Euronext NV

PAR:ENX

Earnings Call Transcript 2018-Q1

[Operator]

Hello, and welcome to the Euronext Q1 results. [Operator Instructions] Just to remind you, this call is being recorded. I will now hand you over to Stéphane Boujnah, CEO and Chairman of the Managing Board of Euronext. Please begin your meeting.

[Stéphane Boujnah, CEO & Chairman of the Managing Board]

Good morning, everybody, and thank you for joining us this morning for the Euronext Q1 2018 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 first quarter 2018. Giorgio Modica, Euronext's CFO, will then further develop the main financials and business drivers for the year before I conclude with my financial remarks. We will both welcome your questions at the end of the presentation with Anthony Attia, Member of the Managing Board of Euronext. Let us start with the Slide 5. First, the first quarter was marked by return of volatility, which translated into double-digit volumes growth in all asset classes: cash, derivatives and spot ForEx. In addition, our market share remained very strong as well as our revenue capture across our key markets, contributing to the strong performance of the quarter. Second, transition to MiFID II was another highlight of this first quarter. 5 months after its implementation, I would like to share, thus, with you a few key takeaways. First, Euronext was ready in day 1 without any major disruption. Second, the full impact of the new regulation is unfolding over time. For example, the cap on dark pool was postponed to 12 March following the announcement, and rest of stocks has been forbidden to be traded on dark pools. For the moment, we don't see massive transfers from OTC to lead venues. We rather observe a shift of OTC flows to Systematic Internalisers.Third, as far as M&A is concerned, we closed this quarter the acquisition of the Irish Stock Exchange, which was signed in November last year. The Irish Stock Exchange is now rebranded as Euronext Dublin, and integration is proceeding according to plans. Deirdre Somers, the former CEO of the Irish Stock Exchange, will join the Managing Board of Euronext after regulatory and shareholders' approval and leads the Euronext center of excellence for Debt & Funds listings and ETFs. Euronext Dublin will start contributing to Euronext P&L from the second quarter of 2018. Fourth, we added a new product to the Corporate Services suite with the acquisition of 80% of InsiderLog in January, a Swedish company specializing in insider list management. Finally, in April, we achieved another important milestone, securing the EUR 500 million long-term funding that will serve as a key pillar of our capital optimization strategy. The new financing extends the maturity of our financial liabilities to 2025. It reduces the cost and diversify the financing mix of the group. With an order book oversubscribed 4.4x, at EUR 2.2 billion, the success of our inaugural EUR 500 million bond 7-year A rated by S&P shows clearly the confidence of bond investors in the Euronext model. On this occasion, S&P has released the first rating of Euronext at A stable outlook, showing the confidence of this third party in our business model and strategy. Moving to Slide 6., here are the main figures of the quarter. First, revenue increased by EUR 20 million to EUR 146.7 million, driven by strong lead, strong market share, strong volumes in cash trading, the strong performance of market data and indices and FastMatch as well as contribution from our Agility for Growth initiatives. Only listing revenue was slightly down due to a mixed environment despite a strong IPO pipeline, but annual fees and Corporate Services remain strong. Second, our cost efficiency improved our operating leverage. And as a consequence, EBITDA increased by 25.1% to EUR 88.2 million, much faster than revenue. And EBITDA margin reached 60.1% at the group level. The EBITDA margin performance remains very solid even if there was a positive net EUR 1.5 million impact on cost this quarter. Third, on the core business and on the Agility for Growth perimeter, excluding tiering, the May 2016 perimeter, the reported margin reached 63.5% this quarter, paving the way to reach our 61% to 63% EBITDA margin target for 2019 for this perimeter. Agility for Growth initiative generated EUR 0.5 million of EBITDA this quarter. Fourth, we recorded around EUR 16.2 million of cost savings, up by almost EUR 5 million compared to the end of December. As a consequence of all those good results and the lower impact of exceptional items, reported EPS increased by 30.5% to EUR 0.82 per share.Slide 7 describes the recent developments. Since last March, with Euronext Dublin, the group, Euronext, is now present in 6 core countries across Europe. As planned, Deirdre Somers has been appointed CEO of Euronext Dublin, and he's to join the Managing Board after regulatory and shareholders' approval. She has the responsibility for the group's center of excellence for Debt & Funds listing and ETFs. The combined group is now a real global leader on many fields: #1 in debt listings, with more than 37,000 listed bonds; #1 in funds listing, with 50 -- with 5,600 funds; and a major player in ETFs, with 1,050 listings. ETFs and debt are really core elements of the ambitions of our Agility for Growth strategy, and we are convinced that Euronext Dublin will serve as an accelerator for projects like finance and the new MTF for ETFs called [ ETF Access. ] From a P&L perspective, Euronext Dublin will be consolidated starting in Q2 2018 as transaction was closed at the end of Q1. A few words, though, on Euronext Dublin stand-alone Q1 results. Revenue increased by around 15%, driven by good listing volumes in Debt & Funds and annual fees and this despite a volatility. Second, EBITDA margin was at 32%, down compared to last year, mainly due to the impact of significant one-off staff cost and acquisition cost related to the transaction with Euronext. Please also note that Q1 2017 margin was exceptionally high, marked by low IT and MiFID II costs. So on the EBITDA margin of the Irish Stock Exchange, there is a base effect for Q1 2017.As a reminder, we plan to achieve EUR 6 million of cost synergies for 2000 -- cost synergies by 2021 in Euronext Dublin and, progressively, reaching the profitability gap with the rest of the Euronext group. Integration works are progressing very well, according to plan, supporting by the engaging energy of our new Irish colleagues. I now leave the floor to Giorgio Modica for the presentation of our Q1 financial results.

