Bolsas y Mercados Argentinos S.A. (BYMA) Earnings Call Transcript & Summary

Very well. Good morning, everyone. Thank you for joining. This is BYMA's earnings presentation call for the first quarter of 2025. And as usual, please keep your questions to the end. For those of you that don't know me. My name is Alejandro Berney. I am the Investor Relations Officer for BYMA. Very well. So for those that -- it's the first time that you joined, we report in inflation-adjusted numbers. Our accounting statements are the columns on the right hand of the page, adjusted by inflation. Throughout the rest of the presentation, we will be showing you the historical numbers. In other words, pesos not adjusted by inflation. And this is to make it easier for the analysts to follow the evolution since the adjusted by inflation numbers change every quarter. So this is the only slide that we will show the adjusted by inflation numbers and a couple of points worth mentioning on that column. First of all, you can see that the central securities depository revenues and the exchange revenues, in other words, both business lines have shown good growth this quarter. So that income grew 30% in real terms. And if you look at the middle of the page, 120% in historical terms. Inflation for this period was 68% from first quarter of 2024 to first quarter of 2025. Expenses grew a little bit above inflation. We will look at the reasons why in shortly. But our gross margin showed very healthy growth, 44% in real terms or 138% growth in historical terms. Other operating income deserves a little bit of an explanation. Other operating income is the financial income we make on our business with monies left by clients and intermediaries. That money, it is left at the central securities depository level or at the exchange level for margin purposes. So financial income from that line was lower in inflation adjusted was lower than last year, and it grew slightly in historical terms by 18% and the main reason why was because of lower asset prices in the fixed income where we invest the other operating income. So as a result of all of this, net profit -- net operating result was -- also grew in real terms by 7% or 84% in historical terms. When you look at the inflation adjustment impact that is a cost that represents the -- it represents the cost of the money due to inflation. And you can see that it reduced significantly from last year to this year. Last year, our portfolio was mostly dollarized, 90%. So we had a few pesos, only 10% of our portfolio was in pesos. This year, that changed to 70-30. And the -- what is -- the dynamic of this is that our U.S. dollar investments are accounted for at the official exchange rate. So the official devaluation last year was similar to this year, but the local inflation last year was very significant in the order of 50% in the quarter, whereas this quarter, it is much lower. So this is the result of 2 things. Number one, we are most -- more exposed in pesos. And number two, there's a much smaller difference between the official exchange rate movement and the inflation for the period. And for those of you that just joined, we will take questions at the end of the presentation, please. Financial income also is lower in relative terms than last year. And in absolute terms, as well when you look at the historical numbers. And again, this is related to the fact that the assets, the fixed income in which we invested our own cash, a portion of that, the peso portion and the Argentine risk proportion that had a correction in asset processes this year, and therefore, the mark-to-market on our portfolio had an impact and therefore, we see lower financial income. Net income at the bottom. Finally, after income tax, net income grew 5% in historical terms and adjusted by inflation, we had a positive quarter, whereas last year, we had a negative quarter, again due to the inflation adjustment impact. So looking now at the business lines. First of all, we'll start with the depository. The main revenue driver is the assets under custody. And you can see the evolution we had measured in face value, how many assets we had, the growth is very significant, over 500% based in market value it is lower and the correction in prices this quarter of around 30% in dollar terms had a significant impact, and we should expect that to come back in the next quarter. And as a matter of fact, we have already seen April with better results in terms of prices of Argentine assets than this quarter than the first quarter. So revenue for the central securities depository, you can see the, again, historical numbers year-over-year of 84% versus the 68% inflation for the period. All 3 business lines growing above inflation. And although quarter-on-quarter, it seems very similar, the reality is that the first quarter is a lower