AGF Management Ltd

TSX:AGF.B

Earnings Call Transcript 2018-Q2

[Operator]

Welcome to the Q2 2018 AGF Management Limited Earnings Conference Call. My name is Adrienne, and I'll be your operator for today's call. [Operator Instructions] Please note, this conference is being recorded. I'll now turn the call over to Adrian Basaraba. Mr. Basaraba, you may begin.

[Adrian Basaraba, Senior VP & CFO]

Thank you, operator, and good morning, everyone. I'm Adrian Basaraba, Senior Vice President and Chief Financial Officer of AGF Management Limited. Today, we will be discussing the financial results for the second quarter of fiscal 2018. Slides supporting today's call and webcast can be found in the Investor Relations section of agf.com. Also speaking on the call today will be Blake Goldring, Chairman and Chief Executive Officer; and Kevin McCreadie, President and Chief Investment Officer. Turning to Slide 4. I'll provide the agenda for today's call. We will discuss the highlights of Q2 2018, provide an update on the key segments of our business, review our financial results, discuss our capital and liquidity position, and finally close by outlining our focus for the remainder of 2018. After the prepared remarks, we will be happy to take questions. And with that, I'll turn the call over to Blake.

[Blake Charles Goldring, Chairman & CEO]

Thank you, Adrian, and thank you, everyone, for joining us on today's conference call. During Q2 2018, we continued to execute against our strategy and stated goals. I'll begin with some highlights. AUM end the quarter at $38.5 billion, up 4% from previous quarter, reflecting growth across all lines of business. We achieved net sales of retail mutual funds for the second consecutive quarter. Our institutional business recorded net sales of over $1 billion. AGF's Invested in Discipline campaign was the winner of the Best Advertising Campaign Award at the Wealth Professional Awards. This award recognized AGF for an outstanding individual campaign directed at wealth professionals in terms of its effectiveness, reach and creativity. Our alternatives platform continued to grow, crossing the billion-dollar mark in May. We've also substantially resolved our transfer pricing case, resulting in a cash refund of $28 million during the quarter. The board confirmed a quarterly dividend of $0.08 per share for the second quarter. We reported adjusted diluted earnings per share of $0.14. Starting on Slide 6, we will provide updates on our business performance. On this slide, we break down our total AUM in the categories disclosed in our MD&A and show comparisons to the prior year. Assets under management are up 6% year-over-year, and we experienced growth across all lines of business, which includes mutual funds, institutional, private client and alternatives. Alternatives AUM increased 12%, reflecting co-investments for InstarAGF's latest investment. As noted on previous calls, once the fund is close to being fully invested, we can expect to begin marketing our second Essential Infrastructure Fund. Based on InstarAGF's current investment pipeline, we anticipate an initial close of Fund 2 in 2019. Turning to Slide 7. I'll provide some detail on the retail business. During our fiscal Q2, the mutual fund industry recorded net sales of $3 billion compared to $13 billion last year. Industry gross sales declined 6%. The ETF industry saw similar trends with net creations down 42% compared to Q2 2017. There's a general market trend away from balanced and fixed income investments towards U.S., international and emerging market equities. Despite the softness in the industry's net sales, AGF's sales improvement continued. Excluding large institutional movements, we saw a 21% increase in gross sales in Q2 compared to the prior-year quarter. On that basis, our retail mutual fund business achieved net sales of $85 million compared to net redemptions of $107 million in Q2 2017. On an unadjusted basis, we recorded net sales of $100 million this quarter. Our managed portfolio solution, Elements, continue to attract healthy inflows, and our international equity funds have seen significant year-over-year growth. The improvement in sales is coming from both MFDA and IIROC channels, which is encouraging. We also continue to have success with our key strategic partnerships, which all remain in net sales. We continue to review our product lineup to ensure that we have the best representation possible in key categories and at competitive prices. In May, we announced the expansion of our preferred pricing offering, which allows eligible investors to automatically benefit from the lowest-fee option available. This change, along with the management fee reductions announced earlier this year, ensure that we have a competitive product shelf that meets the evolving needs of our clients. We expect to record flat to slightly smaller redemption in June. We don't believe that this is indicative of a trend, especially because sales tend to soften during summer months and can be less predictable. We remain very optimistic that we're going to be targeting consistent net positive sales, of course, barring that there is no large market correction. Before we leave retail, I'll provide a brief update on industry regulation. Last week, the CSA announced proposed changes, the most significant being a ban on DSC sales. Embedded compensation will be allowed with some additional requirements around avoiding conflicts. The CSA's pronouncement brings greater clarity and certainty to the industry. It removes a large cloud that was hanging over the industry. There is no immediate impact to AGF. Until we have further clarity from the regulators on the form -- on the implementation of these proposed policy changes and we've had a chance to determine how to navigate these changes to meet the needs of our strategic partners, it is business as usual. And as an investment fund manufacturer, we offer a wide range of mutual fund series and purchase options that align with industry norms. We continually review our lineup to ensure that we have the best representation of our strengths while providing our clients with a choice and diversity needed to adapt to evolving regulatory landscape. AGF, as does today, will continue to operate within the framework dictated by regulators and will work closely with our dealer partners as they navigate these policy changes. We do not expect the new regulatory guidance to materially change our strategic direction. Turning to Slide 8. I'll now pass the presentation to Kevin.

