Q4 2025 Canaccord Genuity Group Inc Earnings Call
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Speaker Change: Good morning, ladies and gentlemen, thank you for standing by.
Speaker Change: I'd like to welcome everyone.
Speaker Change: Canaccord Genuity Group, Inc.
Speaker Change: Fourth quarter results conference call.
Speaker Change: All lines have been placed on mute to prevent any background noise.
Speaker Change: The speakers prepared remarks, there will be a question and answer session. If you would like to ask a question. During this time simply press Star then the number one on your telephone keypad. If you would like to withdraw your question. Please.
Speaker Change: Please press Star then two if you have any difficulties hearing the conference. Please press star zero for operator assistance at any time.
Speaker Change: As a reminder, this conference call is being broadcast live online.
Speaker Change: Good.
Speaker Change: I would now like to turn the conference call over to them.
Dan: Mr. Dan <unk>.
Dan: Chairman and CEO.
Speaker Change: Go ahead Mr. W.
Speaker Change: Thank you operator, and thanks to everyone joining us for today's call I'm joined by Nadine and our Chief Financial Officer. Today's remarks are complementary to our earnings release N DNA and supplementary financials copies of which have been made available for download on SEDAR plus and on the inverse.
Speaker Change: The relations section of our website C. G F dotcom.
Speaker Change: Within our update certain reported information has been adjusted to exclude significant items to provide a more transparent and comparative view of our operating performance. These adjusted items, our non ifr mass items. Please refer to our notice regarding forward looking statements and the description of non Ifr S financial measures.
Speaker Change: That appear in our investor presentation, and in our MD&A and with that let's discuss our fourth quarter and fiscal 2000 and twenty-five results our fourth fiscal quarter saw us deliver our highest quarterly revenue in the past 11 quarters, despite a volatile market environment.
Speaker Change: Revenue growth was fueled by record performance in our wealth management Division and strong advisory fee contributions from capital markets. This contributed to an impressive top line results for the fiscal year with firm wide revenue of $1.8 billion, an improvement of 20% compared to last year and our.
Speaker Change: Strongest result since 2022.
Speaker Change: Our wealth management businesses and all geographies have continued to perform exceptionally well.
Speaker Change: Each business has been consistently executing against their respective plans, which are oriented towards sustainable growth and profitability.
Speaker Change: Client assets grew to a record of $120 billion with new record set in each region, driven by a mix of acquisitions and recruiting activity.
Speaker Change: Proving market values and positive net flows.
Speaker Change: Our strategies have focused on increasing contribution from fee based assets and strengthening net inflows the aggregate value of our client assets as linked to market performance and is expected to reflect some of the volatility experienced in the current quarter.
Speaker Change: Having said that I will note that market fluctuations do not typically drive outflows to the same extent as inflation and rising interest rates, we're seeing increased investing activity among our core clients driven by growing demand for personalized solutions.
Speaker Change: Throughout the three and 12 month periods, we continue to invest in the growth of our wealth management businesses, while advancing our organic growth priorities. We completed three acquisitions in the U K and crown dependencies, enhancing the scale of our financial planning offering and extending our presence across both.
Speaker Change: <unk> onshore and offshore markets.
Speaker Change: Acquisitions were completed in Cambridge in Glasgow, and most recently in the Crown dependencies through our acquisition of Brooks Mcdonald asset management International which was completed in our fourth quarter.
Speaker Change: We also further expanded our talent base by bringing on professionals responsible for advancing our organic growth priorities and strengthening our investment management and financial planning capabilities.
Speaker Change: In Canada, and Australia, we welcomed new investment advisory teams and we have good visibility on a solid pipeline in both regions.
Speaker Change: By focusing on high quality producers, our recruiting efforts are contributing to an increase in fee related revenues enhancing the resilience of these businesses.
Speaker Change: Nadine will provide a more detailed overview of our operating performance, but I'd like to highlight that the fourth quarter. Adjusted pretax net income from this division rose, 22% year over year to $41 million contributing to a full year contribution of $149 million.
Speaker Change: While our fiscal 2025 operating margin for the wealth Division reflects ongoing investments in growth, we anticipate low single digit margin improvement over the coming year, which will be driven by our increased scale and the impact of our organic growth initiatives.
