Leonteq AG (LEON) Earnings Call Transcript & Summary

Good morning, everyone, and welcome to the press conference call of Leonteq's Full Year 2023 Results. The presentation material and the annual report 2023 can be found in the Investor Relations section of our website. In the same section, we have also provided you a time series data excel file and the comparison of the analyst consensus versus our actual reported results. Here with me today are Chief Executive Officer, Lukas Ruflin; and our new Chief Financial Officer, Antoine Boublil. We will start the presentation with our business review for the year. We will then discuss the financial performance for 2023 before losing the presentation with our takeaways. After which, we are happy to take your questions. It's now my pleasure to hand over to our CEO, Lukas Ruflin.

Thank you, Dominik. Dear ladies and gentlemen, dear shareholders, analysts and media representatives. 2023 has been a challenging year for Leonteq and our results were both disappointing and below our expectations. I want to be upfront about this. Antoine Boublil, who has joined us on the 1st of January of this year, will provide you with a comprehensive discussion of our results shortly, but let me now spend some time on our business and share 5 key main features with you. First, our client franchise demonstrated its resilience in challenging market conditions that were characterized by high inflation, corresponding interest rate hikes, over low market volatility and the significant strengthening of the Swiss franc against major currencies. Second, we further diversified our offering and strengthened our footprint outside our home market, in particular, in Europe. Third, we continue to invest into our digital investing platform, LynQs, among several other key initiatives. Fourth, we are about to launch new client solutions, which will increase our total addressable market and which we expect to contribute to our ambition to continuously diversifying our revenue sources. Lastly, efforts are recognized by rating agency. Let me now provide you more details on each of these 5 points in the next slides. We begin on Page 6. Our solid client franchises evidenced by several indicators, some of which I would like to highlight now. We issued over 38,000 new products. That's an increase of 32% year-on-year, and it is the second best number in our entire history. We also processed more than 190,000 client transactions on our platform. And of course, these numbers also highlight the scalability of the platform. Looking at our financials. They also show that our clients invested on average less in a single product in 2023 compared to historic average ticket sizes. During the year, we saw an increase in new transactions in products issued by new white labeling partners. In line with this, we recovered a 39% growth in turnover with new partners, which also reflects our continued efforts to diversify revenues across issues. Turnover from historic partners totaled CHF 6 billion, which is down 6% year-on-year. The efforts to diversify our offering, however, go beyond the issues and thanks to new initiatives, we were able to broaden our revenue streams over the past years. Last year, the revenue contribution from new business initiatives amounted to 47%, which was slightly lower as compared to 2022. This was driven on 1 hand by a decrease year-on-year of revenues linked to our fund derivatives business and the crypto asset business. And on the other hand, the pension savings business performed well, and the AMC business as well as the balance sheet light business demonstrated their resilience in challenging market conditions. Now let's move on to Page 7 and look at our regional performance. In Switzerland, we maintained a strong position in our home market and defended our leading position as the #1 issuer of SIX-listed yield enhancement products with a market share of 28%. And we ranked third among all issuers of total SIX-listed structured products with a market share of 12% in 2023 compared to 8% in 2022, thus in relative terms gaining market share. We also introduced a new innovative ETP+ concept for which Leonteq was awarded with Best newcomer and Best ETP issuer at the Swiss ETF awards in November '23. In Europe, we strengthened our leadership team with the hiring of a New Head of Sales Europe, new General Managers in Frankfurt and a new Branch Manager in London. And in Italy, Leonteq continued to grow its market position with a 15% market share in Cert-X-listed products. We also seized on the opportunities in the hiring market in Asia and expanded our sales force with senior hires in Hong Kong and Singapore. We launched a dedicated version of LynQs for Asia-based wealth managers and multifamily offices, where we recently introduced one of the first click 'n' trade platforms accessible via mobile devices for our clients in Hong Kong and