TMX Group's (TMXXF) CEO Lou Eccleston on Q2 2016 Results - Earnings Call Transcript

| About: TMX Group (TMXXF)

TMX Group Limited (OTC:TMXXF) Q2 2016 Results Earnings Conference Call August 4, 2016 8:00 AM ET

Executives

Paul Malcolmson - Director, Investor Relations

Lou Eccleston - Chief Executive Officer

John McKenzie - Chief Financial Officer

Analysts

Paul Holden - CIBC World Markets Inc.

Geoffrey Kwan - RBC Capital Markets

Graham Ryding - TD Newcrest

Phil Hardie - Scotia Capital

Operator

Good morning. My name is Jessa and I will be your conference operator today. At this time, I would like to welcome everyone to the TMX Group Second Quarter Results Conference Call. [Operator Instructions] Thank you.

Mr. Paul Malcolmson, you may begin your conference.

Paul Malcolmson

Thank you, Jessa, and good morning, everyone. Thank you for joining us this morning for the second quarter 2016 conference call for TMX Group. As you know, we announced our second quarter results last night. A copy of the press release is available on our website under tmx.com, investor relations. Today, we have with us Lou Eccleston, our Chief Executive Officer; and John McKenzie, our Chief Financial Officer. Following opening remarks from Lou and John, we will have a question-and-answer session.

Before we begin, I want to remind you that certain statements made on the call today may be considered forward-looking and we refer you to the risk factors outlined in today's press release and with reports filed by TMX Group with regulatory authorities.

Now, I'd like to turn the call over to Lou.

Lou Eccleston

Thank you, Paul. Good morning everyone and thanks very much for joining us on the call today. I want to start by welcoming John McKenzie, our new CFO. It's great to have you at the table, John.

John McKenzie

Thank you, Lou.

Lou Eccleston

We'll be hearing more from him in a few minutes. So we've reached the halfway point in the year and as you know from reading our earnings release we're seeing encouraging signs in terms of the performance of our markets and also in our operating results. A year and a half ago, we articulated and began to implement a strategic plan to accomplish three major objectives. First, redefine TMX in the eyes of our stakeholders; reposition TMX in the marketplaces we serve; and third, and most importantly, return TMX to profitable growth.

Our new CFO, John, I just mentioned, will take a closer look at the numbers in a minute; but the signs are clear that strategic plan is delivering. As you read in last night's Q2 results, we reported strong earnings growth and in fact reached a new record quarter in terms of revenue. And while important work to execute against our strategy and to reach our longer-term objectives still lies ahead, TMX is firmly on course. We continue to pursue ways to leverage the considerable depth and strength in this organization's business model and manage our costs effectively.

Just turning briefly to some of the key metrics now in our core business areas, sustained volatility pushed volumes higher across our markets through the first half of the year and especially in the second quarter. And while economic growth projections remain muted for the remainder of 2016, the demand for Canadian assets continues to grow. The S&P/TSX Composite Index is among the top-performing indices in the world, up almost 9% in the first six months of the year, and the S&P/TSX Venture Composite Index is the number one performing index in the world this year, up 39%.

Companies in this country and around the world recognize the value of a listing on TMX Markets. According to the World Federation of Exchanges, year to date through June 30, Toronto Stock Exchange and TSX Venture Exchange are number two globally in overall new listings and number one in the world in new international listings. This is a perfect example of what I mean when I talk about TMX as a Canadian business with a global franchise.

We also saw strong growth in derivatives trading on MX in the second quarter. The surge in volumes in equities and derivatives also drove activity higher for Canada's central clearing houses, CDS and CDCC. But as much as the story in our markets this year is about volatility, the headlines for TMX are these: execution, innovation, transformation and operational excellence.

In fact, with yesterday's announcements of business integration initiatives, we have now initiated the next important phase of our plan to accelerate the pace of TMX's evolution. We've identified key leverage points for adopting current technology platforms, operating systems and business support models to enhance client services and achieve greater cost efficiencies, and ultimately to drive increased value for shareholders.

The announced changes represent necessary steps in pursuit of full integration and the implementation of a critical framework for continuous client-driven innovation across all parts of TMX. Our initial focus is on the integration of the technology, operations and management of our cash and derivatives clearing businesses, CDS and CDCC. Glenn Goucher, President and Chief Clearing Officer of CDCC, has also been named President of CDS.