Speaker Change: Turning to capital markets. Despite the increased momentum for corporate finance activity in our core sectors. During our second and third fiscal quarters activity levels. In this segment were subdued in the fourth quarter due to market volatility and uncertainty largely stemming from the global trade policy disruptions.
Speaker Change: <unk>.
Speaker Change: Our advisory segment helped to offset this decline delivering its strongest quarterly revenue of the fiscal year.
Speaker Change: This helped lift the revenue contribution from our capital markets Division to its strongest result in three years and comfortably above pre pandemic levels, although investors remain selective in their exposure to risks equities, we have defended our strong market position for corporate finance activity we are consistently.
Speaker Change: Ranked among the league table leaders in our target sectors and.
Speaker Change: Maintaining our status as the most active mid market dealer globally.
Speaker Change: Reflecting the cautious environment the mining sector remained our most active throughout the three and 12 month periods, but we also saw encouraging momentum across other core sectors.
Speaker Change: Bester sentiment improves we are also beginning to see renewed, albeit cautious appetite for IPO activity.
Speaker Change: Profitability in our capital markets Division for the three and 12 month periods continued to be impacted by elevated non compensation expenses, which includes professional fees and provisions primarily in connection with our previous disclosed regulatory matter.
Speaker Change: We've maintained proactive and transparent engagement with our regulators to ensure alignment with their expectations as we continue to enhance the client experience and advance our strategic priorities well.
Speaker Change: Well our remediation efforts are largely complete the time frame for resolution with respect to our U S enforcement matter remains uncertain.
Speaker Change: During the year, we took deliberate steps to sharpen the focus of our capital markets business by allocating resources and capital to the areas, where we can deliver the greatest value to our clients and compete most effectively.
Speaker Change: As part of this strategic focus subsequent to the end of our fourth fiscal quarter, we announced a definitive agreement to sell our U S wholesale market, making business to canter.
Speaker Change: This move enables us to concentrate our efforts on our investment banking and advisory driven capital market strategy in this region.
Speaker Change: Daiichi business has been a valuable contributor to our U S capital markets operation, but has historically operated adjacent to our core equities franchise.
Speaker Change: And now has reached a level of scale and complexity better suited for a larger platform than.
Speaker Change: And then transaction remains on track for completion in the first half of our 2026 fiscal year until then C. G continues to fully support the employees and the clients of that business.
Speaker Change: Well, we certainly Miss the daily contributions of this talented team. We are excited about the new opportunities that await them as part of cancer and we wish them continued success.
Speaker Change: In all against the backdrop of increased volatility and cautious investor sentiment we delivered.
Speaker Change: Solid topline growth in the three and 12 month periods, while our profitability fell short of expectations, we remain committed to supporting our clients in navigating complex business and investment decisions.
Speaker Change: We have continued to execute against our long term strategy positioning the business for stronger future profitability and improve shareholder returns.
Naveed: With that I'll pass things over to Naveed.
Naveed: You, Dan and good morning, everyone I'll turn your attention to our firm wide performance highlights on page four of our investor presentation.
Speaker Change: A new generation improved for both the three and 12 month period.
Speaker Change: Sure My profitability and earnings per share for the fourth fiscal quarter were lower on a year over year basis, but earnings for the fiscal year improved when compared to last year.
Speaker Change: Sure My profit margins were under pressure in both periods and I will walk you through the key drivers of that performance.
Speaker Change: Firm wide revenue for the three month period increased by 12% year over year to $460 million.
Speaker Change: The increase was primarily driven by higher commissions and fees revenue of $237 million, an increase of 18% year over year, primarily driven by contributions from our wealth management Division.
Speaker Change: In addition advisory revenues increased 31% year over year to $90 million, reflecting increased completion activity in our core sectors.
Speaker Change: As Dan mentioned revenue for the full fiscal year increased 20% year over year to $1 8 billion.
Speaker Change: Wealth management was the largest contributor accounting for 51% of total revenue.
Speaker Change: Capital markets contributed 47% in fiscal 2025 revenue, representing a one percentage point increase year over year with the remaining revenue coming from our corporate and other segment.
Speaker Change: On the expense side firm wide non compensation expenses remained elevated totaling 149 million for the three month period, and 581 million for the 12 month period, representing increases of 24% and 19% respectively.
Speaker Change: The impact of elevated expenses led to a decrease in our pretax operating margin from nine to eight 4% for fiscal 2025.
