Mr. Paul Reynolds reports

CANACCORD GENUITY GROUP INC. REPORTS SECOND QUARTER FISCAL 2015 RESULTS AND ADJUSTED NET INCOME IMPROVEMENT OF 208%

In the second quarter of fiscal 2015, the quarter ended Sept. 30, 2014, Canaccord Genuity Group Inc. generated $236.3-million in revenue. Excluding significant items (a non-IFRS (international financial reporting standards measure), the company recorded net income of $20.7-million or net income of $17.1-million attributable to common shareholders (17 cents per diluted common share). Including all expense items, on an IFRS basis, the company recorded net income of $17.6-million or net income attributable to common shareholders of $14.2-million (earnings per diluted common share of 14 cents).

"During our second fiscal quarter, we achieved strong results in our global advisory business and steady recurring revenue growth from our global wealth management operations," said Paul Reynolds, president and chief executive officer of Canaccord Genuity Group. "While fundamentals of the broader market environment adversely impacted transaction and trading activity during the quarter, our longer-term outlook for our capital markets business is stable and positive."

Second quarter of fiscal 2015 versus second quarter of fiscal 2014

• Revenue of $236.3-million, an increase of 29 per cent or $53-million from $183.3-million;
• Excluding significant items, expenses of $207.4-million, an increase of 18 per cent or $32-million from $175.4-million;
• Expenses of $211.3-million, an increase of 15 per cent or $27-million from $184.3-million;
• Excluding significant items, diluted earnings per common share (EPS) of 17 cents, compared with diluted EPS of three cents;
• Excluding significant items, net income of $20.7-million, compared with net income of $6.7-million;
• Net income of $17.6-million, compared with net loss of $100,000;
• Diluted EPS of 14 cents, compared with diluted loss per share of three cents.

Second quarter of fiscal 2015 versus first quarter of fiscal 2015

• Revenue of $236.3-million, a decrease of 4 per cent or $9.3-million from $245.6-million;
• Excluding significant items, expenses of $207.4-million, a decrease of 4 per cent or $8.5-million from $215.9-million;
• Expenses of $211.3-million, a decrease of 5 per cent or $11-million from $222.3-million;
• Excluding significant items, diluted EPS of 17 cents, compared to diluted EPS of 20 cents;
• Excluding significant items, net income of $20.7-million, compared to net income of $24-million;
• Net income of $17.6-million, compared to net income of $18.9-million;
• Diluted EPS of 14 cents, compared to diluted EPS of 15 cents.

Year to date fiscal 2015 versus year to date fiscal 2014 (six months ended Sept. 30, 2014, versus six months ended Sept. 30, 2013)

• Revenue of $481.8-million, an increase of 30 per cent or $111.3-million from $370.5-million;
• Excluding significant items, expenses of $423.3-million, an increase of 21 per cent or $73.4-million from $349.9-million;
• Expenses of $433.6-million, an increase of 20 per cent or $71.2-million from $362.4-million;
• Excluding significant items, diluted EPS of 37 cents, compared with diluted EPS of 12 cents;
• Excluding significant items, net income of $44.8-million, compared with net income of $18.5-million;
• Net income of $36.5-million, compared with net income of $7.8-million;
• Diluted EPS of 29 cents, compared with diluted EPS of two cents.

Financial condition at end of second quarter fiscal 2015 versus fourth quarter fiscal 2014

• Cash and cash equivalents balance of $290.4-million, down $73.9-million from $364.3-million;
• Working capital of $453.5-million, a decrease of $15.9-million from $469.4-million;
• Total shareholders equity of $1.14-billion, down $26.9-million from $1.17-billion;
• Book value per diluted common share of $8.90, down 15 cents from $9.05;
• On Nov. 5, 2014, the board of directors approved a quarterly dividend of five cents per common share and a special dividend of five cents per common share payable on Dec. 10, 2014, with a record date of Nov. 21, 2014;
• On Nov. 5, 2014, the board of directors also approved a cash dividend of 34.375 cents per Series A preferred share payable on Dec. 31, 2014, with a record date of Dec. 19, 2014, and a cash dividend of 35.9375 cents per Series C preferred share payable on Dec. 31, 2014, to Series C preferred shareholders of record as at Dec. 19, 2014.

