GuruFocus -
- Revenue: $367.1 million, a 20% increase compared to Q2 last year.
- Organic Revenue Growth: 9% over the same period.
- Adjusted Diluted Earnings Per Share: Increased by 13%.
- Global Solutions, Insights, and Analytics Revenue: Grew by 40%, including $32 million from TMX VettaFi.
- TMX VettaFi Revenue Growth: 18% in Canadian dollars or 15% in US dollars compared to the same period last year.
- TMX Trayport Revenue Growth: 18% in Canadian dollars or 16% in pound sterling.
- Derivatives Trading and Clearing Revenue (excluding BOX): Increased by 20%.
- Equities and Fixed Income Trading and Clearing Revenue: Increased by 14%.
- Operating Expenses: Increased by 27% compared to Q2 last year.
- Debt to Adjusted EBITDA Ratio: 3.2x as of June 30.
- Quarterly Dividend: $0.19 per common share.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- TMX Group (TSX:X) Ltd (TMXXF) reported a strong revenue increase of 18% in the first half of 2024 compared to the same period in 2023.
- The acquisition of TMX VettaFi contributed significantly to revenue growth, adding $69.9 million in the first half of 2024.
- TMX Trayport showed robust performance with a 19% revenue growth, driven by a 24% increase in total licenses.
- Derivatives trading and clearing revenue, excluding BOX, increased by 8% year over year, with notable growth in interest rate products.
- The company is making significant progress in expanding its listing franchise beyond Canada, with over 230 international companies now listed on TSX or TSX Venture Exchange.
- Capital formation revenue decreased by 4% in the first half of 2024 due to lower revenue from additional listing fees on the TSX Venture Exchange.
- Operating expenses increased by 27% in Q2 2024 compared to the same period last year, largely due to the inclusion of TMX VettaFi and integration costs.
- The company faces challenges in the macroeconomic environment, impacting capital market conditions over the last 2.5 years.
- There was a modest shortfall in capital formation revenue, partially offsetting the overall revenue gains.
- The transition from BAX to CORRA in derivatives trading resulted in a gap between volume growth and revenue growth.
A: We aim for high single to low double-digit growth rates for VettaFi, aligning with our acquisition expectations. Growth will come from market value changes, fund inflows, and expanding the number of funds we provide.
Q: What are the key reasons asset managers transition to VettaFi?
A: Asset managers are drawn to VettaFi for its comprehensive suite of services, including index conversion, ideation, and distribution tools. We offer efficient, lower-cost solutions and collaborate on new ideas with asset managers.
Q: How is the integration between VettaFi and Datalinx progressing, and what's the roadmap for monetizing VettaFi data?
A: Integration is focused on sales and distribution, aiming for common sales capabilities across clients. We're exploring data set utilization within Datalinx and Trayport to build new funds and enhance offerings.
Q: Can you explain the revenue mix for VettaFi and the impact of recent acquisitions like Robo Global and EQM?
A: Over half of VettaFi's revenue comes from indexing tied to AUM, with varying fee structures. Recent acquisitions contributed 1-2% to growth, with EQM adding to the revenue mix.
Q: What differentiates VettaFi from larger index providers like S&P or MSCI?
A: VettaFi offers bespoke custom indices and end-to-end solutions, including ideation, analytics, and distribution tools, providing a cost-effective and nimble alternative to larger incumbents.
Q: How does the non-indexing component of VettaFi's business grow, particularly digital distribution?
A: Non-indexing revenue is largely subscription-based, with opportunities to sell deeper into clients. We're integrating sales efforts to expand distribution and analytics tools to Canadian dealers.
Q: What is the impact of recent interest rate changes on TSX Trust's net interest income?
A: A 25 basis point change in interest rates impacts net interest income by approximately $2 million annually. Despite rate cuts, increased transaction activity may offset some of the impact.
Q: Can you provide an update on the post-trade modernization initiative and its expected benefits?
A: The initiative is on track for Q1 2025, with benefits including cost savings from sunsetting older systems, improved reporting, and enabling future growth through enhanced capabilities.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.