Q3 2022 Canaccord Genuity Group Inc Earnings Call

Good morning, ladies and gentlemen, thank you rich journey by I'd like to welcome everyone to mechanic or Genuity Group, Inc. Fiscal 'twenty, two and issued third quarter results Conference call. All lines have you placed on mute to prevent any background noise. After just.

Speaker 1: Good morning ladies and gentlemen, thank you for standing by. I'd like to welcome everyone to the Canaccord Genuity Group Inc. Fiscal 2020-2023 results conference call. All lines have been placed on mute to prevent any background noise. After the speaker's 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 1 on your telephone keypad. If you'd like to withdraw your question, press star then the number 2.

<unk> remarks, there will be a question and answer session if you'd like to ask a question. During this giant simply press Star then the number one on your telephone keypad, if you'd like to withdraw your question Press Star then the number 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.

Speaker 1: If you have any difficulties during 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 Daviaux, President and CEO .

Call is being broadcast live online and recorded I would now like to turn the conference call over to Mr. Davio's, President and CEO .

Speaker 2: Thank you, operator, and thanks to everyone for joining us for today's call. As always, I'm joined by Don McVayden, our Chief Financial Officer.

Thank you operator, and thanks to everyone for joining us for today's call as always I'm joined by Don Mcclain, Our Chief Financial Officer.

Speaker 2: Following the overview of our third fiscal 2022 results, both Don and I will be pleased to answer questions from analysts and institutional investors.

Following the overview of our third fiscal 2022 results, both Don and I will be pleased to answer questions from analysts and institutional investors.

Speaker 2: During today's discussion, we'll refer to our earnings release and MD&A, copies of which have been made available for download on CDAR and on the investor relations section of our website at cgf.com.

During today's discussion will refer to our earnings release, and the MD&A copies of which have been made available for download on SEDAR and on the Investor Relations section of our website at <unk> Dot com.

Our quarterly Investor presentation, and supplemental financials are also available on our website I won't cover the entire presentation. During this call, but I will refer to certain slides to guide our discussion.

Speaker 2: Our quarterly investor presentation and supplemental financials are also available on our website. I won't cover the entire presentation during this call, but I will refer to certain slides to guide our discussion.

Within our update certain reported information has been adjusted to exclude significant items in order to provide a transparent and comparative view of our operating performance. These adjusted items or non <unk> financial measures.

Speaker 2: Within our update, certain reported information has been adjusted to exclude significant items in order to provide a transparent and comparative view of our operating performance. These adjusted items are non-IFRS financial measures.

Speaker 2: please refer to our notice regarding forward-looking statements and the description of non-IFRS financial measures that appear on page 1 of our investor presentation and in our MD&A.

Please refer to our notice regarding forward looking statements and the description of non Ifr S financial measures that appear on page one of our investor presentation and in our MD&A.

All of our businesses continued to perform at strong levels during the third fiscal quarter and our nine months fiscal year to date results showed that we are comfortably on track for a strong year.

Speaker 2: All our businesses continue to perform at strong levels during the third fiscal quarter, and our nine-month fiscal year-to-date results showed that we are comfortably on track for a strong year.

Speaker 2: During this period, assets in our wealth management businesses remain strong, and increased advisory activity in our capital markets business helps offset the reduction in new issue activity.

During this period assets in our wealth management businesses remained strong and increased advisory activity in our capital markets business helped offset the reduction in new issue activity.

Speaker 2: Our quarterly and year-to-date financial highlights can be viewed in the context of our historical performance on page 9 of our Investor Presentation.

Our quarterly and year to date financial highlights can be viewed in the context of our historical performance on page nine of our investor presentation.

Speaker 2: Firm white revenue for the three-month period amounted to $551 million, our second highest quarterly production on record.

Firm wide revenue for the three months period amounted to $551 million, our second highest quarterly production on record.

Speaker 2: This brings our total revenue for the first nine months of this fiscal year to $1.5 billion, an increase of 19% when compared to the first nine months of our last fiscal year.

This brings our total revenue for the first nine months of this fiscal year to one $5 billion, an increase of 19% when compared to the first nine months of our last fiscal year.

Excluding significant items firm wide pre tax net income amounted to $113 million for our third quarter, which translates to diluted earnings per share of <unk> 69.

Speaker 2: including significant items, firm-wide, pre-tax net income amounted to $113 million for our third quarter, which translates to diluted earnings per share of $0.69.

Speaker 2: This brings our fiscal year-to-date EPS to $2, an increase of 74% year-over-year.

This brings our fiscal year to date EPS to $2, an increase of 74% year over year.

Speaker 2: As highlighted on slide 10, we continue to generate meaningful margin improvement, a testament to our focus on operating our business more efficiently, without compromising the employee and client experience.

As highlighted on slide 10, we continue to generate meaningful margin improvement a testament to our focus on operating our business more efficiently without compromising the employee and client experience.

Speaker 2: Excluding significant items, our total expense ratio for the 9-month period was 5.3 percentage points lower year over year, while non-compensation expenses as a percentage of revenue were 2.8 percentage points lower.

Excluding significant items, our total expense ratio for the nine month period was five three percentage points lower year over year.

While non compensation expenses as a percentage of revenue were two eight percentage points lower.

Speaker 2: As expected, third quarter general and administrative expenses increased by 6M dollars or 26% year over year. Due to higher promotion and travel expense reflecting increased activity levels following the easing of pandemic restrictions.

As expected third quarter general and administrative expenses increased by $6 million or 26% year over year due to higher promotion and travel expense, reflecting increased activity levels. Following the easing of pandemic restrictions.

Communication and technology expense also increased by $2 million or 13% to support increased head count and business growth.

Speaker 2: Communication and technology expense also increased by $2 million or 13% to support increased headcount and business growth.

Speaker 2: Despite these modest increases, our agile platform continues to support higher activity levels over a relatively fixed cost base.

Despite these modest increases our agile platform continues to support higher activity levels over a relatively fixed cost base.

