Q2 2021 Canaccord Genuity Group Inc Earnings Call
[music].
Welcome everyone to the Canaccord Genuity Fiscals 2021 second quarter results conference call.
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[music] after the speakers remarks, there will be a question and answer session if.
If you would like to ask a question. During this time simply press Star then the number one on your telephone keypad. If you would like to withdraw your question first.
If you have any difficulty securities. 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 over to Mr., Dan Sabia, President and CEO. Please go ahead Mr. Dot Hill.
Thank you operator, and thanks to everyone joining us for today's conference call as always Im joined by Don Mcfayden, Our Chief Financial Officer. Following the overview of our second quarter fiscal 2021 results, both Don and I will be pleased to answer questions from analysts and institutional investors.
A reminder, that our remarks and responses during today's call may contain forward looking statements that involve risks and uncertainties related to the financial and operating results of Canaccord Genuity Group, Inc.
The Companys actual results may differ materially from managements expectations for various reasons that are outlined in our cautionary statements in the discussion of risk in our M. DNA.
Our discussion today May also include certain non I FRS financial measures.
Description of these non I FRS financial measures and their reconciliation to comparable I FRS measures are contained in our earnings release and the M. DNA for the fiscal quarter.
By now you've all likely had a chance to review these documents in our supplementary financial information, which were made available on Friday evening there.
They are available for download on SEDAR or the Investor Relations section of our website at C.G. AFF Dot com.
We've also posted our quarterly Investor presentation online I won't cover the entire presentation. During this call, but I will refer to certain slides as part of our discussion.
Our performance this quarter demonstrates the breadth of our offerings the resilience of our business mix and the strength of our entire C.G. team.
Despite lingering market uncertainty driven by COVID-19, Brexit in the U.S. federal election, we have delivered outstanding value for our clients well continue to execute on our strategic priorities.
Notwithstanding the challenges we produced record quarterly revenue and delivered strong financial and operating performance.
Our quarterly financial highlights can be viewed in the context of our historic performance on page nine of our investor presentation.
Firm wide revenue for the three month period amounted to $390 million, an increase of 44% compared to the same period last year and a new quarterly record for our business.
Excluding significant items second quarter pre tax net income was 50.5 million up 77% from year over year. This translated to adjusted diluted earnings per share of 28 cents for the second quarter and 53 cents fiscal year to date.
Creases, a 56% and 29% respectively.
Our business continues to be well capitalized to support our strategic priorities.
During periods of increased underwriting and trading activity, we've taken steps to ensure we have higher levels of capital available to support our business activities.
I'm also very pleased to report that our board of directors has approved a quarterly dividend of 5.5 cents per common share, which brings our fiscal year to date dividend payments to 11 cents, a 10% increase from our last fiscal year.
In connection with Covidien related spending reductions and our ongoing cost savings initiatives firm wide noncompensation expenses as a percentage of revenue were 11.7 percentage points lower than the same period a year ago.
General and administrative expenses decreased by 36% for the six month period ended September Thirtyth 2020, compared to the same period in the prior year, mostly due to the drop in travel and promotional expenses in this COVID-19 environment.
This savings was partially offset by higher trading costs to support our increased activity levels in our Canadian in U.S. businesses, which is also reflected in the stronger revenues produced by these businesses.
Our effective tax rate for the second fiscal quarter was 28.1% up from 18.5% a year ago.
As we discussed in our last quarterly update we were required to recognize some of the deferred tax assets in our U.S. operations in the prior year period.
Additionally, increased profitability earned in higher tax rate jurisdictions of the U.S. and Australia also contributed to the tax rate increase in the current quarter.
Compensation as a percentage of revenue was 64% a slight decrease from the most recent fiscal quarter, but still elevated when compared to the same period last year.
This increase was primarily due to an increase in the value of performance share units granted in prior periods. In addition to higher levels of incentive based revenue during the second fiscal quarter.
I'll remind you that our P.S. use are paid at the time of vesting and this expense subject that influences of positive and negative share price performance over time, and our anticipated earnings levels relative to targets.
Absent any material price movement, we do not expect the value to change materially in the future and therefore anticipate a return to more normal compensation ratios.
Moving on to our business segment results and starting with capital markets.
Our global capital markets business earned revenue of $242 million, an increase of 62% from the same quarter a year ago. The adjusted pre tax net income contribution was $43 million for the second fiscal quarter, which is the strongest quarterly contribution in recent memory.
This brings the fiscal year to date net income contribution from this segment to $77 million, which represents a year over year improvement of 165%.
