Canaccord Genuity Group Inc.

Good morning, ladies and gentlemen, and thank you for standing by. I'd like to welcome everyone to the Canaccord Genuity Group Inc. Fiscal 2026 Second 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'd like to ask a question during this time, simply press star then the number one on your telephone keypad. If you'd like to withdraw your question, please press the star followed by the two. If you have any difficulties hearing the conference call, please press the 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 call over to Mr. Dan DeVio, Chairman and CEO.

Please go ahead.

Thank you, Operator, and welcome to those of you joining us for today's call. As always, I'm joined by our Chief Financial Officer, Nadine Ahn. Our remarks today are complementary to the earnings release, MD&A, and supplemental financials, copies of which have been made available for download on CDAR Plus and on the Investor Relations section of our website at cgf.com. Nadine will also be referring to our investor presentations. available on our website and through the online portal for this conference call. Within our update, certain reported information has been adjusted to exclude significant items to provide a transparent and comparative view of our operating performance. These adjusted items are non-IFRS measures. Please refer to our notice regarding forward-looking statements and the description of non-IFRS financial measures that appear in our MD&A. And with that, let's discuss our second quarter fiscal 2026 results. During our second fiscal quarter, major equity indices posted strong gains and gold prices surged 17%, while improved certainty on trade-related matters coupled with downward pressure on interest rates contributed to a substantially improved market environment for our core wealth management and capital markets activities. Consolidated revenue of $530 million increased by 24% year-over-year and by 18% sequentially, representing our strongest top line quarterly announcing a substantial increase in our provision for ongoing U.S. regulatory matters. This reflects our revised estimate of the total monetary penalty related to the enforcement matters. First and foremost, I want to acknowledge how seriously we are taking these matters. Compliance and integrity are fundamental to the trust you place in us as shareholders. We are cooperating fully with our regulators, and we anticipate reaching a global resolution in the coming months. As this remains an ongoing matter, we are precluded from discussing in further detail. I want to reaffirm that over several years, our U.S. business has substantially invested in a comprehensive compliance transformation aimed at aligning with regulatory standards and remediating its existing program. In addition, as you've heard me say before, we've also invested in strengthening our compliance talent and infrastructure across all businesses and geographies. In keeping with our commitment to continuous improvement, we've also taken steps to meaningfully reduce our risk exposure while ensuring that we can continue to deliver exceptional experiences for our clients. In addition to the increased provision, we've recorded a non-cash goodwill impairment charge of $110 million in our U.S. capital markets business. For several quarters, macroeconomic and trade-related uncertainties have tempered activity across our core focus sectors, impacting revenue and profitability in our U.S. operations. Although advisory completions have rebounded from the trade-driven slowdown of the prior quarter and corporate financing activity has seen a meaningful uptick, the recovery for small and mid-cap segments within our core sector has been more gradual in this region. Nevertheless, we continue to execute against a robust pipeline of reinforcing our confidence and its stronger performance in the second half of the year. Together, these items contributed to an IFRS loss attributable to common shareholders of $204 million and a loss per share of $2.04. While this quarter's results are disappointing in light of these measures, we've confronted legacy issues head-on and taken steps to strengthen the foundation of our business. Our core operations remain strong, our balance sheet is solid, and we continue to see encouraging momentum across key growth areas. I'm confident that the actions we are taking today will support sustainable value creation for our shareholders in the years ahead. And with that, I turn things over to Nadine.

