The Tel-Aviv Stock Exchange Ltd. (TASE) Earnings Call Transcript & Summary

Ladies and gentlemen, thank you for standing by. Welcome to the Tel-Aviv Stock Exchange Fourth Quarter and Full Year 2025 Results Conference Call. [Operator Instructions] As a reminder, this conference is being recorded, March 5, 2026. The Recording will be publicly available on TASE's website. With us on the line today are Mr. Ittai Ben-Zeev, CEO; and Mr. Yehuda Ben-Ezra, CFO. Before I turn the call over to Mr. Ittai Ben-Zeev, I would like to remind everyone that this conference is not a substitute for reviewing the company's annual financial statements, quarterly financial statements and interim report for the fourth quarter and full year of 2025, in which full and precise information is presented and may contain inter-alia forward-looking statements in accordance with Section 32A of the securities law, 1968. In addition to IFRS reporting, we might mention certain financial measures that do not confirm to generally accepted accounting principles. Such non-GAAP measures are not intended in any manner to serve as a substitute for our financial results. However, we believe that they provide additional insight for better understanding of our business performance. Reconciliations between these non-GAAP measures and the most comparable related GAAP measures are included in tables that can be found in our earnings press release and in the slide presentation accompanying this call. Both can be accessed on the English MAYA site and in the Investor Relations portion of our website at ir.tase.co.il/in. Mr. Ben-Zeev, would you like to begin?

Good evening, Israel Time, everyone, and thank you for joining us today. I'm happy to host you in our earnings call. The financial statements for 2025 show that TASE ended the year on a high note. Q4 2025 capped another record year for TASE with revenues reaching an all-time high of ILS 149.3 million for Q4 and ILS 563.5 million for the full year 2025. These results represent a record increase of 29% year-over-year and quarter-over-quarter. We also saw a record increase of 58% in adjusted EBITDA, and an increase of 9.5% in the adjusted EBITDA margin as well as an all-time high in TASE net profit with a 79% increase compared to 2024. All this was achieved while continuing to maintain organic growth across all TASE's core activities despite Israel having fought a multi-front work for most of 2025. Yehuda Ben-Ezra, our CFO, will discuss the financial statements in detail later in this call. For most of 2025, trading on TASE took place against the backdrop of the ongoing world and elevated volatility. Against this background, the Israeli capital market has exhibited resilience and economic strength during 2024 and 2025. The leading equity indices on TASE broke their historic record on numerous occasions, outperforming the leading global indices. The TA-90 Index and the TA-35 topped the global return table with gains of 46.6% and 51.6%, respectively, compared to 17.9% on the S&P 500 Index and 21% on the NASDAQ-100 Index. In addition, the positive and exceptional trend was also evident in the sectoral indices, particularly in the financial sector. At the end of 2025, TASE equity market cap reached ILS 2 trillion, a 46% increase from year-end 2024 due to the impact of the rise in TASE equity indices. Trading volumes also set new records with the cash equities ADV rising to ILS 3.4 billion in 2025, 57% increase over 2024. The IPO market stagged an impressive resurgence in 2025 with 21 IPOs and an additional 5 companies listing their shares without raising capital, including 1 dual-listed company. Overall, the total capital raised on the equity market sold to ILS 21 billion compared to ILS 8 billion in 2024. In 2025, the TASE bond market displayed increased trends as a major source for debt funding, both for corporate issuers and for the Israeli government. Corporate bond issuances totaled ILS 187 billion in 2025, compared to ILS 124 billion in the previous year. The Ministry of Finance raised ILS 137 billion in Israel during 2025. The strong demand and successful issuances in Israel and abroad, is a powerful sign of confidence in the Israeli economy. Trading volumes in the corporate bond market rose by 9% in 2025, compared to the volume in 2024, while the government bonds ADV, amounting to ILS 3.3 billion similar to 2024. We have continued implementing our strategic plan to strengthen business activity. As part of a significant milestone in strengthening TASE international profile