Ladies and gentlemen, thank you for standing by. Welcome to the Tel-Aviv Stock Exchange Q4 and full year 2021 results conference call. All participants are present in a listen-only mode. Following management's pre-presentation, instructions will be given for the question and answer session. For operator assistance during the conference, please press star zero. As a reminder, this conference is being recorded March 21, 2022. The recording will be publicly available on TASE's website. With us on the line today are Mr. Ittai Ben-Zeev, CEO, and Mr. Yehuda van der Walde, CFO. Before I turn the call over to Mr.
Ittai Ben-Zeev, 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 report for the fourth quarter of 2021, in which full and precise information is presented and may contain inter alia forward-looking statements in accordance with Section 32A of the Securities Law, 1968. In addition to the IFRS reporting, we might mention certain financial measures that do not conform to the generally accepted accounting principles. Such non-GAAP measures are not intended in any manner to serve as a 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 in the investor relations portion of our website at ir.tase.co.il/en. Mr. Ben-Zeev, would you like to begin?
Yeah, thank you. Good evening, Israel time, everyone, and thank you for joining us today. I'm happy to host you in our earnings call. 2021 has been a record-breaking year for TASE in all the main fundamentals. It was a turnaround year for the Israeli high-tech sector on TASE with a record number of new companies. Out of the 107 new companies that joined TASE this year, 72 were high-tech companies. The IPO market broke the record achieved in 1993 with 94 IPOs. This, according to WFE data, places TASE second in the world with a 28% rate of new companies. The growth in the number of new companies is also reflected in the market cap of the shares traded on TASE, which for the first time in its history broke the ILS 1 trillion ceiling.
We ended the year with 541 companies, the highest number in a decade. TASE flagship indices also reached new peaks. At the end of the year, the TA-35 index increased by 32%, and the TA-90 index increased by 33%, outperforming the leading global indices. The increase in the number of new companies also allowed us to launch new indices and sectors. In 2021, we launched three new equity indices: retail, cannabis, and dual listing, as well as four new bond indices. The influx of foreign investments into TASE in 2021 totaling to ILS 13 billion net in shares marked a 10-year record following net sales of ILS 4.8 billion and ILS 1.3 billion in 2020 and 2019 respectively.
TASE also became an important hub for foreign ETFs traded locally, and recently we welcomed international investment management firm Invesco, which listed 6 ETFs and is planning to list more in the near future. Invesco is joining the 2 international issuers, BlackRock and Lyxor, already listed on TASE, and we now have more than 30 foreign ETFs traded on TASE. One of the important moves that we are promoting is increasing investor diversity by reaching out to investors from the Eastern Hemisphere as well. For these purposes, this February, we sent out a delegation of executives from 25 Israeli-listed companies to the United Arab Emirates in a first collaboration with the Embassy of the UAE in Israel and with the Dubai Chamber of Commerce. Our goal was to expose the Israeli companies to investors and strategic partners in the UAE.
The meetings were fruitful and successful, and we will continue to develop this cooperation and strengthen the economic and business ties between the two countries. In 2021, we also continued to reach out to the Israeli public and increase its involvement in trading. In the past two years, we have witnessed a sharp growth in the number of new accounts, which reached 280,000. We expect this trend to continue in the coming years. We also enable the public to participate in continuous trading phase with small amounts of only ILS 500. In 2021, two new members joined us. The Phoenix Insurance Company joined us as a custodial member, transacting directly on TASE lending platform, and fintech company, Fair Financial Technologies, that will be operating a digital fintech platform for the distribution of mutual funds to the public in Israel.
This will increase the competition and make more services available to the public at better costs. Finally, we are working to promote ESG among the public companies. To support this important field, we are working with regulators to advance ESG practices and encourage the public companies to publish ESG reports. We, too, will be publishing TASE's first ESG report on March thirtieth. On the subject matter of the historic TASE shares held by the Israeli banks, I would like to point out that we are currently considering other possible venues in order to solve this issue. TASE will distribute a dividend of 50% of the yearly profit in an amount of ILS 22.7 million. This concludes the dividend distribution plan as approved in 2019.
