TMX Group Limited

Ladies and gentlemen, thank you for standing by, and welcome to the TMX Group Inc. First Quarter 2020 Financial Results Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1 on your telephone. We ask that you limit yourself to one question and re-queue for any additional questions. Please be advised that today's conference is being recorded. If you require any further assistance, please press star zero. I would now like to hand the conference over to your speaker today, Julie Park, Manager, Investor Relations, TMX Group. Please go ahead.

Thank you, Operator, and good morning, everyone. Thank you for joining us this morning for the first quarter 2020 conference call for TMX Group. As you know, we announced your results late yesterday, and a copy of our press release is available on TMF.com under investor relations. Today, we are all joining virtually from our homes and have with us John McKenzie, our interim chief executive officer and chief financial officer, and Paul Malkinson, managing director of investor relations. Following opening remarks, we will have a question and answer session. Before we begin, I would remind you that certain statements made on today's call may be considered forward-looking. I refer you to the risk factors contained in our press release and reports that we have filed with regulatory authorities. And with that, I will turn the call over to John.

Well, thank you, Julie, and good morning, everyone, and thanks for dialing into the call this morning. I want to start by wishing everyone the very best who's listening today and hope that you and your families are staying healthy and safe. As Julie mentioned, we are virtually here this morning to discuss TMX's group's financial performance for the first quarter of 2020. And although this date has been long marked on our calendar, for TMX and for everyone joining us this morning, almost nothing about these last few weeks will be characterized as business as usual, as the COVID-19 pandemic has drastically changed the world in which we live and work. And before we get into the details of our results this morning, on behalf of all of us at TMX, I want to send a message of hope and strength to all of those listening to the call today whose family has been affected by this terrible virus. Our thoughts are with you. I also want to sincerely thank all of the healthcare workers, first responders, and others providing essential services across our communities here in Canada and around the world. And while we humbly salute those on the front lines, the fact is that even from our homes and remote workspaces, we all play a role in the fight against COVID-19. The response from our capital markets community to this unprecedented crisis has been impressive. TMX applauds the efforts of our stakeholders, including listed issuers, as well as our trading and clearing participants, to help our communities cope from manufacturing of safety products for healthcare workers to generously donating funds and volunteering time to support agencies. From a broader economic standpoint, while the impacts of COVID-19 pandemic will be deeply felt for some time, the resiliency of Canada's financial industry is something to be proud of. and bodes well for the future measures to reopen the country and reinvigorate the economy taking shape. TMX is firm, and as clear-eyed as ever, in our commitment to fulfill our core mission in operating Canada's capital markets. We feel strongly that it is both in the public interest and in the best interest of all of our stakeholders that at all times, and especially in times of crisis, markets must remain open and available. Our markets are functioning well and doing what they were designed to do, provide investors with liquidity, and ensure issuers have a world-class venue to raise capital. And while much of the economy has been put on hold, we are not at all in a complete standstill. Businesses of all sizes across the country are up and running and working as hard as ever to adapt to the realities of an evolving operating landscape while preparing for a future that has yet to be clearly defined. And as the broader recovery begins to take shape, TMX remains a steadfast partner and helping to ensure that the future for our entire market ecosystem is as bright as possible. Now, let me turn to our first quarter performance. TMX achieved strong financial results compared to Q1 of 2019, reflecting the extreme volatility and a surge in activity as markets reacted to the COVID-19 pandemic. Our revenue was $220 million, a 12% increase over Q1 2019. Earnings per share was $1.24 on a diluted basis, up 14%, and $1.53 on adjusted basis, an 18% increase from Q1-19. And cash flows from operating activities were $79 million, reflecting a 50% increase compared to Q1 of last year. The increase in revenue was somewhat offset by a small increase in operating costs in the quarter. Trading statistics for Q1, and particularly for the month of March, indicated a degree of turbulence across the marketplace. Volume traded on Toronto Stock Exchange in the first quarter was up 36% over last year, and March TSX volumes more than doubled in comparison to March of 2019. Across all of our equity markets, trading volumes were up 24% in the quarter, 73% in March compared to last year. And on Montreal Exchange, overall derivatives volume traded in Q1 2020 was up 27% compared with Q1 of 2019. with a 33% increase during the month of March compared with last year. In a quarter marked by unprecedented events, we did see some consistency in terms of the impact marketplace trends have on other areas of our balanced business model. High volatility had a negative impact on capital raising conditions in Q1 compared to Q1 of last year. Additional financing activity on the Toronto Stock Exchange decreased compared with Q1 of 2019. particularly the number of larger transactions as issuers chose to avoid unpredictable and severe swings in the market. As a result, revenue from our capital formation business was down 1.7 million, or 4% year over year, somewhat offsetting the increase in the overall revenue in the quarter. As the world begins to emerge