Summary of operations

Corporate

• On Aug. 6, 2014, the company held its 2014 annual general meeting of shareholders, where all nominated directors were re-elected or elected to the board, including Kalpana Desai as an independent director, bringing the board to nine directors, seven of whom are independent.
• On Aug. 8, 2014, the company announced the filing of a renewal for its normal course issuer bid to provide for the ability to purchase, at the company's discretion, up to a maximum of 5,100,049 common shares through the facilities of the Toronto Stock Exchange during the period from Aug. 13, 2014, to Aug. 12, 2015. The purpose of any purchases under this program is to enable the company to acquire shares for cancellation. The maximum number of shares that may be purchased represents 5 per cent of the company's outstanding common shares. There were no shares repurchased during the second quarter of fiscal 2015 under the normal course issuer bid. In the first quarter of fiscal 2015, 264,200 shares were purchased and cancelled under the terms of the normal course issuer bid, which expired on Aug. 12, 2014.

Capital markets

• Canaccord Genuity led or co-led 35 transactions globally, raising total proceeds of $1.8-billion during the second quarter of fiscal 2015.
• Canaccord Genuity participated in 86 transactions globally, raising total proceeds of $10.7-billion during the second quarter of fiscal 2015.
• Significant investment banking transactions for Canaccord Genuity during the second quarter of fiscal 2015:
  • $640-million for Amaya Gaming Group common shares on the TSX;
  • $179.2-million (U.S.) private placement for Amaya Gaming Group preferred shares;
  • $103.5-million for The Intertain Group Ltd. on the TSX;
  • $98-million (Australian) for Ashley Services Group Ltd. on the Australian Securities Exchange;
  • $74-million (Australian) for Tiger Resources Group on the ASX;
  • 56 million British pounds for Intelligent Energy PLC on the London Stock Exchange;
  • $52-million (U.S.) for Inventure Foods Inc. on Nasdaq;
  • 41 million British pounds for Matomy Media Ltd. on the LSE;
  • $39.6-million (U.S.) for BioAmber Inc. on the New York Stock Exchange;
  • $38.6-million for WesternOne on the TSX;
  • $30.7-million for Pro REIT on the TSX;
  • $30.2-million (U.S.) for Pure Multi-Family REIT on the TSX Venture Exchange;
  • $30-million for DataWind Inc. on the TSX;
  • $27.4-million for Dalradian Resources on the TSX;
  • $25-million for Petro-Victory Energy Corp. on the TSX-V;
  • $23-million for Terrace Energy Corp. on the TSX-V.
• In Canada, Canaccord Genuity participated in raising $210.7-million for government and corporate bond issuances during the second quarter of fiscal 2015.
• Canaccord Genuity generated advisory revenues of $55.7-million during the second quarter of fiscal 2015, an increase of 86 per cent compared with the same quarter last year.
• During the second quarter of fiscal 2015, Canaccord Genuity advised on the following mergers and acquisitions and advisory transactions:
  • Amaya Gaming Group on its $4.9-billion (U.S.) purchase of Rational Group;
  • Plan Group on its sale to Bouygues SA;
  • B2Gold Corp. on its merger with Papillon Resources Ltd.;
  • Medical Action Industries Inc. on its acquisition by Owens & Minor;
  • Nordion Inc. on its $826-million (U.S.) sale to Sterigenics International;
  • SOF Investments on the 212-million-British-pound sale of Moneycorp to Bridgepoint;
  • DHX Media Ltd. on its acquisition of Family Channel, Disney XD, Disney Junior (English) and Disney Junior (French);
  • Paperny Entertainment Inc. on its sale to Entertainment One Ltd.;
  • Exact Holdings on its divestiture of Longview Solutions to Marlin Equity Partners;
  • TowerBrook Capital Partners on the acquisition of Independent Clinical Services from the Blackstone Group;
  • Geodis SA on the sale of Ciblex to Eurotranspharma;
  • Pteris Global Ltd. on the $151.2-million (Singaporean) reverse takeover of Shenzhen CIMC-TianDa Airport Support Ltd.;
  • TA Associates on the 120-million-British-pound disposal of MandM Direct;
  • Regard Holdings Ltd. on its 120-million-British-pound disposal by MML Capital Partners to Montreux Healthcare Funds and Macquarie Lending;
  • OnMobile on its divestiture of VoxMobili SA to Synchronoss Technologies Inc.;
  • The Intertain Group Ltd. on its 45-million-British-pound purchase of Mandalay Media;
  • Rathbones on the 43.1-million-British-pound acquisition of Jupiter Asset Management's private client and charity investment business;
  • Pro REIT on its sale of subscription units to Lotus Crux REIT LP;
  • Ultimo on its disposal to B2 Holding ASA.

