Canaccord Genuity Group Inc Stock

Good morning. I'd like to extend a warm welcome to those of you who have joined us. Thank you for taking the time to meet with us today. My name is Dan Daviau. I have served as CEO of Canaccord Genuity Group since 2015 and was appointed Chairman in 2024, and I have the privilege of chairing today's meeting.

Joining me on today's webcast are our Executive Vice President and Chief Financial Officer, Nadine Ahn; and our Senior Vice President of Legal Affairs, General Counsel and Corporate Secretary, D'Arcy Doherty. I'd also like to welcome additional members of our executive leadership team and our current directors who are joining us from various locations in North America, the U.K. and Crown Dependencies and Australia. We are once again holding this year's meeting online to promote broader participation and provide the option for shareholders to vote and submit questions regardless of their location.

Before we get started, a couple of procedural matters. Many shareholders submitted their votes before the meeting. Thank you. If you voted in advance and you do not wish to change your vote, no further action is required. A very small number of you have decided to vote at the meeting. Voting instructions were made available in the information that shareholders received as part of the meeting materials, and these instructions have also been available on SEDAR+.

If you are a registered shareholder or proxy holder, you would have received your control number or user name with your meeting materials by mail or e-mail. This gives you the ability to vote and submit questions as shown on the meeting website. If you have followed the instructions in the meeting materials, then you will have logged into this meeting with your control number as your user name and the password canaccord2026, all in one word using lower case letters.

If you are not a registered shareholder or proxy holder, then you have logged into this meeting as a guest. Guests will be able to follow the proceedings, but will only be able to submit questions after the end of the formal business of the meeting. Once the discussion and all items of the business has concluded, I will pause briefly to allow sufficient time to enter your votes, and then I will declare the voting closed on all resolutions.

We will conduct all votes on the matters before us as a poll. On a poll, every shareholder entitled to vote on the matter has 1 vote in respect of each share entitled to be voted on the matter and held by that shareholder. The poll will be open for all resolutions at the same time. This will allow you to vote on each resolution immediately or wait until the conclusion of the discussion on each resolution prior to casting your vote.

Later today, the results of this meeting will be made available on the company's Investor Relations website and on SEDAR+. There will be an opportunity for registered shareholders and proxy holders to ask questions on each resolution in turn. Please ensure that the questions or comments are related to the matters currently before the meeting.

When submitting a question, please provide your name and indicate clearly whether you are a shareholder or proxy holder. To submit a question, use the questions icon on the virtual meeting platform. We will answer questions related to each motion at the appropriate time in the meeting. We will also be pleased to address general questions after the presentations have concluded. If we receive several questions on the same topic, we will group these questions together and provide a response.

We will respond to as many questions as possible during this meeting. If we are not able to address your question here, we will respond to you directly after the meeting if you provide an e-mail address or a telephone number where you can be reached. During the meeting, you may experience pauses from time to time as we review messages, so please bear with us.

On behalf of those speaking today, I note that all comments may include forward-looking statements. I encourage you to take a moment to review the detail regarding forward-looking statements and non-IFRS measures that have been provided as part of today's presentation and also available in our financial reports.

Our agenda for today's meeting will begin with the submission of the company's fiscal 2026 financial statements, followed by the election of directors, the appointment of auditors, the advisory resolution on our executive compensation approach as disclosed in our circular. Following the official business of today's meeting, I will share a few remarks about our business and provide a brief overview of our corporate strategy and outlook. As I have previously mentioned, we will be pleased to take general questions after the presentations have concluded.

And now for the official business of today's meeting. The meeting will please come to order. I appoint Jenny Karim, an Officer of Computershare Investor Services to be the scrutineer of the meeting.

I have received Computershare's report as to the share representation at today's meeting, and there is a quorum present. So I now declare this meeting to be regularly called and properly constituted for the transaction of business. I declare the polls open on all resolutions.

The first item of business is the election of the company's directors to serve until the next Annual General Meeting or until their successors are appointed. First, I propose a motion that the company set the number of directors at 6.

D'Arcy, have we received any questions or comments online?

We have not, Chair. Thank you.

If there are no questions, please cast your votes on Item 1 right now before we move on to Item 2. I declare the meeting open for nominations and advise that management has nominated the following individuals, all of whom have consented to their election.

Biographies for each of our nominated directors has been provided in the management information circular. John Albright, our Lead Independent Director; Michael Orbach; myself, Dan Daviau; Shannon Hussey; Terry Lyons; and Cindy Trip.

D'Arcy, have we received any further nominations or questions or comments online?

We have not, Chair. Thank you.

Since there are no further nominations and no questions, please cast your votes for each of the director nominees. It is now in order to proceed with the appointment of auditors. I propose a motion to appoint Ernst & Young LLP, Chartered Professional Accountants as auditors of the company for the next ensuing year and authorize the directors to fix their remuneration. Please vote now.

[Voting]

D'Arcy, have we received any further nominations or any questions or comments online?

We have not, Chair. Thank you.

Our final item of business is an advisory resolution on the company's executive compensation approach. The Board considers this to be an important part of our shareholder engagement process and commits to reviewing the results of the vote when considering further decisions related to executive compensation. D'Arcy, have we received any questions or comments online?

No, we have not, Chair. Thank you.

Please vote now.

[Voting]

That concludes the official business portion of our fiscal 2026 Annual General Meeting. I will pause for a moment while the voting concludes. Thank you. I now declare voting on all matters closed. All motions have been passed and the following directors have been elected as directors of the company to serve until the next Annual General Meeting or until their successors are appointed. Michael Orbach; John Albright; myself, Dan Daviau; Shannon Hussey; Terry Lyons; and Cindy Trip. I will now declare the formal meeting concluded.

Thank you once again to my fellow shareholders for your continued trust in our organization. Fiscal 2026 demonstrated the strength of our strategy, the resilience of our operating model and the value of our partnership culture. The year began against an uncertain backdrop shaped by shifting trade policy, evolving interest rate expectations and geopolitical developments. Although conditions remain volatile, the environment became progressively more constructive as the year unfolded.

Throughout this period, we remain focused on delivering market-leading advice and execution for our clients, investing selectively in our platform, managing risk prudently and allocating capital with a long-term perspective. Full year revenue increased 20% to more than $2 billion. Just as importantly, our revenue mix was far more balanced than the last time we achieved this level. Wealth Management contributed 50% of annual revenue compared with prior periods when capital markets generated roughly 2/3 of firm-wide revenue.

This diversification underscores the strength of our wealth management platform and highlights the meaningful upside potential in capital markets as activity continues to recover. While improved market conditions supported higher activity levels, disciplined execution and stronger operating leverage drove significantly greater profitability. Adjusted net income to common shareholders increased 115%, accompanied by meaningful pretax margin expansion.

Throughout fiscal 2026, we continue to invest in and scale our global wealth management platform. We achieved this through acquisitions and targeted recruitment to enhance our capabilities, allowing us to do more for our clients. These efforts contributed to a record performance. Revenue increased 26% year-over-year. Adjusted pretax net income increased 40% and client assets grew 23% with new records in each of our geographies. Client asset growth was supported by market appreciation, positive net inflows and deeper client engagement. Each region contributed through distinct and complementary growth drivers.

In the U.K. and Crown dependencies, we advanced our organic growth priorities, building on prior acquisitions and talent investments to enhance our financial planning and distribution capabilities. In Canada, increased client activity and greater adviser collaboration supported stronger performance as we continue to grow fee-based revenue while supporting increased transaction volumes.

In Australia, strong underlying growth was complemented by the transformative Wilsons Advisory acquisition, which added meaningful scale, expanded our capabilities and established a truly national footprint. Our Capital Markets division also delivered substantially stronger results, reflecting the investments we've made in our people and our platform and the ability of our teams to move decisively as opportunities emerged.

Revenue increased 26% year-over-year, while the division's pretax net income contribution more than tripled, demonstrating significantly improved operating leverage. Investment Banking revenue increased 93% year-over-year and accounted for 39% of global capital markets revenue. Growth was driven by significantly higher corporate financing activity in all regions, with particularly stronger contributions from Canada and Australia, where we maintain leading metals and mining franchises. While activity strengthened across our core focus sectors, metals and mining was a notable driver of growth, supported by constructive market conditions and powerful long-term themes such as electrification, energy transition infrastructure, battery metals, and supply chain security.

Advisory revenue increased to its highest level since fiscal 2022 and represented 29% of total capital markets revenue. Our U.S. business led this performance, benefiting from strong technology activity, and we improved contributions from several other sectors, including metals and mining. We also continue to strengthen the platform through targeted strategic initiatives. These actions included the divestiture of our U.S. wholesale market making business and the acquisition of CRC-IB, which expands our capabilities in renewable energy and energy transition advisory.

Together, these transactions further sharpen our business mix, increase our focus on higher-value advice-driven offerings and position us to capture growth in attractive long-term markets. During the fiscal year, we also resolved the previously disclosed regulatory enforcement matter related to noncore trading operations in our U.S. Capital Markets business. While these matters did not involve any other U.S. business or any CG operations in other geographies, resolving them required significant effort from teams across the organization and the related penalties and remediation of costs affected profitability in our U.S. business during the year.

Addressing these issues was just part of our broader multiyear effort to strengthen our compliance framework, controls and oversight capabilities. The framework today is stronger, more consistent and better positioned for the future, reflecting the expertise, persistence and commitment of the teams who led this work. Our business is built around a clear purpose, helping growth companies and investors access the advice, capital and relationships they need to achieve their ambitions.

The markets we serve support innovation, employment and economic growth, and yet they are often underserved by traditional banking channels. I am proud of the work our more than 3,000 colleagues do every day to support their success and grateful for their unwavering dedication. At the core of our performance is our partnership culture, which supports a long-term approach to serving clients, managing risk and creating shareholder value.

During fiscal 2026, our limited partnership increased its ownership incrementally. Following the third round of subscriptions by new and existing employees in June, our ownership increased to 15.3% on an as-converted basis. This further strengthens alignment between our employees and our shareholders and encourages decisions that support long-term value creation.

As we entered fiscal 2027, we carried forward considerable momentum from a record fiscal 2026. Yesterday evening, we disclosed a strong first quarter result with meaningfully higher year-over-year contributions from both Wealth Management and Capital Markets. Performance was supported by record client assets, stronger capital markets activity across our core advisory and financing verticals and improved operating leverage. Earnings growth substantially outpaced revenue growth, and we are comfortably on track to achieve our target operating margin improvement for the current fiscal year.

Looking ahead, our priorities remain straightforward; execute for our clients, deepen partnerships, continue to strengthen our risk and compliance framework, and allocate capital thoughtfully. We are also investing in technology, including artificial intelligence to improve how we serve clients and operate our business. Our focus is practical, increasing efficiency, enhancing the speed and quality of our insights and strengthening controls and risk management. We are approaching AI responsibly with strong governance, appropriate data protections and meaningful human oversight.

Most importantly, we see AI as a tool to strengthen the capabilities of our people and give them more time to focus on the trusted client relationships that define our business. While the timing and direction of market activity remains difficult to predict, our stronger platform, improved operating leverage and continued expense discipline position us well to respond as opportunities emerge.

We also remain committed to evaluating strategic opportunities that can maximize long-term value for our fellow shareholders while maintaining continuity and the highest standards for service for our clients. It is my privilege to serve as your Chairman. I'm grateful for the confidence of our shareholders, the partnership of our Global Operating Committee and the guidance of our Board as we continue to advance these priorities.

And with that, we would be pleased to take your questions.

Thank you, Mr. Daviau. We will proceed now to the question period.

Mr. Chairman, there are no questions from the floor from shareholders or guests at this time.

Okay. Well, thank you all for joining, and that I guess, I will conclude today's meeting. Thank you.

Good morning, ladies and gentlemen. Thank you for standing by. I'd like to welcome everyone to the Canaccord Genuity Group Inc. Fiscal 2027 First Quarter Results Conference Call. [Operator Instructions] As a reminder, this conference call is being broadcast live online and recorded.

