Avantax (AVTA) 9 May 232023 Q1 Earnings call transcript

Good day, and thank you for standing by. Welcome to the Avantax First Quarter 2023 Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question-and-answer session. [Operator Instructions] Please be advised that, today's conference is being recorded.

to conference like speaker, to now Littrell. Dee would hand over the your I ahead. go Please

we Officer. and website Chief you, Marc XXXX Monday market Relations Chris and Call. Quarter to Walters, the on I'm Earnings On earnings Chief Investor close, Mehlman, joined supplemental the by information following of Thank and afternoon, everyone, avantax.com. Conference Executive welcome, our Officer; the section our Financial release at posted Avantax First today

that everyone date. today's contains we begin, remind Before as current me that statements the only discussion speak let forward-looking of

and As from such, they actual include results expectations. current events risks materially and differ uncertainties, could and our

Please most and release recent in XX-K refer and our our included Form press our SEC to XX-Q. filings

risks to by no more uncertainties, and For these we update as required forward-looking information obligation statements, law. except on some specific our assume of

financial We today. will measures and both GAAP discuss non-GAAP

reconciliations our measure GAAP section earnings avantax.com, and supplemental Investor Our and measure. release full Relations each information are the nearest website applicable at to on the of available non-GAAP of financial include discussed financial

With the to call hand that, Chris. over let me

morning. a Dee. our quarter, corporate Avantax performance I'm business management name of reporting strong this we a continuation to our to off first quarter share Good operational in that XXXX announcing earnings change you, Thank last earlier we're pure-play wealth year, our great our start results. to After pleased as night. first with a reported

of strong flows newly asset inflows We minimal with net momentum and continued delivered in attrition record-setting assets recruited assets. and positive

marketing financial continued we support professionals, rates growth XX% effective consulting, that service. production on to to based exceed and retention our the including provide Our

on quarter, and ago. have and continues XX% streamlining and we to average was than structure. focused areas. the we remarks now capital operations Lastly, is on Last in our just made both then, progress higher two significant additional per see Since steady made focusing it progress adviser increase years we production

we flows same-store the were highest fifth organization. drove to first Net largely strong flows assets attrition. quarter. level positive net limited With quarter, operations asset sales, years sales, for the and regards the new in the for the straight with for at new Beginning to due

a Same-store brokerage tax From Planning incremental program CPA we sales added value. nine financial Avantax store firms. professionals, results. and building new new a helps recruited professionals on across strategic advisory new perspective, wealth quarter-over-quarter partner affiliates sales also XX drive assets five strong our to pair outperformed, Partners and new both to We've up XX financial including across that professional to

a focused turn Overall, strong tax-inclusive this and equity model. indicator was our their and off and to professionals existing strength comprehensive strong, for financial markets Avantax prospective a year, clients the more more of looking down tax to financial both Coming of were quarter a plans. bond approach considerably, wealth when management

both their addition, our Rise financial Connect proven and focused professionals growth are industry accounting and Avantax our firms, Elite have initiatives and our these from professionals strategies outperforming financial as as programs successful in Growth as In conference on our program, for participating as practice such well coaching benchmarks. peers to management

by we QX, on In retention, continued to business. in class. best continues retention. trend of professional was we This which Financial exceeding believe XX% retention production be driven the parts our performance of multiple

our insights data-driven, maximize solutions closely their team, continues them help achieve critical financial professionals with that Elite which growth. to and client top-performing business which to superior performance; services our our team, service partners our strategy financial and professionals operations provides to and metrics, growth support Our team their processing consulting to

easier experiences and and experience for can and unique prioritize use, to clients. out build financial technology and are professionals that value provide our product the intuitive Our continued to professional digital teams more have their financial end

our Growth season, launching tax through past drive Community accountability. connectivity, Program, Chapter to education As is we and more revamped move

our shift. to mix on Now,

Our management attrition than partially being enabled commission-based shift of assets. concentrated XX% sales, towards are by was as assets. both assets This client total new now more well advisory assets as under strong same-store

have that are Partners Avantax RIA look firms a to Planning to we good Additionally, acquire for continued business. employee-based fit our

Management the financial our focused we deals our this management at we acquisitions firms we year. to efforts least wealth excited Wealth other to two with and In note Management now are past not affiliated affiliated on close Avantax have currently Avantax expanding that with with independent acquiring professionals but external Wealth expect are

