TMX Group Limited

Good morning, ladies and gentlemen, and welcome to the TMX Group Limited Q4 2021 Financial Results Conference Call. At this time, all lines are in listen-only mode. Following the presentation, we will conduct a question-and-answer session. If at any time during this call you require immediate assistance, please press star zero for the operator. This call is being recorded on Tuesday, February 8, 2022. I would now like to turn the conference over to Paul Malcolmson. Please go ahead.

Well, thank you, Operator, and good morning, everyone. I hope that you and all of your families are staying well and safe. Thank you for joining us this morning for the full year and fourth quarter 2021 conference call for TMX Group. As you know, we announced our results late yesterday, and a copy of our press release is available on TMX.com under Investor Relations. This morning, we have with us John McKenzie, our Chief Executive Officer, and David Arnold, our Chief Financial Officer. Following opening remarks, we will have a question and answer session. Before we start, I want to 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 in reports that we have filed with regulatory authorities. And with that, I'd like to turn the call over to John.

Well, thank you, Paul, and good morning, everyone. Thank you for joining us today for our discussion of TMX Group's Q4 and full-year 2021 financial performance. And on behalf of all of us at TMX, I want to wish you the very best of health to everyone listening this morning. Now, as Paul mentioned, we announced our results last night, and shortly, David will take you through the fourth quarter in detail. But first, I'd like to focus my comments this morning on TMX Group's performance for the full year 2021, updating you on the progress we have made in our efforts, both internally and externally, to strengthen TMX's ability to drive success for our clients and to make markets better. And I also want to outline our top priorities as we continue on into 2022. Now, 2021 was a tremendous year for TMX, marked by strong performances and major accomplishments across our business areas, as well as important progress in strategic initiatives. Before I get further into our operating results, I want to acknowledge a common and crucial element in all of TMX's successes, our people. Throughout the year, and in every facet of our business, TMX's team of professionals demonstrated an unwavering commitment to our clients and stakeholders, rising to meet the increased demands, and the day-to-day challenges of a busy market, all while navigating the realities of work and home life during the pandemic conditions. Our business achievements are people achievements. And speaking on behalf of TMX's senior leadership, I want to thank all of our employees for their outstanding efforts. Now, to our results for the full year. TMX generated record revenue of $980.7 million, an increase of 13% from 2020. Our diluted earnings per share agree 22% or 21% on adjusted basis compared to the year end, December 31st, 2020. TMX's impressive performance in 2021 reflects significant contributions from across our business areas, including capital formation, derivatives trading and clearing, and trade port, and stands as powerful evidence of TMX's ability to serve the diverse needs of our dynamic and global client base. Our total operating expenses increased 9% from 2020, and this is largely due to the inclusion of expenses related to AST Canada, including acquisition and integration costs. The year-over-year increase in expenses also reflected higher headcount and payroll costs, including merit increases, as well as higher costs related to our short-term employee performance incentive plan, given the strong operating results for 2021. Now moving to our business areas. Revenue from capital formation was $257.7 million, an increase of 36% from 2020, largely driven by an increase in the number of issuer financings and financing dollars raised on Toronto Stock Exchange and TSX Venture Exchange. It was a record-setting year in terms of deal-making activity and new listings on our equity markets. Our total financing dollars raised by issuers totaled $56.9 billion in 2021, a 33% increase over 2020, and led by continued growth in our largest sectors of technology and mining, with total dollars raised up 70% and 33% respectively. The highlights from 2021 included some new all-time records, including 177 new listings on Toronto Stock Exchange, excluding graduates, a 17% increase from 2020. 36 corporate IPOs on TSX, triple the number from 2020, and sustained momentum in the innovation sector, which includes companies in clean tech, biotech, and renewable energy, with an overall record 110 new listings on TSX and TSX Venture and $23 billion in overall capital raised. Inside the numbers, the face of Canada's equity markets continues to change. Our stock list has never been so diverse, with companies of all sizes and stages of maturity from a broad range of sectors offering compelling opportunity for investors. And the foundation of our market has never been stronger. On TSX Venture Exchange, the world's leading public venture market and the bedrock of our unique ecosystem, issuers raised more than $11 billion in financing across more than 1,800 transactions during 2021. Leading the way in TSX Venture Financing's bisector were innovation and mining, with $3 billion and $6 billion raised respectively. A strong public venture market is a key element of our two-tiered public company ecosystem. and a differentiating feature of Canada's capital markets. These early stage companies across all sectors are amongst the most innovative in the world. And no market in the world does a better job of nurturing and clearing a path to long-term success for small cap growth companies than the Canadian public venture market community. We celebrated 36 graduations from TSX Venture to TSX during 2021, the most since 2011. Since 2000, more than 700 companies have graduated from TSX Venture to Toronto Stock Exchange, and these Canadian-grown success stories make up 21% of today's benchmark S&P TSX Composite Index. TMX continues to expand the reach and raise the profile of our markets beyond our borders and through our targeted business development program. On a combined basis, TSX and TSX Venture rank third amongst our global exchange peers by the number of new international listings in 2021. We welcomed 49 new issuers from the United States and other regions of TMX focus, like