I would now like to turn the conference over to Mr. Dan Daviau, Chairman and CEO. Please go ahead, Mr. Daviau.

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 our description of non-IFRS financial measures that appear in our MD&A.

And with that, let's discuss our first quarter fiscal 2027 results. Global equity markets performed well during our first fiscal quarter even as the economic backdrop remained mixed. Strength was broad-based with particularly strong gains in emerging markets and continued enthusiasm around artificial intelligence.

Commodity markets were less consistent as expectations for deescalation in the Middle East weighed on crude oil and gold prices during the 3-month period, although the broader environment for our mining activities remained constructive. Against this backdrop, we delivered a strong first fiscal quarter results with increased year-over-year contributions from both wealth management and capital markets.

Firm-wide revenue rose 29% year-over-year to $577 million, reflecting solid growth across our businesses. Our wealth management division contributed 53% of total revenue, increasing by 26% year-over-year with broad-based growth in each of our 3 geographies.

Canada delivered strong growth as higher client activity and new issue revenue, combined with improved scale and expense discipline drove stronger operating leverage. Notably, the average book per adviser in this business has increased by 37% year-over-year to a record of $428 million, with many of our advisers reaching new milestones during the 3-month period.

In the U.K., revenue growth was supported by strong market performance, increased client activity and continued progress against our organic growth initiatives. Performance from our Australian business has continued to strengthen following the Wilsons Advisory integration, demonstrating the benefits of increased scale, broader capabilities and a more competitive national platform.

We ended the quarter with record client assets of $160 billion, a 28% increase from a year ago, driven by favorable market conditions, the addition of Wilsons Advisory in Australia, and positive net inflows.

Revenue from our Capital Markets division represented 45% of firm-wide revenue and increased 30% year-over-year. Both corporate financing and advisory activities improved meaningfully year-over-year, although they moderated from the exceptional levels in our fourth quarter.

Advisory activity was broad-based, led by technology, with meaningful contributions from metals and mining, consumer and retail and sustainability.

Since completing the CRC acquisition last quarter, this team has exceeded expectations across all measures. Sustainability-related activity represented 13% of combined investment banking and advisory revenue during the quarter, driven primarily by our U.S. business. I will note that this measure understates the sector's broader contribution as sustainability-related mandates are also captured within several of our other core industry groups.

Corporate financing activity continued to be led by metals and mining, which accounted for 50% of global investment banking revenues with the strongest contributions coming from Australia and Canada. We also saw improving activity in technology, sustainability, and other core sectors during this quarter.

Turning to profitability. Our firm-wide adjusted net income increased by 120% year-over-year to $57 million, while adjusted diluted earnings per share increased by 177% to $0.36 per share. Strong revenue growth, combined with disciplined expense management, continued to improve firm-wide margins despite the impact of an elevated compensation ratio, which Nadine will address in more detail.

Our deeply entrenched partnership culture remains central to attracting and retaining talented professionals across all regions. In June, we completed a third round of employee partnership subscriptions with strong participation from both new and existing employees.

As part of the transaction, the employee partnership also acquired $12 million principal of our outstanding convertible debentures from a third party. As a result, the employee ownership in the limited partnership increased to 14.31% of our common shares at quarter end or 15.33% on an as-converted basis, further strengthening alignment between our employees and shareholders.

With that, I'll now turn things over to Nadine for a more detailed review of our financial performance.

Thank you, Dan, and good morning, everyone. We delivered strong year-over-year growth in our first fiscal quarter with profitability growth outpacing revenue growth. Firm-wide pretax net income for the 3-month period increased by 128% year-over-year against revenue growth of 29%, and our pretax operating margin improved by 5.7 percentage points compared to the same period last year.

We maintained strong discipline for non-compensation costs across the organization as revenue and the scale of our business increased. Total non-compensation expenses, excluding significant items, decreased by $4 million or 3% year-over-year to $142 million, representing 25% of first quarter revenue compared with 33% of revenue in the same period last year.

As Dan mentioned, our firm-wide compensation ratio was elevated at 62% for the quarter. The increase reflects the impact related to the fair value of share-based payment awards associated with strong EPS growth and share price appreciation during the 3-month period. Excluding this charge, the firm-wide compensation ratio would have been 59.5%.

Turning to wealth management. First quarter revenue increased 26% year-over-year to $305 million, while adjusted pretax net income increased 40% to $57 million. The adjusted pretax profit margin improved by 1.9 percentage points year-over-year to 18.7%.

Starting with our largest wealth management business in the U.K. and Crown Dependencies, revenue increased 4% year-over-year to $131 million, while adjusted pretax net income of $29 million was broadly in line with the prior year and up 26% sequentially as project-related spending began to normalize.

The adjusted pretax profit margin was 22.3%, down 1.3 percentage points year-over-year, but up 4.2 percentage points sequentially. Client assets in this business reached a record $82 billion or GBP 43 billion, representing a year-over-year growth of 14% and 13%, respectively.

Growth was driven by a combination of market appreciation and positive net inflows, which represented 0.7% of opening first quarter client assets, equivalent to a 4.3% on an annualized basis.

In Canada, first quarter revenue increased 29% year-over-year to $121 million, driven by higher commissions and fees and investment banking revenue, which increased by 29% and 77%, respectively. Adjusted pretax net income more than doubled to $21 million, resulting in a 7.4 percentage point improvement in the pretax profit margin to 17.2%.

Client assets grew to a record $60 billion, up 33% from a year ago, supported by strong market appreciation and positive inflows with net inflows representing approximately 1.5% of opening client assets for the quarter. Fee-generating assets represented 53% of total client assets, reflecting the continued strength of our recurring revenue base even as participation in new issues increased.

Australia generated record revenue of $53 million, an increase of 131% year-over-year. Adjusted pretax net income more than tripled to $7 million, while the pretax profit margin increased by 5.2 percentage points to 13.4%. Client assets in our Australian business increased 113% year-over-year to a record $19 billion, reflecting the addition of Wilsons Advisory, together with robust client activity and the onboarding of client assets from recruited advisers.

Higher asset levels and greater scale supported improved profitability across our wealth management businesses. Margins increased in all regions, although the pace of improvement may vary from quarter-to-quarter based on business mix and stage of growth.

Turning to global capital markets. First quarter revenue of $261 million increased 30% year-over-year. Adjusted pretax net income was $37 million compared with approximately $6 million in the prior year period. And the adjusted pretax profit margin improved by 11.5 percentage points to 14.3%.

The year-over-year improvement was driven by significantly stronger advisory revenue, complemented by growth in investment banking and commissions and fees revenue. A more favorable business mix, together with higher activity levels also contributed to improved profitability, particularly in our U.S. business.

Investment banking revenue increased 40% year-over-year. Canada was the largest contributor, with revenue increasing 25% to $33 million, followed by Australia, where revenue increased 72% to $30 million, and the U.S. where revenue increased 34% to $25 million. Our U.S. business also delivered a notable sequential increase in investment banking revenue.

Advisory revenue increased 123% year-over-year, led by the technology, mining, and consumer sectors, while contributions became more broadly distributed across our global platform. The U.S. was the largest contributor, generating $57 million in advisory revenue, up 162% year-over-year.

Revenue in Canada increased 45% year-over-year, although it moderated from the exceptional level recorded in the prior quarter. Australia delivered record advisory revenue of $17 million as the business continues to build its capabilities, while advisory revenue in the U.K. more than doubled year-over-year.

Pipelines remain strong across all regions, although the timing of completions will continue to vary with transaction activity and broader market dynamics.

Commissions and fees revenue increased 22% year-over-year to $50 million. Our U.S. business was the largest contributor with revenue increasing 12% to $21 million. The U.K. generated $11 million, up 30%, while Australia delivered record commissions and fees revenue of $10 million, up 63%, supported by increased client activity and a higher share of ASX turnover.

And finally, the year-over-year decline in principal trading revenue primarily reflected lower revenue following the divestiture of our U.S. wholesale market-making business. This was partially offset by a 36% increase in U.K. principal trading revenue to $5 million, supported by recent investments in our market-making and investment trust desks, which has improved flow across existing desks in the region.

Turning to the balance sheet. We ended the quarter with cash and cash equivalents of $1.2 billion and working capital of $817 million, providing ample liquidity to meet our regulatory requirements, pursue strategic priorities, and support ongoing business activity.

The quarter end decline in cash and cash equivalents primarily reflected payment of accrued bonuses from the prior quarter, together with normal timing differences in business activity and related movements in other financial assets and receivables. These movements did not materially affect our underlying liquidity position.

We have started the fiscal year comfortably on track to deliver the low single-digit improvement in firm-wide pretax operating margin that we articulated last quarter. Continued progress against our strategic priorities, disciplined expense management and improving operating leverage support this outlook, although the pace of improvement will remain sensitive to market conditions.

With that, I will turn things back to Dan.

Thanks, Nadine. In all, we are pleased with the strong start to fiscal 2027 and the broader contributions across our global platform. In wealth management, stable interest rates and stronger equity markets should continue to support client assets and engagement.

We remain focused on generating positive net inflows, increasing fee-based assets, and leveraging the greater scale of our Canadian, U.K., and Australian businesses to support continued growth. In capital markets, the backdrop remains constructive, supported by active client engagement, and gradually improving financing and advisory activity across our core mid-market sectors.

Mining continued to be a significant contributor during the quarter. While underlying demand remains constructive, the pace of financing activity may moderate from recent levels as market conditions evolve. Activity in other sectors is beginning to broaden, although the recovery remains gradual. Our advisory and corporate finance pipelines remain healthy, but the timing and mix of transaction activity are inherently difficult to predict.

Next week, we'll be hosting our 46th Annual Growth Conference in Boston, which will be our largest ever. Record registrations and a strong mix of public and private companies and investors from our 4 continents underscores our differentiated offering for growth companies and investors.

This extraordinary level of engagement also gives us a valuable perspective on emerging opportunities and evolving investor priorities across the sectors and regions that we serve.

Although market conditions are inherently difficult to predict, we are focused on the factors we can control. Stronger operating leverage, disciplined execution, and continued progress against our strategic priorities positions us well to respond as opportunities emerge and deliver long-term value for our shareholders.

Reflecting this confidence, the Board has approved a quarterly common share dividend of $0.10 per common share.

With that, Nadine and I would be pleased to take your questions. Operator, you may now open the lines.

[Operator Instructions] Your first question comes from Jeff Fenwick with ATB Cormark.

So Dan, just a first question here, or maybe, Nadine, you referred to the net working capital position of the business, obviously, going through a period of real strength here, but I do find it hard sometimes to discern the actual sort of financial position of the firm or the available capital that might be sitting there for Canaccord to invest in growth initiatives.

Any way to characterize if we were to look at that net working capital balance or what sort of amount of that would be available for you to deploy versus being tied up in the balance sheets of the various units?

Yes. I think if you look at it from a -- it really has to be done at a regional level because we're regulated on a regional level. So what you've seen is the strength, particularly in Canada with our growth in our wealth management business and also capital markets strong results over the last few quarters.

It's really building up that operating working capital within our regulated Canadian entity. So unfortunately, yes, you don't see it on an individual basis. But I think you just want to look at where you're starting to see overall the growth in the balance sheet and from a year-over-year basis, that growth in working capital is where you're seeing the ability to deploy.

I think that's really where we're seeing surplus. We've seen obviously a return to strength in the U.S. with some growing profitability there, opportunities to continue to invest. But it is a bit difficult to see. But I think if you just look at, kind of, where the year-over-year changes, that's really the buildup that we're seeing, recognizing that we maintain appropriate buffers within our regulated entities.

And I asked that question just in the context of strategic opportunities that you might see in the marketplace where you're active today, Dan. Like, are there -- it feels like you could be in a position to do some larger investments if the opportunity presented itself. Like, how are you thinking about it from that standpoint?

I wouldn't consider ourselves balance sheet-constrained because whether we have the capital or we've raised the capital, and I don't mean dilutive capital, I mean debt, we're not going to be constrained on acquisitions we want to do, Jeff.