On capital structure.

or outstanding and During shares $XXX approximately purchased approximately tender closed Auction, for our million. we cash million our loan approximately $XXX QX total we a modified of hand by a The from of draw pursuant facility. was shares to term X.X which on XX.X% funded million Dutch amount

Additionally, recommenced minutes. our program, we in Marc few stock detail buyback March, a will which in

On the TaxAct separation.

the would on separation. update I Finally, to an like TaxAct share

As to ensure part several services transition. of the sale, operational TSAs key areas we smooth a execute agreed agreements in to transition or

by for business services time, be We deliver At end provided QX. of to the the the performance that expect financial in to expect rate to QX. we run positioned beginning stable complete

I'll it the remarks. after over prepared answer to to Now, happy turn Marc, we'll be questions

continue performing Thank good to internal expectations. that drive results. plan in investments we line the past and extremely and has The over well Chris, our years,. we of morning, record-breaking you, continued to everyone. The with couple execute team business made are our

time proud clients to extremely of the continue who and financial times. are efforts our of through our their guide professionals, team We period of volatile end over this

business the annual growth. deliver that believe long-term We sustained well-positioned to is

accounts assets new We assets. another have total broke records and assets, well-executed delivered total Avantax and percentage quarter. record-breaking client net of advisory as a revenues, for

in revenue seen we've our the revenue interest our Total the year be figure from of previous X% XXXX. up mix first well quarter of financial quarter from a Achieving as to portfolio. of to the $XXX rate approximately results. the environment discuss reflection asset this continues up of favorable quarter million and X% Now first as was fourth shifts

the a higher interest fourth the Transaction-based quarter. $XX.X which X% down rate commission revenues from is has which of XXXX exchanges. first environment, like commission revenues slightly alternative investments during the were million, impacted reflection transaction-based decreased quarter Year-over-year to

for EBITDA the our continuing net of discontinued $X.X estimate capital diluted same the sale, XXXX Included GAAP million income net was $X.XX million. income year. TaxAct of in in operations million versus for were share. Adjusted $XX.X $X.X the a from per operations quarter working of income the million period from last GAAP first or was finalization for $X.X resulting

costs. I costs we associated the that of include like items earlier actions costs in $X.X took million note in are $X.X an compensation to our additional couple stock-based compensation with to executive in rightsize and A of million costs stock-based year $X out point The approximately in million team. transition would

details few quarter. this other our A regarding performance

XX.X% Our coming highest quarter This of during first payout financial quarter of from rate of continued accounts. XX.X%, XXXX. assets professionals tier up into a the mix to first driven increased from -- fourth and of our share in the performance part was in the larger by advisory-based

to fluctuations the is We rate and the client will transaction-based up flows improvements continue of quarter of sequentially approximately net in see concentration from billion. fourth on total assets That revenues, positive with of ended of the net first makeup inflows. due our the market payout $XX.X quarter. and the depending assets of asset mix We XXXX to quarter X% in the

assets X% the new as client assets $XX.X the billion Fee-based from with a fourth quarter advisory advisory to assets quarter by of high were of sequentially approximately at also XX.X%. record total ending percentage up a

net asset compares flows $XXX for to $XXX of $XXX into the for million advisory were $XXX quarter client asset This XXXX. million total of advisory quarter inflows having quarter. Net client the for of million into asset fourth of total assets with the million net and inflows inflows

versus the of of XXXX. based timing Newly fourth $XXX expect lumpiness issue, This recruited assets for pipeline our would strong the $XXX for million decline and million is quarter were on the size some quarter quarter-to-quarter as of recruits. recruitment approximately we remains first XXXX a

a tend to look would This like attention to earnings deck. fluctuate such as and repositioning our funds. have market total between and balances our assets, assets. noticed you treasuries XX turn assets in of cash which point cash clients to I'll three-year I our money driven Similar balances products, of a client presentation percentage our that X% provides sweep to and sweep cash our Slide to at number peers, back revenues. to have your as we higher-yielding X% been

just number This we assets is platform, although first had of leaving client large However, end this balances have repositioned. of our we that of of January. the a of deposits in the billion were Because subsequently sweep March towards see to year-over-year at the the $X.X from invested part don't cash movement, year the end declined down of end XXXX. XX% the XXXX,