Speaker 2: Our third quarter was also a very productive period for strategic activities, including acquisitions to increase the long term value and market position of our UK wealth business and our US capital markets business and 100 million dollars share by.

Our third quarter was also a very productive period for strategic activities, including acquisitions to increase the long term value and market position of our U K wealth business and our U S capital markets business and $100 million share buyback.

Speaker 2: Slide 11 summarizes our capital deployment initiatives.

11 summarizes our capital deployment initiatives to date.

Speaker 2: Reflecting the robust earnings from our capital markets businesses, we completed a substantial issuer bid for $100 million after the end of the quarter, further reducing our common share count outstanding by 6%, our lowest level in over 10 years.

Reflecting the robust earnings from our capital markets businesses, we completed a substantial issuer bid for $100 million. After the end of the quarter further reducing our common share count outstanding by 6% our lowest level in over 10 years.

Speaker 2: I'm also pleased to report that our board of directors has approved a quarterly common share dividend increase to eight and a half cents, reflecting the growing earnings of our wealth management business. Year to date, our total dividend payout is up 31% from this time last year.

I'm also pleased to report that our board of Directors has approved a quarterly common share dividend increased to $8.05, reflecting the growing earnings of our wealth management business year to date, our total dividend payout is up 31% from this time last year.

Speaker 2: We are delivering on our commitment to provide enhanced returns to our shareholders while maintaining sufficient capital for investment in our strategic priorities. Moving to the performance of our...

We are delivering on our commitment to provide enhanced returns to our shareholders, while maintaining sufficient capital for investment in our strategic priorities.

Moving to the performance of our capital markets business.

Our combined global capital markets businesses earned third quarter revenue of $362 million.

Speaker 2: Our combined global capital markets businesses earned third quarter revenue of 362 million dollars, the second highest quarterly results on record for this sake.

The second highest quarterly results on record for this segment.

Speaker 2: Excluding significant items, Capital Market's third quarter pre-tax net income was $94 million, bringing the fiscal year-to-date contribution to $251 million, a year-over-year increase of 48%.

Excluding significant items capital markets third quarter pre tax net income was $94 million, bringing the fiscal year to date contribution to $251 million a year over year increase of 48%.

Speaker 2: The pre-tax profit margin in this segment remains comfortably above historic levels at 25.3% for the fiscal year to date, an improvement of 4.8 percentage points compared to the same period last year.

The pre tax profit margin in this segment remains comfortably above historic levels at 25, 3% for the fiscal year to date, an improvement of four eight percentage points compared to the same period last year.

Speaker 2: We continue to experience a constructive backdrop for capital raising activities in our core sectors and geographies, despite market wide declines from the previous record level.

We continued to experience a constructive backdrop for capital raising activities in our core sectors and geographies despite market wide declines from the previous record levels.

Speaker 2: Third quarter investment banking revenue amounted to $127 million, a decrease of 26% year over year, but an increase of 42% sequentially. Technology, life science and mining sectors were the most active global asset in the world.

Third quarter investment banking revenue amounted to $127 million, a decrease of 26% year over year, but an increase of 42% sequentially technology life science and mining sectors were the most active globally.

Speaker 2: All geographies performed very strongly. The US had its second highest revenue on record, with significant breadth in the number of material transactions.

All geographies performed very strongly the U S had its second highest revenue on record with significant breadth in the number of material transactions.

Speaker 2: Canada revenue grew by over 60% from last quarter, concluding a very active calendar year where our franchise was the top or second most active underwriter in the country, depending on how we measure.

Canada revenue grew by over 60% from last quarter, concluding a very active calendar year, where our franchise was the top where second most active underwriter in the country, depending on how we measure it.

Speaker 2: Our Australian business delivered its strongest quarter in history with revenue of $46 million, an increase of 59% sequential.

Our Australian business delivered its strongest quarter in history with revenue of $46 million.

An increase of 59% sequentially.

Speaker 2: Finally, our UK capital markets team has experienced solid year-over-year growth in investment banking and advisory revenue, which were up 33% and 113% respectively.

Finally, our U K capital markets team has experienced solid year over year growth in investment banking and advisory revenues, which were up 33% and 113% respectively.

Speaker 2: Also of note, this team ranked first for number and volume of transactions on AIM for calendar 2021.

Also of note. This team ranked first for number and volume of transactions on aim for calendar 2021.

Speaker 2: Revenue from trading activities were lower in all regions, reflecting reduced volatility during the three month period.

Revenue from trading activities were lower in all regions, reflecting reduced volatility during the three month period.

Speaker 2: Across our regions, the most substantial contributions were from our advisory segment, which set a new quarterly record revenue of $152 million, representing 42% of our firm-wide capital markets revenue for the three-month period.

Across our regions. The most substantial contributions were from our advisory segment, which set a new quarterly record revenue of $152 million, representing 42% of our firm wide capital markets revenue for the three month period.

Speaker 2: This brings the fiscal year-to-date advisory contribution to $367 million, up 187% year-over-year, and surpassing all prior full-year contributions by a wide margin.

This brings the fiscal year to date advisory contribution to <unk> $367 million up 187% year over year and surpassing all prior year full year contributions by a wide margin.

These results reflected strong completions in North America, and U K and Europe with an important contribution from our Paris team, which is operating at record levels.

We continue to see constructive pipeline of M&A opportunities into our fourth quarter.

Speaker 2: we continue to see a constructive pipeline of M&A opportunities into our fourth quarter.

Speaker 2: In December , we announced our acquisition of Sawaya Partners, a premier US-based advisory firm focused in the consumer sector. This acquisition builds on our track record of increasing contributions from higher margin advisory activity while materially enhancing our consumer and health and wellness verticals.

In December we announced our acquisition of <unk> partners, a premier U S based advisory firm focused in the consumer sector.

This acquisition builds on our track record of increasing contributions from higher margin advisory activity.

Purely enhancing our consumer and health and wellness verticals.

Speaker 2: Integration efforts have been positive and productive and we're looking forward to expanding our client offering and reach with this team. Let's turn to the...

