Earnings call transcript: TASE beats Q1 2025 EPS expectations, stock rises

Tel Aviv Stock Exchange (TASE) reported a strong financial performance for Q1 2025, with earnings per share (EPS) reaching 0.39, significantly surpassing the forecast of 0.2855. This positive surprise was accompanied by a 21% revenue increase to 131 million shekels. The market reacted favorably, with TASE’s stock price rising by 3.3% to 4939, approaching its 52-week high of $14.01. According to InvestingPro analysis, TASE’s impressive 84% return over the past year has positioned it above its calculated Fair Value, with analysts maintaining a Buy rating on the stock.

Key Takeaways

• TASE reported a 40% year-over-year increase in EPS.
• Revenue grew by 21%, reaching 131 million shekels.
• The stock price rose by 3.3% following the earnings announcement.
• Record EBITDA margin achieved at 47.2%.
• Positive investor sentiment despite increased operational costs.

Company Performance

TASE demonstrated robust performance in Q1 2025, with significant improvements across key financial metrics. The company’s revenue and net income saw substantial growth, while the EBITDA margin reached a record high. This performance is particularly impressive against the backdrop of declining indices like the Dow Jones and S&P 500.

Financial Highlights

• Revenue: 131 million shekels, up 21% year-over-year.
• Earnings per share: 0.39, a 40% increase from the previous year.
• Adjusted EBITDA: 61.8 million shekels, up 27%.
• Net income: 35.8 million shekels, up 32%.

Earnings vs. Forecast

TASE’s EPS of 0.39 surpassed the forecast of 0.2855, marking a significant earnings beat. This result reflects a strong operational performance and effective cost management, contributing to the positive market reaction.

Market Reaction

Following the earnings release, TASE’s stock price increased by 3.3%, closing at 4939. This upward movement contrasts with the broader market trend, where major indices have seen declines, highlighting investor confidence in TASE’s growth prospects.

Outlook & Guidance

TASE plans to continue enhancing market liquidity and has scheduled two custody fee price increases for 2026 and 2027. The company also aims to maintain a consistent marketing budget while expecting a lower expense growth rate in upcoming quarters. Trading at a P/E ratio of 45.7x and maintaining a solid current ratio of 1.41, TASE shows strong financial discipline. For a comprehensive analysis of TASE’s growth trajectory and peer comparison, InvestingPro offers detailed research reports with expert insights and valuation metrics.

Executive Commentary

CEO Itay Benzadev emphasized the company’s commitment to market development, stating, "We are continuing to invest in developing and enhancing the local capital market." He also noted the clearinghouse’s efforts to align with global standards and expressed optimism about the IPO pipeline.

Risks and Challenges

• Increased operational expenses, such as employee benefits and communication costs.
• Potential impacts from regional conflicts.
• Market saturation and competitive pressures in the financial sector.

Q&A

During the earnings call, analysts inquired about the IPO pipeline and pricing changes in clearinghouse and custody services. TASE confirmed strong operational efficiency despite regional challenges and highlighted improvements in the IPO landscape compared to previous years.

Full transcript - Tel Aviv Stock Exchange (TASE) Q1 2025:

Conference Moderator, Tel Aviv Stock Exchange (TASE): a As a reminder, this conference is being recorded, 05/13/2025.

The recording will be publicly available on Case’s website. With us today on the line are Mr. Itay Benzadev, CEO and Mr. Yudah Benzadev, CFO. Before I turn the call over to Mr.

Itay Benzadev, 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 reports for the first quarter of twenty twenty five, in which full and precise information is presented and may contain InterAlia forward looking statements in accordance to Section 32 a to 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 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 the Investor Relations portion of our website at ir.case.co.il/en. Mister Benzadev, would you like to begin?

Itay Benzadev, CEO, Tel Aviv Stock Exchange (TASE): Good evening, Israel time, everyone, and thank you for joining us today. I’m happy to host you in our earnings call. The report for q one twenty twenty five shows that the quarter ended with record results in all PACE business lines and core activities. I’m pleased to share with you that during the quarter, our revenues increased 21% from the same quarter last year. Our adjusted EBITDA increased 27%, bringing our adjusted EBITDA margin to a record of 47.2%, and our net income increased 32% compared to the same quarter last year.

