Euronext Athens Holding S.A. (EXAE) Earnings Call Transcript & Summary

Ladies and gentlemen, thank you for standing by. I'm Constantino, your Chorus Call operator. Welcome, and thank you for joining the Hellenic Exchanges - Athens Stock Exchange Conference Call and Live Webcast to present and discuss the 9 months 2021 financial results. [Operator Instructions] The conference is being recorded. [Operator Instructions] At this time, I would like to turn the conference over to Mr. Nikolaos Koskoletos, CFO; and Mr. Stelios Konstantinou, Head of Investor Relations. Gentlemen, you may now proceed.

Good afternoon, ladies and gentlemen, and good morning as always to those of you listening to us from the other side of the Atlantic. We would like to present the financial results of the group for the 9 months of 2021 which were published yesterday and are available in the IR section of our website, and then take any questions that you might have. Nick?

Thank you, Stelios, and my best to all participants. So some highlights about the performance of our market before we get into the financial performance of the group. In the 9 months of 2021, what we had, we had the average capitalization of the Greek capital market actually increased by 26% (sic) [ 25.4% ] to close to EUR 60 billion versus EUR 47 million and change in the 9-month period 2020. Breaking that down, you see that the [ liquid ] banks' market cap increased by almost 50%, while the market cap of the rest of the market increased by 22%. For the quarter, in Q3, the average market cap stood 42% higher than the respective period last year where our price levels were still reflecting a different macro backdrop than the one envisioned post the positive news related to the vaccines that hit the market in November of last year. The average trading -- the average Daily Traded value, that also increased by 16% to EUR 74 million year-to-date up to the -- for the 9-month period. EUR 63.4 million was the value for the same period last year. While in terms of quarters, we saw similar increases as the market data -- market cap data that I mentioned before. In terms of velocity, we saw some positive swings earlier in the year, which have [ pulled ] back in the past few months. But given the higher overall price levels, it produces higher trading values than what would otherwise have been the case. Derivatives -- on the derivatives, the activity increased by almost 50% to close to 57,000 contracts compared to 38,400 last year the same period. On data feed, you can see that we had an increase in [ the EBITDA ] that was related to some price increase that we announced, and we didn't have any significant changes to our client base, so we still maintain the upside should we have increased interest in our data feed from more users. And finally, so far in 2021, the year has been a strong year in terms of capital raising, both from the bond market which continues the positive run that we've had over the past few years, so we had increased activity in acquisitions as well, so bringing total issues at EUR 7.5 billion from EUR 1.2 billion last year, which is almost, quite impressively, it's almost double the 2016 - 2020 cumulative period in terms of capital raising. So we believe that as the Greek macro growth story develops, and our fund starts going to the system, the capital market will also [ come into the limelight ] as the investment gap still remains quite large. And as beneficial as [ the EV ] funds are, more funding is required and we believe that the capital markets can and should have a pivotal role in the capital formation process. So with that said, Stelio will go into more -- into a more detailed presentation of results. So I'll pass the call to him. Stelio?

