Fiera Capital Corporation (FSZ) Earnings Call Transcript & Summary

Ladies and gentlemen, good morning. My name is Jean-Guy Desjardins, and I am Chairman of the Board and Chief Executive Officer of Fiera Capital Corporation. I am pleased to welcome you to this Annual General Meeting of Fiera Capital Corporation. In order to comply with government-imposed measures related to the COVID-19 pandemic and to protect the health and safety of our communities, shareholders, employees and other stakeholders, Fiera has chosen to hold its Annual General Meeting of Shareholders in a virtual format again this year. Instructions on how to exercise your voting rights or ask questions during the meeting are currently displayed on your screen. In this regard, we would like to remind you that registered shareholders and registered proxy holders are the only persons entitled to vote or ask questions during the meeting. You can now vote on each proposal until the closing of the vote. After the last resolution, you will be notified when the voting period is over. If you have already voted by proxy, it is not necessary to vote again. If you choose to vote again, only your vote cast during the meeting will be counted and the vote that you previously submitted by proxy will be revoked. If questions are asked, we will, first and foremost, identify the shareholder or proxy holder by name, and then read the question out loud, so that it may be heard by all shareholders, proxy holders and guests present at the meeting. To ensure the orderly conduct of the meeting, we have designated in advance Mr. Jean-Philippe Lemay, who will act as Mover; and Mr. Gabriel Castiglio to act as Seconder. Mr. Lemay and Mr. Castiglio are both shareholders of the company. In accordance with the bylaws of the company, I will be acting as Chairman of the meeting and Mr. Castiglio will be acting as Secretary. This year's meeting will be held in French, but simultaneous interpretation in English is available. Please note that we welcome any questions in either French or English. Certain forward-looking information within the meaning of applicable securities laws may be presented over the course of this meeting. We encourage you to review the cautionary statement relating to forward-looking information, which appears on your screen. I will now present those who will be available to answer your questions during the meeting: Mr. Jean-Philippe Lemay, Global President and Chief Operating Officer; Mr. Lucas Pontillo, Executive Vice President and Global Chief Financial Officer; and Mr. Gabriel Castiglio, Executive Vice President, Chief Legal Officer and Corporate Secretary; as well as myself. This is the agenda for today's meeting. We'll begin by the appointment of the Scrutineer and the confirmation that quorum has been reached. The company's financial statements for the financial year ended December 31, 2020, and the independent auditor's report thereon will then be received. Following this, we will elect the company's directors and proceed with the appointment of the company's independent auditor. And finally, I will present highlights from the 2020 financial year and the first quarter of 2021. The meeting will be concluded with a question period. Pursuant to the authority granted to me by the bylaws of the company. I appoint Mr. Paul Allen, a representative of Computershare Investor Services, Inc. as Scrutineer for this meeting. The Scrutineer has informed us that we have reached quorum since at least 2 shareholders holding at least 20% of all voting shares are present or represented by proxy. I just declare the meeting validly called and duly constituted for the transaction of business provided for in the agenda. The Scrutineer's report will be given to the secretary of the meeting and attached to the minutes of this meeting. Please also note that you can obtain the minutes of the last Annual Meeting upon request to the Secretary of the company. I also confirm that the secretary of the company has provided me with a copy of the notice of meeting, the management information circular and forms of proxy as well as the confirmation from Computershare that these documents have been duly sent to shareholders. These documents will be attached to the minutes of the meeting. Let us now begin the formal portion of the meeting. I refer you to the consolidated financial statements for the financial year ended December 31, 2020, and to the independent auditor's report. These documents have been provided to all shareholders who requested them. We understand that you have reviewed these documents, and we will therefore not ask the secretary of the meeting to read them. I would like to remind you that the consolidated financial statements for the financial year ended December 31, 2020, as well as the auditor's report are available at the following address, www.sedar.com and on the company's website under the section, Investors Relations. As previously mentioned, once we have addressed all the legal and technical items on the agenda, you will have the opportunity to ask us your questions. The next item on the agenda is the election of directors. As provided for in the articles of the company, holders of Class A subordinate voting shares, voting separately as a class are entitled to elect 1/3 of the members of the Board of Directors, referred to as Class A directors. And the holders of Class B special voting shares, voting separately as a class are entitled to elect 2/3 of the members of the Board of Directors referred to as Class B Directors. We will therefore have 1 vote for Class A directors and one vote for Class B directors. In accordance with the management information circular, management has proposed to elect 12 nominees as directors of the company, this being 4 Class A Directors and 8 Class B Directors. I will now ask Gabriel to indicate whether we have received any questions on this item of business via the electronic platform.