Israel, Australia, and South America. These companies operate in a variety of sectors, including technology, mining, life sciences, and renewable energy. And the addition of new listings from large cap companies and big name IPOs to early stage juniors and capital pool companies builds our markets stronger and deeper and enhances our value proposition among global investors. Canada's markets are among the best in the world. They are deep and diverse. They are fair and liquid, innovative and responsive. But our markets are not static and must continue to evolve. And TMX is committed to working in collaboration with our clients and stakeholders to innovate and adapt our offerings to make markets better and ensure we retain our competitive edge into the future. Now, turning to derivatives. Revenue from trading and clearing was $142.5 million, up 13% from 2020, driven by a 14% increase in revenue from Montreal Exchange and CDCC. 2021 was a year of significant growth for Canadian derivative markets. Total volumes on MX increased 29% compared to 2020, highlighted by strong performances in some of our signature Canadian benchmark products, including the BAX contract, where volume grew 21% year over year. We also saw a significant growth in investor interest in some of our developing product areas, with volumes in single share futures up 91% and equity options up 35% from 2020. MX continues to adapt its suite of products to meet investor demand. In November 2021, we launched the 30-year Government of Canada Bond Futures Contract, adding another liquidity point to our futures curve by complementing the two, five, and 10-year contracts. The new 30-year contract is designed to facilitate hedging from longer maturity instruments and to create more cross-market trade opportunities. And in keeping with the cross-market theme, Amex took a major step forward in its global expansion plans with the September launch of extended trading hours to sync with the Asia Pacific time zone. An initiative that began in 2018 with trading on London time, extended trading hours on Montreal Exchange, directly connects us to the world's premier financial centers enabling sophisticated, modern investors in all time zones to trade Canada on their time. The initial response to Asia-Pacific hours has been very positive. Despite the challenges the pandemic poses in terms of business development halfway across the world, and our daily volumes during the new session have averaged approximately 6,000 contracts in the opening months. And combined, Amex's European and Asia-Pacific extended hours sessions accounted for approximately 6% of total MX volumes traded during 2021. Looking ahead to next year, in response to growing demand for risk management products in the crypto space, MX is working towards introducing a cash-settled future product designed to enable investors to hedge cryptocurrency investments. And our team continues to examine ways that we can enhance the overall MX client experience and augment our market-making program to attract more retail trading. Now, moving on to trade points. We are pleased to report double digit growth during the year with revenue of 150.6 million, a 10% increase compared to 2020. Growth was driven by a 7% increase in average number of total subscribers and also included 2.1 million in trade signal revenue from the acquisition in June. Over the past weeks and months, volatility has again gripped global energy markets. Natural gas supply shortages in Europe and parts of Asia coupled with increased demand as economies build back towards pre-pandemic levels of activity, have driven energy prices to record highs. And Tradeport's tailored product plays an important role in energy markets, especially in uncertain conditions, equipping clients with data and analytics capabilities to make informed trading decisions. Our network offers a key access point, connecting traders, portfolio managers, and analysts to over 40 execution venues, across power and natural gas markets. In response to rapidly evolving global energy markets and the ongoing transition to renewables gathering momentum, Traport continues to explore opportunities to diversify its client offering and expand into new asset classes and geographies. In addition to a stellar year from a performance perspective, 2021 was also a very important year for TMX in terms of progress made in our four strategic priority areas. Accelerating growth. across the enterprise and our business areas. Enhancing our talent and culture by investing in our people and our purpose to make markets better and empower bold ideas. Activating TMX as a vocal proponent to advocate for smart policy measures to ensure Canada's markets maintain our competitive edge. And integrating environmental and social governance and sustainability objectives and initiatives into TMX's corporate and business objectives and priorities. As discussed on our Q3 call, we appointed Michelle Tran, a respected TMX veteran with deep connections across our client community as the new president of TMX Data Links. And just two weeks ago, we once again tapped into the depth of expertise and wealth of experience with the organization to point Tim Babcock as the new vice president and head of TSX Venture Exchange. Tim has more than 20 years of experience with TSX Venture. His knowledge and expertise in regards to all aspects of the business and community coupled with his leadership skills, positioned him and the TSX Venture franchise for ongoing success. It continues to be an exciting time for TMX. Filling these roles and others from inside our organization demonstrates our commitment to nurturing talent and developing exceptional leaders. And it stands as compelling evidence that we are on the right track in establishing a high-performance working culture. Now, in addition to our Q4 financial results last night, we were very pleased to announce an 8% dividend increase, from 77 cents to 83 cents per share, payable on March 11th, 2022 to shareholders of record at the close of business on February 25th, 2022. This is the fifth increase in TMX Group's dividend in three years and demonstrates our proven ability to generate increasing cash flows over time and over different market conditions. We remain committed to executing an effective long-term growth strategy, serving stakeholders in our markets across the world with excellence throughout all market conditions and continuing to deliver value to our shareholders. And with that, let me turn the call over to David.