Earnings call transcript Q4 2022

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Operator

Hello and welcome to the Avantax Fourth Quarter 2022 Earnings Conference Call. All participants will be in listen-only mode. [Operator Instructions]. After today's presentation, there will be an opportunity to ask questions. [Operator Instructions]. is event this note being recorded. Please

now Dee Littrell. would like to to over conference the Please turn I go ahead.

Dee Littrell

Thank On market to earnings earnings website, you, the Avantax of relations information at supplemental fourth everyone and on our quarter release the and conference Wednesday we close, call. following afternoon, posted our Avantax.com. section welcome investor XXXX

I Chief Financial Mehlman, Officer, and am Marc joined today by Chris Walters, Chief Executive Officer.

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

As current some such, XX-K specific risks except and forward-looking Form We including risks of these release uncertainties, and assume could differ law. filings, actual events update required on our recent they include refer and press results Form materially expectations. our SEC uncertainties. to most and as statements, from and by obligation to XX-Q, our our for and our no information Please more

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

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

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

Chris Walters

step our share Dee. symbol name. we for I morning. you, pleased fourth a ticker marking corporate name the wealth as am our next results pure-play Avantax changed Thank XXXX changed quarter to On to earnings the to and under Good time management XX, first company. our Avantax January Blucora our from AVTA,

stockholders. continuing TaxAct, organization adjustments. focus million, reflect to our shared us an post-closing On of sell shift to TaxAct to our call, to wealth During and the affiliate XX, our to on of we to our third positioned $XXX announced which for software grow business quarter that capital December the management we of agreed return we had singular completion earnings Cinven business sale subject to our

wealth year members and successfully our in all the our to achieved employees I contributions would like record-breaking to their a accomplishments. thank time same key these many Board management at We for operating while of of having professionals, realizing these metrics. financial milestones

noted, and execute focused operations As organization our operations, our have and team are our we on capital wealth-only On begun positioning progress have growth streamlining strategy. to significant we structure. our more made

As announced reduce part of we of size work, our annual of are plan meeting our have and to Directors this Board multiple the contributions a appreciated. executives XXXX departure greatly the whose of at

financial supporting aligned client, to of: acquisitions. the retaining professionals existing financial Our firms; and strategic deliver best continuing the professionals and increasing tools; by exceptional NNA assets providing professionals fee-based growing been by team recruiting financial by and a higher of has existing and value mix when priorities interest accounting new RIA our to growth in and shifting service

CPA support investments our made to targeted We’ve professionals and incremental also firms. affiliated financial

rate interest structure, does XXX,XXX compared a compared our provides capital upfront million. we we new On a repurchased a significant have that has us not delayed to principal interest million. feature revolving a $XXX to in up On as million term for January XX, shares draw That entered keep $XX facility facility January, other lower of and for enables down This loan of a credit $XX.X facility. also to a to costs total amount costs previous options. credit has agreement, further of maximum into

This per offer commenced to repurchase to Auction $XX stock On common modified purchase a authorization. our that approved is our million tender million $XX to $XXX share. Dutch for and we $XXX addition in announced January share XXth, we between up of

use indicators of excel our across quarter, measure fourth most the our to we that business. on we performance Moving the to to important results the for continued

net our positive flows. First,

in million consecutive business for net quarter. flows last the of had seen net new for million quarter billion period. asset and the $XXX have fourth XX-month record a the for setting $X.X QX, up new positive assets, trailing We $XXX In over we

Second, our recruiting.

We during the record our approximately recruited quarter, continued adding another professionals year best also to next fourth successfully assets in newly million recruited recruit XX% more finishing $XXX with assets financial over than year. in

We recruited CPA as as Partners to broker firms Avantax strong a also Planning new employee-based pipeline independent dealer in both model RIA. and for XXXX three well have our our

acquisitions. firm our Third,

employee-based XX model quarter, increasing This with milestone held in in marked little assets $X billion acquisitions ago. completed up two over client from a billion, months, $X.X to we XX a approximately years total our