[Kevin Andrew McCreadie, President & Chief Investment Officer]

Thank you, Blake. As I stated previously, our long-term target is to have 60% of our AUM above median over 3 years and 50% above over any 1-year period. As you will recall, we achieved these targets the past 2 quarters. For the current quarter, our AUM above median was 27% over 3 years and 14% over the 1-year period. Our portfolio had a quality bias due to our disciplined risk management proxies. During Q2, such investments have underperformed while securities with momentum characteristic have continued to increase in value. As you can see on Slide 8, 1-year global factor return at 7.7% for the momentum factor, 2.6% for those with beta, and negative 0.5% for earnings yield. Furthermore, trailing earnings yields, dividend yield and low vol have all seen performance diminish recently, with all 3 factors posting negative performance over the past 12 months. In close to 18 years of history, these factors have underperformed together less than 10% of the time. Not only are the synchronized underperformance of these factors rare, the underperformance of these factors is statistically extreme relative to their own history. We expect the extreme negative performance of these factors to normalize, and this should increase the diversification benefit from exposure to these factors over time. AGF Global Equity Fund is one of our largest funds with $1.6 billion of AUM and also a building block for many of our balanced products, so we had a significant influence on overall current performance. The fund has fallen below median due to the factors I have described. Turning to Slide 9. I will conclude our discussion on investment performance by highlighting the long-term consistency of our global equity strategy. Next slide shows that over the past 18 years, our global equity strategy has consistently outperformed both the benchmark and the universe of global equity managers. On a 5-year basis, our global equity strategy has outperformed the benchmark 100% of the time and ranked above median 90% of the time. The fund has been managed by the same fund manager, using the same process for over 20 years, so we are very comfortable with our positioning in this fund. Overall, we believe that quality inherent in our portfolios is appropriate for our investors over the long term. We don't believe that it will be prudent to chase momentum at this stage of the cycle. Before we leave this topic, I'll also comment that above-median performance is end-day sensitive, so we generally don't read too much into 1 month of data. Our Morningstar ratings are largely unchanged, and particularly for our large funds, are comparable to the industry peers. Moving on to the institutional side of the business. We recorded net sales of over $1.2 billion in Q2 of 2018. We onboarded clients who invested in our AGFiQ and fundamental active strategies. We are encouraged by the early success of our AGFiQ platform within the institutional channel. AGFiQ has the ability to deliver products that provide better risk-adjusted returns through a disciplined multifactor process. The AGFiQ team offers a strong track record in long/short strategies, which can be delivered more economically than traditional hedge fund vehicles. We are seeing interest in these strategies from pension funds, OCIO providers and investment consultants in both Canada and the U.S. As you know, Regina Chi joined us as lead portfolio manager for our emerging market strategies late last year. Year-to-date, the AGF Emerging Markets Fund has ranked in the 25th percentile in terms of performance. We have seen strong year-over-year increase in gross retail flows for this fund. In addition, as a result of the strong performance, there has been an increased interest from institutional investors in our emerging market capabilities. Looking forward, demand for global and AGFiQ strategies are growing, and RFP activity remains strong. Although institutional sales can be lumpy quarter-to-quarter, we are confident we can maintain our momentum over the long term. And with that, I'll turn the call back over to Adrian.