The results reflect the continued implementation of Pace’s strategic plan and the growth potential of the Israeli capital market. Yuta Benneva, our CFO, will discuss the financial statements in detail later in this call. For the whole of the first quarter, the TA-thirty five and TA-one 25 indices recorded a positive return of 10.8%, respectively, compared to a decline of 0.94.3% in the Dow Jones and S and P five hundred indices, respectively. At the end of q one twenty twenty five, PACE equity market cap reached 1,400,000,000,000.0 shekels, the same as at year end ’20 ’20 ’4. Equity average daily trading volumes hit an all time high with a 35% jump and totaled 2,900,000,000.0 shekels in q one twenty twenty five compared to 2,100,000,000.0 shekels in the same quarter last year.

A 10,000,000,000 shekels net inflow of funds invested by foreign and local investors in local industries was one of the factors responsible for this surge in trading volumes. In addition, we have also seen significant growth in q one twenty twenty five in purchases of ETFs on local equity and bond indices of 2,200,000,000.0 shekels and 1,300,000,000.0 shekels, respectively, while sales of 2,200,000,000.0 shekels were recorded in ETFs on international equity indices. Moreover, purchases of mutual funds that invest in equities in Israel amounted to 2,200,000,000.0 shekels, while sales of 400,000,000.0 shekels were recorded in mutual funds that invest in foreign equities. Furthermore, the value of the public holdings in foreign funds traded on tape reached a total of 15,200,000,000.0 shekels, 1 point 1 billion shekels higher than the value at the end of twenty twenty four. ’5 new companies completed an IPO in q one twenty twenty five alone, the same number of IPOs that took place during the whole of 2024.

A total of 3,000,000,000 shekels was raised on the equity market compared to 2,500,000,000.0 shekels in the same quarter last year and a jump of 50% on the amount raised in q four twenty twenty four. The Ministry of Finance raised 49,000,000,000 shekels on TAFE in q one twenty twenty five compared with 52,000,000,000 shekels in the previous quarter. During February 2025, the Ministry of Finance also managed to raise $5,000,000,000 on international markets from a public issuance of bonds, which constitutes a further vote of confidence in the Israeli economy even during a period of global and local challenges. In the corporate bond market, the business sector raised 4,300,000,000.0 shekels, which is 103% more than in the same quarter last year and 23% more than in Q4 twenty twenty four. As part of our continued plan to enhance liquidity in our market, I’m pleased to inform you that on May 4, the new market making program was launched with an investment of several million shekels over two years.

The key improvements in the program include an increase in the number of market makers with some of these acting as market makers in equity for the first time. There will also be two market makers per share, which will open the door to more competition and provide a greater depth of trading. In relation to the TA 90 index, market makers will operate in all the shares included in the index with the obligation to both being significantly improved and margins being considerably reduced. To date, 265 companies have signed on the market making program, and we believe that we will see additional companies joining it at a later stage. In addition, in late April, we published for the first time a tailor made market making program for public companies within the framework of which we will offer companies a unique market making program tailored to the needs of each company that chooses to join the program.

I’m pleased to update that Bank of Poland was the first to take part in the tailor made program, and we have already published an RFI to local and foreign market makers for the bank’s dedicated program. We attach great importance to increasing liquidity and improving the marketability of the companies in accordance with our strategic plan and especially in creating essential tools that will help companies realize their potential with foreign and local investors. In addition, within the context of the making trading more sophisticated and increasing the range of services and trading orders, we intend to launch TAL Trading Air Plus at the July year in which all trades are executed at the closing price of the closing auction. This will be a new trading phase using a premium order, which will command a higher commission than the commission on standard transaction. In the data distribution field, we have witnessed an increase in retail data consumption, which stems from the fact that one of the big banks has chosen to purchase real time data distribution for all its customers.