Singapore. Our investments in expanding our digital investing platform, however, not limited to Asia. Let me give you more color around efforts on LynQs globally on Page 8. With LynQs, we respond to clients' needs to accelerate our digital transformation and provide a full range of structured product processes on a single platform. LynQs today is one of the most comprehensive platforms when it comes to the pricing, trading, life cycle management of structured products via one digital interface. In '23, we introduced new features, which aim to increase the ease and efficiency for clients when pricing structured products, in addition to aiming at increasing the yield of these investment solutions. We currently have more than 1,000 financial intermediaries who are actively pricing on our platform. And in the past year, we registered more than 3.5 million pricings in total. Following the launch of our quote module on LynQs in April '21, we also saw a significant increase in number of products we issued directly through our quote model. And finally, in H2 '23, more than 3,000 of our products were issued directly via LynQs, which is equivalent to a click 'n' trade ratio of around 17%. Now on to Page 9. I mentioned it before, our long-term pension savings business performed well in '23. In particular, the business benefited from the increased interest rates during the year, and we implemented product enhancements that increase the attractiveness of these savings solutions. As a reminder, our pension savings business is today based on two existing corporations, one with Helvetia and one with Mobiliar. We serve these partners through a proprietary insurance platform, which we have named internally OMEGA. This platform enables the fully automated digital processing of the entire life cycle of unit-linked insurance policies. Over the past few years, We, however, also invested heavily in a new innovative pension saving solutions through a collaboration with Glarner Kantonalbank. We will offer retirement savers in Switzerland, a pure digital savings product that combines a guaranteed and upside potential as opposed to ongoing interest payments or investment in a mixed asset class portfolio. The solution is particularly interesting for individuals that have concerns about the risk of investing in securities, and therefore, today, typically maintain their retirement savings in low-yield cash accounts. Our solution, we believe, is an attractive alternative, offering higher return while addressing risk concerns. Following a recent successful Friends & Family phase, we are confident to launch this innovative offering in the near future. On to Page 10. Under the so-called retail flow business initiative, we have built up a team of around a dozen dedicated experts in trading and sales. We have made good progress in developing a core platform that is required for issuing a market making a large number of flow products. We have the ambition to launch the first leverage products under that platform towards mid '24 in Switzerland. In the context of the strategic initiatives, Leonteq also recently acquired a minority stake in BX Swiss. BX Swiss is 1 of 2 stock exchanges in Switzerland, and this majority owned Boerse Stuttgart Group. We, in this context, also intend to become a market maker for equity securities and ETF on BX Swiss in due course. On to Page 11, which gives you an overview on the recognition and progress we have made with our external rating agencies. First, with the rating upgrade by Fitch to BBB stable outlook, which we have been recognized for later in 2023. Our efforts to diversify our business in terms of issuers and products alongside the continued and diligent focus on risk management, as mentioned, been recognized. Another highlight was the upgraded ESG ratings from MSCI and Sustainalytics. With our upgrade to AA by MSCI, we have now been ranked as an industry leader in managing significant ESG risks and opportunities. Being ranked among the top 25 of MSCI's 63 diversified financial peers worldwide. Sustainalytics also continued to categorize Leonteq as having low risks of experiencing material financial impacts from the ESG factors, and we rank among the top 5 percentile of Sustainalytics' Global Universe as well as within the diversified financial universe. I'm now pleased to introduce to you our new CFO, Antoine Boublil. Antoine has wealth of relevant experience with a proven track record in working closely with the investor community, credit rating agencies and all our other stakeholders. Antoine was CFO at Cembra, which he accompanied to its IPO in 2013, most recently was the CFO of Credit Suisse (Schweiz) AG. I'm convinced that his deep understanding of the financial service industry and his leadership qualities will further contribute to the successful and continued execution of Leonteq's strategy. With that, I hand over to you, Antoine.

