TMX Group Ltd

TSX:X

Earnings Call Transcript 2024-Q1

[Operator]

Good morning, ladies and gentlemen and welcome to the TMX Group Limited Q1 2024 Financial Results Conference Call. [Operator Instructions] This call is being recorded on Friday, May 3, 2024.I would now like to turn the conference over to Mr. Amin Mousavian. Please go ahead.

[Amin Mousavian, executive]

Thank you, Joel and good morning everyone. Thanks for joining us today to discuss the 2024 first quarter results for TMX Group. It is a beautiful day here in Toronto and it looks like winter is finally deciding it's time to leave. As you know, we announced our results late yesterday and copies of our press release and MD&A are available on tmx.com under Investor Relations.This morning, we have with us John McKenzie, our Chief Executive Officer; David Arnold, our Chief Financial Officer. Following the opening remarks, we'll have a question-and-answer session.Before we begin, let's cover our forward-looking legal disclosure. 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 law. Actual results may differ materially from these expectations and additional information is contained in our press release and periodic reports that we have filed with the regulatory authorities.Now I will turn the call over to John.

[John McKenzie, executive]

Well, thank you, Amin, and good morning, everyone. Thank you for joining us today to discuss TMX Group's financial results for the first quarter of 2024 and to everyone listening in. As Amin said earlier, thank you for joining us on such a beautiful spring Friday.Now today is actually a more formal Friday than usual for us in the Toronto office today, because it's AGM Day here at TMX. And we look forward to hosting our Special Annual General Meeting this afternoon at 2:00 p.m. And for the rare occasion of doing it while the Maple Leafs are still in the playoffs. And I'm sure we all appreciate that.Now turning to the business at hand this morning, our first quarter results reflect solid performances from key components of our business, including areas of recent global expansion, as we continue to build on our growing information business. Also reflected in TMX results is the fact that we are not immune to challenging market conditions.Macroeconomic factors continue to weigh heavily on important segments of our ecosystem during the first 3 months of this year, creating uncertainty and inhibiting growth. And as a result, capital markets activity in some of our traditional key performance indicators are down year-over-year.Importantly, these environmental challenges are not exclusive to TMX. Many of our stakeholders are negatively impacted by sustained short-term uncertainty and that is why now and through all turns of the market, our focus is squarely on seeking out ways to create meaningful and lasting competitive advantages for our growing client base here and around the world.Now while David will take you through the Q1 results in greater detail in a few minutes, I'd like to focus my comments this morning on outlining some key performance highlights during the quarter and update you on progress we have made in advancing some important strategic initiatives.So turning first to TMX's first quarter performance, overall revenue increased 16% from Q1 of 2023, largely as a result of higher revenue from Global Solutions Insights And Analytics, which included $37.9 million from TMX VettaFi, fully reflected in our results for the first time following the close of the acquisition on the first business day of the year.Q1 results also featured year-over-year growth from TMX Trayport and partially offset by lower revenue from capital formation, equities and fixed income trading. Organic revenue, excluding the addition of TMX VettaFi, increased 3% year-over-year. Diluted earnings per share was $0.38 on an adjusted basis for Q1, also, a 3% increase from the first quarter of last year. And total operating expenses increased, compared to Q1 '23, largely due to the inclusion of TMX VettaFi and David will take a little closer look at these Q1 expenses in his remarks to follow.Moving now to our business areas. Revenue from GSIA in Q1 was 48% higher than Q1 of 2023, or 11% excluding TMX VettaFi. TMX VettaFi's revenue was 33% higher in U.S. dollar, compared to the same period last year prior to the acquisition. And that year-over-year growth was primarily driven by higher indexing revenue and reflecting organic growth in assets under management and revenue also from the 2023 acquisitions of ROBO Global and the EQM indices as well as higher revenues related to events.February marked TMX VettaFi's premier annual event exchange. Now this is a 3-day conference billed as an advisor-centric networking and educational experience and this year's edition was a phenomenal success, with near 2,000 attendees from across the ETF and financial services industry and the feedback our team received was overwhelmingly positive.It also served as a powerful networking opportunity for our various business development teams, including listings, trading and TMX Datalinx. Now upon announcing the deal late last year, David and I talked about how the addition of VettaFi, a U.S.