Mr. Kish Kapoor reports

RF CAPITAL REPORTS FOURTH QUARTER AND FISCAL 2023 RESULTS

RF Capital Group Inc. had revenue of $351-million in fiscal year 2023, consistent with the prior year. Revenue was supported by assets under administration (AUA) of $35.2-billion at Dec. 31, 2023, which was up $288-million from the prior year. AUA increased as recruiting, net new assets and strong markets in the fourth quarter offset the departure of adviser teams that managed $2.5-billion in AUA. Adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) decreased 3 per cent to $59.5-million, because of the revenue change and a 2.6-per-cent increase in adjusted operating expenses.

In the fourth quarter of 2023, the company generated revenue of $86.7-million, down $1.8-million or 2 per cent from the prior year. Revenue benefited from a 1-per-cent increase in wealth management fees, but interest income declined by $1.8-million due to lower client cash and margin balances. Although adjusted operating expenses were flat, the decrease in revenue led to a $2.5-million decline in adjusted EBITDA to $14.5-million. Similarly, adjusted EBITDA was down $2.4-million quarter-over-quarter, primarily as a result of $3.5-million of restricted share unit and deferred share unit mark-to-market recoveries recorded in third quarter 2023.

There were no adjusting items to EBITDA in third quarter or fourth quarter of 2023, reflecting the end of RF Capital's transformation journey.

For more details on the company's results, please refer to its 2023 management's discussion and analysis.

Kish Kapoor, president and chief executive officer, commented: "Our results reflect the challenges of transforming our business during a period of uncertainty. But with the hard work of building the foundation largely behind us, we finished the year strongly with AUA increasing $800-million in the last two months of the year. That trend, together with three adviser teams that manage $800-million of AUA joining our Victoria office in November, position us for a good start to 2024."

Mr. Kapoor continued: "Looking forward, we are embarking on a journey focused squarely on our three-pillar growth strategy -- driving organic, recruiting and inorganic growth -- and we are doing so with modern digital tools and a platform built for scale. I am confident that we can now begin to unlock the long-term value of the investments we have made to pursue opportunities in an industry that is expected to double in size in the next decade."

Deepening capabilities

Dave Kelly joined the company as chief operating officer of its operating subsidiary, Richardson Wealth. Mr. Kelly's career spans more than 25 years of progressively senior roles in financial services. Most recently, he was head, Gluskin Sheff & Associates, a prominent independent Canadian advisory firm. Prior to that, he spent 14 years in wealth management at Toronto-Dominion Bank, culminating in the role of senior vice-president and head, private wealth management and financial planning. In choosing Richardson Wealth after interviewing 50 industry professionals, he said: "With the significant investments Richardson Wealth made to dramatically scale the business now in place, I am drawn to the firm's adviser-centric culture, the rich history of the name on the door, and the vision to become the brand of choice for Canada's top advisers and their clients." Alongside Neil Bosch and James King, the recently appointed regional heads of adviser experience and growth, Mr. Kelly will have primary responsibility for enhancing the overall experience for advisers and driving profitable organic growth.

2026 recognition payments

As the company's success is dependent on retaining and attracting advisers, management was encouraged that in a recent Great Place to Work survey 85 per cent of advisers who responded to the survey said they are proud to tell others that they work at Richardson Wealth. To recognize them for their continued loyalty and pursuant to an agreement reached during the company's 2020 reorganization, advisers who were with the firm in 2020 and are still here were granted a second tranche of recognition awards with a value of $15.2-million. The awards will pay out in November, 2026, to advisers who remain with Richardson Wealth until that time.

New cash flow metrics

In Q3 2023, the company introduced two new financial metrics to enhance disclosure of its operating performance: free cash flow available for growth and free cash flow. These new cash flow disclosures were developed in part due to feedback it received from the investment community. Free cash flow available for growth demonstrates the cash flow that RF Capital has available to invest in growth initiatives such as recruiting, and free cash flow highlights the residual after growth investments and transformation costs. In 2023, the company generated free cash flow available for growth of $35.4-million. Free cash flow improved from 2022 but was still negative $2.6-million. It was negative primarily because of $18.8-million of recruiting payments and transformation related costs, including payments to resolve legacy legal matters.

Outlook and key performance drivers

Due to the wide range of viewpoints on market growth next year, RF Capital will not be communicating its expectations for EBITDA going forward. It believes that this approach is consistent with industry practice.

With respect to the drivers of the company's financial performance and profitability:

• AUA will be supported by growth in the company's existing advisers' client assets and recruiting. AUA is also highly correlated with equity market movements.
• The 2023 departure of advisers who managed $2.5-billion of AUA will impact average AUA and revenue growth rates in 2024.
• Interest revenue is likely to follow prime rate trends, which are expected to decline from current levels.
• Transaction activity underlying the company's corporate finance revenue could rebound but is likely to remain subdued through the first half of the year.
• Although the company expects inflation to continue at elevated rates, it is committed to finding operating cost savings and efficiencies in its business as a partial offset.
• The $4.9-million of RSU and DSU mark-to-market recoveries that reduced the company's operating expenses in 2023 (compared with $2.3-million in 2022) may not repeat in the future.

Preferred share dividend

On Feb. 29, 2024, 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 March 29, 2024, to preferred shareholders of record on March 15, 2024.

Q4 and fiscal 2023 conference call

A conference call and live audio webcast to discuss RF Capital's fourth quarter and fiscal 2023 financial results will be held on Friday, March 1, 2024, at 10 a.m. (EST). Interested parties are invited to access the conference call on a listen-only basis by dialling 416-406-0743 or 1-800-898-3989 (toll-free) and entering participant passcode 8122652 followed by the pound key, or via live audio webcast on Richardson Wealth's website. A recording of the conference call will be available until Thursday, April 4, 2024, by dialling 905-694-9451 or 1-800-408-3053 and entering access code 5042186 followed by the pound key. The audio webcast will be archived on Richardson Wealth's website.

Fiscal 2023 –- select financial information

The attached table presents the company's financial results for fiscal 2023 and the two preceding periods.

About RF Capital Group Inc.

RF Capital Group 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 $35.8-billion in assets under administration (as of Jan. 31, 2024) and 22 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 Centre for Fiduciary Excellence for its separately managed and portfolio management account platforms. Richardson Wealth has also been recognized as a Great Place to Work, 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.

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