Mr. Chairman, I confirm that we have not received any questions on this item of business via the electronic platform.

Thank you, Gabriel. May I now have a motion for the nomination of the Class A Director nominees of the company as they appear on your screen.

Mr. Chairman, I propose the nomination of the following persons as Class A directors of the company, Mr. Geoff Beattie, Mr. Gary Collins, Mr. David L. Giunta; and Mr. David R. Shaw. Do we have a seconder?

Mr. Chairman, I second the motion.

Thank you. I confirm, therefore, that the company has not received proposals for other director nominees, and I thus declare the nomination period closed. I remind you that the holders of Class A subordinate voting shares will vote separately as a class, on the motion for the election of each Mr. Beattie, Collins, Giunta and Shaw. We now invite you to vote on the election of the Class A directors. And I remind you that it is possible to vote on all proposals on the agenda of the meeting up to and until the end of the vote after the last resolution. With respect to the election of Class B directors of the company, only the holders of Class B special voting shares, voting separately as a class are entitled to vote. Those, therefore, appearing on your screen, are those people proposed as Class B Directors of the company. Mr. Réal Bellemare; Mr. Nitin N. Kumbhani; Mr. Raymond Laurin; Mr. Guy Masson; Mr. Jean C. Monty; Ms. Lise Pistono; Mr. Norman M. Steinberg; and myself, Jean-Guy Desjardins. I therefore confirm that the sole holder of Class B special voting shares for -- or be capital -- Fiera Capital LLP and has voted in favor of each of the nominees proposed by management to be elected as Class B directors of the company. Accordingly, I declare each of these nominees elected as Class B directors of the company. I would now like to take this opportunity to thank Mr. Jean Monty. He will not be running for reelection as a Director. I thank him for his contribution to the Fiera Capital Board of Directors over the past 2 years. On behalf of Fiera Capital, I wish him well in his future endeavors. The next item on the agenda is the appointment of the auditor. Shareholders are asked to reappoint the auditor, Deloitte, until the next Annual Meeting of Shareholders and to authorize the Board to fix its remuneration. The holders of Class A subordinate voting shares and Class B special voting shares are entitled to vote on the appointment of the auditor. I'd now like to ask Gabriel to indicate to me whether we have received any questions on the item -- on this item of business through the electronic platform.

Mr. Chairman, I confirm that we have not received any questions on this item of business through the electronic platform.

I would now request a motion for the appointment of the auditor.

Mr. Chairman, I propose that Deloitte be appointed as auditor of the company until the next annual meeting of the shareholders and to authorize the Board of Directors to fix its remuneration.

Do we have a seconder?

Mr. Chairman, I second the motion.

