Earnings call transcript: Power Corporation Q1 2025 sees revenue beat, EPS miss

Power Corporation of Canada, a prominent player in the Insurance industry with a 53-year track record of consistent dividend payments, reported its Q1 2025 earnings, revealing a slight miss on EPS forecasts but surpassing revenue expectations. The company posted an adjusted EPS of CAD $1.22, just below the forecast of CAD $1.23, while revenue reached CAD $4.21 billion, exceeding the anticipated CAD $4.04 billion. The stock saw a modest increase of 0.18% in after-hours trading, closing at $50.49.

According to InvestingPro, Power Corporation has raised its dividend for 3 consecutive years, demonstrating strong commitment to shareholder returns. InvestingPro analysis reveals 10+ additional key insights about the company’s performance and outlook.

Key Takeaways

• Revenue for Q1 2025 exceeded forecasts by CAD $170 million.
• EPS came in slightly below expectations, missing by CAD $0.01.
• The stock price increased by 0.18% in after-hours trading.
• Strong performance in retirement and wealth management drove earnings.
• The company continues to focus on alternative asset management platforms.

Company Performance

Power Corporation’s performance in Q1 2025 was marked by a solid increase in adjusted net earnings, which rose 11% year-over-year to CAD $787 million. The company’s diversified portfolio, particularly its retirement and wealth management segments, contributed significantly to this growth. The Great West Life and IGM Financial divisions reported strong results, further bolstering the company’s position in the financial services sector. InvestingPro data shows the company maintains strong financial health with an overall score of 2.76 (GOOD), particularly excelling in growth metrics with a score of 3.14.

Financial Highlights

• Revenue: CAD $4.21 billion, up from the forecasted CAD $4.04 billion.
• Earnings per share: CAD $1.22, a 12% increase year-over-year.
• Net Asset Value per share: CAD $68.99, a 14% increase from the end of 2024.
• Quarterly dividend: CAD $1.025 per share, up 9% year-over-year.
• Share buybacks: 3 million shares repurchased in Q1.

Earnings vs. Forecast

Power Corporation’s revenue surpassed expectations by CAD $170 million, representing a 4.2% surprise. However, the EPS slightly missed the forecast by CAD $0.01, which is a minor deviation that may not significantly impact investor confidence given the strong revenue performance.

Market Reaction

Following the earnings announcement, Power Corporation’s stock experienced a slight increase of 0.18%, closing at $50.49. This movement reflects a positive investor sentiment driven by the revenue beat, despite the minor EPS miss. The stock is currently trading near its 52-week high, with InvestingPro data showing impressive returns of 8.33% over the past week and 6.21% over the last six months. For deeper insights into Power Corporation’s valuation and growth potential, including exclusive analysis and Fair Value estimates, explore the comprehensive Pro Research Report available on InvestingPro.

Outlook & Guidance

Looking forward, Power Corporation aims for an 8-10% base EPS growth for Great West Life, with a raised Return on Equity (ROE) target of 19%. The company plans to continue its focus on share buybacks and capital efficiency, expecting further growth from its alternative asset management platforms.

Executive Commentary

CEO Jeffrey Orr highlighted the company’s diversified structure, stating, "We’re a solid, diversified company with our businesses diversified, our earnings diversified." He also expressed confidence in the company’s growth potential, saying, "We think we can grow the platforms with the capital we have."

Risks and Challenges

• Potential market volatility affecting investment returns.
• Regulatory changes impacting financial services operations.
• Economic downturns possibly affecting consumer spending and savings.
• Competition from other financial service providers.
• Integration challenges with recent acquisitions, such as BEX Capital.

Q&A

During the earnings call, analysts inquired about potential synergies across Power Corporation’s platforms and the strategy around capital allocation and share buybacks. The company addressed these concerns, emphasizing its focus on capital efficiency and the potential consolidation of Wealthsimple ownership.

Full transcript - Power Corporation Of Canada (POW) Q1 2025:

Conference Operator: Good morning, ladies and gentlemen, and welcome to the Power Corporation First Quarter twenty twenty five Earnings Conference Call. At this time, all lines are in listen only mode. Following the presentation, we will conduct a question and answer session. I would like to remind everyone that this call is being recorded on Wednesday, 05/14/2025. I would now like to turn the conference over to Mr.

Stephen Hung, Head of Investor Relations for Power Corporation. Please go ahead, sir.

Stephen Hung, Head of Investor Relations, Power Corporation: Thank you, operator. Good morning, everyone, and thank you for joining the call to discuss our first quarter financial results. Before we begin, please note that the live webcast link and materials for this call are posted under the Shareholder Reports tab on our website at powercorporation.com. Please turn to Slide two. I would like to draw your attention to the cautionary note regarding the use of forward looking statements, which form part of today’s remarks.

Please also refer to Slide three for a note on the use of non IFRS financial measures, other measures and clarifications on adjusted net asset value. To discuss our results today, joining us are President and CEO, Jeffrey Orr and our EVP and CFO, Jake Lawrence. We will begin with opening remarks followed by Q and A. With that, I’ll turn the call over to Jeff.

Jeffrey Orr, President and CEO, Power Corporation: Thank you, Steve, and welcome, everyone. Thanks for joining us this morning. I am going to just draw your attention on Page five to recent investor disclosures at our various group companies. Of course, we’ve just come through a number of annual general meetings for Great West and IGM and GBL and Powers is later this morning as well there is a Great West Lifeco Investor Day that had a lot of interesting information. So lots of stuff available on our various websites.