I would also like to inform you that the board of directors instructed the management to formulate a buyback plan for the company's shares in an amount of up to ILS 100 million, and for a period of up to 2 years. We believe that this move will enable the investors and the shareholders to enjoy TASE future growth potential. In conclusion, the reports show that the most important foundations of TASE are growing and even breaking new records. We will continue to open up and make the capital market more accessible to the public. We will have more new companies listed on TASE and reflect the strength of the Israeli economy. We will enhance liquidity and open new doors for international investors into the local capital markets. We will innovate and expand the range of TASE products and services and upgrade its underlying infrastructure.
Now, I would like to hand over to Mr. van der Walde, who will continue with the review of the fourth quarter results.
Thank you, Ittai. Good evening, everyone, and thank you for joining us today. I am very pleased to participate in our earnings call. TASE's strong fourth quarter and full year results for 2021 indicate a continued positive momentum with record quarterly and yearly revenues. TASE profitability increased significantly throughout 2021, and particularly in the fourth quarter during which the adjusted net profit margin was 17% and the adjusted EBITDA margin was 34%. TASE's strong operating performance contributed to a record full year free cash flow of over ILS 61.6 million, an increase of nearly 30% compared to the previous year. I will begin with slide 4, which shows some of the key highlights from our results of the fourth quarter.
Our revenues for the fourth quarter of 2021 increased by 11% compared to the fourth quarter of 2020, and amounted to ILS 85.7 million. Adjusted EBITDA for the fourth quarter of 2021 totals ILS 29.5 million compared to ILS 25.9 million in the fourth quarter of 2020, an increase of 14%. Financing income in the fourth quarter of 2021 totals ILS 1.3 million compared to the financing income of ILS 1.2 million in the fourth quarter of 2020. The adjusted net profit amounted to ILS 14.2 million, an increase of 24% to the corresponding quarter last year. After going over the highlights of the financial results, let's take a deeper look at the composition of our revenues and expenses.
Let's go to slide five. Our revenues from trading and clearing commissions increased by 9% compared to the first quarter of 2020, and totaled ILS 36.6 million. The increase between the first quarter of 2021 and that of the year 2020 resulted from a higher trading volume in all asset classes. Mainly in shares, which contributed 12% and was partially offset by a decrease of 2%, resulting from a decrease in trading days. Our revenues from listing fees and annual levies increased by 14% compared to the first quarter of 2020, and totaled ILS 17.4 million. 7% of the increase resulted from revenue recognition in respect of the listing fees due to the increase in number of IPOs, and 4% of the increase resulted from annual levies.
Our revenues from the clearing house services increased by 17%, totaling ILS 17.6 million. 10% of the increase resulted from custodian fees. 6% of the increase resulted from existing services rendered by the clearing house members and listed companies. Our revenues from distribution of data and connectivity services increased by 5% compared to the corresponding quarter of 2020, and totaled ILS 13.5 million. The increase mainly resulted from data distribution to overseas customers. I will now discuss our expenses in the first quarter of 2021. Please go to slide 6. In the first quarter of 2021, our adjusted expenses totaled ILS 68.6 million compared to ILS 63.7 million in the corresponding quarter of the previous year, an increase of 8% year-over-year.
The expenses related to employee benefits increased by 13% and totaled ILS 37.7 million. The increase in the expenses mainly results from the annual salary update and a decrease in capitalization of software costs. Computer and communication expenses increased by 8% compared to the corresponding quarter of the previous year, and totaled ILS 7.4 million. The increase resulted mainly from operating costs of newly added computer system and a price increase in computer services. Marketing expenses increased by 42% compared to the corresponding quarter of the previous year, and totaled ILS 3.2 million. The increase is a result of timing of marketing campaign launches. The depreciation amortization expenses increased by 6% compared to the corresponding quarter of the previous year, and totaled ILS 12.2 million.
The increase in depreciation amortization expenses is due to the launch of central blockchain securities lending platform in the first quarter of 2020. I would now like to review our financial position highlights. Please go to slide 7. As of December 31, 2021, our equity totaled ILS 662 million, and comprises 74% of the balance sheet, excluding open derivative or position balances from our clearing house activity. In addition, we have approximately ILS 390 million in cash and investment in financial assets. We don't have any financial debt. We have ILS 165 million excess liquidity and ILS 113 million excess capital above our regulatory requirement. With that, I will turn the call back to our moderator to conduct the Q&A.