Thank you, Nick. So let's start with the overview of our 9 months 2021 financial performance from the top. The consolidated turnover of the group in the 9 months of 2021 was EUR 27 million compared to EUR 22.1 million in the 9 months of last year, and that's up 22.3%. If we analyze revenue further, we see that trading-based revenue, i.e. from trading, clearing and settlement, was up 10% on the back of higher [ activity ] in the cash market in the 9-month period compared to last year. Market cap-based revenue, i.e., exchange, depository and clearing house services, was up 46%, mainly due to increased corporate actions activity. While revenue from ancillary services, which includes market data support of other markets, et cetera, was up 29%. Let's now look at the 6 month important revenue drivers, which combined for about 9% of total revenue. Revenue from clearing made up 28% of total turnover and amounted to EUR 7.6 million compared to EUR 6.8 million in the 9-month period last year, and that's up 11%. The increase is due to the 15% increase in clearing revenue in the cash market, while derivatives market revenue was up 4.6%. Revenue from trading represents 15% of total consolidated turnover, and in the 9-month period was up 8%, perhaps EUR 4.1 million compared to EUR 3.8 million last year. Now as far as revenue from the derivatives markets, both trading and clearing is concerned, in the 9-month period trading activity, net number of contracts increased by 48% to 56,700 contracts compared to 38,400. However, revenue went up 4.6% and the average revenue per contract is down 30% to EUR 0.146 per contract compared to EUR [ 0.07 ] per contract. As you know [ isin ] in terms of [ back of ] investors [ profiting against fios underlying ] securities and [ verse of ] market [ drawn well ] revenue do not always go hand-in-hand. [ Passing on ] derivatives, [ trading and continuing ] revenue in the 9 months 2021 was EUR 1.51 million compared to EUR 1.46 million [ or 5 ] million, and that [ worse amounts to ] 13% of total trading and [ extend ] revenue and 5.6% of total turnover. Moving on, revenue from [ exchange ] services makes 11% of total turnover, and this line includes the quarterly subscription fees paid by listed companies, fees on [ ridency ] and IPOs, as well as [ fees paid by ] members and that amounted to EUR 3.1 million, up 33% compared to the 9-month period last year. Revenue from depository services is up 64%, amounting to EUR 3.3 million compared to EUR 2 million in the 9 months for 2020. Revenue from [ this line ] makes up 12% of total turnover and includes revenue from rights issues, quarterly subscriptions paid by operators, and revenue from inheritances and the like. Most revenue from that line was from A, corporate actions by issuers at EUR 1.6 million compared to EUR 800,000 last year; and B, subscription fees of operators, which is a custody-type [ like ] fee that is based on capitalization of the market, which came in at EUR 1.5 million compared to EUR 1.1 million last year. Revenue from ancillary services makes up 14% of total turnover. And in 9 months of 2021, it was up 60% to EUR 3.8 million compared to EUR 2.4 million in the 9-month period last year. Fees increase is due to the more than 100% increase in revenue from supporting other markets, which came in at EUR 2.16 million in the 9 months of this year compared to EUR 1 million over the same period last year. In particular, this significant increase is mainly due to the provision of additional services following the start of the operation of the spot electricity market of the Energy Exchange under the European Model, the Target Model, the so-called Target Model, the provision of services to Boursa Kuwait, the Cyprus Stock Exchange and DESFA, which is the Hellenic Gas Transmission System Operator. In addition to the significant increase in revenue from the support of other markets, we also saw revenue from XNET increase by 30% and revenue from Colocation Services increase by 13%. Finally, on the top line, revenue from market data makes up 8% of total turnover and includes fees that we collect from data vendors for the provision of ATHEX market data. Revenue from this market -- from market data, rather, increased by 8%. Turning now to the expense side. Total operating expenses, including ancillary services, increased by 3.1% (sic) [ 3.4% ] in the 9 months of 2021 at EUR 15.1 million compared to EUR 14.6 million last year. Operating expenses were up by approximately EUR 340,000 or 2.5% in the 9-month period at EUR 14.1 million compared to EUR 13.7 million. If we break down OpEx, we see that personnel costs were slightly down at EUR 8.15 million compared to EUR 8.2 million last year, while all other expenses were up 7.7% at EUR 4.8 million compared to EUR 4 million last year. In turn, the main drivers [ behind increase ] is increase of approximately EUR 100,000 in consultancies and an increase of approximately EUR 300,000, EUR 318,000 in maintenance and IT support. Personnel, [ a merge and ] expenses accounts for 58% of total OpEx compared to 60% in the 9-month 2020 period and is by far the largest expense category. Headcount at the group at the end of September 2021 was 231 people compared to 228 at the end of the same period last year. Turning now to the bottom line. The earnings before interest and taxes of the group increased by 131% to EUR 7.6 million compared to EUR 3.3 million in the 9 months of 2020. Net after-tax earnings for the group amounted to EUR 7 million compared to EUR 2.54 million in the 9 months of last year, and that's a 177% increase. And the effective tax rate, the effective consolidated tax rate on earnings in the 9 months of 2021 was 11.1% compared to 25.5% over the 9 month period last year. We remind you that for 2020, the nominal corporate income tax rate was 24%, while for 2021, the nominal rate is 22%. Turning now to the balance sheet. The cash and cash equivalents of the group at the end of September 2021 increased to EUR 68.7 million compared to EUR 68 million at the end of 2020. At the parent company, cash and cash equivalents were EUR 28.5 million compared to EUR 17.9 million. Approximately 20% of the cash, i.e., about EUR 13.5 million at the end of the 9-month period, is kept at the Central Bank where interest rates are negative, currently at minus 0.5%. Also on the balance sheet, a further EUR 259.4 million will report as both an asset and a liability, part of [ actually ] third-party cash assets and [ concern ] margins in the cash and derivatives markets. These funds are also deposited at the Bank of Greece. And with that comment, I would like to thank you and open the call for any questions that you might have.

