Canaccord Genuity Group Inc.

Good morning, ladies and gentlemen. Thank you for standing by. I would like to welcome everyone to the Canaccord Genuity Group, Inc. Fiscal 2025 Fourth Quarter Results Conference Call. All lines have been placed on mute to prevent any background noise. Following the speaker's prepared remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star, then the number 1 on your telephone keypad. If you would like to withdraw your question, please press star, then two. If you have any difficulties hearing the conference, please press star, then zero for operator assistance at any time. As a reminder, this conference call is being broadcast live online and recorded. I would now like to turn the conference call over to Mr. Dan Daviau, Chairman and CEO. Please go ahead, Mr. Daviau.

Thank you, Operator, and thanks to everyone joining us for today's call. I'm joined by Nadine Ann, our Chief Financial Officer. Today's remarks are complementary to our earnings release, MD&A, and supplementary financials, copies of which have been made available for download on CDAR Plus and on the Investor Relations section of our website, cgf.com. Within our updates, certain reported information has been adjusted to exclude significant items to provide a more transparent and comparative view of our operating performance. These adjusted items are non-IFRS items. Please refer to our notice regarding forward-looking statements and the description of non-IFRS financial measures that appear in our investor presentation and in our MD&A. And with that, let's discuss our fourth quarter and fiscal 2025 results. Our fourth fiscal quarter saw us deliver our highest quarterly revenue in the past 11 quarters, despite a volatile market environment. Revenue growth was fueled by record performance in our wealth management division and strong advisory fee contributions from capital markets. This contributed to an impressive top-line results for the fiscal year. with firm-wide revenue of $1.8 billion, an improvement of 20% compared to last year, and our strongest results since 2022. Our wealth management businesses and all geographies have continued to perform exceptionally well. Each business has been consistently executing against their respective plans, which are oriented towards sustainable growth and profitability. client assets grew to a record of $120 billion, with new records set in each region, driven by a mix of acquisitions and recruiting activity, improving market values, and positive net flows. While our strategies have focused on increasing contribution from fee-based assets and strengthening net inflows, the aggregate value of our client assets is linked to market performance. and is expected to reflect some of the volatility experienced in the current quarter. Having said that, I will note that market fluctuations do not typically drive outflows to the same extent as inflation and rising interest rates. We're seeing increased investing activity among our core clients, driven by growing demand for personalized solutions. Throughout the three and 12-month periods, we continued to invest in the growth of our wealth management businesses while advancing our organic growth priorities. We completed three acquisitions in the UK and Crown Dependencies, enhancing the scale of our financial planning offering and extending our presence across both onshore and offshore markets. Acquisitions were completed in Cambridge and Glasgow, and most recently in the Crown Dependencies. through our acquisition of Brooks MacDonald Asset Management International, which was completed in our fourth quarter. We also further expanded our talent base by bringing on professionals responsible for advancing our organic growth priorities and strengthening our investment management and financial planning capabilities. In Canada and Australia, we welcomed new investment advisory teams, and we have good visibility on a solid pipeline in both regions. By focusing on high quality producers, our recruiting efforts are contributing to an increase in fee-related revenues, enhancing the resilience of these businesses. Nadine will provide a more detailed overview of our operating performance, but I'd like to highlight that the fourth quarter adjusted pre-tax net income from this division rose 22% year over year to $41 million, contributing to a full year contribution of $149 million. While our fiscal 2025 operating margin for the wealth division reflects ongoing investments in growth, we anticipate low single-digit margin improvement over the coming year, which will be driven by our increased scale and the impact of our organic growth initiatives. Turning to capital markets, Despite the increased momentum for corporate finance activity in our core sectors during our second and third fiscal quarters, activity levels in this segment were subdued in the fourth quarter due to market volatility and uncertainty, largely stemming from the global trade policy disruptions. Our advisory segment helped to offset this decline, delivering its strongest quarterly revenue of the fiscal year. This helped lift the revenue contribution from our capital markets division to its strongest result in three years and comfortably above pre-pandemic levels. Although investors remain selective in their exposure to risk equities, we have defended our strong market position for corporate finance activity. We are consistently ranked among the league table leaders in our target sectors and maintaining our status as the most active mid-market dealer globally. Reflecting the cautious environment, the mining sector remained our most active throughout the 3- and 12-month periods, but we also saw encouraging momentum across other core sectors. As investor sentiment improves, we are also beginning to see renewed, albeit cautious, appetite for IPO activity. Profitability in our capital markets division for the 3- and 12-month periods continue to be impacted by elevated non-compensation expenses. which includes professional fees and provisions primarily in connection with our previous disclosed regulatory matter. We've maintained proactive and transparent engagement with our regulators to ensure alignment with their expectations as we continue to enhance the client experience and advance our strategic priorities. While our remediation efforts are largely complete, the timeframe for resolution with respect to our U.S. enforcement matter remains uncertain. During the year, we took deliberate steps to sharpen the focus of our capital markets business by allocating resources and capital to the areas where we can deliver the greatest value to our clients and compete most effectively. As part of this strategic focus, subsequent to the end of our fourth fiscal quarter, we announced a definitive agreement to sell our U.S. wholesale market baking business to Cantor. This move enables us to concentrate our efforts on our investment banking and advisory-driven capital market strategy in this region. The IEG business has been a valuable contributor to our U.S. capital markets operation, but has historically operated adjacent to our core equities franchise and now has reached a level of scale and complexity better suited for a larger platform. The transaction remains on track for completion in the first half of our 2026 fiscal year, Until then, CG continues to fully support the employees and the clients of that business. While we certainly miss the daily contributions of this talented team, we are excited about the new opportunities that await them as part of Cantor, and we wish them continued success. In all, against a backdrop of increased volatility and cautious investor sentiment, we delivered solid top-line growth in the 3 and 12-month periods. While our profitability fell short of expectations, we remain committed to supporting our clients in navigating complex business and investment decisions. We have continued to execute against our long-term strategy, positioning the business for stronger future profitability and improved shareholder returns. And with that, I'll pass things over to Nidhi.

