Q1 2025 TMX Group Ltd Earnings Call
Thank you for standing by. This is the conference operator. Welcome to the TMX Group Ltd. First Quarter 2025 Results Conference Call. As a reminder, all participants are in listen only mode and the conference is being recorded.
Speaker Change: I'd now like to turn the conference over to Amin, Mousavi, and Vice President of Investor Relations and Treasurer and interim Chief Risk Officer. Please go ahead, Mr. Mousavi in.
Speaker Change: Thank you Michael and good morning, everyone. Thanks for joining us today to discuss the 2025 first quarter results for T. M X group.
Speaker Change: Our results for an outstanding quarter highlighted by another record revenue performance last night copies of our press release and MD&A are available on <unk> Dot com under Investor Relations.
John Mckenzie: This morning, we have with US John Mckenzie, our Chief Executive Officer, and David Arnold Our Chief Financial Officer. Following the opening remarks, we will have a question and answer session.
John Mckenzie: Before we begin let's cover our forward looking legal disclosure.
Speaker Change: Certain statements made during this call may relate to future events and expectations and constitute forward looking information within the meaning of the Canadian Securities laws actual results may differ materially from these expectations and additional information is contained in our press release and preoptic reports that we have filed with the regulatory authorities now I will turn the call over to.
John Mckenzie: John.
John Mckenzie: Well, thanks, and good morning, everyone. Thank you all for joining us on our call today on what is very much a busy week here at <unk> Suisse.
John Mckenzie: As many of you know already and you've read through the documents by now we announced our outstanding Q1 results last night.
John Mckenzie: This afternoon, we are hosting our annual shareholder meeting here in our market centre in Toronto and Tomorrow marks the 21st edition of our annual equities trading conference.
John Mckenzie: This morning, I'm going to focus my comments on providing an overview and insights into our performance from an enterprise perspective, highlighting those areas of strength as well as areas where challenges continue to exist.
John Mckenzie: And I want to update you on important progress we have made in executing our strategy and bringing our purpose to life and some exciting ways. This year now.
John Mckenzie: Now it does feel like 2025, just got here, but we really hit the ground running.
John Mckenzie: And <unk> has delivered excellent Q1 results with outstanding year over year growth in revenue and adjusted earnings per share.
John Mckenzie: And while we are immensely proud of our recent success in the bold steps forward, we have taken this year to position <unk> for future success.
John Mckenzie: We recognize the gravity of the challenges faced by a broad set of stakeholders, both in Canada and around the world in these uncertain times now.
John Mckenzie: Now as much as ever our industry needs, a strong <unk> and innovative and adaptive responsive and resilient to enterprise committed to serving their needs and enabling their success.
John Mckenzie: Now turning to our results for the first three months of this year.
John Mckenzie: Overall revenue increased 21% compared to Q1 of 2024 and to a new record quarter.
John Mckenzie: Revenue growth included increases across the enterprise from traditional businesses and new growth areas as well as transactional and recurring sources.
John Mckenzie: Organic revenue, excluding new Smile Index research and the bond indices that we acquired in February increased 19% and adjusted diluted earnings per share increased by 26% from the first quarter of 2024.
John Mckenzie: Our total expenses increased compared to last year as well, reflecting the inclusion of operating expenses related to recent acquisitions and strategic realignment.
John Mckenzie: The year over year increase in expenses also reflected higher costs related to our employee performance incentive plan driven by the increase in our share price and higher head count and payroll costs, which David will take a closer look at later on in his remarks to follow.
John Mckenzie: Now moving onto the highlights of Q1 across our business areas.
John Mckenzie: Trading activity on our traditional derivatives and equity markets increased significantly year over year as investors reacted to tariff announcements from the U S and prevailing economic and interest rate uncertainty.
Our record IMAX volumes led by strong activity across the equity and interest rate derivatives segments, ETF options and government of Canada Bond futures drove a 42% year over year increase in derivatives trading and clearing revenue excluding box.
John Mckenzie: On the equity side Q1 revenues from equity and fixed income trading increased 24% over Q1 of 2024, largely due to an 18% year over year increase in combined volumes on TSS TSS venture and Alpha.
John Mckenzie: The first quarter also featured impressive performance from our new U S equity trading venue and Etfs, which we've named Alpha ex U S, which launched in January.
John Mckenzie: Our focus on innovation execution quality and partnership Alf X U S has been well received by participants the United States and the average daily volume has grown each month since launch.
John Mckenzie: Now overall revenue from global insights, which we formerly called GSI, a was 14% higher than Q1 of 2025 highlighted by double digit increases from Tms identify MTM extra report.
John Mckenzie: From an enterprise view, both <unk> and <unk> identify represent key components of <unk> strategy to diversify globalize and increase the portion of our revenue that's derived from recurring sources.
John Mckenzie: They also share an innovative and competitive entrepreneurial spirit all important accelerants to this growth.
John Mckenzie: Q1 revenue from trade Port grew 20% compared to last few are 13% in pound sterling largely due to an increase in license fees.
John Mckenzie: Our cold CT Joule network provides an essential connection point with a dynamic suite of insights tools and capabilities at the center of the global energy markets ecosystem.
<unk> identified Q1 revenues increased 21% year over year or 13% in U S dollars.
John Mckenzie: Increased revenue was driven by organic growth in assets under management and higher analytics revenue as well as revenue from recent acquisitions of index research and our bond indices.
John Mckenzie: Now moving forward, our global insights division continues to seek out strategic opportunities to expand product offerings and create innovative client solutions across new asset classes and geographies.
John Mckenzie: Now turning to capital formation revenue increased 10% when compared to Q1 2024 due to the inclusion of revenue from new style and higher revenue from additional listing fees.
John Mckenzie: Despite continued challenging capital raising conditions, we are seeing some encouraging signs of recovery specifically in the mining sector with renewed financing activity on T. S X MTS ex venture.
John Mckenzie: And the continued growth of candidates ETF industry, which set an all time record for monthly fund inflows in March.
John Mckenzie: And now beyond listings revenue from Tms corporate solutions, which we formerly called other issuer services increased 18% year over year, largely due to the inclusion of new style and newswire had a very strong start to the year, adding nearly twice the number of new public company newswire clients in the first quarter compared to the same period last year.
John Mckenzie: T. S X Trust also reached a milestone in their evolution in March surpassing our largest competitor to become Canada's leading transfer agent by market share. So congratulations to our great people at PSX Trust for this tremendous accomplishment.
John Mckenzie: And I'd like to turn now to another tremendous accomplishment and a landmark achievement that has been years in the making.
John Mckenzie: Last week marked the successful launch of our post trade modernization platform or PCM.
John Mckenzie: This implementation represents a major upgrade an overhaul of cbs's foundational technology, providing the essential functions, including clearing and settlement as well as depository and entitlement payments.
