Gielda Papierów Wartosciowych w Warszawie S.A. (GPW) Earnings Call Transcript & Summary

Okay. Good afternoon, and welcome to the Warsaw Stock Exchange Group conference call covering the results of the second quarter and first half of 2026. Thank you for joining us today. Let me introduce today's speakers. We are joined by Tomasz Bardzilowski, Chief Executive Officer of the Warsaw Stock Exchange; Marcin Rulnicki, Chief Financial Officer of Warsaw Stock Exchange; and [indiscernible], Deputy Chief Executive Officer of Polish Power Exchange or TGE. We will begin with a presentation of the group's financial results and key business developments followed by a question-and-answer session. Without further ado, let me hand the floor to Tomasz.

Yes. Hello, everybody, and welcome our earnings call. Our results in the second quarter and also in the first half were obviously driven by the very strong cash equity market. Our main indices are up around 30% year-to-date and this has been reflected in the strong activity. Turnover in cash equities was up 15% year-on-year in the second quarter and 27% in the first half. On the other hand, we have observed falling volumes and turnover in our energy trading in second quarter. In electricity, it was down 4%. And in gas, down 28%, followed a very strong first quarter. We will talk a bit more about the users behind [ Special & Gas ] segment in the presentation. Overall, our consolidated revenue went up by 8% in the second quarter driven by 13% growth in financial market and a 7% decline in commodity market. Year-to-date, in the first half, the growth in revenues is 17% year-on-year. CapEx -- sorry, OpEx growth was 10%, a slight decline versus first quarter. Adjusted operating profit up almost 4% in the second quarter and adjusted net profit up 1% in the second quarter to PLN 58 million. After the first half, the net profit is up 18% to PLN 128 million. Here you see the performance of our main indices. Warsaw has been one of the global leaders in terms of performance in the first half with around 30% growth in main indices, as I said. And heroically, we've celebrating the record high level of WIG20 after almost 20 years as its highest historical highest level. However, this is an index, which is excluding dividends on a total return basis, it's up over 100% over the last 2 years. So strong performance in large caps and also mid-caps in Poland. Equities turnover, as I said, up 15% in the second quarter, slight, but almost slight deceleration in the -- from the first quarter. However, when you look at -- and this is what we show in the lower chart when you see the performance and the volume growth in July and August, you see around 44% growth, which, of course, makes us a bit more optimistic in terms of our revenues in the third quarter. When we -- we are also quite happy to see that our trading velocity ratio remains above 50%, placing also as one of the most liquid exchanges in Europe, obviously, on market capitalize basis. We are very happy to see increased IPO activity, 10 new debuts on the main market in the year-to-date versus just 3 in the whole 2025. And in particularly, the value of ECM transactions quite high, almost PLN 20 billion year-to-date. These are the SPO so capital increases and ABB. And this is almost -- this is almost 80% growth versus last year. Overall, 35 transactions concluded on the market year-to-date. And also, we are happy to see that we've reversed a declining trend in terms of number of listed companies. So the number of new debts was higher than that of the listings, and we have right now, 403 companies listed on the main market. Also happy to see a increase in free float driven by especially BP transactions in large capital stocks. The free float is now around 54%, and this compares with less than 50% a few years ago. Good activity also on the corporate board market on our catalyst market, the value of nontreasury bond issues close to PLN 30 billion year-to-date, 160 new issues [indiscernible] to trading year-to-date. And overall, the value of bonds listed at PLN 175 million, which is a 23% increase versus the same period of last year. We continue to make efforts to realize our bond -- corporate board market and our activity aim at a simplified issuance process, increased liquidity including also an obligation to have a market maker for corporate bonds above a certain threshold and also lower regulatory barriers. And of course, our strategic -- one of the strategic priorities is to attract retail investors to the exchange and we do it also through widening of our ETF offer. We've been very successful on this point, especially in the first half in January, there was just 17 ETFs listed on the market. Now we have 45 and hoping to cross 50 ETFs over the next few months, 25 new listings just year-to-date. And also here, we show on the chart to the right that overall, the inflows and investments of Polish investors into equities in the year-to-date are around PLN 5 billion. However, only 70% of those investments are on ETF listed on the Warsaw Stock Exchange. So we believe that we have still allows to do in terms of increasing our share and overall volumes in ETFs on the market. And this is also why we are expanding our offer of our indices over the last few weeks, we had 3 new indices in that market. Next week, we will publish a new index in our alternative marketing [indiscernible]. And also, we are working on a new index for innovative companies, companies with high R&D spending. So that's on the main issues on our corporate developments. Right now, I'll pass to Marcin to guide you through our details of our results.

