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

Ladies and gentlemen, thank you for standing by. I'm Popi, your Chorus Call operator. Welcome, and thank you for joining the Athens Exchange Group Conference Call to present and discuss the full year 2022 financial results. and the conference is being recorded. [Operator Instructions] At this time, I would like to turn the conference over to Mr. Yianos Kontopoulos, CEO; 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 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 fiscal year 2022, which were published yesterday and are available in the IR section of our website, and then take any questions that you might have. Our CEO, Mr. Yianos Kontopoulos, will first make some general comments. And then our CFO, Mr. Nikos Koskoletos, will present the performance of the market on the group for 2022. So I'll now pass the floor to Mr. Kontopoulos.

Thank you very much for the introduction, Stelios. Ladies and gentlemen, good afternoon, and thank you for your patience. I would like to welcome you as well to the full year 2022 financial results Conference Call of the Athens Exchange Group. I will take this opportunity to give you a brief overview and status update of our current corporate positioning. The past year has been a challenging 1 for offense Exchange Group as we had to face the tough geopolitical and market conditions created by the war in Ukraine, Europe's energy crisis and the rising inflation, which, as you know, had a significant impact on most financial markets worldwide. Despite these difficulties, the Greek stock market performed much better than most regional or international markets, driven mostly by the growth of the Greek economy. On top of that, our new results-oriented strategy focusing on extra version and digital transformation, and our team's hard work and dedication have helped us to overcome the adversity and lay the foundation for the growth of the group. In 2022, we managed to strengthen our financial position in terms of revenue and earnings before interest and taxes. Our net revenue was EUR 37.9 million or 4.8% higher than in 2021. And our EBIT was EUR 8.73 million, 1.6% higher than last year. Despite the difficult macro environment, we have remained committed to our mission of strengthening the role of the capital market to the Greek economy, and we have worked actively throughout the year with all ecosystem stakeholders to improve our market's competitiveness and adaptability. 2022 was a year of 2 halves as far as market activity and capitalization are concerned, as over the course of the year, we saw a strong growth momentum in the first half followed by a declining trend in the second. Overall, our average daily trading activity increased in 2022 by 3.4%, reaching EUR 73.7 million and the overall market capitalization has increased as well by 3.7%, reaching EUR 63.3 billion. The growth momentum continues in the first quarter of 2023 in which market capitalization has exceeded EUR 70 billion. As a result of these increases, our trading-based revenue, that is the revenue from trading and post-trading activities, increased by 6.3% in 2022 compared to 2021. And our market cap based revenue was also up by 21%. Mr. Nikos Koskoletos, the Group CFO, will present in detail our financial KPIs in due course. Before I give the floor to Nikos, I would just like to take the opportunity to make a few comments on our path for the next year. Building on the experience we've gained in the past 12 months in 2023, we continue to focus on extra version, digital innovation and the enhancement of our services to boost our markets activity. This year, we plan to launch new products that will improve and expand the services we provide to our clients. We are also executing a new IT operating model, and we are investing to improve further our systems robustness and efficiency, providing enhanced digital services to our clients. In addition, we're exploring a hybrid corporate venture capital initiative, which will focus on the integration of the next-generation digital fintech solutions to the stock exchange environment that will hopefully enhance the service Athens provides to its stakeholders in general. Last but not least, in order to strengthen our growth momentum and attract new investments in the Greek capital market, we are organizing multiple extra version activities in various geographies, such as investor roadshows in Europe and in the U.S. and conferences promoting the Athens Stock Exchange services. Along with these initiatives, we remain committed to promoting sustainability and corporate responsibility as we recognize the importance of sustainable development. Looking ahead to 2023 and beyond. I can say that I'm optimistic about the future of the Athens Exchange Group. The Greek economy is reemerging stronger after the end of the corona pandemic, fostering the growth of the Greek capital market. Despite the continuing geopolitical adversity, we will keep working in a structured and methodical manner, aiming to upgrade and reinforce the position of Athex Group envisioning its upgrade to develop market. I'm confident with a vital contribution of our team and the ongoing dedication to extra version and digital innovation, we will further increase the value we deliver to our shareholders in the years to come. That's all I wanted to say as an introduction to this call. Thank you all for listening and for your continued support and trust in Athex. I'll give the floor now to Nikolaos Koskoletos, who will give you a detailed overview of our full year financial performance. Nikolaos, I'll pass the floor to you.

