Canaccord Genuity Group Q3 2026 Earnings Call Transcript

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Provided by Quartr
February 17, 2026

Key Takeaways

  • Positive Sentiment: Strong quarter: Firm-wide revenue was CAD 616 million (+37% YoY) and adjusted pre-tax net income doubled to CAD 81 million, translating to adjusted diluted EPS of CAD 0.36 (+112% YoY).
  • Neutral Sentiment: Capital Markets led by investment banking (especially Australia): Capital Markets revenue rose 43% YoY to CAD 301 million with Australia accounting for almost 50% of investment banking revenue, though management cautioned these sector-driven levels may not be a normalized run rate.
  • Positive Sentiment: Strategic portfolio changes: The sale of the U.S. wholesale market‑making business reduces cost and risk, while acquisitions of Wilsons Advisory (Australia) and CRC‑IB expand wealth scale and energy‑transition advisory capabilities.
  • Negative Sentiment: Regulatory uncertainty remains: The company is still engaging with U.S. regulators on enforcement matters and says the timing and terms of any resolution remain uncertain.
  • Positive Sentiment: Balance sheet and shareholder actions: Client assets reached a record CAD 145 billion (+26% YoY), the board approved a CAD 0.085 quarterly dividend, and management says working capital is sufficient to support strategy and flexibility.
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Earnings Conference Call
Canaccord Genuity Group Q3 2026
00:00 / 00:00

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Operator

Good morning, ladies and gentlemen, and thank you for standing by. I'd like to welcome everyone to the Canaccord Genuity Group Inc.'s Fiscal 2026 third quarter results conference call. All lines have been placed on mute to prevent any background noise. Following 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 one on your telephone keypad. If you'd like to withdraw your question, please press the pound key. If you have any difficulties hearing the conference, please press star, then zero for the operator assistance at any time. As a reminder, this conference call is being broadcast live, online, and recorded. I would now like to turn the conference call over to Mr. Dan Daviau. Please go ahead.

Dan Daviau
Dan Daviau
Chairman and CEO at Canaccord Genuity Group

Thank you, operator, and welcome to everyone joining today's call. As always, I'm joined by our Chief Financial Officer, Nadine Ahn. Our remarks today are complementary to the earnings release, MD&A, and supplemental financials, copies of which have been made available for download on SEDAR+ and on the investor relations section of our website at cgf.com. Within our update, certain reported information has been adjusted to exclude significant items to provide a transparent and comparative view of our operating performance. These adjusted items are non-IFRS measures. Please refer to our notice regarding forward-looking statements and the description of non-IFRS financial measures that appear in our MD&A. And with that, let's discuss the third quarter fiscal 2026 results.

Dan Daviau
Dan Daviau
Chairman and CEO at Canaccord Genuity Group

Supportive monetary policy, lower interest rates, and elevated fiscal spending helped lift broader markets during the third quarter, and this contributed to a continued improvement across our Wealth Management and Capital Markets businesses. Firm-wide revenue of CAD 616 million for the three-month period increased by 37% year-over-year and by 16% sequentially, representing our second highest quarterly revenue on record. Contributions were evenly split between our Wealth Management and Capital Markets divisions, which recorded year-over-year increases of 30% and 43%, respectively. Most notably, our third quarter financial performance benefited from an excellent environment for mining sector activity, driven by record gold prices and solid demand for industrial metals. On an adjusted basis, Capital Markets revenue increased by 43% year-over-year to CAD 301 million, mostly from new issue activity.

Dan Daviau
Dan Daviau
Chairman and CEO at Canaccord Genuity Group

This translated into a substantial growth in corporate financing revenue across all regions, led by an exceptional quarter from our Australia operations, which accounted for almost 50% of total investment banking revenues for the three-month period. More than 80% of this amount was linked to natural resource sector activity. Approximately 13% of investment banking revenue in our Australian operation was attributed to realized and unrealized gains on inventory positions, which are an important component of doing business in the market. We do employ a disciplined execution strategy to monetize these positions while preserving capital and continuing to meet client needs. Although we are pleased with the current and prior quarter's activity levels, I would caution against assuming these activity levels represent a normalized run rate.