Canaccord Genuity Wealth Management (global)

• Globally, Canaccord Genuity Wealth Management generated $63-million in revenue in the second quarter of fiscal 2015.
• Assets under administration in Canada, plus assets under management in the United Kingdom and Europe and Australia, were $31.7-billion at the end of the second quarter of fiscal 2015.

Canaccord Genuity Wealth Management (North America)

• Canaccord Genuity Wealth Management (North America) generated $31.6-million in revenue and, after intersegment allocations, recorded a net loss of $1.8-million before taxes in the second quarter of fiscal 2015.
• Assets under administration in Canada were $10.8-billion as at Sept. 30, 2014, down 2 per cent from $11-billion at the end of the previous quarter and up 14 per cent from $9.4-billion at the end of the second quarter of fiscal 2014.
• Assets under management in Canada (discretionary) were $1.4-billion as at Sept. 30, 2014, up 10 per cent from $1.3-billion at the end of the previous quarter and up 49 per cent from $935-million at the end of the second quarter of fiscal 2014.
• As at Sept. 30, 2014, Canaccord Genuity Wealth Management had 162 advisory teams, a decrease of one advisory team from Sept. 30, 2013, and June 30, 2014.

Canaccord Genuity Wealth Management (United Kingdom and Europe)

• Wealth management operations in the United Kingdom and Europe generated $29.8-million in revenue and, after intersegment allocations, and excluding significant items, recorded net income of $4.6-million before taxes in the second quarter of fiscal 2015.
• Assets under management (discretionary and non-discretionary) were $20.4-billion (11.3 billion British pounds).

               SELECTED FINANCIAL INFORMATION EXCLUDING SIGNIFICANT ITEMS(1)
            (in thousands of dollars, except per-share and percentage amounts)  

                                                 Three months ended Sept. 30,   Six months ended Sept. 30,
                                                           2014         2013            2014         2013
                   
Total revenue per IFRS                                 $236,271     $183,306        $481,827     $370,537
Total expenses per IFRS                                 211,326      184,262         433,594      362,380
Significant items recorded in Canaccord Genuity
Amortization of intangible assets                         1,707        1,658           3,448        3,360
Restructuring costs                                           -        5,486               -        5,486
Significant items recorded in      
Canaccord Genuity Wealth Management
Amortization of intangible assets                         2,224        1,751           4,464        3,640
Restructuring costs                                           -            -             783            -
Significant items recorded in corporate and other
Restructuring costs                                           -            -           1,600            -
Total significant items                                   3,931        8,895          10,295       12,486
Total expenses excluding significant items              207,395      175,367         423,299      349,894
Net income before taxes -- adjusted                     $28,876       $7,939         $58,528      $20,643
Income taxes -- adjusted                                  8,130        1,205          13,765        2,099
Net income -- adjusted                                  $20,746       $6,734         $44,763      $18,544
Earnings per common share -- basic, adjusted              $0.19        $0.03           $0.40        $0.13
Earnings per common share -- diluted, adjusted            $0.17        $0.03           $0.37        $0.12

(1) Figures excluding significant items are non-IFRS measures. 