Thank you, Dan, and good morning, everyone. I'll start with the performance highlights on page four of our investor presentation. Firm-wide revenue of $530 million improved by 24% year-over-year and 18% sequentially. representing our strongest quarterly revenue since the third quarter of fiscal 2022. The increase was primarily driven by meaningful improvement in firm-wide corporate financing revenue, which increased by 91% year-over-year to $108 million, in addition to higher commissions and fees revenue, which increased by 25% year-over-year to $257 million, primarily driven by our wealth management businesses. When measured on a fiscal year-to-date basis, Firm-wide revenue amounted to $979 million, an improvement of 14% compared to the first six months of fiscal 2025. As Dan mentioned, we continue to make solid progress on our efforts to curb expenses, although certain costs remain elevated in the three-month period. A detailed breakdown of the factors contributing to our second non-quarter compensation expenses can be found on slide 7 of our investor presentation. The largest driver of the increase was related to fixed or less controllable expenses, which represented $7 million of the year-over-year increase. The impact of foreign exchange accounted for $2.4 million, or 34% of this increase. Additionally, premises and equipment costs in connection with new flagship offices in several geographies represented $2.7 million, or 39% of the increase. As previously noted, we expect that the year-over-year variance in premises and equipment expenses will begin to taper off in the second half of this fiscal year as we pass the one-year occupancy milestones in each location. Professional fees remain moderately elevated due to our remediation efforts in the U.S., and we also incurred higher communications and technology expenses in connection with investments to support growth in our Canadian and U.K. wealth operations. Given the advanced stage of our remediation efforts and expectations for a unified resolution in the coming months, we expect that professional fees in this business will begin to taper off accordingly. The remainder of the increase was attributable to revenue or investment-driven expenses. Firmwide compensation expense amounted to $323 million, an increase of $72 million or 29% year-over-year, broadly in line with the increase in incentive-based revenue. Our firm-wide compensation ratio was modestly elevated to 60.8%, partially due to changes in the value of certain unvested stock-based compensation awards during the three-month period. Excluding significant items, our pre-tax operating margin for the three-month period improved by 1.4 percentage points year-over-year, and by 3.9 percentage points sequentially to 11.3%. Adjusted pre-tax net income of $60 million for the second fiscal quarter increased by 41% year over year, which translated to diluted earnings per share of $0.27. Turning to our segment results. Our Wealth Management Division earned revenue of $269 million during the quarter and $512 million for the fiscal year to date, year-over-year increases of 24% and 19% respectively. The second quarter increase was largely attributable to a $42 million or 25% increase in commissions and fees revenue to $211 million, reflecting record quarterly contributions from all regions. Additionally, Revenue from investment banking activity earned in the wealth division increased by $13 million or 240% year-over-year to $18 million, primarily due to stronger activity levels in our Canadian and Australian businesses, excluding significant items which increased by $17 million or 26% compared to the same period of last year. in addition to increased investment banking revenue, which improved by $8 million, or 206% year-over-year. Client assets surpassed $49 billion in the second fiscal quarter, increasing 24% year-over-year and 10% sequentially, representing a new record for this business. As outlined on slide 11, higher market valuations were a major contributor to this increase, supported by positive net flows. The business continues to advance its priority of growing contributions from fee-generating client assets, which amounted to 54% of total client assets for the fiscal year to date. The average book per advisor also reached a new record of $348 million, among the highest in the industry. On an adjusted basis, our Canadian wealth business delivered second quarter pre-tax net income of $18 million. a year-over-year increase of 54% and the strongest quarterly result since the first quarter of fiscal 2022. This brought adjusted pre-tax net income to $28 million for the first half of fiscal 2026, up 30% from the same period of last year. The adjusted pre-tax profit margin for the fiscal year to date improved by 1.5 percentage points year-over-year to 13.4%. Adding back non-cash development charges, normalized EBITDA in our Canadian wealth management business was $25 million for the second quarter and $40 million for the fiscal year to date. Year-over-year increases of 42% and 18% respectively. And finally, second quarter revenue in our Australian wealth management business increased by 43% year-over-year to a record $28 million. bringing fiscal year-to-date revenue to $51 million, up 34% compared to the same period of last year. Revenue growth in this business was broad-based, reflecting increased client activity levels, IA recruitment, and new client onboarding. Commission and fees revenue of $22 million for the three-month period increased by 23% year-over-year, and investment banking revenue of $5.5 million increased by more than four-fold when compared to the same period of last year. Measured in local currency, client assets in this business grew to a record $11 billion, an increase of 37% year-over-year and 11% sequentially. During the second