Speaker Change: Slide seven in our Investor presentation provides a breakdown of our fiscal 2025 expense drivers and the impact of foreign exchange highlighting that noncore expenses accounted for approximately 24% of the year over year increase.
Speaker Change: Revenue in investment driven expenses drove the largest component of the increase and reflected increased interests or dividend costs as well as trading costs, which were primarily offset by higher revenues.
Speaker Change: Discretionary expenses represented approximately 24% of the increase primarily related to an increase in professional fees associated with the remediation work in the U S. As well as increased acquisition related costs as we continue to invest in the business.
Speaker Change: We are focused on cost discipline and generating an improvement in our operating margins.
Speaker Change: Our effective tax rate for the fiscal year decreased by two three percentage points year over year to 26, 9% largely due to a decrease in the effective tax rate in connection with the reduced impact of <unk> share price movement on deferred taxes.
Speaker Change: Firm wide compensation ratio for the fiscal year with within our desired range at 59%.
Speaker Change: Excluding significant items firm wide pretax net income for the three months period was $32 million down 18% year over year and down 19% sequentially for.
Speaker Change: For fiscal 2025, adjusted pretax net income totaled $149 million up 12% year over year.
Speaker Change: These results translated to adjusted diluted earnings per share of <unk> 12 for the three month period down three or 20% year over year, bringing our fiscal 2025 adjusted diluted earnings per share to <unk> 61 cents.
Speaker Change: Up 21 cents or 53% year over year.
Speaker Change: Turning to segment results.
Speaker Change: Wealth management Division earned revenue of $239 million during the fourth fiscal quarter and $905 million for fiscal 2025, representing year over year increases of 19% and 17% respectively.
Speaker Change: Increases for the three and 12 month periods were primarily driven by higher commissions and fees revenue from all regions and a modest increase in contributions from the investment banking segments in our Canadian and Australian businesses.
Speaker Change: Our wealth business in the U K and Crown dependencies contributed record quarterly revenue of $118 million up 12% year over year, and 2% sequentially, bringing fiscal year to date revenue to a record $450 million fly.
Speaker Change: Slide 12 outlines client asset flows.
Speaker Change: Measured in local currency client assets in this business increased by 8% year over year to 37 billion pounds and net inflows, including assets from acquisitions represented 11% of opening assets under management.
Speaker Change: Third quarter adjusted pretax net income contribution of 28 million represented a year over year improvement of 4%.
Speaker Change: Full year profitability in this business was flat compared to the prior fiscal year, largely due to higher development costs in connection with our acquisitions and organic growth activities in the region.
Speaker Change: The business achieved normalized EBITDA of 21 million pounds for the three months period, and 79 million pounds for the full year, representing a year over year increase of one 2%.
Speaker Change: Our Canadian wealth business earned fourth quarter revenue of $100 million up 29% year over year.
Speaker Change: Fiscal 2025 revenue increased 26% year over year to $375 million.
Speaker Change: As outlined on slide 11 client assets in this business increased by 11% year over year to 43 billion and net inflows represented 7% of opening.
Speaker Change: The adjusted pretax net income contribution amounted to $13 million for the fourth quarter and $43 million for the fiscal year increases of 90, and 21%, respectively, but below desired Rangers in the context of our revenue growth.
Speaker Change: In the three and 12 month periods. This business incurred higher interest expense in connection with client cash balances, which were primarily offset by interest revenue.
Speaker Change: As well as increased premises and equipment costs in connection with our new office in Vancouver, and higher development costs to support our recruitment and retention activities.
Speaker Change: While our adjusted pretax operating margin for the quarter improved both year over year and sequentially. The fiscal year operating margin of 11, 5% with half a percentage point lower than the prior year.
Speaker Change: Adding back the noncash development charges.
Speaker Change: Normalized EBITDA in our Canadian wealth management business was $19 million for the fourth quarter, which brought full year EBITDA to $69 million, an improvement of 26% compared to the prior fiscal year.
Speaker Change: And finally revenue earned by our Australian wealth management business of 21 million for the quarter increased 23% year over year, bringing fiscal year to date revenue to $80 million, an increase of 26% year over year, a new record for this business.
Speaker Change: Client assets increased by 31% year over year to $8 4 billion due to an increase in new client assets from our recruiting activities as well as higher market values.