currently at advisory took billion, April. in relatively stabilize to stable then a since with balances in stayed result and billings Balances have started cash as mid-March that place of $X.X

interest by a in hike the our millions, impact a low cash digit the to remainder equity in rate May revenue for anticipate negative recent year of sweep mid-single stronger we amounts, and to stable expected small current we Assuming balance the this earlier in sharing the the year, most markets. offset part

approximately and sheet. the of completion outstanding We cash approximately $XX The $XXX X.X announced cost the our auction were on results at tender offer and March, early to total the Turning We term of and satisfied of on term the facility. million and share. of repurchase Dutch delayed-draw million balance $XXX debt $XXX modified we our loan our from was ended offer. In proceeds retire quarter loan. the equivalents tender cash able with hand to of cash million million of with per shares

end the amount loan expect by $XXX we of of the the A. second quarter, borrowed million to reference, the For term have entire

common our repurchase As of $XXX Board to mentioned from stock. the million company authorized quarter, Directors our of the company's fourth

purchased million of purchase a so the tender of XXXX, approximately we million. three one shares offer, of with in $XX.X total In addition months to stock have of first common purchase at approximately the a $XXX also price far approximately our of shares million

total April of repurchases between shares approximately a purchased approximately XXXX our $XX.X million X, X approximately for shares May share This X, Also, brings XXX,XXX total at XXXX, million. million. to X.X May approximately $XX price and purchase through we

independent priorities business executing continue in to fuel long-term program to returning of allocation investing to capital Our and professionals. financial our be capital our on acquisition shareholders, growth

net we our be the ratio times. leverage X.X and X.X expect to times For medium-term, between

XXXX turn year let's With full that, our outlook. to

issued February. guidance previously from reconfirming We our are

We of of market figures revenue million X% the of expect end EBITDA growth $XXX million. $XXX.X between between and million and from per to $XXX XXXX. $XXX.X quarter full million QX year assume These adjusted

conclusion Funds performance year, balances include flows asset of of relates of of that and the it transaction-based to outcomes assuming the profit revenue cash the in can throughout under additional provision May the Fed meeting drive TSA. to the As rates, subsequent cuts rate timing the the revenues, no timing hikes or are decision. commissions we Factors of and changes services

of that of the which completed larger Our guidance the of drive be throughout realized we with the will by amount services TaxAct connection be cost quarter in meaningful conclusion end will the the following provision assumes the transition that efficiencies sale, the of the will business in third with believe we substantially XXXX. year,

GAAP share. expect million share $XX.X to and $XX.X per respect between to of we between earnings and net per With GAAP $X.XX income, million $X.XX

coming savings the if the delivering related higher and cost anticipating in items the to cost relating not adjusted a also of are We for of range bit items to previously end higher the TaxAct. expense transition shared sale at of

that $XX.X million. a and million was reminder, range between $X.X As

to program received to Fed rate. several plan rate we questions and to Lastly, cash sweep it whether the tied we the have relates our Funds hedge as variable

a options years. of of to our and between balance significant a hedge and portion three number intend have for We five explored notional

enter will balances details cash on additional report and hedged. once we provide tenors quarterly will rates hedged thereafter into agreement a and We amounts hedging

prepared This remarks. concludes our

We Tom? will over now for turn operator to the the call Q&A.

Schmitt Thank question-and-answer comes conduct line Our session. we Jeff, your this Instructions] question you. Jeff time Blair. of William first will is open. At [Operator a from

good everyone. morning, Hi,

X%. Looking at in target. be net that's look And with they flows quarter, actually the line to your in of about kind

back was sort you out to if the it X.X% X%. growth, think of market I

that see was I sustainable and could how is that up? So of if moving sort curious just you

years feel we in that of as expectations. continue with line We've expect generally well. be about Look some and to net to they're positive trajectory important couple had to good we over incredibly metric perform very the the able on flows last

that with Jeff asset of retention add flows a strong thing William of been us us rate assets to It and have comparing who to today have We're really and a company. it. in and we've all able And up retain as with exciting our the sets we folks only would that stick to are that's right? bucket, welcome you starts growth the for and long-term us glad so very the Blair sure The element making don't really first that with production I aboard. leaky