Statement from the president and chief executive officer

Fellow shareholders,

While we continue to have confidence in the solid fundamentals for global equities markets, our second quarter results were impacted by a global expectation of a market correction that became a reality in early October. Broad market indices posted minor increases during the quarter, while smaller and mid-cap stocks struggled, leading to diminished transaction and trading activity in the growth-oriented sectors.

This operating environment had the most notable impact on our U.S. operations. Following seven straight quarters of gains, U.S. equities turned quickly downward in September. Valuations in the top half of historic ranges resulted in fewer compelling investment opportunities, which negatively impacted investment banking and trading activity in that region. The aggregate value of follow-on offerings in our core U.S. coverage sectors declined by 56 per cent compared to the previous quarter.

On a positive note, Canaccord Genuity Group recorded $236.3-million in revenues for the quarter, a healthy year-over-year improvement of 29 per cent. This translated into adjusted earnings per share of 17 cents, an increase of 467 per cent. We attribute this performance to the investments we have made to diversify our revenue streams and improve our cross-border execution capabilities.

Working capital increased by $18.4-million to $453.5-million since the first quarter of fiscal 2015. On an adjusted basis, we have lowered non-compensation related expenses by 4.6 per cent, compared to our most recent quarter against a 3.7-per-cent decrease in revenue for the same period.

Global advisory revenue increases 87 per cent year over year

Lower volatility and volumes continued to support mergers and acquisitions activity during the quarter, and we achieved strong results advising mid-market growth companies in all regions. Advisory fees for our second fiscal quarter were $55.7-million, an increase of 87 per cent from the same period last year. The largest contributor to this growth came from our Canadian business, and our United Kingdom, U.S. and Asia-Pacific businesses also achieved advisory revenue within the upper ranges of their historic quarterly results.

Capital markets

During the fiscal quarter, Canaccord Genuity participated in 86 transactions globally and raised total proceeds of $10.7-billion. When compared to the same period last year, our global investment banking business generated a second quarter revenue increase of 63 per cent, led by the performance of our Canadian operations and due in part from our role as lead adviser and bookrunner to Amaya Gaming Group, in the second-largest transaction in our firm's history. Additionally, our Asia-Pacific operations continue to post meaningful increases in investment banking and trading commissions.

Planned investments in the strategic build-out of our U.S. research, banking and fixed-income businesses added roughly $3-million to our expenses for the quarter. We believe these investments will meaningfully contribute to the growth for this business as they will add to the breadth of our offering and improve our execution capabilities.

In October, the strength and quality of our Australian business was given prominence as the dominant recipient of the East Coles Equities Markets Awards, winning Best Independent Equities House, Best Independent Equity Capital Markets Bank and Best Independent Equities Research House, with 13 of our analysts receiving top rankings.

Also in October, our European team received the 2014 Corporate Financier of the Year award in the Unquote British Private Equity Awards, which celebrate innovation and excellence in private equity and venture capital.

Recurring revenues balance capital markets volatility

We expect increasing levels of fee-based and managed accounts in our Canadian and United Kingdom wealth management businesses will materially improve recurring revenue streams and reduce earnings volatility for our business. On a global basis, Canaccord Genuity Wealth Management generated $63-million in revenue for the second quarter and increased assets under administration and management by 15.5 per cent compared to the same period last year.

Our Canadian wealth management business continues to show improvement, narrowing its loss before taxes to $1.8-million, a decrease of 66 per cent compared to the second quarter of last year. Continued focus on the transition to fee-based and managed accounts has led to a 49-per-cent year-over-year increase in assets under management. Through targeted recruitment, we have attracted growing numbers of advisers with established books of business and proven track records of exceptional client service.