Fourth, we continued professionals. financial retain to productive

the were XX.X% non-producing in production. professionals the retention the production professionals financial departed for high rate in consistently financial with during came rolling gross who Of Our less $XX,XXX quarter. XX% at quarter, than

satisfaction. are professional XX serving innovative regularly our points surveys from professional survey, financial our and to we leader meeting in our us well the needs. to financial solutions, by by last and mission In community technologies, Promoter executing assist professionals, survey our tax satisfaction financial winter the of ’XX a financial Lastly, Net from We professionals’ financial planning. conduct Scores our survey points clients and tax-focused better on XX be In improved investment tax-advantaged short, CPAs, tax-inclusive professionals year. Spring providing

programs of strategy, community the extending through growth wealth the We in events; consulting, remain focused key financial which the lead to accelerate growth driven largest training, digital in continuing and purpose investment develop including service include, differentiated products. on best growing to class aspects capabilities and support; on and professionals’ nurturing management tax-focused practice financial solutions, our communities, providing industry professionals coaching growth, our and management of our delivering and

employee-based their Avantax opportunities has way with led efforts, growing we that business. work our with these resulted for priorities, and rapidly financial significant to portion In to of Planning RIA, Avantax addition a this Partners, aligns the further which in professionals to our grow providing in are to pipeline

that, in employees future and our our we management business on professionals exciting actions effectively structure together, financial well Our will is taking plan, our professionals, capital financial result clients shareholders. and wealth executing is for serving pure-play is end believe and on an

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

Marc Mehlman

sale last months, can our in a since as from results The our several the Thank our wealth where can you, has share financial we over moment good work business. Chris, announced business of this standalone performance, financial and you And tell strong. morning TaxAct the culminated as everyone. is

net Starting records of with the fourth broke mentioned, have are thrilled assets quarter to year recruited this was we executed XXXX business. and assets, for results, the the strong as for in our quarter. Chris year Avantax well assets advisory. total percentage new for a

down being is from above the business, Total a XXXX rate seen X% guidance. in was high-end prior of of environment figure shifts million fourth fourth well to as results. of a slightly $XXX.X as reflection of our the the up the the favorable our this quarter third despite and quarter up the revenue quarter record interest on revenue financial versus year, Now for record the we’ve asset portfolio. Achieving meaningfully market mix of

Return the versus full QX on commission for Year-over-year million, points $XX X% is XXXX. quarter were up assets year decreased sequentially. of an of XXX and transaction-based basis increase revenues XX% for XX% XXXX. revenues Transaction-based commission

for fourth and difficult comparison the discontinued discontinued to As of million the high which operations EBITDA continuing end for quarter, near at ease $XX.X it both is adjusted operations for the our tell came guidance. the in treatment, from is of

costs by operations, lower National with QX performance QX is the expected expense result the higher favorable revenue quarter than of million continuing was for EBITDA adjusted the because and performance than for driven quarter. in a As Conference. $XX.X

on pretax GAAP GAAP gain in income Included net was $XXX our per or net is $X.XX income of TaxAct million, sale a $XXX.X million. diluted share. of

other details quarter. few A regarding performance this our

decreased fourth the QX from in since XX.X%. the lowest we in third the Our pay-out XXXX, XX.X% to have rate quarter was XX.X% it rate seen when quarter,

the of net payout flows quarter. transaction-based revenues, see depending the rate fluctuations We and of of the assets concentration in upon will in mix the make-up

advisory total We a billion $XX.X assets $XX.X high were X% with ended client of at assets a to quarter client as year-over-year Fee-based ending assets of percentage year the billion the new into assets advisory down assets of quarter. inflows with having total billion. the billion were the total $XXX Net for $X.X net the fourth Advisory of with client year year $XXX fourth the million for XX.X%. flows quarter in million $X.X and with for

for time. versus million the record XXXX, our XXXX $XXX at in which a newly driven assets for billion full-year that have We to business $X.X was recruited

As recruited assets. is newly annum our to goal organic growth previously, drive via shared per X% to X.X%

sale. balance to debt, the no Turning sheet, the year and we as outstanding TaxAct cash term we with the million $XXX proceeds cash the ended equivalents from off and loan with paid of

A subsequently We to a up Term where along with a established months, group twelve the $XXX banking entered million Loan $XX with a over revolver. next we have million borrow can into newly

year $XXX the share to help offer over draw of be capacity the to primarily tender expect of to term remaining million $XXX We with fund fund to loan continued late course the February borrowed the the expected in repurchases.

result group fund attractive confidence meaningful opportunity our business. and cost the were to low We relative interest to We rate the our other us the financing create the pleased to and and are bank showed with provide options value. believe in

growth be allocation our authorization, our acquisition to shareholders million of under model. financial investing and repurchase in into to tender employee-based on capital capital in our Our fuel to priorities our to program returning the offer business the individual continue $XXX.X following continuing execute professionals remaining