John Mckenzie: This initiative one of the larger projects, we have ever undertaken brings a world class end to end solution to Canada's markets and sets a new global benchmark for building agile, leading edge capital markets infrastructure.
John Mckenzie: The <unk> initiative also stands as an impressive feat of collaboration and I'd like to express my gratitude to all of our client participants and regulators for partnering with US on this journey into our technology provider Tcs bank's collectively we have implemented the broadest scale system of this kind ever on a single platform.
John Mckenzie: And like any complex large scale technology project, we've experienced an interesting range of challenges along the way, including the COVID-19, pandemic and the industry transition to T plus one.
John Mckenzie: And we expect to see continued challenges flare up areas to adjust things we need to improve on as we move further along towards the deployment of our full capabilities.
John Mckenzie: And so with that I'd like to thank our participants not just for their partnership but for their patients.
Speaker Change: Infrastructure headlines might not generate the most clicks. These days, but this new platform is mission critical system for every financial institution in Canada.
Speaker Change: It pushes up to the head of the pack of our global peers and enables further growth powering new services like the recently introduced Ccs or Canadian collateral management system and FCC notes.
Speaker Change: And my special Thanks goes out to our clearing and technology teams for pushing this project across the line.
Speaker Change: We all know that it has been many late nights weekends, but it's your dedication and perseverance that has been nothing short of inspirational and this journey.
Speaker Change: As we celebrate the successful implementation of the transformative platform I also want to acknowledge the partnership of J ration RASM, who recently made the decision to move on from <unk>.
Speaker Change: Jay joined US in 2016, as our Chief Information Officer and his portfolio has continued to grow to include post Street businesses, and then Tms data links corporate strategy and Tms identify.
Speaker Change: Jay, let our technology team and supporting new products and integration initiatives, including integral work on PGM and creating a modern and client centric approach to resiliency and I'd like to wish him every best success in his future endeavors.
Speaker Change: Now during the last year's Investor Day, we took a deep dive into our long term strategy and outlined <unk>, our plans to accelerate the growth of the enterprise.
Speaker Change: At the end of Q1, we took more steps to ensure we had the pieces in place to further enable our propulsive execution mindset realigning the organization with expanded leadership mandates across operations and corporate functions.
Peter Conroy: Peter Conroy, who you've come to know is the CEO of Shreveport has been appointed CEO of global insights and has expanded mandate, Peter <unk> Port Tms verify and Tms data links.
Peter Conroy: And the role of CFO, David Arnold, who you'll hear from in a few moments has also expanded to include full oversight of strategy and corporate development. In addition to leading the finance function as well as enterprise risk management innovation and integration.
Peter Conroy: And on April one we welcome Judy didn't Tms, Judy as Chief Information Officer, and the newest member of our senior management team.
Peter Conroy: She is responsible for the strategic leadership and guidance of all aspects of technology at <unk> and helping to drive the ongoing evolution and execution of the <unk> corporate strategy Judy.
Peter Conroy: Judy most recently served as the CIO of the U S Bank TD.
Peter Conroy: She brings more than 20 years of experience as a technology executive and financial service industry into a new role, including leadership roles at RBC CIBC and BMO.
Speaker Change: And I'm really excited about what these leadership appointments and expanded mandates mean for <unk> and our overall team.
Speaker Change: <unk> track record of technology leadership, and innovation Peters proven success in delivering for clients and leading growth and David's opportunistic and disciplined approach to strategy.
Speaker Change: These are winning attributes and I feel very strongly that our leadership is in good hands.
Speaker Change: And next I'd like to briefly update you another important enterprise initiative.
Speaker Change: Our capital markets advocacy efforts.
Speaker Change: Now our markets have proven resilient resilient through all measure and manner of crisis overtime macroeconomic geopolitical or otherwise from the credit crisis right through the COVID-19 pandemic.
Speaker Change: And this year the weight of prevailing uncertainty hangs over all of our markets due to the unpredictability of global tariffs.
Speaker Change: And on the heels of our federal election here in Canada, Tms continues to advocate on behalf of our interest in our market and our stakeholders.
Speaker Change: In March we published a six point platform outlining specific steps that the Canadian government can take to ensure our country as seen through the world is a great place to invest in new business and.
Speaker Change: And while election campaign platforms promised some of the right things and some of the same things that we've asked for campaign promises are just promises and we need to see follow through and consistency from the new federal government measures to create an investment friendly environment.
Speaker Change: These include tax reforms to incentivize companies to invest in growth and innovation and regulatory reforms to bring certainty to the market to increase confidence that large projects can get done here and enable Canada to compete for global capital.
Speaker Change: And we have made real progress in the push continues dmx's advocacy as an always on campaign in keeping with our history at the center of the country as capital markets.
Speaker Change: And with our responsibility to our stakeholders.
Speaker Change: In closing and as always I want to thank our people across the country here in Canada and also in the U K, Germany, Austria, Australia, Singapore, Israel, Brazil, and the U S.
Speaker Change: For your central contributions to <unk> success through.
Speaker Change: Through all market conditions, our team around the world is unified in this purpose and this shared commitment to making markets better and empowering bold ideas is tms's sharpest competitive edge.
Speaker Change: Our recent performance, including Q1 results are impressive, but what we're most proud of is the standard of excellence. Our team has set in every reporting period, and serving our markets and our clients and.
Speaker Change: And together, we look forward to the opportunities and the challenges ahead, so with that David Let me pass the call over to you.
David Arnold: Thank you John and good morning, everyone.
David Arnold: I'm pleased to report that the <unk> group has delivered exceptional financial results for the first quarter of 2025, demonstrating the strength of our diversified business model and successful execution of our global growth strategy.
David Arnold: Yes.
Speaker Change: Since John covered the highlights of our year over year revenue performance I will begin with a review of our sequential results were.
Speaker Change: We maintained strong momentum from Q4 of 2024 into the first quarter of 2025.
Speaker Change: Enterprise wide revenue showed continued growth, reaching a record of $419 1 million building on the positive trajectory established in the previous quarter.
Speaker Change: Revenue increased $25 8 million or 7% from the fourth quarter, reflecting revenue increases from derivatives trading and clearing as well as equities and fixed income trading and clearing driven by stronger trading volumes.
Speaker Change: Revenue growth in our global insight segment was fueled by organic growth across <unk> trade Port TNX data links and <unk> identified including the Q1 annual Exchange conference.
Speaker Change: Partially offset by lower capital formation revenue, reflecting lower net interest income revenue from both lower rates and lower balances compared with Q4.
Speaker Change: Now turning to expenses as I stated on a number of occasions. Our entire team is focused on generating positive operating leverage and as such quarter to quarter nominal expense increases are always managed budgeted and analyzed with this in mind.