Our United Kingdom and European wealth management business has also shown steady improvement, increasing assets under management to $20.4-billion, and fee-related revenue was a record 68.5 per cent of total revenue for the quarter.

Commitment to our communities

Another important measure of our success is our ability to make positive contributions in the communities where we operate. During the quarter, we hosted the second annual Canaccord Genuity Great Camp Adventure Walk to benefit the Hospital for Sick Children. A grand total of $1.8-million was raised to support the goal of improving the health and well-being of children around the world.

On Oct. 13, 2014, our U.S. capital markets team hosted Trading Day for Kids to benefit Youth I.N.C. Through commission fees generated from designated equity, electronic and agency options trades, the team raised $850,000, bringing our three-year contribution to just over $2.75-million.

Looking forward

We expect the current market environment will prove challenging for our capital markets activities in the near term, but our longer-term outlook for equity markets is stable and positive. While our macroeconomic outlook for the balance of the fiscal year is cautiously optimistic, our pipeline is strong and diverse.

Our priorities for our global capital markets division centre on increasing contributions from new products, such as debt and restructuring, and leveraging the capabilities of strategic hires to compete domestically and support cross-border collaboration.

For our global wealth management division, we will continue to focus on growing our share of fee-based and discretionary managed accounts, and actively pursue opportunities to increase our scale in the United Kingdom and Europe. The imminent launch of our proprietary asset management product, Canaccord Genuity Global Portfolio Solutions (GPS), is expected to increase our recurring revenue streams by attracting new clients to our Canadian wealth management business and increasing engagement with existing clients. This unique range of portfolios has been created to service the growing demand for investment solutions which seek to provide stable returns with minimal risk by targeting limited levels of volatility.

We have worked hard to improve our competitive position and further strengthen our brand in regions we have targeted for growth. As we enter the second half of our fiscal year, we will continue to pursue opportunities for organic growth and uphold our culture of cost containment. We will adhere to a disciplined approach to investing in key areas of our business with a focus on better serving our clients and creating long-term value for our shareholders.

Kind regards,

Paul Reynolds

President and chief executive officer

Access to quarterly results information

Interested investors, the media and others may review this quarterly earnings release and supplementary financial information at the company's website.

Conference call and webcast presentation

Interested parties are invited to listen to the company's fiscal 2015 second quarter results conference call with analysts and institutional investors via a live webcast or a toll-free number. The conference call is scheduled for Thursday, Nov. 6, 2014, at 5 a.m. Pacific Time, 8 a.m. Eastern Time, 1 p.m. United Kingdom time, 9 p.m. China Standard Time, and on Friday, Nov. 7, 2014, at 12 a.m. Australia Eastern Standard Time. At that time, senior executives will comment on the results for the second quarter of fiscal 2015 and respond to questions from analysts and institutional investors.

The conference call may be accessed live and archived on a listen-only basis via the Internet at the company's website.

Analysts and institutional investors can call in via telephone at:

• 647-427-7450 (within Toronto);
• 1-888-231-8191 (toll-free in North America);
• 0-800-051-7107 (toll-free from the United Kingdom);
• 1-800-760-620 (toll-free from Ireland);
• 0-800-917-449 (toll-free from France);
• 0-800-183-0171 (toll-free from Germany);
• 10-800-714-1191 (toll-free from northern China);
• 10-800-140-1195 (toll-free from southern China);
• 1-800-287-011 (toll-free from Australia).

Please request to participate in Canaccord Genuity Group's fiscal 2015 second quarter earnings call. If a passcode is requested, please use 6814072.

A replay of the conference call can be accessed after 8 a.m. PT (11 a.m. ET) on Thursday, Nov. 6, 2014, until Dec. 18, 2014, at 416-849-0833 or 1-855-859-2056 by entering passcode 6814072 followed by the pound sign.

We seek Safe Harbor.