Mr. Dan Daviau reports

CANACCORD GENUITY GROUP INC. REPORTS FOURTH QUARTER AND FISCAL 2023 RESULTS

Canaccord Genuity Group Inc. has released its financial results for the fourth quarter and fiscal year ended March 31, 2023.

"While our fiscal 2023 financial results were below our expectations, past investments to grow our wealth businesses and expand our [merger-and-acquisition] offering have contributed to our resilience," said Dan Daviau, president and chief executive officer of Canaccord Genuity Group. "The operating environment remains challenging, but our business remains on solid ground, and we are deeply committed to advancing our proven strategy in ways that protect value for our clients and shareholders."

Fourth quarter and fiscal 2023 highlights (all dollar amounts are stated in thousands of dollars unless otherwise indicated):

• Fourth quarter revenue of $430.4-million, a decrease of 13.9 per cent year over year and an increase of 12.6 per cent sequentially;
• Fiscal 2023 firm-wide revenue of $1.5-billion, down 26.2 per cent year over year compared with the prior year's record revenue;
• Fourth quarter expenses were impacted by increased general and administrative expenses related to increased provisions and professional fees, as well as higher interest expense with market rate increases;
• Fourth quarter net income before taxes excluding significant items of $16.3-million, a decrease of 82.7 per cent ($5.4-million and a year-over-year decrease of 94.4 per cent on an international financial reporting standard basis) when compared with fourth quarter 2022 results;
• Fiscal 2023 net income before taxes excluding significant items (1) of $125.9-million, a decrease of 69.9 per cent year over year (a loss of $34.4-million and a year-over-year decrease of 109.1 per cent from net income before taxes of $378.3-million on an IFRS basis);
• Excluding significant items (1), quarterly diluted earnings per common share for the fourth fiscal quarter of seven cents (a loss of eight cents per share on an IFRS basis);
• Excluding significant items (1), diluted earnings per common share for fiscal 2023 of 59 cents (a loss of $1.16 per share on an IFRS basis);
• Total client assets (1) in the global wealth management business of $96.2-billion, an increase of 0.2 per cent from Q4 2022 reflecting year-over-year increases of 4.3 per cent in the United Kingdom and Crown dependencies, an increase of 1.5 per cent in Australia, and a decrease of 5.8 per cent in Canada;
• Fourth quarter common share dividend of 8.5 cents per share; full-year common share dividend amount increased 6.3 per cent compared with prior fiscal year.

(1) A non-international financial reporting standard measure.

Core business performance highlights

Canaccord Genuity wealth management

The company's combined global wealth management operations earned revenue of $197.1-million for the fourth fiscal quarter, a year-over-year increase of 13.1 per cent primarily due to the anticipated improvement in interest revenue attributable to the higher interest rate environment. Revenue for the fiscal year amounted to $708.3-million, a decrease of 1.7 per cent compared with the prior year. Excluding significant items (1), pretax net income increased by 26.1 per cent year over year to $36.9-million for the fourth quarter and decreased by 15.3 per cent to $125.7-million for the fiscal year. On an IFRS basis, pretax net income increased by 21.6 per cent and decreased by 22.8 per cent for the fourth quarter and fiscal 2023 compared with the same period in the prior year.