Thank you, Dan, and good morning, everyone. I'll turn your attention to our firm-wide performance highlights on page four of our investor presentation. Revenue generation improved for both the three- and 12-month periods. Firm-wide profitability and earnings per share for the fourth fiscal quarter were lower on a year-over-year basis, but earnings for the fiscal year improved when compared to last year. Firm-wide profit margins were under pressure in both periods, and I will walk you through the key drivers of that performance. Firm-wide revenue for the three-month period increased by 12% year-over-year to $460 million. The increase was primarily driven by higher commissions and fees revenue of $237 million, an increase of 18% year-over-year, primarily driven by contributions from our Wealth Management Division. In addition, advisory revenues increased 31% year-over-year to $90 million, reflecting increased completion activity in our core sectors. As Dan mentioned, revenue for the full fiscal year increased 20% year-over-year to $1.8 billion. Wealth management was the largest contributor, accounting for 51% of total revenue. Capital markets contributed 47% of fiscal 2025 revenue, representing a 1 percentage point increase year-over-year, with the remaining revenue coming from our corporate and other segments. On the expense side, Firm-wide non-compensation expenses remained elevated, totaling $149 million for the three-month period and $581 million for the 12-month period, representing increases of 24% and 19% respectively. The impact of elevated expenses led to a decrease in our pre-tax operating margin from 9% to 8.4% for fiscal 2025. Slide 7 in our investor presentation provides a breakdown of our fiscal 2025 expense drivers and the impact of foreign exchange, highlighting that non-core expenses accounted for approximately 24% of the year-over-year increase. Revenue and investment-driven expenses drove the largest component of the increase and reflected increased interest or dividend costs as well as trading costs, which were primarily offset by higher revenues. Discretionary expenses represented approximately 24% of the increase, primarily related to an increase in professional fees associated with remediation work in the U.S., as well as increased acquisition-related costs as we continue to invest in the business. We are focused on cost discipline and generating an improvement in our operating margins. Our effective tax rate for the fiscal year decreased by 2.3 percentage points year-over-year, to 26.9%, largely due to a decrease in the effective tax rate in connection with the reduced impact of LTIP share price movement on deferred taxes. Firm-wide compensation ratio for the fiscal year was within our desired range at 59%. Excluding significant items, firm-wide pre-tax net income for the three-month period was $32 million, down 18% year-over-year and down 19% sequentially. For fiscal 2025, adjusted pre-tax net income totaled $149 million, up 12% year-over-year. These results translated to adjusted diluted earnings per share of 12 cents for the three-month period, down 3 cents or 20% year-over-year, bringing our fiscal 2025 adjusted diluted earnings per share to 61 cents, up 21 cents or 53% year-over-year. Turning to segment results, our Wealth Management Division earned revenue of $239 million during the fourth fiscal quarter and $905 million for fiscal 2025, representing year-over-year increases of 19% and 17% respectively. Increases for the three and 12-month periods were primarily driven by higher commissions and fees revenue from all regions and a modest increase in contributions from the investment banking segments in our Canadian and Australian businesses. Our wealth business in the UK and Crown dependencies contributed record quarterly revenue of $118 million, up 12% year-over-year and 2% sequentially. bringing fiscal year-to-date revenue to a record $450 million. Slide 12 outlines client asset flows. Measured in local currency, client assets in this business increased by 8% year-over-year to £37 billion, and net inflows, including assets from acquisitions, represented 11% of opening assets under management. Fourth quarter adjusted pre-tax net income contribution of £28 million, represented a year-over-year improvement of 4%. Full-year profitability in this business was flat compared to the prior fiscal year, largely