RF Capital narrows loss in Q2

RF Capital recorded a net loss of $2.1 million in the second quarter, an improvement from the $4.1 million net loss it reported in this year’s first quarter.

That compares with a net income of $2.7 million in the second quarter of 2024 for RF, the parent firm of Richardson Wealth. RF Capital is set to be acquired by iA Financial Corp. in a deal announced Monday, and expected to close in the fourth quarter.

The firm’s fee revenue increased 6%, driven by higher assets under revenue — up 9% to $40.4 billion. But overall revenue declined 2% from last year’s second quarter to $89.9 million. The decline was driven by lower non-commissionable revenue, including lower interest income.

Earnings before interest, tax, depreciation and amortization (EBITDA) fell 29% compared to last year’s second quarter to $10.7 million, reflecting flat operating expenses and an 8% decline in gross margin to $49.3 million. The drop in total revenue and an increase in commissionable revenue contributed to the decline in gross margin.

On a quarter-over-quarter basis, RF Capital reported a 13% rise in EBITDA.

The results heighted “positive momentum” for the company, said CFO Francis Baillargeon on a short conference call Friday.

On an adjusted basis, the firm reported a net income of $289,000 for the quarter. Adjusted figures include business transformation costs such as refinements to the firm’s operating model, outsourcing its carrying broker operations, changes to its real estate footprint and costs related to rolling out a new strategy across the company.

“While we remain in a complex economic environment with ongoing market volatility, we continue to focus on controlling our expenditures and opportunities that drive growth,” CEO Dave Kelly said in a release. “Those opportunities are centred on the diligent execution of our three-pillar strategy. My overarching goal is ensuring our advisory teams feel valued and respected and they have the products, services and tools needed to do their best work.”

Kelly, who will stay on as CEO through the firm’s acquisition by iA, was not on the call.

While advisor recruitment is one of the pillars of RF Capital’s strategy, no new advisor teams joined the firm during the second quarter. The firm had 143 advisory teams at the end of June, down from 147 in Q1 and 150 last June.

On the call, Baillargeon noted the firm will be launching a social media campaign featuring its advisors in September as part of its recruitment efforts.

IA’s $597 million purchase price includes a $370 million valuation of RF Capital’s diluted equity and $227 million in financial obligations (the outstanding portion of revolving debt and preferred shares).

Richardson Financial Group, which owns about 44.3% of RF Capital’s outstanding common shares on a non-diluted basis and 30,422 preferred shares of Richardson Wealth Ltd., has entered into an agreement with iA to support the deal.

A shareholder vote on the transaction is planned for September.