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

Good day, and welcome to Euronext Full Year 2023 Results Call hosted by Stéphane Boujnah, CEO and Chairman of the Managing Board of Euronext, joined by Giorgio Modica, CFO. [Operator Instructions] This meeting is being recorded. At this time, I'd like to hand the call over to Stéphane Boujnah. Please go ahead, sir.

Good morning, everybody, and thank you for joining us this morning for the Euronext Fourth Quarter and Full Year 2023 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 fourth quarter 2023, followed by the full year 2023 performance. Giorgio Modica, the Euronext CFO, will then develop the main business and financial highlights of the fourth quarter of 2023. As an introduction, I would like to highlight 4 important points. First, Euronext is today stronger than ever. Thanks to our diversification efforts over the past few years. In 2023, we have delivered revenue growth close to 4% and even close to 8% in Q4. We have also significantly reinforced Euronext's leadership position in listing and trading in Europe. Second, we beat our 2023 cost guidance. Thanks to cost discipline, thanks to synergies and some positive one-offs, we continue to deliver ahead of schedule and despite an inflationary environment that everyone knows, we continue to do better on costs. Third, we delivered a strong end of the year with Q4 2023 adjusted EPS growing by plus 27.9% from last year. Fourth, we are now present on the entire trading value chain, thanks to the expansion of Euronext clearing to European equities. This clearing strategic milestone was critical -- was a critical contribution to the EUR 74 million of cumulative run rate synergies delivered at the end of 2023. This achievement is above our interim objective of EUR 70 million targeted for the end of '23. It is also significantly more than the initial objective of run rate synergies of EUR 60 million that was targeted at the end of '24, as announced in October 20 and in April '21, when we closed the acquisition of the Borsa Italiana Group. So we are perfectly on track to complete the integration of the Borsa Italiana Group and to achieve the upgraded target of EUR 150 million of annual run rate synergies by the end of 2024. Lastly, in 2023, we continued our innovation path following the successful opening of the test environment at the end of January 2024, Euronext confirms today the launch of Dark, Mid-Point and Sweep functionalities in Q1 2024 hosted in our core data center in Bergamo. Let me start with the Q4 performance on Slide 4. Euronext reported a strong fourth quarter of '23, posting plus 7.8% revenue growth year-on-year to EUR 374.1 million. The quarter was marked by strong dynamism of post-trade and non-volume-driven activities, together with the record performance of fixed income and power trading. First, post-trade revenues grew significantly, driven by the first positive contribution of the Euronext clearing expansion to cash instruments and also by a solid growth in our CSD business, together with growth in related net treasury income. Second, our trading revenue posted strong growth, supported by the record quarter for fixed income and power trading. This is the proof of the group's successful diversification despite the decreasing equity and derivative volumes, our total trading revenues across asset classes grew by more than 7%. Third, nonvolume-related revenue posted a strong performance overall, notably in listing, Advanced Data Services and technology. And this translated into nonvolume-related revenue accounting to 60% of the total Q4 revenue and covering 141% of underlying operating expenses, excluding D&A. We continued our disciplined approach to cost control that offset inflationary pressures, and we recorded a positive one-off accruals release of $6.3 million. As a consequence, Q4 2023 underlying operational expenses, excluding D&A, slightly decreased to EUR 157.8 million, down minus 0.9% compared to the cost base of Q4 2022. Overall, we reported a strong growth in adjusted EBITDA of plus 15.2% to EUR 216.3 million and an adjusted EBITDA margin that increased by 3.7 points to 57.8%. This strong performance, combined with a positive interest rate environment for cash in the bank led to a 27.9% increase in adjusted EPS at EUR 1.42 per share and to an adjusted net income of $148.2 million. On a reported basis, EPS for this fourth quarter also benefited from a capital gain and increased by plus 34.2% to EUR 1.25. That brings me to our yearly 2023 performance on Slide 5. First, thanks to our diversified business model, we achieved plus 3.9% increase in revenue and income to reach close to EUR 1.5 billion. This performance was notably supported by our nonvolume-related activities that accounting for 60% of total revenue last year. I would like to highlight the strong performance of our fixed income trading business and of our power trading business that both grew by plus 15% this year. Second, we obviously maintained our trademark cost discipline and reported better-than-expected costs at $610 million, less than 1% of the cost base of last year. This also compares to the revised guidance of $680 million at the initial -- that compared to the initial cost guidance for 2023 provided a year ago, which was $630 million. This good performance and cost this past inflationary pressures resulted from strong cost control and also from positive FX impact and a one-off accrual release. Consequently, our 2023 adjusted EBITDA grew by EUR 864.7 million and we delivered an adjusted EBITDA margin at 58.6%. Thanks to the positive interest rate environment, our strong cash position enabled us to fully offset the cost of our debt compared to last year. As a result and supported by a EUR 53 million capital gain. Reported net income increased by 17.3% in 2023 to EUR 513.6 million. Adjusted