The Tel-Aviv Stock Exchange Ltd. ($TASE)

Ladies and gentlemen, thank you for standing by. Welcome to the Tel-Aviv Stock Exchange Q1 2026 Results Conference Call. [Operator Instructions] As a reminder, this conference is being recorded May 12, 2026. The recording will be publicly available on the TASE website. With us online 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 first quarter of 2026, in which full and precise information is presented and may contain, inter alia, forward-looking statements in accordance to Section 32A of Securities Law 1968. In addition to IFRS reporting, we might mention certain financial measures that do not conform to generally-accepted accounting principles. Such non-GAAP measures are not intended in any manner to serve as substitute for our financial results. However, we believe that they provide additional insight for a 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/en. 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 strong financial statements for Q1 2026 reveal record results across all TASE core business lines and operations, with revenues growing by a substantial 40% compared to Q1 2025. Adjusted EBITDA surged by 87% and the adjusted EBITDA margin reached 63%, while TASE adjusted net profit was 112% higher than in Q1 2025. These results reflect the continued implementation of TASE strategic plan and the growth potential of Israel capital market despite Israel having been fighting a multi-front war for a large part of the quarter. Yehuda Ben-Ezra, our CFO, will discuss the financial statements in detail later in this call. Elevated trading volatility was a prominent feature of Q1 2026. This was largely the result of the tensions between the United States and Iran, which, following several unsuccessful attempts at negotiations, led to war breaking out with Iran at the end of February. After 40 days of fighting, a ceasefire was declared. Even during this challenging period of Israel being engaged in a war simultaneously on several fronts, we have witnessed the stability and resilience of the Israeli society and the country's economy, with this being reflected in TASE record Q1 results that show significant growth in trading volumes compared to Q1 2025. In Q1, the TA-35 and TA-125 indices posted gains of 12.9% and 9.6%, respectively, in contrast to the losses of 3.2% and 4.3% posted by the Dow Jones and S&P 500 indices, respectively. At the end of the quarter, TASE equity market cap reached ILS 2.3 trillion, compared to ILS 1.4 trillion at the end of Q1 2025. In the first quarter, trading volumes on the equities market soared to an all-time high of ILS 5.6 billion, a surge of 92% compared to ILS 2.9 billion in Q1 2025 and 61% higher than the ADV for the whole of 2025. The first quarter also saw a surge in the ADV of dual-listed equities that rose by 81% to ILS 1.17 billion from only ILS 648 million in 2025. Among the factors contributing to the sharp rise in trading volumes were the transition to a Monday through Friday trading week, heightened foreign investor activity and the public making substantial cash inflows into the local indices. Additionally, during the first quarter, we also saw substantial growth of ILS 3.1 billion in purchases of local equity index ETFs as well as ILS 1.8 billion in purchases of local bond index ETFs, while, in contrast, foreign equity index ETFs recorded sales of ILS 5.3 billion. The value of the public holding in foreign ETFs traded on TASE rose to ILS 19.6 billion, ILS 4.5 billion more than in Q1 2025. Eight new companies completed IPOs on TASE during the quarter, raising a total of ILS 1.9 billion, compared to 5 IPOs in Q1 2025 that raised ILS 0.7 billion. We have received inquiries from dozens of other companies that are considering making IPOs on TASE, and we expect to see other companies completing this process in the near term. The Ministry of Finance raised ILS 46.6 billion on TASE during the first quarter, compared to ILS 49 billion in Q1 2025. The Ministry of Finance was also successful in raising $6 billion on the international market, an achievement that represents a further expression of confidence in the Israeli economy even during this time of global and local security challenges. Corporate bond issuances totaled ILS 45 billion in the first quarter, 20% higher than in Q1 2025 and 33.2% higher than in Q4 2025. As you all know, at the beginning of January, we switched to a Monday through Friday trading week, a measure that has proven to be a clear success. Friday trading volumes have considerably exceeded those of Sundays, surging from an average Sunday volume in 2025 of ILS 1.6 billion to average Friday volume of ILS 4.4 billion, a 175% boost. Moreover, foreign investor participation and market liquidity levels have both increased noticeably. We are continuing to progress with our strategic plan, whose goals include enhancing the liquidity and marketability of TASE companies. In this connection, I would like to note that 8 companies have already joined TASE Tailor Made program. It can already be seen that the program is establishing its position as a significant tool for bolstering liquidity and expanding the base of foreign and local investors in the Israeli capital market. While foreign investors account for approximately 31% of the overall activity on TASE equities market, they represent about 37% of the trading volume in Tailor Made equities. We believe that we will see more companies joining the program in the coming months. In the derivatives market, we added 2 new market-makers to the futures market-making program at the end of March. Three market-makers are now operating within the framework of the program. This significantly strengthens the market-making program, which contributes to liquidity in each of the contracts. The addition of these market-makers took place at the same time as our launch of a new futures contract on our flagship TA-125 index and is a continuation of TASE strategic plan to develop and improve the local capital market and align with the practices of the global futures market. I would like to point out that since the launch of futures in September 2024, we have seen a steady increase in the use of this tool by domestic and foreign capital market participants. The monthly trading volumes have jumped from approximately 7,500 units in December 2024 to approximately 65,000 units in March 2026, a significant increase, testifying to a real market need for these hedging and exposure products. In addition, we are promoting a reform in the liquidity of the corporate bond indices, whereby one of the threshold terms for inclusion in the leading bond indices will be a liquidity criterion that the bond will be required to meet. The new reform builds on the success of the equity indices liquidity program and constitutes a crucial pillar in the development of the bond market on TASE. The transition to Monday through Friday trading week has boosted foreign investor activity, and the liquidity reform is expected to further deepen the participation of both foreign and local investors in the Israeli bond market. The program will go into effect on July 30, 2026. In conclusion, the first quarter's strong financial statements reflect the resilience of the Israeli capital market and TASE stability that stand on the solid foundation of the Israeli economy even during this challenging period. We continue to work to develop the local capital market and to achieve the goals of our strategic plan while constantly perfecting and diversifying TASE products and processes. And now I'd like to hand over to Mr. Yehuda Ben-Ezra, who will continue with a review of the first quarter results.

