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

Okay. Thank you for your patience. We will begin now our fourth quarter earnings presentation. Good morning, everyone. For those of you that don't know me, my name is Alejandro Berney. I am Investor Relations Officer for BYMA, and we are presenting today the results of fourth quarter of 2025. So beginning with the first slide, as always. Here, you can see the historical numbers as well as the inflation-adjusted numbers. You can see from both columns that our -- both of our business lines, the depository as well as the exchange continue to grow very strongly. In real terms, you can see a 36% growth in income. For the first time in a while, you can see that the CSD, the Central Securities Depository revenues are growing faster than the exchange. You will probably recall that most of the times for several years, we have seen the exchange growing much faster, and this is due to the change in the fees related to equities trading that we have mentioned before. We will talk more about this in the following pages. Expenses also have grown. We'll talk about that, but still gross margin growing faster than overall income, 41% in real terms. And other operating income shows a reduction in real terms. In historical numbers, it is flat to the previous year. The reason for that is the lower interest rates in Argentina. Inflation has been dropping very quickly, and therefore, interest rates are much lower than before. Inflation in 2024 was around 117%, whereas last year, it was at 31%. So the drop in rates of our peso balances have impacted other operating income. Net operating result, slightly higher, therefore, in real terms than last year due to the combination of both effects. And you can see net income, therefore, flat from last year and lower in historical adjusted by inflation numbers actually, not in historical. So going on to our business lines. You can see the assets under custody growing both in nominal terms as well as in market value. You can see the strong growth third quarter to fourth quarter, and that is the result of asset prices of all assets in Argentina recovering after the October election. And now going into revenues, you can see that the revenue growth was much higher, 105% versus the 46% that you saw in the previous page. And this is exactly the result, not only not entirely. If you look at third quarter and fourth quarter, the quarter-on-quarter revenues grew 61%. 40% of that 61%, so 2/3 roughly is the result of the change in fees. This is the first quarter where the CSD charged the equity assets according to market value, the change that we've been announcing since the beginning of last year. So there's a 20% quarter-on-quarter growth related to additional market value, issuances as well as asset prices. So the growth is not entirely due to the change in fee structure. 2/3 of it is related to the change in fees, 1/3 of it is related to business growth. On the exchange, we see the flip side. So the -- as you may recall, the change was designed to be revenue neutral, and therefore, the revenues from equity trading came down, and that explains the smaller quarter-on-quarter growth. Going into the different asset classes of the exchange. We'll begin with equity as usual. And you can see here how volumes grew 90% year-on-year, fourth quarter of '24 versus fourth quarter of '25. But equity revenues grew only 36%, so slightly above inflation. In real terms, they were flat versus last year. So in spite of the strong reduction in fees because they came down from 7 basis points to 5 basis points, still in real terms, it was slightly higher. So that shows the underlying growth in volumes that we experienced in equity revenues. And again, a lot of it was due to the fact or explained by the activity after the October 26 elections of last year. Going now into fixed income. Here, we have seen a drop quarter-on-quarter on the revenues stronger on the revenues than on the volumes. The drop in volumes is related to the change of monetary policy from the Central Bank. So as you may recall, also related to the elections of October of last year, there was a lot of nervousness locally in the market. And therefore, the -- that nervousness translated into additional dollar buying and the Central Bank lifted local rates in order to stop that or try to reduce the dollar buying. And at the same time, the higher interest rates were also supplemented by additional monetary action from the Central Bank. They were highly active in our [indiscernible] SENEBI panel, injecting liquidity or removing liquidity according to the date. But there was a lot of activity, therefore, in that trading section, which obviously translated into very high revenues. So the volume came down and the revenues came down, the revenues came down more because of the change in mix. So several things happened. First of all, we saw in the fourth quarter more repo where in our exchange, what is not simultaneous is generally a T0 Buy and a T1 Sell or the other way around. So that type of activity has a fee reduction. And therefore, we saw a lot more repos, implicit repos, which meant lower fees overall. But still, you can see the real growth rate in -- again, compared to inflation of 31%, you can see the real growth rate in the revenues compared to last year. Finally, our on-exchange repo continued to see growth, strong revenues as we see in every quarter, the additional arbitrage -- our on-exchange repo is used more and more for funding arbitrage or for funding trading strategies. And therefore, we continue to see a very good growth on the revenues in that line. Market data is a small portion of the exchange revenues. It just