Euronext Nv Unsp/Adr

Hello and welcome to the Euronext Q1 2024 results call. My name is Laura and I will be your coordinator for today's event. Please note this call is being recorded and for the duration of the call, your lines will be on listen-only mode. However, you will have the opportunity to ask questions at the end of the call. This can be done by pressing star 1 on your telephone keypad to register your question. If you require assistance at any point, please press star zero and you will be connected to an operator. Today, we have Stefan Bujna, CEO and Chairman of the Managing Board of Euronext, joined by Giorgio Modica, CFO, as our presenters. I will now hand you over to your host, Stefan Bujna, to begin today's conference. Thank you.

Good morning, everyone, and thank you for joining us this morning for the Euronext first quarter 2024 results conference call and webcast. I am Stéphane Boujna, CEO and Chairman of the Managing Board of Euronext, and I will start with the highlights of this quarter. Giorgio Modica, Euronext CFO, will then develop the main business and financial highlights of the first quarter of 2024. As an introduction, I would like to highlight three main points. Euronext has demonstrated its capabilities to deliver strong growth thanks to its diversified business model. We have delivered plus 8% revenue growth in Q1 2024, bringing revenue and income to a record level of €401.9 million. This very good performance was driven by solid growth in non-volume related businesses. in record performances in fixed income, record performance in power trading, as well as the benefits of our successful expansion of Euronext Clearing to Euronext European Cash Market in November 23. Thanks to our continued cost control and some positive run-offs, we reduced significantly our underlying expenses by minus 2% year-on-year to $150.7 million despite inflation that affected all of us, and we reached, therefore, an adjusted EBITDA margin of 62.5%. we are definitely on track to complete the integration of the Borsa Italiana Group. We completed the migration of Italian derivatives to Euronext's proprietary trading platform, Optic, in March. The last step of the integration will be delivered in Q3 2024, in a few weeks' time, when we migrate all Euronext financial derivatives and commodities listed on our European markets to Euronext Clearing to complete our presence on the entire trading value chain. Thanks to our continued progress with the delivery of the Borsa Italia Group integration, we delivered €79 million of cumulative run rate synergies at the end of 2024. So, we are perfectly on track to achieve our Growth for Impact 2024 target of €115 million of annual run rate synergies by the end of this year, just three years after this transformational acquisition was completed. Since the beginning of the year, we have continued to innovate for the benefit of the attractiveness of European capital markets and for the benefit of our clients. Euronext successfully launched dark midpoint and sweep functionalities in Q124, our core data center in Bergamo. These new functionalities are critical in continuing to provide the highest liquidity to all our trading members. And we have rolled out a harmonized corporate action services across our CSDs in order to tackle post-trade fragmentation in Europe. Lastly, we have strengthened and diversified our data index franchise with the announced acquisition of Global Rate Set Systems, GRSS, a leading and highly respected provider of services to benchmark administrators. GRSS is a mission-critical service provider to the benchmark administrators that produce three of Europe's critical interest rate benchmarks, Euribor, CYBOR, and NIBOR. Together with the GRSS teams, we aim to reinforce significantly the positioning of GRSS in order to become the go-to provider in the contributed data and indices space, leveraging on Euronext's global leadership and recognition. Let me give you a quick overview of the performance of the first quarter of 2024 on slide 4. Euronext reported a very strong first quarter of 2024, posting revenue growth of plus 8% year-on-year, up to €401.9 million. The quarter was marked by strong dynamism in post-trade and non-volume rate-driven activities, together with the record performance of fixed income and power trading. First, post-trade revenues saw double-digit growth. Euronext's clearance performance was driven by the first full quarter of contribution from its expansion to European cash instruments, as well as very dynamic commodities clearing activity. Euronext Securities posted a strong plus 6% increase in revenue this quarter, thanks to the growth in insurance and custody services. Second, our trading revenues posted strong growth supported by record quarter for fixed income and power trading. This is the proof of the group's successful diversification. Despite lower equity and derivative volumes, our total trading revenues grew by over 7%. Third, Non-volume-related revenue posted a strong performance, overall notably in listing and advanced data services. We remain, this quarter again, the leading listing venue in Europe. We also observed, in the second quarter so far, a very encouraging dynamic of our listing activity, with two large IPOs in April. Plan is where? and CBC Capital. This translated into non-volume related revenue accounting for 58% of the total Q1 revenue and covering 155% of underlying operating expenses excluding DNA. We continued our trademark discipline approach to cost control. Combined with a positive one-off accruals release, Q1 2024, underlying operational expenses excluding DNA decreased slightly to $150.7 million down minus 