Good morning, ladies and gentlemen. Thank you for standing by. I'd like to welcome everyone to the Canaccord Genuity Group Inc. Fiscal 2022 Second Quarter Results Conference Call. All lines have been placed on mute to prevent any background noise. Following the speaker's remarks, there will be a question-and-answer session. If you would like to ask a question during this time, simply press star then the number one on your telephone keypad. If you would like to withdraw your question, please press star followed by the number two. If you have any difficulties hearing the conference, please press star then zero for operator assistance at any time. As a reminder, this conference call is being broadcast live online and recorded. I would now like to turn the conference call over to Mr. Dan Daviau, President and CEO. Please go ahead, Mr. Daviau.
Thank you, operator, and thanks for everyone joining us for today's call. As always, I'm joined by Don MacFayden, our Chief Financial Officer. Following the overview of our second quarter fiscal 2022 results, both Don and I would be pleased to answer questions from analysts and institutional investors. During today's discussion, we'll refer to our earnings release in MD&A, copies of which have been made available for download on SEDAR in the investor relations section of our website at cgf.com. Our quarterly investor presentation and supplemental financials are also available on our website. I won't cover the entire presentation during this call, but I will refer to certain slides to guide our discussion. Within our update, certain reported information has been adjusted to exclude significant items in order to provide a transparent and comparative view of our operating performance. These adjustment items are non-IFRS financial measures.
Please refer to our notice regarding forward-looking statements and the description of non-IFRS financial measures that appear on page one of our investor presentation and in our MD&A. I expect that you've all had the opportunity to review our quarterly disclosures that were made available last night. The operating environment remained healthy throughout the three-month period, and we experienced some seasonality in our new issue and trading businesses. M&A activity has picked up substantially. While new issue activity has declined from record volumes of recent quarters, it has remained comfortably above historic levels. Our wealth management businesses in all our regions performed strongly, albeit with lower contributions from new issue activity in Canada and Australia. Firmwide revenue for the three-month period amounted to CAD 475 million, an increase of 22% compared to the same period last year.
When measured on a year-to-date basis, adjusted revenue for the first half of fiscal 2022 amounted to CAD 231 million, an increase of 30% compared to the same period a year ago. Looking at slide six of our investor presentation, we can see that our second quarter and first half results have surpassed the prior fiscal year on every measure, revenue, net income, and adjusted earnings per share. Excluding significant items, firm-wide pre-tax net income of CAD 96 million for the second quarter contributed to a year-over-year increase of 127% or CAD 117 million for the first six months of fiscal 2022.
This translated to adjusted diluted earnings per common share of CAD 0.58 for the second quarter and CAD 1.31 for the first half, year-over-year increases of 107% and 147% respectively. While we are certainly pleased with this result, we note that it was achieved in a more challenging backdrop for risk capital, where several ECM transactions were either pulled or postponed, in addition to the seasonality that has traditionally impacted our second quarter capital-raising activities. Our diversified platform has positioned us to generate stable growth regardless of the operating environment. Slides eight and nine show the contribution of revenue and net income from our core businesses and geographies.
Excluding significant items, our total expenses as a percentage of revenue for the second fiscal quarter decreased by 7.2 percentage points when compared to the same period a year ago, with non-operating compensation costs coming in at 19%, a year-over-year reduction of four percentage points. This result was driven by a combination of revenue growth and expense discipline, resulting in an adjusted pre-tax profit margin of 20% for the second fiscal quarter, up 7.2 percentage points from the same period last year. As evidenced on slide 10, we've maintained a strong focus on the efficiencies and cost discipline measures that we implemented prior to the pandemic. We've yet to see a meaningful increase in travel and entertainment costs, but as restrictions ease, in-person activities are increasing and related costs are moving up.