We've enjoyed a remarkably strong environment for new issue activity in Canada, the U.S. and Australia, surpassing the already strong levels seen in the previous quarter.
During the quarter, we participated in a 155 transactions raising $19.3 billion for growth companies.
Total investment banking revenue from our global capital markets Division was $109 million a year over year increase of 155%.
We provided a breakdown of our revenue mix by activity in geography on page 23 of our Investor presentation.
You will see here that we've benefited from continued strong activity levels in the life Sciences technology and mining sectors, where we have developed deep expertise and differentiated cross border capabilities.
Our U.S. and Canadian businesses were the largest contributors of revenue and pre tax net income for the three month period and our Australian operation recorded the most significant year over year increase in revenue.
In the U.S., we experienced strong year over year gains across all revenue categories with the most notable increase in investment banking and principal trading up 109% and 92% respectively when compared to the same period last year.
Advisory activities in this business also strengthened considerably during our second fiscal quarter as some of the normalcy return to dealmaking environment, although still below historic levels.
The adjusted pre tax profit margin in this business for the first half of the fiscal year was 12%.
I'm also very pleased to report that we have continued to strengthen our competitive position in the U.S. with market share data showing that CG is outpacing the broader market in commission share gains for the first half of calendar 2020.
In fact, we're very pleased with our market position in all of our geographies.
Data from geologic shows Canaccord genuity as the most active Midmarket investment bank globally for the calendar year to date.
We also continued to be a top ranked underwriter in Canada, where we are the number two overall underwriter and also the leading IPO underwriter to date in calendar 2020.
Despite reduced contribution from advisory activities. This business delivered year over year growth of 27%, primarily driven by investment banking and commission and fees, which increased 66% and 70% respectively.
Excluding significant items the pre tax net income contribution from our Canadian business was $16 million for the second fiscal quarter, bringing the fiscal year to date contribution from this business to $23 million up 51% when compared to the same period last year.
Results in our Australian business, where the best we've ever seen with record quarterly revenue of $46 million, bringing the fiscal year to date total to $89 million, which surpasses all prior full fiscal year results by a wide margin.
We note that while a portion of the corporate finance revenue in this business is attributable to unrealized gains in certain inventory and warrant positions. This portion is significantly lower than it was in our first fiscal quarter well.
While the market value can fluctuate significantly we apply a conservative valuation approach and work to monetize our positions efficiently, which we've been actively pursuing throughout the quarter.
Despite a softer environment for capital raising and advisory activities in the UK and Europe during our second fiscal quarter CG holds the number two ranking for 18 listings year to date and has secured a healthy number of new corporate broking wins in this environment.
Through October and early November we continue to experience elevated activity levels in most of our geographies and key focus areas. Although we expect the pace of new business to moderate as we work through the remainder of the third fiscal quarter.
Like many of our peers, we still have concerns about the pandemics ongoing influence on world economies. In addition to near term uncertainty related to the us federal election, and the ultimate outcome of Brexit.
That being said I'm very confident in the strength of our market position in each of our geographies and the resilience of our business model well.
Well the longer term economic impacts of the pandemic remain to be seen there is a historic amount of liquidity and monetary stimulus available to fund forward economic growth and this bodes well for the work we do to support our small caps natural resources and other cyclical industries.
Our wealth management businesses also performed very well during our second fiscal quarter.
Excluding significant items the pre tax net income contribution from this segment increased 24% year over year to $27 million.
Total client assets grew to $73 billion, an improvement of 12% when compared to the same period last year.
As you will see on slide 13, we are still very much on track to achieve our mission 2022 objectives for this division.
In Canada, the excellent partnership between our capital markets and wealth management businesses create an opportunity for our investment advisors to participate in a remarkable environment for new issue activity there.
This is reflected in the 38% year over year increase in the second quarter revenue contribution from this business, which amounted to $67 million.
Excluding significant items the pre tax net income contribution was $11.7 million the highest quarterly contribution on record for this business.
The pre tax profit margin increased to 17.4% for the three month period.
Into 15.6% for the first six months of the fiscal year.
Client assets in Canada increased by 21% year over year to a record $25 billion and the average book size per advisor has grown 26% year over year to $170 million.
We've made excellent progress in our efforts to advance our North American wealth management platform to accommodate the diverse needs of our investment advisor teams and the clients they serve.
In recent weeks, we began the implementation of our state of the art account management platform powered by Envestnet, which will be completed before the end of the calendar year.