Speaker Change: The adjusted pretax net income contribution amounted to $1 million for the fourth quarter and 5 million for the fiscal year increases of 45 and 53% respectively.
Speaker Change: Our global capital markets Division earned revenue of $212 million for the fourth fiscal quarter and $831 million in fiscal 2025, representing year over year increases of five and 22% respectively.
Speaker Change: The fourth quarter increase primarily reflected the impact of higher adviser advisory revenues in our core focus sectors.
Speaker Change: Capital markets Advisory revenue of 19 million for the three months period was the strongest quarterly result of the year and on par with our fiscal 2023 quarterly average, which was our second strongest year for advisory activity.
Speaker Change: The fiscal 2025 revenue increase was primarily driven by increased advisory and corporate financing activities in our core mid market focused sectors.
Speaker Change: The shift in market conditions during our fourth quarter led to reduced risk appetite compared to prior periods, which negatively impacted corporate financing revenue across all regions.
Speaker Change: Despite this full year revenue from this segment rose, 44% year over year to 215 million our strongest level in three years.
Speaker Change: Demonstrating our team's agility in helping clients access capital when market conditions are favorable.
Speaker Change: As noted earlier profitability from our capital markets Division continued to be affected by higher non compensation expenses, primarily in our U S business as fiscal 2025 translated professional fees as we continued to execute on the remediation work related to our regulatory matters.
Speaker Change: That said stronger revenue generation alongside our ongoing efforts to reduce discretionary spending contributed to improved results for fiscal 2025 compared to the prior year.
Speaker Change: This division contributed adjusted pretax net income of $1 million for the fourth quarter and $44 million for the full fiscal year compared to $3 3 million and 6 million respectively for the comparative period in the prior year.
Speaker Change: Going forward, we expect an overall improvement in operating margins in our capital markets business.
Speaker Change: Turning to the balance sheet, we are maintaining sufficient working capital to support our strategic priorities and increase business activity, while also preserving the flexibility to reallocate capital as market conditions evolve.
Speaker Change: With that I will turn things back to Dan.
Speaker Change: Thank you and it in despite ongoing economic and trade policy uncertainty M&A activity in our core sectors is expected to remain resilient corporate financing activities supported by our research sales and trading capabilities remains closely linked to the condition of the new issue market, which fluff.
Speaker Change: <unk> with broader market dynamics.
Speaker Change: When these windows are open.
Speaker Change: C G have proven our ability to consistently outperform expectations.
Speaker Change: We are continuing to invest with discipline in the growth of our wealth management businesses, while advancing our organic growth priorities.
Speaker Change: At the same time, we remain firmly focused on reducing firm wide discretionary expenses.
Speaker Change: Together with our organic and inorganic growth initiatives, we expect our cost efficiency efforts to support firm wide margin improvements with a goal of achieving single digit growth in the upcoming fiscal year, reflecting confidence in this outlook. Our board of directors has approved a quarterly common share dividend.
Speaker Change: Eight and a half cents.
Speaker Change: With that Nadine and I will be pleased to take your questions. Operator, Please open the lines.
Speaker Change: Thank you.
Speaker Change: Ladies and gentlemen, we will now begin the question and answer session should you have a question. Please press the star followed by the one I just touched on.
Speaker Change: Should you wish to cancel will request. Please press the star followed by the channel.
Speaker Change: You are using a speaker phone please lift the handset before pressing any case once again that is star one should you wish to ask a question.
Jeff Fenwick: Your first question is from Jeff Fenwick from <unk> Securities. Your line is now open.
Jeff Fenwick: Hi, good morning, everyone.
Speaker Change: Good morning, Jeff.
Dan: Dan I wanted to start off with I noted in the release that there was an agreement with <unk>.
Dan: Lend some some incremental money owed to employees to help facilitate a more insider ownership.
Dan: Just wondering if it has the board put some parameters around what that is I mean I'm.
Dan: Obviously, we're all aware that there's.
Dan: A standstill from a prior Brian buyout, our insider buyout.
Dan: So it had been in place so how are they what's the thinking in terms of balancing.
Dan: Higher insider buying but obviously there is a cohort there that would potentially participate in a buyout or was involved in the past.
Dan: Yeah, I mean, I wouldn't link the two things together I mean the employee.
Dan: The employee partnership and the loan program for the employee partnership that was always meant and certainly describe to be a perpetual program ideas you've got.