We expect this trend to continue as demand for in-person or hybrid conferences return. Although this activity is returning to more normal levels, we continue to operate with a disciplined and selective approach to our spending in this area. Reflecting our focus on returning capital to shareholders, we have remained active in our NCIB program. We expect that to continue through the second half of our fiscal year. I'm also pleased to report that our board of directors has approved a quarterly common share dividend of CAD 0.075 for the second fiscal quarter. Total capital deployment initiatives for the first half of fiscal 2022, including common share dividends and buyback activity, amounted to CAD 44 million, or 28.6% of our adjusted net income. With that, let's turn to the performance of our operating businesses.
Activity levels in our global capital markets business remained very strong over the three-month period, reflecting the strength of our mid-market franchise and the steadfast commitment from our talented teams across the businesses and geographies. Firm-wide capital markets revenue for the second fiscal quarter amounted to CAD 305 million, up 26% compared to the same period last year. Our U.S. business was the largest revenue contributor for the three-month period, with total revenue of CAD 179 million, up 59% compared to the same period a year ago. Revenue contributed by our U.K. and Europe capital markets business increased 130% year-over-year.
Second quarter revenue in our Canadian and Australian businesses remained higher than historic levels, but declined 15% and 26% respectively, reflecting lower new issue and trading activity when compared to the second quarter of last year. Over the three-month period, we participated in 128 transactions to raise gross proceeds of CAD 16 billion for growth companies. Firm-wide investment banking revenue for the quarter was a very healthy CAD 90 million, but down 18% compared to the same period a year ago. Revenue earned from our trading activities were 28% lower on a year-over-year basis, a reflection of lower market volatility which decreased market activity and revenue opportunities, primarily in our U.S. and Canadian operations.
These declines were offset by a 279% year-over-year increase in higher margin advisory revenues, which amounted to CAD 139 million for the three-month period. Our U.S. business delivered a 419% increase in advisory fee revenues, which amounted to CAD 104 million, surpassing all prior full fiscal year amounts from this team. Our U.K. business, with a substantial contribution from its Paris office and our Canadian operation, also delivered substantial increases in this segment with increases of 205% and 58% respectively. Our exceptional track record of delivering ECM transactions and successful outcomes for mid-market growth companies has helped to add to the growth in our advisory practice.
I'm so pleased with our specialists in all regions who can have that trusted conversation with top decision makers across sectors and regions and coordinate our delivery of innovative ideas and solutions to companies without conflict. We also made strategic investments in this segment to complement our ECM focus area, and we're seeing the benefits of that plan. Building on the successful deployment of this strategy, we continue to explore further investments to grow our advisory capabilities. Reflecting the increase in higher margin advisory activity, the second quarter adjusted pre-tax net income contribution from our capital markets business improved by 70% year-over-year to CAD 73 million. An adjusted pre-tax profit margin increased by six percentage points to 24%. Across our capital markets businesses, we continue to pursue opportunities for expanding our product offerings.
As we develop ancillary products to complement our mid-market capabilities, our long-term earnings potential is enhanced. Looking at the current quarter, market activity has demonstrated that new issue and advisory levels remain robust through October. If the environment remains constructive in the final two months of this calendar year, we are optimistic that our Q3 results will continue to reflect our strong market position. Our global wealth management businesses delivered another quarter of impressive growth. Firm-wide client assets reached a new record of CAD 98 billion, up 34% year-over-year. Total revenue for the quarter in our combined wealth management businesses amounted to CAD 166 million, an increase of 14% compared to the same period a year ago. Excluding significant items, the second quarter pre-tax net income contribution increased by 18% year-over-year to CAD 32 million.
This brings the total contribution for the first half of this fiscal year to CAD 80 million, up 56% from the same period last year. Client assets in our Canadian business reached a new record of CAD 36 billion at the end of the second quarter, with the average book per advisor growing by 44% year-over-year to CAD 245 million. This increase was driven by a growth in commissions and fees and interest revenue, which was partially offset by lower investment banking activity. I will also note that the proportion of fee-based revenue in this business increased to 45%, a year-over-year improvement of 13 percentage points.