Glenn has been with the organization since 2001 and is well respected in the global clearing community. He's got industry expertise. Under Glenn's leadership, CDS and CDCC will seek out ways to deliver significant operational efficiencies to market participants. This includes integrating management, infrastructure and support.

Looking further down the road, we've also begun to examine ways to integrate key elements of our equities and derivatives trading businesses. We'll be in a position to tell you more about those and the progress on those as we make those efforts later in the year. So it's important now to contextualize TMX integration. The overall goal here is consistent with the vision we began to articulate last year, to put clients first by providing substantial product and service benefits in client account management, business development and product development.

Now, in terms of the people that make these integration initiatives successful, we're very excited to have Jay Rajarathinam on board as our Chief Information Officer. Jay joined the company a couple of weeks ago and is responsible for TMX's overall technology vision and strategy. Jay has 20 years of leadership experience in financial services technology across a wide range of infrastructure and application domains, including high-performance computing and trading systems. Jay is going to help drive our ongoing technology operations and integration initiatives, and we welcome him to our team at this critical and exciting time in our history.

As you saw in our announcement earlier this week, there was a change in leadership in our derivatives business, Montreal Exchange. Luc Fortin recently joined MX as Managing Director, Derivatives Trading, and as per announcement on Tuesday, has now stepped into the role of Interim President and CEO, MX. Luc has over 25 years of capital market experience in leading client-facing teams in fixed income and derivatives.

Under Luc's leadership, MX will develop and deploy effective new strategies to continue to grow the derivatives business. MX has performed well in the recent past, but still has plenty of runway to grow. We remain acutely focused on working with our stakeholders to continually enhance the overall MX client experience and the appeal of our derivatives market to domestic and international investors.

Another recent executive announcement and one that has an immediate impact on this morning's analyst call is the appointment of John McKenzie to CFO, TMX Group. John has been with the company for 16 years, most recently serving as President of CDS. He knows our business as well as anyone having held executive positions in TMX corporate strategy and development, and in the finance department over the years. John has played a key role in TMX's financial and strategic planning and managed various acquisitions including the Maple transaction, MX, and Shorcan, as well as the resulting integration initiatives.

I think also, John's appointment really speaks to the overall strength in the leadership team at TMX. Over his first few weeks on the job, he's hit the ground running, which will enable us to maintain pace on our stated path toward innovation, transformation and operational excellence. I look forward to working with Jay, Luc and John and the rest of our TMX leadership team as we take TMX into the future. I also look forward to updating all of you on our plans as we continue through the year.

So thanks for that and over to you, John.

John McKenzie

Thank you very much, Lou, for the kind words of introduction, and good morning to everyone on the call. I want to start by saying that I'm very much looking forward to working with all the market participants that follow us, the analysts that are listening in, as well as our shareholders and potential investors. And I look forward to meeting many of you in the coming weeks and months.

So as you will have read in our release, Q2 was an exceptionally strong, in fact a record quarter. Continued market volatility drove significant increases in volumes across our markets, translating into 9% revenue growth, an increase of 110% in reported earnings per share and an increase of 32% in adjusted earnings per share over the last year.

We are once again seeing the benefits of the leverage we have in our operating model, when revenue growth is coupled with maintaining an aggressive approach to cost efficiency. Our success in managing cost in the second quarter is indicative of the efficiencies we are looking to drive throughout TMX Group.

As we plan to further reduce cost going forward, we do expect to incur additional strategic realignment costs, though we anticipate the majority of our strategic realignment costs will have been recorded by the end of 2016.

Now, let's talk about our second quarter results on a year-over-year basis. The increase in net income and reported EPS largely reflected higher revenue and lower operating expenses, including lower strategic realignment expenses.

Also in Q2 2015, there were two significant items which reduced reported EPS relating to a change in Alberta corporate tax rate as well as an impairment charge. There were no comparable items in Q2 2016. The 32% increase in adjusted earnings per share also reflected the higher revenue and lower operating expenses in the quarter.

Looking at our top line, there were increases in efficient markets, largely driven by equity and energy trading, derivatives and market insights revenue, somewhat offset by a decline in capital formation revenue. There was also a favorable impact of approximately $2 million from a weaker Canadian dollar relative to other currencies.

The increases in efficient markets and derivatives were largely driven by significant increases in volumes traded. The increase you've seen in market insights revenue reflected higher revenue from the TMX Atrium wireless business, increases from indices, as well as higher revenue recoveries related to underreported usage of real-time quotes in prior periods.

