Accord Financial Corp. (ACD) Earnings Call Transcript & Summary

Hello, and welcome to the Accord Financial Corp. Annual General Meeting. Please note that today's meeting is being recorded. If you participate in today's meeting and disclose personal information, you'll be deemed to consent to the recording, transfer and use of same. If you disclose personal information of another person in today's meeting, you'll be deemed to represent and warrant to Computershare and the corporation that you first obtained all required consents for the disclosure, recording, transfer and use of such personal information from all appropriate persons before your disclosure. During the meeting, we will have a question-and-answer session. You can submit questions or comments at any time by clicking on the Q&A tab. It is now my pleasure to turn today's meeting over to Simon Hitzig, President and CEO. Mr. Hitzig, the floor is yours.

Thank you, Ryan. The meeting will now come to order. Welcome to the 48th Annual Meeting of Shareholders of Accord Financial Corp. I'm Simon Hitzig, President and CEO. This is the formal part of the meeting, which will be followed by an informal part where you will be updated on the company's refinancing plan and our outlook for the year and have an opportunity to pose questions. With this year's AGM being hosted online, there are a couple of things to note. First, you can ask questions through the chat function anytime during the meeting, which we will either answer during the call or follow-up afterwards if you provided contact info. Second, you will have an option to vote your shares online during each agenda item. However, if you voted by mail or online before the meeting, you do not need to vote again during the meeting. Your votes have already been registered. In accordance with the bylaws of the company, I will act as Chairman of the meeting, and I appoint Irene Eddy, Senior Vice President of the company, to act as Secretary. I further appoint Haseeb Iftikhar of Computershare Trust Company of Canada as scrutineer. The notice calling this meeting of shareholders was mailed on June 2, 2026, to all shareholders of record May 30, 2026. The Secretary will annex the notice and affidavit of mailing to the minutes of this meeting. Haseeb, Will the scrutineer please submit and read the report on attendance?

Thank you, Mr. Chairman. Scrutineer's interim report goes as follows: 18 shareholders by proxy representing 6,479,458 shares, the total issued and outstanding as at record date is 8,558,913 shares, the percentage of outstanding shares represented at the meeting is 75.7%. Thank you.

Thank you. The notice having been given in accordance with the bylaws and a quorum being present, I declare that this meeting is duly constituted for the transaction of business. A few notes on voting procedure. As described earlier, Computershare will tabulate voting on each agenda item by combining votes received before the meeting with real-time votes cast during the meeting, keeping in mind that votes cast during the meeting will override votes cast for the same shares if they were also voted before the meeting. And that's why I suggest you do not vote for a second time during the meeting. Let's move on to the agenda items for the meeting. Receipt of the audited consolidated financial statements of the corporation for the year ended December 31, 2025, and the auditor's report thereon. The first item of business is to receive the consolidated financial statements as described for the fiscal year December 31, 2025, including management's discussion and analysis, the accompanying notes, together with the auditor's report thereon, all contained in the annual report mailed and made available electronically to shareholders. The annual report is also posted to the Accord website and on sedarplus.ca. Receipt of those documents is, therefore, acknowledged. Let's move on to election of directors, the next item of business. As set out in the management information circular, management is nominating the following as directors: Gary Prager; Stephen Warden; and Simon Hitzig. Will someone move to nominate?

Yes. Mr. Chairman, it's Stephen Warden. I will nominate the foregoing persons for election to the Board of Directors of the company to hold office until the next annual meeting of the shareholders or until their successors are elected or appointed.

Thank you. May I have the nomination seconded?

Yes, Mr. Chairman, this is Irene Eddy and I second the nomination.

Thank you. The resolution is open at this time to online voting. I'll just pause for a moment. [Voting]

I note that the vast majority of shares voted in favor of the nominees pursuant to the scrutineer's report, and therefore, declare the foregoing persons elected directors of the company to hold office until the next Annual Meeting of Shareholders or until their successors are duly elected or appointed. Note that final voting results will be included in a press release issued late today and posted on the Accord website. The next item of business is the appointment of auditors for the current year and authorizing the directors to fix their remuneration. I ask someone pleased to move the resolution appointing the auditors for the current year.