[Adrian Basaraba, Senior VP & CFO]

Thank you, Kevin. Slide 10 reflects a summary of our financial results for the current quarter, the sequential quarter, and year-over-year comparisons. During the second quarter of 2018, we recorded $5.2 million of onetime restructuring and administrative costs and $9.6 million of onetime provision release related to the transfer pricing case. For ease of comparison, we have included adjusted numbers, which I will refer to in my remarks. Total revenue was $3.3 million higher compared to Q1 2018, largely due to improving Smith & Williamson results and higher average AUM. Total revenue was $2.9 million lower compared to Q2 2017 as prior year results included a $2.8 million gain related to the sale of a security we sold from treasury. SG&A was $55.2 million, which is $2.1 million higher than Q1 2018, largely due to timing of marketing expenses. We expect full year SG&A to stay within our guidance of $210 million. As mentioned in our previous call, the $210 million does not include severance charges and could be higher if a further acceleration of business performance materializes. In Q2 2018, EBITDA from continuing operations was $25.8 million, and adjusted diluted EPS was $0.14, which is flat compared to the prior quarter. In May, we acquired the remaining 49% of FFCM to further strengthen our quantitative investing in ETF platform under the AGFiQ banner. Prior to the acquisition, 49% of FFCM's net loss was attributable to the noncontrolling interest holders and not recorded in AGF's EPS calculation. As a result of the change in ownership interest, the entirety of Q3 2018 and onward, EPS will include 100% of FFCM's results. Turning to Slide 11. I'll walk you through the yield on our business in terms of basis points. This slide shows our revenue, operating expenses and EBITDA, including fund operations as a percentage of average AUM on the current quarter as well as trailing 12-month yield. Note that the results exclude our earnings from Smith & Williamson, the alternatives platform, onetime items and other income. The revenue yield in Q2 2018 was 116 basis points. The 2 bps decrease compared to the trailing 12 months is largely due to the management fee reduction that came into effect April 2018 as well as growth from our institutional business, which earns comparatively lower fees. Q2 SG&A is unchanged at 61 basis points. So the resulting EBITDA yield of 20 bps is 2 basis points lower compared to 12 -- trailing 12 months yield. Before I leave this slide, I'll address our revenue rate in more detail. Our revenue tends to decline approximately 1 or 2 basis points per year, simply because our sales generally go into funds with lower fees as compared to our redemptions, which tend to be in funds with relatively higher fees. Separate from that trend, over the past few quarters, we've announced a series of fee reductions that will impact our revenue. Once fully implemented, revenue will be impacted by approximately 3 basis points on total investment management AUM. The breakdown of the 3 basis points is as follows: Fee reductions effective December 11, 2017, will impact our revenue by 0.5 basis point on an annualized basis, and those effective April 1 will have a 1.5 basis point impact. The expansion of the preferred pricing offering, which is effective in August, will further impact our revenue by 1 basis point. We don't foresee any further significant fee reductions. Over the near term, our net revenue reduction might accelerate if growth in ETFs and AGFiQ institutional mandates gain more traction. These fee realities are consistent with trends that we're seeing across the industry, and we believe that the fee cuts are necessary to ensure competitiveness of our products in order to gain scale. Turning to Slide 12. I will discuss free cash flow and capital uses. This slide represents the last 5 quarters of consolidated free cash flow, adjusted for onetime items as shown by the orange bars on the chart. The black line represents the percentage of free cash flow that was paid out to the dividend. Adjusted free cash flow was $5.9 million in Q2 2018, which is $4.5 million lower than Q2 2017. With the growth of our retail mutual funds business, our DSC paid increased by $1.6 million compared to Q2 2017. In addition, as was disclosed on our previous call, we received the Smith & Williamson dividend 1 quarter early in Q1 instead of Q2. Excluding onetime items, our trailing 12 month free cash flow was $46 million and our dividend payout ratio was 55%. Considering both Stream and the Essential Infrastructure Fund, our remaining capital commitment to the alternatives platform was $37 million at the end of Q2 2018. We expect the majority of this commitment to be invested over the next 2 years. The Essential Infrastructure Fund is moving closer to being fully invested, and we expect to bring Fund 2 to market in 2019. The second fund, which has a target of $1 billion in commitments, provides the scale required to recover our working capital and begin to record more significant profits from our interest in the manager. I'm glad to announce that the transfer pricing review is substantially resolved. We had initially provided $64 million for the transfer pricing issue. With the settlement, the issue was resolved at approximately $44 million or $20 million favorable compared to the provision. In terms of cash impact to the end of Q1 2018, we had paid approximately $70 million, including the $10 million we paid in Q1 to facilitate the processing of recesses. During Q2, we received cash refund of $28 million. We are satisfied with the positive outcome of the issue. Moving to other capital considerations, we repurchased approximately $2 million worth of shares to the NCIB so far in the month of June, and we would consider opportunistically repurchasing more shares in the future. Long-term debt now stands at $170 million, and our operating line provides credit to a maximum of $320 million. Turning to Slide 13. I'll now turn the call over to Blake to wrap it up.