Like, we're going to do what makes sense for us. We don't have on the capital markets side of the business, we haven't outside of buying the odd M&A firm, that happens every couple of years. And it's hard to find the right firm and the right fit in the right sector at the right time with partners that you want to long-term partner with.

But outside of that in capital markets, we're not doing a lot of strategic activity in the capital markets side of the business. I don't foresee that changing.

On the wealth side of the business, we have done lots of acquisitions in the U.K. and in Australia. And I wouldn't see ourselves capital-constrained. We could do anything we wanted to do when we would raise the capital or have the capital to do that. So it's not -- the balance sheet isn't a constraining factor in that.

Okay. And maybe just your appetite for that. I mean, when I look at, for example, your platform has done exceptionally well on the wealth management side of things as your numbers are showing us. At the same time, we've seen some transactions in the Canadian market with strategic investors that are paying seemingly some very high multiples. So I mean, how you put the context there in terms of your capacity versus what you're seeing price-wise?

Yes. I mean, we are -- I guess if there was a constraint, it's our valuation, right? Things have to be accretive to us and makes sense. We're a strategic acquirer, not a financial acquirer.

So we have the benefit of synergies in anything we would look at. There isn't a lot of assets, material assets in this market to buy. I think you can -- you know what they are, but certainly, we'd be in the market on anything and looking at everything.

Nothing is happening without us knowing about it. So if we're not there, there's a reason we're not there. We chose not to be there. But yes, we would continue to look at buying in Canada and buying in Australia and buying in the U.K. in our core wealth verticals. And as I said, I don't perceive ourselves constrained by that.

Right now, the cheapest way to grow wealth is have -- give your advisers the tools they need to grow assets organically. That's by far the highest return on capital.

The second highest return on capital is hiring people, and we're aggressively recruiting in all of our key geographies. That's the best -- that's the second best way to make money in growing wealth. And the third way to do it and still accretive is buy stock.

So we're looking at all of those paths all the time. I mean, our wealth management business now is $160 billion. I think it was what it was $60 billion when we started, like it's a much, much bigger business than it used to be, and we certainly have the financial capacity to continue to grow it.

And we think we should be growing it, certainly in Canada and Australia, and arguably in the U.K., we should be growing our wealth business. It will result in better margins.

And maybe one last one here for me. As you highlighted in your deck, HPS and your partner in the U.K., they have the right to ask you to look for an exit for them from that investment as of the end of this month. Any update there in terms of communication with them? Is that something you have to wait for the formal notice to come across your desk? Or any color you can offer there?

No. I mean, like -- yes, I know what the paper says, but we obviously talk to HPS every week. So there's no formal anything to talk about it. I mean, our investor presentation outlines where we stand today. We've really got nothing incrementally to disclose at this point with respect to U.K. wealth. And we continue to assess a whole bunch of different strategic options there and really don't have anything incremental to add to our public disclosure, Jeff.

Your next question comes from Stephen Boland with Raymond James.

Dan, maybe you can just talk a little bit about U.K. capital markets? I'm just trying to understand the plan for that division. It seems like you get to that $30 million in revenue, and you kind of get to the breakeven to a little bit of profitability. How do you make that profitability more sustainable going forward? Like what's the -- I would say, the medium- to long-term plan, but, like, what do you do to make sure that you're getting your cost of capital out of that division?

Good news is we don't have a lot of capital in that division. But it's -- the U.K. is a tough new issue market. As we all know, new issues depend on companies wanting to raise money and investors wanting to write checks.

And unfortunately, in the U.K., they've been in an outflow position for several years between Brexit and foreign capital not going into the U.K. and a number of other factors in that market, including the government. It just hasn't been an attractive market for foreign investors to invest in. Expat tax, they took away that. So all the expats left the U.K.

It's just not -- Canada, every market, maybe with the exception of the United States and India and a couple of others have a problem with a number of public companies in the U.K. is right at the top of the list. U.K. last year, I think we listed 22nd in the markets where IPOs happened.

I don't know 21 other markets where IPOs happened. So it's a tough -- to rank 22nd is pretty bad. So the new issue market in London is difficult because there's not a lot of investors out there. But it continues to be a good domestic market for us.

So what we've done in London strategically is aligned it with the rest of our business. It does a lot of tech. It does a lot of mining. It does a lot of health care, sustainability, the sectors we're good at otherwise globally.

So that's what it's meant to do. And as a result, it doesn't carry a lot of incremental cost. So it's very easy for us to not lose money in a difficult new issue market. And where we've been investing there is in our M&A and strategic business. It is important both to our global franchise and the U.K. that it's aligned from an M&A perspective with the rest of our markets.

So I wouldn't envision us making material investments in the U.K. or de-vestments in the U.K. -- divestitures in the U.K. It's fine right now. It doesn't burn a hole in our pocket, and it's strategically important to the rest of our franchise. And it really -- and I'll say this, and I'll get proven wrong down the road, it really can't hurt us. And as a result, it really can't help us a lot either. It's not structured that way.

Okay. That's great. Maybe 2 small questions on Australia. When I look at the compensation formula comp to revenue, it seems elevated compared to the rest of the business. Is there a change or a difference in how the compensation works in Australia?

No, I think you're referring to the wealth side of the business there as opposed to the capital markets side of the business because I think our capital markets comp ratios are pretty much in line. So maybe the broader business.

And the wealth business, it's just a scale game at the end of the day. I mean, that -- right now, the business has $20 billion in assets, but it was running at $13 billion the quarter before, pre the Wilsons acquisition. And what you tend to find is there's a lot of comp in back office and support and infrastructure that doesn't go up when the business gets bigger.

So just like our U.K. business went from mid-teens margins, EBITDA margins to approaching even 30% at one point and our Canadian margins are improving as the business scales. That's what's going to happen with the Australian business over time. You will see -- you will see the margins improve.

And part of that is compensation because a big chunk of compensation goes to -- is not variable. It is relatively fixed in terms of back-office support, I think compliance, infrastructure, all that kind of stuff won't go up as the business increases.

On the capital markets side of the business, the comp ratio is more or less in line. All of our comp ratios are elevated a little this quarter in capital markets because of our PSU charge. We have a comp-based scheme that's tied to the performance of our stock and our results.

So when our stock goes up and when our results are stronger, you will see compensation go up. It's noncash. It's an accrual. But our overall comp ratio is probably just over 2%, Nadine, higher this quarter --

Yes.

-- because of PSU charges. So on an apples-to-apples basis, our comp would have been 59.5% across the firm. It was elevated this quarter. That was all because of PSU charges and just Nadine having fun with accounting.

Okay. Yes, I might correct that. And just on Australia as well, there was a big jump in advisory fees. So I'm not sure if this is just a one-off or is it addition like a team [indiscernible] you brought in.

Yes.

I'm just trying to get an idea of how sustainable [indiscernible]?

Yes. One-off -- if I had to classify it as one-off or continual, I would go more towards the one-off spectrum. We did have a large advisory fee close in Australia in the quarter. I don't expect that to continue.

Although we have invested in advisory in Australia, like, 2 years ago, we did no advisory in Australia. We've hired some people and we continue to grow that platform. But no, I wouldn't -- I think we, what $16 million, what we put up in Australia advisories. That isn't going to happen again next quarter. So I think it's kind of going up slowly over time. Occasionally, you get hit by a pitch, which is what happened the last quarter.

Your next question comes from Graham Ryding with TD Securities.

Maybe I could just touch on the employee partnership side. It looks like in June, you did a third round here of this program of share purchases. Can you just give us some context on how that program works in terms of, like, the size of loans that Canaccord is providing and then how much of that gets repaid throughout the year before you, sort of, move on and do the next round of repurchases?

So it started at -- these are rough numbers, Graham, and Nadine, you can correct me when I get them wrong. It started at an $80 million program. $80 million program was reflective of about 100 people at the beginning, so you can kind of do the math as to how much per person.

It really was meant to match about 1x what somebody got paid. The reason why it was 1x that someone got paid is because we take 20% of what they get paid every year and repay the loan. So the loan is structured to repay over 5 years. Sometimes it repays quicker, sometimes it repays slower, depends on the level of compensation and what we take away.

They're fully recourse loans. In other words, if you leave, I can steal your house. They pay -- they're interest-bearing loans. Interest more or less matches the dividend on the stock. So it's not a big cash outlay, but that's the plan on these things.

And remember that employees to participate in the employee partnership, yes, they'll get a $1 loan, but they've got to -- they have to come up with $0.20 in cash and actually buy some stock as well. So there's good coverage on the loan.

There's no exposure on the loan. Right now, the loan balance in the employee partnership is roughly $65 million. I'll tell you why it's still $65 million in a minute. And the underlying interest in the partnership at 15% of fully diluted shares outstanding is like $250 million.

So there's all kinds of coverage between what the partnership owns and the loans outstanding versus that 4:1 or certainly over 3:1. So very, very little company exposure or risk in the underlying loan amount to the employees.

And there's really no cost to the company. As you can tell, we put this loan program in place for the last 3 years, and you haven't seen our comp ratio move. So no matter how you flow the money in and out, there hasn't really been a cost to the company.

So what a great program where now we've got the employees owning over 15% of the business as not as stockholders, as stockholders, like that stock has gone forever. It's in the employee partnership and it's never coming out.

So it's been a really good program in terms of aligning the employees' long-term interest with our shareholders' long-term interest. So we're delighted that take-up has been so strong and good.

What the Board has mandated us to do, and ISS doesn't love it, to be honest, but what the Board has mandated us to do is as the loans repay in a year, we take 20% of that compensation. We repay loans. That loan repayment in the first year was $15 million because it was a bad year.

Last year, I think it was $23 million. I'm making up these numbers, but I'm not too far off. We can recycle the loans and invite new people into the partnership or top up people as they mature in the business. And that's all Board-approved on an individual-by-individual basis.

They say, okay, that's a good person. You can give them a loan to come into the employee partnership. So we did another 2% or 3% last year. So every year, it's like another $20 million. And as a result, you've seen the ownership go from 10% up to 15-plus percent over the last 3 years.

And we expect that to continue another 2% or so every year. I guess it will depend ultimately on where the stock price is and what the loan repayment amounts. We're not taking the loan balances up. It is what it is.

And it's been a really, really good program. I think we've got maybe 150 participants now in the employee partnership. There was, I think, close to 30 new participants this year we invited in. So it's been a really good program for everybody. Did I answer all your questions on that? Graham?

Sorry, I was on mute. So roughly -- that was helpful. So you're saying the $65 million has roughly been steady over the last few years?

Yes, not roughly. It's been exactly steady. We literally -- whatever the loan repayment comes in is that's what the Board has given us permission to issue a new one. So it's dead steady.

Okay. Understood. And then maybe I could just jump to U.K. wealth. It looked like the organic flows rate picked up this quarter, I think sort of 3% annualized, just over 3% annualized, if I'm reading that correctly. Anything to call out that drove the improvement there? And is this a reasonable run rate for this platform?

Yes, I think it's a reasonable run rate for the platform. I actually think it's stronger than that between you and I. But because what we really track is the managed flow run rate. And we reported 3%.

There is a small element of execution-only business in the U.K., which was relatively flat. So the managed flows were actually a little stronger than 3%. And yes, lots of things to point out. I mean, it's been a 3-year Herculean effort by David Esfandi and the team there in terms of getting net organic assets.

Remember, we buy a lot of companies in the U.K. Every time you buy something, it kind of distracts you a little bit away from growing the business organically because you lose assets when you buy things and you're busy integrating and all that.

But between our new Chief Commercial Officer over there that's got a robust pipeline, we've been recruiting into that business. There's been other acquisitions in that market. We've been hiring advisers that aren't happy with whoever bought them.

We've got a restricted product offering there that's working well. We've been converting assets from other platforms onto our platforms there. That's worked out really well. So it's a really multipronged attack. And then we're using a lot of AI in the business, not only for lead generation, attracting new assets, but also to prevent asset outflows.

Remember, you're measuring net new assets. So if you can keep $1, it's like getting $1.

And then -- so right across the board, the business has been good. And then a lot of integrated financial planning, investment advice, that's been a big growth driver for us as well. So it's really a 5, 6-pronged attack, and these things are starting to work.