It's Stephen Warden, Mr. Chairman. Be it resolved that KPMG LLP, Chartered Professional Accountants, be appointed auditors of the company until the next annual meeting of the shareholders and the Board of Directors be authorized to fix their remuneration.

May I have that resolution seconded?

Yes, it's Irene Eddy, and I second the resolution.

This resolution, like the previous is open to online voting. If there are any shareholders would like to do so, I'll pause for a moment. [Voting]

Again, I note that the vast majority of shares have been voted in favor pursuant to the Scrutineer's report, and therefore, declare the resolution is carried. As with the previous resolution, final voting results will be included in the press release issued tonight and posted on the Accord website. Is there any further business before we move to the informal part of the meeting? I don't see any notes to that effect in the meeting chat. So if there's nothing further, I will ask the secretary to move to terminate the formal part of the meeting, after which I will update you on the affairs of the company.

Mr. Chairman, I move that the meeting be concluded.

Is there a second?

I will second the motion. Stephen Ward.

Thank you. I declare the motion carried and the formal part of the meeting concluded. Again, thank you for tuning in. The -- I have a brief slide presentation, which I will run through now. Let me just make sure the slides are working. All right. So this slide presentation is going to have 2 parts. I am going to address the transformation that a cord has undergone over the last year or 2, which is significant and is, by and large, complete. And that part of the presentation is largely backwards looking. The second part of the presentation, I am going to cover Accord's refinancing plan, which is largely forward-looking. And as we've noted in much of our public disclosure, we are working on a comprehensive refinancing plan, which will affect all parts of the balance sheet. And we expect the bulk of that part of our plan to unfold between now and the fourth quarter. And so that is in effect, a forward-looking plan. And so that's the reason why I've held on this slide. Given that it is forward-looking, it is subject to complication, and there can be no assurances that we succeed in the plan. But I am going to provide details after I talk about our transformation. So over -- as most of you know, Accord, from around 2014, had a plan, which was to broaden the business. And I use broaden to include expanding our product line, which we did by developing products and by buying companies, and also to expand the range of businesses we were in to include media finance, for example. And so from about 2014 until roughly 2 years ago, that was our plan was to expand and diversify operating in both Canada and the U.S. with a very broad product line that included some niche businesses like media finance. About a year ago or really beginning more like 18 months ago now, we reviewed our strategy and changed. And part of that was related to the fact that our capital was constrained, largely owing to a fraud that occurred at the end of 2023. But we repositioned the company also in response to market intelligence that we gathered in both the equity markets and the debt markets. And we had through various strategic initiatives, we heard the message that a court had become too complicated. And by entering businesses, including media finance, perhaps the business had become less interesting to investors, given that it appeared as though we weren't as focused as we might have been. So owing both to the capital constraint and to a strategic review, we made the decision to refocus the business in the area where we felt that we had the best opportunity to grow and be profitable. And so we've undertaken numerous initiatives over the last couple of years eventually resulting in the current position, which is exactly where we intended to land. And we are calling this Accord 2.0, which is a refocused and streamlined business aimed at leveraging our distinct advantages in Canada. And as most of you know, this is where we began in 1978. We have nearly 50 years of continuous operating history and brand building and reputation building in this country. And as I'm going to run through in a minute, we have some unique advantages in this market that we did not have in the United States. So this is how we got here. We did a number of things, which are -- I'll start by saying they were eliminations, call it. So we did exit the U.S. market. That was an initiative that began in the fall of 2024 when we sold our U.S. Equipment Finance business. And that transformation was completed in Q1 2026 when we sold our media finance business in Los Angeles, along with our remaining ABL business, which was headquartered in Greenville, South Carolina. All of that was completed. That work began in 2025, by the way, but was completed with a flurry of transactions in the second half of Q1 2026. Along with exiting the U.S. market, we also exited largely our lender finance accounts. And this, again, is partly owing to our capital constraints, our lender finance accounts tended to be quite large, but also was in response to feedback from potential lenders and from investors as we came to understand that lender finance is not in keeping with the mission of Accord 2.0. At the same time, we exited all of our large -- what we would have called large accounts with