• Wealth management operations in the U.K. and Crown dependencies generated record quarterly revenue of $103.7-million for the fourth quarter and $343.7-million for the fiscal year, increases of 29.2 per cent and 10.7 per cent, respectively, primarily due to higher commission and fee revenue, interest income, and income from PSW since its acquisition in first quarter 2023. Commission and fee revenue earned in this business reached a new record of $311.4-million for fiscal 2023, an increase of 3.2 per cent from the prior year. Net income excluding significant items (1) was $26.4-million before taxes in fourth quarter 2023, an increase of 12.1 per cent year over year. For the year ended March 31, 2023, there was an increase of 1.5 per cent in net income excluding significant items (1) compared with fiscal 2022.
• Canaccord Genuity wealth management (North America) generated $78.4-million in revenue for the fourth quarter and $302.2-million for the fiscal year, an increase of 2.9 per cent and a decrease of 9.9 per cent, respectively. Revenue for the year was significantly impacted by reduced investment banking and new issue activity in fiscal 2023 compared with fiscal 2022 and prior years. Partially offsetting reduced investment banking revenue was a significant increase in interest revenue primarily because of increased rates. Fourth quarter interest income in this business increased by 162.8 per cent year over year to $13.8-million, and fiscal 2023 interest income increased by 144.0 per cent to $46.2-million. Excluding significant items (1), net income before taxes for this business was $10.9-million in fourth quarter 2023, an increase of 113.0 per cent compared with Q4 2022.
• Wealth management operations in Australia generated $15.0-million in revenue for the fourth quarter and $62.4-million for the fiscal year, decreases of 15.9 per cent and 16.4 per cent, respectively, reflecting the decline in transaction-based revenue over the fiscal year. Excluding significant items (1), net loss before taxes for this business was $400,000 in Q4 2023, a decrease of 163.5 per cent compared with net income before taxes of $600,000 in Q4 2022.

(1) A non-IFRS measure.

Total client assets in the company's global wealth management businesses at the end of the fourth fiscal quarter were $96.2-billion, an increase of $200-million or 0.2 per cent from March 31, 2022.

• Client assets in North America were $35.7-billion as at March 31, 2023, an increase of 2.8 per cent from $34.7-billion at the end of the previous quarter and a decrease of 5.8 per cent from $37.9-billion at March 31, 2022.
• Client assets in the U.K. and Crown dependencies were $55.1-billion (33.0 billion pounds sterling) as at March 31, 2023, an increase of 1.3 per cent from $54.4-billion (33.2 billion pounds sterling) at the end of the previous quarter, and an increase of 4.3 per cent from $52.8-billion (32.1 billion pounds sterling) at March 31, 2022.
• Client assets held in the investment management platforms in Australia were $5.4-billion ($6.0-billion (Australian)) as at March 31, 2023, an increase of 3.5 per cent from $5.3-billion ($5.7-billion (Australian)) as at Dec. 31, 2022, and an increase of 1.5 per cent from $5.4-billion ($5.7-billion (Australian)) at March 31, 2022. In addition to client assets held in its investment management platforms, client assets totalling $14.6-billion ($16.1-billion (Australian)) are also held in non-managed accounts.

Canaccord Genuity capital markets

Globally, Canaccord Genuity capital markets earned revenue of $226.1-million for the fourth fiscal quarter, representing a decrease of 27.5 per cent from Q4 2022, largely reflecting an industry-wide decrease in investment banking activity, reduced trading revenue and reduced advisory revenue. Its combined global capital market businesses contributed revenue of $792.9-million for the fiscal year, a year-over-year decrease of 39.2 per cent. Excluding significant items, this segment recorded a pretax loss of $5.5-million for the fourth quarter and pretax income of $30.8-million for the fiscal year, compared with pretax income of $73.4-million in Q4 2022 and $324.6-million in the previous fiscal year.

• Canaccord Genuity capital markets participated in a total of 83 investment banking transactions globally, raising total proceeds of $3.1-billion in Q4 2023.
• Canaccord Genuity capital markets participated in a total of 359 investment banking transactions globally, raising total proceeds of $17.5-billion in fiscal 2023.

The company's U.S. capital market business was the largest contributor of revenue for the three-month period, with revenue of $114.3-million, or 50.5 per cent of total global capital market revenue. This business contributed advisory fee revenue of $59.7-million for Q4 2023, an increase of 13.0 per cent sequentially and a decrease of 8.0 per cent from the same period in the prior year, reflecting the more challenging environment for completions. Investment banking revenue for the three-month period increased by 29.7 per cent on a sequential basis but decreased by 52.4 per cent to $7.2-million when compared with the strong result set in the fourth quarter of the prior year. Principal trading revenue also decreased by 43.7 per cent from the prior year's exceptionally strong performance to $21.4-million in the fourth quarter due to lower volatility, trading volume and activity. Fourth quarter profitability in this business was negatively impacted by increased general and administrative expenses, primarily attributable to increased provisions and professional fees. Excluding significant items (1), this business generated a pretax loss before income taxes of $9.0-million for the fourth quarter and pretax income of $43.1-million for the fiscal year.