Moving forward, this is Power Corp’s one hundredth anniversary this year. So we’re celebrating what we call a century stronger. The actual birthday was April 18. We’re just cleaning up the birthday cake around here. Now a big year for us.

The company has been around a long time, gone through a lot of change. And so we’re celebrating that this year. Moving forward to Page seven. We had, I would describe, a solid quarter on track. The two businesses, Great West Life and IGM, that produced basically all of our repeatable earnings had solid earnings growth.

I mentioned the Great West Life Investor Day. I’m going to come back and highlight a few points on that. Our alternative asset management platforms did a number of steps since we last met, which was only about seven or eight weeks ago, I think, for when we had our Q4 call. So a number of other developments adding to the scale and the breadth of those organizations. And there’s a number of leadership changes that I want to give my comments to to you and share with you as we go through the presentation.

With that, I’m going to pass it over to Jake.

Jake Lawrence, EVP and CFO, Power Corporation: Great. Thanks, Jeff. And I’m to start my remarks today on Slide eight. As Jeff noted, we’re pleased to report solid quarterly results to start 2025. In Q1, adjusted net earnings from continuing operations was CAD $787,000,000 and that’s up 11% compared to CAD $710,000,000 in the same quarter of 2024.

When we look at the earnings on a per share basis, Q1 adjusted net earnings were CAD 1.22, and that’s up 12% compared to CAD 1.9 last year. That incremental 1% growth in EPS is a direct result of our active share buyback program. That program continued again throughout Q1 when we repurchased 3,000,000 shares. As I’m going to detail later in the presentation, our results reflect growth in Great West and IGM Financial businesses, which Jeff noted combined the vast majority of Power’s recurring earnings. Our NAV per share was $68.99 at the end of the quarter, March 31, and that’s up 14% compared to the end of last year, 12/31/2024.

What was driving the underlying increase was Great West share price, which reacted positively to its Q4 earnings release that occurred back in February. As noted, we’ve remained active buying back shares in the quarter and the reduction in share count contributed approximately 0.23 to the NAV. Our NAV per share closed at $63.6 yesterday, and that’s in part reflecting the share price volatility we’ve experienced post quarter end. And then finally, the Board of Directors did declare a quarterly dividend of $0.06 $1.02 $5 per share, and this is consistent with last quarter’s dividend and is up 9% year over year. Moving on to Slide nine.

Great West once again delivered strong quarterly base earnings of over $1,000,000,000 and it’s the fourth consecutive quarter with base earnings in excess of $1,000,000,000 Their earnings contribution rose 6% and were driven by double digit growth in its retirement and wealth businesses. Great West also reported base ROE of over 17%, highlighting the growth in its more capital efficient businesses. IGM’s contribution to Power’s earnings were also up 6% year over year as IGM reported record first quarter adjusted EPS to start 2025. These results were driven by record quarter AUM and A and strong net inflows at both IG Wealth and Mackenzie. As well, IGM saw impressive growth in client assets across its four strategic investments.

GBL’s contribution to Power’s adjusted net earnings declined year over year as the prior year comparable figure included a number of fair value gains associated with GBL’s capital GBL Capital’s investments. As Jeff will outline shortly, GBL continues to progress on its value creation strategy and earlier this month, its dividend of 5 per share was approved. Moving to our alternative investment platforms, Cigard’s contribution to earnings were driven primarily by fair value increases in our investment in Cigard’s private equity and venture capital funds. Power Sustainable’s results included improvement in its FRE and greater contribution from its energy infrastructure fund. As a reminder, in accordance with IFRS, we consolidate the underlying operations of Power Sustainable’s Energy Infrastructure Fund.

This means that despite being a limited partner in the fund, our accounting earnings will still pick up items such as amortization as well as financing expenses. The increase in our corporate operations and other line this quarter was driven primarily by operating expenses where we had an adjustment related to the performance assumptions used in our equity based compensation. A portion of the adjustment is onetime in nature, and this adjustment is expected to reduce volatility in future quarters. Overall, we’re pleased with our group’s strong start to 2025 and believe this quarter’s results are a testament to our group’s ability to grow in challenging environments. Moving on to Slide 10.

As mentioned, we reported net asset value per share of $68.99 at the end of the quarter. I’ll draw your attention to the bottom left of the page, where we reemphasize that 84% of Power’s growth asset value is comprised of Great West and IGM, our publicly traded earnings driven businesses. Much of our NAV growth this quarter was headlined by the strong share price performance at Great West that I mentioned earlier. We believe the share price reaction represents the Street’s validation of the transformation Great West has undergone in recent years. We also saw a solid increase in our NAV related to GBL.

SIGARD and Power Sustainable stayed relatively consistent quarter over quarter with fair value gains in our investment in private equity and venture capital funds driving a slight overall increase. As a reminder, SIGARD and GBL entered into a strategic partnership whereby GBL acquired a 5% fully diluted interest in the SIGARD general partnership at a value consistent with our Q4 twenty twenty four level. Our cash balance ended slightly lower at $1,400,000,000 as we remained active in the NCIB program. Of that $1,400,000,000 we consider just over $1,000,000,000 to be available once we factor in dividends declared by Power and IGM, but not yet paid. And with that, I’ll turn it back over to Jeff for some more remarks from him.