Thank you. I invite you to vote on the appointment of the company's auditor. Since we have covered all of the topics on the meeting's agenda, let's now take a short break in order to allow registered shareholders and proxy holders to vote if this has not yet been done. I remind you that it is not necessary to vote. Again, if you have already voted by proxy. I would now like to state that the voting period is now closed for all of the topics on the meeting's agenda. The Scrutineer has provided us with their preliminary report. I thus declare that a majority of the votes cast by the holders of Class A subordinate voting shares were in favor of the election as directors of each of Mr. Geoff Beattie; Mr. Gary Collins; Mr. David L. Giunta; and Mr. David R. Shaw. I also declare that a majority of votes cast by the holders of voting shares of the company who are in favor of the appointment of Deloitte LLP as auditors. Final voting results for each of these motions will be filed on SEDAR as soon as they are made available. Now in this next section of the presentation, I will begin by reviewing our accomplishments for 2020 as well as our accomplishments for the first quarter of 2021. I will also discuss investment performance and share highlights on our investment platforms. I'll then provide an overview of our growth catalysts for the future. I must say that I'm incredibly proud of our employees for staying focused on creating value for our clients in the face of an unprecedented global crisis. We aim to act to the benefit of the population in the company, and we continue to execute environmentally, socially and in terms of governance. In 2020, our global assets under management portfolio demonstrated lower volatility both at the onset of the pandemic and in the market recovery phase, we continue to execute on our strategic priorities, proving that we can successfully adapt to profound and sudden disruptions, thanks to the resilience of our people and the competitiveness and diversity of our asset base. As we advance towards our goal of becoming one of the world's top-tier asset managers. We will continue to maximize opportunities from this strong foundation. The new global operating model that we launched last year serves as a platform for growth for us, allowing us to create synergies and increase collaboration. It also allowed us to leverage our distribution channels worldwide. We are already seeing the fruits of our labors in our financial results. We generated profitable growth in 2020 while maintaining a solid balance sheet. We emphasized capital preservation over the first semester of 2020, thus strengthening our financial position in the second half of the year, as is evidenced by our results. Total revenues reached $695.1 million in 2020, which is an increase of $37.9 million or 5.8% compared to 2019. Adjusted EBITDA for the year increased by almost 9% to reach $209.7 million and the adjusted EPS increased by 4.5% to reach $1.40 per share. At the same time, we held our quarterly dividend constant and it remained at $0.21 per share. This is confirmation that we are delivering value to our shareholders. Despite concerns that we would resort to a dividend cut, we will fully maintain our dividend at $0.21, running stress tests and scenario analysis to test the robustness of our balance sheet and to continue ensuring its integrity. In this spirit, I'm also pleased to say that since January 2020, Fiera Capital is a member of the S&P/TSX Canadian Dividend Aristocrats Index, an index that recognizes companies that have consistently increased dividends annually for the past 5 years. I also want to state that in 2020, after paying $85.3 million to our shareholders in the form of dividends and $2.9 million in the form of share redemptions. We ended the year with $68.9 million in cash and cash equivalents. I'd like to add that so far, we have redeemed close to 900,000 shares for total consideration of $10.1 million within the context of the company's share buyback program initiated in July 2020. And we still have room to buy and cancel an additional $3.1 million in shares until July 2021. Let's now turn to the first quarter of 2021. Since the beginning of the year. Several important developments have evolved in line with our high probability scenario for rapid economic recovery in 2021. Optimism around the trajectory for growth is gathering notable momentum while the global vaccination rollout is bringing forward the time line for a return to economic normalcy and reinvigorating our outlook in light of our economic outlook, we are very pleased with our first quarter results and pleased with the solid footing on which we start the year. Revenues reached $165.6 million in the first quarter of 2021, which is an increase of 2.4% compared to the first quarter in 2020. Adjusted EBITDA of $47.5 million increased by $4 million compared to the first quarter in 2020. And adjusted EPS increased to $0.36, which is compared to $0.20 in the first quarter of last year. These results demonstrate the value of the acquisitions that we have undertaken, and more importantly, they're successful integration. What's more? The continued enhancement and rollout of our global distribution model contributed to strong organic growth of $3.1 billion during the first quarter. As demonstrated by net sales generated across each of our 3 distribution channels. The implementation of the new integrated global operating model as introduced last year, makes us more agile and efficient and drives the cost synergies. More importantly, this new structure puts the full power of our organization to the benefit of our clients, given our broad deployment of investment strategies. Since the inception of this model, and up until the 31st of March 2021, we have accomplished synergies from this initiative to the tune of $13 million. These amounts were redeployed into key functions of the business, notably in distribution and our investment platform in order to accelerate growth. We are already seeing trickle down effects to the bottom line as a result of these reinvestments. Our organizational shift also led to a