TMX Group Management Discusses Q2 2012 Results - Earnings Call Transcript

Jul.27.12 | About: Tmx Group (TMXGF)

TMX Group (OTC:TMXGF) Q2 2012 Earnings Call July 27, 2012 8:00 AM ET

Executives

Paul Malcolmson - Director of Investor and Government Relations

Thomas A. Kloet - Chief Executive Officer, President, Director, Ex-Officio Member of Finance & Audit Committee, Ex-Officio Member of Public Venture Market Committee, Ex-Officio Member of Governance Committee and Ex-Officio Member of Human Resources Committee

Michael S. Ptasznik - Group Head Chief Financial Officer, Senior Vice President and Chairman of Treasury Committee

Analysts

John Reucassel - BMO Capital Markets Canada

Jeff Fenwick - Cormark Securities Inc., Research Division

Geoffrey Kwan - RBC Capital Markets, LLC, Research Division

Operator

Good morning. My name is Tracy, and I will be your conference operator today. At this time, I would like to welcome everyone to the Second Quarter 2012 Analyst Conference Call for TMX Group. [Operator Instructions]

Thank you, and I'll now introduce and turn the call over to Mr. Paul Malcolmson. You may begin your conference, sir.

Paul Malcolmson

Thank you, Tracy, and good morning. Thank you, everyone, for joining us today for the second quarter 2012 conference call for TMX Group. As you know, we announced our second quarter results this morning. A copy of the press release is available on our website, tmx.com, under Investor Relations.

Today, we have with us Tom Kloet, our Chief Executive Officer; and Michael Ptasznik, our Chief Financial Officer. Following opening remarks from Tom and Michael, we'll 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 I would refer you to the risk factors that are contained in today's press release and reports filed by TMX Group with regulatory authorities. Now I'd like to turn the call over to Tom.

Thomas A. Kloet

Thank you, Paul, and good morning, everyone. Thank you for joining our conference call to discuss TMX Group's second quarter earnings. Like the first quarter of 2012, we continue to operate our business against the backdrop of continued global economic and financial instability. These macroeconomic conditions have impacted the cash markets portions of our business. And our experience parallels most of our peers in this business. However, our diversification strategy, which now has its operating markets and services in multiple asset classes, somewhat offset these cash markets declines. On balance, our portfolio of assets continue to perform well under these conditions, and our prospects for future growth remain strong once the global economic stabilizes and turns more fully towards growth.

There were a number of significant one-time items this quarter. While I'm going to leave it to Michael to walk you through them in detail, I did want to comment briefly on some of them before I discuss our second quarter operational performance and provide an update on the Maple offer.

During the second quarter, we incurred $54.4 million of costs related to the Maple transaction and the proposed merger with the London Stock Exchange Group. Now these charges include a $29 million fee to LSEG and $23.4 million of success fees paid to our financial advisors, both payable when Maple takes up the shares. Put simply, these are the costs associated with successfully reaching the finish line with Maple, which we expect to do on July 31.

The Maple transaction delivers value to shareholders while positioning TMX Group for future growth. The second onetime item relates to NGX's acquisition of net throughput in 2009 to enter the physical crude oil space. Now as you may recall, TMX Group acquired a call option to acquire NTP in 2007. And under the terms of that agreement, the former shareholders of NTP have the ability to put their shares to us. As required under IFRS, we have performed an impairment test on NTP's intangible assets at the end of the second quarter. And it was determined that previously forecasted revenue would not be achieved. As a result, we recorded a non-cash impairment charge of $44.6 million.

The main factors contributing to the impairment was a limited acceptance of NGX's clearing services in crude oil space, worsened by a weak demand in the United States and Canada. We are disappointed with the results, but we have mitigated the overall impact to TMX Group by virtue of the success of our Shorcan Energy trading business, which is provide the voice brokerage facilitation that the market prefers at this time. We will continue to work to regain NGX's crude oil market share and increase trading and clearing activity.

On the positive side, as a result of the continued growth in BOX volumes and its success in the U.S. options market, we record a reversal of an impairment charge recorded when we converted to IFRS. Therefore, we recorded a gain of $13.4 million related to this reversal.

Turning now to TMX Group's second quarter operational performance, as I noted earlier, our operating statistics in Q2 2012 continue to reflect the impact of global economic uncertainty. It has been a difficult market, to be sure.

