Q2 2023 TMX Group Limited Earnings Call
Now looking ahead, a key priority for Amex. The Amex initiative is the transition from SEDAR to the Canadian overnight repo rate average or Cora with full cessation of SEDAR on track for June 2024.
The three month core futures or CRE continues to gain traction, reaching an average daily volume of approximately 14000 contracts in the first half of this year.
Now turning to capital formation revenue was $144 6 million a 5% increase from the first six months of 2022.
Reflecting higher issue services revenue and partially offset by lower financing lower revenue from additional listing fees due to a decrease in the number of financing transactions on Toronto stock exchange and decrease in dollars raised on both T. S X and T S X venture exchange.
Revenue from other issuer services, which largely consists of the <unk> Trust business was $60 9 million, a 50% increase compared to the first half of large last year and driven by higher net interest income slightly offset by lower transfer agent fees.
Macroeconomic factors, including sustained high interest rate environment, and inflationary pressures continue to weigh on capital raising activity during the first half of the year and while the number of new listings on <unk> and T. S X venture decreased year over year. The pipeline of go public prospects is robust and we are confident in our resurgence as conditions normalize.
Our unique two tiered ecosystem remains the choice for small and medium size enterprises here in Canada increasingly around the world.
So your mix changes ranked third amongst our global peers by the number of new international listings. During the first six months of the year and more than half of those new companies joined our markets from the U S.
Our business development efforts to continue to promote T. S X and T. S X ventures value proposition amount early stage companies in targeted regions across the U S.
And consistent with our history of industry leadership and innovation team X continues to be focused on the future of our markets.
Last year, our capital formation formation team undertook an important initiative called venture forward designed to solve the current challenges of stakeholders across our vital venture community and strengthen our markets into the future.
T. S X venture has an impressive track record of launching early stage public companies funding, primarily gross stages and providing us investors with access to unique small cap investment opportunities.
But we can always do better.
And so in June this year, following an extremely productive and in depth consultation process G. S X venture produced a comprehensive report that outlines our commitment to doing better in support of innovation and growth and in order to clear path for new companies investors to enter our ecosystem.
The key venture forward commitments include a T. S X venture passport listing process to accelerate the listing and capital raising timeline for qualified new listing applicants.
T S X venture sandbox and initiated a better support the listing of unique businesses or transaction structures.
And third to evaluate the potential need for a new and highly differentiated exchange to complement T. S X venture with the goal of providing new categories of early stage companies alternative asset classes and investors with access to public markets.
Venture forward commitments are in lockstep with <unk> corporate purpose across the organization as we are pursuing new ways to make markets better.
And our equities trading business earlier this year, we announced two new order books on <unk> Alfa exchange Alf X a visible lit order book and Alpha Dark Dark order book.
With initial features designed to improve execution quality and provide traders with innovative new functionality. The additional order books established new platforms for continued innovation and an enhanced overall trading experience and we are on track with this initiative to go live this fall as planned.
Earlier this month, we publish a consultation paper seeking industry feedback regarding trading of a digital assets, including Chris crypto currency on <unk> Alfa exchanged.
And our view, Canada has an opportunity to be a world leader here and providing a fair and transparent structure for investors to participate in the growth of the digital asset industry, but like all we do our priority focuses on serving the needs of our clients and stakeholders. So industry feedback will inform team acts as a next step and we will update the market on our plans as appropriate.
In closing today I'd.
I'd like to thank all of our partners across the capital markets industry stakeholders clients participants regulators for their continued partnership and support and with that let me turn the call over to David.
Thank you John and good morning, everyone.
<unk> results for the second quarter reflect our continued commitment to invest in long term growth, while managing uncertainty in the macroeconomic environment.
It was another excellent quarter with record revenue of $306 2 million, a 7% growth compared with Q2 of last year as reported or <unk>.
Operating expenses increased 8% this quarter as we invest to position ourselves for further growth, which I will talk about in more detail shortly.
We reported an increase of 6% and our diluted earnings per share this quarter, driven by $9 5 million of higher income from operations compared to Q2 of last year.
Partially offset by a higher income tax expense of $6 3 million due to in part higher earnings coupled with an increase in the U K corporate income tax rate from 19% to 25%, which came into effect on April 1st of this year.