Jeffrey Orr, President and CEO, Power Corporation: Thank you, Jake. Moving forward to Great West Life, a lot of that was covered by Jake. I’ll just add that within Great West LifeCo’s earnings strong performance continued strong performance by Empower. And but strong growth across the rest of the platform, and that’s the way we think of it. We’re going to get growth, in our view, moving forward from all of the business units.

Empower is obviously the lead growth, but there’s solid growth coming from across the platform. The other thing I would just point out is the capital position and the capital generation of Great West Lifeco is becoming, I think, clearer and clearer, and I’ll make another I’ll make a comment on that on the next page. But there were strong buybacks and the $2,500,000,000 of cash up at the HoldCo in addition to excess capital down in the regulated entities themselves. So with that, why don’t I just move to Page 12 to highlight, I think you would have potentially seen this from Great West, but Great West Life had come public with their medium term objectives. And that was in early twenty twenty one, started 2021.

And they, at their Investor Day in April, kind of just did an accounting of that. The they had exceeded, of course, their base EPS growth, their 16% to 17% ROE. They had were at 17% last year, and they had got their payout ratio from about 60% in 2020 down to right around 50%. So with that, they revised their objectives. They kept the base EPS growth at eight to 10%, but did note that there’s a potential for them to exceed that through the deployment of excess capital because there’s a lot of excess capital.

They moved their ROE target up to 19%. They introduced a new base capital generation measure, and that goes across the segments. I think that’s going to be really useful for people who are looking at Great West Lifeco to understand how the earnings actually translate into capital generation that can then be used to either move upstairs, pay dividends, reinvest in the business, but that’s going to I hope and expect will give people a lot clearer understanding of the ability of the company to continue to generate capital and cash and they just maintain their target earnings payout ratio. So hopefully, continues the group’s march to creating greater communication, greater disclosure, greater transparency around what’s happening. The other thing I’d like to talk about is on the next page, very significant for the company is when you have a leadership change.

I want to start by saying Paul Mann was the CEO for twelve years. It’s kind of remarkable. The business changes every year when you go back, and we did so with over the occasion of Paul’s us announcing that Paul was retiring as CEO. You go back twelve years and you look at Great West and it’s hard to recognize it today, all of the change that’s going on, significant repositioning. We went through that period in the first half of Paul’s tenure where there’s just heavy investments going on, not a lot of earnings growth.

And the earnings growth numbers that I just referred to over the last five years, we’re really starting to hit our stride. The company has been really repositioned. Paul did a really great job. He’s going to stay on as a special adviser into early twenty twenty six to help and just make sure he’s there to make sure it’s a smooth transition with David. Not that David necessarily is going to need a lot of help.

David Harney has been with the group. I say that loosely. He for over thirty years, he joined Irish Life. And when we acquired Irish Life, he was running the group business. He was, several years later, promoted to being the CEO of Irish Life.

Four years or so ago, took over as the President of all of Great West Life’s European operations and then added responsibility for reinsurance. And so he’s got had a wide remit, as they say in Europe, over the businesses of Great West Lifeco. He’s started off as a math major and an actuary, but he spent most of his career building businesses, doing client facing work, really a talented guy, and I think he’s going to really do extremely well. We’re really pleased with David’s appointment. Okay.

A couple of comments on IGM. So it was, in fact, the record earnings for them for the first quarter. So those are good results. Choppy environment, obviously, but they did have very strong inflows. IG Wealth in net inflows, a lot of that driven through high net worth flows.

Mackenzie was also in inflows. That was driven by institutional flows, but very strong institutional flows in particular into one of their strategies, which is getting good traction globally. It was not Canadian flows, it’s through international investors. So lots of good momentum happening there. And they themselves are, of course, returning capital to shareholders and they in addition to dividends engaged in share buybacks.

So it’s kind of solid performance for IGM and Mackenzie. If you turn the page, however, to Page fifteen, you’ve got their strategic investments, which are not a little bit analogous when Jake was talking about our NAV and talked about the part of the great the Power Corp portfolio, which is not really earnings driven, it’s NAV driven. Well, the strategic investments here for IGM are analogous to that. With the exception of China Asset Management, it is producing strong margins. But the growth across this portfolio in the client assets for the last twelve months is really quite outstanding.

You’ve got Wellsimple’s assets at the end of the quarter up to GBP 73,000,000,000 from GBP 39,000,000,000 the previous year. Rockefeller, these are their assets converted to Canadian dollars, strong growth year over year. China AMC’s growth, the CAD $529,000,000,000 of assets, and IGM owns 28% of that. So that’s a big their share of those assets are very large. And Northleaf in a difficult funding environment continues to grow through fundraising.

So really strong performance by IGM strategic investments. And that sets the stage as we move down in time for ultimately earnings driven by those businesses as they reach scale and decide to focus on profitability. A couple of comments on GVL, turning the page. So they did announce, to reiterate back in the fall, they had their own Investor Day where they announced that they were targeting double digit TSR objectives through the continued execution of their strategy. They, in the first quarter, disposed of a lot of their SGS stake, and that’s about EUR 2,400,000,000.0 going back to the start of twenty twenty four of assets that they have disposed of public assets that they’ve disposed of.

