RF Capital Group Inc.

Good morning, everyone. Apologies for the technical difficulties with the line this morning, which gets us off to a late start.

But thank you for joining us as we walk through GMP's fourth quarter and 2018 results. Here with me this morning in usual is Deb Starkman, our CFO.

Before we get started, I would like to remind you this call is being webcast and will be available for subsequent replay. Our remarks today may contain forward-looking information and actual results could differ materially.

Forward-looking information is subject to numerous risks and uncertainties. Certain factors or assumptions applied in forward-looking information can be found in our 2018 AIF and our 2018 Annual MD&A.

These documents are available on our Web site and also on sedar.com. The operating environment in fourth quarter turned decidedly negative.

Significant equity market volatility in December led to negative performances across virtually all asset classes, and as a result, client activity was tepid. Trade related uncertainty and slowing global growth were the primary drivers of the equity market sell-offs.

The S&P, TSX Composite Index declined 11% in the quarter with the energy sector being particularly hard hit by a combination of sharply lower oil prices and ongoing pipeline capacity constraints. The price of WTI ended the year at CAD 51 after reaching an intra-year high of CAD 86 in October.

That said, we are encouraged to see a sharp reversal in general investor sentiment and a rally in global equity markets in the first two months of 2019. Despite the negative backdrop in Q4, we are pleased to have delivered of adjusted net income from continuing operations of CAD 8.2 million, equating to EPS of CAD 0.09.

Total revenue was CAD 38.3 million in the quarter, down from CAD 52.8 million in Q4 last year. The decrease was primarily due to unrealized losses from principal transactions particularly in December for the aforementioned reasons, with a majority of which have reversed in first quarter with the rebound in global equity markets.

Commission revenue was also down year-over-year. Partly offsetting these decreases was stronger investment banking revenue of 9% and the increase was led largely by another robust quarter for underwriting activity in the cannabis sector.

Our partners at Richardson GMP reported adjusted EBITDA of CAD 10.6 million in the quarter on total revenue of CAD 69.1 million. Our performance this quarter is a testament to the strength and resiliency of our core Canada capital markets business and the continued profitability of our industry leading wealth management business.

The Canadian capital markets are what we know better than most and where we are consistently top tier and profitable. Looking back on the full-year, we are encouraged by both the solid revenue and earnings growth we reported in 2018 and the considerable strides we made towards sharpening the firm's focus on our core and profitable Canadian capital markets and wealth management businesses.

As challenging as 2018 was in many respects particularly in the fourth quarter, GMP delivered solid financial results from continuing operations. We grew revenue by 15% and recorded adjusted net income from continuing ops of CAD 34.8 million leading the way with a 46% increase in investment banking revenue with year-over-year growth from the cannabis, blockchain and energy sectors.

Of note, our non-commodities business accounted for 70% of total investment banking revenue in 2018. The firm generated adjusted EPS from continuing ops of CAD 0.40 and ROE was 17.4%.

In 2018, we also returned CAD 23.1 million to shareholders through common stock dividends and share repurchases. We are also pleased to have reinstated a quarterly cash dividend of 2.5 cents per common share and declared two special cash dividends of CAD 0.10 and CAD 0.075 per common share in March and November respectively.

These decisions were made in recognition of GMP's improved financial performance, strong capital levels and positive outlook for the franchise. Let me now walk you through the quarterly financial highlights for our two business segments.

Capital Markets reported fourth quarter pre-tax adjusted earnings from continuing ops of CAD 6.5 million, down from CAD 15.4 million in Q4 last year. Total revenue of CAD 34.5 million decreased 29%.

The decrease was driven almost exclusively by on realized losses on principal inventories. However, it is worth noting that the majority of such mark-to-market losses have reversed in the first two months of 2019; commission revenue was also down as client trading activity paused amid heightened equity market volatility.

These decreases were partly offset by higher investment banking fees which rose the aforementioned 9% compared with Q4 last year. Expenses of CAD 28.2 million were down 16% compared with Q4 largely due to lower employee compensation and benefits expenses and lowing -- lower selling general and admin expense.

Let me expand further. Principle transaction generated net losses in the quarter of CAD 11.1 million compared with net gains of CAD 4.6 million in the same period last year.

This decrease was led largely by unrealized losses on principal inventories acquired in connection with investment banking mandates and higher losses from client trade facilitation amid volatile equity markets. Investment banking revenue of CAD 35.5 million increased the aforementioned 9% primarily driven by higher underwriting revenue which increased 15% compared with Q4 last year.

This quarter included our co-lead of [indiscernible] 520 million RTO as well as capital raisings for a number of -- other players in the cannabis sector. Advisory revenue in Q4 2018 decreased by 7% compared with the same period a year ago.

In fourth quarter in 2018, Canadian independent dealers continued to benefit from significant capital raising and advisory activity in the cannabis space. Canadian capital markets experienced a surge in cannabis listings with additional support from Canadian investors giving way to capital inflows from increasingly international investing audience.