Powerful tool positions CG investment advisors at the forefront of data driven holistic account management, which will lead to more meaningful engagements and enhance their ability to provide tailored solutions for their clients.
We're also having a terrific experience advancing our mandate to support Morgan Stanley in the launch of their Canadian wealth management business.
While the recruiting environment remains competitive we continue to have strong momentum and we are attracting talented employees from both independent and bank owned dealers.
We anticipate some third quarter seasonality as we approach the holidays, but the pipeline remains strong and CG is a very attractive destination for top quality advisors.
Revenue in our UK and Europe wealth management business decreased by 3% compared to the same period a year ago. This was primarily due to the reduction in interest revenue attributable to the lower rate environment and a reduction in the volume of execution only activities during the three month period.
The value of client assets in this business has continued to recover at a faster rate than the broader UK market a testament to the exemplary investment management by our professionals in this region.
With an additional benefit from foreign exchange rates client assets in this business amounted to $45.4 billion at the end of the second quarter, an increase of 3% compared to the same period a year ago. Despite the softer revenue environment, We're seeing continued margin and profitability strength in this.
Business.
Excluding significant items the pre tax profit margin in this business was 22.8% for the first six months of fiscal 2021, an improvement of 1.7 percentage points compared to the same period last year.
We continue to actively explore a range of solutions aimed at unlocking greater value from this business, while continuing to support its growth.
And finally contributions from Australia wealth business have continued to grow since our acquisition of Patterson's a year ago. The.
The adjusted pre tax net income contribution from this business exceeded $1 million for the first time in our second fiscal quarter well.
Well. This team is benefiting from a very strong environment for new issues and commission based activities also highlight that fee related revenue in this business has improved by 3.6 percentage points when compared to the most recent fiscal quarter.
While we anticipate that the low interest rate environment, we will continue to negatively impact revenues associated with our deposit lending activities for the balance of our full fiscal year. We are continuing to invest in the growth of this segment, while managing our costs carefully.
Looking forward, we remain focused on increasing the net income contributions from all our wealth management businesses to enhance our long term stability and earnings growth.
Talent development has always been a strong priority at CG, but it can sometimes take a period of dislocation to cast a light on the outstanding breadth and depth of leadership that we have throughout the organization.
During the quarter, we announced two very senior global appointments, Jason Melbourne was appointed global head of distribution.
In addition to continuing to be head of Canadian equities, he becomes responsible for leading coordination of deal origination insecurity placement across all of our geographies.
Jason also joins our global operating committee will work closely with our global partners to support the advancement of our key business initiatives.
Gen Party has advanced to the role of global head of equity capital markets, where she is now responsible for driving best practices and coordination of VCM activities across all our geographies Gen.
Jan has been ahead of our U.S CCM business since 2013, where she has been integral to increasing our syndicate participation and strengthening our cross border equity capital markets capabilities in.
In addition to these improvements we've made several other promotions across the organization with a focus of building a strong diverse network of talented partners to lead our business into the future.
In spite of the challenges over the past seven months. The COVID-19 pandemic has not impacted our priorities. The company has continued to perform exceptionally well and we are benefiting from the improved efficiencies collaboration and other positive changes that have emerged from this experience we continue to realize structural.
All expense efficiencies, while accelerating our investment in advancing our technology and infrastructure not all of these will play out in the immediate quarters, but as we think of how our business in our industry will look over the coming years, we continue to take steps to position ourselves for long term success.
I want to take a moment to thank the entire CG team for their ongoing efforts, both new and existing CPG clients have benefited from our differentiated offerings and your relentless commitment to helping them achieve their goals.
Looking at the overall business environment, we remain encouraged by what we're seeing across our businesses and geographies, but also recognize that the pandemic Brexit and a difficult transition for the U.S. administration will continue to have an impact on market conditions.
In the near term, we expect that financing activities in our core sectors will remain elevated throughout the year, albeit not at the extraordinary pace that we've experienced in our first half. We're also seeing improved activity levels in our advisory businesses and the outlook for our M&A activities is encouraging.
In any environment, our strategic focus is clear to deliver increased value to our clients across each of our businesses and geographies and strengthen the value of our business for our employees and shareholders.
We're entering the second half of fiscal 2021 with good momentum for activity levels in our core focus areas and a strong market position in all of our businesses.
Our conversation with clients are constructive and we'll remain cautiously optimistic in our outlook for the balance of the fiscal year.
With that Don and I will be pleased to take your questions. Operator could you. Please open up the lines.
