TMX Group Limited reports results for the third quarter 2014 Français
Nov 06, 2014, 19:02 ET
- Revenue of $170.2 million in Q3/14, up 3% compared with Q3/13
- Income from operations of $63.1 million in Q3/14, up 7% compared with Q3/13
- Diluted earnings per share of 73 cents in Q3/14, up 109% from 35 cents in Q3/13
- Adjusted diluted earnings per share of 86 cents in Q3/14, up 15% compared with Q3/13
- Adjusted diluted earnings per share of 86 cents excludes 13 cents per share of amortization of intangibles related to acquisitions.
TORONTO, Nov. 6, 2014 /CNW/ - TMX Group Limited [TSX:X] ("TMX Group") announced results for the third quarter ended September 30, 2014.
Lou Eccleston, Chief Executive Officer of TMX Group, said:
"I am very proud to be joining TMX Group and to be able to comment on the numerous accomplishments achieved by my predecessor and our employees. The highly successful implementation of TMX Quantum XA on our equity markets and the recent announcement of upcoming initiatives to streamline our equity trading offerings are great examples. TMX Group is incredibly well positioned to realize the benefits of growing and evolving capital markets over time with its vertically integrated and diverse business model. I look forward to working with all of our stakeholders as we turn to the next chapter in TMX Group's history."
Commenting specifically on Q3/14 results, Michael Ptasznik, Chief Financial Officer of TMX Group, said:
"We were pleased with our year over year results as revenue grew by 3% and income from operations increased by 7% over the same period in 2013. This reflected growth in revenue from additional listings and information services. The reduction in finance costs of over $6 million in Q3/14, compared with the same period last year, also contributed to 15% growth in our adjusted EPS."
SUMMARY OF FINANCIAL INFORMATION
THREE MONTHS ENDED SEPTEMBER 30, 2014 COMPARED WITH THREE MONTHS ENDED SEPTEMBER 30, 2013
The information below reflects the financial statements of TMX Group for the quarter ended September 30, 2014 (Q3/14) compared with the quarter ended September 30, 2013 (Q3/13).
| (in millions of dollars, except per share amounts) (unaudited) |
Q3/14 | Q3/13 | $ increase | % increase | |||||
| Revenue | $170.2 | $165.3 | $4.9 | 3% | |||||
| Operating expenses | 107.1 | 106.4 | 0.7 | 1% | |||||
| Income from operations | 63.1 | 58.9 | 4.2 | 7% | |||||
| Net income attributable to TMX Group shareholders | 39.4 | 19.2 | 20.2 | 105% | |||||
| Earnings per share1 | |||||||||
| Basic | 0.73 | 0.35 | 0.38 | 109% | |||||
| Diluted | 0.73 | 0.35 | 0.38 | 109% | |||||
| Cash flows from operating activities | $73.1 | $68.4 | $4.7 | 7% | |||||
Non-IFRS Financial Measures
Adjusted earnings per share and adjusted diluted earnings per share provided for the quarter and the nine months ended September 30, 2014 and September 30, 2013 are not International Financial Reporting Standards (IFRS) measures and do not have standardized meanings prescribed by IFRS and are, therefore, unlikely to be comparable to similar measures presented by other companies. We present adjusted earnings per share and adjusted diluted earnings per share to indicate ongoing financial performance from period to period, exclusive of a number of adjustments. These adjustments include the non-cash impairment charges related to BOX Market LLC (BOX) (net of non-controlling interests (NCI)) and other assets, the amortization of intangible assets related to acquisitions, credit facility refinancing expenses, Maple Transaction and integration costs, an adjustment related to the sale of PC-Bond and related income tax expense, and the increase in deferred income tax liabilities resulting from the changes in British Columbia (B.C.) corporate income tax rate. Management uses these measures to assess our ongoing financial performance, including our ability to generate cash, exclusive of these adjustments, and to enable comparability across periods.
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1 Earnings per share information is based on net income attributable to TMX Group shareholders.