-based indexing, digital distribution, analytics and thought leadership company would create value for our clients, strengthening our ability to meet the needs of the indexing and ETF community here in Canada and around the world.And we were also clear on how the acquisition would accelerate TMX's strategic, financial and transformational objectives, increasing the proportion of our revenue derived from recurring sources, adding to our fastest growth business area and increasing our global footprint. And this remains a compelling story.Our experience working together from the time of TMX's initial investment in early 2023 gave a strong indication of the caliber of talent across the team and some of the opportunities in front of us. And to be candid, we set the bar pretty high for TMX VettaFi and while it's still early, they have exceeded our initial expectations in every way.GSIA sustained growth momentum in other 2 areas as well. It was another strong quarter for TMX Trayport. Revenue grew 21% to Q1 of last year, or 16% in pound sterling, driven by a 26% increase in trader subscribers, annual price adjustments and the impact of a favorable FX rate. TMX Trayport continues to benefit from an innovative and adaptive approach to serving world commodity markets.Big wins in the quarter featured existing clients expanding their usage and including large European energy utilities and adding 11 new trading firms. We are also seeing significant growth in TMX Trayport's combined data-driven trading offering, featuring data analytics, trade signal and auto trader. Client subscriptions to this powerful combination of analytics, advanced technical charting and algorithmic trading capabilities now account for nearly 11% of overall TMX Trayport revenue.And focused on the future growth, TMX Trayport continues to seek out opportunities to move into new asset classes and geographies and to meet the rising demand for advanced trading tools, insights and solutions. For example, we are seeing intriguing signs of growth in the Japanese power markets, currently in a transitional period due to deregulation.And while this is still a nascent market that has been slow to develop, we are encouraged by the more than 200% year-over-year growth in OTC cleared volumes and a 180% increase in active users.In TMX Datalinx revenue grew as well, growing 4% year-over-year due to higher revenue from benchmark and indices, driven by the new term CORRA benchmark as well as higher revenue from colocation, data feeds and price adjustments in Q1 of 2024.Now I'd like to turn my attention to derivatives. Derivatives trading and clearing revenue excluding BOX, decreased 3% year-over-year. The decrease included a 9% lower revenue from MX, due to an unfavorable product mix and a 3% decrease in overall volumes traded.Lower revenue from derivatives trading was partially offset by a 9% increase in revenue from CDCC due to the positive impact of the pricing changes, which came into effect in January 2024 and higher repo volumes. And while sustained volatility across fixed income markets and monetary policy uncertainty continue to drive strong volume activity and liquidity in many of our key products, volumes traded in equity options were down 11% when compared to the first quarter of last year, which was a period of pronounced growth. And we're encouraged though by the continued upward momentum in other areas. Some of the key MX Q1 highlights included 11% higher volumes in shared futures, 6% higher volumes in interest rate products, including continued strength in our bond futures products.Volumes in our 2-year and 5-year government of Canada bond futures contracts grew by 66% and 25% respectively when compared to Q1 of 2023 and overall open interest on March 31 was 16% higher than at the same date last year. MX's 3-month CORRA futures contract, or CRA, has been a tremendous success.Trading growth has grown -- trading has grown substantially over the past year and set a new record in Q1, with more than 93,000 contracts traded. The CRA is now established as the product of reference for short-term rate management as the industry prepares for the transition from CDOR to the Canadian overnight repo rate average rate, or CORRA plan for next month.Now in keeping with our corporate purpose, TMX's client-driven innovative mindset extends to our post-trade business. Earlier this week, in collaboration with Clearstream, we were pleased to announce the successful launch of the new Canadian collateral management service, the first tri-party repo capability in the Canadian market.Developed over the past year by TMX and Clearstream, CCMS is designed to modernize Canada's funding market, automating the life cycle of all secured funding transactions, starting off with repo, to enable participants to better mobilize, track and optimize their collateral securely. And we are excited about it. Efficient markets are more liquid, they're more attractive and they are more competitive.So CCMS is a game-changer for Canada's money markets, accelerating the evolution of a well-functioning, modernized market, supporting the expansion of tri-party repos for the first time in Canada and as a viable investment value for buy-and sell-side participants as providing an important optimized financing solution as banker's acceptance come to an end with the cessation of CDOR at the end of next month and providing a platform for participants to manage collateral in support of the critical transition to T+1 settlements, the reduction of the standard settlement date from 2 days to 1 day later this month.And while this is still very early, we are seeing strong industry demand. Five major Canadian banks are among the first to participate in live transactions this week and we will be onboarding new clients over the coming months. And then looking a little further down the road. We are looking to plan -- we are planning to expand this new service beyond repos into additional collateral exposures.Now as you may recall, last year Canadian regulators, in conjunction with the SEC, announced the timeline for T+1. We made the decision at that time to defer delivery of our post-trade modernization program to ensure the industry participants seamlessly transitioned to 1-day settlement aligned with regulatory requirements. But