Euronext NV

PAR:ENX

Earnings Call Transcript 2020-Q3

[Operator]

[Operator Instructions] I will now hand you over to your host, Stéphane Boujnah, CEO and Chairman of the Managing Board, to begin today's conference. Thank you.

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

Good morning, everybody, and thank you for joining us this morning for the Euronext Third Quarter 2020 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 this third quarter. Giorgio Modica, the Euronext CFO, will then develop further the main business and financial highlights. And we will open up for questions together with Anthony Attia, a member of the Managing Board of Euronext.So let's start on Slide 4. As you've seen, Euronext reported solid results for the third quarter of 2020. This reflects the continued benefits of our diversification initiatives as well as the resilience of our core business. As you've seen, the revenue increased in Q3 2020 by EUR 23.1 million, up plus 12.7% to EUR 204.8 million compared to Q3 2019. This robust performance reflects solid revenue growth, resulting from both continued diversification and a resilient core business. So excluding acquisitions and at constant currencies rate, revenue grew by plus 3.4% in Q3 versus last year. Non-volume-related revenue accounted for 54% of group revenue this quarter and covered 128% of operating expenses, excluding depreciation and amortization.So thanks to our continued cost discipline, group EBITDA also grew by plus 9.1% in Q3 2020 to EUR 117.8 million. And this translated into an EBITDA margin of 57.5%. It is 1.9 points lower than last year's third quarter as we are in the process of consolidating costs from our recent acquisitions whose integrations are still ongoing. But on a like-for-like basis, and excluding recent acquisitions, such as VP Securities in Copenhagen, EBITDA margin reached 59.7%, slightly higher than last year. In this context, we confirm the cost guidance announced in February for 2020 as we expect the strategic costs and also Børs VPS integration costs to ramp up in the fourth quarter.Overall, this good performance over the quarter resulted in a plus 13.8% increase in adjusted EPS and a EUR 1.12 per share. On a reported basis, Q3 2020 net income was up plus 10.6% at EUR 70.2 million.So moving to to Slide 5, I would like to come back quickly on the Borsa Italiana acquisition. On 9 October, we announced a turning point in our history with the contemplated acquisition of the Borsa Italiana Group. The combined group, when the deal is completing, we have a well-diversified business mix covering the full exchange value chain. The combined group will become the leading pan-European venue for listing with EUR 4.4 trillion market capitalization on its markets. It will be the #1 venue for secondary markets with EUR 11.7 billion of average daily volume. The combined group will offer a full postpaid value chain with the addition of a multi clearing house -- multi-asset clearing house, sorry. And it will become the third CSD in Europe, and we will more than double the volumes of assets under custody within the Euronext book.From a financial perspective, the proposed combination will provide compelling value proposition for our shareholders. The combined group would cross the EUR 1 billion revenue mark and will provide healthy EBITDA margin profile, I mean even prior to any synergies. And it is clearly very important to note that Borsa Italiana has higher revenue and EBITDA performance than what was rumored in the press before the transaction was announced. In addition, the combination is expected to deliver EUR 60 million of run rate synergies by the third year after completion through a combination of EUR 45 million of expected cost synergies and $15 million of expected revenue synergies. And the combination of Euronext and the Borsa Italiana Group is expected to result in an immediate accretion on adjusted EPS before any synergies and a double-digit EPS accretion on EPS for synergies in year 3.To conclude on this slide with some words on financing and timing. I just wanted to remind everyone that Euronext is to acquire 100% of the London Stock Exchange Group Holdings Italia S.p.A., which is the holding company of the Borsa Italia Group for a cash consideration of EUR 4.325 billion. The financing is fully secured through bridge loan facilities, fully underwriting -- underwritten by a group of banks. And we expect to complete the acquisition by the first half of 2021, subject to various conditions precedent that are in the process of being met. The first one is the approval by the Euronext Extraordinary General Meeting, which will convene on the 20th of November to review the transaction. The other one is the clearance by the European Commission for the London Stock Exchange proposed merger with Refinitiv. I'm sure you all saw that on the third of November, London Stock Exchange group shareholders approved the sale of Borsa Italiana, which was also one of the conditions to the transaction.So I now hand over to Giorgio Modica for the detailed presentations of our third quarter results.

