Ladies and gentlemen, thank you for standing by. Welcome to the Tel Aviv Stock Exchange Q4 2023 Results Conference Call. All participants are at present in listen-only mode. Following management's formal 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 sixth, twenty twenty-four. The recording will be publicly available on TASE's website. With us on the line today are Mr. Itai Ben-Zeev, CEO, and Mr. Yehuda Ben-Ezra, CFO.
Before I turn the call over to Mr. Itai 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 and full year of 2023, in which full and precise information is presented and may contain, inter alia, forward-looking statements in accordance to Section 32A, 2, Securities Law 1968.
In addition to IFRS reporting, we might mention certain financial measures that do not conform to generally accepted accounting principles. Such non-GAAP measures are not intended in any manner to serve as substitute for our financial results. However, we believe that they provide additional insight for better understanding of our business performance.
Reconciliations between these non-GAAP measures and the most comparable related GAAP measures are included in tables that can be found in our earnings press release and in the slide presentation accompanying this call. Both can be accessed on the English MAYA site and in the investor relations portion of our website at ir.tase.co.il/en. Mr. Ben-Zeev, would you like to begin?
Good evening, Israel Time, everyone, and thank you for joining us today. I'm happy to host you in our earnings call. I'm pleased to report record results for Q4 and full year 2023, with continued organic growth despite the headwinds that we encountered in Israel this year, against the backdrop of the government-proposed judicial reform and the war that broke out on October seventh. For the full year 2023, we achieved revenue growth of 8% year-over-year, or 9% after excluding a one-time effect included in 2022. Adjusted EBITDA increased 17% from 2022, and adjusted net profit soared by 74% year-over-year. Our adjusted EBITDA margin reached 40%. Yehuda Ben-Ezra, our CFO, will discuss the financial statements in detail later. Trading on TASE was volatile as a result of the geopolitical challenges faced by Israel in 2023.
Overall, TASE leading equity indices underperformed their international counterparts. IPOs came to a virtual halt, while capital raised by listed companies declined compared to the previous year. At the same time, debt issuance intensified, with the Israeli Ministry of Finance raising ILS 87 billion on TASE, more than double the ILS 40 billion raised in 2022, which is not including the issuance in the global market. Corporate debt issuances were also strong, with ILS 100 billion raised through corporate bonds and ILS 416 billion raised through T-Bills. Contributing factor to the overall increase was the reform in Israeli government earmarked bonds.
The significantly higher amounts raised by the Ministry of Finance this year were used to finance the operating deficit of ILS 77.5 billion, or 4.2% of the GDP, as well as to cover wartime expenditure that had reached ILS 25 billion by year-end. According to the Bank of Israel's estimates, the direct cost of the war are expected to hit ILS 215 billion by the end of 2025, which would require the government to issue substantial amounts of debt in 2024 and 2025 as well. The strong demand for Israeli government bonds, both locally and internationally, is a vote of confidence in the Israeli economy. Trading volumes in equities averaged ILS 2 billion a day, 13% lower than in 2022.
Israeli institutional investors increased their exposure to the Israeli capital market in 2023, even during the war. In contrast, the Israeli public reacted by reducing their investments in local indices and invested instead in international indices, with a material portion of their purchases being executed through international ETFs traded on TASE. Trading volumes in government bonds averaged ILS 2.9 billion, 20% higher than the average daily trading volume in 2022, and T-Bills volumes reached a daily average of ILS 1.4 billion, 78% higher than in 2022. In line with our strategic plan, we continued building up our core business in 2023. Internationally, we delivered organic growth in the demand for our market data products, most notably our connectivity services.
In this context, we are set to open a POP in Frankfurt in the next few weeks, similar to our London POP, for easier direct international access to trading on TASE and to market data. The foreign ETFs traded on TASE also enjoyed increased activity as local investors chose to purchase international indices through TASE. We intend to continue exposing new global traders to the Israeli capital market, and to attract international brokers to become TASE members, to operate alongside the three new local members that joined TASE in 2023. The reform in the bond market is also underway. In December, we reduced the minimum order size for government bonds, corporate bonds, and T-Bills. This is on the heels of a similar move for cash equities in the previous year.
