Release Date: July 25, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Deutsche Boerse AG (DBOEF, Financial) reported a strong 19% net revenue growth in Q2 2024, reaching EUR1.45 billion, exceeding initial expectations.
- The company's new investment management solutions segment saw a 7% organic net revenue increase, driven by client wins in software solutions.
- The trading and clearing segment grew net revenue by 11%, with the commodities business being the fastest-growing part.
- Fund services experienced a 10% net revenue increase, benefiting from a favorable market environment.
- The company increased its full-year guidance to more than EUR5.7 billion in net revenue and more than EUR3.3 billion of EBITDA, reflecting strong performance and positive outlook.
Negative Points
- The interest rate environment, which had been a tailwind, started to fade in the second quarter, impacting net interest income.
- The termination of the agreement with NASDAQ to acquire the Nordic power derivatives business resulted in exceptional costs of EUR15 million.
- The software solutions segment faced higher comparables from the previous year, affecting growth rates.
- The ESG business, despite an 8% growth, is facing a more muted sentiment, particularly in the United States due to the upcoming election.
- The company had to manage exceptional costs and impairments, including a EUR10 million exceptional impairment of software in the security services segment.
Q & A Highlights
Highlights of Deutsche Boerse AG (DBOEF) Q2 2024 Earnings Call
Q: Can you elaborate on the volatility of SaaS revenues versus on-premises revenues in software solutions? What should we expect in the next quarters?
A: SaaS revenue growth is significantly higher compared to on-premises. SaaS revenues increased by 21% in the first half, while on-premises grew by 4%. The annual recurring revenue (ARR) for SaaS is growing at 17%, with North America showing a 27% growth. The overall guidance remains unchanged, expecting around EUR600 million in net revenues for the year.
Q: Can you provide an update on the fixed income roadmap and the additional EUR300 million identified?
A: The fixed income development is progressing as planned, with significant contributions expected in the second half of 2025 and 2026. The increased volatility will continue to support the fixed income business. The repo GC pooling business is also on track, with a market share of 60% in the trading volume.
Q: What are the synergies expected from the SimCorp and Axioma integration?
A: We are on track to deliver EUR90 million in revenue and cost synergies, with 60% expected to be realized this year. Additional synergies with other group segments like Eurex and Clearstream are being explored, and further details will be communicated once finalized.
Q: Can you provide more color on the ESG revenue growth and its sustainability?
A: ESG revenue grew by 8% in Q2, driven by governance solutions, corporate solutions, and ESG data business. This growth is expected to be sustainable, with an aspirational level of 8% growth continuing.
Q: What is the impact of the termination of the NASDAQ deal on your capital distribution strategy?
A: The termination of the NASDAQ deal will not affect our capital distribution strategy. The exceptional costs related to the termination were EUR15 million, including a EUR20 million breakup fee. Our capital allocation policy remains unchanged.
Q: Can you provide an update on the leverage ratio and the deleveraging process?
A: The net debt-to-EBITDA ratio is 1.7, and we expect it to remain at this level by year-end. We are on track with our deleveraging process, and any excess cash will be considered for share buybacks if there are no attractive M&A opportunities.
Q: What is the competitive position of your software solutions business in North America?
A: We are strongly positioned with an independent and integrated solution focusing on front, middle, and back-office solutions. Our ARR growth in North America is 27%, indicating strong competitiveness in the market.
Q: What are the plans for further synergies with other segments?
A: We are exploring additional synergies with other group segments like Eurex and Clearstream. Further details will be communicated once the assessment is complete.
Q: What is the outlook for the FX business and its market share?
A: The FX business, particularly 360T, is well-positioned with strong growth in the US and Asia Pacific markets. We aim for double-digit growth, with a current market share of over 10%.
Q: What are the plans for the Nordics power market following the termination of the NASDAQ deal?
A: We will focus on organic growth in the Nordics market, targeting to win additional clients and increase our market share from the current single-digit percentage.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