We are confident that we will see other PACE members following the same path in light of the constant growth pressure from the retail side to operate in the capital market. In conclusion, the Q1 twenty twenty five financial statements show that even in this challenging period, we are still witnessing the stability and resilience of SAFE, which rests on the strong foundation of the Israeli economy. We are continuing to invest in developing and enhancing the local capital market, and we will continue to work towards achieving the goals we have set for ourselves in accordance with our strategic plan. And now I’d like to hand over to Mr. Yoda Beneza, who will continue with the review of the first quarter results.

Thank you, Itay. This has once again posted strong financial results for the first quarter with record results in all our businesses, lines, and core activities. This result underscore the solid foundation of the Israeli economy and reflect the continued confidence of both local and global investor, Israel’s economy, and capital market. Some of the main financial metrics are shown in slide number four. Our revenues displayed substantial growth of 21% for the quarter and did a new record totaling 131,000,000 shekels.

Our adjusted EBITDA at 61,800,000.0 shekels also set a new record, while our adjusted EBITDA margin hit a record 47.2%. Our net profit increased to a new record of 35,800,000.0 shekels. I will continue with slide number six, which shows some of the key highlights from our results for the first quarter. Revenues totaled 131,000,000 shekels compared to 108,300,000.0 shekels in the same quarter last year, an increase of 21%, which was evidenced across all activities. Our revenues for nonproduction services increased to 62% of total revenues and a decrease of 2%.

Expenses totaled 84,800,000.0 shekels compared to 75,200,000.0 shekels in the same quarter last year, and it’s here for 14%. The increase in expenses is due mainly to employee benefit expenses and computer and communication expenses. Adjusted EBITDA totaled 61,800,000.0 shekels compared to 48,600,000.0 shekels in the same quarter last year, an increase of 27%. The increase is due mainly to the higher revenues. Adjusted net profit amounted to 36,900,000.0 shekels compared to 27,800,000.0 shekels in the same quarter last year, an increase of 32%.

The increase is due mainly to an increase in revenue from services, net of increase in cost and tax expenses. Our basic EPS reached a new high of 0.39, increasing by a record 40% compared to the same quarter last year. Let’s now go to slide seven where we can take a deeper look into other revenues in q one twenty twenty five. Revenues from trading and clearing commissions increased by 15% compared to the same quarter last year and totaled 49,500,000.0 shekels. The increase is mainly due to higher trading volumes, mainly in equities and mutual fund units.

This increase was partially offset by a reduction in the effective commission rate. Revenue from listing fees and annual levies increased by 12% compared to the same quarter last year and totaled 4,300,000.0 shekels. The increase is mainly due to higher revenues from annual levies mainly as a result of the operation and the value of the listed securities. Revenues from listing fees were also higher, which is being mainly the result of more companies applying for listing and offerings. Revenue from clearinghouse services increased by 60% compared to the same quarter last year and totaled 31,900,000.0 shekels.

The increase is mainly to higher revenues from clearing out services to members, especially following the completion of regular session, measures in relation to those transactions. Other factors resulting in the increase were the higher custodian fees as a result of the increase in the value of the assets that are held in custodian ship and updating the custodian fees price list. Revenue from distribution connectivity services increased by 8% compared to the same quarter last year and totaled 24,500,000.0 shekels. The increase is mainly due to higher data distribution revenues from business and private customers in Israel. I will continue with Slide 10, which shows our Q1 twenty twenty five expenses.

Employee benefit expenses increased by 14% compared to the same quarter last year, totaling 44,600,000.0 shekels. The increase is mainly due due to higher salaries, increased variable compensation, driven by a higher profitability and lower usage of vacation days. The available compensation has reached the maximum level set in the collective agreement. Computer and communication expenses increased by 16% and totaled 12,600,000.0 shekels. The increase results mainly from an increase in the maintenance cost, new computer system and license, and from an increase in manpower and projects.