Thank you, Ittai. As Ittai has already mentioned, TASE's outstanding first quarter financial results are the ultimate testament to the highly successful first quarter of 2026, with the company delivering record revenues across all lines of businesses. Once again, throughout the first quarter, TASE has demonstrated remarkable resilience even as Israel faced an extended multi-front conflict. I will continue with Slide 6, which shows some of the key highlights from our results for the first quarter of 2026. Our revenues reached a new high of ILS 183.3 million, increasing by a record 40% compared to the same quarter last year. Adjusted EBITDA improved significantly by 87% to a record ILS 115.6 million, while the adjusted EBITDA margin also improved from 47.2% to 63.1%. Our net profit displayed substantial growth of 116% and increased to a new record of ILS 77.4 million. Our basic EPS reached a new high of ILS 0.836, increasing by a record 114% compared to the same quarter last year. Let's move on to Slide 7, which shows some of the key highlights from our results for the first quarter. Revenue amounted to ILS 183.3 million, compared to ILS 131 million in the same quarter last year, an increase of 40%. This is our highest quarterly revenue since TASE IPO, and growth was evident across all operations. Expenses totaled ILS 84 million compared to ILS 84.8 million in the same quarter last year, a decrease of 1%. Adjusted EBITDA totaled ILS 115.6 million, compared to ILS 61.8 million in the same quarter last year, an increase of 87%. The increase is due mainly to the higher revenues and lower costs. Net profit amounted to ILS 77.4 million, compared to ILS 35.8 million in the same quarter last year, an increase of 116%. The increase is due mainly to the increase in revenue from services, which was partially offset by the increase in tax expenses. Moving on to Slide 9, we can take a deeper look into our first quarter revenues. Revenues from trading and clearing commissions, despite there have been 2 less trading days in the quarter this year, revenue increased by 44% compared to the same quarter last year and totaled ILS 71.1 million. The increase is mainly due to the higher trading volumes in share and bonds and the volume of creation and reduction of mutual fund units. Revenues from listing fees and annual levies increased by 7% compared to the same quarter last year and totaled ILS 27.5 million. The increase is due mainly to revenues from annual levies as a result of the increase in the number of companies and funds. In addition, revenues from listing fees and examination fees were also higher due to the increase in volume from [indiscernible]. Revenues from clearinghouse services increased by 69% compared to the same quarter last year and totaled ILS 53.9 million. The increase is mainly due to higher revenues from services to members as a result of higher volumes of activity and due to the increase in revenues from custodian fees as a result of the increase in the value of the assets that are held in the custodianship and to an increase in the average commission rate. Revenues from data distribution and connectivity services increased by 23% compared to the same quarter last year and totaled ILS 30.1 million. The increase is mainly due to higher revenues from authorization to use the test indices and data distribution for businesses and private customers in Israel. I will continue with Slide 12, which shows some of our first quarter expenses. Compensation expenses decreased by 1% compared to the same quarter last year and totaled ILS 44.3 million. The decrease is mainly due to utilization of vacation days. Computer and communication expenses decreased by 7% and totaled ILS 11.7 million. The decrease results mainly from a reduction in the maintenance cost of new computer system and license, and from a decrease in the manpower in projects. Marketing expenses decreased 34% compared to the same quarter last year and totaled ILS 1.2 million. The decrease results mainly from a reduction in the marketing expenses this quarter compared to the same quarter last year. Depreciation and amortization expenses increased by 8% compared to the same quarter last year and totaled ILS 15.7 million. The increase is due mainly to new projects, to an increase in software and license. Net financing income totaled ILS 2 million, compared to financing income of ILS 0.9 million in the same quarter last year. The increase is due mainly to an increase in the balance of deposits and to a reduction in the interest expenses on a loan. Let's now go to Slide 13 where we can review our financial position at the end of first quarter of 2026. Our equity totaled ILS 585 million. Our adjusted equity, which includes deferred income from listing fees but excludes other derivative position balances, represents 76% of the adjusted balance sheet. We held ILS 408 million in cash and investment in financial assets. The balance of the bank loan totaled ILS 79.6 million. The surplus equity of regulatory requirements totaled ILS 484 million, compared to ILS 550 million at the end of 2025. The surplus liquidity of the regulatory requirements totaled ILS 238 million, compared to ILS 310 million at the end of 2025. The decrease in surplus equity and liquidity is mainly due to the ILS 144.8 million dividend paid in the current quarter. Lastly, let's look at Slide 14, where we can review our first quarter cash flow highlights. Cash flows from investing activities resulted in negative cash flow of ILS 27.7 million, compared to negative cash flow of ILS 20 million in the same quarter last year. The increase is due mainly to an increase in investment in property and equipment. Cash flows from financing activities resulted in negative cash flow of ILS 158 million, compared to negative cash flow of ILS 232.7 million in the same quarter last year. The change is due mainly to the buyback of company shares in the amount of ILS 202.6 million in the first quarter of last year. TASE free cash flow increased by ILS 34.4 million compared to the same quarter last year and totaled ILS 70.1 million. The increase was mainly due to an increase in the EBITDA. In conclusion, TASE's strong performance in the first quarter of 2026 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 to our operator to conduct the Q&A.