we expect our PTM program to be ready for implementation as planned by the end of this year.Our team is working closely with our participants and stakeholders on reengagement activities as this is a collaborative exercise and thus that timing may change if there is any significant delay in the T+1 go live date, which is currently May 27, or gaps in terms of participant readiness.But quickly, I actually like to take a moment to thank our industry stakeholders for working closely together with us on these transformative initiatives and for their ongoing partnership in making our markets better.Now moving on to capital formation, revenue was $60.6 million, a 5% decrease from Q1 of 2023, reflecting lower revenue from additional listing fees, due to a decrease in the number of financing transactions, despite an increase in total dollars raised on the Toronto Stock Exchange and a decrease in the financing transaction on dollars raised on the TSX Venture Exchange.And while difficult conditions have impacted capital markets activity not just here in Canada, but across world markets, we are seeing important wins in our ecosystem and compelling evidence that the spirit of entrepreneurship endures. And we are confident that as confidence returns to Canada markets, activity is due to pick up. It is not a question of will it, it's a question of when it.Among our 55 new listings in the quarter, which included 31 new listings on the TSX Venture Exchange were 4 companies who uplifted, or graduated from other domestic markets to our ecosystem during the quarter, including Hypercharge Networks, an electric vehicle supply equipment company breaking into the rapidly growing EV charging market, with a simple and efficient charging solution. And ATHA Energy, a Canadian mineral company engaged in the acquisition, exploration and development of uranium assets in the pursuit of a clean energy future.Together, TSX and TSXV are proven means to access a broad range of global investors and a viable pathway to sustainable long-term growth. Vitalhub is another great example of the power of our 2-tiered ecosystem. The company went public on TSX Venture Exchange in 2016 through a qualifying transaction via our signature Capital Pool company program and then graduated to the Toronto Stock Exchange in 2021.Vitalhub has sustained growth over the last 5 years and closed a $40 million financing last month. And as always, our teams are closely connected to the listed issuers and prospect communities and we're working to bring next great -- the next great companies to the market.And as we continue to work with ETF providers to support the ongoing strong growth of that industry as well, 14 new ETFs from 11 different providers listed on TSX in the first quarter, representing a dynamic range of investments, including thematics and factors, as well as commodities and income-oriented ETFs.And overall TMX's business model has continued to prove resilient and this is largely a reflection of the intrinsic and enduring strength of Canadian markets. Our markets more than measure up to markets around the world, but measuring up is a continuous pursuit. And in any competition, we strongly believe that winning is a worthy ambition.Canada has what it takes to be an economic powerhouse, rich natural resources, a highly educated workforce and a healthy spirit of innovation, investment and entrepreneurship and we need to continue to create the conditions for sustained success. TMX is a vocal and engaged advocate at all levels of government in this country for measures to unlock the flow of capital and create the environment that investors look for, regulatory certainty and clear globally competitive incentives for entrepreneurs, workers and investors to share in the success of Canadian companies.And while we have seen some signs of progress and evidence that our voice is being heard, we have a good deal of work ahead of us, specifically to help policymakers better understand the scope of the impact of their decisions have -- which have on crucial components of our ecosystem.In the recent federal budget announcement, the government indicated that they would explore the expansion of Canada's signature R&D support program to include public companies. This is a welcome and encouraging development on a key recommendation we are pursuing for a number of years and it is an important step forward.However, at the same time, we share the concerns of many across Canada's business and investment community about the unintended consequences from the announced increase in the capital gains tax inclusion rate. This increase will add another disincentive to investing in Canada, at a time where we need to be focused on attracting talent, capital and competing for global investment flows.We need to collectively find new ways to incent risk-taking, measures which could include an expansion of the provenly effective mechanism flow through share program as we have suggested, rather than imposing stricter limits on rewards. So our ask is simple for governments to take a pause, to engage directly with representatives from the industry most effective, most affected and to gain a better understanding of the impact of what is essentially a 33% tax increase on investing activity. And then work with us all, towards viable alternatives and mitigants.Now in closing today, I want to reemphasize TMX's pledge, to serve stakeholders across our marketplace around the world, with excellence and integrity. Our people are clear-eyed and united in our commitment to the enduring success of our capital markets ecosystems and in pursuit of TMX's long-term strategic, financial and transformational objectives.With that, let me pass the call over to David. Thank you.

