RCS Capital (RCAP), the parent company of Cetera Financial, said fourth-quarter revenues fell 27% to $504 million and earnings plummeted to a loss of nearly $123 million, or -$1.33 per share, vs. a loss of $1.4 million, or -$0.02 per share, a year ago as fallout from troubles at American Realty Capital (ARCP) continued.
On an adjusted basis, earnings dropped 70% to $12.6 million or $0.14 a share, compared with $42.7 million, or $0.46 a share, in Q4’13. Both adjusted earnings and revenues missed analysts’ expectations; they had forecast $0.18 in adjusted EPS and sales of $605 million in the period.
The wholesale unit said revenue from sales of nontraded REITs and other products — some of which carry the American Realty Capital brand — was $92.1 million in Q4’14, based on $946 million in total direct investment sales vs. year-ago revenues of $186.6 million on $2.1 billion in total direct investment sales. These results represent a drop of 55% in equity sales and a 51% decline in revenue tied to these sales; plus, the unit’s adjusted earnings fell 60% to a loss of $10 million.
RCS Capital shares traded down about 11% on Tuesday near $10.
Though the group says it has 1,568 active selling agreements in place, up from 1,151 deals in early 2014, the latest results clearly reflect suspensions to selling deals that mushroomed after ARCP announced $23 million of accounting errors in late October.
“Importantly, we expect the ongoing reinstatement of our selling agreements and the strengthening of our selling group will continue to be a positive contributor to our capital-raising activities,” said Realty Capital Securities CEO Bill Dwyer, in a press release.
(After ARCP’s news broke, RCAP called off plans to purchase part of Cole from its sister organization. In addition, Charles Schwab (SCHW) and Fidelity stopped sales of products associated with Nicholas Schorsch’s real estate operations. Multiple independent broker-dealers suspended sales of Cole and AR Capital nontraded REITs, including LPL Financial (LPLA), Advisor Group, National Planning Holdings, Cambridge Investment Research, Securities America and Cetera Financial. Schorsch has since given up his role as executive chairman of RCS.)
Looking ahead, the company says it should have full-year 2015 earnings of $1.43 to $1.59 a share and adjusted earnings before taxes and other adjustments of about $244 million to $268 million.