for non-underlying items, net income was up plus 5.3% to EUR 584.7 million, representing an adjusted EPS of EUR 5.51. Consequently, a dividend of $2.48 per share will be proposed at our upcoming Annual General Meeting in May. The dividend represents a payout ratio of 50% of reported net income as set up in our dividend policy. That's EUR 0.26 more than the '22 dividend per share means an increase in the dividend of plus 12%. As a reminder, we finalized the announced 200 million share repurchase program in January '24. Let me now share the key takeaways of our businesses in 2023. First, as I said, our nonvolume-related activities delivered strong growth in 2023 and accounting for -- and accounted for 60% of total revenue. Following the successful migration of our core data center in Bergamo in 2022, we continue to bear the fruit of this migration, notably with our colocation services. In 2022, we further scaled up our Technology Solutions activity that grew close to 10% in 2023. Our Advanced Data Services business also reported strong performance with revenue up plus 6%. This results from good performance across the data products offering and also solid demand for analytic products. Our post-trade franchise delivered a robust year. First, our custody and settlement business grew plus 5.5% like-for-like at constant currency. This was driven by growing assets under custody, improved revenue capture and continued expansion of the services business. On a reported basis, this activity was impacted by negative ForEx impact from the Norwegian krone. Second, our clearing revenue were stable despite declining equity and derivatives. This results from 2 factors. First and foremost, our clearing flows are diversified. As a result, the strong fixed income clearing and commodities clearing activities partially offset the lower equity and financial derivatives clearing. Then- and what is to be probably the most important, we managed to capture additional business at Euronext Clearing following its expansion to all Euronext cash markets. since 27 November, Euronext clearing eased the preferred CCP for 6 European cash markets. Last, net treasury income increased by plus 6% compared to 2022, underlying net treasury income, primarily reflecting higher collateral health. As you would have understood, we are now a European top-ranking post-trade infrastructure operator. Once again, we remain also the leading listing venue in Europe for equity, attracting 64 new equity listings in 2023. We also consolidated our position as the leading listing venue for [ depth ] worldwide now being the home of over 55,000 bonds. Our Corporate Services franchise continued to post double-digit growth, demonstrating the successful expansion of our Software as a Service offering. Lastly, our trading franchise was resilient despite the lower volatility environment for equities. Indeed, while cash trading and derivatives trading volumes were down by over minus 10%, total trading revenues only decreased by minus 4.7%. This is again the demonstration of our more diversified business model. In 2023, our fixed income trading business reported a record year with double-digit growth in all asset classes, resulting in revenue up plus 15.6%. In addition, our power trading business also posted a record year with revenue up plus 14.5%, primarily supported by intraday power market, where volumes doubled compared to 2022. As I said, 2023 demonstrated a critical result of Euronext diversification. We delivered solid growth even in an environment not favorable to [indiscernible]. Clearly, 2023 saw the continuation of the Euronext transformation, and we made good progress in our integration process and synergy delivery. In 2023, we delivered on several strategic milestones that were absolutely critical for us to achieve our transformation in 2025. First, on the trading side. We successfully completed for the first time since -- for the fourth time since our IPO in 2014, the migration of cash equity markets to a single technology trading platform update. The migration of Italian cash markets to uptick did create benefits for trading members with a material improvement of the Italian market quality. This milestone paved the way for the migration of Italian derivatives trading to uptick in the coming weeks. Second, we made very good progress to further strengthen our post-trade business. In 2023, we took an important step towards the European expansion of Euronext Clearing, expanding its offering on schedule to the cash market in France, Ireland, the Netherlands and Portugal. Euronext Clearing now clears equities, ETFs, structured products, warrants and bonds across 6 Euronext markets, including Italy. This migration materially contributed to the synergies delivered over 2023, but also paved the way for the migration of listed financial and commodities derivatives in Q3 2024. Such good progress on integration means we were able to reach EUR 74 million of run rate cumulated EBITDA synergy at the end of 2023. This is above the EUR 7 million (sic) [ EUR 70 million ] target expected for the end of '23 and already more and much more than the EUR 60 million targeted for the end of 24 million initially announced in October '20 and in April 21 when we closed the acquisition of the Borsa Italiana Group. Looking forward, the migration of Borsa Italiana derivatives to uptick and the expansion of Euronext Clearing to Euronext listed derivatives by Q3 '24, will complete our presence on the entire trading value chain. It will position Euronext ideally to capture future growth opportunities across Europe. The completion of these 2 critical projects will materially contribute to reaching our revised objective of EUR 150 million of run rate cumulative EBITDA synergies by the end '24. I now give the floor to Giorgio Modica for the review of our fourth quarter 2024.

