- Revenue of $287.3 million, up 8%
from $266.8 million in Q3/22
- Diluted earnings per share of $0.31, up 7% from $0.29 in Q3/22
- Adjusted diluted earnings per share1 of $0.35, up 3% from $0.34 in Q3/22
TORONTO, Oct. 30,
2023 /CNW/ - TMX Group Limited (TSX: X) ("TMX Group")
today announced results for the third quarter ended
September 30, 2023.
Commenting on results for the first nine months of 2023,
John McKenzie, Chief Executive
Officer of TMX Group, said:
"TMX's positive results for the first three quarters of 2023
stand as compelling evidence of the enduring efficacy of our
long-term strategy to diversify, globalize and innovate across our
business. Higher overall revenue was driven by double-digit,
year-over-year growth from Global Solutions, Insights and
Analytics, including Trayport and TMX Datalinx, and increased
revenue from Derivatives Trading and Clearing, excluding BOX.
Partially offsetting these increases, revenue from capital raising
activity, and Equities and Fixed Income Trading, was lower compared
to the first nine months of 2022 due to persistent challenges in
market conditions. Moving forward, TMX's priority focus is on
serving clients around the world with excellence, while pushing the
evolution of the organization to meet the needs of modern capital
markets stakeholders long into the future"
Commenting on performance in the third quarter of 2023,
David Arnold, Chief Financial
Officer of TMX Group, said:
"Our financial results for the third quarter once again reflect
the intrinsic strength of our balanced business model, as we
achieved positive revenue and earnings per share growth amidst
challenging market conditions. TMX reported 8% growth in revenue
and 7% growth in diluted earnings per share (3% on an adjusted
basis) year-over-year, reflecting increases across some of our key
business areas. Higher overall revenue was driven by increases from
recurring sources, a 19% increase in revenue from GSIA, including
Trayport and TMX Datalinx, and higher revenue from Derivatives
Trading and Clearing (excluding BOX), and CDS. Increases were
partially offset by the negative impacts of lower activity in
capital raising and equities trading."
___________________________
|
1 Adjusted
diluted earnings per share is a non-GAAP ratio, see discussion
under the heading "Non-GAAP Measures".
|
RESULTS OF OPERATIONS2
Non-GAAP Measures
Adjusted net income is a non-GAAP measure3, and
adjusted earnings per share, adjusted diluted earnings per share,
and adjusted earnings per share CAGR are non-GAAP
ratios4, 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
attributable to equity holders of TMX Group and Adjusted Earnings
Per Share Reconciliation for Q3/23 and Q3/22" and "Adjusted Net
Income attributable to equity holders of TMX Group and Adjusted
Earnings Per Share Reconciliation for FNM/23 and FNM/22".
We have also presented long term adjusted EPS CAGR as a
financial objective which is the growth rate in adjusted diluted
earnings per share over time, exclusive of adjustments that impact
the comparability of adjusted EPS from period to period, including
those outlined under the headings "Adjusted Earnings Per Share
Reconciliation for Q3/23 and Q3/22" and "Adjusted Net Income
attributable to equity holders of TMX Group and Adjusted Earnings
Per Share Reconciliation for FNM/23 and FNM/22". The adjusted EPS
CAGR is based on the assumptions outlined under the heading
"Caution Regarding Forward Looking Information - Assumptions
related to long term financial objectives".
Similarly, we present the dividend payout ratio based on
dividends paid divided by adjusted earnings per share as a measure
of TMX Group's ability to make dividend payments, exclusive of a
number of adjustments as outlined under the heading "Adjusted Net
Income attributable to equity holders of TMX Group and Adjusted
Earnings Per Share Reconciliation for Q3/23 and Q3/22" and
"Adjusted Net Income attributable to equity holders of TMX Group
and Adjusted Earnings Per Share Reconciliation for FNM/23 and
FNM/22".
Debt to adjusted EBITDA ratio is a non-GAAP measure defined as
total long term debt and debt maturing within one year divided by
adjusted EBITDA. Adjusted EBITDA is calculated as net income
excluding interest expense, income tax expense, depreciation and
amortization, transaction related costs, integration costs,
one-time income (loss), and other significant items that are not
reflective of TMX Group's underlying business operations.
____________________________________
|
2 TMX Group
completed a five-for-one split of its common shares
outstanding (the Stock Split) effective at the close of
business on June 13, 2023. All common share numbers and per share
amounts in this release, including comparative figures, have been
adjusted to reflect the Stock Split.
|
3 As defined
in National Instrument 52-112 Non-GAAP and Other Financial Measures
Disclosure.
|
4 As defined
in National Instrument 52-112 Non-GAAP and Other Financial Measures
Disclosure.
|
Quarter ended September 30,
2023 (Q3/23) Compared with Quarter ended September 30, 2022
(Q3/22)5
The information below reflects the financial statements of TMX
Group for Q3/23 compared with Q3/22.