We also reduced the minimum order size for CoCo Bonds, and we can already see that the average daily trading volume has increased threefold compared to the 90 days prior to the change. In the derivative market, we launched an additional weekly series of options on the TA-35 Index that expires on Tuesdays, in addition to the Thursday expiration series, which has significantly boosted the opening auction of shares on the expiration days. At the beginning of March 2024, we launched an additional weekly series that expires on Sundays, thereby assisting with the hedging of the weekend risk. We are also seeing growth in revenues from institutional investors' activity in options on single shares. In 2023, we also launched a digital system for real-time reporting of OTC transactions, giving investors access to readily available information on transactions executed off the order books.
I'm also pleased to inform you that our dedicated private market system, which is used, among other purposes, for the operation and clearing of mutual hedge funds, has been activated, and most TASE members have already subscribed to it. To date, 22 mutual hedge funds with AUM of ILS 210 million have already registered with the clearing house. Regarding digital assets, we have recently launched a dedicated pilot of crypto custody services for entities that have been authorized to act for their clients in cryptocurrencies. For the first time in Israel, TASE will support custody of digital assets, which will further the investment of the Israeli crypto market and the adoption in, of innovative technologies for the benefit of Israeli investors.
Finally, I would like to mention the agreement that we signed with the four banks and another TASE member that are the holders of the legacy arrangement shares. In December, we approved an agreement which included the payment of a special dividend by TASE in an amount of ILS 2.5 per share to all the shareholders, in return for an agreement by the holders to sell these shares. In January this year, Jefferies, in conjunction with Leader, completed the placement of the legacy shares with domestic and international institutional investors. As prescribed by law, TASE received the excess consideration over ILS 508 per share from this sale. Now, more than ever, we are dedicated to bringing in foreign investors and strengthening our international standing.
The sale followed a roadshow in New York, and despite the ongoing war, all of the legacy shares, representing almost 18%, 18.5% of our shares outstanding, were placed at a price of 20.6 ILS per share, a mere 2% discount to the market price at the time of sale. The total sale consideration was ILS 353 million, of which ILS 87 million was paid to the selling shareholders, and TASE received a net amount of ILS 242 million, which has been credited directly to TASE equity and is earmarked for the development of TASE technological infrastructure. The success of the placement, especially in these challenging times, is a vote of confidence in the Israeli economy and TASE. The sale of the shares ended the disputes between TASE and the banks included in the arrangement.
I am pleased to announce that TASE's Board of Directors has approved today the payment of a dividend of ILS 42 million, representing ILS 0.45 per ordinary share, payable on March 21, 2024. The board of directors has also approved an annual dividend distribution policy, starting with its financial statement for 2024, and will remain in effect through to its financial statement for 2026, during which time, TASE will work to distribute to its shareholders a cash dividend at a rate of 50% of the annual net profit.
The dividend will be paid soon after the date of the annual financial statement's approval. In conclusion, even during the current situation in Israel, our financial statements exhibit the stability and strength of TASE and the underlying robust foundation of the Israeli economy. And now, I'd like to hand over to Mr. Yehuda Ben Ezra, who will continue with the review of the yearly results.
Thank you, Itai. TASE's strong year results of 2023 and fourth quarter indicate continued positive momentum. In 2023, total revenue reached a record high, it amounted to ILS 389.9 million, an increase of 8% compared to the previous year. Excluding the non-recurring effect last year, the increase in revenue totaled 9%. The adjusted EBITDA in 2023 significantly improved, rising to ILS 157.6 million, representing a 17% increase compared to the previous year. The adjusted EBITDA margin significantly improved to 40.4%, compared to 37.4% in the previous year. Our adjusted net profit experienced substantial growth, reaching ILS 89.3 million, an impressive 74% increase compared to the previous year.