[David Arnold, executive]

Thank you, Johnr, and good morning, everyone. As John mentioned, macroeconomic factors continue to weigh heavily on important segments of our ecosystem during the first 3 months of the year, creating uncertainty and inhibiting growth. As a result, capital markets activity and some of our traditional key performance indicators are down year-over-year. But despite this, we continue to benefit from our deep and diverse business model in the first quarter of 2024.We reported record revenue, both including and excluding VettaFi, which joined the TMX family at the beginning of this quarter. Our revenue increased 16% compared with Q1 last year and organic revenue grew 3% over the same period. Our diluted earnings per share was $0.50, representing an increase of 56%, compared with $0.32 in Q1 of last year. This increase included a gain of $0.21 per share, related to the revaluation of our previously held minority interest in VettaFi, which was fully acquired on January 2 of this year and is now being referred to as TMX VettaFi.Our adjusted diluted earnings per share increased by 3%, reflecting lower income tax expense of $5.4 million and higher income from operations of $2 million, primarily driven by growth in our businesses with a higher percentage of recurring revenue. This was partially offset by higher net finance costs related to the acquisition of TMX VettaFi.Since John has already covered our revenue relative to Q1 of last year, I will pick up where he left off, by taking a closer look at our expenses on a year-over-year basis. Operating costs in the first quarter increased by 28% compared to Q1 of last year on a reported basis, driven by the following items.First, Q1 of this year includes $20 million of operating expenses related to TMX VettaFi. Now it's worth noting that Q1 expenses for TMX VettaFi would typically be higher than the rest of the year as they include costs related to the Annual Exchange Conference held in Miami in early February.As such, going forward and all things being equal, we will see higher expenses in Q1 for TMX VettaFi. And all things being equal, higher revenue as well in Q1, as the revenue earned from the exchange conference would also be accounted for in Q1 of each year.I say all things being equal, because depending on business growth in other business lines in TMX VettaFi results could differ. For example, revenue linked to assets under management for indices and benchmarks, digital distribution activity and so forth. We continue to point you to our December disclosures, when we announced the transaction, which focus on the full year outlook for TMX VettaFi.Second, an additional $18.7 million relating to TMX VettaFi now being part of the group results, namely $11.8 million relating to the amortization of acquired TMX VettaFi intangibles, $5.4 million increase in acquisition and related expenses. And finally $1.5 million in higher integration costs.Third, we incurred $1.3 million of expenses in the first quarter related to our U.S. expansion initiative. And lastly, there was a $1.6 million increase in BOX markets regulatory related expenses. Somewhat offsetting the increases, Q1 of last year included a $2.2 million onetime write off of receivables and $0.6 million related to SigmaLogic.Now excluding these items, our operating expenses increased by approximately 4%, or 3.8% to be exact, on a comparable basis, reflecting higher head count as we continue to invest in growth and increased employee performance incentive plan costs relative to Q1 of last year.Now turning to a comparison of our results on a sequential basis, revenue in Q1 is up $44.4 million versus Q4, mostly driven by the inclusion of TMX VettaFi. In addition, there were also sequential revenue increases from the rest of our Global Solutions, Insights and Analytics segment, namely TMX Trayport and TMX Datalinx as well as our derivatives trading and clearing and equities and fixed income trading segments.This was somewhat offset by lower revenue in capital formation. The inclusion of TMX VettaFi increased revenue by $37.9 million in the first quarter. Excluding TMX VettaFi, revenue was up $6.5 million, or 2% compared with Q4.Now as I mentioned earlier, all else being equal, Q1's revenue for TMX VettaFi would typically be higher, due to the inclusion of the Annual Exchange Conference revenue. So going forward, all else being equal, it is reasonable to expect some seasonality in the TMX VettaFi revenue.Operating expenses this quarter were up $30.9 million, or 18% from Q4 of 2023, including $20 million of operating expenses relating to TMX VettaFi, $11.8 million relating to the amortization of acquired VettaFi intangibles, $1.2 million in integration costs and $1 million in acquisition and related expenses.These increases were partially offset by a $5.7 million decrease related to strategic realignment costs incurred in the fourth quarter to create capacity for further investments in growth. $1.8 million lower expenses related to BOX's regulatory-related expenses and savings resulting from the strategic realignment beginning in Q1 of this year.Accounting for these items, our comparable operating expense increased 3% sequentially, mainly reflecting higher payroll and IT costs. As you will recall, in Q4 of 2022, we disclosed our 3 key transformational measures. Now while these are long-term objectives and we have made meaningful progress over the last 5 quarters. And this quarter, we have reached a milestone on one of the 3.Our revenue outside of Canada was 50% in the first quarter, a 9% increase from 2023, 6% of which is from the inclusion of TMX VettaFi and 3% from organic growth. We have for the first time met the low-end of our transformational objective for this measure.Global Solutions, Insights and Analytics revenue as a percentage of total revenue was also up 9% from 2023 to 44%, of which 7% is from the inclusion of TMX VettaFi and 2% from organic growth. And last but certainly not least, recurring revenue as a percentage of total revenue increased by 2% to break-through the 55% mark this quarter, primarily driven by the addition of TMX VettaFi.Now turning to our balance sheet, you may recall from my Q4 remarks the VettaFi -- my Q4 remarks the VettaFi transaction, which closed on January 2 this year, was financed through term credit facilities totaling USD 963 million divided into 3 tranches. Term A facility of USD 600 million maturing 12-months from closing. Term B facility of USD 163 million maturing 18 months from closing. And finally Term C facility of USD 200 million maturing 24 months from closing. The weighted average yield of the term credit facilities was SOFR plus 120.5 basis points.Now on February 16 in this quarter, we completed a Canadian private placement offering totaling $1.1 billion across our Series G, Series H and Series I debentures. These proceeds from the debentures were mainly used for the full repayment of the Term A facility and our outstanding commercial paper.Since we termed out the Term A credit facility at a lower rate, all things being equal, the net financing costs in the first quarter can be considered a high watermark. The weighted average interest rate for our total outstanding debt of approximately $2.3 billion was lower by over 55 basis points as of March 31 compared to January 3.On March 31, 2024, our debt-to-adjusted EBITDA ratio was 3.6x. We also held close to $468 million in cash and marketable securities, which was $293 million in excess of $175 million we target to retain for regulatory and related purposes.Now net of excess cash, our leverage ratio was 3.2x and we remain confident in our deleveraging plan and ability to return to our target range of 1.5 to 2.5x within 2 years. In March 2024, our normal course issuer bid program expired and we elected not to renew the program at this time, as we focus our efforts on executing our deleveraging plan.Last night, our Board approved a 6% increase to our quarterly dividend to $0.19 per common share, payable on May 31 to shareholders of record as of May 17. This increase is a reflection of our confidence in the ability to generate cash, while continuing to make progress on our deleveraging plan. With this increase, we will have paid out 50% of our adjusted earnings per share for Q1, which remains at the top end of our target payout range of 40% to 50%.So that concludes my formal remarks. And I'd like to turn the call back to Amin for our Q&A period.

