The Tel-Aviv Stock Exchange Ltd.

Ladies and gentlemen, thank you for standing by. Welcome to the Tel Aviv Stock Exchange Q2 2024 results conference call. All participants are present in a listen-only mode. Following management's presentation, instructions will be given for the question and answer session. For operator assistance during the conference, please press star zero. As a reminder, this conference is being recorded August 7, 2024. The recording will be publicly available on TAZE's website. With us on the line today are Mr. Itay Ben-Zaev, CEO, and Mr. Yehuda Ben Ezra, CFO. Before I turn the call over to Mr. Itay Ben-Zaev, I would like to remind everyone that this conference is not a substitute for reviewing the company's annual financial statements, quarterly financial statements, and the interim report of the second quarter of 2024. in which full and precise information is presented and may contain inter alia forward-looking statements in accordance to Section 32A to Securities Law 1968. In addition to IFRS reporting, we might mention certain financial measures that do not conform to generally accepted accounting principles. Such non-GAAP measures are not intended in any manner to serve as substitute for our financial results. However, we believe that they provide additional insight for better understanding of our business performance. Reconciliations between these non-GAAP measures and the most comparable related GAAP measures are included in the tables that can be found in our earnings press release and in the slide presentation accompanying this call. Both can be accessed on the English Maya site and in the investor relations portion of our website at ir.taize.co.il. Mr. Ben-Zaev, would you like to begin?

Good evening, Israel Time, everyone, and thank you for joining us today. I'm happy to host you in our earnings call. We conclude Q2 2024 with strong performance in all TAIZ core activities and further organic growth. with this all being against the backdrop of the October 7 war. We have witnessed significant growth in our quarterly revenues, which are up 13% on the same quarter last year and a 29% increase in adjusted EBITDA. Our EBITDA margin rose to 44% and adjusted net profit also increased. Yuda Ben Ezra, our CFO, will discuss the financial statements in detail later in this call. Despite the country still being in the midst of the war, the TA 125 index rose by 3.5% in H1 2024, similar to the 3.8% increase in the Dow Jones index and compared to the 14.5 jump in the S&P 500. A rise in prices was also evident in most sectoral indices, particularly the TA Retail Index that rose by 13 percent and the high-tech company indices, the TA Technology Index and the TA Global Blue Tech Index, which rose by 10 percent and 9 percent, respectively. compared to the NASDAQ 100 index, which rose by 17% during the same period. The equity market cap at the end of the H1 2024 was 1,087 billion shekels, 3% higher than the market cap at the end of 2023, with this resulting from the rise in the TACE equities indices. Compared to 2023, H1 2024 trading volumes in the main trading channels increased significantly. Trading volumes in equities were 8% higher than the average daily trading volume for all of 2023, an average 2.1 billion shekels a day. Trading on the bond market averaged a daily volume or 4.5 billion shekels, 15% more than in 2023. The rise in trading volumes stemmed mainly from government shekel bonds, where the average trading volume amounted to 2.3 billion shekels compared to an average of 1.9 billion shekels in 2023. The average daily volume in corporate bonds reached 1.2 billion shekels a 14% increase compared to 2023. CPI-linked government bonds also recorded greater trading volume with a daily average of 1 billion shekels, 1% higher than the average daily volume in 2023. The average daily volume in corporate bonds reached 1.1 billion shekels, a 12% increase compared to 2023. Trading volumes in Israel government T-bills were also higher, averaging 1.7 billion shekels daily, 19 percent more than the average daily volume in 2023. In the mutual fund market, the average daily turnover of creation and redemption rose to 1.8 billion shekels, 28 percent higher than the average turnover in 2023. The market cap of the mutual fund at the end of H1 2024 was 375 billion shekels, 14% higher than the market cap at the end of 2023, with this resulting from acquisition of mutual funds and an increase in the value of the fund's assets on TAFE. During H1 2024, three companies completed an IPO on taste compared to just one IPO in all of 2023. In light of the ongoing October 7 war and the increase in the cumulative deficit, the Ministry of Finance continued to raise debt in Q2 2024 too and issued bonds totaling 124.4 billion shekels in the whole of the first half of 2024, compared to 76.7 billion shekels in the second half of 2023. 