Integration efforts have been positive and productive and we're looking forward to expanding our client offering and reach with this team.

Let's turn to the performance of our wealth management businesses.

Speaker 2: At the end of the third quarter, client assets surpassed $100 billion for the first time, reaching a new record of $102 billion and up 20% compared to a year ago.

At the end of the third quarter client assets surpassed $100 billion for the first time, reaching a new record of $102 billion and up 20% compared to a year ago our.

Speaker 2: Our combined wealth management businesses earn revenue of $185 million for the third quarter and $546 million fiscal year to date, increases of 2 and 18% respectively.

<unk> wealth management businesses earned revenue of $185 million for the third quarter and $546 million fiscal year to date increases of two and 18% respectively.

When measured on a fiscal year to date basis. This segment contributed adjusted pretax net income of $119 million, an increase of 32% year over year.

Speaker 2: When measured on a fiscal year-to-date basis, this segment contributed adjusted pre-tax net income of $119 million, an increase of 32% year-over-year.

Our UK Crown dependencies business delivered its strongest quarterly net income contribution on record of $22 million in.

Speaker 2: Our UK and Crown Dependencies business delivered its strongest quarterly net income contribution on record of $22 million, an increase of 39% year over year.

An increase of 39% year over year.

Speaker 2: This business also continues to achieve steady margin growth with its adjusted pre-tax profit margin improving 4.4 percentage points year over year to 27.1%.

This business also continues to achieve steady margin growth with its adjusted pre tax profit margin improving four four percentage points year over year to 27, 1%.

Speaker 2: This was achieved on revenue of 82 million dollars, also a quarterly record, and an increase of 17% compared to the same period of year.

This was achieved on revenue of $82 million also a quarterly record and an increase of 17% compared to the same period a year ago.

Speaker 2: Client assets in this business at the end of the quarter amounted to a record $59 billion.

Client assets in this business at the end of the quarter amounted to a record $59 billion.

Speaker 2: In December , we announced the acquisition of Punters Southall Wealth, a leading vertically integrated wealth manager. This further expands our footprint in the UK and increases the scale of our financial planning capabilities.

In December we announced the acquisition of hunters so call wealth.

A leading vertically integrated wealth manager. This further expands our footprint in the UK and increases the scale of our financial planning capability.

Upon completion this development will add another $8 5 billion in client assets.

Speaker 2: Upon completion, this development will add another $8.5 billion in client assets.

HP has agreed to provide funding of 65 million pounds upon closing through the purchase of convertible preferred shares to be issued by U K wealth.

Speaker 2: HBS has agreed to provide funding of £65 million upon closing through the purchase of convertible preferred shares to be issued by UK Wealth.

Speaker 2: The underlying value of our interest has been enhanced with the expansion of the business, its growth prospects, and the underlying value proposition associated with the investment.

And the underlying value of our interest has been enhanced with the expansion of the business its growth prospects and the underlying value proposition associated with the investments looking ahead, we expect further enhancements to the results of this business as we integrate our acquisitions of Adam and company and W. While pursuing our.

Speaker 2: Looking ahead, we expect further enhancements to the results of this business as we integrate our acquisitions of Adam & Company and PSW while pursuing our organic growth initiative.

Organic growth initiatives.

Speaker 2: Our North American wealth business demonstrated resilience during the third fiscal quarter, with client assets hitting a new record of $37.5 billion.

Our north American wealth business demonstrated resilience during the third fiscal quarter with client assets hitting a new record of 37 5 billion.

Speaker 2: Total revenue amounted to $83 million for the third quarter, bringing its year-to-date contribution to $259 million, an increase of 19% year-over-year.

Total revenue amounted to $83 million for the third quarter, bringing its year to date contributions of $259 million.

An increase of 19% year over year.

Speaker 2: While the anticipated reduction in new issue activity in this business led to an 11% year-over-year decrease in third quarter revenue, I will note that commission and fee revenue was the strongest on record for this business at $59 million. This 25% year-over-year increase reflects the growth in our client assets.

The anticipated reduction in new issue activity in this business led to an 11% year over year decrease in third quarter revenue I will note the commission and fee revenue was the strongest on record for this business at $59 million. This 25% year over year increase reflects the growth in our client.

Assets. Additionally.

Speaker 2: Additionally, fee-related revenue accounted for 43% of third quarter revenue for this business.

Additionally fee related revenue accounted for 43% of third quarter revenue for this business.

Our average book per adviser has grown to $257 million representing.

Speaker 2: Our average book per advisor has grown to $257 million, representing a very impressive year-over-year growth of 26%.

Representing a very impressive year over year growth of 26%.

Speaker 2: We continue to evaluate a range of options for profitable growth in this business and our recruiting pipeline remains strong. Finally, third quarter revenue for our Australian business exceeded $20 million for the first time, an increase of 17% year over year. For context, when we expanded this business two years ago, the annual revenue of the acquired business was in the range of $50 million.

We continue to evaluate a range of options for profitable growth in this business and our recruiting pipeline remains strong.

Finally third quarter revenue per Australian business exceeded $20 million for the first time, an increase of 17% year over year for context. When we expanded this business two years ago. The annual revenue of the acquired business was in the range of $50 million.

Speaker 2: Including significant items, this business contributed pre-tax net income of $7 million fiscal year to date, a year-over-year increase of 37%.

Excluding significant items. This business contributed pretax net income of $7 million fiscal year to date, a year over year increase of 37%.

Speaker 2: Just like our Canadian wealth business, our Australian business is clearly benefiting from the synergies of its alignment with our leading capital markets business in the region.

Just like our Canadian wealth business, our Australian business is clearly benefiting from the synergies of its alignment with our leading capital markets business in the region.

Speaker 2: In all, the investments we've made to increase the scale of our wealth management businesses will continue to enhance our earnings foundation and long-term resilience as we navigate shifting market dynamics.

And all the investments we've made to increase the scale of our wealth management businesses will continue to enhance our earnings foundation and long term resilience as we navigate shifting market dynamics.