[Amin Mousavian, executive]

Thanks, David. Joel, would you please outline the process for the question-and-answer session?

[Operator]

[Operator Instructions] Your first question comes from Ben Budish with Barclays.

[Benjamin Budish, analyst]

Maybe starting with VettaFi, can you give a little bit more color? You talked about the seasonality of Q1, but perhaps we would, if things kind of go right, maybe we wouldn't see it as much. Can you talk a little bit about what the typical seasonality looks like and what is the sort of typical in a Q1 versus, like, the rest of the year? And then I'm wondering if there's any other stats you can kind of share even into April, like the sort of index-linked AUM, how is that sort of trending throughout the year? I think we have a general sense of how much of the revenues that contributes, but anything else that can kind of help us think about our models, at least for Q2 and then the seasonality bit.

[John McKenzie, executive]

Yes, happy to. So thanks for the question, because I think that's a really important one for us to unpack for everyone. The seasonality piece really is limited to Q1. So the majority of VettaFi's business is subscription-based, it's growing over time. And so as we continue to build it as one of our high growth businesses over the long-term, yes, you will see long-term quarterly growth.Now the difference in Q1, is really about the conference that I mentioned in my remarks as well, the exchange conference, which took place in Miami in February. To give you a bit of perspective, approximately USD 6 million in revenue that comes from managing that conference on behalf of the industry. And while it is a contributor to EBITDA, it's not a material contributor.So the margins in the quarter are also not reflective of what the long-term margins are. And so that gives you kind of the context both on the revenue and the expense side. And so if you think about that and adjust for it and then use the appropriate growth throughout the quarters as we build the business quarter-by-quarter, it gives you a good indication of how the business is growing.And that's why we also provided kind of that context of how Q1, compared to Q1 of VettaFi a year ago, before we bought it. And you saw that double-digit organic growth in the quarter as well. So unpacking those pieces. Now in terms of the AUM, that is the right piece to look at. We're going to guide you to the VettaFi website for that. I don't have that on hand for me right now, but that is the best indicator.Now it's not going to be uniform across the products because some products have different pricing built into it, but it will give you the guidance in terms of the overall assets under management that are linked to VettaFi indices. And we'll see about how we bring more of that into our disclosure in the future.

[Benjamin Budish, analyst]

Great. Very helpful. Maybe just one more on VettaFi. I mean it's been a couple more months now since we've last spoke. I think you've owned the asset since the beginning of the year. Any more updates in terms of what TMX can do to sort of accelerate the growth of this business? Are there sort of learnings from Trayport that you can kind of apply here, or does the strategy look a little bit different?

[John McKenzie, executive]

Well, can I say yes and yes? There are certainly learnings from our Trayport experience and we are applying them both in terms of how we manage the business, how we integrate the business, how we create scale with the different teams. But one of the pieces that I think is unique in this one is the ability to work between TMX VettaFi and other parts of our TMX ecosystem to create joint product opportunities for our clients.Again, I'm going to take you back to the exchange conference for a second. That was a conference that VettaFi leads, but also, we had participation from all other parts of TMX. And jointly generated, like I talked to you about the amount of revenue the conference generates, we generated an equivalent amount of what I'll call pipeline of new client prospects of jointly developed products for new clients from those engagements at that conference.And so while it's a really important industry conference, it's a sales pipeline builder for us as well. And what we can do now differently as part of the same organization is actually work with clients like ETF providers, with a whole host of solutions, including both the index creation, the digital distribution capability, the listing on exchange as you build volume, then the options traded on the MX on that listed ETF.So it's an ecosystem opportunity that didn't exist to us in separate organizations before and we are in multiple client discussions now that really are a product of that partnership. So really excited by both how we help VettaFi grow faster, but also how VettaFi and the capabilities for the ETF community allows us to serve a broader suite of ETF clients and bring more issues to market. So it is a 1 plus 1 is 3 in terms of the growth potential for both parts of the franchise.

[Operator]

Your next question comes from Etienne Ricard with BMO Capital Markets.

[Etienne Ricard, analyst]

On VettaFi, digital distribution was previously highlighted as a source of synergy. So could you please share an update on how you plan to integrate VettaFi within TMX Datalinx and the resulting synergy potential?