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

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

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

relates transaction of the guidance, the that more our throughout to hike year. in of the time continue we at assumes outcomes sales the XX include revenue it finalizing curve, performance drive Fed factors leverage Other to March. and As of point and flows timing basis can Funds the asset rates forward one

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

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

one-time between sale million $X.X of are and of relating adjusted TaxAct. the and We to to other million the savings, cost items $XX.X related items in expense cost proxy potential matters anticipating delivering

and the $XX million interest expenses depreciation in between we Lastly, million million amortization roughly have for $XX.X million $XX year. and assumed in in $XX.X expense,

concludes prepared This remarks. our

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

Operator

Thank much. you very

[Operator Josh the Siegler Please with Fitzgerald. We from Instructions]. will question Today's now Cantor go ahead. first comes begin question-and-answer session.

Josh Siegler

for Yes. good Thanks morning. Hi, taking question. my

that has what this over advantage management you next allocating you wealth sole a more about thinking business, how the And your your time year? of for most competitive are are management to? focus growing on Now excited about

Chris Walters

is been working really Interesting, well. this a a that's strategy of continuation incredibly

that. And executing intensely so we are focused on

we're perspective, this year. PSAs attention and time a from delivering through know, you As late

And recruiting business improvement so activism. elements efforts. associated platform there That said a that our still setting supporting in with time have development new the we're have This our of is been the working tax significant is professionals where records. financial to the strategy been

their are our into And to those to them business, and Delivering best in on focused training be we So to work their every such. we're exceptional customer them even financial consulting for And that in lean actually way then partner the areas. they from right excited make professionals time service, for easier efforts to to to phenomenal things growth are of education more with. all events some as supporting in that grow more. growth and that we them, easy we and have put the

finally, tools and And right efficiency. improve that their technology, technology

talked that few last the each about right, one increased as those time spending we're have in we we focus, as years. areas, so, over And of

Josh Siegler

want trend of also market Understood, become assets Do that's to you net new Thank to specific I expect trend continued to mix? a as larger percentage positively despite KPI, throughout year into one this assets with negative advisory XXXX, the helpful assets, color. to a continue very in the dial assets part Thanks. advisory much. you and healthy impact. total of

Chris Walters

we've value part seen expect to growth about of going mix continue. a we talked trends forward, being important and that our the high strategy have we shift As

Josh Siegler

you. Thank Got it.

Operator

The Kurnos Please Benchmark ahead. go Company. question comes The next from with Dan

Daniel Kurnos

Good long another the change, name to where morning. thanks. one for Maybe on Great, a Strong year just and for I've finish been Mark. congrats around time. yet name this

finished. tease so can run the First, economic of just rate way the of TSA. is you clean kind to housekeeping play business, know, any pure Is on the impact, the we understand once TSA there out

Marc Mehlman

are months so tax a run a Yeah, so expected up for six we And the TSA to season. to close we're that providing, there and to fair of of is nine that operational months. amount support considering are minimum

an provide than elements to off difficult sooner to others. bit number, those little going a exact of support is it's operational while So fall certain elements are

associated be out we TSA when the performance. each results, core our from our And part so the quarter income the financial teasing we of report will with

from coming from versus make that'll a a the is for it versus see the to is our guidance you reality easier of But meaningful XXXX is majority TSA. underlying really vast So our what It not came TSA. impact. underlying business for a operations

Daniel Kurnos

have other, if Okay. you some interest do any the And also Fed rates, go one for reason to ceilings rate decides crazy? on

Marc Mehlman

We do not.

Daniel Kurnos

Okay. curious -- about going, talked thank management. a question different both a having the sort this, And really of and that's sort two chance that. new, CPA we directly front. good maybe how ask I'm Obviously, And are a on the then pipeline is clean a land, externally. didn't now wealth for to Chris, have currency then discuss of you you conversations the internally have so in way, FinTech in you fronts. One, on to really

conversations how that if of are and Just perceive that centric the the that ex-TaxAct, tax people are of now company's the rebranded you any way sort going, on focus. sort bearing has

sort have, now. you this M&A go a if received understanding about got might we've a and you're out opportunities. you're that way thinking of there currency, And maybe have more interesting to hey, of is right say, the obviously, that, now recalibrate sort choppy market able Or that

