Deutsche Boerse AG

XETRA:DB1

Earnings Call Analysis

Strong Quarterly Results Drive Upward Revision in Full-Year Guidance

In Q2 2024, the company reported a robust 19% increase in net revenue to €1.45 billion, driven by organic growth and SimCorp consolidation. The Software Solutions segment saw a significant 21% revenue growth, particularly in SaaS in North America. The Trading & Clearing and Fund Services segments also showed strong performance. Due to better-than-expected results and fewer anticipated interest rate cuts, full-year guidance has been raised to over €5.7 billion in net revenue and over €3.3 billion in EBITDA. This optimistic outlook is bolstered by secular growth initiatives and resilient operating cost management.

Strong Revenue Growth Across Segments

In the second quarter of 2024, the company reported a remarkable 19% net revenue growth, totaling EUR 1.45 billion. This growth outpaced the first quarter and highlights stronger-than-expected performance across all segments. Notably, the new Investment Management Solutions segment experienced a 7% organic increase in net revenues, driven by client wins in Software Solutions.

Guidance Revision and Future Outlook

Due to the company's robust performance in the first half of the year and fewer expected interest rate cuts, the full-year guidance has been revised upwards. The company now anticipates exceeding EUR 5.7 billion in net revenue and EUR 3.3 billion in EBITDA. This revision underscores the confidence in continued growth, particularly in the Commodities business, and a sustainable structural growth moving forward.

Operating Costs and Synergies

Operating costs in the first half were largely influenced by the SimCorp consolidation. However, the company effectively managed organic operating costs, which aligned with expectations. The organic cost growth was attributed to inflation, exceptional costs, and additional investments. Importantly, the integration of SimCorp is on track, with around 80% of targeted operating cost synergies already achieved.

Software Solutions: Key Contributor

Software Solutions demonstrated solid performance with a 21% net revenue increase in the first half. The Software-as-a-Service (SaaS) segment was particularly strong, showing a 17% annual recurring revenue (ARR) growth, especially in North America, which saw a 27% rise. The company's focus on SaaS over on-premises solutions is yielding significant results.

Securities and Fund Services Growth

The Securities Services segment recorded a 5% net revenue growth in Q2, despite diminished influence from net interest income. Fund Services benefitted from a favorable market environment, achieving a 10% increase in net revenue. This aligns with the firm's growth expectations for the business.

Positive Market Conditions and Volatility

Equity market volatility slightly improved in Q2, aided by temporary spikes in April and June. While higher interest rates had been a boon in H1, their effects started fading in Q2. The diversified business model and increased share of recurring revenue position the company well for ongoing growth, even as interest rate impacts are expected to decline.

M&A Strategy and Shareholder Returns

The company does not plan any major acquisitions in 2024, focusing instead on integrating SimCorp. With strong liquidity and a strategic capital allocation policy, priority is given to investing in growth initiatives. If no attractive M&A opportunities arise, the company is prepared to consider share buybacks to return value to shareholders.

Fixed Income and ESG Insights

The fixed income segment's EUR 300 million growth roadmap is on target, with major contributions expected in 2025 and 2026. ESG (Environmental, Social, and Governance) business showed significant improvements, with an 8% net revenue growth driven by robust performance across Governance Solutions and Corporate Solutions. Despite a cautious market environment, the firm remains optimistic about sustaining this growth trajectory.

Earnings Call Transcript 2024-Q2

[Operator]

Good afternoon, ladies and gentlemen, and welcome to the Deutsche Börse AG Analyst and Investor Conference Call regarding the Q2 2024 results. [Operator Instructions] Let me now turn the floor over to Jan Strecker.

[Jan Strecker, executive]

Welcome, ladies and gentlemen, and thank you for joining us today to go through our second quarter 2024 results. With me are Theodor Weimer, Chief Executive Officer; and Gregor Pottmeyer, Chief Financial Officer. Theodor and Gregor will take you through the presentation. And afterwards, we will be happy to take your questions. The link to the presentation material for this call has been sent out via e-mail, and it can also be downloaded from the Investor Relations section of our website. As usual, this conference call is recorded and will be available for replay afterwards.

With this, let me now hand over to you, Theodor.

[Theodor Weimer, executive]

Thank you, Jan. Welcome, ladies and gentlemen. With the first quarter results, we already achieved a good start into the year, very solid net revenue growth, especially in Software Solutions, paired with moderate operating cost growth, resulted in good organic operating leverage and EBITDA growth overall. The results in the second quarter with 19% net revenue growth to a total of EUR 1.45 billion were even stronger than the first quarter and exceeded our initial expectations. Aside from the SimCorp consolidation, this was driven by very good organic growth across all segments.