(in millions of
dollars, except per
share amounts)
|
Q3/23
|
Q3/22
|
$
increase
|
%
increase
|
Revenue
|
$287.3
|
$266.8
|
$20.5
|
8 %
|
Operating
expenses
|
162.0
|
144.2
|
17.8
|
12 %
|
Income from
operations
|
125.3
|
122.6
|
2.7
|
2 %
|
Net income attributable
to equity
holders of TMX Group
|
85.3
|
81.0
|
4.3
|
5 %
|
Adjusted net income
attributable to
equity holders of TMX Group6
|
96.8
|
93.7
|
3.1
|
3 %
|
|
|
|
|
|
Earnings per
share
|
|
|
|
|
Basic
|
0.31
|
0.29
|
0.02
|
7 %
|
Diluted
|
0.31
|
0.29
|
0.02
|
7 %
|
Adjusted Earnings per
share7
|
|
|
|
|
Basic
|
0.35
|
0.34
|
0.01
|
3 %
|
Diluted
|
0.35
|
0.34
|
0.01
|
3 %
|
|
|
|
|
|
Cash flows from
operating activities
|
117.0
|
112.5
|
4.5
|
4 %
|
Net Income attributable to equity holders of TMX Group and
Earnings per Share
Net income attributable to equity holders of TMX Group in
Q3/23 was $85.3 million, or $0.31 per common share on a basic and diluted
basis, compared with a net income attributable to equity holders of
TMX Group of $81.0 million, or
$0.29 per common share on a basic and
diluted basis for Q3/22. The increase in net income attributable to
equity holders of TMX Group reflects an increase in Income from
operations of $2.7 million from
Q3/22 to Q3/23 driven by an increase in revenue of $20.5 million partially offset by an
increase in operating expenses of $17.8 million. The increase in revenue from
Q3/22 to Q3/23 reflects higher revenue from Global Solutions,
Insights and Analytics, Derivatives Trading and Clearing (excl.
BOX), CDS, and TSX Trust, partially offset by lower Listings,
Equity and Fixed Income Trading, and BOX Options Market LLC (BOX)
revenue. Q3/23 revenue also included $1.8 million related to WSH (acquired
November 9, 2022). The higher
expenses included $6.7 million
related to BOX's estimate of increased expenses for services
provided by BOX Exchange LLC8, as well as approximately
$2.1 million of expenses related
to WSH, of which there was approximately $0.4 million related to amortization of acquired
WSH intangibles. There were also higher expenses reflecting higher
headcount and payroll costs, employee performance incentive plan
costs, consulting and legal fees, and IT operating costs. Somewhat
offsetting these increases was $3.5
million in integration costs related to AST Canada incurred
in Q3/22.
________________________________
|
5 TMX Group
completed a five-for-one split of its common shares
outstanding (the Stock Split) effective at the close of
business on June 13, 2023. All common share numbers and per
share amounts in this release, including comparative figures, have
been adjusted to reflect the Stock Split.
|
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".
|
8 BOX
Exchange LLC is a national securities exchange registered with the
Securities and Exchange Commission, and is responsible for
regulating and monitoring activities of BOX Options Market LLC, to
ensure compliance with BOX Exchange rules and U.S. federal
securities laws. TMX has a 40% equity and a 20% voting interest in
BOX Exchange LLC.
|
The increase in earnings per share was also partially
attributable to decreased net finance costs, somewhat offset by an
increase in the number of weighted average common shares
outstanding from Q3/22 to Q3/23, and higher income tax expense.
Adjusted Net Income attributable to equity holders of TMX
Group9 and Adjusted Earnings per
Share10 Reconciliation for Q3/23 and
Q3/2211
The following tables present reconciliations of net income
attributable to equity holders of TMX Group to adjusted net income
attributable to equity holders of TMX Group and earnings per share
to adjusted earnings per share. The financial results have been
adjusted for the following:
- The amortization expenses of intangible assets in
Q3/22 and Q3/23 related to the 2012 Maple transaction (TSX,
TSXV, MX, CDS, Alpha, Shorcan), TSX Trust, Trayport (including
VisoTech and Tradesignal), AST Canada, and BOX, and the
amortization of intangibles related to WSH in Q3/23. These costs
are a component of Depreciation and amortization
expenses.
- Fair value gain on contingent consideration, reflecting a
reduction in the earn-out liability assumed as part of the WSH
acquisition in Q4/22. The gain is included in Net Finance
Costs.
- Integration costs related to integrating the AST Canada
acquisition in Q3/22. These costs are included in Depreciation
and amortization, Compensation and benefits and Selling,
general and administration.
- A decrease in deferred income tax liabilities which decreased
income tax expenses in Q3/22 relating to a decrease in the
Pennsylvania and Nebraska future income tax rates.
|
Pre-tax
|
Tax
|
After-tax
|
(in millions of
dollars)
(unaudited)
|
Q3/23
|
Q3/22
|
Q3/23
|
Q3/22
|
Q3/23
|
Q3/22
|
$ increase /
(decrease)
|
% increase /
(decrease)
|
Net income attributable
to equity holders of TMX Group
|
|
|
|
|
$85.3
|
$81.0
|
$4.3
|
5 %
|
Adjustments related
to:
|
|
|
|
|
|
|
|
|
Amortization of
intangibles
related to acquisitions12
|
15.0
|
14.2
|
3.4
|
3.4
|
11.6
|
10.8
|
0.8
|
7 %
|
Integration
costs13
|
—
|
3.5
|
—
|
0.9
|
—
|
2.6
|
(2.6)
|
(100) %
|
Fair value gain on
contingent
consideration14
|
(0.1)
|
—
|
—
|
—
|
(0.1)
|
—
|
(0.1)
|
n/a
|
Change in deferred
income tax
liabilities relating to changes in
future tax rates15
|
—
|
—
|
—
|
0.7
|
—
|
(0.7)
|
0.7
|
(100) %
|
Adjusted net income
attributable to
equity holders of TMX Group16
|
|
|
|
|
$96.8
|
$93.7
|
$3.1
|
3 %
|
___________________________
|
9 Adjusted
net income is a non-GAAP measure, see discussion under the heading
"Non-GAAP Measures".