T Hank you. Hello, everyone. Let me walk you through details of our financial results in the next few slides, starting with the summary of P&L, as usual. So [indiscernible], looking at the revenue, it was PLN 155.4 million in Q2 '26 after almost 8% growth year-on-year. The drivers of this growth were in the financial market, that's pretty much the same drivers as usually. So cash equity trading, very good performance in Armenia and also higher sales of market data. At the same time, in the commodity market, we observed a small decline in Q2 and mainly because of low activity of investors in the natural gas trading and subsequently, the clearing of transactions on gas also went down compared to the previous year. We can see a growth in other revenue, and this is like a market, including a number of different activities, but it's just accumulation of a few smaller sources of revenue, and I do not expect that this growth is something to remain for the following quarters. Usually, in this line, we present, for example, revenue from our subsidiary logistics from renting rooms in the Warsaw Stock Exchange building and other activities, which are noncorrected just like a coincidence that we had accumulation of these in Q2 we will be back at the regular levels in the following quarters. In the operating costs, the growth was 10.2%, almost PLN 100 million in Q2. We have dedicated slides where we explain details. But this growth in revenue and a bit higher growth in operating expenses resulted in a small increase in our cost income ratio. It went up to 64.2%. And it's 130 basis points higher than the year before. We had small adjustments because of nonrecurring transactions with impact both on our operating income and net profit line. They were the result of recalculating the provisions for a potential return of grants received for noncore projects, but their impact on both lines, it's not significant. Therefore, adjusted operating profit was almost PLN 55 million after 4%, 3.8% growth, and EBITDA was almost PLN 63 million, 0.6% growth, speaking about adjusted numbers here. What happened below the operating profit line, we had a slightly higher share in profits of associates, which is, of course, the depository activity and lower result on financial activities, and this is due to lower interest rates, we can use to invest our excess cash. Maybe 1 more thing to mention here is that our return on equity, ratio went up to 20.1% I think this is -- it hasn't been above 20% level for 7 years. So this reflects our improving results over time. Speaking about the revenue structure, nothing surprising here compared to the previous slide. Maybe one thing to comment is the share of revenue, which is not related to trading activity. This nontrading revenue went up to 35.6% in Q2 '26 compared to 31.3% the year before. Now speaking about the trading-related revenue, so the biggest part of revenue within the financial market segment. As we mentioned before, the driver for growth in this line of business was activity on cash equities. The revenue from this class of assets went up to PLN 58.4 million, 11.2% higher year-on-year. And this was following the higher activity of investors on cash equities on the market. So the turnover in on the market was PLN 151 billion, 15% up compared to the previous year. We had higher share of high-volume providers and market makers or liquidity providers. Their share in total turnover was close to 36%, 310 basis points higher than in Q2 '25. And this translated also to lower average fee per transaction. It went down by 3.7% and was at the level of 1.89 bps. We had much higher turnover on ETFs, and this is good news. So ETFs in Q2 -- the turnover on ETFs in Q2 went up almost 90% year-on-year. And in the first half of the year, it was almost 140% higher than in the first 6 months of 2025. Of course, this turnover does not translate to significant revenue in the group yet, but we like the trend. In other business lines within financial markets we had growth in Information Services. We are used to, let's say, solid single-digit growth in this line of business and this is another quarter of good performance here. Maybe the growth rate looking at Q2 seems a bit lower, but please have a look at the first half of the year compared to 6 months of 2025 because in comparable data in '25, we had an adjustment in revenue recognition despite this growth rate looks lower. In Armenia, we have still very good performance. The revenue from Armenia depository and the stock exchange goes up consistently. In Q2 '26, the revenue from depository activity was at 130% higher than the year before. And this is, let me say it again, due to revised higher fees for depository services that were implemented in July 2025. I'm mentioning this date, not without the reason because it means that Q2 '26 was the last quarter when we had this effect of lower base because of lower rates for services. From Q3 '26, we will be comparing to the same fees, the same rates on the organic reasons we'll be making the potential growth. Therefore, the growth rate will certainly go down. At the same time, we are happy about the exchange activities, which are also generating more and more revenue. Of course, the numbers here are not significant yet, but we see higher activity of market participants especially in the corporate bond market in Armenia. Listing fees, stable single-digit growth and [indiscernible] prices here. Now a few slides about the commodity market. I will ask Marius for comments to this.

