Operator: Thank you for standing by, and welcome to the Q2 2026 AGF Management Limited Earnings 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. As a reminder, this call is being recorded. I would now like to introduce your host for today's conference, Ken Tsang. Sir, please begin.
Ken Tsang: Thank you, operator. Good morning, everyone. I'm Ken Tsang, Chief Financial Officer of AGF Management Limited. Today, we will be discussing the financial results for the second quarter of 2026. Slides supporting today's call and webcast can be found in the investor relations section of agf.com. Also speaking on the call today will be Judy Goldring, Chief Executive Officer, and Ash Lawrence, Head of AGF Capital Partners. For the question and answer period, John Porter, Chief Investment Officer, will also be available to address questions. After the prepared remarks, we will be happy to take questions. With that, I will now turn the call over to Judy.
Judy Goldring: Good morning. Thank you for joining us. Q2 was a strong quarter for AGF. At the end of May, we made a subsequent investment in New Holland Capital, where AGF now owns a 50% economic interest in the company. We are pleased with New Holland Capital's organic growth, with AUM increasing 44% to CAD 11 billion since our initial investment two years ago. With the inclusion of New Holland's AUM of CAD 11 billion, our AUM and fee-earning assets were CAD 75 billion at the end of Q2, up 40% from a year ago. AGF Investments Canadian Retail Mutual Funds reported the eighth consecutive quarter of positive retail mutual fund net sales, with net sales of CAD 6 million in the quarter. Our SMA and ETF business remained strong, with AUM increasing by 74% year-over-year to CAD 4.8 billion. Our Canadian SMA and ETF net flows were CAD 155 million in the quarter. We reported adjusted diluted EPS of CAD 0.72 and generated CAD 36 million of free cash flow in the quarter. Our balance sheet remained strong with CAD 435 million in short and long-term investments, net debt of CAD 51 million, and CAD 145 million available on our credit facility. The strength of our balance sheet and capital position provides us with flexibility to deploy capital thoughtfully in line with our strategic priorities. During the quarter, AGF was added to the Nasdaq Broad Canadian Dividend Achievers Index, a testament to our track record of consistent dividend growth and our ongoing focus on returning capital to shareholders.
AGF Investments Mutual Fund AUM was CAD 38 billion, up 23% year-over-year, outpacing the industry increase of 20%. The growth of our ETF and SMA AUM globally remained strong, up 74% year-over-year. Segregated accounts and sub-advisory AUM increased by 3% compared to the prior year. We are expecting a CAD 150 million redemption in the pipeline in Q3 — it is not performance related but was driven by the relative outperformance of our strategy, causing the client to rebalance the allocation back to target weight. Our AGF Private Wealth AUM increased by 16% compared to the prior year, reaching CAD 10 billion. AGF Capital Partners AUM and fee-earning assets were CAD 15.3 billion at the end of the quarter, which included CAD 11 billion from New Holland Capital.
Turning to mutual fund sales — the Canadian mutual fund industry saw positive net sales of approximately CAD 7 billion in the quarter, substantially driven by net flows into fixed income and specialty funds, which included liquid alternatives, crypto, and commodities products. AGF Investments Canadian Retail Mutual Fund delivered its eighth consecutive quarter of positive net sales of CAD 6 million. We also continue to see strong flows in our Canadian ETF and SMAs as retail clients look to utilize different investment vehicles to access our investment capabilities. Many of our leading mutual funds are also available via SMAs and ETFs. We are introducing a new view this quarter combining our Canadian retail mutual fund and ETF and SMA flows to better reflect this overall trend. Our Canadian ETF and SMAs have seen positive net flows over the past eight quarters, with consistent year-over-year growth over the last two years.
Our ETF and SMA products globally have grown at 64% on a compounded basis over the last two years, now reaching CAD 4.8 billion. We continue to see consistent growth and momentum across the U.S., Canada, and Asia, where many of our strategies are available on leading wealth management platforms.
On investment performance — AGF Investments measures mutual fund performance by comparing gross returns before fees relative to peers within the same category. Our one-year performance was in the 42nd percentile, our three-year performance was in the 43rd percentile, and our five-year performance was in the 40th percentile. Approximately 60% of our funds outperformed our peers on a three and five-year basis. I will now pass it over to Ash Lawrence to provide an update on the AGF Capital Partners business.
Ash Lawrence: Thank you, Judy. Building a diversified alternatives and private markets business remains a strategic imperative and is key to the long-term success of AGF. Over time, AGF Capital Partners will be a driver of growth and contribute to a greater diversification of AGF's assets and client base. AGF formally established AGF Capital Partners as our multi-boutique alternatives business in 2022. Since then, we have made significant progress in the build-out of the business.