There was a positive impact on market insights revenue from a weaker Canadian dollar relative to the US dollar, but offsetting these increases there was a decline in razor risk revenue and a 6% decrease in the average number of professional market data subscriptions for TSX and TSX Venture products.

Capital formation revenue declined 2% compared with last year, with the decrease driven by a loss of revenue from the Equicom business which was sold in July 2015. However, excluding that change, revenue was actually 2% year-over-year. In addition, there was a decline in both initial and sustained listing fees. Partially offsetting this, additional listing fees increased by 16% over Q2 2015, reflecting a 19% increase in the number of transactions billed on TSX.

There was also an increase in the additional listing fees on TSX Venture, reflecting a significant increase in the number of financings and the amount of financing dollars raised. The revenue increase was also attributable to the favorable impact of an increase in the maximum additional listing fee on TSX effective February 1 this year.

Turning to our cost base, operating expenses before strategic realignment expenses in Q2 2016 were down 5% from last year. A reduction in costs related to razor risk of $3.1 million, overall lower head count and the sale of Equicom were all contributing factors. There were also decreases in information and trading system costs and depreciation and amortization.

The decreases were partially offset by higher employee performance incentive costs and increased selling, general and administrative costs. There was also an unfavorable impact of about $1 million from a weaker Canadian dollar relative to other currencies, including the US.

Income from operations before strategic alignment expenses increased 32% in Q2 over Q2 2015, reflecting the 9% increase in revenue and 5% drop in operating cost before strategic realignment expenses. This really underlines the benefits we can realize in our business model when revenue growth is accompanied by expense reductions.

Now, looking at our financial results sequentially, revenue from Q2 2016 increased over Q1 2016, reflecting higher revenue from capital formation, largely additional listing fees, market insights, efficient markets, and other revenue, somewhat offset by decline in the derivatives revenue quarter-over-quarter. This increase in other revenue was primarily due to recognizing lower net foreign exchange losses on US dollar and other non-Canadian-denominated monetary assets in Q2 2016 compared to Q1 2016.

Operating expenses before strategic realignment expenses for Q2 2016 were essentially flat compared with Q1 2016. Higher employee performance incentive plan costs and increased selling, general and administration costs, including higher marketing costs, offset lower compensation and benefits costs related to lower payroll taxes and a higher capitalization of labor cost in Q2 2016 compared with Q1 2016.

Income from operations before strategic realignment expenses increased 24% from Q1 2016 to Q2 2016, reflecting the higher revenue. So in the quarter, we reduced our debt by about $53 million during the first half of this year. Debt repayment will continue to be the primary use of cash in 2016. At the end of June, we now have only about $19 million outstanding under our core commercial paper program.

As mentioned in May, with our $350 million of Series C debentures due in October, we plan to repay these debentures with proceeds from the commercial paper program and excess cash. Yesterday, our Board declared a quarterly dividend of $0.40 per common share to be paid on September 2, 2016 to shareholders of record on August 19, 2016.

At this point, I will turn the call back to Paul for the question-and-answer session. Thank you, Paul.

Paul Malcolmson

Thanks, John. Jessa, could you please outline the process for the Q&A session?

Question-and-Answer Session

Operator

[Operator Instructions] Your first question comes from the line of Paul Holden from CIBC.

Paul Holden

It was obviously a very good quarter from a revenue standpoint. I wanted to get a sense from your perspective on how much of the revenue growth is sort of sustainable growth. So, i.e., how much is coming from new initiatives such as AgriClear, the data analytics package that you rolled out or other initiatives?

Lou Eccleston

I'll start, I think, Paul, the good news is that, as we've said all along, we really expect those to be material end of 2016 moving into 2017. And so what you see, I think, is a combination in these results of obviously favorable market conditions, particularly across the diversified portfolio, which is equities and derivatives.

But on top of that, when we make the comments about what's happening with listings and especially international listings, we've made that a priority. So we talked about Shaun McIver as our new Chief Client Officer for equity capital markets and he's building account management business development both in Canada and outside of Canada. So I think that's one of the new initiatives that you're starting to see take hold, helping that business initiative as well.

And in terms of the analytics and also on AgriClear, I think we're still in the same timeframe. Although I will say, they keep progressing, and I think that on the analytics side, with a launch late February, you're already seeing a very robust pipeline and about four or five commercial clients on board already. So I think we're on target for those. But I do think the listings is a function of increased business development around what we've talked about in the past.