Thank you, ladies and gentlemen, we will now conduct the question and answer session.
I would like to ask a question press Star then the number one on your telephone keypad. If you would like to withdraw your question press the pound.
A brief pause, while we compile the cumulative roster.
Your first question comes from Jeff Fenwick of Cormark Securities. Your line is open.
Hi, good morning, everybody.
So Dan I, just wanted to start off talking about.
Capital capital available to to support the growth of the business and you referenced that in your opening comments here I.
I guess when I when I look at some of the growth out of your capital markets units and the extent of it. There. My question my concern might be around regulatory capitals can you just characterize.
How much is there enough internally generated profitability in those units that's sufficient to.
To support all the surgeon underwriting that you've got there or is there a need for some capital down into those groups.
Ill, let Don take it to start with Don.
Hi, Jeff.
Simple answer is yes, there is sufficient cap regulatory capital throughout the organization to support the search.
Certainly the current levels of activity and the kinds of activity that we sort of foresee.
Ahead of us.
The biggest user of capital in the most variability is is as you would know the underwriting margin required to put be put up in.
In both Canada, and the us depending upon the underwriting calendar at any point in time and it's it's a it's an activity that's actively managed and looked at and.
And.
We have healthy levels that.
Support.
The kinds of underwritings that we see investments.
Yes, Jeff you'll notice that we probably calm down a little bit on our stock buyback activity throughout the quarter, given the healthy use of our capital and our capital markets business, but again very profitable and certainly have had enough to support our business today.
Okay, and I guess, when we put in the context of the profitability growing so much as it does it give you some more firepower to pursue investments than in other parts of the business I know.
UK for example, you kind of wish you had more.
More of a currency in your stock to go out there and do some transactions.
Are you in a position to push push a bit more there to that change your view on the strategic.
Our approach to the UK market and the options are contemplating or how do we think about that.
And broadly outside of the UK broadly across the business, we have a defined strategic plan one we've been executing on for the last several years I don't think you're going to see any material change to what weve done strategically outside of UK wealth.
We will continue to grow our Canadian wealth business, we've aggressively recruited in that business, we spent over $100 million recruiting into that operation. We obviously got some other growth initiatives in Canada, we bought that UK wealth are sort of the Australia wealth business.
For $27 million last year, that's working out well, we made over a million dollars. This quarter in that and then on our UK wealth business, specifically I mean, we have said that we're going to continue to pursue options with respect to giving that business. The capital it needs to continue to grow and we are on that path of doing that.
And hope hopefully over the next several quarters, we'll have something announceable on that side.
Okay and I just wanted to touch on Australia again, I mean it is.
Such a remarkable shifting their performance there and it's very hard on the outside they get a sense of how sustainable that momentum is because it is a multiple of what they would have talked typically in a quarter.
Well, what kind of color can you offer us there I mean, obviously there is strength in a lot of the small cap mining equities.
Firms are raising equity.
Much higher pace this year.
Any other color you can offer around.
That kind of level process. You did mentioned there are some some gains on broker warrants.
Thing, helping to also how should we think about that.
Awesome.
Several fold I guess I mean, yes, Australia did more revenue last quarter than we did all last year. So typically it fed to walk into that and you look at something like that and say that's not sustainable.
Long term what is the right pace of that activity are hard for us to predict in the capital markets business as you can imagine competitively, though we fundamentally changed in that business with the addition of Patterson's and with the strength of our corporate finance operation. We are a different competitor than we used to be and that was the premise and part of.
Adding a wealth business to a very strong capital markets business, there and its played up our syndicate positions have moved materially we're leading the larger deals multi hundred million dollar deals in that marketplace as well as continuing to support our small cap client base. So.
I don't know what the new normal is.
But I know what is higher than where it's been.
Last year for example, so well together, we will try and measure that again hard hard for us to project. Its certainly not all mining driven I don't have the numbers at the top of my head here, but.
It wouldn't be half of our revenue mining wouldn't be half of our revenue in that market I mean, the mining turned around in the early cyclical stock turnaround is important and thats important globally as you can imagine as we see it kind of a global recovery reopening of the economy, though the sectors that were active in other sectors you want to be.
Whether its mining and we mentioned this on our last quarter. It was picking up was 24% of our global revenues last quarter.
In corporate finance, which is basically the same as technology in our life science sectors, which are also incredibly active. So we are very optimistic about it and the final point, it's not all stock gains. It was you heard me say in the call. It was a much smaller proportion this quarter of gains you see in that revenue than you saw in the.
