Euronext Publishes Second Quarter 2017 Results

Regulatory News:

Today Euronext (Paris:ENX) (Amsterdam:ENX) (Brussels:ENX) announced its results for the second quarter of 2017.

• Strong quarter, with improved cash and derivatives volumes:
  • Revenues up +3.8% compared to Q2 2016, to €137.3 million (Q2 2016: €132.3 million)
  • Cash average daily volume up +18.5% compared Q2 2016 and equity derivatives average daily volume up +27.3%
  • Strengthened cash equity market share for the quarter at 64.2%
  • Changes in competitive landscape for derivatives
  • Strong listing activity supported by large secondary market operations
• Continued cost discipline, while progressing the delivery of Optiq® and MiFID II projects, and Agility for Growth initiatives
• EBITDA of €79.2 million (Q2 2016: €77.7 million) and EBITDA margin of 57.7% (Q2 2016: 58.7%)
• Record quarterly performance since IPO translating into a reported EPS of €0.78, up +9.9% compared to Q2 2016
• New milestones in the deployment of Agility for Growth initiatives:
  • Delivery of Optiq® Market Data Gateway in July providing clients with a 10x reduction in latency
  • Further enrichment of the Corporate Service offering to issuers with the acquisition of iBabs, the innovative digital board portal solution
  • Launch of the Euronext Block MTF
  • €1.6 million of revenues and €1.9 million of costs generated by Agility for Growth initiatives in the quarter
• Acquisition of FastMatch, with closing expected within Q3 ‘17

"I am proud to report today the strongest quarter since our IPO. The second quarter of 2017 saw volumes return to 2015 levels, driven by increased investor appetite and an improved financial and political outlook for the European Union. Euronext capitalised on this favourable environment and continued to deploy strong cost discipline. We strengthened our core business and delivered significant milestones in our Agility for Growth strategy, shaping the Euronext of tomorrow. Our new Optiq® platform was launched for market data and our diversification of activities continued with the reinforcement of our corporate services offering and the entry into the spot FX market," said Stéphane Boujnah, Chairman and CEO of the Managing Board of Euronext NV.

Financial performance

The second quarter of 2017 saw an improved trading environment with the lifting of political and economic uncertainties in Europe, attracting inflows to European equities. Supported by another strong quarter in listing, this translated into improved trading volumes on both the cash and derivatives markets, with derivatives also benefiting from the closure of TOM in the Netherlands. As a result, revenues for Q2 2017 increased by +3.8%, to €137.3 million (Q2 2016: €132.3 million).

Operational expenses excluding Depreciation & Amortisation increased by +6.3% to €58.1 million (Q2 2016: €54.6 million) due to the deployment of our Agility for Growth initiatives, ongoing IT projects (including the development of our new trading platform, Optiq®), and new business.

During the quarter, Agility for Growth initiatives generated €1.6 million of revenues and €1.9 million of costs.

The EBITDA for the quarter was strong, at €79.2 million, representing a margin of 57.7% (Q2 2016: €77.7 million at 58.7%).

As of the end of Q2 2017, €15.3 million of cost savings have been achieved since 1 April 2016, slightly down compared to Q1 2017 due to costs related to the Optiq® and MiFID II projects.

Depreciation and Amortisation decreased by -12.8% in Q2 2017, to €3.3 million (Q2 2016: €3.8 million), resulting from certain assets now being fully amortised.

Operating profit before exceptional items was €75.9 million, a +2.7% increase compared to Q2 2016 (€73.9 million).

€1.4 million of exceptional costs were booked in Q2 2017 compared to €5.2 million of exceptional costs in Q2 2016. These costs were mainly related to restructuring, while Q2 2016 exceptional items included expenses for employee termination benefits in the various Euronext locations, and expenses related to the updated French restructuring plans and the relocation of Belfast IT operations to Porto.

Net financing expenses for Q2 2017 were €0.4 million compared to net financing expenses of €0.8 million in Q2 2016.

The €4.0 million of results from equity investment relates to dividends received from Euroclear. In Q2 2016, a dividend income of €3.8 million was received from Euroclear, and a dividend income of €0.7 million was received from LCH Group.

Income tax for Q2 2017 was €24.0 million, representing an effective tax rate for the quarter of 30.8% (Q2 2016: €23.0 million and 31.8%). This is consistent with the normalised tax rate of the Company, while in Q2 2016, the tax rate was slightly higher due to discrete items including the impact of the French restructuring plans.

As a result, the net profit for Q2 2017 increased by 9.3%, to €53.9 million (Q2 2016: €49.3 million). This represents an EPS of €0.78 basic and €0.77 fully diluted in Q2 2017, compared to €0.71 basic and €0.70 fully diluted in Q2 2016. The number of shares used for the basic calculation was 69,562,035 and for the fully diluted calculation was 69,951,659.