[Giorgio Modica, Chief Financial Officer]

Thank you, Stéphane, and good morning, everyone. Let's start with Slide 9. Euronext consolidated revenues increased EUR 20 million or 15.9% in the first quarter of 2018 to EUR 146.7 million, many thanks to stronger volumes in both cash and derivatives, the positive impact of Agility for Growth initiatives accounting in the quarter EUR 4.2 million; and the acquisition of FastMatch contributing EUR 5.2 million to the top line. The first quarter of 2018 saw a favorable trading environment with the return on volatility and a supportive macro environment in Europe. The only disappointment of an otherwise excellent quarter was listing revenues at EUR 18 million. This decrease of 4.3% versus the first quarter of 2017 was driven by a weaker performance on IPOs despite the pipeline, which remained very strong, and a decline in follow-on activity. Corporate Services and annual fee partially mitigated those impacts and positively contributed to the result of the business. Cash market share remained strong at 65.3%. And volume growth on both derivatives and cash contributed to the good performance of trading. In addition, the cash trading is further strengthened at 0.62 basis points. I will come to this later on in the presentation. Our year-on-year top line growth sees benefits from the base effect related to FastMatch acquisition in the third quarter of 2017, with spot FX trading generating EUR 5.2 million this quarter. Market data and indices performed extremely well, with revenues up 15.4% to EUR 29.7 million as a result of new market data agreement and the good performance of indices. In total, Agility for Growth initiatives generated EUR 4.2 million in revenues in the first quarter of 2018, thanks to Corporate Service, along with the first revenues from APA/ARM services. The non-volume-related revenues amounted to 42% of total group revenues, with the addition of fixed Corporate Service revenues being offset by the consolidation of FastMatch trading revenues and the strong cash trading performance. The operating cost coverage ratio reached 104% in the first quarter of 2018. Moving to the next slide, let's discuss about listing. The mixed listing environment translated into a reduction of revenues of 4.3% to EUR 18 million. On the one hand, volatility pushed part of the IPO pipeline to next quarter. At last year, 6 new listing were completed, with EUR 0.8 billion raised versus EUR 0.2 billion last year, including 2 large companies: NIBC and B&S. As a reminder, the first quarter of 2017 was marked by the jumbo transaction, like the listing of TechnipFMC in our market. Euronext continues to attract tech SMEs from non-Euronext markets. The Q1 2018 saw the listing of a U.K.-based company, Acacia Pharma; and an Italian company, Media Lab, own Euronext Access. Follow-on revenues decreased 41.4% compared to a very high level in the first quarter of 2017. And that quarter was marked by large transactions such the one of ETF. On the other hand, annual fees increased 6.1% to EUR 8.3 million. And Corporate Service generated EUR 3.7 million of revenues, benefiting from the acquisition of iBabs and Company Webcast in the course of 2017. The revenue of Corporate Service this quarter is slightly down versus the Q4 2017, mainly due to some seasonalities in the activity of Company Webcast. Commercial efforts continue to be strong, with more than 50 new clients signed this quarter. Moving to Slide 11. Cash trading revenues increased nearly 20% to EUR 55.7 million on the back of strong revenue capture and market share in a volatile environment. Euronext cash trading ADV increased nearly 22% to EUR 8.5 billion compared to the first quarter of 2017. And we reached, on the 16 May '18, nearly EUR 20 billion ADV, which is the second most active day since 2010. The average yield increased despite the stronger volumes to 0.52 basis points. And this is mainly thanks