At the end of the second quarter of 2012, the S&P/TSX Composite Index was down 13% compared to the end of the second quarter of 2011. The S&P/TSX Venture Composite was down 37%. While the Canadian economy and our company are both fundamentally very strong, it is clear that the global situation is having an impact on both investor and public company confidence. Total equity capital raised on Toronto Stock Exchange and TSX Venture Exchange during the second quarter was approximately $11 billion.

This represents a decrease of 28% compared to the second quarter of 2011. Financing on Toronto Stock Exchange was down 16% compared to the second quarter of 2011, and total financing on TSX Venture Exchange was off 66%, indicating that the economic environment has continued to have a more acute impact on junior companies seeking growth capital.

The number of financing transactions, which is an important determinant of our revenue, continued to be behind 2011 levels. On a year-to-date basis, financings were 13% lower on Toronto Stock Exchange and 29% lower on TSX Venture Exchange. On a year-to-date basis, the number of graduations from TSX Venture Exchange to Toronto Stock Exchange is on par with 2011-ish levels, which is positive given the overall business environment. Trading volumes on Toronto Stock Exchange during the second quarter of 2012 were down approximately 17%, both compared to the previous quarter and compared to the second quarter of 2011.

Trading volumes on TSX Venture Exchange were down more significantly. Volumes in the second quarter were 41% behind the second quarter of last year and 33% behind the first quarter of this year.

Again, it is important to note that the decline in equity trading volumes during Q2 was not unique to our markets.

It is a global trend. For example, NYSE Euronext U.S. cash equity trading was off 18% for the first 6 months of 2012 compared to 2011. And both Deutsche Börse and LSE were off approximately 22%.

It is also important to note that the TMX Group's Canadian equity trading market share remains steady.

In fact, at 69%, it is up 2% during the first 6 months of 2012 compared to the first 6 months of 2011.

Accounting for some of the increase is TMX Select, our alternative trading system. It celebrated its first anniversary earlier this month. On the put side, the macroeconomic environment, coupled with our ongoing business development efforts, continued to help drive volumes on Montréal Exchange. Compared to the second quarter of 2011, trading volume at MX was up 10% in the second quarter of 2012 and open interest was up 6%. Volume was up 9% and open interest was down 6% compared to the prior quarter. MX again set a number of trading records during this past quarter.

BOX volumes were up 55% compared to the second quarter of 2011, and up 6% compared to the first quarter of 2012.

We are pleased with the traction that BOX has gained over the last several quarters.

NGX trading and clearing volume was up 8% compared to Q2 2011, but down 5% compared to the first quarter of 2012. In terms of our business initiatives during the quarter, NGX added a new clearing hub in the U.S., bringing its total to 44.

BOX received Securities and Exchange Commission approval of its application for registration as a national securities exchange, and began operation May 14, 2012, as its own self-regulatory organization. And in April, CDCC's Canadian Derivatives Clearing Service was designated by the Bank of Canada as being subject to Bank of Canada oversight under the Payment, Clearing and Settlements Act. These are important developments for CDCC and for the rest of the company.

You may have noted that our business development teams were very active around the world during the second quarter. Our road shows and events were designed to raise awareness of the Canadian capital markets, as well as our listing, trading, data and connectivity products.

We are very mindful of the need to carefully manage our costs during this challenging operating environment. However, we believe that these business development activities are very important elements of our long-term strategy. We understand that it is important to continue to sell hard when the market is slower, so that we're well positioned for the future when the economic environment becomes more favorable.

I'll now turn it over to the -- I'll now turn -- I'll turn now to the Maple offer and how we expect the closing to proceed.

As you know, provincial securities regulators approved final recognition orders with respect to Maple's acquisition of TMX Group, CDS and Alpha. In addition, the Competition Bureau granted clearance for these acquisitions to occur. The last remaining hurdle is for 70% of shareholders to tender their TMX Group shares. It is important for shareholders to deposit their shares prior to 5:00 p.m. on July 31. If the minimum 70% of shares is tendered and the conditions to the offer have been satisfied at the July 31 expiry time, Maple expects to be in a position to take up of TMX Group shares deposited under the offer on July 31.