And if you then and Jake mentioned the dividend, which was approved. And then on the right hand side, you just see the transformation of their portfolio over the past five years. They’ve been talking about it, but you see it on a kind of multiyear basis as they make progress. I’m going switch the page here and then make my next comment on leadership. So Yan Galien, who has been the CEO of the company for the last fourteen years, has moved into the position of Chair of the Board.

Paul Demre has been the Chair since 2019, will move into the position of Vice Chair. And Johan Hood joined, he had been the previous twenty five years had been with KKR. He was Chair of their European, Middle East and African operations. And he’s been brought on, started in the last several weeks. And I think he’s got a lot of energy and is very focused on the strategy execution on continuing the rotation here.

And I think that will continue to strengthen the leadership overall of our group as we attract a great person who I think that will be a very good thing for GBL and for shareholders. Okay. A couple of comments on our alternative asset management platforms. This next page is just a visual to remind everyone how we think about it. The asset management activities of Cigar and Power Sustainable, we get value through recurring fee related earnings and also carried interest and ultimately through the growth and the value of the GPs or of the manager.

And then we have capital that is in their various investing activities, our proprietary capital, which we report separately. And you could think of us as an LP, a limited partner investor in there, and we get returns on the different asset classes. Those are the two main streams, and we think of it broken up in those two ways. Turning the page, Cigar just continues to make progress in not only fundraising, but in also looking at strategic partnerships. I think we spoke at the last meeting about GBL coming in as a 5% general partner and committing capital.

Since we last met, they have announced the acquisition of BEX Capital, which is a specialized secondaries firm, secondaries firm that they have acquired along with PEM last year. And so they’re building out their secondaries capabilities in fund of funds. And so that not only adds to their scale, but complements the lineup of products that they bring to market. Comment on Power Sustainable. They, in the last few weeks, announced the launch of their fourth product.

In fact, the successful closing of their fourth product, I should say, which is a de carbon private equity strategy. This is a U. S.-based team with lots of experience that have joined our group. It’s a mid market fund that’s focused on more resource efficient and resilient North American the North American market on resource efficient and resilient companies, basically, it’s a decarbon fund, but it’s mid market private equity is the right way to think about it. So Power Sustainable has now got four products all in the space.

You see them down the right hand side. They’re up and running and are focused on continuing to fundraise and get scale through that. So good progress at Power Sustainable. Right then, I’ll complete with a few comments on Power Corp itself. We continue to return capital to shareholders, one hundred and thirty five million of buybacks in the first quarter.

We’ve got about $1,000,000,000 in available cash. We get the question all the time about, if you’re getting close to your $850,000,000 does that mean buybacks don’t happen? We have lots of continued sources of available cash at a number of energy assets that remain as wholly owned assets at Power Corp that were part of our they were, in effect, undeveloped when we launched the new strategy. They’ve been developed. They’re being sold in the into the energy fund.

That’s the immediate source of cash over the next couple of quarters. We’ve also got about $2,000,000,000 in seed capital or seed capital, excuse me, in basically our proprietary capital invested with the platforms. We’ve got a targeted return of about 10% on that, which we monetize over time. We’ve got lots of sources of cash, so we do not see ourselves see ourselves being able to maintain the current pace of buybacks and don’t see any issue with that. And we’ve done all that, and we continue to maintain a very strong financial position, which is particularly important as we have a little bit of uncertainty and market risk out there with the current environment, obviously.

Our discount, we’re pleased that it’s tightened in over the last few quarters. I think I’ve said to people before, it’s hard I get myself to understanding from our operating costs that if you do the present value of those, you could get to a 2% to 3% discount. But then I can make the argument that there shouldn’t be a discount beyond that, not that I expect it to necessarily go to 3%. But we think there’s still been an opportunity for that to narrow, and we still do. So we’re pleased that we’re starting to see that narrow down.

So it was a 21%. I think that’s yesterday’s close, if I’m not mistaken. If we sign up date. Perfect. And then flipping over to ’23, the you’ve got the returns that we’ve created over various periods.

The five year return there is a bit exaggerated because you go back into the downturn in 2020 of COVID. So we’ve got the number going back to the end of twenty nineteen, which is so five years and four months, I guess. So strong returns, well ahead of our benchmarks. And I’d just reiterate, this is not a valuation story. You can do your own work on the two earnings driven businesses that we have, Great West and IGM, on their forward PEs, but they’re trading right around where they were at the start of the new strategy in 2019.

And then you’ve had the NAV growth that’s gone on, but basically the discount, which was around 24%, twenty five % when we announced the deal, so it’s at 21%. So you can do the math on 4% of an NAV discount in terms of over five plus years. That’s not that’s really not contributed much to the returns that we’ve created. This is not a valuation story. So people often go, wow, your stocks have really done well, you’re on a run.

And I think just look through all of that and say, yes, well, it’s because the earnings at Great West Life and IGM have grown, the dividends have continued to be extremely healthy And there’s been net asset value growth, which much of which at Power Corp has been turned into cash and put to use through buybacks. And we don’t see any reason why that strategy can’t continue given the announced targets that we have for all of our companies as long as we execute. Of course, we have to continue to execute, which is not a given, but we have confidence that we can do that. I’m going to skip Page 24. Our strategy remains the same and just kind of finish on the last page, which is looking ahead.

And this is the math behind how we think about our targeted TSRs. 84% of our gross asset value, as Jake pointed out, is earnings based, it’s Great West Life and IGM. Each of those companies have got an objective publicly in the market, medium term EPS growth objective, 8% to 10% for Great West, nine percent for IGM. They each have yields that are right around 5%. In the case of Great West, they’ve been increasing their dividend for the last ten, eleven years consistently.