Dan Daviau
Dan Daviau
Chairman and CEO at Canaccord Genuity Group

Certain sector-driven revenues are benefiting from unusually strong conditions that we would not expect to persist at the same levels and are more likely to moderate in the future. Revenue growth from our Wealth Management division was driven primarily by a 32% year-over-year increase in commission and fees, along with a 154% year-over-year increase in investment banking revenue, largely reflecting higher new issue activity in our Canadian and Australian businesses, and bolstered by contributions from our acquisition of Wilsons Advisory, which was completed on October 1st. We ended the quarter with client assets of CAD 145 billion and new records set in each of our geographies. Excluding significant items, firm-wide pre-tax net income for the third fiscal quarter doubled when compared to the same period of the prior year to CAD 81 million, which translated to diluted earnings per share of CAD 0.36.

Dan Daviau
Dan Daviau
Chairman and CEO at Canaccord Genuity Group

I will note that our Australian business contributed CAD 0.09 to the adjusted EPS in the third quarter, with CAD 0.08 coming in the Capital Markets division. As disclosed in our quarterly filings, our beneficial ownership in this business will decline beginning in the fourth fiscal quarter. We continued to advance our strategic priorities during the quarter. On November 7, we completed the sale of our U.S. wholesale market-making business, allowing us to sharpen our focus on our integrated M&A and investment banking capital markets capabilities, while reducing the cost base and risk profile of our U.S. capital markets operations. We also completed our acquisition of the leading renewable energy advisory firm, CRC-IB, which has enabled the formation of a new energy transformation group, deepening our commitment to the sustainability sector clients in all geographies.

Dan Daviau
Dan Daviau
Chairman and CEO at Canaccord Genuity Group

Finally, we completed our acquisition of Wilsons Advisory in Australia, adding meaningful scale and establishing a truly national footprint in our wealth management business in the region. Before handing things over to Nadine to discuss our financial results in more detail, I'd like to briefly highlight a few additional disclosures from our quarterly results press release. Firstly, we continue to engage with our U.S. regulators on the content and substance of a potential unified resolution of our previously disclosed regulatory enforcement matters. However, the timing of the resolution of these matters remains uncertain. Secondly, at the request of regulators, on October 17th, the company issued a statement in response to media coverage speculating about a potential transaction involving our U.K. wealth management business, which has contributed to increased volatility in our stock price.

Dan Daviau
Dan Daviau
Chairman and CEO at Canaccord Genuity Group

The company continues to assess options for this business in the context of, among other things, the rights of its strategic and financial minority partner and that partner's investment horizon, as noted in prior company disclosures, prevailing market and execution conditions, and other relevant industry factors. At this time, there can be no assurance that any discussion will result in a transaction or that such transaction would occur at valuations implied by recent market and transaction activity. With that in mind, we do not intend to comment further on these matters, except as required under applicable regulatory obligations. With that, I'll turn things over to Nadine.

Nadine Ahn
Nadine Ahn
EVP and CFO at Canaccord Genuity Group

Thank you, Dan, and good morning, everyone. As Dan mentioned, we delivered exceptionally strong revenue in the quarter, which resulted in meaningful earnings growth. Firm-wide pre-tax net income for our third fiscal quarter rose 103% year-over-year to CAD 81 million, bringing our fiscal year-to-date net income to CAD 174 million, up 49% year-over-year. This translated to adjusted diluted earnings per share of CAD 0.36, up 112% year-over-year, reflecting strong revenue growth across all businesses and lower non-compensation expenses as a percentage of revenue. We continue to focus on cost efficiency initiatives to drive firm-wide margin expansion. While certain costs increased in connection with higher revenue generation, our total expenses as a percentage of revenue declined by 4.3 percentage points compared to the same period of last year.