realignment of our activities including the agreement to sell the right to manage the New York based Fiera Capital emerging Markets fund, as well as the sale of 2 U.S. private wealth businesses. These 2 businesses are Bel Air Investment Advisors and Wilkinson Global Asset Management. The sale of Bel Air also contributed to further reducing our financial leverage. As at March 31, 2021, our funded debt to EBITDA ratio was 2.4x. Not only was it lower for the fourth consecutive quarter, but it was at its lowest level over the last 3 years. Lower than it was prior to completing 6 acquisitions over the course of 2018 and 2019 and despite the setback from the pandemic in 2020. Finally, in line with our ambition for responding to our clients' investment needs with a broad range of competitive investment solutions we announced the addition of a second global equity team in March 2021. The team has a first-class track record of performance, ranking first quartile on a 2-year, 3-year and 4-year basis. Additionally, over the past 4 years, the team has delivered 19.9% of annualized value in. The team will bring approximately USD 0.5 billion of assets under management and has significantly in -- has significant investment capacity with the existing cap on our current global equity strategy, this addition will allow us to continue building on our success and fully capture this growth opportunity globally. Let's now turn to assets under management and investment performance. Most of our public market investment strategies ranked in the first and second quartiles relative to their peer groups in 2020 despite an extremely volatile period in capital markets. In equities, 87% of our strategies outperformed their respective benchmarks in 2020. Our global and international equity strategies generated significant added value of 4.8% and 12%, respectively. When it comes to fixed income 97% of our strategies outperformed their respective benchmark. With Canadian fixed income strategies performing particularly well. Most of these delivered results in the first quarter. Quartile, notably, our active core and specialized credit strategies generated value-added of 1.98% and 2% in 2020, respectively, and the strategic core strategy generated 2.2%. In private markets, our investment strategies generated strong performance across all key strategies in 2020, demonstrating the resilience of the platform in a volatile year. The robust performance of our strategies and new client mandates contributed $18.9 billion and $10.2 billion respectively, to assets under management growth in 2020. With December 31, 2020, assets under management, including committed undeployed capital reaching $181.9 billion. It is important to note that our 12-month average fee rate calculated as a function of base management fees has been increasing over time. It was 36.8 basis points in 2020, comparing very favorably to 27.2% in 2016. More recently, assets under management reached $172.9 billion as of March 31, 2021. Our company generated strong organic growth of $3.1 billion during the first 3 months of the year, with net sales in each of our 3 distribution channels. Institutional -- I'm sorry, in each of the 3 distributed channels. Institutional generated $1 billion of organic growth for new mandates in a variety of equity and private investment strategies as well as in multi-asset mandates. Financial intermediaries brought in $1.5 billion in net sales, driven by large wins in Canada and the U.S. for multi-asset and private market mandates as well as significant contributions from existing clients. When it comes to private wealth, it generated $600 million in net organic growth driven by new large mandates in Canada and in the U.S. for fixed income as well as cross-asset mandates. Most of our equity strategies delivered positive returns in the first quarter of 2021. With global equity markets rising as expectations for an economic recovery straighten. Notwithstanding the recent return to favor of value stocks, our equity strategies continue to outperform over the long-term with 88% of our equity assets under management, beating their benchmarks over the last 3 years. In fixed income, rising interest rates created a challenging environment, but our teams continue to outperform over the long-term on a 3-year basis. Percent of our fixed income assets under management outperformed their benchmarks. In private markets, we saw strong performance across all key strategies during the first quarter. We raised approximately $300 million in new subscriptions mainly for our global agriculture, global infrastructure and real estate strategies. And a similar amount was deployed in new portfolio investments. Our global infrastructure and agricultural strategies amongst others, are ready for institutional commercialization and our core part of our international distribution strategy. Supported by seasoned teams, these strategies have established a solid track record of performance and rigorous investment processes. Both strategies are global, and invest in high-quality assets only, making them suitable for international investors seeking asset class and regional diversification. As such, considering the current macroeconomic outlook and evolving investor needs, we expect growth in this space to continue. The decrease in assets under management observed between the end of 2020 and the end of Q1 was anticipated as the sale of Bel Air, and the termination of the review sharing arrangement with City National, in connection with the Fiera Capital Emerging Markets Fund, had and assets under management impact of $10.3 billion. If we exclude the impact of these dispositions, assets under management increased by $1.3 billion during the first 3 months of the year. As we compare to the end of 2020. Our company's next growth phase will be underpinned by the very strengths that enable us to successfully navigate the global health crisis of 2020, a strong competitive position to capture market share, a wide range of diversified investment strategies in both public and private markets. Trusted relationships with our direct clients and financial partners