Adjusted Earnings per Share2 Reconciliation for Q3/14 and Q3/13
The following is a reconciliation of earnings per share to adjusted earnings per share2:
| Q3/14 | Q3/13 | ||||||||
| (unaudited) | Basic | Diluted | Basic | Diluted | |||||
| Earnings per share3 | $0.73 | $0.73 | $0.35 | $0.35 | |||||
| Adjustment related to: | |||||||||
| Amortization of intangibles related to acquisitions | 0.13 | 0.13 | 0.14 | 0.14 | |||||
| Credit facility refinancing expenses | - | - | 0.22 | 0.22 | |||||
| Maple Transaction and integration costs | - | - | 0.04 | 0.04 | |||||
| Adjusted earnings per share2 | $0.86 | $0.86 | $0.75 | $0.75 | |||||
| Weighted average number of common shares outstanding | 54,302,453 | 54,334,116 | 54,087,535 | 54,141,064 | |||||
The increase in adjusted EPS to $0.86 in Q3/14 from $0.75 in Q3/13 reflected an increase in revenue and lower finance costs.
RESULTS OF OPERATIONS
Revenue
Revenue was $170.2 million in Q3/14, up 4.9 million or 3% compared with $165.3 million in Q3/13. There were increases in issuer services, energy markets trading and clearing, information services, and technology and other revenue. These increases were partially offset by the impact of the discontinuation of CDS services largely related to the administration of SEDAR, SEDI and NRD effective January 31, 2014. The revenue increases were also partially offset by lower trading revenue from BOX and cash markets.
Operating Expenses
Operating expenses in Q3/14 were $107.1 million, up 0.7 million or 1% from $106.4 million in Q3/13. There was increased initiative spending, unrecoverable commodity taxes, bad debt expense, professional fees and marketing expenses in Q3/14 compared with Q3/13. These increases in operating expenses were largely offset by the impact of the cost synergies realized as a result of the integration of TMX Group Inc., The Canadian Depository for Securities Limited (CDS) and Alpha Trading Systems Inc. and Alpha Trading Systems Limited Partnership (collectively, Alpha), elimination of expenses related to providing SEDAR, SEDI and NRD services following the termination of the agreement with Canadian securities regulators on January 31, 2014, lower costs associated with our employee performance incentive plans and reduced depreciation and amortization expense.
Net income attributable to TMX Group shareholders
Net income attributable to TMX Group shareholders was $39.4 million in Q3/14, up 105% compared with net income of $19.2 million in Q3/13. Earnings per share attributable to TMX Group shareholders was $0.73 per common share on a basic and diluted basis in Q3/14, up 109% compared with $0.35 per common share on a basic and diluted basis in Q3/13. The increase is primarily attributable to the fact that we incurred $16.4 million of credit facility refinancing expenses in Q3/13 and had lower finance costs in Q3/14 compared with Q3/13 following the refinancing of approximately $1.0 billion of debt under our credit facility through the issuance of debentures, the amendment of our credit facility under more favourable terms at the end of Q3/13, and the launch of our Commercial Paper Program in June 2014. The increase also reflects higher revenue achieved in Q3/14 compared with Q3/13.
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2 See discussion under the heading Non-IFRS Financial Measures.
3 Earnings per share information is based on net income attributable to TMX Group shareholders.
NINE MONTHS ENDED SEPTEMBER 30, 2014 COMPARED WITH NINE MONTHS ENDED SEPTEMBER 30, 2013
The information below reflects the financial statements of TMX Group for the nine months ended September 30, 2014 including the operating results of TMX Equity Transfer Services Inc. (Equity Transfer) from April 5, 2013, compared with the nine months ended September 30, 2013.