[Blake Charles Goldring, Chairman & CEO]

Thank you, Adrian. Q2 was a solid quarter. We continued to make progress against our stated objectives. We achieved 2 consecutive quarters of retail mutual fund net sales, a goal we set out at the beginning of the year. We are winning institutional clients from multiple jurisdictions, and they are investing in multiple strategies. InstarAGF Essential Infrastructure Fund is moving closer to being fully invested, and we expect initial close of Fund 2 in 2019. Along those lines, I'd like to reiterate our primary goals for the remainder of 2018. Above-median investment performance, consistent net sales of retail mutual funds, sustained organic growth in institutional and position InstarAGF for a launch of the second Essential Infrastructure Fund, continue to leverage the AGFiQ platform to establish this unique capability in the areas of quantitative investing and ETFs. And finally, I want to do all of this while containing our expenses with an aim to drive increased profitability. I want to thank everyone on the AGF team for all their hard work. I'm proud of the results that we've achieved in the second quarter of 2018, and I'm excited to accomplish much more throughout the balance of the year. We'll now take your questions.

[Operator]

[Operator Instructions] And our first question comes from Gary Ho from Desjardins Capital.

[Gary Ho, Analyst]

First question, just on the fund performance side. Kevin, it sounds like you're comfortable with how your portfolio is positioned right now. Are you seeing any negative impact on the gross sales side at all, especially within the IIROC channel?

[Kevin Andrew McCreadie, President & Chief Investment Officer]

No. And Steve has a long-term track record, Steve Way, of running that fund. He's well known in the retail channel for his consistency over time. And this has just been really recent dip because of some of the factors, so we're not seeing an impact there. Obviously, this would be sustained for more than several quarters and move into a couple of years’ worth of type underperformance, then I'd start to say possibly, but not after 1 or 2 quarters. So pretty comfortable with where we're positioned right now.

[Gary Ho, Analyst]

Okay, great. And then second question, just on the CSA announcement last week on DSC. Just wanted to see if you guys have done any work on kind of what this means for AGF, either financially or operationally. I think you still sell some DSC mutual funds and have some legacy business on your books. Any more details there would be helpful.