Nadine Ahn
Nadine Ahn
EVP and CFO at Canaccord Genuity Group

Firm-wide non-compensation expenses, excluding significant items, decreased by CAD 5 million, or 3.2% year-over-year, to CAD 152 million, representing 25% of third quarter revenue. This decline was largely driven by lower interest, trading, and general and administrative expenses. Trading, settlement, and technology costs decreased by CAD 2.5 million, or 5% year-over-year, to CAD 48 million, primarily reflecting a CAD 6.5 million reduction following the sale of the U.S. wholesale market-making business, which was completed during the third fiscal quarter. This was partially offset by higher trading costs in our Australian wealth operations, driven by increased commissions and fees activity.

Nadine Ahn
Nadine Ahn
EVP and CFO at Canaccord Genuity Group

Interest expense declined by CAD 5.2 million, or 16.8% year-over-year, to CAD 26 million, reflecting lower interest rates and the sale of the U.S. wholesale market-making business. General and administrative expenses also declined by CAD 2.5 million, or 6% year-over-year, due to one-time items in the prior period. Firm-wide compensation ratio on an adjusted basis for the fiscal year to date was 61.1%. The timing of bonus accruals, as well as the impact of changes in the value of certain unvested stock-based compensation awards, negatively impacted the compensation ratio in the third quarter. Turning to business unit performance, capital markets contributed pre-tax net income of CAD 51 million, representing a 248% improvement from the same period last year.

Nadine Ahn
Nadine Ahn
EVP and CFO at Canaccord Genuity Group

The adjusted pre-tax profit margin improved by 10 percentage points year-over-year to 17%, with the most notable increases in our Australian and U.S. businesses. On a consolidated basis, capital markets revenue increased by 43% year-over-year to CAD 301 million. And as Dan had mentioned, the primary driver of this increase was the 170% increase in investment banking revenue. In connection with higher investment banking activities, commissions and fees revenue also increased by 42% year-over-year to CAD 54 million, the highest level since Q4 fiscal 2021. Advisory revenue of CAD 65 million declined by CAD 6 million, or 9% year-over-year.

Nadine Ahn
Nadine Ahn
EVP and CFO at Canaccord Genuity Group

Our U.S. operations contributed $43 million, representing a 38% year-over-year increase, which was partially offset by declines in our Canadian and U.K. businesses, where results reflected a more challenging year-over-year comparison period due to several significant mandates completed in the prior year period. Trading revenue declined by 48% year-over-year, primarily due to the sale of the U.S. market-making business, which was completed on November 17th. Contributions from this business reflect approximately 5 weeks of activity prior to the completion of the transaction. With the sale of the U.S. market-making business and the acquisition of CRC-IB now complete, the revenue mix, cost base, and risk profile of our U.S. capital markets business will shift meaningfully.... and we expect this will drive a sustained improvement in operating margins in this business.

Nadine Ahn
Nadine Ahn
EVP and CFO at Canaccord Genuity Group

Turning to our wealth management businesses, revenue of CAD 304 million, an adjusted pre-tax net income of CAD 57 million increased by 30% and 57%, respectively. Included in these amounts are contributions from Wilsons Advisory of CAD 16.1 million in revenue and CAD 1.8 million in adjusted net income before tax. The key drivers of revenue growth during the quarter were a 32% year-over-year increase in commissions and fees revenue to CAD 240 million, driven primarily by higher contributions from our Australian and Canadian operations, and a 154% increase in investment banking revenue to CAD 25 million, with 64% of that amount contributed by our Canadian operations and the remainder from Australia.

Nadine Ahn
Nadine Ahn
EVP and CFO at Canaccord Genuity Group

While our U.K. business remained the largest contributor to pre-tax net income, our Canadian and Australian businesses delivered substantial increases as stronger revenue translated into improved operating leverage. Our Canadian business contributed CAD 23 million in adjusted pre-tax net income, representing a 155% year-over-year increase, while Australia more than tripled its contribution to CAD 7 million. Client assets at the end of the quarter reached a new record of CAD 145 billion, representing a 26% year-over-year increase, driven primarily by market appreciation, acquisitions, and supported by positive net flows. Measured in local currency, assets in our U.K. wealth management business grew 13% year-over-year to GBP 40 billion. This translated into CAD 75 billion in Canadian dollars, representing a 16% increase compared with the prior year, driven primarily by market appreciation, acquisitions, and foreign exchange movements.