quarter, typically, because there are -- there is cyclicality in the revenues of the central securities depository. Their corporate actions that happened in December in the fourth quarter and the second quarter, those are high with corporate action fees. And therefore, we do typically see smaller growth between the fourth quarter and the first quarter. The exchange has been the case for the last several years, has shown very strong growth, stronger than the central securities depository as we saw on the first page, revenue grew 137%, again versus the 68% inflation in the period. And in this quarter, we have seen equity growing the fastest -- that is a change from the last several quarters. And because of the fees we charge for equity trading, it has been the segment that contributed the most both to revenue and to growth of revenue. Interestingly, when we look at the CEDEARs versus the local equity, you can see that the growth has been mostly on CEDEAR side this quarter. And that is not surprising, again, given the evolution of the Argentine prices in local equity. We have seen that typically when local equity has a bad quarter, more of the interest from local investors switches to the foreign securities, which are represented in the CEDEAR market, in the CEDEAR segment. This segment is the global equities that trade in Argentina through a certificate of deposit. So most of the growth came from that segment. And I think it's also interesting to highlight that although we had a similar quarter to the previous one in the local securities and the local equity. If you consider the fact that the index dropped almost 30% in dollar terms, then you can see that having a flat quarter is very positive news. And the reason behind that continues to be the growth in the accounts and the growth in the activity that we are having with the clients. So we continue to see approximately 700,000 new accounts opened each month, and therefore, that new activity is the one that is helping us a few of the growth. And again, in spite of the price drop in the Argentine assets. So in summary, revenue grew almost tripled year-on-year, it grew 193%. Looking at the fixed income segment. This quarter, it had a slower growth. This segment is also impacted by the correction in asset prices. Fixed income for Argentine debt also dropped in the quarter, mostly the dollar-denominated that trades locally. And therefore, in this quarter, the fixed income segment doubled from last year, it grew at 103%. The on-exchange repo, the [ calciones ] is as has been the case for the last couple of years continues to grow at a lower rate because we -- this is a segment where BYMA guarantees. Therefore, we are committing our capital over and above the margin that we receive from the brokers and in this case, therefore, we look at very closely the risk we are taking and therefore, the growth in this segment also is more subdued than the other segments. Still on all the knowledge shows a positive again, revenue growth over the last year, positive in real terms. Market data. This is a segment where fees are expressed in dollars, and we invoice at the official exchange rate and therefore, this quarter, we haven't seen year-on-year, we haven't seen much growth. The evolution has -- is mostly related to the evolution of the exchange rate. Going now to expenses. As we highlighted in the first page, they were slightly above inflation, and it is mostly related to 2 things. Number one, higher activity. So taxes is one of the highest -- one of the highest income -- sorry, one of the highest tax expense items that has been growing year-over-year and taxes are directly proportional to our invoicing. This is ingresos brutos. Ingresos brutos is a flat percentage on our invoicing. So as our business growth, this continues to grow at a fast rate. The second reason are technology expenditures. We had a low 2024 base because in 2023, we had negotiated and prepaid a lot of the agreements and paid upfront before the devaluation. Most of the technology expenditures are in dollars. And therefore, the fact that we accelerated those expenses before and the devaluation in December allowed us to have a lower base in 2024. So now this is a normalized base. And when you compare year-over-year, you see a significant growth, but it is related to the fact that 2024 was very low. Compensation grew below inflation. As you can see this is the largest expense line and also one of the largest changes when you look at it historically, but it's important to highlight that the growth is below inflation. And this is related to the fact that we continue to optimize our employee structure, and there has been a lot of movements not so much net reductions. However, a significant change in the profile of the employees and a significant change as well on the compensation of new employees that