TMX Group Limited

Good morning, ladies and gentlemen, and welcome to the TMX Group Limited Q4 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 at any time during this call you require immediate assistance, please press the star zero for the operator. This call is being recorded on Tuesday, February 4, 2025. I would now like to turn the conference over to Amin Musabian, Vice President of Investor Relations and Treasury. Please go ahead.

Thank you, and good morning, everyone. Thanks for joining us today and taking time away from economic and tariff updates this morning to discuss the 2024 fourth quarter results for TMX Group. We announced our results for yet another outstanding quarter 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.

Thanks, Amin, and good morning, everyone. Thank you all for joining our call today. And as disclosed in last night's Q4 press release and annual financial statements, and as Amin just mentioned, TMX delivered fantastic results in 2024, capping off a year of pronounced growth in key components of our business, significant accomplishments across our evolving enterprise, and important progress on our growth initiatives. In 2024, TMX delivered four consecutive quarters of year-over-year growth in revenue and adjusted earnings per share, highlighting the deep strength of our diverse portfolio of interconnected assets, the benefits of adhering to a consistent long-term growth strategy, and the ability of our passionate and dedicated TMX team to deliver. Now, turning to our results for the year. Overall revenue, including TMX Vetify and index research, increased 22% when compared to 2023. Strong growth was highlighted by double digit increases from TMX trade port and derivatives trading and clearing, as well as higher revenue from equities and fixed income trading and clearing. Revenue gains were partially offset by lower revenue from capital formation, excluding revenue from news file, which was acquired in August of 2024. Organic revenue, excluding TMX Vetify, Index Research, and News File, increased 10%, and adjusted diluted earnings per share increased 16% from 2023. Total operating expenses increased compared to last year, reflecting the inclusion of expenses related to recent acquisitions. And David's going to take a closer look at expenses in his remarks to follow. Now moving to our business areas. Overall revenue from GSIA increased 44% from 2023, or 11% excluding TMX Vetify. It was an outstanding year for TMX Trayport, a major contributor to our success in 2024, and TMX's fastest growing business area. Revenue increased 22% compared to 2023, or 17% in pound sterling, driven by a 25% increase in total licensees, as well as annual price adjustments and higher revenue from data and analytics products. Since its acquisition in 2017, TMX's Tradeport annual revenues have doubled while accelerating our long-term strategy of increasing our global footprint and increasing the proportion of revenue derived from recurring sources. TMX Tradeport's winning strategy is based on an innovative client-first mindset and a commitment to serving participant needs as they evolve. Our core JUUL network provides essential connectivity and a suite of innovative and adaptive tools, insights, and capabilities to the global energy market ecosystem. The network has grown to include more than 370 trading firms, 9,700 total licensees or end users, and applications, and over 27,000 network connections. TMX Tradeport clients now span over 40 different countries, including the biggest names in the global energy and commodity trading. Looking ahead, Tradeport's continued focus is on expanding into new asset classes and geographies, including climate markets, North American power, and Japanese power. Now, staying with GSIA, TMX Vetify's revenue was 18% higher in U.S. dollars when compared to 2023 prior to acquisition. TMX Vetify plays an important role in the ETF product lifecycle, deploying customized digital capabilities and expertise from product ideation to index design and prototyping through ETF launch and beyond. And growth in 2024 was primarily driven by higher indexing revenue, reflecting organic growth in asset center management and revenue from 2023 acquisitions, such as Robo Global and EQM indices, as well as index research, which we acquired in late October. Overall, TMX Vetify revenue increased also as a result of higher revenue from events, including our marquee annual exchange conference. Exchange is an essential forum for gathering feedback from stakeholders on new index design and input on enhancements to existing indices. The 2025 edition from Exchange for Exchange is fast approaching, set for March 23rd in Las Vegas. And moving forward, TMX Zify continues to seek out strategic opportunities to expand product offerings, data and index solutions across new asset classes and geographies. Now turning now to capital formation. Revenue increased 2% when compared to 2023, largely due to the inclusion of revenue from News File and partially offset by lower revenue from additional listing fees as market conditions remain challenging throughout the year. Our capital formation strategy is focusing on strengthening our two-tiered ecosystem. Our business development team has built a powerful and growing pipeline of private companies around the world that we work closely with in preparation for joining our markets. And despite prevailing headwinds, we proudly welcomed Montreal-based fashion retailer Group Dynamite to Toronto Stock Exchange in November as they completed a $300 million initial public offering with an enterprise value of $2.2 billion. And it's great to see a homegrown Canadian business seize the opportunity to get a good deal done and choose the public path for growth. And it's also an encouraging sign that as conditions normalize, we can see more deals come to market. Now, as we detailed at Investor Day, we aren't waiting for the game to come to us. Our team is focused on building beyond Canada's borders, beyond corporates, and beyond listings. More than 50% of the companies in our pipeline are from outside of Canada, and while a range of sectors are represented, approximately 60% are from the innovation sector. Our recent success in Australia stands as compelling evidence that the work we've done to raise global awareness of the unique TSX-TSX venture value proposition is paying off. In 2023, we added a full-time presence in Australia, and our efforts to promote Canada's markets and establish connections between local dealmakers and our ecosystem has led to a number of ASX listings joining our market in