Mr. Dan Daviau reports

CANACCORD GENUITY GROUP INC. REPORTS FIRST QUARTER FISCAL 2024 RESULTS

Canaccord Genuity Group Inc. has released its financial results for the first fiscal quarter ended June 30, 2023.

"Following a brief period of modest recovery, market conditions in our first fiscal quarter continued to be challenging for capital raising and M&A activities. Our wealth management businesses have continued to perform well, providing resiliency in our results," said Dan Daviau, president and chief executive officer of Canaccord Genuity Group. "The environment appears to be improving as our clients begin to anticipate recovery and we are hopeful for stronger business activity towards the second half of this fiscal year."

First fiscal quarter highlights:

(All dollar amounts are stated in thousands of Canadian dollars unless otherwise indicated.)

• First quarter revenue of $343.3-million, an increase of 8.2 per cent over the same period in the prior year;
• First quarter net income before taxes excluding significant items of $32.9-million, an increase of 19.8 per cent or $5.4-million year over year (on an IFRS (international financial reporting standards) basis, net income before taxes amounted to $6.3-million, a year-over-year increase of 231.7 per cent);
• Q1 2024 profitability was impacted by both higher interest expense and higher interest revenue reflecting market rate increases, reduced advisory fees revenue due to delays in completion of continuing mandates, increased development costs in connection with the expired management-led bid, as well as higher general and administrative costs due to elevated conference and promotional expenses and professional fees;
• Diluted earnings per common share excluding significant items for the first fiscal quarter of seven cents per share (diluted loss per common share of 15 cents on an IFRS basis);
• Total client assets in the company's global wealth management business increased by 7.2 per cent year over year to $97.3-billion, reflecting year-over-year increases of 9.8 per cent in Canada, 4.8 per cent in the United Kingdom and Crown dependencies, and 15.2 per cent in Australia;
• First quarter common share dividend of 8.5 cents per share.

Core business performance highlights:

Canaccord Genuity Wealth Management

The company's combined global wealth management operations earned revenue of $191.0-million for the first fiscal quarter, a year-over-year increase of 17.8 per cent. Net income before taxes excluding significant items for this segment increased by 45.6 per cent year over year, to $36.0-million.

• Wealth management operations in the U.K. and Crown dependencies generated first quarter revenue of $103.2-million, an increase of 40.7 per cent compared with the same period last year and reflects significantly increased interest revenue and higher commissions and fees revenue, primarily attributable to the integration of PSW which was acquired in Q1 2023. Measured in local currency (GBP), revenue was 61.4 million pounds sterling in Q1 2024 compared with 45.7 million pounds sterling in Q1 2023, an increase of 34.4 per cent compared with the same quarter last year. Net income before taxes excluding significant items for this business was $26.7-million in Q1 2024, up 42.2 per cent year over year.
• Canaccord Genuity Wealth Management (North America) generated $72.6-million in fiscal first quarter revenue, which was in line with the same quarter a year ago. Revenue in this business continues to reflect the impact of the prolonged weaker environment for investment banking activity, partially offset by increased interest revenue attributable to the higher interest rate environment. Excluding significant items net income before taxes for this business amounted to $9.0-million in Q1 2024, which represents a year-over-year increase of 38.7 per cent.
• Wealth management operations in Australia generated $15.2-million in fiscal first quarter revenue, a decrease of 4.3 per cent compared with the first quarter of last year. Excluding significant items net income before taxes for this business was $300,000 in Q1 2024, up from a net loss of $500,000 in Q1 2023.

Total client assets in the company's global wealth management businesses at the end of the first fiscal quarter amounted to $97.3-billion, an increase of $6.5-billion or 7.2 per cent from Q1 2023.

• Client assets in the U.K. and Crown dependencies were $54.7-billion (32.5 billion pounds sterling) as at June 30, 2023, a year-over-year increase of 4.8 per cent (a decrease of 2.4 per cent in local currency).
• Client assets in North America were $37.2-billion as at June 30, 2023, an increase of 4.2 per cent from $35.7-billion at the end of the previous quarter and an increase of 9.8 per cent from $33.9-billion at June 30, 2022, due to net new inflows from existing IAs, recruitment activity and new assets from the company's acquisition of Mercer's Canadian Private Wealth acquisition which was completed on May 29, 2023.
• Client assets in Australia were $5.4-billion ($6.1-billion (Australian)) at June 30, 2023, a decrease of 0.5 per cent from $5.4-billion ($6.0-billion (Australian) at the end of the previous quarter and an increase of 15.2 per cent from the first quarter of fiscal 2023. In addition, client assets totalling $14.5-billion ($16.4-billion (Australian) are also held on record in less active and transactional accounts through the company's Australian platform.

Canaccord Genuity Capital Markets

On a consolidated basis, Canaccord Genuity Capital Markets earned revenue of $145.7-million for the first fiscal quarter, a year-over-year decrease of 11.2 per cent.