come on board BYMA. Our financial income, and this is at the end of March. So this is before we paid our dividend. You can see, first of all, in the middle of the graph, fourth quarter of 2023, you can see the FX devaluation impact. We had a substantial onetime gain there because of the change of the official exchange rate from 300 to 800. And you can see that subsequent to that, the FX difference has been much lower because, again, as I mentioned earlier, this is related to the official exchange rate changes and how much money we make there before on the official exchange rate devaluation. So again, this quarter, it has been lower income. In the fourth quarter, we did have on the FX side, we also booked some gains related to some selling of dollar-denominated debt and therefore, it was higher in the fourth quarter than for the rest of the year. And interest and mark-to-market also is lower because of the mark-to-market activity that I mentioned before, in which our investment marked down as a consequence of the prices in the local fixed income market. So with looking at the efficiency, which we keep track of very closely, and it is one of our KPIs, efficiency continued to be at an all-time high, both measured in EBITDA and in operating margin the and in spite of the small growth in expenses, our revenue growth outpaced that. And therefore, we continue to show very high efficiency, and you can see the red blind global average of exchanges, according to Bloomberg. So we are definitely one of the top quartiles. We will leave as usual, these historical numbers, and you can see the updated first quarter numbers. We will also be uploading this in Excel format for those of you that want to make calculations from our results. So finally, in terms of highlight, a very strong quarter in terms of operating growth, expenditures growing slightly above inflation based on the 2 points that I mentioned before. Financial income was low in this quarter. However, it is related to the asset price the correction that we saw in the first quarter in Argentina, and we have seen the market turn around from April onwards. So we are sure that this will be an -- a quarter in which it was small for the rest of -- smaller than the rest of the year. The efficiency at all-time high. And in terms of highlights, as I mentioned, new accounts and greater activity. This quarter, you might not see all of it because of the correction in asset prices, and that impacts both the ADTV, the average daily traded volume, as well as the assets in the custody, both measures have the prices within that ratio, and therefore, the correction we saw this quarter, which was sizable in terms of 30% that impacted our results. We saw this is related to the fourth bullet point there and the highlights in April, we saw that the government changed their FX policy. It used to be a crawling peg up to April 14 starting later starting after that point, the government is operating within bands. And so after that change, we saw a new maximum record in the number of transactions -- sorry, there's a typo there -- of over 1.3 million transactions. It's 10% are above our previous record. And the other point in terms of the health of the local market, we saw that the issuance by corporates in this year so far up to March was 53% above 2024 measured in dollars. So we continue to see a very healthy market in terms of growth of issuance. And because of all of the projects that have been approved by the government under the RIGI program, R-I-G-I, where they have reduced capital gains taxes and confirmed access to Central Bank of exchange we expect that this will continue to drive investment and therefore, we continue -- we expect to continue to see an increase in corporate issuance. Finally, and before I open it up for questions, a couple of the projects we launched, BYMA cash is an internal system that makes it easier for us to be aware of all the cash movements and instructed cash movement through different accounts that we use, either central bank or U.S. dollar accounts abroad or through the central securities depository. So we launched this internally developed platform, bringing operational efficiencies. We just launched also the first phase of a new invoicing system in terms of cybersecurity, we implemented a new perimeter the provider is called Palo Alto, we continue to invest in better security, and this was a large and important project. And finally, we continue to implement the project is ongoing and should be implemented by the end of the year. The upgrade to our CCP system, our post-trade system. This is the last major piece of the process that we are overall and should give us a very large increase in terms of scalability to assist us with the growth that we are experiencing. So that is all, and I will open it up for your questions now. Pedro?