Thank you, Stéphane, and good morning, everyone. Let us now have a look at the strong performance of these fourth quarter of 2023. I'm now on Slide 9. As mentioned already, total revenue this quarter reached EUR 374.1 million, up 7.8% compared to last year and 9.1% at constant currency. 60% of our revenue is non-volume-related, highlighting the success of our diversification part. Those strong results were notably driven by the record performance in fixed income and power trading, the solid contribution of our nonvolume-related businesses and the incremental equity clearing business captured by Euronext since the widening of its offering across the Euronext markets on 27 November 2023. In addition, Q4 2023 revenue and income reflects an increase in net treasury income year-on-year as the NPI in the fourth quarter of last year was still impacted by the runoff of the investment portfolio at Euronext Clearing. I will now start the business review, and I'm now on Slide 10. Listing revenue was EUR 56.2 million, up 6.9% like-for-like and at constant currencies, reflecting the good quarter of the listing and follow-on activities and the continued strong growth of our corporate service SaaS offering. Reported revenue was up 5%, reflecting the negative impact of the knock on the results of our Norwegian activities when reported in euros. Euronext demonstrated once again its leadership in equity listing in Europe with 64 total listings in 2023. On the debt side, we reinforced our global leadership in listing with over 55,000 bonds listed on our markets, and we also strengthened our leading position in ESG bond listing. Euronext Corporate Services, as mentioned, continue to deliver a solid performance with revenue growing to EUR 12.3 million this quarter, up 28.8% compared to the fourth quarter of 2022, resulting from the strong progression of our SaaS offering. I'm now on Slide 11. Other nonvolume-related activity continued to grow this quarter. Advanced Data Services reached EUR 56.1 million of revenue, up 3%, driven by the strong performance across the data product offering and the solid demand for analytic products. Technology Solutions reported EUR 27.6 million of revenue up 2.6%, thanks to the continued benefit from the internalization of our colocation services and the good performance of market connectivity services. Investor Services reported EUR 3 million revenue in the fourth quarter of 2023, representing a 15.7% increase compared to the same quarter last year, thanks to the continued commercial expansion of our franchise across the largest global investment managers. Moving now to trading on Slide 12. As I mentioned earlier, Euronext solid trading revenues at EUR 124.5 million clearly benefits from the diversification of our trading activities. Cash trading volumes were down 4.1% in the fourth quarter of 2023 compared to the same quarter last year. However, due to Euronext's strong management of cash trading fees and market share, revenue was only down 1.6%. Revenue capture averaged 0.53 basis points over the quarter above the floor indicated for 2023 post migration of both the Italiana markets uptick. And despite the average size of orders remain elevated. Cash equity market share averaged 65.2% here again, well above the floor of at least 63% set for 2023. Derivatives trading revenue decreased by 4.4% to EUR 12.8 million due to lower financial derivative volume with ADV down 8%, partially offset by the strong performance of the commodity derivatives with volumes up 27.2% versus last year. Average revenue capture on derivative trading reached EUR 0.34 per lot. Lastly, an uptick in volatility drove FX trading volume up 18.8% this quarter. Like-for-like and at constant currencies, FX trading revenue was up 4.8%. Revenue remained stable on a reported basis at EUR 6.7 million this quarter as the growing volumes were offset by the depreciation of the U.S. dollar and an unfavorable volume mix with more disclosed activity, continued with our trading activities on Slide 13. Fixed income trading reported another record quarter. Revenue grew 38% to EUR 30.6 million. In detail, MTS cash average reached EUR 27.7 billion, up close to 80% year-on-year. This reflects continued market volatility as well as the contribution of MTS EU. The market launched in November 2023 contributed around EUR 1 billion of daily trading volumes. MTS Repo term adjusted was EUR 469.1 billion, up 18.2% compared to the fourth quarter of 2022. Euronext fixed income retail franchise also continued to perform extremely well with volumes up 27.9% to EUR 1.5 billion. Despite the FX headwind from the NOK depreciation power trading revenue grew to a new record of EUR 10.4 million, up 16.9% compared to the fourth quarter of 2022. This performance reflects all-time high intraday volumes and solid day ahead volumes. On a like-for-like basis and at constant currencies, revenue was up 30.8%. I would like now to conclude this business review with our post trade activity, and I'm now on Slide 14. Q4 2023 clearing revenue grew by 11.5% to EUR 32.3 million. As mentioned earlier, we have expanded Euronext Clearing offering to Euronext Brussels on November 6, 2023, and to Euronext cash market in France, Ireland, the Netherlands and Portugal on November 27, 2023. This quarter, we have generated for the first time revenues for the clearing of cash instruments on those markets to our CCP. In addition, bond clearing activity continue to be dynamic. This more than offset lower revenue received from LCHSA for the clearing of our derivative products. Non volume-led clearing revenue accounted for EUR 9.2 million of the total clearing revenues in the fourth quarter of 2023. Net treasury income amounted to EUR 11.7 million. It is close to 3x the amount it was in the fourth quarter of 2022 that was, as I explained, negatively impacted by the runoff of the investment portfolio of Euronext Clearing and it is in line with what I have communicated last quarter as a new level of NTI until the delivery migration of clearing is going to be delivered. As a reminder, following the introduction of the VAR-based margin methodology in October 2023, which create efficiency for our clearing members, we expect around 12 million NTI per quarter should collateral level remains stable for the first 2 quarters at the level similar to the one we had in the fourth quarter of 2023. From the completion of the expansion of Euronext Clearing in Q3 2024 onwards, the NTI is expected to increase due to the addition of listed derivative flows. Lastly, revenue from commodity segment and other posted activity was EUR 62.3 million this quarter. This represents 8.9% increase compared to Q4 2022 at current constant currencies. These results are underpinning by growing asset under custody, which last quarter were at about EUR 6.7 trillion, higher settlement activity and a strong performance of the services offering. On a reported basis, revenue increased 4.6%, once again impacted by the weak NOK. I'm now on Slide 16 on the cost guidance for next year. In 2023, we had a positive impact, as Stéphane highlighted, of EUR 11.4 million from the NOK depreciation on our cost base. In addition, underlying expenses were positively impacted by a one-off accrual release of EUR 6.3 million. In 2023, Euronext reported EUR 610 million of underlying expenses excluding D&A, compared to initial guidance of EUR 630 million. For next year -- for this year in 2024, Euronext will continue to be very disciplined on cost, we expect that savings and synergies will offset inflation and 2023 cost ramp up. As a result, Euronext expects its 2024 underlying expenses, excluding D&A, to be around EUR 625 million, below the initial guidance for last year including around EUR 10 million to finance growth projects and excluding potential impact from FX over the year. I'm now on Slide 17. Adjusted EBITDA for the quarter was up 15.2% to EUR 216.3 million, resulting from higher revenues and the positive impact of the one-off releases. This translated into an adjusted EBITDA margin of 57.8% in the fourth quarter of 2023. Nonunderlying costs for the quarter were EUR 15.5 million primarily linked to the delivery of cost synergies in Q4 and to the ongoing work related to the clearing expansion and the last phase of the Borsa Italiana derivative markets migration to uptick. Moving to net income on Slide 18. Adjusted net income last quarter was strongly up 5.3% to EUR 148.2 million, resulting notably from as we discussed, higher EBITDA, thanks to the strong performance of our businesses and well contained cost base, higher net financing income resulting from higher interest income from our cash and cash equivalents. This is the second quarter we were earning more cash from our deposit, then we paid as interest on our debt. Higher results from equity investment reflecting the EUR 11.4 million capital gain arising from the disposal of our stake in Tokeny and the dividend received from Sicovam. Lastly, income tax for the fourth quarter of 2023 was EUR 40 million. This translated into an effective tax rate of 22.6% for the quarter positively impacted by tax exempted gains like the capital gain I just mentioned. As a result, reported net income increased 31.5% to EUR 130.6 million. And adjusted EPS base, it was up 27.9% at EUR 1.42 per share. To conclude with cash flow generation and leverage as you can see from the slide, our balance sheet position is very solid as well as cash flow generation. In the fourth quarter of 2023, Euronext reported a net cash flow from operating activities of EUR 194.5 million compared to a negative cash flow of EUR 147.1 million in the fourth quarter of 2022, reflecting the movement in working capital related to Nord Pool and Euronext Clearing CCP activities. Excluding the impact on working capital, net cash flow from operating activities accounted for 87.4% of EBITDA in the fourth quarter of 2023. We continue to deleverage this quarter despite the buyback that we just concluded. Net reported -- net debt to adjusted EBITDA was at 1.9x at the end of the quarter and 2x on a reported EBITDA basis. This concludes my presentation. And with this, I would like now to give the floor back to Stéphane.

