- Revenue of $286.1 million, up 17%
from $245.0 million in Q2/21,
including $27.3 million from
acquisition of voting control of BOX on January 3, 20221
- Diluted earnings per share of $1.64, up 20% from $1.37 in Q2/21
- Adjusted diluted earnings per share2 of $1.88, down 1% from $1.90 in Q2/21
TORONTO, July 28,
2022 /CNW/ - TMX Group Limited (TSX:X) ("TMX Group")
today announced results for the second quarter ended June 30,
2022.
Commenting on the first half of 2022, John McKenzie, Chief Executive Officer of TMX
Group, said:
"TMX delivered positive results for the first half of the year,
despite challenging conditions across much of our operating
environment. While external factors, including increased
volatility, higher interest rates and geopolitical events had a
negative impact on global capital markets activity, year-over-year
growth was driven by increased revenue from Trayport and
Derivatives Trading and Clearing, as well as revenue from AST
Canada, acquired in August 2021.
Empowered by the determined and collaborative efforts of our
people, we move into the second half of the year clear in purpose;
focused on serving our clients with excellence and striving to make
our markets better for all stakeholders."
Commenting on TMX Group's performance in the second quarter of
2022, David Arnold, Chief Financial
Officer of TMX Group, said:
"TMX's results for the second quarter reflect the continued
resiliency of our diverse business model, with overall revenue
growth of 17%, including increases across all our business
segments. Revenue excluding BOX, AST Canada, and Tradesignal
was up 1% compared with the second quarter of last year. We
managed our operating expense increase excluding BOX, AST
Canada, and Tradesignal to 7%, which remains below the current rate
of inflation in Canada. Our diluted earnings per share grew
by 20%, compared to the second quarter of 2021, which included an
income tax expense related to a U.K. corporate tax rate change, and
adjusted diluted earnings per share3 was lower by
1%."
____________________________
|
1 See
discussion under the heading "BOX".
2 Adjusted diluted earnings per share is a
non-GAAP ratio, see discussion under the heading "Non-GAAP
Measures".
3 Adjusted diluted earnings per share is a
non-GAAP ratio, see discussion under the heading "Non-GAAP
Measures".
|
RESULTS OF OPERATIONS
Non-GAAP Measures
Adjusted net income is a non-GAAP measure4, and
adjusted earnings per share, adjusted diluted earnings per share,
and adjusted earnings per share CAGR are non-GAAP
ratios5, and do not have standardized meanings
prescribed by GAAP and are, therefore, unlikely to be comparable to
similar measures presented by other companies.
Management uses these measures, and excludes certain items,
because it believes doing so provides investors a more effective
analysis of underlying operating and financial performance,
including, in some cases, our ability to generate cash.
Management also uses these measures to more effectively measure
performance over time, and excluding these items increases
comparability across periods. The exclusion of certain items
does not imply that they are non-recurring or not useful to
investors.
We present adjusted earnings per share, adjusted diluted
earnings per share, and adjusted net income to indicate ongoing
financial performance from period to period, exclusive of a number
of adjustments as outlined under the headings "Adjusted Net Income
and Adjusted Earnings Per Share Reconciliation for Q2/22 and Q2/21"
and "Adjusted Net Income and Adjusted Earnings Per Share
Reconciliation for 1H/22 and 1H/21".
BOX
On January 3, 2022 BOX Holdings
Group LLC (BOX) executed a unit buy-back with certain members which
resulted in TMX Group's economic and voting interests increasing
from 42.6% and 45.5%, to 47.9 % and 51.4%, respectively. As a
result, effective January 3, 2022,
TMX Group obtained voting control over BOX and commenced
consolidating the entity. Going forward, non-controlling interests
("NCI") related to BOX (52.1%), including net income and equity
attributable to NCI will be reported in our financial
statements. The transaction has been accounted for as a
business combination in accordance with IFRS 3, Business
Combinations. TMX Group remeasured its previously held
interest, resulting in a non-cash gain of approximately
$177.9 million in Q1/22, recognized
in the consolidated income statements as other income. BOX is
included in the Derivatives Trading & Clearing operating
segment.
Overall, BOX contributed to the increase in net income and
diluted earnings per share in Q2/22 and 1H/22 compared to Q1/21 and
1H/21 respectively, as a result of improved operating performance
and our increased economic interest. In addition, the
decrease in adjusted net income6 and adjusted diluted
earnings per share7 in Q2/22 and 1H/22 compared to the
same periods in 2021, was partially offset by a positive impact
from BOX.
_______________________
|
4 As
defined in National Instrument 52-112 Non-GAAP and Other Financial
Measures Disclosure.
5 As defined in National Instrument 52-112
Non-GAAP and Other Financial Measures Disclosure.
6 Adjusted net income is a non-GAAP measure, see
discussion under the heading "Non-GAAP Measures".
7 Adjusted earnings per share is a non-GAAP ratio,
see discussion under the heading "Non-GAAP Measures".
|
Quarter ended June 30, 2022 (Q2/22) Compared with Quarter
ended June 30, 2021 (Q2/21)
The information below reflects the financial statements of TMX
Group for Q2/22 compared with Q2/21.