| (in millions of dollars, except per share amounts) (unaudited) |
Nine months ended September 30, 2014 |
Nine months ended September 30, 2013 |
$ increase/ (decrease) |
% increase/ (decrease) |
|||||
| Revenue | $534.6 | $519.8 | $14.8 | 3% | |||||
| Operating expenses | 323.0 | 333.4 | (10.4) | (3)% | |||||
| Income from operations | 211.6 | 186.4 | 25.2 | 14% | |||||
| Net income attributable to TMX Group shareholders | 59.4 | 82.5 | (23.1) | (28)% | |||||
| Earnings per share4 | |||||||||
| Basic | 1.09 | 1.52 | (0.43) | (28)% | |||||
| Diluted | 1.09 | 1.52 | (0.43) | (28)% | |||||
| Cash flows from operating activities | $196.5 | $229.0 | $(32.5) | (14)% | |||||
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4 Earnings per share information is based on net income attributable to TMX Group shareholders.
Adjusted Earnings per Share5 Reconciliation for Nine months ended September 30, 2014 and Nine months ended September 30, 2013
The following is a reconciliation of earnings per share to adjusted earnings per share5:
| Nine months ended September 30, 2014 |
Nine months ended September 30, 2013 |
||||||||
| (unaudited) | Basic | Diluted | Basic | Diluted | |||||
| Earnings per share6 | $1.09 | $1.09 | $1.52 | $1.52 | |||||
| Adjustment related to: | |||||||||
| Non-cash impairment charges related to BOX (net of NCI) and other assets |
1.32 | 1.32 | - | - | |||||
| Amortization of intangibles related to acquisitions | 0.39 | 0.39 | 0.45 | 0.45 | |||||
| Maple Transaction and integration costs | 0.06 | 0.06 | 0.07 | 0.07 | |||||
| Credit facility refinancing expenses | 0.05 | 0.05 | 0.22 | 0.22 | |||||
| Sale of PC-Bond and related income tax expense | - | - | 0.10 | 0.10 | |||||
| Increase in deferred income tax liabilities resulting from the change in B.C. corporate income tax rate |
- | - | 0.05 | 0.05 | |||||
| Adjusted earnings per share5 | $2.91 | $2.91 | $2.41 | $2.41 | |||||
| Weighted average number of common shares outstanding | 54,219,272 | 54,313,230 | 54,022,162 | 54,107,513 | |||||
The increase in adjusted EPS to $2.91 in the nine months ended September 30, 2014 from $2.41 in the nine months ended September 30, 2013 was due to an increase in revenue, lower operating expenses and lower finance costs.
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5 See discussion under the heading Non-IFRS Financial Measures.
6 Earnings per share information is based on net income attributable to TMX Group shareholders.
RESULTS OF OPERATIONS
Revenue
Revenue was $534.6 million for the nine months ended September 30, 2014, up $14.8 million or 3%, compared with revenue of $519.8 million for the nine months ended September 30, 2013. Issuer services revenue included revenue from Equity Transfer (acquired April 5, 2013). There were increases in issuer services and information services revenue, partially offset by lower trading revenue from BOX and a decrease in technology services revenue reflecting the discontinuation of CDS services largely relating to the administration of SEDAR, SEDI and NRD. These CDS operations were transitioned to a new service provider on January 13, 2014; the CDS agreement ended on January 31, 2014. In addition, there was a reduction in revenue following the sale of PC-Bond on April 5, 2013.
Operating Expenses
Operating expenses in the nine months ended September 30, 2014 were $323.0 million, down $10.4 million or 3%, from $333.4 million in the nine months ended September 30, 2013. Operating expenses were lower, reflecting the cost synergies realized as a result of the integration of TMX Group Inc., CDS and Alpha, the elimination of operating expenses related to PC-Bond that were no longer consolidated following the sale on April 5, 2013, and lower operating expenses related to providing SEDAR, SEDI and NRD services following the termination of the agreement with Canadian securities regulators on January 31, 2014. These decreases were partially offset by the inclusion of nine months of operating expenses for Equity Transfer (acquired April 5, 2013) in 2014 compared with six months in 2013 and higher initiative spending, professional fees, unrecoverable commodity taxes, bad debt expense and costs related to Natural Gas Exchange Inc.'s (NGX) operations.
