Euronext publishes Q2 2023 results and announces a share repurchase programme

Solid quarter driven by organic growth in non-volume-related business and robust market share and yield performance in cash trading

Amsterdam, Brussels, Dublin, Lisbon, Milan, Oslo and Paris – 27 July 2023 – Euronext, the leading pan-European market infrastructure, today publishes its results for the second quarter of 2023.

• Q2 2023 revenue and income was €368.1 million (-1.8% compared to Q2 2022, -0.5% like-for-like at constant currencies):
• Strong performance of non-volume-related business:
  • Technology Solutions reported €27.3 million of revenue (+13.2%^[1]) thanks to the internalisation of colocation services following the migration of the Core Data Centre to Bergamo.
  • Advanced Data Services reached record revenue of €56.9 million (+9.4%) driven by an increased number of clients and revenue capture, as well as a continued strong performance of the data solutions business.
  • Custody and Settlement reported €63.7 million of revenue (+2.0%) supported by new fee schemes.
  • Listing activity confirmed Euronext’s leadership in Europe, despite a soft IPO market, with 16 new listings. More than half of new European listings and the largest IPO in Europe took place on Euronext in Q2 2023. Listing revenue was €55.1 million (-0.5%), negatively impacted by the NOK depreciation over the year.
  • Non-volume-related revenue accounted for 61% of Q2 2023 revenue (vs. 59% in Q2 2022) and covered 148% of underlying operating expenses, excluding D&A (vs. 144% in Q2 2022).
• Fixed income trading reported strong revenue of €25.3 million (+1.4%) driven by increasing interest rates. Power trading revenue grew to €8.6 million (+24.7%) resulting from strong momentum in the European intraday electricity market and improved revenue capture.
• Cash equity market share and revenue capture improved, partially offsetting lower volatility environment for equity trading and clearing activities, compared to a very dynamic Q2 2022:
  • Cash trading revenue was €65.2 million (-13.3%) reflecting improved revenue capture and market share offset by a less volatile environment. Cash revenue capture averaged 0.53bps, reflecting the immediate benefits from the new fee schemes implemented in Italy following the migration of Borsa Italiana cash markets to Optiq^® in March 2023. Equity market share increased over Q2 2023 to average 65.4% during the quarter.
  • Clearing revenue was €29.4 million (-6.4%), driven by the low volatility environment.
• Adjusted EBITDA^[2] was €216.1 million (-2.5%) and adjusted EBITDA margin was
  58.7% (-0.5pts):
• Underlying operating expenses, excluding D&A, were at €152.0 million (-0.7%), resulting from continued cost discipline. Euronext reiterates its 2023 guidance for underlying operating expenses excluding D&A of €630 million.
   
• Adjusted net income was €142.9 million (-0.2%) and adjusted EPS was €1.34 (-0.3%).
• Key figures for Q2 2023:

• Net debt to reported EBITDA was at 2.6x at the end of Q2 2023 (vs. 2.4x at end of Q1 2023, reflecting the payment of the 2022 financial year dividend), and net debt to adjusted EBITDA was at 2.2x.
• Euronext completed in July 2023 the sale of its 11.1% stake in LCH SA to LCH Group, for a cash consideration of €111 million. As a result, in Q3 2023 Euronext will incur a tax-exempted non-underlying capital gain of around €40 million and stop recording 11.1% of LCH SA’s net income. This disposal does not impact the revenues nor the costs related to the clearing agreement with LCH SA until the end of the contract planned in Q3 2024.
• Euronext will launch on 31 July 2023 a share repurchase programme of maximum €200 million (representing around 3% of Euronext’s outstanding shares), for a duration of maximum 12 months. This programme is enabled by Euronext’s strong cash generation capabilities and demonstrates Euronext’s rigorous capital allocation strategy. This programme does not change Euronext’s credit rating. Euronext maintains its dividend policy of 50% of reported net income.
• Major steps in Q2 2023 for the Borsa Italiana Group integration:
• €44.2 million of cumulated run-rate annual EBITDA synergies were achieved since the acquisition of Borsa Italiana Group in April 2021, of which €0.4 million were delivered in Q2 2023.
• €4.9 million of cumulated implementation costs were incurred during Q2 2023. This brings to €90.2 million the cumulated implementation costs incurred at the end of Q2 2023.
• Key steps were met in the preparation for the Optiq^® migration of Borsa Italiana Group fixed income and derivatives markets planned in Q4 2023. This migration will generate costs synergies related to the termination of the contract with the current third-party trading platform provider as soon as Q4 2023.
• Key milestones were achieved to deliver the European expansion of Euronext Clearing on time and on budget and enable to generate targeted revenue and costs synergies as soon as Q4 2023.
   
