Thank you very much. Good morning to everyone, and thank you for joining us in this trading update for Q3. As you may have seen in the statement we have published this early morning today, we also announced the successful integration of the two companies that we acquired in H1, Web Financial Group and instiHub. I'm very excited about the creation of Allfunds Tech Solutions, a new dedicated company that will benefit from the integration of Allfunds Digital and Web Financial Group. In addition, instiHub will be rebranded into the new Allfunds Data Analytics, becoming our business line focusing on data and analytics solutions. Both are going to be instrumental in our strategic goal of further providing digital solutions to our clients and increasing our subscription revenues. Let's start with Q3 results and numbers, okay?
As you have seen this morning in our press release, assets under administration were stable since June 2022 for Allfunds Group, decreasing only at 0.8% or EUR 10.4 billion. This resilience in assets was driven by the best quarter in migrations year to date, with EUR 17.2 billion, despite the negative market performance and the outflows from existing clients. This makes this quarter the strongest quarter of the year. As regards to platform service assets in the current quarter, given the high quality, the high volatility experienced in global markets in August and September, we saw assets decreasing by 2% to EUR 895 billion, demonstrating greater resilience as a result of new client migrations now onboarding to our platform.
The decrease was mainly due to the risk-off sentiment environment across equities and fixed income asset classes, you know, as you can imagine. In terms of market appreciation, the negative performance across asset classes contributed to virtually most of the decline. I remind you here that fixed income markets were down 6.9% in the quarter, whereas equities suffer a range of 5%-6.6% drop in that same period, depending on which equity market index you choose, you know? As you have seen, we have experienced organic outflows from existing clients slightly above Q1 and Q2, that we have largely offset with new clients migrations during the quarter. This resulted in modest net outflows of about EUR -0.5 during the quarter. The existing client outflows were concentrated on the months of August and September, especially the last half of September.
As opposed to what happened in Q1 and Q2, we have seen in this Q3 a stabilization in the outflows in the fixed income asset class. Regarding the migrations, you will see that we have managed to onboard almost EUR 10 billion in the platform service AUAs, you know? EUR 8 billion in the Dealing & Execution AUAs. We already have explained in the past that the services of Dealing & Execution, D&E, are not our core business, it's true. We will be willing to grow as a way to gain clients for the platform service. The capture of this new specific client was strategic for Allfunds. It was a very important win and highlights our ability to win businesses from large distributors with flexible servicing needs. Regarding our subscription-based business, we are very excited with the progress.
We continue seeing banks and financial institutions wanting to upgrade their tech offering, and we are becoming a strong partner for this investment. There is good traction on the upselling and cross-selling efforts from the recent acquisitions, and the prospects for the end of year remain very positive. I would also like to reiterate today again that we remain highly confident in our business model and the growth levers at our disposal. We have continued to see strong client activity with 51 new distributors onboarded year to date, a figure that we usually onboard on average for the full year, and more than 100 new fund houses, demonstrating our ability to continue to win market share and deliver excellent client outcomes. It's our famous flywheel effect. During the quarter, we onboarded about EUR 17 billion of assets onto the Allfunds platform.
Our new client pipeline remains very strong. While it is this year more weighted to the last quarter of the year, we remain confident in achieving the level of secure migrations of EUR 40 billion for second half of 2022. That is what I commented to you last July. When we talked about H1 results. Overall, our secular growth drivers remain absolutely intact, outsourcing, the shift to open architecture and digitalization. Finally, I would like to spend the last minute of the call on the integration of the two companies we have acquired, Web Financial Group and instiHub. I'm happy to share with you that these integrations have been completed without any setback and in less than four months.
Both the creation of Allfunds Tech Solutions and Allfunds Data Analytics are a direct effort to align and harmonize teams across the business. Such an integration will leverage the mutual benefits of these organizations to help create an even more robust offering to clients. This step will also reinforce our strategy to diversify our revenues and be less impacted by market volatility. As a final update, I would like to remind you that we are just waiting for the closing of MainStreet Partners to occur in the coming months to also reinforce our ESG offering. This addition will certainly provide further collaboration areas with the new business lines created. That's it. Thank you very much, again for joining us today in this call, and let's now open for Q&A. Thank you.
Thank you. As a reminder, if you would like to ask a question, please press star one on your telephone keypad, or press star two if you'd like to withdraw your question. The first question today comes from Alex Medhurst from Barclays. Please go ahead.
