VANCOUVER, BRITISH COLUMBIA--(Marketwire - Nov. 13, 2012) - Matrix Asset Management Inc. (the "Company" or "Matrix") (TSX:MTA) reported today its financial and operating results for the third quarter ended September 30, 2012 and announced that, subject to TSX approval, a stock dividend of $0.015 per share will be paid on December 20, 2012 to shareholders of record on December 5, 2012. The dividend will be paid through the allotment and issuance of additional Common shares in the capital of the Company (the "Dividend Shares"). The Board of Directors remains hopeful that a cash dividend will be reinstated in the future as initiatives aimed at growing assets under management ("AUM") are implemented and cost-cutting measures continue to reduce Matrix's expenses.
Dividend Shares will be issued at a price equal to the volume weighted average trading price of Matrix's Common shares over the ten trading days prior to the dividend payment date (the "Issue Price"). Each shareholder's dividend entitlement will be determined by multiplying the number of Common shares held by the shareholder as at the record date by $0.015, dividing the cash value by the Issue Price and rounding the resulting number of Common shares to the nearest whole Common share (with more than one-half of a share being rounded up).
Q3 2012 Highlights
- The third quarter of 2012 saw AUM and corresponding fee-based revenues continue at levels comparable to the second quarter. At the end of the third quarter, total AUM was $1.1 billion, compared to $1.1 billion as at June 30, 2012 and $1.9 billion as at September 30, 2011. Fee-based revenues were $5.8 million for the third quarter compared to $6.0 million for the second quarter.
- EBITDA for the third quarter was $0.8 million and $0.9 million year to date, compared to $(0.4) million and $(2.8) million during the same periods last year.
- Recurring EBITDA for the third quarter was $0.8 million compared to $(43) thousand during the second quarter and to $1.1 million during the same period last year, and was $1.3 million year to date, compared to $4.0 during to the same period last year.
- Free cash flow for the third quarter was $0.9 million compared to ($0.7) million during the same period last year, and $0.4 million year to date compared to $(3.2) million during the same period last year, representing a significant year to date increase of $3.6 million.
- Total expenses are down $8.7 million or 28% on a year to date basis compared to the prior year, and down $1.5 million or 18% relative to the second quarter of 2012.
- Recurring expenses decreased by approximately $2.3 million for the nine months ended September 30, 2012 as compared to the prior year, and down $1.2 million relative to the second quarter of 2012.
- During the third quarter, Matrix Funds announced the filing of the preliminary prospectus for the Matrix 2012 Enhanced Short Duration National and Québec Flow Through LP. The first closing occurred on October 31, 2012, and gross proceeds raised were close to $20 million, representing the largest amount raised in over 4 years for the LP program. The Québec units reached the maximum sales levels as set out in the prospectus, representing the first time the Matrix flow-through LP program announced a "Sold Out". Matrix Funds adopted a fee structure that aligns its interest with unitholders by charging its management fee on the final NAV of the LP when its assets are rolled over.
- Matrix Funds' gross redemptions continued to decline during the previous quarter, which had the lowest gross redemption amount in 9 years. Net sales were almost flat during the third quarter, compared to net redemptions of $9.1 million during the same period last year
Prior and Subsequent Events:
- GrowthWorks Canadian Fund Ltd. ("Canadian Fund") has closed Class A Share redemptions to preserve capital for follow-on investing and to pay liabilities and operating commitments. The Canadian Fund is focused on completing divestments from its venture portfolio. A number of the fund's venture positions are subject to signed letters of intent for exit transactions. A portion of the proceeds from these transactions would be used to reduce the accrued management fees owing to Matrix. While there can be no assurance that the transactions will complete as scheduled or at all, management believes there is a high probability that the transactions will be completed by the end of 2012.
