TMX Group Limited (X) Earnings Call Transcript & Summary

Good morning, everyone. This is, to some degree, the kickoff to the conference. I'm Alex Kramm. I cover U.S. exchanges, business services companies. Excited to welcome TMX Group here. John McKenzie. Thank you very much for coming.

Thank you.

I actually do not cover TMX, but I've followed it for quite some time. So hopefully, we'll learn a little bit more here. So thanks for coming all the way down from Canada. I know it's a tough time of the year to spend in Florida a couple of days. But anyways, so look, why don't we just jump in here. So as I said, I don't cover the company formally, but given that I've looked at your competitors and looked at you guys from afar for the last 20 years, I'm somewhat familiar with the story. So -- but the company also at that time has gone through a lot of transition. So for those of us not as familiar, why don't you just give us a quick overview about the company and then the key growth targets and objectives that you've laid out over there.

Yes, I'm happy to. We'll see if I do a good enough job, so can you cover us for next time. So we started as Toronto Stock Exchange, Montreal Exchange, very traditional exchange company trying to manage all the Canadian infrastructure pieces in one business. But I'd say the piece around transformation was a strategy that our team collectively built about 4 years ago, which we kind of collectively named the TM2X strategy, which we wanted to challenge the organization, how do you break out of kind of what more we're in to have a vision for how you can actually 2x the organization, 2x the revenue, 2x some of the core businesses, 2x the global footprint. And in that, continuing to transition the franchise from being kind of a historical transaction-based business into something that's much more information-based, recurring and growing. And so that was the vision we set out and we looked at kind of where were our superpowers, the things that we could lean in to do that. And it was certainly in data information. It was certainly in building off the strength of the energy franchise we have with Trayport. But it was also looking at the fact that we actually have one of the largest issuer bases so we can go deeper on serving those issuers. We've got one of the strongest ETF franchises. We're actually -- TSX was actually the home of the original invention of the ETF. I think that was actually just last week. It was about 35 years. So we wanted to lean into that and provide more services around that. And by doing all that, really step up the growth in the franchise and step it up in a couple of key areas where we were going to do more recurring revenue and much more global revenue. So even though we were headquartered in Toronto, it would be a global franchise. And now today, more than half of the revenue is outside of Canada. And so that's kind of the story. So the results that we've had in the kind of this past quarter, the past year, which have been the best quarter and year we've ever had, are really a product of executing that long-term strategy.

Good. So you mentioned recurring revenues. And I think one of the long-term objectives is to get to more than 2/3 or around 2/3. I think you're at 55% as of the last quarter. So how do you think you'll get there? And is there a time frame that we should be thinking about?

Yes. So there isn't a time frame to be fair, we do provide it as long-term objectives. But the way we're going to get there, and it wasn't that long ago that we were about 1/3. So there's 2 ways that we get there. One, our organic strategy is very much tilted to driving those recurring revenue businesses. So when you look at our mix, we give a lot of guidance around what are the high-growth franchises in the organization. I know we'll talk about them in more detail. But things like Trayport and VettaFi and our other issuer services, our trust businesses are all largely recurring subscription-type businesses that were growing at high rates, high singles, low doubles. So there's an organic piece that's going to continue to lift that up. Now the interesting thing is at the same time, we're growing our derivatives franchise with transactional very quickly. But over the long term, we do see a lot more long-term growth in those recurring pieces. But then the second piece is around the capital allocation in terms of where do you put the priority investments to go faster. So when we think about where we're going to invest inorganically, it's all about that strategy of how do we accelerate those parts of the franchise. And so when you look at kind of what have we acquired and rolled into the organization in the last year, VettaFi for one, largely all recurring, Index Research that we brought another index business to put into that, Newsfile, recurring services to issuers to help them with disclosure. Again, we're prioritizing that type of growth when we invest inorganically, and it will help us get there faster.