Our new Investment Management Solutions segment saw an increase of net revenues by 7% on an organic basis in the second quarter, which, amongst others, was driven by client wins in Software Solutions. The Trading & Clearing segment grew net revenue by a strong 11%, with our commodities business, again being the fastest-growing part of our Trading & Clearing business and overall. In Fund Services, we started to benefit from a more favorable market environment and increased net revenue by 10%, which is in line with our general growth expectation for this business. And in our Securities Services segment, we achieved solid 5% net revenue growth in the second quarter even without any meaningful influence from the net interest income anymore.

With this development in the first and second quarter, we also achieved a better-than-expected organic net revenue performance in the first half of the year. Most of this growth continues to be driven by our secular growth initiatives, but we also saw modest cyclical headwinds. On the one hand, there were still some tailwinds from higher interest rates in the first half, but they have started to fade in the second quarter. On the other hand, equity market volatility has improved slightly in the second quarter because of temporary spikes in April and June.

The operating cost growth in the first half was mainly driven by the SimCorp consolidation. But we also managed the organic operating costs tightly, and they developed in line with our expectations. Slightly more than half of the organic operating cost growth was even just driven by exceptional costs, the remainder by inflation as well as additional investments. As a result, we achieved very good operating leverage on an organic basis and double-digit EBITDA growth in the first half. Because of the slightly better-than-expected performance in the first half and particularly in Commodities and the outlook for the second half of the year with fewer interest rate cuts than originally expected, we increased our guidance for the full year to more than EUR 5.7 billion net revenue and more than EUR 3.3 billion of EBITDA.

While we are all expecting interest rates as well as our net interest income to decline at some point, we believe that some of the potential impact will be compensated for higher levels of volatility once interest rates are declining more meaningfully. Combined with our diversified business model and the increased share of recurring revenue, we are expecting to continue to generate solid growth going forward.

Before Gregor goes into the details of the results, let me comment on the development of our Software Solutions business because of the significance of the SimCorp acquisition. Software Solutions had a strong first quarter, which exceeded our expectations and also a very solid second quarter despite higher comparables in the previous year at Axioma. The most important client win in the second quarter was the multiyear contract signed by the Public Sector Pension Investment Board in Canada, who will use SimCorp on going forward to manage their CAD 265 billion assets under management more efficiently.

Together with a few other new clients out of the region, North America is now our top growth area with annual recurring revenue growth significantly above average. In addition to new clients and upsells of existing clients, cross-selling with Axioma is showing good traction, especially in the EMEA region.

In the second quarter, we also rolled out a new flagship integrated platform, SimCorp One, which combines our entire broad offering, including Axioma's analytical -- analytics suite, all connected to our industry-leading investment book of records. The Post-Merger Integration project is well underway, and we are fully on track with regards to synergy delivery. In the second quarter, we already achieved around 80%, 8-0% of the targeted operating cost synergies.

Looking into the second half of the year in 2024 in Software Solutions, the building of the sales pipeline is progressing well, and we are currently working on a number of significant sized deals. With this, we are fully on track to achieve our net revenue synergy and EBITDA margin to our targets for the year 2024. All in all, with a very good performance in the first half of the year and the positive outlook, we are fully in line with the growth trajectory we set ourselves under our Horizon 2026 strategy.

With that, let me now hand over to you, Gregor.

[Gregor Pottmeyer, executive]

Thank you, Theodor. On Page 2, we show the details of the results of the first half of the year. The financial performance throughout the first 6 months was very positive. In addition to the key aspects of the results, Theodor just outlined, let me comment on some of the further income statement line items. The result from financial investments amounted to EUR 12 million and was mainly driven by valuation effects from some of our direct and fintech fund investments as well as the creation of the new Investment Management Solutions segment. Depreciation amounted to EUR 246 million in the first half of the year and included an exceptional effect in the second quarter. With this, we expect to be below our guidance for the full year. The financial result benefited from the faster-than-expected redemption of commercial paper issued for the SimCorp acquisition, and we expect a level of up to EUR 40 million per quarter for the remainder of the year.

Let me now walk through the operating cost development in the first half of the year on Page 3. The overall operating cost increase was mainly driven by the consolidation of SimCorp. The termination of the agreement between EEX and NASDAQ to acquire the Nordic power derivatives business, resulted in exceptional costs of EUR 15 million. This includes a breakup fee of USD 20 million, which was partly offset by other items related to this project. The remaining 4% organic cost growth was driven by around EUR 18 million cost to achieve the Investment Management Solutions synergies, inflation as well as higher investments into growth and infrastructure. For the full year, we expect an organic operating cost growth similar to this level or maybe even slightly below.