Thank you, Lukas, for your kind words. Good morning, everyone. I'm pleased to present to you for the first time the financial results of Leonteq. So let's start now on Page 13. 2023 was indeed a challenging market environment for Leonteq. Some might even call it a perfect storm, especially in the second half of the year. First, the market volatility has collapsed by historical standard. And apart from 2 spikes in March and October, it has reached new lows, which were significantly below 2022. This has impacted both our trading results as we will see shortly and the attractiveness of some of our products. Second, central banks have continued to raise interest rates as a response to elevated inflation levels. This contributed to make bank deposits, in particular, term deposits more attractive to investors, also relative to structured products. Third, the Swiss franc, which was the best-performing currency in G10 last year strengthened significantly, in particular in the second half. This impacted negatively a large component of our revenue base denominated in U.S. dollar and in euro. Finally, on the fixed income side, we saw a narrowing of credit spreads from the high of the previous year, which was a positive on our financials. Moving on to the next Page 14, let's see what impact that macro backdrop had on the overall structured product markets based on statistics from the Swiss Structured Product Association. The overall structured product market reduced by 18% in 2023 compared to 2022. In that context, Leonteq showed the resilient performance, particularly in its historical core franchise focused on yield enhancement products and equity asset class. Our total turnover was down 8% year-on-year to CHF 21.3 billion and down 4% if you adjust for foreign exchange movements. On the yield enhancement product, our turnover is up 5%, better than the market at 4%. This was driven by Switzerland and Europe, while Asia was lower due to some nonrecurring large transaction in 2022. On equity asset class, our turnover is down only 2% compared to the market being down 16%. Our resilience is also evidenced by an increase in our total SIX-listed market share from 8% in 2022 to 12% in 2023, where Leonteq together with its platform partners continued to rank third among issuers. We issued significantly more product, and client transaction process on the platform were up 15%. Besides, we continue to see an increase of the turnover contribution from new partners to 20%, reflecting an increase of 7 percentage points compared to the previous year. Lastly, we maintained a balance sheet like ratio of 13%, with the ambition to contribute more work in the future, leveraging our SHIP platform as well as our third-party issuer network. Moving now to the net fee income on Page 15. Leonteq fee income totaled CHF 213.2 million, which is down 4% on a year-on-year basis and on 2% if you adjust for FX. Net fee income purely from structured product was down 6% year-on-year and down 3% adjusted for FX. In the first half of the year, fee income was up 5%, but that followed a drop of 20% in the second half on a year-on-year basis and 33% sequentially. However, margins remained stable on a full year basis, up 89 basis points. In terms of regional split, Europe had a solid year in terms of fee income with a 47% revenue contribution, which would have been even stronger, excluding the currency impact. This development is largely due to our continued investment in terms of capabilities and sales coverage. Asia kept a stable share, but was clearly challenged in the second half with a 35% drop sequentially in net fee income. We also have made selected hires in the region during that period, particularly in Hong Kong and Singapore, and we expect to capitalize on the rebound of the activity there when it will materialize. Apart from structured product, we have seen good growth in our pension saving business in Switzerland, which was up 20% year-on-year in terms of net fee income. And this was driven by increased interest rates and announcements we made to our product. If I now move to Page 16, where I'll cover the net trading result. The net trading result is comprised of the contribution from both our aging strategies and our refinancing activities. The net fee income and the contribution from our hedging strategies are interdependent, but are typically negatively correlated. So in positive equity market with lower market volatility, we tend to see strong fee income and rather flat to slight positive hedging contributions. In more volatile market, clients tend to be less active, whilst we benefit on the hedging side, is providing sort of a natural hedge for the fee business. As you can see clearly on the left side of the page, 2022 was a very particular year in terms of volatility in the market. This was a combination of a couple of factors have produced exceptional gains in terms of hedging contribution. Those factors were: first, the high level of platform asset at the end of 2021; and then second, the exceptional fluctuations in share price of several large cap companies that we've seen them. This was clearly not repeated in 2023, where apart from 2 episodes of higher volatility in March and October, the year was characterized by lower loss and a level of volatility, which led to lower results. Summarizing now our results on the P&L for the year on Page 17. Total operating income was down 43% year-on-year, largely driven by 85% reduction in the net trading results line. Net fee income, as mentioned previously, was down 4% and 2% on an FX-adjusted basis. Net interest income has turned positive year-on-year with the help of higher rates on our cash balances. Other operating income was down 39% due to the nonrepeat of platform partners income refund in 2022. Operating expense were down 8%, mainly driven by lower variable compensation, which I will comment further on the next page. In the tax line, we recorded a credit of CHF 2.2 million for the year, driven by prior year tax adjustments. For the full year, group net profit were CHF 20.6 million, down 87% year-on-year. But when looking at the split by semester, we had a net profit of CHF 28 million in the first half, while a net loss of CHF 8.2 million was recorded in the second half. This was explained by the macro factor I mentioned before, running against the business, particularly towards November with clients sitting on cash volatility collapsing and the headwind of exchange rates. Return on equity was a low 2% for the full year and EPS was CHF 1.15. Let's now look at the driver behind the 