Excellent. So why don't we jump into the business a little bit more, starting with your biggest one, GSIA, which is the I guess, mostly almost all recurring, right? It's 41% of revenues today. And really, the driver has been Trayport. You mentioned energy. Really impressive growth last year, 17% constant currency. So can you break that growth down a little bit between the core energy business, expansion to new markets, new clients and because, again, it seems pretty impressive.

Yes. It very much is a yes and in terms of that. And we've been -- for those who don't know, we've been in this business since 2017. We acquired a great franchise that had a lot of potential, but didn't have a lot of growth, and it was growing kind of 6%, 7% when we bought it. And since then, we've grown at 10% plus every single year, 17% in pound last year and very much by unlocking the potential that's there. So when you think about those levers for growth, they are in kind of 3 core areas. So number one, we're actually continuing to grow the core franchise. So we are continuing to add clients in Europe and abroad on really the core product in there, which is the screen to be able to trade gas, power and everything around gas and power. And in that, we are constantly bringing new players on in terms of our -- I think we renew 20-ish percent of our contracts each year. They're long-term agreements. Almost every client with that scales up their usage with us and expands the product to more desks. So we're continuing to penetrate that way and continue to grow. The second piece is around actual premium services on top. So very much like you can with a Bloomberg, you've got a base product, but then you can add premiums on top, and that's what we've been doing either by building them or by buying them and integrating them in. So for example, we have an algorithmic trading solution. So very much like the equity markets, if you're in the power market now and you're in renewables, you have to be able to trade very quickly. So we've built an algorithmic tool. We can actually sell across the platform. We've got deep data analytics tools. They're an enhanced product as well, charting capabilities on top of that. And other partnerships where we're going to continue to build out the platform. And those pieces, while they're small, they're less than 10% of the revenue today, but they're growing faster because you're actually selling to your existing client base. And then the third lever for growth is really by geographies and asset classes. So on the asset class, we're always looking in terms of how do we expand that platform out. We now have not just renewables, we have carbon on the platform. We have some oil on the platform. We're going to continue to put more energy product on. One of the big areas of expansion out is when you've got that intersection both between the commodities themselves and geographies that come online. So Japanese power is a material one as the Japanese power market opens up, we are in there working with the key clients on the ground. We've got a team in Singapore that's doing that, that I had a chance to go visit just last year. And there's a lot of excitement for what can happen in Japan because once that market continues to develop, that's a market that's the size of multiple large European countries combined. So we're investing in making sure that they've got the capabilities they need. And then the other big market is obviously the U.S. And that's one we have been in for a few years. When we came into the U.S. with Trayport a few years ago, we did maybe GBP 1 million of revenue, and we're probably doing GBP 6 million, 7 million today. So it's still small in terms of the overall franchise, but the growth rate is there and the adoption is there. So every year, it's just can we keep adding players onto the platform so we can start to get critical mass of liquidity of different types of order providers. So those are the 3 themes. We don't break it down in terms of where the growth comes from, but gives us the confidence that we can continue to say we're going to continue to grow at these kind of strong growth rates, high growth rates going forward.

Yes. And I would echo, we -- or I personally think energy with everything going on, energy transition, the complexities, it's a good place to be. We definitely like that asset class. One quick follow-up. So maybe you can be a little bit more specific about what you expect 2025 after this really good year we just saw. And then a little bit of a nitpicky one because I listened to your fourth quarter call, and you made that comment that it sounded like renewals last year were a little bit more than usual, maybe 1/3 or so. And usually, you get 15% to 20% a year. So again, not sure how 2025 is going to look, but I -- to me, it sounds a little bit like, oh, maybe you'll get less normal renewals, does that give you less pricing opportunities as well?

If I led you in that direction, I didn't mean.

Again, maybe it's a nitpicky, but I have you here.