[Blake Charles Goldring, Chairman & CEO]

Gary, maybe I'll kick off. This is Blake. In anticipation of regulatory changes, and I have to -- just I mean, we started saying that, finally, that there is a much clearer path and a cloud has been, frankly, removed from the industry. I mean, this is actually a very positive, in fact, embedded commissions, which really allow smaller investors to also be treated well. This is all positives. Now in that it just patiently changes, we've gone and positioned our business, really, for any particular outcome. And we've done things like create the ETFs and F series for fee-based accounts. We've got Q series with those embedded fees. We have [ gone ] and suites of preferred pricing offering for large-ticket purchases. And we've actually been working very closely with our different partners to ensure that they are properly compensated for the excellent work they do from providing advice, and that's an important aspect to the whole system that we have, that advice matters and we firmly believe that. So we don't expect that the new regulatory changes are going to have any sort of material impact on our strategic direction.

[Adrian Basaraba, Senior VP & CFO]

Yes, and Gary, it's Adrian. You mentioned the financial impact. So if you think about it, we paid approximately $38 million of DSC over the past 12 months. So if DSC is, in fact, banned, we obviously wouldn't have to pay that or we would not pay that. That would increase our free cash flow in the short term. Over the long term, really we need some further clarity from the regulators in terms of the form and implementation of the proposed changes. So it's really too early to say much more about the long-term impact.

[Gary Ho, Analyst]

Okay. That's helpful. And Adrian, while I have you there, can you talk about the restructuring charge, the $5 million, relatively big number. What gives you comfort you'll still hit the $210 million annual guidance? I think you're tracking roughly $107 million halfway mark through the year.

[Adrian Basaraba, Senior VP & CFO]

Yes. So that's a good point, Gary. $107 million year-to-date. That number I think you're quoting there does not include severance or onetime items. And I would compare against our guidance of $105 million. So we are roughly in line with our guidance. And if you think about it, I've mentioned on previous calls that expense levels can fluctuate quarter-to-quarter based on time and expenses. And I'll just remind everybody as well that we don't include severance in our guidance. And we also do not include increased comp from an acceleration of business performance. But we are comfortable that the $210 million is a reasonable estimate for SG&A for 2018.

[Gary Ho, Analyst]

And any color on the $5 million?

[Adrian Basaraba, Senior VP & CFO]

Color in terms of -- it's a restructuring charge related to talent refresh in the organization. It did save us some money to do that. But that is essentially being reinvested and fully incorporated into the $210 million guidance

[Operator]

[Operator Instructions] And the next question comes from Graham Ryding from TD Securities.

[Graham Ryding, Research Analyst of Financial Services]

I'll just start with the fund performance side. Just want to make sure that -- it sounds like the drop in that 3-year number is a reflection of performance year-to-date, largely, as opposed to strong performance 3 years ago dropping off. Is that the right way to look at the situation?

[Kevin Andrew McCreadie, President & Chief Investment Officer]

Yes, Graham, it's Kevin. Usually, you don't have a large move as you drop 1 month off. But we have a number of funds on 3-year calculation. It's something north of 30%, 35% of our AUM and slid just over the 50th -- 50 kind of 60th. So not -- just custom second quartile. So that slides back and forth. So it's not that dramatic because it's sitting right inside of that band, if you will. Does that make any more sense to you? I mean, it's a big number that just slid over, but it's that close to the other side, if you will.

[Graham Ryding, Research Analyst of Financial Services]

Yes. That makes sense. Okay. On the institutional side of your business, strong quarter with the inflows this $1.2 billion. Can you break that down for us? I think you said last quarter, it was about $0.5 billion of sort of quant-based mandates in there. Is that -- was the remainder global equity? Is that how we should think about the inflows this quarter?