Thank you very much, Giorgio. As you have seen and as you've heard, 2023 was definitely a pivotal year for Euronext. First, our diversification journey is now paying off as we are posting growth driven by non-volume and diversified activities. Second, we maintain a consistent trademark cost discipline despite an inflationary environment. Third, we delivered several key projects of the Borsa Italiana Group integration, enabling us to complete the value chain and to be on track to achieve our 2024 targets and synergies. So as we celebrate this year, the tenth anniversary of our IPO that took place in June 2014, I'm looking forward to deep dive into the opportunities that this transformation will offer for Euronext at our Investors Day that we will hold in November 2024 in Paris. Thank you for your attention. We are now ready to take your questions together with Giorgio Modica and Anthony Attia, the Global Head of our Derivatives and post-trade operations and also Nicolas Rivard, Global Head of Cash Equity and Data Services.

[Operator Instructions] Our first question comes from Enrico Bolzoni from JPMorgan.

So a couple on fixed income and the opportunity there. So you had a strong number in Q4, can you just provide some extra color in terms of how you think this line can evolve in the future? What are the key opportunities? And partially related to that, once you will have the clearing of derivative in place, do you plan to step up also when it comes to launching new derivative products for fixed income or the focus is going to be primarily for equities. And related to that, my understanding is that at the moment, there's a lack of, for example, derivative products for the European bonds -- and European bonds. So I was wondering whether you can comment on whether your combined capabilities, MTS and derivatives can potentially create some opportunity there? So this is my first question. And then the second question I wanted to ask is on capital distribution and the use of your capital, your delevering I appreciate you're going to have a Capital Market Day, but can you give us some color in terms of what you're thinking now in terms of increasing the payout or special buybacks or use of capital? And general comment on what do you see from an M&A standpoint? What do you see out there? If there are opportunities with the output.

Thank you. On the fixed income business, MTS had its best year ever in 2023, driven by all sorts of developments in the interest rate environment and the related consequences in the [indiscernible] segment. But what is impressive is that we are making progress in the organization of MTS in accelerating the urbanization of the MTS strategy which for years, was trying to penetrate further debt management offices beyond Italy and Spain and the mobilization of all the resources of Euronext is paying off with those debt management offices. The most visible part of the efficiency of those commercial efforts is the fact that MTS was appointed by the European Commission at the end of '23 as the platform, the electronic platform for the secondary trading of the next-generation EU bond program, which, as you know, is going to reach at its peak EUR 750 billion of issuance. So we are confident in the growth of the MTS business. We are supporting the commercial efforts of MTS across Europe and the MTS platform and solutions relevance is getting traction with what is today one of the largest issuers in the continent, which is the European Commission. As far as the development of derivatives offering related to the development of our clearing operations, this is definitely part of the road map but we are not going to comment anything that is not a solution that is available to clients before it is available to clients. So that's the whole point of having an Investor Day in November 24 to be very explicit on these points. On the capital allocation, I'll give the floor to Giorgio Modica, but again, the big picture is that we have a consistent dividend policy. We have done a one-off share buyback. We are going to work hard on developing a new strategic plan. And to a large extent, the capital allocation policy will be an output of the capital requirements for organic growth and for M&A developments as they will be decided by the end of this year. But Giorgio, will prefer to add color and flavor around this capital allocation -- the other question.

Stéphane, I believe you said it all. Last year, in total, we distributed between the dividend and the buyback around EUR 440 million. Clearly, this level is not sustainable as Stéphane mentioned, the buyback last year is one-off. So for this year, what you should expect, the application of our policy that until the next Investor Day is going to remain a dividend payout of 50% of reported earnings. Then what will happen as we commented before, before the Investor Day, we will engage with our stakeholders and shareholders to see well the same policy that was applied in this plan is going to be suitable for the next plan. But as far as 2024 is concerned, we will apply the current policy.