No, we certainly expect the same kind of renewal strength. And we actually have the team, the way the team actually works with that is with renewals, they're looking at how they actually provide more value to the client. So well, every client agreement we do is an enterprise agreement. And then we -- the idea is you get them to try to use the product more parts of their shop, new products as well because it's already in that fixed rate. And then when the renewal comes, can it step up for what's the broader use in the franchise. So not only do we have a regular cadence of renewals coming, but the team itself has a target of what I'll call uplift in terms of the value of those client contracts increasing, not because we're pricing them necessarily. And we'll talk about pricing separately, but because we're providing more value and there's more usage there. And that objective is around 35% uplift on average. And the team exceeded it last year. I don't see any reason why we won't be doing for that again. And then the second piece to your question, and the only way I'd say that kind of comparative to comparative, 17% in pounds up last year. The last 2 years were probably higher in terms of CPI-based pricing into the product than what we would see in 2025, just with CPI at lower rates. So a couple of years ago, we had almost 8%. I think it was 4-ish, 3% to 4-ish last year. It's going to be a little lighter this year. But again, 3% to 4-ish out of 17% is not the hugest -- the biggest piece of that growth factor.

Not the main driver?

Yes.

Good. Speaks to the long runway and not as mature as some of the other data companies I cover.

Yes.

Anyways, staying on the segment, but then looking at the other newer growth engine, which is VettaFi, which I think it just had its 1-year anniversary a couple of weeks ago, right, under your ownership. So asset growth has been impressive. Can you talk about what do you expect there? And if you can give us an update on expectations for 2025, that would be great.

Yes. So very -- on the expectations, and I'll go into what's driving it, very much that same model. We put it as a high-growth business. So we're looking for -- we always say high single, low double, but I am looking to continue to push this in the double. We were in double-digit growth rate. So even though it was not in the franchise year before, on an organic basis, it was still double digit in the first year, it was with us as well, but we also added new products into it as well. The biggest part of that revenue base is definitely in the index servicing. So the index servicing into ETFs, the largest product is the Alerian MLP ETFs, but there are many other ones as well. And the real strategy is to continue to push more assets, more usage of those products, but also continuing to expand products. And that's the biggest piece, more indices into different ETFs, different asset managers. We've got a really great capability around the index factory in terms of what it's called in terms of cloud-based scalable solution, the ability to do on a very low-cost basis, customized index for any asset manager. And that's kind of the superpower that's in there. We combine that with some really nice bolt-on businesses around analytics and distribution. And they are a smaller part of the franchise. They're not the growth driver. The index piece is the growth driver. But being able to have all 3, we can go to a client and not just provide the index, but provide distribution tools so they can actually get their product to an audience. I think we have almost 200,000 registered advisers in the U.S. that are on the network. So you actually -- not only can you push a product out and create the marketing around it, but you can see what advisers are interacting with and give that analytics back to the client. So it's a really powerful package that's unique in the industry, and we're looking at how do we replicate that in other marketplaces. So the factors for growth going forward are going to continue to be around more index creation, asset flows into those index as they mature. Also building out in other sectors. So there are things that we acquired over the previous years like EQM, Robo Global, different thematic indexes, we're going to look to scale those up. The one that we just brought in the fall was Index Research, gives us European-based indices and also capability to service European asset managers in their time zone as well. So this is very much a strategic build-out so we could actually take that VettaFi proposition that's so strong in North America and get into the European market with it. And so those pieces together, we expect this is going to continue to grow. And then the simple underlying piece, you mentioned earlier on, this is not -- this is a great time to be in energy. Having one of the core products being a midstream energy ETF that's also rate sensitive when rates are starting to come down. This is a great product to be in right now.

Good. So then let's shift gears to, I don't know, the legacy side, which is the trading side. We were actually talking earlier, the derivatives business, I don't know, if I should say, has been on fire, but very impressive growth in 2024. So again, can you talk through what drove that strength? And then, of course, following the exchanges, it's impossible to predict volumes, but we all try. So maybe you can talk about some of the bigger themes that keep you excited for 2025 for that business and obviously, the position there.