So you look at that and say, if they execute and there is no change in their multiple, which I would argue is not a high multiple right now, but if they execute on the earnings growth and on their dividends and there’s no change in their valuation, the math gets you to a TSR of around 14%. The rest of our portfolio, the bulk of the rest of Power’s assets, whether it’s GBL or our capital underpinning the alternative strategies have got publicly announced targets of 10% or 10% plus. We’ll continue to harvest that as we move forward and do buybacks to shrink our share base. And when we look at all of that, if we execute on that, the world behaves as it’s supposed to behave, I. E, markets continue to grow in the normal course, you’re going to get a return that’s going to be comparable to the numbers we’ve produced over the last five years.

Of course, there’s lots of things that can happen. It’s not going to be a straight line, but that is the math behind our strategy going forward. And we are very confident in our ability to execute as long as the world behaves. So I will then finish my comments by saying, is the world going to behave? Well, everybody’s guess is as good as mine.

There’s a lot of risk and uncertainty out there. And I will note that a number of observers have commented that we are a company that does well when there’s been previous downturns, financial crisis. We’re a solid, diversified company with our businesses diversified, our earnings diversified and a fairly prudent approach to our risk management, which is not to say there’s no risk in our businesses, but we on a relative basis, fairly prudent. But I do want to say like we do way better when the economy is doing well and when markets are growing and there’s confidence. And so, it’s nice that people think of us as a defensive play.

But when things are going well and the world looks better and there’s growth, that increases materially our probability of being able execute our value creation strategy and create the kind of returns I’m talking about. So we’re looking forward to the economy being strong and to some of the current issues that are going on in the world being resolved appropriately, And that will be better for us. But if it doesn’t work out that way, we’re we think we’re in a pretty strong position financially in every other way. So with that, I am going to conclude my remarks, and we’ll open it up for questions. Operator?

Conference Operator: Thank you. We will now begin the question and answer session. The first question comes from Doug Young with Desjardins Capital Markets. Please go ahead.

Doug Young, Analyst, Desjardins Capital Markets: Hi, good morning. The first question, I guess, Jeff, I think I’ve asked

Tom MacKinnon, Analyst, BMO Capital Markets: you this before, but I’ll throw

Doug Young, Analyst, Desjardins Capital Markets: it out there. Is there more and I get the valuation that you talked about IGM, Great West and the platforms, but is there more that you can do across the platforms between Great West, IGM and Power to surface value? And one example, I mean, there’s a Wall Street Journal article talking about and we knew this was coming, but Empower is going to get into the alt business. And obviously, Empower is a big part of the Great West Life platform and story. And you’ve got a very strong and growing alt business up at the power level.

But so I just wanted to throw it out there. How should we think about just the value creation across the platforms and the opportunity for Sagard within what Empower can do on the Alt side?

Jeffrey Orr, President and CEO, Power Corporation: Doug, thanks for the question. And the answer is that we are extremely active in encouraging our different distribution platforms to engage with the manufacturing platforms to see if there’s opportunities. And in the case of Empowerment’s announcement this morning that’s in The Wall Street Journal, cigar is part of that program, just to make the point. And that’s the proof is in the pudding. But we so we encourage dialogue.

We create opportunities for people getting together and make sure that the distribution platforms are aware of what we are doing on the manufacturing side. We stop short, and we need to stop short of ever telling our distribution platforms what they are going to put on their shelves, because they have a competitive business to run. They’re all running their businesses. They have, in many cases, fiduciary obligations to clients. And even if it’s not a fiduciary standard, they need to be putting a competitor product on.

So the Sagar, for example, and Power Sustainable, while we think they have great products, they’re still relatively small firms in the world of alts and their product suite doesn’t satisfy the complete needs of all of our distribution platforms. So it’s not realistic to think that they’re going to take the majority of the share of our distribution platforms. They’re going to find if they have competitive products that are better than or equal with others that are out there, they’re going to get an opportunity. But you can’t expect it to fill the entire shelf because they do not have the swath of products that, say, some of the very large players would have. So that’s I’m just trying to give you context there.

So the answer is it is happening. And we are there’s continual dialogue between our alternative platforms and our distribution platforms. Do you want to add to that, Jake?

Jake Lawrence, EVP and CFO, Power Corporation: Yes. I would just Doug, good question. I’d add there’s the financial examples around product and distribution. And then there’s the ones that are sometimes less obvious to the investment community. And so we look at the FinTech strategies that exist.

And so we’ve got partners and operating companies and port company portfolio companies down at Sagarde partnering across the group. And so conquest financial planning, existing at IGM, Nesto, the mortgage backbone at IGM. So there’s lots of ways that other parts of the group are contributing in as well that are worth noting. It may not be as obvious and tangible immediately in the financial statements or in asset flows. Yes.

Jeffrey Orr, President and CEO, Power Corporation: If you go beyond all, I could take a lot more time to talk about how much of Great West Lice Liquid Shelf is managed by IGM partnerships on distributing insurance through IGM out of Canada Life. I can we can go on and on about what’s happening across the platforms. So that’s it. So it contributes. It helps.

But the platforms, the old platforms have to go out and be competitive with third party non related investors, first and foremost. They can’t just be relying on our distribution.