Fourth quarter revenue of $70.1-million in the Canadian capital market operations increased by 122.5 per cent compared with third quarter 2023 on higher investment banking and advisory activity but decreased by 5.8 per cent when compared with Q4 2022. Excluding significant items (1), the pretax profit margin in this business was 5.4 per cent for the fourth quarter, representing a decrease of 19.0 percentage points from the same period in the prior year.

Fourth quarter revenue in the U.K. and Europe capital market operations decreased by 3.7 per cent year over year but increased by 46.3 per cent compared with Q3 2023. Revenue for fiscal 2023 declined by 20.0 per cent year over year to $96.3-million, reflecting lower investment banking and advisory activity. Excluding significant items (1), the U.K. and Europe capital market business earned pretax income of $2.2-million for the fourth quarter, a year-over-year improvement of 49.6 per cent.

Fourth quarter revenue earned by the Australian capital market business decreased by 78.1 per cent year over year to $13.5-million. This business contributed revenue of $65.5-million for the fiscal year, a decrease of 62.4 per cent compared with the prior year. Excluding significant items (1), this business recorded a pretax loss of $2.4-million and pretax income of $7.9-million for the three- and 12-month periods, respectively, compared with pretax income of $18.2-million and $50.6-million, respectively, for the prior-year comparatives.

(1) A non-IFRS measure.

Summary of corporate developments

On Jan. 9, 2023, 1373313 B.C. Ltd., on behalf of itself and a management-led group consisting of officers and employees of the company and its subsidiaries, announced an intention to commence a takeover bid to acquire all of the issued and outstanding common shares of the company (other than certain common shares beneficially owned by the CG employee group) at a price of $11.25 per common share. A takeover bid circular was issued on Jan. 29, 2023. Subsequently, a special committee of independent directors of the company issued a circular in response to the takeover bid circular.

On March 13, 2023, the company announced that Gillian Denham, Dipesh Shah, Charles Bralver and Sally Tennant, and Francesca Shaw provided the company with notice of their resignations from the board of directors of the company. As a result of the resignations, the board appointed Terrence Lyons as a new director and appointed Michael Auerbach as chair of the special committee and Mr. Lyons as a member. The board also appointed Mr. Lyons as its new lead director. Mr. Lyons is the former lead independent director and chair of the audit and risk committee of the company, having served as a director of the company from 2004 to 2022.

On March 20, 2023, the company announced that the board of directors had appointed Amy Freedman and Rod Phillips as independent directors. With these changes, the board is now composed of seven directors, of whom five are independent. The independent members of the board also appointed Ms. Freedman and Mr. Phillips as additional members of the special committee.

On March 22, 2023, the special committee provided an update to shareholders with respect to its evaluation and consideration of the management offer, and announced that Greenhill & Co. Canada had been appointed as financial adviser.

On April 6, 2023, the company announced that it had filed and mailed a directors circular in response to the management offer and the takeover bid circular dated Feb. 27, 2023. At this time, the board did not make a recommendation to shareholders and stated that the newly formed special committee required additional time to make an informed recommendation to the board.

On April 12, 2023, the company announced that it had received exemptive relief sought from the B.C. Securities Commission and the Ontario Securities Commission to extend the period within which the company was required to prepare and send a directors circular responding to the management offer. The directors circular was mailed and filed on April 6, 2023, in accordance with the exemptive relief.

On May 8, 2023, the company announced that it had been advised by certain of its applicable regulatory authorities that, due to a continuing regulatory matter involving one of the company's foreign subsidiaries, regulatory approval for the change in control contemplated by the management offer would not be granted on an expedited basis, and that, based on continuing discussions with the regulatory authorities, the company has determined that regulatory approvals will likely not be received in a timely enough manner to permit completion of the management offer prior to the expiry date of June 13, 2023, and may not be received prior to expiration of the financing commitments for the management offer on Aug. 9, 2023. The receipt of regulatory approvals is a condition of the management offer.

On May 29, 2023, the company announced that, through its Canadian wealth management business, it had completed its acquisition of Mercer's Canadian private wealth business.

