Hellenic Exchanges Athens Stock Exchange SA

ATHEX:EXAE

Earnings Call Transcript 2022-Q1

[Operator]

Ladies and gentlemen, thank you for standing by. I'm Popi, your Chorus Call operator. Welcome, and thank you for joining the Hellenic Exchanges Athens Stock Exchange Conference Call to present and discuss the first quarter 2022 financial results. [Operator Instructions] The conference is being recorded. [Operator Instructions]

At this time, I would like to turn the conference over to Mr. Nikolaos Koskoletos, CFO; and Mr. Stelios Konstantinou, Head of Investor Relations. Gentlemen, you may now proceed.

[Stelios Konstantinou, executive]

Good afternoon, ladies and gentlemen, and good morning, as always, to those of you listening to us from the other side of the Atlantic.

We would like to present the financial results of the group for the first quarter of 2022, which were published yesterday and are available on the IR section of our website, and then take any questions that you might have. We remind you that since the change in reporting on our P&L in the fourth quarter of last year, we have made available on our website the P&L, yearly and quarterly data from 2017 to 2021 in the new format.

I'll pass on the floor to Nick.

[Nikos Koskoletos, executive]

Thank you, Stelios, and good afternoon, and good morning to all. I just wanted to note a couple of drivers that impacted our Q1 performance.

First, we had the average daily traded value, which stood 24% higher at close to EUR 93 million per day versus EUR 75 million in Q1 of 2021. The average market cap also stood 24% higher than the respective period of 2021. And we see that the listed banks market cap increased by 80%. The market cap for the rest of the market increased by 16%. And in addition, another element that impacted our Q1 performance was the EUR 625,000 one-off income item regarding the return of paid taxes following an audit that we had underwent 5 years ago.

In terms of how things are shaping up in 2022, so far, we have a new CEO that started at the beginning of March. We've been very active in meeting with all involved stakeholders, both domestically and abroad. And we're working on incorporating the feedback we've been receiving, and we'll be taking those items into account with regards to our future actions. And undertaking possibly some corrective actions were required on things that we've already embarked on.

Market volumes seem to be holding up for the most part. While we note that the conflict in the Ukraine does not directly impact the group as we do have -- we do not have any exposure there. And obviously, we are following developments closely there.

And in addition, another notable item, as it's widely known in the second half of 2021, we have seen a sharp increase in energy prices. Mainly electricity is a small part in -- main electricity is a small part of our operating expenses. However, it is something that we do monitor. Our electricity billing in Q1 2022 was at EUR 320,000 compared to EUR 175,000 for the same period last year. That's an 83% increase. So energy costs are expected to increase overall for the year compared to what we had seen in 2021.

So at this point, I'd like to pass it back to Stelios to go through our Q1 2022 performance in more detail.

[Stelios Konstantinou, executive]

So let's start with the overview of our first quarter 2022 financial performance. The consolidated turnover of the group in the first quarter of this year was EUR 9.9 million compared to EUR 8.4 million last year. That's up 18.1%.

If we go through the lines, we see that trading-based revenue, i.e., from trading and post-trading, was up 18% on the back of higher ADTV in the cash market in the first quarter of this year compared to last year. Market cap-based revenue, i.e., from listings and other services to issuers, was up 53%, again, mainly due to the significantly higher activity on corporate actions in the first quarter of this year. And revenue from services was also up 7%.

So revenue from trading represents 19% of total consolidated turnover. And in the first quarter of this year, it was up 22% at EUR 1.8 million compared to EUR 1.5 million last year. Revenue from post trading made up 41% of total turnover and amounted to EUR 4.1 million compared to EUR 3.5 million in the first quarter of last year, up 17%. And this increase is due to the 26% increase in clearing revenue in the cash market, while derivatives revenue was up 3.6%.

In post trading, revenue from operator subscriptions increased by 49% to EUR 493,000 compared to EUR 328,000 in the first quarter of last year due to changes in the fee policy of our subsidiary, ATHEXCSD that became effective on 12 April 2021.