due to higher development costs in connection with their acquisitions and organic growth activities in the region. The business achieved normalized EBITDA of £21 million for the three-month period and £79 million for the full year, representing a year-over-year increase of 1.2%. Our Canadian wealth business earned fourth quarter revenue of $100 million, up 29% year-over-year. Fiscal 2025 revenue increased 26% year-over-year to $375 million. As outlined on slide 11, client assets in this business increased by 11% year-over-year to $43 billion, and net inflows represented 7% of opening AUA. The adjusted pre-tax net income contribution amounted to $13 million for the fourth quarter and $43 million for the fiscal year, increases of 90% and 21% respectively, but below desired ranges in the context of our revenue growth. In the three- and 12-month periods, this business incurred higher interest expense in connection with clients' cash balances, which were primarily offset by interest revenue, as well as increased premises and equipment costs in connection with our new office in Vancouver, and higher development costs to support our recruitment and retention activities. While our adjusted pre-tax operating margin for the quarter improved both year-over-year and sequentially, the fiscal year operating margin of 11.5% was half a percentage point lower than the prior year. Adding back the non-cash development charges, normalized EBITDA in our Canadian wealth management business with $19 million for the fourth quarter, which brought full-year EBITDA to $69 million, an improvement of 26% compared to the prior fiscal year. And finally, revenue earned by our Australian Wealth Management business of $21 million for the quarter increased 23% year-over-year, bringing fiscal year-to-date revenue to $80 million, an increase of 26% year-over-year, a new record for this business. Client assets increased by 31% year-over-year to $8.4 billion due to an increase in new client assets from our recruiting activities as well as higher market values. The adjusted pre-tax net income contribution amounted to $1 million for the fourth quarter and $5 million for the fiscal year, increases of 45% and 53% respectively. Our global capital markets division earned revenue of $212 million for the fourth fiscal quarter and $831 million in fiscal 2025, representing year-over-year increases of 5% and 22% respectively. Fourth quarter increase primarily reflected the impact of higher advisory revenues in our core focus sectors. Capital markets advisory revenue of $90 million for the three-month period was the strongest quarterly result of the year and on par with our fiscal 2023 quarterly average, which was our second strongest year for advisory activity. The fiscal 2025 revenue increase was primarily driven by increased advisory and corporate financing activities in our core mid-market focus sectors. The shift in market conditions during our fourth quarter led to reduced risk appetite compared to prior periods, which negatively impacted corporate financing revenue across all regions. Despite this, full-year revenue from this segment rose 44% year-over-year to $215 million, our strongest level in three years, demonstrating our team's agility in helping clients access capital when market conditions are favorable. As noted earlier, profitability from our capital markets division continued to be affected by higher non-compensation expenses, primarily in our U.S. business as fiscal 2025 saw inflated professional fees as we continued to execute on the remediation work related to our regulatory matters. That said, stronger revenue generation alongside our ongoing efforts to reduce discretionary spending contributed to improved results for fiscal 2025 compared to the prior year. This division contributed adjusted pre-tax net income of $1 million for the fourth quarter and $44 million for the full fiscal year, compared to $3.3 million and $6 million, respectively, for the comparative periods in the prior year. Going forward, we expect an overall improvement in operating margins in our capital markets business. Turning to the balance sheet, We are maintaining sufficient working capital to support our strategic priorities and increase business activity, while also preserving the flexibility to reallocate capital as market conditions evolve. With that, I will turn things back to Dan.