[Operator Instructions] The first question is from Dan Fannon of Jefferies.

This is actually Rick Roy on for Dan today. So I wanted to first dig into the momentum and operating leverage you guys are seeing in the clearinghouse services segment. If you could please maybe expand on the sustainability of these asset levels. How much of the forward outlook is predicated on beta versus the pipeline of new members and new services? And relatedly, were there any pricing changes to call out in the quarter?

Okay. I will start with the last question. There were no changes into the pricing. What we see in our clearing and settlement is a few positive factors that combine altogether. We've been seeing clearly a substantial increase in trading volumes, which, of course, brings also more activity within the clearing and the settlement between the members. On top of it, we've been seeing a growth in the mutual fund and ETF domain. The AUM has been growing. So by definition, in terms of the custodian fee that we charge once the AUM is higher, then our revenues are higher as well. And as we did in the past few years, a reform in all of the OTC clearing and settlement, basically, now we work in a model that is more in line with the global clearing houses. So all of these factors basically contribute to the positive revenue growth that we see. And we expect as long as the trading volume will continue to grow together with the AUM, to see it with correlation with the clearing activity and revenues.

And then maybe if I could also add, do you have any changes in your outlook for the expenses as you think about the rest of 2026?

So I guess that we will not end 2026 at the same level of expenses as we had in the first quarter. We have the [ situation ] about the employees and year-by-year -- cyber and all of those elements. So I guess that throughout the year, we'll have a modest increase in our expenses, but no surprises.

I guess maybe digging into that one more level. So outside of maybe the new compensation agreements ongoing as well as some of the stuff you guys are doing in terms of credit facilities, et cetera, do you see, I guess, sustained depression of expenses due to the conflict and ceasefire, et cetera, ongoing in the region?

You mean -- can you clarify the question because I'm not sure that I fully understood you.

I guess just to expand on what you said, outside of the compensation plans discussed in the earnings, anything else going on in the macro that might be leading expense levels lower than normal?

No, no. We don't see any impact on that. It's the IT investments that we make and the regular compensation issues. We don't see any negative impact because of macro situation on our expenses.

[Operator Instructions] Thank you. This concludes the Tel-Aviv Stock Exchange Q1 2026 Results Conference Call. Thank you for your participation. You may go ahead and disconnect.