Excluding significant items, first quarter earnings per common share of $0.19 ⁽¹⁾

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

TORONTO, Aug. 1, 2018 /PRNewswire/ - During the first quarter of fiscal 2019, the quarter ended June 30, 2018, Canaccord Genuity Group Inc. (Canaccord Genuity, the Company, TSX: CF) generated $274.1 million in revenue. Excluding significant items ⁽¹⁾_, the Company recorded net income ⁽³⁾ of $25.0 million or net income of $21.7 million attributable to common shareholders ⁽²⁾ (earnings per common share of $0.19). Including all significant items, on an IFRS basis, the Company recorded net income ⁽³⁾ of $18.6 million or net income attributable to common shareholders ⁽²⁾ of $15.3 million (earnings per common share of $0.14).

"Fiscal 2019 is off to a strong start and we continued to strengthen our business mix and increase scale in our wealth management operations, while our capital markets business benefited from a continued positive backdrop for growth stocks," said Dan Daviau, President & CEO of Canaccord Genuity Group Inc. "We are confident in our market position and we are increasingly demonstrating that our business is advantageously positioned to navigate changes in the market environment, while we stay focused on driving stability for our business and our shareholders."

First Quarter of Fiscal 2019 vs. First Quarter of Fiscal 2018

• Revenue of $274.1 million, an increase of 37.2% or $74.3 million from $199.8 million
• Excluding significant items, expenses of $244.8 million, an increase of 24.2% or $47.8 million from $197.0 million ⁽¹⁾
• Expenses of $252.2 million, an increase of 25.1% or $50.6 million from $201.6 million
• Excluding significant items, diluted earnings per common share (EPS) of $0.19 compared to a loss per common share of $0.01 ⁽¹⁾
• Excluding significant items, net income ⁽³⁾ of $25.0 million compared to net income ⁽³⁾ of $1.6 million ⁽¹⁾
• Net income ⁽³⁾ of $18.6 million compared to a net loss ⁽³⁾ of $2.6 million
• Diluted EPS of $0.14 compared to a loss per common share of $0.05

First Quarter of Fiscal 2019 vs Fourth Quarter of Fiscal 2018

• Revenue of $274.1 million, a decrease of 14.9% or $48.0 million from $322.1 million
• Excluding significant items, expenses of $244.8 million, a decrease of 9.3% or $25.1 million from $269.9 million ⁽¹⁾
• Expenses of $252.2 million, a decrease of 22.2% or $72.2 million from $324.4 million
• Excluding significant items, diluted EPS of $0.19 compared to diluted EPS of 0.28 ⁽¹⁾
• Excluding significant items, net income ⁽³⁾ of $25.0 million compared to net income ⁽³⁾ of $37.3 million ⁽¹⁾
• Net income ⁽³⁾ of $18.6 million compared to a net loss ⁽³⁾ of $9.7 million
• Diluted EPS of $0.14 compared to a loss per common share of $0.15

Financial Condition at end of First Quarter Fiscal 2019 vs. Fourth Quarter Fiscal 2018

• Cash and cash equivalents balance of $739.3 million, a decrease of $123.5 million from $862.8 million
• Working capital of $563.6 million, a decrease of $12.0 million from $575.6 million
• Total shareholders' equity of $819.6 million, a decrease of $21.8 million from $841.4 million
• Book value per diluted common share of $5.52, a decrease of $0.19 from $5.71⁽⁴⁾
• On August 1, 2018, the Board of Directors approved a cash dividend of $0.01 per common share payable on September 10, 2018 with a record date of August 31, 2018.
• On August 1, 2018, the Board of Directors approved a cash dividend of $0.24281 per Series A Preferred Share payable on October 1, 2018 with a record date of September 14, 2018, and a cash dividend of $0.31206 per Series C Preferred Share payable on October 1, 2018 with a record date of September 14, 2018.