Speaker 2: Alongside our investments in talent and acquisitions, we are actively building our specialist network in technology, sustainability, and other growth areas to keep pace as investors continue to reshape their investment.

Alongside our investments in talent and acquisitions, we are actively building, our specialist network and technology sustainability and other growth areas to keep pace as investors continue to reshape their investment needs.

Speaker 2: And of course, underpinning all of this is our continued emphasis on cybersecurity to protect the firm and our clients. Obviously, we saw a broad market downturn and bouts of volatility in January , which have contributed to a challenging environment for new issue activities in all our geographies.

And of course underpinning all of this is our continued emphasis on cyber security to protect the firm and our clients. Obviously, we saw a broad market downturn and bouts of volatility in January which have contributed to a challenging environment for new issue activities in all our geographies we are intentional.

Speaker 2: We have intentionally invested in our wealth and advisory platforms over several years to protect our ability to produce reasonable results during uncertain times.

We invested in our wealth and advisory platforms over several years to protect our ability to produce reasonable results during uncertain times.

Speaker 2: While we expect increased headwinds, our franchise has never been stronger. Our future earnings will be fueled by the continued expansion of our wealth management businesses and the increased breadth and depth of capabilities across our integrated capital marketsIX

While we expect increased headwinds our franchise has never been stronger our future earnings will be fueled by the continued expansion of our wealth management businesses and the increased breadth and depth of capabilities across our integrated capital markets businesses as we continue to innovate and strengthen our franchise for the long.

Speaker 2: as we continue to innovate and strengthen our franchise for the long term.

Long term.

Speaker 2: With that, Don and I would be pleased to take your questions. Operator, can you please open the line?

With that Don and I will be pleased to take your questions. Operator can you. Please open the lines.

Speaker 1: Thank you. Ladies and gentlemen, we will now conduct the question and answer session. If you would like to ask a question, please press star, then the number 1 on your telephone keypad. If you would like to withdraw your question, press star, then 2. There will be a brief pause while we compile the Q&A rock.

Thank you, ladies and gentlemen will now conduct the question and answer session. So I'd like to ask a question. Please press Star then the number one on your telephone keypad.

That should withdraw your question Press Star then two there will be a brief pause while we compile the Q&A roster.

Speaker 1: Your first question comes from Jeff Fenwick with Cormac Securities. Please go ahead. Hi, good morning, everyone.

Your first question comes from Jeff Fenwick with Carmax Securities. Please go ahead.

Hi, Good morning, everyone. Good morning, John .

Speaker 3: So, you know, good to see continued strong progress in the UK wealth management business and your latest acquisition there. So, what's your feeling in terms of your market position? Are there more deals like this to be done? This included selling a little incrementally more of the interest to HPS and maybe just a comment there around your target ownership level.

So.

See continued strong progress on that when you pull wealth management Watson.

Your latest acquisition more or so.

What's your feeling in terms of your market position are there more deals like this to be done.

This included selling a little incremental incrementally more of the interest in <unk>, maybe just a commentary around your target ownership level.

Speaker 2: Yeah, I don't think there's a formal target ownership level, Jeff. You'll note when you do the math.

Yes, I don't think Theres, a formal target ownership level, Jeff you'll you'll note when you do the math.

Speaker 2: The incremental ownership interest at HPS picked up would be reflective of the fact that the value was higher as well.

The incremental ownership interest that hps picked up would it be reflective of the fact that the value was higher as well.

Speaker 2: the convertible value effectively, that convertible craft.

The value that convertible value effect of that convertible craft. So the premise of creating value through doing incremental deals with hps's capital makes sense continues to make sense. So our interest is probably up.

Speaker 2: you know, the premise of creating value through doing incremental deals with HBS's capital makes sense, continues to make sense. So our interest is, you know, probably, you know, from a value perspective, 20% from where it was before, when we first did our first deal with them. So we continue to look at incremental transactions. And that being said, this was a big, this was a big deal, it's going to take time to integrate. We don't close it till April 30th, probably that's kind of when we're targeting towards that.

From a value perspective to 20% from where it was before.

When we first did our first deal with them. So we continue to look at incremental transactions and that being said this was a big this was a big deal it's going to take time to integrate we don't close until April 30th probably that's kind of what we're targeting towards that so no.

Speaker 2: you know, one thing at a time, but you know, scale continues to make sense in that business. And you can see it from the record profitability numbers and you know, the record margin numbers.

One thing at a time, but.

Scale continues to make sense in that business and you can see it from a record profitability numbers in.

The record margin numbers, so the premise of growing the business through acquisitions is good I would also add that it was a really good quarter organically, we put organic growth initiatives in place in that business that seem to be working it's early stage, we've only been at it for probably a couple of quarters now, but we've had good organic growth.

Speaker 2: So, you know, the premise of growing the business through acquisitions is good. I'd also add that it was a really good quarter organically. We put organic growth initiatives in place in that business that seemed to be working. You know, it's early stage. We've only been at it for probably, you know, a couple of quarters now, but we've had good organic growth in that business as well.

And that business as well.

Speaker 3: Thanks for that. And then I wanted to touch on advisory and the acquisitions you've been doing at these boutiques that you're rolling in. And, you know, to look back over the last decade.

Okay. Thanks for that and then I wanted to touch on advisory.

The acquisitions Youre doing at these boutiques that you are rolling in and if.

You look back over the last decade the stories.

Speaker 3: mostly about these professionals starting up their own shops and leaving larger ones and now we're seeing a bit of a reversal here. So maybe just comment, why come and work with you? Why are they looking to sell? Is it just that there's obviously great economics behind these businesses stand alone and what are they getting when they come to Canada?

Mostly about these professionals starting up their own shops, and leading larger ones and now we're seeing a bit of a reversal here. So maybe just comment why why come in and work with you.

Why are they looking to sell.

There's obviously, great economics behind these businesses stand alone and what are they getting when they when they come to an accord.

Yes, good questions and I started the business myself over time.

Speaker 2: Good questions and I've started the business myself over time.