the last couple of months, including Paladin Energy, a uranium production company with a $3 billion market cap, and Firefly Metals, a copper-gold company with a market cap of $500 million, both listed on TSX in December, and Cygnus Metals, a diversified critical minerals explorer listed on TSX Venture last month. We're continuously looking for strategic opportunities to leverage our proven expertise and help expand that ecosystem. In October, TSX-V and TSX signed an MOU with B3 in Brazil to explore Brazilian-based solutions to create public company market opportunities for investors and entrepreneurs with a focus on mining, energy, and renewable energy industries. Now, looking beyond corporates, Next month marks an important milestone. It's the 35th anniversary of the ETF, which was invented right here at the Toronto Stock Exchange. And 2024 was a record-breaking year for TSX's ETF franchise. Net inflows reached $75.5 billion, beating the annual record set in 2021 by more than 30%. We welcomed 127 new ETFs to the market, topping the previous record of 126 in 2020. And assets under management for TSX listed ETS surpassed $500 billion for the first time in history. And beyond listings, we continue to seek out innovative solutions to serve the needs of TSX and TSX Venture issuers, as well as private companies. Revenue from other issuer services, which includes TSX Trust, increased 7% year-over-year, largely due to the inclusion of $5.5 million from Newsfile, a news dissemination and regulatory filing provider, which we acquired in August. Now, I'd like to turn to our derivatives business, which has been an area of sustained growth momentum and key product expansion in 2024. Revenue from derivatives trading and clearing, excluding box, increased 17% year-over-year, including a 12% increase in MX revenue driven by higher volumes and a 29% increase in revenue from CDCC as a result of positive impact of both pricing changes and overall higher clearing volumes. In a year of policy uncertainty around interest rates, With considerable implications across asset classes, participants continue to turn to MX's tailored suite of derivative products to balance their portfolios and mitigate risk. Key 2024 MX highlights include 13% year-over-year growth in overall volumes, 29% higher volumes in interest rate products, 41% higher volumes in ETF options, and a record period for our Government of Canada bond future products. Volumes in our 2, 5, and 10-year contracts grew by 54%, 38%, and 18% respectively when compared to last year. And overall open interest was 51% higher at December 31st when compared to the end of the previous year. The year also marked the increase in adoption of Canada's new benchmark rate, CORA. CRA is now the established product for hedging the Canadian dollar short-term rate with over 1 million contracts and open interest as of December 31st. So 2024 really was a tremendous year for TMX. Marked by strong performances across our diversified global business and by game-changing advances in our long-term strategy to push the evolution of our organization to meet the needs of a rapidly growing global client base. And the impressive achievements of 2024 are a source of shared pride in the organization and powerful evidence of a sound enterprise strategy But candidly, they are now last year's achievements, and our focus is squarely on the future. And I'm happy to report that 2025 is off to a great start in terms of our key initiatives. Two weeks ago marked the successful launch of Alpha X US, our new equity ATS venue, aimed at improving execution performance for the U.S. broker-dealer community. And while it's still early days, the response from participants thus far has been very positive. And our post-trade modernization project is on track for the end of March as scheduled, pending industry readiness and regulatory approvals. We are very encouraged by the successful completion of the client testing phases. The complex CDS modernization project has been a journey, and so I'd like to share my sincere thanks to our team here across the Clearing and Technology Divisions for their ongoing dedication and hard work in seeing the project through, and to our industry partners for stepping up to work alongside of us. Now, before I finish my comments today and pass the call over to David for a much deeper dive on Q4, I'd like to turn briefly to a responsibility that we take very seriously at TMX, key to executing our growth strategy and fulfilling our role in serving clients and stakeholders with excellence. And that is our important role as a capital markets advocate. Our purpose is to make markets better and empower bold ideas. It's a unified enterprise commitment rooted in a proud history and focused on ensuring a viable future. From a front row seat for more than 170 years, we have seen the best of Canadian innovation, ingenuity, and entrepreneurship. And we are committed to clients and stakeholders across this broad financial ecosystem and to all Canadians to champion growth by promoting measures to create a business environment that supports investment in Canadian companies. Now, it's not lost on everyone that Canada faces threats of tariffs and other measures of economic force from a new U.S. administration. And while the leadership and direction of Canada and our federal government is yet to be determined. So more than ever, we need policymakers to deliver a clear vision and a workable strategy to raise Canada's game and seize the opportunity to become a much more formidable global player. Not just defend short-term challenges like tariffs, but to set us on the right path for the long term. Canada must be seen at home and throughout the world as a great place to do business and invest, with clear and consistent regulation, efficient and transparent processes for permits and approvals, and a competitive tax regime that encourages risk-taking and rewards investment. And we will take every opportunity to continue to raise these critical issues. More than 20 years ago, the Canadian economy was characterized as an emerging northern tiger, and we believe it's time to reawaken that tiger. So in closing, I want to thank all of our employees for their continued dedication to TMX. Our impressive track record of performance and legacy of innovation and industry leadership is driven by the work of our people that is put in every single day to serve our markets with excellence. We have a lot to live up to and a lot of work to do, but I am most excited about the opportunities in front of us. And with that, let me pass it over to you, David. Thank you.