Speaker Change: <unk> expenses in Q1 increased $25 6 million or 12% on a reported basis from Q4, which included a 2% increase from strategic realignment expenses, we incurred in the first quarter following our organizational changes and the successful completion of our post trade modernization project last week.
Speaker Change: We expect to incur additional strategic realignment expenses in the second quarter as you rollout the organizational changes and decommission our legacy post trade systems.
Speaker Change: Now excluding strategic realignment operating expenses increased 10% from Q4 driven by the following a.
Speaker Change: A 4% increase related to <unk> annual exchange conference that typically occurs in Q1 of each year.
Speaker Change: A 3% increase in payroll taxes, which is typical in the first quarter driven by the annual reset and bonus payments.
Speaker Change: And finally, a 3% increase related to higher employee performance incentive plan costs.
Speaker Change: So after factoring in these items our costs are in essence flat to Q4.
Speaker Change: As I mentioned earlier, John covered the highlights of our year over year revenue performance. So I will take a closer look at our results compared with the prior year and will focus my remarks on our expenses.
Speaker Change: On a reported basis operating expenses increased by 16% in Q1, which fueled our 21% revenue growth John spoke of earlier, we delivered mid single digit positive operating leverage while continuing to invest in our future growth.
Speaker Change: So the increase in reported expenses included the following items first we incurred $8 5 million of additional expenses related to new acquisitions, namely $3 9 million.
Speaker Change: Operating expenses related to news file index research and bond indices, $3 6 million accrual of deferred and contingent payments related to news filed an index research and finally $1 million of higher amortization related to acquired intangibles.
Speaker Change: We incurred $4 6 million related to strategic realignment expenses in Q1 of this year.
Speaker Change: And in closing partially offsetting these increases were approximately $6 6 million of lower acquisition and integration costs, when compared with Q1 a year ago.
Speaker Change: So excluding these items operating expenses increased by approximately 14% on a comparable basis year over year, primarily reflecting two market driven components.
Speaker Change: <unk>, 5% from higher employee incentive plan costs.
Speaker Change: Gives me.
Speaker Change: Mainly driven by a higher share price.
Speaker Change: 3% attributable to the FX impact of a stronger U S dollar and pound Sterling.
Speaker Change: Now the remaining 6% is driven by merit increases as well as higher head count and <unk>, <unk> and our post trade businesses, which accounts for 3%.
Speaker Change: 2% increase in operating costs, reflecting higher usage and subscription fees in the first quarter compared to last year.
Speaker Change: And then finally, the balance relates to increased legal and consulting fees increased travel costs and directors' fees, which if you do the math equates to roughly 1%.
Speaker Change: Moving now to our reported diluted earnings per share.
Speaker Change: Call in Q1.
Speaker Change: Accordingly, our Q1 results from last year, we recorded a gain related to the fair value Remeasurement of our previously held minority interest in <unk> and as a result, our reported Q1 2025 diluted earnings per share is down when compared to Q1 of 2024.
Speaker Change: Now a more meaningful comparison of our adjusted diluted earnings per share reveals an increase of 26% from 38% in Q1 last year to 48 in Q1 of this year, which reflects a 28% increase in income from operations and lower net financing costs.
Speaker Change: Now on the balance sheet front, a debt to adjusted EBITDA ratio for March 31 was $2 five town two five times down approximately one one turns compared to last year. Following the close of our acquisition of <unk> and are now back within our target leverage range of one and a half to two five times.
Speaker Change: On March 3rd Morningstar, <unk> revised our credit rating trend from negative to stable, while maintaining our long term issuer rating at double a loan and commercial paper rating of our one middle.
Speaker Change: As of March 31, we also held over $361 million in cash and marketable securities, which is more than a $155 million in excess of the approximately $206 million, we target to retain for regulatory purposes.
Speaker Change: Net of excess cash our leverage was two three times, which is <unk> nine times lower compared with last year.
Speaker Change: Lastly, I'm pleased to announce that last night, our board approved a quarterly dividend of <unk> 20 per common share payable on June six to shareholders of record as of May 23.
Speaker Change: This represents a dividend payout ratio of 42% in the first quarter and our last 12 months payout ratio was 43%, which is within our target payout ratio of 40% to 50%.
Speaker Change: <unk> group's performance for Q1, 2025 demonstrates the results and effectiveness of our strategic initiatives.
Speaker Change: Ability to capitalize on market opportunities and our commitment to operate efficiently.
Speaker Change: Our diversified revenue streams highlighted by 21% year over year revenue growth significantly outpacing expense growth coupled with the successful completion of the post trade modernization project and the successful launch of <unk> position us well for sustained growth.
Speaker Change: I'm confident in our ability to continue delivering value to our shareholders.
Speaker Change: So with that I'll now turn the call back to the mean to moderate the Q&A period. Thank.
Speaker Change: Thank you David Michael would you please outline the process for the Q&A session.
Speaker Change: We will now begin the analyst question and answer session to join the question. Hugh You May Press Star then one on your telephone keypad, you will hear a tone acknowledging your request if youre using a speakerphone. Please pick up your handset before pressing any keys to withdraw your question. Please press Star then two.
Speaker Change: We ask that analysts limit themselves to two questions and then re queue for any additional follow ups.
Speaker Change: The first question comes from Etsy, and Ricard with BMO capital markets. Please go ahead.
Speaker Change: Thank you and good morning team.
Speaker Change: So trading volumes across derivatives increased meaningfully in Q1, I know, it's tough to break down but how much of the recent increase would you estimate is market driven as opposed to.
Speaker Change: A structural increase in the adoption of Canadian Bearishness.
Speaker Change: I think the best way to think about that is if you look at where we were from I'm, sorry, and good morning.
Speaker Change: If you look where we're from a trading activity actually kind of Q4 to Q1 as opposed to year over year, you kind of get a better sense of what some of the long term growth and trading activity had been versus the pieces that were more market volatility related.
Speaker Change: Can you kind of you can start to break it down that way. Unfortunately, there isn't a way to cleanly break it down but we are seeing long term growth in that business, regardless. Despite the piece, that's driven by that volatility in the first quarter.
Speaker Change: Yes.
John Mckenzie: Okay, and John with the upgrade of the post trade systems now completed.
Speaker Change: How do you expect this initiative to impact.
John Mckenzie: The attractiveness of Canadian equity markets and.
John Mckenzie: Is there an uplift to trading volumes that could come as a result.
John Mckenzie: I wouldn't want to predict an uplift to trading volumes, but what it really does is it really streams line all the back office processing for the street. So it's going to make it easier to connect to Canadian markets. The systems. The capabilities are using more of a global standard.
John Mckenzie: And that makes it easier for foreign organizations to operate in the Canadian marketplace, and so all of that streamlines. It will eventually reduce costs in the system make the marketplace more efficient, but even more important as it provides a platform that allows us to provide additional capabilities and services to the street, which candidly that was very difficult to do on a Lego.