Speaker 2: Let me take a step back and then I will answer your question. I guess the first, from our perspective, it was very important to transition our business as you know. We are material shareholders. We want our long-term value, long-term stability. That involved investing in our wealth businesses because we saw a great opportunity and also increasing our M&A presence. Okay, M&A is busy right now. We've been growing our M&A business for years.

Let me take a step back and then I will answer your question I guess the first.

From our perspective, it was very important to transition our business. As you know we are material shareholders. We want long term value long term stability that involved in investing in our wealth businesses, because we saw great opportunity and also increasing our M&A presence.

Okay M&A is busy right now we've been growing our M&A business for years.

Speaker 2: So, and obviously you see that playing out in the numbers right now. So this was our strategy and is our strategy. I think we've been pretty public saying we will grow in our core sectors of expertise.

So and obviously you see that playing out in the numbers right now. So this this was our strategy and as our strategy that we've been pretty public, saying, we will grow in our core sectors of expertise.

Speaker 2: you know, going deeper in existing sectors. So that's kind of what we've been doing. So why would somebody transact, and again I know this from my days at Genuity, you know, why would you transact with a bigger firm? Because you think you'll make more revenue.

Going deeper in existing sectors. So that's kind of what we've been doing so why would somebody transact and again I know this from my days at Genuity why would do transact with a bigger firm because you think you'll make more revenue per person.

Speaker 2: In other words, you think you'll get paid more. That's generally why you would transact on a transaction. And what's happened is we've built such, you know, when you're talking about in our core expertise and our core verticals. So if you were, you know, in digital advertising, as the folks at Penske were, and felt that we could add international revenue to their relatively domestic pipeline, that's a big increase.

In another words, you think you'll get paid more that's generally why you would transact audit transaction and what's happened is we've built such when youre talking about in our core expertise in our core verticals so viewer.

And digital advertising as the folks at Petski Ware.

And felt that we could add international revenue to their relatively domestic pipeline. That's a big increase then add on the fact that you think we can do equity for their <unk>.

Speaker 2: Then add on the fact that you think we can do equity for their, you know, basically their advisory pipeline. That's another huge...

Simply their advisory pipeline, that's another huge increase.

Speaker 2: and you know you've got and you can afford to grow the firm and expand them even domestically so you add all that up and all of a sudden you know you're sitting there and you're making a dollar and you think if you can join us that you can produce three dollars of revenue

And you've got and you can afford to grow the firm and expand them even domestically. So you add all that up and all of a sudden.

Youre sitting there and you're making a dollar and you think if you can join us that you can produce $3 of revenue.

Speaker 2: You end up making a lot more money and you see the benefits of that. We've got a very entrepreneurial franchise, as you know, a very collegial environment. I'm sure a lot of people say that, but I'm telling you if you talk to the people who joined our franchise, they would attest to that. They're delighted to be here and the premise is working out well for them personally as well as obviously for us corporately. I'm sure that answers your question.

You end up making a lot more money and youll see the benefits of that.

We've got a very entrepreneurial franchise as you know a very collegial environment I'm sure a lot of people say that but I'm, telling you. If you talk to the people who joined our franchise. They would attest to that they are delighted to be here in the <unk>.

<unk> is working out well for them personally as well as obviously for us Corporately hopefully that answers your question.

Sure and I guess on in terms of the way Youre structuring these agreements are giving them some upfront.

Speaker 3: Sure, and I guess in terms of the way you're structuring these agreements, you're giving them some upfront dollars obviously, but it looks like this one has quite a substantial earn out over time as well. So you're making sure the economics are working for every...

Obviously it looks like this one is quite a substantial earn out over time as well so youre keeping making sure. The economics are working for everybody yes.

Speaker 2: Yeah, I am over generalizing intentionally, Jeff. It's a good question, but it's basically a dollar upfront and then a dollar over a long period of time. You know, if you hit your targets and and.

I'm over generalizing intentionally Jeff it's a good question, but it's basically a $1 upfront and then a dollar over a long period of time.

If you hit your targets and and.

Speaker 2: We're delighted to pay that second dollar because it's a good new scenario for us. And in fact, in Petski, they've earned their other dollar. That's been earned. It hasn't been paid yet, but it's certainly been earned. Four years of Target's realized early. And quite frankly, with Sawaya, we hope that that'll pan out the same way.

Delighted to pay that second dollar.

Because it's a good news scenario for us and in fact in Petski labor and there are other dollar.

That's been earned it hasnt been paid yet, but it certainly been earned.

Four years of targets realized early.

And quite frankly with so why are we hope that that will that will pan out the same way.

And maybe on a somewhat related topic.

Speaker 3: And maybe on a somewhat related topic, then I would like to talk about your Australian capital markets business. It's obviously booming down there, and I guess it's a bit of a question around talent retention. Maybe brought me a little more broadly speaking, but noted that you effectively sold back part of that. I would like to be interested in that local business to the team there. So let me just discuss a little bit around why do you think that you're doing that?

We'd like to talk about your Australia capital markets business.

It's obviously building down there and I guess, it's a bit of a question around talent retention, maybe brought in a little more broadly speaking but.

I noted that you effectively sold back part of the interests are not about local business to the team there. So let me just.

Just a little bit around why do that.

Speaker 3: how that works. I mean, they're just anxious to get more of the equity in a business. I mean, obviously, but.

How that works I mean, they just.

Anxious to get more of the equity and business spending obviously, but.

Speaker 2: maybe any color you could offer there. Yeah, no, no. I could see how you could think that on the face of what we've announced, but the practical reality is we've taken that business between the wealth and the capital markets business or just the capital markets business.

Maybe any color you could offer there.

No no.

I can see how you could think that on the face of what we've announced but the practical reality is we've taken that business between the wealth and the capital markets vessels or just the capital markets business from a $30 $40 million a year business to last quarter $50 million. It's a much much much bigger business than it was two years ago.

Speaker 2: from a 30, $40 million a year business to last quarter, $50 million. It's a much, much, much bigger business than it was two years ago.