During the three-month period, Canaccord Genuity Capital Markets participated in 87 investment banking transactions globally, raising total proceeds of $3.9-billion. While capital raising activities have remained below historic levels, first quarter revenue in the company's investment banking segment increased by 136.5 per cent compared with Q1 2023, attributable to increased contributions from the company's operations in Canada, the United States and Australia.

Advisory revenue declined by 51.2 per cent year over year, due to lower contributions from the company's U.S. and U.K. businesses which reflects the more challenging environment for completions despite a solid pipeline of engagements. Commissions and fees revenue increased by 14.6 per cent year over year due to higher contributions from Canada and the U.K. and Europe, which were partially offset by declines in the U.S. and Australia. On a consolidated basis, revenue from principal trading activity amounted to $23.0-million, a year-over-year decrease of 18.8 per cent. Trading revenue in the company's Canadian and U.K. businesses increased by 252.1 per cent and 188.3 per cent, respectively, while revenue contributed by the company's U.S. operation decreased by 35.5 per cent reflecting lower volatility in the quarter and reduced market activity.

Excluding significant items, the company's global capital markets division recorded a net loss of $7.6-million for the quarter compared with net income before taxes excluding significant items of $4.1-million in the same period a year ago. The company's Canadian business contributed net income before taxes of $2.5-million, which was offset by losses in the company's U.K. and U.S. businesses reflecting the impact of higher fixed costs in a reduced revenue environment and increased general and administrative expenses, largely attributable to promotional expenses and professional fees.

Summary of corporate developments

During Q1 2024, the company made the following changes in executive leadership roles in its North American businesses: Stuart Raftus was appointed chief executive officer, Canaccord Genuity Corp., with responsibility for oversight of the Canadian broker-dealer business. He continues to lead CG Wealth Management in Canada, a role he has had since 2014. Jason Melbourne was promoted to head of Canadian capital markets and will retain his existing role as global head of distribution. Jeff Barlow become CEO, Canaccord Genuity LLC (U.S.), a title change that reflects the increased importance to the company's global franchise of its U.S. business for which he has been president since 2015.

Subsequent to the end of the quarter the company implemented a number of cost-saving initiatives, including a headcount reduction of approximately 7.0 per cent in Canada and the U.S., new controls and procedures to reduce promotion and travel activities, and a comprehensive review of all communication, technology and other costs. In connection with these initiatives, the company expects to record a restructuring provision of approximately $10.0-million in Q2 fiscal 2024.

Results for the first quarter of fiscal 2024 were impacted by the following significant items:

• Fair value adjustments on certain illiquid or restricted marketable securities recorded for IFRS (international financial reporting standards) reporting purposes, but which are excluded for management reporting purposes and are not used by management to assess operating performance;
• Restructuring costs;
• Amortization of intangible assets acquired in connection with business combinations;
• Certain incentive-based costs related to acquisitions in the U.S. capital markets and CGWM U.K;
• Certain components of the non-controlling interest expense associated with CGWM U.K.

Financial condition at the end of first quarter fiscal 2024 versus fourth quarter of fiscal 2023:

• Cash and cash equivalents balance of $600-million, a decrease of $402.6-million from $1.0-billion;
• Working capital of $725.1-million, a decrease of $24.5-million from $749.6-million;
• Total shareholders equity of $1.0-billion, a decrease of $50.0-million from $1.1-billion.

Common and preferred share dividends

On Aug. 3, 2023, the board of directors approved a dividend of 8.5 cents per common share, payable on Sept. 15, 2023, with a record date of Sept. 1, 2023.

On Aug. 3, 2023, the board approved a cash dividend of 25.175 cents per Series A preferred share payable on Oct. 2, 2023, to Series A preferred shareholders of record as at Sept. 15, 2023.

On Aug. 3, 2023, the board approved a cash dividend of 42.731 cents per Series C preferred share payable on Oct. 2, 2023, to Series C preferred shareholders of record as at Sept. 15, 2023.

Access to quarterly results information

Interested parties are invited to listen to Canaccord Genuity's first fiscal quarter results conference call via live webcast or a toll-free number. The conference call is scheduled for Friday, Aug. 4, 2023, at 8 a.m. Eastern Time, 1 p.m. U.K. time and 10 p.m. Australia ET.

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

Analysts and institutional investors can call in via telephone at:

• 416-764-8609 (within Toronto);
• 888-390-0605 (toll-free in North America outside Toronto);
• 0-800-652-2435 (toll-free from the United Kingdom);
• 1-800-076-068 (toll-free from Australia).

Please ask to participate in the Canaccord Genuity Group Q1 2024 results call. If a pass code is requested, please use 13704336.

A replay of the conference call will be made available from approximately two hours after the live call on Aug. 4, 2023, until Sept. 4, 2023, at 416-764-8677 or 1-888-390-0541 by entering pass code 704336 followed by the pound key key.

About Canaccord Genuity Group Inc.

Through its principal subsidiaries, Canaccord Genuity Group is a leading independent, full-service financial services 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. The company 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 United Kingdom, Guernsey, Jersey, the Isle of Man and Australia. The company's international capital markets division operates in North America, the United Kingdom Europe, Asia and Australia.