Euronext N.V. (ENX) Earnings Call Transcript & Summary

Hello, and welcome to the Euronext Fourth Quarter and Full Year 2022 Results. My name is Caroline, and I will be your coordinator for today's event. Please note, this call is being recorded. [Operator Instructions] I will now hand over to your host Stéphane Boujnah, Euronext's CEO and Chairman of the Managing Board, joined by Giorgio Modica, Euronext's CFO, to begin today's conference.

Good morning, everybody, and thank you for joining us this morning for the Euronext Fourth Quarter and Full Year 2022 Results Conference Call and Webcast. I am Stéphane Boujnah, CEO and Chairman of the Managing Board of Euronext. And I will start with the highlights of the full year and the fourth quarter. Giorgio Modica, the Euronext CFO, will then further develop the main business and the financial highlights of the fourth quarter. As an introduction, I would like to highlight 3 points. First, Euronext is stronger than ever. Euronext is now present in the full value chain and Euronext confirmed its leadership position in listing and in trading in Europe. In addition, our revenue demonstrated strong resilience, thanks to our diversified business model. Second, we beat our 2022 cost guidance, thanks to cost discipline, in an inflationary environment. Third, we are well advanced in the integration of the Borsa Italiana group. And by the end of 2023, we will reach EUR 70 million of cumulative run rate synergies. We are now in a position to upgrade our 2024 synergy target by EUR 15 million to EUR 115 million of annual run rate synergies. Let me give you some more detail on each of those points. First, as I said, Euronext is today the leading listing venue in Europe for equity and for that globally. And we are also the largest revenue for equity trading in Europe, representing 2x the volume traded on the London Stock Exchange and Deutsche Börse. We are now a top ranking post-trade infrastructure operator through Euronext clearing and Euronext securities. This is all the result of our diversification strategy. And this major transformation is reflected in our 2022 performance where 58% of our underlying revenue is now non-volume related. 2022 was also stronger in terms of financial performance. In 2022, Euronext reached record underlying revenues and income above EUR 1.4 billion. This is up plus 13% compared to 2021. We generated plus EUR 120.2 million additional revenue in 2022 compared to '21 which was a very strong reference years, as you may remember. This strong 2022 performance was driven by the strong performance of nonvolume-related businesses and enhanced revenue capture. And in trading, we recorded a very strong year for power and for ForEx trading. The softer volume environment for cash equity trading in the second half of 2022 was clearly offset by significant and efficient management of yield and a real uptick in market share from October 2022. Our post-trade franchise significantly benefited from the consolidation of Euronext Clearing and Euronext Securities, Milan. Which we acquired as part of the Borsa Italiana Group acquisition in April '21. The diversified business of the Euronext Securities allowed us to capture value as settlement activity stabilized in H2 2022. I would like especially to highlight the performance of our listing business, which grew by plus 15.1% and reported solid listing activities with 83 new listings in 2022. In particular, we welcomed 20 international companies, which in my view is the recognition that Euronext market in Europe are now the venue of choice for listing in Europe. Furthermore, our Advanced Data Services business increased by plus 15.5%, reflecting growth across the real-time and nonreal-time data business as well as index growth. Lastly, following the successful migration of our core data entered to Bergamo in June 2022, we significantly scaled up our Technology Solutions business, reaching over EUR 100 million in revenue now. That's why, as mentioned earlier, the share of nonvolume-related revenue represented 58% of our top line in 2022 and accounted for 141% of our operating costs, excluding D&A. And that brings me to our ongoing focus on cost discipline on Slide 5 with the bigger picture on financials. Thanks to our strong cost discipline and several positive one-off impact of the year, we overachieved our revised cost guidance of EUR 612 million, down from an initial cost guidance, as you may remember it, of EUR 622 million because we reported EUR 606.1 million of underlying expenses, excluding D&A. And this was achieved despite inflationary pressures, despite pressure on supply chains that everyone experiences. Consequently, our 2022 adjusted EBITDA grew double digit to $861.6 million. This translated into an adjusted EBITDA margin at 58.7%. Overall, this performance resulted in a plus 5.7% increase of adjusted net income to EUR 555.3 million. Adjusted EPS was down minus 4.8% to EUR 5.21 per share, and this reflects the higher number of outstanding shares over 2022 compared to 2021. On a reported basis, net income is up plus 6% to EUR 437.8 million. Consequently, a dividend of EUR 2.22 per share will be proposed at our upcoming Annual General Meeting in May. This dividend represents a payout ratio of 50% of reported net income, adjusted for the EUR 49 million pretax or EUR 35 million prospects one-off loss related to the partial disposal of the Euronext clearing portfolio announced in Q2 2022. And this dividend is EUR 0.29 more than the EUR 0.21 dividend per share, it is an increase of plus 13%. Moving now to the Q4 performance on Slide 6. Euronext reported a solid fourth quarter for 2022. The quarter was marked by strong performance of Advanced Data Services, strong performance of listing activities, offset by lower revenues from business created with cash equity volumes. Underlying revenues were down minus 6.2% compared to Q4 2021 at EUR 347 million, reflecting the resilience of our diversified revenue streams in the low volatility environment. Despite softer cash equity derivatives and MTS cash trading activities, the strength of our nonvolume-related businesses enables us to report only a slight decline in total revenue. First, non-volume-related revenue posted a strong performance overall, notably, as I said earlier, in listing in Advanced Data Services in technology. Second, our trading businesses that are not related to equity markets strongly performed. We notably recorded strong growth year-on-year in power trading and a solid quarter in ForEx trading. Last, we efficiently manage our revenue capture and regain market share from October 2022 in cash trading operations. This translated into nonvolume-related revenue accounting for 60% of the total Q4 revenue and covering 130% of underlying operating expenses, excluding D&A. So Q4 2022 underlying operational expenses, excluding D&A, increased slightly to EUR 159.2 million, up plus 1.6% compared to Q4 2021. And this reflects forecast disciplined approach