continues to grow similar to devaluation since all of these contracts are in dollars. Jumping on into expenses. Here, you can see that they were above inflation. Typically, we are close to inflation. And so this requires some more explanation. The main 3 lines, expense lines, the main 3 expense lines in terms of overall growth, first of all, compensation. That growth is related to the fact that there was a 12% of headcount increase, that was an external software factory that we in-sourced and it was more convenient to have it now as employees due to the changes that have been going on in the software production before. And as a consequence of the high digitalization rate after the pandemic, it was very hard to keep employees and therefore, the way to work more efficiently was to hire software factories. That situation has changed dramatically. Now software engineers and programmers are looking -- prefer to have a stable job and therefore, they are more willing to be part of the headcount of a business or a company. And so we've seen -- we saw a good opportunity of a software factory that was working practically 100% for us for a strong -- a large portion of those employees to come on board as employees. So that explains, again, the compensation line increase. Technology expenditures, there were a lot of agreements, more than a handful. Here, we detailed the most important ones, Red Hat, Amazon Web Services, Salesforce and Okta. Okta is our security -- our user ID identification and security platform. These -- we paid annual contracts in the quarter, and therefore, there was a strong increase of that. Practically 1/3 of -- again, of the technology expenditures increase was related to that. The other 2/3 is just to several projects that we are finishing, such as the NASDAQ real-time clearing implementation. These are some large projects that are -- that will allow us to increase our capacity and modernize our network. Interconnection with other -- sorry, not that one, rather taxes, Ingresos Brutos, that line, as you may recall, is always an expense line that grows very fast. So it explains the other large portion of this increase. And that is related -- directly related to the percentage increase in our revenue. So Ingresos Brutos, as you may recall, is 5.5% of the revenue line. Here, we wanted to let you know that we have a plan in place and have started implementing that plan to limit the increase in Ingresos Brutos in this taxes line going forward. We have done that through several measures. And therefore, we will start seeing the implementation of that during 2026. And our intention, therefore, is to keep this line flat in historical terms, so it shouldn't continue to grow as it has in the past. Going on to financial income, and I just saw that typo, apologies about that. So as we mentioned in the previous earnings call for the third quarter, our financial income was hit due to the Mark-to-Market in prices. The money left by clients and our own cash both had negative Mark-to-Market due to a fixed income short-term debt issued by the national government having a strong impact -- negative impact in prices in September of last year. And therefore, in October, with the positive results by the government, this turned around completely, and therefore, we saw that Mark-to-Market coming back. And you can see, therefore, that in spite of, again, a reduced interest rates from 2024 to 2025, you can see that we are still 10% above the financial results of the fourth quarter of 2024. Sorry. And just to add also that this is something that we always convey. Our own cash now is 40% dollarized. So the result of the revenue and the expense line is that we continue to have -- we continue to be at maximum margin and efficiency measures. Our 12-month rolling EBITDA at 76%, similar to all of last year. And our operating margin, which does not include any financial income from clients that is at 69%. That also continues at that maximum historical number. We will leave in the presentation, as usual, all of these historical figures so that you can keep track of them. We are -- we will be uploading this as an Excel file as well, so you can have it. You can search for it on our Investor Relations website in case you would like to do any analysis. And finally, and I'll spend a little bit more time here than usual. We wanted to highlight a couple of things that have been very important. First of all, this is a question that we usually get, what does the IPO pipeline look like? The IPO pipeline for equity still continues to be there. Obviously, the impact due to the international consequences of the wars means that markets have turned down, and therefore, we think that there will be a delay. We know of a company, an energy generation company that is ready to go out, and they are waiting for the right moment. So this will probably be delayed. We also do know that the government continues to work on the privatization of companies. They have come out several times in the press mentioning that AySA, which is our water and sewage company for the Greater Buenos Aires. They continue to -- the plan continues to be to privatize with the strategic investor in March and list the 39% of the remaining of the company in -- by June of this year. So we estimate that on the privatization front, the market situation will be less important than those companies that are looking to become public, raise cash for the investments that they have, such as in the electricity generation sector. Private sector issuance was very strong last year, a total of ARS 33.7 billion according to the information provided by the Comisión Nacional de Valores. This is private -- this is issuance across all