In early 2024, we acquired a 51% stake in Kensington Capital Partners, a leading private equity and venture capital manager. We also made our initial investment in New Holland, a multi-strategy hedge fund and specialized credit manager. This quarter, we increased our interest in New Holland from 24.9% to 50%, with rights to further increase our stake in subsequent periods. At the beginning of 2026, New Holland launched a specialty finance-focused fund for institutional investors. New Holland has also onboarded new institutional investors to its flagship multi-strategy hedge fund, which now has almost CAD 3 billion in assets. Early last year, AGF and New Holland jointly launched the AGF NHC Tactical Alpha Fund, giving eligible Canadian investors access to their flagship mandate. New Holland's total AUM is up 44% since our initial investment in 2024, reaching CAD 11 billion.
In the midst of a very difficult private equity environment, Kensington Capital Partners successfully updated the terms of its flagship CAD 1.2 billion Kensington Private Equity Fund to modernize the fund structure and better align the fund terms to the liquidity profile of the underlying investments, resulting in the lifting of the suspension of redemptions in March of this year. Additionally, Kensington acquired a strategic interest in ONE9, a venture capital firm focused on the defense and security sector, and has since launched a sector-specific strategy and grown the team focused on what is quickly becoming a major investment theme with institutional clients. The AUM of the AGF SAF Private Credit Strategy also crossed CAD 250 million, with steady growth driven by both strong performance and flows throughout the past year. Our Canadian private debt strategy is focused on non-sponsor-backed borrowers in the lower mid-market and mid-market within Canada.
Over the last few years, we have developed internal infrastructure to strengthen the support for our affiliate managers. We've established a dedicated sales team to market our private market strategies to Canadian investors, both retail and institutional. We've built dedicated functions within AGF to support the business and our affiliates, such as marketing and legal resources. We've provided capital to grow the business alongside investing in numerous funds managed by our affiliate managers. We remain disciplined in our origination process as we look to grow the platform further — over the past three years, we have screened approximately 70 managers and continue to build our presence and relationships to benefit our pipeline.
AGF Capital Partners now has over CAD 15 billion of AUM and fee-earning assets spanning various investment strategies, including absolute return, venture capital, private credit, and private equity, both in Canada and the United States. Going forward, we will continue to grow AGF Capital Partners by supporting the growth of our affiliate managers while continuing to look for targeted acquisition opportunities. With that, I will now pass it over to Ken to discuss our financial results.
Ken Tsang: Thanks, Ash. Our financial results in this period are adjusted to exclude severance, corporate development, non-cash acquisition related expenses, and other adjustments as noted in our MD&A. Adjusted EBITDA for the quarter was CAD 64 million, up CAD 34 million from the prior quarter and CAD 25 million from the prior year, mainly driven by higher top-line revenues. SG&A was CAD 63 million, down CAD 2 million from the prior quarter and up CAD 3 million from the prior year. The decrease from the prior quarter was attributable to seasonally higher expenses recorded last quarter. The increase from the prior year was mainly due to higher performance-related and AUM-driven expenses. Adjusted net income attributable to equity owners for the current quarter was CAD 47 million, and adjusted diluted EPS was CAD 0.72. Free cash flows for the quarter were CAD 36 million, largely flat to the prior quarter, and CAD 12 million higher than the prior year, mainly due to higher EBITDA from our AGF Investments and AGF Private Wealth businesses.
Within AGF Investments and AGF Private Wealth, net management fees were CAD 97 million for the quarter, CAD 4 million higher than the prior quarter driven by higher average AUM and two additional days in the quarter, and CAD 13 million higher than the prior year driven mainly by higher average AUM. Revenues from AGF Capital Partners were CAD 27 million this quarter, representing a significant increase from both the prior quarter and prior year. The increase was mainly due to the CAD 15 million gain on our New Holland transaction, where we exercised certain option rights to increase our interest from 25% to 50%. The increase in revenues from our long-term investments this quarter also contributed to the sequential quarter increase. Since inception, these investments have generated returns of over 11% per annum, exceeding our long-term target return of 8% to 10%.
With the conversion of our convertible note to equity and subsequent investment in New Holland, we will be accounting for New Holland on an equity accounting basis going forward. We expect the New Holland transaction to be modestly accretive to earnings in the near term after accounting for performance fees and amortization expenses. The expansion of New Holland's operating leverage is expected to further contribute to earnings growth over time.
On our EBITDA yield — this view excludes AUM and related results from AGF Capital Partners, as well as DSC revenues, other income, and any one-time adjustments. The EBITDA yield this quarter was 28 basis points, three or four basis points higher than the prior quarter and the trailing 12 months, highlighting the operating leverage of our business as AUM grows.