John Mckenzie: Mainframe platform will be even like the ones I talked about in my remarks, the Ccs system. The STC notes product, we were able to launch those but to really get uptake and have the industry to really be able to use them and solve their own problems. It needed. This architecture.
John Mckenzie: That's what's going to be the upside is that enabling architecture to allow us to provide more products and services that the street is looking for and if you remember from our Investor Day comp conference the dialogue that David and I had we are positioning the post trade business to be an area, where we can actually be an upside growth area and actually bring new products and services. So this is the enabling platform to do that.
John Mckenzie: <unk>.
John Mckenzie: Okay, and one last if I may given the recent changes to the organization.
John Mckenzie: How should we now think about the leadership structure it.
John Mckenzie: Across your global insights businesses.
John Mckenzie: It typically trade board.
John Mckenzie: The way to think about it is I mean, what we've really done and this is part of being fixed thoughts in the making for a while is putting all of our insights businesses under one umbrella is only going to allow us to accelerate the synergies between them and by synergies I mean, how do we use some of the great sales methodologies and approaches that we've been using and trade port apply it across <unk>.
All businesses take more of an enterprise approach in terms of both building products and solutions looking for opportunities of data in one part of the franchise to create products and others. So it's really taking the best of the successes we've had in those various businesses and our combined leadership team and Peter will be building out our leadership team around him to.
John Mckenzie: All those businesses as we move forward.
John Mckenzie: Thank you very much.
John Mckenzie: Yeah.
John Mckenzie: And the next question Arlinda Gallup go after with.
Speaker Change: With Canaccord Genuity. Please go ahead.
Arlinda Gallup: Good morning, Thanks for taking my question and congrats on the quarter.
Speaker Change: Obviously.
Speaker Change: Going back into the derivatives segment, which is obviously outstanding.
Speaker Change: John maybe can you talk to sort of how we should think about.
Speaker Change: The components that drive long term growth here I think you've discussed quite a lot in the past about how the bond futures as they come off rebates can instead of <unk>.
Speaker Change: Add to sort of that growth momentum, but outside of that.
Speaker Change: What are the other components, we can think about as we look to.
Speaker Change: Assess what that growth rate could be over the next 234 years, maybe also touching on sort of the.
Speaker Change: Equity futures and equity options and the Etfs that side of things as well.
Speaker Change: What sort of the traction youre seeing there including retail participation.
Speaker Change: Yes, those are all really good questions. So.
Speaker Change: I'd like to be able to do that and disaggregate, what's going on from just the market activity.
Speaker Change: So you've got it exactly right. What we're seeing is a number of our products that are still moving up what I'll call the maturity curve and.
Speaker Change: So the number of products that we've launched in recent years like like the two like the five like the 30 year fixed income futures the relaunch of Cora.
Speaker Change: They are still.
Speaker Change: Not at full maturity. So when you look at the trading activity of those compared to our long established products like the 10 year you can start to see the area of opportunity in terms of growing into that mix. The more of these products grow and the more liquidity that you have in them. The more we can use them for while the more of the clients can use them for executing strategies that go across multiple tenures.
Speaker Change: Short of period, and long and another and so there is more that the industry can do with it as we build the suite out. So there's a lot of adoption to go the underlying industry itself is a long term double digit growth industry from a volume standpoint, you've got that natural growth piece, you've got increased adoption and as they get more liquid they also become more <unk>.
Speaker Change: Usable in the global context were getting that exposure to the Canadian marketplace. So do you think about our international program or after hours trading that's actually still a limited portion of our actual growth.
Speaker Change: Revenue has grown so much.
Speaker Change: Is that the state has had to grow pretty fast just to keep up and it's still about kind of 5% of that mix. So it's still got a lot of room to grow as well as we get more international participation. Then you talked about some of the specific product areas that have again substantial upside so things like ETF options. That's an area. We're seeing continued growth not just from the retail adoption that you talked about but also from institute.
Speaker Change: <unk> adoption, that's using it in their products.
Speaker Change: And we've recently launched new options on other structured products like <unk> as well.
Speaker Change: The team is continuing working on our product roadmap of bringing new ideas, they're not ideas that just come from us theyre all ideas that come from engagement with the clients. So those pieces I just talked about it was the option expansion all driven by client discussion and we're constantly engaged with clients as to what's coming next so it's not about kind of throwing spaghetti at the wall and we're going to see what sticks.
Speaker Change: It's all based on what the clients are looking for so that we know if we're launching a product that is going to be liquidity in it from the early days. So those are the themes that are going to keep that long term growth rate up continued maturation of the products. We've already launched continued global usage of the products by a large swath of institutional traders and continued roadmap or adding new product that meets climb.
Speaker Change: Needs.
Speaker Change: Thanks, John that's really helpful. And then my second and last question.
Speaker Change: Considering the market volatility we've seen in <unk>.
Speaker Change: Your currency is getting stronger.
Speaker Change: It's getting better.
Speaker Change: Maybe just update us on sort of the M&A landscape.
Speaker Change: Are you, perhaps seeing more reasonable valuation in terms of ask that would kind of make.
Speaker Change: Incremental more sizable M&A a reality.
Speaker Change: Just kind of revisit that thank you.
Speaker Change: That's a great question, Harry <unk>, David and good morning.
Speaker Change: Yes, I mean, we are seeing that.
Speaker Change: But obviously as you know we.
Speaker Change: First focus is really delevering.
Speaker Change: <unk> group.
Speaker Change: As I mentioned, we're now inside that kind of normal course leverage ratio.
Speaker Change: Obviously, we've got <unk>.
Speaker Change: Significant capacity for for acquisitions and the focus has always been the same right as acquisitions that accelerate our strategy our excite us.
Speaker Change: And it really is always anchored on the strategy. So yes, im seeing a little bit of price discovery in a couple of files that are peaking on interest.
Speaker Change: They're also as.
Speaker Change: We are coming through what can only be considered as a somewhat volatile first quarter.
Speaker Change: On a macroeconomic stage.
Speaker Change: I think time will tell how things will transact in the second and third quarter of this year.
Speaker Change: There are some early signs that some and <unk>.
Speaker Change: Interesting businesses that we've had our eyes on it might be coming to market and obviously, we will take a good hard look and as always it will boil down to our discipline in terms of.
Speaker Change: Acquisitions that are accretive and that evaluation that makes sense.
Speaker Change: And really then what can we do and how can we use the Tms superpower of a network effect to better integrate and better run the operations of Whatever's acquired so yes.
Speaker Change: Im cautiously optimistic for the second third and fourth quarter of the year.
David Arnold: Thanks, David.
Speaker Change: <unk> light.
Speaker Change: And your next question comes from Benjamin <unk> with Barclays. Please go ahead.