one exception, which we've written about extensively in the recent public disclosures. So whereas the previous iteration of Accord held a number of accounts over $10 million, we now have no accounts -- rather, we have 1 account remaining, which is over $10 million. So while the portfolio is significantly smaller today than it was a year ago, it is broadly diversified. As I said, only 1 account over $10 million. The next largest account today would be in the range of around $7 million and we have hundreds of accounts under $2 million. So here we are. After significant effort, time, attention and resources devoted to a transformation we have landed exactly where we intended to land, which is we are laser focused on our home market here in Canada and on supporting SMEs and entrepreneurs from coast to coast. Also we've abandoned or moved away from, let's say, the holding company model. So as recently as 2 years ago, Accord operated effectively as a holding company with multiple operating units. We previously had 6 businesses, each of them relatively distinct, each of them with a President and a senior team and each of them effectively operating in silos with a few exceptions. As I think everybody on the call understands we have shared financing over the years. There's 1 treasury function, 1 corporate CFO and 1 senior debt facility, which was shared amongst all of the operating businesses. But beyond that, we operated really as a holding company. Well, those days have ended. Now that we are focused on a single market with a single range of products, we now operate truly as 1 Accord. We have brought together our operating platform. We are only a few months away from completing a technology transformation, whereby a single platform supports our business. And from an org structure standpoint, we now have 1 org structure, which is led by James Zhang, who is President of the Canadian Lending Operation, and his team reports to him regardless of where they sit from coast to coast. So it's 1 team, it's 1 market, it's 1 platform, and the entire business now is laser focused on raising the bar on lending to SMEs in Canada. One of the key advantages and the reason why I put a slide together on this is that, in Canada, we have several distinct advantages, first and foremost of which is our product line. While Accord competes with dozens and dozens of competitors from coast to coast, almost all of those competitors focus on a single product. So for example, there are many leasing companies, equipment leasing companies in Canada. There are many factoring companies in Canada. There are a handful of ABL companies in Canada. There are a few dozen online lenders to small businesses in Canada. But each of those competitors, by and large, offers 1 product. Accord is differentiated in that we offer many products. In fact, almost a full range of lending products for any SME from coast to coast. The unique advantage here is twofold. One is our borrowers and our referral sources don't need to know what products they are seeking. All they need to know is they need funding. And if they call Accord, they are highly likely to find a solution among our broad suite of products. Second, once a client is onboarded with Accord, they have freedom to move from product to product as the business evolves. And that may be a very small entrepreneur business with a few million dollars of revenue that maybe gets onboarded with an 18-month $100,000 term loan, but from there, as we get to know the client and they get to know us, the client is able to migrate as the business grows or changes or the needs evolve. Besides the banks and credit unions in Canada, there are very few competitors aimed at SMEs and entrepreneurs that offer that breadth of product. In addition, the product line is partly in at least several cases since the pandemic, we have some unique products that are supported by Export Development Canada or EDC, which, again, in the nonbank sector, is unique in Canada. So here we are. I think this is my final comment on Canada. Accord 2.0 is supporting entrepreneurs, creating sustainable value for shareholders. We are leveraging our home Accord advantage with a brand and market presence built since 1978, nearly 50 years. With a broad product line and deep expertise, we are able to compete with fragmented competition, which is generally single product focused and very often regional focused. We have a differentiated product set, and we also have a demonstrated history of growth in this country both through the pandemic and at many other points in our 48-year history. We operate coast-to-coast. Again, this is unlike most of our competitors, with presence in Montreal, Toronto, Calgary, Vancouver and a number of other support and sales staff located in other parts of the country. And as I mentioned, we have an unparalleled solution set with the industry -- the nonbank industry's broadest range of products from receivables and inventory finance, equipment finance, small business lending programs and EDC-backed products, allowing clients to join us with a single product and then evolve with us as their needs evolve. So that's our strategic repositioning. We feel very, very good about where we've been able to land through a series of transactions that were extremely labor-intensive for the entire senior team, which, as previously reported, were completed on March 31. So we're now in the first quarter really of Accord 2.0 with our Canada