Dan: Employees that quite frankly didn't get enough the first time and new and emerging employees and the idea was always to.
Dan: Recycle the capital every year, a big chunk of those loans are repaid.
Dan: Because the repaid through bonuses. So we started at 6% we started at 80 in the first year, we repaid 15. So it went down to 65. This year. The bonuses. We just paid we repaid another chunk of the loans. The board gave us authorization to reload a chunk of that money quite frankly, a little bit more.
Speaker Change: Sure, but the vast majority of it was the loans that were just repaid two other partners emerging partners partners, who didn't didn't didn't get enough last time, so it's not.
Speaker Change: It's a bottoms up analysis, how much do we need to do to keep keep everybody aligned and motivated.
Speaker Change: Together with long term shareholder interest and that number this year is a maximum of $27 million. So that's what that is the actual outstanding balance on the loans on our balance sheet, because we just had a big repayment and I think it was the outstanding balances of about 65 will go up slightly but just slight.
Speaker Change: <unk> here.
Jeff Fenwick: Because we're not solving for something other than what where the demand is does that answer your question Jeff.
Jeff Fenwick: Yeah, I think so and I guess is there there's some thinking just in terms of any restrictions on just I guess, you can't really restricted but the aggregate insider ownership as a percentage of the total and clearly yeah.
Speaker Change: Yeah, obviously over time, as we get closer to 20% or something that's a relevant benchmark.
Dan: Then I think there I think there could potentially be restrictions, but we haven't really assess that at this point I mean, we're going from roughly 11 and small change a 14% here I think that's a couple of years down the road before we really got us sit down and make make those the board needs to make those decisions, but it is a comprehensive.
Dan: Board process.
Dan: We can't do the employee partnership can't do this without the loans and the loans come from the company and.
Dan: The board has a lot of.
Dan: Oversight.
Dan: And approvals in the context of that so we've had a long standing objective is in our investor presentation that something that you've heard me talk about a lot and I believe running an investment bank and our material wealth management firms involved significant employee ownership, we think it is.
Dan: Aligns the interests of our employees and our shareholders perfectly and this program is a great way to do it. So you know at the end of the day, increasing employee ownership in the business, where they are actually as you know these are fully recourse loans.
Dan: These loans pay interest.
Speaker Change: The only the only the only benefit them and quite frankly, your stock's locked up forever.
Speaker Change: So the only benefit of this program is we talk up the bonus a little bit to help on the loan repayment, but thats peanuts in the bigger picture of things Okay.
Speaker Change: Okay. That's helpful color. Thank you and then wanted just to ask about the sale of the wholesale trading a unit out of the U S.
Speaker Change: Could you give us a little bit of color.
Speaker Change: When I look at the financials, there would that be the majority or all of what you would categorize as principal trading within the majority.
Speaker Change: Yes.
Speaker Change: Yeah Okay.
Speaker Change: Okay, and I think I'll, just add that the relative profitability of that group was less than our other other parts of <unk>. So just trying to think about going forward should we be modeling the U S. Human at obviously the step down in revenue, but perhaps with a little better margin on the business yeah.
Speaker Change: Yeah, I think Thats I think thats accurate it was a positive contributor to the business, let's be clear it has been for the last 20 years.
Speaker Change: And run by a phenomenal group of.
Speaker Change: Employees and partners so.
Speaker Change: But.
Speaker Change: This simplifies our business from a regulatory standpoint from a risk standpoint.
Speaker Change: And.
Speaker Change: Sooner or later this business in particular was a heavy tech was a heavy tech business and Theres a lot of firms out there like cancer and others quite frankly that you know are very focused on.
Speaker Change: Technology and trading and there's a there's a long term a better owner for this business I think the employee saw it that way and we certainly saw it that way it wasn't a question of.
Speaker Change: If if we were going to dispose of this business. There was a question of when was it going to be this year and next year. The year. After so I think we found a good buyer and cantor and <unk>.
Speaker Change: Hopefully that deal will push towards a conclusion.
Speaker Change: And the next three months or so okay, and maybe one more for me and on U K wealth management.
Speaker Change: So good progress there obviously are not continuing to gather assets into that business and you called out efforts to sort of invest in at an end.
Speaker Change: Perhaps drive more net inflows from from clients, but what does it take there to get some real operating leverage out of the business.