8% decline in our total operating expense on Page 18. Personnel expenses were down 9% year-over-year, with fixed compensation up 4%, which reflects selective hiring in IT development, which has a partial offset in professional services. Furthermore, we also made selective key hires on the sales side as well as on our product offering, in particular, in relation to the retail flow business initiative mentioned before. Discretionary variable compensation for the year 2023 was down more than 50%, which reflect the lower business performance of the year. However, this reduction was partially offset by the amortization of deferred compensation from prior years. Another operating expense provisional services decreased due to lower IT consulting fees. IT-related expense were up 13% on the period, reflecting higher cost for network and data center as well as market data services and continued investments of the business in its digital platform. FTEs ended the year at 5 91, up 2%, but were up 7% on average for the year, in particular, driven by new hires in IT and rate control. To summarize, Leonteq demonstrated a certain flexibility in managing its cost in a challenging financial environment, in particular on the discretionary compensation side. Nevertheless, in 2024, we have started to review diligently our cost structure, and we'll take action to optimize the allocation of our resources in order to create additional flexibility. Let's now continue on to Page 19 to look at our balance sheet. Leonteq had solid balance sheet underpinned by a strong capital base. Let me give you first an overview of the key balance sheet components. The position of Leonteq's balance sheet is driven on the one hand by the outstanding volume of own structured product issued. And on the other hand, by the hedge positions to offset the closure from those structured products issued by both Leonteq and by its platform partners. When distributing its own structured product, Leonteq use part of the cash proceeds to finance hedge position in part to invest between its investment portfolio. Proceed-generated solutions of partner products are recognized on the issuance partner balance sheet, and the market risk arising from partner issuance are mainly hedged by Leonteq as part of its service offering. Leonteq applies a dynamic hedging approach to offset the market risk exposure induced by the client or by investing either invested equity securities or engaged into the revised transactions. Due to Leonteq's core franchise being historically centered on the payoff with equity structured -- equity securities as underlying asset class, the embedded derivative components in subproduct are usually put options. The value of these options depend largely on share price, rising market leads to lower replacement value and decreasing markets leads to higher replacement value. The same also applied to the derivative hedge transactions. Similarly, the collateral class with hedging counterparties for exchange [indiscernible] as well as the hedging arrangements entered into with Leonteq partners increase or decrease in the same way. Now in terms of published figures, we reported a decrease in our total balance sheet of CHF 3 billion to CHF 9.3 billion at the end of 2023. This was driven by a decrease in trading financial assets on the back of a reduction in outstanding platform assets with historical partner and lower equity hedging position. This factor also reduced the replacement value of our derivatives, which were further impacted by rising equity markets in 2023. Leonteq issued product outstanding remained really stable at CHF 4.7 billion. And similarly, our high-quality investment portfolio remained broadly stable at CHF 2.8 billion. In that overall context, our funding needs were reduced and so were our balance sheet level of cash. Lastly, our shareholders reduced by CHF 90 million, which I will comment further on the next page. We maintained a strong capital base on Page 20. We define the capital base as the aggregate amount of shareholders' equity and deferred fee income. Shareholders equity totaled CHF 780 million at the end of December 2023 compared to CHF 870 million at the end of 2022. This decrease was mainly driven by a total distribution to our shareholders amounting to CHF 90 million. This included dividend payment totaling CHF 72 million and a completed share buyback program totaling CHF 18 million. Under this program, we bought back a total of 439,855 shares, which is equivalent to 2.3% of the company's share capital. As previously announced, the Board of Directors intends to propose a capital reduction for the shares bought back at the upcoming AGM to '24. In addition, due to the composition of our equity for which parties denominated in U.S. dollar, currency transition adjustment negatively impacted the equity balance by CHF 33.5 million due to the strong appreciation of the Swiss franc mentioned earlier. On the other hand, more narrow credit spread on our investment portfolio led to a positive impact of CHF 18 million in the other comprehensive income. Together with deferred in fee income of CHF 58 million, Leonteq capital base remained strong at CHF 838 million at the end of the year 2023. In terms of capital allocation on the next page, the Board will propose at the AGM a dividend distribution of CHF 1 per share. This amount will be payable out from retained earnings and out from capital contribution reserve. This represents a payout ratio of 87% and compares to the announced target of a dividend payout ratio superior at 50%. Going forward, the Board of Directors intends to pay more than 50% of the group annual profit in the form of dividends and keep the option to launch additional share buyback program similar to the one executed in 2023 if results permit. From an earnings guidance perspective, it is clear that the volatility of hedging contributions has proven to be a challenge to calibrate the company earnings guidance. This resulted in positive earnings revision in the year 2021, also in the year 2022 and negative earnings revision in the year 2023. In that context and as markets remain difficult to predict in the short term, we do not intend to give a precise range in terms of guidance at this stage, but we have the clear ambition to grow our full year 2024 earnings compared to the full year 2023. As the year progressed and we execute on our initiatives, including continuing to diversify our revenue sources and optimizing our cost base, we'll report out on our progresses. I will now turn over to Lukas for his concluding remarks.

