AGF Management (AGF) Q2 2024 earnings summary

Executive summary

• AUM and fee-earning assets reached $47.8 billion as of May 31, 2024, up 16% year-over-year, driven by strong investment performance, mutual fund growth, and the acquisition of Kensington Capital Partners Limited (KCPL), which closed in March 2024 and is now consolidated.

• Adjusted diluted EPS was $0.35 for Q2 2024; adjusted net income attributable to equity owners was $23.6 million, both down from the prior quarter and year-over-year.

• Board declared a quarterly dividend of $0.115 per share for Q2 2024, up from $0.110 in the prior quarter.

• Maintained a strong financial position with $329 million in investments, $44 million in cash, and $80 million in long-term debt.

• AGF received industry recognition, including awards for investment strategies and the closing of Kensington Venture Fund III at $290 million.

Financial highlights

• Total net revenue was $97.0 million, up 1% year-over-year but down 6% sequentially; net management, advisory, and administration fees were $81.2 million, up from both the prior quarter and year-over-year.

• Adjusted EBITDA was $37.0 million, down from $49.5 million in the prior quarter and $43.9 million a year ago; adjusted EBITDA margin was 28.0%.

• Free cash flow for the quarter was $17.2 million, with a trailing 12-month payout ratio of 37%.

• Adjusted SG&A expenses rose to $60.0 million, reflecting strategic investments, KCPL consolidation, and higher compensation.

• AGF Capital Partners revenue was $12.0 million, down from $24.4 million in Q1 and $18.0 million a year ago, impacted by lower fair value adjustments and distribution income.

Outlook and guidance

• Expense guidance for 2024 increased by $18 million to account for acquisitions, with a target to meet full-year adjusted SG&A.

• Management expects industry flows to improve in the latter half of the year as rate cuts materialize, with continued focus on growth, recurring earnings, and building a diversified private capital and alternatives business.

• Guidance excludes performance fees, carried interest, severance, and corporate development expenses.

• Elevated interest rates and market volatility are expected to persist, potentially impacting investment returns and AUM growth over the next 12 months.

• Management continues to monitor capital and liquidity closely, with sufficient resources to fund business plans and commitments.