[Giorgio Modica, Chief Financial Officer]

Thank you, Stéphane, and good morning, everyone. Let's start with Slide 7. First of all, I would like to start saying that like-for-like and organic performance exclude the impact of the consolidation of VP Securities, Nord Pool, OPCVM360 Ticker, 3Sens, and exclude exchanges of foreign exchange rate. As Stéphane mentioned, Euronext reported a solid quarter with revenues reaching EUR 204.8 million, up EUR 23.1 million or 12.7%. External growth contributed EUR 19.2 million to this performance.Let's take a closer look at the different businesses. Post-trade revenue increased 44.9% to EUR 44.6 million driven by the first impact of the consolidation of VP Securities contributing for EUR 10 million, the strong organic performance and higher clearing revenues. Trading revenue was up 7.3% to EUR 75.9 million, with EUR 6.3 million contributed by Nord Pool power trading. This contribution offset slightly lower cash and derivative trading revenues. Listing revenue grew 2.9% to EUR 35.8 million, thanks to the strong performance of corporate services at EUR 7.8 million revenues. Advanced data services saw a 3% increase to EUR 34.5 million, reflecting a solid performance of the market data and indices business and the contribution of Nord Pool data businesses. In the third quarter of 2020, non-volume-related revenue accounted for 54% of total group revenue, increasing from 52% in the same quarter last year. This change reflects the expanded post-trade activity with VP Securities. Lastly, these non-volume-related revenue covered under 28% of our operating cost, excluding D&A, almost identical to 129% last year.Moving to listing, Slide 8. Corporate services remains this quarter the growth engine of listing. Listing revenue grew 2.9% to EUR 35.8 million, with our corporate service franchise reporting EUR 7.8 million of revenues, up 29.5% due to the continued demand for digital solutions in the current market. On primary markets, Euronext reported a record quarter in terms of new listing with 21 SME new listing that demonstrate the attractiveness of our value proposition and the success of the listing initiative launched in the last year. Oslo contributed for 13 new listings in the third quarter of 2020, one of the busiest quarter of its history and beat a self 13-year record. Five new listings were from companies domesticated outside of the Euronext market, most of them in Spain. And our TechShare program contributed for 2 new listings. Overall, EUR 917 million were raised on the Euronext primary market compared to EUR 221 million last year.Secondary market showed the usual seasonal slowdown in activity combined with a larger proportion of convertible bond financing. In the third quarter of 2020, EUR 8.5 billion were raised in secondary equity issues compared to EUR 6.1 billion in the third quarter of 2019.Moving now to our trading business. Let's start with cash trading on Slide 9. Cash trading revenue decreased 0.6% to a total of EUR 53 million, reflecting lower trading volumes offset by improved average revenue capture and market share. Like-for-like revenue decreased 0.2%.Looking now at the different components of this performance. ADV decreased 5.8% to EUR 7.5 billion. The average fees of the third quarter increased 0.54 basis points compared to 0.51 basis points in the third quarter of 2019. This is 5.2% increase that almost perfectly offsets the impact of [ subcu ] volumes. On average, market share on cash trading reached 70% over the quarter compared to 69.4% in the third quarter of 2019.Moving on to derivative trading. Derivative revenue were EUR 10.8 million, down 6.3% compared to the third quarter of 2019, reflecting lower trading volumes also impacted by the uncertainty over the dividend.Let's take a closer look at the different drivers. Revenues decreased more than volumes as the average fees slightly decreased compared to last year. Average revenue per lot was EUR 0.30, down 1.3%. This reflects, as I highlighted in the second quarter, the significant increased proportion of lower yield equity future in our product mix. This was partially offset by stronger volumes in commodity derivatives that, as you know, have higher-than-average fees. Excluding the impact of these new equity futures, namely single stock and dividend future products, the average revenue capture would have been EUR 0.33 per lot.Moving to the next part of our trading business on Slide 10. Spot FX recorded average daily volume of $19.3 billion, almost stable to the third quarter of 2019. Spot FX trading revenue was down 2.4% to EUR 5.8 million, negatively impacted by the euro-dollar evolution. At current currencies, spot FX trading revenue was up 2.6%.Power trading, encompassing the trading activity of Nord Pool, of which Euronext acquired 66% in January 2020, reported EUR 6.3 million revenues. This reflects the lower volumes due to the seasonal slowdown of spring and summer months, as mentioned in the second quarter. In the third quarter of 2020 average