As of 30 June 2017, the Company had cash and cash equivalents of €81.2 million, and no debt.

Business highlights

• Listing

Revenues were €23.6 million in Q2 2017, an increase of +1.1% compared to Q2 2016, despite Q2 2016 being, at that time, the strongest quarter since IPO with €23.3 million of revenues. This solid performance was driven by material increases in follow-on activity during the quarter, confirming the growing use of equity financing on capital markets.

On the primary market, activity was satisfactory given market conditions and high volatility. The second quarter saw the continuation of the first quarter trend of large capitalisations returning to our markets. Euronext Paris recorded its first large capitalisation deal since November 2015 with the IPO of ALD. Furthermore, the EU Tech Hub initiative reached a new milestone with the listing on Euronext Paris of X-Fab, a German-based technology company.

In total, €106 billion in equity and debt were raised on our markets in Q2 2017, compared to €89 billion in Q2 2016. Nine new listings, including five SME deals, took place on our markets in Q2 2017 raising €2.6 billion, compared to fourteen listings during Q2 2016 which raised €3.2 billion.

• Trading

Cash trading

Average daily volumes increased by +18.5% to €8.4 billion compared to Q2 2016. The recovery in volumes resulted from a more stable political outlook in France, favourable economic conditions and improved corporate earnings across the Eurozone. In this rising volume environment, revenues increased by +9.8% to €50.3 million in Q2 2017, compared to €45.8 million in Q2 2016. Yield softened but remained resilient at an average of 0.48 bps in Q2 2017, a -4.0% decrease compared to the 0.50 bps yield of Q2 2016.

Our market share strengthened during the quarter, averaging 64.2% and standing at 65.3% at the end of June, a significant increase from 61.3% in Q2 2016. This increase resulted from the implementation of our new non-member proprietary fee scheme and from adjustments within the SLP programme that attracted additional volumes. Furthermore, our Equity Best of Book service which attracts retail flows to our markets, continued to gain traction, with two new members on-boarded during the quarter.

The average daily transaction value of ETFs was €501 million, a -10% decline from Q2 2016, impacted by lower volatility. However, new ETF listings continued positive momentum with 26 new products listed on our markets, bringing the total number of ETFs listed at the end of June to 809. Overall, the franchise continued to grow with the on-boarding of a new ETF issuer, Candriam.

Derivatives trading

Derivatives trading revenues increased by +2.2% in Q2 2017, to €10.4 million compared to €10.2 million in Q2 2016. Individual equity derivatives reported a +50.0% increase on average daily volume to 333,930 contracts (222,631 contracts in Q2 2016), while the average daily volume on equity index derivatives was up +13% to 245,908 contracts (217,211 contracts in Q2 2016). These figures include a total of 5.6 million equity and index option contracts, resulting from the planned non-recurring migration of open interest from TOM, our competitor on the Dutch market, to Euronext. This migration took place in June at marginal rates, due to the exceptional circumstances of the TOM closure.

Commodity products recorded weaker average daily volumes in Q2 2017, down -8.5% to 50,372 contracts (55,061 contracts in Q2 2016). The end of the quarter saw improved volume as the heatwave that hit France in late June, coupled with spring wheat problems in the U.S., increased uncertainties on the wheat harvest this year and translated into significant price and volatility increases.

• Market data & indices

In Q2 2017, market data and indices revenues were €26.0 million compared to €27.3 million in Q2 2016. This decrease of -4.6% was primarily due to the higher than usual contractual audit findings that were recorded in Q2 2016.

• Post-trade

Clearing

Clearing revenues increased by +8.0%, from €12.3 million in Q2 2016 to €13.3 million in Q2 2017, reflecting stronger derivatives trading activity as well as higher treasury and other clearing income.

Settlement & Custody

Revenues from Interbolsa in Portugal increased by +5.4%, from €5.0 million in Q2 2016 to €5.2 million this quarter, driven by an increase of settlement, public debt and equities under custody.

• Market solutions & other

Revenues from Market Solutions increased by +1.7% in Q2 2017, to €8.3 million (Q2 2016: €8.2 million). The business continued to benefit from MiFID II projects and related work for commercial technology clients.

In May 2017, Euronext agreed Head of Terms for Atos to become the sales and delivery partner for the Optiq® platform. This arrangement enables Euronext to extend its sales reach and scale its delivery capabilities ahead of the commercial availability of Optiq® in 2018.

Non-IFRS financial measures

For comparative purposes, the company provides unaudited non-IFRS measures including:

• Operational expenses excluding depreciation and amortisation
• EBITDA, EBITDA margin.

We define the non-IFRS measures as follows:

• Operational expenses excluding depreciation and amortisation as the total of salary and employee benefits, and other operational expenses
• EBITDA as the operating profit before exceptional items and depreciation and amortisation
• EBITDA margin as the operating profit before exceptional items and depreciation and amortisation, divided by revenues.