[Kevin Andrew McCreadie, President & Chief Investment Officer]

That's exactly right. It's about half and half. Half fund, half Global Core mandates.

[Graham Ryding, Research Analyst of Financial Services]

And can you talk about the pipeline of activity or what sort of visibility you have going forward?

[Kevin Andrew McCreadie, President & Chief Investment Officer]

Yes. I mean, the pipeline is obviously pretty lumpy from quarter-to-quarter, we're in a bunch of finals right now. It's early in the new quarter, so don't have anything of significance to report. But I'm pretty comfortable given the activity we're seeing, that we're going to stay in a organic growth mode on institutional this year. So -- but the quarter, it's rather early to look at a large number on the pipeline yet.

[Graham Ryding, Research Analyst of Financial Services]

Okay. That's fine. The high net worth platform. Just looking at the year-over-year growth in your private client, it suggests that organic net sales were not that material. Is that accurate? And any color on sort of the growth in that platform?

[Blake Charles Goldring, Chairman & CEO]

It's Blake. And again, there -- that's variable as well with new, new clients that we win quarter-to-quarter, so...

[Kevin Andrew McCreadie, President & Chief Investment Officer]

We had a large, I think a large new client in that segment last year which might be distorting the year-over-year growth on that. We still think of that, Graham, as sort of a still a low or high -- I should say high single digit kind of growth rate. So I think it's being skewed by the -- we had some pretty big wins last year. I'm trying to think about which quarter they rolled into, so that would be making the year-over-year growth look a little muted because of the base effect.

[Graham Ryding, Research Analyst of Financial Services]

Yes, okay. Okay. And then just lastly, on the regulatory side. They're focusing on conflicts of interest and suitability and whatnot. But I understand there's a little bit more color to come. But any thought on -- like do you need to make any changes to the trailing commissions that you pay? Or any strategic moves do you think that you're going to have to make here?

[Blake Charles Goldring, Chairman & CEO]

At this point, we don't see that there's dramatic changes. And there's still -- a lot of clarity still has to come out frankly on exactly how this is going to get rolled out on the -- and as you know, we're in a period of comments. So I think at this stage, I have to say wait and see the next call.

[Operator]

[Operator Instructions] And our next question comes from Stephen Boland from GMP.

[Stephen Boland, MD & Equity Research Analyst]

Just on the alternatives segment. You mentioned the new fund in 2019. It was $1 billion. What would your co-commitment be on that fund? Maybe you've mentioned it before.

[Adrian Basaraba, Senior VP & CFO]

Steve, it's Adrian. Thanks for the question. Yes, that's yet to be determined, so we don't have really any update on that at this point in time.

[Stephen Boland, MD & Equity Research Analyst]

Okay. But hopefully, it will be lower, right, I presume, than your traditional?

[Adrian Basaraba, Senior VP & CFO]

We'll give you clarity as we make that decision, we'll be disclosing it.

[Stephen Boland, MD & Equity Research Analyst]

Okay. And I just want to go back to the CSA announcement, and certainly, it's early days as you've mentioned. But I guess when we look back over the past several years, we've seen, I would say -- and maybe you can correct me if I'm wrong here, but the manufacturers were looking to keep assets on their books. And so they were moving and introducing fee-based products and pushing the advisers to move their books into fee-based products, which tended to have a lower margin or a lower revenue fee, whatever you want to call it. I presume now if that's off the table, what's the early feedback you've gotten from some -- maybe some of your bigger advisers that have big DSC books, maybe have been reluctant to move them into fee-based. I mean, does that margin erosion, in your minds, does that kind of slow or even stop based on that movement from trailer to fee-based?

