RF Capital Reports Record Q2 Revenue Despite AAU Drop of $3.2 Billion
The results “highlight the benefit of increasing income diversification,” Kish Kapoor, president and CEO of RF Capital, said on a conference call. This diversification helped the company offset lower fee-based and transactional capital markets revenue from the prior quarter, he said.
However, Kapoor warned that “the past few months have been difficult” with Richardson Wealth advisers spending more time helping clients navigate a volatile market.
“Market sentiment remains weak and this is likely to have a prolonged impact on our AUAs, revenue and EBITDA for the coming quarters,” Kapoor said.
Insurance revenue for the quarter was $9.2 million, compared to $0.5 million for the same period last year, largely due to a “significant contract” which was concluded in course of the quarter. While the company is unlikely to match this revenue performance in the coming quarters, “we plan to continue to grow our insurance business more broadly through our growing portfolio of opportunities,” said Tim Wilson, CFO of RF Capital, during the call.
RF Capital launched its own managing general agency last year after ending a partnership with a third party and negotiating direct contracts with life insurance companies, Kapoor said. The move has resulted in “greater adoption of insurance strategies within our organization through much greater financial planning,” he said.
Interest income for the quarter was $8.1 million, up 83% or $3.7 million from the same period last year due to higher interest rates. benchmark interest on the Company’s cash balances and margin loans.
“With interest rates expected to rise further in the second half, we expect interest rate revenue to increase from the second quarter onwards,” Wilson said.
Fee-based revenue was $62.3 million, down 8.2% from $67.9 million in the prior quarter, but up 6.0% from $59.0 million. dollars last year.
“We don’t expect the market to recover this year,” Wilson said. He said the company expects continued pressure on fee income to continue for the remainder of 2022, partially offset by the addition of new consulting teams.
In the second quarter, Richardson added three advisory teams and lost one, and finished the quarter with 163 teams overall. Kapoor said the company plans to add two to three teams in the third quarter, with more expected to join in January and February 2023 after the company transitions to Fidelity Clearing Canada’s platform on December 31. RF Capital currently uses its own clearing broker.
Consolidated adjusted EBITDA was $16.6 million for the second quarter, compared to $13.3 million during the same period last year. Reported net profit was $58,000, compared to a loss of $1.9 million in the same quarter last year. Wealth Management adjusted EBITDA was $18.3 million, up 18% from $15.5 million last year.