First quarter, a much more modest numbers. This is real guided cash commission not mark to market on positions and we continue to monetize those positions pretty frequently so.
The business is performing really well Marcus.
Our entire team in Australia have done a phenomenal job.
Okay, great. Thanks for that color I'll re queue.
Your next question comes from Rob Goff professional on.
Please era.
Good morning, congrats on the quarter and.
Thanks for taking my question, perhaps sticking with.
Down under could you talk a bit deeper on the coordination and integration that you're seeing with the capital markets and wealth management.
How might that be impacting the transitioning of funds from the trading platform out into year end.
Yes.
The problem with a pandemic Rob it's a great question with the problem with the pandemic is I haven't been to Australia in a year.
Really no obviously.
Obviously, we stay incredibly coordinated globally and over to do those businesses in part part we had several objectives in Australia as we bought power.
Patterson's and merge Pattersons it will give them the global tools that are other wealth businesses have give them the resources operate as an integrated global platform on wealth, but part of the premise as I indicated before was to tie that into our capital markets business provide our capital markets business the synergies that we see in Q.
Canada in Canada.
Having an integrated model is really important it's important to our capital markets business, we have a stronger capital markets business, because we have a wealth business is it 10% stronger 20% stronger 30% I don't know, but it's much stronger because of it similarly speaking and even more importantly.
It really helps our wealth business associated in our wealth business with our capital markets business in Canada. It creates a much stronger business Theres, obviously client referral activity deal revenue. It allows us to invest more in the platform you've seen our envestnet spend here you've seen the Morgan Stanley contract, you've seen our robo offering and our and our.
And the other technology spends that we've had that makes a much stronger wealth platform in Canada and what we're trying to do is mirror what weve done in Canada in the in the Australian marketplace in Canada, we've taken our assets from 8 billion or 9 billion, depending on when you want to start to 25 billion, we've taken a busy.
Does that mean zero to a business, that's making nine and $10 million a quarter now pre tax so in Australia, we're starting with zero. We had started with relatively speaking zero net income and our wealth business, it's up to a million dollars a quarter now it took four years in Canada, it's going to take time in Australia, but the team there is doing.
Exactly what it needs to do to continue to grow.
Okay. Thank you and you mentioned in your comments at the EPS you'd costs going forward would be primarily related to the share price.
I would take it that that change would reflect on your being fully on track or perhaps ahead of your mission 2022 goals and could you talk to what the mix might have been for the year to date.
Don do you want to take that one.
The previous you charger.
Sure.
Yes, as we talked about last quarter, the PS you charge.
Obviously stood out as more impactful than previous quarters and that was.
Big driver of that was the increase in the share price. That's a big component of the valuation that was PS use but it's not the only component there are performance metrics that that that affect the valuation of that so we saw some continuation of that into the second quarter.
But I think going forward, we should see so the continuation of that obviously, obviously saw some elevation in comp ratio in that second quarter, but I think as we as we go forward I think that the largest driver is going to be share price. So I think we'll see as we progress through to the end of the year returned to more normal less.
Sales of prop ratio than from what we saw.
Soft this quarter and the previous quarter.
Yes, we would expect to run 60% or sub 60% on our comp ratio. I think you can think that the incremental comp ratio is primarily BSU mark to market.
Remember that those PS use.
They don't a lot of the best for another two and a half three years so.
This is this is a mark to market position and yes, they will.
They will grow the value of those are the charge will grow with the stock price.
Generally speaking Thats a good news event, if things are performing really well the charge would be a little higher and obviously vice a versa. So.
I think that answers your question.
I'm not sure.
Thank you and if I may.
One last question on the UK could you, perhaps flesh out a bit what you're thinking in terms of raising fund in UK in terms of the different forms of raising capital available to you and what the advantages might be.
Yes, I want to be a little nuance at this stage because we're obviously in the middle of assessing things and executing things.
So.
But I think we've said in the past and I know, we've talked that that scale matters in that business. We have a huge business. There, we are making $60 million or so pre tax year.
Year in that business, our margins have continued to improve but.
But scale matters in that business and we're already a large participant but we want to be a larger participant for that scale capital will be required.
Those businesses in the UK tend to be valued significantly higher than where our stock is at.
Seven times earnings or wherever people have us right now so if we can raise capital at a higher valuation to facilitate further growth in that market and give David as far the and his team in the UK have done a phenomenal job executing.
The capital they need to continue to grow that business without diluting our shareholders of our public company at a much lower valuation that would be optimal. So we are obviously pursuing a range of alternatives that would facilitate that.