To be very clear, if the 70% condition is not satisfied at July 31, the offer would expire and there would be no opportunity to deposit TMX shares during the deposit extension period. On July 31, if the above conditions are met, a new Board of Directors will be appointed for Maple and TMX Group. The new Maple Board of Directors will appoint the executive teams of TMX as executives of Maple, and I will be named CEO of Maple. As noted previously, Maple will be renamed TMX Group Limited. TMX Group Inc. will be a subsidiary of TMX Group Limited. Assuming Maple takes up TMX shares under its offer on July 31, Maple expects to complete the acquisition of Alpha and CDS on August 1. As noted in the press release issued this morning, internal teams are already working on the integration and synergy plan with leaders of both CDS and Alpha. We are targeting to achieve annual cost synergies of approximately $20 million on a run-rate basis beginning in the first quarter of 2014.

Our preliminary estimate of the one-time cost to achieve these synergies is $24 million. Both the estimate and the targeted synergies will be further refined as we complete our integration plan. These synergies, which are expected to come from consolidating existing operations and realization of efficiency and overlapping functions, are important, and we will work diligently to achieve them. However, while important, this transaction is not simply about achieving synergies. It is about creating and seizing opportunities. It's about taking an even stronger company with a greater suite of products and services, and enhancing our competitive position as a global player. I am very excited about the future prospects for the new TMX Group, and look forward to the next chapter, which we expect to begin in just a few days. I will now turn it over to Michael to review TMX Group's second quarter financial performance. We will then be happy to answer your questions. Thank you. Michael?

Michael S. Ptasznik

Thank you, Tom, and good morning, everyone. The global economic challenges of the first half of 2012 had a negative impact on some of the key drivers in our traditional core cash market's listing and trading business. The decline in new listings and lower equity trading volumes led to lower revenues in Q2 and in the first 6 months of 2012 versus the same periods in 2011.

However, these reductions have been partially offset this quarter by increases in derivatives, energy and import services. Revenue for the quarter -- second quarter of 2012 was $167.5 million, down 1% from $169.3 million for Q2 '11, reflecting lower revenue from Issuer Services and cash markets trading, partially offset by the increased revenue of derivatives market's trading, clearing, technology services and other revenue. This includes revenue from Razor Risk, which was consolidated into our results from February 14, 2012, and info services, which includes revenue from TMX Atrium acquired in July of last year.

Net income attributable to TMX Group shareholders was $1.8 million or $0.02 in Q2 '12, down from $54.7 million or $0.73 per common share on a diluted basis for Q2 '11, mostly as a result of some of the onetime items that Tom spoke of a few minutes ago, including the $54.4 million pretax of Maple and LSEG costs; and net impairment charges of $31.2 million, including the $44.6 million pretax non-cash write-down related to the intangible assets of NTP. These are partially offset by a $13.4 million non-cash reversal of an impairment loss on intangible asset related to BOX, of which $7.2 million is attributable to TMX Group shareholders. The decreases in net income were offset by a $32.2 million decrease in income tax expense, primarily due to our significantly reduced net income and the impact from the recognition of deferred income tax assets, along with the income tax recovery related to BOX.

Excluding these items, adjusted diluted earnings per share was $0.81 per common share, 14% lower than adjusted earnings per share of $0.94 per common share on a basic and diluted basis for Q2 '11. Issuer Services revenue in Q2 '11 was down 19%. This was driven by initial listing fees, which were down 48% primarily due to a decrease in the number and value of new listings on Toronto Stock Exchange. Additional listing fees in Q2 '12 decreased 19% primarily due to a decrease in the number and value of additional financings of TSX Venture Exchange and Toronto Stock Exchange. And the decrease of 7% in annual sustaining listing fees was due to the overall lower market capitalization of listed issuers on both of our exchanges at the end of 2011 compared with the end of 2010, and also due to a reduction on certain fees effective January 1, 2012.

Turning now to our trading, clearing and related line. Cash markets equity trading revenue decreased 16%, primarily due to the volume declines on TSX Venture and Toronto Stock Exchange that Tom touched on earlier. The decrease in overall cash markets trading revenue was also as a result of changes to our fees on Toronto Stock Exchange effective October 1, 2011, and a decrease in our Shorcan fixed income electronic trading fees. Moving to our derivatives market, as Tom mentioned, MX and BOX once again delivered strong results in the second quarter. Revenue was up 22% in derivatives trading and clearing, reflecting higher revenues from BOX primarily due to higher volumes, and also increased trading and clearing revenue from MX and CDCC. The increase in revenue was partially offset by the impact of price changes since Q2 2011. Revenues from energy markets trading and clearing was up 5%, reflecting an 8% increase in the total energy volume traded on NGX.

