Release Date: July 31, 2026
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- TMX Group Ltd TMXXF delivered its 8th consecutive quarter of double-digit revenue growth, with total revenue up 16% year-over-year and adjusted diluted EPS up 19% in Q2 2026.
- The company announced a transformative strategic investment to create Memex Group, a US-based options and equities exchange, positioning TMX Group Ltd (TMXXF) as the majority owner with ~59% stake and expanding its footprint in the world's most competitive marketplace.
- TMX Group Ltd (TMXXF) saw strong performance across all segments, including a 40% increase in TMX Verify revenue (37% in USD) and a 22% increase in TMX Data Links revenue, driven by organic growth and recent acquisitions.
- Capital formation activity surged, with overall capital raised up 51% in the first half of 2026, including a 108% increase in equity capital raised on TSX Venture, and the company welcomed 201 new listings, a 44% increase year-over-year.
- The board approved an 8% increase to the quarterly dividend, bringing the payout ratio to 42%, while maintaining a strong balance sheet with a leverage ratio of 1.9x (1.6x net of excess cash).
- TMX Group Ltd (TMXXF) expects the Memex Group transaction to be accretive to adjusted EPS within the first 12 months of closing, before any synergies, and has a proven track record of rapid deleveraging following prior acquisitions.
Negative Points
- TMX Group Ltd (TMXXF)'s combined equities trading market share declined to approximately 59% in Q2 2026, down 3% from the same period last year, with Alpha volumes decreasing 25%.
- The company's leverage ratio is projected to increase to up to 3.4 times on a pro forma basis, reflecting the funding of the Memex Group investment and other pending acquisitions, which is above its long-term target range.
- TMX Tradeport revenue growth was muted by a GBP1.3 million decrease in non-recurring revenue compared to Q2 2025, primarily due to lower consulting services, impacting overall segment growth.
- Box volumes declined 3% in the quarter, and the company noted that softer volumes and market share were partly due to a shift in market mix and potential staff distraction during the merger process.
- The Memex Group transaction is subject to regulatory approvals, including the SEC and HSR filing, and is not expected to close until the second half of 2027, creating execution and timing risk.
- Operating expenses increased 13% in Q2 2026, driven by acquisition-related costs, higher employee incentives, and a non-cash write-down of an intangible asset, partially offset by prior-year strategic realignment expenses.
Q & A Highlights
Q: How are you thinking about juggling the three acquisitions (CBOE, Raffi, and Memex/Box) while maintaining focus on the organic business over the next 6 to 12 months?
A: John McKen, CEO: We spent a lot of time on capacity, not just balance sheet capacity, but the team's capacity to execute with excellence. The key is that these transactions don't all close at the same time. CBOE Australia and Raffi are very close to closing, while CBOE Canada is on a different timeline due to regulatory review. The Memex/Box combination is expected to close around a year from now. We are also utilizing different parts of our franchise and teams for integration work, and we bring in talent from the acquired organizations, which enhances our team.
Q: Can you talk about what your US position would look like after the Memex/Box deal, and what the prospects are for sustaining the double-digit growth momentum?
A: John McKen, CEO: The combined entity will have approximately 10% of the US options market and a growing percentage of the US equity market. We view this as a high-growth opportunity and a platform to do more. Our largest clients are global traders and issuers, and this investment helps us serve them better. The long-term vision is to build a TMX US that offers the same breadth of services we provide in Canada. We are thrilled to make this step as it is a big building block for our global strategy.
Q: Can you provide the valuation ascribed to Box within the Memex transaction so we can calculate the multiple for what you are contributing?
A: David Arnold, CFO: We are not breaking down the individual components of the transaction. We are speaking to the aggregate. You can do back-of-the-envelope calculations using the full purchase price and our previous equity ownership stake, but we are not disclosing the individual componentry. The 17 times combined adjusted EBITDA multiple is the best guide.
Q: What is it that Memex has that Box doesn't already have? Is it a technology driver that you couldn't naturally grow through Box and the US ATS?
A: John McKen, CEO: There are several pieces. First, the talent in both teams is excellent. Memex has extremely good connectivity in the US and a recent, innovative technology platform that will become the basis for a next-gen offering. Memex also has multiple market licenses and an equity piece that targets different parts of the marketplace than our own ATS. These are all very complimentary offerings.
Q: Tradeport had another slower quarter. Is mid-single-digit growth the new trend, or what gives you confidence it will remain in the high-growth bucket?
A: David Arnold, CFO: Tradeport is absolutely still a high-growth business segment. This year is somewhat anomalous due to the renewal cycle of our site license agreements, which average 3 to 4 years. The 8% expansion in recurring revenue is the core engine and tracks to our long-term guidance. We manage through the medium term, and I would expect as we go into 2027 and beyond, with the renewal pipeline we see, we will return to high single to low double-digit growth.
Q: Can you give us color on the growth profile within Memex, specifically what drove the 27% average growth rate?
A: David Arnold, CFO: We are looking at this as a combined business going forward and are not providing individual componentry disclosures. The 27% average growth rate over the last three years reflects rapid expansion within the business and benefits from higher market volatility. We don't see it being 27% in the long term, but it will be in our high-growth segment, which is high single to double digits.
Q: Box volumes and market share are down this year. Is there anything particular driving the softer volumes?
A: John McKen, CEO: The stock market has a very strong offering but caters to certain parts of the market segment. When there are large shifts in market segments, the mix can change. This is actually why the transaction is complimentary—Box and Memex participate in the options market with different offerings and target different user bases. The Box business remains very strong. I also want to note that there may have been some distraction among staff over the short term, but now that this is public, teams can focus on their clients.
Q: How would you gauge the relative timing risk of the Memex/Box deal closing, particularly with the SEC?
A: John McKen, CEO: Any exchange combination and ownership change of this size is subject to SEC approval. There will be a filing process for both Memex and Box. From a process standpoint, this transaction will not have come as a surprise to the SEC—there has been a long dialogue about the intention to do this. The fact that we are announcing today signifies we have confidence in that process.
Q: The revenue capture on cash equity trading looked a bit better than past quarters. Is that correct, and what's driving it?
A: David Arnold, CFO: You've got it. There is a mix between the continuous limit order book and the auction process. We have more market share in the auction space because we run the only auctions in Canada. If there is a shift between auction and continuous limit order time windows, it affects the revenue capture. There's nothing bad here—you've identified the key driver.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
This stock alert was generated using automated technology and GuruFocus financial data to provide readers with timely and accurate market reporting. This content was reviewed by GuruFocus editorial team prior to publication. Please send any questions or comments about this story to [email protected].