- On November 2, 2012, Working Opportunity Fund (EVCC) Ltd. ("WOF") announced advanced negotiations towards a potential sale of one of the WOF's largest portfolio positions at a significant increase to the WOF Fund's carrying value. Management believes the potential gain on the sale of this portfolio company could result in an increase of greater than 20% in the WOF's Venture Series share values. A resulting increase in NAV may increase NAV-based fees paid to the manager of WOF. There can be no assurance that the transaction will complete as contemplated.
David Levi, President and CEO of Matrix, commented: "The past quarters were challenging and returning to profitability is a priority for management. Important progress was achieved on reducing expenses and implementing organic growth initiatives. Cost saving measures initiated last year have started to take hold and we expect to realize additional expense reductions as we continue to implement cost-cutting measures. We are pleased with the results of Matrix Funds, which are showing organic growth following our recent initiatives. Also, during the quarter we raised short term capital towards financing the working capital deficit and we are continuing to pursue longer term capital raising initiatives to reduce the deficit."
Corporate Overview
Matrix is a diversified asset and wealth management company with offices across Canada. The Company manages approximately $1.1 billion in assets through three operating divisions:
- Institutional asset management, operated through SEAMARK, which offers portfolio management to institutional and high net worth private clients, including through managed portfolio advisory ("WRAP") programs of leading Canadian investment dealers.
- Fund management, operated through Matrix Funds Management (a division of GrowthWorks Capital Ltd.), which manages the Matrix family of mutual funds and specialty funds (formerly Mavrix Funds and SEAMARK Mutual Funds) and distributed through investment dealers and financial planners across Canada.
- Venture capital, operated through GrowthWorks, which manages funds in the venture capital sector.
This diversified set of operations delivers multiple sources of revenue across several asset and client groups. The Company's mission is to provide a diverse array of investment choices and the best possible investment management service to Canadian investors and institutions. With five offices located in major and regional centres across Canada, Matrix has a true national investment presence.
Summary of Third Quarter Financial Results - Unaudited
Results of operations for Matrix for the third quarter consolidate the results of Matrix and its subsidiaries. Matrix reports its consolidated financial position, statement of income (loss), statement of comprehensive income (loss), statement of shareholders' equity and cash flows in accordance with International Financial Reporting Standards ("IFRS" or also referred to as generally accepted accounting principles, or "GAAP") in Canadian dollars.
The following table sets out selected consolidated financial information about Matrix for the three months and nine months ended September 30, 2012 compared with financial information for Matrix for the same periods in 2011.
| For the three months ended September 30, 2012 (in $ thousands) | For the three months ended September 30, 2011 (in $ thousands) | For the nine months ended September 30, 2012 (in $ thousands) | For the nine months ended September 30, 2011 (in $ thousands) | ||||||||||
| Revenue | |||||||||||||
| Management and administration fees | $ | 5,205 | $ | 6,503 | $ | 16,557 | $ | 20,685 | |||||
| Additional administration fees | 296 | 352 | 952 | 1,076 | |||||||||
| Incentive participation dividends | 144 | 265 | 1,127 | 1,533 | |||||||||
| Interest income | 187 | 1 | 346 | 26 | |||||||||
| Other income | 99 | 185 | 293 | 723 | |||||||||
| Total Revenue | 5,931 | 7,306 | 19,275 | 24,043 | |||||||||
| Expenses | |||||||||||||
| Selling, general and administrative | 4,563 | 5,630 | 16,186 | 19,733 | |||||||||
| Share-based compensation | 133 | 154 | 412 | 382 | |||||||||
| Servicing commissions | 578 | 631 | 1,780 | 2,048 | |||||||||
| Amortization - property and equipment | 83 | 82 | 246 | 224 | |||||||||