• Stéphane Boujnah, Chief Executive Officer and Chairman of the Managing Board of Euronext, said:

“Euronext’s Q2 2023 results demonstrate the strength of our diversification strategy towards non-volume-related activities. Euronext’s revenue remains robust, reaching €368.1 million, and remained stable at current currencies despite a negative volatility environment. This performance results from strong organic growth in the advanced data services and technology businesses. Our power and fixed income trading businesses continue to perform extremely well, resulting from growth initiatives and supportive tailwinds. Euronext confirms this quarter again its position as the leading European listing venue, with 16 listings. Combined with our continued best-in-class cost discipline, our efforts led to an adjusted EBITDA margin of 58.7%, and reported profit grew to €120.0 million.

Throughout the second quarter of 2023, Euronext remains the leading trading venue in Europe, consolidating its market share and capturing value in a low volatility environment. Cash equity market share increased over the quarter to 65.4%, and revenue capture reached 0.53bps. This reflects, among other initiatives, the immediate benefits of the migration of Italian cash markets to Optiq^®.

We continue to deliver the major projects of our “Growth for Impact 2024” strategic plan. Following the successful migration of Italian cash equity markets to Optiq^® in March 2023, the planned migration of the remaining Italian markets is on schedule with a first seamless rehearsal completed in early July. This paves the way for the migrations of the remaining Italian cash markets this year, and the migration of the Italian derivatives markets in early 2024. These migrations will contribute materially to the delivery of targeted synergies as soon as Q4 2023. Our teams are also progressing well with the European expansion of Euronext Clearing, and we have confirmed the extension of Euronext Clearing for the clearing of our equities as of Q4 2023 and our derivatives in Q3 2024.

We also announce today the launch of a share repurchase programme for a maximum amount of €200 million. This programme is enabled by our strong cash generation capabilities and demonstrates our rigorous capital allocation strategy. This share repurchase programme will not change our deleveraging path nor our dividend policy, and will preserve financial flexibility to capture market opportunities.”

 

Euronext Q2 2023 financial performance

Q2 2023 revenue and income

In Q2 2023, Euronext consolidated revenue and income amounted to €368.1 million, down -1.8% compared to Q2 2022, mainly due to the robust performance of non-volume-related activities and better performance of fixed income and power trading partially offset by the strong comparison base for equity-related trading activities and negative FX rate variation effects.

Non-volume related revenue accounted for 61% of underlying Group revenue in Q2 2023, compared to  59% in Q2 2022, reflecting the successful diversification towards non-volume related activities and strong trading activity in Q2 2022 due to volatility spikes. The underlying operating expenses excluding D&A coverage ratio by non-volume related revenue was at 148% in Q2 2023, compared to 144% in Q2 2022.

On a like-for-like basis at constant currencies, Euronext consolidated revenue and income was almost stable at -0.5%.

Q2 2023 adjusted EBITDA

Underlying operational expenses excluding depreciation and amortisation slightly decreased to €152.0 million, down -0.7%, reflecting strong cost discipline in an inflationary environment.

Consequently, adjusted EBITDA for the quarter totalled €216.1 million, down -2.5% compared to Q2 2022. This represents an adjusted EBITDA margin of 58.7%, down -0.5 points compared to Q2 2022 due to the decrease in volume-related revenue, which was partly offset by resilient non-trading related revenue and continued cost discipline.