(in millions of
dollars, except per share amounts)
|
Q2/22
|
Q2/21
|
$ increase /
(decrease)
|
% increase /
(decrease)
|
Revenue
|
$286.1
|
$245.0
|
$41.1
|
17 %
|
Operating
expenses
|
147.8
|
112.1
|
35.7
|
32 %
|
Income from
operations
|
138.3
|
132.9
|
5.4
|
4 %
|
Net income attributable
to equity holders of TMX Group
|
92.1
|
77.3
|
14.8
|
19 %
|
Adjusted net
income[8]
|
105.3
|
107.1
|
(1.8)
|
(2) %
|
|
|
|
|
|
Earnings per
share
|
|
|
|
|
Basic
|
1.65
|
1.38
|
0.27
|
20 %
|
Diluted
|
1.64
|
1.37
|
0.27
|
20 %
|
Adjusted Earnings per
share[9]
|
|
|
|
|
Basic
|
1.89
|
1.91
|
(0.02)
|
(1) %
|
Diluted
|
1.88
|
1.90
|
(0.02)
|
(1) %
|
|
|
|
|
|
Cash flows from
operating activities
|
152.0
|
142.1
|
9.9
|
7 %
|
Net Income attributable to equity holders of TMX Group and Earnings
per Share attributable to equity holders of TMX Group
Net income attributable to equity holders of TMX Group in
Q2/22 was $92.1 million, or $1.65 per common share on a basic and
$1.64 on a diluted basis, compared
with a net income attributable to equity holders of TMX Group of
$77.3 million, or $1.38 per common share on a basic and
$1.37 on a diluted basis, for
Q2/21. The increase in net income attributable to equity
holders of TMX Group reflects a decrease in income tax expense
compared to Q2/21, where we incurred a $19.8
million expense due to a U.K. corporate income tax rate
change, as well as an increase in Income from operations of
$5.4 million from Q2/21 to Q2/22
driven by an increase in revenue of $41.1 million partially offset by an
increase in operating expenses of $35.7 million. The increase in revenue
included approximately $27.3 million
related to BOX Holdings (consolidated January 3, 2022), $12.2
million related to AST Canada (acquired August 12, 2021), while the increase in operating
expenses included approximately $28.7
million in Q2/22 related to AST Canada (acquired August 12, 2021), BOX (consolidated January 2022), and Tradesignal (acquired
June 1, 2021). The increased expenses
included $2.8 million related to
amortization of acquired intangibles for AST Canada and BOX
(4 cents per basic and diluted
share), $0.9 million related to the
TSA, as well as AST Canada integration costs of $4.9 million (7
cents per basic and diluted share). The increase in
earnings per share was also partially attributable to a decrease in
the number of weighted average common shares outstanding from Q2/21
to Q2/22.
Partially offsetting these increases to net income attributable
to equity holders of TMX Group was $0.6
million incurred in Q2/21 related to acquisition and
related costs for AST Canada and Tradesignal.
___________________________
|
8
Adjusted net income is a non-GAAP measure, see discussion under the
heading "Non-GAAP Measures".
9 Adjusted earnings per share is a non-GAAP ratio,
see discussion under the heading "Non-GAAP Measures".
|
Adjusted Net Income10 and Adjusted Earnings
per Share11 Reconciliation for Q2/22 and
Q2/21
The following tables present reconciliations of net income
attributable to equity holders of TMX Group to adjusted net income
and earnings per share attributable to equity holders of TMX Group
to adjusted earnings per share. The financial results have
been adjusted for the following:
- The amortization expenses of intangible assets in Q2/21 and
Q2/22 related to the 2012 Maple transaction (TSX, TSXV, MX, CDS,
Alpha, Shorcan), TSX Trust, Trayport (including VisoTech and
Tradesignal), AST Canada, and BOX; and is a component of
Depreciation and amortization expenses.
- Acquisition and related costs associated with the equity
investment in ETFLogic (February
2022) and Ventriks (June 2022)
in Q2/22. These costs are included in Selling general, and
administration and Compensation and benefits.
- Integration costs related to integrating the AST Canada
acquisition in Q2/22. These costs are included in Selling,
general and administration, Compensation and benefits and
Depreciation and amortization.
- An increase in deferred income tax liabilities which increased
income tax expenses in Q2/21 relating to an increase in the
U.K. corporate income tax rate from 19% to 25%, effective
April 1, 2023.
|
Pre-tax
|
Tax
|
After-tax
|
(in millions of
dollars)
(unaudited)
|
Q2/22
|
Q2/21
|
Q2/22
|
Q2/21
|
Q2/22
|
Q2/21
|
$ increase /
(decrease)
|
% increase /
(decrease)
|
Net income attributable
to equity holders of TMX Group
|
|
|
|
|
$92.1
|
$77.3
|
$14.8
|
19 %
|
Adjustments related
to:
|
|
|
|
|
|
|
|
|
Amortization of
intangibles related to acquisitions12
|
14.2
|
12.1
|
4.7
|
2.6
|
9.5
|
9.5
|
—
|
— %
|
Acquisition and
related costs13
|
0.1
|
0.6
|
—
|
0.1
|
0.1
|
0.5
|
(0.4)
|
(80 %)
|
Integration
costs14
|
4.9
|
—
|
1.3
|
—
|
3.6
|
—
|
3.6
|
n/a
|
Increase in deferred
income tax liabilities relating to a change in the future U.K. tax
rate
|
—
|
—
|
—
|
(19.8)
|
—
|
19.8
|
($19.8)
|
n/a
|
Adjusted net
income15
|
|
|
|
|
$105.3
|
$107.1
|
($1.8)
|
(2 %)
|
Adjusted net income decreased by 2% from $107.1 million in Q2/21 to $105.3 million in Q2/22 largely driven by
higher operating expenses partially offset by higher revenue.
___________________________________
|
10
Adjusted net income is a non-GAAP measure, see discussion under the
heading "Non-GAAP Measures".
11 Adjusted earnings per share is a non-GAAP
ratio, see discussion under the heading "Non-GAAP Measures".
12 Includes amortization expense of acquired
intangibles including BOX, AST Canada, and Tradesignal in Q2/22
.