quarter, we announced our acquisition of Wilson's Advisory, which was completed on October 1. The financial contribution from this acquisition will be included in the operating results for this business beginning in our third fiscal quarter. Second quarter adjusted non-compensation expenses increased by $0.6 million or 13% year-over-year, largely in connection with acquisition-related travel and administrative costs. Excluding significant items, pre-tax net income more than doubled to $3 million when compared to the second quarter of last year. The adjusted pre-tax profit margin of 11.2% increased by 6.5 percentage points year-over-year and represents the highest result for this business since the second quarter of fiscal 2022. Turning to our capital markets business, consolidated capital markets revenue of $253 million for the second quarter increased by 25% year-over-year and 26% sequentially to the highest level since the fourth quarter of fiscal 2022. For the fiscal year to date, revenue in this division increased by 11% year-over-year to $453 million. The second quarter increase was primarily driven by investment banking segments, which saw revenue rise by $39 million or 76% year-over-year to $91 million for the three-month period. Notably, our Australian business contributed $51 million, representing 56% of total investment banking revenue for the quarter, and achieved a remarkable 193% year-over-year growth, which was primarily driven by the mining sector activity. Investment banking revenue also meaningfully improved in our Canadian and U.S. businesses by 20% and 52% respectively when compared to the same period of last year. Following the sharp decline in advisory completion activity caused by trade-related uncertainties in our first quarter, Q2 advisory revenue rose to $79 million, a 62% sequential improvement as activity levels began to recover. Our U.S. business was the largest contributor to this result, generating $46 million in revenue over twice the amount recorded in Q1. However, this figure remains 18% below the revenue earned in the same period last year, as completion activity levels were still subdued at the start of the quarter. Our UK business also experienced a notable uptick, with advisory revenue improving by 253% sequentially and by 73% year-over-year to $22 million. Consolidated commissions and fees revenue of $42 million improved by 22% year-over-year as new issues in client trading activity increased in all geographies. Principal trading revenue of $31 million increased by 12% year-over-year. The U.S. business was the largest contributor to this result, with quarterly revenue of $27 million largely attributable to the International Equities Group. As the sale of this business was completed on November 7th, our third quarter results will begin to reflect the reduction in related contributions. On an adjusted basis, non-compensation expenses increased by 6% year-over-year, largely due to higher trading costs, which were in line with increased revenue. Additionally, non-comp expenses in our Australian business increased by $1.4 million due to conference expenses and costs associated with the previously discussed acquisition of Wilson's Advisory. Along with higher trading costs, expenses in our U.S. business remained elevated due to the increased premises and equipment costs noted earlier, as well as professional fees in connection with our previously disclosed regulatory enforcement matters. I'll touch briefly on the goodwill impairment that impacted IFRS results for our U.S. business. Goodwill is required to be tested for impairment at least annually. As Dan mentioned, over the past several quarters, a combination of macroeconomic and trade-related uncertainties has moderated activity levels across our core focus sectors, weighing on revenue and profitability in our U.S. operations. As past performance would demonstrate, we continue to see substantial long-term value in our U.S. business, which remains a strategically important part of our global platform, with a strong record of generating meaningful revenue and profitability under more typical market conditions. However, accounting standards require fair value assessment at what we believe to be the bottom of the cycle. The goodwill charge is a non-cash accounting adjustment and does not result in any current or future cash outlay. I'd like to emphasize that this adjustment has no impact on the ongoing operations or our capacity to continue to invest in our U.S. business. On a consolidated basis, adjusted non-compensation expenses as a percentage of revenue for our capital markets division decreased by 4.7 percentage points year-over-year to 26%. The adjusted pre-tax net income contribution from our capital markets division increased by 71% year-over-year to $26 million. Improved contributions from Australia, Canada, and the UK were offset by a break-even result in our U.S. business. Aside from the previously discussed U.S. matters that impacted our profitability this quarter, our efforts to curb discretionary expenses are evident in our results. With activity levels expected to strengthen in the second half, we anticipate continued margin improvement into fiscal 2026. As we advance both our organic and inorganic growth initiatives and execute effectively for our clients amid improving business conditions, we remain confident in our ability to enhance firm-wide profit margins and achieve our targeted single-digit growth for the current fiscal year. Turning to the balance sheet, we maintain sufficient working capital to meet our regulatory commitments support our strategic priorities and expanded business activity while preserving the flexibility to respond to outstanding regulatory matters and reallocate capital as market conditions evolve. With that, I'll turn things back to Dan.