SUMMARY OF OPERATIONS

Corporate

• On June 6, 2018, the Company announced that it had entered into a non-binding letter of intent to acquire an additional 30% of the shares in its Australian capital markets and wealth management business, Canaccord Genuity (Australia) Limited. The transaction will increase the company's ownership in Canaccord Genuity (Australia) from 50% to 80%. The consideration for the purchase will be A$36.0 million comprised of A$15.0 million cash, a A$6.0 million note payable and the issuance of approximately 2.3 million shares of the Company with a value of A$15.0 million. The shares will be subject to a three-year escrow arrangement with annual releases. Closing is subject to finalizing definitive documentation, customary closing conditions and regulatory approval including the TSX approval (which has been obtained).
• On June 6, 2018, the Company completed its previously announced acquisition of Jitneytrade Inc. and Finlogik Inc. (collectively referred to as "Jitneytrade") directly and through the purchase of Finlogik Capital Inc. Jitneytrade Inc. is a direct access broker and an active trader in futures and equity options in Canada. Finlogik Inc. is in the business of delivering value-added fintech solutions in the Canadian market.
• On June 1, 2018, the Company created a performance share option (''PSO'') plan subject to shareholder approval at the Annual General Meeting on August 2, 2018. On June 14, 2018, the Company granted 6,220,000 options under the PSO plan; this grant is subject to shareholder ratification at the Annual General Meeting. The options have an exercise price of $6.73 per share, based on the fair market value of the common shares on the grant date. The PSOs have a term of five years and will time-vest ratably over four years (with one third vesting on each of the second, third and fourth anniversaries of the date of the grant). The PSOs will also be subject to market (stock price) performance vesting conditions, as well as have a three times exercise price cap on payout value.
• On June 11, 2018, Canaccord Genuity Acquisition Corp. (CGAC), a special purpose acquisition corporation sponsored by a wholly-owned subsidiary of the Company (the Sponsor) announced its proposed merger with Spark Power Corp. The merger will constitute CGAC's qualifying transaction and is subject to the satisfaction of certain conditions, including regulatory and CGAC shareholder approvals.

Canaccord Genuity (Capital Markets)

• Canaccord Genuity generated revenue of $156.2 million, and after intersegment allocations and excluding significant items, recorded net income before taxes of $13.2 million ⁽¹⁾
• Canaccord Genuity participated in 92 investment banking transactions globally, raising total proceeds of C$11.2 billion ⁽⁵⁾ during fiscal Q1/19
• Canaccord Genuity led or co-led 41 transactions globally, raising total proceeds of C$1.75 billion ⁽⁵⁾ during fiscal Q1/19
• Significant investment banking transactions for Canaccord Genuity during fiscal Q1/19 include:
• C$143.0 million for MedMen Enterprises Inc. on CSE
• C$132.3 million initial public offering for The Green Organic Dutchman on TSX
• US$115.0 million for Sientra Inc. on Nasdaq
• C$100.4 million for CannTrust Holdings Inc. on TSX
• C$83.3 million for Green Thumb Industries on CSE
• US$52.6 million for T2 Biosystems Inc. on Nasdaq
• US$50.3 million for Asure Software on Nasdaq
• A$70.0 million initial public offering for Marley Spoon AG on ASX
• US$46.0 million for Sesen Bio Inc. on Nasdaq
• £20.4 million for Pacific Industrial & Logistics (now Urban Logistics REIT) on AIM
• US$29.7 million for ORBCOMM on Nasdaq
• C$25.0 million for The Green Organic Dutchman on TSX
• C$34.5 million for Vogogo Inc. on CSE
• C$34.0 million private placement for UrtheCast Corp.
• C$30.0 million for Globalive Technology Partners (on TSXV)
• A$25.0 million Placement for Alliance Mineral Assets Ltd on SGX
• C$17.3 million for CannaRoyalty Corp. on TSXV
• A$20.0 million for Tawana Resources Limited on ASX
• A$15.0 million for Oklo Resources Limited on ASX
• In Canada, Canaccord Genuity participated in raising $301.0 million for government and corporate bond issuances during fiscal Q1/19
• Canaccord Genuity generated advisory revenues of $24.6 million during fiscal Q1/19, an increase of $5.7 million or 30.4% compared to the same quarter last year
• During fiscal Q1/19, significant M&A and advisory transactions included:
• CDQP on its acquisition of a leading minority stake in Fives Group alongside Investissements PSP and Ardian valued at €1.5 billion
• Spinal Kinetics, Inc. on its sale to Orthofix International N.V.
• DZETA Conseil on its sale of Outilacier to IPH/Brammer
• Reeher LLC on its sale to Blackbaud Inc.
• Ketra Inc. on its acquisition by Lutron Electronics Inc.
• Aveda Transportation & Energy Services on its C$126.0 million sale to Daseke Inc.
• REACH Health, Inc. on its sale to InTouch Health, Inc.
• Acasta Enterprises Inc. on the sale of JemPak Corporation to Henkel AG & Co. for C$118 million
• Kratos Defense & Security Solutions on the sale of its Public Safety and Security division to Securitas
• etc. venues on its partnership with Benchmark
• Acolyte Group on its sale to General LED Holdings
• Tiger Optics LLC on its acquisition by Union Park Capital LLC
• Tessi on its acquisition and financing of Owliance
• LBO France on the refinancing of FH Ortopedics
• First Cobalt Corp. on its $98 million acquisition of US Cobalt Inc.