to cost control and higher capitalized project costs offsetting inflationary pressures. Overall, we reported an EBITDA -- an adjusted EBITDA of EUR 187.9 million and an adjusted EBITDA margin of 54.1%. This led to an adjusted EPS at EUR 1.11 per share and an adjusted net income of EUR 118.2 million. On a reported basis, the EPS for this fourth quarter reached EUR 0.93. Clearly, '22 was a year of transformation for Euronext, and we made good progress in our integration process and synergy delivery. The migration of our core data centers from Basildon in the U.K. to Bergamo in Italy was the first key milestone of our growth for Impact strategic plan. This migration, combined with continued cost discipline enabled us to deliver EUR 34.1 million accumulated run rate annual synergies at the end of 2022 in relation to the acquisition of the Borsa Italiana Group. Looking forward, we expect to achieve around EUR 70 million of our targeted synergies by the end of '23 alone with the delivery of several key projects. First, next month, we will significantly change the dimension of our unique European liquidity pool because the migration of Italian cash markets to Euronext state-of-the-art proprietary trading platform Optiq will benefit local and global trading members and will allow an alignment of fees. Second, the other Italian markets will migrate to the Optiq European liquidity pool starting in Q4 2023 unlocking further cost synergies with the termination of the Millennium LSEG technology contract. Third, Euronext clearing will become the CCP of choice for equity clearing by the end of this year, generating revenue synergies. And the following year by Q3 2024, Euronext clearing will also clear your next listed derivatives. Those good progress on integration means that we are able to upgrade our synergy targets. We expect total run rate synergies in relation to the acquisition of the Borsa Italiana Group to reach EUR 115 million by the end of '24. This is EUR 15 million more than the amount targeted until now. And this is almost 2x the initial amount announced at the moment of the Borsa Italiana Group acquisition. You may remember that in April '21, we committed to deliver EUR 60 million of synergies in relation to the acquisition of the Borsa Italiana Group. Today, we are confident that we will deliver almost a double EUR 115 million of synergies in relation to the acquisition of the Borsa Italiana Group. So that demonstrates, once again, the strong track record of the Euronext teams in delivering operating performance and operating leverage. On the next slide, I'd like to take a moment to tell you in more detail about one of our key strategic objectives related to clearing. It's a key strategic project. Last month, we confirmed the planned European expansion of Euronext clearing to all Euronext listed derivatives for Q3 2024. As a result, Euronext served LCH SA, a notice of termination for the existing derivative clearing agreement on 16 January 2023. As we already announced, the related termination fee of approximately EUR 36 million to be paid to LCH SA is part of the EUR 150 million envelope of implementation costs related to the growth for Impact 2024 strategic plan. Therefore, this amount will be provisioned in our income statement as a nonunderlying expense in Q1 2023 and will be payable in 2024. When we embarked on our ambitions, post-trade strategy our aim was clear: To offer our clients the benefit of scale and harmonization across European markets, while still maintaining a robust local footprint in insect market. For all clients, this will bring margin efficiencies with the implementation of a new value-add risk model and a single depot. It will also bring efficiencies across all asset classes with transparency on data, particularly on settlement, leveraging Euronext Securities target to security settlement platform. So the expansion of Euronext clearing is really critical as it will allow us to manage the entire trading value chain of our market by the end of '24, and it will generate significant revenue and cost synergies. Moving to Slide 9. We continue to deploy capital efficiently in 2022 through a number of initiatives allowing us to better control our technology and develop new services. First, in March, Euronext Securities acquired the General Meetings designated representative and shareholders registered activities of Spafid. This strategic partnership has contributed to the high growth of added services offered through Euronext Securities franchise. Secondly, we have internalized the technology powering MTS and Euronext equities in Milan as part of our plan to integrate our full value chain and our technology. In addition, following the completion of the strategic review undertaken as part of the integration of the Borsa Italiana Group and our decision to divest from noncore assets, Euronext has disposed the U.S. subsidiary of MTS, MTS Markets International Inc. Importantly, during this time, we have pursued very actively our deleveraging path reaching 2.6x net debt to EBITDA at the end of December 2022. And this compares to 3.2x net debt to EBITDA at the closing of the acquisition of the Borsa Italiana Group. Together with our strong cash generation capability, this brings us to around EUR 1.5 billion of available capital at the end of December 2022. And all progress has been recognized by S&P that upgraded their outlook to positive in 2022. And as you have seen it yesterday evening, we have been upgraded to BBB+. So we are very well advanced on our integration. We are confident in our ability to deliver upgraded synergies because, once again, this demonstrates the post-merger integration track record of the Euronext teams and this confidence, combined with our favorable liquidity position enables us to continue exploring external growth. We will be looking for assets able to contribute to higher organic revenue growth to provide scalability and to improve exposure to nonvolume-related businesses, obviously, always in line with our rigorous capital allocation policy. Finally, I'd like to take a moment to highlight the great progress we have made with our Fit for 1.5 Degree ESG commitment. We had [indiscernible] achievements of this SBTI targets have already been implemented, such as the migration of the Euronext core data center in Bergamo, which is powered 100% by renewable energy sources. We are also pleased to announce that Euronext has been included in the Euronext Equileap Eurozone 100 and the Euronext Gender Equality France 40. 2 Industries showcasing European companies that demonstrate a strong role in improving gender equality. And we have continued to push for a broader transition in our markets. We have launched the CAC SBTI Index, an index for grouping companies within the SBF 120 that have set emission reduction targets approved as being in line with the Paris Agreement, 1.5 degree goal. So I now hand over to Giorgio Modica for the review of our fourth quarter performance.