Thanks, Nadine. We're having a very productive start to the second half of our 2026 fiscal year. We are seeing meaningful signs of recovery in the equity capital markets with small cap indices signaling a renewed risk-on environment. Notably, the IPO market is showing early signs of recovery, and private equity-backed IPOs have more than doubled year over year, underscoring the confidence in public exits. That said, activity remains selective. Our proceeds raised have increased by nearly 60% compared to the first half of the last fiscal year. The mining sector continues to dominate, but we are encouraged by strong pickup in technology, industrials, and healthcare sectors, which should lead to a more diversified mix in the second half. Our Australian business is currently the top-ranked investment dealer in the region for equity financings, both by proceeds and volume, and we are also ranked third overall in the Canadian league tables. Capital markets advisory activity is also gaining momentum, and our outlook for advisory completions in the second half is stronger than in the first. While our U.S. business experienced an abrupt slowdown in M&A completions amid trade-related uncertainties during the first quarter, it has since regained momentum. The team is executing on a robust pipeline of mandates while continuing to win new ones. M&A activity is improving in Canada and the UK as well, and we are also seeing good momentum from our Australian practice, which is still in the early stage of its development. On November 7th, we completed the previously announced sale of our U.S. market-making business. This transaction enables our U.S. operations to focus capital and resources on our core equities and M&A franchises, which are both higher-margin and capital-light businesses. Each of our wealth management businesses is delivering on their respective business plans and continues to deliver impressive growth. Our business in the UK and Crown dependencies continues to advance its organic growth priorities with a focus on growing contributions from fee-based assets, which will continue to enhance the stability and quality of its earnings. We continue to see very strong growth potential in our Canadian wealth business. Driven by economic expansion and interest rate cuts, North America is outpacing the rest of the world in wealth creation, with Canada offering particularly attractive opportunities for investors. With several domestic competitors having recently been acquired, the environment for independent wealth managers has become increasingly favorable, positioning CG to capture additional market share. And finally, as Nadine mentioned, we completed our acquisition of Wilson's on October 1st, which will add approximately $7 billion in client assets to our Australian wealth platform, further strengthening our national footprint and brand in the region. Integration is progressing smoothly, and we look forward to delivering enhanced offering to our combined wealth and capital markets clients in the region. Looking ahead, our strongest opportunities lie in accelerating wealth management growth across all regions, while leveraging our integrated equity and M&A capabilities to deepen our presence in core sectors poised for outperformance amid a more sustained market recovery. Assuming no changes to our operating environment, our results for the first half of this fiscal year give us confidence that we are on track to exceed our fiscal 2025 performance. Our Board of Directors has approved a continuation of our quarterly common share dividend of $0.085. With that, Nadine and I will be pleased to take your questions.