daily volume for the day-ahead were 2.19 terawatt hour, while the average daily volume for the intraday were 0.07 terawatt hour. As a reminder, other Nord Pool activities, namely market coupling, shipping and market data are recorded in market data and technology solutions.Moving to Slide 11 for post-trade. Revenue from our post-trade activity increased 44.9% in the third quarter 2020 to EUR 44.6 million. Clearing revenue was up 11.7% to EUR 14.9 million, reflecting higher treasury income and revenue capture offsetting lower derivatives trading volumes. Custody and settlement revenue accounted for EUR 29.8 million, up 70.3%, resulting primarily from the first impact of the consolidation of VP Securities, as mentioned. In addition, the business benefited from high settlement activity and the increased retail participation in Norwegian CSD.Moving to Slide 12. Starting with the advanced data services, revenue was up 3% to EUR 34.5 million in the third quarter of 2020. This growth was driven by the consolidation of acquired businesses contributing EUR 0.5 million and a resilient core business with continuous traction from ESG products and market data business. Investor services revenue grew 7.9% to EUR 2 million, thanks to the good commercial traction. Lastly, on technology solutions, revenue was up 20.2% to EUR 11.9 million, mainly resulting from the consolidation of Oslo Børs VPS and Nord Pool but also from a solid core business performance.Moving to Slide 14 for the financial highlight of the quarter, let's start with EBITDA. EBITDA grew 9.1% to EUR 117.8 million this quarter. We already covered revenue. Therefore, I will focus mainly on costs and margins. Organic cost increased EUR 2.3 million or 3.2%, mainly driven by lower capitalization costs compared to last year as well as costs related to the strategic plan. Overall, the EBITDA margin for the group decreased to 57.5% in the third quarter of 2020, down 1.9 points. It is mainly due to our recent acquisition not fully optimized yet and diluting the group margin. Organic EBITDA margin was at 59.7% this quarter, up 1 point compared to last year. This quarter EBITDA margin of the newly acquired business was 35.9%, with lower margin of Nord Pool, partially offset by the higher-than-expected margin of VP Securities. More specifically, VP Securities margin was boosted by the usual seasonal impact of the third quarter with lower cost and one-off release of accruals on revenues.Finally, as Stéphane mentioned, we expect costs from Oslo Børs VPS integration and the strategic project in the next quarter, which is why we confirm our 2020 cost guidance of a mid-single-digit growth compared to the annualized second half of 2019.Moving to Slide 15 and net income. The net income increased this quarter, 10.6% to EUR 70.2 million as a result of the good operating performance. Adjusted for PPA and exceptional items, EPS was up 13.8% at EUR 1.12. In detail, we already covered the first building block of the waterfall EBITDA, so I will move on. D&A increased 17.8%, resulting mainly from the consolidation of recently acquired business and the impact of PPA. This quarter, EUR 5.7 million of our D&A are linked to the PPA of acquisitions.EUR 3.5 million of exceptional costs were booked in the third quarter of 2020, primarily related to the contemplated acquisition of Borsa Italiana and restructuring costs. Net financing expense for the third quarter of 2020 was EUR 3.4 million, up from EUR 2 million in the third quarter of 2019. It mainly reflects the impact of foreign exchange rate and interest rate-related to the top bond issue in June 2020. The tax rate was lower than last year at 26.4%, positively impacted by the reduced domestic tax rates as we expand our footprint in the Nordic region and other local tax rates tend to decrease across the Euronext countries.Lastly, I would like to highlight that we anticipate to book various exceptional costs in the fourth quarter of 2020 in relation to the integration of VP Securities and the contemplated acquisition of the Borsa Italiana Group. More specifically, we expect to expense between EUR 10 million and EUR 15 million in the fourth quarter of 2020.To conclude with financial, let's move to Slide 16. Net operating cash flow, post-tax for the quarter, was EUR 71.7 million, impacted by changes in working capital of Nord Pool. As a consequence, the cash flow conversion scaled down from approximately 70% last year to circa 61%. Excluding the impact of Nord Pool, Euronext, cash conversion is stable, or would have been, stable vis-à-vis 2019. Our net debt stands at EUR 710 million, representing a net leverage of 1.4x pro forma over the last 12 months. Gross debt was EUR 1.3 billion as of the end of the third quarter 2020. Looking at the bottom of the slide, Euronext's liquidity position remains strong, slightly under EUR 1 billion, including the undrawn RCF of EUR 400 million.I now hand back the floor to Stéphane, and we will be available for your questions at the end of the conference.