And we're seeing this is the second quarter now where we've had really good growth, and we don't see a reason for it to stop. You never know. But right now, it seems like it's working well, and the team seems like they're executing well on that plan.

There are no further questions at this time. I will now turn the call over to Mr. Daviau for closing remarks.

Okay. Well, thanks, everyone. Those are really good questions. And as always, we're available to answer more if you'd like. I'd like to thank everyone for joining us. Certainly appreciate your continued interest and support.

We have our AGM today. It will begin at 10:00 a.m. So we'll be on that shortly. Details are available in our information circular and on our website. Otherwise, we look forward to updating you again on our second quarter results, which will be in November. And with that, operator, we can close the lines. Thank you very much.

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

Good morning, ladies and gentlemen. Thank you for standing by. I'd like to welcome everyone to the Canaccord Genuity Group Inc. Fiscal 2026 Fourth Quarter Results Conference Call.

[Operator Instructions] 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, Chairman and CEO. Please go ahead, Mr. Daviau.

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 our 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 measures that appear in our MD&A.

And with that, let's discuss the fourth quarter and fiscal 2026 results. Q4 began on a constructive note with the markets rising in January on strong earnings and enthusiasm around AI-driven productivity. Sentiment weakened over the balance of the 3-month period as geopolitical conflict, sharp moves in oil, bond and currencies and a rotation away from growth in technology weighed on investor confidence.

Gold prices also reflected the broader volatility, reaching a record high in January before entering a multi-week sell-off and declining nearly 17% by quarter end. Against this backdrop, our teams remain focused on disciplined execution, supporting a solid quarterly result and a strong finish to the fiscal year.

Firm-wide revenue of $613 million for the 3-month period increased 33% year-over-year, representing our third highest quarterly revenue on record. For the full fiscal year, revenue reached a record $2.2 billion, reflecting an operating model designed to protect shareholder value across market cycles.

The fourth quarter revenue contribution from our Capital Markets division increased by 37% year-over-year. This reflected stronger investment banking and commission and fees revenue led by our Canadian and Australian businesses, where mining sector activity remained robust, although modestly below the exceptional levels achieved in the prior quarter.

Our Canadian business also delivered an exceptional advisory result in the quarter. For fiscal 2026, capital markets revenue increased to its highest level since fiscal 2022. This performance reflected robust underwriting activity in Australia, strong underwriting and advisory activity in Canada and disciplined execution across our global platform. We continue to rank among the league table leaders in our target sectors and continue to maintain our position as the most active mid-market dealer globally.

During the year, we participated in 472 capital raising transactions, raising more than $63 billion for growth companies, a 70% increase over the prior year. Our Wealth Management division delivered its 10th consecutive quarter of revenue growth, which brought fiscal 2026 revenue earned by this division to a record $1.1 billion, up 24% from fiscal 2025.

Growth in the 3- and 12-month period was led by stronger commission and fee revenue, reflecting higher client engagement levels as market conditions improved. Results in our Canadian and Australian business also benefited from elevated transaction-based revenue, particularly from new issue activity, which typically carries higher margins but is more market dependent. While this has been a positive contributor in recent quarters, margin progression in these businesses may moderate as activity levels normalize.

We ended the year with record client assets of $148 billion, up 23% year-over-year, driven by market appreciation, strong organic net inflows and the addition of Wilson Advisory in Australia. We continue to invest in and scale this platform through targeted recruitment, expanded product capabilities and selective acquisitions, strengthening our ability to attract and retain assets, drive net inflows and improve the quality of earnings over time.

Across the organization, we continue to manage expenses carefully, while maintaining disciplined investment in areas that support long-term growth. Excluding significant items, firm-wide pretax net income increased 176% year-over-year to $89 million in the fourth quarter, and adjusted diluted earnings per share rose 300% to $0.48. For the full year, adjusted diluted earnings per share were $1.26, up 107%, reflecting stronger operating leverage and improved profitability across the platform.

Throughout the year, we took deliberate steps to allocate resources and capital to the areas where we can deliver the greatest value to clients and compete most effectively. In Australia, the Wilsons Advisory acquisition materially strengthened our platform, adding 60 advisers and establishing a truly national wealth management footprint, bringing complementary talent and relationships to our capital markets business in the region.

In the U.S., the acquisition of CRC enabled the formation of our new energy transformation group, deepening our capabilities in higher-growth advisory segments, while strengthening our offering for sustainability sector clients and related mandates across our broader sector platform. And with that, I will turn things over to Nadine.

Thank you, Dan, and good morning, everyone. As Dan mentioned, we delivered very strong fourth quarter results and capped the year with record revenue and materially improved profitability. Firm-wide pretax net income for the fourth fiscal quarter increased 176% year-over-year to $89 million, bringing full year pretax net income to $263 million, up 76% from fiscal 2025.

This translates to adjusted diluted earnings per share of $0.48 in the quarter, up 300% year-over-year and $1.26 for fiscal 2026, an increase of 107% over the prior year. While a more supportive market backdrop contributed to top line growth, operating discipline drove significantly stronger profitability.

For fiscal 2026, our pretax operating margin improved by 3.5 percentage points compared to fiscal 2025. Firm-wide non-compensation expenses, excluding significant items, were $155 million in the fourth quarter and $601 million for fiscal 2026, with the full year increase reflecting acquisition-related growth, higher activity levels and continued investment in our platforms.

Our non-compensation expense ratio improved by 5.6 percentage points year-over-year to 27.2%. Compensation expense increased with stronger performance across the organization in addition to changes in our revenue mix, while share-based compensation increased year-over-year, primarily due to mark-to-market changes in the valuation of certain awards. Our firm-wide compensation ratio was 60.9% for fiscal 2026.

Turning to business unit performance. Capital Markets contributed adjusted pretax net income of $58 million in the fourth quarter, bringing the fiscal 2026 contribution to $141 million, an increase of 222% from the prior year. The adjusted pretax profit margin in this division was 20% in the fourth quarter, driven by stronger revenue and improved operating leverage.

Fiscal 2026 margin was 13.5%, up 8.2 percentage points from the prior year. On a consolidated basis, Capital Markets revenue increased 37% year-over-year to $292 million in the fourth quarter and 26% to $1 billion for fiscal 2026. The year-over-year increase in the quarter was driven primarily by higher investment banking revenue, up 161%, along with stronger advisory and commissions and fees revenue.

Activity in the metals and mining sector continues to support stronger performance in Canada and Australia, where we have established sector depth. We are also seeing improvement across our other core sectors, although the pace and consistency of activity remain more variable, particularly in the U.S. and U.K.

Advisory revenue was $119 million in the fourth quarter, up 32% year-over-year, with our U.S. operations remaining the largest contributor and Canada delivering a particularly strong quarter. For fiscal 2026, advisory revenue of $312 million represented the third highest annual result on record for this business line.

Commissions and fees revenue increased 26% year-over-year to $53 million in the quarter and by 25% for the full year, while trading revenue declined materially, primarily due to the sale of the U.S. wholesale market making business. With the sale of that business and the addition of CRC, the revenue mix and earnings quality of our U.S. capital markets franchise improved during fiscal 2026, and we expect those changes to support stronger margin performance over time.

Turning to Wealth Management. Revenue of $307 million in the fourth quarter and $1.1 billion for fiscal 2026 represented year-over-year increases of 28% and 24%, respectively, and new records for each period. Fourth quarter revenue growth was driven primarily by commissions and fees revenue of $248 million, up 30% year-over-year, reflecting higher contributions from all geographies as well as higher investment banking revenue in Canada and Australia.

For the fiscal year, we recorded meaningful increases in all regions. Enhanced performance in Australia also reflected contributions from our acquisition of Wilson Advisory, which was completed in the second half of our fiscal year. The adjusted pretax net income for our Global Wealth Management division increased 10% year-over-year to $45 million in the fourth quarter, bringing the full year contribution to $195 million, up 31% from fiscal 2025.

The U.K. remained the largest contributor to Wealth Management earnings in the 3- and 12-month periods, while Canada delivered strong year-over-year improvement and Australia continued to scale following the Wilsons acquisition. As Dan noted, Canada and Australia produced particularly strong operating leverage, while margins in the U.K. and Crown dependencies declined modestly.

This reflected higher general and administrative and development costs to support growth initiatives as well as higher compensation ratio driven by increased fixed compensation to support higher headcount. Client assets ended the year at a record $148 billion, up 23% year-over-year. Growth was driven by market appreciation, acquisitions and positive net inflows across the platform.

In the U.K. and Crown dependencies, client assets finished the year at $74 billion or GBP 40 billion in local currency, up 7% and 8% year-over-year, respectively, supported by market growth and positive net new asset flows. Client assets in Canada reached a new record of $56 billion, up 30% year-over-year, reflecting higher market values, positive net flows and enhanced adviser productivity.

The average book per investment adviser team grew 29% year-over-year. Client assets in Australia reached a new record of $18 billion, increasing $10 billion or 113% year-over-year with approximately $7 billion of that increase attributable to Wilsons Advisory.

Across the wealth platform, increased scale, improving asset levels and continued investment in growth initiatives position the business well as we move into fiscal 2027. Although margin progression will continue to vary by geography depending on investment levels and revenue mix. During the fourth quarter, in connection with the completion of the Wilsons acquisition, the holding company for Australian operations completed a rights offering.

As expected, this reduced our ownership percentage in the Australian business with our beneficial ownership decreasing from 65% to 52.4%. For accounting purposes, our ownership as of March 31 is reflected at 54.6%, which includes shares held in an employee trust controlled by the Australian holding company compared to 68.4% a year ago.

Turning to the balance sheet. We ended the year with cash and cash equivalents of $2 billion and working capital of $787 million, maintaining ample liquidity to support regulatory requirements, strategic priorities and ongoing business activity. For fiscal 2027, we expect our firm-wide pretax operating margin to improve by low single digits, supported by continued progress against our strategic priorities, improvements in operating leverage and ongoing firm-wide expense discipline.

With that, I'll turn things back to Dan.

Thank you, Nadine. We are very pleased with our fourth quarter performance and the momentum we carried through fiscal 2026, which reflected strong execution, broader contributions across the platform and materially improved profitability. At the core of that performance is our partnership culture, which supports a long-term approach to servicing clients and driving value for our fellow shareholders.

In Wealth Management, our priorities remain to grow client assets, deepen fee-based relationships and continue to improve operating leverage, while making selective investments to support long-term growth and a stronger reoccurring revenue mix. We expect conditions across our core capital markets activities to remain broadly supportive, recognizing that geopolitical uncertainty, market volatility and shifts in investor sentiment could affect the pace and timing of activity.

We have good visibility on strong advisory pipelines in Canada and the U.S., and our outlook for corporate financing remains constructive, supported by improving activity levels across our core focus sectors. We also continue to evaluate strategic opportunities with the objective of maximizing long-term value for our shareholders, while maintaining continuity and high standards of service for our clients.

As previously disclosed, this includes our ongoing assessment of a range of strategic options for our wealth management business in the U.K. and Crown dependencies. To date, our activities have been limited to discussions and assessment of potential opportunities, and we expect this work to continue on an ongoing basis with no fixed time line for completion.

The business remains a meaningful contributor to our financial performance, and we continue to see value in its role within our global wealth management operation. Having said that, I would direct you to the full statement included in last night's quarterly press release, and we will not be commenting further on this matter.

Overall, the structural improvements we have made in our capital markets business, together with disciplined execution and selective investment in our wealth management platform leaves us well positioned to capture market share and support continued earnings momentum. Reflecting this confidence in our outlook, our Board has approved a 17.6% increase to our quarterly common share dividend to $0.10 per share as disclosed in last night's release.

With that, Nadine and I would be pleased to take your questions. Operator, you may open the lines.

[Operator Instructions] First question comes from the line of Stephen Boland from Raymond James.

Nadine, you threw a lot of numbers out there on expenses. So I'm wondering if you could maybe just separate the Canada and the U.S. expenses and the improvement. Obviously, the Canadian expenses quarter-over-quarter were pretty flat. Non-compensation I'm talking about.