Operator, please open the lines. Thank you.

Ladies and gentlemen, we'll now begin the question and answer session. Should you have a question, please press the star followed by the one on your touchtone phone. You will hear a prompt that your hand has been raised. Did you wish to decline from the polling process? Please press the star followed by the two. And if you are using a speakerphone, please lift the handset before pressing any keys. One moment, please, for your first question. And your first question comes from Jeff Benwick from Cormark Securities. Please go ahead.

Hi. Good morning, everyone. So, Dan, I wanted to start with the regulatory provision in the quarter. pretty sizable amount. Could you just speak to capital position and your ability to fund that? Do you require, you know, raising some debt here or how is that going to be managed?

Hello? Hello? Hi, sorry, just one moment. We're just trying to fix the microphone. Can you hear me now? I can hear you guys. Did you hear my question?

Yes, we did.

Apologies. I think you can hear my response. It's Nadine. I'll respond to your question, Jeff. So when we put the provision, we set aside the cash and the capital the moment that we made the provision for the regulatory matter. And we do have sufficient capital to continue with our U.S. operations and continuing to invest in the business. So there's no issue as it relates to our balance sheet. It's already been funded.

The bad news, Jeff, it took us three years to get us this far. The good news is we've known for three years that we've had to get something. So lots of time to accumulate capital that we require for this.

Yeah, that's helpful. Thank you. And then obviously alongside of that, as you've mentioned, reorienting the business, trying to change some of the risk exposures. I think you referred to that comment. I assume that's in part related to the divestment of the trading desk, the wholesale trading group there. With that closing, is there any way you could provide us some color, even just backward looking on what sort of top line contribution that group made and the related expenses? Is there any sort of color you can add that might help us with modeling that going forward?

Yeah, so the sale of the international equities group, we don't expect it to have a meaningful impact overall on our earnings profile. I think if you look at the U.S., corporate capital markets business as part of our disclosure, you'd see that principal trading revenue line number, that would primarily have related to that business. In addition, when you look at the cost base associated with it, obviously trading business is going to have a higher proportion related to that common tech cost. So, as Dan mentioned in his remarks, as on a go-forward basis, we do expect that as we primarily the ECM and advisory business, we should start to see an improvement overall in the margins in the U.S. business. As well, we've also, with the remediation work in the U.S., we're going to start to see a decrease in some of our trophies. So, overall, we expect that while the sale does not have a meaningful impact on the overall earnings profile, provided that we continue to see growth in our U.S.

revenues, that I could see an improvement in margins overall.

And then in terms of responding to these market conditions that are evolving, I know there's been a focus on expanding advisory. Is there more work to do in the U.S., maybe reorienting the focus of that segment now, maybe cutting some areas and adding others, or where do you feel you are in that process?

Yeah, Jeff, we're always evolving the business, obviously. We operate globally in several core sectors. Those sectors are very important to us, and we'll continue to expand into those core sectors. The expansions generally we've done in those core sectors has been into the advisory channel. So, you know, when we bought Sawaya, when we bought Results, when we bought Petski, that's not going to stop. You know, we'll continue to look at acquisitions in our core verticals. So, you know, it's a little bit finding a needle in a haystack to find the right partner at the right price at the right time. with the right culture. Um, but you know, we're, we're in the market always looking for the, for those, for those areas. Um, yeah, that's, I think the best I can answer that.

Okay. Thank you. And I can't, uh, can't leave without asking about UK wealth management. I know there's, um, lots of rumors and speculation, but clearly you're, you're, you're, you're clearly featuring it in your slides there on the timeline and, and giving us an EBITDA number that you, uh, obviously want us to zero in on. Maybe it's a bigger picture question here. What are you and the board thinking in terms of strategic direction going forward? If you were to surface value and exit a market like the UK, that'd be a very significant change for the continuation, like the run rate of the business. Is there another area to focus growth on, another market? Um, it just, you know, you'd be giving up obviously, um, uh, the largest contributor to your earnings. Clearly it's servicing some big value, but what would you, what would you think that would do with respect to this going forward for Canaccord?

Yeah, a great question that I don't think I'm prepared to answer at this stage, Jeff. But, you know, in general on the UK, the broader UK question, obviously we're not going to comment on rumors and speculation. You know that we have a minority partner in that business, a financial strategic partner in that business. So we're obviously talking to lots of people all the time about a whole range of alternatives. So, you know, and some of those involve external parties, which is what creates, you know, rumors and stuff in the marketplace. So I can tell you that on our broader wealth businesses, including our UK wealth business, we're incredibly pleased with the performance of all those businesses. I mean, record revenue, record earnings, firm-wide assets at record levels, $134 billion now. They're all contributing significantly. Our Canadian business is contributing well. Our UK business is obviously... you know, record levels of EBITDA and revenue. Our Australia business now is starting to contribute, you know, pro forma Wilson will be at, you know, $17 billion in assets, made good money in that business. So, you know, that strategy that we started, whatever it was, six years ago, growing wealth and having it increase, it's working. Last time we had revenues like this, Jeff, Two-thirds of them were capital markets and a third of them were wealth. Now we have revenues like this and more than half of them are coming from wealth and certainly way more than half of our earnings are coming from wealth. So we like the wealth strategy. I can't get to the second part of your question. What if we do this and what if we do that? Then what are we going to do? Those are all really good questions that the board will assess at the right time.