Information services revenue was $43.8 million, an 8% increase compared with Q2 '11, primarily due to the inclusion and growth in revenue from TMX Atrium, which was acquired on July 29, 2011, and higher revenues from co-lo services, data fees, index licensing and PC-Bonds. Technology services and other revenue increased primarily due to the receipt of a one-time termination fee, recovery of disposal and severance costs and recognition of previously deferred revenue from IROC of approximately $5 million.

Offsetting the increased revenue was a loss of revenue from IROC following the termination of our contract to provide services effective March 31, 2012, which amounts to approximately $6.7 million on an annual basis.

Overall operating expenses in Q2 '12 were $82.3 million, up 15% from $71.5 million in Q2 '11, primarily due to the inclusion of approximately $6 million for expenses related to TMX Atrium, Razor Risk and ir2020. There were also $2.8 million in higher costs due to the impact of the share price depreciation on our long-term employee incentive plan.

For the 6 months ended June 30, 2012, revenue was $329.8 million, down 4% from the same period last year, reflecting lower revenues in Issuer Services and cash markets trading, partially offset by increased revenue from derivatives markets trading and clearing, information services, including TMX Atrium, and technology services and other, including Razor Risk. Due to the impact of onetime items, net income attributable to TMX Group shareholders was $58.6 million or $0.78 per common share on a diluted basis for the first half of 2012, a decrease of 50% compared with net income attributable to TMX Group shareholders of $117.8 million or $1.57 per share on a diluted basis for the first half of 2011.

On an adjusted basis, the EPS was $1.57 per common share or $1.56 on a diluted basis, was 18% lower than adjusted earnings per share of $1.92 per common share, $1.91 on a diluted basis for the first 6 months of 2011. The decrease in adjusted EPS was due essentially to the same drivers that I outlined for the quarter. Looking now at our sequential performance, revenue in Q2 '12 increased $5.2 million or 3% compared with Q1 '12. This was due to higher derivatives markets trading and clearing revenue, as well as higher technology services and other revenue, including the revenue from Razor Risk and the termination of our agreement with IROC. We also had increased revenue from Issuer Services and Info Services in Q2 '12 versus Q1 of '12. The increases were largely offset by lower cash markets trading revenue. Net income attributable to TMX Group shareholders for Q2 '12 decreased from Q1 '12 primarily due to higher Maple-related costs and the net impairment charges in Q2.

Cash and marketable securities totaled $521 million at June 30, 2012, an increase of $30 million from December 31, 2011. We generated $126 million in cash flow from operations from the first 6 months of 2012, a decrease of $53.5 million from the first 6 months of 2011, primarily due to a significantly reduced lower income before income taxes. We paid approximately $50 million in dividends in the first half of the year. And finally, yesterday, the board declared a quarterly dividend of $0.40 per common share to be paid on August 23 to shareholders of record on August 9, 2012. This dividend will be payable to shareholders who tender their shares. With that, I will turn the call back to Paul for the question-and-answer session.

Thomas A. Kloet

Thanks, Michael. Tracy, could you please outline the process for the question-and-answer session?

Question-and-Answer Session

Operator

[Operator Instructions] Your first question comes from the line of John Reucassel with BMO Capital Markets.

John Reucassel - BMO Capital Markets Canada

Tom, you said there wasn't -- there was limited acceptance of NGX clearing services. Could you help just explain that a little bit? That's in the U.S. hubs or the Canadian hubs? Or what -- just trying to...

Thomas A. Kloet

Well, John, I think I heard the question. And I may have missed the beginning of it, but I think it related to the NTP comments?

John Reucassel - BMO Capital Markets Canada

Yes.

Thomas A. Kloet

Yes. It's across the board. In the -- but in the limited -- my comments were limited to crude oil space. Importantly, since the acquisition of NTP, the market has, for the most part, preferred a bilateral clearing operation with the voice broker, OTC voice broker trade execution. That's why I balanced the comments on the NTP right down to the success we've had in developing Shorcan's voice broker trading operation.

John Reucassel - BMO Capital Markets Canada

Okay, okay. I'll come back on that. And just on the REPO interest, just trying to understand, is 4,800 contracts cleared in the quarter, is that good? Or is that bad? I'm just trying to size that in the contribution to revenue material.