So is that just a combination of -- you guys are working on a lot of projects on technology, compliance. Maybe just start with Canada first, that this is kind of the flat run rate that we can expect. Obviously, you can grow, you're going to probably incur more expenses. I'm just trying to get a bit of a breakdown on Canada and then may I have a specific question on U.S. expenses as well.

Sure. Thank you. So in terms of Canada, yes, we were running at a bit of an elevated. We did have some onetime costs in there related to some pro freeze given some of the activities we were engaging in from a strategic perspective. But in addition, we were running at probably a higher technology cost base due to some of our vendor contracts that we are working on remitting in terms of -- into fiscal 2027.

So for Canada, we do expect to see continued margin improvement, particularly in the wealth management business. In Capital Markets, you would expect that we would have seen the operating margin improvement. Cost did come down. We've been managing, particularly in discretionary areas on some of our general and admin as it relates to managing our travel and expense.

So our productivity actually improved quite significantly in Canada on our capital markets side of things. So from a run rate perspective, you would expect to see on the Canadian wealth, some decrease there related to some of our business-related non-comp expenses, just given some of the onetime items that we had in place. But also we expect to see improvement in margins just with some of our revenue scale as well.

Yes. Just on the U.S., I mean, you sold the trading business also, we're getting, I guess, used to a new run rate. But is it the same story in the U.S. that you had some elevated obviously remediation onetime costs as well as the trading business, like how structural is this run rate now for this quarter? Because there was a meaningful drop in the non-compensation expenses.

Yes. A lot of that would have been driven, as you noted, off of the sale of our wholesale market-making business with the trading costs coming down there as well as our interest costs as it relates to the dividend position. Going forward, though, in addition to the IEG removal, we expect to see, given our elevated pro fees as we completed our remediation work in the U.S. So we expect to see that move to a more normalized run rate that we would have seen a number of years ago. So that's going to benefit from a margin perspective overall.

In addition, we'll start to see, given the revenue mix shift, in particular, we expect to see that margin improvement going into fiscal 2027 with, I would say, an improvement in the mid-single digits on that margin withered focus area going forward in that regard.

Okay. I appreciate that. And Dan, one for you, I guess. The -- in your outlook, I kind of -- and maybe I'm just reading this a little bit different, but kind of a mixed message about the outlook in terms of -- I'm not sure if it's the economy, the ability to capital raise, but it was kind of a little bit more negative at the beginning.

And then in the last paragraph, it was very kind of like positive for mid-market capital raising advisory. And so I'm just trying to get maybe in your own words, like what your outlook is just say, for the next 12 months?

Yes. I think -- and you know better than most, I mean, capital markets is difficult to predict even in a good time. We obviously have great visibility on M&A. The equity business is more difficult to predict, particularly in volatile markets. We've got wars going on. We've got the economy flying around. We've got a trade negotiation coming up. So if you're hearing some cautiousness. It's just nobody knows.

Our M&A pipeline continues to be really strong. Some of that stuff gets pushed off occasionally depending on what's happening in cross-border wars and all that kind of stuff. But our M&A pipeline continues to be really strong. We feel pretty confident there. And the new issue pipeline, in addition to everything else I said, is heavily concentrated into the mining sector. You can see that.

I mean a half, Nadine, roughly this quarter of our business is tied to the mining sector in Canada and Australia. And when you've got that kind of exposure, you -- not that I have any reason not to be super excited by it, but you just would express some cautiousness around that. So I think we feel reasonably good about our business, reasonably good about our numbers, but it's just a tough business to predict, unlike our wealth business, which is an incredibly easy business to predict.

Your next question comes from Jeff Fenwick from ATB Cormark.

I wanted to start off asking about the Canadian Wealth Management unit there. Client inflows have been a very material contributor over the last year and quite an impressive result overall. Just wondering, was there something that was done there operationally or from a program perspective around maybe a new CRM platform or assistance with client outreach that assisted that? Or what were the levers being pulled there? Or maybe it was just more related to the fact the market was doing very well and that just encouraged the inflows as well. But any color you could offer there?

In fairness, it's probably both, Jeff. But the -- we have an immense number of programs going around to increase our net organic assets. We obviously get our assets from 3 ways. We recruit advisers. That growth has been not significant this year. It continues, but it hasn't been the primary driver. The market increase obviously drives assets, and it's been a good year in the market.

And then finally, net organic flows of the cheapest way to grow your business is net organic flows, have your existing set of advisers grow. So we give them a lot of tools to increase their business. We've got a very phenomenal group of advisers who are incredibly entrepreneurial, who are materially increasing their operations. You've seen the average size of book per adviser grow substantially this year. That's not all market. That's mainly net new assets.

So we've got a great business there, and we've got a great set of tools, and we've got a great set of partners, who will continue to grow. You haven't seen an increase so much in the number of teams because it's just the cycle of bigger advisers for smaller advisers. We're not looking to add a bunch of real estate and stuff like that. So that strategy continues to play out the way it has played out over the last decade, to be honest. So continue to be very excited by our Canadian wealth business and the prospects in front of it. And you can see that reflected in the numbers.

And as Nadine mentioned on the cost, we continue to spend money there. That's -- when you see those costs not going down, it's because we're investing in that side of the business, and we'll continue to invest in that side of the business.

Okay. That's helpful color. And then maybe I'll circle back on to the OpEx discussion here. Maybe in the U.K., that's one where we've seen the G&A line sort of progressively creep higher here. Maybe just some commentary on that, where the focus has been there and what we can expect going forward?

Yes. In the U.K., I mean, we've built out quite a bit in terms of our tools to support our advisers there as well. So that continues to be an investment that we make within the firm. Also, I noted that there was some increased headcount just in terms of as we not only take on new acquisitions, but also upskill some of our complement in terms of helping to manage the size and scale of the business that we have right now.

You would have noticed that some of the onetime cost items that we had come through, particularly in the fourth quarter did have a negative impact on margins. We do expect that to rebound into fiscal 2027. There's a huge focus on cost and as well as looking for increased productivity and efficiency with these tools that we've brought in. So for U.K., I would say that the expectation is that we will start to revert back to those healthier margins that you're used to seeing in that business into fiscal '27.

Yes. And again, just like our Canadian business, we're investing in growth in that business, net organic asset growth. To Nadine's point, that doesn't come free. You invest in tools, you invest in technology, you invest in people. So you're seeing those investments play out on the cost side in the U.K. a little bit. But as Nadine also noted, we have invested already. So you'd expect those costs to come down.

Okay. And then maybe one more, excuse me, on the compensation front, I believe there's a certain cadence around awards paid out to employees and then the recycle of some of that into purchasing units in the Partners LP. Can you just remind us of that? I mean it expanded its position in Canaccord ownership overall by a fair amount last year? And is there sort of a similar cycle that we could play out here?

The policy of the Board, having just got through the Board meetings is there's a repayment of those loans that go on every year. Those are fully recourse interest-bearing loans. These aren't anything other than that and the loans help people buy partnership units. The partnership unit -- the partnership in turn buys equity of Canaccord Genuity, that equity stays inside that partnership, and it's kind of -- I don't want to say gone forever, but it stays inside the partnership.

So we're up to about 14%. There will be a loan repayment this year that's already happening as we speak through bonuses being paid to people. So they're repaying their loans. Those loans will be recycled again. That partnership will increase its ownership in Canaccord Genuity again this year. Last year, it was about 2%. This year, it will be about the same number. That's the plan for the foreseeable future is that partnership will continue to accumulate stock of the underlying company. Does that answer your question?

Yes, that's helpful. And maybe I'll just squeeze a quick one in there as well on OpEx. I meant to ask about Australia. I mean we've had only really 1 quarter after the Wilson acquisition there. Is the OpEx in the quarter there somewhat representative of the run rate going forward? Or were there some added costs there as you integrated that business?

Yes. There were definitely some increased costs as it related to the Wilson acquisition, but that has been fully integrated now. So we do expect that the margin expansion, just given the scale of that business will start to improve closer to what you would see from a peer average.

Yes. You remember, this business started as a $1 billion business 5 years ago. We're up to $18 billion. We're starting to achieve scale. It's not the $55 billion we are in Canada or whatever, but it's starting to get the scale that we're looking for. So margins will improve in that business over time.

Your next question comes from Graham Ryding from TD Securities.

I guess start with U.K. wealth. It looks like the AUM there was flat quarter-over-quarter, up 8% year-over-year in constant currency. That seems to have underperformed the [ flexi ] market as a benchmark, and the growth profile there is lower than your other platforms in Canada, Australia. Any color or anything to call out for why you're seeing lower growth in U.K. wealth?

I think in terms of the U.K. market overall, it's been struggling a bit. But I think going forward, the focus that we've had not only from some of the discussion we've had around the tools we're bringing in from our advisers is really around growing the net new assets.

Obviously, we've been growing the business significantly through M&A and integrating those quite well. And the focus now as we start to build out our planning business in conjunction with the rest of the team that we expect to see that improvement in our net new asset growth, which you start to see that trajectory to really amplify.

Yes. And Graham, 2 points to it, and we should get you better details on this, so my apologies. But there's 2 points to note. We have integrated a couple of acquisitions in. Ultimately, when we integrate these acquisitions in, we know we're losing some assets. Like we exceptionalize that in our internal management reporting, but we know we're losing like intentionally losing some assets, so to speak. So you don't see that in our public numbers. You just see the flat assets, but our own internal numbers would reflect higher growth than that, #1.

#2, the portfolios aren't just U.K.-based portfolios. There -- these are fully managed portfolios, right, with international equities, fixed income. So I will have to give you the proportions of that so that you can do the right analysis. But we don't think this business is flat. We don't think this business is shrinking. Our management benchmark show this business to continue to increase. And in fact, in Q4, had a phenomenally good Q4 in terms of net new assets and growth. So we feel pretty excited by the business where it sits today.

Okay. And then in the presentation, you do show 4.2% organic flows and then you flag a negative 2.1% as exceptional. Is that what you're talking about? Is that...

Yes. That's exactly what I'm talking about. Yes.

Understood. And maybe the acquisition of CRC was quite sizable at CAD 130 million. What is the earnings contribution that you expect from that platform? And then just any sort of high-level color on where in particular that platform is quite strong and why you think this is a good investment?

Yes. So first of all, on the acquisition, I think you know how acquisition -- I know you know how acquisition accounting works. And a huge portion of that purchase price is earn-out purchase price. You take a provision for it at the beginning. If they hit it, great. If they don't, you take it back. So -- and that's a balance sheet item, not an income statement item. So the actual purchase price was significantly less, I think half of that amount. So that's the first thing.

And you hope they hit the earnout because it's free money, so to speak. So you're strongly encouraged for that. That's the first thing. The second thing, they are in the energy transition space, this is the way we define it at our organization. You can say it's sustainability or whatever. And either we're geniuses or we got lucky, but that energy transition space is massive right now and continues to grow.

AI, data centers, crypto, like these things all need power. And it's not all just traditional power. There's a lot of different types of power. That's where these guys are particularly strong and particularly active. So the business is very robust. When we first entered into our original loan agreement with these people, which was our new partners, which is more than 18 months ago, a long time ago, we had lent them some money to buy their initial partners.

When we entered into that deal compared to what they're doing today, they're probably doing 50% more revenue than they were doing back then. So it was -- it's been a very positive experience. It will continue to be a very positive experience. Their existing run rates right now. We closed the deal in December, Nadine or early January. January close, like the performance has been very good and it will continue to be strong.

We anticipate that more than offsetting the lost revenue from the principal trading business that we sold and quite frankly, at a margin level that would be more significant than what we lost. That's not a big bar to claim over. But -- so we see it materially helping not only our U.S. business and our M&A franchise in the U.S. but there's incredible synergies between that business and the rest of our global footprint into Canada.

Everyone is going through the same energy transition, whether it's Canada, the U.K., ultimately, Australia. So we see a really good partnership there, but they're going flat out on just existing North American business right now.