Speaker Change: Hey, This is Chris O'brien on for Ben I wanted to touch on trade for it looks like <unk> continues to grow nicely and theres been a nice jump in revenue retention in Q1. So I was just wondering if there's anything to call out in terms of the jump in <unk>.
Speaker Change: And sorry, and retention and if there's anything else that's driving the strength.
Speaker Change: Okay.
Speaker Change: Hi.
Speaker Change: Chris Christopher Okay, Chris Hi, It's David Yes, I mean really it's two things right. It's continued momentum on.
Speaker Change: Our annual renewals that do come do you see as I've mentioned in prior calls and with Brian that we've effectively got.
Speaker Change: A portion of our client base in <unk> that have site licenses that are effectively 345 year kind of deals. So in any given point in time some of those will come due for renewal on their kind of anniversary and during that process. We're really focused on deepening our relationship with the client right.
Speaker Change: So in many instances thats, what you see driving as you as you look at any snapshot and depending on which client agreements come come due for renewal and then our ability to actually provide them additional services and that drives the increase in IRR, but theres also the natural expansion as we add new clients and.
Speaker Change: We continue to do that at <unk> and then the other part that that drives the IRR is existing clients actually deepening the number of licenses that they actually.
Speaker Change: Contract with US and then you couple that obviously with as we've said both at our Investor day and on previous calls we continue to do product expansion at <unk> into other asset classes and then obviously the work we're doing in other geographies. So you kind of put that all in and Thats why youre seeing a nice steady uptick in both retention and AOR.
Speaker Change: Great. Thank.
Speaker Change: Thank you so much and I guess just.
Speaker Change: Another question that I was.
Speaker Change: Looking into on the trust business.
Speaker Change: It sounds like Youre, taking more share than you passed your next biggest competitor for sure.
Speaker Change: And typically you know you see a step up in Q2 with activity, but I guess in the short term kind of how do we think about the step up.
Speaker Change: That increased share that you've been taking and then on the longer term opportunity there how.
Speaker Change: How much more runway is there to go given how much share you've taken so far.
Speaker Change: Yes, So let me start Chris and then I'll hand, it over to John ready to talk about and kind of the longer term growth strategy, but youre right. I mean, when you look at Q2 for the trust business.
Speaker Change: Do have excuse me a large portion of our clients that of December 31 year ends. So Q2 typically is when they hold the annual shareholder meetings and as a result, you really see two things occurring in the second quarter.
Speaker Change: A little bit more revenue relative to other quarters as it relates to those services. But then we also have some increased variable cost that you will see in the second quarter as it related business still healthy positive operating margins and leverage but those are really the two variables you will see typically in the second quarter.
Speaker Change: As <unk> seen in a long term kind of growth.
Speaker Change: <unk> objectives, we intend to grow this business in high single to double digits, and so maybe I'll pause in John just spoke about some of the growth vectors, yes, Im happy too and this continues to be a business that we're really excited about and that's that's actually why we've taken the step of taking all of these businesses that we have in the theme of beyond listing.
Speaker Change: <unk> into one set of corporate solutions.
Speaker Change: It allows us to take a strategy of going to market, where we can actually bring multiple solutions to an issuer and thats actually a public issuer or someone who is still actually private in raising capital in private market. So.
Speaker Change: So we did talk about the fact that we're now number one in terms of transfer agency, but that's only one part of the franchise and one of the big pieces that was driving some of the revenue growth in the both the first quarter.
Speaker Change: And candidly in Q2 of last year I'm going to come back to them. The second was it we're winning more and more corporate action mandates. These are trust mandates and so the more we build out the client base. The more we can win trust band AIDS. These are often driven by corporate actions. So they can be lumpier. They are hard to predict but the the value add and where I see that long term growth.
Speaker Change: Continuing our team is continuing to win these mandates more and more frequently.
Speaker Change: So we can't always predict them because it is corporate actions that are initiated by a client, but if we are a leading provider and we can win the more and more you start to see that become more of our base going forward now in Q2 last year. That's why I referenced that we actually had some large corporate action activity that contributed to some of the upside revenue in that quarter as well and I can't always predict what's going.
Speaker Change: <unk>.
Speaker Change: The other pieces with that is all of these other services are not at the level of market penetration that we are in a transfer agency. So we're going to continue to build on transfer agency and it's always easier to win new mandates and necessarily switching one but then when you add to that we're looking to do more trust mandates more employee plan mandates, we're now selling more.
Speaker Change: More news file of engagements and we talked about the client uptake on that it was essentially double the new client adds of what we saw a year ago.
Speaker Change: That's what's got US excited about this whole portfolio because again, we're meeting the full suite of needs for a private or public issuer.
Speaker Change: And that ability to then kind of penetrated and have a.
Speaker Change: Suite of products are you getting that larger share of wallet with the client because you're providing a better set of services is what gets exciting. So it's not just limited to that transfer agency growth, it's everything else on the value chain that we're trying to build out.
Speaker Change: Great. Thank you so much.
Speaker Change: Yes.
Speaker Change: And the next question comes from Nik Priebe with CIBC capital markets. Please go ahead.
Speaker Change: Yeah, Thanks, just going back to trade port.
Speaker Change: At certain times in the past the timing of larger enterprise agreement renewals.
Speaker Change: The expansion of the number of user licenses and that drove a bit of a growth surprise. If you will for the business. Just wondering is there any visibility into chunkier contract renewals that might be in the pipeline this year.
Nick: It's a good question Nick.
Nick: There isn't anything that stands out in our radar right now for the balance of 2025, but what is important is what we don't know so there isn't a and outsized contract that is coming up in a specific quarter that I would want to signal to you, which really gets at the heart of your question, but what I.
Nick: Still to be determined is as we get into the second third and fourth quarter as those ones that are on our radar that are coming due is just the quantum of the.
Nick: Share of wallet and or additional services that they wish to subscribe for as kind of the unknown right and so.
Nick: It's not to say that they couldnt there couldnt be one that.
Nick: Decides to increase by 30%, 40% right.
Speaker Change: Got it okay that makes sense and then just one more entry but can you also can you remind me what that net revenue retention metric.
Nick: Metric measures and why that ticked up in the quarter.
Speaker Change: Looks like it was higher in Q1 of the prior year as well just wondering how to interpret that.
Speaker Change: That's a great question that gets I mean, so what is measured as the amount of recurring revenue that we have from existing clients and as you can imagine with trade port we continue to add new clients and.
Speaker Change: We keep all of the clients. So as a result as they subscribe for additional services.
Speaker Change: They have the renewal on the price increase you typically see that number would be north of a 100% and with a bit of a spike in Q1 due to the price increases that come effective January one.
Speaker Change: I see okay that makes a lot of sense alright, that's it for me thanks very much.