Thank you, Yianos. And good evening, and good morning to all. Let's start with the overview of our 2022 financial performance at the top. The consolidated turnover of the group in 2022 was EUR 37.8 million compared to EUR 36.1 million in 2021, registering a 4.8% increase. Diving deeper, we see that, as mentioned, trading base revenue was up 6% on the back of a 3.4% increase in the average day traded value in the cash market that we saw in 2022 compared to that of the previous year. Market cap-based revenue, which is the listing and services to issuers was up 21%, and that was due to the 3.7% increase in the average capitalization of the market. And as we have mentioned in the past, the impact of IFRS 16, which prorates revenue from rights issues and IPOs over a 3- and 5-year period, respectively. Despite the fact that in 2022, we had much less new capital issued at EUR 1.2 billion compared to EUR 8.1 billion in 2021. Revenues from services, that is data services, IT and digital were down 3%, and that is mostly on the back of the -- lower use of the electronic Book Building Facility that we offer and lower revenue from the remote shareholder meeting service that we have, given the easing of the social discipline measures seen previously at the height of the pandemic in previous years. But let's look at the revenue line in more detail. Revenue from trading represents 16% of our consolidated turnover. And in 2022 was up 1.4% at EUR 5.9 million versus EUR 5.8 million in 2021. Revenue from post trading made up 40% of total turnover and amounted to EUR 15.1 million versus EUR 13.9 million in 2021, registering an 8% increase. The increase is due to basically a 41% increase in settlement, a 14% increase in subscriptions from operators and 2.6% increase in equities clearing. As far as revenue from the derivatives market that is both trading and post-trading is concerned, in 2022, trading activity measured by the average daily number of contracts, dropped by 27% to 35,000 contracts versus 48,200 in the previous year. Revenue in turn was down only 2.3% and the average revenue per contract increased 35% to just over EUR 0.20 per contract versus EUR 0.15 -- almost EUR 0.16 in the previous year. And this is just to remind that our fees for derivatives contracts depend on the type of investor, the product being traded and the prices of the underlying securities. So it's a matter of mix of the participants in the derivatives market. Lastly, on the trading and post-trading revenue, in 2022 was EUR 1.84 million versus EUR 1.88 million corresponding to 9% of total trading and post-trading revenue. Revenue from listing makes up 13% of total turnover. This line includes the quarterly subscription fees paid by listed companies, so it's directly associated with the actual market capitalization. Fees on rights issues and IPOs and other services issuers, and those amounted to EUR 5 million, up 21% compared to 2011. Revenue from data services make up 9% of total turnover and improve the fees that we incurred from data vendors for the provision of Athex market data as well as our revenue from our own offering in broker. The fees that we collect from market data, the beneficial on the number of data terminals to which these data venders disseminate Athex market data to an increase by 4%. And as you know, I think it's something that we've covered in the past as well, we have been gradually increasing our data fee prices. Revenue from IT and digital services make up 19% of total turnover and include revenue from digital services, infrastructure and technology solutions to mostly the Energy Exchange Group and Boursa Kuwait. As I mentioned, the performance this year was affected by reduced usage of the electronic Book Building Facility we have and the AXIA e-Shareholders Meeting. Revenue from IT and digital services was down 4.6% to EUR 7 million versus EUR 7.4 million. Finally in the ancillary services, which makes up the smallest part of our turnover at 3%, and basically, what we have there is some rent that we earn from our real estate that