Our adjusted diluted earnings per share remains unchanged at a robust 38 cents.
Turning now to our businesses I'll start with the segments, where we experienced increased revenue this quarter.
Revenue in our global solutions insights and analytics segment grew by 18% this quarter with double digit growth from both <unk> and Tms data links.
Revenue from <unk> was up 24% in Canadian dollars or 17% in pound Sterling due to a favorable FX impact of $2 9 million.
The 17% increase in pound Sterling was primarily driven by a 10% increase in trader subscribers. In addition to our annual price adjustments and a growth in total subscribers.
Revenue in our <unk> data links business grew by 13% driven by increases in data feeds co location enterprise agreement renewals data links expressed through apps benchmarks and indices and the impact of 2022 in early 2023 price adjustments, which we are.
Spoken off in prior quarters.
There was also an increase of $1 8 million from the inclusion of Wall Street Horizon's revenue this quarter.
Along with the favorable impact FX impact of approximately $1 5 million from a stronger U S dollar.
The average number of professional market data subscriptions for T. S X and TSA expansion products remained unchanged in the quarter compared with last year.
Their subscriptions for the Montreal exchange grew by 2%.
This is the second quarter in succession at TMA data links business has delivered double digit revenue growth well in excess of our long term objective of strong growth, which you have defined defined as five plus percent.
Turning to capital formation revenue was up 10% this quarter, primarily from a 55% increase in <unk> revenue, reflecting higher net interest income driven by higher balances higher rates and above average corporate actions activity. This.
This increase was partially offset by lower additional listings fees in the quarter due to decreases in both the total number of financings and total financing dollars raised as well as lower initial listings fees.
The additional listing fees decrease reflected an 11% decrease in the number of additional listing transactions billed at the maximum listing fee of 250000, and a 23% decrease in the number of transactions billed below the maximum fee on T. S X.
Derivatives trading and clearing revenue excluding box was up 4% in the quarter driven by a 3% increase in revenue from the Montreal exchange and a 6% increase in <unk> the.
The Montreal exchange revenue increase reflected an 11% volume increase this quarter compared to the second quarter of last year.
Along with the positive impact from the pricing changes, which came into effect in January of 2023.
This was somewhat offset by an unfavorable product and client mix.
Turning to box box revenues decreased 7%, reflecting a lower rate per contract, which more than offset the 23% increase in volumes on box in the quarter and a favorable FX impact of approximately $1 2 million on box revenue from a stronger U S dollar.
Of note boxes market share in equity options remained flat at 6%.
As a result, the entire derivatives trading and clearing segment reported flat results this quarter as the increases in the Montreal Exchange and C. D. C. C will offset by a decrease in reported box revenue.
Revenue from our equities and fixed income trading and clearing segment decreased 4% in the quarter compared with the second quarter of last year.
This decrease was driven by 28% decline in the overall volumes of securities traded on our equities marketplaces.
<unk> volumes on <unk> decreased by 28% <unk> venture exchange by 22% and alpha by 40%. Despite the downturn in volumes, we saw gains in our combined market share this quarter, which was up 1% for T. S X and TSA Expansionary exchange listed issues.
On the fixed income trading side revenue increased versus Q2, a year ago, reflecting higher activity in swaps, partially offset by decreased activity in government of Canada bonds.
Revenue from our Cts business was up 7%, reflecting higher interest income on clearing fans event management fees and standby liquidity fees.
Turning now to expenses as mentioned earlier operating expenses in the second quarter increased 8% on a reported basis compared to last year.
More than half of our increase in expenses is driven by inflationary pressures coupled with higher foreign exchange rates. While the remainder is driven by targeted investments we are making in growth areas of our business in order to accelerate our long term growth.
As is evident from our disclosures we have increased our full time equivalent employees.
These increases are in targeted areas of our business that are driving high growth, most notably trademarks and TSA Trust in.
In addition to acquisition of Wall Street Horizon.
With over two thirds of our staffing increases in our revenue generating business the balances across our core corporate functions to support our businesses, most notably our global technology solutions team, which accounts for the majority of the remaining one third.
In addition to increased staffing we have increased our discretionary investments driven predominantly by growth investments in our trade Port Trust markets and derivatives clearing businesses. In addition to lower capitalization of our post trade modernization project during the slowdown period as we address the industry wide move to.