Nadine Ahn
Nadine Ahn
EVP and CFO at Canaccord Genuity Group

Client assets in Canada increased 25% year-over-year to CAD 53 billion, largely reflecting higher market values, with additional contributions from recruiting. While the business experienced positive net flows during the quarter, fee-generating accounts represented a lower proportion of total client assets, reflecting the higher level of commission-based assets in connection with the increased investment banking activity in this business during the three-month period. Assets in our Australian business also reached a new record, increasing to AUD 17 billion from AUD 8 billion a year ago. Approximately AUD 6.7 billion of this increase was attributable to the acquisition of Wilsons Advisory. Strong revenue performance in the current quarter, together with our continued focus on organic and inorganic growth initiatives, has strengthened profit margins across the business and positioned us well relative to our targeted single-digit growth objectives.

Nadine Ahn
Nadine Ahn
EVP and CFO at Canaccord Genuity Group

Our nine-month year-to-date performance has exceeded this target, and we remain well positioned relative to our single-digit growth objective for the full fiscal year. Turning to the balance sheet, we maintain sufficient working capital to meet our regulatory commitments, support our strategic priorities, and expanded business activity, while preserving the flexibility to reallocate capital as market conditions evolve. Reflecting this confidence, our board of directors has approved a quarterly common share dividend of CAD 0.085. With that, I will turn things back to Dan.

Dan Daviau
Dan Daviau
Chairman and CEO at Canaccord Genuity Group

Thank you, Nadine. We are very pleased with our third quarter performance, which was driven by elevated client activities, strong execution, and improving market conditions. Looking ahead, we remain focused on executing our strategic priorities to deliver attractive returns for our shareholders. While we anticipate some moderation from the revenue levels achieved in Q3, we expect market conditions to remain broadly supportive. Commodity prices and improving conditions for small- and mid-cap equity markets continue to underpin improving capital raising and advisory activities across our core capital market sectors. We continue to see strong momentum in advisory, supported by active pipelines and increasing client engagement. Regionally, we expect continued solid performance in our Canadian capital markets business and improving performance in the U.S. and U.K., partially offset by the seasonally slower summer period in Australia. In wealth management, we anticipate sustained growth in client assets, bolstered by positive net flows.

Dan Daviau
Dan Daviau
Chairman and CEO at Canaccord Genuity Group

That said, the increased new issue revenue and some commission revenue remain highly market dependent, making our Canadian and Australian businesses more sensitive to market conditions. Even with the intermittent periods of volatility, broadly speaking, markets are functioning well with strong investor engagement. With that, Nadine and I would be pleased to take your questions on the quarter. Operator, you may now open the lines.

Operator

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

Dan Daviau
Dan Daviau
Chairman and CEO at Canaccord Genuity Group

Hi, Jeff.

Jeff Fenwick
Jeff Fenwick
Managing Director and Head of Equity Research at Cormark Securities

... Wanted to start off on Australia first, in the wealth management area. Obviously, that Wilsons Advisory acquisition was a very complementary addition and gave you some good scale in the market. Could you speak to the opportunity to continue to find other firms like that? Is this a market that's going through consolidation similar to other markets, and how are you thinking about that going forward?

Dan Daviau
Dan Daviau
Chairman and CEO at Canaccord Genuity Group

You're gonna kill my Australia theme, Jeff, with questions like that. But it's a big acquisition for us, and, you know, there are three new offices, plus integrating three offices into our existing facilities. You know, I think they're capped out on acquisitions for the time being, but your question isn't, "Hey, what about next quarter?" I hope it's about, you know, long term. Long term, I think we've always said we see the opportunity in Australia similar to the opportunity we see in Canada. You know, I guess the only difference between the two markets is from time to time, we'll find complementary acquisitions in Australia, which are more difficult to come by in Canada. We do have an active recruiting pipeline in Australia. We continue to recruit into that.