we have and some ancillary services that we offer. That was down 13% to EUR 1.3 million compared to EUR 1.5 million. And that was mostly because of a grant that was booked in 2021, so it's mostly a base effect of the increased 2021 figure and not a trend. Moving on to the expenditure side. Total OpEx increased by 10.5% in 2022 to reaching EUR 24 million compared to EUR 21.7 million that we had in 2021. Breaking down the operating expenses, we see that personnel costs were up 6.3% in 2022 at EUR 12.4 million compared to EUR 11.7 million in 2021. And all other expenses increased by roughly EUR 1.5 million, i.e., by 15% at EUR 11.6 million versus EUR 10.1 million. The highlights of the other expense category include the significant increase in the utility bill due to the persistent high electricity prices in 2022 compared to 2021 and resulting in the EUR 1.5 million electricity bill compared to close to EUR 900,000 in 2021. However, electricity does count for a smaller part of our OpEx at EUR 6.2 million, but the delta was significant, and that's why it is a notable change. The 20% increase in the other operating expenses due in turn mainly of -- the 20% increase in other operating expenses was also impacted by the fact that we were hit by increased insurance premiums given the dynamics of the particular market with regards to FMIs and the fact that we also have a [ cybersecurity ] insurance policy. Personal remuneration and expenses accounts for 52% of total operating expenses compared to 53.7% in 2021. Head count at the group level on December 31 was 236 FTEs compared to 228 in 2021. So all this brings out to the -- our operating profitability in terms of EBIT increased by 1.7%, and that was to EUR 8.7 million compared to EUR 8.6 million in 2021. Most notably, the number that impacted that change was the fact that, as you probably saw in the fourth quarter, a decrease in the depreciation rate that mostly dealt with the fact that we changed the effective usage lifetime of the building, our main real estate property from 25 years to 50 years, basically bringing it in line with market practice and as per our independent evaluators. So that is something that will structurally flow through to the next years. And in 2022, we also booked EUR 625,000 revenue from tax returns resulting from a favorable court judgment, that we saw that in previous quarters. Just wanted to mention here that we have appealed to have EUR 270,000 return, but that is something that we'll have to wait on the judicial system to have a relevant resolution. So the bottom line, net after-tax earnings for the group amounted to EUR 8.2 million, relatively flat to 2021. And given the risk performance, the Board we'll be proposing to the upcoming AGM, a EUR 0.15 dividend per share, that is a EUR 9 million payout, implying a 4.8% yield of the 2022 closing price and basically just less than 4% yield off our current price and will be grossed up as per the treasury shares that we have as well. So we're probably looking at just over EUR 0.156 per share. So on the balance sheet side now, the cash and cash equivalents of the group dropped to EUR 60.6 million compared to EUR 72 million. Most notably here, the actual effect was the payment of last year's dividend. The buyback program that we had pretty much run for most of the year that was terminated towards the end of the year. And we had a CapEx of close to EUR 4 million. So approximately 24% of the cash at EUR 15 million is capped at the Central Bank which were -- the interest rates there up until mid-summer, were negative. And as we have explained in the past, that is held at the CCP level and we need to hold these funds at the Central Bank for regulatory purposes. As I mentioned, with regard to our share buyback program, that was completed at the end of November. We have acquired close to 2.5 million shares, and the average price there is that EUR 3.34. So this concludes our comments for the 2022 financial results of the group, and we'd like to pass it on to the operator for any Q&A that we might have.