Thank you. Ladies and gentlemen, at this time, we'll begin the question and answer session. If you have a question, please press star one. If you wish to cancel your request, please press star two. If you are using speaker equipment, kindly lift the handset before pressing the numbers. Your questions will be pulled in the order they are received. Please stand by while we pull for your questions. I repeat, if you have a question, please press star one. The first question is from Daniel Fannon of Jefferies. Please go ahead.
Thanks. Good evening, gentlemen.
Hi, Dan.
I guess to start, I just wanted to clarify, I think what I heard from you, Ittai, is that with the agreement with the banks, that you are exploring other possible venues. I just wanna make sure I understand what that means and how you're potentially progressing and potentially other options.
Yeah, well, we don't have agreement with the banks, but as we discussed in previous calls, we have this issue with the historic shareholders that are capped at 508, but they are still keeping the shares. We tried last year some ways to motivate them to sell the shares because obviously it will benefit the liquidity, and it will generate cash that can be deployed for further investments. Lately, we were able to find another route that may or may not lead to a transaction. Because, you know, I'm frequently asked about this issue, I wanted to point out that it's now on the table again, and hopefully it will be successful. We can't. We don't know if it will be successful.
We just hope it will be successful.
Understood. One follow-up on that point. This has to be approved by the regulators in addition to, obviously, the shareholders agreeing to whatever terms you're setting forth?
The route that we were able to find, the regulator is fine with that route.
Okay.
Now the issue is the banks.
Got it. Okay, that's helpful.
Yeah.
Moving to the buyback of ILS 100 million up to 2 years, is this going to be preset? Should we think about it as kind of consistent over that time period or opportunistic, based upon, you know, what you see as value in the shares?
Well, we will have in these coming weeks a discussion in the board of directors that, you know, these questions and also obviously the price will be discussed. Then, obviously we will issue an immediate report with the specific details of the time and et cetera. It can be combination of the two. It still hasn't been decided, but it was important to the board and to the management to convey the message that up to ILS 100 million, we plan to do a buyback.
Understood. Just in terms of the outlook as we think about momentum in the business, clearly a lot of positive attributes in the quarter and on the revenue side. As you think about new listings, I assume you know things are slow here to start the year with the volatility, but as you think about a backlog or you know the conversations that are happening around the either dual listing or primary listing, can you update us on that?
Sure. Year to date, we already had 10 IPOs on the exchange. By the way, the average market cap of those IPOs is higher than the average market cap that we had in 2021. We still see dozens of companies that want to do IPO during 2022. You know, obviously the market is more selective, but we still see IPOs, and I think that we'll continue to see new IPOs in the exchange. I think that's a positive sign about the perception of private companies want to become public, and on the other hand, our investors are still want to participate in IPOs. We continue to speak with the dual listing companies that trade only in New York.
As we all know, most of them, if not all of them, saw a significant reduction in the market cap in the past few months. We believe that it just demonstrate the advantage of being traded on TASE. We continue to have dialogues, but as we discussed in previous calls, we believe that at some point it will happen, but the most difficult part is to bring the first large Israeli company to do so. Once the first one will do, I believe that it will be easier to bring the second and the third. I cannot estimate at the moment when it will happen.
Okay, that's helpful. As you look at the non-transactional revenue opportunity outside of new listings, as you think about 2022 and beyond, could you maybe stack rank the opportunity set and what you're most excited about incremental contribution in the coming periods?
Yeah. Well, we see plenty of opportunities across our non-transactional businesses. You know, whether if you look at our data, that we are continue to bring new products, new premium data products. We see more investors, more international investors and more retail investors. By definition, they expect more data, and they wanna get more analysis. We plan to issue a comprehensive tools that will give the retail in Israel a deeper understanding and analysis of what going on. We believe that if you look at things like transactions that are being carried out, not through the book, and some OTC, over-the-counter transactions and other elements that we can elaborate and expand what we can offer them.
I believe that the strong organic growth that we have shown in the past few years in all of the elements in the non-transactional will continue to demonstrate them in the coming years. We don't see one or two or three specific elements. We generally then see across the board a lot of interesting growing opportunities, and we are heavily focused on growing the business.
Okay. Shifting to the cost side, as we think about 2022 and the framework for expense growth, you have the agreement on compensation, but in terms of non-compensation expenses, is there any changes to kind of the budget or the profile of that growth rate for those expenses?
Hi, Dan. This is Yehuda. I will take that question.