Yes. I mean let's start with the fact that certainly, it's a good year for derivative markets generally. But the reason Montreal Exchange and our franchise is outperforming is it's not just where the market is going, but the -- it's the product of a lot of work to get there over the years and really around expanding and maturing the service model and the product suite. And last year was an output of that. So when you look at the results for last year, we had growth in the interest rate curve that was just exponential. And it was on the basis of -- historically, this is a business that had traded off of a 30-day and a 10-year product. And we've been working really hard to build points out in the curve all the way through. And we took kind of the bolder step a number of years ago to say not only are we going to launch these new curve products, but we're going to put really robust market making on them to build early liquidity and get that trading on exchange. And that's always the challenge with exchanges is how do you get liquidity on exchange, because once liquidity is there and strong, it can build on itself. So we went on a program first with our 5-year product with a very rich market-making regime that actually just rolled off last year, and you would have seen some of the lift in the rates per contract for that. And then we use that same strategy for the 2, for the 30 and for relaunching the short-term rate, which is now the core product. And the impact on that is that the interest rate futures are up very strong double digits, in some cases, 40% to 60%. And that's going to be the bellwether piece for driving the business forward. And those are products that are globally used. So the fact that we actually can trade 20.5 hours a day, people can trade in some other regions. We're getting lift in those products globally. And as they mature and the market-making regimes roll off, we'll have this feature in the next few years where not only will we have strong transaction growth, but the revenue growth will grow even faster as we get to kind of more normalized revenue per contract on those products. So we're very, very bullish on that business this year. And then it doesn't help hurt that we end up with a market that's got a lot of volatility and volatility that impacts rates and exchange rates, those are really good for fixed income-based trading products.

100%. All right. Then staying on derivatives, something, I guess, closer to my home, which is the U.S. options exchange BOX. Volumes have been really strong there, too, over the last few years. And look, there's bigger exchanges there, but you've definitely benefited from that as well. So maybe you can just tell us how BOX actually differentiates itself from the several other options exchanges that I cover. And then as a side question here, you own, I think, a little over 50% of that exchange. Is that the optimal structure for it? Or is there industrial logic to maybe own more of it over time?

Yes. So the -- I mean, the initial question around the strength of the business and what's unique. What makes BOX unique is actually BOX is not trying to go after the kind of the generic low-cost, low-value trade, the high volume trade. It is really more about using the price improvement features, some unique capabilities and technology to go after more structured trading, institutional-based trading. So a higher order, higher quality trading activity. And to use for lack of a better word, it does BOX it in a little bit. And so it's not -- and that model is not going to trade 20%, 30% of the market because it's looking at more of that execution quality side. And with that, we own about, I think, 47% of the franchise. We vote a little over 50% just because of the nature of it. So we don't operate it day-to-day. It actually does run on technology we built. It's the same technology platform that runs the Montreal Exchange, just designed for the different marketplaces. But we don't operate it day-to-day. Would I like to someday? That would be a strategic fit for us. But I also recognize that the other players that are around the table are really good players. They're really good partners. So that's always going to be a collective discussion on what's the best way to take it forward. But I do believe, and it is in our long-term thinking, if we can find ways to unlock that structure, there are more -- there's more that we can collectively do with it. So I would be open to doing more with BOX in the future.

Great. And then speaking of U.S. market structure, you have another foray going right now, which is AlphaX U.S. I think it just launched again a few weeks ago or so, which is another U.S. equity trading venue. I would say pretty crowded space.

You didn't think we needed another one?

More for me to track. But I guess the question is, how are you trying to differentiate yourself? And then more importantly, how are you thinking about any sort of revenue goals, how much of the market you want to be, any time frame? So how do investors gauge success of this new initiatives that seems like a pretty steep climb.