asset classes of Argentine companies. It was 36% year-over-year, represents an all-time high. So we expect that trend to continue. We expect it to continue because we see dollar balances continue to go up in local banks, and therefore, companies can tap savings to issue more. And this in spite again of the nervousness that we are seeing in foreign markets. These are typically smaller and shorter issuances, but still, we think that they will continue to grow year-over-year because oil and gas, energy and now mining, they have large investment needs, and therefore, we expect them to continue to raise capital. The Fiscal Innocence Law is -- which was passed in December. We expect some savings, some additional savings to be exteriorized and deposited at banks and they will then look for returns, which should continue to fuel this positive momentum we are seeing locally in which dollar deposits hit an all-time high and even higher than in the 1990s. The previous high was from the 1990s. So towards the end of last year, dollar deposits hit a new time high. So we expect that trend to continue bottom line, which should feed again, the growth in the issuance. And finally, in terms of highlights, the Labor Reform Law was approved a couple of weeks ago. It was implemented as of today. The government published today the laws beginning -- official beginning. And therefore, it is already a reality. And this will have an important impact to capital markets directly and indirectly. First of all, directly, the labor assistance fund. This is somewhat lower than what was originally estimated. Now estimates are closer to 0.2% of GDP per year going into these funds. These funds are important for our capital market because obviously, it is a new flow, but it also marks a new type of local institutional investor, which is very important for us to have. Most of our business comes from the retail segment, so from individuals, and they tend to move -- they're very short-term oriented and their trends are that they tend to move all with the same type of either buying or selling. So having a longer-term type of institutional investor is going to be very important, not only for the market to grow, but for our local capital market to solidify in terms of longer views. And in terms of key projects, short selling, we just implemented again, and this is part of our strategic project that we are launching this year. We want to facilitate foreign high-frequency traders to operate locally. We are talking to a couple that have experience internationally and are not present in Argentina. We have been working from a technology side. You may recall that we implemented a low-latency network. And now through AWS, they can reach our local servers. And therefore, we expect to see some type of HFT operating locally this year. The FX, the foreign exchange restrictions are a detainer or a large roadblock for this type of activity, but we would -- in our view, we would like to have some HFTs operating at least at a very small scale to have everything ready for when the restrictions are lifted. The -- one of our key projects is the new CCP platform that we are implemented. This is also a NASDAQ solution. We have a go-live date of April 24. We've been working for over 2 years on this project. It was -- the go-live date is pretty firm now. As you can see, we are close to this date, and we expect everything to go correctly, and this will be needed in order to continue improving our scalability. We have been working on that front. Today, we have capacity to attend peaks that are double the previous peak of 1.6 million operations. So we -- as we have seen with different tests, today, our capacity is 3 million, and we want to continue to increase that capacity. And therefore, this is a critical piece of that trend. And finally, also to increase local liquidity, domestic ETF and market makers for domestic equity, we're talking to several providers who have experience in that, again, in other markets to try to bring those instruments locally in order to continue raising the liquidity that we have in equity and because today, what has -- those equities that have ADR are easily -- there's already several brokers implementing strategies for arbitrage, but those equities like BYMA that don't have an ADR they don't have this strategy possible. So we're bringing market makers who already have experience in local equity without ADRs. So that's it. And before we move into questions, I just wanted to highlight, we will be sending out the order for the April 10 assembly. So our Annual General Assembly was proposed last night for October 10 -- sorry, for April 10, I meant. April 10 in the morning is the AGM. And first of all, I would like to encourage our shareholders to participate. And for that, for those of you that have global custodians that go through Euroclear and Clearstream, if you can, as soon as possible, make sure you express that interest because that process is manual and it requires some paperwork. So it's important for you to express that interest as soon as possible to your global custodians and prime brokers again, so they get so that Euroclear and Clearstream receive that notice. We will be sending out the translated agenda for the AGM probably by end of day today. And in that agenda, you will see that the proposed dividend to be paid out that needs to be approved by the AGM. The proposed dividend will be $120 million payable in dollars. So that's it from a presentation perspective, and we will open it up now for questions. And I can see that several of you already lifted your hands. I believe William, you were the first one to raise your hand. So please go ahead with your question.