On free cash flows and capital uses — our trailing 12-month free cash flows were CAD 134 million, and our dividends paid as a percentage of free cash flows was 24%. In the same period, we returned CAD 80 million to shareholders, consisting of CAD 32 million in dividends and CAD 47 million in share buybacks. During the quarter, we repurchased over half a million shares under our NCIB. We ended the quarter with net debt of CAD 51 million, CAD 435 million in short-term and long-term investments, and CAD 145 million remaining on our credit facility. Our future capital allocation will be balanced and includes returning capital to shareholders through dividends and share buybacks, as well as investing in areas of growth.
On our market valuation — our trailing 12-month adjusted EBITDA was CAD 193 million and our enterprise value was approximately CAD 1.3 billion at a 6.9x EV to EBITDA multiple. At 6.9x, our long-term investments are valued at CAD 124 million, a 70% discount against the balance sheet value of CAD 418 million as of Q2. The rest of the business continues to trade at a two-turn discount against other traditional asset managers. These suggest further potential upside to our valuation, despite the strong share price movement over the last few years. When we do see volatility in our stock, we continue to be very active and will continue to look for opportunities to buy back shares opportunistically. I will now pass it back to Judy to close out the presentation.
Judy Goldring: To sum up this quarter, we continue to make progress against our strategic objectives. AGF Investments and AGF Private Wealth businesses remain strong. Our AUM and fee-earning assets continue to climb, reaching nearly CAD 75 billion, 40% higher from the prior year. Our investment performance remains solid and our sales momentum remains strong. We are excited about the opportunities ahead for New Holland Capital and the continued growth of the AGF Capital Partners business. We remain disciplined in our expense management while investing for growth. The strength of our balance sheet and capital position will provide us with flexibility in our capital allocation strategy and the resilience to weather different market environments. I would also like to take a moment to thank our entire AGF team for all their hard work. We will now take your questions.
Operator: Our first question comes from Graham Ryding of TD Securities.
Graham Ryding: Hello. Good morning. Could we start with New Holland Capital? Can you give us a feel for the organic growth profile there in terms of net new assets, maybe how that's looked over the last few years?
Ash Lawrence: Hi, Graham. They've seen significant growth from an AUM perspective since we closed our transaction — 40%+ growth, now sitting around CAD 11 billion, or about USD 5.5 billion to $8 billion. That growth is largely coming from two sources: new fundraising as well as profits being reinvested within some of their core strategies, namely their flagship multi-strategy which has now reached about CAD 3 billion. We're seeing quite a bit of organic growth in their existing portfolio. They also launched a specialty finance vehicle at the beginning of this year, and while it's still early days, they are seeing investor interest in that product as well.
Graham Ryding: How much of that organic growth is coming from the Dutch pension funds versus North American clients?
Ash Lawrence: The Dutch SMA is largely related to profits being reinvested. I don't have the exact number in front of me, but it is part of it, not the majority. The majority of that capital is fundraising from new sources, both in North America and in Europe.
Graham Ryding: On the SMA flows — do those include flows from the U.S. and international, or just Canada?
Judy Goldring: The CAD 155 million reflects only the Canadian SMA number at this time. We don't break it out jurisdictionally. We're always open to greater disclosure, and we are taking feedback on whether that number should be broken out. If you look at the total AUM number we show between SMA and ETF, it's probably equally weighted between Canada and globally outside of Canada. We continue to see strong flows in the U.S. as well, where we sit on about 10 different platforms.
Ash Lawrence: Just for added clarity — the CAD 4.8 billion AUM represents both Canadian and U.S. SMAs and ETFs in aggregate. The CAD 155 million of flows are strictly on the Canadian side, though we have also seen strong flows on the U.S. side as well.
Graham Ryding: That CAD 4.8 billion — can you break out how much is SMA versus ETF, or at least directionally?
Judy Goldring: We don't break that detail out. The majority is SMAs. As we continue to evolve our ETF platform and have launched a few more products there, we continue to focus on growth in that area, but we don't break out the SMA and ETF split.
Operator: Our next question will come from the line of Romil Sobti with Jefferies.
Romel Sabat: Thank you for taking the question. On New Holland — could you explain what the remaining options and warrants are, and whether you expect to exercise them this year?
Ash Lawrence: Post-transaction, we have two warrants — essentially options — still available to us. One will take us to a majority ownership, just a small amount to flip us into majority, and then another 15% option that will take our ownership up into the 65% range. The first warrant is exercisable by us at any time, though it will trigger certain consent rights that we will need to obtain in the U.S. before we actually reach 50.01%. The second warrant is exercisable by us 24 months from now within a window of time.
