RCS Capital (RCAP) Misses Q2 EPS by 13c, Enters Agreement with Apollo Global (APO)

RCS Capital (NYSE: RCAP) reported Q2 EPS of $0.17, $0.13 worse than the analyst estimate of $0.30.

• Adjusted EBITDA of $26.9 Million for the Second Quarter
• Retail Adjusted EBITDA of $26.5 Million
• Investment Banking / Capital Markets Adjusted EBITDA of $10.7 Million
• Assets Under Administration ("AUA") of $238.7 Billion; up 11.4% from Prior Year1
• 9,505 Total Advisors at the End of the Second Quarter
• 97.5% Annualized Advisor Retention2
• 267 Advisors Recruited in the Second Quarter Representing $33.1 Million in Gross Annualized GDC; Net Annualized GDC up $21.5 Million in the Second Quarter

Strategic Transactions and Initiatives

Consistent with the Board of Directors' and management's previously stated commitment to enhance shareholder value, the Company has entered into an agreement with an affiliate of Apollo Global Management, LLC (NYSE: APO) (together with its consolidated subsidiaries, "Apollo"), a leading global alternative investment manager, to sell RCS Capital's Wholesale Distribution division and certain related entities, for $25 million in cash. The Company expects to utilize the net cash proceeds from the sale to reduce its outstanding senior secured indebtedness.

Further, Cetera Financial Group will also enter into a strategic relationship with Apollo to offer alternative Apollo-sponsored investment products through Cetera's open architecture network of independent financial advisors. Apollo currently manages more than $160 billion of assets across a broad spectrum of asset classes, geographies and strategies, many of which we expect will be attractive to retail investors seeking current income and increasing allocations to alternatives within their portfolios.

In addition, the Company announced that Apollo and affiliates of Luxor Capital Group ("Luxor") have agreed to invest $37.5 million ($25 million from Apollo and $12.5 million from Luxor) in the Company through newly issued preferred stock. The Company intends to use the proceeds from this strategic investment to provide additional liquidity and working capital to allow the Company to continue to capitalize on the attractive market environment.

In conjunction with the Apollo investment, Apollo will appoint two members to the RCS Capital Board of Directors, including Marc Rowan, Co-Founder of Apollo, and Anthony Civale, Lead Partner & Chief Operating Officer of Apollo Credit. In addition, Brian D. Jones has stepped down from the Board.

The various Apollo transactions, which were unanimously approved by RCS Capital's Board of Directors, are subject to customary closing conditions and regulatory approvals.

In conjunction with this transaction, RCS Capital and RCS Capital Management, LLC have agreed to terminate the external management services agreement, which will simplify the Company's governance structure. RCS Capital will issue an aggregate of 3.0 million shares of Class A common stock to Luxor and 2.6 million shares of Class A common stock to the other members of RCS Capital Management in connection with the termination.

The Company also announced today that it has initiated a search for a new Chief Executive Officer and Chief Financial Officer. Both CEO Michael Weil and CFO Brian D. Jones will remain in their respective roles until successors have been appointed. Subsequently, Mr. Jones will have his full focus on building a leading investment bank and the premier advisory and capital markets platform in the independent broker dealer space. The investment bank business will continue to leverage its outstanding real estate investment trust advisory track record, as well as grow and diversify by focusing on underwriting and syndicating income-oriented securities for leading public and private issuers. The RCS Capital Board has agreed to retain a leading executive search firm to assist with the process of identifying and evaluating the CEO and CFO candidates from both internal and external sources. The Board expects to be able to attract executive management talent who will help set the future strategic vision of the independent retail advice business.

The Board will also form a committee to explore further options to strengthen the core retail advice business and enhance value for shareholders

For earnings history and earnings-related data on RCS Capital (RCAP) click here.

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