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

Thank you very much, Giorgio. So in conclusion, Euronext has delivered a strong third quarter, thanks to both recent diversification initiatives and our resilient core business. And Euronext delivers on its strategic goal of building the leading pan-European market infrastructure with the contemplated acquisition of Borsa Italiana, which is in every respect, an accelerator of the strategic plan released 1 year ago, Let's Grow Together 2022.So Giorgio, Anthony and I are now available for your questions.

[Operator]

[Operator Instructions] And the first question comes from the line of Haley Tam from Crédit Suisse.

[Haley A. Tam, Research Analyst]

Two questions for me, please. Can I ask you one about the cash trading yield? At 0.54 basis points, it was actually higher than I had anticipated. And I think you previously said a normal of about 0.5. So I just wonder whether that is still due to smaller average trading sizes or if there's something else that's perhaps a more permanent shift going on there. And the second question, just help me understand, I'm afraid, the VP Securities. There was a EUR 10 million revenue contribution. You also obviously mentioned some one-off accrual releases. And I noticed the Q3 costs for the whole group haven't really increased all that much despite the inclusion of VPS, VP Securities. So I just wondered if you can give us some idea of the normal run rate perhaps that we should include from this business.

[Giorgio Modica, Chief Financial Officer]

Thank you very much for your question. With respect to the revenue capture on cash trading, I confirm what I said. We are living in very specific market conditions and, therefore, we do not anticipate the rate of 0.54 basis points to be sustainable in the long run. And we believe that revenue capture closer to the one of the previous quarter is going to be more sustainable. Again, it's a combination of many factors, out of which the reduction of the average trading side is one of those. The increased retail participation is another. But to answer specifically your question, we confirm what we said. This is the result of very specific market conditions, and we do not expect it to be a new normal. When it comes to the cost base and to the revenues of VP Securities, so the release clearly impact the margin but it is below EUR 1 million, so it's not super material.When it comes to the -- and I believe that some others would have the same question with the cost guidance for 2020. I need to say and explain a few elements. The first element is that the cost of the third quarter benefit from a seasonal reduction of cost, which is linked to the holiday season. So every single quarter in the last many years, the Euronext Group has a slightly lower cost base because of this impact. And the seasonality is present as well in the Nordic region where usually the cost of the third quarter are lower with respect to the cost of other quarters. So the third quarter is not a good quarter to start projecting.The second element, we confirmed this quarter the mid-single-digit cost guideline that clearly excludes the new acquisition. Let me state a few things in this respect. It is important to understand that at this very moment, Euronext, it depends the way you look at it, as either a benefit in terms of cost coming from the exchange rate or a negative cost on revenues, which means that if you look at the evolution of euro against the currencies which are relevant for us, this usually translate in slightly lower costs. And therefore, our cost guidance clearly did not take into consideration potential changes of exchange rate. So what I can say is that if you take into consideration the fact that mid-single digit is a range and the impact of foreign exchange rate and the fact that the third quarter is not a good starting point to project, I believe that is going to be easier for you to rationalize the reason why we're confirming our target for the 2020 cost base.