Speaker Change: That's been climbing, but the earnings have not been following along.
Speaker Change: Yeah Fair point.
Speaker Change: The first point I'd make is yes, we have.
Speaker Change: And you've made this point, we have invested significantly in that business on our growth initiatives.
Speaker Change: The people systems technology.
Speaker Change: <unk> in millions of pounds and it's working as the good news it doesn't happen overnight as you know, Jeff we bought a lot of businesses there.
Speaker Change: It's hard to buy things and integrate them and at the same time grow organically, but that's what we've done now where we're at.
Speaker Change: Position and that's it's early we're three years six months into it are four months into it now where the business is growing organically, particularly in the areas, where we wanted to grow organically and this isn't just happening it's happening because we've got an immense.
Speaker Change: Training and sales system that we've set up there. So it's starting to work and I think youre going to see the results of that as we continue to move forward you see you're starting to see them now, but that's going to improve to answer your questions on margin on the business, maybe Dan you want to take that.
Speaker Change: Yeah. Thank you Jeff in terms of looking at the margin perspective, we obviously have a number of costs associated with the acquisitions is as Dan mentioned as well as our investments in the business as it relates to our staff et cetera to further augment our drive towards that organic growth. So as we continue with the scale growth in that.
Speaker Change: We definitely expect to see the margins.
Speaker Change: Margins improved through 2026.
Speaker Change: Okay. Thanks for that color I'll requeue.
Speaker Change: Thank you. Our next question is from Rob Goff from Ben Tim Your line is now open.
Speaker Change: Thank you and good morning.
Rob Goff: Good morning, Rob Thanks.
Rob Goff: You noted the strength of the advisory business and in particular, the U S Tech advisory business stood out could you talk to your outlook.
Rob Goff: That business going forward.
Rob Goff: Yeah I mean.
Rob Goff: No you don't know, but as I've always said.
Rob Goff: M&A is a little bit more predictable than some of our other businesses and capital markets and yeah. We continue to have a huge pipeline of activity.
Rob Goff: And.
Rob Goff: You know big client wins, and big assignment wins that obviously all have to work through.
Rob Goff: Obviously with if Theres continued market volatility some of these things are delayed from time to time in deals get pushed out to the right, but that's not what we're seeing right now so I think we've articulated that we could we see a strong pipeline and we continue to see a strong pipeline. So.
Rob Goff: Yes.
Rob Goff: Yes.
Rob Goff: I hate using the expression cautiously optimistic but.
Rob Goff: Main cautiously optimistic on our M&A business as we push forward here into this fiscal year.
Speaker Change: Thank you and in your deck, you mentioned that you were pursuing organic and inorganic growth in all regions per well.
Speaker Change: Could you talk to the U K is this a period of integration or are there further Chuck.
Speaker Change: Tuck ins.
Speaker Change: For that region.
Speaker Change: Yeah, I think in the U K.
Speaker Change: Well every time I say that we're not buying anything we ended up buying something but.
Speaker Change: But realistically.
Speaker Change: Yes.
Speaker Change: It's very targeted our acquisitions in the UK, it's really to provide a more fulsome service to our clients. So the days of us buying big Big UK wealth companies and integrating them in so that we've got sufficient scale that that's over for the time being I'm not saying it won't start up again, but certainly for now it's.
Speaker Change: Over to the extent that we're doing acquisitions now it's mainly it is to have a more holistic relationship with our clients buying financial planning firms.
Speaker Change: For example, those by definition more more often than not are small tuck in acquisitions and that's that's what you saw with our Cambridge acquisition.
Speaker Change: So yes, we will continue to look at that but Theres no I wouldn't expect an announcement in the next three months that we bought something.
Speaker Change: Okay. Good. Thank you and if I may a last question could you talk to what Youre seeing in the Aussie market on the bulk side.
Speaker Change: Yes.
Speaker Change: When we first got into the Aussie wealth business five years ago.
Speaker Change: Boston intentionally a fixer upper great partners, but but but but a firm that needed to be reworked.
Speaker Change: And that has been reworked and we're really tracking very similar strategy to the one we deployed in Canada, where it went from 8 billion to $40 2 billion.
Speaker Change: And.
Speaker Change: Yeah.
Speaker Change: The Aussie market has presented a very similar opportunity for us to recruit and bring onboard.
Speaker Change: <unk> group of New advisors nine this year and that will continue that will continue to increase.