Non-IFRS financial measures are not meant to be considered in isolation or as a substitute for comparable IFRS measures and should be read only in conjunction with the consolidated financial statements.

Corporate Highlights

• New milestones in the delivery of the Agility for Growth strategic plan

• Strengthening the corporate services franchise

On 10 July 2017, Euronext announced the acquisition of a 60% stake in iBabs, a leading Dutch provider of dematerialised board portal solutions for corporate and public organisations, for a consideration of €30.1 million. The acquisition of iBabs marks the achievement of a significant milestone in the development of the Euronext Corporate Services franchise. This transaction strengthens Euronext’s value proposition to listed companies while targeting a broader audience of private companies and public institutions. iBabs’ solutions support governance, workflow management, efficient decision making and secured collaboration at board level and across management teams. These solutions will be integrated into the Euronext Corporate Services offering alongside existing services such as our next-generation webcast solution, investor relationship management tool and tailor-made advisory service.

In July 2017, Euronext Corporate Services launched its new website, complementing the existing day-to-day support service and providing a new suite of services that truly address the challenges facing our clients on the capital markets.

• Expansion of the fixed income offering: Euronext Synapse MTF in Beta Test

Following the expansion of its joint venture with Algomi, a leading fixed income technology provider, Euronext reached a significant milestone in July 2017 with the delivery of the Euronext Synapse platform and the availability for client testing. This new MTF will provide a straightforward and confidential trading process for illiquid corporate and financial bonds. Euronext Synapse MTF is subject to approval by the FCA and operated by Euronext with technology provided by Algomi.

• Morningstar European indices

Subsequent to the strategic collaboration between Euronext and Morningstar, the leading global provider of independent investment research, two new Morningstar European indices went live on 30 June 2017: the Morningstar Developed Markets Europe 100 and the Morningstar Euro 50.

• Launch of Euronext Block

In partnership with AX Trading, Euronext announced in July 2017 the go-live of Euronext Block, the pan-European MTF that will offer large-in-scale trading across 2,500 equity and ETF instruments. With its innovative "Invitation to Trade” mechanism, Euronext Block will help investors navigate the new liquidity landscape under MiFID II and beyond. Following FCA approval as of July 2017, client onboarding will begin during August with trading expecting to ramp up later in the year.

• Acquisition of FastMatch

On 23 May 2017, Euronext announced the acquisition of FastMatch, the fastest growing Electronic Communication Network in the spot Foreign Exchange market. FastMatch has leading-edge technology, entrepreneurial spirit and access to a large, transparent and diversified pool of liquidity at unrivalled speed and capacity. Through the acquisition of an interest of approximately 90% in FastMatch, for an initial cash consideration of $160 million, Euronext is enabling FastMatch to increase its growth profile in Europe, commercialise its market data and develop derivative products. The acquisition will be fully financed through bank debt while maintaining Euronext’s ability to pursue other external growth opportunities and will be immediately accretive to Euronext’s earnings. The transaction is expected to close in Q3 2017 and the financing has been secured.

• Launch of a new fund service

On 15 May, Euronext launched the Euronext Fund Service in Paris, an innovative and complementary solution for investing in open-end funds (UCITS1 and AIF2) registered or passported in France. It is designed to meet the needs of industry professionals for straight-through processing access to funds by improving fund visibility and facilitating access to domestic and international investors. It also enables clients to place orders with brokers for a range of international open-ended funds in the same way they do already for other exchange tradable products.

• Securing clearing solutions for cash and derivatives markets post 2018

Under its Agility for Growth strategy, Euronext is deploying significant effort to establish clearing optionality for its clients. Subsequent to the acquisition of a 20% stake in EuroCCP, enabling Euronext to offer user choice in clearing for the equity markets within the Eurozone through the implementation of a preferred CCP model, Euronext announced on 3 April 2017 the signature of a binding heads of terms with ICE Clear Netherlands, a subsidiary of Intercontinental Exchange, for the provision of clearing services for its financial derivatives and commodities markets.

The agreement with ICE Clear Netherlands covers the clearing of financial derivatives and commodity derivatives for a period of 10 years. Euronext will contribute a €10m up-front investment in ICE Clear Netherlands. This agreement provides for a continued income stream for Euronext, with EBITDA levels comparable to the existing agreement with LCH SA. Overall this represents a long-term, open access, sustainable and innovative Eurozone based clearing proposition for Euronext and its customers.

• Changes of Leadership in Technology and Operations

Jos Dijsselhof, member of the Managing Board and Chief Operating Officer, left Euronext on 30 June 2017. Alain Courbebaisse joined Euronext on 7 June 2017 as Chief Information and Technology Officer, reporting to Stéphane Boujnah, CEO and Chairman of the Managing Board. Maurice van Tilburg, member of the Managing Board and CEO of Euronext Amsterdam, in addition to his current responsibilities, became Head of Market Operations in charge of Euronext Market Services.