[John McKenzie, executive]

Yes, it's a great question. I mean, we started with the way we've organized the company, so both Datalinx and VettaFi, while they have separate leadership teams, they actually do report both into Jay Rajarathinam in terms of leading that part of the franchise. So we look to get the ability for those teams to work together to create those joint opportunities.And it's 2-way. So there's also -- there's sources of data within Datalinx that haven't been commercialized in index product. And so we're jointly working with what are the data sets that can be commercialized through indices created by VettaFi and vice versa what are the opportunities to create new products that Datalinx can [ cross-sell ]?Now we have actually 2 different sales teams that are now working together, because they have unique client bases, but we have that ability to now cross-sell. And so the -- as you said, the digital distribution tools, those are often sold to ETF clients. That could be a lead that's generated by a listings ETF manager that's passed to VettaFi or through the Datalinx team. So it's really creating that sales coordination between the different sales groups that focus on different client bases.That's why I just say, I'm actually not even sure we've announced this to our team yet, but we will be holding an annual sales conference here in Toronto in the summer, designed exactly around bringing those sales teams together so they can also, not only understand the different product availabilities, but how they do that lead pass relationship and then provide a better and greater service quality to the client.

[Etienne Ricard, analyst]

Okay. Appreciate the details. Indices managed by VettaFi are currently overweight certain sectors of the economy. I know VettaFi has been active on the acquisition front over the past year to diversify the sector exposure. Do you expect to continue deploying capital into targeted acquisitions, or do you see a path for continued AUM diversification given the pipeline of new indices being launched?

[John McKenzie, executive]

Yes and yes. So we are both in the organic construction of new indices that would diversify the asset classes that VettaFi has under management. And we are actively pursuing other tuck-ins like things like ROBO Global and EQM that you saw in 2023.

[Operator]

Your next question comes from Aravinda Galappatthige with Canaccord Genuity.

[Aravinda Galappatthige, analyst]

I just wanted to focus a little bit on Trayport. Obviously the jump in subscribers was certainly notable particularly on the trader side. I was wondering if you can talk a little bit to that and how that can kind of play out in the sort of the local currency growth that we can expect to see? I know it's a really good number in Q1 16%, but I'm seeing the trader subscriber jump at almost 26%. Just wanted to kind of understand how that would blend into the upcoming quarters?

[John McKenzie, executive]

Happy to. But let me first take the moment to welcome you to your first call with us, so really appreciate you having on board. With respect to the Trayport subscriber piece, I recognize that that was a positive surprise for a lot of folks following the story. It was not a positive surprise for us. It was positive and not surprising, because we can see the activity that's going on with the team during the quarter.So you saw in my remarks, or you may have heard in my remarks that we actually signed up 11 new clients trading firms during the quarter. So those are all net new adds that would bring a number of subscribers with them. But even more impactfully is the process that we do around enterprise clients and the renewal of those clients. So these are clients that have an enterprise relationship where they can use Trayport throughout their shop.They do it over a multi-year period and when those clients come for renewal, we reset based on where they're using it in their environment. And so we had a number of client renewals in the first quarter with revenue uplifts of anywhere, call it 30% to 90%, because over the time period they really expanded the use of Trayport on multiple desks in their shop. And that's exactly the relationship we want to create with clients, give them the incentive to use it everywhere and then we reset over time.Similarly with the additional products. So we talked a bit about the fact that we've got growing revenue, faster growing revenue actually in things like analytics, algorithmic trading. Again, we build those also into the enterprise agreements and then can expand them across the client base.And so that's actually now almost 11% of the Trayport revenue is coming from these additional services that if we were talking about this a few years ago, didn't exist at all. And so those are the 2 color points, really a combination of that additional new clients we added and the renewals that we're adding additional trader subscribers to them.

[Aravinda Galappatthige, analyst]

Great. That's great color. Just one quick question before handing over. On the sustaining listing fees, I noticed that you had alluded to some sort of client discounts. I was trying to kind of reconcile the 2% decline there versus what I understood was sort of an upward adjustment to the maximum fee. I was wondering whether it came into effect in Q1, or perhaps it was offset by these client discounts. Just wanted to understand the dynamics a little bit better?

[David Arnold, executive]

Thanks, Aravinda. It's David. So yes, you're right. So there were really 2 things. When we provide the disclosure in Q4, it's effectively preliminary, because we do the full reconciliation and billings in the first quarter and effectively a lot of the market cap that you saw in Q4 increase year-over-year was in a lot of companies that were in excess of the maximum fee cap.But then what you also have is you have a couple of delistings and also, then some bulk discounts for ETF manufacturers and so on. So that's kind of why there's that minor reconciling difference between Q4 and what we're now disclosing in Q1. And once again, it's not material, but that kind of gives you the color as to why the number changed.

[Operator]

Your next question comes from Graham Ryding with TD Securities.

