TMX Group Limited

Good morning, ladies and gentlemen, and welcome to the TMX Group Limited Third Quarter 2024 Financial Results Conference Call. At this time, all lines are in a listen-only mode. Following the presentation, we will conduct a question-and-answer session. If anyone has any difficulties hearing the conference, please press star zero for operator assistance at any time. I would now like to turn the conference over to Amin Masabian, VP of Investor Relations and Treasury. Please go ahead.

Merci, Jenny. Bonjour à tous. Good morning, everyone. We joined you from our Montreal office this morning to discuss the 2024 third quarter results for TMX Group. We announced our results for another outstanding quarter late yesterday, and copies of our press release and MD&A are 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 the opening remarks, we'll have a question and answer session. Before we begin, let's cover our forward-looking legal disclosure. Certain statements made during this call may relate to future events and expectations and constitute forward-looking information within the meaning of the Canadian Securities Law. Actual results may differ materially from these expectations, and additional information is contained in our press release and periodic reports that we have filed with the regulatory authorities. Now I will turn the call over to John.

Well, thanks, Amin, and good morning, everyone. Thanks for joining the call today, and it's a pleasure to be here in Montreal, where last night we had the pleasure of joining with colleagues and celebrating 150 years of the Montreal Exchange. Bonjour tout le monde et merci de vous joindre à l'appel d'aujourd'hui. C'est un plaisir d'être ici à notre bureau de Montréal. And a happy Halloween to everyone as well listening to you and your families. Our promise to you today is all treats in the call, no tricks. So, as disclosed in last night's press release and the financial statements, TMX did deliver excellent results for the third quarter, featuring strong performances across the enterprise in both traditional business areas as well as in our newer growth areas. and in both domestic and global marketplaces. Our success in the quarter and sustained momentum during the first nine months of 2024 showcases TMX's core winning traits, a diverse and dynamic business model made up of complimentary businesses, a strong balance sheet supporting our growth aspirations, a track record of strategic execution, and leading edge technology with the unwavering commitment of TMX's people here in Montreal, across the country, and around the world, to serving our growing client base with excellence and purpose. Now, at our Investor Day in June, we identified four priority areas to leverage the foundational strength of our core business to accelerate growth beyond the fundamental concepts of listing, trading, and market data, and to reach beyond Canadians' mortars. And before I turn to TMX's year-to-date performance, I want to highlight two recent investments we have made to help build on our position of strength well into the future, to move beyond the core in global solutions, insights, analytics, and in capital formation. Now, as you know, earlier last year, prior to the acquisition, we made an initial investment in Vetify, which included a commercial agreement. It became pretty clear over a relatively short period of time working together that the TMX DataLinks-Vetify partnership has the potential to turbocharge our GSIA growth strategy and to bring new, exciting, and adaptive solutions to better serve the ETF community, a key segment of our client base. Now, TeamX Vetify, the team's commitment to seeking out competitive advantages for clients across the index and ETF ecosystem, and determined and propulsive growth mindset has proven to be a tremendous fit. Since the founding of the company three years ago, Vetify has focused on seizing the strategic opportunities to augment their suite of client offerings and expand the global footprint. And earlier this month, TMX Vetify acquired Index Research, an end-to-end index provider that designs and manages indices with more than $10 billion in linked assets under management across both equities and fixed income markets. It's the third suite acquired in the past 18 months, following the 2023 acquisitions of Robo Global and the EQM indices. And the acquisition of Index Research fits squarely within TMX's long-term strategy and transformational growth objectives to expand internationally and bolster our GSIA segment. And importantly, index research brings new operational and client service capabilities focused on the EMEA region to TMX Vetify plus a talented team of professionals. And we're always looking for ways where we can strengthen our value proposition. Our purpose is to make markets better and empower bold ideas. And be a part of that living purpose is to strive every day to make the overall client experience better across the enterprise. And this shows up in capital formation. where we're building on our non-listing business or beyond listing business, exploring solutions