|
10 Adjusted
earnings per share is a non-GAAP ratio, see discussion under the
heading "Non-GAAP Measures".
|
11 TMX Group
completed a five-for-one split of its common shares
outstanding (the Stock Split) effective at the close of
business on June 13, 2023. All common share numbers and per
share amounts in this release, including comparative figures, have
been adjusted to reflect the Stock Split.
|
12 Includes
amortization expense of acquired intangibles including BOX, AST
Canada, and Tradesignal in Q3/22 and Q3/23 and WSH in
Q3/23
|
13
Includes costs related to the integration of AST Canada (acquired
August 12, 2021) in Q3/22.
|
14 For
additional information, see discussion under the heading
"Additional Information - Net Finance Costs".
|
15 Future
reductions in income tax rates in Pennsylvania and
Nebraska.
|
16 Adjusted
net income is a non-GAAP measure, see discussion under the heading
"Non-GAAP Measures".
|
Adjusted net income attributable to equity holders of TMX
Group increased by 3% from $93.7
million in Q3/22 to $96.8 million in Q3/23 largely driven by
higher revenue and lower net finance costs, partially offset by
higher operating expenses and higher income tax expense.
|
Q3/23
|
Q3/22
|
(unaudited)
|
Basic
|
Diluted
|
Basic
|
Diluted
|
Earnings per share
attributable to equity holders of TMX
Group
|
$0.31
|
$0.31
|
$0.29
|
$0.29
|
Adjustments related
to:
|
|
|
|
|
Amortization of
intangibles related to acquisitions17
|
0.04
|
0.04
|
0.04
|
0.04
|
Integration
costs18
|
—
|
—
|
0.01
|
0.01
|
Adjusted earnings per
share attributable to equity holders
of TMX Group19
|
$0.35
|
$0.35
|
$0.34
|
$0.34
|
Weighted average number
of common shares outstanding
|
278,423,567
|
279,321,968
|
278,042,680
|
279,115,695
|
Adjusted diluted earnings per share increased by 1 cent from $0.34
in Q3/22 to $0.35 in Q3/23 reflecting
an increase in income from operations and lower net finance costs.
The increase in adjusted earnings per share was somewhat offset by
an increase in the number of weighted average common shares
outstanding and higher income tax expense from Q3/22 to Q3/23.
_____________________________
|
17 Includes
amortization expense of acquired intangibles including BOX, AST
Canada, and Tradesignal in Q3/22 and Q3/23, and WSH in
Q3/23.
|
18 Includes
costs related to the integration of AST Canada (acquired August 12,
2021) in Q3/22.
|
19 Adjusted
earnings per share is a non-GAAP ratio, see discussion under the
heading "Non-GAAP Measures". Fair Value Gain on Contingent
Consideration and Change in Deferred Income Tax Liabilities
Relating to Changes in Future Tax Rates are not presented in
the reconciliation due to the size of the adjustment being less
than a penny.
|
Revenue
(in millions of
dollars)
|
Q3/23
|
Q3/22
|
$ increase /
(decrease)
|
% increase /
(decrease)
|
Capital
Formation
|
$60.4
|
$62.6
|
$(2.2)
|
(4) %
|
Equities and Fixed
Income Trading
and Clearing
|
54.9
|
54.1
|
0.8
|
1 %
|
Derivatives Trading
and Clearing
|
67.6
|
62.1
|
5.5
|
9 %
|
Global Solutions,
Insights and
Analytics
|
104.3
|
87.9
|
16.4
|
19 %
|
Other
|
0.1
|
0.1
|
0.0
|
0 %
|
|
$287.3
|
$266.8
|
$20.5
|
8 %
|
Revenue was $287.3 million in
Q3/23, up $20.5 million or 8% from
$266.8 million in Q3/22 attributable
to increases in revenue from Global Solutions, Insights and
Analytics, Derivatives Trading and Clearing (excl. BOX),
and Equities and Fixed Income Trading and Clearing,
partially offset by decreases in Capital Formation, and a
$1.9 million decrease in BOX revenue.
The increase in revenue from Q3/22 to Q3/23 included $1.8 million of revenue for WSH (acquired
November 9, 2022). Excluding revenue
from WSH, revenue was up 7% in Q3/23 compared to Q3/22.