When we are looking on the expenses side, in 2022 half of our employees are working on the computing environment. We have also other services that's connected to the high-tech companies. Those expenses or costs are increased higher than other costs in the upcoming years. There will be also increase in those costs of the computer and the communication expenses. It's also part of what we developed in the previous years, which is now a system that we are using.
The increase that you see between 2020 and 2021 will be a little bit higher than what you will see between 2021 and 2022. On the marketing expenses, as usual, we give the notice when we are doing a large campaign or that's in the TV and other media. During the first quarter, we had a new campaign, and we give the details in our press release, so you can see the expenses over there. For the whole year, for now, we don't see any changes in that area for the full year.
In the other expenses, it's more or less very similar to 2021.
Okay. If I think about the longer-term opportunity, some of the goals you guys have cited previously for double digit non-transactional revenue growth, and then a margin profile that is similar to some of the other global exchanges, is that framework still hold?
Yeah, absolutely.
There is two legs for that. One is that we have new ideas and new things to do that in the clearing house and data, and that we have more products and to launch during the next years. The other leg is that the pricing of the products and services that we are looking and checking and comparing what we need to change and how to do that.
There will be some modification along the time.
Okay. Just last one for me, just a smaller question on the other revenue, which I know has been suppressed due to COVID and some of the challenges associated with using the exchange for, you know, investor days at marketing events. Do we think that potentially could return, you know, in 2022?
Yeah. We launch like in other stock exchange a ceremony open ceremony there for the new companies and for anniversary.
We had it before, but now we are charging money for it.
Yeah. It's much more lucrative now, and this is nice revenue for the company and also our convention center start to work again. We also have other things like in the previous year that we're looking to give to other stock exchange to consult other stock exchange. We hope that it also will contribute to our revenue in this area.
We have done a lot of know-how in the exchange. As we discussed in previous calls, we have the ability to help and consult some SMEs exchanges in some of the knowledge and experience that we have here. This is also something that we will examine.
Understood. Thanks for taking all my questions.
Thank you very much, Dan.
The next question is from Alex Moreno. Please go ahead.
Hi. Thank you. Well, some of the questions were covered as you focused on the non-transactional future revenues. In terms of transactional revenues and new products, well, we've noticed that digital assets in general and blockchain are pretty much underdeveloped in Israel, being it a very tech-heavy country. Is there a regulatory restriction on this? If there isn't, is TASE planning to expand into this space as many exchanges in other countries are doing?
Yeah, well, this space, we think is very interesting, and we have our thoughts about it. With regard to regulation, it is not clear in Israel what is allowed and what is not allowed. There is a certain committee that is discussing those elements. Once the committee will publish the guidelines and basically what can be done, then it will be very easy for us to assess the potential and how we should pursue this opportunity. My short answer is that we are looking and waiting, you know, for the right publication of this committee to decide how to advance.
Will the committee publish these guidelines on its own, or is it in response to some questions either from the exchange or from other members of the investment community or general public?
In the past couple of years, you know, as you know, because we are the startup and the scale-up nation, and there are so many entrepreneurs in Israel, there were plenty of questions that were referring to the government and to the regulators. Because we all know that we have the ability in Israel to lead the world in those elements. But at the end of the day, the way this evolves in Israel, the regulatory framework is critical to get the understanding of what can be done and what cannot be done. Until it will be clearly published, then we'll be smarter.
Excellent. Again, going back to what you mentioned, that one of your focuses is, offering new data products. In general terms in data and connectivity, are you looking into, making investments in new systems or technologies, to improve your offering in this regard, as well as launching products? Among these investments, are you also considering, acquisitions just to broaden your, lineup?
Well, we believe, you know, given that, you know, data has become a line of business only when the company became a for-profit company a few years ago, we believe that we have plenty of things to do internally before we maximize the full potential of what can be done. Obviously, if we'll see interesting investments that we believe are lucrative and that will add to the business, we will consider that. The same applies for M&A. We see strong organic growth ahead of us, so it's not like we need M&A to boost growth. By definition, if there will be interesting opportunities, we will look into them.
Excellent. Thank you very much.
Thank you.
That's it on my end.
Thank you.
There are no further questions at this time. Thank you. This concludes the Tel-Aviv Stock Exchange Q4 and full year 2021 results conference call. Thank you for your participation. You may go ahead and disconnect.