Thank you, Marcin. Hello, everybody. Let me start with the electricity market. In Q2, electricity trading volumes reached 29 terawatt hours, down 4% year-on-year. The decline was mainly driven by the forward market forward volume for to 15 terawatt hours. The good news is that in Q3, we are already seeing recovery. But on the stock market, volumes continue to grow, increasing 15% year-on-year and the growth was supported by stronger activity on the international intraday and the head market. And also it is worth to mention that it was also supported by introduction of 15 minutes products on the first fixed thing. Going to the gas trading. The gas trading volume reached 44 terawatt per hours in Q2. It went down 28% year-on-year. The decrease came mainly from the forward market which was 34% down, higher gas price reduced demand, especially for longer-term contracts. Additionally, we must remember at this point that there was a high base from the last year. At the same time, the gas spot market performed very well and volumes increased 18% year-on-year to 8.4 terawatt hours. Let's go to the year. And this slide is -- it is a good illustration confirming the negative correlation between the prices and turnover on the gas market. The gas market is highly sensitive to the geopolitical developments, and it is often driven by them. And these events always have a significant impact on the commodity markets. But this year, has been particular dynamic, and it shows it has a very strong impact on our turnover on the gas market. And going to the next slide. Yes. In Q2, revenue declined by 7%. However, for the first half year, it increased by nearly 5%. And passing to the main revenue lines, the trading stables revenue was down 80% year-on-year. Clearing revenue was down 12% year-on-year, and it's mainly due to the lower trading volumes in the gas forward market and a renewable certificates market. Other participants fee revenue increased by 23%. The growth was driven by higher [indiscernible] clearinghouse collateral system fees and a growing number of influencing customers. And finally, the register services revenue declined slightly by 1.4 million year-on-year. And it's key updates from the commodity market. Thank you.