Yes. And there's a couple of ways. I mean the first thing I would like folks to think about is think about the execution on this. And so from a -- right from the design standpoint, we were looking at what was the unmet need in the marketplace. So it's not just -- we're not just going to launch another market just so we can join a crowded field. What was the unmet need? And what we saw was room where there was room for improvements around execution quality, again, servicing institutional traders, the sell side that serves accounts. And there are some other players doing it, but we had some unique capabilities that were differentiated and tested out as well because as we're a market operator in Canada, we already launched some of these capabilities with our AlphaX and Alpha DRK in Canada to try to test out the capabilities. And so we saw that there was kind of an open place of the marketplace where we could serve clients better. We know the clients really well because it's not like we are a new entrant. We actually serve these clients in our core marketplaces every day from both sides of the border. And so from an ideation to actual market launch, which we launched just over 2 weeks ago, that was less than 18 months. And that is unheard of in this business to be able to go from an idea to an actual operational launch market that's working and serving clients that fast. So the execution piece is part of that. And that was actually part of our kind of proof in our technology piece that if we could do this on this next gen, it would actually create a core of what we could reimport back to other marketplaces. So what's really unique about it, not just what it's doing for the clients, but we essentially took the best of multiple technology stacks in TMX and put them all into one. So we took the underlying architecture of the SOLA system that we use for derivatives because it's designed for a high messaging marketplace. We use that with all the industrial logic of the equity marketplace from our in-house quantum system, put those together and -- but I also delivered it through an AWS Outpost cloud platform. So it's using some of the best of everything in the marketplace. And as much as we're going to build the U.S. market, we're also doing a test bed for what's the next technology platform of the future for TMX, and we're already working now on the road map of how we actually bring that back to other marketplaces. So that's some of the industrial logic in terms of what we did. In terms of the results, the actual client engagements we've had and volumes on the platform for the first few weeks have actually exceeded all expectations, which is really nice. And now at the end of the day, if you had said, let's go launch a new market 2 days after a Trump inauguration, I'm not sure that was the best way to do it. We had a lot of late nights and folks that did a lot of triaging work and a lot of white knuckles in terms of making it all go. But the client engagement has been really good. Now as an ATS, again, this is not going to be -- it's not going to be 5% or 10% of the marketplace. But if we can get 1% and 2% of the U.S. market for this, it'd be a very strong profitable franchise because it's actually a very efficient low cost platform to run using all things we already have. And so that's what we're working towards, and we think that's something that we actually can do over the next couple of years.

Since you just mentioned maybe bringing that technology to other places, last question on the trading side. Maybe give us a quick update on the Canadian equities business. It's probably a very mature business, but you do have a couple of competitors there, Nasdaq and Cboe. So again, anything new, any new initiatives that we should be thinking about? Or is this a good base business that will do its thing similar to what you see in the U.S.?

You can never take that for granted. You really can't. And it's actually the flip side when I got asked about, are you going to come to the U.S., it is a very crowded market with a lot of big competitors. I always have to remind people, just like you did, I compete with these markets every single day. We actually -- like you said, we've got Nasdaq platform, Cboe platform in Canada. And we do really well. We continue to trade 60-plus percent in our names on a regular basis. And because we do keep reinventing the offering as well, new order types, new functionality, new features, strong close, the launch of things like AlphaX and DRK, which were just last year, bringing new capabilities back as we import this back is going to allow us to bring more functionality as well. So we're going to constantly reinvest in that marketplace. And I'm a really strong believer that if you don't do your core really well, then you don't deserve to do the other things. Your clients aren't going to trust you to do them. So it's one where we have to keep reinvesting in. And I'd like to see that kind of strength going forward.

Good. And then I guess moving on to the capital formation side then. So look, here in the U.S., and I'm sure we're going to feel at this conference, a lot of people excited about capital markets picking up and then, of course, IPOs coming back. So to be honest, I'm not too close to the dynamics in Canada, but there certainly has been a lot of macro news out there as well. So how do we think about the listings business in the near term? And then maybe as we think a few years ahead, how do you view the opportunity set around corporate listings, both TSX, the Venture exchange as you plan for that business to obviously still grow?