to new fee schemes, reducing the sensitivity of the yield to volumes. The new market share remain pretty strong at 65.3%, up 3.9 points year-on-year, thanks to the success of those new fee schemes, such as the nonmember OMEGA pack and Best of Book now used by all retail brokers. Euronext remain at the forefront of innovation. Euronext Fund Services, launched last May, on-boarded 33 asset managers. Euronext Block, our MTF block trading platform, connected the first wave of brokers. We issued technical document for ETF Access, our new ETF for MTF to be launched at the end of the year. And we are currently building a strong pipeline for Euronext Synapse, the MTF for our corporate bonds, with many members already signed in Europe. Moving to the next slide, let's look at derivatives. Revenues increased 4.5% to EUR 10.6 million. The yield is slightly down to 0.28 basis points on the back of a less favorable product mix. Derivative ADV is 14.9% up, mainly thanks to increased volatility and the improved market position on the Dutch market following the migration of option contract from the TOM platform in June 2017. The decrease in commodity volume was due to the poor condition in the physical market. The New Market Participant program, designed to develop the nonphysical market, now involves more than 450 trading firms, with more than 4 attracted by the new NMP program, which was launched in January this year. Finally, FastMatch generated EUR 5.2 million in revenues this quarter, driven by spot FX ADV up 14.3% to USD 20.2 billion. Moving to the next slide. As I was commenting before, market data and indices performed well this quarter. it's up 15.4% to nearly EUR 30 million revenues due to the new market data agreements and the good performance of indices. The revenues from market solution increased by 5.2% in the first quarter to nearly EUR 9 million. The business continues to benefit from new projects. And revenues are supported by the delivery of the first commercial releases of Optiq to international clients. Clearing revenues increased 10.3% to EUR 13 million in the first quarter of 2018, reflecting stronger derivatives trading activity as well as higher treasury income. Revenue from Interbolsa in Portugal increased by 9.3% to EUR 5.4 million in the first quarter of 2018, driven by an increase of public debt and equity under custody compared to the first quarter of 2017. Other post trade revenues of EUR 0.1 million were recorded in the first quarter of '18, accounting for the first revenues generated by the APA/ARM initiative part of Agility for Growth. Moving to Slide 14. The Euronext EBITDA grew 25.1% this quarter to EUR 88.2 million, with the margin of 60.1%, up 4.4 points versus the first quarter of 2017. The good operating leverage and cost efficiency are key to this performance, with the reduction of costs in the core business compensating the additional cost coming from the acquired companies. Operating expense, excluding D&A, grew only 4.3%, mainly due to the impact of new acquisition, mainly iBabs and FastMatch; savings on the core business; and net positive one-off, as mentioned by Stéphane, of around EUR 1.5 million. Cumulated core gross savings amounted to EUR 16.2 million this quarter, up compared to the end of December. I remind you that the objective for 2019 is EUR 15 million of saving, net of inflation; EUR 22 million, gross of inflation. Agility for Growth generated an EBITDA of EUR 0.5 million this quarter. If we look at the margin of the core business and Agility for Growth, excluding clearing, which is the perimeter used for our 61% to 63% EBITDA target for '19, in this quarter, we reached the margin of 63.5%, up 6.8 points compared to the same period last year. We will continue our cost-saving effort in the remaining part of the year, with the progressive ramp-down of IT cost in the course of the second half of 2018. We recorded EUR 1.5 million of PPA