Paul Holden

And then speaking of the listings business, obviously the entry of NASDAQ into Canada has had some people questioning if there's going to be new competition in the listings business. And then I guess also Aequitas is now offering listings as well. So can you update on if you've seen anything to date from NASDAQ and Aequitas is having any impact on the listings business?

Lou Eccleston

The way we think about it is that we focus on the markets, clients and growing our business. And that's where we remain focused. So also, I think it's interesting that you need to have a broader perspective, right. So when we talk about our business being both a Canadian and a global business and we're generating a good amount of our business, 20% or so in the listings world from outside of Canada. So we've got not just a strong domestic business, we've got a strong global franchise. And I think that sets us up extremely well for whoever we're going to compete with.

So haven't heard anything different, but we remain squarely focused on our business, our clients, and being a place where people want to be, and making our market the most valuable. And that's going to give us competitive barriers to anybody who competes with us here or around the world.

Paul Holden

And then in terms of the integration of CDS and CDCC, so I think the opportunities for cost rationalization have been made clear. Are there also perhaps some strategic benefits of combining the two maybe in terms of technology development or otherwise?

Lou Eccleston

There's no doubt. I mean, there's no doubt. I'll start, and I think John can weigh in on this too having run CDS as well. This is, I think, a very significant step for us, when you think about bringing together the capabilities across the TMX portfolio. And the idea of thinking about one line of business that focuses on depository clearing not only gives you efficiencies in how you run infrastructure, it also gives you consistency in how you approach strategic growth. So I think it's big in both areas. John, you want to add to that?

John McKenzie

If you start from the premise, you think about the client bases of these two businesses, both today and tomorrow, are really the same clients; the opportunity of bringing them together allows you to take a common approach to how we approach those clients. We've had clients in the past asking us when we're going to do this because it's going to be better from an operational efficiency for them. It'll allow us to bring new services to bear for those clients, like collateral efficiencies, things like that. So it's only a win for the industry and we're actually excited to move it forward on that basis.

Paul Holden

And one final question, wondering if there's any updated thoughts on potential asset rationalization.

John McKenzie

I mean we are certainly continuing to look at which assets are less core to our strategy going forward and looking at whether or not there are better homes for those assets, but nothing to update you on at this point.

Operator

Your next question comes from the line of Geoff Kwan from RBC Capital Markets.

Geoffrey Kwan

My first question was just a follow-up on Paul's question on the CDS, CDCC. I mean, it's something that, I think, to your point, most people agree that there's a lot of benefits to it. But TMX has had this business since, I think, was it 2008, but hadn't done anything. And my question is around, are there any limitations that you may have on what you might pursue to kind of optimize the businesses because I thought there might have been some sensitivity around jobs and other considerations between Toronto and Montreal.

Lou Eccleston

We've got both public and provincial mandates which are well within and will remain well within as we pursue the integration and leverage. I think the biggest thing is that it wasn't a strategy until a year and a half ago, and it now is. I mean, we literally came in and changed, right down to the mission statement, of being about infrastructure, to being about clients and to being about technology solutions.

So I think whatever mandates we have are not prohibitive of us pursuing the best solution, structure and strategies for clients in the market. So you've got to manage that. There isn't a company in the world that doesn't have regulatory frameworks to work within. We're the same. But it doesn't prohibit us from moving the business forward.

Geoffrey Kwan

Maybe if I asked another way, if you guys felt that the best way to optimize the businesses would be to have all of it based in Toronto, would you be able to do that?

Lou Eccleston

It's not even a relevant question, because first of all, the geography isn't what's going to drive our strength and we need to be a business that's got presence across all of Canada as well as having a presence in other parts of the world. So that's what's important for us. You got to be where your client base is. You got to serve your clients. So that's what matters to us.

Geoffrey Kwan

And just the other question I had on the expense side, when I’m looking at the compensation as well as the G&A line, you mentioned you still have more to go on the strategic realignment. Just what we saw in the quarter, how do you think about that going forward? Is that a reasonable run rate? Is it maybe some seasonality to it, it could it be a bit higher, a little bit lower, just maybe some color around that would be appreciated.

John McKenzie

Geoff, I'll try to give you some color there. I mean, I'm going to do this without giving you actual forward guidance, because as you know that's not an approach that we take. But I think what you look at the run rate you're seeing in Q1 and Q2, you can certainly take that as indicative of the approach we are taking to cost management and efficiency through the firm and that approach is not going to change in the quarters going forward.