Yes. And I'll share with you both my hopes and my angst as we go through that. So we -- like 2024, again, there wasn't a lot of IPO activity for us either. And I know that's been common through probably most of your coverage, but because we have a model that's unique in the world with both the venture exchange for junior equities and the TSX for senior equities, we've got a lot of different ways that we can bring companies to market. So even in an era where we had, I think, one IPO on the TSX last year, we still brought over 200 issues to market. Now a big piece of that was ETF. We talked about ETF earlier. We did 127 net new ETFs last year, which was a record year, and that continues to grow. And it's multiple sectors, multiple categories, different types, but we also brought 100 non-ETF issuers to market. And that's a combination of actually having our team actually hunt for listings for where our value proposition is going to be good for that company. So we uplisted companies from other exchanges that we were able to give them a superior proposition that happened multiple times. We brought in more global listings. We continue to rank amongst the best in terms of international listings. So we actually put presence on the ground in Australia. That's already brought new listings into the Canadian market, both at a junior level for mining and at a senior level. So it's kind of lean into where you're good. And so that's what we've been trying to do. And the unique piece in our venture market is we continue to bring companies to market through our capital pool company program. So these are small caps with the idea that they can then finance multiple times and they can grow through the franchise and graduate to the senior market. So all that activity continued last year, even though we didn't see this big robust IPO activity. Now at the same time, for all the years I've been in the exchange, the conditions -- I'm going to call them the financial conditions, not the confidence conditions. The financial conditions for IPOs right now and financing are fantastic. When you think about the high valuations, lots of liquidity, lots of capital on the sidelines, lower and declining interest rates that helps on the value proposition, those pieces are all really strong in terms of actually being the conditions for financing. The overhang that we've had, and I think that is a global hang, is there's a big uncertainty piece. So if you are a company that's thinking about an IPO, your Board of Directors, it's very easy for them to say, "you know what, we're going to wait a little bit, because we're not confident in terms of getting a good transaction done, and we don't want to trade down." So we are seeing a lot of that. We've got 1,600-plus companies that are in our pipeline that we're engaged with, but it's hard to get visibility on to who's ready to go. The group Dynapipe one that went was successful, but then it got a lot of noise afterwards and a lot of volatility. And so that's part of the challenge. There's other things we're working on to fix that. So this is where I thank your President Trump for 2 things. The volatility has been good for our trading businesses. Volatility has not been good for the listing business. But at the same time, there's a coalescing and a reawakening in policymakers that they have to do things that actually create the conditions for businesses to grow again. So if we can start to knock down some of the barriers around investment, barriers around permitting mines, energy projects, those are all the sectors that TSX, TSX Venture are really strong at. If we can start to see more political will there, you could see a renaissance in some of those core businesses.

Well, while we're waiting for that...

But we're going to wait for it. We're going to help to drive it.

There is -- there are other things within the Capital Formation segment. So this other issuer services seems to be a high-growth area that you're starting to emphasize. I think you even made some acquisitions in there. So can you just quickly talk about the growth drivers there? And it's surprising to me because some of your U.S. peers who are also doing other listings, ancillary solutions, they've been actually struggling in that area a little bit. So maybe tell us what you're doing different?