As far as revenue from the derivatives markets, both in trading and post trading, is concerned in the first quarter of this year, trading activity, i.e., number of contracts, dropped by 19%. However, revenue was up 3.8% and the average revenue per contract was up 24.6% to EUR 0.215 per contract compared to EUR 0.172 per contract last year.

Lastly, on derivatives, trading and post-trading revenue in the first quarter of this year was EUR 576,000 compared to EUR 555,000. And that corresponds to 9.8% of total trading and post-trading revenue.

Revenue from listing makes up 12% of total turnover. And this line includes the quarterly subscription fees paid by listed companies, fees on rights issues, IPOs and other services to issuers. And that came in at EUR 1.2 million, up 53% compared to the first quarter of last year.

Revenue from data services makes up 9% of total turnover and includes the fees that we collect from data vendors for the provision of Athens Exchange market data as well as revenue from InBroker. The fees that we collect from market data depend essentially on the number of data terminals to which these data vendors disseminate our market data to, and that increased by 15%. As you know, following a review of our prices there, we have been gradually increasing our data feed price, and that's reflected in the top line there.

Revenue from IT and digital services makes up 16% of total turnover and includes revenue from digital services, infrastructure and technological solutions to the Energy Exchange Group and Boursa Kuwait. The same category includes revenue from Electronic Book Building services, AXIAline, AXIA e-Shareholders Meeting, Colocation and some other licenses. And revenue from IT and digital services overall was up 15%.

Finally, revenue from ancillary services makes up 3% of total turnover in the first quarter of this year. It was down 36% to EUR 250,000 compared to EUR 400,000 in the first quarter of last year. And there, ancillary services mainly includes revenue from support services to the Energy Exchange and some others like rents.

Moving on now to the expense side. Total operating expenses increased by 5.1% in the first quarter of this year to EUR 4.9 million compared to EUR 4.7 million last year. If we break down OpEx, we see that personnel costs are up 3.1% in the first quarter at EUR 2.64 million compared to EUR 2.56 million last year. While on the other hand, the other expenses increased by about EUR 160,000, and that's up 7.5%. The main driver behind the increase in other OpEx is the EUR 150,000 increase in electricity costs that Nick previously mentioned.

Now personnel remuneration and expenses accounts for 54% of total operating expenses, and that's about the same as in the first quarter of last year. Headcount at the group at the end of March 2022 was 221 compared to 231 at the end of 2021.

Turning to the bottom line. The earnings before interest and taxes of the group increased by 50.4% to EUR 3.4 million compared to EUR 2.3 million in the first quarter of last year. In the first quarter of this year, we also booked EUR 625,000 in revenue from tax returns resulting from a favorable court judgment concerning the return of tax and penalties that were assessed following a tax audit for fiscal years 2008, 2009 and 2010. So at the end of the day, the net after-tax earnings of the group amounted to EUR 3.3 million compared to EUR 2 million in the first quarter of last year, and that's a 68% increase.

Moving on to the balance sheet. The cash and cash equivalents of the group at the end of March 2022 increased to EUR 74 million compared to EUR 71.9 million at the end of 2021. Approximately 12% of the cash, i.e., EUR 8.7 million at the end of the first quarter, is kept at the Central Bank, where interest rates continue to remain negative, currently at minus 0.5%.

And also, on the balance sheet, a further EUR 231.6 million, rather, that we report as both an asset and a liability, are third-party cash assets and concerned margins our subsidiary ATHEXClear receive from its members in the cash and derivatives markets. And these funds are also deposited at the Bank of Greece.

And with this comment, this concludes our comments for the first quarter 2022 financial results of the group. I would like now to open the call to any questions that you might have. Thank you.

[Operator]

[Operator Instructions] The first question comes from the line of Memisoglu, Osman with Ambrosia Capital.

[Osman Memisoglu, analyst]

Just a couple on my side. First, on the ancillary services. Is there a reason for the decline or -- because we have quite a bit of a decline, both on a year-over-year basis and Q-on-Q basis, just wanted to get your thoughts on the outlook.