from the initial phase of the COVID-19 pandemic and contemplates the next important steps to recovery, the future is harder to predict than ever. but I want to ensure all of our stakeholders that even as the company has taken necessary measures to adapt how we work in the new business world, TMX's roadmap for growth remains in place. Our comprehensive digital capabilities have enabled us to keep markets running and allowed us to stay connected to our clients despite physical dislocation. All of our trading platforms and the vast majority of our client offerings and processes are fully electronic. And as we surveyed the still evolving and uncertain business landscape, Timeline-specific initiatives may require some tweaking, but TMX's corporate strategy and competitive value proposition fundamental to our success has not changed. TMX remains focused on executing our comprehensive and cohesive long-term global strategy centered around our growth champions, capital formation, derivatives, and trade port. In the capital formation business, while capital may remain on the sidelines to some degree over the near term, We continue to target specific regions where TMX's unique ecosystem and sectoral expertise give us a competitive edge. By necessity, our immediate focus is on supporting this crucial and core element of our business. History has shown public markets fuel progress, and we are confident that public markets will again play a leading role in the economy finding its feet. The capital formation process is critical in the funding of entrepreneurship and innovation while creating jobs for Canadians and fueling economic growth. Over the past two months, TMX has undertaken various issuer support initiatives, including relief measures and successful government policy advocacy campaign, and we continue to work together with all listed companies and all of our stakeholders to weather the COVID-19 crisis and lay the groundwork for future success. Perhaps now more than ever, sustainability is a priority topic for all companies. With an eye on helping issuers meet evolving investor standards and build their company stronger and more resilient into the future, we launched ESG 101 in March. This new centralized hub features resources designed to help TSX and TSX Venture issuers understand the fundamentals of environmental, social, and governance, or ESG reporting. Over the last few years, ESG factors have become priority criteria for investors and asset owners and sustainability practices have become increasingly important considerations for companies across all sectors. And we are proud to announce today that TMX has reached a new milestone in our own ESG reporting. The inaugural TMX Group Environmental, Social, and Governance Report will be made available shortly on our website. The goal of this report is to inform all of our stakeholders of our progress of incorporating ESG matters into the TMX Group's corporate strategy process and operations. It's an important first step for TMX, and we look forward to hearing your feedback. Now, to turn to our derivatives business. Our team is moving forward on our strategy to capitalize on the growing global demand, particularly on the buy side, for derivative products by expanding MX's presence in foreign markets. Initiatives previously announced remain on track at this point, including the launch of a new Canadian overnight repo rate average, or CORA, future product, planned for mid-June, and the next phase of MX's extended hours initiative to sync with markets in Asia, scheduled for 2021. And on to trade port. Revenue from the core subscriber business, including Visotech, was up 16% in sterling over Q1 2019, with a 10% increase in trader subscribers and an 8% increase in total subscribers. Activity in the signature European and Asian benchmark LNG contracts was strong in the first quarter, Volumes in the TTF contract increased 44% in the first quarter of 2020 compared with the same period in 2019. And record average daily volumes were reported for the JKM contract in recent months. The increase in volumes in these markets results in the expansion of the market participants, which drives growth in the number of subscribers connecting with Tradeport to these products. The trend of algorithmic power trade in Europe intraday markets continues to grow. And in the first quarter, intraday volumes on the EPEX spot grew by 37% over the same period in 2019. In closing, I want to share a quick observation and pass along one more very important thank you. For TMX, as for many of our issuers, early May is typically a very busy time, both operationally and for our corporate reporting functions. I can tell you from personal experience, the escalating pace of work during the day is leading up to results is a familiar and near-tangible element of a public company's reporting process. Suffice to say, the Q1 2020 reporting has been a very different experience. The buzz around the office has been replaced by a new virtual working reality, and over 95% of all TMX employees are working from home and have been for almost two months now. At the outset of this pandemic, necessary precautions were taken to protect our critical operations staff, and they have been on-site as needed. On behalf of our senior leadership team, I want to thank TMX employees for their perseverance, adaptability, and above all, exemplary dedication to the company throughout these last two months. Your consistent focus on maintaining continuity and service excellence to our clients across the marketplace is most appreciated. And while we are fortunate to be able to do our jobs remotely and maintain high operational standards, we look forward to the days ahead. when the office is once again abuzz and we can enjoy face-to-face interactions with our coworkers and our friends. In closing, I want to emphasize that as its recovery measures begin to take shape, TMX remains firmly focused on serving clients across all of our markets with excellence and executing against our global growth strategy. And with that, I will turn the call over to Paul, who will provide further color on our first quarter results. Thank you.