In the fourth quarter of 2023, total revenue reached a record high of ILS 101.4 million, increased by 18% compared to the corresponding quarter last year. The adjusted EBITDA totaled to ILS 40.1 million, a significant increase of 25% compared to the corresponding quarter last year. The adjusted EBITDA margin significantly improved to 39.5%, compared to 37.2% in the corresponding quarter last year. The adjusted net profit totaled ILS 22.7 million, a significant increase of 70% compared to the previous year. I will begin with slide number 6, which shows some of the key highlights from our results of the year 2023.
Revenue from services totaled to ILS 389.9 million shekel, compared to revenue of ILS 361 million shekel in the previous year, an increase of 8%. Eliminating the non-recurring effects recorded last year, the increase in revenue totaled 9%. The increase in revenue is across all operations. Our income from non-production and services are 60% from our total revenue, similar to the previous year. Adjusted expenses totaled to ILS 285.4 million shekels, compared to ILS 237.2 million shekel in the previous year, an increase of 3%. Increase in costs is due mainly for employee benefit expenses and computer and communication expenses, which was partly offset by a reduction in marketing expenses.
The adjusted EBITDA totaled ILS 157.6 million, compared to ILS 135.2 million in the previous year, an increase of 17%. The increase is due to an increase in revenue, which was partly offset by an increase in adjusted expenses. The adjusted EBITDA margin increased to 40.4%, compared to 37.4% in the previous year. Financing incomes totaled ILS 11.2 million, compared to financial expenses of ILS 13.2 million in the previous year. The increase is a result of the positive return on the company investment in marketable securities, as well as rising interest rate on the in-company deposits.
The adjusted net profit increased significantly and amounted to ILS 89.3 million, compared to ILS 51.4 million in the previous year, an increase of 74%. The increase is due mainly to an increase in revenue and the transition to financing income. I will continue with slide number 10, which shows some of the key highlights from our results for the fourth quarter. Revenue from services totaled to ILS 101.4 million, compared to revenue of ILS 86.3 million in the corresponding quarter last year, an increase of 18%. Our income from non-transactional services are 59% from our total revenue, compared to 61% to the corresponding quarter last year. Adjusted expenses totaled 74.9 million shekels, compared to 67.3 million shekels in the corresponding quarter last year, an increase of 11%.
The increase in the cost is due mainly for employee benefit expenses and computer and communication expenses. The Adjusted EBITDA totaled ILS 40.1 million, compared to ILS 32.1 million in the corresponding quarter last year, an increase of 25%. The increase is due to an increase in revenue, which was partly offset by the increase in the adjusted expenses. The Adjusted EBITDA margin increased to 39.5%, compared to 37.2% in the corresponding quarter last year. Financing incomes totaled 3.2 million shekels, compared to financing expenses of ILS 0.5 million in the corresponding quarter last year. The increase is a result of a positive return on the company investment in market-based securities, as well as from the rising interest paid on the company deposits.
The adjusted net profit increased significantly and amounted to ILS 22.7 million, compared to ILS 13.3 million in corresponding quarter last year, an increase of 70%. The increase is due mainly to an increase in revenue and transition to financing, which was partly offset by an increase in expense. After going over the highlights of our financial results, let's take a deeper look at the composition of our revenue in the current quarter. Let's go to slide number 11. Revenue from trading and clearing commission increased by 22% compared to the corresponding quarter last year, and totaled to ILS 41.2 million. The increase is due to the increase in the number of trading days this current quarter, which increased revenue by 14%.
An additional 8% of the increase, mainly from the effect of higher trading volumes of government bonds and mutual funds. Revenue from listing fees and annual levies increased by 3% compared to the corresponding quarter last year, and totaled ILS 20.2 million. The increase is mainly due to an increase in revenue from listing fees by 2%. Revenue from the clearinghouse services increased by 17% compared to the corresponding quarter last year, totaling ILS 21 million. The increase is mainly due to the increase of 9% in revenue from clearinghouse services to companies, and additional 6% increase is due to an increase in revenue from clearinghouse services to members, of which 3% results from the expansion of services in relation to information or OTC transactions.