Thomas A. Kloet

Well, it's certainly still in the development phase. I would not say that the contribution's material. It's slightly behind our initial projections, although relatively close. The one thing that is -- that perhaps is apparent to us in the REPO market, and it's -- a lot of it's based on current conditions, is the average tenor of a trade is a bit shorter than maybe it was 2 years ago. A lot of that's due to the current interest rate environment. And our pricing depends -- is conditional both on the size of the trade cleared, as well as the period. So in different economic conditions, that market's going to behave differently. We don't see any significant change. And when I say slightly behind, ever slightly behind our initial forecast.

John Reucassel - BMO Capital Markets Canada

Okay. And then I'll ask one last question then maybe I'll re-queue. Just could you comment on the higher-frequency trading kind of volumes experienced this quarter, and the differences that you see on TSX -- TFC versus Alpha? And what does that mean going forward, if anything?

Thomas A. Kloet

Well, I don't have much visibility into it at Alpha, frankly, so I can't actually make that comparison. But it is a reality that across the board, and I think my comment would be the same one that virtually any major stock exchange CEO would give you, that high-frequency trading is down. A lot of that has to do with the volatility in the marketplace, the relatively low volatility in the marketplace. A VIX number -- VIX index number of below 25 is going to present fewer opportunities for those high-frequency traders that try to -- that behave a bit more like traditional market makers than a market with a VIX that's above, say, 20 or 25. And we've experienced a quarter here where there was relatively low volatility in the equities market.

John Reucassel - BMO Capital Markets Canada

Okay. So, Tom, would it be 10% of your volumes this quarter?

Thomas A. Kloet

I would say probably...

Michael S. Ptasznik

Closer to 15 to 20.

Thomas A. Kloet

Yes, probably closer to 15 to 20. So it's down. But I mean, remember, the denominator's going down, too, John. So when you do the math, it is slightly less of the market is HFT. But we have a -- as I noted in my earlier comments, significant lower overall volumes.

Operator

Your next question comes from the line of Jeff Fenwick with Cormark Securities.

Jeff Fenwick - Cormark Securities Inc., Research Division

Tom, I just wanted to ask you a question also on trading. I noticed in the final change documents that there was some commentary that you were going to have to submit all of the fee structure to the OSC for all your different marketplaces for review. And I'm just trying to get my head around what the potential change to your fee structures could be here. I mean it seems to be focused on are the structures giving preference to any particular type or set of participants in the marketplace. And I know historically, that has been part of how these structures are working to try and attract different types of players in the different markets. So is there any way you can kind of frame what the potential impact could be there on that side of your business?

Thomas A. Kloet

Well, no, I can't actually because it's a bit of a new process for us. But in the recognition orders, obviously, we have a regime where our pricing in trading will be subject to reviews. And to -- it's my view that to establish a baseline, the regulators want us to submit the current pricing on all of our trading products for review. But it would be very speculative of me to try to suggest that I know what the outcome of that review will be. I mean, I think our fees remain competitive, have been competitive. And if you look at what's happened in the marketplace, trading fees have been reasonably stable over the last prolonged period. So I think we remain with very competitive fees and I'm optimistic that the outcome of that review will be -- will allow us to continue to run the business the way we do. I mean, I don't see that as a major risk. But it is safe to say it's something we're subject to and will be subject to as we go on with future changes.

Jeff Fenwick - Cormark Securities Inc., Research Division

Okay. It's just difficult to understand, and I assume it's focused on fees within the market rather than across different markets because clearly, you run separate markets that are targeted at different types of trading activity. So I'm wondering how that might shift the way the business operates, I guess, longer...

Thomas A. Kloet

Yes, I have no indication that there's a shift coming as a result of that. And you make an important point, we do have different fees in different elements of our business, and targeted -- the target of the fee structure of Select, for instance, is different than TSX fee targets. So if that's the point you're making, I think that my expectation would be that would be something that would continue in the marketplace.

Jeff Fenwick - Cormark Securities Inc., Research Division

And then maybe we can move on to business development or corporate development activities. I mean, some speculation in the media that you've been active and continuing to look at business opportunities. So just confirm, are you continuing to look out there, you're looking outside of Canada as well as within? Or what's the status of that as you've been busy with the Maple transaction as well?