On Page 4, we show the details of the second quarter results. The 8% organic net revenue growth was mainly driven by our secular growth initiatives. Contrary to the last couple of quarters, the interest rate environment was not a cyclical tailwind anymore, but we benefited from temporary increases of volatility, especially in the middle of April and June when the volatility stocks reached levels of around 20. Adjusted for the aforementioned EEX and NASDAQ effect, the organic operating cost increased 4%. This was driven by around EUR 8 million cost to achieve the Investment Management Solutions synergies, inflation as well as additional investments. In addition to the exceptional costs, there was a EUR 10 million exceptional impairment of software in Securities Services and a EUR 20 million (sic) [ EUR 28 million ] exceptional tax reimbursement, resulting from a change in tax assessment in Switzerland for previous periods.

I'm now turning to the results of the segments, starting with the new Investment Management Solutions segment on Page 5. The segment is split into 2 parts. The first part is Software Solutions, which is the combination of SimCorp software business and Axioma's analytic business. This part benefited from contract renewals, new clients and upsells at SimCorp, with the solid year-over-year and quarter-over-quarter growth. In analytics, we saw a lower level of point-in-time revenues, especially compared to the exceptionally strong first quarter. The development is fully in line with our expectations. The most important key performance indicator for this business, the annual recurring revenue, increased to EUR 549 million, which is 14% more year-over-year and 2% more compared to the end of first quarter.

The second part of the segment is a combination of the ISS ESG business and the STOXX Index business. The performance of the ESG business improved, and we saw 8% net revenue growth in the quarter. This was driven by relatively similar growth rates in Governance Solutions, the core ESG business, and the Corporate business. The headwinds in the ISS Market Intelligence business eased a little bit, but continued in the second quarter as our clients are more cost sensitive in the light of market environment in the asset management industry. But this effect has been overcompensated by a higher point in time revenue in one of the other non-ESG business of ISS, the Security Class Action Services. The net revenue in the index business in the second quarter 2023 included a one-off effect from repricing of exchange licenses. Adjusted for this effect, net revenue in the index business increased mid-single digit.

Let me turn to Slide 6, the Trading & Clearing segment. In financial derivatives at Eurex, we saw double-digit growth across equity and fixed income products. In equity-related products, the temporary spikes of volatility had a positive impact on Trading & Clearing revenue as well as the margin revenue. In fixed income-related products, we continue to see the impact from incentives for building initial liquidity and short-term interest rate derivatives and slightly lower margin revenue as a result of higher netting efficiency in the clearinghouse. But those effects were by far overcompensated through volume growth.

The other line item in financial derivatives in the previous year's quarter included a reimbursement of legal fees of around EUR 11 million. Adjusted for this effect, the line item also contributed double-digit growth. In Commodities and EEX, the growth was mainly driven by [ power ] derivatives in Europe. This was the result of significant market share gains from OTC and business from new clients, including quant-driven participants. In our ForEx exchange business, 360T, new buy-side clients and faster growth in regions, like the U.S. and Asia Pacific, helped to by far compensate the lower volatility we observed since mid-last year.

In the Fund Services segment on Page 7, the market environment continued to improve in the second quarter, while cyclical headwinds from the trend towards [ passive ] prevailed, higher equity market levels were supporting the business. Together with the continued onboarding of new clients and funds, we achieved 12% net revenue growth in custody and 30% net revenue growth in settlement. Fund assets under custody in June also reached a new record level of EUR 3.7 trillion.

In our Securities segment on Slide 8, the tailwinds from the interest rate environment has started to fade in the second quarter with only modest growth compared to the previous year. Nevertheless, the net interest income amounted to a record level of EUR 180 million. This excludes the EUR 16 million net interest income that is reported in the Fund Services segment. On a combined basis, the net interest income amounted to EUR 196 million. Custody and settlement continued to benefit from the ever-increasing amount of global debt outstanding and higher activity in fixed income markets. In addition, custody also benefited from higher equity market levels. As a result, assets under custody reached yet another record level of EUR 15.1 trillion in June. Custody revenues also benefited from a strong quarter in our collateral management business.

On the last page of today's presentation, we show the details of our updated guidance for 2024. Main reasons for the better than initially expected development in 2024 are the strong performance in our Commodities business, EEX, and higher net interest income expectation compared to the start of the year. In Commodities, we saw a step change of activity levels over the last 2 years, which is mainly driven by a significant increase of our market share compared to OTC. We think this is a sustainable development and are expecting further structural growth going forward.

Our net interest income modeling is mainly based on current forward rates. At the beginning of the year, the market expected 5 to 6 rate cuts in the U.S., which is by now reduced to 2 in September and December. Therefore, we are expecting a net interest income across securities and fund services that is similar or even slightly above the EUR 700 million level we saw last year. As a result, we are now expecting net revenues to exceed EUR 5.7 billion, which is in line with the current market expectations. As mentioned before, for the full year, we expect an organic operating cost growth similar to the 4% level in the first half of the year or maybe even slightly below that. Therefore, the EBITDA is now expected to exceed EUR 3.3 billion.