Thank you, Nadine. Despite ongoing economic and trade policy uncertainty, M&A activity in our core sectors is expected to remain resilient. Corporate financing activities supported by our research, sales, and trading capabilities remains closely linked to the condition of the new issue market, which fluctuates with broader market dynamics. When these windows are open, we at CG have proven our ability to consistently outperform expectations. We are continuing to invest with discipline in the growth of our wealth management businesses while advancing our organic strategy. growth priorities. At the same time, we remain firmly focused on reducing firm-wide discretionary expenses. Together with our organic and inorganic growth initiatives, we expect our cost efficiency efforts to support firm-wide margin improvements with a goal of achieving single-digit growth in the upcoming fiscal year. Reflecting confidence in this outlook, our Board of Directors has approved a quarterly common share dividend of 8.5 cents With that, Nadine and I will be pleased to take your questions.

Operator, please open the lines.

Thank you. Ladies and gentlemen, we will now begin the question and answer session. Should you have a question, please press the star followed by the one on the touch-down button. If you wish to cancel your request, please press the star followed by the two. If you are using a speakerphone, please lift the handset before pressing any keys. Once again, that is star one, should you wish to ask a question. Your first question is from Jeff Fenwick from Coremark Securities. Your line is now open.

Hi, good morning, everyone. Good morning, Jeff. Yeah, I wanted to start off with, I noted in the release that there was an agreement to lend some incremental money out to employees to help facilitate more insider ownership. Yep. Has the board put some parameters around what that is? Obviously, we're all aware that there's a standstill from a prior insider buyout that would have been in place. What's the thinking in terms of balancing higher insider buying, but obviously there's a cohort there that would potentially participate in a buyout or was involved in the past?

Yeah, I mean I wouldn't link the two things together. I mean the employee partnership and the loan program for the employee partnership, that was always meant and certainly described to be a perpetual program. The idea is you've got employees that, quite frankly, didn't get enough the first time, and new and emerging employees. And the idea was always to recycle the capital. Every year, a big chunk of those loans are repaid because they're repaid through bonuses. So we started at 80. In the first year, we repaid 15, so it went down to 65. This year, the bonuses we just paid, we repaid another chunk of the loans. the board gave us authorization to reloan a chunk of that money, quite frankly, a little bit more, but the vast majority of it was the loans that were just repaid to other partners, emerging partners, partners who didn't get enough last time. So it's a bottoms-up analysis. How much do we need to do to keep everybody aligned and motivated together with long-term shareholder interest? And that number this year is a maximum of $27 million. So that's what that is. The actual outstanding balance on the loans on our balance sheet, because we just had a big repayment, and I think the outstanding balance was about $65 million. We'll go up slightly, but just slightly here, because we're not solving for something other than where the demand is. Does that answer your question, Jeff?

Yeah, I think so, and I guess there's some thinking just in terms of any restrictions. I guess you can't really restrict it, but the aggregate insider ownership is a percentage of the total.