to better serve our almost 3,500 issuers on TSX and TSX Venture, as well as the thousands of private companies beyond our immediate ecosystem. Our non-listing business, which includes TSX Trust, generated over $100 million in 2023 and represented over 40% of the total cap form revenue in the first nine months of 2024. In August, we further expanded our offering with the acquisition of NewsFile, a leading news dissemination and regulatory filing provider. NewsFile provides client companies with an integrated, efficient way to meet certain disclosure requirements, including newswire distribution and multi-jurisdictional filing solutions. And for those of you who received our press release last night, you will see now that we are also a client. The addition of NewsFile expands our public and private company solutions offering and advances our competitive position in a key growth area. NewsFile served 2,500 clients globally in 2023, and nearly half that number were private companies. They have a stellar reputation for service excellence, a client-first mindset, and a history of innovation, plus room to grow. And so I'd like to extend a very warm TMX welcome to our newest team members from Index Research and NewsFile. Now, turning out of the results for the first nine months of 2024, our overall revenue increased 20%, including 101 million from TMX Vetify and reflecting year-over-year revenue growth from TMX TradePort, derivatives trading and clearing, and equities and fixed income trading and clearing, with gains partially offset by lower revenue from capital formation. Organic revenue, excluding TMX Vetify News File, increased 8%, and diluted earnings per share on an adjusted basis increased 10% for the first nine months of 2023. Total operating expenses increased compared to the same period last year, reflecting the inclusion of TMX Vetify expenses, and David will take a closer look at expenses later on with his remarks to follow. Now, moving to our business areas. Revenue from GSIA increased 43% for the first nine months of 2023, or 10% excluding TMX Zettify. TMX Zettify's revenue was 18% higher in U.S. dollars compared to the same period last year prior to acquisition. And TMX Zettify growth has been primarily driven by higher indexing revenue, reflecting organic growth in assets under management, revenue from the 2023 acquisitions of Robo Global and EQM Indices, and higher revenue related to events, including February's Exchange Conference. The TMX-Vetify integration is largely complete, and the most significant of the remaining projects, combining our New Year offices to centralize our TMX-US operations, is well underway. Now, staying with GSIA, TMX-Trayport has been the driving force for enterprise growth in 2024. Revenue increased 20% compared with the first nine months of last year, or 16% in pound sterling, driven by a 25% increase in total licensees, annual price adjustments, and higher revenue from data products. The strength of TMX's Tradeport network continues to grow, serving a vital role in linking participants to execution venues and clearinghouses across global energy markets. We have more than 9,500 licensees, or end-user applications, and over 26,000 network connections. and a participant demand for data analytics to support their strategies continues to grow. Today, TMX Tradeport offers clients a suite of adaptive, customized tools, insights, and analytic capabilities. And data and analytics represents 11% of its overall revenue. Now looking beyond the core, TMX Tradeport is pursuing global opportunities to replicate the success of our network and leverage our expertise in new geographies and asset classes. including climate markets and power markets in North America and Japan. I'd like to turn to capital formation. Revenue here was 2% lower compared to the first nine months of 2023, reflecting lower revenue from additional listing fees due to prevailing challenging conditions in the marketplace. At Investor Day, we outlined our strategic growth plans for listings and beyond. Our year-to-date performance illustrates that Toronto Stock Exchange and TSX VentureChange Our powerful two-tiered growth engine for helping small companies become big success stories is a story that reads IPOs and beyond. While macro factors continue to negatively impact capital raising conditions and weigh ongoing public activity, our Cap Forum team is always focused on building our ecosystem stronger by attracting new cross-listings from international markets and seeking out graduate prospects from other Canadian markets. Recent success stories include the TSX listing of Westgold Resources in August. Westgold is an ASX-listed Australian gold producer who joined our ecosystem to gain direct access to North American investors. The company came to the TMX Market Center in Toronto to take part in our market open ceremony, and to mark the occasion, the CEO put it really well when asked why they sought out a listing in Toronto as well as their home market in Australia. And I quote, this is the best of both worlds. Both of these markets love gold and understand it. That's