around the world and, of course, a talented team. On this note, I am pleased to share that we've significantly strengthened our leadership team over the course of the last 12 months. Last Fall, we appointed Anik Lanthier as President and Chief Investment Officer of Public Markets. And more recently, in the first quarter 2021, Jean Lemay was appointed as Global Chief Human Resources Officer to be able to lead our global HR strategy. These leaders have decades of experience, that they can put into their roles, and we will be able to benefit from that as we continue to grow. I'm incredibly pleased to have them with us. I'm also very proud of our commitment to social responsibility. This reflects not only our corporate values, but the wants and issues of our employees and clients. Accordingly, on matters of diversity, equity and inclusion, we revised the charter and the mandate of the dedicated internal team, which now reflects the diversity of our employees across the globe and which going forward, now reports to me and to our Board's nominating and Governance committee. This is directly in line with our beliefs that successful organizations build well represented diversified teams, offer equal opportunity and create an inclusive experience so that people and employees can perform at their best. Fiera Capital also made it a point to maintain its charitable giving initiative in 2020. Given the global health and economic crisis brought on by the pandemic and with the number of people in communities struggling, 2020 was a crucial year to be giving back to communities more than ever. Consequently, we made donations totaling $1.8 million over the year. These amounts went to hospital foundations, social welfare charities, universities, colleges and others. These amounts also included more than $300,000 that went specifically to a purchase of medical-surgical masks, respiratory masks, isolation gowns and examination gloves to assist health care facilities in dealing with the pandemic. Again, in 2020, we ran a successful fundraising campaign with Centraides United Way, where our employees came out in great numbers and donated generously. This is but one of the examples of how Fiera capital can be a source of positive change and how we are committed to giving back to the communities in which we operate. As stewards of our client assets for our clients, we are well aware that our clients have an increased importance in the role that we play in the investment decision-making process when investing capital on their behalf. It is, therefore, both a privilege and a responsibility for Fiera Capital. Accordingly, we are dedicating additional efforts to maintaining and improving ESG integration throughout our strategies and we will be publishing our second responsible investing report over the course of the next few weeks. We believe that successful management of ESG risks creates more resilient businesses that are positioned to create sustainable long-term value as we build on the positive momentum of our business, we will focus on the main catalysts for future growth of our firm, which directly addresses key industry trends across the globe and across investor preferences. With its breadth of investment capabilities, our private markets perform and continue to represent a key competitive advantage. Just 5 years ago, private market strategies accounted for less than 4% of our assets under management. But as at the 31st of March 2021 -- sorry, these investment strategies represented $13.6 billion of private market strategies and now represent 8% of total asset portfolio they demonstrate their resilience during the pandemic in a very clear way, through their predictable returns, lower correlation to equity and fixed income markets as well as their ability to offer capital protection with Fiera Capital's increasing international distribution footprint -- oh, sorry, investment solutions. We are able -- we have become experts in investment solutions by emphasizing markets, real asset markets, such as agriculture, infrastructure and real estate markets. Our multi-asset solutions are another distinguishing factor for us, particularly in the Canadian market. Investors are increasingly seeking to consolidate asset management providers to manage costs, and simplify oversight. To remain competitive in this changing market environment, asset managers not only must provide a breadth of offerings as well as expertise in both public and private market strategies, but they must also offer these strategies in specific outcome oriented combinations. With our unique asset allocation, expertise in both public and private markets, we are winning more and more multi-asset mandates. I would also like to emphasize that these mandates tend to have a longer average life than specialized mandates, resulting in greater revenue stability. Global equity remains another solid growth vector for us. As one of the broadest market strategies on the market, actively managed investment strategies available to investors worldwide, this strategy remains very much in favor across the globe. We have demonstrated proven international distribution, success with our global equity offering over the last decade to the point where, given that strategy, we have decided to cap the strategy now at $56 billion of assets under management in order to preserve the strong returns generated by the team. It is worth noting that is a result of persisting client interest in this strategy. Net organic growth has increased at compounded annual rate -- a rate of 9.6% over the last 3 years. Having successfully onboarded an additional team with an outstanding 4-year track record of performance as well as significant investment capacities. We are very well positioned to replicate our prior achievements in this space. And we are already seeing strong momentum and early indications of interest by investors. Finally, pursuing untapped opportunities in worldwide markets remains core to our growth story. To that end, we will continue leveraging our enhanced global distribution model. Please note that in 2020, 51% of revenues were generated