Yeah, obviously over time as we get closer to 20% or something that's a relevant benchmark, then I think there could potentially be restrictions. But we haven't really assessed that at this point. I mean, we're going from roughly 11 and small change to 14% here. I think that's a couple years down the road before we really got to sit down and make those, the board needs to make those decisions. But it is a comprehensive board process. The employee partnership can't do this without the loans, and the loans come from the company. And the board has a lot of oversight and approvals in the context of that. So, you know, we've had a longstanding objective. It's in our investor presentation. It's something that you've heard me talk about a lot. that I believe running an investment bank and a material wealth management firm involves significant employee ownership. We think it aligns the interests of our employees and our shareholders perfectly, and this program is a great way to do it. So, you know, at the end of the day, increasing employee ownership in the business, where they're actually, as you know, these are fully recourse loans. These loans pay interest. You know, the only benefit of them, and quite frankly, your stock's locked up forever. So the only benefit of this program is we top up the bonus a little bit to help on the loan repayment, but that's peanuts in the bigger picture of things.

Okay. That's helpful, Keller. Thank you. And then I wanted to ask about the sale of the wholesale trading unit out of the U.S., Could you give us a little bit of color? When I look at the financials there, would that be the majority or all of what you would categorize as principal trading within?

The majority, yeah.

I think I understand that the relative profitability of that group was less than other parts of CGUS. I was trying to think about how going forward should we be modeling the U.S. unit, obviously the step-down in revenue, but perhaps with a little better margin on the business.

Yeah, I think that's accurate. It was a positive contributor to the business, let's be clear. It has been for the last 20 years and run by a phenomenal group of employees and partners. But this simplifies our business from a regulatory standpoint, from a risk standpoint. And, you know, sooner or later, this business in particular was a heavy tech business. And there's a lot of firms out there like Cantor and others, quite frankly, that, you know, are very focused on, you know, technology and trading. And, you know, there's a long-term, a better owner for this business. I think the employees saw it that way. And we certainly saw it that way. It wasn't a question of, if we were going to dispose of this business. It was a question of when. Was it going to be this year, next year, the year after? So I think we found a good buyer and canter, and hopefully that deal will push towards a conclusion in the next three months or so.

And maybe one more for me on U.K. wealth management. Yeah. Good progress there, obviously, on continuing to gather assets into that business, and you called out efforts to – sort of invest in it and perhaps drive more net inflows from clients. But what does it take there to get some real operating leverage out of the business? I mean, the asset's been climbing, but the earnings have not been following along.

Yeah, fair point. The first point I'd make is, you know, we have, and you made this point, we have invested significantly in that business on our growth initiatives. The people, systems, technology, millions and millions of pounds. And it's working is the good news. It doesn't happen overnight. As you know, Jeff, we bought a lot of businesses there. You know, it's hard to buy things and integrate them and at the same time grow organically. But that's what we've done now. We're at a position, and it's early. We're three or six months into it or four months into it now, where the business is growing organically, particularly in the areas where we want it to grow organically. And this isn't just happening. It's happening because, you know, we've got an immense training and sales system that we've set up there. So it's starting to work, and I think you're going to see the results of that as we continue to move forward. You're starting to see them now, but that's going to improve. To answer your questions on margin on the business, maybe Nadine, you want to take that?

Yeah, thank you. Jeff, in terms of looking at the margin perspective, you obviously have a number of costs associated with the acquisitions, as Dan mentioned, as well as our investments in the business as it relates to staff, et cetera, to further augment our drive towards that organic growth. So as we continue with the scale of growth in that business, we definitely expect to see the margins improve through 2026. Okay.

Thanks for that, Caller. I'll read you.

Thank you. Your next question is from Rob Blossom, Ventim. Your line is now open.

Thank you, and good morning.

Good morning, Rob. Thanks.

You noted the strength of the advisory business, and in particular the U.S. tech advisory business stood out. Could you talk to your outlook in that business going forward?

Yeah. I mean, you don't know what you don't know. But as I've always said, M&A is a little bit more predictable than some of our other businesses in capital markets. And, yeah, we continue to have a huge pipeline of activity. And, you know, big client wins and big assignment wins that obviously all have to work through. Now, obviously, if there's continued market volatility, some of these things are delayed from time to time and deals get pushed out to the right. But that's not what we're seeing right now. So, you know, I think we've articulated that we see a strong pipeline and we continue to see a strong pipeline. So, you know, I guess I'm I hate using the expression cautiously optimistic, but remain cautiously optimistic on our M&A business as we push forward here into this fiscal year.