Speaker Change: And your next question comes from Jim <unk> with National Bank Financial. Please go ahead.
Speaker Change: Thanks.
Speaker Change: Good morning, first for David just kind of.
Speaker Change: First time, I guess I appreciate all the extra expense color you provided on the call today.
Speaker Change: I kind of tried to simplify it.
Speaker Change: It seems to me that like the core expense growth in the quarter on a year over year basis would be just that 6% and thats something thats. That's somewhat permanent that we can that we can think about here through 2025 is that is that a fair simplification or are there. Some some other more permanent factors, we should kind of think about it in terms of opex growth.
Speaker Change: No. That's a fair simplification the key word there is simplification, what I would honestly trying to focus on is.
Speaker Change: Try and triangulate not just on the year over year, so as you're looking forward to Q2 right.
Speaker Change: Looking to Q2 of last year. There is a lot that you need to factor in whereas if you look at our exit rate coming out of Q1 right.
Speaker Change: Just for the fact that we had the <unk> Exchange conference right. In Q1, So you really back that out obviously we've had.
Speaker Change: Outsized.
Speaker Change: Total shareholder return for <unk> relative to the S&P composite index.
Speaker Change: And Thats, if you look at our share. It today, you can really understand that when it comes to our deferred share units are restricted share units and psus were able to effectively hedge share price appreciation, but on a performance share units. Obviously, there is a multiplier relative to the benchmark, which is the S&P <unk> composite index.
Speaker Change: And we really outperformed that in the first quarter.
Speaker Change: You're going to do the math, you'll see that in the first quarter given our total shareholder return, we outperformed that almost by 17 points right. The S&P composite in the first quarter is around 1% and we were around 18% right. So and then when you actually look at the vintages of those performance share units Youll see very quickly that for two of the older.
Speaker Change: <unk> so the 2023 and 2024, we're almost at the maximum right. So the amount of additional expense that could come from those in the second quarter and others will really be based on how does that share price performed relative to the index and because these are cash settled instruments for our long term incentive program.
Speaker Change: They are effectively mark to market every quarter right based on total shareholder return relative to the benchmark. So those would be the two things that I would think about it and then the third thing is if you look at Q1, obviously there has been.
Speaker Change: Bonuses were paid and as the annual reset of payroll taxes. So those would be the kind of three things to kind of normalize for it to get to a kind of number for Q2, and then triangulated, taking last year's Q2 and adjusting it for as you said a simplified roughly 6% and then you should be very much triangulating with.
Speaker Change: With kind of where expenses ahead it does that.
Speaker Change: Does that help.
Speaker Change: Perfect.
Speaker Change: Second question is just as you as you launched the TTM or complete the TTM and John you talked about <unk>.
Speaker Change: Secured general notes.
Speaker Change: What's the timeline to potentially see those generating.
Speaker Change: Revenues are incremental revenues to <unk>.
Speaker Change: Maybe a little bit too early to size that.
Speaker Change: You talked about.
Taking that business from market growth to high growth. So what's what's the timeframe to see some of that potentially flow through here.
Speaker Change: Candidly, we actually expect to see activity in those products in the back half of this year.
Speaker Change: So we have the nice thing about launching those products and having them established even before we got <unk> done is we've already got industry clients connected to them. We've industry clients that are working on how they would use the STC note product. So we're all ready to go.
Speaker Change: Only thing reason im not saying today is because to be candid. We are still in what I'll call a hyper care period around the launch of the <unk> system.
Speaker Change: The system is.
Speaker Change: From a scope standpoint, one of the largest platform launches in the Canadian market history, because we did everything from clearing to settlement to corporate actions entitlement processing all at once so it's not only a lot to absorb for our team here at <unk> for the whole industry and that's why I talked about just our thanks for the patience of the industry as we worked through it.
Speaker Change: So they've got a lot to absorb on their side as well even simple things on how do I get this report how do I actually make this change how do I process. This entitlement or some of the growing pains you have with any new adaptation.
Speaker Change: So we expect that they're going to be some weeks or months of what I am calling this hyper care period to make sure. The industry is really stable in terms of what we're doing.
Speaker Change: And then I expect to see that we're going to get uptake in these products in the back half.
Speaker Change: I can't give you guidance in size.
Speaker Change: Thinking about them, because we think that can be meaningful.
Speaker Change: Yes, so look forward maybe more like a.
Speaker Change: Q4, where we can kind of see the acceleration in the growth of.
Speaker Change: That part of the business I suppose.
Speaker Change: Yes, I believe that in your words.
Speaker Change: And then last just.
Speaker Change: The U S strategy looks like it got off the ground.
Speaker Change: <unk> nicely and ahead of expectations I think as you hinted even with the Q4.
Speaker Change: Results call.
Speaker Change: Is that is there any shift in how youre thinking about that business now with the early success.
Speaker Change: And where you could take it or what with the U S. Can mean for <unk>, perhaps maybe even more broadly than just etfs.
Speaker Change: Well, even just within the Ats piece to start with.
Speaker Change: And again kudos to the team that has launched this this has been one of the most impressive launches of a new U S marketplace. Both in terms of the scope, but in time frame that we've talked about this in the past we went from an idea on this too.
Speaker Change: Now technology getting regulatory approval and essentially 12 months on doing those two pieces.
Speaker Change: The important piece now right is that that early growth and we talked about it kind of month by month continuing to grow in terms of the amount of.
Speaker Change: The names that get executed over share volume thats getting done as exceeded expectations continues to exceed expectations in terms of the growth rate and what that is helping the team do is actually bring on more clients sooner. So we had a mix of clients that were part of our initial phase of getting launched and we had a number of our clients that were in the pipeline that wanted to see that <unk>.
Speaker Change: <unk> as they came on were going to be able to bring on more clients earlier and actually improved execution for them as well. So the focus right now is still about driving success in this platform. It still it's exceeding expectations, but it's still early days and so you want to be high touch and making sure that we're getting all those expectations met for the street.
Speaker Change: And then going from there there is multiple paths, we're thinking about so the U S is going to continue to be a really important strategic area for us a place we're going to continue to build there is more we can do with the Acs model in terms of doing other trading types and assets. There. We are looking at other things we can do in the U S market as well and in the near term.
Speaker Change: What we're looking to do is actually just to bring together candidly all of our U S operations into a single team because.
Speaker Change: A couple of years ago, we were able to go down to New York and meet with everybody in our in our business at a dinner table for four or four eight.
Speaker Change: And now we've got 100 plus people in the U S across multiple businesses. So we will be opening up a new flagship Tms office in lower Manhattan later on this year, bringing that team together, helping to start to collate, new ideas and that'll be part of our beachhead in terms of what we build on there from going forward. So so stay tuned that will certainly be part of our growth strategy as we continue to build it in the future.
Speaker Change: I appreciate that John Thank you.
Speaker Change: No problem.