95.7 billion shekels of the total issuance were raised on TAFE. We continue to work on implementing the strategic plan to strengthen international activity. As I noted in our last conference call, we published for the first time in cooperation with the Israel Securities Authority and the Bank of Israel a call for public comments in relation to the transition to trading on Friday, as is the standard throughout the world. We received very positive feedback from investors in Israel and abroad, and we are currently examining all the responses received in order to reach the most fitting solution, both for international investors and for the Israeli capital market. We believe that aligning our trading days with the rest of the world will help to increase accessibility for international investors and to increase their presence in the Israeli market. It is worth noting here the fruitful cooperation we have with the regulators who are working with us to promote the Israeli capital market, particularly at this time and under the current circumstances. I'm pleased to be able to report that the Ministerial Committee for Legislation approved the securitization law in mid-July, which will allow securitization transactions to be conducted in Israel for the first time similar to the customary global standards. The measure is still expected to be passed by the Knesset, and we hope to be able to see this market's development during 2025. What's more, the Israel Securities Authority recently approved the launch of new fixed-date money market funds that will guarantee the public a return in advance. with this being in parallel with the already existing money market funds. This development will enlarge the range of investment products intended for the Israeli public. In addition, we continue working to introduce the number of new brokerage members in the Israeli capital market. And in this context, I would like to note that at the end of May, Al Shuler Shacham Trade began to operate as a member of TAFE and as a member of the TAFE Clearinghouse. We are continuing to invest and develop the exclusive indices market, and in June we launched new indices for the first time with Kesem, the largest ETF company in Israel. We continue to develop new indices so as to increase the range of products intended for the general public And in mid-July, we announced an additional launch of six new equity and bond indices, some of which are intended to further taste cooperation with the various manufacturers. We will carry on investing and working to a larger product range as part of our strategic plan to enhance and develop the Israeli capital market, as well as to expand our cooperation in developing and marketing unique indices for specific customers. In conclusion, the Q2 financial statement shows that even during this time of war, we are witnessing the importance and resilience of taste within the Israeli economy. We intend to continue working toward growing taste and making it more accessible to the world to keep on investing in infrastructure and technological developments for new products, and to carry on striving to work to achieve the goals we have set for ourselves in accordance with our strategic plan for the coming years. And now, I would like to hand over to Mr. Yehuda Ben Ezra, who will continue with a review of the Q2 results.

Thank you, Ultari. As Itay mentioned earlier, despite the complex situation in Israel, CES has again posted strong financial results for Q2 2024. Some of the main financial metrics are shown in slide number four. Our revenues for the quarter amounted to 105.1 million shekels, increasing by a record certain percent compared to the corresponding quarter last year. Adjusted EBITDA soared by 29% to a total of 45.8 million shekels, while the adjusted EBITDA margin also improved significantly from 38.3 to 43.6%. Our adjusted net profit experience substantial growth of 26% and increased to 25.7 million shekels. I will continue with slide number 10, which shows some of the key highlights for our results for the first half of 2024. In the first half of 2024, we continued to post strong financial results. Total revenue amounted to 213.4 million shekels, an 11% increase compared to the corresponding period last year. Adjusted EBITDA totaled 29.4 million shekels, representing a 19% increase over the corresponding period last year. The adjusted EBITDA margin significantly improved to 44.2% compared to 41% in the corresponding period last year. Adjusted net profit totaled 53.5 million shekels compared to 46.5 million shekels in the corresponding period last year, a significant increase of 15%. I will continue with slide number six, which shows some of the key highlights from our results. For the second quarter, revenue amounted to 105.1 million shekels compared to 92.9 million shekels. The corresponding quarter last year, a 30% increase, which was evident across all operations. Our revenue from non-production services increased by 1% to 63% of the total revenues. Adjusted expenses totaled 73.4 million shekels. compared to 70.9 million shekels in the corresponding quarters last year. A 3% increase. The increase in expenses is due mainly to employee benefit expenses and to computer and communication expenses. Adjusted EBITDA total, 45.8 million shekels, compared to 35.6 million shekels in the corresponding quarter last year. An increase of 29%. The increase is due to higher revenues. The adjusted dividend margin improved and rose to 43.6% compared to 38.3% the corresponding quarter last year. Financing income totaled 2 million shekels compared to financing income of 3.6 million shekels in the corresponding quarter