13 Includes costs related to the acquisition
of AST Canada (acquired August 12, 2021) and Tradesignal (acquired
June 1, 2021) in Q2/21, and the equity investment in ETFLogic
(February 2022) and Ventriks Ltd. (June 2022) in Q2/22. See
Initiatives and Accomplishments - Capital Formation - AST Canada
transaction, Global Solutions, Insights & Analytics - ETFLogic
and Ventriks in the Q2 2022 MD&A for more details.
14 Includes costs related to the integration of
AST Canada (acquired August 12, 2021). See Initiatives and
Accomplishments - Capital Formation - AST Canada transaction in the
Q2 2022 MD&A for more details.
15 Adjusted net income is a non-GAAP
measure, see discussion under the heading "Non-GAAP
Measures".
|
|
Q2/22
|
Q2/21
|
(unaudited)
|
Basic
|
Diluted
|
Basic
|
Diluted
|
Earnings per
share
|
$1.65
|
1.64
|
$1.38
|
$1.37
|
Adjustments related
to:
|
|
|
|
|
Amortization of
intangibles related to acquisitions16
|
0.17
|
0.17
|
0.17
|
0.17
|
Acquisition and
related costs17
|
—
|
—
|
0.01
|
0.01
|
Integration
costs18
|
0.07
|
0.07
|
—
|
—
|
Increase in deferred
income tax liabilities relating to a change in the future U.K. tax
rate
|
—
|
—
|
0.35
|
0.35
|
Adjusted earnings per
share19
|
$1.89
|
$1.88
|
$1.91
|
$1.90
|
Weighted average number
of common shares outstanding
|
55,865,712
|
56,124,115
|
56,198,495
|
56,585,348
|
Adjusted diluted earnings per share decreased by 1% from
$1.90 in Q2/21 to $1.88 in Q2/22 largely driven by higher operating
expenses partially offset by higher revenue. The decrease in
adjusted earnings per share was lower due to a decrease in the
number of weighted average common shares outstanding from Q2/21 to
Q2/22.
____________________________
|
16
Includes amortization expense of acquired intangibles including
BOX, AST Canada, and Tradesignal in Q2/22
17 Includes costs related to the acquisition of
AST Canada (acquired August 12, 2021) and Tradesignal (acquired
June 1, 2021) in Q2/21, and the equity investment in ETFLogic
(February 2022) and Ventriks Ltd. (June 2022) in Q2/22. See
Initiatives and Accomplishments - Capital Formation - AST Canada
transaction, Global Solutions, Insights & Analytics - ETFLogic
and Ventriks in the Q2 2022 MD&A for more details.
18 Includes costs related to the integration of
AST Canada (acquired August 12, 2021). See Initiatives and
Accomplishments - Capital Formation - AST Canada transaction
in the Q2 2022 MD&A for more details.
19 Adjusted earnings per share is a non-GAAP
ratio, see discussion under the heading "Non-GAAP
Measures".
|
Revenue
(in millions of
dollars)
|
Q2/22
|
Q2/21
|
$ increase /
(decrease)
|
% increase /
(decrease)
|
Capital
Formation
|
$73.3
|
$69.2
|
$4.1
|
6 %
|
Equities and Fixed
Income Trading and Clearing
|
58.9
|
57.3
|
1.6
|
3 %
|
Derivatives Trading
and Clearing
|
64.1
|
33.9
|
30.2
|
89 %
|
Global Solutions,
Insights and Analytics
|
88.8
|
84.6
|
4.2
|
5 %
|
Other
|
1.0
|
—
|
1.0
|
n/a
|
|
$286.1
|
$245.0
|
$41.1
|
17 %
|
Revenue was $286.1 million in
Q2/22, up $41.1 million or 17% from
$245.0 million in Q2/21 attributable
to increases in revenue from Derivatives Trading and Clearing,
Capital Formation, Global Solutions, Insights and Analytics and
Equities and Fixed Income Trading, partially offset by a
decrease in revenue from CDS. Revenue for Q2/22 included
approximately $27.3 million related
to BOX Holdings (consolidated January 3,
2022), $12.2 million related
to AST Canada (acquired August 12,
2021) and approximately $0.2
million related to Tradesignal (acquired June 1, 2021). Revenue excluding BOX, AST
Canada and Tradesignal increased by 1% from Q2/21 to Q2/22.
Operating expenses
(in millions of
dollars)
|
Q2/22
|
Q2/21
|
$
increase
|
%
increase
|
Compensation and
benefits
|
$66.4
|
$57.2
|
$9.2
|
16 %
|
Information and trading
systems
|
21.6
|
15.9
|
5.7
|
36 %
|
Selling, general and
administration
|
32.1
|
18.7
|
13.4
|
72 %
|
Depreciation and
amortization
|
27.7
|
20.3
|
7.4
|
36 %
|
|
$147.8
|
$112.1
|
$35.7
|
32 %
|
Operating expenses in Q2/22 were $147.8
million, up $35.7 million or
32%, from $112.1 million in
Q2/21. There were approximately $28.7 million of expenses included in Q2/22
related to BOX (consolidated January 3,
2022), AST Canada (acquired August
12, 2021), and Tradesignal (acquired June 1, 2021). The increased expenses
included $2.8 million related to
amortization of acquired intangibles for AST Canada and BOX
(4 cents per basic and diluted
share), $0.9 million related to AST
Canada's TSA, as well as AST integration costs of $4.9 million (7
cents per basic and diluted share). There were also
higher expenses related to higher headcount and payroll costs,
increased costs related to our long term employee performance
incentive plan of approximately $1.9
million, and increased expenses for travel and
entertainment. In addition, there were higher expenses in Q2/22 due
to the release of a provision for restoration costs for our data
centre in Q2/21.
Partially offsetting these increases was lower short term
employee performance incentive plan costs, and lower
severance. We also incurred $0.6
million (1 cent per basic and
diluted share) in acquisition and related costs related to
Tradesignal and AST Canada in Q2/21.