Thomas A. Kloet

Well, yes. While we've been involved in the Maple transaction, we have continued our view that we look for growth opportunities both within Canada and outside Canada. The acquisitions of both Razor Risk and Atrium, while we've been in this process, is indicative of the fact that we've not stood still. And we, as noted in the notice to change, we remain exploring a number of opportunities. I can't comment on any specific ones, but we continue to look at those.

Jeff Fenwick - Cormark Securities Inc., Research Division

And might it be easier to look for transactions outside of Canada? You might still be able to sort of sidestep some of that local regulatory scrutiny in terms of market structure if you were, say, to look elsewhere?

Thomas A. Kloet

No. I don't -- we're going to look where -- the focus of our view remains consistent with what it's been in the past. If we see opportunities that meet a strategic need of the organization and that will be EPS accretive, we're going to pursue them. Now I'll tell you that as we bring CDS into the group, I think as I indicated, we're extending our suite of products and services. And I think there'll be additional opportunities that come as a result of entering into the equities clearing and depository space that I think are interesting as well. So there's a whole suite of opportunities out there for us and we'll carefully pursue them, but with the same overall framework that needs to suit a strategic need for the organization and be EPS accretive.

Operator

[Operator Instructions] Your next question comes from the line of Geoff Kwan.

Geoffrey Kwan - RBC Capital Markets, LLC, Research Division

I know that you mentioned that you're still kind of in the early stages of looking at synergies and onetime cost. But on the synergy side, can you talk about maybe where some of the bigger buckets that you see, where some of these cost savings might be? And in terms of realizing on those synergies, is it potentially lumpy in where you may get some initial synergy realizations early and then less later, or essentially, how we might want to think about it?

Thomas A. Kloet

Yes, Geoff, the synergies are going to be basically phased in over the period. And as you said, we're still in preliminary stages of going through our -- looking at the synergies and the planning. But they'll be -- it'll be in a number of phases over the period of the, roughly, the 18 months or so that we plan to be able to achieve those. With respect to the buckets, it'll typically follow our expense buckets. So obviously, they'll be looking for synergies on the compensation and benefits side by bringing together some of our businesses and where we have overlapping functions, we'll be looking for savings on the technology side as we're trying to consolidate the technology on some of the platforms. And then obviously, on the G&A, we'll be looking for synergies there. So they'll follow roughly along the typical breakdown of our expense base.

Geoffrey Kwan - RBC Capital Markets, LLC, Research Division

Okay. And the next question I have is just post the transactions with CDS and Alpha. Are you able to talk about how you look at -- in terms of on one hand, looking at the dividend and potential growth in the dividend versus dealing with the leverage issue and deleveraging of the business from a financial perspective? And then in terms of the focus of how much effort is needed to kind of integrate the businesses, and the ability to go out and pursue additional acquisitions and presumably integrate those?

Thomas A. Kloet

Well, with respect to the dividend, we have -- the dividend policy of the organization obviously has to be looked at by the new board. The current dividend policy is one where we talk about growing the dividend over time as earnings and cash flow grow. But as you said, obviously, that's going to be a significant amount of debt on the books, and our definite focus is paying down that debt and reducing that amount over time. We're reducing the amount of leverage, which if you go back to Maple's original discussions, that was the idea, was that this organization, thankfully, has significant cash flow and is able to be able to reduce the amount of leverage that's being put on to make the acquisition. So over time, we do intend on reducing the debt. And then if there is opportunity to increase the dividend beyond that, then that is something, obviously, the board will have to consider in the future. With respect to the second part of your question, Geoff, I think at the heart of it, you're asking, do we have the bandwidth to do both. Is that essentially what you're saying? Do we have a bandwidth to both complete this integration and look at new opportunities?

Geoffrey Kwan - RBC Capital Markets, LLC, Research Division

Yes, I think that's a fair way to look at it. And I guess, maybe specifically on the integration, I mean how much work do you think it's going to be? Is it something that can be done reasonably quickly? Or is there a decent amount of kind of legwork that needs to get done?