We'll now move to our next question from Hubert Lam from Bank of America.

I've got three of them. Firstly, can you talk about the revenue outlook for 2024? I think if you look at the cost guidance you've given for this year, implies at least about EUR 1.6 billion of revenues. What's driving the growth for this year? And where do you see the upside and where do you see the pressure? That's the first question. The second question is around costs. You're planning for additional EUR 10 million investment costs. Can you elaborate where it's going to and the expected payback for that? And lastly, again, on the cost guidance, what FX rates are you basing your expense guidance on? Is it the spot FX at the end of last year. I'm just wondering if the NOK continues to appreciate, could this be a headwind for your cost guidance?

So Giorgio will take your 3 questions on the revenue outlook for 2024, on the cost base targeted for 2024 and on the ForEx rate assumptions.

Yes, absolutely. So the first element that I would like to highlight is that we are not going to give you a target for revenue for 2024. However, we can help you to get a better understanding. And another element that I would like to confirm is our target in terms of CAGR EBITDA that will remain between 5% and 6% as announced at the Investor Day. So in your bridge, there are 2 elements between the revenue of this year and the revenue of next year, that you should take into consideration. The first one are price increases. So last year, when around this time when we met, we told the market that, on average, we would have increased the prices on nonvolume-related activity, accounting 60% of our revenues with an increase averaging 5%. The increase that we anticipate and by the way, we have delivered the price increase last year as announced. For 2024, we expect an average increase of price of around 3% on our nonvolume-related activities. So this is the first element of the bridge. The second element is that you have seen a very small portion of the revenues coming from the clearing of equities. And for next year, you should expect a number which is around EUR 20 million. So those are elements that will contribute to bridge the gap between this year and next year. I cannot add more elements on that. On the cost. So this is something on which I would like to spend a bit of time because I'm sure that many of you will have questions, and I would like to explain a little bit the bridge between the cost of 2023 and the cost of 2024. The first element that I would like to highlight is that if you look at our cost, have slightly increased throughout the year. And the reason is simple because we have -- we are adapting Euronext to manage a larger business through the integration of CC&G and the migrations of -- on clearing the expansion of the service of Euronext Clearing. So therefore, when we make the comparison between '22 and '23 and '24, I think if you to a certain extent, annualized Q4, you will get to a very different number than the full year. So this is the first element. So how do you make the bridge? The first element, the correct starting point for the bridge should be EUR 216.3 million, which is the actual cost base underlying adjusted for these exceptional release of EUR 6.3 million, which happened in the last quarter. Then for next year, there are going to be several impacts. The first one is, you can see today that we have around EUR 35 million of clearing costs. And those costs are relating to the clearing derivative contract that we have in LCH SA and so in those contracts -- this contract is going to be terminated at the very beginning of the third quarter of 2024. So for the bridge, you will need to consider 50% of that. So a number which is between EUR 15 million and EUR 17.5 million P&L impact. Which is important for the target for next year, whereas on a run rate basis, this would be the EUR 35 million. So this is important to highlight. In the P&L of next year, you will have not the full run rate synergies. The second element that you will need to take into consideration is the -- on the one side, the impact of the synergies delivered in fourth quarter or over the next year and further synergies that we will be delivering next year. And if you take all these numbers together, those should be sufficient to offset an inflation that we estimate of around 3% of our cost base. So around EUR 19 million, EUR 20 million. And as we said, we had EUR 10 million of new investments. So to summarize the different elements, we have a net increase of less than million from EUR 216 million to EUR 225 million. And this is able to offset an inflation of around EUR 20 million and additional investment of EUR 10 million through the delivery of P&L synergies of around EUR 25 million. And then the last question, sorry, I was forgetting the last part of your question. In the guidance, we have -- what we have used is an average rate for the fourth quarter of the year, which is consistent with our budget assumptions. And sorry, just to complete because you were hinting what happens if the NOK gets stronger. Yes, our cost base are going to be higher. This is a fact, but our revenue are going to be even higher. So last year, we lost more than EUR 10 million of EBITDA due to the NOK. And therefore, a strengthening of the NOK might have a negative impact on the EUR 625 million but a positive impact on overall EBITDA growth in euros.

We'll now take our next question from Bruce Hamilton from Morgan Stanley.

I was actually going to ask about costs, but you've given a very complete answer there. So a couple of smaller questions. One on the cash market share and pricing. Obviously, you gave us what look Q3 look like -- Q4 rather look like, which was encouraging. You haven't given us a guide for 2024. So should we assume you're still pretty confident of being above 0.52 bps and above 63%. That's the first question. Second one, just on the sale of Tokeny. Does that signal that you don't really see any potential linked tokenization and trading of digital assets? Or was it just the wrong sort of asset to achieve your goals there? And then finally, in terms of AI, are there any kind of use cases you're working on to drive efficiency across the organization? And is that part of the kind of synergies to offset inflation? Or is it sort of longer dated?