Excluding expenses from BOX, AST Canada, and Tradesignal,
operating expenses increased 7% in Q2/22 compared with Q2/21.
Additional Information
Share of (loss) income from equity accounted
investees
(in millions of
dollars)
|
Q2/22
|
Q2/21
|
$
(decrease)
|
%
(decrease)
|
|
($0.3)
|
$7.8
|
$(8.1)
|
(104) %
|
- In Q2/22, our share of (loss) income from equity accounted
investees decreased by $8.1 million
primarily due to a change in accounting relating to BOX
(consolidated January 3, 2022) and
CanDeal[20]. For Q2/22 our share of (loss) income from equity
accounted investees includes only ETFLogic and Ventriks Ltd.
compared with Q2/21, which included BOX and
CanDeal21.
Income tax expense and effective tax
rate
Income Tax
Expense (in millions of dollars)
|
Effective Tax
Rate (%)
|
Q2/22
|
Q2/21
|
Q2/22
|
Q2/21
|
$28.8
|
$54.6
|
22 %
|
41 %
|
Excluding adjustments, primarily related to the items noted
below, the effective tax rate would have been approximately 26%,
excluding NCI, for Q2/22 and Q2/21.
- In Q2/22, we recognized a deferred tax asset relating to
historical tax losses not previously recognized for VisoTech,
resulting in a corresponding decrease in income tax expense of
$0.9 million.
- In Q2/21, the previously announced increase in the U.K.
corporate income tax rate from 19% to 25%, effective April 1, 2023, was substantively enacted. This
rate change increased net deferred income tax liabilities,
resulting in a corresponding increase in income tax expense of
$19.8 million.
Net income attributable to non-controlling interests
(in millions of
dollars)
|
Q2/22
|
Q2/21
|
$
increase
|
|
$8.4
|
—
|
$8.4
|
- As of January 3, 2022, we began
consolidating BOX as we gained voting control over BOX. As a result
our financial results from January 3,
2022 forward include the results from BOX on a consolidated
basis and we report the Net income attributable to
non-controlling interests in our financial statements.
- For periods from July 1, 2016 to
January 2, 2022, our financial
results did not include the full impact of BOX, and our share of
BOX's net income was reflected in Net income (loss) from equity
accounted investees in our financial statements.
________________________
|
20 Effective February 28, 2022, TMX discontinued
the application of the equity method of accounting for CanDeal.
21 Effective February 28, 2022, TMX
discontinued the application of the equity method of accounting for
CanDeal.
|
Six months ended June 30, 2022 (1H/22) Compared with six
months ended June 30, 2021 (1H/21)
The information below reflects the financial statements of TMX
Group for the six months ended June 30,
2022 compared with the six months ended June 30, 2021.
(in millions of
dollars, except per share amounts)
|
1H/22
|
1H/21
|
$ increase /
(decrease)
|
% increase /
(decrease)
|
Revenue
|
$573.2
|
$497.0
|
$76.2
|
15 %
|
Operating
expenses
|
293.1
|
231.4
|
61.7
|
27 %
|
Income from
operations
|
280.1
|
265.6
|
14.5
|
5 %
|
Net income attributable
to equity holders of TMX Group
|
359.5
|
173.7
|
185.8
|
107 %
|
Adjusted net
income22
|
208.0
|
213.5
|
(5.5)
|
(3) %
|
|
|
|
|
|
Earnings per share
(attributable to equity holders of TMX Group)
|
|
|
|
|
Basic
|
6.44
|
3.09
|
3.35
|
108 %
|
Diluted
|
6.41
|
3.07
|
3.34
|
109 %
|
Adjusted Earnings per
share23
|
|
|
|
|
Basic
|
3.73
|
3.80
|
(0.07)
|
(2 %)
|
Diluted
|
3.71
|
3.78
|
(0.07)
|
(2 %)
|
|
|
|
|
|
Cash flows from
operating activities
|
230.7
|
220.7
|
10.0
|
5 %
|
Net Income attributable to equity holders of TMX Group and Earnings
per Share attributable to equity holders of TMX Group
Net income attributable to equity holders of TMX Group in 1H/22
was $359.5 million, or $6.44 per
common share on a basic and $6.41 per
common share on a diluted basis, compared with a net income
attributable to equity holders of TMX Group of $173.7 million, or $3.09 per common share on a basic and
$3.07 on a diluted basis, for
1H/21. The increase in net income attributable to equity
holders of TMX Group reflected a gain on the revaluation of our
interest in BOX upon acquisition of voting control of $177.9 million in 1H/22, a decrease in income tax
expense compared to 1H/21, where we incurred a $19.8 million expense due to a U.K. corporate
income tax rate change, and an increase in income from operations
of $14.5 million. The increase
in income from operations from 1H/21 to 1H/22 was driven by an
increase in revenue of $76.2 million,
which included $60.3 million related
to BOX (consolidated January 2022)
and $21.1 million related to AST
Canada (acquired August 12, 2021),
somewhat offset by an increase in operating expenses of
$61.7 million. The increase in
operating expenses included approximately $53.2 million in 1H/22 related to AST Canada
(acquired August 12, 2021), BOX
(consolidated January 2022), and
Tradesignal (acquired June 1,
2021). The increased expenses included $5.6 million related to amortization of
acquired intangibles for AST Canada and BOX (8 cents per basic and diluted share),
$2.2 million related to the TSA, as
well as AST Canada integration costs of $6.1
million (8 cents per basic and
diluted share). The increase in earnings per share was also
partially attributable to a decrease in the number of weighted
average common shares outstanding from 1H/21 to 1H/22.
