Mr. Jean-Guy Desjardins reports

FIERA CAPITAL REPORTS THIRD QUARTER 2023 RESULTS

Fiera Capital Corp. has released its financial results for the third quarter ended Sept. 30, 2023.

"The end of the third quarter saw a significant shift in market sentiment resulting in a reversal in equity market performance and a large shift in the yield curve impacting bond markets. Unfavourable markets resulted in a reduction of $4.7-billion in our AUM [assets under management], of which $3-billion related to fixed income. In this weak market environment, we remain focused on our performance and dedicated to our clients. Our investment teams continue to execute on their mandates to be well positioned for when investors begin reallocating capital," said Jean-Guy Desjardins, chairman of the board and global chief executive officer. "Our regional distribution model is almost fully implemented with the recently announced appointment of Eric Roberts, executive director and chief executive officer, Fiera USA.

"The search for our fourth and final appointment, a Canadian CEO, is also in the final phases."

"We remain pleased with our operating performance in the face of market volatility, which has shown a year-over-year increase in base management fees. This performance along with our positive free cash flow enabled us to reduce our debt, as well as significantly improve our last 12-month free cash flow in the third quarter," said Lucas Pontillo, executive director and global chief financial officer. "I am also announcing that the board of directors has approved a dividend of 21.5 cents per share, payable on Dec. 18, 2023."

Highlights:

• AUM decreased by $8.9-billion or 5.4 per cent compared with June 30, 2023:
  • An unfavourable market impact reduced AUM by $4.5-billion, which included $3-billion related to fixed-income mandates. In addition, organic growth was negative $3.7-billion during the quarter. The sale of three public markets funds that were subadvised by PineStone to New York Life Investments also reduced AUM by $500-million and income distributions from private markets funds reduced AUM by $200-million.
  • Included in the negative net organic growth of $3.7-billion was $3.1-billion of outflows related to AUM subadvised by PineStone. Of this, $3.1-billion of outflows, approximately $1.1-billion was transferred directly to PineStone and $1.8-billion related to lost mandates as a result of clients exiting these strategies entirely. The remaining $200-million related to negative net contributions where clients rebalanced their portfolios to reduce their allocation to these strategies:
    • For the three months ended Sept. 30, 2023, of the $1.8-billion related to lost mandates as a result of clients exiting their position entirely, approximately $700-million related to National Bank Investments Inc.
• AUM decreased by $3.2-billion or 2 per cent compared with Dec. 31, 2022:
  • While a favourable market impact increased AUM by $6-billion on a year-to-date basis, this amount was offset by negative net organic growth of $8.3-billion, primarily in public markets. In addition, the sale of three public markets funds that were subadvised by PineStone to New York Life Investments impacted AUM by $500-million and income distributions from private markets funds reduced AUM by $400-million.
  • Negative net organic growth included $7.5-billion of outflows connected to AUM subadvised by PineStone, of which approximately $3.9-billion related to AUM that transferred directly to PineStone, while $2.6-billion related to lost mandates as a result of clients exiting these strategies entirely. The remaining $1-billion related to negative net contributions where clients rebalanced their portfolios to reduce their allocation to these strategies:
    • For the nine months ended Sept. 30, 2023, of the $7.5-billion of outflows connected to AUM subadvised by PineStone, $2.2-billion related to National Bank Investments, of which approximately $1-billion was transferred directly to PineStone.
    • National Bank Investments is also expected to withdraw its remaining $5.6-billion in AUM subadvised by PineStone by early 2025.
    • Going forward, excluding the AUM outflows related to National Bank Investments, management expects the AUM reduction from lost mandates transferring directly to PineStone to be in the range of $1-billion to $3-billion per year.

Third quarter financial highlights

The company's financial highlights reflect the following major items for the third quarter of 2023:

• Revenue decreased by $1.1-million, or 0.7 per cent, compared with Q2 2023. The decrease was due to lower base management fees in public markets and lower commitment and transaction fees, which were partly offset by higher performance fees in public and private markets, higher other revenues, and higher base management fees in private markets:
  • Revenue decreased by $1.9-million, or 1.2 per cent, compared with Q3 2022. The decrease was primarily due to lower share of earnings in joint ventures and associates and lower commitment and transaction fees from lower deal activity, which were partly offset by higher base management fees, performance fees and other revenues.
• Adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) decreased by $1.6-million or 3.5 per cent compared with Q2 2023, primarily due to lower revenues, which were offset by lower associated subadvisory fees and continued curbed discretionary spending holding selling, general and administration expenses relatively flat:
  • Adjusted EBITDA decreased by $1.3-million or 2.9 per cent compared with Q3 2022, primarily due to lower revenues and slightly higher overall selling, general and administration expenses which were muted by lower subadvisory fees and contained discretionary spending.
• Adjusted net earnings decreased by $5-million, or 17.4 per cent, compared with Q2 2023, primarily due to lower revenues, unfavourable foreign exchange and higher interest on long-term debt, which were partly offset by lower income tax expense:
  • Adjusted net earnings was essentially flat compared with Q3 2022, as lower revenues and higher interest on long-term debt and debentures were offset by lower income tax expense and lower foreign exchange expense.
• Net earnings attributable to the company's shareholders increased by $600,000 compared with Q2 2023, primarily due to a gain on sale of funds in connection with the New York Life Investments partnership and lower income tax expense, which were partly offset by unfavourable foreign exchange and lower revenues:
  • Net earnings attributable to the company's shareholders increased by $2.4-million compared with Q3 2022 primarily due to the gain on sale of funds and lower income tax expense, which were partly offset by higher interest on long-term debt, higher accretion and fair value change on purchase price obligations, and lower revenues.
• LTM free cash flow increased by $5.6-million compared with Q3 2022. The increase was mainly due to higher cash generated by operating activities, primarily from changes in non-cash working capital, which was partly offset by lower LTM net earnings. In addition, lower cash was used in the settlement of purchase price obligations, which was partly offset by higher interest on debt and lower distributions from joint ventures and associates.

Year-to-date financial highlights

The company's financial highlights reflect the following major items for the nine-month period ended Sept. 30, 2023, compared with the nine-month period ended Sept. 30, 2022:

• Revenue decreased by $21-million or 4.2 per cent, primarily due to 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, partly offset by higher base management fees in private markets.
• Adjusted EBITDA decreased by $10.8-million, or 7.8 per cent, primarily due to lower revenues, partly offset by lower employee compensation costs and subadvisory fees.
• Adjusted net earnings decreased by $12.8-million, or 14.4 per cent, primarily due to lower revenues and higher interest on long-term debt and debentures, partly offset by lower SG&A (selling, general and administrative), excluding share-based compensation, favourable foreign exchange revaluation and lower income tax expense.
• Net earnings attributable to the company's shareholders decreased by $3.8-million. Items which impacted the nine-month period ended Sept. 30, 2023, compared with the same period last year included:
  • A lower contribution from adjusted EBITDA of $10.8-million;
  • A provision of $6.3-million related to certain claims in the current year;
  • A $10.3-million increase in interest on long-term debt, due to rising interest rates.
• Partly offset by:
  • A gain on sale of funds of $5.1-million in connection with the New York Life Investments partnership;
  • Favourable foreign exchange.

Third quarter business highlights

Strategic transactions

In connection with the company's previously announced strategic distribution partnership with New York Life Investments (NYLIM), on Sept. 13, 2023, the company sold four funds to NYLIM which were brought into its MainStay Funds lineup. A gain on sale of funds of $5.1-million was recognized during the quarter.

Subsequent to Sept. 30, 2023

Leadership announcements

As part of the company's global expansion strategy, the company appointed Mr. Roberts as executive director and CEO, Fiera USA, effective Nov. 13, 2023. Mr. Roberts will directly lead the marketing and distribution teams across the United States and provide executive leadership for all employees in the region. This follows the previously announced appointments of Klaus Schuster and Rob Petty as executive director and CEO of Fiera EMEA (Europe, Middle East and Africa) and Fiera Asia, respectively.

These appointments allow the company to expand and strengthen its presence in the United States, EMEA and Asia, respectively, as the company continues to implement its new regionalized distribution model with a focus on building local capabilities.

Dividend declared

On Nov. 7, 2023, the board of directors declared a quarterly dividend of 21.5 cents per Class A share and Class B share, payable on Dec. 18, 2023, to shareholders of record at the close of business on Nov. 20, 2023. The dividend is an eligible dividend for income tax purposes.

Additional details relating to the company's operating results can be found on its 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 a.m. ET on Wednesday, Nov. 8, 2023, 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 through 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 Nov. 15, 2023, by dialling 1-888-390-0541 (toll-free), access code 896532 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.

About Fiera Capital Corp.

Fiera Capital is a leading independent asset management firm with a growing global presence. The company delivers customized and multiasset 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 its mission of being at the forefront of investment management science to create sustainable wealth for clients.

We seek Safe Harbor.