Canaccord Genuity Group Inc.

Dan Daviau - President and CEO Brad Kotush - Chief Financial and Risk Officer

Thank you, operator, and thanks to everyone for participating on the conference call today. With me on the call is Brad Kotush, our Chief Financial and Risk Officer.

I'll begin by providing an overview of our fiscal first quarter results for the period ended June 30, 2016. Afterwards, both Brad and I will be pleased to answer questions from analysts and institutional investors.

A reminder that our remarks and responses during today's call may contain forward-looking statements that involve risk and uncertainty related to the financial and operating results of Canaccord Genuity Group, Inc. The Company's actual results may differ materially from management's expectations for various reasons that are outlined in our cautionary statements and in the discussion of risks in our MD&A.

We encourage you to review our earnings release, MD&A and supplementary financial information, all of which were made available yesterday evening. These documents can be found on SEDAR or on the Investor Relations section of our website at canaccordgenuitygroup.com.

I'll now provide an overview of our performance during the fiscal first quarter. Despite heightened volatility across global capital markets and an environment of persistent uncertainty in the months leading up to the Brexit referendum results, I am pleased to report that we have successfully returned to profitability during the first quarter of our 2017 fiscal year.

Additionally, since we announced our restructuring initiatives six months ago, we have achieved most of the cost reduction initiatives, and we're well on track to delivering our target of $30 million in cost savings. During the quarter, we also successfully closed a private placement which was fully subscribed by our most senior and top revenue producing partners in the organization.

In doing so, we've further strengthened the alignment with our shareholders and employees now own approximately 40% of our common shares on a fully diluted basis. Canaccord Genuity Group revenue for fiscal first quarter was $206 million, an increase of 3% when compared to our most recent fiscal quarter.

While this was a very challenging period for our capital markets operation in UK and Europe, our Canadian capital markets and wealth management operations benefited from improving capital raising activity and advisory activity in addition to a pickup of activity in the natural resources sectors. I am also pleased to report that fort the first fiscal quarter, our wealth management operations in Canada achieved profitability for the first time since the second quarter of fiscal 2012.

Excluding significant items, net income for the first fiscal quarter improved to $8 million, up from a loss of $2 million in the most recent fiscal quarter and our net profit margin improved to 4%, up from losses of 1% and 11% in the two previous fiscal quarters. This result was achieved thorough ongoing expense reduction initiatives and also partly attributable to a favorable foreign exchange rates.

First quarter diluted earnings per share increased $0.05 per share from a loss of $0.06 per share in the fourth quarter of fiscal 2016. Excluding significant items firm-wide expenses as a percentage of revenue were 95%, down 17% from their peak in the third quarter of fiscal 2016.

With the bulk of our restructuring initiatives behind us, we continue to explore additional sources of cost savings across our global platform. We also continue to maintain a reasonable capital position, which protects our capacity to increase business activity and enhance our earnings capability.

At the end of the first fiscal quarter, our Company had $386 million in working capital and $282 million in cash and cash equivalents. And now, turning to the performance of our capital markets business.

During the first quarter, our global investment banking teams participated in 86 transactions to raise proceeds of $10.3 billion for our global growth companies. For the period ended June 30th, our global capital markets position generated revenue of $141 million, an increase of 1.4% when compared to the previous three months.

The strongest improvements in the period came from our Canadian and Australian operations which recorded sequential revenue increases of 25% and 15% respectively. This performance was offset by a small loss in our U.S.

operation and more substantially by a loss in our UK and Europe capital markets business which was most impacted by the general uncertainly leading upto the recent Brexit referendum. Total financing activity of our key markets was lower compared to the same period last year, as a result of ongoing broad market volatility.

With the exception of our Australian investment banking operation, all regions recorded decline in investment banking revenue on a year-over-year basis. We are encouraged by improving activity levels and our core focus and specifically in the natural resources sectors where we have traditionally been a leader.

While the environment for capital-raising remained below normalized levels, advisory activity has been improved in most of our markets. Firm-wide revenue earned from advisory activity during the first fiscal quarter improved by 80% on a year-over-year basis.

The strongest contributor to this performance was our Canadian operation, which recorded a 362% increase in revenue from advisory activity when compared to the same period last year. I would also like to highlight the performance of our trading operation in the U.S.

This business contributed 73% of total principal trading revenue for the quarter, which increased by 22% on a year-over-year basis. While much of this result was driven by the performance of our international equity group, our options trading and fixed income business also had improved results.

As we continue to strengthen our cross-border capability, I believe we stand to substantially benefit from driving increased, incremental revenue growth across our global sales and trading operations. We have seen modest improvements globally in principal trading and investment banking revenue when compared to the previous fiscal quarter.

We expect the ongoing uncertainty [ph] related to the Brexit referendum results will continue to put pressure on our UK and European capital markets business. Our recent initiatives to streamline this business and strengthen alignment with our core global capabilities will help this business better withstand market challenges.

Importantly, with the global coordinated investment banking sales and trading teams, our clients in this geography can benefit from the differentiated perspectives and the resources available across our global platform. Across our global capital markets business, we've recruited into our core focused areas to strengthen our capability in investment banking, equity research and sales and trading.

Now, turning to our wealth management operations. Globally, Canaccord Genuity wealth management generated $64 million of revenue during our first fiscal quarter.

Our investment advisory teams in the UK and Europe, Canada and Australia are entrusted with $33 billion in client assets. Our award winning wealth management operation in the UK and Europe have continued to increase assets under administration and management during the quarter.

Steady improving net inflows led to an 11% increase in assets under management for this business when measured in local currency. Additionally, in the days following the results of the Brexit referendum vote, our recently upgraded platform was vigorously tested and I am pleased to say that our team successfully managed the elevated trading volumes.

This highly scalable business continues to be an important source of stable, reoccurring revenue and is capable of further organic and inorganic growth. By adopting a stronger client service philosophy and working to reduce our fixed costs, our Canadian wealth management business has returned to profitability.

While assets under administration and management in our Canadian wealth business were negatively impacted by lower market values and a reduced number of advisory teams when compared to the same period a year ago, net income before taxes for the fiscal quarter of 2017 was $400,000, up from a loss of approximately the same amount during the same period last year, due in large part to our cost reduction efforts. We continue to focus on improving reoccurring revenue growth across our wealth management operation to help offset the inherent volatility in our global capital markets businesses.

Looking ahead, our priorities continue to center on further driving cross-border collaboration. Next week, we will host our 36th Annual Global Growth Conference in Boston with confirmed attendance from close to 310 companies across the technology, healthcare, industrial, consumer and sustainability sectors.

Over two case, [ph] we will showcase our global capabilities, as we connect industry leaders with investors and more than 3,500 one on one meetings and a robust series of presentations and panel discussions. We continue to maintain a strong focus on running our business more effectively while maintain a strong client focus across our operations.

While I am pleased to see activity levels improving in most of our markets, we remain committed to strengthening alignment across our business to drive a stronger net income result, improve our profitability and sustainably improve returns for our shareholders. Just a reminder to anyone on the call, we will be hosting our annual general meeting today at 10 o' clock at Goddmans LLP in the Bay Adelaide Centre in downtown Toronto.

For anyone who cannot join us in Toronto, the event will be webcast and available on the events page of the investor relations section of our Company website. I thank you all for your participation and look forward to hearing from you or seeing you soon.

Thanks very much.

Ladies and gentlemen, this concludes the conference call for today. Thank you for participating.

Please disconnect.