Maybe it's about picking the right places. We really focused on -- the ambition there is actually to be able to build a franchise, and we'll have to give it a better name than other issuer services, and we will do that. But we want to build that franchise to be equal to the actual capital raising franchise. And I think we're actually about 40% of the business right now is in the other issuer services side. The 2 biggest drivers there are the trust franchise and now the Newsfile piece that we brought in. And we've been in trust for a while. We actually entered the trust business as a transfer agent with only 13% of the market in Canada. Last quarter was the first time we became #1. So in terms of actual transfer agency mandates, we're actually now bigger than Computershare, the big global behemoth in this space. Now our clients tend to be smaller, but they're growing with us as well. But what we worked on and the whole strategy is that we looked at what is the whole suite of products that a capital raiser needs. And by capital raise, I'm very specific because I don't mean a public company, a public or private company that's got multiple shareholders and that's raising capital. And what that helped us do when we looked at that framework, it actually expands the whole universe of who we can serve. So we now have private companies in our trust network. We have other solutions in there as well. So we have an employee plan management tool that can compete with the Morgan Stanley Shareworks platform and others. We've got the ability to do plan management for as a trustee. And so we're continuing to build that out in terms of things that we can do. The Newsfile acquisition that we did in the fall, and this is actually one that Loui and I have known this business for probably a decade, and this was the right time, again, gets to that thing as one of the things that all public and private company needs is they actually need disclosure capability in terms of how do they get their disclosure messages out to the right audience. They do this well. They do it on a digital basis. So it's a natural piece to bring into the organization. And they also do it in North America. So it's not just land locked in Canada. So that's what we're doing in the space is trying to figure out, okay, what are those services that they all need that you can deliver on a technology basis, so it's scalable and actually reach beyond the borders at the same time. And we're going to be able to continue to add to this both in terms of geographic pieces and tools along the way. And you can imagine, cross-sell to clients because I've got a trust client now that doesn't have disclosure, that's the next conversation. The real win I found it was in Q4 this year was the one piece we've talked about, which is always the hardest one to predict is once you've built that relationship with clients, when they come to market on their own corporate action, if they're doing an M&A, things like that, and they need a trustee to support them, we're now winning more of those mandates than we did in the past. So you saw a real substantial lift in our trust revenues in Q4 because we won some great mandates to help clients with their corporate actions. And the bigger we build our client base, the more we can win those mandates. So we continue to be really excited about what we can do in this space. And the nice thing is when you start to serve private companies, you also build that pipeline of future public companies. So we're meeting them earlier on in their life cycle.

Excellent. I want to close soon here on expenses and capital allocation. But before we go there, there was -- you just mentioned Trump already. So maybe just to come back to it for a second, there certainly has been a -- tariffs have been a big topic here. So maybe just on that note, anything else you didn't talk about earlier as it relates to tariffs impacting TMX, capital formation, anything we haven't talked about from that perspective?

No. I mean, let's be candid. I mean it's a shame that we're talking about this at all, especially when it's in the Canada-U.S. context under countries that have free trade agreements that have long partnerships on trade. But that being said, the biggest challenge is really the investment chill that it creates. And I know it creates it actually on both sides of the border. The volatility is potentially good for markets, but it can be disruptive if it goes on for a long time. So this is an area where we actually hope for 2 things, that cooler heads eventually prevail, but also that it actually galvanizes governments to, again, create a policy framework that drives competition, resource development. And I'll give you a couple of examples. I was on the record in Canada for over a year talking about capital gains taxes because the government in its wisdom decided to raise them, which is completely the opposite thing you'd want to do in terms of spurring investment. That's no longer on the table. So this kind of competitive dynamic in terms of growth is taking some bad policy off the table and replacing it with people thinking about how do we actually drive growth. So we are getting way more attention with policymakers and ideas to spur investment. And so if I have to take something that's going to be my silver lining in that cloud, it's going to be that people are finally paying attention and willing to make tougher decisions that are going to help spur investment in a way that we weren't getting for previous years.

Excellent. All right. As I promised, let's get to some of the expense and capital side. On the expense side, I noticed every exchange that I cover in the U.S. provides annual expense guidance. I don't think you do. So maybe we can just talk about that.

If we do, will you cover us?

I'm not making promises on stage, but we can talk about it afterwards. But we -- can you talk about the growth algorithm a little bit on the expense side and how we think about that even being impacted by market factors and other things because, again, some of your peers certainly think they can provide updates there.