focused business plan and the team that we want leading the business and we're starting to put on the kinds of business now that we intended to as we landed at Accord's 2.0. So I do want to say a few words about our refinancing plan. While strategically, we are positioned exactly as we hope to be, our balance sheet is not conducive to supporting Accord 2.0 to hit the growth targets that we intend to hit. And as we've reported numerous times in our public disclosures, the balance sheet needs to also transform from what it is, what it was into what it needs to be to support Accord 2.0. And so let me just say a few words about what we're doing in that regard. First up, as reported recently, Accord intends to transform its subordinated debt of which there are several layers, including related party demand notes and term notes along with publicly traded debentures and some privately held debentures as well. We are seeking to amend and extend all of that subordinated debt. Our goal is to extend, as reported publicly, for 5 years contingent on a senior bank refinancing with the flexibility to pay interest in cash or to accrue through maturity. Our strong belief is that this is the first step, and this first step must be completed to set the stage for a senior debt refinancing. We feel confident that we will achieve this goal. The key milestone is a very late July debenture holder meeting, at which we are proposing to make these changes, amend and extend in addition to changes to the interest rate and a few other features. If we are able to successfully amend and extend the subordinated debt, it will be -- it will present a far more compelling opportunity for a new senior lender to step in and refinance our banks. Our feeling -- more than our feeling has been counseled by all of our financial advisers. If the subordinated debt is owing and do immediately in the near term or even shortly after a senior debt refinancing, it's unlikely that a new lender will step in and replace our banks. A new lender is going to want to know that the rest of the balance sheet is clean and that there are no hurdles to the senior debt refi. So that's goal #1, subordinated debt. After that or the process rather is concurrent, but closing after July, we intend to refinance the bank facility, which is currently funded by 6 banks, 2 in the U.S. and 4 in Canada. As previously reported, our bank debt has shrunk from roughly $300 million a few years ago at the time of the fraud at the end of 2023. It was about $148 million at the end of 2025, and the bank debt is now down to $53 million. All of that intended to set the stage for a refinancing to provide a number that is small enough to be a nice entry point for a new lender or lenders to replace our banks assuming the subordinated debt is amended and extended. So we are seeking a new facility. We expect -- or at least we are aiming to close that in Q4. October 31 is our target date. And we're seeking a new lender or a group of lenders that will provide flexible senior debt to support what I described as a -- quite a diverse range of products here in Canada. Although keeping in mind that being in a single country largely with 1 currency and a more diversified loan portfolio should be simpler to finance, at least that's our intention. Assuming we get the subordinated debt refinanced and the senior debt refinanced, we will be in a strong position to execute the growth plan. And our growth plan looks a lot like our growth looked through the pandemic when we presented a similar product line to Canadian entrepreneurs at a time -- at a similar -- in a similar configuration, and we grew very nicely in 2020, '21 and '22. So it's our hope to resume that growth path and prove again why Accord has earned its metal here in Canada. Along with that, we intend to eliminate the very, very heavy expenses that we've incurred over the last couple of years in managing our bank facility and managing the various initiatives that we've undertaken both on the M&A front and on the refinancing front. And this is an army of consultants, financial consultants, legal counsels, both on our behalf and on our bank's behalf that Accord has been funding at extreme expense. So that's our plan. If we are successful between now and October 31, we will be in a strong position to get back to growth and to restore the shareholder value that has eroded in recent years and also ultimately to refinance or repay the subordinated debt at a time in the future. As I mentioned during the forward-looking information slide, this is a forward-looking plan. We have set the stage through a number of important initiatives, largely by simplifying the business and exiting the United States, and we've shrunk the bank loan, but there is still a lot of wood to be chopped between now and October 31 and there is uncertainty that we will achieve our goals. Obviously, there is optimism. The entire senior team is here and fully engaged every day on achieving success here, but as everyone knows, there's no certainty on the refinancing plan. Now I just want to see if we received questions. There are no questions. I'm going to give it about 30 more seconds. I will give it 15 more. All right. There's no further questions. I want to thank you all for joining. I also want to thank all of you for supporting Accord through this challenging transformation. I have no further remarks. Thank you.

This concludes the meeting. You may now disconnect.