We continue to focus on growing contributions from this segment through our recruiting activities, as well as continuing to support our existing advisors in expanding their offering to capture a greater share of wallet. Fiscal year to date, the adjusted pre-tax net income contribution from this business amounted to CAD 36 million, an increase of 87% when compared to the same period in the prior year. We also ranked very strongly in the independent survey of Canada's top wealth advisors with total number of CG advisors exceeding representation from all other independent firms by a wide margin. While the recruiting environment remains competitive, we continue to have strong momentum. We are also maintaining a strong focus on alternative ways to add products and services to grow and enhance our overall Canadian wealth offering. Client assets in the U.K. and Crown dependencies increased by 27% year-over-year to CAD 58 billion.
Revenue reached a new quarterly record of CAD 75 million for the three-month period, up 17% year-over-year. Excluding significant items, the pre-tax net income contribution from this business amounted to CAD 20 million for the second quarter and CAD 39 million fiscal year to date, increases of 40% and 30% respectively. Our organic growth strategy is beginning to produce results, and margins in this business continue to be strong. Fiscal year to date, the adjusted pre-tax profit margin in this business was 26.4%, up 3.6 percentage points from the prior year. During the quarter, we announced the completion of the CAD 218 million investment by certain accounts and funds of HPS Investment Partners.
On an as converted basis, the convertible preferred share investment into our U.K. wealth management division reduces our equity interest in this business by approximately 22%. Our partnership with HPS continues to be positive and constructive as we continue to explore opportunities to materially add businesses to our platform in the U.K. in a manner which is complementary to our existing business and accretive for our shareholders. I'm also very pleased to welcome our new colleagues from Adam & Company. This transaction closed on October 1st, so the assets and revenues will begin to be reflected in our results for the second half of this fiscal year. We are excited about the strategic fit of this highly complementary business, and we look forward to a seamless integration.
This development will increase our client assets by roughly CAD 3 billion, and we expect it will be accretive to our adjusted earnings. Finally, managed assets in our Australian wealth business increased by 43% year-over-year to a record AUD 5 billion, demonstrating our continued strong momentum in this region. Second quarter revenue increased by 31% year-over-year to CAD 19 million. While revenue from new issue activity declined by 23% sequentially, this team delivered a new quarterly record of CAD 16 million in commission and fee revenue, up 40% year-over-year. We continue to execute against a broad range of opportunities in this business. We remain focused on advancing advisor recruitment and asset growth as we maintain momentum as the premier brand for small and mid-cap investors in Australia. Our recruiting success in this region have increased substantially because of this momentum.
Finally, as our Australia franchise grows larger, we continue to assess the appropriate ownership structure of that business to align our employee base in the region and provide the business the capital it needs to grow. In conclusion, I'm very pleased with our results for the second quarter and the first half of fiscal 2022. Despite the environment for new issues returning to more normalized levels, the global macroeconomic environment continues to provide a supportive backdrop for activities in our core mid-market sectors. The M&A environment is the strongest we've seen, and we are optimally positioned to deliver on a growing pipeline of strategic activity. Our market position is stronger than ever, and we are among the league table leaders in all of our geographies.
We are especially grateful for the trust that our clients and shareholders have placed in us, and we strive to always exceed their expectations as the leading independent mid-market investment banking and wealth management firm. As travel restrictions ease, we are reestablishing the personal engagement that is so important for our employees and clients. We enter the second half with a very strong balance sheet and a very healthy working capital position to support all our business activities. We continue to invest strategically to enhance our mid-market capabilities and grow our wealth management businesses. With our buyback activity, our share count continues to trend lower, supporting enhancements to our earnings per share in any market backdrop. With our balance sheet strength, we expect to be able to continue this activity.
As always, we remain firmly committed to delivering outstanding experiences and results for our clients while managing our business for profitable growth and creating sustainable long-term value for our shareholders. With that, Don and I would be pleased to take your questions. Operator, can you please open the lines?
Thank you. Ladies and gentlemen, we will now conduct a question and answer session. If you would like to ask a question, please press star, then the number one on your telephone keypad. If you would like to withdraw your question, please press star two. There will be a brief pause while we compile the Q&A roster. Your first question comes from Jeff Fenwick of Cormark Securities. Please go ahead.
Hi, good morning, everyone.
Morning.