and attracting foreign investors, I'm pleased to update that we have completed transition to a Monday through Friday trading week at the beginning of 2026. In the last 2 months, this move has already led to a substantial influx of foreign investors during Friday trading, exceeding the average recorded on Sundays in 2025. In addition, on February 23, the cyber giant Palo Alto Networks began trading on TASE, officially making it a dual-listed company on the U.S. and Israeli market, which constitutes a profound vote of confidence in Israeli capital market. And we believe this will lead to further breakthrough for the local capital market while strengthening TASE position on the international financial stage. Foreign investors too expressed confidence in the local capital market and purchased equities totaling ILS 4.4 billion in 2025, mainly in the financial and defense sector. This is in marked contrast to the previous year when foreign investors' activity resulted in net sales. It is worth noting that in the first 9 months of 2025, the value of foreign investors holdings in non-dual listed equities grew by 70%, and in September 2025, the value of their holdings reached an historic high of ILS 64 billion, reflecting the deepening presence in the Israeli market. The Israeli retail segment continued to show significant increased interest in the domestic market and the growth in the opening of new trading accounts continued throughout 2025. The retail investors opened approximately 200,000 new trading accounts, 25% more than in 2024. In the trading segment, we continue to invest and develop the indices market in 2025. In total, we launched 10 new equity and bond indices during 2025, of which 7 indices are exclusive and we intend to continue developing new indices to increase and diversify the products as part of our strategic plan to refine and develop more investment products for the investors. At the end of December 2025, the total AUM of all TASE indices amounted to ILS 148 billion compared to ILS 99 billion at the end of 2024. The total AUM of TASE equity indices amounted to ILS 91 billion, compared to ILS 48 billion at the end of 2024. In the derivatives market, we have seen average daily trading volume grow by 14% compared to 2024. In light of the success of the equities market making reform, that I have mentioned in my previous calls, 7 large companies included in the TA-35 Index joined the tailor-made market-making program, resulting in the trading volumes of those companies increasing significantly. I would now like to provide you with an update to what I reported to you in our previous earnings call regarding examination of a partial or full sale of our index activity. We are currently negotiating to enter into a deal to sell the activity and to cooperate strategically with a major international entity. At this stage, there is no certainty as to when, if at all, the negotiation will bear fruit and result in a binding agreement. I would also like to update you regarding the dividend payment to the current shareholders. You will no doubt recall that we previously adopted a dividend distribution policy for the years 2024 to 2026, pursuant to which TASE is to distribute a cash dividend to its shareholders at a rate of 50% of the annual net profit for 2025. The dividend according to the policy amounts to ILS 90.5 million. In addition to this, in light of the substantial growth in TASE profitability in 2025 and the consequent significant increase in the company's liquid reserves, TASE will distribute a special dividend of ILS 54.3 million. In all, TASE will distribute a total dividend of ILS 144.8 million, representing ILS 1.56 per ordinary share that will be paid on March 20, 2026. Furthermore, during the coming year, TASE management will examine drawing up a buyback plan with this being subject to market conditions and other relevant considerations. In conclusion, the 2025 financial statements show that despite all the challenges of the last few years, we are witnessing the growth and resilience of TASE and of the Israeli economy. Our financial statements continue to reflect our investment in developing new and diverse products for the benefit of the public and the investments made for the benefit of technological and innovative developments so that we continue to achieve the goals we have set for ourselves in accordance with our strategic plan for the coming years. And now I'd like to hand over to Mr. Yehuda Ben-Ezra, who will continue with a review of the year results.