Layered onto that, as we indicated, we anticipate there will be more strategic realignment impacts in the second half because we are looking for additional savings for the firm that have long-term benefit to the organization. So you're going to see that all in the back half of the year, at which time we'll be able to give you more clarity around the type of savings that we would anticipate going forward and the cost to achieve those.

Operator

[Operator Instructions] Your next question comes from the line of Graham Ryding from TD Securities.

Graham Ryding

I just wanted to make sure that, so at this stage, you're not calling out any targets for any savings that you think you can surface from integrating CDS and CDCC. Is that correct?

Lou Eccleston

Correct.

Graham Ryding

And the next leg is obviously you're focusing on better integrating your trading platforms. What's the timing around that stage of the integration?

Lou Eccleston

The first step, just pause a little bit. I mean, the first step is as I said around our depository and clearing. So we are in the process now of doing detailed design studies and really trying to nail down what exactly are the specific integrations across the platforms technology; operations; management structures. Glenn will take a good hard look at that, all of those things, along with Jay, to understand those. So I think it's fair to say that by the time we get to the end of the year, we'll have completed at least our targets for CDS and CDCC in terms of the integrations.

And then when it comes to trading, Jay's only been in the door a couple of weeks, so we want to give him a chance to get settled in and really understand. He's got a deep experience base in these systems. So he's going to be a guy who really oversees that closely. So I think that's going to be phase 2.

We would not undertake simultaneous integrations of both those because I think that's just too much for the organization to do at the same time. So it'll be more sequential. But I think by the time we get to the end of the year and when we're talking to you about Q4, I think we'll have completed our study work on the depository world and be much further along on the trading.

Graham Ryding

And so at that time, you think you'd likely be more in a position to call out some potential savings or estimates that you think you can...

Lou Eccleston

I think at least directionally. Again, as John said, it won't be strict guidance per se, but it'll be direction.

Graham Ryding

So it just helps us from trying to – your margins and whatnot.

Lou Eccleston

Understand.

Graham Ryding

The one area that you noted was a new fee model that you're proposing within CDS. First of all, does that require regulatory approval? And I was under the assumption that if you made any changes to CDS, there was sort of a revenue sharing arrangement with the industry. Is that still the case?

John McKenzie

So I'm happy to take that one because that one's near to my experience. So within CDS, the fee model that you noted in there, the one that was published just a couple of weeks ago, was actually a republishing of a fee model we put forward at the end of 2014 that looks to charge fees to the issuers of securities in CDS. It's a model that's used around the world in many other depositories. You'll also see that there was a study we released that showed that CDS was actually one of the lowest cost depositories in the world. So this is all part of that reform.

So the proposal is before the Commissions. It does require regulatory approval. But with regards to your question around the revenue sharing, these are not the services that are part of that revenue sharing model, so that wouldn't apply. In fact, these are services that are offered by other commercial entities in the Canadian marketplace. So the customers do have choice and that will be part of the consideration that the regulators take when they take it forward.

The rationale for republishing it was, there was significant feedback that came from the first proposal. We took the model back and we talked to the industry about what their challenges were and we formed the model to make it work better with the issuers that were affected and we're republishing it on that basis.

Graham Ryding

And then if it's approved, do you have any context for how material this could be to CDS revenue?

John McKenzie

It's going to be important and significant to CDS. It's also important thing to CDS in terms of its ability to reinvest in that technology, but it wouldn't be material to the overall firm.

Graham Ryding

And then just lastly, any update around the CSA's review of market data fees? And if not, do you have any idea when we may get an update from the regulators on that methodology and assessing?

Lou Eccleston

No, Graham, we don't have an update at this point.

Operator

Your next question comes from the line of Phil Hardie from Scotia Capital.

Phil Hardie

So lots of turnover at TMX in recent months and obviously that brings fresh insights, but I guess it also brings its own challenges. So I guess my question would be kind of how far are we along with those initiatives and kind of what's in place to help mitigate some of the risks and smooth some of the transitions?

Lou Eccleston

First, I think we're going through a pretty significant transformation and refocusing of our strategy and how we execute. So it's not uncommon for an organization of our size to go through those changes. The key though is are we upgrading, are we adding new insights, are we looking at fresh ways to grow the business and adding experiences to the team? And I think that's clear that we've done that.

The second thing that we've really tried to focus on and it doesn't get as much press, I guess, but we've had a number of internal promotions. We've had significantly more internal promotions than we have external hires. So at the same time that we're always concerned about institutional memory and experience, we're also always focused on unlocking institutional capabilities.