Canaccord Genuity Wealth Management (Global)

• Globally, Canaccord Genuity Wealth Management generated $112.6 million in revenue in Q1/19
• Assets under administration in Canada and assets under management in the UK & Europe and Australia were $66.2 billion at the end of Q1/19⁽⁴⁾, an increase of 8.0% from $61.3 billion at the end of Q4/18 and an increase of 68.5% from $39.3 billion at the end of Q1/18

Canaccord Genuity Wealth Management (North America)

• Canaccord Genuity Wealth Management (North America) generated $46.8 million in revenue and, after intersegment allocations and before taxes, recorded net income of $5.2 million in Q1/19
• Assets under administration in Canada were $18.9 billion as at June 30, 2018 an increase of 21.5% from $15.6 billion at the end of the previous quarter and an increase of 49.3% from $12.7 billion at the end of Q1/18⁽⁴⁾
• Assets under management in Canada (discretionary) were $3.7 billion as at June 30, 2018, an increase of 32.2% from $2.8 billion at the end of the previous quarter and an increase of 40.6% from $2.6 billion at the end of Q1/18⁽⁴⁾
• Canaccord Genuity Wealth Management had 148 Advisory Teams ⁽⁶⁾ at the end of fiscal Q1/19, an increase of 6 Advisory Teams from March 31, 2018 and an increase of 13 from June 30, 2017

Canaccord Genuity Wealth Management (UK & Europe)

• Wealth management operations in the UK & Europe generated $65.8 million in revenue and, after intersegment allocations, and excluding significant items, recorded net income of $13.5 million before taxes in Q1/19⁽¹⁾
• Assets under management (discretionary and non-discretionary) were $46.4 billion (£26.9 billion) as at June 30, 2018, an increase of 3.5% from $44.9 billion (£24.8 billion) at the end of the previous quarter and an increase of 80.3% from $25.8 billion (£15.3 billion) at June 30, 2017 ⁽⁴⁾. In local currency (GBP), assets under management at June 30, 2018 increased by 8.5% compared to March 31, 2018 and 75.8% compared to June 30, 2017⁽⁴⁾.

Non-IFRS Measures

The non-International Financial Reporting Standards (IFRS) measures presented include assets under administration, assets under management, book value per diluted common share and figures that exclude significant items. Significant items include restructuring costs, amortization of intangible assets acquired in connection with a business combination, impairment of goodwill and other assets and acquisition-related expense items, which include costs recognized in relation to both prospective and completed acquisitions,  gains or losses related to business disposals including recognition of realized translation gains on the disposal of foreign operations, certain accounting charges related to the change in the Company's long-term incentive plan as recorded with effect on March 31, 2018, certain incentive-based costs related to the acquisition of Hargreave Hale, as well as certain expense items, typically included in development costs, which are considered by management to reflect a singular charge of a non-operating nature. Book value per diluted common share is calculated as total common shareholders' equity adjusted for assumed proceeds from the exercise of options and warrants and conversion of convertible debentures divided by the number of diluted common shares outstanding including estimated amounts in respect of share issuance commitments including options, warrants and convertible debentures, and, commencing in Q1/14, adjusted for shares purchased under the Company's normal course issuer bid (NCIB) and not yet cancelled and estimated forfeitures in respect of unvested share awards under share-based payment plans.

Management believes that these non-IFRS measures will allow for a better evaluation of the operating performance of the Company's business and facilitate meaningful comparison of results in the current period to those in prior periods and future periods. Figures that exclude significant items provide useful information by excluding certain items that may not be indicative of the Company's core operating results. A limitation of utilizing these figures that exclude significant items is that the IFRS accounting effects of these items do in fact reflect the underlying financial results of the Company's business; thus, these effects should not be ignored in evaluating and analyzing the Company's financial results. Therefore, management believes that the Company's IFRS measures of financial performance and the respective non-IFRS measures should be considered together. 

Selected financial information excluding significant items ⁽¹⁾

Business segment results for the three months ended June 30, 2018

Fellow Shareholders:

Our results for the first quarter of fiscal 2019 reflect the stability in the fundamentals for our business, both on the income and the expense side. For the three-month period, Canaccord Genuity Group Inc. earned record first quarter revenue of $274.1 million, an improvement of 37.2% from the same period a year ago.