Partially offsetting these increases to net income attributable
to equity holders of TMX Group was $1.2 million incurred in 1H/21 related to
acquisition and related costs for AST Canada and Tradesignal.
__________________________
|
22
Adjusted net income is a non-GAAP measure, see discussion under the
heading "Non-GAAP Measures".
23 Adjusted earnings per share is a non-GAAP
ratio, see discussion under the heading "Non-GAAP Measures".
|
Adjusted Net Income24 and Adjusted Earnings per
Share25 Reconciliation for 1H/22 and
1H/21
The following tables present reconciliations of net income
attributable to equity holders of TMX Group to adjusted net income
and earnings per share attributable to equity holders of TMX Group
to adjusted earnings per share. The financial results have
been adjusted for the following:
- The amortization expenses of intangible assets in the six
months ended June 30, 2021 and the
six months ended June 30, 2022
related to the 2012 Maple transaction (TSX, TSXV, MX, CDS, Alpha,
Shorcan), TSX Trust, Trayport (including VisoTech and Tradesignal),
AST Canada, and BOX; and is a component of Depreciation and
amortization expenses.
- Acquisition and related costs in the six months ended
June 30, 2021 associated with
acquiring AST Canada (acquired August 12,
2021), and the equity investments in ETFLogic (February 2022) and Ventriks (June 2022) in the six months ended June 30, 2022. These costs are included in
Selling general, and administration and Compensation and
benefits.
- Integration costs related to integrating the AST Canada
acquisition in the six months ended June
30, 2022. These costs are included in Selling,
general and administration, Compensation and benefits and
Depreciation and amortization.
- Gain resulting from the revaluation of our interest in BOX upon
acquisition of voting control (effective January 3, 2022) in the six months ended
June 30, 2022. This gain is
included in Other Income.
- An increase in deferred income tax liabilities which increased
income tax expenses in the six months ended June 30, 2021 relating to an increase in the U.K.
corporate income tax rate from 19% to 25%, effective April 1, 2023.
____________________________
|
24
Adjusted net income is a non-GAAP measure, see discussion under the
heading "Non-GAAP Measures".
25 Adjusted earnings per share is a non-GAAP
ratio, see discussion under the heading "Non-GAAP
Measures".
|
|
Pre-tax
|
Tax
|
After-tax
|
(in millions of
dollars)
(unaudited)
|
1H/22
|
1H/21
|
1H/22
|
1H/21
|
1H/22
|
1H/21
|
$ increase /
(decrease)
|
% increase /
(decrease)
|
Net income attributable
to equity holders of TMX Group
|
|
|
|
|
$359.5
|
$173.7
|
$185.8
|
107 %
|
Adjustments related
to:
|
|
|
|
|
|
|
|
|
Amortization of
intangibles related to acquisitions26
|
29.0
|
24.0
|
7.5
|
5.0
|
21.5
|
19.0
|
2.5
|
13 %
|
Acquisition and
related costs27
|
0.4
|
1.2
|
—
|
0.2
|
0.4
|
1.0
|
(0.6)
|
(60 %)
|
Integration
costs28
|
6.1
|
—
|
1.6
|
—
|
4.5
|
—
|
4.5
|
n/a
|
Gain on
BOX29
|
(177.9)
|
—
|
—
|
—
|
(177.9)
|
—
|
($177.9)
|
n/a
|
Increase in deferred
income tax liabilities relating to a change in the future U.K. tax
rate
|
—
|
—
|
—
|
(19.8)
|
—
|
19.8
|
($19.8)
|
(100 %)
|
Adjusted net
income30
|
|
|
|
|
$208.0
|
$213.5
|
($5.5)
|
(3 %)
|
Adjusted net income decreased by 3% from $213.5 million in the six months ended
June 30, 2021 to $208.0 million in the six months ended
June 30, 2022 largely driven by
higher operating expense partially offset by higher revenue.
_________________________________
26 Includes amortization expense of acquired
intangibles including BOX, AST Canada, and Tradesignal in the six
months ended June 30, 2022.
27 Includes costs related to the acquisition of
AST Canada (acquired August 12, 2021)
and Tradesignal (acquired June 1,
2021) in the six months ended June
30, 2021, and the equity investment in ETFLogic
(February 2022) and Ventriks Ltd.
(June 2022) in the six months ended
June 30, 2022. See Initiatives and
Accomplishments - Capital Formation - AST Canada transaction,
Global Solutions, Insights & Analytics - ETFLogic and Ventriks
in the Q2 2022 MD&A for more details.
28 Includes costs related to the integration
of AST Canada (acquired August 12,
2021). See Initiatives and Accomplishments - Capital
Formation - AST Canada transaction in the Q2 2022 MD&A for more
details.
29 Gain resulting from the revaluation of our
interest in BOX upon acquisition of voting control (effective
January 3, 2022). See Other Income
for more details.
30 Adjusted net income is a non-GAAP measure, see
discussion under the heading "Non-GAAP Measures".
|
1H/22
|
1H/21
|
(unaudited)
|
Basic
|
Diluted
|
Basic
|
Diluted
|
Earnings per share
(attributable to equity holders of TMX Group)
|
$6.44
|
6.41
|
$3.09
|
$3.07
|
Adjustments related
to:
|
|
|
|
|
Amortization of
intangibles related to acquisitions31
|
0.39
|
0.38
|
0.34
|
0.34
|
Acquisition and
related costs32
|
0.01
|
0.01
|
0.02
|
0.02
|
Integration
costs33
|
0.08
|
0.08
|
—
|
—
|
Gain on
BOX34
|
(3.19)
|
(3.17)
|
—
|
—
|
Increase in deferred
income tax liabilities relating to a change in the future U.K. tax
rate
|
—
|
—
|
0.35
|
0.35
|
Adjusted earnings per
share35
|
$3.73
|
$3.71
|
$3.80
|
$3.78
|
Weighted average number
of common shares outstanding
|
55,796,770
|
56,078,658
|
56,217,748
|
56,611,340
|
Adjusted diluted earnings per share decreased by 2% from
$3.78 in 1H/21 to $3.71 in 1H/22 largely driven by higher operating
expenses. This decrease was partially offset by higher
revenue, and an increase in adjusted earnings per share
attributable to a decrease in the number of weighted average common
shares outstanding from 1H/21 to 1H/22.