or just on affiliated change that think your step with first you firms started being Have sort size of of of aren't are the the shift is to done you're anything And management Great. that firms though time And market? this next acquire it's character the in doing strategy of I wealth you on your even competitors that kind front to terms that seeing in you've recruiting early that. pretty in -- targeting? aggressive Avantax, that it's the

are with have in moving book approach categories. largely is on -- with are deep and so off recruiting have is that Well of aligned M&A business the of of that the -- appreciation our of relationships. We we terms very aligned culture, somewhat advisory a separate M&A our platform, characteristics we in think and wealth similar. front of targeting tax-focused But the managers strategy, aligned to a want our who and firm

we as that so common year deals the a we and that have we're expect off off is opportunity couple why we announced platform. this And are move we of profile sticking to see which to platform

Okay.

think relates from this multiple the transition years think notable And to been professionals sorry, it recruiting you in recruiting continues competitive to another that this asked aren't broker-dealer of As as to there's nothing that's like and versus for quarter financial right? I them to And so. independent question market the a competitive about be we we change a But it acquiring market one recruiting, on seeing them. and -- changed. notable in It's dynamics. front, in also a

you. Okay. Very Thank helpful.

very for Thank our by you Stand next question. much.

next is Company. of The Our comes open. line Dan, question from your Dan Benchmark Kurnos

guys Really Marc color partner of called that. third-party you the stuff. good I guys you've Great. way that the opportunity some pursuing. helpful maybe in done the that you just you morning. Super the Chris out cash of kind all appreciate Thanks by sweep on part been have in the past. know

You've recruitment. both of guess contributing little even and TaxAct of been we're there contribution successful results better it's If mix that's just about you're -- Can also that when helping doing drive on talk sort if of bit you seeing? very you that. if fronts runway to a owned I sort that's how helping sort with

third-party believe don't I And Yeah. on that I commented partnerships.

we However, about look in it have talked past partners. to and we the

We work that management partners have multiple mean software to us I give the introduce -- opportunity. to partners access client software tax that with us wealth base and their

that how We've right reach tactics It's be for never our that accounting data many firms provided are. specific one of contributions partners employ the business. we on can target great to significant those

it. specific continue but to size We through success partnerships, forms see any the of provided magnitude haven't data or of those on

take can I And similar you on the kind you characteristics, M&A. Marc off-platform And of and/or think say when mean stuff, so this. you also size-wise for I'm assuming

the of As between of, growth can more know inflows capital chew kind the kind success is given seeing -- to time, there think do at the and you're recruitment year of towards and I shifting allocation how you that walk we any the kind the balance? thoughts kind of And in M&A? same go we gum but kind both about bucket trajectory, of through

front make we allocation as the in Yes, at capital benchmark historically the constant that said we a we is look it's various of decisions. options which buyback of all review a us. by What share

program. we're that fortunate in extent the very successful add have the that right? our opportunity seriously, M&A going over couple meaningful M&A to take been of to an to years last is value, To presenting We're

to affiliated expanding are but not those currently capital so those with Avantax internal are out to also to the just more those who or allocation opportunity much Management, that who external decisions. Wealth creates make And just

look we it basis. regular So, at a on

clear Marc to step be And question just housekeeping aside. one I'll and

and a to long-term know outlook rates own are of current regards more So, belief has to stable how rates internally may influence stay Given that take with does the you tend know a that here sort rates at levels between different changed at last rate of what approach, but all? current what outlook I view to your hike long have you your are?

say on to right is would Fed Fed I is financial based doing The end what to pay being the to the trying decisions is clients. grade. their data is to going my for make presented the professionals above that do do to going our that's we're What them. support

take into that environment will at it rate hedging end the of my the account I We relates remarks. as the prepared discussed to program

going on a but is create rather position are stability. Our goal to where things take not to

The is can to decision-making we decision-making smarter the our the more smarter then capital as stable -- allocation the in our long-term. earnings potential relates it

So, that's think really it. how about we

color fair it. enough. the guys. Appreciate Thanks Okay, for

now call Thank remarks. Walters this Chris like you. time At to our I turn would back to for closing

for interest you all and for Thank you Great. in speak We'll quarter. us to next Avantax. joining your today

your you today's today's Thank in does participation call. program. This for conclude

disconnect. now may You