for FastMatch and iBabs this quarter, while we'll start accounting for Euronext Dublin PPA in the second quarter of 2018. The net income increased 30.6% in the first quarter of '18 to 57.3% (sic) [ EUR 57.3 million, ] mainly driven by EBITDA growth and less exceptional cost and financing expenses than last year. Net financial expenses for the first quarter of '18 were EUR 0.4 million compared to net financial expenses of EUR 1.1 million in the first quarter of '18. That was marked by one-off items related to the previous term loan as well as the acquisition of -- the potential acquisition of LCH SA. Please note as well that we consolidate for the first time our 11.1% stake in LCH SA, and we record EUR 1.5 million in the equity investment. As a reminder, we received last year, at the same period, EUR 0.7 million as a dividend from LCH Group. Income tax for the first quarter of 2018 was EUR 25.2 million, representing an effective tax rate for the quarter of 30.4%, stable versus last year. Adjusted EPS is up 28.1% year-on-year at EUR 0.85 compared to EUR 0.65 in the first quarter of 2017. Let's move to Slide 15. Since the release of Agility for Growth, Euronext has changed significantly. The perimeter of activity has changed, new targets have been set, and therefore, we decided to provide you with a table aimed at simplifying the tracking of Euronext performance. I believe that the table is sufficiently self-explanatory and, I hope, useful. As you remember and as we discussed, the 61% to 63% EBITDA margin included the core business, Agility for Growth and excluding clearing. In the first quarter of 2018, based on that definition, Euronext reached 63.5% EBITDA margin. I would just like to add a few consideration on net margin. First, debt/EBITDA margin benefit from roughly EUR 3.5 million of positive one-off, which -- on cost, without which, the margin would be closer to the lower end of the range. The second is that this result strengthen our confidence in our ability to deliver the target of profitability of 2019. On the other side, that level of profitability cannot be simplistically extrapolated and applied to the next quarter of 2018. On the other hand, what we call new perimeter, which is basically FastMatch and Euronext Dublin, recorded a very low margin at 6.2%, impacted by EUR 2 million of one-off cost related to the Dublin acquisition. Without that, the profitability of FastMatch remains extremely solid at around 45%. Should you have any question on this table, please let me know during the Q&A session.Moving to Slide 16, I would like to start with a few words on our inaugural bond. In April, Euronext significantly restructured its liabilities through the launch of its EUR 500 million inaugural bond. With this strategy, we have secured 4 objectives. First, we will reduce the P&L cost of funds' worth versus the previous term loan. The new cost of funding is going to be a new LIBOR plus around 40 basis points. Second, we have extended the maturity of our liability to 7 years or 2025, which is a prerequisite for any capital optimization strategy. Third, we have diversified our financing mix outside of the banking channel, which provides additional financing flexibility. Fourth, we secured resources for growth. Within this framework, we used the proceeds from the bond to the financed or existing debt rate to acquire FastMatch, iBabs and Euronext Dublin that totaled EUR 338 million at the end of 2018. Moving now to cash flow. The net operating cash flow-to-EBITDA ratio increased to 85% in the first quarter of 2018, up from 81% same quarter last year, mainly thanks to the good performance of EBITDA this quarter. Looking at the bottom right of the slide, you can see that our liquidity position remains healthy at EUR 365.3 million, thanks to our strong cash generation and despite the acquisition of Euronext Dublin last March. Let me now leave the floor to Stéphane Boujnah.