Thank you very much, Stéphane, and good morning, everyone. Let's have now a look at the performance of Euronext in the fourth quarter of 2022. I'm now on Slide 12. In the fourth quarter of 2022, Euronext demonstrated solid results reflecting the strong performance of advanced data services and listing combined with an efficient management and -- of market share and revenue capture in a challenging trading environment for especially cash trading volumes. As a result, and as already mentioned by Stéphane, Euronext underlying revenue income was only down 6.2% compared to the fourth quarter of 2021 despite the relevant reduction of volumes, notably reflecting the strength of our diversified business mix. Briefly, listing revenue grew 3.1%, resulting from a resilient equity and debt listing activity despite the tougher environment, we captured the majority of listing in Europe remarkable this quarter where the high shares of company from outside of the Euronext market among our listing, accounting for around 40% of equity listing and demonstrating the international appeal of Euronext. Trading revenue was down 12.1%, resulting from lower cash equity and MTS cash volume, partially offset by a record quarter for power trading and a good performance of FX trading. Post-trade revenue including -- excluding NTI, was down 2.5% as a result of weaker equity clearing activity and a stabilized settlement activity. Advanced data service revenue increased 7.3% due to a good performance across the offering, both on real-time and non real-time data as well as on indices. Technology Solutions grew 1.8%, driven by the good performance of co-location activity after the migration to the Bergamo data center in June this year. In the fourth quarter of 2022, non-volume-related revenue accounted as Stéphane said for 60% of total group revenue versus 58% in the same quarter last year, reflecting higher advanced data services and corporate service revenues and -- revenues from services in general. Lastly, those non-volume-related revenues cover 130% of our underlying operating expenses, excluding D&A, compared to 136% last year. Now I would like to move to the next slide, Slide 13, for listing. Listing revenue was EUR 53.5 million this quarter with an increase of 3.1% compared to the same quarter last year. This growth is driven by higher annual fees, the strong performance of corporate services and the positive impact of primary and secondary listing revenue recognition over time. We have discussed already the impact on IFRS on listing revenues. In detail, during the fourth quarter of 2022, Euronext maintained its leading position in Europe for primary equity listing counting 24 new listing, of which, as I said, approximately 40% were international companies. In the fourth quarter of 2022, EUR 310 million were raised on Euronext primary market compared to a very strong Q4 2021 with EUR 6.6 billion rate on our markets. As far as secondary issues are concerned, EUR 10.1 billion was raised in the fourth quarter of 2022, well above the same quarter last year. Euronext also reinforced its position as the leading venue for bond listing worldwide this quarter with over 53,000 bonds listed across all Euronext market at the end of the year. And this despite a slowdown of the global bond listing activity due to the macroeconomic environment. This translated into EUR 226.9 billion in that rate on Euronext market during this quarter. Overall, this brings us to a total of EUR 237.3 billion raised in equity and debt of Euronext market this quarter. Lastly, Corporate Service continued its growth trajectory across businesses despite slightly lower webcast activity in a post-pandemic environment. Let's have a look at our trading business on Slide 14. I'm starting with cash trading. In the fourth quarter of 2022, we observed lower cash trading volumes, which were partially offset by efficient revenue capture and market share management. In particular, we saw an uptick in market share from October 2022, not at the detriment of revenue capture. Cash trading revenue was EUR 65.1 million this quarter, a decrease of 17.9% compared to the same quarter last year. As a result of average daily volumes of EUR 10.1 billion, a volume decrease of 17.2% and 3% fewer trading days this quarter. Average revenue capture over the quarter was at 0.50 basis points versus 0.49 basis points in the fourth quarter of 2021, reflecting the dilutive impact of Borsa Italiana markets and larger average order size in line with pre-pandemic levels. As a reminder, we charge per value and per order, explaining the dilutive impact of larger order size on our revenue capture. As I said, we reported an uptick in market share from October 2022 and Euronext market share on cash trading averaged 65.3% in the fourth quarter of 2022. In the past, we were often asked about the sustainability of those metrics. This is why I would like to confirm to you that in 2023, we expect to maintain on our market, the market share greater or equal to 63%, and our revenue capture to be around 0.52 basis points following the integration of Borsa Italiana cash markets to uptick, considering current market conditions and order size. Euronext has once again confirmed its position as the largest, the deepest and the most stable liquidity pool in Europe offering the highest quality of execution to its market participants. We are excited that our cash trading