Doug Young, Analyst, Desjardins Capital Markets: No, it makes sense and it gives me a bit of flavor. And then on the BECCS acquisition, can you talk about how much you purchased? I mean details on the agreement to buy up the rest and like employee retention. And I assume and it reads like this is only for private equity LPs. Is that the case?

Or is it further a whole type of fees?

Jeffrey Orr, President and CEO, Power Corporation: I’m going to come back. I didn’t get the last part of your question. So I got the part about the financial terms, which we’re not disclosing. Why don’t I answer them and then you come back, which I what I missed or what you think I missed. The people retention is always the key on this.

These are people businesses. And Cigar spends an enormous amount of time as they’re bringing in existing strategies and partners who have built those strategies. They’ve spent an enormous amount of time making sure that there’s a lot of exchange and that there’s a cultural fit. First of all, the financial arrangements are set up so people can’t walk out. But more importantly than that, they’ve got a very active program of bringing in their partners and using their network and introducing them to their global network as well as their LPs.

They do a great job of it. That is one of their core advantages because if you don’t do that, obviously, you don’t bind the folks to the organization. So there’s a very active and I think so far very successful strategy. You I missed the last part of your question. You were breaking up a little bit.

Doug Young, Analyst, Desjardins Capital Markets: Yes. Sorry. Is that only private equity LPs? Or is it a slew of all LPs that would that they do business in?

Jeffrey Orr, President and CEO, Power Corporation: Yes. So there’s a lot of family in BECS, I believe.

Conference Operator: Doug, are you asking

Jake Lawrence, EVP and CFO, Power Corporation: about the asset class? It’s all private equity. So there’s no private credit or real estate. It’s

Doug Young, Analyst, Desjardins Capital Markets: private It’s private equity.

Jeffrey Orr, President and CEO, Power Corporation: And it’s secondary. Secondary and Yes. Secondary. That’s what

Doug Young, Analyst, Desjardins Capital Markets: I’m yes. No, I get that. I just I’ll come back. And then quickly, the size of the energy investments that are going to be folded into funds that is a source of liquidity you talked about, could you size that?

Jake Lawrence, EVP and CFO, Power Corporation: Yes. So it’s going to depend on timing for different projects, Doug, but it’s greater than $100,000,000 we expect in totality.

Doug Young, Analyst, Desjardins Capital Markets: Appreciate the color. Thank you.

Jeffrey Orr, President and CEO, Power Corporation: Thanks, Doug.

Conference Operator: And the next question comes from Tom MacKinnon with BMO Capital. Please go ahead.

Tom MacKinnon, Analyst, BMO Capital Markets: Yes. Thanks very much. Maybe a question just with respect to the how you balance share repurchases with investing into Cigar and Empower Sustainable. I mean, I look at Cigar and Empower Sustainable, they’re not at the scale. You’ve certainly talked about how small they are.

Their product set may not be as diversified as other alternatives and you need to scale to improve the fee related earnings of these companies. So it seems like the strategy here is to take all the dividends you get from these earnings stories and and buy back stock with this as opposed to investing into cigar and power sustainable, which how do you balance that? Those things are probably better growers. You talk about them being 10% plus growers to begin with. And how do you think that should don’t you think that would help improve the discount to the NAV if you could show that you can add value at the HoldCo through growth and fee related earnings at Cigar and Power Sustainable as opposed to adding value at the HoldCo just by taking the dividends and buying back stock?

Jeffrey Orr, President and CEO, Power Corporation: Yes. So the dividends the way we think of it is the following, Tom. The dividends that we receive from Great West Life and IGM and purchase at GBL, Those we view as the source they’re steady, they’re reliable. And we use we view that as the source of the dividends that we pay on the Power Corp stock. So we put that in that bucket, and we deduct our operating expenses and our preferred dividends and the interest on our small amount of debt.

And we say this is what the cash flow comes from that, and that’s available for dividends on the shares. And we have about a 160,000,000 surplus right now if you run that out. So that we’ve got some positive cash coming in from that. Then the other sources being, we still have residual assets that we talked about energy that we’re disposing of. We have $2,000,000,000 of capital underpinning the alternative asset management strategies that is we think produces about 10% return, but it’s not every quarter.

These things are a mix of royalties. There’s some debt funds. There’s some private equity. There’s some venture capital. It’s a bit episodic.

And we occasionally then sell some secondary positions in them when the market is right for that. There’s a lot of secondary buyers out there. So we use the seed capital and which and the way we think of it, we’ve got our excess cash flow, our some of the assets we haven’t sold. We have the earnings on the seed capital, dispositions to fund our buybacks. And that’s the source of the buybacks.

And we’re trying to manage that $2,000,000,000 of capital to be roughly equal so that the growth in we’re recycling it, but the growth in the capital that’s producing the FRE, as you mentioned, that we’re and producing the carry as well, don’t forget as a GP, you get carry. Source of income is going to grow. But we’re trying to get it to grow on a capital efficient basis, I. E, other people’s capital. Some of that is Canada Life.

They work closely, for example, with Power Sustainable on their U. S. Infrastructure debt fund because they have their balance sheet once that they worked with them. They helped to actually hire the team. So that’s good.