Yeah, good morning, and thanks for taking my questions after the presentation. A couple of sort of areas I want to touch on. First is a bit of color on this EUR 8 billion migration to Dealing & Execution. Firstly, what are the prospects of upgrading this to the core platform offering? Second, you know, can you comment a little bit on the initial revenue margin? Will it be the same sort of 0.2 basis points for the rest of that Dealing & Execution portfolio? And third, does the remainder of that EUR 40 billion H2 migration target include any more migrations for Dealing & Execution? Thank you. Just a second area of questioning. Well, maybe just one question in the second area. We're obviously much of the way through the second half.
Can you give any indication of how revenue margins are trending within the 3.3-3.5 basis point range? Thanks very much.
Yeah, Alex, thank you very much for your questions. You know, unfortunately there's a lot of noise and it was tough, you know, to get all the messages, you know, and the questions that you posed. Well, let's see now if I got. I don't know why.
Yeah, the line is breaking.
Yeah.
Alex, you let us know. I think that the first question was on migrations on the Dealing & Execution piece. What are the prospects to upgrade that client to the full platform service?
The other one was regarding margin, yeah, EUR 40 billion, okay, revenue margin. Well, regarding migrations.
Yeah. Sorry. Would it be useful for me to repeat that?
Yeah.
I might have a clearer line.
Now it looks like the line is better. Yeah.
Okay, great. The first question was just around the EUR 8 billion migration to Dealing & Execution.
Okay.
You know, what are the prospects of upgrading this to the core platform?
Okay. Super.
Can you comment on the revenue margin initially on this EUR 8 billion? Is it the same as the sort of 0.2 basis points for the rest of the portfolio?
Perfect.
Does the H2 EUR 40 billion target include any more migrations to Dealing & Execution?
Super.
Then the second sort of question was just, you know, can you give any indication on how revenue margins are trending for the second half within the 3.3-3.5 basis point range? Thank you very much.
Super. It's all clear. Thank you, Alex. Much better. Okay. Regarding the EUR 8 billion and the possibility to upgrade. Well, I mean, we are consistent, you know, with the strategy, you know, and we do all our best, you know, to capture clients for our platform service, which means, you know, the one-stop solution, you know, the old-fashioned traditional business model. However, it's true that we are also keen to make exceptions in the case, you know, that we've realized that we are talking about a very strategic client, you know, in a very specific core country, which is the case, okay? We do it. Why we do it? Because in this case, this money comes from a competitor, so it's always good, you know.
Second, because it reinforces, you know, our well our market share dominant market share in one specific core country. Second, okay. Third, because as you said, yes, once you start dealing with a client, you know, working with a new client, you always have the possibility, you know, to upsell the level of service that you provide to this distributor. No. not just necessarily trying to move that client from Dealing & Execution to platform service. That, of course, is one of our main priorities, but also to sell to this client digital services, you know, which is our kind of core focus, you know. and we are really keen to do it, as you can imagine, you know. that's regarding this EUR 8 billion, you know. Also regarding to migrations.
In this case, this EUR 8 billion, I cannot disclose the margin, the specific margin, because I would be disclosing the margin with a specific client, something that I cannot do. But I can tell you that it's significantly higher than the average margin that we have in Dealing & Execution. Third question regarding migrations. Are we expecting new migrations in Dealing & Execution in Q4? The answer is yes. How much of the EUR 40 billion? We don't know yet. Yes, we are expecting some more assets coming in in Q4 in Dealing & Execution. This is regarding migrations. I don't know if I have answered your questions. And re-
I think the-
Yeah.
The last question probably, Álvaro, in your case.
Yeah.
Revenue margin for the business.
Yeah. Exactly. On revenue margin.
Yeah. Sure. Glad to take that. Hi, Alex . So we maintain the same guidance that we gave you since the beginning of the year. Remember we mentioned we expected the platform margin to be around 3.3-3.5 basis points, assuming a stable to flat market scenario. Given the current situation to be more on a bear market scenario, the margin might be at the lower end of the range. Again, it's difficult to predict what the market is going to do, but based on what we know today, I think looking at the low end of the range seems more reasonable.
Great. Thank you very much, and apologies for the poor line.
No problem. Thank you, Alex. Thank you very much.
Our next question comes from Bruce Hamilton at Morgan Stanley. Go ahead, Bruce.
Hi there. Thanks. Sorry, somewhat sort of questions following on the lines of the previous ones. But maybe just thinking ahead into 2023 in terms of what visibility you have on pipelines and new clients. I mean, should we be thinking as sort of, you know, is there kind of EUR 60 billion plus of potential new wins? I think, you know, when you came into this year it was about EUR 100 billion. Is it, you know, similar order of magnitude? When we think about new client business then, I mean, what sort of proportion or how should we think about what proportion comes to platform versus Dealing & Execution?