Chris Walters

take so the Yeah, one. let me first

as over organization the communicated you to directly name of their There backing to not their can they imagine had past complexity they working is years the end name financial our would and statement. introduced clients change, connected a was that up were because support that the some excited really had professionals with, clients, any the they have on look the were was to about their right? that So and was about name

our professional I that We think there a base. so enthusiasm across And was think it's great financial real thing.

prospects, the of just is our Avantax the now It for brand profile also of the it kind that name raises company. of public given

think so And significant was there I enthusiasm.

we about we few and in how believers tax As it, M&A over our to really may it years a unique last strategy where had relates are think disciplined focus. strong the we've

we One, efforts, very back that and primary way, for can at our work as looked to growth-oriented are so a efforts to of One they're monetize us. provide there with are also looking a solely different And for succession on solution. that M&A, is multiple in couple categories And we who but independents want and and relevant. reasons. their focus maybe affiliate office a leave want others great their are growth some the of us to

as last fallen XX the that of have done know, over the deals you into that years so And couple category. we've

a accounting category, focused The financial falls born tax and was I firms, second area that was HKFS, into other think, of right. It an out RIA is that firm.

the seen couple And last for areas, extraordinary will or that those look pretty What to we've there. multiples so we continue healthy have been in the years. is of

opportunistically. continue we'll to in monitor the move both categories and situation so And

Daniel Kurnos

agree, much. better Chris. Great, I Avantax Blucora. is Yes, than thanks very

congrats. So

Chris Walters

Great. Thanks, Dan.

Operator

The question Paris Barrington Alex with go from ahead. next Please comes Research.

Alex Paris

and finish the Hi, Congratulations my taking work everybody. got that Thanks on for strong all questions. done. to a you year

So I a couple have of questions.

other operations? come line with starting the TSA. discontinued P&L? information that a little Is First, it items? within on -- all into more bit it it does come is on in Or Where the does

Marc Mehlman

our continuing on The operations going and of forecasts. income going to in be but It's show to part EBITDA TSA line, business will to come it's DisOps. adjusted is not another our a of part up

of split And operations part out, continuing it our will be financials. so but it will be

Alex Paris

is TSA just above is behind midpoint revenue the XX% today, the the of provided for think your is which you margin. medium the And on with organic you. at you XX%, Based last target on adjusted growth the that guidance revenue to you. said the once margins that X.X% that is XX.X% is XX% then midpoint call, EBITDA adjusted I to target term and of XX% growth got Okay, EBITDA,

of EBITDA there TSA. kind that be color you're that in would range, Any the solidly you're still running despite additional helpful. So the fact

Marc Mehlman

Sure.

to revenue a interest isn't side, X.X% XX% the the of clean sweep rate, First, sort environment. slash on

is continue out revenue that degree interest what year. the some And take to noise for helping our fact sweep. do to so to trying And of rates up go the growth we're is the

to continue position be we business some what as through work you've our From it a seen result environment, to rate the interest able we And rising a is in margin our as able as cost believe actions to announcements, we from TSA. find perspective, strong a of probably already we've ourselves of been take relates for some to to profitability deliver the base. again,

Alex Paris

Great, And in that the then of you would bigger lower that for the a the assumptions of there guidance. than drive revenue is the outlined variance that in net net your that of kind that's guidance guidance range? There's to end helpful. versus What range end underlie income year. the income higher

Marc Mehlman

potentially one was So it this that how would much place the take cost as parameters deliver may to of well that I matters shared other as year. synergies some some the of

what may months. savings we're some to Certain enough the for XX the trying do out next early course of that a more cost may over than wide the so 'XX, to lane on others. And cost in provide play of unknowns is

mentioned during some the others. the And that than of other cost script more factors I may

create And enough so we're just flexibility. trying to

Alex Paris

I'll of take Okay, Appreciate got rest my you. questions offline. you. the Thank it.

Operator

would for further like [Operator our I Chris questions remarks. the back this question-and-answer Walters any conference closing to Instructions]. seeing no turn Pardon concludes session. to me, over

Chris Walters

all your Avantax. us you interest in and for for Thank today Great. joining

will next to you speak We quarter.

Dee Littrell

Good bye.

Operator

presentation. you now The for concluded. today's conference attending has Thank

disconnect. now may You

Avantax (AVTA) 16 Feb 232022 Q4 Earnings call transcript