Okay, thanks. I appreciate that. I had to ask. I'll pass it along. I know. Thank you, Jeff.

Thank you. And your next question comes from Rob Gough from Ventum Capital. Please go ahead.

Thank you. And thank you, Jeff, for asking the tough questions up front. So my question will turn down to Australia. Could you talk to the integration timeline strategy with Wilson? And, you know, you often build into momentum and then momentum is certainly in Australia. Can you talk to further inorganic growth in that region?

Yeah, I mean, Wilson is a big acquisition for us. You know, just 60 advisors, eight offices to integrate into our broader platform. They have a small capital markets business that was integrated on day one, literally. And then the wealth businesses are busily integrating as well. Perth has moved. Sydney has, Melbourne has moved. Sydney, we need to find some more space. But, you know, the businesses are going to quickly be integrated into our wealth business. You know, the back office system will take a little bit longer than that, obviously. But, you know, it's a big, you know, it's a big, chunky acquisition for us in that market. So it's going to take some time. which addresses your second question about what do you do next, or is there other strategic things? Like right now, this is what we've done, and this is kind of what we're doing, and it'll take time. We do continue to, our existing plan, which was to hire more advisors, we continue to do that, and that's a similar strategy to the strategy we've had in Canada. We just hired four advisors from Morgan Stanley in Perth, for example, and that will continue to upgrade and uptier our advisory offering there. So our principal strategy in Australia is an organic strategy, the same strategy we've deployed in Canada. Occasionally, we'll find the odd inorganic opportunity like we did with Wilson, and we'll do that as well.

Thank you. And you mentioned in your remarks the rationalization of the Canadian wealth marketplace and where you're seeing opportunities. Could you perhaps talk to how that's impacting your efforts in pipeline?

Yeah, I mean, the recruiting pipeline is always kind of goes up and down and chunky. The truth is, and again, I'm sure IA will do a good job with Richardson and, you know, all that kind of stuff. But at the end of the day, there's not as many truly independent platforms out there as there used to be. You can just look at the pace of activity, whether it's a pure kind of full-service wealth manager like us or other types of independent wealth managers, they're disappearing pretty quickly. And we remain a very, very strong independent wealth platform. We've got $49 billion in assets. We made $25 million in EBITDA in that business this year if you back out the development charges. So we've got a very, very strong business and one that we've invested a lot of resources in, and we continue to invest in that business. So it's a very attractive platform for advisors that want to leave their existing place to join. It's also a very attractive platform for existing advisors who are here to grow from. We've got, you know, reasonable net new assets in the business. We continue to recruit in the business. We continue to bring on more advisors in the business. And we continue to feel incredibly confident about the, you know, the future of this business.

Thank you. Good luck. Thank you.

Thank you. And your next question comes from Stephen Poland from Raymond James. Please go ahead.

Morning, everyone. Maybe... Nadine, maybe you could just dig into the impairment a little bit. I know you're saying U.S. capital markets, but is it specific to one of the subsidiaries that you purchased, Petsky or Swaya? I'm just trying to get an idea of is it just a widespread impairment or is it specific to a certain segment specifically?

No, so the goodwill that's sitting on the balance sheet as it relates to the U.S.

is the aggregate of those acquisitions. And so essentially when you're looking at goodwill impairment, you start out looking at your last 12 months baseline. And given the performance in the U.S. has been a bit slower than we initially anticipated starting out into fiscal 2026, you're kind of starting jump off point is lower. And so we're still projecting good growth in the business overall, but I'm starting at a lower point, which impacts my carrying value, my relative to valuation.

So that's what the impairment is coming down. And we don't look at it. It's not a specific business line. It's really around the projections of the full U.S. capital markets business going forward.