Operating expenses
(in millions of
dollars)
|
Q3/23
|
Q3/22
|
$ increase/
(decrease)
|
% increase/
(decrease)
|
Compensation and
benefits
|
$77.0
|
$67.4
|
$9.6
|
14 %
|
Information and trading
systems
|
23.7
|
23.0
|
0.7
|
3 %
|
Selling, general and
administration
|
33.1
|
24.9
|
8.2
|
33 %
|
Depreciation and
amortization
|
28.2
|
28.9
|
(0.7)
|
(2) %
|
|
$162.0
|
$144.2
|
$17.8
|
12 %
|
Operating expenses in Q3/23 were $162.0
million, up $17.8 million or
12%, from $144.2 million in Q3/22,
primarily driven by $6.7 million
related to BOX's estimate of increased expenses ($4.6 million in 1H/23, and the remaining
$2.1 million in Q3/23) for services
provided by BOX Exchange LLC. The increase from Q3/22 to Q3/23
included approximately $2.1 million related to WSH (acquired
November 9, 2022), of which there was
approximately $0.4 million related to
WSH's amortization of acquired intangibles. There were also higher
expenses reflecting higher headcount and payroll costs, employee
performance incentive plan costs, consulting and legal fees, and
increased IT operating costs.
Somewhat offsetting these increases was $3.5 million in integration costs related to AST
Canada incurred in Q3/22.
Excluding the above mentioned expenses for BOX, WSH, and AST
Canada, operating expenses increased 9% in Q3/23 compared with
Q3/22.
Additional Information
Share of (loss) income from equity-accounted
investments
(in millions of
dollars)
|
Q3/23
|
Q3/22
|
$
decrease
|
%
decrease
|
|
$(0.1)
|
$(0.4)
|
$0.3
|
75 %
|
- In Q3/23, our share of loss from equity-accounted investments
decreased by $0.3 million. For Q3/23,
our share of (loss) income from equity-accounted investments
includes VettaFi20, Ventriks, and other equity
accounted investments, compared with Q3/22, which included
SigmaLogic and Ventriks.
Net finance costs
(in millions of
dollars)
|
Q3/23
|
Q3/22
|
$
(decrease)
|
%
(decrease)
|
|
$3.2
|
$5.2
|
$(2.0)
|
(38) %
|
- The decrease in net finance costs from Q3/22 to Q3/23 reflected
higher interest income on funds invested of $4.5 million as a result of higher interest
rates, and a $0.1 million fair value
gain on contingent consideration, reflecting a reduction in the
earn-out liability assumed as part of the WSH acquisition, somewhat
offset by higher interest expense on borrowings, and higher foreign
exchange losses of $0.8 million.
Income tax expense and effective tax
rate
Income Tax
Expense (in millions of dollars)
|
Effective Tax
Rate (%)
|
Q3/23
|
Q3/22
|
Q3/23
|
Q3/22
|
$30.6
|
$25.4
|
25 %
|
22 %
|
Excluding adjustments, primarily related to the items noted
below, the effective tax rate would have been approximately 27%,
excluding NCI, for Q3/23, an increase of 1% from Q3/22 primarily
due to an increase in the U.K. corporate income tax rate from 19%
to 25% effective April 1, 2023. A
blended tax rate of 23.5% was applied through the tax year as
required for corporations with a December
31st year-end.
- In Q3/23, there were non-taxable FX gains resulting from the
unrealized translation of monetary assets and liabilities.
- In Q3/22, Pennsylvania and
Nebraska announced future
reductions in income tax rates, which decreased the deferred income
tax liabilities, resulting in a corresponding decrease in income
tax expense.
Net income attributable to non-controlling interests
(in millions of
dollars)
|
Q3/23
|
Q3/22
|
$
(decrease)
|
|
$6.1
|
10.6
|
$(4.5)
|
____________________
|
20
Equity-accounted investment as of January 9, 2023.
|
- The decrease in net income attributable to non-controlling
interests (NCI) for Q3/23 compared to Q3/22 is primarily due to
lower net income in BOX driven by lower revenue and higher
operating expenses, including an increase in BOX's estimate of
expenses for services provided by BOX Exchange LLC.
Nine months ended September 30, 2023 (FNM/23) Compared
with nine months ended September 30, 2022
(FNM/22)21
The information below reflects the financial statements of TMX
Group for the nine months ended September
30, 2023 (FNM/23) compared with the nine months ended
September 30, 2022 (FNM/22).