Accelerate the move to T plus one as I noted in the first quarter.
Given our investments to drive higher growth, both in 2023 and beyond and lower capitalization for the post trade modernization project during the slowdown period.
Quarterly expenses I expect it to hold at the current level for the remainder of the year.
Consistent with what we had previously communicated in other words, the best indication of future spend levels is our current run rate.
While there may be quarterly fluctuations I expect our first half expenses to be the best indication of a second half spend levels.
Turning now to our sequential results.
Revenue increased $7 1 million from the first to second quarter, primarily or primarily reflecting higher <unk> trust revenue driven by an increase in net interest income and higher additional listing fees due to an $80 to 82% increase in the number of transactions billed at the maximum fee as.
As well as higher trade port revenue on the back of an increase in subscribers and a number of long term deal renewals.
This was somewhat offset by lower equities and fixed income trading driven by 19% decline in the overall volumes of securities traded on equities marketplaces, as well as lower derivatives trading and clearing revenue, reflecting a 10% decrease in volumes for the Montreal exchange and CDC.
Operating expenses remained unchanged from Q1 to Q2 much like we intend to do as we head into Q3 and Q4 as I mentioned earlier.
Turning to our balance sheet in the six months, leading up to June 2023, we spent $16 8 million repurchasing 622090 shares of our common shares under our normal course issuer bid program.
A debt to adjusted EBITDA ratio was one nine times at the end of the second quarter down from two times at the end of the first quarter and.
And we also held over $470 million in cash and marketable securities, which was about $295 million in excess of $175 million, we target to retain for regulatory and credit facility purposes.
Last night, our board approved a quarterly dividend of <unk> 18 cents per common share payable on August 25th to shareholders of record as of August 11.
This is a 3% increase from our Q1 and follows on the heels a recent increase in Q4 of 2022.
And most notably this was also our third increase in 18 months.
With this increase we will pay out 46, 47% of our adjusted Q2 earnings per share, which is marginally above the mid point of our target payout ratio of 40% to 50%.
Our consistent growth in earnings and disciplined capital management track record underpins our confidence to continue to generate growing free cash flow and we remain focused on executing our long term global <unk> global growth strategy that John referred to to deliver increased value to our shareholders with that I'd like to turn the call back to I mean to initiate.
A Q&A period.
Thanks, David and asks would you please outline the process for the Q&A session.
Thank you ladies and gentlemen, we will now begin the question and answer session. If you'd like to ask a question. Please press star followed by the number one and your telephone keypad. If your question has been answered then you'd like to withdraw from the queue. Please press star followed by the number two and if you're using a speaker phone. Please lift your handset before pressing any keys wonder woman.
Please all we compiled the roster.
Your first question will come from Ben <unk> with Barclays. Please go ahead.
Hi, there. Thanks, so much for taking the question.
One for David.
The sequential increase in the trust revenues was a bit higher than we were expecting I was wondering if you could kind of parse that out a little bit more I mean, you mentioned a couple of different factors.
More corporate actions higher rates higher balances had the three of those look relative to each other sort of impact the quarter.
Thanks, Ben So Youre right Q2 is higher than Q1, that's actually a recurring phenomenon. So typically Q2, we see a little bit more activity than we would see in Q1 Q3 and Q4. So if you look back historically youll see that in addition, though Dan you are right. There are higher rates this quarter and also higher balances.
And higher corporate actions, but we really don't go into kind of parsing them all out into individual components.
A disclosure we just we just have historically not done.
So what I would do is look at the Q1 balance for the trust revenue I would adjust for any rate increases between Q1 and Q2 and then also look at the historical kind of Q2 analysis to see what the enormous and then I'd use that as a jumping off point for as you go into Q3.
Got it that's helpful. And then maybe just kind of one follow up on the same topic, just an update on sort of the cross selling initiatives between the legacy Trust business in Asps.
Kind of moving that product up market where are you.
Are you in that sort of process.
That's a great question to Dan and John will probably add in here as well that's actually a big reason why we did the <unk> acquisition was to give us an opportunity to participate in more trust mandates larger corporate actions and so you're seeing the benefits of that in Q2 as you do the analysis, you'll see that is larger.