Thank you, Antoine. I would like to conclude today's presentation with our takeaways on Page 20. Our 2023 results are disappointing and significantly below our expectations. However, our client franchise demonstrated its resilience throughout challenging market conditions. In executing our growth strategy, we delivered tangible and natural progress against all defined pillars, including our sustainability thresholds. Through our continued investments in key initiatives over the past few years, Leonteq has created a solid and diversified foundation for the company to build on. Going forward, we aim to start harvesting from these investments, which are aimed to further diversify revenue sources. At the same time, we are evaluating a range of measures to optimize and make our cost structure more flexible in order to adapt to rapidly changing market conditions. And finally, in terms of profitability, Leonteq has the clear ambition to grow profits for the full year 2024 compared to the full year 2023. Thank you very much for your attention.

[Operator Instructions] The first question comes from the line of [indiscernible] with Octavian.

Maybe could you explain us a bit with more detail, you mentioned executing on growth strategy. You have this midyear 2026 target to reach between CHF 450 million, CHF 500 million income. Could you a bit elaborate from your position as of today, how you plan to reach this target? This is the first one. And maybe if you could also elaborate a bit more on your cost optimization of flexibility there what you plan to do?

Thank you very much for your question. I'll take the first one and then pass it on to Antoine for the second one. Well, just as a reminder for everyone on the call, we gave a 2026 midterm target level of CHF 450 million to CHF 500 million top line for '26 in February '22. And as a matter of fact, we reached the '26 target already in '22. So the business has clearly proven that it is absolutely target range that is achievable. Now of course, as the '23 results have demonstrated, we are dependent on clients being positively geared towards investing in the core line of products we are offering. And we are obviously also dependent on clients continuing to endorse the mainly different and innovative growth offerings on which we are working. So the combination of more benign market terms in the future, for argument sake in '26, combined with, as I mentioned earlier during the call, are starting to harvest from the significant investments we have made in the last few years in new initiatives should put us on the trajectory of reaching the targets or repeating the top line achievement of '22. Now of course, it is difficult for me to be too specific because we are trying to run this business by taking a diversified approach to what sort of underlying investment exposure our clients base might want to take. We believe with this diversified offering, we will be able to reach the target, but it would really be difficult to specifically point to one specific product area. I've mentioned it this year in '23, the pension savings business has been successfully growing. Other initiatives like the fund derivatives business has been less positively contributing compared to prior years. And of course, the '26 combination in itself specifically is not something which we can or want to forecast, but we believe the combination of these various offerings and as I said, a more benign market outlook for '26 will lead us there. With that Antoine the second part.

