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.