Dan, I wanted to start with Canadian wealth management. I mean, it's been a great run of adding client assets, and particularly the average assets per team has been growing quite a bit. Could you maybe just discuss the dynamics about what's going on there now in terms of, I know you were adding some teams or and letting some smaller ones go. You know, what's accounting now for the asset growth? Is it more of a focus of just capturing more of those existing client assets? Is there a pipeline of advisors that you're looking to bring in over the sort of near to medium term? How do we think about growth in Canada from here?
Yeah, I mean, great question, and obviously, you know, it's something that's, you know, front of mind, continues to be front of mind for us. I wanna answer your question with all of the above, I guess. I mean, first thing is we're seeing really good growth in our existing advisors. I mean, you saw that survey come out recently and, you know, we had, although we have 2% market share, w`````e had 18% of the top advisors in the country in the Globe survey the other day. So our 12, sorry, 12%, 18 advisors or 12% of the advisors, you know, the Globe advisors kind of work for us. So we've got a great group of advisors that are growing their books materially.
Stuart was in, you know, a trade publication yesterday speaking a little bit about that in terms of what, you know, what the underlying growth of some of our advisors assets have been. That's been the primary driver of growth, I'd say, in the last quarter, but we continue to attract new advisors as well. There's obviously, you know, nothing's really changed in the underlying trends in terms of us bringing on new people. We continue to meet a lot of new people, and we continue to expect to see some people transitioning through the piece. I mean, we just came through the summer. That's not really a time where people do a lot of transition, but I suspect over the next several quarters, we're gonna see a pickup of the transition of existing advisors.
We're also looking at, you know, adding new, you know, tangential segments to our wealth business and growing, you know, wealth assets that way as well. We've been exploring a number of different alternatives. You know, as you know, Jeff, we've invested, you know, CAD 400 million growing our wealth platform. We're gonna continue to invest. We obviously have a very robust balance sheet these days given our profitability, so we're gonna continue to invest growing our wealth platform in Canada. We've invested a ton in technology, we did a ton in systems, a ton in branding, a ton in marketing, everything that, you know, advisors need to grow their business. Nothing's changed on that strategy, I'd say. If anything, we're doubling down on it.
Okay. What about possible platform adds? I mean, you had an initial approach there to the Richardson Wealth. Are there other independents in Canada you might take a look at here? I mean, you're in a position to, as you say, financially to look at something like that? Or is the focus-
Yeah.
Maybe more on the individual teams?
Yeah. Again, all of the above. You know, there's not a lot of things strategically available. There's just not a lot of large independent platforms out there, as you know. You know, you can probably count them on less than one hand, in terms of what's out there. But you know, strategically, we felt there was a chance to bring on a synergistic platform. We've really up-tiered our business at CAD 240-ish million per advisor. Our advisor group is large. It wouldn't help the brand to bring on a bunch of advisors with significantly lower books.
I mean, the reason we are as profitable as we are in our Canadian wealth business is, you know, the advantages you get from having, you know, very large advisors and very large advisory books and the profitability associated with that. We got to be careful about, you know, culturally what we bring on. We've built an incredibly strong culture in our wealth business, and we want to be very sensitive to not destroying that through something strategic. Something strategic should add to it, not take away from it.
Yeah. Maybe a follow-on to your comment there about the larger teams and the better profitability. I mean, obviously felt just the pressure of the drop in the new issue business here, but this is still a good level of profitability. Is this the sort of a low watermark for the group here? On a normalized basis, it should be probably a bit higher, or what's your sense for Canada?
Yeah. I mean, it'd be. If I was going to predict one business, this would be the business I'd predict, you know, forward-looking. Yeah, I. Hard to predict the new issue business, and that's obviously down significantly CAD 30-ish million quarter-over-quarter, CAD 25-ish million quarter-over-quarter. Like, we get that, and that's gonna happen, new issue. Realize, and I know you know this, we're coming off the summer as well. We don't do a lot of, you know, retail-driven new issue work in the summer. So that's seasonally always slow, number one, so I suspect there's upside from there. Number two, you know, our fee and commission revenue is going up. Like, it tracks our assets, and our assets are going up, so it's going up.