Thank you, Ittai. As Ittai mentioned earlier, TASE outstanding fourth quarter financial results capped off a highly successful 2025 with the company is delivering record revenues across all lines of businesses. Throughout the year, including the fourth quarter, TASE demonstrated remarkable resilience, [ given ] Israel faced an extended multi-front conflict. This will thus highlight the strength of Israel economy and the stability of its capital markets, showcasing best consistent performance under challenging conditions. I will continue with Slide #7, which shows some of the key highlights from our results for the year 2025. Our revenues in 2025 reached a new high of ILS 563.5 million, increasing by a record 29% compared to the previous year. Adjusted EBITDA in 2025 improved significantly by 58% to record of ILS 293.8 million, while the adjusted EBITDA margin also improved from 42.6% to 52.1%. Our net profit displayed substantial growth of 79% and increase to a new record of ILS 181 million. Our basic EPS in 2025 reached a new high of ILS 1.97, increasing by a record 81% compared to the previous year. I will continue with Slide 17, which shows some of the key highlights from our results for the fourth quarter. Revenues amounted to ILS 149.3 million compared to ILS 115.4 million in the same quarter last year, a 29% increase. This is the highestly quarter of the revenue since the TASE IPO and growth was evidenced across all operations. Our revenues from non-transactional services amounted to 63% of total revenues, the same the corresponding quarter last year. Expenses totaled ILS 84.5 million compared to ILS 84.2 million in the same quarter last year, a 0.4% increase. Adjusted EBITDA totaled ILS 80.8 million, compared to ILS 46.8 million in the same quarter last year, a 73% increase. The increase was due to higher revenues. Net profit amounted to ILS 51.6 million compared to ILS 25.4 million in the same quarter last year, a 104% increase. The increase was due mainly to higher average for services. This increase was partially offset by the increase in tax expenses. I will continue with Slide 15, where we can take a deeper look into our revenues in the fourth quarter. Revenues from trading and clearing commission increased by 27% compared to the same quarter last year and totaled ILS 54.7 million. The increase is due mainly to higher trading volumes, particularly in shares and in the volume of trade share reduction of mutual fund units. Revenues from listing fees in annual levies increased by 14% compared to the same quarter last year and totaled ILS 25.4 million. The increase is due mainly to revenue for annual levies as a result of the increase in the numbers of companies and funds that pay an annual levy. In addition, revenues from listing fees and examination fees were also higher due to the increase in the volume of funds raised. Revenue from clearing [ and ] services increased by 58% compared to the same quarter last year and totaled ILS 41.2 million. The increase is mainly due to the completion of regulation measures relating to the OTC transaction. Other factors related to the increase were the higher custodian fees as a result of the increase in the value assets under custody and the updating of the custodian fees price [ lift ]. Revenues from data distribution and connectivity services increased by 19% compared to the same quarter last year and totaled ILS 27.4 million. The increase is due to an increase in revenues from index licensing fees, mainly as a result of the increase in the value and the use of TASE indices and from higher data distribution revenues for businesses and private customers in Israel and abroad. I will continue with Slide 18, which shows some of our fourth quarter expenses. Compensate expenses decreased by 4% compared to the same quarter last year and totaled ILS 43.3 million. The decrease was due to a decrease in variable compensation. Computer and communication expenses increased by 11% and totaled ILS 11.7 million. The increase results mainly from an increase in the maintenance cost of new computer system and licenses and from an increase in man power and projects. Marketing expenses decreased by 40% compared to the same quarter last year and totaled ILS 1.7 million. The decrease is mainly from a decrease in campaigns. Depreciation and amortization expenses increased by 6% compared to the same quarter last year and totaled ILS 15.2 million. The increase in depreciation expenses was due mainly to the upgrading of infrastructure and the launch of new products. Net financing income totaled ILS 2.5 million compared to net financing income of ILS 2.6 million in the same quarter last year, a 1% decrease. Let's now go to Slide 19, where we can review our financial position. At the end of year 2025 [Audio Gap] our adjusted equity includes deferred income from listing fees and excluding open derivatives position balances, represents 77% of the adjusted balance sheet. We held ILS 494 million in cash and investment financial assets. The balance of the bank loan totaled ILS 21 million. The surplus equity, other regulatory requirements at year-end 2025 totaled ILS 550 million compared to ILS 627 million at year-end 2024. The decrease was mainly due to the decrease in the TASE equity resulting from the buyback of TASE shares and a distribution of dividend in 2025. This decrease was partially offset by the net profit in 2025. The surplus liquidity, other regulatory requirements at year-end 2025 totaled ILS 310 million compared to ILS 172 million at year-end 2024. The increase in surplus liquidity is mainly due to the increase in the EBITDA. I will continue with Slide 20, where we can review our fourth quarter cash flow highlights. Cash flow from financing activities resulted in negative cash flows of ILS 13.1 million compared to negative cash flow of ILS 4.9 million in the third quarter last year. The higher negative cash flow are due mainly to proceeds of ILS 10 million from the sale of our arrangement shares in the same quarter last year. Cash flows for investing activities resulted in negative cash flows of ILS 38.5 million compared to negative cash flow of ILS 20 million in the same quarter last year. The increase in negative cash flow is due to -- mainly to the acquisition of financial assets net. TASE free cash flow amounted to ILS 75.4 million compared to 35.9 million in the same quarter [Audio Gap] the increase in the EBITDA. Also, the Board of Directors today approved the payment of a dividend of ILS 144.8 million, representing ILS 1.56 per ordinary shares to be distributed on March 2026. In conclusion, TASE performance in the last quarter and throughout 2025 demonstrates its solid foundation as well as the fundamental resilience and growth potential of the Israeli economy. And with that, I will return the call over to Operator to conduct the Q&A.

[Operator Instructions] The first question is for Hector Erazo from Jefferies.

This is Hector Erazo on for Dan Fannon at Jefferies. On expenses, as you think about the budget for 2026, how does that compare to 2025? And what are the areas of spend that are different going into this year?

Hector. So I think looking at this year, in terms of our marketing budget, it will not exceed what we had in the last couple of years. In terms of the compensation of the employees, it should be similar according to the agreement that we have with the employees. And we continue to invest in our IT, and you can estimate the CapEx ILS 55 million to ILS 60 million a year. So shouldn't be any surprises on that front.

[Operator Instructions] There are no further questions at this time. Thank you. This concludes the Tel Aviv Stock Exchange Fourth Quarter and Full Year 2025 Results Conference Call. Thank you for your participation. You may go ahead and disconnect.