Net income attributable to TMX Group shareholders
Net income attributable to TMX Group shareholders was $59.4 million, or $1.09 per common share on a basic and diluted basis, compared with net income of $82.5 million, or $1.52 per common share on a basic and diluted basis, for the nine months ended September 30, 2013. The decrease reflects the recognition of non-cash impairment charges related to BOX in Q2/14 primarily related to BOX's goodwill and customer list, of which our share was $63.6 million. This was partially offset by higher income from operations, lower credit facility refinancing expenses, and lower finance costs following the refinancing of approximately $1.0 billion of debt under our credit facility through the issuance of debentures, the amendment of our credit facility under more favourable terms at the end of Q3/13, and the launch of our Commercial Paper Program in June 2014. In addition, during the first nine months of 2013, we incurred $16.4 million of credit facility refinancing expenses compared with $3.6 million in the first nine months of 2014. Net income for the nine months ended September 30, 2013 also reflects significantly higher income tax expense related to the sale of PC-Bond.
Financial Statements Governance Practice
The Finance & Audit Committee of the Board of Directors of TMX Group reviewed this press release as well as the Q3/14 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 Q3/14 financial statements, MD&A and the contents of this press release were approved.
Condensed Consolidated Interim Financial Statements
Our Q3/14 financial statements are prepared in accordance with IFRS as issued by the IASB, are in compliance with IAS 34, Interim Financial Reporting, 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 Quarterly Materials
TMX Group has filed its Q3/14 financial statements and MD&A with Canadian securities regulators. 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 [email protected].
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, factors relating to stock, derivatives and energy exchanges and clearing houses and the business, strategic goals and priorities, market condition, pricing, proposed technology and other initiatives, financial condition, operations and prospects of TMX Group which are subject to significant risks and uncertainties. These risks include: 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 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; dependence on information technology; vulnerability of our networks and third party service providers to security risks; failure to implement our strategies; regulatory constraints; constraints imposed by our level of indebtedness; risks of litigation or regulatory proceedings; dependence on adequate numbers of customers; failure to develop, market or gain acceptance of new products; currency risk; adverse effect of new business activities; 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; 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 the U.S. dollar - Canadian dollar exchange rate), 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; productivity at TMX Group, as well as that of TMX Group's competitors; market competition; research & 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.
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 under the heading Risks and Uncertainties in the 2013 Annual MD&A.
About TMX Group (TSX:X)
TMX Group's key subsidiaries operate cash and derivative markets and clearinghouses for multiple asset classes including equities, fixed income and energy. Toronto Stock Exchange, TSX Venture Exchange, TMX Select, Alpha Group, The Canadian Depository for Securities, Montreal Exchange, Canadian Derivatives Clearing Corporation, NGX, BOX Options Exchange, Shorcan, Shorcan Energy Brokers, Equicom and other TMX Group companies provide listing markets, trading markets, clearing facilities, depository services, data products and other services to the global financial community. TMX Group is headquartered in Toronto and operates offices across Canada (Montreal, Calgary and Vancouver), in key U.S. markets (New York, Houston, Boston and Chicago) as well as in London, Beijing and Sydney. For more information about TMX Group, visit our website at www.tmx.com. Follow TMX Group on Twitter at http://twitter.com/tmxgroup.
Teleconference / Audio Webcast
TMX Group will host a teleconference / audio webcast to discuss the financial results for Q3/14.
Time: 8:00 a.m. - 9:00 a.m. ET on Friday, November 7, 2014.
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: 647-427-7450 or 1-888-231-8191
Audio Replay: 416-849-0833 or 1-855-859-2056
The passcode for the replay is 14675671.
SOURCE: TMX Group Limited
For further information:
Catherine Kee
Manager
Corporate Communications
TMX Group
416-814-8834
[email protected]
Paul Malcolmson
Director, Investor Relations
TMX Group
416-947-4317
[email protected]