(in millions of
dollars, except per share
amounts)
|
FNM/23
|
FNM/22
|
$ increase /
(decrease)
|
% increase /
(decrease)
|
Revenue
|
$892.6
|
$839.2
|
$53.4
|
6 %
|
Operating
expenses
|
480.8
|
437.3
|
43.5
|
10 %
|
Income from
operations
|
411.8
|
401.9
|
9.9
|
2 %
|
Net income attributable
to equity
holders of TMX Group
|
271.6
|
440.5
|
(168.9)
|
(38) %
|
Adjusted net income
attributable to
equity holders of TMX Group22 23
|
306.1
|
301.7
|
4.4
|
1 %
|
|
|
|
|
|
Earnings per share
attributable to
equity holders of TMX Group
|
|
|
|
|
Basic
|
0.98
|
1.58
|
(0.60)
|
(38) %
|
Diluted
|
0.97
|
1.57
|
(0.60)
|
(38) %
|
Adjusted Earnings per
share
attributable to equity holders of TMX
Group24 25
|
|
|
|
|
Basic
|
1.10
|
1.08
|
0.02
|
2 %
|
Diluted
|
1.10
|
1.08
|
0.02
|
2 %
|
|
|
|
|
|
Cash flows from
operating activities
|
384.8
|
343.2
|
41.6
|
12 %
|
Net Income attributable to equity holders of TMX Group
and Earnings per Share
Net income attributable to equity holders of TMX Group in FNM/23
was $271.6 million, or $0.98 per
common share on a basic and $0.97 on
a diluted basis, compared with $440.5
million, or $1.58 per common
share on a basic and $1.57 on a
diluted basis, for FNM/22. The decrease in net income attributable
to equity holders of TMX Group is largely due to a non-cash gain of
$177.9 million being recognized in
Q1/22 resulting from the revaluation of our interest in BOX upon
acquisition of voting control, partially offset by an increase in
income from operations of $9.9
million. The increase in income from operations from FNM/22
to FNM/23 was driven by an increase in revenue of $53.4 million, reflecting higher revenue from
Global Solutions, Insights and Analytics, TSX Trust, Derivatives
Trading and Clearing (excl. BOX), and CDS, partially offset by
lower Listing, Equity and Fixed Income trading, and BOX revenue.
The revenue increase also included $5.3 million related to WSH, and
$0.2 million for SigmaLogic.
There was also an increase in operating expenses of $43.5 million, which included $8.0 million of expenses related to
SigmaLogic, WSH, and VettaFi, of which there was approximately
$1.5 million related to
amortization of acquired intangibles for WSH, as well as
$0.8 million related to acquisition
and related expenses for SigmaLogic, WSH and VettaFi. The increase
from FNM/22 to FNM/23 also included $6.7 million related to BOX's estimate of
increased expenses for services provided by BOX Exchange LLC, as
well as higher expenses related to higher headcount and payroll
costs, employee performance incentive plan costs, increased IT
operating costs, revenue related expenses, and higher costs for
travel and entertainment.
_________________________________
|
21 TMX Group
completed a five-for-one split of its common shares
outstanding (the Stock Split) effective at the close of
business on June 13, 2023. All common share numbers and per
share amounts in this release, including comparative figures, have
been adjusted to reflect the Stock Split.
|
22 Adjusted
net income is a non-GAAP measure, see discussion under the heading
"Non-GAAP Measures".
|
23 Reflects
an adjustment increasing the income tax effect for the 1H/23 by
$1.4 million.
|
24 Adjusted
earnings per share is a non-GAAP ratio, see discussion under the
heading "Non-GAAP Measures".
|
25 Reflects
an adjustment increasing the income tax effect for the 1H/23 by
$1.4 million.
|
The increase in earnings per share was also partially
attributable to a decrease in the number of weighted average common
shares outstanding from FNM/22 to FNM/23, as well as lower net
finance costs, partially offset by higher income tax expense.
Adjusted Net Income26 attributable to
equity holders of TMX Group and Adjusted Earnings per
Share27 Reconciliation for FNM/23 and
FNM/22
The following tables present reconciliations of net income
attributable to equity holders of TMX Group to adjusted net income
attributable to equity holders of TMX Group and earnings per share
to adjusted earnings per share. The financial results have been
adjusted for the following:
- The amortization expenses of intangible assets in the nine
months ended September 30,
2022 and the nine months ended September 30, 2023 related to the 2012 Maple
transaction (TSX, TSXV, MX, CDS, Alpha, Shorcan), TSX Trust,
Trayport (including VisoTech and Tradesignal), AST Canada, and BOX,
and the amortization of intangibles related to WSH in the nine
months ended September 30, 2023.
These costs are a component of Depreciation and amortization
expenses.
- Acquisition and related costs in the nine months ended
September 30, 2022 and the nine
months ended September 30,
2023 related to the SigmaLogic transaction (equity-accounted
prior to the acquisition of control in February 2023 and divested in April 2023). The nine months ended September 30, 2023 includes acquisition related
costs of WSH (acquired November 9,
2022), and the equity-accounted investment in VettaFi
(January 2023). The nine months ended
September 30, 2022 includes
acquisition related costs for the equity investment in Ventriks
(June 2022). These costs are included
in Compensation and benefits, Selling, general and
administration and Net Finance Costs.
- Gain resulting from the sale of 100% of our interest in
SigmaLogic to VettaFi (effective April 21,
2023), net of divestiture costs in the nine months ended
September 30, 2023. This gain is
included in Other Income while the costs are included in
Selling, general and administration.
- Fair value gain on contingent consideration, reflecting a
reduction in the earn-out liability assumed as part of the WSH
acquisition in the nine months ended September 30, 2023. This gain is included in
Net Finance Costs.
- Integration costs related to integrating the AST Canada
acquisition in the nine months ended September 30, 2022. This cost is included in
Selling, general and administration, and Depreciation and
amortization Compensation and benefits, and Information and
trading systems.
- Gain resulting from the revaluation of our interest in BOX upon
acquisition of voting control (effective January 3, 2022) in the nine months ended
September 30, 2022. This gain is
included in Other Income.