_______________________________
|
31
Includes amortization expense of acquired intangibles
including BOX, AST Canada, and Tradesignal in the six months ended
June 30, 2022.
32 Includes costs related to the acquisition
of AST Canada (acquired August 12, 2021) and Tradesignal (acquired
June 1, 2021) in 1H/21, and the equity investment in ETFLogic
(February 2022) and Ventriks Ltd. (June 2022) in 1H/22. See
Initiatives and Accomplishments - Capital Formation - AST Canada
transaction, Global Solutions, Insights & Analytics - ETFLogic
and Ventriks in the Q2 2022 MD&A for more details.
33 Includes costs related to the integration of
AST Canada (acquired August 12, 2021). See Initiatives and
Accomplishments - Capital Formation - AST Canada transaction in the
Q2 2022 MD&A for more details.
34 Gain resulting from the revaluation of our
interest in BOX upon acquisition of voting control (effective
January 3, 2022). See Other Income for more details.
35 Adjusted earnings per share is a non-GAAP
ratio, see discussion under the heading "Non-GAAP
Measures".
|
Revenue
(in millions of
dollars)
|
1H/22
|
1H/21
|
$ increase /
(decrease)
|
% increase /
(decrease)
|
Capital
Formation
|
$137.2
|
$130.3
|
$6.9
|
5 %
|
Equities and Fixed
Income Trading and Clearing
|
121.0
|
126.0
|
(5.0)
|
(4) %
|
Derivatives Trading and
Clearing
|
135.6
|
71.4
|
64.2
|
90 %
|
Global Solutions,
Insights and Analytics
|
178.5
|
169.6
|
8.9
|
5 %
|
Other
|
0.9
|
(0.3)
|
1.2
|
(400) %
|
|
$573.2
|
$497.0
|
$76.2
|
15 %
|
Revenue was $573.2 million in 1H/22
up $76.2 million or 15% compared with
$497.0 million in 1H/21 attributable
to increases in revenue from Derivatives Trading and Clearing,
Global Solutions, Insights and Analytics, as well as Capital
Formation, partially offset by a decrease in Equities and
Fixed Income Trading and Clearing revenue. The increase
included $60.3 million of revenue for
BOX (consolidated January 3, 2022),
$21.1 million for AST Canada
(acquired August 12, 2021), and
$0.8 million for Tradesignal
(acquired June 1, 2021).
Excluding revenue from BOX, AST Canada, and Tradesignal, revenue
was down 1% in 1H/22 compared with 1H/21.
Operating expenses
(in millions of
dollars)
|
1H/22
|
1H/21
|
$
increase
|
%
increase
|
Compensation and
benefits
|
$137.7
|
$122.1
|
$15.6
|
13 %
|
Information and trading
systems
|
41.6
|
30.5
|
11.1
|
36 %
|
Selling, general and
administration
|
57.9
|
37.1
|
20.8
|
56 %
|
Depreciation and
amortization
|
55.9
|
41.7
|
14.2
|
34 %
|
|
$293.1
|
$231.4
|
$61.7
|
27 %
|
Operating expenses in 1H/22 were $293.1
million, up $61.7 million or
27%, from $231.4 million in
1H/21. There were approximately $53.2
million of expenses included in 1H/22 related to BOX
(consolidated January 3, 2022), AST
Canada (acquired August 12, 2021),
and Tradesignal (acquired June 1,
2021). The increased expenses included $5.6 million related to amortization of
acquired intangibles for AST Canada and BOX (8 cents per basic and diluted share),
$2.2 million related to AST Canada's
TSA, as well as AST integration costs of $6.1 million (8
cents per basic and diluted share). There were increased
headcount and payroll costs, increased costs related to our long
term employee performance incentive plan of approximately
$3.4 million, and increased expenses
for travel and entertainment. In addition, there were higher
expenses in 1H/22 due to the release of a provision for restoration
costs for our data centre in 1H/21.
Partially offsetting these increases was lower short term
employee performance incentive plan costs of approximately
$6.7 million, and lower
severance. We also incurred $1.2
million (2 cent per basic and
diluted share) in acquisition and related costs related to
Tradesignal and AST Canada in 1H/21. Excluding expenses from
BOX, AST Canada, and Tradesignal, operating expenses increased 4%
in 1H/22 compared with 1H/21.
Additional Information
Share of (loss) income from equity accounted
investees
(in millions of
dollars)
|
1H/22
|
1H/21
|
$
(decrease)
|
%
(decrease)
|
|
$(0.4)
|
$14.3
|
$(14.7)
|
(103) %
|
- In 1H/22, our share of (loss) income from equity accounted
investees decreased by $14.7 million
primarily due to a change in accounting relating to BOX
(consolidated January 3, 2022) and
CanDeal[36]. For 1H/22, our share of (loss) income from
equity accounted investees includes CanDeal[37], ETFLogic and
Ventriks compared with 1H/21, which included BOX and
CanDeal[38].
Other income
(in millions of
dollars)
|
1H/22
|
1H/21
|
$
increase
|
%
increase
|
|
$177.9
|
—
|
$177.9
|
n/a
|
- In 1H/22, we recognized a non-cash gain of $177.9 million resulting from the revaluation of
our interest in BOX upon acquisition of voting control
(January 3, 2022). See
Results of Operations - BOX in the Q2 2022 MD&A for more
details.
