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CI Financial

Corient Growth Offsets CI Financial's Q3 Asset Losses in Canada

On an earnings call this week, CEO Kurt MacAlpine said to expect more acquisitions at a less frenzied pace than past years as the company continues to pay down debt.

Toronto-based CI Financial released third-quarter earnings this week, reporting 31.5% annual asset growth in its rebranded U.S. wealth management business, Corient, compared with nearly 26% company-wide.

Corient and CI’s Canadian custody business were the only segments to increase assets sequentially in the quarter, the latter due to the conversion of about C$14.3 billion in client assets. The Canadian asset management and wealth businesses both saw reductions in each of the last two quarters, while still growing annually by 4% and 10%, respectively. Executives blamed risk-averse investing behavior for the bulk of 2023 drawdowns.

With $197 billion in client assets, Corient represented nearly 47% of all CI assets at the end of the third quarter and reported an adjusted EBITDA of $99.3 billion, up from around $63.9 billion a year ago and $94.2 billion in the last quarter. About 62% was attributable to shareholders after subtracting non-controlling interest due to a consortium of institutional investors that bought a 20% share in the U.S. business earlier this year.

The company used a large chunk of the $1 billion received in the sale to pay down burgeoning debt that resulted primarily from a stateside shopping spree that ultimately formed the basis for Corient. Debt reduction accounts for half of CI’s 2023 capital allocation at about $920 million, while about 20% ($374 million) is being put toward continued M&A activity. About 25 percent is devoted to stock buy-back programs and the remaining 5% represents dividend payments.

“There’s a little bit of tail of guaranteed payments from acquisitions that were completed through the second quarter that will remain the obligation of Canada,” said CEO Kurt MacAlpine. “But those will be settled up in the coming months. All other contingent considerations and new acquisitions are the obligation of the U.S.”

Settling outstanding interest payments is likely to increase debt leverage—at 3.3% at the end of Q3—in the current quarter, said MacAlpine, declining to make predictions regarding 2024. But all U.S. acquisitions will be funded from Corient balance sheets moving forward, as will all remaining acquisition liability.

MacAlpine said the stateside rebranding and unification effort has been “well received.” He called it an “important step in integrating those operations and positioning Corient for continued growth as one of the largest private wealth firms in the U.S.”

“We will continue to make selected acquisitions, adding high-quality businesses while expanding our geographic reach,” he said.

Corient closed on a $2.3 billion AUM acquisition in July, adding another $10 million in revenue for the quarter through acquisitions, and has since purchased an Indianapolis firm with around $1.4 billion in assets.  

Company-wide, CI reported adjusted EBITDA of $276.6 million, up from $25.9 million a year ago and $272.3 million in the last quarter. EBITDA attributable to shareholders was $237.8 million, and adjusted diluted earnings per share were $0.81.

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