Romel Sabat: If you exercise the first option, would that change to consolidation instead of the equity method?
Ash Lawrence: Yes, it would.
Romel Sabat: Could you provide a bit more color on the operations of New Holland Capital — the base management fee rate and the profit margins you're seeing?
Ash Lawrence: Over the last couple of years, New Holland has undertaken meaningful growth investments into their business — largely adding and upgrading skill sets and people, as well as building out a trading affiliate. As a result, their fee-related earnings right now are roughly break even. Our expectation, and the reason for the exercise of our option, is that with the bulk of that retooling now complete, we do expect those fee-related earnings to pick up over the next 12 to 24 months. The platform is now positioned for growth. As a reminder, when we talk about fee-related earnings, we're typically excluding performance fees. They do generate performance fees in almost all of their strategies. On a look-back basis — when we were still in our loan arrangement and had a participating interest as part of that structure — earlier this year that generated about CAD 4.5 million to AGF at our 25% special interest, inclusive of performance fees earned over 2025.
Operator: We have a follow-up question from the line of Gary Ho with Desjardins Securities.
Gary Ho: Maybe just going back to the SMA and ETF flow side. Good momentum. You said there are 10 partners — wondering if any of those were added recently, and which products are you seeing the best flows. Also, I was a bit surprised by the mutual fund net sales of CAD 6 million in the quarter, given you had mentioned around CAD 40 million quarter to date on the last call. Were there outflows in May, and how does June look?
Judy Goldring: On the mutual fund side — we did see some softening in our sales as did the industry quarter-over-quarter, and I would attribute that mostly to seasonality. Year-over-year, despite the strong equity markets, we saw a softening relative to last year. We think that was mostly due to the softening of the economy, higher cost of living, and inflation being in play. We do service a certain segment of the Canadian retail investor base that would be most impacted by that economic situation. The industry also saw strong flows in the balanced and specialty categories where we have less exposure — things like gold, high yield, and crypto. To the extent we do have specialty mandates in the high yield space, we did see strong flows consistent with the industry, but we just don't have as much broad exposure there. Month to date has been solid, with CAD 25 million in net sales through to the end of yesterday.
On the SMA side, the industry is directionally moving toward that vehicle, and we have positioned ourselves well. Our national accounts team has done a great job getting onto about 10 or 11 different platforms in Canada. On those platforms, we're seeing mostly our growth suite of products — U.S. growth, global select, SMID — and we also have energy transition in play in certain jurisdictions. We continue to evolve that platform, and I think that's directionally where the industry is going.
Gary Ho: On the fair value distribution line — backing out the New Holland Capital write-up, I get to just under 2% return on your long-term investments. Is the 5% to 6% return you highlighted last quarter for this fiscal year still a good number to use for the balance of the year?
Ash Lawrence: Yes. On an annualized basis for 2026, we are still looking at something in that 5% to 6% range, taking into account the 2.5% markdown we had last quarter. While in certain private markets it may not be the strongest year, we do still expect to get to that 5% to 6% level over the course of the year.
Gary Ho: Anything to call out from the infrastructure assets that drove the fair value loss last quarter?
Ash Lawrence: That portfolio stabilized from a valuation perspective this quarter. We do expect some monetizations coming in the next few years. A good chunk of that portfolio, not the entire holdings, is across two funds, one of which has now hit the 10-year mark. Given that some of those assets are now mature, they won't be yielding the same returns they were earlier in the J-curve. Between now and monetization, we would expect some decrease in performance from a return perspective. We just need to make sure we don't misinterpret that as erosion of performance — it's more that the assets are mature.
Gary Ho: John, I believe you're on the call. What attracted you to the role and what can you leverage from your prior experience?
John Porter: Thanks, Gary. I've been here a bit less than two months, and my focus right now continues to be on building relationships across the organization. This is a great investment team and a great platform, and we're operating from a position of strength. The three main reasons I joined: our commitment to investment excellence, the culture of collaboration that has long been emphasized here, and the continuous improvement mindset. As I move forward, the continuous improvement mindset is something I'm really going to lean into. We're going to pursue every avenue we can to be even better at delivering world-class risk-adjusted returns for our clients, and I couldn't be more excited to be part of that.
Operator: I am not showing any further questions at this time.
Judy Goldring: Thank you. This was another strong quarter for AGF. Our investment performance and sales momentum remain strong. Our strong balance sheet and cash flow position provides the flexibility to return capital to shareholders, continue investing in long-term growth, and remain resilient through market conditions. We look forward to our Q3 earnings call on September 23rd, 2026.
Operator: Thank you, ladies and gentlemen. This concludes today's conference call. Thank you for participating. You may now disconnect. Everyone, have a great day.