[Operator Instructions] The first question comes from the line of Alevizos Alevizakos with Axia Ventures.

I've got a couple of questions, if I may. One is I would like an indication of how you think about your CapEx going forward this year, it was slightly higher than what we have seen. But what would be the right level to think about CapEx going forward given that you've got a number of plans in your agenda? And then the second thing, I didn't get what is the plan with the 2.5 million of buybacks. Are you planning to use these shares to sell them back? Or are you planning to cancel them? Or will they be used for some bonuses?

Thank you for your question. Your sort of question -- I think Nikos is aching to answer both. So I'll do the reverse. I'll let him answer and then if I need to add something, I'll let you know. So Nikos, go ahead.

Okay. So on the CapEx, yes, going forward, I think the reason our CapEx for this year, the one that came up is that we brought forward some investments that were already planned. So given the expedited nature of the things that we want to do, some investments were prebooked in the 2022 numbers. I think we had talked about a EUR 7 million program over the next 2 years. Possibly, we might be looking at EUR 8 million just over that. So I would say that the number that we registered this year is pretty much or close to the number that we will be having over the next couple of years. And now with regards to the share buyback, the shares actually are -- the mandate -- further shares that we have right now, as per the GM resolution is either to cancel or to be used as compensation as the Board may see fit. I don't know if that covers your question.

Yes, yes. And a follow-up, if I may. The headcount, just to go up a little bit. And I would like to know what do you use in your planning as the wage inflation and what should be the kind of optimal number of FTEs that you will have like in the next couple of years?

Let me just give you the headline and then Nikos can add whatever he thinks, I might have missed. I think we're getting closer to the optimal number. We might be plus or minus a few more people, at least according to our budgeting for this year, but that will be pretty much it. I think my philosophy about what we needed to do here in terms of our overall approach to this particular expense line is to view it effectively as dislocation from the past few years, and our needs ahead require these types of interventions in '22 and '23. So I think that's pretty much the horizon of taking care of what at least the executive team thought of the dislocation with respect to the number of FTEs. And also, obviously, as I mentioned in my introductory remarks, taking into consideration general inflationary pressures and also an increased competition with regards to IT talent. But again, the FTE approach and the dislocation that we saw is not just merely IT because in IT sometimes it's retaining people as opposed to really making some sort of a complete difference in strategy in terms of the talent that you need, but also looking ahead in terms of what we expect the horizon and the opportunities to be in terms of our main line of business. So those are the thoughts behind it. And the short version of the answer is that is basically '22 and '23, the numbers are getting close.

The next question comes from the line of Kalogeropoulos Yiannis with Beta Securities.

I have 2 questions actually. One relates to the potential pipeline of new listings and what should we be expecting for as new listings for 2023. And the second question relates in general to your OpEx lines. If we examine all your OpEx lines, or your OpEx elements, every OpEx line, I mean, personnel, maintenance, PV rises and goes up on a double-digit growth which further more exceeds your top line growth. Is that something that should be -- is expected to be reversed in 2023? Or the growth rates will continue growing up at these rates or maybe slow down a bit?

Okay. With respect to the pipeline of new listings. Look, there's a pipeline and there's a pipeline. Meaning that things that are intentions and then things happen or good things happen or bad things happen. So what I can tell you in terms of the -- at least the sense behind it, there's definitely interest. And I think that -- that's my personal opinion. I think that one of the major issues that will set the stage will be the -- whether we have a big entry into the pipeline taking place in 2023 or not. I think that potentially could be a catalyst in terms of how our visibility on the pipeline will likely play out. What I want to say is that interestingly, especially when you start from a relative dearth of IPOs, what happens is that things happen benchtop. It's almost like a process on process, right? They don't happen in some sort of an orderly fashion. So getting a big one in, in 2023, I think will make the whole difference. And we shall see. That's the answer to the first question. But overall, I think there is interest. For our interactions with the ecosystem, I think there's -- we should be optimistic. In terms of the OpEx line, as I mentioned, look, there are some factors that we don't quite control, but none of the actions that we have taken in '22 and in '23 are passive. In essence, for me, a lot of what we need to do is a redirection, taking care of some of dislocations and positioning for what might come next. And I think the right reassessment for this will happen in 2024, just to see what we've done makes sense or not. But for now, what's happening and some of the double-digit growth will go into single digits and some of the single digit will go to double digit because when you make some sort of interventions in the middle of the year, as you can understand, arithmetically, that also part of that will show in 2023 and so on and so forth. But ultimately, for me, the way you should look at it at this move is basically 2022 and 2023 is a transition period. And it's not something that you should extend into -- further into the future, nor does it mean that this -- we're staying passively against it. We are making adjustments and decisions as we see fit, and to the extent that we can.

The next question comes from the line of Boulougouris Alexandros with Wood & Co.

Just a quick question on the depreciation line, which Nick, you mentioned the decline in the fourth quarter, if my numbers are correct, it was extremely low. What should be the run rate now per quarter from the first quarter of 2023 that we should assume in our models.