Thank you, [ Marius ]. Let me take it from here and tell you a few comments about the operating expenses. So consolidated operating expenses level was PLN 99.8 million. The growth was 10.2% year-on-year. The personnel expenses were growing slightly slower than in previous quarters. The growth presented reported here was less than 6%. However, we still have some sources of this growth. We see increase in salaries and also in the number of employees in Armenia. That was a part of this project of expanding the business, part of the agreement with the Central Bank was that we will also strengthen the teams and investing in the infrastructure. So this is happening. But this is also followed by a very dynamic growth in revenues as we observed in one of the previous slides. And also in the Warsaw Stock Exchange, we have growth in salaries and new employees, especially in IT teams. These costs were growing slightly slower in the previous quarters also because of very intensive works on awards development. And part of these personnel expenses were capitalized because of that. and we will see it when we go to CapEx market. The other source of growth was were external services. And here, we have 2, 3 major reasons. The first one are higher cost of IT-related services. Some of them are recurring and related to services that we buy in Software as a Service model to strengthen our IT infrastructure and security. Some of them are related to projects which are run right now at the Warsaw Stock Exchange and subsidiaries including the implementation of new solutions and this part will disappear with time. In other external services, we have increased cost of advisory expenses and this is related mainly to Armenia and expansion of the business there. I mean, depository business, first of all. And also, the expenses related to market promotion and development, these costs grew as well in the second quarter of '26, also because of anniversaries that we had both in Armenia and in Warsaw in the same quarter. but these costs are nonrecurring, and they will not be repeated in the following quarters. Depreciation and amortization goes down. This is another quarter in a row when we observed this trend, and this is due to finalized amortization of UTP licenses and also no amortization of solutions, which were transferred to noncore companies, which were written off at the end of the year. Anyway, the growth rate of our operating expenses at the level of 10.2% was unfortunately slightly higher than the growth rate of our revenue year-on-year, and this is the first quarter after, I think, 8 in a row that when we couldn't make this revenue change higher than the OpEx change. That's why also our cost income ratio went up to 64.2%. However, we are still within our strategic target of 65%. In this slide, we are trying to understand the, let's say, underlying base operating expenses increase just to be able to refer to also our expected long-term business growth rate. And we identify costs which are associated with the growth, which is, let's say, extra or over the expectations. And the important elements here are additional costs in Armenia. PLN 3.4 million in Q2, and this is associated with this growth in revenues that we called a few slides back and also increase in transportation service costs. This is one of our subsidiaries where we offer logistics services and the growth in business there linearly translating into higher operating expenses. Excluding these elements, the underlying OpEx increase was PLN 5.1 million in Q2. And this translates to 5.6% growth rate year-on-year. So this is to say, much closer to our long-term ambition. I mentioned CapEx. And when you look at capital expenditures in Q2 '26, there were PLN 17.3 million, 7.1% up year-on-year. And the increase comes from wards development expenses, yes. So our proprietary trading system which we are finalizing right now, PLN 10.5 million capitalized, and this is including a portion of personnel expenses contributing to this lower growth in this line in P&L. In other classes of assets, we see a small decline in Q2. In Q3, we still expect intensive work on the WATS. So there will be a high number in this position as well. And in Q4, this should go down, but at the same time, this is like a quarter we naturally have significant investments in equipment and other intangible assets. So I'm trying to make a point that in the second half of the year, we expect that our capital expenditures should be higher than in the first half of the year. Speaking about WATS, as you know, the go-live date was postponed until the 5th of October. And because of that, we had to revise our budget for this project. The current expectation is that by the go-live date, we will spend PLN 173 million on the project, PLN 21 million out of this amount is already expensed in P&L or will be expensed in P&L by the date of go-live and the remaining PLN 152 million is capitalized and will be capitalized, and we will start amortization of this after the go-live date in October. And the slide about cash flow and liquidity, we modified the presentation here a little bit, so we refer to shorter periods and make the numbers small, let's say, comparable to what we present in the financial statements. So on the first 6 months of '26 compared to the first half of '25 on this slide, cash flow from operating activities went down a little bit year-over-year. And this is despite the growth in the profit line. So this, of course, requires an explanation. And the explanation is that basically, we have higher levels of trade and other receivables year-on-year. And we also had significant payments in the first half of '26 related to very good results, yes, and these payments referred to variable salaries for the team and also corporate income tax. Both these were, let's say, accrued for in 2025, but the payments were made in the first half of '26. Therefore, the cash flow compared to the previous year was slightly worse because of these outflows. Free cash flow, slightly up year-on-year because of lower CapEx, the conversion of operating profit to cash flow is still good. However, if you compare these shorter periods, it went down year-on-year. And we had like PLN 470 million of net cash on our balance sheet at the end of June. This is, of course, before the payment of the dividend, which took place on 6th of August. We paid out PLN 143 million from 2025 profit to our shareholders. So this was PLN 3.4 per share, 8% higher than the year before. I think this is pretty much it for details of the financial statements. And now we'll have a few comments about the outlook for the coming quarters.