This concludes our presentation. We are now looking forward to your questions.

[Operator]

[Operator Instructions] And the first question comes from Johannes Thormann from HSBC.

[Johannes Thormann, analyst]

First of all, I want to ask about the Software Solutions. Can you elaborate a bit more on the volatility of the [ SaaS ] revenues as well as the on-premises revenues? What should we expect in the next quarters from these revenue lines and upward trend still in SaaS and more downward trend in on-premises or what do you -- what should we expect? So secondly, on Fund Services, as I heard, you have probably one big client mitigation relatively digested. When are you ready for the next big migration for your organization? Or how is the pipeline in other words?

[Gregor Pottmeyer, executive]

Yes. Thanks, Johannes, for your 2 questions. So starting with the Software Solutions question. So we are rightly on track to deliver our strategy here. So you can see that the SaaS development from a net revenue perspective, it increased by 21% in the first half year. On-premise, we grew by 4%. So exactly as we expected that the SaaS revenue growth is much higher compared to the on-premise growth. And that's the net revenue number, the more important number is the ARR growth number, where we show overall 14%, and the SaaS-related ARR is 17%. So it's higher compared to the other one. And even more important, North America SaaS ARR is growing by 27%.

So that shows that our strategy focusing also on the North American market, focusing on SaaS, Software as a Service business is exactly right on track, and we deliver here. From a revenue perspective, already told during in the first quarter that there is seasonality in between, and it depends whether it's an on-premise contract and a SaaS contract. So overall, the guidance is unchanged. We expect roughly EUR 600 million net revenues in that kind of business. And that means on a net revenue basis, double-digit growth and on an ARR basis, it's 14%, 15%. So we are right on track to deliver that.

Your second question, Fund Services. So you said, it's one big one is the next big. We don't need this big integration. So we have -- we also like to have many medium or smaller ones, right? And therefore, you see our strong numbers in the processing, in the settlement and in the custody business, what was it, 19% or something like that, right? So it's a very strong growing business due to our strong sales pipeline, and we expect that, that kind of double-digit growth will continue to happen.

[Operator]

The next question comes from Andrew Coombs from Citi.

[Andrew Coombs, analyst]

A couple of questions from me. I mean, firstly, on the fixed income road map, the additional EUR 300 million you've identified, you're talking a lot about how the growth is secular more so than cyclical within the training division, can you give us a feel for the trajectory of that EUR 300 million? I think you previously talked about it being linear, potentially EUR 100 million recognized this year, but keen to know the progress you're making on the different elements there? And then secondly, any update you have on synergies with regards to SimCorp, Axioma and potential synergies above and beyond those immediate ones as well?

[Gregor Pottmeyer, executive]

Yes. Starting with your first question. So the fixed income road map was a plus EUR 300 million, what we communicated on our Investor Day. As we always said from the beginning, it's a little bit back-end loaded, that EUR 300 million because the OTC clearing and the STIR initiative. So 1 of the 2 big contributors to that fixed income road map with the significantly growth in the second half year of '25 and in '26. So far, it's exactly according to our plan, all the development here.

With regard to the fixed income products, yes, you see that increased volatility that obviously helps. And the good thing is, it won't disappear that kind of volatility because interest rates will go down, but the question is how fast and which size and so on. So we will -- you will see over the next 2 to 3 years, continued higher volatility and, therefore, support for our fixed income business. The same is true for our Repo GC Pooling business, what is also going according to plan.

With regard to our STIR business, so we make also good progress here. We have -- from a trading volume perspective, we have now a market share of 60%, so are far ahead of all the others. So it's working according to plan. We have to build up that kind of liquidity pool over the next [ months ]. Therefore, we incentivize market participants with this trading incentives, et cetera, with the fee holiday to build up that kind of liquidity pool. So even if it's a little bit back-end loaded, but all the numbers even in the first half year are rightly according to our plan, our glide path to achieve the EUR 300 million for 2026.

Your second question with regard to the additional synergies out of SimCorp, Axioma. Yes. So first of all, we are right on track to deliver our EUR 90 million revenue and cost synergies, so 60% are already, from a run rate perspective, will be delivered this year. So it's unchanged our view here. With regard to the additional synergies, we are working on this topic. We are excited about that kind of opportunities that we see additional synergies with the other group segments like Eurex, like Clearstream like Fund Services. And we will guide you if we have finished our work, and then we will communicate what additional synergies we expect on top.

[Operator]

The next question comes from Arnaud Giblat from BNP Paribas Exane.

[Arnaud Giblat, analyst]

Yes, I was just wanting to follow up on the costs. I think you said that the costs in H2 will be broadly flat versus H1 last year, if I could just check that. And secondly, on the -- just coming back to STIR, I just wanted to confirm that when you'd expect the fee holidays to come off and when we should see the impact coming through? I think you said 2025, but just wanted to double check that.