Marketing expenses increased by 32% compared to the same quarter of last year in total of 1,800,000.0 shekels. Most of the increase is attributed to the timing of campaigns. Depreciation and amortization expenses increased by 8% compared to the same quarter last year and totaled 14,600,000.0 shekels. The increase is due mainly to new projects and to an increase in software license. Net financing income totaled 900,000.0 shekels compared to financing income of 1,400,000.0 shekels in the same quarter last year.

Net interest is due mainly to a decrease in the balance of deposits to reduction in gains from up to down securities. I would like now to review our financial position highlights at the end of q one twenty twenty five as shown in slide 11. Our equity total of 505,000,000 shekels, our adjusted equity includes deferred income from listing fees and accounts of 71% of the adjusted balance sheet excluding corporate derivative position balances. We have 337,000,000 shekels in cash in investment in financial assets. In January 2025, despite having sufficient liquidity, we signed in two years one hundred and thirty million shekels loan with the approved terms, which was used to repay the 100,000,000 shekels bank loan that existed at the year end 2024.

The 30,000,000 shekels differences between the two loans increases Fed’s liquidity funds. The agreement also includes the one year one hundred and twenty million shekels credit line. The balance of the new bank loan totaled 123,000,000 shekels. The surplus equity also regulatory requirements totaled 409,000,000 shekels compared to 627,000,000 shekels at the end of twenty twenty four. The surplus liquidity of regulatory requirement totaled 111,000,000 shekels compared to 172,000,000 shekels at the end of twenty twenty four.

The decrease in the surplus equity and liquidity is mainly due to the 202,400,000.0 shekels used for the buyback of the company’s shares in the first quarter. Let’s now go to slide 12 where we can review our cash flow highlights in q one. Cash flows from investing activities resulted negative cash flow of 20,000,000 shekels compared to negative cash flow of 12,500,000.0 shekels the same quarter last year. This is due mainly to an increase in investment in property and equipment. Cash flow from financing activities resulted in negative cash flow of 232,700,000.0 shekels compared to negative cash flow of 45,100,000.0 shekels in the same quarter last year.

The change is you manage to divide it from the company’s shares in an amount of 202,400,000.0 shekels and a dividend payment in an amount of 50,700,000.0 shekels. Debt free cash flows increased by 9,000,000 shekels compared to the same quarter last year and totaled 35,600,000.0 shekels. The increase was mainly due to the increase in the EBITDA. And with that, I will return the call to our moderator to conduct the q and a.

Conference Moderator, Tel Aviv Stock Exchange (TASE): Thank you. Ladies and gentlemen, at this time, we will begin the question and answer session. If you have a question, please press 1. If you wish to cancel your request, please press 2. If you are speaking if you are using speaker equipment, kindly lift the handset before pressing the numbers.

Please stand by while we poll for your questions. The first question is from Dan Fannon of Jefferies.

Rick Roy, Analyst, Jefferies: This is actually Rick Roy on for Dan today. So in light of the positive update that you gave on IPOs with five a quarter or more or, you know, equaling the amount of 2024, could you comment on how the pipeline looks going forward?

Itay Benzadev, CEO, Tel Aviv Stock Exchange (TASE): Yeah. Hi, Rick. So clearly, we see this year a much better pipeline than the previous two years. I think that a a key issue is actually the valuation itself. Because looking at the Israeli market, as you know, we we have a lot of businesses that the founders are at a certain age that they are thinking, you know, how what is the best way to to basically test it to the next generation.

So being public is a very good solution for them. But sometimes because of the valuation itself, people rather to stay and wait and try to get a better timing of the market. I think that if the global uncertainty after this week Trump visit in in Saudi’s and The Emirates, if things will look better worldwide, it will give a a positive push for getting more IPOs later on this year.

Rick Roy, Analyst, Jefferies: Alright. Thank you. That’s helpful. And then if you could remind us about the previously described pricing changes that are going to occur or that have been occurring in clearinghouse and in index as well and how those might impact the remainder of this year based on more current clearinghouse and AUM balances?