Corporate action activity, John you want to add anything.
Yeah, I think that's exactly right. So I. Thank you for the question I mean, our whole investment thesis. When we did this was to be able to be able to support a larger base of clients with more diverse needs.
And you see that that lift in Q2 is exactly that kind of result, when you've got a larger base of clients and we can support multiple products across that we can cross sell up sell or provide additional services like trust mandates and allows us to participate in more and much larger corporate action activities than we could have in the past swipes David's point.
That step up in Q2 isn't necessarily indicative of a run rate and we want to guide you back to kind of what the Q1 mill plus growth looks like.
It is indicative of the broader potential given our larger service base. The services, we can provide the cross selling opportunities and the bigger clients that we can serve so it's exactly as you suggested it and it's working very well you see that in the results.
Got it thanks, so much guys.
Your next question will come from Nick <unk> with CIBC capital markets. Please go ahead.
Yes. Thanks.
Prepared remarks, I think you alluded to a partial concentration it's staffing growth at <unk> port and I understand your guidance is for flat operating expenditure at the enterprise wide level for the balance of the year, but as we look out into 2024 and 2025 can you talk a little bit about the prospect of operating leverage at <unk> specifically.
The need for incremental headcount additions as the subscriber base continues to grow over the next few years.
Great question, Nick So.
Normal course, we are going to have positive operating leverage.
In the in the multi basis multi percentage point kind of gap, but as we obviously go to investing growth there are periods, where either on a quarter basis or a half year basis, we will see that actually compress a little bit.
Our 2020 for jumping off point will be 2023 2023 as you can see relative to 2022, we are investing in long term growth I would expect it to moderate in 2024, and 2025, but thats absent any kind of opportunistic opportunity that we might actually see them and take advantage of.
Specifically when you talk about trade port I mean, one of the things Thats important <unk> franchise is a jewel direct platform I jewelry platform is something that we do feel we can continue to improve and modernize.
There's lots of talk about cloud architecture, and more agile approach to responding to our clients' needs.
Our trade for team are looking very closely at that and doing early stage investing to actually modernize that platform.
Understood. Okay very good and then my second question, just maybe stepping back for a moment with some of the investments that you've made last year and early this year.
Wall Street Horizon, and verify as an example, do you expect to upstream any cash flow via dividends from those investments or are those business is more focused on being in growth mode. I'm, just trying to get a sense of what the contribution of some of those.
Businesses might be too to cash build over the next year or two.
Yes, it's a totally fair question. So let me separate them because they are different types of investments So wall Street horizon.
We will in the next quarter essentially complete our integration of that business and it will operate as a product line within our data links franchise.
So all of the growth in it and it is a.
The high single double digit grower as well with the potential to be higher.
We'll watch we'll accrue into the data links business and the cash flow that goes with that and then as we execute the the rest of the integration there will be some synergy potential in that business as well so think of that more as a traditional small tuck in with that cash flow flowing right through the business as we continue to grow at.
The difference around verify being that we are in the 22% stake the were 22%.
Business itself.
Has some debt financing needs as well.
Has the actual amortization of the investments that that it is made and that's why you don't see it a full pull through in the stage right. Now. It is we would deem it as discontinued mean that growth mode, where its reinvesting to grow faster. It is a high growth franchise and we want it to continue to do that both Jay and myself participated in the board.
A verify and that's the ambition that we all collectively have for that business. So in the near term I don't see that as being a he said I could dividend producer for us, but as you know we've got long term ambitions to continue to build out in the index and analytics spaces and those initiatives as we build them in partnership with verify will accrue to the cash flow for the organization.
Understood. Okay that makes sense that's it for me thanks very much no.
No problem.
Your next question comes from <unk> <unk> with BMO capital markets. Please go ahead.
Thank you and good morning, I'd like to circle back on the ongoing transition from back.
Flora de Montreal exchange, So a few questions I guess.
First of all how is the adoption of the core products comparing to your initial expectations.
At what point would you expect volumes to be comparable.
What do you used to be on the backs once the transition is completed next year.
That's a fantastic question, so actually where we're further ahead than we expected to be at this point given the actual cessation of seed or isn't around until till middle of next year.
So the fact that the average.