[Blake Charles Goldring, Chairman & CEO]

Why don't I start and just say that feedback from the larger advisers we've spoken to so far has been pretty much business as always. And why I say that is that many of the IIROC brokers have made this move already as far as not using deferred sales charge. And they've actually moved towards more of a fee-based type of model. So I -- when I take a look at our own sales, we've had frankly a gross sales trailing 12-month basis that are up 34% year-over-year. And our DSC becomes a smaller part of overall compensation at the firm. And this has been a trend that's been going on for a long, long time, Steve. So I think that what -- the target and performance, frankly, are really going to be on things like the relationship between the adviser and the client. And that's where there's still a fair amount of work that's going to be done. And that will dictate -- I think that will be probably far more impactful than some of the changes that we're talking about the compensation piece.

[Adrian Basaraba, Senior VP & CFO]

Yes, I'll I just add, Steve, it's Adrian, I think if you compare it to what the prevailing view was out there in terms of the move to fee-based and some of the substitute products that might have been out there, this is probably positive relative to that. But I think all along, I don't think we really, as a firm, felt like we were ready for the change and we've got the products available regardless of whether the initial move is towards fee-based or DSC or front end. So we probably weren't as concerned about it as the prevailing view was out there around what these changes could mean.

[Stephen Boland, MD & Equity Research Analyst]

Okay. And maybe just a last question on your -- Adrian, we've been kind of going back and forth a little bit this morning on this. But on the free cash flow, I mean, I understand the way you calculate it. It's kind of been skewed by the taxes received in your chart on Page 18, and it brings your free cash flow for, I guess, from the way you -- I mean, how -- the way you calculate it. How material it is in the way you look at your cash flow. If this is the metric you're using, your free cash flow is only $2 million in the quarter. So I guess, does this -- is it just a table? Or does this influence the way you model your cash budgeting, I guess, for the next 12 months?

[Adrian Basaraba, Senior VP & CFO]

So Stephen, the table that you're referring to is really just a reconciliation, because free cash flow is not a measure to find by GAAP. Really, the way to think about free cash flow essentially is EBITDA adjusted for noncash items. So I mean, really that's kind of the way that we think about it.

[Stephen Boland, MD & Equity Research Analyst]

Okay. All right. So really just like -- just because that number...

[Kevin Andrew McCreadie, President & Chief Investment Officer]

So feel free to kind of follow-up on that, Steve, but...

[Operator]

[Operator Instructions] And we have Gary Ho from Desjardins.

[Gary Ho, Analyst]

Sorry, just one quick follow-up. Just on the S&W, the earnings was up quite materially this quarter versus even Q1 in last year. Anything that's onetime in that $5.7 million?

[Blake Charles Goldring, Chairman & CEO]

No. We've continued to see very solid strong growth with Smith & Williamson.

[Gary Ho, Analyst]

And any update from that side, monetization or IPO or whatnot?

[Blake Charles Goldring, Chairman & CEO]

Well, we're -- I can't confirm. We're still working hard on that, Gary, I'm on an airplane later tonight for board meetings tomorrow. So we continue to work towards an IPO and what you call 1 Smith & Williamson.

[Operator]

And our next question comes from Graham Ryding from TD Securities.

[Graham Ryding, Research Analyst of Financial Services]

Just a follow-up on the retail flows. Can you give us some color on product-wise, what is -- what's selling well for you?

[Blake Charles Goldring, Chairman & CEO]

So we've seen, or as I mentioned in my comments, the elements, which has been sort of a balanced product, and have seen solid growth there. Also, there's been a shift and we've seen this growth in our international suite of products.

[Graham Ryding, Research Analyst of Financial Services]

That will be your international equities or both for your fixed income?

[Blake Charles Goldring, Chairman & CEO]

That will be international equities.

[Operator]

And we have no further questions. I'll turn the call back for final remarks.

[Adrian Basaraba, Senior VP & CFO]

Thank you very much for joining us today. Our next earnings call will take place on September 26, 2018, when we will review our results for Q3 2018. Details of the call will be posted on our website. Finally, an archive of the audio webcast for today's call with supporting materials will be available in the Investor Relations section of our website. Good day, everyone.

[Operator]

Thank you. Ladies and gentlemen, this concludes today's conference call. Thank you for your participation and you may now disconnect.