And as a result that business requires additional capital it requires underwriting margin that requires the things that you would expect Jeff and a business that's over quadrupled in size, let alone the growth of the wealth platform over there I'm just talking about.

Speaker 2: And as a result, that business requires additional capital. It requires underwriting margin. It requires the things that you'd expect, Jeff, in a business that's over quadrupled in size, let alone the growth of the wealth platform over there. I'm just talking about.

Speaker 2: you know, the capital markets business, the wealth business, when we bought...

The capital markets business, the wealth business when we bought.

Speaker 2: When we did our acquisition over there, I mean, it was doing, I don't know, 50-ish million in revenue. We did 20 million in revenue last quarter in that business. So our wealth business has grown a lot.

When we did our acquisition over there I mean, it was doing 50 ish million revenue, we did $20 million in revenue last quarter in that business, our wealth business is growing a lot.

Speaker 2: The net of it is it requires a lot more capital. So you had a choice to make. Either we wrote the capital check, which we were obviously prepared to do.

The net of it is it requires a lot more capital. So you had a choice to make either we wrote the capital check, which we were obviously prepared to do.

Speaker 2: But the employees had a preference to write the check as well. And again, that supports alignment from our perspective. So…

But the employees had a preference to write the check as well in the game that supports alignment from our perspective so.

Speaker 2: You know, our interest kind of went down a little because they wrote a check for some of the additional capital required in the business. But, Don, please jump in if you

Our interest kind of went down a little because they wrote a check for some of the additional capital required in the business, but Don please jump in that view.

Speaker 2: I have a different answer on that. No, I think that sums it up. I mean, and as we've talked about before.

I have a different answer on that.

That sums it up I mean.

And as we've talked about before.

Speaker 2: You know, Australia being it is a fair distance away. So having having the employees with a key ownership stake in the business is just a prudent way to manage and run that business by having significant meaningful ownership.

Australia being it is a fair distance away, so having having the employees with a key ownership stake in the business is just a prudent way to manage and run that business.

Significant.

Sure.

Speaker 2: stake in the game, so to speak. And Jeff, I just add one last thing. Unlike our UK wealth business where our, you know, shareholdings have been coming down, our relative ownership has been coming down, you know, we don't see this as a long-term trend for our Australian business. In other words, it will get increasingly diluted over time. I think this is just kind of a one-time-ish event. Okay, great. That's helpful, Color.

Stake in the game so to speak.

And Jeff I'd, just add one last thing unlike our U K wealth business, where our shareholdings have been coming down on a relative ownership has been coming down we don't see this as a long term trend for our Australia business in other words that will get increasingly diluted overtime.

I think this is just kind of a one time ish of it.

Okay, Great. That's helpful color, that's all I had thank you.

Great questions. Thanks, very much.

Thank you. Your next question comes from Graham Ryding with TD Securities. Please go ahead.

Speaker 1: Thank you. Your next question comes from Graham Riding with GED Securities. Please go ahead.

Hi, good morning good.

Good morning Graham.

Sorry, I could stick with the Salon partners acquisition is there any can you give us any color on sort of what sort of revenue. This company has delivered over the sort of recent years too.

Speaker 2: I can stick with the saliva partners acquisition. Is there any, can you give us any color and sort of what sort of revenue this company has delivered over the sort of recent years to what sort of contribution.

What sort of contribution you are expecting here.

Well, we don't disclose those numbers publicly.

Speaker 3: Well, we don't disclose those numbers publicly. But I think...

But I think.

Speaker 4: A good proxy for it is obviously the addition of Petski Prunye three years ago had a meaningful impact on our um on our um

A good proxy for it is obviously the addition of Petski brunette three years ago had a meaningful impact on our.

On our.

Speaker 4: advisory revenue run rate in the US and I think SAWAI is a similar kind of a transaction. You can kind of draw some parallels there.

Advisory revenue run rate in the U S and I think so why is a similar kind of a transaction and you can kind of draw some parallels there.

That way.

Okay.

Speaker 2: I appreciate the recent acquisition in the UK is, I guess, larger than some of your other ones. So there's going to be a bit of time to focus on integration here. But looking further out, what is the sort of longer term plan in terms of your ownership stake in the UK wealth business and partnering with HBS? Should we expect that ownership, your ownership position in that platform to continue to trend down over time or?

I appreciate the recent acquisition in the UK.

I guess larger than some of your other ones, so theres going to be a bit of time to focus on integration here, but looking further out what is the sort of longer term plan in terms of your ownership stake in the UK.

Wealth business in partnering with Hbf's should we expect that ownership.

Ownership position in that platform to continue to trend down over time or.

Do you have any do you have any targets, yes, I think as long as acquisitions over there.

Speaker 2: Do you have any targets for that? Yeah, I think as long as acquisitions over there cost 10 times EBITDA or 9 times adjusted EBITDA and we trade at, you know.

Cost 10 times, EBITDA or nine times EBITDA, adjusted EBITDA and we trade at.

Speaker 2: seven times earnings, you can imagine how we think about funding acquisitions in that business.

Seven times earnings.

Imagine, how we think about funding acquisitions in that business.

Speaker 2: We'll use the higher value currency as opposed to the lower value currency, which means a reduction in our ownership as we do additional acquisitions.

We'll use the higher value currency as opposed to lower value currency, which means a reduction in our ownership as we do additional acquisitions.

Speaker 2: Um, that being said, you know, if we pull this off the way.

That being said.

We pulled this off the way.

Speaker 2: We seem to be doing it today. Every deal's gonna have to be negotiated, but I'd like to think that our share of the enhanced net income from acquisitive growth.

We seem to be doing it today every deals kind of has to be negotiated but.

I'd like to think that our share.

<unk> enhanced net income from it.

Acquisitive growth.

Speaker 2: will result in bigger net income to our shareholders, so to speak, you know, without the commitment of capital. So on the last transaction, as you're more than aware, you know, we didn't write a check. We funded it with incremental debt and with an incremental significant investment from HBS. So it's working out perfectly the way we'd expect it.

Will result in bigger net income to our shareholders so to speak without the commitment of capital so.