Q2 2023 net income, share of the parent company shareholders

Depreciation and amortisation accounted for €42.2 million in Q2 2023, an increase of +9.4% compared to Q2 2022, resulting from ongoing migration projects. PPA related to acquired businesses accounted for €20.4 million.

Adjusted operating profit was €197.8 million, a -4.4% decrease compared to Q2 2022.

€32.7 million of non-underlying expenses, including depreciation and amortisation, were reported in Q2 2023, related to the ongoing clearing and Optiq^® migration projects.

Net financing expense for Q2 2023 was €1.9 million compared to a net financing expense of €9.1 million in Q2 2022. This decrease reflects higher interest income from cash held partially offsetting the cost of issued debt.

Results from equity investments amounted to €3.2 million in Q2 2023, representing the contribution received from LCH SA, in which Euronext owned an 11.1% stake until 6 July 2023. Following the disposal of Euronext’s 11.1% stake in LCH SA, the Group will not record any contribution from LCH SA from Q3 2023. In addition, Euronext will incur a €40 million tax-exempted non-underlying capital gain in Q3 2023 in relation to this disposal.

Income tax for Q2 2023 was €41.2 million. This translated into an effective tax rate of 24.8% for the quarter (Q2 2022: €45.2 million and 27.1% respectively). The reduction is linked to higher non-taxable income received over the period.

Share of non-controlling interests mainly relating to the Borsa Italiana Group and Nord Pool amounted to €5.2 million in Q2 2023.

Consequently, the reported net income, share of the parent company shareholders, increased by +0.9% for Q2 2023 compared to Q2 2022, to €120.0 million. This represents a reported EPS of €1.12 basic and €1.12 fully diluted in Q2 2023, compared to €1.11 basic and €1.11 fully diluted in Q2 2022. The weighted number of shares used over Q2 2023 was 106,741,621 for the basic calculation and 106,989,806 for the fully diluted calculation.

Adjusted net income, share of the parent company shareholders was almost stable, down -0.2% to €142.9 million. Consequently, adjusted EPS (basic) was slightly down -0.3% in Q2 2023, at €1.34 per share, based on 106,741,621 shares for Q2 2023, compared to an adjusted EPS (basic) of €1.34 per share in Q2 2022, based on 106,616,256 shares for Q2 2022.

In Q2 2023, Euronext reported a net cash flow from operating activities of €139.0 million, compared to €76.8 million in Q2 2022, reflecting lower income tax paid compared to Q2 2022. As a reminder, Euronext paid in May 2023 €2.22 per ordinary share for the dividend related to the 2022 financial year. Excluding the impact on working capital from Euronext Clearing and Nord Pool CCP activities, net cash flow from operating activities accounted for 73.3% of EBITDA in Q2 2023.

Business highlights

• Listing

Listing revenue was €55.1 million in Q2 2023, a slight decrease of -0.5% compared to Q2 2022, reflecting a resilient quarter for the listing activity partially offset by the negative impact from the depreciation of the NOK over the year. On a like-for-like basis at constant currencies, listing revenue was up +2.1%.

Euronext’s primary markets equity listing business sustained its leading position in Europe with 16 new listings in Q2 2023, representing 59% of European listing activity. Euronext welcomed the largest IPO in Europe year to date in terms of money raised with the listing of Lottomatica Group on Euronext Milan, and three out of the five biggest IPOs in Europe in Q2 2023. Euronext further demonstrated its attractiveness to international large caps, including Ferretti, which dual-listed in Milan in addition to Hong Kong, and the admission to trading of the Spanish infrastructure group Ferrovial on Euronext Amsterdam, with a market capitalisation of €21.0 billion at admission.

In Q2 2023, Euronext’s markets reported €1.1 billion raised in primary equity issues, stable compared to Q2 2022 with €1.1 billion raised.

