TORONTO STOCK EXCHANGE 8 Sales Aggressive or overly optimistic sales growth assumptions will not be accepted. Sales targets should be reconciled to past performance (e.g., if historical sales growth is 5%, TSX will accept a continued growth rate of up to 5% for the purposes of the run rate calculation). Sales assumptions during the run rate period should be realistic and consistent with available data concerning the pipeline of executed sales contracts, sales backlog and expected product delivery schedules. Sales assumptions should include realistic expectations for the achievement of project milestones for contracts where revenue is earned in stages. Assumptions should be supported by committed revenue sources such as existing subscription revenue or signed contracts as opposed to non-recurring projects or verbal commitments. Note that where there are several advanced sales negotiations underway, it may be unrealistic to assume that all of the negotiations will result in executed contracts for the pipeline. Borrowing proceeds Borrowing proceeds may be included only if there is a committed loan facility in place or negotiations with the lender are sufficiently advanced such that the risk of non-completion is very low. In these cases, listing conditions will likely include evidence of execution of the loan. Uses of funds should be conservative Aggressive assumptions for cost savings should be avoided. Calculations should assume that expenses will be as high as, or higher than, historical expenses (taking into account current events such as inflation, global macroeconomic factors, availability of supply, etc.). Applicants should include a contingency buffer to address unexpected costs, particularly for project expenditures. If the sources of cash include draws against existing borrowing facilities, applicants should include financing fees and interest expenses calculated in accordance with the terms of the loan agreement. The run rate calculation must be current to the time of listing As the business environment is dynamic, it is expected that the run rate calculation will evolve and change over time. Therefore, if the application review period takes longer than expected, TSX Staff may request an updated run rate calculation to ensure that by the time of listing, the calculation is not considered to be stale. Applicants reporting revenue Management teams often prepare internal analyses similar in concept to the run rate calculation, commonly modelling for optimistic, base case and worst case scenarios. For TSX listing application purposes, the objectives of the base case scenario are often aligned with the objectives of the run rate calculation. The optimistic scenario may be illustrative of the upside potential of the business, however, the goal of the run rate calculation is to understand how the business is expected to be run once listed on TSX. At the other end of the spectrum, while a worst case scenario is useful for understanding absolute risk and resulting survival plans, it may not reflect a realistic expectation of how the business is expected to be run once listed on TSX.
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