[Operator]

The next question comes from the line of Philip Middleton from Bank of America.

[Philip David Middleton, Analyst]

That was very clear. I wondered if you could also just say are there any one-offs in the post-trade revenues because it does look a very, very strong number, maybe stronger than, I suppose, most people are expecting. Also, could you comment a little bit more about the tax rate, what you think is sustainable for the next few quarters? I don't know if there's anything you want to say about the recent system outage you had as well.

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

So I'll take the questions on the outage, and Giorgio will take the questions on the tax rate and on the revenues of VP Securities in Copenhagen. So we had one outage on the 19th of October. And following this operational incident, measures have been taken to ensure that all operations are secured. That Euronext Managing Board is undertaking a full review of the procedures, of the processes, to ensure the smooth running of all operations going forward. I think it's important to note that the issue was not due to a problem in the proprietary code of Optiq, but it was due to a bug in a third-party component, in a third-party middleware.So what I want to say is that clearly, Euronext has invested heavily in technology and capacity and latency and processes. This has allowed us to deliver a platform, which is cutting-edge, that has been extremely stable and resilient since it was released. We -- this platform did an amazing job during the peak of volatilities and volumes in March, April and May. And we believe that that it is the backbone of the Euronext project, which is all about building a single liquidity pool, enabled by a single order book and powered by a single technology platform. And that irrespective of this particular incident, which was material and which we are addressing in a close dialogue with clients, with regulators and where all the relevant appropriate measures have been taken, both the short-term ones and the long-term ones that are in the process of being rolled out, it's important not to lose perspective.And the perspective is that the platform works. The platform is affection. The platform is more stable than some other platforms. And the model is exactly what -- consistent with what the clients expect. The clients want to reduce complexity. The clients want to reduce cost. The clients want deeper liquidity. The clients want -- the stakeholders want an integrated market within the European Union. The regulators, the policymakers want to build the capital market union and to have a sort of backbone to enable this capital market union. And this is what we are doing. So this glitch, this outage was material, and we are addressing it, but let's not lose the perspective.

[Giorgio Modica, Chief Financial Officer]

So when it comes to your first question related to post -- to the performance of the [ RCSDs ], there is nothing specific in terms of one-off. It's a very good organic performance. It's fair to say that clearly this business is, for the vast majority, driven by -- it's a function of the asset under custody, but there is a portion which is linked as well to the volume of activity. And in this respect, there are a few elements which are relevant and might be impacted by COVID. One is the number of accounts that have seen a very significant increase in the Nordics. And this is, to a certain extent, in parallel to the increased trading activity that we have seen on cash trading. And the other one is the number of settlement distraction, which is again could be linked to volatility, but nothing to be specifically mentioned in terms of one-off. Again, it's a very good full organic performance.When it comes to the tax rate, we already guided for a reduction over time of the tax rate because pretty much across the board, all Euronext countries are expected to reduce their tax rate. Now clearly, the consolidation of Nordic countries speeds up that element because the average tax rate is at or below 25%, so this has an impact. The last comment, so going forward, I believe that in the next quarter, you should expect a tax rate, which is around 27%. Now it's fair to say as well, and it is very important, that some of the exceptional costs are not going to be tax deductible. So you should expect potentially the tax rate to be higher, on a nominal basis, the quarter where we expensed the most exceptional items.

[Operator]

The next question comes from the line of Benjamin Goy from Deutsche Bank.

[Benjamin Goy, Research Analyst]

Two questions, please. First, the third quarter was not particularly a very favorable environment for the industry, but still you grew 3.4% and thereby above your 2.3% guidance range. Just wondering what this quarter tells us about the underlying run rate or growth rate for Euronext going forward? And then secondly, on corporate services, another strong quarter, obviously. Yes, just wondering on the billing model and how recurring these revenues can be.