Secondary equity issues were quieter in Q2 2023 with follow-on activity reporting €4.3 billion raised in compared to €11.1 billion in a strong Q2 2022.

In a softer environment for ETP listings in Europe, Euronext remained the leading exchange in Europe for the listing of ETPs with 47 new listings.

Euronext maintained its position as the leading listing venue for bonds worldwide in Q2 2023^[5], growing the number of bonds listed on its markets to over 54,000. In Q2 2023, €332.7 billion in debt was raised on Euronext markets, reflecting the current market conditions, and compared to €241.7 billion raised in Q2 2022. The positive momentum of Euronext’s ESG bond offering continued in Q2 2023 and Euronext strengthened its position as the world’s leading ESG bond venue in terms of issuance amount and number of issuers, reaching €1.2 trillion in sustainable bonds listed on its markets.

In total, €338.2 billion in equity and debt was raised on Euronext’s markets in Q2 2023, up +33.2% compared to Q2 2022.

Euronext Corporate Services reported a solid quarter in terms of revenue at €11.8 million in Q2 2023, up +17.4% compared to Q2 2022, resulting from strong performance of the SaaS offering.

• Trading

• Cash trading

Cash trading revenue decreased by -13.3% to €65.2 million in Q2 2023, resulting from improved market share and revenue capture, offset by lower volumes environment and larger average order size still negatively impacting revenue capture. In Q2 2023, Euronext recorded average daily cash volumes of €10.0 billion, a decrease of -14.0% compared to Q2 2022, resulting from a low-volatility environment and negative comparison base. On a like-for-like basis at constant currencies, cash trading revenue was down -13.3% in Q2 2023 compared to Q2 2022.

Euronext cash trading yield averaged 0.53 bps, above Euronext’s target of at least 0.52bps following the migration of Borsa Italiana cash markets to Optiq^®. This results from the immediate benefits of the new fee schemes implemented for Italian markets, partially offset by higher average order size.

Cash equity market share steadily increased over the second quarter of 2023 to average 65.4%, well above the 2023 target of at least 63%, and continuing the positive market share dynamic since the beginning of the year. Euronext continued to guarantee best-in-class market quality and to maintain its position as the venue for price formation for European equity trading.

Overall, Euronext reinforced its position as the venue for price formation following the migration of Italian cash equity markets to Optiq at end March 2023. Euronext EBBO presence increased from 50% in Q1 to 68% in Q2 for FTSE MIB stocks, and decreased to less than 15% for competing MTFs.

• Derivatives trading

Derivatives trading revenue decreased by -12.6% to €13.0 million in Q2 2023, compared to a particularly volatile Q2 2022 for derivatives trading resulting from the war in Ukraine, partially offset by strong performance from commodity derivatives. On a like-for-like basis at constant currencies, derivatives trading revenue was down -12.3% in Q2 2023 compared to Q2 2022.

During Q2 2023, financial derivatives trading volumes decreased across the offering with average daily volume on financial derivatives at 505,806 lots, down -23.2% from Q2 2022 primarily due to a decrease in equity individual derivatives trading compared to the strong volumes supported by higher volatility in Q2 2022, and affected by uncertainties around fiscal treatment of dividends in France in Q2 2023.

Average daily volume on commodity derivatives was at 89,400 lots in Q2 2023, up +25.3% compared to Q2 2022. The Euronext commodities franchise pursued its positive dynamic with continuing strong support from commercial clients and strong traction from financial clients thanks to the success of a dedicated programme.

Euronext revenue capture on derivatives trading was €0.35 per lot for the second quarter of 2023, reflecting a positively geared volume mix and solid revenue capture.

• Fixed income trading

Fixed income trading revenue grew by +1.4% to €25.3 million in Q2 2023, reflecting strong performance by MTS Repo and other fixed income activities, and a solid quarter for MTS Cash, supported by higher interest rates and market volatility. For the second quarter of 2023, MTS Cash reported €15.5 million of revenue and MTS Repo reported €6.3 million of revenue. On a like-for-like basis at constant currencies, fixed income trading revenue was up +1.5% in Q2 2023 compared to Q2 2022.