2% compared to our cost base of the first quarter of 2023, and all that despite inflationary pressure. Overall, we reported a strong growth in adjusted EBITDA of plus 15%, to €251.3 million, and an adjusted EBITDA margin that increased by 3.8 points to 62.5%. This strong performance, combined with a continued positive interest rate environment for cash in the bank, led to a plus 15% increase in adjusted EPS at €1.58 per share. and it also led to an adjusted net income of €164.2 million. On a reported basis, EPS for this first quarter also benefited from the positive comparison base related to the provision of the €36 million termination fee of the clearing agreement that we paid in Q1 2023. Consequently, reported EPS increased by plus 49.1% to 1.35%. Lastly, we continue to deliverage massively, reaching 1.6 times net debt to last 12 months adjusted EBITDA at the end of March 2024. This compares to 3.2 times at the completion of the Bursa Ethernet Group acquisition in April 2021. Our ongoing delivering path has been praised by S&P, who upgraded us to BBB+, positive outlook As I mentioned earlier, we are now entering the final phase of our 2024 strategic plan and the Bursa Italiana Group integration with only one step ahead of us to complete this integration journey. In March 24, we successfully migrated Italian derivatives trading operations to OPTIC. This migration was the last in the ambitious integration plan of Italian cash and derivatives markets and to the Euronext Single Trading Platform. and it was completed less than three years after the acquisition of the Bolsa Italiana Group, completed in April 2021. This success contributed to the synergies delivered this quarter, and we reached 79 million of Cumulated Run Rate EBITDA synergies at the end of Q1 2024. You have understood that we are well on track and on schedule to deliver the last step of our Growth for Impact 2024 strategic plan. The expansion of Euronext Clearing to all financial and commodity derivatives listed on all Euronext markets in the third quarter of 2024 will be the final step to achieve the targeted delivery of $115 million of Cumulated EBITDA synergies at the end of 2024. Furthermore, the expansion of our Clearinghouse will unlock a new set of strategic organic growth opportunities for us, which I'm looking forward to share with you on our Capital Markets Day on the 8th of November 2024 in Paris. And I'll give the floor to Giorgio for the review of our first quarter of 2024.

Thank you, Stefan, and good morning, everyone. Let us now have a look at the strong performance of this first quarter of 2024. I'm now on slide seven. As already mentioned by Stefan, total revenue this quarter reached €401.9 million, up 8% compared to last year, and 8.5% at custom currency. This quarter there is no change in scope impact, and the full performance is organic. Non-volume-related share of revenue remains high at 58%, highlighting the success of our diversification strategy. despite the record quarter for some of our trading businesses like fixed income and power trading. Our diversified businesses delivered strong growth in this first part of the year with a record top line. Let me deep dive into the drivers of this excellent performance starting with listing on slide 8. Listing revenue was 57.7 million euro, up 5.5% driven by the increased volume of equity and debt activity versus last year, and the good performance of Euronext corporate services. Euronext confirmed its leadership in equity listing in Europe and debt listing worldwide. On the equity side, in Q1 2024, Euronext welcomed 10 listings. Furthermore, we observe an encouraging dynamic in this first part of the second quarter with two large IPO in April, Plansware and CVC Capital. On the debt side, we reached for the first time 57,000 bonds listed on our markets, while we also strengthened our leading position on ESG bond listings. Euronext Corporate Services continues to deliver a solid performance with revenue growing to €12 million in this Q1 2024, up 12.5% compared to the first quarter of 2023, resulting from the strong performance of the SaaS offering. Slide 9 illustrates how data and investor services activity continue to drive growth this quarter. Advanced data services reached 59.4 million euro revenue up 5.5%, driven by the increased demand for non-professional usage and solid demand for fixed income and power trading data. Investor services reported 3.1 million euro revenue in the first quarter of 2024, representing a 17.4% increase compared to the first quarter of 2023. resulting from a continued commercial expansion, cementing the franchise among the largest global investment managers. On the other end, Technology Solutions reported 26.7 million euro of revenues down 3.3% due to the reduction of logical access revenue following the completion of the migration of Borsi Italiana cash and derivative market to OPTIC, In other words, our client benefited from the savings of connecting to only one system. Moving to trading on slide 10, Euronext trading revenues at €138.4 million, up 7.4% from the €128.9 million in the first quarter of 2020. not only shows the benefit of the diversification of Euronext trading activity, but it also showed the resilience of a cash trading model in a low-volume environment. Cash trading revenue was 70.6 million euros, down 1.6%, versus the first quarter of 2023. It reflects lower trading volumes by 9.2%, primarily offset by improved average fees. Cash revenue capture average 0.54 basis points, despite the average order size remain very high. It demonstrates the benefit of the new PIN scheme implemented in Italy following the migration of Borsa Italiana cash