Okay. Great. Appreciate the color. So I don't want to hold you to any hard numbers, but did you say you expect this to replace your wholesale trading business, which I think was sort of running at about $30 million a quarter?

No, it wasn't running at $30 million a quarter. I wish it was -- maybe there was a quarter or 2 where it was running CAD 30 million a quarter, CAD 20 million? No, still not. It wasn't -- that business is volatile, ups and downs quarters. But no, that's a business that's going to do our CRC business, that business that we bought, like that's -- I'm trying to maybe give me an even eye. So we'll get back to you, Graham, I'm supposed to be answering that question. I can answer it. I'm just not allowed to.

There are no further questions. I'll turn the call back over to Mr. Daviau.

Good. Well, thanks, everyone, for joining today. And again, thanks for your continued support. Graham and others were available for future questions on the quarter as needed. Otherwise, we're going to update you not too far away, given this was our year-end, we'll be reporting again in early August. So look forward to talking to everyone then. If you can close the lines, operator, that would be great.

Ladies and gentlemen, this concludes today's conference call. Thank you for participating. Please disconnect your lines.

Good morning, ladies and gentlemen, and thank you for standing by. I'd like to welcome everyone to the Canaccord Community Group, Inc. Fiscal 2026 Third Quarter Results Conference Call. [Operator Instructions] 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.

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. 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 $616 million for the 3-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 $301 million, mostly from new issue activity. 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 3-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.

Certain sector-driven revenues are benefiting from unusually strong conditions that we would not expect to persist at the same levels and they 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 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 1.

We ended the quarter with client assets of $145 billion and new records set in each of our geographies. Excluding significant items, firm-wide pretax net income for the third fiscal quarter doubled when compared to the same period of the prior year to $81 million, which translated to diluted earnings per share of $0.36. I will note that our Australian business contributed $0.09 to the adjusted EPS in the third quarter with $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 continue 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.

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 17, 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.

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. And with that, I'll turn things over to Nadine.

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 pretax net income for our third fiscal quarter rose 103% year-over-year to $81 million, bringing our fiscal year-to-date net income to $174 million, up 49% year-over-year. This translated to adjusted diluted earnings per share of $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. Firm-wide non-compensation expenses, excluding significant items, decreased by $5 million or 3.2% year-over-year to $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 $2.5 million or 5% year-over-year to $48 million, primarily reflecting a $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.

Interest expense declined by $5.2 million or 16.8% year-over-year to $26 million, reflecting lower interest rates and the sale of the U.S. wholesale market making business. General and administrative expenses also declined by $2.5 million or 6% year-over-year due to onetime 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 pretax net income of $51 million, representing a 248% improvement from the same period last year. The adjusted pretax 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 $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 $54 million, the highest level since Q4 fiscal 2021. Advisory revenue of $65 million declined by $6 million or 9% year-over-year. 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 7. 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.

Turning to our Wealth Management businesses. Revenue of $304 million and adjusted pretax net income of $57 million increased by 30% and 57%, respectively. Included in these amounts are contributions from Wilsons Advisory of $16.1 million in revenue and $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 $240 million, driven primarily by higher contributions from our Australian and Canadian operations and a 154% increase in investment banking revenue to $25 million, with 64% of that amount contributed by our Canadian operations and the remainder from Australia.

While our U.K. business remained the largest contributor to pretax net income, our Canadian and Australian businesses delivered substantial increases as stronger revenue translated into improved operating leverage. Our Canadian business contributed $23 million in adjusted pretax net income, representing a 155% year-over-year increase, while Australia more than tripled its contribution to $7 million. Client assets at the end of the quarter reached a new record of $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, representing a 16% increase compared with the prior year, driven primarily by market appreciation, acquisitions and foreign exchange movements. Client assets in Canada increased 25% year-over-year to $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 3-month period. Assets in our Australian business also reached a new record, increasing to $17 billion from $8 billion a year ago. Approximately $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. Our 9-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 $0.085. With that, I will turn things back to Dan.

Thank you, Nadine. We are very pleased with our third quarter performance, which was driven by elevated client activity, 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. 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 Instructions] Your first question comes from Jeff Fenwick from Cormark Securities.

I 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?

You're going to kill my Australia team, Jeff, with questions like that. It's a big acquisition for us. And there are 3 new offices plus integrating 3 offices into our existing facilities. 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 long term. Long term, I think we've always said we see the opportunity in Australia similar to the opportunity we see in Canada.

I guess the only difference between the 2 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. We've got a bunch of advisers 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, maybe a little bit cheaper than it is in Canada to bring on advisers, but we continue to see that. So we really like the Australian wealth space and are going to continue to invest significantly into it.

And I think as the business scales up, you'll see margins improve. 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. They're not segregable. They're one combined business, our capital markets and wealth businesses. So you may see a little bit more volatility in that business than you typically see in a wealth business. simply because as the business transitions to fee-based, we still continue to play in the new issue business.

And obviously, when things are active, particularly in the resource square, you'll see an increase in commission revenue as assets flow into deals and flow out of deals. But 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 pretty exciting, and we like it.

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. I guess, more of the employees wanted to gain exposure to a business that's doing well down there...

Yes 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 free cash flow that we had sitting there. But 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 our ownership coming down, as I think we disclosed, we'll retain control. It's a complicated process on how you do a rights deal in Australia to employees. So what exactly our equity ownership is, we can't disclose that yet, but it will be coming down from its existing 65%.

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 adviser 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.

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 platforms they could be on in the market? Or just any color there you could offer?

Fair questions. I mean, we do continue to recruit teams, although 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 adviser and cycling out a smaller adviser or a smaller adviser retires or what have you. So the average book per adviser continues to grow significantly, and it's at a record, Nadine, it's currently...

$369 million.

$370 million. So -- and that number is at all-time records. So our average advisory teams are up. You also see we disclose teams. So sometimes 2 advisers will combine into 1 team. So that activity is going on, and that's an activity we strongly encourage. So we probably should disclose a number of advisers, too, to be honest, Jeff, because I think it will give you a better transparency on that.

But yes, we're in the market of continuing to bring over great new partners into our franchise. We brought over a couple of last quarter. We continue to have a good pipeline. We're in that business, and we continue to be in that business. So no real color. We're very excited by our Canadian wealth business and its pace of activity and its recruiting pace, but it takes time to bring people over.

Fair enough. And 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 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 choose to make that acquisition.

Yes. 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 -- the -- how you define sustainability and how you define energy transition, I mean that's going to go on no matter what. 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 kind of go where the market is active. And this is a team -- 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 at or better than they've delivered in the past. So it's certainly an exciting opportunity. And again, even if some of the tax-driven financing disappears, we see their M&A business significantly increasing.

So I mean, energy needs aren't going to disappear. And 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 through -- flows from that advisory practice that they have and stapling on the international capabilities. 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. And so we're excited by it.

And your next question comes from Rob Goff from Ventum Capital.

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

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

I'm still a newbie.

Yes. No, you're not.

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

Yes. 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. Arguably right now, maybe it's a little lighter. That being said, I'll have a meeting tomorrow and I'll decide, it's very active again.

But 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 I don't think much has really changed. The cost of acquisition hasn't changed. The pace of acquisition hasn't changed. I think it's just going to be more of the same. Certain quarters will be bigger and certain quarters will be smaller. That's probably the best way I'd frame it. Is that your question? Or is it something deeper than that?

I'm not that deep.

Yes, you are.

And your last question comes from Graham Ryding from TD Securities.

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

Yes...

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

Yes. It depends on what data you get us. The -- 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 -- 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.

I think the difficult part is coming to -- I think we used the term, terms and form or form and terms of the regulatory settlement. It's just coming up with the right words and you've had multiple government shutdowns and you've got three regulators that we're dealing with. So I'm still optimistic about getting to a resolution. There's -- the alternative isn't very attractive. So hopefully, over the -- I would have said this last quarter, hopefully, over the next quarter, we'll get it solved, but you could have heard me say the same thing over the last couple of quarters, too.

Yes. 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. business?

It didn't I say I'm not going to talk about the U.K. -- yes, I won't talk about our U.K. business. But yes, the Evelyn transaction, I mean, Evelyn was a bigger firm than ours, arguably, 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 you asked, is it comparable? Sure, it's comparable. 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 -- so I won't get into that. But yes, it's not a completely dissimilar business, if that's your question.

Yes, that's helpful. On the U.K. wealth side, it looked like your pretax 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 pretax earnings and the margin profile of that business?

Yes, I'll take that. You're correct. We did note that our pretax margin is down by about 2 points or 3 percentage points. Primarily, that was driven -- we are 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 positive net flows in that business, but the expense creep up is really what drove the shrinkage in margin, but we expect that to pivot as we get through some of that cost base.

Understood. And 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?

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

Okay. Great. And my last one, if I could. Just on the Australian ownership piece, I appreciate that you can't put a pin on what your stake is going to move down to. But will you maintain more than 50% ownership in that Australian business after this rights offering?

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

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

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

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

Okay. Well, thank you all for joining us today. And again, our apologies for reporting on Friday, February 13, on 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 broke 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.

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.

Good morning, ladies and gentlemen, and thank you for standing by. I'd like to welcome everyone to the Canaccord Genuity Group Inc. Fiscal 2026 Second Quarter Results Conference Call. [Operator Instructions] 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, Chairman and CEO. Please go ahead.

Thank you, operator, and welcome to those of you joining us for today's call. As always, I'm joined by our Chief Financial Officer, Nadine Ahn. Our remarks today are complementary to the earnings release, MD&A and supplemental financials, copies of which have been made available for download on SEDAR+ and on the Investor Relations section of our website at cgf.com. Nadine will also be referring to our investor presentation available on our website and through the online portal for this conference call.

Within our update, certain reported information has been adjusted to exclude significant items to provide a transparent and comparative view of our operating performance. These adjusted items are non-IFRS measures. Please refer to our notice regarding forward-looking statements and the description of non-IFRS financial measures that appear in our MD&A.

And with that, let's discuss our second quarter fiscal 2026 results. During our second fiscal quarter, major equity indices posted strong gains and gold prices surged 17%, while improved certainty on trade-related matters, coupled with downward pressure on interest rates contributed to a substantially improved market environment for our core wealth management and Capital Markets activities. Consolidated revenue of $530 million increased by 24% year-over-year and by 18% sequentially, representing our strongest top line quarterly results announcing a substantial increase in our provision for ongoing U.S. regulatory matters.

This reflects our revised estimate of the total monetary penalty related to the enforcement matters. First and foremost, I want to acknowledge how seriously we are taking these matters. Compliance and integrity are fundamental to the trust you place in us as shareholders. We are cooperating fully with our regulators, and we anticipate reaching a global resolution in the coming months. As this remains an ongoing matter, we are precluded from discussing in further detail. I want to reaffirm that over several years, our U.S. business has substantially invested in a comprehensive compliance transformation aimed at aligning with regulatory standards and remediating its existing program.

In addition, as you've heard me say before, we've also invested in strengthening our compliance talent and infrastructure across all businesses and geographies. In keeping with our commitment to continuous improvement, we have also taken steps to meaningfully reduce our risk exposure while ensuring that we can continue to deliver exceptional experiences for our clients. In addition to the increased provision, we've recorded a noncash goodwill impairment charge of $110 million in our U.S. Capital Markets business.

For several quarters, macroeconomic and trade-related uncertainties have tempered activity across our core focus sectors impacting revenue and profitability in our U.S. operations. Although advisory completions have rebounded from the trade-driven slowdown of the prior quarter and corporate financing activity has seen a meaningful uptick, the recovery for small and mid-cap segments within our core sector has been more gradual in this region. Nevertheless, we continue to execute against a robust pipeline, reinforcing our confidence in the stronger performance in the second half of the year.

Together, these items contributed to an IFRS loss attributable to common shareholders of $204 million and a loss per share of $2.04. While this quarter's results are disappointing in light of these measures, we've confronted legacy issues head on and taken steps to strengthen the foundation of our business. Our core operations remain strong, our balance sheet is solid, and we continue to see encouraging momentum across key growth areas. I'm confident that the actions we are taking today will support sustainable value creation for our shareholders in the years ahead.

