RCS Capital Struggles to Find Footing in Second Quarter

RCS Capital Struggles to Find Footing in Second Quarter

RCS Capital, the broker/dealer network assembled by real estate investor Nicholas Schorsh over the past several years, reported a $66 million loss in profits in the second quarter and a net loss of over 300 financial advisors.

The company also announced Thursday that it would sell its wholesale business unit to Apollo for $25 million; CEO Michael Weil and CFO Brian Jones will leave the firm.

“When the sale of the wholesale division is complete, RCS Capital will be more focused, simplified and better positioned to continue providing outstanding service to our advisors and their retail clients throughout the country," Larry Roth, CEO of Cetera Financial Group, said in a statement.

But investors were not so sure. After trading at a 15 percent premium for much of Thursday amid rumors of an acquisition, RCS Capital’s stock closed the day down 29 percent.

 

Here are the highlights:

  • Overall RCS Capital reported $645.4 million in revenues for the second quarter, $529 million of which was in retail revenues, up 7 percent from the $494.5 million the unit reported a year ago.
  • Net income for the firm overall was a $66.1 million loss, or $0.17 per fully diluted share, which missed analysts’ expectations by $0.13, according to Seeking Alpha.The retail division’s net income was a loss of $23 million.

  • Before interest, taxes, depreciation, and amortization, retail lost $14.9 million, which the firm said was due to lower strategic partner revenue, reduced sales of direct participation programs, increased conference expenses resulting from a change in accounting policy, and higher technology costs.

  • RCS Capital had $238.7 billion in assets under administration last quarter, up 11.4 percent from a year ago. Assets Under Management were $47.2 billion, up 19.8 percent from June 2014.

  • RCS Capital reported 9,505 at the end of the second quarter, down 34 from the 9,539 advisors the firm reported with the firm at the end of May. Additionally, the firm reported recruiting 267 advisors in the second quarter.

 

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