business will significantly change dimension with the migration of Italian cash markets to Euronext state-of-the-art property trading platform uptick in the first quarter of 2023. Now I would like to move to derivative trading. Derivative trading revenues decreased 5.4% to EUR 13.4 million this quarter as a result of softer volume environment, partially offset by a positive impact of volume mix on revenue capture and fee changes. Average daily volumes on financial derivatives in the fourth quarter of 2022 was down 12.7% from the same quarter last year, suffering from a strong comparison basis with high volatility in the fourth quarter of 2021. Commodities average daily volumes were down 17.2% in the fourth quarter of 2022 compared to the fourth quarter of 2021, reflecting a normalized trading environment. Over the quarter, the average revenue capture increased for derivatives to EUR 0.34 per lot, up 12.5% from the fourth quarter of 2021, thanks to volume mix impact and fee changes. Lastly, on fixed income trading. Fixed income trading reported revenue at EUR 22.1 million this quarter compared to EUR 24.2 million in the fourth quarter of 2021. This reflects an economic environment in Europe favoring money markets and therefore, deeper volumes. MTS reported an overall robust performance in market dominated by increasing interest rate, with continued strong traction for Repo trading offset by lower cash trading volumes. In the fourth quarter of 2022, MTS cash reported EUR 12.8 million of revenue with ADV down 32.7% to EUR 15.4 billion and MTS Repo reported EUR 5.6 million of revenue with term adjusted ADV up 36% to EUR 397 billion. Continuing on trading on Slide 15. The fourth quarter of 2022 saw a solid performance of Euronext effect in terms of both revenues and average daily volume benefiting from the continued positive momentum with high volatility and good traction of our matching engine in Singapore. Euronext reported average spot effects trading daily volumes of $20.1 billion (sic) [ EUR 20.2 billion ] in the fourth quarter of 2022, up 4% compared to the fourth quarter of 2021. Spot effect selling revenue increased 9.5% compared to the fourth quarter of 2021 at EUR 6.7 million. Power Trading reported $8.9 million in revenue in the fourth quarter of 2022, a growth of 4.7% year-on-year, driven by dynamic volumes, increased footprint in Nord Pool in Central Europe, U.K., Ireland and a continued robust performance in the Nordics. In the fourth quarter of 2022 average daily volume Day-ahead power traded was 2.98 terawatt hours, up 7.9% and with respect to the same quarter last year and average daily Intraday power traded was at 0.13 terawatt hour. This is an increase of 9% sic [ 69.6% ] year-on-year. I would like to highlight that intraday trading volumes in Central and Western Europe reached record levels this quarter. Moving to Slide 16. Revenues from our post-trade activity, excluding net treasury income decreased 2.5% to EUR 88.6 million. Clearing revenue was down 3.9% this quarter to EUR 29 million as a result of dynamic bond clearing activity, partially offsetting with weaker cash and derivative clearing activity. As announced with the Q2 2022 results, Euronext clearing -- engaged in a partial disposal of its investment portfolio. We disposed the portfolio maturing after the first of May 2023 and kept the rest until maturity. The runup of this portfolio is currently ongoing and almost completed. As a consequence, our net treasury income is not yet at cruising speed, and this quarter amounts to EUR 4.3 million. In this respect, I would like to confirm our target for NTI 2023. In the first quarter of 2023, we expect to reach 10 basis point margin similarly from the margin we have reached in the fourth quarter of 2022. And from the second quarter this year and onwards, we will reach our cruising speed at 20 basis points. I wanted to make a brief comment as well on the upgrade of S&P. What I wanted to highlight is that the upgrade of rating is not only linked to an improvement of leverage, but as well a reduction of clearing risk and our anchor rating move from BBB to BBB+. As S&P has removed as the notch downgrades for clearing and inventories. This gives us significantly more upside as far as rating is concerned. Continuing on settlement and other post-trade revenue, including the activity of Euronext Security, the revenues were EUR 59.6 million this quarter, down 1.9% year-on-year. This reflects the resilient top line of Euronext Securities, thanks to its diversified geographical footprint in a stabilized environment for settlement, over the fourth quarter of 2022, the value of assets under custody at Euronext securities increased to EUR 6.3 billion (sic) [ EUR 6.3 trillion ]. I'm now moving to the next slide, Slide 17. Advanced Data Services reached record revenues of EUR 54.5 million this quarter, up 7.3% year-on-year, driven by strong traction of our core data businesses and good momentum of Advanced Data Solution franchise, including on quant research and indices. Investor Service revenues were -- at EUR 2.6 million this quarter, up 13.2%, reflecting continued commercial expansion of the business. Lastly, Technology Solutions revenue was up 1.8% compared the same quarter last year to EUR 26.9 million, reflecting the good performance of co-location activity following the migration of Euronext core data center and this more than offsets the