Canaccord Genuity Group Inc. (CF) Earnings Call Transcript & Summary

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 David Kassie. I have served as Chairman of Canaccord Genuity Group since 2010, and I have the privilege of chairing today's meeting. Joining me on today's webcast are our President and CEO, Dan Daviau; our Executive Vice President and Chief Financial Officer; Don McFayden; and D’'Arcy Doherty, Senior Vice President of Legal Affairs and Corporate Secretary. I would also like to welcome additional members of our executive leadership team and our current directors and director nominees who are joining us from various locations in North America, the U.K. and Europe 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 made available on SEDAR. If you are a registered shareholder or a proxy holder, you would have received your control number 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 the user name and the password CGF2024 using capital 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 on all items of business has concluded, I will pause briefly to allow sufficient time to enter your votes and then I will declare voting closed on all resolutions. We will conduct votes on the matters before us by 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 our 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 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 a proxy holder. To submit a question, use the message 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 the 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 telephone number where you can be reached. During the meeting, you may experience is pauses from time to time as we review messages and coordinate our roles at a distance. So please bear with us. On behalf of those of us speaking today, I note that our 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 has been provided as part of today's presentation and is also available in our financial reports. Our agenda for today's meeting will begin with the submission of the company's fiscal 2024 financial statements followed by the election of directors, the appointment of auditors, a vote to approve the unallocated options and continuance of the company's performance share option plan for 3 years from today's date. And finally, the advisory resolution on our executive compensation approach as disclosed in our circular. Following the official business of today's meeting, I'll invite our CEO and incoming Chairman, Dan Daviau, to 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 Loretta Pataki an Officer of Computershare Investor Services, Inc. to be the scrutineer of the meeting. I have received Computershare's report as to 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 five. 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 now before we move on to item 2. [Voting]

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. Our lead independent Director, Michael Orbach, Dan Daviau, Shannon Hussey, Terry Lyons; and Cindy Trip. D'Arcy, have we received any further nominations or any 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. [Voting]

Before we continue, I would like to take an opportunity to express our deep gratitude to Amy Freedman, Joanna O'Connor and Rod Phillips, who will not be standing for reelection this year. Throughout your respective terms of service, you have all upheld an unwavering commitment to good governance, notably to help the firm navigate several significant developments in the best interest of shareholders as well as to help guide the business in the face of a more challenged capital markets environment. We are thankful for the sound judgment and advice that each of you has provided during your respective 10 years. It is now in order to proceed with the appointment of auditors to propose a motion to appoint Ernst & Young LLP chartered professional accountants as auditors of the company for the ensuing year. and authorize the directors to fix their remuneration. Please vote now. D'Arcy, have we received any further nominations or any questions or comments online?

We have not, Chair. Thank you.

Our next item of business is a proposal for the approval of all unallocated options under the company's pro forma share option plan. giving the company and its directors the ability to continue granting options under this plan for a period of 3 years from today. D'Arcy, have we received any questions or comments on volume?

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 on considering future decisions related to executive compensation. D'Arcy, have we received any questions or comments online?

We have not, Chair.Thank you.

Please vote now. That concludes the official business portion of our fiscal 2024 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, Dan Daviau, Shannon Hussey, Terry Lyons; and Cindy Trip. I declare the formal meeting concluded. I would like to extend my congratulations to our newly appointed Chairman, Dan Daviau; and also to Michael Terry and our newly elected independent directors, Shannon and Cindy. Before I hand things over to Dan, I would also like to take this opportunity to thank my fellow shareholders for your support. It has been an absolute privilege to serve as Chairman of your Board of Directors for the last 14 years. I am also incredibly grateful to have worked alongside the diverse group of talented directors, executives and employees who have consistently upheld our core values and remain committed to our strategy, even admits the most challenging market conditions. Together, we have fundamentally reshaped our business. Firm-wide client assets in our wealth management business have grown from roughly $13 billion in 2010 and to $106 billion today, and we have also substantially increased our proportion of fee-based assets, reducing our reliance on less predictable transaction-based revenue. We also invested in materially growing our capital markets advisory capabilities, and our revenue contributions from this segment over the same period have increased from a negligible amount to an annual average of approximately $320 million over the past 4 fiscal years. In doing so, we made Canaccord Genuity the recognized independent firm of choice for small and mid-cap entrepreneurs and investors across 4 continents and elevated our financial performance, taking our business from marginal prodigy to averaging $125 million in annual adjusted pretax net income over the past 4 fiscal years. Importantly, we also took meaningful steps to increase the diversity of our talent mix across the organization with an acute focus on building a diverse pipeline of future leaders to power our business into the future. We also have held a strong focus on delivering value to our fellow shareholders. We steadily increased our dividend payments over the last 5 years, supported by the performance of our Wealth Management division and reduced our outstanding common share count by increasing share buyback activity during periods when our Capital Markets business generated strong results. While the decision to step down as your Chairman marks the end of 1 chapter. This is by no means the end of my commitment to the ongoing success of Canaccord Genuity. I remain a dedicated shareholder and advocate for the company, and I continue to be very optimistic about the opportunities that lie ahead. Under Dan's leadership, I have great confidence in the caliber of the CG leadership team as well as in the experience and integrity of our incoming Board of Directors. As your fellow shareholder, I look forward to witnessing and participating in the continued success of this remarkable organization. And with that, I would like to pass things over to Dan.