[Gregor Pottmeyer, executive]

Okay. With regard to the costs, indeed, we expect that the growth in the second half year will be below of the level in the first half year. That's why I commented -- commented that the 4% organic cost growth could be lower for the full year, and that would obviously mean that in the second half year, the cost growth is a little bit lower. And so far, the number I see in the consensus for our cost is not a bad number. Your second question with regard to the fee holiday, yes, in our STIR product, yes, we decided at least to have that kind of incentivation until year-end. And at year-end, we will make a decision whether we prolong that kind of fee holiday or not. So final decisions are not made.

[Operator]

The next question comes from Benjamin Goy from Deutsche Bank.

[Benjamin Goy, analyst]

One question on the ESG revenues, plus 8%. I think with all the noise you hear in the market, it looks good to me, but maybe you can give more color on the, call it, more classic governance and the greener side of ESG, what trends you see in the market and what is [indiscernible] at the moment and sales cycles?

[Gregor Pottmeyer, executive]

Yes. Thanks, Benjamin. I mean, yes, indeed, I think the ESG growth was plus 8% is quite a good number in the current environment. And it's basically across the different business lines. So it's across our -- our Governance Solutions business. It's across our Corporate Solutions business. So it's around our ESG data business. So all are in that dimension, 7%, 8%, 9%. So there's no big difference across the 3 different business plans.

[Operator]

The next question comes from Michael Werner from UBS.

[Michael Werner, analyst]

Two questions from me, please. First on Securities Services. Sorry, sorry, not that one. Looking at [ DNA ], the -- we did see you guys lowered the guidance to below. I think the previous guidance was at EUR 540 million for full year. I think the current run rate in the first half was around EUR 490 million. Any indication as to kind of where that should go for the full year?

And then second, just if you could update us on your leverage ratio, where you are in the deleveraging process? I know, as you said, interest rates have remained higher, it means higher cash generation for you. And how you are thinking about the timing? When you first announced the SimCorp deal, I think you indicated that you wouldn't look at M&A until the second half of 2025. And in the meantime, if that deleveraging process happens more rapidly, is this something where you would consider buybacks?

[Gregor Pottmeyer, executive]

Yes. Starting with your second question. So far, you have seen our numbers or the cash flow number in the first half year was EUR 1.3 billion. So you're exactly right on track. What I've told you with the EUR 2.5 billion operating cash flow we expect here. So far, it's right on track. You are aware that the commercial papers, and there is no commercial paper issuance anymore, so we paid it back basically. So we are right on track to build up now our liquidity. And at the end of the year, expect some EUR 800 million to EUR 900 million having excess liquidity for that and that will obviously continue to increase in 2025.

That's why we say it from an M&A perspective, we will not do M&A -- additional M&A in 2024. So we focus on the SimCorp integration. We focus on the debt buyback, what we have achieved now and what we will do in 2025, we will see. Yes, there is some excess cash, as I mentioned at the beginning. But according to our capital allocation policy, yes, the first priority is investing in our secular growth initiatives. Priority #2 is still unchanged, M&A. Yes, if there are attractive targets, we are interested to look at that. Thirdly, it's dividend and fourth is share buyback. And share buyback, if you have that kind of excess cash, if there is no attractive M&A then we intend to do share buyback. So that we can continue to confirm and the cash increases even a little bit better than originally expected.

The first question around depreciation. Yes, at the beginning of the year, we guided some EUR 540 million. From a run rate perspective, yes, we are clearly below that level. That's why we said, yes, we expect that the depreciation level will be clearly below our original guidance, whether it's the same amount compared to the first half year, usually in the second half year, depreciations are a little bit higher, but we should be clearly below that originally guided level. And the additional impact we had in Q2, there was a EUR 10 million depreciation around our digitized processes as we focus now on our Google migration platform, there was a need to make a depreciation in that EUR 10 million amount.

[Michael Werner, analyst]

And just a quick follow-up. Do you have a leverage ratio for the end of the first half debt to EBITDA for DB1?

[Gregor Pottmeyer, executive]

Net debt-to-EBITDA number is 1.7. So that's also the number we expect for year-end. And so that we are clearly below the 2.25 for the AA minus rating. But the more restricting limiting number is the free funds from operation due to net debt. So here, we have to achieve a 40% or should be above 40%, but that's also what we expect at year-end that we are slightly better than this level.

[Operator]

And the next question comes from Enrico Bolzoni from JPMorgan.