I'll take the questions on AI and Tokeny and Giorgio Modica will answer the question on market share on cash equity trading. On AI, we are embarking a comprehensive 360 review of every single cost center and every single revenue generation center to identify potential use cases that can accelerate or expand the origination of new products or the penetration of new clients and also to impact significantly our cost base. This is work in progress. It's a comprehensive exercise, which requires a careful approach of insinuating what is buzzwords and what is real transformational processes. And that's ongoing, again, the final cut will be shared in -- on the Investor Day in November '24 because the reality, when you look at AI for real and when you go beyond superficial generative AI used by the general public, the proper analysis of what it takes to make it happen for real and what is the total -- what are the total economics of the use cases in terms of cost reduction and revenue expansion is more differentiated that many people think. So that's the process we are about to do. So I'm not going to entertain you with slogans or punch lines, about change of paradigm, et cetera. We are working hard to see how we can transform the company from here with these new tools. On Tokeny, we took a minority investment, we decided to sell our stake and to catalyze the capital gain on that occasion, not before we have a fundamentally different view on tokenization, but because the allocation of capital to achieve this objective a big part of tokenization was not necessarily optimal as a minority shareholder into this company. There is sometimes a misconception which is I advance, hence higher -- I advanced, hence I become an expert. When you take a minority stake, sometimes you do learn, sometimes you become an expert, sometimes for all sorts of specific situations around the dynamic of the company. You are in a situation where you believe that there are other ways of becoming relevant than just owning a minority stake in a company tagged here with tokenized assets. So that's why we have decided after a successful experience, successful interactions, but a suboptimal return on capital employed, the suboptimal return on knowledge acquired for the investment to take the opportunity of the capital gain and to contribute to the sound meticulous disciplined asset rotation that we owe our shareholders when we believe that we can achieve the objectives with less capital allocation. That's for Tokeny and then on the market share on cash equity trading over to you, Giorgio.

Yes. So let me take the question. The first element we're willing to highlight is that the reason the objective of Euronext remains always the same, which is top line maximization. And one of our jobs is to optimize the mix between the market share and the revenue mix. And the last year, the reason why we put the floor is that there was a sentiment in the market that we were not in control. We wanted to give a very strong signal that we are in control, and I believe that we have over delivered on the two, giving confidence to the market. But I believe that this phase is over, but there is more to that. The second element, which is important is that I believe now is a good moment to share with you the way our market share is built. And the reason why in 2024, this might give signals that would need to be interpreted. So let me try to explain. Our market share is composed as following. On the nominator, you have our volumes. And on the denominator, you have the total of the big markets plus the multilateral Dark. So to a certain extent, we are -- our market share of 65% does not really represent our market share on the lit. -- but our market share on the lit and multilateral dark. So what we are experiencing and what the market is experiencing at the moment is that given the uncertainty around the new regime that [indiscernible] will implement. So the move from the double cap by 8% to the new cap at 7%. The rules of the implementation are not stringent and defined. And what is happening is that what we are seeing is a significant increase of Dark that at the expense of the systemic internalization. So what is happening to our market share is that what we're seeing is that in -- at the beginning of 2023, there is a mild dilution, which is mainly triggered by abnormal volumes on the Dark, not again at the expense of the lit, but at the expense of the systemic internalizer which were not themselves part of the nominator of our market share. So for all these reasons and as well for the reason that we are going to big competitive in the Dark space for the first time as Stephane announced in the first quarter of this year. So we will be able to strengthen our position -- on the nominator having as well our unique proposition on Dark, we believe that the best way to adopt big impact driven maximize revenues is have the strategic flexibility to set our objective in order to maximize revenues.

We will now move to our next question from Arnaud Giblat from BNP Pariba.

I've got three quick questions, please. Firstly, could I ask about the contribution from cash clearing that started on the 27th of November. How much euro contribution was in the period? Just trying to figure out what the run rate could look like. My second question is, could you expand a bit more about the market share dynamics that are going at MTS? I mean, clearly, it's been a key source of strength, I was just wondering if you could put a bit more color there? And finally, I'm wondering how pricing discussions are going. I mean you mentioned 5% price increases in '23 and 3% in '24. We're seeing some of the market data peers out there seeing less kind of capacity to increase prices. Is this a source of pushback from the company clients?

So Arnaud, I will answer your third question, and Giorgio will answer your questions on the contribution of the cash carrying revenues and the run rate outlook and he will answer also your question on the dynamic of the MTS market share. It's very complicated to make a blended answer to your question on prices. What is real is that like any properly managed companies, we have adjusted some of the prices in areas where prices have not been reviewed for a while, and there has been some contribution to the revenue expansion of last year, and there will be again in '24 contribution driven by a price increase because we realize by doing the exercise that we had the pricing power, which was higher than initially anticipated. But as you perfectly said, some of this pricing adjustment exercise are replicable. Others are not. The reason I don't want to give you a blended guidance is that the reality is extremely differentiated. We have some software contracts, for example, where you have CPI's price adjustment closes, where there was price adjustments and price increases that were embedded in this product and this business for years. We have other businesses where the proper price adjustment is embedded in the yield and market share management, that's the case of cash equity trading when you discuss market share and you discuss price increases. You have areas that will much more discrete and you speak in language as a one-off type of adjustment like the annual fees of listing. You have some market data contracts with for the Retail dissemination market data contract, you have price adjustment, but with the significant inertia with a delay between the reference point of inflation or CPI and the year where it is implemented. So it's extremely differentiated. What you should know is that in an inflationary environment, we do 2 things as a company. We are super cautious in cost management, and Giorgio was explicit about that. And you can see the numbers. You can see that cost base in Q4 was less than 1% above the first phase of 1 year before despite inflation. So we are very disciplined. And the other way around, we try to see to what extent we can pass to price increases, some of the pressure we have on our cost base to clients. If and when we can extract better value from our offering. And that's not always the case. And as you said, sometimes we are touching the limit sometimes we are not touching the limit, it's extremely differentiated. Sorry if we're not giving you a sort of 1 size fits all answer. But the diversification of our product, that very increased diversification of the revenues, which you have observed in the contribution to our top line. That translates in a diversification of the answer to your question. Giorgio?