Okay. I mean, when I look at the revenue trend, You know, this is probably your second highest revenue quarter for the last few years, I think. You know, profitability, it seems to be tough to be consistent. So I'm wondering what you can do in the U.S. to, you know, there's still another $100 million of goodwill, I think, allocated to that division. So I'm just curious, like, you know, how do you drive the profitability going forward? Like, is it $112 million of revenue kind of to break even? number that you have to do just to break even, or is there triggers that you can pull here?

Well, I think that what we're talking about in terms of the projections in that business overall, we're starting to see it, and Dan can speak to it a bit more as it relates to our pipeline, but I think you hit on one of the other primary areas of focus, which is the cost base.

And so, as we start to look forward, in particular, with the sale of IEG and, in fact, having a bit of a higher cost base, but in addition with the work we've completed as it relates to the focus we're building on our compliance program, that, from a remediation standpoint, those costs are also going to be coming down.

So, we do expect to see the margin expansion in addition to a more favorable revenue. I think Nadine hit on it pretty well.

I mean, we came off Q1, there was all that tariff stuff and, you know, really impacted M&A. It obviously came back in our Q2. We continue to see that momentum going forward. Our core M&A franchise is as good or stronger than it's ever been. I think that improves the new issue environment. You saw great new issue numbers out of us, but to be honest, the big increases were in Australia and Canada. Both of those tend to do a lot of mining deals, and I think mining's been pretty active. We see an expansion. We see the other sectors starting to expand beyond that, beyond just the resource sector. And that's where we would tend to dominate in the U.S. The final thing is that government's been shut down in the U.S., and you know that impacts IPOs in particular. We do disproportionately well in some of the IPO activities, so we expect that to turn on. So that'll improve our business. So we think there's lots of upside in the U.S. Don't get me wrong. We're very excited about our prospects in the U.S., notwithstanding the goodwill write-down. And, you know, there was a time and a place, and it's still the same franchise that we have, that we made a lot of money in the U.S. Like, again, no one likes to refer to COVID times because no one likes to refer to them. But, you know, we were making $100 million a year in the U.S. So, you know, there's a real opportunity to, you know, we're not in the, I won't use baseball analogies, it's way too soon. But, you know, we're still in the first period. I'll use hockey analogies now. You know, we're still in the first period here. There's a fair amount of skating in front of us.

Okay. That's great color. And then the second thing, I'll turn to Australia, and obviously the revenue is pretty strong, mostly mining. So I'm just curious on the financing, you know, Which accounts or jurisdictions are buying these deals? And the reason I ask this is because I think in the past you've said if Asian accounts are coming into buying Australian deals and especially mining deals, that's a very bullish sign and could kind of lengthen the timeline of having a bullish market there. So I'm just curious if that's occurring.

It's a great question. I'm not sure I know the answer. I'm not sure I was the one that said that, but maybe. Who knows? I can't remember what I had for breakfast. Again, we've got a very integrated global sales desk. We're big enough to have a global sales desk. We're small enough that we can be integrated and operate well. So, you know, we'll sell UK deals into Australia. We'll sell Australia deals into North America. And, you know, the border kind of vanishes with us. So we're pretty good at that. I mean, integrated ECM platform, particularly in the mining square where, you know, it's, you know, the companies are very, very similar, notwithstanding where they may operate. It's the key underlying dynamic. So we're good at distributing. That being said, I do think that the vast majority of the Australian equity flow has come from domestic accounts. You've got large superannuation funds. They continue to grow. There continues to be You know, it's not a shrinking, you know, institutional pool of money the way you'd see in the UK or maybe even in Canada. It's a growing institutional pool. And add to the fact that we've got a pretty significant retail distribution path in Australia now. You know, we're becoming a more significant distributor. distributor of equities into our own retail channel. And you saw that through the new issue chunk of the revenue that flows through our Australian wealth business, which I think was four or $5 million this quarter. So, you know, we're becoming, you know, a serious distributor. And as I, as I referred to in the prepared remarks, I mean, we were like last quarter, we were number one in the Australian league tables, not number one, number of deals, like number one in any measure and, And even for the year, I think we're number two overall in the, you know, dollars raised, number one in the number of deals done. So we are a very significant Australian underwriter now, similar to our, you know, similar to our position in Canada. Okay. It's great.