[Enrico Bolzoni, analyst]

First one, just a clarification. I remember that the Q1 results, you mentioned that you had onboarded 7 new clients within the IMS division, of which 6 were SaaS. But I noticed a comment you made this quarter where you say that in the first quarter, primarily, you were still onboarding on-premises solution. And now [indiscernible], you switch more to SaaS. I just wanted to understand because it seems a bit of a contradictory statement. Just wanted to get a sense of what actually you are growing the amount of SaaS contract versus on-premises. So that's my first question.

My second question relates to the breakup of the potential deal with NASDAQ. I just wanted to understand whether you can provide any sort of color on this event. And alongside that, does it increase the chances of capital distribution in light of these recent updates. And then finally, I just wanted to get a clarification on the -- on the NII evolution. I noticed that NII increased Clearstream, but actually was marginally down in Fund Services. Can you just remind us of what drove the difference in trend over the quarter?

[Theodor Weimer, executive]

Let me kick it off. Enrico, Theodor here. I take the question on the potential NASDAQ power derivatives clearing business takeover from our side. Some color from my side is as follows. Our acquisition of NASDAQ's power derivatives and clearing business in the Nordics was in the final phase of Phase I from the merger control proceedings with [ DG Comp ] on the commission side. We have received several and had received several inquiries from DG Comp and have offered behavioral remedies as part of the filing. However, the case team of DG Comp had signaled to us that the transaction would most likely not be cleared in the famous Phase II. Such a Phase II could last for various months, and the time lines are not fully predictable in these situations.

Additionally, even a successful outcome after an extensive Phase II would incur high legal and economists advisory costs, such as Phase II process requires many internal resources for the response to the upcoming request information, so-called RFIs by DG Comp. We, therefore, look at for alternatives discussed with NASDAQ and concluded on June 23 to terminate the [ APA ], the purchase agreement, originally signed on June 14, by the way, and the termination resulted in total exceptional cost, as Gregor mentioned, of EUR 50 million. This includes the breakup fee of USD 20 million, which was partly offset by a few related -- few related items to this project.

And of course, the [ EEX ] is perfectly positioned and will continue to pursue its own business strategy for the region and the related markets independently and individually. So business as usual will continue. And your question was heading to, is there an effect on positive tailored maybe on the capital distribution. But I can tell you, clearly, this is not the case. So this will not affect at all the capital allocation policy and the de facto capital allocation of the company.

[Gregor Pottmeyer, executive]

Yes. So -- and just to further comment on this capital distribution. Obviously, it will not change, as Theodor said, and it was already -- it was only planned a very low EUR 3-digit million amount what we are talking about here, yes. It's not a big and not a material impact that would lead to a change with regard to that. Your first question with regard to the -- yes, we communicated 7 new clients, and we discussed it because the number of clients is not the key number, what helps you really to understand what happens here. And secondly, it really depends what happens in Q1, what happens in Q2. Usually, we are all aware that the key quarter is Q4 even the last 2 weeks of the year. And that makes the final decision that the year is successful, yes or no.

In Q1, we have in principle seen a stronger Axioma performance due to point-in-time revenues Q2. SimCorp was much, much stronger, and Axioma was a little bit behind it. So overall, as I told you at the beginning that the net revenue growth in the SaaS business was 21% in the first half year and of the on-premise business was 4%. So that clearly shows that SaaS is what we are focusing on, and also we deliver the higher growth rate here.

Your third question around NII and funds business overall. So it really depends what is the cash balances be behind, what is the settlement activity in the different businesses. And so far, it's the same interest rates, obviously, U.S. dollar and euro. So the function really depends on the settlement activity and on the cash balances you see here.

[Operator]

And the next question comes from Hubert Lam from Bank of America.

[Hubert Lam, analyst]

I just got 2 quick ones. Firstly, for Axioma, it was a low revenue quarter of about EUR 21 million, I think, in second -- in Q2. I know it's against tough comparables. But how should we think about this number going forward? Is that kind of -- should we expect -- use that as a base? Or where should we think about that going forward? Secondly, on ESG growth, I know it's very good at 8% growth in Q2. I think it was 1% in Q1. So a big step up there. Is this 8% growth sustainable going forward?

[Gregor Pottmeyer, executive]

Yes. With regard to your first question around Axioma, I don't think that the low Q2 number is right prediction for the next quarter, but it's also not a high Q1. So it really depends what kind of contracts we can do. What is an on-premise contract. We have some bigger onetime impact point-in-time revenue. So it's a little bit difficult to say overall. But for Axioma overall, for the full year, we expect some EUR 100 million. So that's a number we expect here. And for SimCorp -- Axioma, we said it some EUR 600 million. So that's the number you should expect.

The ESG 8%, so far, in principle, we expect that kind of 8% is our aspirational level, no doubt about that. And you -- and I have said that in all these 3 product lines, we see that kind of growth, and that's obviously good to see. And so far, we will see that we can continue on that basis, but it's definitely our ambition level to achieve that kind of 8%, and there are also good reasons to believe that we will continue to do so.