Yes. Yes, and the reason we don't, candidly, is actually -- it's in the peer group within kind of the Canadian financial landscape, it generally isn't done that way. And so it is something we constantly think about and constantly think about how do we actually provide better guidance along the way. So David and I, the way we think about it, largely apples-to-apples, and this is tricky for us right now, apples-to-apples, we're kind of targeting kind of up to inflation in terms of the expense impact because the largest pieces of our franchise are our people and -- our people and our talent and what we're seeing in terms of the market for people and talent, that's kind of depending on geography, about 3% to 4%. And the rest of the franchise is really around technology. And most of our technology is quite scalable. So it's more around the technology renewals than anything that's scaling up as we go. And so that's kind of where we're targeting in terms of kind of the steady-state apples-to-apples. But recognizing we're trying to give as much guidance as we can around the things that are a little lumpier. So the impacts of the acquisitions rolling in and getting built into the base. And then the bigger change, and we're going to give more guidance on this in the next quarter around going live on our post-trade modernization program. This is a 6-year product, a 6-year project, $150 million that we're putting into it with the anticipation that we go live at the end of this quarter. It actually will reduce our cash OpEx when we go because the new platform is more efficient than the old platform, but we're going to have new amortization of that new platform coming on, on a noncash basis. We're going to need some time to actually get the savings out of the franchise. So we're going to figure out how we give better guidance on that to help you bridge that. But it's an area that's going to make us again more scalable because it's going to allow us to do more products and services on top that we couldn't do before. So that's kind of where we kind of target, apples-to-apples kind of that inflationary pieces. And we try as much as we can to offset new investment with savings in the franchise. So everyone in the organization has savings targets. They're all target based, and we use that to drive where can you identify things that are not adding value so we can add the folks that we need for what we're building.

And then lastly, from my perspective, finishing up on M&A and capital allocation more broadly, you've been clearly pretty active even last year, pretty active. So can you just give us a quick -- and I'm looking at the time, a quick update on your M&A strategy, what you focus on, what type of businesses are complementary? And then, of course, any financial metrics that you are most focused on when you go into the market?

Strategy driven. So always, we are looking at things that accelerate the existing growth strategy we have. And so that means more properties that we can tuck in, in terms of the data analytics, things that servicing our client base in ETFs, asset managers, the more we can do to support issuers and marketplace work where it expands the capabilities that we've got. So everything is engineered around that strategy. Last year was a really good example where we did both a large acquisition and a number of tuck-ins. We're continuing that kind of ambition where we're looking at both. We're looking at things that can be a bit more transformational. Those are hard to do every year because it's got to be the right value proposition at the right time. But we're also looking at other things we can tuck in. So just like we tucked in the Index Research piece, the Newsfile piece, we have a number of those things as well that we're looking to bring into the franchise where we can scale them up. With that, our balance sheet is in great shape to do it. So our leverage is already back down to 2.7. Our target range is 1.5 to 2.5. And so we pretty much brought all the leverage down that we did for VettaFi, and that gives us really good firepower. And the second piece of that is I have got a Board that is pro-growth that wants us to continue to invest this way if it creates value to accelerate the strategy and value for the shareholders. So to those metrics, we are looking to be able to do things that are accretive. We are looking to do things that exceed our expected risk-adjusted cost of capital, but we do, do it specific to the initiative because what you need to see on a $1 billion transaction is different than on a $40 million transaction. So expect that discipline to continue.

We have only a minute left. I should ask if there's anything in the room before we wrap. But I also think that we have really touched on everything. So why don't we leave it at this because I don't think we have enough time to get another answer. So thanks very much for coming and join the conversation, and we can always talk about me looking more at Canadian companies at some point. So...

Yes, we're going to bring you up in the summertime instead. So you'll be more interested in doing it.

All right. Very good. Thank you very much for coming.

Appreciate it.