[Graham Ryding, analyst]

Maybe I can just start -- just to make sure that I'm getting the message right on VettaFi. So given that there's this seasonality in Q1, is it still accurate to say that you're guiding towards USD 100 million in revenue in 2024 and a 60% overall margin on the EBITDA line?

[David Arnold, executive]

That's correct. That is correct. So the disclosures we gave when we announced the transactions still hold, but we're very pleased with the performance in Q1. And really to build onto what John said, right, so obviously there'll be the seasonality in Q1. And you see in our MD&A, if you look on the Page 14 where we talk about VettaFi, really break down that there are 3 components to that business.The indexing part of the business, the digital distribution analytics and then the events. So the event piece is typically a Q1 item. Indexing, that will fluctuate quarter to quarter based on a couple of factors. One is this -- those that are linked to assets under management, it will fluctuate as the assets under management grow and hopefully don't decline.But then there's also the addition of new indices that John touched on, both organic, but then there's also switches where individuals switch from one index provider to TMX VettaFi. So that can kind of create some fluctuation in the indexing line in quarters to come. And then digital distribution analytics is one of those interesting ones where it typically builds through the year.And if you look at the prior year numbers, you can kind of see how the aggregate TMX VettaFi numbers kind of build because a lot of that is also to do with marketing budgets and capacity at some of the ETF manufacturers, who tend to go a little slower in Q1 and then build through Q2, Q3 and Q4 during the year. Not material, but it is a subtle seasonality piece that I wanted to highlight.

[Graham Ryding, analyst]

Okay. Okay. That's helpful. What was the -- what was VettaFi's organic revenue growth in Q1 after you adjusted for the 2 acquisitions you did last year, ROBO and EQM?

[David Arnold, executive]

We haven't disclosed that, Graham. But what I will say is robust organic growth and in line with what we put in our long-term objectives. So high-single to double-digits.

[Graham Ryding, analyst]

Okay. Okay. And then maybe I would just jump to the trust line in your capital formation. I just want to make sure that I get the timing right on that one. Should we expect a similar jump in Q2 versus Q1 for that line item? I think you flagged before that there might be, like, sort of AGM and some sort of event-specific fees that you would earn in Q2. Is that still a dynamic that we should be expecting?

[John McKenzie, executive]

Yes, but not to the degree you saw in Q2 last year. I'll remind you that the disclosure we had last year in Q2, where we had a couple of very large corporate action transactions with high balances and rate impacts. Those were -- those are really good. They're really important pieces of business, but they are not predictable. And that did have an impact on Q2 much beyond the AGM pieces.

[Graham Ryding, analyst]

Okay. That's helpful. And then, David, on the net finance cost, I appreciate you gave some color that you sort of you've termed out some of your debt into lower rates, so we should try to factor that in. There was also, I think, a net gain in the quarter, that of $7 million that impacted your net finance costs. Should we be factoring that in and we're trying to figure out a sort of run rate for your overall net interest cost?

[David Arnold, executive]

Good question, Graham. No, you shouldn't be. That was actually inextricably linked to the refinancing activity we undertook in the middle part of the quarter. So those were as a result of hedging instruments we put in place to manage both currency and interest rate risk. So those are now closed out. And yes, absolutely refer back to the fact that we're carrying about $2.3 billion.And I point you to Note 5 in the financial statements. You'll see that our financing costs in March or the first quarter were around $30.1 million. You'll see it on that one line. And if you look at the $2.3 billion of outstanding debt at the end of the quarter and you kind of use our weighted average rate of 4.59%, or to be like, let's round it to 4.6% to get to a kind of 55 basis point saving, you get an idea of what that number might look like in Q2. But obviously, we continue to sharpen our pencils on ways to keep reducing our weighted average cost of debt. Did that give you enough, Graham? Is it good?

[Graham Ryding, analyst]

Yes, that's helpful.

[Operator]

[Operator Instructions] Your next question comes from Jaeme Gloyn with National Bank Financial.

[Jaeme Gloyn, analyst]

A few clarification questions. First off, when you mentioned the $6 million in revenue from the conference at VettaFi, is that USD or is that Canadian?

[John McKenzie, executive]

That was USD.

[Jaeme Gloyn, analyst]

And I assume the expenses attached to that likely in that $6 million range as well?

[John McKenzie, executive]

Yes, slightly below. It actually is a -- it is an earnings contributor, but it's not a high-margin activity. So it's not a material contributor to earnings.

[Jaeme Gloyn, analyst]

Yes, got it. I understand you're not going to give the organic growth rates for ROBO and EQM, but can you size those businesses for us? Are they equal size or is one bigger than the other?

[John McKenzie, executive]

Oh, yes. Of the 2 of them, the ROBO was a bigger piece in terms of those acquisitions.

[Jaeme Gloyn, analyst]

Like double or any other more color on that?

[John McKenzie, executive]

No, no more color on that, Jaeme. But I appreciate the effort there. We will give a bit more color, though, on the organic piece. It was what, David, 17% in the first quarter. So the organic revenue growth for VettaFi, excluding acquisitions in Q1 was 17% in U.S. dollars. And so that'll help you kind of get to the other pieces. And ROBO is the bigger of the 2.