On the last transaction is as you are more than aware in a week.

We didn't write a check we funded it with incremental debt and with a.

Incremental significant investment from Hbf, So it's working out perfectly the way we'd expect it to.

Speaker 2: Okay, understood. Can you talk about just the organic growth in the UK wealth platform? I think if I sort of adjust for the Adam and co-acquisition, it looks like, okay.

Okay understood can you talk about just the organic growth in the U K wealth platform.

Sort of adjust for the <unk> acquisition that looks like.

Speaker 2: assets under and actually contracted slightly quarter over quarter. Am I looking at that properly and then is there any color behind that?

Assets under admin actually contracted slightly quarter quarter over quarter am I looking at that properly and then is there any color behind that.

Speaker 2: Yeah, I mean, you're looking at it perfectly correctly. The assets did slightly contract, believe it or not, but it was a very large, very low margin execution only type client.

Yes, I mean, its youre looking at it perfectly correctly the assets did slightly contract believe it or not but it was there.

There was a very large very low margin execution only type client in that business and the problem with some of these clients is when they get big enough. They do it themselves and that so we knew that this was going to happen we aren't exactly sure when it was going to happen.

Speaker 2: in that business and the problem with some of these clients is when they get big enough they do it themselves and that's we knew that this was going to happen we weren't exactly sure when it was going to happen you know but it offset what otherwise would have been pretty impressive organic growth you'll notice that our profitability went up in the business so it wasn't a very profitable customer but notwithstanding that it did result in assets incremental assets on the balance sheet so you're dead

But it would offset what otherwise would have been pretty impressive organic growth youll notice that our profitability went up in the business. So it wasn't a very profitable customer, but notwithstanding that it did result in assets incremental assets on the balance sheet. So you're dead on there.

Okay.

Speaker 2: I understand my last question if I could just thinking of the balance sheet and capital, it still looks like close the substantial issue bid that you're probably sitting on a decent amount of working capital. Are you.

And my last question, if I could just thinking of the balance sheet and capital it still looks like post the substantial issuer bid that you're probably sitting on a decent amount of working capital.

Are you.

Should we expect going forward a combination of youre going to fund some organic growth yourself, but youre also going to look to return capital through <unk>.

Speaker 2: Should we expect going forward, you know, a combination of you're going to fund some organic growth yourself, but you're also going to look to return capital through.

Speaker 2: share buybacks assuming decent profitability over the medium term? Yeah, I mean our balance sheet continues to be robust notwithstanding the $100 million we just spent. The dividend increases twice this year. Our dividend is 30% higher than where it was last year.

Share buybacks, assuming decent profitability.

Over the medium term.

Our balance sheet continues to be robust notwithstanding the $100 million. We just met the dividend increases twice this year, our dividends, 30% higher than where it was last year.

No.

Speaker 2: You know, we just increased our dividend again. That's a pretty good reflection of our view on our cash generative capabilities.

We just increased our dividend again, that's a pretty good reflection of our view on.

On our cash generative capabilities.

And.

Speaker 2: Yeah, I mean we did what we thought was prudent. Remember, we only had 13 million shares tender to our substantial issuer bid. It's going to be hard to keep on doing substantial issuer bids. Our shareholders are pretty supportive of their position.

Yes, I mean, we've done.

We did what we thought was prudent theres only remember we only have 13 million shares tender to a substantial issuer bid it's going to be hard to keep on doing substantial issuer bids are shareholders are pretty supportive of their positions.

Speaker 2: That being said, there'll be no change to our progress that we're making on our normal course issuer bid. We'll continue to do what we've been doing there and returning capital in that way. So the premise has always been we will grow our dividend as our wealth earnings grow because it's relatively predictable. And if we make excess cash in our capital markets business, which we've been doing, we'll figure out a way to get that back to shareholders too through stock repurchases. So nothing's really changed yet there.

That being said.

There'll be no change to our progress that we're making on our normal course issuer bid will continue to do what we've been doing there and returning capital in that way. So the premise has always been we will grow our dividend as our wealth earnings grow because it's relatively predictable.

If we make excess cash and our capital markets business, which we've been doing we'll figure out a way to get that back to shareholders due.

Through stock repurchases. So nothing nothing has really changed there.

Speaker 2: Okay, that's it for me. Thanks. Sorry, Graham, not Jeff. I forgot to ask him a question. My apologies. Christine is getting me a very lucky right now. Sorry about that guy.

Okay, that's great. Thanks, sorry, great Jeff.

Question, My apologies, Christine, Missouri looks right now.

Sorry about that guys.

Yes.

Thank you. Your next question comes from Rob Goff with Echelon. Please go ahead, Rob I'm not going to get this wrong a promise.

Speaker 5: Thank you. Your next question comes from Rob Gough with Ashalon. Please go ahead. Okay, Rob, I'm not going to get this wrong. I promise. Well done. Thanks, Dan. You were talking about if you were to do further acquisitions in the UK, you are sensitive to the valuations over there and you said you may look or may allow your shareholding to be reduced.

Hey.

Thanks, Dan.

You were talking about.

If you were to do further acquisitions in the UK you are sensitive to the valuations of it Darrin.

Ted you May look may allow your shareholding can be reduced.

Speaker 5: Do you then look to this perspective substantial issuer bid as a way of maintaining your de facto leverage to that asset? I never thought of it that way.

Can you then look to this.

Prospective substantial issuer bid as a way of maintaining.

Factored leverage to that asset.

Never thought of it that way.

I don't.

That's in I guess.

Speaker 2: Yeah, I guess it could work that way. I'm not quite and I don't really look at it that way, Rob. But what we're you know, again, it's just a matter of how do we create incremental earnings. And the best way to do that is to fund acquisitions at 15, 16, 17 times earnings, which is, you know, where we sell equity to HBS app.

Yeah.

Yes, it could work that way I'm not quite I don't really look at it that way Rob.

It's just a matter of how do we create incremental earnings.

And the best way to do that is to fund acquisitions at 15, 16, 17 times earnings, which is where we sell equity to <unk>.