Speaker Change: And your next question comes from Graham Ryding with TD Securities. Please go ahead.
Graham Ryding: Hi, Good morning, just wanted to touch on the expense side.
Speaker Change: Thank you flagged that youre strategic realignment should drive some savings.
Speaker Change: In the range of $6 million to $8 million annualized can you just give us an indication of.
Speaker Change: How does that sort of it should flow through I think it starts in the second half 2025, what should we expect that and then when do you hit that sort of $6 million to $8 million run rate.
Speaker Change: Okay. It's a good question Graham so.
Speaker Change: And as you would see in our MD&A right one of the things that we've done is obviously, we've incurred a strategic realignment charge in the first quarter.
Speaker Change: And because we are live now with PGM. Some of those were actions we took in advance of going live on PGM and in the second quarter, we're going to work on decommissioning the systems rationalizing our team taking the actions to really move us forward in that kind of post go live TTM. After John said once we're through the <unk>.
Speaker Change: Hyper care kind of period as we head towards June 30th.
Speaker Change: Then there'll be a couple of things that we've signaled right as we had originally many years ago said, we anticipate being able to operate this at a $6 million to $8 million lower kind of run rate.
Speaker Change: As we finalized Q2 with both what we are going to incur in terms of strategic realignment charges, but also finalizing the full capitalization of the asset we've obviously given you.
Speaker Change: Some indication we need to go through that without orders in internally and then once we're done we'll actually know what our incremental amortization charge will be roughly indicated think of around $2 5 million a quarter right will happen.
Speaker Change: In addition, obviously we've got work that we're doing on the rebate elimination files. So there's a lot of moving pieces here and which is why stay tuned for Q2 results because John and I will get into a lot more detail at that time.
Speaker Change: Now none of that is really going to fall to the bottom line in Q2, which is why we don't have to pre empted by by going there.
Speaker Change: The best way that I can indicate kind of where we are but all signs are we will through the actions, we'll take in the second quarter exceed the $6 million to $8 million.
Speaker Change: I would spoken about and remembering that that's kind of on a cash run rate basis, because obviously, we have to pay for the amortization of the system, which from an accrual accounting will kind of offset some of those savings.
Speaker Change: Yes.
Speaker Change: That's actually it's actually good news that we can confirm that.
Speaker Change: For two all respect for David It was that old CFO that made that commitment to the street.
Speaker Change: And then there has been a long projects. So the fact that we've actually got to this stage, we are able to identify and see that not only are those savings real but we are likely to exceed them.
Speaker Change: Been a real positive execution that way anytime <unk> got a long complex product in a project like this thats been candidly seven years in the making assumptions can change over time.
Speaker Change: But the actual scope of what we delivered in the scope of what we're going to decommission and provide savings to both ourselves into the street is real and it's going to get executed and Echo Davids comments timing, we will get more clarity on but you can imagine we're going to try to achieve that as soon as possible.
Speaker Change: We'll need to find a home for our mainframe system for whoever wants one I think all of you guys still run them and we've got one that is slightly used if you'd like to take it on and that could enhance our savings.
Speaker Change: Okay excellent and then jumping to satisfy.
Speaker Change: If I adjust for acquisitions and FX. It looks like revenue was up 7% year over year is there anything to call out there. It seems it seemed a little bit late.
Speaker Change: And then.
Speaker Change: A follow on to that just the credit Suisse bond industry acquisition, how do you plan to leverage that within the <unk> business.
Speaker Change: Yes, so I'll start a little bit on the kind of core performance I'll hand, it over to John on the funded this season and kind of our strategic vector as it relates to getting to that asset class.
Speaker Change: Yes, your math is kind of not far off I think there are really two things.
Speaker Change: That are relevant.
Speaker Change: Relevant for analyzing the performance in the first quarter. The first is obviously the digital distribution and analytics revenue is really tied a lot to a lot of marketing programs and budgets. So.
Speaker Change: TD extends that individuals are early in a calendar year and we're not actually doing a lot of web content or other kinds of promotions with us.
Speaker Change: You would see that kind of muted and as you've typically seen it tends to ramp up in the second half of the year right as individuals understand what they have left in and marketing budgets and so forth. So thats kind of the first little piece, but the second piece is obviously, we and this is why we are a diversified business right.
Speaker Change: We do see that we arent on our index products, we obviously charge a basis point and driven trailer and TD extent.
Speaker Change: AUM based on market prices fluctuate that would obviously fluctuate within our revenue and so.
Speaker Change: There is obviously some puts and takes there certain industries in the first quarter.
Speaker Change: The magnificent eight and stuff like that there is some.
Speaker Change: <unk> been some value.
Speaker Change: That's kind of been eroded so just depending on the asset mix it kind of flows through it and those really two drivers for the first quarter, but unbundled disease is a really important strategic vector for us. So maybe let me hand, it to John on that.
John Mckenzie: And even before I get to that I will note that.
John Mckenzie: When you look at Q1 growth rate on just the business keep in mind always so thats when we do the annual conference that is.
John Mckenzie: A large chunk of the Q1 revenue and not part of what you would call that year over year growth, because it's kind of a fixed sized event.
John Mckenzie: So the rest of the growth that's growing more than what we would expect in terms of at a high single low double digit rates and there is there isn't really any out trade from the growth expectations. You have to go that big chunk, that's in that first quarter.
John Mckenzie: But I'm glad you raised the bond to the C piece.
John Mckenzie: Theres very little impact I'll be very candid little financial impacts in the quarter from bringing those in these indices are they are longtime benchmarks in the industry. They are well used they are well regarded.
John Mckenzie: They essentially you had not been commercialized, it's actually very hard for banks to commercialize their own indices, because their clients expect them to be given to them as part of the.
John Mckenzie: <unk> exchange for bond trading and things like that so by bringing it out of that.
John Mckenzie: Out of a bank and bring it into Institute <unk>. It gives us the ability to actually provide it out to more clients potentially build ETF off it.
John Mckenzie: And then really commercialize it the way that credit Suisse would never be able to do and brings into our team that thinks they can massive capability and thats really what we wanted to do here and that's always one of those questions you can buy it or you can build it when you do something like this it's a bit of both because we're acquiring both the IP the capabilities talent and it gets us into that asset class and so now.
John Mckenzie: Sets up DMX identifier for building out more in the fixed income space not just in the U S. But on a global basis. So very limited impact in Q1, but sets us up for more long term growth in the franchise going forward.
John Mckenzie: Okay.
Speaker Change: Excellent just one quick follow up there you mentioned digital distribution sort of being tied to marketing what's the you remind the revenue mix for the other side between.
John Mckenzie: Recurring.
John Mckenzie: <unk>.
John Mckenzie: Sort of ETF licensing fees versus the digital distribution piece.
John Mckenzie: Yes.