I have a couple here from my side. First, I would like to ask about the new pricing changes, right? I was under the impression that equity revenues would suffer a little bit more and that the CSD revenues wouldn't grow that much. So I just want to make sure that the current level we saw in terms of fees for both lines is what we should expect ahead or if there was any one-off here that made those revenues a little bit higher during this change, right? I'll do my second one later.

Okay. So like I mentioned very briefly, William, we also looked at that, and you can see that the quarter-on-quarter growth on the custody revenues was 61%, when you drill down into that, 41% was due to the change in fees and equity and the other 20% was -- is explained by the increase overall in assets under custody. So both of these reasons should continue in the future. We should expect similar levels of AUCs because we understand that asset prices are at a new floor after the changes of last year, the expectations of what -- of the reforms that the government can push through and so on and so forth. So asset levels should continue. And yes, there will be volatility on the equity side. But again, we expect corporate debt to continue to be issued at a strong rate. So again, asset levels, we understand should continue pretty much where they are. And the fees for revenues, obviously, they are in place. So we -- as we understand, yes, you can run rate, you can multiply this quarter for the next following quarters.

My second question is related to dividends. If there's any new announcements or you have decided in terms of timing or sizing, this will help.

So in terms of dividends, last night, the Board approved to propose to the Annual General Assembly a dividend of $120 million paid in dollars. The assembly is on April 10. And typically, we pay 10 days after the assembly. So right now, the proposed dividend is that amount and payable probably towards April 20. Pedro, please go ahead with your question.

I wanted to add on William's question on fees. You mentioned that the fee change revenue neutral this quarter. If these changes going forward, could we see another fee adjustment?

No, we don't have a fee adjustment in -- we're not looking at further fee adjustments. So this situation, again, should continue quarter-over-quarter. We believe that where we are in equities, which is 2 basis points for trading and 3 basis points for clearing, netting, and settlement, that is close to international standards. So we don't foresee a change of that right now.

The first question is regarding the -- what you mentioned about the local ETF of equity. And I want to understand what you meant. Are you thinking about issuing an ETF that will be traded locally and also internationally in the U.S. with companies that are, of course, that do not have ADRs or maybe they have, but targeted to bring the Panel Líder, let's say, in a way to the U.S. So that can be -- you can eventually build like an S&P MERVAL ETF directly sorry, and I will leave it. And also that will perhaps include sectorial ETFs like banks and oil and gas, et cetera. That's the first question.

Sure. Yes, we plan on -- we are working with some local asset managers to understand in detail what entails the launch of a local ETF, 100% local. So it would be -- we would probably start with the S&P MERVAL. But yes, we are interested in the future, looking at sectorial ETFs. The ETF would be traded locally. The underlying would be local as well. And we don't foresee listing this ETF abroad. However, foreigners would have access to this ETF, either coming directly into BYMA or indirectly as a lot of foreigners do today through Euroclear and Clearstream. So this security would -- or this exposure to Argentina through our indices would be available in the international platforms through Euroclear and Clearstream. We obviously compare ourselves -- we benchmark ourselves in terms of our market data business. One large reason why it's small is that our indices are very little -- are not used practically. And our indices are not used because we're still stand-alone country, and that will take a while. But instead of waiting for that, we are looking to launch local ETF to help us increase liquidity in the local equity and at the same time, increase a new revenue source through of our sectorial indices.

Okay. And the next question is, do you have a timeline or some date that could eventually this materialize?

No, we don't have a timeline. Most of our resources today are dedicated to launching the new real-time clearing platform, which is on April 24. So again, most of our focus is there. In the meantime, we are exploring not just by ourselves with some local asset managers, how as the process would work. We have been talking to global players to service ETFs as well because it does require other types of platforms. It is not simply using the existing technology. We also need to add some more features to help the arbitrage, help the basket and so on and so forth.

Okay. Now the second question is take me more like a messenger here. I received a lot of questions for retail investors and also for some institutional investors that they question why there are no CEDEARs of ETF of debt listed in BYMA, either launched by Caja de Valores or Comafi. -- there is a restriction on that or why we have a great, great, great offer of equity and ETFs, but...

That's true. We have identified that as a need that the market has and both Comafi and ourselves have gone several times to the Comisión Nacional de Valores. Locally here under Argentine regulations, any CEDEAR, any local depository receipt of either a company or an ETF or any type of global security, that CEDEAR is considered a new issuance. And therefore, the Comisión Nacional de Valores has to approve that. The Comisión Nacional de Valores right now does not want to approve fixed income ETFs.

And 2 more questions that the following is, it's a silly question. I think if you can take a look in Page 6, I think maybe there's a title, the last sentence. It says in the fourth quarter '25, it was 8 bps. Maybe it's fourth quarter '24.

Yes, but that changed in the third quarter. So in the third quarter, we reduced from 8 to 7. But thanks for that. I'll take a look to make sure it's not incorrect.

And I got -- I have another question, but maybe -- Yes, sorry. You mentioned that 40% of the cash was dollarized, but you mentioned that the dividend is going to be around $120 million, isn't it?