And I think that's the key for us, is the kind of team we have in place now. We have a really strong – I mean, I mentioned John being able to step into a critical role like the CFO, we've had a number of people move into positions across our different businesses in equities. Jean Desgagne stepped up to take over global enterprise services. So you've actually seen more movement within than you have externally, inside. So I think it's important to stay focused on that.

But it is a concern, obviously, we focus very much on it. And we take any decisions around people, executives or other, extremely seriously. But the key for us is to be focused on do we have the right people in the right place, given where we're headed for? So I think we've got a fantastic team in place right now and have managed all the issues around the changes. It's a big part of transforming a company. You've got to be very focused on that. The strategy is important, but the people are the ones who execute it. So we're very focused on that.

Phil Hardie

Maybe just changing gears just for a minute here as well, can you talk to the pipeline on the new issue front?

Lou Eccleston

It's an interesting one. The headline would be a lot of demand, but still subject to market conditions. I think that's the bottom line on it. We have a lot of conversations, a lot of people interested, but a lot of what does go public or not is going to depend on what happens in the markets. Volatility is good for trading, not necessarily a comfort level for companies who want to go public. So again, thankfully we have a diversified portfolio. So I can characterize that as a lot of interest, a lot of demand for capital, but still subject ultimately to what happens with volatility in the markets.

Phil Hardie

Any color you can share on the breadth of that demand across industry sectors or is there a concentration?

Lou Eccleston

I think the thing that we are very happy about is the amount of international and technology listings that have come our way. So when you look at that, I've talked in the past about really focused on expanding the capital community. And so when you look at that, it's interesting to see that I've mentioned those international listings; but a lot of those have been the technology listings. And I think more so than – you see more growth in technology than you have in other areas. I think, other than ETFs, the highest growth has been in technology.

So we've had, I think, 24 listings, 80 since 2014, I'm sorry. 20 of them are international in technology. So 80 since 2014 and 20 international for technology. So you're seeing the technology community start to list at a more rapid pace. And I think it's a function of the big pipeline of technology companies that you've got that have capital demand.

Operator

Your next question comes from the line of Paul Holden from CIBC.

Paul Holden

I want to talk a little about the borrowings of the company given that you're switching from permanent term funding to more commercial paper. And [indiscernible] because it's lower cost funding, but sometimes commercial paper comes with some liquidity consideration. So wondering how you're viewing any kind of liquidity constraints around commercial paper or what your total appetite for commercial paper might be and as you switch from that Series C debenture to commercial paper is the plan really because it gives you flexibility to pay that commercial paper down over time with excess free cash flow?

John McKenzie

Actually, Paul, I appreciate you just answered the question right there for me. It really is about driving not just the low cost of the execution, but the flexibility around the program. And you see we're not doing it with our entire debt portfolio. It's really with just that one tranche. And given the strong cash flow that the organization generates, this gives us the maximum ability to manage that position down over time.

You won't see this in the notes, but we are at a point now where if you exclude those strategic realignment expenses our leverage ratio is actually below 3 times now coming off this quarter. So we are starting to think about what does that mean for capital planning going forward and having that additional flexibility within the CP program is going to be quite helpful that way.

Paul Holden

So it's more about being able to pay down gradually maybe, I don't know if you want to say, consistently from quarter-to-quarter versus once every two or three years when a debenture comes up to maturity?

John McKenzie

Yes, that's exactly right.

Paul Holden

And then can you just remind us what your target would be again on the financial leverage?

John McKenzie

I mean, historically, we've taken the approach that we want to be within the peer group, which is generally in the 2 to 3 times range. So this is now the first quarter you're seeing that we're into that range. So it's going to add additional flexibility to us in terms of what we're doing with that capital in terms of reinvesting the business and looking at different ways to return it to shareholders.

Operator

There are no further questions. At this time, I’d turn the call back over to the presenters.

Lou Eccleston

Okay. Thanks. Just before we wrap up, I just want to correct or adjust one statement I made a little bit earlier when we were talking about AgriClear and analytics and those. Just to make sure I was clear on that, I talked about material revenue growth at end of 2016 going into 2017. Really, I meant for market insights, not necessarily material for the overall TMX. So just to make sure I had a clear statement on that for you.

Paul Malcolmson

Thanks, Lou, and thank you, everyone, for listening today. The contact information for me as well as for Investor Relations is in today's press release and we'd be happy to take further questions. Thanks again and have a great day.

Operator

This concludes today's conference call. You may now disconnect.

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