[Operator Instructions] The first question is from the line of Memisoglu Osman from Ambrosia Capital.

Many thanks for the presentation and your time. Two on my side, please. One, on the ancillary side, obviously, you've been progressing on that front quite significantly over the last few quarters. Can you give us any color on the outlook for Q4 and maybe a bit beyond, say, for 2022? And particularly with the energy business with much higher electricity prices? And then on the management front, if you could give us any color on the CEO change process? How is that coming along? Are you looking internally, externally? Any color there would be helpful.

Okay. Hi Osman, thank you for the question. Now with regards to the ancillary services, I think we had mentioned in the past that our target is to -- The sum of data feed all the way down to the -- what is the structure of our current income statement is to be close to -- we're working on getting to a EUR 10 million figure. That is something that obviously is not this year's target, it's something that we are currently working on achieving over the next couple of years, but we could -- if things work out, get to that point earlier than the end of 2023. With regard to guidance on the energy exchange, we have mentioned that overall, it's -- on maturity, it is sized up to be a EUR 1.8 million relationship. That is one thing. The -- what is happening in the energy market is something that is not affecting our revenue stream with regards to the licensing that we are collecting from that relationship, nor is it affecting the support that we're offering to the Energy Exchange. So we do not have any moving parts that is basically exposed to the fluctuation of the energy prices. That is one thing to keep in mind. With regards to the fourth quarter, I think what happened is you see -- more or less could be a fair assumption as to what we could be expecting for the fourth quarter. I wanted to remind you that in Q2, especially in the energy exchange where we had, we had [ 3 ] deliverables that kind of boosted the actual figure on a quarterly basis. So other than that, we do not see any significant surprises other than the things that we are working on and trying to broaden the audience to which we could be offering services to, given our portfolio of things that we're looking to offer other market infrastructures. So that is with regard to the first part, your first question that you had. Now with regards to your second question, the -- there is not much that we can actually say on the process. It's something that we -- it's at the Board level, the Nomination Committee has elected to go through a process. And through that process as soon as that process is continued, I'm pretty sure that the Board will be coming out with an announcement as per its original statement that we will be having to change at the beginning of early next year, I believe was the actual wording. So nothing other than that given the process that has been elected by the Board through the Nomination Committee. And to be honest we don't really have anything more to say on that. Because it's up to the Nomination Committee, so.

[Operator Instructions] Ladies and gentlemen, there are no further questions at this time. I will now turn the conference over to management for any closing comments. Thank you.

Nick, go ahead.

Yes. So I just want to thank you all for participating. Looking forward to speaking with you whenever you [ that is ] whenever you have the opportunity to reach out and we will be seeing you again, I guess, through this platform when we announce our annual results at the end of March.

Thank you for participating. Have a good day. Bye.

Ladies and gentlemen, the conference has now concluded, and you may disconnect your telephone. Thank you for calling. Have a pleasant afternoon.