[Stéphane Boujnah, CEO & Chairman of the Managing Board]

Thank you, Giorgio. As you have understood, Q1 2018 was a very strong quarter, driven by strong volatility impact on volumes, strong revenue capture and strong operating leverage. A few words on the initial trends we are seeing so far. First, clearly, volatility has been softening those last weeks, and volumes have been less dynamic than the very strong first quarter we experienced on all our businesses. While one must note that April 2017 was marked by high volatility related to political elections in some of our markets, so there is clearly a base effect in the comparison between Q1 '17 and Q1 -- sorry, between Q2 '17 and Q2 '18. We will continue to be very active in our yield management to ensure the robustness of this business. The second, listing pipeline remains strong. And we expect some IPOs at the end of Q2 and Q3 2018, depending, obviously, on volatility development and investor appetite. We should continue to benefit from the good dynamic of annual fees and development of Corporate Services, which represents an increasing part of our listing business. Our commercial efforts will continue on Corporate Services but also on various initiatives towards potential issuers. Third, from a technological point -- standpoint up to the migration to the Market Data gateway for cash and derivatives last year, we achieved another significant milestone with the migration of bond-regulated markets trading to Optiq order entry gate and matching engine. This first step under trading platform allowed us to fix many usual bugs, and we continue or in active preparation for the migration of other cash trading markets in June on the Optiq platform. Fourth, our AGM will take place in a few minutes, and we will propose a dividend of EUR 1.73 per share to be paid after approval on the 24th of May. Our next presentation will take place on the 3rd of August for the Q2 results. Anthony Attia, Giorgio Modica and I are now available for your questions. Thank you.

[Operator]

[Operator Instructions] And our first question comes from the line of Martin Price from Crédit Suisse.

[Martin Price, Research Analyst]

First question was just on the cost base. And apologies if I missed this, but I think you indicated there was a one-off cost benefit of EUR 3.5 million in the first quarter. Can you just provide a little bit more detail on that, please? Secondly, I was just wondering if you could provide some indication as to how much expense you incurred for MiFID II and Optiq implementation cost in the first quarter. Just beginning to understand how the expense base could change as those projects draw to a close.

[Giorgio Modica, Chief Financial Officer]

Okay. So when it comes to the exceptional items, really, there are a number of those which are mainly related to release of provisions for many matters, including releases for bonus provision and all the accruals. The amounts are small, but the number of item is significant, and they total up to around EUR 3.5 million. When it comes to the exact breakdown of Optiq cost, we actually do not provide that. However, you can -- what we usually indicate is looking at 2 lines, which are communication and professional services. Those are actually the 2 P&L lines where most of those costs are recorded. And if you look in terms of trend, the evolution, you might have seen an increase of this cost throughout 2017 and '16 as well. Well, those are the 2 lines that we hope are going to reduce throughout the 2018. And the other data point that I believe is useful is to look at the target in terms of savings. So we are at around EUR 16 million, which means that to achieve the target now, we will need pretty much to beat inflation against the consideration that the objective for '19 is EUR 15 million net of inflation.

[Operator]

Our next question comes from the line of Rosine Van Velzen from ING Bank.

[Rosine Van Velzen, Research Analyst]

Let's start with the softer guidance for the second quarter volumes. Could you give us an update on the FastMatch end market in specific and what developments do you see there compared to last year? And then maybe as a follow-up question on your statements of the IPO pipeline is building up, what is your view on the outlook for the rest of capital raising so in follow-on activities and bond-raised revenues? And then a lot...

[Stéphane Boujnah, CEO & Chairman of the Managing Board]

Okay, so -- sorry, go ahead.

[Rosine Van Velzen, Research Analyst]

If I may, a third one. That there is a few of us down to 0.28 basis points due to the product mix. And do you expect to reverse this if the volatility remains at current levels?

[Stéphane Boujnah, CEO & Chairman of the Managing Board]

So Giorgio will answer your first and third question. And Anthony Attia, who is our Group Head of Listing, will answer your specific questions about outlook for the rest of the year on listing.

[Giorgio Modica, Chief Financial Officer]

Yes. So let me start with FastMatch. When it comes to growth, our ambition to growth are linked to a number of new initiatives that we will put into place: first, clearly, is we're thinking to launch new products; second is new data analytics to improve the use of the platform; and third, potentially, is a geographical expansion. So those are the 3 key area that we would like to capitalize to further expand the franchise of FastMatch. When it comes to the question on the derivatives yield, this is simply a mechanical effect of the fact that the contribution of volumes coming from TOM comes mainly on the option products, which are margin dilutive in terms of yield, which means that if the mix remains similar to what it is today, you should not expect significant changes. However, clearly, we are always looking ways to optimize the -- our fee schemes. And clearly, we will think of what is the best way to improve the performance of that business line.