Thank you, David. I'd like to begin by offering my sincere thanks to you for your dedication to the firm and our fellow shareholders over the past 14 years. You have been instrumental to the transformation of our company. Although it is not the end of your journey with CG, it's a chance for us to formally recognize your outstanding support for our clients and employees as well as your exceptional mentorship and partnership. I'm fortunate to count myself among the many investment bankers who've had the privilege to work with and learn from you over many years. Your leadership as our Chairman has been exemplary. And as I step into the role of Chair, I'm dedicated to building upon the outstanding strategy established during your tenure with continued support of our directors and executive leadership team. We are deeply grateful for all you have contributed and look forward to continuing our collaboration in this next chapter. On that note, I'd also like to officially welcome Shannon Hussey and Cindy Trip to our Board. I think I also speak for Michael and Terry, when I say we very much look forward to working with both of you as we continually strive to increase the value of our company and deliver the best possible outcomes for our clients and shareholders. As our industry continues to evolve, we are managing through shifting market dynamics, regulatory changes and transformative technologies, which will present new opportunities and challenges. While the core strategy that has served us so well to date is not expected to change, our future success will require adaptive thinking and accelerated decision-making rooted in deep and relevant expertise. In addition to moving forward with a smaller focused board, our leadership team has always held a deep conviction that an owner mindset is essential to optimizing our long-term business and financial performance. For this reason, we believe that increased equity participation among our employees is critical to our long-term success and in direct alignment with our shareholders' priorities. In March, we announced the formation of an independent limited partnership to be owned by our employees. Importantly, this partnership creates a perpetual and dynamic employee investment vehicle that ensures a constant minimum level of employee ownership in our company, while creating a heightened sense of ownership over decisions, results and performance amongst our top revenue producers from across all our operating businesses. At present, approximately 40% of our outstanding common shares are held by employees, which includes close to 10% held by the partnership. We anticipate pursuing additional regulatory approvals over the coming years to expand the program to more employees as appropriate. In any market environment, the foundation of our success rests with our people. Over the past 2 years, our entire industry has managed through a substantially more complex operating environment with heightened geopolitical tension, increasingly sophisticated cybersecurity challenges and evolving regulatory and legislative developments in our key financial markets. Notwithstanding these challenges, employees across the organization have held a strong collective focus on enhancing the long-term value of our company. We continue to invest in and foster the growth of our wealth management businesses, which were the primary driver of our resilience through the last 2 years. Despite the continued sluggishness of capital markets, we took advantage of downturn to strengthen our core mid-market capabilities and deliver better results for our clients. We also took steps to establish a more cost-effective organizational structure, particularly in our North American capital markets business, which better positions us to achieve our historical profitability ranges in a normalized environment. While cost containment is always top of mind, short-term profitability in the current fiscal year will be impacted by several ongoing capital commitments which includes several major office relocations and continued investments to advance our technology and compliance infrastructure. In addition to these investments, we have enhanced our culture of compliance in all of our core geographies. Whether helping our wealth management clients achieve desired risk-adjusted returns or supporting our capital market clients with access to capital, liquidity and advisory services management and employees across the organization were made guided by our dedication to serving the best interest of our shareholders. Our first quarter results disclosed last night reflect improving market conditions for corporate financing and advisory activities in our capital markets division coupled with continued strong business performance from each of our wealth management businesses. Client assets reached a record high of $106 billion, reflecting improving market valuations and positive net inflows from new and existing clients. As we begin the new fiscal year, we have been pleased by the improving confidence as investors begin to look past the difficult environment that have endured for almost 2 years. And while we are certainly encouraged by the improving economic conditions relevant to our core business, given the ongoing geopolitical and macroeconomic overhangs, we expect to incur volatility, which we are well equipped to manage through. In closing, I'd like to thank my 2,700 colleagues across North America, U.K. and Europe and Australia for their hard work and tireless commitment to driving our collective success. And to my fellow shareholders, thank you for your continued support. It's an honor to serve you as Chairman. Alongside my fellow directors and our global operating committee, we are excited for the future of Canaccord Genuity Group and intently committed to providing exceptional services for our clients and growing returns for our valued shareholders. With that, we would be pleased to take questions.

Thank you, Mr. Daviau. We will now proceed to the question period. Mr. Chairman, there are no questions from shareholders or guests at the portal.

Okay. Thank you.