lower revenues from hosting services. Moving to the next slide, I'm now on Slide 19. I wanted to give some highlights on our 2023 cost guidance. In 2023, Euronext expects its underlying expenses, excluding the D&A, to be around EUR 630 million. Compared to the annualized second half 2022 underlying expenses, excluding D&A of around EUR 620 million. This slight increase is solely related to growth initiatives to develop our nonvolume-related front business. In other words, we expect that the cost base of Euronext to remain stable as cost savings and synergies will entirely compensate inflation and business development costs. I would like also to add that on the revenue side, we have performed a deep review of our pricing strategy across products to reflect inflation and we will have the effect of this activity in 2023. I would like as well to do a few comments on integration costs. Stéphane has already partially covered that. Following the termination of our derivative clearing agreement, we will post the provision this quarter of around EUR 36 million covering termination and migration costs. For the sake of clarity, this does not change our target of integration costs, which is set at EUR 150 million. In addition, I would like to confirm our previous guideline in terms of integration cost per quarter that for 2023 will range in between EUR 10 million and EUR 15 million depending on the quarter. Moving now to the next slide. This brings us to the EBITDA bridge. Euronext adjusted EBITDA for the quarter was down 12% to EUR 187.9 million, mainly from lower volume environment, partially as we discussed, offset by non-volume revenue growth and maintain cost discipline in an inflationary environment. Indeed, despite the pressures of inflation. And despite the deployment of our strategic plan, costs remain contained this quarter. As Stéphane mentioned earlier, we beat our revised 2022 cost target of EUR 612 million initially set at the beginning of the year at EUR 622 million. Adjusted EBITDA margin decreased as a consequence by 3.5 points compared to the fourth quarter of 2021 to 54.1%. Moving to Slide 21 for the bridge on net income, adjusted net income this quarter was down 18.2% to EUR 118.2 million, resulting from lower EBITDA, partially offset by the following elements: first, lower D&A. As in the first quarter of 2021, we had some write-offs as the one of the brand name of VP Securities, with as well lower net financing expenses, mainly linked to the positive impact of higher interest rates. There are many moving parts in this number. But in summary, the positive impact of the interest rate on our interest income reported in the fourth quarter of 2022 is higher than the benefit from the interest rate swap we had in the fourth quarter of 2021 and it was terminated in 2022. And then I would like to highlight as well higher results from equity investments representing the contribution of LCH SA and the dividend received from Euroclear. As a reminder, in last year, Euroclear paid its dividend in Q1 and Q3. I would like to highlight that the non-underlying costs in this bridge are mainly represented by D&A and more specifically related to the PPA amortization of our acquisitions. Lastly, tax for the fourth quarter of 2022 was in EUR 38.5 million. This translates into an effective tax rate of 27.3% for the quarter. Reported net income was EUR 99.3 million, and adjusted EPS basic was down 18% this quarter at EUR 1.11 per share compared to an adjusted EPS basic as well of EUR 1.35 per share in the fourth quarter of 2021. This reflects a higher number of outstanding share of the quarter compared to last year. Moving to Slide 22 for the cash flow generation and leverage. The net operating cash flow post-tax amounted for a negative EUR 147.1 million compared to a positive EUR 145.6 million in the fourth quarter of 2021. This negative flow was impacted by a change in working capital related to Nord Pool CCP activities for EUR 276 million. As we will see in the next slide, the balancing item of this negative cash flow is a reduction of the cash in transit for EUR 297 million. Excluding the impact of -- on working capital from Nord Pool and Euronext clearing activities, net operating cash flow post-tax accounted for 55.3% of EBITDA. Our net debt to EBITDA, as reminded by Stéphane, was at 2.6x in the fourth quarter of 2022 compared to 4.3x in the third quarter of 2022 that was positively impacted by higher cash in transit as we just discussed, including in the cash and cash equivalents excluding the EUR 49 million non-underlying one-off loss on NTI. The net debt to last 12 months reported EBITDA was at 2.4x in the fourth quarter of 2022. Moving on to Slide 23 for the evolution of our liquidity position over the quarter. As described on previous slides, you can see the impact of the short movement in working capital related to Nord Pool CCP activities in the net operating cash flow. As an illustration, our liquidity position remains strong, above EUR 1.5 billion, including the undrawn revolving credit facility for EUR 600 million and excluding the cash currently in transit. As Stéphane highlighted, while the integration of Borsa Italiana is on track, we can look for external growth opportunities, thanks to this strong liquidity position and improvement in our rating profile. And this is -- this completes my presentation, and now I give the floor back to Stéphane.