And with that, I turn things over to Nadine.

Thank you, Dan, and good morning, everyone. I'll start with the performance highlights on Page 4 of our investor presentation. Firm-wide revenue of $530 million improved by 24% year-over-year and 18% sequentially, representing our strongest quarterly revenue since the third quarter of fiscal 2022. The increase was primarily driven by a meaningful improvement in firm-wide corporate financing revenue, which increased by 91% year-over-year to $108 million, in addition to higher commissions and fees revenue, which increased by 25% year-over-year to $257 million, primarily driven by our wealth management businesses.

When measured on a fiscal year-to-date basis, firm-wide revenue amounted to $979 million, an improvement of 14% compared to the first 6 months of fiscal 2025. As Dan mentioned, we continue to make solid progress on our efforts to curb expenses, although certain costs remain elevated in the 3-month period. A detailed breakdown of the factors contributing to our second quarter compensation expenses can be found on Slide 7 of our investor presentation. The largest driver of the increase was related to fixed or less controllable expenses, which represented $7 million of the year-over-year increase.

The impact of foreign exchange accounted for $2.4 million or 34% of this increase. Additionally, premises and equipment costs in connection with new flagship offices in several geographies represented $2.7 million or 39% of the increase. As previously noted, we expect that the year-over-year variance in premises and equipment expenses will begin to taper off in the second half of this fiscal year as we pass the 1-year occupancy milestones in each location. Professional fees remained moderately elevated due to our remediation efforts in the U.S. and we also incurred higher communications and technology expenses in connection with investments to support growth in our Canadian and U.K. wealth operations.

Given the advanced stage of our remediation efforts and expectations for a unified resolution in the coming months, we expect that professional fees in this business will begin to taper off accordingly. The remainder of the increase was attributable to revenue or investment-driven expenses. Firm-wide compensation expense amounted to $323 million, an increase of $72 million or 29% year-over-year, broadly in line with the increase in incentive-based revenue.

Our firm-wide compensation ratio was modestly elevated to 60.8%, partially due to changes in the value of certain unvested stock-based compensation awards during the 3-month period. Excluding significant items, our pretax operating margin for the 3-month period improved by 1.4 percentage points year-over-year and by 3.9 percentage points sequentially to 11.3%. Adjusted pretax net income of $60 million for the second fiscal quarter increased by 41% year-over-year, which translated to diluted earnings per share of $0.27.

Turning to our segment results. Our Wealth Management division earned revenue of $269 million during the quarter and $512 million for the fiscal year-to-date, year-over-year increases of 24% and 19%, respectively. The second quarter increase was largely attributable to a $42 million or 25% increase in commissions and fees revenue to $211 million, reflecting record quarterly contributions from all regions. Additionally, revenue from investment banking activity earned in the Wealth division increased by $13 million or 240% year-over-year to $18 million, primarily due to stronger activity levels in our Canadian and Australian businesses.

Excluding significant items, which increased by $17 million or 26% compared to the same period of last year. In addition to increased investment banking revenue, which improved by $8 million or 206% year-over-year. Client assets surpassed $49 billion in the second fiscal quarter, increasing 24% year-over-year and 10% sequentially, representing a new record for this business. As outlined on Slide 11, higher market valuations were a major contributor to this increase, supported by positive net flows.

The business continues to advance its priority of growing contributions from fee-generating client assets, which amounted to 54% of total client assets for the fiscal year-to-date. The average book per adviser also reached a new record of $348 million, among the highest in the industry. On an adjusted basis, our Canadian wealth business delivered second quarter pretax net income of $18 million, a year-over-year increase of 54% and the strongest quarterly result since the first quarter of fiscal 2022.

This brought adjusted pretax net income to $28 million for the first half of fiscal 2026, up 30% from the same period of last year. The adjusted pretax profit margin for the fiscal year-to-date improved by 1.5 percentage points year-over-year to 13.4%. Adding back noncash development charges, normalized EBITDA in our Canadian Wealth Management business was $25 million for the second quarter and $40 million for the fiscal year-to-date, year-over-year increases of 42% and 18%, respectively.

And finally, second quarter revenue in our Australian Wealth Management business increased by 43% year-over-year to a record $28 million, bringing fiscal year-to-date revenue to $51 million, up 34% compared to the same period of last year. Revenue growth in this business was broad-based, reflecting increased client activity levels, IA recruitment and new client onboarding. Commission and fees revenue of $22 million for the 3-month period increased by 23% year-over-year and investment banking revenue of $5.5 million increased by more than fourfold when compared to the same period of last year.

Measured in local currency, client assets in this business grew to a record $11 billion, an increase of 37% year-over-year and 11% sequentially. During the second quarter, we announced our acquisition of Wilsons Advisory, which was completed on October 1. The financial contribution from this acquisition will be included in the operating results for this business beginning in our third fiscal quarter. Second quarter adjusted non-compensation expenses increased by $0.6 million or 13% year-over-year, largely in connection with acquisition-related travel and administrative costs.

Excluding significant items, pretax net income more than doubled to $3 million when compared to the second quarter of last year. The adjusted pretax profit margin of 11.2% increased by 6.5 percentage points year-over-year and represents the highest result for this business since the second quarter of fiscal 2022. Turning to our Capital Markets business. Consolidated Capital Markets revenue of $253 million for the second quarter increased by 25% year-over-year and 26% sequentially to the highest level since the fourth quarter of fiscal 2022. For the fiscal year-to-date, revenue in this division increased by 11% year-over-year to $453 million.

The second quarter increase was primarily driven by our Investment Banking segment, which saw revenue rise by $39 million or 76% year-over-year to $91 million for the 3-month period. Notably, our Australian business contributed $51 million, representing 56% of total investment banking revenue for the quarter and achieved a remarkable 193% year-over-year growth, which was primarily driven by the mining sector activity. Investment banking revenue also meaningfully improved in our Canadian and U.S. businesses by 20% and 52%, respectively, when compared to the same period of last year.

Following the sharp decline in advisory completion activity caused by trade-related uncertainties in our first quarter, Q2 advisory revenue rose to $79 million, a 62% sequential improvement as activity levels began to recover. Our U.S. business was the largest contributor to this result, generating $46 million in revenue, over twice the amount recorded in Q1. However, this figure remains 18% below the revenue earned in the same period last year as completion activity levels were still subdued at the start of the quarter.

Our U.K. business also experienced a notable uptick with advisory revenue improving by 253% sequentially and by 73% year-over-year to $22 million. Consolidated commissions and fees revenue of $42 million improved by 22% year-over-year as new issues and client trading activity increased in all geographies. Principal trading revenue of $31 million increased by 12% year-over-year. The U.S. business was the largest contributor to this result with quarterly revenue of $27 million, largely attributable to the International Equities Group.

As the sale of this business was completed on November 7, our third quarter results will begin to reflect the reduction in related contributions. On an adjusted basis, non-compensation expenses increased by 6% year-over-year, largely due to higher trading costs, which were in line with increased revenue. Additionally, non-comp expenses in our Australian business increased by $1.4 million due to conference expenses and costs associated with the previously discussed acquisition of Wilsons Advisory.

Along with higher trading costs, expenses in our U.S. business remained elevated due to the increased premises and equipment costs noted earlier as well as professional fees in connection with our previously disclosed regulatory enforcement matters. I'll touch briefly on the goodwill impairment that impacted IFRS results for our U.S. business. Goodwill is required to be tested for impairment at least annually.

As Dan mentioned, over the past several quarters, a combination of macroeconomic and trade-related uncertainties has moderated activity levels across our core focus sectors, weighing on revenue and profitability in our U.S. operations. As past performance would demonstrate, we continue to see substantial long-term value in our U.S. business, which remains a strategically important part of our global platform with a strong record of generating meaningful revenue and profitability under more typical market conditions.

However, accounting standards require fair value assessment at what we believe to be the bottom of the cycle. The goodwill charge is a noncash accounting adjustment and does not result in any current or future cash outlay. I'd like to emphasize that this adjustment has no impact on the ongoing operations or our capacity to continue to invest in our U.S. business. On a consolidated basis, adjusted non-compensation expenses as a percentage of revenue for our Capital Markets division decreased by 4.7 percentage points year-over-year to 26%.

The adjusted pretax net income contribution from our Capital Markets division increased by 71% year-over-year to $26 million. Improved contributions from Australia, Canada and the U.K. were offset by a breakeven result in our U.S. business. Aside from the previously discussed U.S. matters that impacted our profitability this quarter, our efforts to curb discretionary expenses are evident in our results. With activity levels expected to strengthen in the second half, we anticipate continued margin improvement into fiscal 2026.

As we advance both our organic and inorganic growth initiatives and execute effectively for our clients amid improving business conditions, we remain confident in our ability to enhance firm-wide profit margins and achieve our targeted single-digit growth for the current fiscal year. Turning to the balance sheet. We maintain sufficient working capital to meet our regulatory commitments, support our strategic priorities and expanded business activity while preserving the flexibility to respond to outstanding regulatory matters and reallocate capital as market conditions evolve.

With that, I'll turn things back to Dan.

Thanks, Nadine. We're having a very productive start to the second half of our 2026 fiscal year. We are seeing meaningful signs of recovery in the equity capital markets with small-cap indices signaling a renewed risk-on environment. Notably, the IPO market is showing early signs of recovery and private equity-backed IPOs have more than doubled year-over-year, underscoring the confidence in public exits. That said, activity remains selective. Our proceeds raised have increased by nearly 60% compared to the first half of the last fiscal year.

The mining sector continues to dominate, but we are encouraged by strong pickup in technology, industrials and health care sectors, which should lead to a more diversified mix in the second half. Our Australian business is currently the top rank investment dealer in the region for equity financings, both by proceeds and volume, and we are also ranked third overall in the Canadian league tables. Capital Markets advisory activity is also gaining momentum, and our outlook for advisory completions in the second half is stronger than in the first.

While our U.S. business experienced an abrupt slowdown in M&A completions amid trade-related uncertainties during the first quarter, it has since regained momentum. The team is executing on a robust pipeline of mandates while continuing to win new ones. M&A activity is improving in Canada and the U.K. as well, and we are also seeing good momentum from our Australian practice, which is still in the early stage of its development. On November 7, we completed the previously announced sale of our U.S. market making business.

This transaction enables our U.S. operations to focus capital and resources on our core equities and M&A franchises, which are both higher-margin and capital-light businesses. Each of our wealth management businesses is delivering on their respective business plans and continues to deliver impressive growth. Our business in the U.K. and Crown Dependencies continues to advance its organic growth priorities with a focus on growing contributions from fee-based assets, which will continue to enhance the stability and quality of its earnings.

We continue to see very strong growth potential in our Canadian wealth business. Driven by economic expansion and interest rate cuts, North America is outpacing the rest of the world in wealth creation with Canada offering particularly attractive opportunities for investors. With several domestic competitors having recently been acquired, the environment for independent wealth managers has become increasingly favorable, positioning CG to capture additional market share.

And finally, as Nadine mentioned, we completed our acquisition of Wilsons on October 1, which will add approximately $7 billion in client assets to our Australian wealth platform, further strengthening our national footprint and brand in the region. Integration is progressing smoothly, and we look forward to delivering an enhanced offering to our combined Wealth and Capital Markets clients in the region.

Looking ahead, our strongest opportunities lie in accelerating Wealth Management growth across all regions while leveraging our integrated equity and M&A capabilities to deepen our presence in core sectors poised for outperformance amid a more sustained market recovery. Assuming no changes to our operating environment, our results for the first half of this fiscal year give us confidence that we are on track to exceed our fiscal 2025 performance. Our Board of Directors has approved a continuation of our quarterly common share dividend of $0.085.

With that, Nadine and I will be pleased to take your questions. Operator, please open the lines.

[Operator Instructions] And your first question comes from Jeffrey Fenwick from Cormark Securities.

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

hi, sorry just one moment, we are just trying to fix the microphone. Can you hear me now?

I can hear you. Did you hear my question?