Yes, sure. Thank you, Martin. Obviously, over the next few weeks for us, the most important project is the -- our proprietary trading system loss, which is scheduled to go live on 5th of October. Following dress rehearsals, the first rehearsal starts tomorrow. We are quite, I would say, positive following intensive testing in summer months also conducted by external companies. I, of course, we will make the final go line decision only after the confirmation that all the market is ready and on our side that everything works well. So that's what. And in terms of the guidance for the following quarter-on-quarters, looking at trading as we already showed you in our presentation, we've had very strong months in terms of cash equity turnover growth in July and August, around 44% increase year-on-year. And as Marcin said, on the energy front, pickup recovery and electricity volumes, on the other hand, still quite sub due to performance in gas segment due to geopolitical situation. In terms of OpEx, we see OpEx growth in the third quarter at a level not lower than in overall first half with further acceleration in growth in the fourth quarter on the back of increase in depreciation once we will launch WATS. And also, we will recognize this partial for some time, some of the costs [indiscernible] mainly the work of IT developers in the P&L rather than in CapEx. On other hand, we believe that some -- at least, some of those costs at least partially will be offset by lower costs elsewhere, including noncore companies. CapEx, Marcin also mentioned that we expect high CapEx in second half. But overall, I would say that here in Warsaw, we are quite ambit about the outlook in longer term especially related to the launch of the personal investment accounts, which has been already confirmed. The OKI accounts, they went through the whole legislative path and they will enter into force and then launch in the 1st of January. Also, we are very happy to see that another major index providers, [indiscernible] Poland as a developed market will be upgraded by S&P a few weeks ago to develop market status. This upgrade will be effective in September next year. Two words about OKI accounts, personal investment account, once again, for those who haven't heard about this account yet, it's more or less copy pace of a very successful account in Sweden, ISK with a tax fee amount of assets, investments up to PLN 100,000, so roughly $25,000. And however, there's no upper limit on how much investments you can keep in this account, but above 100,000, there will be a tax but on assets, not on capital gains in the first year, it will be around 0.85% of assets. And in the following years, it will be 19% times the reference rate of the Central Bank which today would be around 0.7%. We believe that definitely such a tax incentive will attract with the investors to the market. We already see that the number of brokerage accounts is sharply rising. And we believe that this growth will accelerate next year. Overall, the [indiscernible] finance is estimating the inflow of new capital to the Warsaw Stock Exchange at PLN 70-plus billion over the next 15 years, around PLN 5 billion a year. We definitely believe that these are something which is achievable. And to capture this potential, we will also launch an educational and promotional campaign. So OKI, definitely a breakthrough for Polish capital market and for attracting retail investors to the market. However, as you see on this slide, the potential is still big, and we will -- should continue to mobilize domestic capital. Currently, the -- at the end of last year, the market cap of Polish companies listed in Warsaw was just 27% of GDP, one of the lowest levels in European Union, the average European Union, 70%, and we estimate that to get us to 50% over the next 5 years to require around RMB 250 billion in new domestic capital around PLN 50 billion annually. So there's a lot still to be done and the potential is still very significant. Thank you.

[Operator Instructions] I can say we already have the first question coming from Miguel. Miguel, I'm muting you right now.

Just for a brief introduction on the analysts covering Warsaw [indiscernible]. So for my first question, on average equity fee. Should we think as the first half average as a new run rate or the new run rate is closer to the implied average fee for the second quarter? Like how to think about this moving forward? Can you please just comment how the high-frequency traders share evolved in July and August. And also, it would be interesting to hear if you can disclose the prospects of adding more of these algorithmic clients in the future. And if you think that the share that they represent of total volume will increase in the future and by how much?

Let me perhaps answer the second part of the question, but for the first, I will ask Marcin to comment.