Yeah, if you're asking me, was this quarter a low quarter for our Canadian wealth business? I think it was a low quarter for our Canadian wealth business, and I think the profitability of that business will continue, you know, to grow higher. I don't think it'll be as high as it was when we had CAD 40 million of new issue revenue flowing through that business. Over time, we could certainly get there as our, you know, fee and commission revenue goes up.
That, that's helpful. Thank you. Then why don't we talk a bit about Australia? I mean, you've made some very good progress there so far on wealth management. Just a brief comment in your release about looking at appropriate ownership and appropriate ownership structure in Australia. Can you just clarify, is that-
Mm-hmm.
What's that pertaining to? Is it wealth? Is it cap markets? Is it both, or I don't know.
Yeah. I mean, we, like Canada, we run an integrated wealth and capital markets business in Australia, so you can't really differentiate one from the other and say, you know. We do wanna continue to bring on advisors. We've, you know, had, you know, many handfuls and footfalls of advisors joining us in Australia. You know, it's a very similar strategy to the strategy we deployed in Canada. And as part of that, you're issuing equity to people who are joining. You're issuing, you know, you're giving advisors loans as well. As that business continues to grow, and you can see it's becoming a more material part of our revenue, not only the wealth side but the capital market side, its capital requirements change as well as it becomes bigger.
We don't have, you know, anything to announce at this stage. You know, right now, we own 80% of that business. That could adjust as we, you know, continue to grow that business and continue to bring people and teams on. You know, you can imagine a bunch of different scenarios on how that could play out, and it's just premature to announce it, but it's always something we're continuing to evolve. As I've told people in the past, Australia's a really long way away from Toronto, the furthest place on Earth. You know, to the extent that we can have a little bit of local ownership in that business, that's, you know, that's optimal from our perspective.
Okay, great. That's helpful color. I'll re-queue.
Thank you so much. Great questions.
Your next question comes from Rob Goff of Echelon. Please go ahead.
It's actually his brother, Rob, on the call.
Hey.
Good morning, guys.
Good morning. Thanks.
Congratulations on the quarter. You had another good quarter, great quarter. My first question would be on the strength of the U.S. advisory business. Could you talk to the verticals associated with that and just give us any further insights into the sustainability of those revenue lines?
Yeah, great question. Yeah, I mean, M&A's up globally. I think you know that. Not just us, but you know, most of the participants in the M&A market, we're seeing a very strong underlying environment for M&A, broadly speaking. That being said, you know, based on all the stats we have, you know, our boat has risen more than all the other boats in the harbor. We've done remarkably well. That shouldn't come as a surprise given the investment that we've made in M&A. We've talked about it, you know, at length. We've done M&A acquisitions in the U.S. We bought Petsky Prunier 2.5 years ago. You know, that integration's gone incredibly well. M&A is more in the ethos of our U.S. business.
It's always kind of been there in some of our other markets, but it's become very, very important to our U.S. business. We're earning disproportionately large fees on disproportionately larger assignments as you know, M&A kind of becomes further ingrained in our business. You know, is it sustainable, you know, after a 400% uptick? I don't know. The answer is maybe. We continue to be in a very, very good M&A environment globally and in the U.S. and have a robust pipeline of activity that we are continuing to execute. I think as you probably also know, M&A is probably one of the few businesses in our capital markets business where you can project. You know, when someone goes to raise money, you don't necessarily know two months before whether they're raising money.
When you're doing an M&A assignment, you've got pretty good visibility for the next three to six months in terms of what the pipeline of activity looks like, albeit you could have, you know, timing delays or what have you. We feel pretty confident in our M&A pipeline. To be honest, we feel pretty confident in our new issue pipeline in terms of the activity that's going on. There probably was a little bit of a, you know, bump along the road post the summer, late summer, you know, early September. That's kind of worked its way through the market. I think as you can see, the activity levels are still pretty robust out there. You know, our market position, if anything, is stronger, not weaker than where it used to be in our most relevant markets.