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

The bad news, Jeff, it took us 3 years to get us this far. The good news is we've known for 3 years that we've had to get something. So lots of time to accumulate capital that we require for this.

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

Yes. So the sale of the International Equities Group, we don't expect it to have a meaningful impact overall on our earnings profile. I think if you look at the U.S. for Capital Markets business as part of our disclosure, you see that principal trading revenue line number that would primarily have related to that business. In addition, when you look at the cost base associated with it, obviously, trading business is going to have a higher proportion related to that common tech cost.

So as Dan mentioned in his remarks, as on a go-forward basis, we do expect that as we pivot to primarily the ECM and advisory business, we should start to see an improvement overall in the margins in the U.S. business. As well, we've also -- with the remediation work in the U.S., we're going to start to see a decrease in some of our pro fees. So overall, we expect that while the sale does not have a meaningful impact on the overall earnings profile, provided that we continue to see growth in our U.S. revenues, we expect to see an improvement in margins overall.

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

Yes, Jeff, we're always evolving the business, obviously. I mean, we operate globally in several core sectors. Those sectors are very important to us, and we'll continue to expand into those core sectors. The expansions generally we've done in those core sectors has been into the advisory channel.

So when we bought Sawaya, when we bought Results, when we bought Petsky, that's not going to stop. We'll continue to look at acquisitions in our core verticals. So it's a little bit finding a needle in a haystack to find the right partner at the right price at the right time with the right culture. But we're in the market always looking for those areas. Yes, that's I think, the best I can answer that.

Okay. And I can't leave without asking about U.K. Wealth Management. I know there's lots of rumors and speculation. Clearly, you're clearly featuring it in your slides there on the time line and giving us an EBITDA number that you obviously want us to zero in on. So just maybe it's a bigger picture question here. What are you and the Board thinking in terms of strategic direction going forward?

If you were to surface value and exit a market like the U.K., that would be a very significant change for the continuation of the run rate of the business. So does that -- is there another area to focus growth on another market? It just -- you'd be giving up obviously the largest contributor to your earnings. Clearly, it's servicing some big value. But what would you think that would do with respect to the strategy going forward for Canaccord?

Yes, a great question. I don't think I'm prepared to answer at this stage, Jeff. But in general, on the U.K. -- the broader U.K. question, obviously, we're not going to comment on rumors and speculation. You know that we have a minority partner in that business, a financial strategic partner in that business. So we're obviously talking to lots of people all the time about a whole range of alternatives.

So some of those involve external parties, which is what creates rumors and stuff in the marketplace. So I can tell you that on our broader wealth businesses, including our U.K. wealth business, we're incredibly pleased with the performance of all those businesses. I mean, record revenue, record earnings, firm-wide assets at record levels, $134 billion now. They're all contributing significantly.

Our Canadian business is contributing well. Our U.K. business is obviously record levels of EBITDA and revenue. Our Australia business now is starting to contribute. Pro forma Wilsons will be at $17 billion in assets, made good money in that business. So that strategy that we started, whatever it was, 6 years ago, growing wealth and having it increase, it's working.

Last time we had revenues like this, Jeff, 2/3 of them were Capital Markets and 1/3 of them are Wealth. Now we have revenues like this and more than half of them are coming from Wealth and certainly more -- way more than half of our earnings are coming from Wealth. So we like the Wealth strategy. I can't get to the second part of your question is, what if we do this and what if we do that, then what are we going to do? Those are all really good questions that the Board will assess at the right time.

And your next question comes from Rob Goff from Ventum Capital.

Thank you Jeff for asking the tough questions upfront. So my question will turn down to Australia. Could you talk to the integration time line strategy with Wilsons? And you often build into momentum and the momentum is certainly in Australia. Can you talk to further inorganic growth in that region?

Yes. I mean, Wilsons is a big acquisition for us. Just 60 advisers, 8 offices to integrate into our broader platform. They had a small capital markets business that was integrated on day 1, literally. And then the Wealth businesses are busily integrating as well. Perth has moved. Sydney has -- Melbourne has moved. Sydney, we need to find some more space. But the businesses are going to quickly be integrated into our Wealth business.

The back-office system will take a little bit longer than that, obviously, but it's a big chunky acquisition for us in that market. So it's going to take some time, which addresses your second question about what do you do next? Or is there other strategic things? Like right now, this is what we've done, and this is kind of what we're doing. And it will take time. We do continue to -- our existing plan, which was to hire more advisers, we continue to do that.

And that's a similar strategy to the strategy we've had in Canada. We just hired 4 advisers from Morgan Stanley in Perth, for example, and that will continue to upgrade and up-tier our advisory offering there. So our principal strategy in Australia is an organic strategy, the same strategy we've deployed in Canada. Occasionally, we'll find the odd inorganic opportunity like we did with Wilson, and we'll do that as well.

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

Yes. I mean the recruiting pipeline is always kind of goes up and down and chunky. The truth is -- and again, I'm sure IA will do a good job with Richardson and all that kind of stuff. But at the end of the day, there's not as many -- truly independent platforms out there as there used to be. You can just look at the pace of activity, whether it's a pure kind of full-service wealth manager like us or other types of independent wealth managers, they're disappearing pretty quickly.

And we remain a very, very strong independent wealth platform. We've got $49 billion in assets. We're making -- we made $25 million in EBITDA in that business this year, if you back out the development charges. So we've got a very, very strong business and one that we've invested a lot of resources in, and we continue to invest in that business.

So it's a very attractive platform for advisers that want to leave their existing place to join. It's also a very attractive platform for existing advisers who are here to grow from. So we've got reasonable net new assets in the business. We continue to recruit in the business. We continue to bring on more advisers into the business, and we continue to feel incredibly confident about the future of this business.

And your next question comes from Stephen Boland from Raymond James.

Maybe -- Nadine, maybe you could just dig into the impairment a little bit. I know you're saying U.S. Capital Markets. But is it specific to one of the subsidiaries that you purchased, Petsky or Sawaya? Like I'm just trying to get an idea of is it just a widespread impairment or it's specific to certain segments?

No. So the goodwill that's sitting on the balance sheet as it relates to the U.S. is the aggregate of those acquisitions. And so essentially, when you're looking at goodwill impairment, you start out looking at your last 12 months baseline. And given the performance in the U.S. has been a bit slower than we initially anticipated starting out into fiscal 2026. You're kind of starting to jump off point and lower.

And so we're still projecting good growth in the business overall, but I'm starting at a lower point, which impacts my carrying value, relative to valuation. So that's what the impairment is coming down. And we don't look at it. It's not a specific business line. It's really around the projections of the full U.S. Capital Markets business going forward.

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

Well, I think that what we're talking about in terms of the projections in that business overall, and we're starting to see it, and Dan can speak to it a bit more as it relates to our pipeline. But I think you hit on one of the other primary areas of focus, which is the cost base. And so as we started to look forward, in particular, with the sale of IEG and that having a bit of a higher cost base.

But in addition, with the work we've completed as it relates to focusing building on our compliance program, that from a remediation standpoint, those costs are also going to be coming down. So we do expect to see the margin expansion in addition to a more favorable revenue trajectory going forward. Dan, do you want to add anything?

Yes. No, I think you hit on it pretty well. I mean we came off Q1. There was all the tariff stuff and really impacted M&A. It obviously came back in our Q2. We continue to see that momentum going forward. Our core M&A franchise is good or stronger than it's ever been. So I think that improves. The new issue environment, you saw great new issue numbers out of us. But to be honest, the big increases were in Australia and Canada, both of those tend to do a lot of mining deals.

And I think mining has been pretty active. We see an expansion. We see the other sectors starting to expand beyond that, beyond just the resource sector. So -- and that's where we would tend to dominate in the U.S. The final thing is that government has been shut down in the U.S., and you know that impacts IPOs. In particular, we do disproportionately well in some of the IPO activity. So we expect that to turn on. So that will improve our business.

So we think there's lots of upside in the U.S. Don't get me wrong. We were very excited about our prospects in the U.S., notwithstanding the goodwill write-down. And there was a time and a place, and it's still the same franchise that we have that we made a lot of money in the U.S. Like again, no one likes to refer to COVID times because no one likes to refer to them. But we were making $100 million a year in the U.S. So there's a real opportunity to -- we're not in the -- I won't use baseball analogies. It's way too soon, but we're still in the first period. I'll use hockey analogies now. We're still in the first period here. There's a fair amount of skating in front of us.

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

It's a great question. I'm not sure I know the answer, and I'm not sure I was the one that said that. But maybe who knows? I can't remember what I had for breakfast. But the -- again, we've got a very integrated global sales desk. We're big enough to have a global sales desk. We're small enough that we can be integrated and operate well. So we'll sell U.K. deals into Australia. We'll sell Australia deals into North America, and the border kind of vanishes with us.

So we're pretty good at that, having an integrated ECM platform, particularly in the mining square, where it's -- the companies are very, very similar, notwithstanding where they may operate. It's the key underlying dynamics. So we're good at distributing. That being said, I do think that the vast majority of the Australian equity flow has come from domestic accounts. You've got large superannuation funds. They continue to grow. There continues to be -- it's not a shrinking institutional pool of money the way you'd see in the U.K. or maybe even in Canada.

It's a growing institutional pool and add to the fact that we've got a pretty significant retail distribution path in Australia now. We're becoming a more significant distributor of equities into our own retail channel. And you saw that through the new issue chunk of the revenue that flows through our Australian Wealth business, which I think was $4 million or $5 million this quarter.

So we're becoming a serious distributor. And as I referred to in the prepared remarks, I mean we're -- like last quarter, we were #1 in the Australian league, not #1 in number of deals, like #1 in any measure. And even for the year, I think we're #2 overall in the dollars raised and #1 in the number of deals done. So we are a very significant Australian underwriter now, similar to our position in Canada.

I'll ask one more just on the Canadian Wealth Management, the expansion in the margin. Revenue -- AUM continues to go up, revenue continues to go up, but the expenses seem to be managed pretty well. Is that something that we can continue to expect that, that margin will continue to expand?

Yes, absolutely. That was one of the areas of focus for us coming into fiscal 2026. In particular, we've seen just structurally that cost base had increased as we talked about related to our investments in new properties, both in Vancouver and Toronto. So what you're starting to see is that really that buildout and scale in that revenue and also quite a bit of discipline on our cost base to focus on that margin expansion, which is what we anticipate going forward as well.

And your last question comes from Graham Ryding from TD Securities.

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

Yes. When you think about it, when you're looking at it from an accounting basis, right, like you do have projections in your model, and we baseline it off the last 12 months of cash flows. And so as I rolled into Q2, we didn't see quite the improvement in performance that we had anticipated. That's hitting my last 12 months of cash flows. And so we still are looking, if you look at our disclosure at a projection of 5% growth still in terms of that business. And so you're still seeing an anticipation that we're going to be of an improvement.

But when you look at the impact from a baseline standpoint, that was impacting my overall valuation versus the carrying value. And so it's being able to support the $200 million of goodwill in that business, it wasn't sustainable given the projections going forward. So from an accounting perspective, while there's a lot of judgment in there, it became a bit of a mechanical exercise. But we do still anticipate strong performance in that business going forward, but the ability to hit the valuation based off of the last period was just becoming really challenging, which is why we didn't -- we took 50%. We were obviously still able to carry the extra $100 million.

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

Yes, it's a judgment call. But I think when you look at our disclosure previously, the U.S. business has been operating with reduced headwind or headroom, sorry, which is why we provided sensitivity disclosure every quarter relative to that business. So yes, you could have considered waiting another period, but it was becoming difficult to substantiate the growth trajectory off a lower base, which is taking into account the historical performance.

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

I'm not sure what it was, I'm going to go back and look at that MD&A. Yes, I'll let Nadine answer. How is that if I can't answer it.

No, we didn't provide any guidance as it relates to -- we did discuss it more around as it relates to our operating margin and the guidance we have provided was that a 1 point improvement overall. And I think you can see based on the trajectory that we've had on a year-over-year basis, we're well on our way to achieving that result. I think that's what it was in relation to the operating margins.

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

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

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