Yes. So I think on the cost side, I mean, as you've seen, the total operating expense were down 8% in '23 compared to the previous year. I mean, clearly, this is not enough considering the drop we've seen on the revenue side. But a few points I mentioned here. One is in terms of flexing that cost base, you've seen our -- my prepared remarks that I mentioned that the variable compensation for the year was down 50%. So that's a pretty big cost flex. But unfortunately, it's partially offset by amortization of deferred of the previous year, which were really a record year for Leonteq. So I think, I guess, what we're looking at now is -- I've been in the business for a bit more than 30 days now, is to really look diligently at every line item on the cost side and try to understand a little bit from a zero-based budgeting what we can optimize. I think there's a few ideas that, obviously, we will come back at some point with more detail on as we firm them up. But I think, in general, there is a time for harvesting on some of the investments we made in the past few years, and it's probably -- '24 is probably the time where we see some of those benefits. But at the same time, there is cost idea that we're having, we can further elaborate as the year goes by. But rest assured, I think cost is going to be a big priority for us in '24.

The next question comes from the line of Daniel Regli with ZKB.

So my first question is more like a general, could you give us some kind of update about where we stand in structured products? How has the demand for structured products development year-to-date and in particular, which kind of products were, let's say, more in favor and which ones were less? So -- then secondly, on the 2024 result, obviously, you say you want to increase the profitability. However, I think we all struggle a bit to kind of find the normalized level of profitability one can expect from a 2024 year. So can you maybe some kind of give us more guidance, what you expect in terms of increase of profitability for 2024? And then maybe last on the turnover side. Obviously, you have grown your turnover with new partners quite a bit year-on-year. Can you maybe talk us a bit through what partnerships have went particularly well and where you see further upside potential?

Okay. Daniel, I will take the pleasure of answering the second question, which is the normalized profit level and then pass on to Antoine for the other two. Look, I said it at the very beginning of the presentation. 2023 results are significantly below our expectations and were disappointing. Of course, I myself very disappointed about the fact that we gave a guidance early in the year, which we then had to revise and which we had third time or second time revised. Now I can, I think, relatively easily explain why this happened. This was really driven by macroeconomic circumstances. What I'm very pleased about is how resilient our client franchise has been. I'm very pleased about the significant progress we make on the digital investing platform LynQs' side. I'm very pleased about the number of client transactions, which has really grown very strongly on a percentage basis. And I'm also pleased about the second strongest result in our 17-year history of the client transactions. So on the platform, almost 200,000 you remember, Daniel, when we discussed a few years ago whether we could get an average number of 60,000, 70,000 over 100,000, and we are now at 200,000. At the same time, we have to be transparent. Having missed our guidance now 2 times in a row suggests that it's difficult to be precise, unless we know what the year brings. And simply putting -- simply looking at '24, I think it's fair to say that most likely, it will be another transition year. If you listen to Central Bankers, then probably inflation is starting to come a little bit under control, probably interest rates will start to, if anything, pivot downwards. But then let's not forget we have significant elections. I believe half of the world population is going through elections and, of course, the U.S. election, will likely bring some sort of, I would say, unexpected movements as we have also witnessed during the last 2 last election years. So for me, in particularly and also the rest of my management colleagues to now tell you and say we have the clear understanding of what the world brings is difficult. What we can, however, say is generally, it feels in terms of client interest in our product range a little bit more constructive, Antoine will talk about that in a second. What we can also say is if '24 was to bring larger volatility spikes and this would probably be beneficial to our hedging results, as you have seen before. And what we, as I said before, can probably say is with regard to some of the bigger macroeconomic changes by the end of the year, we will have more certainty. But it's not a year where it's really for us to try to do a data job, then you, Daniel, and the rest of your research colleagues in terms of forecasting what the exact profits range will be. We feel confident to state that we aim at a better result than '23 in terms of net profits, but we would leave the specificities of forecasting down to a specific number to you and your colleagues. Antoine?

Yes. I just add, I mean, some color on the start of the year. I mean, clearly, we think or we see that it's going to be more constructive. If I look at net issuance, both from Leonteq and new partner, I think we've seen a pickup. We also -- if we look at the net fee income, if I look at the month of January, it's a better run rate than what we've experienced for the entire second half on a monthly basis. So I think this has really picked up. I mean, trading environment remains challenging. I mean, we've seen volatility relatively low still in January, but it's still early day in that front. So -- but in general, more constructive tone clearly. And again, as we described on the page around '22 versus '23, the second half '23 was really, really challenging overall from the market backdrop perspective. Now to your question on new partners. And then I think I can't go into the specific, obviously names, but I think we're seeing a positive trend. On some partners, we've really had a good momentum in the last, call, part of the year. So I think that trend is continuing with some of these new partners. So we're quite happy about that in terms of the development of the franchise with them.