- A decrease in deferred income tax liabilities which decreased
income tax expenses in the nine months ended September 30, 2022 relating to a decrease in
the Pennsylvania and Nebraska future income tax rates.
__________________________________
|
26 Adjusted
net income is a non-GAAP measure, see discussion under the heading
"Non-GAAP Measures".
|
27 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)
|
FNM/23
|
FNM/22
|
FNM/23
|
FNM/22
|
FNM/23
|
FNM/22
|
$ increase /
(decrease)
|
% increase /
(decrease)
|
Net income attributable
to
equity holders of TMX Group
|
|
|
|
|
$271.6
|
$440.5
|
$(168.9)
|
(38) %
|
Adjustments related
to:
|
|
|
|
|
|
|
|
|
Amortization of
intangibles
related to acquisitions28 29
|
45.3
|
43.2
|
12.5
|
10.9
|
32.8
|
32.3
|
0.5
|
2 %
|
Acquisition and
related
costs30
|
3.9
|
0.4
|
—
|
—
|
3.9
|
0.4
|
3.5
|
875 %
|
Integration
costs31
|
—
|
9.6
|
—
|
2.5
|
—
|
7.1
|
(7.1)
|
(100) %
|
Gain on sale of
SigmaLogic,
net of divestiture costs32
|
(1.2)
|
—
|
0.2
|
—
|
(1.0)
|
—
|
(1.0)
|
n/a
|
Fair value gain on
contingent consideration33
|
(1.2)
|
—
|
—
|
—
|
(1.2)
|
—
|
(1.2)
|
n/a
|
Gain on
BOX34
|
—
|
(177.9)
|
—
|
—
|
—
|
(177.9)
|
177.9
|
(100) %
|
Change in deferred
income
tax liabilities relating to
changes in future tax rates35
|
—
|
—
|
—
|
0.7
|
—
|
(0.7)
|
0.7
|
(100) %
|
Adjusted net income
attributable to equity holders
of TMX Group36
|
|
|
|
|
$306.1
|
$301.7
|
4.4
|
1 %
|
Adjusted net income attributable to equity holders of TMX Group
increased by 1% from $301.7 million
in FNM/22 to $306.1 million in FNM/23
largely driven by an increase in income from operations and lower
net finance costs, partially offset by higher income tax
expense.
______________________________________
|
28 Includes
amortization expense of acquired intangibles including BOX, AST
Canada, and Tradesignal in FNM/22 and FNM/23, and WSH in
FNM/23.
|
29 Reflects
an adjustment increasing the income tax effect for the 1H/23 by
$1.4 million.
|
30
FNM/22 and FNM/23 includes transaction costs for SigmaLogic
(equity-accounted prior to the acquisition of control in February
2023). FNM/23 also includes acquisition related costs of WSH
(acquired November 9, 2022), and equity investment in VettaFi
(January 2023). See Initiatives and Accomplishments for more
details.
|
31 Includes
costs related to the integration of AST Canada (acquired August 12,
2021) in FNM/22.
|
32 Gain
resulting from the sale of SigmaLogic (effective April 21, 2023).
See Initiatives and Accomplishments - GSIA - SigmaLogic Transaction
for more details.
|
33 For
additional information, see discussion under the heading
"Additional Information - Net Finance Costs".
|
34 Gain
resulting from the revaluation of our interest in BOX upon
acquisition of voting control (effective January 3, 2022), in
FNM/22.
|
35 FNM/22
includes decrease in deferred income tax liabilities due to future
reductions in income tax rates in Pennsylvania and
Nebraska.
|
36 Adjusted
net income is a non-GAAP measure, see discussion under the heading
"Non-GAAP Measures".
|
|
FNM/23
|
FNM/22
|
(unaudited)
|
Basic
|
Diluted
|
Basic
|
Diluted
|
Earnings per share
attributable to equity holders of TMX
Group
|
$0.98
|
$0.97
|
$1.58
|
$1.57
|
Adjustments related
to:
|
|
|
|
|
Amortization of
intangibles related to acquisitions37
|
0.12
|
0.12
|
0.12
|
0.12
|
Acquisition and
related costs38
|
0.01
|
0.01
|
—
|
—
|
Fair value gain on
contingent consideration39
|
(0.01)
|
(0.01)
|
—
|
—
|
Integration
costs40
|
—
|
—
|
0.03
|
0.03
|
Gain on
BOX41
|
—
|
—
|
(0.64)
|
(0.64)
|
Adjusted earnings per
share attributable to equity holders of
TMX Group42 43 44
|
$1.10
|
$1.10
|
$1.08
|
$1.08
|
Weighted average number
of common shares outstanding
|
278,549,825
|
279,430,839
|
278,895,225
|
280,190,255
|
Adjusted diluted earnings per share increased by 2 cents from $1.08
in FNM/22 to $1.10 in FNM/23
reflecting an increase in income from operations, lower net finance
costs, and a decrease in the number of weighted average common
shares outstanding from FNM/22 to FNM/23, partially
offset by higher income tax expense.