<unk> in the core of our already 14000 contracts a day and I actually think in the last number of months, we've been more in the 20 to 30000 range.
Is a really strong start and we are also just in the stage, where the actual benchmarking agreements the normalization of the presentations of the benchmark the quarters based on our getting institutionalized in the street and that's why we mentioned the the partnership agreement that we have done with Canada. The mandate sorry with can deal the mandate we have collectively.
Taken on from the bank of Canada to produce that index to distribute it to produce the number to distribute the data around it. So we are still in the early stages of development. So the fact that we've got that level of volume in the contract is actually very strong.
The expectation is is really get when you get closer to cessation that youll see these products converge and so we'll give guiding people in terms of when you look at the volumes in both the the CRA contract and the Bax contract you really look at them in combination and you will see that volume migrate over time right now, it's more backs and CRA and we will.
Expect that to continue to adjust as we get closer to the transition date next year.
And that's what's been driving a lot of our short term results is that return to the trading in both the box and the CRA after last year, which if you remember was light given the very volatile environment in central Bank rates. So that's how I'd guide you on that and we'll continue to monitor it quarter on quarter and keep you up to date.
And well economics be similar.
Similar in the long run so in the initial stages, we do our work right now we do have like we have with other two year and the five year, we have market, making agreements with the CRA product to help build the volume in that business.
So in the initial stage and particularly this year next year.
There is a different capture rate on that product, but now as we get into normalization and maturity. It should look very similar to the box product.
Okay understood.
I guess, just switching gears on the Boston options exchange, what I find interesting is that U S equity options volume still remain.
Strong relative to pre pandemic levels.
What are your thoughts on the sustainability of volumes.
The industry and more specifically yet.
Box.
I mean, we've got reasonable confidence that they are very sustainable and so I mean, you talked about volumes and we talk to market share and David talked about market share a little bit in his remarks that we've been actually very stable in market share of around 6% in fact have.
Some rounding there were actually up about half a percentage point year over year in terms of box capture.
The market if you look at the historical market for options in the U S. This is a market that has historically grown in the mid teens a year. After year sure you have some seasonality around that and some cyclicality, but the long term trend is for strong growth in that market. So we see this as being sustainable and continued growth potential the only real change in.
The year over year is just the mix of business. So because <unk> got contracts that will trade at different price points, given the volume of some large block trading. The fact that we've got floor trading as well you see that impact in terms of the revenue year over year. Despite the fact that our year to date volumes are up about 14% in box.
I mean, we really happy with the performance of the business the performance of the team there.
And would guide that kind of the revenue capture that you've seen in the first half of the year. This year, which was also similar to what was in kind of the last quarter of last year is a good indicator going forward pending any other changes in the mix of what gets treated.
Thank you very much.
Your next question comes from James <unk> with National Bank Financial. Please go ahead.
Okay.
Yes.
Thanks, Good morning.
Just wanted to add.
A couple of.
Items from the previous questions on that for us on that on the Trust PSX Trust understood that Q2 seasonally higher.
Was there or was there anything else in Q2.
Was it was there unusually higher corporate actions in this quarter relative to a normal quarter.
Or would you look at.
Q2, 2024 is looking pretty similar.
So I've got to be careful my guidance here, because I don't want to disclose anything related to specific clients I would say there was an unusually higher in terms of corporate actions, but also larger so some some very large corporate actions that would be not the type that happen every single quarter. So I wouldn't give you a year over year.
Our commentary there because it really depends on client activity in the corporate actions they are pursuing and the size of them.
Right, Okay understood on that front.
Yes.
And then over to that of five.
Question was on cash flow and I think it's.
Somewhat tied to it but.
Thinking about profitability and how that flows into equity income for <unk>, obviously, the M&A activity and the growth motives stripping out the opportunity to deliver.
So is that.
Would you see some more time on that front.
Second thing Jamie.
Yes, So why don't I go first Jimmy and John can talk a little bit about the business I think part of the dynamic right is that we pick it up as an income from associate if you will we own 22% of the business. So.
And.
In a quarter or a period of reporting period, whether it be a six months or a year, we identified as very little M&A activity.
And we're picking up in net income number that is pretty much the sustainable the way they have a quarter, where they are making lots of acquisitions, they've got a number of integration and transition costs, let's say and as well as to the extent that they are amortizing intangibles, if we owned 100% of the business and we would actually <unk>.