[Anthony Attia]

Anthony Attia speaking of the equity listing question. As we said before, the pipeline for Q2 is good for IPOs. Companies are engaged in the process; however, market environment prompts us to remain cautious. On the follow-on activity, we also expect some significant operations in Q2. Nevertheless, the -- we will remain cautious in a general trend as the capital increase operations are less important compared to last year. On the bond side, we are cautious on Euronext's domestic countries. Nevertheless, we expect some dynamism coming from Dublin.

[Operator]

Our next question comes from the line of Arnaud Giblat from Exane.

[Arnaud Maurice Andre Giblat, MD & Research Analyst]

I've got 3 questions, please. First off, now that the Dublin acquisition is close, I was wondering if you were looking at potentially redomiciling some of the profits to Ireland. Secondly, in terms of M&A, I -- there are a number of cash equity businesses out there, potentially, for sale in Europe. Could you remind us what sort of framework you think about when considering these acquisitions? Is that still part of the Eurozone, or they are -- as valuation is a key consideration, what is the key framework? And particularly, how do you think that, in conjunction with other potential deals that could be down the line, like LCH SA in time, over time. So maybe if you could help us frame your state of mind on M&A and cash equities, that could be helpful. And thirdly, Agility for Growth seems to have made some improvements over the quarter, with costs coming down. Is the current level of profitability in Agility for Growth sustainable?

[Stéphane Boujnah, CEO & Chairman of the Managing Board]

Okay, Arnaud, thank you for your questions. I'll answer the first one and the second one, and then Giorgio will answer the Agility for Growth margin question. The first question, we have no intention whatsoever to reallocate profits to other locations. We pay taxes where we make revenues and profits, so there will be no tax impact at group level of the acquisition of the Irish Stock Exchange. Second, on M&A, the framework remains the same. We believe that organic growth is important, but we believe that restructuring some growth opportunities is critical for the development of the group. And we will continue to explore 2 avenues. One is the diversification of our top line to enter into new asset classes or into non-volume-related businesses, hence, the acquisition of FastMatch; hence, the dialogues we have on possible other target; and hence, to a certain extent, the acquisition of the Irish Stock Exchange, which had a significant listing business, which is not volume related. And that will remain a significant part of our growth strategy -- of our external growth strategy. The other avenue is to expand our federal model if and when opportunities arise in Europe to consolidate the European infrastructure world and to make it -- when 2 conditions are met. Number one, when those independent exchanges are willing to consider consolidation. But as of today, there is no such dialogue, and there is no such situation because all the independent exchanges in Europe are very satisfied and happy with their current total independence, so they don't see the need to consolidate. And that condition was different in the case of the Irish Stock Exchange, where the Irish Stock Exchange decided to start to explore alternative strategy following the winning they had on Brexit. And the other condition is that if and when those situations arise, we must make sure that it creates value for the shareholders of Euronext. And all these exchanges are different, and some of those situations would create value, others would not create value. We are very happy with the acquisition of the Irish Stock Exchange, both for strategic acquisition and also because we believe that we can bring the current 32% EBITDA margin to the level of the core businesses of Euronext. Situations might be different for other exchanges. So this is the framework of our external growth strategy. Giorgio, on number three?

[Giorgio Modica, Chief Financial Officer]

Yes, I wanted to complement the answer of Stéphane on taxes. We have a mechanism whereby all the regulated exchanges within Euronext, i.e., equalize in terms of profitability, so the profitability of each of the exchanges of Euronext at the same margin. And we have an agreement with tax authorities whereby we pay taxes pretty much on the basis of the business, which is revenue. So the tax rate of the group Euronext is the weighted average. The tax rate of the Euronext countries weighted by revenues, which is perfectly in line with what Stéphane said. And when it comes to Agility for Growth, yes, we are very confident we can also improve that level of profitability. And the other thing I wanted to highlight is twofold then. The first one is that, at the moment, we have no business in the portfolio of Euronext which is not capable to generate profitability in express of 50%. And second one is that, today, the profitability of Corporate Services is pretty much funding the development of other initiative which are not yet generating revenues.

[Arnaud Maurice Andre Giblat, MD & Research Analyst]

Can I just follow up on that? Excluding any further acquisitions in Agility for Growth, is it the case that any marginal revenue has no marginal cost attached?

[Giorgio Modica, Chief Financial Officer]

On what segment, Agility for Growth?