MTS Repo recorded record volumes for the second quarter in a row, with term-adjusted average daily volumes growing +27.7% to €444 billion, compared to €348 billion in Q2 2022. MTS Cash average daily volumes were at €21.6 billion, down only -2.0% compared to a strong Q2 2022. Other fixed income volumes also reached historically high levels with ADV up +27.4% year on year at €1.3 billion.

• FX trading

FX trading reported €6.1 million of revenue in Q2 2023, down -15.7% from a strong Q2 2022 and impacted by a negative trading flow mix. On a like-for-like basis at constant currencies, FX trading revenue was down -13.9% in Q2 2023 compared to Q2 2022.

Over the second quarter of 2023, average daily volumes of USD21.6 billion were recorded, down -8.6% compared to Q2 2022 resulting from lower volatility.

• Power trading

Power trading revenue grew to €8.6 million in Q2 2023, up +24.7% compared to Q2 2022, driven by very strong intraday volumes and improved revenue capture, partly offset by lower day-ahead volumes. On a like-for-like basis at constant currencies, power trading revenue was up +45.0% in Q2 2023 compared to Q2 2022.

Over the second quarter of 2023, average daily day-ahead power traded was 2.36TWh, down -6.3% compared to Q2 2022, and average daily intraday power traded was 0.18TWh, up +90.3% compared to Q2 2022.

 

1. Investor Services

Investor Services reported €2.8 million revenue in Q2 2023, representing a +21.5% increase compared to Q2 2022, resulting from continued commercial expansion of the franchise across the largest global investment managers.

On a like-for-like basis at constant currencies, investor services revenue was up +24.6% compared to Q2 2022.

1. Advanced Data Services

Advanced Data Services reached record revenue of €56.9 million in Q2 2023, up +9.4% from Q2 2022, driven by a strong performance of the core data business and the advanced data solutions offering, primarily supported by strong traction from quant research products. Euronext further innovated in the in the index space with the launch of the Euronext^® Artificial Intelligence World Index.

On a like-for-like basis at constant currencies, advanced data services revenue was up +9.5% compared to Q2 2022.

• Post Trade

• Clearing

Clearing revenue was down -6.4% to €29.4 million in Q2 2023, as a result of lower contribution from LCH SA and weaker cash equity, equity derivatives and index derivatives clearing activity, partly offset by stronger bond and commodity derivatives clearing volumes. Non-volume related clearing revenue (including membership fees, treasury income received from LCH SA) accounted for €8.5 million of the total clearing revenue in Q2 2023.

Euronext Clearing activities reflected an uplift in cleared volumes for bond clearing, and a decrease in equity and derivatives clearing in line with trading volumes. In Q2 2023, Euronext Clearing revenue included €1.3 million from derivatives clearing, €3.6 million from equities clearing, and €3.1 million from bonds clearing.

On a like-for-like basis at constant currencies, clearing revenue was down -6.4% compared to Q2 2022.

• Net treasury income

Net treasury income amounted to €13.8 million in Q2 2023, a decrease of -12.0% compared to Q2 2022. This results from the disposal of the Euronext Clearing investment portfolio completed in May 2023, offsetting higher level of cash held.

On a like-for-like basis at constant currencies, net treasury income was down -12.0% compared to Q2 2022.

• Custody, Settlement and other Post-Trade activities

Revenue from Custody, Settlement and other Post-Trade activities was €63.7 million in Q2 2023, up +6.1% like-for-like at constant currencies, or +2.0% compared to Q2 2022 on a reported basis. This reflects a new fee scheme and a seasonal uplift in corporate actions partially offset by slightly lower settlement activities.

28,787,026 settlement instructions were processed in the second quarter of 2023 and assets under custody grew to €6.4 trillion.