That’s not Power Corp’s capital. That’s meeting the needs of apropos Doug’s questions earlier, that’s kind of synergies between our operating businesses and our alt platforms. So we recycle the $2,000,000,000 We take the earnings off it, occasionally dispose of positions and fund our buybacks. And the buybacks, we think, adds a few points to our TSR because we’re taking the earnings that we’re getting from Great Western IGM, we’re taking the dividends. And as we shrink the share base, we’re adding some torque to it.

As well, we’re buying the shares back at a 21% discount. Hopefully, that becomes an 18% discount going lower. But right now, we’re buying the shares back at a discount that bumps our NAV. So we think that’s kind of some icing on the cake that we’re doing those buybacks, but it’s not funded the way we think of it, it’s not funded by dividends. It’s funded by the rest of the portfolio.

We’ve also everyone kind of puts a line in the sand. We say we want $850,000,000 of cash around because that’s we like to sit around with a lot of cash and with lines of credit. But if we got into a position, the timing on these things are sometimes funny. We could go through three quarters where all of a sudden the platforms are launching new funds and we don’t have a realization for another twelve months on some assets. And we could end up with a position where we are we might it looks like we’re going to dip below $850,000,000 That’s not going to stop us, in my view, from doing buybacks.

We’ll figure out how to manage that situation. If we were I’ll just give you one kind of number. When you look at Power on deconsolidated basis, we have about $50,000,000,000 in gross assets and we have $900,000,000 of debt. Like if we ended up in a quarter having to either dip into our cash or end up doing some short term borrowing or whatever. I don’t expect we’ll get there.

If we did, think we want to just carry on right now. Our current strategy is to keep on a steady pace on the buybacks. But I gave you, I threw a lot at you there.

Graham Ryding, Analyst, TD Securities: Tom,

Jake Lawrence, EVP and CFO, Power Corporation: The way I worded

Tom MacKinnon, Analyst, BMO Capital Markets: the question was the source of the money. Maybe you can try to tackle this approach then. The $2,000,000,000 you have underpinning here in Seaguar and Sustainable, why don’t you increase that as opposed to buy back stock? Won’t that help improve the scalability of those?

Jeffrey Orr, President and CEO, Power Corporation: They’ve got at the margin, But our strategy all along has been we’re going to use other people’s capital to do it and told those teams to do that. And by adding $1,000,000,000 over let’s say, cut the buybacks and over two point five years, we add $1,000,000,000 to the total capital underpinning those strategies. It’s not going to move the dial relative to what they can do with third parties. And I think we personally, we think we get better value, because we’re not sure at this point that all the market participants properly value the NAV part of our portfolio. And so we think they do value earnings that flow through and increases in dividends.

So these are all trade offs in life. It’s not like is it black and white, you go down this route or you go down that route. We’re trying to balance all of those different interests. And right now, that balance is we think we can grow the platforms with the capital we have. And we think we can, at the same time, add to our TSR by shrinking the share base.

Tom MacKinnon, Analyst, BMO Capital Markets: Okay. And is there anything to read the previous NCIB was $25,000,000 the new 1 is $20,000,000 that you started in the March. Is there anything to read into that why it’s a little bit lower?

Jeffrey Orr, President and CEO, Power Corporation: No. We’re targeting to keep the buybacks at about the same level they’ve been at for the past many quarters.

Tom MacKinnon, Analyst, BMO Capital Markets: Okay. Thanks.

Jeffrey Orr, President and CEO, Power Corporation: Thank you. Thanks, Sean.

Conference Operator: And the next question comes from Jamie Glorum with National Bank Financial. Please go ahead.

Jamie Glorum, Analyst, National Bank Financial: Yes, thanks. Just wanted to follow-up on that last conversation. Had $1,000,000,000 of cash available in the $850,000,000 sort of minimum holding level, but you said you would sort of go through it. How should we think about buybacks in scenario? Would you’ve used, let’s say, 37,000,000, I think, already this post quarter.

But would you blow through it using buybacks? Or is this really just like, look, if there’s opportunities come along, we’ll maintain the buyback as we’re going, but as the opportunities come, we’ll push below that $850,000,000 level. Is that kind of the right interpretation?

Jeffrey Orr, President and CEO, Power Corporation: Yes. I think we’re committed to doing the buybacks. And the we’re trying to do the buybacks on a more steady basis. And the cash flow that we get in from either realizing on investments or the calls that happen from the platforms to put capital to work are more sporadic than that. And we think we can manage, and not get blocked by the cash position.

That’s what I was trying to say in my answer to Tom. And we’ve got lots of resources to do that. I mean, I don’t think we’ll get there. I think we’re going to liquidate some assets here and it’s not going to be an issue. We do have we’ve got some pretty concrete plans to dispose of some assets and keep the cash coming in over the upcoming quarters.

So I don’t think it’s going to be an issue. And if it were to be an issue, you’re getting hypothetical, would we break down below $850,000,000 or would we go and draw on some lines or doing something? We’ve got lots of tools in the toolkit. I’m it’s not something I’m particularly worried about at this point, James.

Jamie Glorum, Analyst, National Bank Financial: Yes. No, understood. And then in terms of the sources of capital, where would the public op goes, Frank, in those potential sources?

Jeffrey Orr, President and CEO, Power Corporation: You mean disposing of shares? We like them both. That wouldn’t be something that we would be keen to do. We added to our position in Great West when we moved the CMAC position down. Yes, I don’t see that as I mean, you never say never, but I don’t see that as a source of capital at this point.

