarily due to higher revenues, insurance proceeds received during the quarter, the reversal of a claims provision and favourable foreign exchange revaluation. These increases in earnings were partly offset by higher SG&A, higher income tax expense, along with higher restructuring, acquisition related and other costs.
Net earnings attributable to the Company's shareholders increased by $36.9 million compared to Q4 2022, primarily due to higher revenues, insurance proceeds received, the timing of provisioning and reversals of certain claims, and lower severance recorded in restructuring, acquisition related and other costs. These increases in earnings were partly offset by higher income tax expense.
LTM free cash flow increased by $30.3 million or 51.4% compared to the corresponding period of 2022. The increase was mainly due to higher cash generated by operating activities and lower cash used in the settlement of purchase price obligations, partly offset by lower distributions received from joint ventures and associates and higher interest paid on long-term debt and debentures.
Year-to-Date Financial Highlights
The Company's financial highlights reflect the following major items for the year ended December 31, 2023 compared to the year ended December 31, 2022:
Revenue increased by $5.2 million, primarily due to higher base management fees in Private Markets from higher average AUM, higher performance fees, and higher other revenues, partly offset by 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.
Adjusted EBITDA increased by $14.1 million, or 7.4% primarily due to higher revenues, lower employee compensation costs, lower sub-advisory fees and lower professional fees, partly offset by higher travel and marketing costs.
Adjusted net earnings increased by $4.3 million, or 3.5% primarily due to higher revenues, lower SG&A, excluding share-based compensation, and favourable foreign exchange revaluation, partly offset by higher interest on long-term debt and higher income tax expense.
Net earnings attributable to the Company's shareholders increased by $33.1 million. Items which impacted the year ended December 31, 2023 compared to the same period last year included:
A higher contribution from adjusted EBITDA of $14.1 million;
Insurance proceeds of $4.4 million received during the year related to a certain claim
A provision expense of $3.7 million in the current year compared to a provision expense of $16.0 million in the prior year related to certain claims; and
A gain on sale of funds to New York Life investments of $5.1 million, in connection with the strategic distribution partnership entered into in the first quarter of 2023.
Interest on lease liabilities, foreign exchange revaluation and other financial charges was $7.1 million lower, primarily due to favourable foreign exchange revaluation.
Amortization and depreciation was $3.7 million lower due to certain intangible assets being fully amortized in the prior year.
Partly offset by:
$12.1 million of higher interest on long-term debt and debentures and $9.5 million of higher income tax expense.
Subsequent to December 31, 2023
Leadership Announcements
The Company appointed Maxime Ménard as President and CEO, Fiera Canada and Global Private Wealth, effective January 8, 2024. Mr. Menard will collaborate closely with the Public Markets and Private Markets leadership teams to ensure alignment with the Company's strategic priorities. This completes the build-out of our regionalized distribution model which will drive closer proximity to clients, better knowledge of local markets and executive leadership for all employees in such regions. With expanded regional capabilities, Fiera Capital has a solid plan for growth by increasing sales and distribution resources, including entering into and opening offices in new key markets in order to develop additional business opportunities.
Dividend Declared
On February 27, 2024, the Board of Directors declared a quarterly dividend of $0.215 per Class A Share and Class B Share, payable on April 11, 2024 to shareholders of record at the close of business on March 14, 2024. The dividend is an eligible dividend for income tax purposes.
Additional details relating to the company's operating results can be found in the Company Management's Discussion and Analysis for the three months and year ended December 31, 2023 available 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, February 28, 2024, 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 March 6, 2024 by dialing 1-888-390-0541 (toll free), access code 504770 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.