Thank you. And in your deck, you mentioned that you are pursuing organic and inorganic growth in all regions for wealth. Could you talk to the UK? Is this a period of integration or are there further, you know, tuck-ins for that region?

Yeah, I think in the UK, well, every time I say that we're not buying anything, we end up buying something. But realistically, it's very targeted, our acquisitions in the UK. It's really to provide a more fulsome service to our clients. So the days of us buying big, big UK wealth companies and integrating them in so that we got sufficient scale, that's over for the time being. And I'm not saying it won't start up again, but certainly for now it's over. To the extent that we're doing acquisitions now, it's mainly to have a more holistic relationship with our clients, buying financial planning firms, you know, for example. Those, by definition, more often than not, are small tuck-in acquisitions. And that's, you know, that's what you saw with our Cambridge acquisition and So, yeah, we'll continue to look at that, but I wouldn't expect an announcement in the next three months that we bought something.

Very good. Thank you. And if I may, a last question. Could you talk to what you're seeing in the Aussie market on the wealth side?

You know, when we first got into the Aussie wealth business five years ago, you know, we bought intentionally a fixer-upper, great partners, but a firm that needed to be reworked. And that has been reworked. And we're really tracking a very similar strategy to the one we deployed in Canada where we went from $8 billion to $42 billion. And, you know, the Aussie market has presented a very similar opportunity for us to recruit and bring on board, you know, a select group of new advisors, nine this year, and that will continue to increase. So, yeah, we're seeing great growth there, you know, off a lower base, but 30% growth in our fund under management business there. So we continue to see exceptional opportunities there, and we think we're in a remarkable competitive position to realize on those opportunities.

Great. Thank you very much. Good luck. Thank you.

Thank you. Your next question is from Graham Riding from TD Securities. Your line is now open.

Oh, hi. Good morning. Good morning, Graham.

Maybe I could just start with you. Just debt went up quarter over quarter. I assume some of that's related to the Brooks McDonald acquisition. Can you just talk about what drove the remainder? Let's say it was almost a $100 million increase, and then maybe your comfort level. How do you measure? How do you measure debt and what's your optimal level or your comfort level?

The debt increase primarily related from a year-over-year basis to the convert coming on over from fiscal 2024. We've been managing that interest expense and obviously as we look at what we've portrayed as it relates to our total expense base, I think we've been very selective in terms of how we've been investing in the business. So that increased debt is really driving that leverage to be able to drive that revenue growth print that you've seen this year, and that's primarily investing in the U.K. wealth business, as you mentioned. But the big part of that contribution on a year-over-year basis was the convertible coming on.

And quarter-over-quarter?

Quarter-over-quarter, yeah, would have been with the acquisition, yeah.

Okay. And how do you measure debt? Do you have a targeted sort of level that's sort of a band or a range that you want to keep the business operating within?

Well, we manage it against both looking at our overall capital base and what we're ability to invest in and what that return is going to look like on that level from a leverage standpoint. So, yes, it's looked at in conjunction with our overall capital base and our operating capital.

And, Graham, I know you know this, but the debt, you know, the non-convert debt, all the rest of the debt primarily, is all in the U.K. wealth subsidiary. And that's, you know, Schedule A bank debt, you know, so the leverage ratios are relatively modest given the level of earnings in that business.

Understood. And then maybe just pivoting to the regulatory matter.

I'm sure it's your favorite topic, but just is there any progress you can sort of flag? What sort of spend do you think might be left if material and any increased visibility here on potential timing?