Just for those and you would have full transparency, but because we don't consolidate them because we only have 22% stake and the accounting rules are pretty clear we pick up our share of the net income so as John and I have indicated in previous calls when we spoken of the investment and that's causing it to be somewhat muted and but these are all investments for growth. So we are not.
In this for the equity income pick up at the 22% level is driven by our partnership agreement to create indices and benchmarks in Canada, and we have a desire to own more of the business and to the extent it becomes available. So that's why you're not seeing it in the in the financial results and it doesn't really drive the cash flow.
John you've got some business context, yes, the only other piece I'd add to it is to give you more context that the performance of the business first half of the year kind of the EBIT da type margins are in line with what you would expect our GSI a franchise to look like.
So the performance is as we would expect and as you would want to see but as David said, the accounting of it because it is not a wholly owned sub because we need to take in the amortization of the debt financing. That's in there and those types of things is what music, but I can confirm that that's the kind of return were seeing.
Okay. That's good.
Maybe last one for me just on the on the venture forward.
And discussions around a.
Potential new exchange within the Tms family here.
Sure.
Is that something that you would expect to see compete with the CFC.
You're starting to see a little bit of market share gains are.
Or is this something completely new to the Canadian market.
So I'm going to take the latter part of your statement first and just correct. The record because we've actually seen this year, particularly substantial uplift activity from CSC onto both the venture exchange in the senior market in.
If you look at some of the commentary from some of the companies that have moved over extremely strong in terms of the Ceos and the listing experience they've had and the access to capital to get with our markets.
What we're thinking about in terms of net new market as we have heard and you know part of our strategy is how do we bring.
Public market capabilities to a broader issuer base and how do you support companies that are otherwise private today. So not just looking at other competitive exchanges, but companies that trade privately.
New types of structures Tokenism Asian different types of assets and we do have a little known marketplace actually within our structure called next it actually fits below the venture exchange and it is a marketplace that we generally use to kind of capture shell companies restarts repurpose vehicles things like that and so as we explore where law.
Looking at is that the right vehicle for providing more access to capital for a different type of companies or as a replacement or augmentation of that the right way to go where if we brought out a new model structure with more of an open concept.
More digital oriented in terms of how it facilitates can we support a broader base of issuers that are looking to raise capital and trade.
So it's really more from that that landscape of how do we expand the universe of companies. We can support then then how do we compete down market is the way I would suggest to you and we're really in the process now that next stage of consultation with the industry of what could it look like what would be the problems that we're solving.
But the fact that its in their came directly from the guidance that we got from the street, which there there are issuers that could raise capital, but the current model both in ours and other marketplaces doesn't support the needs they've got an another model could do it. So that's the way I would think about it and we will continue to update as we go forward.
Okay. Good thank you.
Your next question comes from Graham Ryding with TD Securities. Please go ahead.
Hi, good morning.
<unk>.
Very strong quarter.
What's your margin can come so you're benefiting from higher rates right now if we start to look forward into 2024, and 2025 when rates could be coming down.
There could be a natural offset in that sort of a scenario, where your margin income might come down a bit but.
You would expect to see higher activity in <unk>.
Additional listings and Ipos as that.
And natural sort of offset that you're expecting your business.
You've got it exactly right. So if we saw a normalization in rates, we do expect to see that activity will pick up and now I will give you at the the touch point. We are seeing also we're still muted very much year over year, we are seeing additional listing activity start to accelerate in the second quarter.
So the actual transaction activity the number of transactions you've seen adventure is now up it's actually now up on the year as well as the number of transactions that are happening on T. S. X is accelerating from where we were in terms of a very low position. The beginning of the year. These transactions and generally are smaller in size, but.
But it's companies tests in the marketplace.
So in normal conditions, I'd say, yes as rates come down that financing activity certainty values in the marketplace can tend to appreciate but it doesn't have to happen in terms of rates coming down for us to see a resurgence in capital raising activity.
We are now call it kind of 12 months into a tighter period, you will have balance sheet rebuilding needs. <unk> companies. You are a company that had been on the sidelines in terms of expansion opportunities companies that raised money in kind of 2020, one that are going to need to re raise and so kind of any period. We've had in the past of this kind of pullback in capital.