Adjusted EBITDA (in $ thousands except for per share data)
FOR THE THREE MONTHS ENDED | FOR THE YEARS ENDED | ||||
December 31, 2023 | September 30, 2023 | December 31, 2022 | December 31, 2023 | December 31, 2022 | |
Net earnings | 42,864 | 12,236 | 4,467 | 66,273 | 31,522 |
Income tax expense | 11,985 | 2,353 | 1,675 | 19,625 | 10,123 |
Amortization and depreciation | 13,406 | 13,381 | 15,074 | 53,935 | 57,622 |
Interest on long-term debt and | 11,710 | 12,485 | 9,908 | 46,003 | 33,924 |
Interest on lease liabilities, foreign | (1,220) | 3,805 | 1,118 | 1,005 | 8,081 |
EBITDA | 78,745 | 44,260 | 32,242 | 186,841 | 141,272 |
Restructuring, acquisition related | 3,100 | 1,511 | 7,323 | 16,069 | 19,256 |
Accretion and change in fair value | 106 | (537) | (6,105) | (2,936) | (5,122) |
Share-based compensation | 2,474 | 3,423 | 2,470 | 12,355 | 20,639 |
Loss (gain) on investments, net | (124) | 419 | 893 | (835) | 1,447 |
Gain on sale of funds | — | (5,139) | — | (5,139) | — |
Other expenses (income) | (6,680) | 5 | 16,002 | (501) | 14,346 |
Adjusted EBITDA | 77,621 | 43,942 | 52,825 | 205,854 | 191,838 |
Per share basic | 0.73 | 0.41 | 0.51 | 1.98 | 1.87 |
Per share diluted | 0.56 | 0.31 | 0.50 | 1.56 | 1.84 |
Weighted average shares | 106,116 | 105,921 | 102,927 | 104,020 | 102,448 |
Weighted average shares | 139,543 | 141,294 | 104,640 | 131,783 | 104,190 |
Reconciliation to Adjusted Net Earnings (in $ thousands)
FOR THE THREE MONTHS ENDED | FOR THE YEARS ENDED | ||||
December 31, 2023 | September 30, 2023 | December 31, 2022 | December 31, 2023 | December 31, 2022 | |
Net earnings attributable to the | 39,418 | 11,067 | 2,509 | 58,452 | 25,353 |
Amortization and depreciation | 13,406 | 13,381 | 15,074 | 53,935 | 57,622 |
Restructuring, acquisition related and | 3,100 | 1,511 | 7,323 | 16,069 | 19,256 |
Accretion and change in fair value of | 364 | (340) | (5,784) | (1,916) | (3,213) |
Share-based compensation | 2,474 | 3,423 | 2,470 | 12,355 | 20,639 |
Gain on sale of funds | — | (5,139) | — | (5,139) | — |
Other expenses (income) | (6,680) | 5 | 16,002 | (501) | 14,346 |
Tax effect of above-mentioned items | (1,919) | (257) | (4,511) | (7,189) | (12,238) |
Adjusted net earnings attributable | 50,163 | 23,651 | 33,083 | 126,066 | 121,765 |
Per share – basic | |||||
Net earnings | 0.37 | 0.10 | 0.02 | 0.56 | 0.25 |
Adjusted net earnings | 0.47 | 0.22 | 0.32 | 1.21 | 1.19 |
Per share – diluted | |||||
Net earnings | 0.30 | 0.09 | 0.02 | 0.50 | 0.24 |
Adjusted net earnings | 0.37 | 0.18 | 0.32 | 1.00 | 1.17 |
Weighted average shares | 106,116 | 105,921 | 102,927 | 104,020 | 102,448 |
Weighted average shares | 139,543 | 141,294 | 104,640 | 131,783 | 104,190 |
Reconciliation to LTM Free Cash Flow (in $ thousands)
FOR THE THREE MONTHS ENDED | ||||||||
Q4 | Q3 | Q2 | Q1 | Q4 | Q3 | Q2 | Q1 | |
2023 | 2023 | 2023 | 2023 | 2022 | 2022 | 2022 | 2022 | |
Net cash generated by (used in) operating | 57,599 | 79,708 | 14,123 | (13,463) | 66,722 | 25,686 | 46,853 | (25,951) |
Settlement of purchase price obligations and | — | — | (1,500) | — | — | (3,476) | (23,901) | — |
Proceeds on promissory note | 1,500 | 1,510 | 1,460 | 1,536 | 1,497 | 1,455 | 1,375 | 1,334 |
Distributions received from joint ventures and | 1,723 | 1,617 | 502 | 4,252 | 2,513 | 3,621 | 4,338 | 6,330 |
Dividends and other distributions to NCI | (3,167) | — | (5,895) | — | 10 | — | (1,753) | (1,425) |
Lease payments, net of lease inducements | (4,690) | (3,837) | (4,925) | (4,510) | (4,607) | (4,396) | (4,221) | (4,306) |
Interest paid on long-term debt and | (6,299) | (12,174) | (12,019) | (10,379) | (9,713) | (8,191) | (8,299) | (7,427) |
Other restructuring costs | 2,075 | 1,226 | 452 | 1,180 | 1,056 | 470 | 160 | 418 |
Acquisition related and other costs | 420 | 130 | 341 | 716 | 527 | 153 | 680 | 1,412 |
Free Cash Flow | 49,161 | 68,180 | (7,461) | (20,668) | 58,005 | 15,322 | 15,232 | (29,615) |
LTM Free Cash Flow | 89,212 | 98,056 | 45,198 | 67,891 | 58,944 | 92,472 | 109,828 | 145,257 |
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, outlook and trends and Fiera Capital's growth, results of operations, performance, business prospects and opportunities and new initiatives, including initiatives that pertain to sustainability. 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", "foresee", "forecast", "project", "continue", "target", "intend" or the negative of these terms or other comparable terminology and similar expressions of future or conditional verbs, such as "may", "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, key employees, asset management industry and competitive pressure, reputational risk, regulatory compliance, information security policies, procedures and capabilities, litigation risk, insurance coverage, third-party relationships, indebtedness, market risk, credit risk, inflation, interest rates and recession risks, ownership structure and potential dilution and other factors described in the Company's Annual Information Form for the year ended December 31, 2023 under the heading "Risk Factors and Uncertainties" 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 risk 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 information, future events or circumstances or otherwise, 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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