Revenue from distribution, data, and connectivity services increased by 30% compared to last year, and totaled to ILS 18.6 million shekels. 40% of the increase in the revenue from data distribution and connectivity services is due to the updating of the index usage price list, and 11% is due to a revenue from data distribution, mainly as a result of the increase in the number of business and private customers. Expenses in the quarter, in the current quarter in depth, I will now discuss our expenses. Let's go to slide number 13. The expenses related to employee benefits increased by 15%, and totaled ILS 40.3 million shekels. The increase in expenses mainly results from an increase in variable compensation and salaries.
Computer and communication expenses increased by 24% compared to the corresponding quarter last year, in total, ILS 10.4 million. The increase resulted mainly from an increase in the maintenance cost of new computer system and power cost and project cost. Marketing expenses increased by 2% compared to the corresponding quarter last year, and totaled ILS 1.6 million. The expenses are affected mainly by the timing of performance of marketing activities. Fees to the Israel Securities Authority decreased by 14% compared to the corresponding quarter last year, and totaled ILS 2 million, as it does reflect the effect of the approval by the Knesset Finance Committee in July 2023 for a reduction of by over the fee by additional 50%. Now, I will move to the balance sheet. Please go to slide number 14.
As of December 31, 2023, our equity totals ILS 401.7 million, and comprises 51% of the balance sheet, excluding open derivatives position balance from our clearinghouse activity and the total deferred income from listing fees, and excluding the dividend declared in the amount of ILS 231.1 million. As of December 31, 2023, we have four hundred and ninety-nine million shekels in cash and investment in financial assets. Loan from bank. Despite the existence of sufficient liquidity balance, the board of directors of TASE approved TASE engagement in an agreement with the bank for the receipt of a loan in an amount of up to ILS 150 million that was received on December 2023, bearing annual interest at a rate of Prime plus 0.5%.
The loan is repayable from January 2024 to 4 December 2026. The ex cess capital as of December 31, 2023, total 318 million ILS, compared to 630 million ILS at the end of 2022. The excess liquidity at the end of year 2023 is 146 million ILS, compared to 257 million ILS at the end of 2023. The decrease in the excess capital and excess liquidity is a result of buyback in the amount of 155 million ILS, and dividend declared in the amount of 231 million ILS. It should be noted that the board of directors also approved the safety cushion, which served as additional layer for any stress scenarios, and this is at the discretion of the board of directors.
Now, let's move to the cash flow, to slide number 15. The cash flow for the year 2023. Free cash flow increased by 38.4 million ILS compared to the previous year, and total 100.9 million ILS. The increase is mainly from operation performance.
Cash from investing activities totaled to ILS 57 million compared to negative cash flow of 53 million shekels last year. The increase is mainly from the realization of the company investment in government bonds, totaled to ILS 107.6 million. Cash flow for financing activities totaled to negative cash flow of 1.4 million shekels, compared to negative cash flow of 54.6 million shekels in the previous year. The increase is mainly from the receiving of a loan from banks amounted to ILS 150 million, that was offset by the buyback that amounted to ILS 155 million. In 2024, on January 2, 2024, a special dividend of ILS 231.1 million shekels was paid.
On January 25, 2024, TASE received a net amount of ILS 242 million for the sale of our legacy arrangement shares. The consideration transfer to TASE was carried directly to its equity and will be used for investment in TASE's technological infrastructure. Also, the board of directors approved today a payment of dividend of ILS 40.16 million, that will be paid on March 21. With that, I return the call back to our moderator to conduct the Q&A.
Thank you. Ladies and gentlemen, at this time, we will 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, silence the handset before pressing the numbers. Your questions will be polled in the order they are received. Please stand by while we poll for your questions. The first question is from Dan Fannon of Jefferies. Please go ahead.
Good evening, gentlemen. Thanks for taking my questions. I guess to start, could you maybe expand upon the comments around the proceeds from the sale and the development of the technological infrastructure that you highlighted? Maybe some more specifics around what that will entail and the time period for which you think this investment will take.