Okay. Thank you. I know Jeff talked on Canada and Australia. Could we perhaps turn to the U.K. and talk to what sort of organic growth you are seeing, margin expansion you're seeing, and in terms of what you are looking for and what you are seeing for inorganic growth along with your partner in HPS?
Yeah, all great questions and something that's top of mind for us. You know, from an inorganic perspective, you know, for the last several years, just taking a half a step back, we've really, truly been focused on increasing our scale of that business, mainly through inorganic initiatives. You know that we bought a number of companies and slowly integrated them in and increased our margins as we were doing it, you know, right out of the playbook that I think we pretty well articulated to you and to our shareholders. You know, that activity continues. That being said, you know, we've had a serious initiative probably for the past six months about growing organically. Just growing our business and, you know, increasing wallet share and increasing assets per existing client.
That initiative is starting to take shape. We've seen reasonable organic growth in that business, but reasonable organic growth in that business is not 10% a year or 15% a year, it's 5% a year or 4% or 3%. That's remarkable organic growth, and that's kind of our objectives, and that's kinda what we're witnessing right now. I think we're achieving our organic growth objectives. Inorganically, you know, through acquisitions, we continue to look at a number of different opportunities and are aggressive on a number of different opportunities. Not only do we have a phenomenal management team that we are incredibly confident in their ability to execute those acquisitions, but we now have a financial partner that increases our resolve in trying to get M&A done.
You know, as you had indicated, you know, HPS is a very good partner, albeit in a relatively short period of time. They're a minority investor in our business now. They own 22% of our business. they bought in at a, you know, roughly a CAD 1 billion valuation. certainly gave us the currency through which to look at further acquisitions, and we've been aggressively pursuing further acquisitions as well. Nothing clearly to announce at this stage. M&A always has probability adjusted to it, but we are looking at increasing the scale of that business. We think that as the scale of that business increases, our margins increase, our scale increases, and it even becomes a more valuable entity. We closed the Adam & Company acquisition. That integration's done. it was done relatively quickly.
You know, we see more acquisitions in our future as we scale that business.
Thank you. One last question, if I may. We often ask you about the recruitment of bank advisors onto the Canadian Wealth platform. Could I ask you about what you are seeing with your existing advisors, capturing accounts from banks? Do you see individuals migrating from banks at a greater pace than you have historically?
Good, great question. I'm not sure I've got that visibility at this stage to be able to, you know, articulate that. What we really look at, you know, when we measure this, not so much as, hey, are we capturing clients that used to be clients at a bank and bringing them over here. Our internal organic growth efforts are obviously, you know, hey, advisors can win new clients, but it's more about, you know, increasing their share of wallet of their existing clients, right? We tend to find not all of our advisors, but certainly for a subset of our advisors, that they have 20% or 30% of a client's, you know, investable assets. How do we get that to 50 or 60 or 70? We could double our book size just by, you know, affecting that strategy.
It's much easier to increase your share of wallet from an existing client than win a new client, so to speak. If we're supporting our advisors' growth, it's more along those lines, I would argue.
Very good. Thank you.
Yeah. The lines are now.
There are no further questions from the phone line, so I would like to turn the conference back over to Dan Daviau for closing remarks. Please go ahead.
Thank you very much, Operator. I really appreciate it, and I appreciate everyone joining us today on the call again. You know, listen, we've had a remarkable amount of success over the last, you know, six or eight quarters. We continue to perform certainly above expectations. I'm incredibly proud of our team and the team that's executed. We're, you know, for the most part, back in the office and have returned to the office. Culturally, we think that's phenomenal because I think culturally, we've certainly changed this organization. We certainly look forward to the upcoming holiday season and the continuation of reopening in most of our regions. I'd certainly like. I know it's early but let me be the first to extend my best wishes for a safe and happy holidays.
You know, we'll talk to you again in February when we release our third quarter results. Thank you, operator. We can close the lines.
Thank you. Ladies and gentlemen, this does conclude your call for today. We thank you for participating and ask that you please disconnect your lines.