Speaker 2: and use that, save that money effectively that we would have spent doing UK acquisitions and buy back our stock at seven times earnings or eight times earnings or wherever we happen to be trading. So it's just a way better way to use capital. I'd rather use the capital to buy back the stock than do incremental acquisitions in the UK if I'm able to. I don't think I answered.

And use that.

Save that money effectively that we would have spent doing UK acquisitions and buyback our stock at seven times earnings are eight times earnings or wherever we happen to be trading. So it's just a way better way to use capital I'd, rather use that capital to buyback. The stock then do incremental acquisitions in the UK, if I'm able to.

I don't think I answered your question, but thats the way we look at it.

Speaker 5: You addressed can ask in terms of acquisitions, your thoughts with respect to Australia, and perhaps on further bulking up on the advisory side.

You addressed.

Can I ask in terms of acquisitions.

Your thoughts with respect to Australia.

And perhaps on further bulking up on the advisory side.

Speaker 2: Yeah, Australia, we don't, as you can see in our financials, we don't do a lot of advisory activity in Australia, if that's your question. It tends to be an equity-centric market. We tend to, you know,

Yes.

We don't as you can see in our financials, we don't do a lot of advisory activity in Australia. If thats. Your question it tends to be an equity centric market we tend to.

Start in equity and grow it into other services create moats around our business, Canada being the most prolific where we do a lot of other things other than equity.

Speaker 2: start in equity and grow it into other services, create moats around our business. Canada being the most prolific where we do a lot of other things other than equity. US where we've grown from our equity practice into an M&A practice. So I would think over time, Australia would probably directionally go the same way.

U S where we've grown from our equity practice into an M&A practice. So I would think overtime, Australia would probably directionally the same way.

Speaker 2: you know, there's nothing immediate to announce, there's nothing, you know, imminent to announce on that side. But our business in Australia is a much bigger business than it used to be, as I kind of alluded to before. You know, when we used to do 40 million revenue, we're now doing, you know, 300. It's a much, much bigger business overall. So, you know, we're gonna continue to think about how we expand that profitably so far it's working, but, you know, I think we take our time with it so, you know,??, it's truly a musical hai. It's really going to be a, really, apa inedd

There is nothing immediate to announce there is nothing imminent to announce on that side, but our business in Australia is a much bigger business than it used to be.

As I kind of alluded to before when we used to do $40 million in revenue we're now doing.

300.

It's a much much bigger business overall, so we're going to continue to think about how we expand that profitably. So far it's working but I think we take our time with it.

That'd be pretty prudent.

Speaker 2: be pretty prudent on how we elect to grow it.

How we elect to grow it.

Speaker 5: In fact, with respect to the transactional accounts in Australia, and the update with respect to the migration there.

With respect to the transactional accounts in Australia.

Any update with respect to the migration there.

Speaker 2: The, you know, again, we've got, you know, we report $5 billion in assets in Australia. The number is substantially higher than that, as you're aware, on assets that, you know, don't pay significant fees is probably the best way to define that. We continue to try and migrate those assets over. That is a long process. We also continue to recruit advisors in that business. That's going very successfully.

Again, we've got.

We report $5 billion in assets in Australia.

Number is substantially higher than that as you are aware.

<unk> assets that.

Don't pay significant fees is probably the best way to define that we continue to try and migrate those assets over that is a long process. We also continue to recruit advisors in that business.

That's a very that's going very successfully.

Sure.

Speaker 2: The probably only thing that doesn't, you know, when you look at a graph or when you look at numbers that kind of looks a little off is notwithstanding our revenue has materially increased in our Australian wealth business.

Probably only thing that doesn't.

When you look at the graph or when you look at numbers that kind of looks a little off as notwithstanding our revenue has materially increased in.

In our Australia wealth business you don't.

Speaker 2: we've got a very profitable business there, but you don't see the profit kind of going up on the same line. And that's simply the investments we're making to hire people. So, you know, whether it's recruiting expenses or other associated hiring expenses.

We've got a very profitable business, there, but you don't see the profit kind of going up on the same line.

It's simply the investments, we're making to hire people so.

Whether it's recruiting expenses or other associated hiring expenses.

Speaker 2: So we would expect the profitability in our Australia wealth business to increase along the lines of revenues increasing, albeit slightly delayed. So the business is, again, performing according to plan, or better than plan, I guess.

So we would expect the profitability in our in our Australia wealth business to increase along the lines of revenues, increasing albeit slightly delayed.

So the businesses again performing according to plan.

Better than plan I guess.

Speaker 5: So exclusive of growth investments in Australia, would the Australian wealth management economics be similar to the Canadian economic...

So exclusive of growth investments in Australia with the Australian wealth management economics is similar to the Canadian economics.

Yes, I think.

Speaker 2: Yep, yeah, I think are arguably a little better just because recruiting's cheaper in Australia than it is in Canada.

Arguably a little better just because recruiting is cheaper in Australia than it is in Canada.

I would say arguably better over time from a long term perspective, it certainly wouldn't be worse.

Speaker 2: you know, I say arguably better over time, you know, from a long-term perspective, it certainly wouldn't be worse.

Okay. Thank you very much.

Thank you good questions.

Thank you there are no further questions at this time Mr. <unk> you May proceed.

Speaker 1: Thank you. There are no further questions at this time. Mr. Davio, you may.

Speaker 2: Okay, well, thanks everyone again for getting on. We really appreciate it. And that concludes our third quarter conference call our net next updates June . That's our that's our year end results. And if, as always, Don and I are both available to take questions. So thanks very much operator and then you can close the line.

Okay, well, thanks, everyone again for getting on we really appreciate it that concludes our third quarter conference call.

Next updates June that's our.

That's our year end results and.

As always Don and I are both available to take questions. So thanks very much operator, you can close the lines.

Speaker 1: Ladies and gentlemen, this concludes the conference call for today. Thank you for participating. Please disconnect your lines.

Ladies and gentlemen, this concludes the conference call for today. Thank you for participating please disconnect your lines.