• Revenue: EUR412.9 million, up 12.2% year-on-year.

• Adjusted EBITDA: EUR256.8 million, up 18.8% year-on-year.

• Adjusted EBITDA Margin: Increased by 3.5 points to 62.2%.

• Adjusted Net Income: EUR165.2 million, up 15.6% year-on-year.

• Adjusted EPS: EUR1.59 per share, up 19% year-on-year.

• Net Debt to EBITDA: 1.8 times at the end of June 2024.

• Listing Revenue: EUR58.4 million, up 5.9% year-on-year.

• Advanced Data Services Revenue: EUR60 million, up 5.4% year-on-year.

• Trading Revenue: EUR142.7 million, up 20.7% year-on-year.

• Fixed Income Trading Revenue: EUR35.6 million, up 40.7% year-on-year.

• Clearing Revenue: EUR39.2 million, up 33.2% year-on-year.

• Custody and Settlement Revenue: EUR69.7 million, up 9.4% year-on-year.

• Operational Expenses (excluding D&A): EUR156.1 million.

• Net Cash Flow from Operations: EUR111.5 million.

• Warning! GuruFocus has detected 9 Warning Signs with EUXTF.

Release Date: July 26, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Euronext NV (EUXTF) reported a 12.2% year-on-year revenue growth in Q2 2024, reaching a record level of EUR412.9 million.

• The company achieved a 12% increase in adjusted EBITDA to EUR256.8 million, with an improved EBITDA margin of 62.2%.

• Successful integration of the Borsa Italiana Group is nearing completion, with significant synergies expected to reach EUR115 million by the end of 2024.

• Euronext NV (EUXTF) completed a strategic acquisition of Global Rate Set Systems, enhancing its position in the Interbank Offered Rate indices market.

• The launch of the Euronext Wireless Network, a new microwave service, positions Euronext NV (EUXTF) as a pioneer in Europe, offering improved order transmission speed and latency.

Negative Points

• The share of non-volume related revenue slightly decreased this quarter due to strong trading and clearing activities.

• Technology solutions revenue declined by 7% due to the termination of double-run connectivity revenues.

• Despite strong performance, the net cash flow from operations decreased to EUR111.5 million from EUR139 million in the same quarter last year.

• The company maintains its cost guidance despite being on track to beat it, indicating potential cost increases in the second half of the year.

• Advanced data services revenue growth slowed to 4% like-for-like, reflecting a mild erosion of professional terminal demand.

Q & A Highlights

Q: On costs, it seems like you are on track to beat your cost guidance for the year. Why are you maintaining your guidance now? Should we expect a step-up in the costs in the second half? A: Giorgio Modica, CFO: We maintain the EUR625 million guidance because we have a EUR10 million envelope dedicated to growth projects, which will be used mostly in the second part of the year. Combining the current trajectory of costs with this envelope aligns with our cost guidance.

Q: How should we think about NTI going forward, especially with the clearing migration revenues? A: Giorgio Modica, CFO: For the next quarter, expect no major changes in our P&L. After Q3, there will be a shift, with NTI increasing by around EUR4-5 million, while clearing revenues will reduce by the same amount due to the retrocession of NTI from LCH SA.

Q: Can you give an update on the proportion of volumes retained from LCH after the clearing migration? A: Anthony Attia, Global Head of Primary Markets and Post Trade: We have retained a very strong market share in cash equity clearing post-migration. For listed derivatives, we capture 100% of flows from Euronext markets, and we plan to grow this through new product launches.

Q: Can you provide more details on the microwave technology and its market potential? A: Nicolas Rivard, Global Head of Cash Equity and Data Services: The microwave technology reduces latency between London and Bergamo by almost 4 milliseconds. It's unique because it democratizes access, is Plug & Play, and fully redundant. We have clients like Goldman Sachs and Morgan Stanley already connected.

Q: With the T+1 settlement coming, do you see an opportunity to increase pricing power with clients? A: Anthony Attia, Global Head of Primary Markets and Post Trade: It's too early to determine if T+1 settlement will provide pricing power. We are working with the market and authorities to ensure readiness and will have more insights next year.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

This article first appeared on GuruFocus.