last year, a 45% decrease, a decrease due mainly to financing expenses in connection with the bank loan taken at the end of 2023. Adjusted net profit amounted to 25.7 million shekels compared to 20.4 billion shekels in the corresponding quarter last year, 26% increase. The increase is due mainly to higher revenue from services, less the increase in cost and in tax expenses. Now let's go to slide number seven, where we can take a deeper look at the composition of our revenue in Q2 2024. Revenues from trading and clearing commissions increased by 9% compared to the corresponding quarter last year, a total of 38.8 million shekels. The increase is mainly due to an increase in the volume of mutual fund units and an increase in the trading volume of TBs, which were offset by the lower number of trading days in quarter, a reduction in the effective commission rate. Revenue for listing fees and annual levies increased by 8%, compared to the corresponding quarter last year, and total 21.7 million shekels. 5% of the increase arose from annual leases, while an additional 3% is for higher listing fees revenues. Revenues from clearinghouse services increased by 17% compared to the corresponding quarter last year, and total 21.5 million shekels. 6% of the increase is due to an increase in revenue from clearinghouse services to companies and funds, While a further 4% of the increase is due to clearing out services to members, the remaining 3% of the increase is due to the rise in the value of the asset health and the custodianship. Revenue from data distribution connectivity services increased by 27% compared to the corresponding quarter last year, a total 22.1 million shekels. 19% of the increase was due to updating the index usage price list, while a further 5% of the increase resulted from higher revenues from data distribution, business, and private customers. The remaining 2% of the increase is due to higher revenues from connectivity services. I would like now to discuss our Q2 2024 expenses, so please refer to slide number nine. Employee benefit expenses increased by 6% compared to the corresponding quarter last year, a total of 39.3 million shekels. The increase in these expenses is due mainly to an increase in variable compensation and the non-utilization of vacation days. Computer communication expenses increased by 17% and totaled 10.5 million shekels. The increase is due mainly to additional expenses with respect to the license and maintenance of new systems and to an increase in manpower and projects. Marketing expenses. Decreased by 73% compared to the corresponding quarter last year, in total 0.7 million shekels. The expenses in the quarter include the cost of new campaign launched at the end of the quarter, as compared to the campaign launched in the corresponding quarter last year. Depreciation and amortization expenses increased by 8% compared to the corresponding quarter last year, in total 14.1 million shekels. The increase is due mainly to the upgrading of infrastructure and the launch of new products. Financing income totaled 2 million shekels compared to financing income of 3.6 million shekels in the corresponding quarter last year. Although our financing income for Q2 2024 increased due to interest income on deposits, our financing expenses increased as a result of bank loan taken at the end of 2023. Taken together, this resulted in decrease in the net financing income. I would like now to review our financial position highlights at the end of Q2 2024, as shown in slide number 14. Our equity totaled 659 million shekels and comprised 70% of the balance sheet, including open derivatives position, balance, and total deferred income from listing fees. We had 479 million shekels in cash and investment financial assets. The balance of bank loan totaled 124.9 million shekels. The surplus equity of regulatory requirement at the end of Q2 2024 totaled 569 million shekels, compared to 318 million shekels at the end of 2023. The increase in surplus equity is almost entirely due to the 242 million shekels in the proceeds received from the self-dearrangement shares. The consideration received by TESS was carried directly to equity, and it is being invested in TESS technological infrastructure. The surplus liquidity over the regulatory requirement at the end of Q2 2024 totaled 115 million shekels, compared to 145 million shekels at the end of 2023. I would like now to go to slide number 15 to review our cash flow highlight in Q2 2024. Cash flow for financing activities resulted in negative cash flow of 14.8 million shekels, compared to negative cash flow of 104.4 million shekels in the corresponding quarter last year. The decrease in negative cash flow is due mainly to payment for the acquisition of treasury shares in the corresponding quarter last year. Cash flow from investing activities resulted in negative cash flow of 9.5 million shekels compared to negative cash flow of 12 million shekels in the corresponding quarter last year. The decrease is due mainly to the lower investment in property and equipment. Death-free cash flow in the second quarter was similar to those in the corresponding quarter last year in total, 17.9 million shekels. And with that, I will return the call to our moderator to conduct the Q&A.