The impact of political uncertainties and trade tensions during the period was offset by healthy earnings growth in most of our key markets, fueled by strength in the U.S. economy, tight labor markets in North America and stronger commodity prices – all factors which contributed to increased activity and client participation during a traditionally slow quarter. The revenue growth we achieved over the three-month period was relatively broad based across our capital markets and wealth management businesses, which earned revenues of $156.2 million and $112.6 million respectively.

Excluding significant items⁽¹⁾ we incurred higher expenses compared to the first quarter of last year, to support stronger activity levels in our capital markets operations and business growth in our UK and Canadian wealth management operations. Despite this increase, our firmwide expense ratio decreased by 9.3 percentage points year-over-year, a testament to our continued focus on cost containment across our businesses.

Net income excluding significant items⁽¹⁾ for the three-month period amounted to $25.0 million, a significant improvement from $1.6 million a year ago. This translated into diluted earnings per common share excluding significant items ⁽¹⁾ of $0.19 for the three-month period, and we estimate that 63% - or $0.12 - of this amount was contributed by our expanded global wealth management operations.

Expanded wealth management operations delivering growing contributions to our profitability 

At the end of the three-month period, total client assets increased to $66.2 billion, a marked improvement of 68.5% compared to a year ago.

With the addition of Hargreave Hale in September 2017, our expanded UK & Europe wealth management operation achieved year-over-year revenue growth of 73.0% for the three-month period. When measured in local currency, client assets in this business increased by 75.8% over the year and by 8.5% sequentially, to £26.9 billion. We continue to make steady progress with our integration of Hargreave Hale and we anticipate further organic growth and margin improvement in this business as our teams in the region leverage their complementary strengths with a collective focus on delivering strong investment performance, an enhanced client experience and employee commitment and dedication.

Total client assets in our Canadian wealth management business increased by 49.3% year-over-year and by 21.5% sequentially, to $18.9 billion. Revenue in this segment increased by 26.7% compared to the first quarter of last year, to $46.8 million.  During the quarter we welcomed additional new advisory teams and additional client assets in Vancouver, Winnipeg, Edmonton and Toronto and the revenue and net income contributions from these additions will be more wholly reflected in future reporting periods.

Recruiting activity in Canada continues to be robust as established Investment Advisors increasingly embrace the advantages and opportunities that an independent platform with broad global expertise and opportunities can provide for their business and their clients. The average book size per Investment Advisory team in this business has increased by over 80% in just two years.

In all our wealth management businesses, we have continued to invest in strengthening our back-office expertise and the implementation of technological solutions to enhance our process efficiencies, so that we can seamlessly integrate new investment professionals and clients as we increase scale and asset growth for this segment.

Delivering stronger outcomes for capital markets clients and improving our competitive position.

Canaccord Genuity participated in 92 transactions to raise $11.2 billion for global growth companies in the first quarter of fiscal 2019.

Revenue earned by our global capital markets business increased by 28.3% year-over-year to $156.2 million, primarily attributable to higher banking and advisory activity levels in our US, Canadian and Australian businesses during a typically slow quarter.

For the three-month period, revenue earned through advisory and underwriting activities grew by 30.4% and 75.8% respectively compared to a year ago. We continue to experience a general trend of larger deal size across our advisory business, reflective of growing demand for independent advice that is free from conflict. Principal trading revenue for the period increased by 19.4% year-over-year, primarily attributable to higher market activity in our US and UK operations.

The strongest contribution to our quarterly result was from our US operation, which earned record quarterly revenue of $76.2 million. Revenue generated through investment banking and advisory activities during the three-month period increased by 262.9% and 29.0% respectively on a year-over-year basis and our institutional equities group delivered another strong performance during the quarter. Excluding significant items, this business delivered a pre-tax profit margin of 10.0%, a significant improvement from a loss of 4.1% in the same period last year.

Our Canadian capital markets division also delivered a solid quarterly result.  This business maintained its lead as the dominant independent investment bank in Canada during the three-month period, having raised close to 70% more capital than our closest independent competitor. Trading volumes in this business were lower due to reduced volatility and seasonality but Canaccord Genuity and Jitneytrade remained the top two independents for block trading volumes in Canada for the three-month period. Following the closing of our Jitneytrade acquisition late in the fiscal quarter, we expect the increased contributions from this business to be reflected in future reporting periods.

Our Australian capital markets business has experienced strong momentum across all sectors and has maintained its position as a leading investment bank for small cap equities in the region.  This business is an increasingly stronger contributor to our global platform and its contribution to our total global capital markets revenue improved by 123% year-over-year.