[Theodor Weimer, executive]

And if I may add, Hubert, the overall sentiment on the ESG that is more muted, right? Everybody is holding back because of the situation in the United States, upcoming election, right? And therefore, we are also awaiting the decision here, right? And therefore, it's pretty clear, customers are more reluctant. This is the underlying trend. I want to stress this, but it's 8%, what we have seen before is probably a pretty good number. We -- and we see a clear difference within the United States and Europe, by the way.

[Operator]

Next up is Tobias Lukesch from Kepler Cheuvreux.

[Tobias Lukesch, analyst]

I had 2 quick ones from my side as well, please. On the synergies, focusing on synergies, I understood that you are quite far actually in the process. I was wondering like if the costs to achieve could actually be lowered in terms of the process? And secondly, you mentioned that you were now reassessing basically or assessing potential further synergies with other segments. I was just wondering on the time line, if there is something, we should expect to be announced maybe with Q3 results? Or is that rather something that will be more or less pinned down with year-end results and is then rather focus next year?

[Gregor Pottmeyer, executive]

Yes. I can confirm with regard to synergies perspective that we are rightly to deliver what we promised. Your specific question around the cost to achieve, yes, could be potentially a little bit lower than the EUR 50 million we had expected for that kind of for this year. But finally, we will see. Your second question around further synergies. Yes, as I mentioned, had another question here in the call, we will communicate that when we are ready to communicate that, and it will take some time.

[Operator]

And the next question comes from Ian White from Autonomous Research.

[Ian White, analyst]

I wonder if I might ask 2 as well, please. Just within Software Solutions, what -- is there any detail you would point us to, to demonstrate that your competitive position relative to peers has improved, especially within North America? Was the PSP win part of a competitive [ RFP ], for example, and if so, what was it that clinched the deal for you? And is there any evidence that you might actually be attracting any client wins directly from competitors in terms of the pipeline of prospects you mentioned? Or is it sort of mostly clients migrating from in-house solutions? Any sort of detail on that would be interesting, please.

And just secondly, I wondered if there were sort of any conversations with General Atlantic around the time frame for them to exit their investment in ISS STOXX? And whether there are any constraints or even indicative horizons to execute the IPO or other exit strategy for General Atlantic, please?

[Gregor Pottmeyer, executive]

Okay. With regard to Software Solutions business, our competitive positioning, I think we are very strongly positioned here in the market. So we are able to offer independent solution. I think that's a very strong argument, right, that you have an independent provider of the Software Solutions. Thirdly, I would like to mention that we have an integrated solution, right? So focusing on front office and middle back office solution. So we can offer more focused on Tier 2 and Tier 3 clients that kind of integrated solution, what is a bigger issue for our clients. And therefore, from my perspective, these are the competitive position from our perspective.

The pipeline is very good, is very strong, right? And that's why we are able to deliver that kind of 14% ARR growth. So that is under sustainable growth, what we expect. So it's high double digit. And so far, focus is North America, where we have higher growth rates, where we see more interest in our Software as a Solution, and that's exactly according to our strategy. And due to our success in North America, you can see that we are really competitive also in the U.S. market, but we are obviously also strong in the EMEA market.

Your third question around GA and IPO in our ISS STOXX business. There's continued to be on a dual track, right? So no change with regard to that. There's optionality that we do an IPO next year, or it's also the option that we buy the 20% back. So no decisions are made for that. But for us, as a management team, it's important to have optionality so that we can -- that we can follow both [ partners ].

[Ian White, analyst]

Got it. I don't suppose you'd be prepared to share any -- any pre-agreed terms that might exist for you to acquire the 20% stake? Is that something that's been pre-agreed? Or would that be just subject to negotiation at the time?

[Gregor Pottmeyer, executive]

No, there's not really any defined pre-agreement. So even from a timing perspective, yes, it's obviously good to have that in 2025. But if the market environments are not good enough, then it could be also delayed by another year, right? So there is enough flexibility from Deutsche Börse perspective and General Atlantic perspective.

[Operator]

And the next question comes from Bruce Hamilton from Morgan Stanley.

[Bruce Hamilton, analyst]

Just 2 for me, if that's all right. So on the index business, I guess it looked kind of flattish Q-o-Q and year-over-year, which is, I think, lower than some peers. So I just wanted to try and understand what you think would need to change for that to reaccelerate? I heard some of the buy-side clients are looking for cost savings, and that's an impact. But do you see any sense of that reaccelerating? And then secondly, on the comments on the NASDAQ deal, that's helpful, should we take from that, that -- and obviously, you've got a very good organic growth story at EEX. But does it mean in effect you think it's unlikely you would be able to pursue any further M&A in your Energy & Commodities business, certainly in Europe, given your current market share?