________________________
|
37 Includes
amortization expense of acquired intangibles including BOX, AST
Canada, and Tradesignal in FNM/22 and FNM/23, and WSH in
FNM/23.
|
38 FNM/22
and FNM/23 includes transaction costs for SigmaLogic
(equity-accounted prior to the acquisition of control in February
2023). FNM/23 also includes the acquisition related costs of WSH
(acquired November 9, 2022), and equity investment in VettaFi
(January 2023). See Initiatives and Accomplishments for more
details.
|
39 For
additional information, see discussion under the heading
"Additional Information - Net Finance Costs".
|
40 Includes
costs related to the integration of AST Canada (acquired August 12,
2021) FNM/22.
|
41 Gain
resulting from the revaluation of our interest in BOX upon
acquisition of voting control (effective January 3, 2022), in
FNM/22.
|
42 Adjusted
earnings per share is a non-GAAP ratio, see discussion under the
heading "Non-GAAP Measures". Gain on Sale of SigmaLogic,
Net of Divestiture Costs and Change in Deferred Income Tax
Liabilities Relating to Changes in Future Tax Rates are not
presented in the reconciliation due to the size of the adjustment
being less than a penny.
|
43 Reflects
an adjustment increasing the income tax effect for amortization of
acquired intangibles related to acquisitions for the 1H/23 by 1
cent.
|
44 The
reconciliations for the Diluted adjusted earnings per share in
FNM/23 and the Basic adjusted earnings per share in FNM/22 are
presented without a rounding adjustment to ensure
accuracy.
|
Revenue
(in millions of
dollars)
|
FNM/23
|
FNM/22
|
$ increase /
(decrease)
|
% increase /
(decrease)
|
Capital
Formation
|
$205.0
|
$199.8
|
$5.2
|
3 %
|
Equities and Fixed
Income Trading
and Clearing
|
173.0
|
175.0
|
(2.0)
|
(1) %
|
Derivatives Trading and
Clearing
|
202.9
|
197.8
|
5.1
|
3 %
|
Global Solutions,
Insights and
Analytics
|
311.6
|
266.5
|
45.1
|
17 %
|
Other
|
0.1
|
0.1
|
0.0
|
0 %
|
|
892.6
|
$839.2
|
$53.4
|
6 %
|
Revenue was $892.6 million in
FNM/23 up $53.4 million or 6%
compared with $839.2 million in
FNM/22 attributable to increases in revenue from Global
Solutions, Insights and Analytics, TSX Trust, Derivatives Trading
and Clearing (excl. BOX), and CDS, partially offset by
decreases in Listings, Equities and Fixed Income Trading,
and a $9.2 million decrease in BOX
revenue. The increase in revenue from FNM/22 to FNM/23 included
$5.3 million of revenue for WSH,
and $0.2 million of revenue for
SigmaLogic (acquired control on February 16,
2023 and divested on April 21,
2023). Excluding revenue from WSH and SigmaLogic, revenue
was up 6% in FNM/23 compared with FNM/22.
Operating expenses
(in millions of
dollars)
|
FNM/23
|
FNM/22
|
$
increase
|
%
increase
|
Compensation and
benefits
|
234.6
|
$205.1
|
$29.5
|
14 %
|
Information and trading
systems
|
68.3
|
64.6
|
3.7
|
6 %
|
Selling, general and
administration
|
93.8
|
82.8
|
11.0
|
13 %
|
Depreciation and
amortization
|
84.1
|
84.8
|
(0.7)
|
(1) %
|
|
$480.8
|
$437.3
|
$43.5
|
10 %
|
Operating expenses in FNM/23 were $480.8 million, up $43.5
million or 10%, from $437.3
million in FNM/22. The increase from FNM/22 to FNM/23
reflected approximately $8.0 million of expenses related to
SigmaLogic (control acquired February 16,
2023 and divested April 21,
2023), WSH (acquired November 9,
2022), and VettaFi (invested in January 2023), of which there was approximately
$1.5 million related to
amortization of acquired intangibles for WSH, as well as
$0.8 million related to acquisition
and related expenses for SigmaLogic, WSH and VettaFi. The increase
from FNM/22 to FNM/23 also included $6.7 million related to BOX's estimate of
increased expenses for services provided by BOX Exchange LLC, as
well as higher expenses related to higher headcount and payroll
costs, employee performance incentive plan costs, increased IT
operating costs, revenue related expenses, and increased expenses
for travel and entertainment.
Somewhat offsetting these increases were lower expenses of
$9.7 million related to AST Canada
and Ventriks, of which there was approximately $9.6 million in integration costs related to AST
Canada, and $0.1 million in
acquisition and related expenses for Ventriks. Excluding the above
mentioned expenses for BOX, SigmaLogic, WSH, AST Canada, Ventriks,
and VettaFi, operating expenses increased 9% in FNM/23 compared
with FNM/22.
Additional Information
Share of (loss) income from equity-accounted
investments
(in millions of
dollars)
|
FNM/23
|
FNM/22
|
$
increase
|
%
increase
|
|
$(1.0)
|
$(0.8)
|
$(0.2)
|
(25) %
|
- In FNM/23, our share of loss from equity-accounted investments
increased by $0.2 million. For
FNM/23, our share of (loss) income from equity-accounted
investments includes
VettaFi45, SigmaLogic46, Ventriks,
and other equity accounted investments compared with FNM/22, which
included CanDeal47, SigmaLogic and Ventriks.