• Euronext Technologies and Other revenue

Euronext Technologies and Other revenue grew to €27.3 million in Q2 2023, up +13.2% from Q2 2022, reflecting a full quarter contribution of the colocation activity following the migration of Euronext’s Core Data Centre on 6 June 2022.

On a like-for-like basis at constant currencies, Euronext Technologies and Other revenue was
up +11.7 % compared to Q2 2022.

 

Q2 2023 corporate highlights since publication of the Q1 2023 results on 16 May 2023

• LCH SA 11.1% capital disposal

On 26 June 2023, Euronext announced it entered into a definitive agreement for the sale of its 11.1% stake in LCH SA to LCH Group Holdings Limited (“LCH Group”), for an amount of €111 million. The transaction was completed on 6 July 2023.

As a result, in Q3 2023 Euronext will incur a non-underlying capital gain of around €40 million, which will be exempt from tax. As a reminder, as of 31 December 2022, Euronext accounted a carrying amount of €70.6 million for its 11.1% stake in LCH SA.

This transaction results from the notification by LCH Group to Euronext of the exercise of its option to buy back Euronext’s 11.1% stake in LCH SA, following the early termination of the existing derivatives clearing agreement between Euronext and LCH SA announced on 16 January 2023, that will take place in Q3 2024.

The price has been defined by an independent expert, in accordance with the pre-agreed terms for the buy back.

Euronext and LCH SA are committed to working together to ensure an orderly migration of clearing flows from LCH SA to Euronext Clearing.

Corporate highlights since 30 June 2023

• Launch of a share repurchase programme

On 27 July 2023, Euronext announced a share repurchase programme (the ‘Programme’) for a maximum  amount of €200 million.

This Programme is enabled by Euronext’s strong cash generation capabilities and demonstrates Euronext’s rigorous capital allocation strategy^[6]. The Programme will not change the deleveraging path of Euronext, nor its credit rating. The Programme will also be compatible with preserving the Group’s financial flexibility to capture market opportunities and its existing dividend policy of a pay-out of 50% of reported net income.

The Programme will be implemented as follows:

• Purpose: the purpose of the Programme is to reduce the share capital of Euronext. All shares repurchased as part of the Programme will be cancelled;
• Maximum amount allocated: €200 million;
• Duration: the targeted period for the share repurchase programme is from 31 July 2023 for a maximum duration of a year, to be implemented on Euronext Paris;
• Framework: Euronext aims to repurchase approximately 3.0% of its ordinary shares, as authorised by the General Meeting on 17 May 2023 to a limit of 10.0%.

Euronext has entered into a non-discretionary arrangement with a financial intermediary to conduct the repurchase.

The Programme will be executed in compliance with the applicable rules and regulations, including the Market Abuse Regulation 596/2014 and the Commission Delegated Regulation (EU) 2016/1052, and based on the authority granted by the annual general meeting of shareholders on 17 May 2023. Euronext will provide regular updates on the progress of the programme, in line with applicable regulations, at:
euronext.com/en/investor-relations/capital-and-shareholding/share-buyback-program.

• Euronext enlarges its SBT 1.5°C index offering to accelerate the transition to green finance

On 11 July 2023, Euronext announced the launch of two new SBT indices: the Euronext Europe SBT 1.5° Index and the Euronext Eurozone SBT 1.5° Index (gross return Bloomberg codes: EZSBT15G and EUSBT15G). These two indices invest solely in companies within the Europe 500 index and within the Eurozone 300 index, respectively, that have emissions reduction targets approved by the Science Based Targets initiative (SBTi) to be in line with the 1.5°C goal of the Paris Agreement.

Agenda

A conference call and webcast will be held on 28 July 2023, at 09:00 CEST (Paris time) / 08:00 BST (London time):

Conference call:

To connect to the conference call, please dial:

Password: Euronext

Live webcast:

For the live audio webcast go to: Euronext Results webcast

The webcast will be available for replay after the call at the webcast link and on the Euronext Investor Relations webpage.