Dan Daviau
Dan Daviau
Chairman and CEO at Canaccord Genuity Group

You know, we've got a bunch of advisors who joined us last quarter and a bunch more that are going to be joining us. And it's a similar kind of take-on program, and maybe a little bit cheaper than it is in Canada to bring on advisors, but we continue to see that. So we really like the Australia wealth space, and are gonna continue to invest significantly into it. And I think as the business scales up, you'll see margins improve. Yeah, I'd caution you a little bit on the Australian wealth business. It tends to be a little bit more transactional. Like Canada, we see a lot of new issue business flow through our wealth business. They're very complementary businesses. You know, they're not segregable. They're one combined business, our capital markets and wealth businesses.

Dan Daviau
Dan Daviau
Chairman and CEO at Canaccord Genuity Group

So you may see a little bit more volatility in that business than you typically see in a wealth business, simply because, you know, as the business transitions to fee-based, you know, we still continue to play in the new issue business, and, obviously, when things are active, particularly in the, in the resource where you'll see an increase in commission revenue, as, you know, assets flow into deals and flow out of deals. But, you know, the, like I said, the business continues to scale up. We've got now 400 people in our Australia wealth business. It's not a small business anymore. So it's, it's pretty exciting, and, and we like it.

Jeff Fenwick
Jeff Fenwick
Managing Director and Head of Equity Research at Cormark Securities

That's very helpful, color. And then I guess associated with this, you made reference in the release to a rights offering underway in Australia, and I guess more of the employees wanted to gain exposure to a business that's doing well down there.

Dan Daviau
Dan Daviau
Chairman and CEO at Canaccord Genuity Group

Yeah, I think that's right. As I've said before, Jeff, managing a business that's the antipode of Toronto, the furthest point on Earth away from another point on Earth, it's good to have local ownership, and it's exciting when our employees want to own more of that business, which they do. We funded the Wilsons acquisition with debt and, you know, and free cash flow that we had sitting there. But with, you know, with a significant chunk of debt, we want to bring down that debt as part of that. We are looking at an equity raise to employees and ourselves, although we see, you know, we see our ownership coming down, as I think we disclosed. We'll retain control.

Dan Daviau
Dan Daviau
Chairman and CEO at Canaccord Genuity Group

It's a complicated process on how you do a rights deal in Australia to employees. So exactly our equity ownership is, we can't disclose that yet, but it will be coming down from its existing 65%.

Jeff Fenwick
Jeff Fenwick
Managing Director and Head of Equity Research at Cormark Securities

Okay, thank you. And then, maybe we'll pivot to Canada. Obviously, in the wealth management group there, quite a strong performance and just continuing some positive trends. But I guess the one thing maybe to take on here is just not really haven't seen much in the way of actual advisor team growth over the last couple of years. And, you've spoken to the desire to recruit, and I think there's been some recruiting, but it's often gain one, lose one. You know, what's the challenge there? Are you happy with the footprint today? Is there a reason why it's a little difficult to roll in teams? Is it maybe just the nature of the profile of the offering versus maybe other thing- other platforms they could be on in the market?

Jeff Fenwick
Jeff Fenwick
Managing Director and Head of Equity Research at Cormark Securities

Or just any color there you could offer?

Dan Daviau
Dan Daviau
Chairman and CEO at Canaccord Genuity Group

Yeah, fair questions. I mean, we do continue to recruit teams, so the pipeline goes up and down in terms of the level of activity. Generally speaking, you don't see growth because we're recruiting a bigger advisor and cycling out a smaller advisor, or a smaller advisor, you know, retires or what have you. So the average book per advisor continues to grow significantly, and it's at a record, Nadine. It's currently-

Nadine Ahn
Nadine Ahn
EVP and CFO at Canaccord Genuity Group

369.

Dan Daviau
Dan Daviau
Chairman and CEO at Canaccord Genuity Group

CAD 370 million. That number is at all-time record, so our average advisory teams are up. You also can see we disclose teams, so sometimes two advisors will combine into one team. So that activity is going on, and that's an activity we strongly encourage. So we probably should disclose number of advisors, too, to be honest, Jeff, 'cause I think it'll give you a better transparency on that. But yeah, we're in the market of continuing to bring over great new partners into our franchise. We brought over a couple last quarter. We continue to have a good pipeline. We're in that business, and we continue to be in that business. So, you know, no real color.