[Arnaud Maurice Andre Giblat, MD & Research Analyst]

Yes, yes.

[Giorgio Modica, Chief Financial Officer]

I mean, Agility for Growth, it really depends on the business. When it comes to Corporate Services, I mean, it's really business-by-business. There are companies that operate software or platforms, like iBabs, in which it's fair to assume that the increase of revenues will not translate 1:1 to traditional cost. There are others in which variable cost are more significant, like Company Webcast. But what I would say is that the only non-platform business of Euronext is into the Corporate Service space. When we look at other initiatives, like Synapse, for example, this has clearly all the benefit in terms of operating leverage as the other business of Euronext.

[Arnaud Maurice Andre Giblat, MD & Research Analyst]

Okay. Can I just have a last follow-up? Sorry. On market data, just the last one, a very quick one, is the step-up in run rate revenues sustainable? It sounded like you've repriced some contracts, that, that might be the case.

[Giorgio Modica, Chief Financial Officer]

So let me be clear on that one, that there are several elements you need to consider. The first one, you've seen in previous quarters that there was a contribution from audit findings. This quarter, this contribution is 0 practically, which means that this is not, on the one side, a fully loaded quarter; on the other side, with MiFID II, we have new products that allow further disaggregation of the market data we sell, which means -- and this concept embeds the possibility for clients to optimize their data consumption, which means that, over time, clients can take benefit from that opportunity and progressively reduce their spend. On the other side, what we have seen so far is that the proactiveness of clients to manage this new product has been limited, and therefore, you have seen the result in our P&L. so which means that, longer term, there might be some optimization. So far, the revenues continue to be strong.

[Operator]

Our next question comes from the line of Anil Sharma from Morgan Stanley.

[Anil Kumar Sharma, Equity Analyst]

I just had actually one question. On Slide 15, the Agility for Growth initiatives, I mean, your -- the Q1 number, I appreciate it's obviously dangerous to extrapolate, but if I times that and annualize that, you're running quite a bit below the 2019 target. So in terms of -- as it takes time to do deals, and it just happened quickly, so I'm just trying to think how you're going to sort of bridge that gap in the next sort of 18 months.

[Giorgio Modica, Chief Financial Officer]

Sorry, the gap in terms of what?

[Anil Kumar Sharma, Equity Analyst]

You got a -- so you got a EUR 55 million target of revenues versus the EUR 4.2 million you've done in Q1. So I'm just saying if you take the EUR 4.2 million and annualize it, let's say, you're up EUR 17 million, EUR 18 million, the gap versus the EUR 55 million, I appreciate you can't do M&A necessarily very quickly because it takes time to source deals, to close deals, so I'm just trying to understand how you're going to bridge that gap, EUR 55 million, in the next 18 months?

[Giorgio Modica, Chief Financial Officer]

Yes, the -- it's twofold. On the one side, the way you should look at that is that the Corporate Service, which is already delivering around EUR 13 million, EUR 15 million on a run-rate basis, is increasing at a very fast rate, which means that we are comfortable that, that part of the business is going to deliver in line or close to the original target set at May '16. On the other side, we are working, and we are pretty much ready on 2 platforms. And the key big ones are -- there are actually 3: one is the new MTF for ETF, the second one is Synapse, and the third one is the partnership with Morningstar. Those are platform that needs to collect liquidity. We believe that we are close to that point, and we believe that each of those initiatives would be able to contribute for the gap. Again, it's less linear than the normal Corporate Service business, but we believe that those platform have the capability to bridge that gap.

[Anil Kumar Sharma, Equity Analyst]

Okay, got it. And sorry, and the second question was just around -- now that the ISE acquisition is sort of closed, is there any potential to kind of release some capital as you move the -- even as you rebranded, obviously, Dublin, you moved into the Federal structure, so is there any sort of balance sheet optimization that can be done?

[Giorgio Modica, Chief Financial Officer]

I mean, clearly, balance sheet optimization is one of our priorities. It's really too early to tell. We will start a number of discussion with the regulators, and we will see over time what are the possibility to further improve the capital structure.

[Operator]

Our next question comes from the line of Ron Heijdenrijk from ABN AMRO.