| Amortization - deferred sales commissions | 528 | 592 | 1,532 | 1,799 | |||||||||
| Amortization - asset management contracts | 191 | 287 | 575 | 861 | |||||||||
| Interest | 436 | 192 | 892 | 624 | |||||||||
| 6,512 | 7,568 | 21,623 | 25,671 | ||||||||||
| Loss before merger, acquisition and other special project costs | (581 | ) | (262 | ) | (2,348 | ) | (1,628 | ) | |||||
| Merger, acquisition and other special project costs | - | 1,431 | 375 | 5,024 | |||||||||
| Loss before taxes | (581 | ) | (1,693 | ) | (2,723 | ) | (6,652 | ) | |||||
| Income tax expense (recovery) | (974 | ) | (1,631 | ) | (1,050 | ) | (5,532 | ) | |||||
| Net Income (Loss) | $ | 393 | $ | (62 | ) | $ | (1,673 | ) | $ | (1,120 | ) | ||
| Basic loss per share (in $) | 0.01 | - | (0.03 | ) | (0.03 | ) | |||||||
| Diluted loss per share (in $) | 0.01 | - | (0.03 | ) | (0.03 | ) | |||||||
| NON-GAAP MEASURES | |||||||||||||
| EBITDA(1) | 790 | (386 | ) | 934 | (2,762 | ) | |||||||
| Add non-recurring items, net(2) | - | 1,529 | 375 | 6,772 | |||||||||
| Recurring EBITDA(3) | 790 | 1,143 | 1,309 | 4,010 | |||||||||
| Free Cash Flow(5) | 876 | (685 | ) | 444 | (3,185 | ) | |||||||
| Loss before taxes | (581 | ) | (1,693 | ) | (2,723 | ) | (6,652 | ) | |||||
| Add non-recurring items, net(2) | - | 1,529 | 375 | 6,772 | |||||||||
| Recurring (loss) income before taxes(4) | (581 | ) | (164 | ) | (2,348 | ) | 120 | ||||||
| Dividends declared and paid | 717 | 716 | 2,120 | 2,140 | |||||||||
| As at | As at | As at | |
| September 30, 2012 | September 30, 2011 | December 31, 2011 | |
| (in $ thousands) | (in $ thousands) | (in $ thousands) | |
| Cash, cash equivalents and investments | $ 368 | $ 2,047 | $ 1,767 |
| Total assets | 28,390 | 35,036 | 28,133 |
| Total long-term liabilities | 10,325 | 8,236 | 11,799 |
| Total assets under management(6) | 1,100,000 | 1,900,000 | 1,600,000 |
| Notes: |
| (1) EBITDA (defined by Matrix as earnings before interest, taxes, depreciation and amortization and other non-cash items) is a measure used by many investors to compare issuers on the basis of their ability to generate cash from operations. Management believes EBITDA is a useful supplemental measure of operating performance as it provides an indication as to cash available for working capital needs, capital expenditures and dividends. |
| (2) Non-recurring items are described in Matrix's Management's Discussion & Analysis posted on SEDAR. |
| (3) Management believes "recurring EBITDA" is a useful supplemental measure of operating performance because it provides readers with greater insight into what the core or run-rate EBITDA generating capacity of the business may be by adjusting EBITDA for various non-recurring items. Without presentation of this measure, there can be a lack of transparency of the effect of non-recurring revenues or expenses on EBITDA. |
| (4) Management believes "recurring income (loss) before taxes" is a useful supplemental measure of operating performance because it provides readers with greater insight into what the core or run-rate income before taxes generating capacity of the business may be by adjusting income before taxes for various non-recurring items. Without presentation of this measure, there can be a lack of transparency of the effect of non-recurring revenues or expenses on income before taxes. |
| (5) Management believes "Free Cash Flow" (defined by Matrix as EBITDA less interest paid, commissions paid and net taxes (payable/refundable as filed)) is a useful supplemental measure of available cash generated from the business' operations for working capital needs, capital expenditures and dividends. |
| (6) Assets under management or "AUM" means the fair value of the net assets of the funds and accounts managed by Matrix and its subsidiaries in respect of which fees are earned. |
The accompanying unaudited interim financial statements of the Company have been prepared in accordance with the International Accounting Standard 34 - Interim Financial Reporting as issued by the International Accounting Standards Board and are the responsibility of the Company's management. The Company's independent auditor has not performed a review of these financial statements. Matrix Asset Management's auditor will perform an audit of the December 31, 2012 Consolidated Financial Statements.