That's correct. So we are proposing a dividend of -- actually, the proposal is in pesos, ARS 171 billion, payable in dollars according to the exchange rate of the day before of the assembly. So the actual amount of dollars may change, but it should be close to $120 million.

Okay. And now yes, the last question, sorry, for being a drag. Are you planning to extend short selling to other liquid securities like equity or something like that or...

Yes, definitely. The new -- I should have said this before, but the new clearing system is going to allow us to be much more flexible. We had short selling and securities lending before we changed to the NASDAQ custody system back in September of 2023. With the new custody system, we had to stop that, and we are relaunching it now again with the new clearing system. So we began with these few securities, but we plan on extending that significantly in the second half of this year after we have stabilized with the new clearing system. And that is part of our HFT strategy. So we want to bring HFTs that have other arbitrage strategies that are not really being used locally. As you know, most of the arbitrage is implied FX, whereas when you look internationally, there are HFTs used typically all asset classes. And here, having Cauciones as part of the exchange and therefore, electronically being able to not only arbitrage interest rates, but also take funding for your arbitrage trade that from what we have spoken, that should help HFTs come and allow them to implement strategies across all asset classes, options, futures, fixed income, [indiscernible] and FX as well. Because at the end of the day, everything has interest rates implied in that.

Congratulations for the results. I have 2 small questions. One is on the -- to check the dividend payment. So if I did well the math, the dividend per share would be ARS 22.5.

It's actually ARS 28 per share.

ARS 28, sorry. And so the approximately taking into account the price of the last closing price, we would be at an 8% dividend yield.

Almost, yes.

And my second question is about your net cash position into the balance sheet at the end of December 2025. What was the amount of the net cash position?

Loic, I don't have that information with me right now. Mario here can help...

You asked for that, but I didn't pass it to you before. Approximately $390 million. Remember third quarter, it was $331 million. Now it's $390 million.

And finally, Jorge, I see you with your hand raised as well. Would you like to ask your question?

Just on the higher expenses, you mentioned bringing in-house some of the software engineers. Would that not lead to lower technology expenses? Or is there not like an offset of lower expenses because previously it was outsourced?

Yes. It should be net-net approximately the same because it was an outsourced cost that we have that we're bringing in-house, but it explains the jump in the salaries line in the compensation line. So not really a savings, but moving between 2 accounts.

Got it. And then I'm sorry, I missed your explanation for the higher taxes within expenses. And can you also clarify the jump in income tax, yes.

Yes. And you're right, those are 2 different tax points. First of all, one of the expense lines that we have is taxes, which are applied directly on our revenue. This is called Ingresos Brutos locally, and it is 5.5% of our revenue. So this is a tax line that -- this is an expense line, I'm sorry, that has been increasing quarter every quarter directly tied to the revenue increase. We have been working with the government of the city of Buenos Aires, and we have 2 plans in place. One is to move parts of our company to an area where the city of Buenos Aires is promoting the area by reducing Ingresos Brutos. So the activity related to Tecnología de Valores, for example, and part of the activity relating to Caja de Valores will be there in that area called Parque Patricios, and that will allow us to raise to 0 that percentage of the activity in that area. The other thing that we are doing as well is we are moving part of the activity that BYMA has -- and when I mean activity, what I mean actually is our internal processes, not client activity per se, but either where our providers are contracted from or where parts of our internal processes, accounting, audit and so on and so forth, where parts of those are done. That will be moved to Córdoba, which is also promoting and reducing and charging lower Ingresos Brutos. So through those 2 strategies, we should start to see that expense line flatten out and not increase with revenue anymore. So that will be a significant savings. In terms of capital gains, I'm sorry, sorry, gains on taxes, the taxes on our gains. Yes, the percentage has jumped from previous quarters, and that is related to the investment activity that we had this quarter. So there are some types of investments that don't have -- that don't pay income tax as long as you continue to roll them over, we finished quite a part of that in order to be liquid with dollars to pay out the dividend. So finishing those investments and leaving them liquid in dollars produced a higher capital gains tax.

And so does that explain the higher taxes within the expenses?

No. The higher taxes within the expenses is the first explanation. The second explanation is related to the higher capital gains taxes. And I don't see any more questions. I'll recall at this point that you can always write to us at [email protected]. You can ask us there any additional questions you may have. We will -- we have already uploaded the presentation and the financial statements for the year. We will be uploading the Excel with these numbers, and we will be translating and sending out to you later today, the order for the AGM that we will hold on April 10. So with that, I would like to thank you for joining us today, and we will continue to be in touch. Have a nice weekend.