• Renewal of Euronext Reference Shareholders Agreement

On 13 June 2017, Euronext was informed that the group of Reference Shareholders (RSH), holding, since IPO, 33.36% of Euronext share capital, had decided to extend an amended version of the RSH Agreement. The previous agreement, dated 3 June 2014 and due to expire on 20 June 2017, was extended for a further period of two years commencing on 21 June 2017. Eight RSH adhered to the extension and now account for 23.86% of Euronext’s share capital. This new RSH group has agreed to a new lock-up period of two years commencing on 21 June 2017 and expiring on 20 June 2019. The Supervisory Board representation of the Euronext RSH is maintained, as the RSH, acting jointly, retain their right to nominate one third of the Supervisory Board seats.

• New term loan facility

Euronext has signed a term loan facility as per 19 July 2017 with five banks to the amount of €175.0 million and accordion of €125.0 million. The term loan facility has a maturity of three years, with two one-year extensions. The funds will be used to finance the acquisition of FastMatch and to repay the draw down on the RCF, used to fund the acquisition of iBabs.

• Update on technology

The migration to our cutting-edge Optiq® platform started with the inauguration of cash market data broadcasts on 19 June and the smooth transition to this service as the primary feed on 10 July. Derivatives market data broadcasts began on 24 July. Optiq® provides outstanding market data latency with a 40 micro-second average and unsurpassed jitter performance. This successful launch is also a key milestone in our MiFID II rolling compliance program which will continue throughout the remainder of 2017. The internal delivery dates for the Optiq® cash order entry and matching components remain unchanged with the go-live date now set for 12 March 2018 to ensure a 6 month testing period as requested by our clients.

Consolidated income statement

The figures in this document have not been audited or reviewed by our external auditor.

Consolidated comprehensive income statement

The figures in this document have not been audited or reviewed by our external auditor.

Consolidated balance sheet

The figures in this document have not been audited or reviewed by our external auditor.

Consolidated statement of cash flows

The figures in this document have not been audited or reviewed by our external auditor.

Cash markets activity

* included New Listings incl over allotment, Follow-ons on Equities, Corporate Bonds on Euronext Listed Issuers. Corporate bonds figures revised as from January 2017 to exclude Euronext listed financials issuers and to regroup them in a broader newly created financial bonds category. Public/Semi-Public bonds category not reported before, created as from January 2017

Derivatives markets activity

Financial calendar

3^rd quarter 2017 results 8 November 2017

About Euronext

Euronext is the leading pan-European exchange in the Eurozone with nearly 1,300 listed issuers worth close to €3.5 trillion in market capitalisation as of end June 2017, an unmatched blue chip franchise consisting of 24 issuers in the Morningstar® Eurozone 50 Index? and a strong diverse domestic and international client base. Euronext operates regulated and transparent equity and derivatives markets. Its total product offering includes Equities, Exchange Traded Funds, Warrants & Certificates, Bonds, Derivatives, Commodities and Indices. Euronext also leverages its expertise in running markets by providing technology and managed services to third parties. In addition to its main regulated market, Euronext also operates Euronext Growth^TM (formerly known as Alternext) and Euronext Access^TM (formerly known as the Free Market). For the latest news, find us on Twitter (twitter.com/euronext) and LinkedIn (linkedin.com/euronext).

Disclaimer

This presentation may include forward-looking statements, which are based on Euronext’s current expectations and projections about future events. By their nature, forward-looking statements involve known and unknown risks, uncertainties, assumptions and other factors because they relate to events and depend on circumstances that will occur in the future whether or not outside the control of Euronext. Such factors may cause actual results, performance or developments to differ materially from those expressed or implied by such forward-looking statements. Accordingly, no undue reliance should be placed on any forward-looking statements. Forward-looking statements speak only as at the date at which they are made. Euronext expressly disclaims any obligation or undertaking to update, review or revise any forward-looking statements contained in this presentation to reflect any change in its expectations or any change in events, conditions or circumstances on which such statements are based unless required to do so by applicable law.

Financial objectives are internal objectives of the Company to measure its operational performance and should not be read as indicating that the Company is targeting such metrics for any particular fiscal year. The Company’s ability to achieve these financial objectives is inherently subject to significant business, economic and competitive uncertainties and contingencies, many of which are beyond the Company’s control, and upon assumptions with respect to future business decisions that are subject to change. As a result, the Company’s actual results may vary from these financial objectives, and those variations may be material.

This press release speaks only as of this date. Euronext refers to Euronext N.V. and its affiliates. Information regarding trademarks and intellectual property rights of Euronext is located at www.euronext.com/terms-use.

© 2017, Euronext N.V. - All rights reserved.

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