RF Capital Group Inc.

For Q3 2023, RF Capital reported revenue of $88 million, up 2% year over year, consistent with 3% growth in ending and average AUA. Interest income was $12 million, insurance revenue increased 55% to just over $3 million, and adjusted EBITDA was $17 million. Cash flow available for growth was $11 million, free cash flow was $5.9 million, and management said free cash flow improved by $7.3 million versus Q3 last year, helped by the absence of transformation and office build-out costs; the quarter also included about $3.5 million of mark-to-market recoveries on RSUs and DSUs. Looking ahead, adjusted EBITDA is now expected to be slightly down in 2023 versus 2022, while cash flow for growth is still expected to be $30 million to $35 million for the year.

Kish Kapoor emphasized that the company is past the heavy transformation phase and is now focused on growth, recruiting, and strategic partnerships. He highlighted improving employee engagement, noting a 78% Great Place to Work survey participation rate and a sixth straight year of recognition, and said the firm is seeing more advanced-stage interest from advisor teams. His tone was cautiously confident, framing the next phase as one of execution and converting the growing pipeline into actual onboardings and deals.

Tim Wilson said Q3 revenue rose 2% to $88 million, adjusted EBITDA was $17 million, and the quarter generated $11 million of cash flow available for growth and $5.9 million of free cash flow. He noted there were no transformation-cost adjustments in the quarter and explained that interest income was flat at $12 million while insurance revenue grew 55% to just over $3 million. On guidance, he said adjusted EBITDA is now expected to be slightly down in 2023 versus 2022 because the TSX fell 4% in September and 3.4% in October and corporate finance activity remains weak, but the company still expects $30 million to $35 million of cash flow for growth. He also said the Fidelity conversion is on track to deliver $5 million to $6 million of annualized savings and that annual CapEx is likely around $8 million.

Analysts focused on the recruiting pipeline, CapEx, retention, the Fidelity conversion savings, insurance revenue growth, and capital allocation. Management said the advisor pipeline is now closer to $30 billion, with strong engagement and multiple advanced-stage diligence meetings, while CapEx should run around $8 million annually because the big build-outs are largely done. Tim Wilson said the Fidelity conversion is delivering the expected $5 million to $6 million of annualized savings, and on capital returns management said higher-return uses like recruiting currently take priority, though NCIBs remain under review in the background.