TMX says half its business now sits outside Canada as TSX listings thin
Half of TMX Group's business now sits outside Canada, chief executive John McKenzie said, a split he called "a real nice balancing point" as the Toronto Stock Exchange operator leans on data and subscription revenue to smooth out cyclical swings.
McKenzie told BNN Bloomberg that three measures make up the strategy: global distribution, recurring revenue and data. More than 50 per cent of revenue now comes from subscriptions, he said, giving investors confidence in long-term growth, while data services account for over 40 per cent of the franchise, with a target of 50 per cent.
The pitch follows third-quarter results showing revenue up 17 per cent year on year and adjusted diluted earnings per share of $0.63, up 21 per cent, according to the company. Chief financial officer David Arnold said organic revenue rose 11 per cent, led by double-digit growth at TMX VettaFi, derivatives trading and clearing, and capital formation. Net income fell year on year after the acquisitions of Cboe Australia and RAFI Indices, which McKenzie said were designed to be immediately accretive.
TMX funded the deals partly through a C$1.1 billion Canadian private placement debenture offering that closed in September, and two acquisitions are yet to close. McKenzie said total leverage would reach about 3.2 times, within a range the company has carried before, against a target of 1.5 to 2.5 times.
The diversification comes as fewer companies list on Canada's main exchange. TMX's September market intelligence report counted 337 new listings across the TSX and its junior venture exchange in the first nine months of the year, of which 101 were companies, according to Token Times; five years earlier the total was a comparable 338, but 176 were companies. Speaking at an Alberta Securities Commission conference, McKenzie said he wants lower regulatory barriers and cost relief for companies going public, warning that hollowing out the middle of the market makes it harder for smaller firms to scale into the next Enbridge, Shopify or RBC.