And activity.
12 to 24 months later, you start to see very strong resurgence so.
That's exactly what we're actually anticipating regardless of whether or not we see a reduction in the rate regime in the near term and we certainly have both anecdotally from other bankers that we talked to you about from our own folks that are working on the pipeline and what we know there are substantial companies that are ready to access the capital markets when they see those conditions normalize. So so it is actually.
Less about the rates coming down and more around confidence.
And valuation on the equity markets, that's going to support the capital raising piece, but but a lower rate regime does often help with valuations on the equity market.
Okay understood.
Maybe just.
Date on trade port.
Just on the expansion into the U S is there any color on that initiative.
Is it impact.
<unk> way, yet or is it still.
Still.
Not early early days build out phase.
It's still in a build out phase, but with material progress and so we actually updated board yesterday, and Peter and team given a full deep dive to our board in terms of how to repurpose progressing our run rates for our revenue out of the U S are now more in the 4 million pound range. So again, that's another lift from where we were last year.
But it's really the exciting piece is actually in client adoption. We've got multiple brokers that are connected to the platform now we've got multiple hedge funds that are connected the platform now.
Now in any kind of adoption curve those brokers are largely using to reporting what I call a whiteboard capacity instead of using the <unk> technology, but they're using it more internally in their own shops as they get more comfortable with it and the willingness of then post those prices more publicly then we can actually then bring more traders into the community as well and build the network out as we've done.
In Europe , So that's kind of the building box piece, we build it with the clients and if they start to use it in their shops, and then as they expose their prices to a broader audience. We can actually bring more traders into the community as well so really happy with the progress the team is making in terms of bringing new clients and getting them using the platform.
Okay, Great and then my last question just on that.
That aside.
Part of the idea of partnering with them to create new <unk>.
Is there.
Any update there or is it still too early.
On the strategic front.
I mean, it's early to give updates on actually where we've actually delivered results because we're only a few months into it but it's not too early in terms of the progress of the initiatives. We're pursuing so we're already actively engaged together with which verify products, we can actually bring to the Canadian marketplace, where we can do joint data distribution.
Verify its got some very interesting digital distribution capabilities. So we're looking at how we use those capabilities jointly to expand both of our product suites, and we have a suite of index products under consideration.
Based on both Canadian and global datasets that we could build new indices with verify so the workflow is there and in terms of around.
The actual output that will come shortly I mean at this point, though we also have as I mentioned, you know kind of distributing.
Verify product, we've got 20 of the flagship indices now available in the Tms web store for the broader team ex audience. So we are getting that leverage of the business, but in terms of it delivering in terms of dollar results in the franchise is very early days still.
Yeah.
Okay, Great. That's it for me thank you.
No problem.
Your follow up question comes from Jamie. Please go ahead.
Yes, it was just.
A real quick one here in terms of the dividend increase this quarter.
And kind of a little bit different than what we've seen recently is there is there anything that we should.
Thank you both from a timing perspective getting more regular every two quarters or is this something that we.
Have you have you thought through in terms of how you think about dividend increases.
Jamie if youre, saying that we've got you baffled on timing than we've hit our objective.
Yes.
Not looking to be probe programmatic like a like a bank that's delivering every two quarters. We really look at conditions are where we are and our payout ratio.
As you know earlier than we went last time, but also coming on the back of our five for one split this helps us to bring it to more of around dividend number and in line with the payout objectives that we've been targeting and so I believe David It puts us kind of at the high end of our 40% to 50% range and you should take the signal of confidence of our continued ability.
To grow the franchise and grow the free cash flow that can support continued growth in the dividend. So we're not going to anchor in on specific timing, we will continue to anchor in on the payout ratio and the growth with the overall franchise.
Got it thank you.
Thank you Jamie there are no further questions at this time I will turn the conference back to <unk> for closing remarks.
Thank you everyone for listening in today, and we look forward to connecting with you throughout the remainder of this year as we make progress on our strategic priorities. If you have any further questions contact information for Investor Relations as well as media is in our press release and we'd be happy to get back to you until next time Goodbye.
Ladies and gentlemen, this concludes your conference call for today, we thank you for participating and ask that you. Please disconnect your line.