Revenue Shortfall Offset by Core Services Growth

• Since our May 2025 report, OLY is up 24%, significantly outperforming the S&P/TSX Composite Financials Index, which rose 10%. We believe the rally was primarily driven by a lower interest rate environment, as historically, lower rates have tended to boost financial stocks.
• After rising 8% QoQ in Q1, client assets declined 1% QoQ to $12.87B in Q2 but remain up 7% YTD. Note that QoQ fluctuations in client assets are not uncommon. As a result, revenue missed our forecast by 2%. EPS fell 8% YoY (Q1: down 6% YoY), missing our forecast by 2%, primarily due to weaker revenue, partially offset by lower-than-expected G&A expenses. Dividends held steady at $1.80/quarter (yield: 5.5%), aligning with our estimate. 
• Although we are lowering our 2025 EPS estimate (while maintaining our dividend forecast), we are raising our 2026+ EPS forecasts to reflect lower G&A expenses in both the short and long term.

• A major highlight of the quarter was a 12% YoY increase in total services revenue from core divisions (IAS and Health Service Plans/Q1: up 4% YoY), driven by higher transaction volumes. Services revenue is expected to continue benefiting from organic demand growth in alternative investments, driven by investors seeking greater diversification, and the potential for higher returns amid economic uncertainty, and low interest rates.
• Approximately 50% of revenue came from interest on unallocated client capital held in cash accounts at major Canadian banks/credit unions.  Since June 2024, the BoC has cut rates seven times (225 bps) to 2.75%, with two more cuts possible in the next six months amid slowing GDP growth, elevated trade tensions, high unemployment, and cooling inflation. Consequently, we anticipate interest revenue declining in the coming quarters.
• Licensed in all provinces except Ontario, the company’s next catalyst may be federal approval, allowing it to offer services in Ontario as well.
• OLY’s EV/EBITDA is 8.6x (previously 6.7x) vs the sector average of 13.7x (previously 12.4x), a 37% discount.

Price and Volume (1-year)

Primary Services

• Investment Account Services (IAS): OLY is a trustee/custodian/administrator of self-directed registered investment accounts for alternative investments
• Health Services Plans: Administers health spending accounts for small/mid-sized corporations
• Currency and Global Payments: Facilitates the buying and selling of currencies for corporations and individuals
• Corporate and Shareholder Services: Offers corporate trust, and transfer agency services, such as maintenance of security holder registries, organizing annual meetings, and administering dividend reinvestments
• Raisr (Exempt Edge): Provides IT services to exempt market dealers, issuers, and investment advisors 

The leading Canadian custodian/ administrator of alternative investments

OLY’s platform caters to a comprehensive range of investments not supported by banks, and other traditional trading/investment platforms

In Q2-2025, 79% of revenue came from IAS (Q1: 77%), 10% from health service plans (unchanged), and the remaining 13% from other services, largely consistent with the prior year

After rising 8% QoQ in Q1, client assets declined 1% QoQ to $12.87B in Q2. We are lowering our year-end estimate by 2% to $13.55B

Q2 revenue was down 3% YoY (Q1: down 0.3% YoY) amid lower interest on unallocated client capital, missing our forecast by 2%, as we had anticipated higher client assets

Importantly, total services revenue from core divisions (IAS and Health Service Plans) was up 12% YoY (Q1: 4%), driven by higher transaction volumes

G&A expenses rose 1% YoY, but came in 1% below our forecast. EPS declined 8% YoY (Q1: down 6%), missing our forecast by 1% due to weaker revenue, partially offset by lower-than-expected G&A expenses

Dividends held steady at $1.80/quarter, aligning with our estimate. The payout ratio was 80% vs the historic average of 70%

FRC Projections and Valuation 

We are not making any material changes to our long-term revenue forecast, supported by our positive outlook on alternative investments, and OLY’s position as the leading administrator of registered plans for alternative investments in Canada.

Since client assets under administration were lower than anticipated, we are lowering our 2025 revenue and EPS estimates

However, we are raising our 2026+ EPS forecasts, reflecting lower G&A expenses both in the short and long term 

We are reiterating our BUY rating, and adjusting our fair value estimate from $147.91 to $177.66/share (the average of our DCF and comparables valuations), implying a potential return of 41% (including dividends) in the next 12 months. OLY has delivered strong stock performance, up 24% since May 2025, supported by a favorable low-interest-rate environment. While Q2 revenue and EPS missed expectations, core services revenue grew, and long-term EPS forecasts are rising due to anticipated G&A efficiencies. Looking ahead, the approval as a federal trust corporation and continued demand for alternative investments present key catalysts, while the stock remains attractively valued relative to peers at a 37% EV/EBITDA discount.

Sector multiples are up 10% since our previous report in May 2025

Anticipating the company’s likely approval as a federal trust corporation, we have removed the 20% discount previously applied to sector multiples in valuing OLY

As a result of the above factors, our comparables valuation increased from $151 to $202/share

Risks

We believe the company is exposed to the following key risks (not exhaustive):

• Operates in a regulated industry 
• The company's target market is niche 
• Although OLY dominates the alternative investment market, there is no guarantee that banks and large investment platforms will not enter this space in the future. 
• Earnings are significantly affected by fluctuations in interest rates
• Transaction revenue depends on market sentiment for alternative investments

APPENDIX

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