Liquidity and Capital Resources
As at September 30, 2012, Matrix had a working capital deficit of $4.1 million, which is slightly improved from the working capital deficit at the end of the second quarter of $4.5 million. Total current liabilities of $13.5 million are scheduled for repayment over the next 10 months, including a payment on account of a subordinated debenture of $1.2 million in July 2013.
The more significant changes in the Company's financial position reported during the year to date result primarily from a $4.0 million third party loan financing to Matrix, the proceeds of which were used to fund a loan in the same amount to Canadian Fund ("the Canadian Fund Loan") to support Canadian Fund's liquidity. The repayment, interest and other terms of these two loans are the same.
Current liabilities have increased to $4.0 million as at September 30, 2012. The primary factors contributing to the increase are $2.0 million payable on account of the Canadian Fund Loan ($1.0 million plus accrued interest on each of January 31, 2013 and July 31, 2013) and $1.2 million payable in July 2013 under a subordinated debenture. The Canadian Fund Loan is secured by a charge over the present and after-acquired assets of a Matrix subsidiary and a guarantee from Matrix. Similarly, the subordinated debenture is secured by the assets of the Matrix subsidiary that originally borrowed the funds and by guarantees from two other Matrix subsidiaries. Matrix is working with the Canadian Fund to reduce and over time eliminate levels of accrued management fees owed by the fund, which will ease liquidity pressures on Matrix.
Additional capital resources will be required to meet Matrix's financial needs for the next 12 months, which includes funds required to service and re-pay debt, and to fund operations. The continuation of Matrix as going concern is dependent on increased revenues and raising, from external sources, sufficient working capital to maintain operations and pay current liabilities as they come due.
As organic growth initiatives and cost alignment measures typically require several quarters to impact AUM and operating results, Matrix is seeking medium term working capital financing to provide further time for these initiatives and measures to take hold. To that end, on August 7, 2012, the Board of Directors approved Matrix raising up to $2.0 million in debt through term loan arrangements of which approximately $0.6 million was raised during the third quarter under term loans advanced by both the CEO of Matrix and a [31%] shareholder of Matrix. Matrix may also seek financing from external sources to pursue growth opportunities.
The financial statements and MD&A for the third quarter were prepared assuming Matrix would continue as a going concern, realize on its assets and discharge its obligations in the ordinary course of business. The continuation of the Company as a going concern is dependent on restoring positive net income, working capital, cash flows, and obtaining additional financing, while continuing to make timely interest payments and meet its debt covenants under existing financing arrangements.
Returning to profitability is a priority for management. There are two key elements to management's plan for doing so. First, to grow fee-generating AUM with existing internal resources, including sales and marketing initiatives and positive portfolio performance. Secondly, to pursue larger growth opportunities through acquisitions after obtaining necessary external financing in the form of equity or debt or both.
Matrix's third quarter 2012 financial statements and MD&A and year end 2011 financial statements and MD&A are available on the SEDAR website at www.sedar.com.
About Matrix (www.matrixasset.ca)
Matrix (TSX:MTA) is a diversified asset and wealth management company with approximately $1.1 billion in assets under management and offices across Canada. The Company's mission is to provide a diverse array of investment choices and the best possible investment management service to Canadian investors and institutions. The Company delivers its services through three main operating subsidiaries serving institutional, high net worth, and retail investors.