Income tax expense and effective tax
rate
Income Tax
Expense (in millions of dollars)
|
Effective Tax
Rate (%)
|
1H/22
|
1H/21
|
1H/22
|
1H/21
|
$60.3
|
$88.3
|
14 %
|
34 %
|
Excluding adjustments, primarily related to the items noted
below, the effective tax rate would have been approximately 26% for
1H/22 and 1H/21.
- In 1H/22, there was a non-taxable gain resulting from the
revaluation of our interest in BOX upon acquisition of voting
control (effective January 3,
2022).
- In 1H/22, we recognized a deferred tax asset relating to
historical tax losses not previously recognized for VisoTech,
resulting in a corresponding decrease in income tax expense of
$0.9 million.
- In 1H/21, the previously announced increase in the U.K.
corporate income tax rate from 19% to 25%, effective April 1, 2023, was substantively enacted. This
rate change increased net deferred income tax liabilities,
resulting in a corresponding increase in income tax expense of
$19.8 million.
_______________________________
|
36
Effective February 28, 2022, TMX discontinued the application of
the equity method of accounting for CanDeal.
37 Effective February 28, 2022, TMX discontinued
the application of the equity method of accounting for CanDeal.
38 Effective February 28, 2022, TMX discontinued
the application of the equity method of accounting for
CanDeal.
|
Net income attributable to non-controlling interests
(in millions of
dollars)
|
1H/22
|
1H/21
|
$
increase
|
|
$20.2
|
—
|
$20.2
|
- As of January 3, 2022, we began
consolidating BOX as we gained voting control over BOX. As a result
our financial results from January 3,
2022 forward include the results from BOX on a consolidated
basis and we report the Net income attributable to
non-controlling interests in our financial statements.
- For periods from July 1, 2016 to
January 2, 2022, our financial
results did not include the full impact of BOX, and our share of
BOX's net income was reflected in Net income (loss) from equity
accounted investees in our financial statements.
FINANCIAL STATEMENTS GOVERNANCE PRACTICE
The Finance & Audit Committee of the Board of Directors of
TMX Group (Board) reviewed this press release as well as the Q2/22
unaudited condensed consolidated interim financial statements and
related Management's Discussion and Analysis (MD&A) and
recommended they be approved by the Board of Directors.
Following review by the full Board, the Q2/22 unaudited condensed
consolidated interim financial statements, MD&A and the
contents of this press release were approved.
CONSOLIDATED FINANCIAL STATEMENTS
Our Q2/22 unaudited condensed consolidated interim financial
statements are prepared in accordance with IFRS and are reported in
Canadian dollars unless otherwise indicated. Financial measures
contained in the MD&A and this press release are based on
financial statements prepared in accordance with IFRS, unless
otherwise specified and are in Canadian dollars unless otherwise
indicated.
ACCESS TO MATERIALS
TMX Group has filed its Q2/22 unaudited condensed consolidated
interim financial statements and MD&A with Canadian securities
regulators. This press release should be read together with our
Q2/22 unaudited condensed consolidated interim financial statements
and MD&A. These documents may be accessed through
www.sedar.com, or on the TMX Group website at www.tmx.com. We
are not incorporating information contained on the website in this
press release. In addition, copies of these documents will be
available upon request, at no cost, by contacting TMX Group
Investor Relations by phone at (416) 947-4277 or by e-mail at
TMXshareholder@tmx.com.
CAUTION REGARDING FORWARD-LOOKING INFORMATION
This press release of TMX Group contains "forward-looking
information" (as defined in applicable Canadian securities
legislation) that is based on expectations, assumptions, estimates,
projections and other factors that management believes to be
relevant as of the date of this press release. Often, but not
always, such forward-looking information can be identified by the
use of forward-looking words such as "plans," "expects," "is
expected," "budget," "scheduled," "targeted," "estimates,"
"forecasts," "intends," "anticipates," "believes," or variations or
the negatives of such words and phrases or statements that certain
actions, events or results "may," "could," "would," "might," or
"will" be taken, occur or be achieved or not be taken, occur or be
achieved. Forward-looking information, by its nature, requires us
to make assumptions and is subject to significant risks and
uncertainties which may give rise to the possibility that our
expectations or conclusions will not prove to be accurate and that
our assumptions may not be correct.
Examples of forward-looking information include, but are not
limited to, growth objectives; our target dividend payout ratio;
the ability of TMX Group to de-leverage and the timing thereof; the
modernization of clearing platforms, including the expected cash
expenditures related to the modernization of our clearing platforms
and the timing of the modernization; other statements related to
cost reductions; the impact of the market capitalization of TSX and
TSXV issuers overall (from 2020 to 2021); future changes to TMX
Group's anticipated statutory income tax rate for 2022; factors
relating to stock, and derivatives exchanges and clearing houses
and the business, strategic goals and priorities, market
conditions, pricing, proposed technology and other business
initiatives and the timing and implementation thereof, the expected
integration costs related to AST Canada and the timing thereof, the
expected cost of the transitional services agreement related to AST
Canada, the anticipated benefits and synergies of the AST Canada,
including the expected impact on TMX Group's earnings and adjusted
earnings per share and the timing thereof, financial results or
financial condition, operations and prospects of TMX Group which
are subject to significant risks and uncertainties.