The first quarter result for our UK, Europe & Dubai operations was influenced by the timing of transaction closings in the region. With a strong advisory component, timing of revenue in this business can be uneven on a quarter-to-quarter basis. During the period we also took additional steps to adjust our staffing mix in this region, to further improve alignment with the global platform.

We have continued in our efforts to create a unified global network of investment banking, sales, trading and research professionals, an important differentiator for our firm in all the regions where we operate.  For the three-month period, revenue per employee in our global capital markets business increased by 25.3% compared to a year ago, and we continue to focus on capturing greater efficiencies and strengthening our execution capabilities.

Steadfast execution on our strategy to drive stronger long-term success

As we enter our second fiscal quarter, market fundamentals remain broadly favorable and the elements that drive a healthy market environment for growth stocks are still in place and supportive of strategic M&A and capital raising activities.

While our industry is facing several uncertainties that have the potential to impact investor sentiment, we are increasingly demonstrating that our business is advantageously positioned to navigate periodic bouts of volatility while we stay focused on achieving our medium and longer-term targets.

With signs that the economic backdrop could become more challenging for growth stocks, we anticipate that rising commodity prices will drive increased activities in the natural resource sectors, a historic area of strength for our firm. We also anticipate growing interest in non-traditional sectors where Canaccord Genuity has established a strong market position, such as cannabis and digital assets.

I am confident that the increased contributions from our wealth management business will allow us to better manage through periods of lower new issue and advisory activity and that our capital markets business is appropriately scaled to deliver consistent service levels for clients in all our markets. Additionally, our expanded trading platform in Canada will allow us to capture a greater share of trading activity during periods of increased volumes.

Our Company continues to be well capitalized for investment in our strategic priorities with $563.6 million in working capital.

Regardless of the market backdrop, we will continue to execute on our strategy of increasing long-term stability and delivering more predictable returns for our shareholders. We have a talented group of professionals who are committed to providing differentiated opportunities and exceptional services for clients and a diversified revenue mix that positions us to be opportunistic in any market environment

Kind regards,

Dan Daviau
President & CEO
Canaccord Genuity Group Inc.

ACCESS TO QUARTERLY RESULTS INFORMATION 

Interested investors, the media and others may review this quarterly earnings release and supplementary financial information at http://www.canaccordgenuitygroup.com/EN/IR/FinReports/Pages/default.aspx

CONFERENCE CALL AND WEBCAST PRESENTATION

Interested parties are invited to listen to Canaccord Genuity's first quarter results conference call via live webcast or a toll-free number. The conference call is scheduled for Thursday, August 2, 2018 at 5:00 a.m. Pacific time, 8:00 a.m. Eastern time, 1:00 p.m. UK time, 8:00 p.m. China Standard Time, and 10:00 p.m. Australia EST. During the call, senior executives will comment on the results and respond to questions from analysts and institutional investors.

The conference call may be accessed live and archived on a listen-only basis at: http://www.canaccordgenuitygroup.com/EN/NewsEvents/Pages/Events.aspx

Analysts and institutional investors can call in via telephone at:

• 647-427-7450 (within Toronto)
• 1-888-231-8191 (toll free outside Toronto)
• 0-800-051-7107 (toll free from the United Kingdom)
• 0-800-91-7449 (toll free from France)
• 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)
• 800-017-8071 (toll free from United Arab Emirates)

Please ask to participate in the Canaccord Genuity Group Inc. Q1/19 results call.  If a passcode is requested, please use 5096969.

A replay of the conference call will be made available from approximately two hours after the live call on August 2, 2018 until October 4, 2018 at 416-849-0833 or 1-855-859-2056 by entering passcode 5096969 followed by the (#) key.

ABOUT CANACCORD GENUITY GROUP INC.:
Through its principal subsidiaries, Canaccord Genuity Group Inc. (the "Company") 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. We achieve this by generating value for our 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 UK, Guernsey, Jersey, the Isle of Man and Australia.  Canaccord Genuity, the international capital markets division, operates in North America, UK & Europe, Asia, Australia and the Middle East. To us there are no foreign markets.^TM

Canaccord Genuity Group Inc. is publicly traded under the symbol CF on the TSX. Canaccord Genuity Series A Preferred Shares are listed on the TSX under the symbol CF.PR.A. Canaccord Genuity Series C Preferred Shares are listed on the TSX under the symbol CF.PR.C.

Investor and media relations inquiries:
Christina Marinoff, Vice President
Investor Relations and Communications
Phone: 416-687-5507
Email: [email protected]

www.canaccordgenuitygroup.com

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