equity markets to OPTIC. Cash equity market share averaged an healthy 64.6%. Derivative trading decreased by 10.9% to 13.4 million euros in the first quarter of 2024 due to lower financial derivative volumes with ADV down 12.6%, partially offset by stronger performance of commodity derivatives with volume up 34.3% versus last year. Average revenue capture on derivatives trading reached 0.33 euro per lot lastly fx trading grew 12.7 percent to 7.1 million euros of revenues in the first quarter of 2024 up 12.7 percent mostly supported by growing volume slightly offset by a negative volume mix impact continuing with trading on slide 11 fixed income trading revenue grew 34.5% and reached another record quarter at 35.2 million euros, reflecting strong performance of MTS Cash, MTS Repo, and the increased traction of the Euronext fixed income retail franchise. Our fixed income franchise continues to be supported by an economic environment favoring many money markets, sustained sovereign issuance activity, and supportive volatility. For the first quarter of 2024, MTS cash recorded 34.7 billion euros of ADV and MTS repo reached 492 billion euros of term-adjusted ADV. MTS EU continued to post the encouraging results. Power trading revenue grew to 12.2 million in the first quarter of 2024, up 23.7% compared to the first quarter of 2023. This record performance was driven by another all-time high intraday volume and a solid year-on-year day-ahead trading activity. I conclude this business review on slide 12. Clearing revenue was up 23.1% to 37 million euros this quarter, affecting the increased equity clearing volumes following the expansion of Euronext Clearing to the cash trading market in Belgium, France, Ireland, and the Netherlands, and Portugal in the fourth quarter of 2023, and high clearing revenues from the dynamic commodity activity. Non-volume-related clearing revenue accounted for 11.1 million euros, and the total clearing revenues in the Q1 2024 reached, as I said, 37 million euros. Net treasury income amounted to 11.7 million in the first quarter of 2024, representing a 57% increase from Q1 2023. As a reminder, Q1 2023 NTI was still impacted by the runoff of the Euronext clearing investment portfolio. Lastly, revenue from cashed-in settlement and other post-trade activity reached 67.8 million euros this quarter. This is a 6% increase, reflecting a dynamic issuance activity, the good performance of new services, and higher assets under custody. On a like-for-like basis, custody settlement and other post-trade revenue was up 7.1% compared to the Q1 2023. Moving on with the financial review of the quarter, I will start now with the EBITDA bridge on flight 14. Euronext adjusted EBITDA for the quarter was up 15% to 251.3 million euros. This translated into an EBITDA adjusted margin of 62.5%. This quarter up 3.8 points compared to the first quarter of 2023. Non-underlying costs for the quarter were 8.7 million euros primary relation to the ongoing work related to the cleaning expansion and new optic migration. As a reminder, in the first quarter of 2023, we provisioned $36 million fee for the termination of the cleaning agreement with FCHSA, which has been paid this quarter in Q1 2024. The underlying operational expenses, including DNA, decreased 2%, reflecting continued cost discipline in an inflationary environment, and the release of some cost and provision totaling around 3.5 million euros. As you can imagine, it's too early now to discuss about changing the cost guidance for 2024 that remains as announced with the results of 2024 at 625 million euros. Moving to net income on slide 15, adjusted net income this quarter is strongly up at 164.2 million euros, which represents an increase of 11.7%. compared to Q1 2023. So as you can see, I will not comment the increase of the net financing income, as this is obvious, reflecting an increase yield on our cash balance. You see as well that we have a decrease from equity investment, and this is mainly linked to the fact that we will not receive the one-off dividend from SICOVAM we received last year. We will receive it in Q4 this year. And we don't benefit anymore from the results of associate link to LCHSA that was disposed last year. Lastly, net income tax for the first quarter of 2024 was 54.7 million euros. This translated into an effective tax rate of 26.9% for the quarter. Minority interests were as well higher due to the very good performance of Norpool and MTS. As a result, reported net income increased 44.8% to 139.7 million euros, and adjusted EPS basis was up 15% in the first quarter of 2024 at 1.58 euro per share. To conclude with the cash flow generation and leverage, I'm now on slide 16. As you can see, our balance sheet position is very solid, as well as cash flow generation. S&P recognized our consistent leverage process and upgraded Euronext to BBB plus positive outlook in April 2024. In Q1 2024, Euronext reported net cash flow from operation activities of 184.6 million euros compared to 318.2 million euros in the first quarter of 2023. The latter reflected the strong positive movements in net working capital related to Northpool and the Euronext clearing CCP activity. Excluding the impact on working capital from Euronext clearing and Northpool CCP activities, Net cash flow from operation activity accounted for 68.6% of EBITDA in the first quarter of 2024, or 184.6 million euros. The reduction versus Q1 2023 is explained by the payment of the 36 million termination fee to LCH SA. Net debt to adjusted EBITDA was at 1.6 times at the end of the quarter and 1.7 times on the reported EBITDA basis. And with this, I would like to give back the floor to Stefan.