Other income
(in millions of
dollars)
|
FNM/23
|
FNM/22
|
$
(decrease)
|
%
(decrease)
|
|
$1.3
|
177.9
|
$(176.6)
|
(99) %
|
- In FNM/23, we recognized a non-cash gain of $1.3 million resulting from the sale of 100% of
our interest in SigmaLogic to VettaFi in exchange for additional
common shares in VettaFi.
- In FNM/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).
Net finance costs
(in millions of
dollars)
|
FNM/23
|
FNM/22
|
$
(decrease)
|
%
(decrease)
|
|
$19.7
|
$22.0
|
$(2.3)
|
(10) %
|
- The decrease in net finance costs for FNM/23 compared to FNM/22
reflected higher interest income on funds invested of $12.8 million as a result of higher interest
rates, and a $1.2 million fair value
gain on contingent consideration, reflecting a reduction in the
earn-out liability assumed as part of the WSH acquisition, somewhat
offset by higher interest expense on borrowings, and higher foreign
exchange losses of $5.6 million
mainly due to acquisition and related costs in FNM/23.
____________________________
|
45
Equity-accounted investment as of January 9, 2023.
|
46
Consolidated February 16, 2023 and divested April 21,
2023.
|
47 Effective
February 28, 2022, TMX discontinued the application of the equity
method of accounting for CanDeal.
|
Income tax expense and effective tax
rate
Income Tax
Expense (in millions of dollars)
|
Effective Tax
Rate (%)
|
FNM/23
|
FNM/22
|
FNM/23
|
FNM/22
|
$98.6
|
$85.7
|
25 %
|
15 %
|
Excluding adjustments, primarily related to the items listed
below, the effective tax rate would have been approximately 27%,
excluding NCI, for FNM/23, an increase of 1% from FNM/22 primarily
due to an increase in the U.K. corporate income tax rate from 19%
to 25% effective April 1, 2023. A
blended tax rate of 23.5% was applied through the tax year as
required for corporations with a December
31st year-end.
FNM/23
- In FNM/23, there were non-deductible FX losses resulting from
the unrealized translation of monetary assets and liabilities.
FNM/22
- In FNM/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 FNM/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 FNM/22, Pennsylvania and
Nebraska announced future
reductions in income tax rates, which decreased the deferred income
tax liabilities, resulting in a corresponding decrease in income
tax expense.
Net income attributable to non-controlling interests
(in millions of
dollars)
|
FNM/23
|
FNM/22
|
$
(decrease)
|
|
$22.2
|
$30.8
|
$(8.6)
|
- The decrease in net income attributable to non-controlling
interests (NCI) for FNM/23 compared to FNM/22 is primarily due to
lower net income in BOX driven by lower revenue and higher
operating expenses, including an increase in BOX's estimate of
expenses for services provided by BOX Exchange LLC.
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 Q3/23
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 Q3/23 unaudited condensed
consolidated interim financial statements, MD&A and the
contents of this press release were approved.
CONSOLIDATED FINANCIAL STATEMENTS
Our Q3/23 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 International
Financial Reporting Standards (IFRS) and IFRS Interpretations
Committee ("IFRIC") interpretations, as issued by the International
Accounting Standards Board (IASB) for the preparation of interim
financial statements, in compliance with IAS 34, Interim Financial
Reporting, unless otherwise specified. All amounts are
in Canadian dollars unless otherwise indicated.
ACCESS TO MATERIALS
TMX Group has filed its Q3/23 unaudited condensed consolidated
interim financial statements and MD&A with Canadian securities
regulators. This press release should be read together with our
Q3/23 unaudited condensed consolidated interim financial statements
and MD&A. These documents may be accessed through
www.sedarplus.ca, 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 +1 888 873-8392 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 in this Press Release
include, but are not limited to, our long-term revenue growth CAGR
and adjusted EPS CAGR objectives; our target dividend payout
ratio; our target debt to adjusted EBITDA ratio; our objectives
regarding growing recurring revenue, revenue outside Canada and the percentage of GSIA revenue as a
percentage of total TMX Group revenue; the modernization of
clearing platforms, including the expected cash expenditures
related to the modernization of our clearing platforms and the
timing of the implementation of the modernization project;
other statements related to cost reductions; the impact of the
market capitalization of TSX and TSXV issuers overall (from 2021 to
2022); future changes to TMX Group's anticipated statutory income
tax rate for 2023; 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 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 and alternative sources of financing,
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,
rising interest rates, high inflation and supply chain constraints)
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; significant delays in the post trade modernization
project resulting from the industry implementation of T+1
settlement or for other reasons, which could lead to increased
implementation costs and and could negatively impact our operating
results; 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
inter-corporate 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 the resulting impact on
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 and
other venues; 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: 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 and services; 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 technology and systems;
- no significant changes to our effective tax rate, and number of
shares outstanding;
- organic and inorganic growth in recurring revenue;
- moderate levels of market volatility over the long term;
- 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 inflation, rising interest rates and
supply chain constraints 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
2022 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, Singapore, and Vienna. 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 Q3/23.
Time: 8:00 a.m. - 9:00 a.m. ET on
Tuesday October 31, 2023.
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 869456.
SOURCE TMX Group Limited