[Giorgio Modica, Chief Financial Officer]

So when it comes to the the growth rate, at the moment, we do not intend to change the guidance, which is 2% to 3%. Then clearly, with the inclusion of Borsa Italiana, which will contribute for 1/3 of the overall group revenue, for sure, we will need to come back to the market with more holistic type of targets. We're aware of that, but it's too soon at the moment. When it comes to corporate services, what I can say is that those revenues are extremely resilient and are based on -- those are fixed and contracted revenues. So there is some slight seasonality throughout the quarters, more specifically for the activities which are related to corporate events, so you should expect some quarters to be higher than others. But apart from that, there is no -- any specific link to volatility on all the current conditions. So you should expect those revenues to very stable and growing.

[Operator]

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

[Arnaud Maurice Andre Giblat, MD & Research Analyst]

I've got 3 questions, please. Just to come back to your cost guidance, I think you said during your remarks, you're talking about EUR 10 million to EUR 15 million of integration costs for VPS and for Borsa Italiana. And you also flagged, I think, a ramp-up from strategic projects in Q4. So I was wondering if you can give the magnitude of the strategic projects' costs? Or is that already included in the EUR 10 million to EUR 15 million step-up? And second, on Nord Pool, what share of the power market is currently traded over the counter? I'm wondering if -- where that stands and if you're seeking to roll out Nord Pool into other new countries.

[Giorgio Modica, Chief Financial Officer]

So it's clear -- maybe I missed the intermediate question, but let's start with the first one. So there are a few elements. The element on which I did make a comment is that clearly, what we anticipated in the second quarter is that there would have been a certain amount of integration cost for VP Securities. And those are going to be the bulk of the EUR 10 million, EUR 15 million that I commented. As you know and as we did last year, once we finalize the assessment of the restructuring cost, we book the provision. And this is exactly what we have done last quarter. So what you should expect is that out of the EUR 10 million, EUR 15 million, the bulk of it is going to be nothing more than what we announced for VP plus additional costs that we will expend for project cost of Borsa Italiana.Those elements are outside of the 5% or mid-single-digit type of growth rate that we guided the market. So this is an additional layer that I wanted to share with the market. The rest, I already commented. I believe, we confirmed the 5%. It is clear that we might have good surprise coming as well from exchange rate. Then when it comes to your question do we intend to expand Nord Pool, the answer is yes. We are active in many countries, and we are growing our market share in Central and Eastern Europe. I believe that I missed your intermediate question. Could you repeat that?

[Arnaud Maurice Andre Giblat, MD & Research Analyst]

Yes. Just what is the share of -- on exchange-traded versus over-the-counter exchange-traded in -- where Nord Pool currently operates?

[Giorgio Modica, Chief Financial Officer]

I'm not sure we have this KPI. What I can share with you is that clearly, on the Nordics market, the market share is pretty much very close to 200%. And the market share in other European markets are growing. But those are markets share within the -- on book, so it does not include OTC.

[Operator]

[Operator Instructions] The next question comes from the line of Albert Ploegh from ING.

[Albert Ploegh, Research Analyst]

Yes, it's Albert Ploegh from ING. Yes, basically 2 small questions left from my end. The first one is on the integration cost of Oslo in the strategic plan. I think it was something like EUR 18 million, EUR 12 million or EUR 13 million in total. I hear what you say for the fourth quarter, but can you give some idea what is left of those envelopes, if you like, for 2021 and '22 that will help us, I think, a bit with our models. The second question is a bit related to the Borsa Italiana potential acquisition, just on the bridge financing facility. How should I see that? I guess the costs will start to come through from that already from the fourth quarter onwards. Can you share some ideas whether that is kind of material on the -- or not very material for our models as well?