Okay.
Thank you very much I'll jump back in.
Your next question comes from Grant writing of TD Securities. Please go ahead.
Great Good morning.
Good morning, just to wrap up on.
On the on the penis you expense it sounds like this quarter was less about.
Is that in share price and more about just perfect.
Performance.
In the quarter is what.
Drove the PSC expenses quarters I.
Yes.
Yes, yes, those performance metrics played a bigger role than just simply the share price I think that's that's that's fair.
Lets 60% is still a reasonable target for your overall comp ratios.
That's our that's that's what we plan on and Thats our target yes.
In that in that range, yes.
Okay.
On the Canadian wealth side was there some recruiting activity that that closed in the quarter that is decent.
Quarter over quarter growth in your in your assets there any color.
Yes, I think a lot of that was number one new net inflows also good market performance, but we did have three recruits join the joined throughout that quarter.
And.
The problem with a recruit it's great when they join the quarter often it takes a month or two or three that bring their books over so I'm not actually sure you would have seen that growth in the quarter you would have seen in the previous quarters recruits, but yeah. Our recruiting activity remains good notwithstanding cove, it which is a.
A pain to recruit through as you can imagine plus now we're going into the holiday season, but yeah. Our recruiting activity is strong.
Remember that notwithstanding other things going on Graham.
We still have a trillion dollar market between the banks and the independents that were recruiting into and we're still only at 25 billion. So we obviously have growth aspirations well beyond that and we continue to achieve those.
Understood that there has been some acquisition activity this year in that space with GMP align capital.
For example is that having an impact at all in either the cost of recruiting advisors or perhaps the amount of advisors, who are open to moving forwards.
We have we havent seen that we still have a robust pipeline, we expect several new recruits to be joining us in the next you know.
Weeks and months.
Again this is a six month process to bring somebody over it's not an overnight decision in most cases. So no. We continue to see a pretty good pipeline, we've got pretty good visibility on that pipeline.
No I don't think its at any impact on us whatsoever to date and again I kind of made the point before we've done an integrated business over here, we've got a phenomenal wealth business and grow and what we also have a strong capital markets business, we could really accommodate almost any kind of advisor whether you're.
A complete fee based advisor or you know you play in new issues and you like the new issue market, we can do that.
On the independent landscape Theres, nobody like us and so we've we fish from a much broader pool of people and we've got an immense amount of people.
People coming over and quite frankly, having recruited now over 45 teams of advisors we've.
We've got a healthy number of.
Satisfied customers so to speak that have come over and our hotel in their friends as much. So we haven't seen a change in the cost in any material way and we're pretty excited by our continued growth along that.
We've also made some material investments in Envestnet and other technology platforms. So I think from a technology perspective.
We're right at the top of our game I don't I don't think there is a better platform in this country for an advisor to join.
Understood.
And my last question, if I could just UK wealth platform.
If there is a transaction that that develops on that front.
Hello.
From a tax consideration is there any like sort of cost base that we should be considering for that UK wealth business.
Don.
Well that would obviously depend on the the form of the transaction I mean, we do have a healthy cost base for that.
For that business unit.
Resulting from acquisitions over the years.
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But again it really depends on on the on the form of the transaction.
And as I think what we've described we're not talking about haven't really enter.
This data.
Sale as such in that business or a portion of that business. So all that might be some.
Potential reduction and ownership interest depending upon the form of the transaction.
We're not planning a.
Any any PNM associated with the transaction.
Yes, we wouldn't we wouldn't see a big tax bill outflow in the context of a transaction that we're contemplating grip.
Understood.
Thank you that's it for me.
There are no further questions I will now return the call to Mr. Wu for closing remarks.
Well, thank you operator, and thanks for everyone joining us today.
Certainly before too long its going to be Thanksgiving. The us followed by the holiday season than the start of the new year and.
We certainly hope that there will be an end to the restrictions and the Pfizer news today was fantastic and but we're going to keep on doing what we do best which is certainly supporting a vibrant marketplace for our growth companies globally, and obviously the investors that follow them.
Certainly for our colleagues in the US I wish you, a very safe and happy holiday season, no matter, how you are going to choose to spend it.
And we look forward to updating everyone again in early February when we release, our third quarter results. So.
Operator, Thanks, and please feel free to close lines.
Thank you Sir.
Ladies and gentlemen, this concludes the conference call for today. Thank you for participating please disconnect your lines.
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Yeah.
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