outside of Canada compared to 30% in 2015. we recently established a distribution agreement with an Australian partner in infrastructure and are finalizing similar partnerships in key regions in Asia, as well as in major European markets. In all cases, we seek to partner with well-known established local players to match the quality of our investment offering. We are developing partnerships for both our public and private market investment strategies and have drawn clients into new -- from new markets such as China, South Africa and Finland. The U.S. market remains at the heart of our concerns and our work. We already have a strong base of over $28 billion in assets under management with financial intermediaries such as large brokerage houses national platforms and regional banks. We continue growing by leveraging our relationships with existing strategic partners and forging relationships with new partners. In Canada, our domestic market, we intend to increase market share by addressing the core institutional markets, generally defined as the $1 billion Plus investor platform, which, according to our estimates, controls over 70% of addressable pension and endowment controlled assets in the country. Our investment platform, ranging across public and private markets, solutions for modeling capacities and combination and possibilities qualify us as a highly competitive provider in this space. In private wealth, the recent creation of a global private wealth group is designed to leverage existing best practices on a global basis. Today, we rank high against our Canadian and U.S. competitors in aggregate assets under management terms. With a presence in some of the largest wealth markets in North America, specifically, New York and Toronto, integrating and aligning our platforms to achieve greater scale will be key to further growth in this important line of business. As such, we will be streamlining our multiple private wealth back-office systems into one. An initiative similar to what we have already successfully accomplished on a global scale with the streamlining of our CRM tool. We will continue to grow our business organically, leveraging the company's robust investment platform in both public and private markets. We are recruiting experienced investment counselors and establishing a best-in-class global advisory model to serve new and existing clients. Our goal is to create a unique global wealth platform for our clients that leverages Fiera Capital's global infrastructure. It will operate under one unified private wealth brand across the world with deep capacities centered on investment idea generation, thought leadership an excellent client relationship management. Establishing private wealth as its own independent operating line is a natural progression in Fiera Capital's evolution and will allow us to build a platform for future growth, enabling us to fully deploy our extensive suite of investment capacities for the ultimate benefit of our clients. We will continue to build on our positive momentum by maintaining our focus and executing against our key strategic priorities. We will remain guided by our pursuit of investment excellence for our clients. This is the true cornerstone of our vocation on which all else lies. And with our seasoned end-client dedicated investment teams and our wide range of investment solutions, we are well positioned to remain an industry leader in this area. We continue to enhance our client interaction model and transition to a solutions-based relationship approach. Outstanding work has already been carried out, both in terms of client retention and cross-selling in Canada, and we will continue to roll out this strategy in other regions over the next few months. Our integrated distribution team will focus on offering holistic investment solutions across various investment and asset classes in order to fully deploy our global investment capabilities and better complete for new mandates going forward. Delivering value to our shareholders through optimized capital allocation remains a top priority for us as we begin our second decade as a public company. We will continue to invest in key areas of the business to drive further growth. And finally, we will continue to build on our global operating model as introduced last June. We strategically moved to realigning business over the past year by shaping our public markets, private markets and private wealth platforms in a way as to ensure long-term growth in the future as led by a strong talented leadership team. And as a strong leadership team, I'm confident in our abilities to execute on these priorities. When I look at what we have accomplished, I'm inspired by how our employees contribute to our success in an unprecedented environment and delivered on our commitment to the people we serve. I'd also like to thank our clients for their renewed trust as we continue to raise the bar in terms of our solutions. I am grateful to our Board members for their invaluable expertise and visionary leadership as they have helped steer us through the headwinds that we faced as we underwent our global transformation. And last but not least, thank you to our shareholders and creditors for having trusted us and for having provided your unwavering support. Thank you very much for your attention. I would like to remind you that Jean-Philippe Lemay, Lucas Pontillo, Gabriel Castiglio and myself are now available to answer any of your questions. I'd like to ask Gabriel, if we have received any questions through the electronic platform.

Mr. Chairman, we have not yet received any questions.

Thank you. I'd like to remind you that only shareholders or proxy holders can ask questions. We have not yet received any questions, but we will take a very short break to allow you to ask your questions as you follow the instructions on your screen as you wish. As there are no questions and as we have covered all of the items on the agenda, I now declare the meeting adjourned. Thank you all for attending this meeting of shareholders of Fiera Capital Corporation, and I wish you a very good day. Thank you very much.