Yes. So on the revenues from some equity clearing, the amount that we have recorded in our account for the fourth quarter is around EUR 2 million. And you should appreciate the start in November, Brussels at the beginning and the rest of the market at the end and as I said, what we are expecting for the full year, and you should appreciate that those are the very, very first days. As I mentioned earlier, it's around EUR 20 million to 0. And then with respect to MTS, the market share, the market share of MTS in its core market, which is the D2D, is extremely elevated. I mean I will not share with you a number, but it's a market share which is higher than the one we have in our cash business. And the way for us to grow it is actually growing the market, as Stéphane explained, to make it more international today, most the PMOs in Europe do not use electronic platform to improve the secondary trading of their sovereign bonds. And so their willingness is to bring more and more activity on the platform. On the other side, on the -- the answer. So very significant market share in excess of 70%. And the ambition is to make the electronic market larger while keeping a very high market share.

Although I did [indiscernible] the cost base of Q4 2023 compared to the cost base of Q4 2022 did not increase by less than 1%. It was reduced by a bit less than 1%. So the cost base of Q4 2023 was minus 0.9%. So the message is the same. The quality message is the same. We were able over year and absolutely in Q4 to reduce our cost base at a time where inflation year-on-year was probably a cost of around 4%.

We will now take our next question from Julian Dobrovolschi of ABN.

I have two follow-ups on the expansion of the clearing business. The first one is, if you can kind of give us a bit more let's say, understanding on what sort of slippage you were able to see after the expansion of the next hearing to all the cash markets of next given the fact that you are running an open model over there. So probably there is a bit of functionality for the client to decide to either opt in or opt out. And the second one, can you also give us some more color how do you think about the pricing for the future clients on derivatives clearing, for example, after Q3, how will this compare to the one on the tail end markets, for example?

So on that question, I'll give the floor to Anthony Attia, who is the Head of our Derivatives and post-trade business.

Thank you for your questions. I understand that they are focusing on the cash equity clearing in the CCP. So the open access model that we have in Europe are twofold. One, this is the one we have at Euronext it's called the preferred CCP model, and the other one is called the [intra approval] model. With the preferred CCP model, the exchanges pick 1 CCP of choice or they recall default CCP and in the case of Euronext, the exchanges to the exception of also picked Euronext Clearing and CCP of choice. And so by default, all the trade will go to the CCP of choice, except if the clearing members pick another CCP and for the same trade the other CCPs, selected by the buyer and the seller. So in concrete, there is a stickiness of the flow in the CCP of choice, and we don't expect significant changes in the course of the year. And as Giorgio explained, we've done this migration on the cash equity clearing in November, and we already have the revenues in our P&L today. On your second question, I understand it was about the evolution of pricing. Again, Giorgio explained that we should expect the total full year revenue and cash equity clearing around EUR 20 million with a harmonized pricing that was set up in November last year with a common approach for all Euronext markets, including Italy.

We will now move to our next question from Ian White from Autonomous Research.

Just a few follow-ups from my side, please. Just firstly, on cash equities and market share. If I look at like-for-like lit market share, versus the largest competitor. The data does seem to suggest that in 1Q '24 so far, you've seeded about 100 basis points of market share to the largest lit competitor, and that's about 200 basis points versus 3Q levels. I'm just trying to understand how to square that with the comments you made earlier regarding reduction in market share being driven by an increase in multilateral dark trading rather than a like-for-like reduction in the lit market share. Basically, do you think the data I'm looking at is incorrect? Or were your comments referring more to the 4Q period rather than what we're seeing in 1Q. That would be the first question, please. Just secondly, can you just clarify, please, the expectations for the remaining EUR 41 million of run rate synergies. I think you said earlier that EUR 35 million of clearing costs will be terminated. So I'm talking just EUR 6 million for the final part of the optic migration and derivatives clearing revenues collectively? Is that the right interpretation? Not very complex maths, but I got the message right there, please? And just finally, a follow-up on MTS. Can you just call out for us how much of the -- I think it's about 75% year-over-year increase in volumes over the last 4 months on the cash trading. How much of that has come from the next-gen, you issued debt versus broader progress in the larger bond markets, please?

So I'll take the question on the run rate synergies target and Giorgio will answer this one. And because I think he wants to be more specific on the MTS one. At this stage, we don't disclose the contribution of the MTS progress made with the next-generation EU because there is an initial period like any of these projects where we don't charge the full amount to the market participants because it's all about building preeminent and leading liquidity pool before the competition does and this is happening and we will switch to a full pricing of this [list] in the next 2 months, and we will be able to answer your question, when we have more visibility. What I can tell you is that in terms of volumes, the liquidity has moved massively to MTS for the secondary trading of next engineer. I'm confident that the pricing will take place as planned at the run rate level but we cannot disclose and create expectations for the moment. But it represents approximately today 4% of the volumes of MTS and it's growing. So we'll see how it can translate into incremental revenues in due course. So I cannot answer your question specifically at this current moment, because it's definitely what was, as you should expect, if you want to create a liquidity first. Now Giorgio, on the run rate synergies and then Nicolas Rivard will answer your question on the market share for cash equity trading, and we can provide you the framework as to how to pick about market share.