On June 5, 2023, the board recommended that shareholders of the company reject the management offer and issued a supplement to the directors circular dated April 6, 2023. As described in the supplement, the reason for rejecting the management offer was that there exists a regulatory condition which was expected to remain unsatisfied at the expiry of the bid on June 13, 2023, and the waiver of which would directly contravene the express requirements of a regulatory authority.

On June 14, 2023, the company announced the expiration of the management offer as certain substantive conditions to the offer, including conditions related to the receipts of required regulatory approvals, were not satisfied as of the expiry time and the management group determined not to extend the management offer. The company entered into an agreement with the management group with respect to certain matters relating to the offer, including a two-year standstill with voting support commitments from certain members of the management group in favour of board-supported director nominees, reimbursement of certain reasonable expenses of the management group (subject to clawback in certain circumstances) and continuation of an ad hoc independent committee, if required, although the board is not actively considering the sale of any division and considers that all business units are important to the development of the long-term value of the company.

Results for the fourth quarter of fiscal 2023 were impacted by the following significant items:

• Amortization of intangible assets acquired in connection with business combinations;
• Certain incentive-based costs related to the acquisition and growth initiatives in the U.S. capital markets and CGWM U.K. wealth operations;
• Certain costs included in corporate and other development costs related to the expired management-led takeover bid for the common shares of the company;
• Certain components of the non-controlling interest expense associated with CGWM U.K.;
• Change in fair value of contingent consideration;
• Fair value adjustment of non-controlling interest derivative liability.

Financial condition at the end of fourth quarter fiscal 2023 versus fourth quarter of fiscal 2022:

• Cash and cash equivalents balance of $1.0-billion, a decrease of $779.8-million from $1.8-billion;
• Working capital of $749.6-million, a decrease of $ 44.8-million from $794.4-million;
• Total shareholders equity of $1.1-billion, a decrease of $123.4-million from $1.2-billion.

Common and preferred share dividends

On June 16, 2023, the board of directors approved a dividend of 8.5 cents per common share, payable on July 4, 2023, with a record date of June 23, 2023.

On June 16, 2023, the board approved a cash dividend of 25.175 cents per Series A preferred share payable on June 30, 2023, to Series A preferred shareholders of record as at June 23, 2023.

On June 16, 2023, the board approved a cash dividend of 42.731 cents per Series C preferred share payable on June 30, 2023, to Series C preferred shareholders of record as at June 23, 2023.

Access to quarterly results information

Interested parties are invited to listen to Canaccord Genuity Group's fourth fiscal quarter results conference call by live webcast or a toll-free number. The conference call is scheduled for Monday, June 19, 2023, at 8 a.m. Eastern Time, 1 p.m. United Kingdom time and 10 p.m. Australian Eastern Standard Time.

The conference call will be available live and will also be archived on a listen-only basis.

Analysts and institutional investors can call in by telephone.

Within Toronto:  416-764-8609

Toll-free in North America outside of Toronto:  888-390-0605

Toll-free from the United Kingdom:  0-800-652-2435

Toll-free from Australia:  1-800-076-068

Please ask to participate in the Canaccord Genuity Group Q4 2023 results call. If a passcode is requested, please use 73066806.

A replay of the conference call will be made available from approximately two hours after the live call on June 19, 2023, until July 19, 2023, at 416-764-8677 or 1-888-390-0541 by entering passcode 066806 followed by the number key.

About Canaccord Genuity Group Inc.

Through its principal subsidiaries, Canaccord Genuity Group is a leading independent, full-service financial service firm, with operations in two principal segments of the securities industry: wealth management and capital markets. Since its establishment in 1950, the company has been driven by an unwavering commitment to building lasting client relationships. It achieves this by generating value for its individual, institutional and corporate clients through comprehensive investment solutions, brokerage services and investment banking services. The company has wealth management offices located in Canada, the U.K., Guernsey, Jersey, the Isle of Man and Australia. The company's international capital market division operates in North America, U.K. and Europe, Asia, and Australia.

Canaccord Genuity Group is publicly traded under the symbol CF on the Toronto Stock Exchange.