Thank you, Giorgio. As you have seen, 2022 was a real pivotal year. We took advantage of our diversified business model, our business model, which is much more diversified than many people think. We strengthened our core business with the continuous leadership not only on listing and trading, but also a very strong development in other businesses. We maintained our trademark cost discipline in an inflationary environment, which has affected everyone. And we have put the key projects of the Borsa Italiana Group integration on a very good track. And so our commitments in terms of synergy delivery for the years to come. So 2022, has demonstrated that Euronext as the recipe for success for cash flow generation even in tough environments. Also, 2022 paved the way for future growth in Euronext. Now, 2023 will be a real transformational year. First, our cash trading market share is expected to remain greater or equal to 63%, and our revenue capture for the cash equity trading business to remain above what we call to 0.52 bps. In 2023 after the Borsa Italiana market migration to Optiq. Second, our continued cost discipline and achieved synergies will enable us to offset inflation. The slight increase in cost only results from costs related to nonvolume-related revenue growth initiatives and savings and synergies entirely compensate inflation and business development costs. So the superior track record of Euronext in post-merger integration will translate -- will continue to translate in a strong cost discipline. Third, as a result, we upgrade our 2024 run rate synergy target to reach almost twice the level of the first announced synergies back to the time of the Borsa Italiana Group acquisition announced that to what will be EUR 115 million of run rate synergies by the end of '24. '23 will be pivotal as I said, with the delivery of the key strategic projects that have been highlighted by Giorgio and I. And the continued cost optimization that will lead to EUR 70 million of cumulative run rate synergies at the end of '23. And fourth, combined with our fast deleveraging since the acquisition of the Borsa Italiana Group. And as demonstrated by the BBB+ upgrade by S&P, announced yesterday evening, we are now in the right position to look for possible external growth. In the respect, obviously, of our strong investment criteria of return on capital employed above WACC after 3 or 5 years -- 3 to 5 years. So thanks for your attention. We are now ready to take your questions together with Giorgio Modica, Anthony Attia, the Global Head of Primary Market and Post-Trade and Simon Gallagher, the Head of Cash and derivatives trading.