a powerful testament to the reputation our equity markets have earned all around the world, and particularly in the resource sector. We now have more than 225 international companies on TSX and TSX Venture, including 62 foreign-based dual listings. Our competitive edge remains as sharp as ever domestically as well, as we work to attract companies that meet our listing standards from other Canadian marketplaces. Recent wins of these include big digital assets and international battery metals, who graduated to the TSX Venture Exchange in September and October respectively. And over the past five years, more than $14 billion in market cap has entered our ecosystem from other Canadian markets. And Toronto Stock Exchange's ETF franchise continues to flourish. We've welcomed over 100 new ETFs to the market this year alone, an increase of more than 25% from 2023 and from 25 different providers. On October 1st, JPMorgan Asset Management, the world's second largest active ETF provider by Asset Center Management, launched its first Canadian ETFs with two new active ETFs listed on TSX. And just last week, Capital Group Canada launched its first suite of active ETS on TSX, including two equity and two fixed income strategies. Now, turning to our derivative markets, we continue to see impressive growth here. Trading and clearing revenue, excluding box, increased 13% year-over-year. These increases included 6% higher revenue from MX due to 12% higher overall volumes and highlighted by strong activity in interest rate derivatives, Revenue from CDCC increased 25% as a result of larger repo volumes and overall higher clearing revenues. Some key MX highlights for the first nine months of 2024 included double-digit year-over-year volume growth in interest rate products, ETF options, single-share futures, and our two, five, and 10-year Government of Canada bond futures. Overall interest rates remained strong as of September 30th, 23% higher compared to the same date last year. Sorry, overall open interest remains strong. Revenue from equities and fixed income trading and clearing was also up 8%, higher than the first nine months of 2023, driven by higher volumes on our equity markets and a favorable product mix. Now, at the beginning of my remarks this morning, I mentioned the two TMX recent investments, the acquisitions of Index Research and News File. with a strategic focus on building our success, looking beyond the scope of our traditional businesses. I want to bookend my comments this morning with reference to two more initiatives we are working towards, set for launch in 2025, in both trading and clearing. Our trading team has been focused on enhancing execution quality for our clients, particularly for the institutional buy side. We launched AlphaX late last year here in Canada. and we have more than 40 participants now sending orders every week with a couple of large liquidity providers consuming data and working on Alpha X specific strategies. Not surprising, similar client needs exist beyond our borders and actually below Canada's borders in the largest market in the world. And we continue to make excellent progress with our plans to develop a U.S. equity trading initiative aimed at improving execution quality for buy-side clients. The response from participants thus far has been very positive, and we have started to execute our agreements. We are set to launch early in the new year to ensure industry readiness as we work to complete client testing and secure our regulatory approvals. Another important initiative on track for 2025 launch is our modernization of the CDS clearing platform, which includes the replacement of certain legacy systems related to clearing and settlement, as well as the entitlement payment systems. Following the successful transition to T plus one in May of this year, the majority of participants resumed testing in the third quarter and we are near completion and we expect to go live near the end of Q1 of 2025. We're grateful for the partnership of our industry stakeholders in helping to advance this complex modernization project. The initiative isn't merely to keep pace with our global peers. It will bring new leading edge solutions to Canadian marketplaces designed to create efficiencies and competitive advantages for our clients. The new platform will serve as a substantial foundation to upgrade and to help power existing initiatives, including the recent launches of the Canadian Collateral Management Service and SGC Notes, both which we launched earlier this year, and will facilitate additional global investment in Canada via future projects. In closing, as always, I'd like to thank the TMX employees all around the world for their continued and outstanding contributions to our success. and that steadfast commitment to making markets better and empowering bold ideas. We are working together to build on TMX's proud history, to advance on a proven track record of growth and innovation, strategic execution, and leadership throughout all market conditions. And I am most excited for what will come next. With that, let me pass the call over to David.