Mr. Kish Kapoor reports

RF CAPITAL REPORTS THIRD QUARTER 2023 RESULTS

RF Capital Group Inc. had revenue of $88-million, up $1.9-million or 2 per cent from Q3 2022 on 3-per-cent growth in AUA (assets under administration). Revenue has been consistent across each quarter of 2023, as AUA (2) has tracked closely with the Toronto Stock Exchange index and has remained around $35-billion to $36-billion. Net income before taxes was up $1.5-million from Q3 2022 and adjusted EBITDA (1) (earnings before interest, taxes, depreciation and amortization) of $17-million was unchanged.

Kish Kapoor, president and chief executive officer, commented: "Our third quarter results are primarily attributable to the strength of our fee-based revenues amid challenging markets. AUA (2) increased year over year, resulting in a bump in overall revenues. Since June and after extensive due diligence processes, we extended offers to several adviser teams to join Richardson Wealth and believe that many of them will choose to join us in the coming months. This, along with Richardson Wealth being recognized as a Great Place to Work for the sixth consecutive year, gives us confidence we are moving the business in the right direction."

Q3 2023 financial highlights (versus Q3 2022)

Revenue:

• Revenue increased 2 per cent to $88-million.
• Wealth management revenue increased 5 per cent to $70-million.
• Fee revenue (1) was 91 per cent of commissionable revenue, unchanged from the comparative period.
• Interest revenue contributed $12-million to revenue, consistent with Q3 2022.
• Insurance revenue increased to $3.1-million, up 55 per cent.

Profitability and cash flow:

• Adjusted EBITDA (1) was flat at $17-million.
• Free cash flow available for growth (1) decreased by $1.1-million to $11.3-million.
• Free cash flow (1) was up by $7.3-million to $5.9-million.

Assets under administration (1) (2) of $34.7-billion:

• Ending AUA (1) (2) and average AUA (1) (2) were both up 3 per cent.

Balance sheet:

• Net working capital (1) was $91-million.
• The company had a $200-million revolving credit facility ($81-million drawn, which is unchanged).

(1) Considered to be non-GAAP (generally accepted accounting principles) or supplemental financial measures, which do not have any standardized meaning prescribed by GAAP under IFRS (international financial reporting standards) and are therefore unlikely to be comparable with similar measures presented by other issuers. For further information, please see the non-GAAP and supplemental financial measures section of the management's discussion and analysis (MD&A).

(2) AUA is a measure of client assets and is common in the wealth management business. It represents the market value of client assets managed and administered by the company.

Great Place to Work

Although the company's digital transformation has proved to be more challenging than expected, the constructive feedback it has received from its people, both anecdotally and formally, through a Great Place to Work survey is encouraging. This survey, conducted in September, captured the engagement levels of employees and advisers. Notably, 78 per cent of employees participated, a very positive indicator.

Eighty per cent of respondents agreed with the statement, "Taking everything into account, I would say this is a Great Place to Work," and 84 per cent agreed with the statement, "I am proud to tell others I work here." This contributed to the company being recognized as a Great Place to Work for the sixth consecutive year. The survey results also indicated that management needs to continue working closely with Fidelity, Envestnet and adviser teams to identify and address gaps, improve service and simplify processes to ensure an extraordinary experience.

New performance metrics

The company introduced two new financial performance metrics in Q3, in part due to feedback from the investment community. These two metrics are free cash flow available for growth and free cash flow.

Free cash flow available for growth is the cash flow that the company generates before any investments in growth or transformation initiatives. Free cash flow is the net cash flow that the company generates from its continuing operations after considering its investments in growth and transformation.

In the third quarter, the company generated free cash flow available for growth of $11.3-million, down $1.1-million from last year, primarily because of higher interest costs. Free cash flow was $5.9-million, up $7.3-million from Q3 2022, mainly due to lower capital expenditures for office buildouts.

Outlook

The company has reduced its 2023 outlook slightly based on recent equity market weakness and now expects that full-year adjusted EBITDA will be slightly below the level last year.

Release of escrowed shares

On Oct. 20, 2023, the company celebrated Richardson Wealth's third anniversary. In accordance with the terms of the Richardson Wealth share purchase and related escrow agreements, the final 30 per cent of the RF Capital common shares subject to the original escrow have been released and were delivered to the vendor shareholders on Nov. 11, 2023. Of the released escrowed shares, 1.5 million will be delivered to Richardson Financial Group Ltd. and its wholly owned affiliate, and 1.4 million will be released to Richardson Wealth advisers and employees, and other shareholders. With this release, the company's public float now represents 56 per cent of its total common shares outstanding.

Preferred share dividend

On Nov. 2, 2023, the board of directors approved a cash dividend of 23.3313 cents per Series B preferred share for a total of $1,073, payable on Dec. 29, 2023 (1), to preferred shareholders of record on Dec. 15, 2023.

(1) In the event that the payment date is not a business day, such dividend shall be paid on the next succeeding day that is a business day.

Q3 2023 -- select financial information

The attached table presents the company's financial results for Q3 2023, Q2 2023 and Q3 2022.

Items of note

The adjusted financial results presented in the MD&A exclude the impact of transformation program expenses, costs associated with legacy legal matters and the amortization of acquired intangibles.

Q3 2023

The third quarter did not include any transformation costs and other provisions.

Q2 2023

The second quarter included $400,000 of pretax transformation costs and other provisions:

• $800,000 of pretax charges related to outsourcing the company's carrying broker operations to Fidelity ($400,000 after tax);
• $400,000 of pretax recoveries related to legacy legal and other transformation matters ($300,000 after tax).

Q3 2022

The third quarter of 2022 included $2.1-million of pretax charges for the company's continuing transformation ($1.5-million after tax). These charges are related largely to developing the company's growth strategy and outsourcing its carrying broker operations.

Each quarter noted above also included $3.3-million of pretax amortization of acquired intangible assets ($2.4-million after tax). The amortization arose from intangible assets created on the acquisition of Richardson Wealth and will continue through 2035.

Non-GAAP and supplemental financial measures

In addition to GAAP prescribed measures, the company uses a variety of non-GAAP financial measures, non-GAAP ratios and supplemental financial measures to assess its performance. The company uses these non-GAAP financial measures and supplementary financial measures (SFM) because it believes that they provide useful information to investors regarding its 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 with 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 the company's 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 the company's 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.

Supplemental financial measures

A supplementary financial measure is a financial measure that is not reported in the company's 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 MD&A include AUA, recruiting pipeline, net new and recruited assets, and working capital. 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 with other companies. The composition and explanation of a SFM is provided in the MD&A, where the measure is first disclosed if the SFM's labelling is not sufficiently descriptive.

About RF Capital Group Inc.

RF Capital is a Toronto Stock Exchange-listed wealth management-focused company. Operating under the Richardson Wealth brand, the company is one of the largest independent wealth management firms in Canada with $34.4-billion in assets under administration (as of Oct. 31, 2023) and 21 offices across the country. The firm's adviser teams are focused exclusively on providing strategic wealth advice and innovative investment solutions customized for high-net-worth or ultrahigh-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.