[Operator Instructions] We will take the first question from Kyle Voigt from KBW.

Maybe a couple of questions for me. First question is just on pricing. Some of your peers globally have spoken about taking larger pricing adjustments in 2023 given the inflationary backdrop. And I believe you mentioned that in your prepared remarks that you also took some inflationary adjustments. Just wondering how you viewed pricing in 2023 versus prior years? And in which lines we should really expect the most material pricing adjustments to come through? And then also just a question on the synergy realization slide in the deck and the timeline there. Obviously, some of the key dates are for the fourth quarter of 2023, so quite late in the year. So when we think about your 2023 underlying cost guidance, I'm just trying to get a sense of what level of actual realized cost synergies are embedded within that, as that may help us think about the expense trajectory into 2024. And given those timing of synergies, is it possible that underlying costs may actually be down in 2024 versus 2023?

Thank you. So Giorgio will answer your 2 questions, the first on pricing and the second one on the phasing of synergy delivery.

So, thank you very much for your question. So with respect to pricing, I guess the best way to describe what we're going to do is that mostly prices are going to be increased in non-trading activities. And the increase that we will have, are around, I would say, mid-single digits, then some slightly more, some slightly less, but this gives you a sense of how much our nonvolume-related business will grow in terms of pricing. And if you consider that 60% of our business is non-volume related. This gives you a bit of an idea of what would be the price increase impact on our top line next year, excluding any other variables. So it's around mid-single digit time 60%. Then on the line that this price increase [indiscernible] -- I mean, I believe I indirectly answered saying that it's not really going to be the trading lines, but the other line. So this is for the first question. When it comes to the synergies, the way I can answer your question is the following. Let's start from the synergies that we have delivered run rate this quarter. So at the end of December 2022, we have reached EUR 34 million of run rate synergies. What this means is that a part of the synergies will hit the P&L in 2023. And this is going as well to contribute to the -- to making sure, as I described that the key cost of the organization will remain flat from a P&L perspective. Then coming to the delivery of synergies next year, a few elements. There is going to be an important moment that there is the migration of Optiq in the first quarter. And this will have impact our P&L right after the migration. But then you are correct, there are other costs and savings that are going to be delivered in the fourth quarter this year with the impact on the P&L of next year. So then my last comment is that this year, we will deliver a combination of revenues and cost synergies. And as far as the revenue synergies, again, I already mentioned the Optiq integration, but we will have as well, the launch of our clearing activities on equities.

We will take the next question from line, Mike Werner from UBS.

Two questions from me please. In terms of the market share in cash equity trading. We know you've adjusted your pricing schedule. I think it was in November. We saw an uptick in market shares into the year-end. The data that I collect, which certainly is not perfect, implies that market shares have trended lower in January and ultimately in the first couple of days of February. So I was wondering if you can confirm if that's what you're seeing. And then B, just wondering, is this -- is that price adjustment in November, kind of your final take? Is this something where we could see further adjustments ultimately to protect the market share as we look out over the next couple of months? And then the second question, just about deleveraging. I think the debt to EBITDA was 2.6x at the end of this year, a very similar level at the end of 2021. I know there was a bunch of restructuring costs throughout year. But as we look out to 2023, kind of given your guidance on restructuring costs, how should we think about the pace of deleveraging through '23, assuming no M&A or no other factors involved?

So Simon Gallagher will answer your first question on market share and yield and prices. And Giorgio Modica will answer your question on the deleveraging pace and phasing.

Thank you, Stéphane. So to answer the first question on market share. So you're right, we implemented a first batch of measures on pricing and liquidity programs in November last year which was successful, which resulted in a 3-point uplift in market share over the quarter. And certainly, since the start of the year, what we're seeing is that volumes are soft there's a lack of real economy liquidity in the market, which has had a slightly downward influence on market share because regulated markets tend to have a higher proportion of real economy flow than the alternative trading venues. And so that's what we see as the primary explanation for the first quarter. To answer your second question, the answer is resolutely no. This is obviously not the end of the pricing measures we are taking and changes in liquidity we are making. There will be further adjustments to the flagship liquidity schemes in March alongside, as Stéphane and Giorgio mentioned the pricing adjustments to the Italian market post migrations. These price changes and liquidity schemes will not be yield dilutive. They will be pushing our liquidity providers a bit more and adjusting the intricacies of the LP schemes. So this is not the end of the story. Obviously, this is a very dynamic and ongoing process.

Yes. When it comes to the deleveraging profile, I can confirm a few elements. Now I believe you are -- the target for dividends. So it's EUR 236 million. And then the other element is that we confirm 2/3 cash flow conversion post tax from EBITDA. So with these 2 elements, I believe that now we have -- I mean we have guided with respect to the non-underlying costs related to the termination of the agreement. Those are the key elements of the equation. So again, to summarize, around 66% cash flow conversion posttax and EUR 236 million of dividends that will be expected in 2023.

We will take the next question from the line, Haley Tam from Credit Suisse.

Can I ask a couple about the revenue capture, please, in the equity market. So first of all, Q4 revenue yield of 0.5 basis points was a step down from 0.53 in Q3. And if I've heard you correctly, you're saying that the supplemental liquidity provider scheme adjustments you've made are not yield dilutive. So I wonder if you could help us walk through that step down from 0.53 to 0.5, please? Just to understand the dynamics there. And then the second question, just to understand your assumptions for 2023. Market share more than 63% revenue capture 0.52 basis points. Are both of those numbers for after the Borsa Italiana migration? Or are the numbers that I should assume for the average through the year? And I do note the 63% is less than the 65% market share you had in Q4. So I just wondered if you could comment on that.