[Jaeme Gloyn, analyst]

That's very helpful. And then last clarification question just on the other issuer services line, do you have that handy, the contribution from those large corporate transactions? I assume if we ex that out, we should see something similar this quarter and from that line item, I don't know. Let me know if that doesn't sound too fair?

[David Arnold, executive]

No, no, no. That's a fair question, Jaeme. So the best way to answer that question is have a look at the Q2 transcript from last year as well as the disclosures and you'll get a good indication as to kind of the material amounts that John referred to that occurred in Q2 of last year.And while Q2 is not finished, we still have lots of time to go to June 30, there may be other actions that come in the quarter, but right now, if they weren't to be similar corporate actions like what we encountered in Q2 of last year, then absolutely there would be a year-over-year decrease. Does that help you, Jaeme?

[Jaeme Gloyn, analyst]

Yes, it does. And then last one, just around the U.S. trading initiative, have we reached a point now where with staff and maybe some sizing and conversations that you'd be able to share some expectations around contribution from that initiative?

[John McKenzie, executive]

No, not at this stage, Jaeme. I mean, that will come later in the year when we get closer to what a go-live looks like and we have an idea of when we would go live with which -- with clients. I will give you an update in terms of our progress of the delivery that we have actually over the quarter really moved ahead on both the technology solution, the partnering with the provider that's doing the cloud-based delivery, the filings with particularly FINRA and testing and delivering the viability of the system to them, filings with other regulatory agencies.So everything is progressing on the expectations that we shared with you last time, but we're not far enough along to have a firm go live, which with what clients are signed up to give you that indication of what we think the early contribution would be.

[Jaeme Gloyn, analyst]

Okay. Appreciate that.

[John McKenzie, executive]

I know you'll ask me again next quarter anyway, so.

[Jaeme Gloyn, analyst]

And probably a few times in between.

[Operator]

There are no further questions at this time. I will now turn the call over to Amin for closing remarks. Oh, I'm sorry, there's another question from Graham Ryding with TD securities.

[Graham Ryding, analyst]

Yes, I just thought I would ask you about the recent update from the CSA on the market data piece. They're sort of suggesting that they're going to review, I guess, the data fee methodology and also the idea of retail advisors accessing a consolidated market data feed. Just wondering maybe you can size that up and how you're feeling about any potential impact on your market data business here?

[John McKenzie, executive]

Well, Graham, when you re-queued in there, I was going to say, since this sounds like it's the last question, it better be a good one and that is a good one. So I appreciate you asking. There are a couple pieces that came out of that and I want to give a lot of credit to our team that works very proactively with the CSA in partnership so that we can really talk about the market, the structure, unintended consequences, impacts.So the 2 key pieces that came out of the response, one were around some strong industry committees to help advise on the future developments of market data structure going forward. We absolutely support that. We think it's the right way to do it. It gets the right people around the table to look at how do you think about the fee model? What contributes to those types of things in the future?The new regime or the recommended regime around disclosure of fee changes were supportive as well. We think that was well thought out and it's actually something that we believe in generally, which is transparency around what you're doing with your fee model. And I think it starts to bring all other markets up to the level that we set for the marketplace. So we think that was positive as well.The interesting piece, the other piece you mentioned around kind of the lack of consolidated data for retail, the demand for that wasn't often coming for retail. It was coming from other marketplaces and other participants that were questioning whether or not a retail could trade if they were only looking at TMX data. So we've actually taken that under our own initiative.We announced to our clients, I think just over a week ago that we are going to be building out a consolidated data product, which will help provide more multimarket depth to pricing, essentially, for that retail audience. So this is not a regulatory ask. We're doing it on the basis of our clients and particularly around those clients that want to make sure that retail are seeing the depth of data across multiple marketplaces. So that actually is initiative that we're taking on we announced at the market just last week.

[Graham Ryding, analyst]

Okay. Understood. And the actual review of the data fee methodology, should I be thinking of your -- when I look at your market insights business, is everything sort of that's outside of VettaFi and outside of Trayport, does that fall into this review of data fee methodology?

[John McKenzie, executive]

And that's really more about subscribers and feeds. So there are a lot of other things within our market data business like index, revenues, colocation that are not part of that scope.

[Operator]

There are no further questions at this time. I will now turn the call over to Amin for closing remarks.

[Amin Mousavian, executive]

Thank you everyone for listening in today. Before we close, I want to take this opportunity to remind you that in just 48 days we will be hosting our Investor Day here at our market center in Downtown Toronto. We look forward to seeing you at this engaging event on June 20 that will showcase our top priorities for accelerating growth.Further details are posted on our website under shareholder events. As usual, if you have further questions, contact information for Investor Relations as well as media is in our press release and we will be more than happy to get back to you. Until next time, goodbye.

[Operator]

Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and ask that you please disconnect your lines.