And also on the IT and digital services. Should we look at this with a seasonality in mind, given that it's up year-over-year but down Q-on-Q? And any color on the cost outlook?

[Nikos Koskoletos, executive]

Okay. So that was the third question, the cost outlook?

[Osman Memisoglu, analyst]

Any color on cost outlook. It seems to be quite a bit of decline on personnel costs, which I thought inflation could be a problem. But you seem to be doing, I guess, better than expected. Or what's the outlook there?

[Nikos Koskoletos, executive]

Okay. So on the cost side, what we did have is our headcount. There was a headcount reduction. We ended the quarter with 221 FTEs, full-time employees, from 231 that we had at the end of last year. So we have some attrition there. And that what has basically offset what the cost that we would have -- the cost inflation that we would have normally seen.

So overall, though, it doesn't change the fact that we are heading into a higher cost base, along the lines of what we've been discussing. So the nonperformance there, the fact that you have not seen any increase, I think it has to do with the headcount reduction. That is not a structural one, but rather a timing one because we did get -- we had a situation of increased attrition in the first quarter. So that's with regards to that element.

On the element of the ancillary services, actually, last year, we had booked a -- I think it was close to EUR 70,000 that were related to a grant that we had received because of our participation in a small EU-funded program, very, very small. But what happened is that we booked that revenue in that quarter. And obviously, this quarter, we don't have that. And that's why you have that base effect.

The ancillary services, overall, we do not see any particular moving part that would be alarming to the overall performance that is expected for that line. It's pretty stable to what was the case in 2021, aside from a smaller element that relates to some services that we have reclassified into the digital services.

And that's why maybe the Q-on-Q comparison doesn't come through as it ought to. So it's close to -- on the first quarter, it's close to EUR 70,000 that have been reclassified and will be part of our services as -- the digital and IT services. So that's with regards to the Q-on-Q comment and the year-over-year. As I mentioned, the last year was overstated.

And then with regards to the question on the technology and IT digital services. With regard to seasonality, there are elements in there that do have a seasonality. And those are the ones that refer to services that we offer to issuers along the season of their general meeting, along the GM meeting -- the GM season that we usually have peaks in June and a little bit of July. So there's that seasonality there. So I would overall look at it on an annual basis, with a very significant milestone being the first half of the year.

[Osman Memisoglu, analyst]

Understood. And regarding headcount, you said not a structural one. Does that mean you're looking to increase headcount in the next quarters? And also -- yes, go ahead.

[Nikos Koskoletos, executive]

We will definitely look -- the reason I said it's not structural is that we will be looking at going back to -- the attrition that we had was not because of our choice. So there's going to be replacement. We're seeking replacement of the attrition that we had.

So I think a good guidance would be that we will at least go to the number that we were at year-end. And then if we do see that there's a -- if we do see that we will be going to a bit higher level than that, it is very possible. But it will definitely go to last year's numbers.

[Osman Memisoglu, analyst]

Okay. And final thing on my side, regarding third party, which is mostly consulting from my memory. Should we expect similar levels to last year? Or how should we model that line?

[Nikos Koskoletos, executive]

No. I think it's a similar level to last year. We're talking about third-party, the relationships that we have with EnEx and Boursa Kuwait. Is that what you're referring to?

[Osman Memisoglu, analyst]

On the cost side, third-party remuneration and expenses.

[Nikos Koskoletos, executive]

On the cost side, the third party. Okay. On the third-party cost side, I think you will have a small increase relative to last year's figures as well.

[Operator]

[Operator Instructions] Ladies and gentlemen, there are no further questions at this time. I will now turn the conference over to management for any closing comments. Thank you.

[Nikos Koskoletos, executive]

Okay. Thank you very much, everyone, for your participation. Have a good evening, and looking forward to speaking to you again at the end of July with our Q2 numbers. Thank you.

[Operator]

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