So, hi, Dan, and thank you for, for, for having the questions. It's always a pleasure. According to the wording in the demutualization law that was approved in the Israeli parliament in 2017, the wording said that any, excess consideration that we may get from the historic shares, we are obliged to put it in our CapEx, to invest in our IT for the development of the market. So by definition, the ILS 242 million shekels, will be part of our ongoing investments that we do in our technology.
If you look at what we invest on a regular year, ILS 50 million-55 million, as long as it stays in line, it says basically that in the next 4-5 years, this amount will be invested in what we plan to do anyway, because we are constantly thinking of the right way of developing and bringing new products and new services in all of the areas that we are doing. So we currently do not have any big project that we intend to launch in order to use this cash, but it will support the ongoing plans that we have for the development of the Israeli market.
Understood. That's helpful. And then just on the quarter itself, the custodial fees, you know, continue to be quite strong. Is there. Can you talk about the trends within that segment and how we should think about that perspective, and what's, you know, some of the drivers are of that, of that success?
Well, clearly, you know, we have the AUM itself, which affects the net fee that we receive. This is one element. The second element that as time goes by, we have more services and more products that we developed. One of those, for example, is the OTC mechanism that basically brings more liquidity and more transparency to the market, because now in Israel, when you print an off-market transaction, it's not like it used to be that only after the end of the trading day you actually know what happened. So you have to print it in a reasonable manner of time. And of course, because we invested in order to have the proper tools to enable that, we also charge a fee.
So this is also has a positive effect on top of the liquidity and transparency and all of those issues. So I think these are. You wanna add?
Yes. Only we have a new fees, the OTC sell the information regarding the OTC. It increase our fees this year in last quarter in 3%.
That's, you know, the main indicator for the fourth quarter.
Okay, that's helpful. And then I guess just broadly on pricing, as you think about, you know, the near term or, or kind of 2024, are there areas where you have proposed price increases or, or where you think there might be, you know, pricing power that you can utilize, you know, in that time period?
Well, on our, in our derivatives market. We are going through a process of changing some of the way we operate the derivatives market. We are gonna launch in the next few months futures, actually for the first time, and we also have our option business. And as we discussed in the past, this is an area that we should have more liquidity, we should have more flow, and also we should generate more revenues. So this area is going through a pricing adjustment. This is one example. I would say that a part of the derivative market, we are constantly viewing what we are offering to the market, and from time to time, we come with new products and new services, whether it's data, whether it's custody, whether it's clearing.
And all of this, by definition, comes with new fees. We also have plans to come out with new trading, you know, like block trades that you have in other markets, and we don't have in the Israeli market. So by definition, if you have a block trade that you can have also your institutional clients, the fee should not be the same as a regular trade that you do on the market. And as I stated in the past, you know, because we started late, we still have many things that we need to accomplish in the next few years. So it's not only about the 2024, and it also covers various areas of activity that we do in the market. So for the next few months, the most obvious one is the derivative market.
Great, that's helpful. And then just on expenses, you know, I know that marketing has been something that's kind of coming lower given the environment, but just curious, as you think about this year, any areas where you might see a change in the rate of growth or outlook as you think about the broad expense items?
Well, I think, you know, we obviously control the marketing expense, as we've shown in 2023. You know, we have the regular elements of expenses, you know, the computers and communication, that clearly after the COVID and the inflation, you know, there was some pricing increase that took place in 2023. This is obviously something that we are monitoring very closely. There is, of course, the employees' compensation, like every year, but we do not anticipate anything which is not a regular, normal course of business in terms of our expenses in 2024.
Great. Thanks for taking all my questions.
Thank you very much, Dan.
If there are any additional questions, please press star one. If you wish to cancel your request, please press star two. Please stand by while we poll for more questions. There are no further questions at this time. This concludes the Tel Aviv Stock Exchange Q4 2023 results conference call. Thank you for your participation. You may go ahead and disconnect.