Okay. So actually, I believe this is related because we have no, let's say, changes in our list here is just a result of the changing structure of the turnover. So if we assume that there will be more liquidity providers in the overall turnover. They, of course, benefit from preferential fees and the average fee will go down However, as long as this is about the additional turnover and our revenue goes up, I think it's not such a bad thing at the end, yes? And if we should expect additional algorithmic traders, I'll pass to Tomasz to comment about this.

Yes, exactly. First, what you've seen in the first half also is that we've added one major player in the space to our client and liquidity provider list. And WATS launched the new trading system, and we will have higher capacity that we could offer. Definitely, we will have more efforts to attract new members to the exchange, new brokers, but also new liquidity providers. And the share -- if we are successful, the share of the liquidity providers in our turnover will increase. And as a result, also the average fee. But that said, obviously, we expect the total turnover to increase as well. So the net result on our revenues, obviously, will be positive -- or should be positive.

Sure, sure. That's understood. But is there any like number that you had in your head, but like what would you see as the medium-term target? Like what would you expect the share of these liquidity providers to be in the total turnover? Right now, it's 36% as second quarter [indiscernible] expectations to maybe like towards 40% or..

As -- let me say that I would say the major liquidity providers already present and active on the Warsaw Stock Exchange. So no, we would not expect here a very significant increase outside that your gas around 40, say, good gas in the medium term.

Okay. Okay. Understood. On other revenues, could you just provide some color here? Like how much of the increase is recurring versus nonrecurring? And what would you see as sort of like the new run rate? And also is logistics and tech, which are noncore business, are these businesses like likely to grow in the future?

Yes, let me take this one. So yes, logistics and tech are presented in this line. In Logistics, we had an increase in the business scale in Q2. However, in the longer run, we have a strategy to focus on higher profit contracts here in this compound. So we are not really chasing the revenue and cost we will be focusing on increasing the profitability. Therefore, I would expect in the coming quarters, the revenue logistics can go down compared to what we saw in Q2. With tech, we have a small recurring growth in revenue because of selling the licenses for our store system, but this is not significant in terms of values. Other events, which you can find here different revenues from noncore activities like, for example, settling partnerships and different events or as I said, renting space in the Warsaw Stock Exchange building. So I would say there is no reason for a recurring growth in this line, at least nothing significant to happen there. I would say Q2 was exceptional.

Yes. Got it. Great. Understood. Now on costs, if I may. Maybe like the most [indiscernible], you guide for at least 11% OpEx growth in the third quarter and faster growth in the fourth quarter. So probably OpEx growth for the year and between 11% and 12% for the full year, right? So this is like double the upper bound of the range you've committed to during that '25, '26 strategy, right? So given that also the increase in previous year, it was about like 10%. It means that you will likely end up 2026 already above the upper range of the implied target of the strategy. So the question is like how to think about 2027 cost growth, like you left 3 additional quarters of comparatively higher depreciation and amortization, probably staff costs are also going to increase as some of these costs were being capitalized until now. So is there anything like offsetting these increases in 2027. And do you still stand by the guidance that OpEx is expected to grow 4% to 6% annually?

Yes. Okay. This is correct that working on our key strategic directions in autumn 2024, we expected 4% to 6% annual growth in the operating expenses. But please remember that at the same time, we're also assuming a 6% to 8% growth in revenues and 8% to 12% growth in EBITDA. So actually, we are beating all these measures. And on EBITDA, to say, last year, we were almost 38% up. So I would say this set of the KPIs should be treated combined, yes. So if we see extraordinary growth in our revenues, we also expect that certain costs may follow. And that's why we are preparing this slide that Lukasz presented or reminded to us right now. So we are indicating these elements of business growth, which exceeded our expectations. and costs related to them, yes. And once we exclude this, you can see that the underlying OpEx increase would be certainly lower. This is how we look at it, okay? So we are not really going to let's say, revised the strategic, let's say, KPIs at the moment because we believe that combined, we are still exceeding the expectations. However, we'll be working on the new strategy in 2027, and we will also come up with new KPIs, new targets together with the strategy next year.