TMX Group Ltd (TMXXF) Q3 2024 Earnings Call Highlights: Strong Revenue Growth Amid Rising Expenses

GuruFocus News
4 min read

In This Article:

  • Revenue: $353.8 million in Q3, a 23% increase from the previous year.

  • Organic Revenue Growth: 12% over the same period.

  • Adjusted Diluted Earnings Per Share: Increased 17% from Q3 of 2023.

  • Global Solutions, Insights and Analytics (GSIA) Revenue: Grew by 41% in Q3.

  • TMX VettaFi Revenue: Up 7% in CAD or 6% in US dollars compared to the same period last year.

  • TMX Tradeport Revenue: Increased 22% in CAD or 16% in pound sterling.

  • Derivatives Trading and Clearing Revenue: Grew 23% excluding boxs.

  • Equities and Fixed Income Trading and Clearing Revenue: Up 13% in Q3.

  • Capital Formation Revenue: Increased 2% in Q3.

  • Operating Expenses: Increased by 22% in Q3.

  • Pro Forma Debt to Adjusted EBITDA Ratio: 3 times as of September 30.

  • Cash and Marketable Securities: Over $518 million as of September 30.

  • Quarterly Dividend: $0.19 per common share approved.

Release Date: October 31, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

  • TMX Group Ltd (TMXXF) reported a 23% increase in revenue for Q3 2024, driven by the addition of TMX VettaFi and organic growth.

  • The company's Global Solutions, Insights, and Analytics (GSIA) segment saw a 41% revenue growth, with TMX VettaFi contributing significantly.

  • TMX Tradeport experienced a 22% revenue increase, driven by a 27% rise in total licensees and annual price adjustments.

  • The derivatives trading and clearing segment, excluding BOX, grew by 23%, with strong performance in the Montreal Exchange and CDCC.

  • TMX Group Ltd (TMXXF) maintained a strong balance sheet with a pro forma debt to adjusted EBITDA ratio of 3 times, down from 3.6 times in March 2024.

Negative Points

  • Diluted earnings per share decreased by 3% in Q3 2024, despite a 17% increase in adjusted diluted earnings per share.

  • Revenue from capital formation was slightly down, excluding the contribution from Newsfile, due to lower additional listing fees.

  • Operating expenses increased by 22% in Q3 2024, driven by costs related to new acquisitions and higher employee performance incentives.

  • The equities and fixed income trading segment saw a decrease in market share for TSX and TSX Venture listed issues, down 2% from Q3 last year.

  • The company faces potential challenges from regulatory changes in the US, such as the SEC's proposal to reduce access fee caps, which could impact Canadian markets.

Q & A Highlights

Q: Can you provide visibility on the timing of market-making incentives rolling off and the impact on revenue? A: While specific timing can't be disclosed due to commercial sensitivity, the roll-off is expected in the near term and will have a similar positive impact on revenue as seen with previous roll-offs. We anticipate continued RPC growth over the next couple of years. - John McKenzie, CEO

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