Speaker Change: So, yes, we're seeing great growth there.
Speaker Change: Off a lower base, but 30% growth in that in that in our funds under management business there. So.
Speaker Change: We continue to see exceptional opportunities there and we think we're in a remarkable competitive position to realize on those opportunities.
Speaker Change: Great. Thank you very much good luck.
Speaker Change: Thank you.
Speaker Change: Thank you. Our next question is from Graham Ryding from TD Securities. Your line is now open.
Speaker Change: Hello, Hi, good morning.
Speaker Change: Good morning, Greg.
Speaker Change: Yeah.
Speaker Change: Maybe maybe if I could just start with you just that went up.
Speaker Change: Quarter over quarter I assume some of that's related to the Brooks Mcdonald acquisition can you maybe just talk about what drove.
Speaker Change: The remainder it looks like it was almost $1 million increase and then maybe your comfort level, how do you measure how do.
Speaker Change: Do you measure.
Speaker Change: Scott.
Speaker Change: What's your sort of optimal level of your comfort level. Yeah. So the debt increase are primarily related from a year over year basis to the convert coming on over from.
Speaker Change: Within there in fiscal 2024.
Speaker Change: So we've been managing that.
Speaker Change: Interest expense and obviously as we look at what we've portrayed as it relates to our total expense base. You know I think we've been very selective in terms of how we've been investing in the business. So that increase that is really driving that leverage to be able to drive that revenue growth print that you've seen this year and that's primarily on.
Speaker Change: Investing in the in the U K wealth business as you mentioned, but the big part of that contribution on a year over year basis was the convertible coming off.
Speaker Change: And quarter over quarter that was really more of our quarter, yeah would've been with the acquisition yet.
Speaker Change: Okay.
Speaker Change: And how do you measure.
Doug: Doug do you have a targeted sort of level that sort of.
Doug: A band or a range that you want to keep the business.
Doug: Operating with them.
Speaker Change: Well, we manage it against both looking at our overall capital base, and what where our ability to invest in and what that return is going to look like on that that level from a leverage standpoint. So yes, it's looked at in conjunction with our overall capital based on our operating capital.
Speaker Change: And Greg I know you know this but the the debts.
Speaker Change: The non convert that all the rest of the debt primarily is all in the UK well subsidiary.
Speaker Change: And Thats.
Speaker Change: Yeah.
Speaker Change: To schedule a bank debt.
Speaker Change: The leverage ratios are relatively modest.
Speaker Change: Given given the level of our earnings in that business.
Speaker Change: Okay understood and then maybe just pivoting to.
Speaker Change: The regulatory matter insurance your favorite topic, but just.
Speaker Change: Is there any progress you can sort of flag.
Speaker Change: What sort of spend do you think might be left.
Speaker Change: Material and any increased visibility here on potential timing yeah, yeah. The big spend I won't go in order that you asked the question, but the big spends has all been around the remediation efforts.
Speaker Change: Salt in some remediation efforts and we're <unk>.
Speaker Change: Namely through that.
Speaker Change: We've mainly remediate everything that we think we need to remediate that.
Speaker Change: That involves a lot of historical look back and stuff like that I think were pretty good so that spend should come down maybe Dan can speak to it more specifically.
Speaker Change: But you know.
Speaker Change: I think we are there.
Speaker Change: Thank you.
Speaker Change: Cleaning it up or getting rid of it I mean, it's.
Speaker Change: On a real unfortunate timing with respect to the U S regulators and really.
Speaker Change: Getting people's attention, given they're competing priorities and concerns so we'd like to make progress on it.
Speaker Change: Yeah, we'd like to have this thing disappear.
Speaker Change: And were you know.
Speaker Change: Aggressively working towards that that being said it takes two people to dance, so I'm sure they'll get their or their house in order and then we can have more intelligent conversations going forward.
Speaker Change: So I can't I can't give you I can't give you a timeframe. Unfortunately I wish I could.
Speaker Change: Understood.
Speaker Change: And then my last question you.
Speaker Change: I appreciate the slide you put in there just flagging the different.
Speaker Change: Options or timeline for the HTS.
Speaker Change: Five year anniversary coming up in July 2026, So can you just sort of run through.
Speaker Change: Perhaps how you're thinking about your preferred options as you approach that deadline.