Forward-Looking Statements
Certain statements in this press release are forward-looking statements, including statements regarding the operations, business, financial condition, expected financial results and profitability, expense reductions, future dividends and dividend policies, proposed financings, performance, potential acquisitions, material divestments from managed venture capital portfolios, levels of management fee accruals owed to Matrix by managed venture capital funds, prospects, opportunities, new products, priorities, goals, strategies, accounting policies and estimates and outlook of Matrix for the current fiscal year and subsequent periods. Forward-looking statements are predictive in nature and are not based upon historical fact. Forward-looking statements are based upon beliefs and assumptions, including with respect to levels of Matrix's AUM and expenses and related assumptions as to levels of portfolio returns and managed fund sales and redemptions, beliefs and assumptions concerning prevailing and future economic and market conditions and the impact of such conditions and other factors on Matrix's AUM, the continuation of portfolio and fund management and advisory engagements, the extent and effectiveness of cost-saving measures and the impact of such measures and other factors on earnings, the ability of managed venture capital funds to complete divestments and pay management fees, tax rates and laws, performance of managed venture capital investments relative to performance fee return thresholds, the collection of trade receivables and the absence of extraordinary or one-time expenses not currently known to management.
While management considers these beliefs and assumptions to be reasonable based on information currently available to it, these statements are subject to numerous risks and uncertainties and no assurance can be given that such beliefs and assumptions will prove to be correct. Accordingly, actual results may differ significantly from those expressed or implied by forward-looking statements due to many factors including, but not limited to, risks associated with institutional, mutual fund and venture capital fund management sectors generally, market, economic, political and other risks affecting portfolio performance, interest and foreign exchange rates, managed fund sales and redemptions and in turn Matrix's AUM, other risks affecting revenues and earnings, regulatory and other risks associated with completing proposed financings, divestments by managed venture capital funds, potential acquisitions and other strategic transactions and introducing new products, integration and continuity risks affecting completed acquisitions, changes in consumer demand for financial products and the ability of Matrix to respond to such changes and other risks and uncertainties listed under "Risk Factors" in the MD&A for the quarter ended September 30, 2012 and in Matrix's Annual Information Form dated March 30, 2012, which are available on SEDAR. Many of these risks are beyond the control of Matrix.
Readers are cautioned to consider these and other risks, uncertainties and potential events carefully and not place undue reliance on forward-looking statements. Other than as specifically required by law, Matrix undertakes no obligation to update any forward-looking statements to reflect events or circumstances after the date on which such statements are made, or to reflect the occurrence of unanticipated events, whether as a result of new information, future events or results or other factors.
Non-IFRS Measures
"EBITDA", "recurring EBITDA", "Free Cash Flow" and "recurring income (loss) before taxes" are not measures recognized under International Financial Reporting Standards ("IFRS"). However, management of Matrix believes that most shareholders, creditors, other stakeholders and investment analysts prefer to have these measures included as reported measures of operating performance, a proxy for cash flow, and to facilitate valuation analysis. These non-IFRS measures do not have any standard meanings prescribed by IFRS and therefore may not be comparable to similar measures presented by other issuers. Readers are cautioned that these non-IFRS measures are not alternatives to measures determined in accordance with IFRS and should not, on their own, be construed as indicators of performance, cash flows or profitability or measures of liquidity. These non-IFRS measures should be read in conjunction with the financial statements of Matrix posted on SEDAR. For additional information regarding Matrix's use of non-IFRS measures, including reconciliations of these measures to the nearest IFRS measures, please refer to the "Non-IFRS Financial Measures" and "Non-Recurring Items, EBITDA & Free Cash Flow" sections of its MD&A available on the SEDAR website at www.sedar.com.
Contact Information:
David Levi
President & CEO
(604) 895-7274 and (416) 934-7700
david.levi@matrixasset.ca
Matrix Asset Management Inc.
Isabelle Gervasio
Vice President, Investor Relations & Business Development
Toll Free: (514) 227-0666 ext. 3222
isabelle.gervasio@matrixasset.ca
www.matrixasset.ca