[Giorgio Modica, Chief Financial Officer]

No. I understand you should -- I believe that for the next quarters, I will try to guide you the best I can. Having in mind that certain costs are going to be triggered by decisions which are not necessarily ours because there are success fees, et cetera. So what I can anticipate, again, just to make it clear, that the cost that we're booking at the moment are more related to the consultants, lawyers, those type of costs. And then the other cost you mentioned are going to be closer to the execution of the deal and are going to be more success-based. So again, out of the EUR 10 million, EUR 15 million, the bulk of that is going to be VP restructuring cost. And the remainder is the cost of advisers that are fees, which are not success-based.Then when it comes to Oslo Børs, we did expense at the moment already more than 50%. The full KPIs on the Oslo Børs acquisition, we will release them in Q4 for the simple reason that after the migration, we will have a more complete picture because, as you can expect, a very significant portion of the savings are going to be linked to the migration from MillenniumIT to Optiq. So at the end of the fourth quarter, we will give you a clear snapshot on where we are, on synergies achieved and restructuring cost incurred.

[Operator]

There are currently no further questions in the queue. [Operator Instructions] We do have another question in the queue, and it comes from the line of Bruce Hamilton from Morgan Stanley.

[Bruce Allan Hamilton, Equity Analyst]

Just a small question, and it feels a bit unfair to quibble on what are a good set of numbers. But the data revenues, while up year-over-year, obviously down a bit versus the second quarter and a bit lighter at least to the consensus expectations. Is there anything sort of one-off there? Or is there any reason why there would be seasonality in that line? Or how should we think about that? Because actually, that's one of the areas, one we'd probably look to be growing decently over time?

[Giorgio Modica, Chief Financial Officer]

No. I mean there is nothing to be surprised. The element where there is a bit of seasonality is -- are the day-next revenues, which are based on the AUM that we built on the family of indices that we have developed, and those tend to have volatility because we bill based on the data that we report. And these tend to be more volatile. So actually a better picture of the direction of travel is having a median between quarter rather than point in time. Apart from that, the business is growing nicely. This quarter, those revenue was slightly below than one of the previous quarter. But again, it's more related to a type of billing between quarters than anything specific.

[Operator]

The next question comes from the line of Gurjit Kambo from JPMorgan.

[Gurjit Singh Kambo, Head of Diversified Financials Research]

Just one question for me. Just on the derivatives trading side, obviously, the revenue per lot declined mainly to do with the single stock and dividend futures. I guess how do we think about that going forward? I know it's going to depend on mix, but is there any sort of new products that you're launching, which might mix that, impact that revenue per lot going forward? Just anything, how to sort of think about that over the next sort of few quarters.

[Giorgio Modica, Chief Financial Officer]

So the key driver -- it's a very fair question. So at the moment, we have 3 types of products: the commodities that, at the moment, are recording record-high volumes, at the highest revenue capture among all the products; then we have the new products that, as you correctly mentioned, have slightly lower fees; and then we have the bulk of our products which, like any other derivative product it's offering at the moment, mainly due to the lack of visibility on dividends, which is a fundamental element for the pricing and trading of derivatives. So what has happened is that when you see relatively stable volumes year-to-date, the reality is that there has been a significant shift, i.e., our core franchise in terms of volumes has reduced significantly. Like any other market, for the reason I mentioned, and the gap has been filled by new products.Now anything that will give better visibility on derivatives and could fuel the derivative market would bring back to a certain extent, the mix, but it's very difficult to anticipate. So for the next quarter, I believe that it's a little bit of difficult to anticipate. But again, what we are seeing at the moment is a mix, which is similar to the one of the previous quarter with a stronger contribution of derivatives. But again, it's very -- I try to explain you the different building blocks. But it's very difficult to predict how it's going to be the mix. We all hope that the derivatives volumes are going to be back at the level they were in the second quarter.

[Operator]

There are no further questions in the queue. So I'll hand the call back to our speakers to conclude today's call.

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

Thank you very much for your time. I wish you a very good day.

[Operator]

Thank you for joining today's call. You may now disconnect.