I'll ask one more just on the Canadian milk management, the expansion and the margins. revenue, you know, AUM continues to go up, revenue continues to go up, but the expenses seem to be managed pretty well. Is that something that we can continue to expect, that that margin will continue to expand?

Yes, absolutely. That was one of the areas of focus for us coming into fiscal 2026.

In particular, we've seen just structurally that cost base had increases we talked about related to our investments in new properties, both in Vancouver and Toronto. So what you're starting to see is that really that build-up in scale and that revenue and also quite a bit of discipline on our cost base to focus on that margin expansion, which is what we anticipate going forward as well.

Okay, that's it for me. Thanks very much. Yeah, great questions. Thank you.

Thank you. And your last question comes from Graham from PD Securities. Please go ahead.

Hi, Graham.

Hi, good morning. I know we've talked about this a lot already, but maybe I'll come out in a different way. So the U.S. capital markets write-down, it just looks to me or us that commentary and data that we're seeing from the U.S. brokers broadly suggests activity is picking up, earnings expectations are rising. Your write-down at this time seems somewhat at odds with sort of the improving sentiment broadly in the U.S. capital markets. Can you just help me connect the dots there and why you're taking it right down now at a time when the cycle looks like it should be picking up.

Yeah, when you think about it, when you're looking at it from an accounting basis, right, like you do have projections in your model and we baseline it off the last 12 months of cash flows. And so as I rolled into Q2, we didn't see quite the improvement in performance that we had anticipated. That's hitting my last 12 months of cash flows. And so we still are looking, if you look at our disclosure, at a projection of 5% growth still in terms of that business. And so you're still seeing an anticipation that we're going to have an improvement, but when you look at the impact from a baseline standpoint, that was impacting my overall valuation versus the carrying value. And so being able to support the $200 million of goodwill in that business

it wasn't sustainable given the projections going forward. So from an accounting perspective, while there's a lot of judgment in there, it became a bit of a mechanical exercise. But we do still anticipate strong performance in that business going forward, but the ability to hit the valuation based off of the last period was becoming really challenging. Okay. which is why we took 50%. We were obviously still able to carry the extra $100 million.

And did you consider sort of assessing this at the end of fiscal 2026, you know, in a couple quarters to maybe get the potential?

I think that is a judgment call. Yeah, it's a judgment call. But I think when you look at our disclosure previously, the U.S. business has been operating with reduced headwind or headroom, sorry, which is why we provided sensitivity disclosure every quarter relative to that business.

So, yes, you could have considered waiting another period, but it was becoming difficult to substantiate the growth trajectory off that lower base, which is taking into account the historical performance.

Okay. Understood. And then, You flagged in your MD&A just confidence in achieving your profitability targets for fiscal 2026. Can you share with us what those targets are?

I'm not sure what it is. I've got to go back and look at that MD&A. Yeah, I'll let Nadine answer. How's that? Because I can't answer it.

No, we didn't provide any guidance as it relates to, but we did discuss it more around as it relates to our operating margin, and the guidance we have provided was that one-point improvement overall, and I think you can see based on the trajectory that we've had on a year-over-year basis, we're well on our way to achieving that result.

I think that's what it was in relation to the operating margins.

Okay. That's it for me. All my other questions were addressed. Thank you. Thank you.

And there are no further questions at this time. Mr. DeVille, you may continue.

Well, again, thanks, everyone, for joining us. I know we moved the time of this call. I appreciate this is a busy morning for everybody. So I appreciate your focus and attention to this. This is obviously an important quarter for us, and we have a lot of stuff going on. Certainly look forward to updating you next quarter, and always we're available for questions. So, operator, please feel free to close the lines.

Thank you. Ladies and gentlemen, this concludes your conference call for today. We thank you very much for your participation, and you may now disconnect.