Dan Daviau
Dan Daviau
Chairman and CEO at Canaccord Genuity Group

We're very excited by our Canadian wealth business and its pace of activity and its recruiting pace, but you know, it takes time to bring people over.

Jeff Fenwick
Jeff Fenwick
Managing Director and Head of Equity Research at Cormark Securities

Fair enough. And then maybe one last one here, just on the announced acquisition of the environmental-focused or energy transition-focused boutique in the quarter. I mean, just given-

Dan Daviau
Dan Daviau
Chairman and CEO at Canaccord Genuity Group

CRC?

Jeff Fenwick
Jeff Fenwick
Managing Director and Head of Equity Research at Cormark Securities

Yeah, just given the tone and the actions of the current U.S. administration doesn't exactly feel like a growth area right now. So maybe just give us a sense of what you see there, where the opportunity lies longer term and why you'd choose to make that acquisition.

Dan Daviau
Dan Daviau
Chairman and CEO at Canaccord Genuity Group

... Yeah. So CRC, we had an option to acquire them for a period of time in a completely different environment. They significantly performed over what we had expected. So we certainly exercised our option. We're very cognizant of the tax and other changes in the U.S. It's a business, you know, the how you define sustainability and how you define energy transition, I mean, that's going to go on no matter what. You know, is it tax-driven financing activity, or is it fundamental M&A activity? That business kind of evolves. And just like your own M&A business at your firm or anywhere else, you know, you kind of go where the market's active.

Dan Daviau
Dan Daviau
Chairman and CEO at Canaccord Genuity Group

This is a team, you know, a young team, a phenomenal team of partners that have really shown a remarkable ability to transition their business, and we see that in their existing business. So we're very confident in their ability to keep on delivering, you know, at or better than they've delivered in the past. So, it's certainly an exciting opportunity. You know, and again, even if some of its tax-driven financing disappears, we see their M&A business significantly increasing. So, I mean, energy needs aren't going to disappear. And, you know, how you facilitate those energy needs, particularly in the U.S., will be important. Add to that the fact that we'll have an equity business that flows from that advisory practice that they have, and stapling on the international capabilities.

Dan Daviau
Dan Daviau
Chairman and CEO at Canaccord Genuity Group

So as we've always said, we're going to grow in core sectors where we think we've got a unique, global advantage, and this is one of the sectors where we think between our U.K., Canadian, and Australian practice, that we can really outperform in. So we're excited by it.

Jeff Fenwick
Jeff Fenwick
Managing Director and Head of Equity Research at Cormark Securities

Great. Appreciate the color. Thank you. That's all I had.

Dan Daviau
Dan Daviau
Chairman and CEO at Canaccord Genuity Group

Thanks, Jeff.

Operator

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

Rob Goff
Managing Director and Head of Research of Technology, Special Sits, and Financials at Ventum Capital

Thank you very much. Congrats on the quarter. I hope there's no need for caution on continued momentum in the markets out there.

Dan Daviau
Dan Daviau
Chairman and CEO at Canaccord Genuity Group

You haven't been doing this business long enough, Rob, if you don't think there's caution on continued momentum.

Rob Goff
Managing Director and Head of Research of Technology, Special Sits, and Financials at Ventum Capital

I'm still a newbie.

Dan Daviau
Dan Daviau
Chairman and CEO at Canaccord Genuity Group

Yeah. No, you're not.

Rob Goff
Managing Director and Head of Research of Technology, Special Sits, and Financials at Ventum Capital

I can pretend. Sometimes with the wealth advisors, when you're out recruiting, like, from the banks, you know, risk tolerances and such are key considerations. How are you finding the flow of either advisors or assets from Canadian banks over to your wealth arm?

Dan Daviau
Dan Daviau
Chairman and CEO at Canaccord Genuity Group

Yeah, like, like I mentioned a little bit with Jeff, I mean, the pipeline ebbs and flows. Sometimes it's massive, and we're talking to literally a new team every week, and sometimes it's a little lighter. I'd argue, arguably right now, maybe it's a little lighter. I, you know, that being said, I'll have a meeting tomorrow, and I'll decide it's, you know, very active again. But, you know, the, you know, it's fundamentally part of our strategy. It's not... It doesn't happen by accident. It happens because we've got a whole recruiting momentum here. So, you know, I, I don't think much has really changed. The cost of acquisition hasn't changed. The pace of acquisition hasn't changed. You know, I think it's just going to be more of the same. Certain quarters will be bigger, and certain quarters will be smaller.

