TD 's opinoin: holdDH Reports Q3/16 Results Impact: NEGATIVE; sizeable miss and 2016 guidance reduced Several factors drove the large miss and lower guidance this quarter. Most notable was softer revenue and adjusted EBITDA (margins) from its Global Transaction Banking Solutions (GTBS) segment and its Lending & Integrated Core (L&IC) division. Canadian payments (chequing) revenue was also down a material 8% y/y, which, in our view, could be a theme going forward. The company has lowered its guidance for 2016 to reflect: 1) increasingly muted GTBS and Canadian revenue outlook and 2) lower adjusted EBITDA margin due to higher spending on risk management and growth-related initiatives. See Exhibit 2. Revenue of $418mm was flat y/y, missing our $432mm estimate. Adjusted EBITDA of $110mm missed our $133mm estimate ($127mm y/y), margins of 26.2% were below our 30.7% forecast and 30.4% y/y. Adjusted EPS was $0.49 vs. our $0.66 estimate and down from $0.62 y/y. Trends across the segments were discouraging: Canadian payments revenue (chequing) was down 8% y/y. The recently announced mortgage regulation changes could also weigh on future results. L&IC revenue growth continued to trend lower at -2.6% y/y in Q3/16 (lower LaserPro renewal cycle in 2016) and margins remain compressed. That said, the renewal cycle is expected to normalize in 2017 and we are expecting revenue growth and margin recovery. GTBS - DH's growth engine - is having a soft year. Revenue growth guidance has been lowered to low-to-mid-single-digits (vs. high-single-digit long-term expectation). TD Investment Conclusion The soft results and lower guidance suggest some uncertainty towards DH's outlook and its ability to meet medium-term targets. Although we believe that L&IC is positioned to improve next year, the lower growth and margin profile for GTBS gives us a pause given we believe that this is a crucial growth engine for DH. We are also becoming increasingly cautious around the Canadian division given the decline in payments revenue. Although the operational realignment should surface cost savings, increased spending on risk management and growth initiatives could offset. Given an increasingly muted outlook around growth and margins, we reiterate our HOLD rating.