GMP Securities is proud to continue playing a leadership role in this entrepreneurial growth sector. On a less positive note, there was no abatement in the bear market commodities for commodities that began in 2014 and remains a significant headwind for all Canadian dealers including GMP.

The dollar value of industry-wide common equity underwriting transactions completed in Canada in the energy and mining sectors was down 88.7% and 34.6% respectively compared with an already anemic 2017. Let me take this opportunity to comment briefly on the state of the Canadian Energy sector.

While we are encouraged by last week's conditional approval of TransMountain by the National Energy Board albeit construction is still several years away. The harsh reality is the ongoing Canada risk off-trade coupled with lack of progress on pipelines and infrastructure led to a massive migration of international capital out of Western Canada and primarily into the United States where there are far less regulatory financial and political obstacles to operating.

According to the Canadian Association of Petroleum Producers, 2018 marks the fifth straight year that capital spending has contracted. Frankly, our energy industry is mired in endless regulation and procedure.

Canadian Energy companies are among the best in the world in what they do, but seemingly endless political dithering has created considerable hurdles to their progress hurting -- thus hurting the sector's global competitiveness. We have been blessed as a country with one of the great caches of resources wealth in the world and harvesting that responsibly which of course includes the gold standard on the environmental side should absolutely be the rule that government and business alike.

Make no mistake. GMP remains long-term bullish on Canada Oil remains the world's number one source of energy and we don't see that abating for decades to come.

However, balancing oil and gas with new technology and renewable energy is the way forward for Canada's energy economy as long as an appropriate balance is struck between the two. Canadian energy will recapture the interest of global investors only when there are increasing signs we are willing to address some of the larger and broader challenges of the industry many of them structural.

More importantly GMP FirstEnergy remains well positioned as the only viable independent and Canada's largest and most valuable industry. With that, let's turn to wealth management where Richardson GMP reported adjusted EBITDA of CAD 10.6 million in the quarter and assets under admin ended the year of CAD 27.4 billion with the advisory teams at 166.

RGMP remains a core building block of long-term value creation. Our partners there manage a highly coveted wealth management business that is consistently profitable and increasingly scalable.

Richardson GMP is focused on growth. Over the next five years they strive to grow client assets to CAD 50 billion and lift the advisor roster to 250.

Given changes to Canadian banks are making in their wealth management businesses our partners at RGMP are optimally positioned to attract large book investment advisors who want to be in the advice delivery game. And now I'll turn it over to Deb for a review of expenses.

Thank you, Harris. Before my remarks on expenses, let me address the accounting treatment and discontinued operations.

As you are aware, consistent with our stated objective of focusing on our profitable Canadian markets and wealth management businesses on December 11, 2018 GMP announced that it has entered into a definitive agreement in respect of a transaction that subsequently resulted in the sale in GMP USA. Management determined that GMP USA met the criteria under International Financial Reporting Standards as discontinued operation at December 31.

As required by accounting standards the results of discontinued operations are presented separately in the consolidated income statement with comparative information restated accordingly. Net loss from discontinued operations was CAD 8.7 million in the fourth quarter and CAD 12.6 million for the year.

Let me now review our expenses from continuing operations. Expenses of CAD 37 million decrease 15% compared with Q4 last year, largely due to lower employee compensation and benefits which decreased 15% and lower selling general and administrative expenses.

This decrease in employee compensation expense was led by a 30% decrease in variable compensation, commensurate with lower revenue generation. The decrease in selling general and administrative reflects lower transaction costs amid weaker trading activity and lower business development expenses.

As always, we continue to be prudent managers of risk while safeguarding liquidity and capital. We ended the quarter with solid networking capital of CAD 179 million.

Now, I'll turn it back over to Harris for closing remarks.

Thanks, Deb. 2018 was clearly an important year of transformation for GMP and a return to solid operating performance from continuing operations.

It marked the conclusion of a multi-year process that resulted in meaningful changes to our organized social structure. The harsh reality is that we faced some monumental industry challenges over the past decade.

Our key strategic focus has been to ensure we are active in markets where we can be relevant and a top tier player. That means Canada and it means being a meaningful player in the capital markets including underwriting and advisory and the wealth management segment to have 33% ownership stake in Richardson GMP.

I am reminded as I conclude of a Viking saying that best summarizes GMP's operating philosophy. It goes something like this, what's coming will come and we'll meet it then.

The ships in the global capital markets aren't coming. They are already here and have been here with us for the better part of the decade.

The decline in legacy businesses as a consequence of structural change to our industry is a simple reality. We believe GMP has successfully counteracted these obstacles through unrelenting focus on our core and profitable Canadian business where we remain a highly agile top tier industry player.

With net income from continuing operations of nearly CAD 35 million in 2018 and adjusted ROE of 17.4%, we believe our Canadian operations remain the fulcrum for sustainable earnings momentum. Today GMP is unequivocally more focused, leaner and nimbler, retaining the capacity to pivot to the upside from a position of strength.

We continue toward working toward identifying additional areas where we can improve in an effort to enhance shareholder returns. That concludes our remarks this morning and we want to thank you for joining us today.