Okay. Can I maybe ask a follow-up question on your partnerships. And I think last year, you once -- or this termination or finalization of the setup with Raiffeisen was due and you had to postpone the kind of completion of this project. Can you maybe give us a quick update where we stand here. is the project now completed? Or is this still ongoing?

No, I think it's -- the short answer is it's still ongoing. I mean, good work being done. And obviously, the two parties are working diligently to come to a conclusion on this project. So I think that's as much I can say right now, this is still ongoing.

[Operator Instructions] The next question comes from the line of [indiscernible] with AWP.

I would have two questions, if I may. The first one, also regarding the measures that you're evaluating to optimize the cost structure. Could you -- I would like to know whether this also includes job cuts? And the second question is also regarding revenues. Again, you mentioned that 47% were revenues from new business initiatives. I would like to know what is in that number besides the business' crypto assets? And also, can you maybe give a guidance regarding maybe midterm or long-term revenues out of those -- from new business yields?

Okay. Maybe I'll start with the -- with your question on the cost side. I think there's a couple of comments. One, obviously, last year, we think was really challenging in terms of the environment. It's not necessarily a given that this will continue for this in that pace going forward. So we need to maintain some flexibility in terms of having the right level of stuff that we can capture, obviously, the business and several clients. With that said, I think two things, what reflected last year in the cost is the variable comp to reflect the year. But as you can see, the number of head count on our FTEs remain broadly stable. I think our approach for '24 is going to be very disciplined in terms of head count. So we'd be very mindful in terms of not adding. And obviously, as the year goes by and we go through some of the optimization measures we would like to implement, we'll see what the impact would be. But we don't have, at this stage, anything to communicate in terms of what you refer as a job cuts. I think we'll maintain a level of head counts, which is commensurate with the level of activity in the business, but we'll be very disciplined about definitely not growing that number at this stage.

And I'll take the second question about the new business initiatives. So to say it that simply, anything that we did not do before 2018 in our definition would be within the so-called new business initiatives. So it's really the 2018 year as a mark for the very simple reason that in 2018, we did a capital increase with our shareholder basis in order to expect invest among other things in new business initiatives. So I just run you through some of the key initiatives there are more. I highlighted it LynQs is a very important initiative. Our AMC business, which contributed to quite a stable result on the fee income side is a new initiatives. Our crypto offering is a new initiative. Our funds derivatives business is a new initiative. Our balance sheet light business is a new initiative. We intend to start during '24, the new business initiative of the retail flow business activities to which I referred. We intend shortly to launch together with Glarner Kantonalbank a new pension savings offer in Switzerland. And there are a few other initiatives that we have within the pipeline, but it's a bit too early to talk about. The combination of all these initiatives should comfortably contribute to more than 50% of top line in '26. And having in '23, already 47%, you can see that we are not that far away as it stands already today.

Yes. But that was -- you had a huge decrease of revenues. So that's not -- the 47% doesn't give a real insight into what you are expecting maybe in the middle term or long term for this new fields for the revenue?

I'm the first one to acknowledge that the 2023 results were disappointing. So I agree with your statement about that specific aspect. Having said so, no matter what the results are, your question was what is the likely combination of the revenue cost...

No, the revenues -- guidance for the revenues maybe in 2026 long term that you're expecting from out of the new fields?

Okay. Let me then try to be very short and precise. Our 2026 midterm revenue target is CHF 450 million to CHF 500 million, and we expect more than 50% of those to come from this new business initiatives.

Ladies and gentlemen, that was the last question.

Well, in that case, ladies and gentlemen, dear shareholders, analysts, media representatives and other attendees of the call, thank you very much for your time to listen to us today. We are embarking on a road show, and our Investor Relations department is very happy to connect with you individually. In case you have follow-up questions, please reach out to us. Our contact details are also visible on our website. Thank you again very much, and have a good day.