John Mckenzie: Haven't really given the split what we've really spoken about as we've isolated with the annual exchange conference kind of top line would be so it's just that because it's really lumpy right that'll be typically its a first quarter event.
John Mckenzie: We just moved the venues so we headed in Vegas this year to some debate as to whether it will be in the second quarter next year and if that crystallizes. We'll let you noticed that you can think about it then but then the balance of the business is really mainly driven by the index and benchmark business. That's the lion's share of the business and obviously digital.
John Mckenzie: Distribution analytics is the next piece, but it's a much smaller piece so.
John Mckenzie: We haven't released them split out the numbers over there but to the extent that there is holding back on marketing budgets as I touched on that obviously then does have a small couple of percentage point drag on earnings or revenue growth, but really I would focus on the AUM side of the business for the majority of the growth factor.
Speaker Change: Great that's it for me.
John Mckenzie: Thank you.
Brian Bedell: And your next question comes from Brian Bedell with Deutsche Bank. Please go ahead.
Brian Bedell: Great. Thanks, Good morning, Thanks for taking my question.
John Mckenzie: Maybe John just to zoom back to Canada, you mentioned since.
Brian Bedell: Since the elections <unk> bin.
John Mckenzie: They're making some suggestions obviously in terms of tax.
Brian Bedell: Tax reforms and other regulatory reforms I guess, what's your.
Brian Bedell: You, obviously you've been at this a long time, what's your view that things may actually change.
Brian Bedell: <unk> and <unk>.
Brian Bedell: Significantly improve Canada as a destination for.
Brian Bedell: For business and for capital markets.
Brian Bedell: And what would that mean exactly for for Tms in terms of contribution to your Canadian based businesses.
Yes, that's a fantastic question. So thank you for that.
Brian Bedell: I'm actually probably the most confident I have been in a long time that we actually got the ability to drive change right now.
Brian Bedell: Canadian election, and everything that's going on in the U S. As I think made countries more laser focused on their competitiveness.
Brian Bedell: We had two parties in Canada is essentially both ran on economic platforms and took 85% of the boat together and so there's a lot of commonality around reforms, we talked about the six points that we put out in terms of recommendation I can actually tell you that all six of them were picked up in platforms.
Brian Bedell: Four in one and two and the other and so I'm going to give you. Some specific examples. The proposal we have made around R&D tax credit reforms that small public companies can access them to the same degree was actually in the Canadian fall economic statement. It got picked up in the Liberal platform.
So we need to push to make sure it gets executed but that would reduce.
Brian Bedell: Having that done reduces the friction for a small company to go public and raise money and so that's a key piece.
Brian Bedell: There was a commitment to expanding the mineral exploration tax credit and since our marketplace is a really strong contingent of mining companies.
Brian Bedell: That actually creates more certainty on the ability to fund and finance those projects going forward and they're capital intensive. So those are really good measures.
Brian Bedell: Both parties actually talked about creating more certainty around project approval regime, that's critical capital formation as well because if you can't have certainty around project activity, it's hard to have certainty on raising the capital. So it's always hard to take all these pieces and say, okay. What does that mean for how many more of lessons are we going to get but that is actually what we're driving towards because when you can improve the conditions for companies.
Brian Bedell: A raise money.
Brian Bedell: We should see an increase in the amount of companies, we have raise additional capital to finance new mines, new pipelines, new projects et cetera, and we should see the ability for more companies to raise public money. So all of this again is about reducing the frictions between going from private to public.
Brian Bedell: There was an announcement even just this week and it's been part of our long term advocacy effort on the Ontario government expanding out their advanced manufacturing tax credit from private companies into public companies as well and that's why we've had a dialogue with the government for a while I want to thank them for their partnership and working on this and.
Brian Bedell: And thats going to mean again that public companies that do manufacturing, Ontario can participate in this as well and therefore will be easier for private companies to raise public money to expand so it's always hard to pinpoint direct benefit to the business, but it is part of that long term, how do you make the market ecosystem stronger and.
Brian Bedell: I've been working on this with our team for probably six seven years and to see some of these ideas come to fruition you gotta admit it's actually very exciting because it's going to directly benefit our constituents, which then has a benefit to our marketplace.
Brian Bedell: That's great News and then maybe zooming out globally at the same time as you.
Brian Bedell: Continuously look to expand that.
Brian Bedell: The business on a global basis, and an increase the comp contribution.
Brian Bedell: From from outside Canada.
Brian Bedell: Maybe if you can just talk about to what extent do you think you are in a better position to do that organically with your efforts in the U S. Obviously the success of <unk>.
Brian Bedell: <unk>.
Brian Bedell: Potential ability to leverage the post.
Brian Bedell: Great modernization project.
Brian Bedell: The organic so overall.
Brian Bedell: Your bullishness on organically improving that mix versus.
Brian Bedell: Or do you need other acquisitions do you think to complement that strategy or I should say.
Brian Bedell: Your desire to make other acquisitions outside of the U S to complement that strategy.
Brian Bedell: Yes, I like how you phrase that so we do not need other acquisitions to do what we are very bullish on our ability to grow organically.
Brian Bedell: Very much has been our strategy all of the pieces. We've got we have the assets in place to do it we've got the team that can actually deliver we've now demonstrated in multiple cases, our ability to execute on complex projects to do that.
Brian Bedell: So in all of these areas, we can grow organically, we can durable that kind of strong growth across the franchise by doing that.
Brian Bedell: I Love, the fact that David talked about our kind of our balance sheet strength. The fact, we were able to return back to target. So quickly because it does allow us that flexibility of when we see the right opportunities to accelerate the strategy, we're going to be able to execute on those.
Brian Bedell: But those are opportunities to accelerate we can continue to drive the growth. We're looking to drive organically without them. So you can expect us to continue to be very disciplined about the investments that we do make in terms of both contributing to the strategic growth and having the economics that makes sense from an investor standpoint, and it really allows us the freedom and flexibility to be choice.
Brian Bedell: Full on where we invest because we've got such a great underlying core strategy. So.
Brian Bedell: Don't need to do it but if we can find the right opportunities to accelerate we will absolutely do those okay.
Brian Bedell: Okay, that's great color. Thank you.
Brian Bedell: This concludes the question and answer session I would like to turn the conference back over to Mr. Musavi and for closing remarks.
Speaker Change: Thank you everyone for joining us today before we close the call I'd like to thank Nino by for our work with our team and many of you over the past few years and congratulate neena on her new role in our TMS Finance. We also welcome Mandy Cataria, who recently joined our Investor Relations team. If you have any further questions contact information for investors really.
Speaker Change: <unk> as well as media is in our press release and will be more than happy to get back to you until next time Goodbye.
Speaker Change: This brings to a close today's conference call. You may disconnect. Your lines. Thank you for participating and have a pleasant day.