Thank you very much for the question. And I mean, it's a question I appreciate. I like squaring things professional business. So the EUR 41 million missing is -- let's start from run rate. So let's square first the run rate. EUR 35 million -- EUR 30 million, EUR 35 million is on a run rate basis is the termination of the LCH SA derivative clearing agreement. And the rest are other optimization, let's call it this way, the EUR 5 million, EUR 6 million of further optimizations. Then how does it translate into the EUR 25 million of P&L savings that we will have? The computation is the following: the EUR 35 million of clearing costs will translate into around EUR 17.5 million. of P&L savings. So you would be missing around EUR 7.5 million. This EUR 7.5 million is the P&L impact of the run rate synergies. You remember, we discussed of the EUR 6 million that we're missing to get to the EUR 41 million on the one side. And you have as well the impact in P&L of the cost savings that we delivered in the fourth quarter this year and will have full impact on next year. I hope that this does clarify. But if you have a follow-up question, happy to be to try again.

I just want to make sure I got the -- I understand the run rate correctly. So if you just mean it's not getting it. But it's EUR 35 million, in terms of the remaining EUR 41 million of run rate that's going to be delivered by the end of 2024. Basically, it's EUR 35 million or so of clearing costs and then just about EUR 6 million.

Other optimizations is correct.

We will move to our next question from...

There was a question on the market share competition. So over to you, Nicolas.

Yes. Thank you for your question. I will provide 2 data points, which I think will illustrate our answer, and I think we help you understand the driver behind the market share. The first one, if you look at the market structure, so not looking at Euronext market share, but looking at the relative market share of lit market versus dark and SI, there is no change over the last year. Which means that the lit market market share compared to dark and SI is stable. And I think this is a good illustration of what Giorgio was mentioning that even though we see the dark volume increasing and the dark market share increasing, this is at the expense of the systematic internaliser. The second data point I want to share with you is regarding the lit market share of [indiscernible] versus competitors and here again, this has been pretty stable over the last year. Actually, we are running slightly above last year in terms of market share on the lit market on Euronext shares.

And just to clarify the comment on the lit when you talk about stability, up to and including where we are today or are you talking about to the end of 4Q '23 just because the -- as I said, the data I'm looking at seems to suggest the lit market share has come off in the early part of 2024.

About today or end of January for the latest numbers, but I'm talking about the recent development.

We'll now move to our next question from Mike Werner from UBS.

Just one question for me, and apologies if this was already addressed. But in terms of the dark pool that you announced you'll be launching in Q1 of this year, how should we think about that from a revenue-generating perspective? Is this one -- I think the initial pricing was around 0.3 basis points, if I'm correct. But is this one where similar to what you saw with the EU bonds within MTS where you offer discounts to participants until you generate a sufficient pool of liquidity and then ramp up the pricing after that -- sorry, normalize the pricing after that. And also, is there any adjacent revenues that you may get from the, say, from incremental colocation offerings.

So Giorgio, and then Nicolas.

Absolutely. My part of the answer is going to be disappointingly short. Unfortunately, we cannot give you a target, but it's a great occasion to give the floor to Nicolas. It will explain you where we are so excited about that.

Thank you, Giorgio. Indeed, in the end of March, and this year, we are going to launch our dark offering on all Euronext market. This dark offering will be included in our data center in Bergamo in as part of our optic training system. And therefore, we will provide to customers a very simple and direct access to dark functionality with absolutely no latency. So we are extremely confident that this value proposition is of interest of clients, which is what we are witnessing as we speak with clients. The clients are lineup to -- in the test environment, which as mentioned by Stephane open at the end of January. This dark functionality included in our optic platform, will allow numbers to -- without being too technical, but to sweep from the dark to the lit, which means that sending an order which we first will go to the dark. And if the order is not executed, we move without any latency to the lit order book. And this value proposition is quite appealing for clients because you're ensuring that you get the best liquidity from our dark pool and then from our liquidity pool on our lit market.

We will now move to our next question from Tom Mills from Jefferies.

Sorry, I just wanted to follow up on the cash equity market share question again. It's still slightly confusing to me. Are you saying that the market share in 1Q if we just sort of take the run rate to date is likely to be flat versus 4Q '23 or flat versus 1Q '23 when it was 63.8%? Just because it does seem like there's been quite a significant lag down 1Q '24 today. And I'm just struggling to understand how it's stable based on what you're saying.

So just let me try to clarify. So Giorgio mentioned that the way and probably for historical reasons, the way we will publish the market share of Euronext include as the denominator of the dark pools. So the dark, the multilateral facility offering dark functionalities, whereas Euronext does not, at the moment, offers such system. And Giorgio mentioned that the dark volume in the beginning of the year have increased. And Giorgio mentioned the driver being most probably the uncertainty around the regulatory change of regime of the volume cap. Giorgio also mentioned that this is the expense mostly as far as we see from the systematic internaliser. The other question -- the other answer is that from -- with regard to lit market share. So if we remove this effect on the dark volumes, the lit market share that we see is fairly stable in the range of the fluctuation and absolutely not dropping from the beginning of the year.

And it appears there are no further questions in the queue at this time. With this, I'd like to hand the call back over to Stéphane Boujnah for any additional or closing remarks. Over to you, sir.

Thank you very much for your time, and have a good day.

Thank you. This concludes today's conference call. Thank you for your participation. Ladies and gentlemen, you may now disconnect.