These risks include, but are not limited to: competition from
other exchanges or marketplaces, including alternative trading
systems and new technologies, on a national and international
basis; dependence on the economy of Canada; adverse effects on our results caused
by global economic conditions (including COVID-19) or uncertainties
including changes in business cycles that impact our sector;
failure to retain and attract qualified personnel; geopolitical and
other factors which could cause business interruption (including
COVID-19); dependence on information technology; vulnerability of
our networks and third party service providers to security risks,
including cyber-attacks; failure to properly identify or implement
our strategies; regulatory constraints; constraints imposed by our
level of indebtedness, risks of litigation or other proceedings;
dependence on adequate numbers of customers; failure to develop,
market or gain acceptance of new products; failure to close and
effectively integrate acquisitions to achieve planned economics,
including AST Canada, or divest underperforming businesses;
currency risk; adverse effect of new business activities; adverse
effects from business divestitures; not being able to meet cash
requirements because of our holding company structure and
restrictions on paying dividends; dependence on third-party
suppliers and service providers; dependence of trading operations
on a small number of clients; risks associated with our clearing
operations; challenges related to international expansion;
restrictions on ownership of TMX Group common shares; inability to
protect our intellectual property; adverse effect of a systemic
market event on certain of our businesses; risks associated with
the credit of customers; cost structures being largely fixed; the
failure to realize cost reductions in the amount or the time frame
anticipated; dependence on market activity that cannot be
controlled; the regulatory constraints that apply to the business
of TMX Group and its regulated subsidiaries, costs of on exchange
clearing and depository services, trading volumes (which could be
higher or lower than estimated) and revenues; future levels of
revenues being lower than expected or costs being higher than
expected.
Forward-looking information is based on a number of assumptions
which may prove to be incorrect, including, but not limited to,
assumptions in connection with the ability of TMX Group to
successfully compete against global and regional marketplaces;
business and economic conditions generally; exchange rates
(including estimates of exchange rates from Canadian dollars to the
U.S. dollar or GBP), commodities prices, the level of trading and
activity on markets, and particularly the level of trading in TMX
Group's key products; business development and marketing and sales
activity; the continued availability of financing on appropriate
terms for future projects; changes to interest rates and the timing
thereof, among other things, could positively or negatively impact
AST Canada's accretion to adjusted earnings per share; the amount
and timing of incurrence of AST Canada integration costs; the
amount and timing of: revenue and technology cost synergies
resulting from the AST Canada acquisition; productivity at TMX
Group, as well as that of TMX Group's competitors; market
competition; research and development activities; the successful
introduction and client acceptance of new products; successful
introduction of various technology assets and capabilities; the
impact on TMX Group and its customers of various regulations; TMX
Group's ongoing relations with its employees; and the extent of any
labour, equipment or other disruptions at any of its operations of
any significance other than any planned maintenance or similar
shutdowns.
Assumptions related to long term financial objectives
In addition to the assumptions outlined above, forward looking
information related to long term revenue cumulative average annual
growth rate (CAGR) objectives, and long term adjusted earnings per
share CAGR objectives are based on assumptions that include, but
not limited to:
- TMX Group's success in achieving growth initiatives and
business objectives;
- continued investment in growth businesses and in transformation
initiatives including next generation post-trade systems;
- no significant changes to our effective tax rate, recurring
revenue, and number of shares outstanding;
- moderate levels of market volatility;
- level of listings, trading, and clearing consistent with
historical activity;
- economic growth consistent with historical activity;
- no significant changes in regulations;
- continued disciplined expense management across our
business;
- continued re-prioritization of investment towards enterprise
solutions and new capabilities;
- free cash flow generation consistent with historical run rate;
and
- a limited impact from the COVID-19 pandemic on our plans to
grow our business over the long term including on the ability of
our listed issuers to raise capital.
While we anticipate that subsequent events and developments may
cause our views to change, we have no intention to update this
forward-looking information, except as required by applicable
securities law. This forward-looking information should not be
relied upon as representing our views as of any date subsequent to
the date of this press release. We have attempted to identify
important factors that could cause actual actions, events or
results to differ materially from those current expectations
described in forward-looking information. However, there may
be other factors that cause actions, events or results not to be as
anticipated, estimated or intended and that could cause actual
actions, events or results to differ materially from current
expectations. There can be no assurance that forward-looking
information will prove to be accurate, as actual results and future
events could differ materially from those anticipated in such
statements. Accordingly, readers should not place undue
reliance on forward-looking information. These factors are
not intended to represent a complete list of the factors that could
affect us. A description of the above-mentioned items is contained
in the section "Enterprise Risk Management" of our
2021 Annual MD&A.
About TMX Group (TSX:X)
TMX Group operates global markets, and builds digital
communities and analytic solutions that facilitate the funding,
growth and success of businesses, traders and investors. TMX
Group's key operations include Toronto Stock Exchange, TSX Venture
Exchange, TSX Alpha Exchange, The Canadian Depository for
Securities, Montréal Exchange, Canadian Derivatives Clearing
Corporation, and Trayport which provide listing markets, trading
markets, clearing facilities, depository services, technology
solutions, data products and other services to the global financial
community. TMX Group is headquartered in Toronto and operates offices across
North America (Montréal,
Calgary, Vancouver and New
York), as well as in key international markets including
London and Singapore. For more information about TMX
Group, visit our website at www.tmx.com. Follow TMX Group on
Twitter: @TMXGroup.
Teleconference / Audio Webcast
TMX Group will host a teleconference / audio webcast to discuss
the financial results for Q2/22.
Time: 8:00 a.m. - 9:00 a.m. ET on
Friday July 29, 2022.
To teleconference participants: Please call the following number
at least 15 minutes prior to the start of the event.
The audio webcast of the conference call will also be available
on TMX Group's website at www.tmx.com, under Investor
Relations.
Teleconference Number: 416-764-8659 or 1-888-664-6392
Audio Replay: 416-764-8677 or 1-888-390-0541
The pass code for the replay is 897683.
SOURCE TMX Group Limited