Jane, when we look forward

Jake Lawrence, EVP and CFO, Power Corporation: there’s other pockets, right? We Jeff and I both mentioned the five dividend coming in from GBL. That’s an incremental source of funds cash coming into us over the course of the rest of the year. We’ve got some of the infrastructure energy assets we expect we’ll be recognizing a sale on in the coming quarters. There’s lots of pockets that easily push down any appetite to need to want to liquidate those core positions.

And I would put

Jeffrey Orr, President and CEO, Power Corporation: it the other way. We’ve actually stated publicly, James, that if our operating subs being Great West Life and IGM needed capital to do a transaction, that would actually trump buybacks. So and we have done that. I’m not saying it would stop buybacks, but if we came to a point where Great West Life in the past, we’ve supported them when they’ve had major equity issues to do. They haven’t done one in it’s been well over a decade.

But there have been times in the past where they need to do a transaction and they need to raise public capital. And we’ve jumped in and put 400 or $500,000,000 as a kind of underpinning of an equity offering. And that would we would prioritize that. And if that meant we had to suspend buybacks for a few quarters or something, I think we’d probably do that. So that is a priority supporting those businesses.

It just doesn’t happen that often. And I’m going to flip the question around and say, looking at Great West Life, they’ve got lots of capital on the books. And would they actually need us to do something? And they haven’t for a long time. Spent ten billion in 2020 and 2021 buying personal capital, MassMutual and Peru and didn’t need any equity capital to do it.

They’ve got a lot of capital. But if it came to that, that would be right at the top of the list, our priorities. Great. Thank you.

Conference Operator: And the next question comes from Graham Ryding with TD Securities. Please go ahead.

Graham Ryding, Analyst, TD Securities: Hi, good morning. Jake, I guess this question is probably for you just in terms of timing. Does that GBL dividend come through in Q2? And then I think GBL is also canceling some shares in Q2. Does that increase your relative ownership?

Or do you sell some of your GBL shares into that buyback program?

Jake Lawrence, EVP and CFO, Power Corporation: So simply yes and yes. So the dividend will come in during Q2 and I believe they canceled just north of 5,000,000 shares and that will increase our ownership position. We did not participate in the buyback.

Graham Ryding, Analyst, TD Securities: Okay, great. And then, Jeff, just on Wealthsimple, does it need further capital at this point? Or is it now at the point of sort of being self funding? And then going forward, does it make sense to have Power Corp. Sort of broader ownership of Wealthsimple split across sort of Power and IGM and Portage?

Or would it make sense at some point to consolidate the ownership into one of your entities or within Power?

Jeffrey Orr, President and CEO, Power Corporation: Yes. It’s Scott. Your first question in terms of needing capital, I don’t see the need right now. They’re basically, they’re right around breakeven. You go through the first quarter, they spend a lot on marketing, they get into a slight loss position.

But they’ve got they’re at the point where their revenues are just quite equal to their costs and their assets. The revenues keep growing quickly. But you never say never, they could come who knows whether they come forward with some things that they want to do. But at this point, we’re not anticipating a capital need. The answer to your second question is, it probably at some point makes sense.

But I don’t want to get everybody speculating that we’re kind of focused on that because I don’t see that happening in the short term. It’s not something we’re spending much time about focused on. It came about through historical reasons. I think I have explained that before when we launched the FinTech strategy in 2015. Wealthsimple was a different part of that FinTech strategy.

It wasn’t about investing in 50 different FinTechs to get visibility as to what was going on and then hopefully have some of those capabilities be embedded in Great Western IGM. That was the Portage strategy and it’s been highly successful. We saw Wealthsimple as something that could be a long term part of our portfolio, and we put $300,000,000 into it, before doing taking some money off the table in a subsequent secondary. But the first few rounds of that, it was really a power financial strategy, And we financed the first few rounds. As the things started to get going, the IGM management team and Board really started to focus on the fact this is a this could be a real business.

This could be a very successful business. And maybe it belongs in our portfolio and they funded the I can’t remember, was rounds three, four and five or rounds four and five, it doesn’t matter. So the first rounds got funded up here. The second rounds, they jumped said, we’d like to get part of this. So we said, great.

And we’ve ended up with it in two places. And so that’s the history of it. And at some point, it’d be nice to put it in one place. But I would not be out there kind of telling people to do whatever with your recommendations based on holding your breath. That we saw an opportunity to do that at some point.

We’d like to do that, but it’s not high on our priority list right now.

Graham Ryding, Analyst, TD Securities: Yes. Okay. Yes. That makes sense. There’s some good

Jeffrey Orr, President and CEO, Power Corporation: growth there. And I just wonder if it sort

Graham Ryding, Analyst, TD Securities: of gets lost a little bit when it’s split across so many different entities. Probably. Thank you.

Jeffrey Orr, President and CEO, Power Corporation: Graeme, I think your observation is right. I think that’s a fair observation. You.

Conference Operator: There are no further questions. I would like to turn the conference back over to Mr. Stephen Hung for any closing remarks.

Stephen Hung, Head of Investor Relations, Power Corporation: Thanks everyone for joining us today. Following the call, a telephone replay will be available until August 6 and the webcast will be archived on our website. We look forward to talking with you next quarter. This concludes our call and have a great day.

Conference Operator: Ladies and gentlemen, this concludes your conference call for today. Thank you for participating and you may now disconnect your lines.

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