[Gregor Pottmeyer, executive]

Yes. Starting with your first question around the index business. Yes, we have seen a decline in Q2 on the pro forma number at minus 1%. But we mentioned at the beginning, in our speaking notes that there was a one-off effect in Q2 last year with regard to the repricing of our exchange licensing, contract between Eurex and [ STOXX ]. so there was a one-off effect here in Q2. If you adjust for that one-off effect, so from a run rate perspective, then the index business is growing by 5%.

Your second question, on NASDAQ. Yes, we jointly decided not to follow that path of NASDAQ Nordics. Now we are free. We are doing our organic approach here. And we will finally see what is the end out of that. But that does not mean that we are limited now for our commodity M&A space, while there are always some opportunistic opportunities here where we -- where we look at that.

[Theodor Weimer, executive]

I can also state very clearly from my side, Bruce, right, we have in our Commodities business, we have very strong market share on the power side. And the power side, especially, we have to be very sensitive to [indiscernible] issues. And in this specific situation, right, the EU Commissioner DG Comp apply the Article 22, right, Article 22, which is at the end of the day, not really applicable to us, but it did it surprisingly so, with nobody could have predicted. So overall, on the -- we have such a strong market position on the power side that we always have to be sensitive. But in the other businesses, be it [ gas ], bet it commodities, be it adjacent other commodities business where there is the space wide open, and I can confirm that M&A is a clear part of our strategy, our growth strategy on the commodity side on the EEX side.

[Operator]

Next up is Benjamin Bathurst from RBC.

[Benjamin Bathurst, analyst]

I have a couple of questions on FX and digital, if I may. There's another increase in revenues in this line in Q2. And you mentioned that you're taking share in FX. I wondered where do you see 360T ranking in the FX market globally now in terms of share? And do you think you can continue to outpace the 6% targeted Trading & Clearing divisional growth for that asset class looking forward?

[Gregor Pottmeyer, executive]

Yes. Thanks for the question around FX 360T business. And so far, we feel that we are very well positioned across the globe. Now it's not just focusing on Europe. We have also strong legs now in the U.S. market, but also in the Asian Pacific market. We did specifically win new clients and new business in U.S. and in Asia. So that is quite promising to see. So far, our ambition level is continue to be on a double-digit growth level, right? So that's no change with regard to that.

The big move those -- from the OTC business, unfortunately, that did not happen, right? And at the beginning, when we acquired 360T in 2015, there was the expectation that according to interest rates for business that also the regulators would push a little bit more on the FX business, but this did not happen so far. It's quite constant. So the OTC business is still 90% and the MTS exchange business, some 10%, right? So -- and therefore, we have a market share of more than 10% in -- out of that 10%. So -- but so far, double-digit growth is our ambition level, and we continue to expect that.

[Operator]

The next question comes from Roland Pfänder from ODDO BHF.

[Roland Pfänder, analyst]

Just one question from my side, I would like to come back to the Nordics power market. I understood that you are going for an organic growth trajectory there. But did anything change? Is this a market opportunity regarding your organic growth? Or are you doing additional investments. So what is your strategy to bring up the market share in this region?

[Gregor Pottmeyer, executive]

Yes. Obviously, as a deal with NASDAQ is terminated, then we will obviously do it from an organic perspective. And you have seen our announcement, it was [indiscernible] in the press that we are focusing now on the product and the distribution channel, and it's our target to win additional clients in the Nordic market. As overall, in the core European market, we have a significant market share. That's obviously good. In the Nordics market, it's a single-digit percentage market share, right. And therefore, there is enough potential for us, and that's why we are focused to win additional clients here also in the Nordics space.

[Operator]

And the next question comes from Tom Mills from Jefferies.

[Thomas Mills, analyst]

I just wanted to ask one question. I guess we've seen one of your competitors in the Investment Management Solutions space make quite a large, I guess you could argue quite expensive deal in the data analytics area of that space. Just wondering if you guys would also feel like you needed to kind of tool up a bit in that area, maybe add some more data analytic capabilities, add anything to address more of the private market space as they're doing.

[Gregor Pottmeyer, executive]

Yes. So in principle, yes, obviously we have seen that kind of acquisition [indiscernible] that. And in principle, Investment Management Solution is of interest for Deutsche Börse to increase our capabilities. So far, we feel now much better positioned with the acquisition of IFS, with the acquisition of SimCorp. So we have much more capabilities here, and now we'd be focused with the new organizational set up here. And in principle, you should expect that we continue to do M&A in that Investment Management Solutions space and yes, unchanged our strategy here.

[Operator]

All right. We don't have any further questions in the pipeline and would like to close today's call. Thank you very much for your participation, and we wish you all a nice summer season. Thank you.