Dan Daviau
Dan Daviau
Chairman and CEO at Canaccord Genuity Group

It—that's probably the best way I'd frame it. Is that your question, or is it something deeper than that?

Rob Goff
Managing Director and Head of Research of Technology, Special Sits, and Financials at Ventum Capital

I'm not that deep down.

Dan Daviau
Dan Daviau
Chairman and CEO at Canaccord Genuity Group

Okay. Yes, you are. Okay.

Rob Goff
Managing Director and Head of Research of Technology, Special Sits, and Financials at Ventum Capital

Thanks. Good luck.

Dan Daviau
Dan Daviau
Chairman and CEO at Canaccord Genuity Group

Thank you.

Operator

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

Dan Daviau
Dan Daviau
Chairman and CEO at Canaccord Genuity Group

Hi, Graham.

Graham Ryding
Graham Ryding
Equity Research Analyst at TD Securities

If I could touch on the U.S. regulatory review, I'm sure it's your favorite topic.

Dan Daviau
Dan Daviau
Chairman and CEO at Canaccord Genuity Group

Yeah.

Graham Ryding
Graham Ryding
Equity Research Analyst at TD Securities

Just the commentary-

Dan Daviau
Dan Daviau
Chairman and CEO at Canaccord Genuity Group

Speaking about.

Graham Ryding
Graham Ryding
Equity Research Analyst at TD Securities

Yeah. The commentary seemed to change slightly from last quarter, where you suggested, you know, expectation of a resolution in the coming months. It seems like you're describing it now as remaining, continuing to remain uncertain. Am I, am I reading too much into this, or has the progress on this front slowed, somewhat?

Dan Daviau
Dan Daviau
Chairman and CEO at Canaccord Genuity Group

Yeah, it depends on what day you get us. No, I don't think the progress has slowed. I think it's taken longer than I would have expected. I think you're right, that our commentary in the last couple of quarters would have suggested that at any point in time, we'd be kind of done and over with. I think we're comfortable with the financial provisions we put in. I don't think, you know, if we weren't comfortable with them, you would have seen a change to that. Those are estimates obviously. We didn't make a change to our financial provisions. You know, I think the difficult part is coming to, I think we use the term, terms and form or form and terms of the regulatory settlement.

Dan Daviau
Dan Daviau
Chairman and CEO at Canaccord Genuity Group

It's, you know, it's just coming up with the right words, and you've got, you know, multiple government shutdowns, and you've got three regulators that we're dealing with. So, you know, I'm still optimistic about, you know, getting to a resolution. There's, you know, the alternative isn't very attractive. So hopefully, you know, over the, you know, I would have said this last quarter, hopefully over this quarter, we'll get it solved. But you could have heard me say the same thing over the last couple of quarters, too.

Graham Ryding
Graham Ryding
Equity Research Analyst at TD Securities

Yeah. Okay, fair. There was a deal recently in the U.K. on the wealth side with NatWest and Evelyn Partners. Would you consider Evelyn a decent comparable for your U.K. business? Any reason why we should not be viewing that deal as a read-through into your U.K. biz?

Dan Daviau
Dan Daviau
Chairman and CEO at Canaccord Genuity Group

Didn't I say I'm not going to talk about the U.K.? Yeah, I won't talk about our U.K. business, but yeah, the Evelyn transaction, I mean, Evelyn was a bigger firm than ours, arguably, you know, probably double our size, probably a little bit more mature, and probably had better organic growth than we had. And probably a slightly stronger influence on planning than. Although we have that, they were probably a little bit more mature from that perspective. So it fit better in with a strategic buyer, like a bank. That doesn't mean that ours wouldn't. So, yes, is it comparable? Sure, it's comparable.