Speaker Change: What are you sort of looking at this point are you exploring any buyers for their stake or perhaps the U K business overall.
Speaker Change: Are you looking at potentially financing options pay them off like how are you how should we think about it.
Speaker Change: Yes.
Speaker Change: Won't be as clear as you'd like me to be a gram.
Speaker Change: But you know what.
Speaker Change: All of the above.
Speaker Change: Sale refinance.
Speaker Change: Buy them out.
Speaker Change: Like theirs.
Speaker Change: Okay.
Speaker Change: There's probably 10 different options, if I really thought through them.
Speaker Change: So we continue to think through all of those but the important part about that business as we're delighted with how it's performing.
Speaker Change: It's performing remarkably well asset growth, we continue to integrate the firms that we bought were getting net new asset growth in that business.
Speaker Change: We're absolutely delighted to be a shareholder of this business and we think that's a massive value contributor to us.
Speaker Change: So that's the beauty of it is that.
Speaker Change: Those statements allow me to have more options as opposed to less options with respect to the business because the business is performing so well so yes, but we can we're very cognizant, obviously of the timeframes that come up we still have three years to think about things if we want to but we're obviously thinking through.
Speaker Change: All of our options with respect to that business as we speak.
Speaker Change: Okay. That's helpful does it makes sense too.
Speaker Change: Find some sort of exit before July 2026.
Speaker Change: IRR of 11, 5% just sort of start to accrue higher and higher.
Speaker Change: Yes, Graham I am not going to be as clear.
Speaker Change: Pete.
Speaker Change: So yeah.
Speaker Change: Yeah.
Speaker Change: We continue to look through all of all of our alternatives and and and were cognizant of all the dates involved.
Speaker Change: Okay. That's it for me thank you.
Speaker Change: Thank you.
Speaker Change: Thank you. Our next question is from Steven <unk> from Raymond James Your line is now open.
Speaker Change: Thanks, So just wanted to go back to about waterfall slide seven really helpful.
Speaker Change: Can you just tell me what's the difference between client expenses are in promotional and travel expenses.
Speaker Change: Sure. Thank you.
Speaker Change: Client expenses would relate to settlements or reserves et cetera, with particular clients primarily.
Speaker Change: Subtle reserve part.
Speaker Change: Is that the wealth management part of the business or primarily yes, yes, yes, okay. Yes.
Speaker Change: I don't want to pick on the.
Speaker Change: The discretionary expenses, but I understand the provisions professional fees.
Speaker Change: But within your fiscal 'twenty 'twenty four expenses, you have conference costs and client engagement cost buried in the fiscal 2024 and then.
Speaker Change: You've added another $8 million in expenses.
Speaker Change: It seems pretty material like I guess for one year.
Speaker Change: Top up.
Speaker Change: Mentioned in your intro remarks are you are you going to try and focus on discretionary expenses. So is that a number that is going to be flattening out here.
Speaker Change: Yes.
Speaker Change: Oh go ahead.
Speaker Change: Yeah, you're absolutely right. We've got a we were definitely focused on that area in particular, and so it's an opportunity for us given the fact that these are more discretionary. So we've got targets across the firm in every region to focus on that cost bucket because to your point we are spending.
Speaker Change: As you know a reasonable amount of money already so far it to go up in this year. So we're really focused on targets for each business and we've got plans in place to bring that number down on a year over year basis.
Speaker Change: Okay. So theoretically okay.
Speaker Change: Once the you said the professional.
Speaker Change: Professional fees were not pretty much done you flatten out the conference costs and increased client engagement quite that far.
Speaker Change: Yeah.
Speaker Change: Looking at saving of like $20 million over $20 million could disappear in terms of growth in the assets is that a fair comment fair comment.
Speaker Change: Okay.
Speaker Change:
Speaker Change: I think that's all I had appreciate it thanks.
Speaker Change: Two questions.
Speaker Change: Okay.
Speaker Change: That concludes our call. Thank you all again for joining us today and as always <unk>.
Speaker Change: Certainly can be available to take any questions. Our next.
Speaker Change: Earnings update will be in early August when we release, our first fiscal quarter results.
Speaker Change: So with that operator, I think you can now close the lines and thank you again everybody.
Speaker Change: Thank you.
Speaker Change: Ladies and gentlemen, the conference has now ended thank you all for joining you may all disconnect your lines.