Alex, yes, actually, because the change happened at the end of the year. The decision for the change was made at the end of the year. So basically, the annualized impact effectively was impacted in the fourth quarter. It's not an organic thing. It's just a matter of making the change annualizing it and reporting it for our year-end numbers. So I think the run rate that you should consider is the one that we reported in 2022. And basically, there was a debasement versus 2021, and that should be the number going forward. .

Starting from around EUR 3.75 million. That's the...

Correct. Like from the EUR 4.5 million that we were, the number, it would be -- yes, the number that you would see in 2018 -- I think the new base for 2022 is a EUR 3.7 million.

The next question comes from the line of Memisoglu Osman with Ambrosia Capital.

I just wanted to check to see if you could potentially elaborate on what -- how we should think about the focus on extra version. Any more color there would be helpful.

Sorry, I had my line muted. Look, for me, this is probably the thrust of the opportunity at least in the next couple of years, meaning that we think there is an idiosyncratic offering out of the Athens Stock Exchange for the international community, which is a big part of our investor base. And as I mentioned, part of the initiative here has to be us taking a much more active role in terms of bringing new clients and new investors to take a look at what we have to offer. Meaning that we need to find the right type of alliances with market participants, which will open the doors and will help us nudge the interest of institutional investors from different constituencies to take a look towards what Greece has to offer as opposed to something else. And there are always many different opportunities. So that means that we invest a lot of time and thought process in terms of how we accommodate that type of marketing, if you may, of what the product is out there. And as you well know from your experience, we need to repeat that and keep repeating that many, many times. So it sounds simpler in principle, but in reality, it's a big effort. So that's effort number one. The second one, the second aspect here is to make sure that we help create products that will meet the needs of the market, meaning that if we can come up with initiatives that will allow a greater propensity for investors to increase their positions in Greece or to open up their positions because the derivative side, for example, will work in a smoother fashion or in a more meaningful fashion then that becomes a priority for us. And that's definitely one of the areas that we are looking at intensely in 2023, and that relates also to aspects that relate to making sure that our stock lending capacities are optimized, and I guess I'm using euphemisms here, but I want to make them a lot more aggressive and a lot more -- a lot richer than they have been out there. So the team is really focusing on those aspects. There is also an effort to look at how we can make some changes with respect to the pricing scheme that we are using. So we are well advanced in those thought processes and we're going to test them relatively soon. So this is something that potentially we'll see this year. We are also looking at revamping our rule book in order to make certain aspects of the market to work a lot more efficiently and smoothly and to really reflect the necessities of what the market is requesting nowadays, both internationally and domestically. And also looking at the relaunching of the alternative market, which is for us to help us. The trust of the Greek economy still results around small and medium enterprises. So that needs to be a parallel target that we have actively looked up during 2022, and we're looking for initiatives, including one tomorrow that doesn't necessarily only cover, for example, initiatives that would help small and medium enterprises, but also new newcomers into the IPO space in Greece. So if you want to take a look at our website, there is an interesting initiative tomorrow. And last but not least, I'm sure you guys have visited at times our website. And look, we can do a lot more there, both in terms of explaining what we do, but also facilitating the process of how people access and get informed about our market. So that's a big investment item for 2023. And I hope that this will help also on the part of extra version. You probably ask for a shorter answer, so I'll just stop here and happy to...

No, no, that's very helpful. I really appreciate the color.

[Operator Instructions] We have a follow-up question from the line of Memisoglu Osman with Ambrosia Capital.

Just on shareholder remuneration, should we expect -- you've basically followed up with a similar dividend payment. Should we expect a similar return of capital level later on this year?

Nick, I'll let you take this.

Yes, sure. Osman, No, I think it's something that we had covered in terms of capital return. Starting off from last year, where we basically paid out 100% of the cash distribution as a dividend. We are doing the same this year and pretty much will be -- we'll continue to do that way.

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.

Thank you, everyone, for taking the time to listen in. If you would like to speak with us, of course, we'll be happy to take any questions that you might have that you wish to speak with us in private. Thanks again, and have a great day. Bye-bye.

Thank you.

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