Congrats on the quarter as well. First, I wanted to get your sense on how business has been changing in the recent weeks now with the capital controls being lifted, if you're seeing local investors, how you're seeing the that flow that you have between local and foreign stocks, be it [indiscernible] or the people that were exchanging FX through stocks. How are you seeing the first signs on overall business activity between each of the pockets?

There's 2 things, which I think are important. First of all, after the FX measures were implemented, which were implemented really for the local persons, right? So the lifting of the capital controls really only applied to local persons, not to local corporates and not to foreign investors. So from that standpoint, what we experienced was in the first week, very high volumes -- as I just showed, we had our maximum or new maximum right after the exchange controls were lifted. We saw a lot of arbitrage between the local officials FX market and the local exchange up to a point that now the differences are basically less than 5% price difference and typically between 0 and 1%. And when we also see that when it's a down day, we continue to see lower activity. So our local investors are not used to -- they don't -- they're not used to investing in a dollar market. Therefore, they don't short, although short selling and securities lending, we do have an offer, which we need to improve as well. We know that there are some improvements that we still there is an educational aspect of learning or a change in behavior that also needs to happen in the local investor. So we continue to see more activity on an update than on a down day. So that's what we have seen so far in these -- and I'll add one more thing. Typically, when the local market uses a bond, which is the AL30 so one of the bonds issued by the local -- our treasury -- by the National Treasury. One of those bonds, which is the most liquid bond is typically the bond that is used to just buy dollars. So interestingly, we've seen the same volume 2 weeks before and 3 weeks after the change in the FX rate. So we haven't seen that the liberalization of the FX restrictions has had any negative consequence in our volumes at all.

Perhaps even positive on some other products then?

Yes, positive in terms of more arbitrage. And this is relating to the first comment I mentioned. So we've seen more increase in arbitrage and that's why now the resulting effect is at very little difference even if they are in different markets. [indiscernible]

Alejandro, I only have one question regarding the financial income. Would you maintain a 70% dollarization or we can expect that number to change or to go down?

Yes. Thank you, Pedro. As most of you know, we paid a large dividend in April, and that was paid in dollars. So what you will see is that our dollar portion will go down and what you can expect for the rest of the year after that result is closer to a 60-40 or even a little bit closer to 50-50 in terms of pesos and dollars. $60, 40 pesos, that will be the first reaction due to the drop in the dollar portion. Now going forward, our investment committee might take another -- might change the percentages might change the reviews, right? So this is what I can tell you is as of now, it is not a commitment for the rest of the year. Any other questions? Hello, [ Tia ].

Can you please talk about 2 things. Number [indiscernible], but if you can just tell us where you started and where you finished the quarter and how does that look this quarter? And then just even in the pipeline for corporate insurance, listing side deals?

For sure. So last year, towards the beginning of the year, we were opening approximately 300,000 new accounts per month. We finished the year in 700,000, and we maintained this quarter close to those numbers a little bit above 700,000, but on average, 700,00-750,000. So we continue to have that measure of new accounts. We have seen that a significant increase when we measure it in unique tax IDs. So from a -- although from an a new account perspective, we're not seeing a large increase when we look at it from a tax ID perspective, we ended the year at almost $7 million by the end of the quarter, we were above $8.5 million so it seems that the new accounts that we're opening are a lot of unique clients, which is much better for us, of course. That is in terms of new accounts. In terms of corporate activity, we are seeing, as I mentioned briefly, an increase in issuances. The local community has been very fast in adapting to the new circumstances for example, one of the local banks issued a short-term bond, which you buy in pesos and you can -- after 6 months, you will be able to collect the maturity in dollars, and that is as a result of the fact that the FX regulations were not lifted yet for corporates, right? So local corporates are adapting to those circumstances, and we continue to see that they tap the markets and there is demand. And that is why in dollar terms, we continue to see over 50% year-over-year issuance in terms of corporate debt. In terms of IPOs we know we are talking to several companies. The risk activity people are getting ready. Obviously, the impact in prices reduced or changed the timing of some of those. We do expect that in the short term, we'll have at least one. And then over the year, over the rest of the year, we know there's a 4 or 5 companies that are gearing up for a listing on the exchange, not necessarily raising money, but some of them just listing others will be IPOs Very well. Any other questions? Well, as usual, you can find the information on our web. We will be posting these documents also on our web. And this call has been recorded. It will be -- the audio also will be placed on the web. But if you have any other questions, you can always write to us at ri.byma.com.ar. Thank you, everyone. Have a nice day. Thank you for joining.