[Ron Heijdenrijk, Analyst]

I have a few questions, starting off with, could you please talk through your market share developments in April and May, what have you seen there, and what are the main drivers? Then secondly, your cash yield, you've set yet some new fee schemes reducing the yield sensitivity to higher volumes. Would that therefore mean that the 0.52 basis points is more or less sustainable going forward? And then finally, you were talking about the ISE PPA starting from the second quarter onwards. Could you guide us on the quarterly run rate there?

[Giorgio Modica, Chief Financial Officer]

Yes, so let me start. So the first question was related to the evolution of the market share. The evolution of the market share is linked to further optimization in our fee structure. And this is mainly due to the new program that we introduced at the end of last year: the nonmember OMEGA pack and the Best of Book, which proved to be extremely successful. Then when it comes to the impact on fees, it is not really that -- apart of these new schemes that I just mentioned, we did not change any other major components. The fact is that we have, to acertain extent, move existing clients for (sic) [ from ] a more dilutive fee structure to less dilutive fee structure and less sensitive to volumes. So another way to explain it is that we have fewer volumes running today through our asset fee scheme and more volumes coming these new liquidity pools. And sorry, your final question was? Oh, the PPA. Yes, PPA, we're working with auditors, so it's really too soon to tell. This is an analysis that we will finalize within the second quarter, so I don't have the element to guide you.

[Operator]

Our next question comes from the line of Syed Akbar from Kempen.

[Syed Anil Akbar, Analyst]

Just one question on the volumes. So you saw like significant increase in your market share, 65%. How sustainable do you see this going forward, especially considering that like there's others, like Systematic Internalisers and other parties, that are going to be entering the market? So do you see any pressures on this part? Or do you not see it in the near-time future? Just that.

[Giorgio Modica, Chief Financial Officer]

Yes. So clearly, there are a lot of moving parts. And what you mentioned is right, but what we see today is that the Systemic Internaliser (sic) [ Systematic Internaliser impact is not having a strong impact on the lit market but rather on the OTC part of it. And we see our 65% market share as sustainable. And clearly, we will need to see what are the developments, but that level does not seem to us as unsustainable at the moment.

[Syed Anil Akbar, Analyst]

Okay. And if I may, just a follow-up. On the ETF side, other parties have reported that the volumes on MTFs have gone up versus the lit exchanges. Have you seen something like this also happening under yours or...

[Giorgio Modica, Chief Financial Officer]

No, we didn't.

[Operator]

[Operator Instructions] And our next question comes from the line of Kyle Voigt from KBW.

[Kyle Kenneth Voigt, Associate]

Really, it's just a follow-up a bit for Giorgio. On the revenue capture side, I think there's a question, maybe a few participants ago, just on the sustainability of the revenue capture from the year at 0.52 basis point level, and maybe I missed the response. But I understand that there is dynamics in the quarter that -- just in terms of the pricing changes that you're going to put through. But as we're working out and the sustainability, I guess, of 0.52 basis points for the rest of the year, if you could just provide some more color as to what you're seeing into the second quarter so far and if that is sustainable going forward. And just looking back historically, there hasn't been many periods on a year-over-year basis where we've seen this much volume growth, then we haven't seen compressions in the yield. So I guess going forward, should we not expect as much compression in the yield that we do model volume growth in our models?

[Giorgio Modica, Chief Financial Officer]

Yes. So let me be more -- let me try to be more specific. Clearly, there are different price schemes and at different pricing. And what has changed is not actually -- I mean, we introduced the OMEGA pack, and we introduced the Best of Book. And what has actually changed is that existing clients have moved within the price schemes that Euronext is offering, and that move of clients -- those moves have been towards schemes which are more profitable for us. And therefore, we believe that those are -- at the moment, the yield remains strong. So we don't have elements to predict a significant drop of the yield component. And yes, going forward, if clients remains in using the same tariff bonds they are using today, you should predict in your model a reduced relationship between volumes and yield, which still exists but is less direct than it was in the previous quarters.

[Operator]

And as there are no further questions, I'll hand back the conference to our speakers.

[Stéphane Boujnah, CEO & Chairman of the Managing Board]

Thank you very much, and have a good day.

[Operator]

This now concludes our conference call. Thank you all for dialing in. You may now disconnect your lines.