Yeah, the big spend, I won't go in the order that you asked the questions, but the big spend has all been around remediation efforts. consultants and remediation efforts. And we're mainly through that. We've mainly remediated everything that we think we need to remediate. And, you know, that involves a lot of historical look back and stuff like that. I think we're pretty good. So that spend should come down. Nadine can speak to it more specifically. But, you know, I think we're there. You know, on cleaning it up or getting rid of it. I mean, we're on a real unfortunate timing with respect to the U.S. regulators and really, you know, getting people's attention given their competing priorities and concerns. So, you know, we'd like to make progress on it. Yeah, we'd like to have this thing disappear um and we're you know aggressively working towards that that being said it takes two people to dance so i'm sure they'll get their their their you know their house in order and then we can have more intelligent conversations going forward so i can't i can't give you i can't give you a time frame unfortunately i wish i could no understood and then my last question you um

Appreciate the slide you put in there just flagging the different options or timeline for the HPS five-year anniversary that's coming up in July 2026. So can you just sort of run through perhaps how you're thinking about your preferred options as you approach that deadline and, you know, what are you sort of looking at at this point? Are you exploring any buyers for their stake or perhaps the UK business overall?

Yeah.

Are you looking at potentially financing options, pay them off?

Like, how are you – how should we think about, you know, your – Yeah, I'm not – I won't be as clear as you'd like me to be, Graham. But, you know, all of the above, you know, sell, refinance, buy them out. You know, like there's probably 10 different options if I really thought through them. So we continue to think through all of those. The important part about that business is we're delighted with how it's performing. It's performing remarkably well. Asset growth, we continue to integrate the firms that we bought. We're getting net new asset growth in that business. We're absolutely delighted to be a shareholder of this business, and we think it's a massive value contributor to us. So that's the beauty of it. That business, Those statements allow me to have more options as opposed to less options with respect to the business because the business is performing so well. So, yeah, but we're very cognizant, obviously, of the timeframes that come up. We still have years to think about things if we want to, but we're obviously thinking through all of our options with respect to that business as we speak.

Okay, that's helpful. Does it make sense to – find some sort of exit before July 2026 so that sort of IRR of 11.5% doesn't just sort of start to increase higher and higher?

Yeah, again, Graham, I'm not going to be as clear as you'd like me to be. So, yeah, we continue to look through all of our alternatives, and we're cognizant of all the dates involved.

Okay, that's it for me. Thank you. Thank you.

Thank you. Your next question is from Stephen Bowen from Raymond James. Your line is now open.

Thanks. I just want to go back to that waterfall slide seven. It's very helpful. Can you just tell me what the difference between client expenses are and promotion and travel expenses?

Sure. Thank you. Client expenses would relate to settlements or reserves, et cetera, with particular clients. Primarily?

Settlement or reserve? Is that the wealth management part of the business?

Primarily, yes.

Okay. I don't want to pick on the discretionary expenses, but I understand the provisions, professional fees. But within your fiscal 2020, 24 expenses. You have conference costs and client engagement costs buried in the fiscal 2024. And then, you know, you've added another $8 million in expenses. Like, it seems pretty material, like, I guess, for a one-year, you know, top-up. I mean, Dan, you mentioned in your intro remarks that you're going to try and focus on discretionary expenses. So, is that a number that is going to be flattening out here? Yeah. Yeah, you're absolutely right.

We're definitely focused on that area in particular and so it's an opportunity for us given the fact that these are more discretionary so we've got targets across the firm in every region to focus on this cost bucket because to your point, we are spending a reasonable amount of money already so for it to go up in this year, so we're really focused on targets for each business, and so we've got plans in place to bring that number down on a year-over-year basis.

Okay, so theoretically, you know, once the, as you said, the remit professional fees and that's pretty much done, you flatten out the commerce costs and increase client engagement, like that's fine. You're looking at saving like $20 million, over $20 million to disappear in terms of growth in the assets. Is that a fair comment?

Fair comment.

Okay. I think that's all I have. I appreciate it. Thanks. Good questions. Okay.

That concludes our call. Thank you all again for joining us today. And as always, Nadine and I certainly can be available to take any questions. Our next earnings update will be in early August when we release our first fiscal quarter results. So with that, operator, I think you can now close the lines, and thank you again, everybody.

Thank you, ladies and gentlemen. The conference has now ended. Thank you all for joining. You may always connect your lines.