So Simon Gallagher will answer your 2 questions on the revenue capture and on the phasing of the market share evolution.

Thank you, Stéphane. So I'll break down very precisely the variance in yield from 0.53 to 0.5. In the numbers that we included a small number of nonequity items. So it's the warrants and certificates and ETFs notably. So if we break down the 0.03, 0.01 of that was due to nonequity items just variance in volumes in nonequity businesses, which are the ETFs and the warrants and certificates. And so that leaves 0.02 basis points imputable to cash equity yield. 2/3 of this 0.02 was due to changes in the order sizes. And so how does this impact the 0.02? When markets tend to be a bit less -- there's less volatility in the markets, order sizes, as we've seen recently, order sizes tend to go up a little bit which means there's less arbitrage opportunities from the electronic liquidity providers, which means order sizes go up in the market. And this interacts with certain features of our fee grid where we have fixed euro fees per executed order. And so this is -- 2/3 of that 0.02 is imputable to order sizes. 1/3 of the 0.02 can be imputable to other features of the fee grid, including partially to the SLP changes we made in the supplemental liquidity scheme. So if you break down -- if you break it down that way, the changes we made to the SLP scheme are rather largely immaterial in terms of impacts on yield. And there will be further yield accretive changes to the SLP scheme from the second quarter onwards. With respect to the second question, the market share number, I think, can be seen as an average over the year as a base. And the yield -- the revenue traction number is a -- and the market share is obviously a floor we see, and this is the minimum that we are targeting. And the yield extraction number is post -- is the run rate post Italy migration.

We will take the next question from line, Bruce Hamilton from Morgan Stanley.

I guess, firstly, just going back to the synergies, obviously encouraging that you've increased those. But could you break out the EUR 115 million between revenues and costs. And just going back to the earlier question, given that consensus assumes, I think, a reduction in absolute cost in 2024, is that kind of consistent with the way you're thinking about the cost synergies? And then secondly, on M&A, and balance sheet flexibility. In terms of your sort of EUR 1.5 billion of capacity, I can see on Slide 23, you've laid out how you get there. But what's the sort of net debt EBITDA that you would be comfortable going up to temporarily to do a deal? And then just an update on what the -- what you view your current WACC as well would be helpful.

So Giorgio will answer your question on the synergies, delivery on cost and on the balance sheet and debt capabilities.

So let's start with the first one. I would like to highlight that the increase from EUR 100 million to EUR 115 million is mainly related to a better visibility on the opportunities on clearing. So this is the first element. Then when it comes to the breakdown between cost and revenue I will try to do my best, but there is a complexity is that, as we said from the beginning, the EUR 115 million is an improvement of EBITDA that includes sometimes projects involving more revenues and more cost. So the best breakdown I can provide you with is the following. Let's start from the original target, the EUR 60 million. The EUR 60 million where -- broken down as follows: EUR 45 million of cost savings and EUR 15 million of revenue uplift. Now this EUR 15 million revenue uplift -- the significant portion of the EUR 15 million is linked to the migration of Optiq, part of which we are going -- and the most relevant part, we are going to execute in 45 days. And this is clearly a pure revenue synergies. Then the other buckets are around EUR 10 million EBITDA coming from the migration to data center. And this is already embedded in our number, but involves more revenues, but as well more cost. And then the reminder that was originally assessed to be EUR 30 million and now it's increased to EUR 45 million, is the clearing opportunity, and you will -- and then, there are many moving parts because we'll clearly have more revenues, but as well, we will need to upgrade and as we are doing the platform of next clearing. But on the other side, we will not have any more the costs that today we are paying to LCH SA, which are currently captured in our P&L. So this is the breakdown. Unfortunately, I cannot further break down the different projects in between cost and revenues. So this is -- this, I believe, covers your first question. When it comes to the underlying cost of capital, I believe that Euronext is in line what we see as an average of analysts. And again, as I always stressed, those are point in time. So what I can say is that I don't see a major deviation from what you analysts are taking as an average as our own cost of capital. And when it comes to the max leverage what I would say is the following. And again, this is a very tricky question because it depends very much on the target you acquire that would give us additional leverage. But as we commented in the past, we believe that in terms of pure debt capacity, we would have a capacity in the range between EUR 1.5 billion and EUR 2 billion. This is roughly speaking, the stand-alone capability that we would have to finance in pure debt acquisitions. And again, I would like to highlight that, as you very well know, rating and leverage consideration are very much target specific.