Dan Daviau
Dan Daviau
Chairman and CEO at Canaccord Genuity Group

If you're asking me, "Hey, would you apply that multiple to your business?" that's something I'm not going to comment on, but because I think that's what you really were asking. But you know, so I won't get into that. But yeah, it's not a completely dissimilar business, if that's your question.

Graham Ryding
Graham Ryding
Equity Research Analyst at TD Securities

Yeah, that's helpful. On the U.K. wealth side, it looked like your pre-tax earnings were a bit lower than what we were looking for and sort of moved sideways a little bit over the last sort of year relative to your AUA growth. So I think the margins come down a bit this quarter. Any commentary on just the pre-tax earnings and the margin profile of that business?

Nadine Ahn
Nadine Ahn
EVP and CFO at Canaccord Genuity Group

Yeah, I'll take that. Yeah, you're correct. We did note that our pre-tax margins down by about two or three percentage points. Primarily, that was driven... We have been running a bit of a higher cost base. You'll recall we had a number of acquisitions closing just towards the tail end of the year as we're working through the integration of those, which resulted in a bit higher in terms of our pro fees, legal fees, et cetera. So we're running a bit higher on that basis. So we would have seen our expenses increase relative to what you would have seen on the revenue growth. We obviously benefited on an AUA standpoint from the market growth, and we're continuing to see some positive net flows in that business.

Nadine Ahn
Nadine Ahn
EVP and CFO at Canaccord Genuity Group

But the expense creep up is really what drove the shrinkage in margins, but we expect that to pivot as we get through some of that cost base.

Graham Ryding
Graham Ryding
Equity Research Analyst at TD Securities

Understood. You flagged that on the net flow side, that there was some intentional outflows due to acquisitions. Have those slowed or stopped, or are those continuing to come through?

Nadine Ahn
Nadine Ahn
EVP and CFO at Canaccord Genuity Group

Yeah, we referenced there would have been one exceptional outflow that we had, we had been signaled to us quite early on. That would have come out in the quarter. So outside of that, we are starting to see positive net flows, in the low single digits.

Graham Ryding
Graham Ryding
Equity Research Analyst at TD Securities

Okay, great. And my last one, if I could, just on the Australian ownership piece, I appreciate that you can't put a pin in what your stake is going to move down to, but will you maintain more than 50% ownership in that Australian business-

Dan Daviau
Dan Daviau
Chairman and CEO at Canaccord Genuity Group

Yeah.

Graham Ryding
Graham Ryding
Equity Research Analyst at TD Securities

After this rights offering?

Dan Daviau
Dan Daviau
Chairman and CEO at Canaccord Genuity Group

Yes, we'll retain control, more than 50% ownership.

Graham Ryding
Graham Ryding
Equity Research Analyst at TD Securities

Okay. That's it for me. Thank you.

Dan Daviau
Dan Daviau
Chairman and CEO at Canaccord Genuity Group

Thanks. Sorry, I wish we could be more precise, but it's just impossible at this stage.

Operator

Thank you. There are no further questions at this time. Mr. Dan Daviau, you may continue.

Dan Daviau
Dan Daviau
Chairman and CEO at Canaccord Genuity Group

Okay. Well, thank you all for joining us today. And again, our apologies for reporting on Friday, February 13, in the afternoon. We just had some real scheduling problems with our board this time around. So I appreciate you all being on the call this morning, and hopefully, we didn't wreck a good long weekend. Appreciate your continued support as always, and Nadine and I are certainly available for further questions on the quarter as needed. So with that, operator, if you can close the lines. Thank you very much.

Operator

Ladies and gentlemen, this does conclude your conference call for today. We thank you very much for your participation. You may now disconnect. Have a great day.

Executives
    • Dan Daviau
      Dan Daviau
      Chairman and CEO
    • Nadine Ahn
      Nadine Ahn
      EVP and CFO
Analysts
    • Graham Ryding
      Equity Research Analyst at TD Securities
    • Jeff Fenwick
      Managing Director and Head of Equity Research at Cormark Securities
    • Rob Goff
      Managing Director and Head of Research of Technology, Special Sits, and Financials at Ventum Capital
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