Itay Benzadev, CEO, Tel Aviv Stock Exchange (TASE): Well, we don’t have any pricing changes in into the index. We had in twenty twenty twenty two and 2023. And in terms of the custody, as we announced last year, this year 2025 was the first stage. What happened is the AUM that we had this year was significantly higher than what we had at the middle of last year. So that was part of the positive impact in terms of our revenues.

And we will have two additional price increase at the beginning of twenty twenty six and in the beginning of twenty twenty seven with regards to our custody fee.

Rick Roy, Analyst, Jefferies: Understood. And and I with the clearinghouse, when when that was initially announced, you had given revenue guidance for those price increases, but those, I believe, were based on, you know, older asset levels. Are you able to provide any update to those revenue guidance numbers?

Itay Benzadev, CEO, Tel Aviv Stock Exchange (TASE): Well, when we made the release, it was based on the AUM that we had at the June. So I don’t know on top of my head, you know, what is the positive delta. That’s right. It’s 20% higher than the the number that we gave. Around 20% higher.

Yes. You’re assuming it’s around 20% higher at the moment. Of course, it may change according to the future AUM that we have.

Rick Roy, Analyst, Jefferies: Understood. That’s that’s actually extremely helpful. And then, you know, just on that topic and the general strength with Clearinghouse in the quarter, do you have any comments you could provide on the general sustainability of balances in in the Clearinghouse segment in general with maybe additional services or, you know, just where balances are trending as you just commented on?

Itay Benzadev, CEO, Tel Aviv Stock Exchange (TASE): Well, I think that, you know, we made a lot of effort in the past few years to bring more services and more and more products. And I think that right now, our clearinghouse is working on a global standard. We supply the Israeli market all of the necessary services. And part of the reason that we’ve had a, you know, a conflict in the region and a lot of volatile market. And as everybody saw, all of our clearing went smoothly.

It’s a vote of the high operational efficiency that we have. I think also that if we look back a few years ago, right now, we pretty much have a much better value proposition in what we give all of the custodian members. And I feel very confident that we will continue to operate at the same level and in the right in in the right measures.

Rick Roy, Analyst, Jefferies: Got it. And maybe for my last question, if you could comment on your marketing marketing expense outlook and maybe expenses more broadly for twenty twenty five. And and appreciate that you commented that the bone the variable bonus cap has been hit in

Itay Benzadev, CEO, Tel Aviv Stock Exchange (TASE): the quarter, but just on marketing and the overall expense outlook. Yeah. So in marketing, as we stated in the previous call, the marketing budget will not be higher than what we’ve had in 2024. So it will be up to the amount that we invested in 2024. And in terms of the variable compensation, as you noted, we actually, right now, are at the top in terms of our profitability and the impact on the variable compensation, meaning that as long as we will generate additional profit, it will not be reflected in additional variable compensation with regards of the employees.

Rick Roy, Analyst, Jefferies: Understood. And then if you could comment on the overall expense budget for the year?

Itay Benzadev, CEO, Tel Aviv Stock Exchange (TASE): Yeah. I I think that, you know, as we noted, we also had more exiles in the first quarter, giving the vast amount of activity that we had. And also what is very typically for the first quarter, lot of employees didn’t take any days off. So this is another factor that gave more cost. I will put it this way, you know, looking ahead, my belief and estimate is that we’ll have a lower rate of expense rate than what we had in the first quarter.

Rick Roy, Analyst, Jefferies: And that you’re speaking to year over year growth?

Itay Benzadev, CEO, Tel Aviv Stock Exchange (TASE): Yes. Yes.

Rick Roy, Analyst, Jefferies: Okay. Well, that wraps up my questions, appreciate the time tonight, gentlemen. Wish you the best.

Itay Benzadev, CEO, Tel Aviv Stock Exchange (TASE): You very much. Take care. Yep. Thank you.

Conference Moderator, Tel Aviv Stock Exchange (TASE): If there are any additional questions, please press 1. If you wish to cancel your request, please press 2. Please stand by while we poll for your questions. There are no further questions at this time. This concludes the Tel Aviv Stock Exchange Q1 twenty twenty five results conference call.

Thank you for your participation. You may go ahead and disconnect.

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