Thomas A. Kloet

Yes, there's a decent amount of legwork that needs to get done. This is a -- this is what I would call an atypical transaction in some ways, in that we haven't had the kind of visibility into both organizations that you would normally have before you acquire them. And I think everybody understands the history of that and why. But -- so it's a bit atypical in that respect. So my guess is there is going to be an amount of legwork required for that. At the same time, I think we have a very talented team of executives in the group and we're inheriting some talented people as well. So I think we can spread out that work and still look at acquisitions. And any kind of material thing we would do would take -- would have a gestation period to it as well, right, while we get a chance to get our legs and arms around the integration process. So I'm confident we can do both, but certainly, that will be a factor that we will consider before we would even propose anything to our board or consider it further. I mean, we do have to consider that and I think it's a fair question, but we don't have the full visibility because, one, we haven't actually seen all of the entities we're acquiring and we don't exactly know who those targets are going to be either, so.

Geoffrey Kwan - RBC Capital Markets, LLC, Research Division

Okay. And the last question I had is when I take a look at the equity market data subscriber line, that has, I believe, been coming down quarter-over-quarter over the past 4 quarters. And I'm just trying to get a sense on how much of that is, for example, just some of the job losses we've seen in the industry. And then I know that there's a component, too, where if a certain person kind of clicks through and quotes enough time they get converted to a full-time subscriber. So just trying to get some color on that. And then I know that there tends to be the delay between if someone does lose their job and when the market data revenue line does feel a bit of a hit. How to kind of think about it maybe going forward?

Thomas A. Kloet

Yes, I think largely, Geoff, what we're seeing consistent with what other universal exchange groups are seeing is that as employment in the industry gets reduced a bit, that there's a result in -- resulting impact on the subscriber base. And I think that's largely what we're seeing. There is the other effect, which is that as trading volumes go down, there's less reason for people to click onto a -- to the quotes. And that does result in a -- as you've described, result in a reduction of the number of subscribers. I don't have in front of me the mix of those 2, and I'm not -- I don't have those numbers, but I think the larger end of it is probably the latter.

Operator

At this time, there are no further questions in queue. I turn the call back over to the presenters for any closing remarks.

Thomas A. Kloet

So I just want to make sure, I mentioned something earlier on the synergies, on the earlier question. And when I talked about combining the technology onto one platform, what I was just trying to make sure that we're clear, we still haven't finalized any of the plans with respect to the technology web. But over time, obviously, we're going to want to consolidate hardware. We want to consolidate the data centers and other things like that. So there's -- I don't want have people misunderstand that, that the -- from a technology standpoint, there are still lots of planning to do as to which way we're going to bring in the -- it together. But there are lots of savings that can be had by bringing networks and data centers together as well.

Paul Malcolmson

Good. Well, thank you, everyone, very much for listening today. The contact information for media, as well as for Investor Relations, is in today's press release. And we would be happy to take further questions. Once again, thank you, and have a good day.

Operator

Ladies and gentlemen, this concludes today's conference call. You may now disconnect.

Copyright policy: All transcripts on this site are the copyright of Seeking Alpha. However, we view them as an important resource for bloggers and journalists, and are excited to contribute to the democratization of financial information on the Internet. (Until now investors have had to pay thousands of dollars in subscription fees for transcripts.) So our reproduction policy is as follows: You may quote up to 400 words of any transcript on the condition that you attribute the transcript to Seeking Alpha and either link to the original transcript or to www.SeekingAlpha.com. All other use is prohibited.

THE INFORMATION CONTAINED HERE IS A TEXTUAL REPRESENTATION OF THE APPLICABLE COMPANY'S CONFERENCE CALL, CONFERENCE PRESENTATION OR OTHER AUDIO PRESENTATION, AND WHILE EFFORTS ARE MADE TO PROVIDE AN ACCURATE TRANSCRIPTION, THERE MAY BE MATERIAL ERRORS, OMISSIONS, OR INACCURACIES IN THE REPORTING OF THE SUBSTANCE OF THE AUDIO PRESENTATIONS. IN NO WAY DOES SEEKING ALPHA ASSUME ANY RESPONSIBILITY FOR ANY INVESTMENT OR OTHER DECISIONS MADE BASED UPON THE INFORMATION PROVIDED ON THIS WEB SITE OR IN ANY TRANSCRIPT. USERS ARE ADVISED TO REVIEW THE APPLICABLE COMPANY'S AUDIO PRESENTATION ITSELF AND THE APPLICABLE COMPANY'S SEC FILINGS BEFORE MAKING ANY INVESTMENT OR OTHER DECISIONS.

If you have any additional questions about our online transcripts, please contact us at: transcripts@seekingalpha.com. Thank you!