'Cause obviously if it's to the latter, it's much less impactful to revenues at least initially, which is, you know, something we need to sort of bear in mind. Secondly, just on the revenue margin point. If I've understood what you're saying is from the 3.5 basis points you did in the first half, we should imagine that that's trending toward, you know, 3.3 in the second half? Or are you saying for the full year it's near 3.3, so you dip, you know, below the 3.3 in the second half? Then, you know, h ow should we think going forward, you know, if equity markets start to recover, should that, you know, recover back up to, you know, 3.4-3.5, or how do we think about that sort of dynamic? Thank you.
Thank you, Bruce. Okay. Regarding next year, you know, migrations and pipeline, I mean, we are working as we speak in next year budget, and we still don't have, you know, that figure, you know? I think that I mentioned in July, you know, this overall pipeline of around EUR 130 billion, okay? Again, as you know, one thing is the pipeline that not necessarily, you know, has to be in inside one specific year, you know, because it can happen, you know, that migrations fall into the following year, okay? Pipeline is this one which, yes, I think it's extraordinary strong pipeline.
A specific, you know, number for next year, I mean, you gave a number, which is, well, is not far away, you know, from what I'm expecting. That's all I can really say. Regarding revenue margin, I think, Álvaro, probably you know you can jump in with this question. Probably I can answer or I probably can start, you know, answering to this comment that you made, you know, regarding what happens if the market rebounds, you know. Well, definitely there is a clear effect, you know, in our margin, overall margin, with product mix, okay?
Which means that the better, you know, the product mix of our portfolio, of the assets, you know, that we have in the platform, the better for our margin. It's clear, you know, that we make more money if we have more equity, okay, in the platform, you know. Yes, we are all expecting that sooner or later, you know, markets will rebound, and definitely we should see an impact, very positive impact in our product mix, therefore a very positive impact in our overall margin. Having said this, Álvaro, probably you can.
Sure.
Take the question regarding, again, you know, margin. Yeah.
Yeah. Hi, Bruce. Of course we won't be disclosing the forecast for the second half. I think the way to look at this is, as you correctly pointed out, we disclosed the 3.5 basis points for the first half. Most of the outflows that we saw during that period of time was on the fixed income space. We've seen a different trend in Q3, as you referred earlier. We've seen equities also flowing out of the platform to some extent. That has, of course, impacted our margin. Having said so, I would reiterate the 3.3 to 3.5 range for the full year.
I think we will be probably closer to the 3.3%-3.4%. I would be surprised to see margin going for the second half below the 3.3%. As we mentioned earlier in the call, there's a lot of uncertainty. Volatility can also play in our favor, as you know, on the transaction income. I would reiterate that range that I provided. As Juan was saying, of course, rebound in equities might have a very positive impact on the margin. We see this more as a temporary, let me say setback or impact. Let me also take the opportunity. I think you asked about the D&E migration for next year.
I think as Juan answered earlier to Alex. This migration that you saw in Q3 and what is remaining is more opportunistic. We don't really have a, I would say, significant amount of potential new D&E migrations in the pipeline. Most of what, if not all of what will be coming next year. Like on the platform service side.
Got it. That's very helpful. Thank you.
You're welcome.
Thank you.
The next question comes from Philip Middleton from Bank of America. Please go ahead.
Yes, good morning. Well, I wonder if you could talk a little bit about what you've been seeing from the BNP portfolio, where you were looking to move more assets from the Dealing & Execution to the full service one. I also wonder if you could say a bit about. It seems like the characteristics of new business this quarter have changed a bit with more emphasis on people choosing to outsource for the first time. Do you think that's the lasting trend or just a bit random because of the small sample size?
Okay. Yeah. Thank you. Thank you very much. I mean, regarding the first question, client conversion, BNP or Allfunds client conversion, it's on track. Nothing really to point out. I will disclose the numbers, you know, in February, okay, whenever we have the 2022 results presentation. I mean, everything is on track. Regarding the question of the type of taxonomy of clients, new clients, you know, as you said, I mean, it's a very small, let's say, period to take any conclusion really. I think the beauty of our business model is that, as you know, we have 16 offices around the world operating locally.
We have clients in more than 60 countries. I think now it's around 65 countries. We always try to target the best clients, you know, in each of these countries. But as you can imagine, diversification is our main goal. I don't know, some quarters we are pretty successful, you know, in the Middle East, and suddenly the following quarter, we see, you know, clients coming, I don't know, in Latin America, or clients coming in the Nordics. I don't think we can take at this point any conclusion about, you know, client taxonomy in this moment, okay?
Probably, again, in February, probably we can look back and see, you know, if there is any pattern, you know, in 2022, you know, types of clients you know? If something has really changed. My opinion today is that, no, nothing has really changed.
Okay. Thank you very much.
Thank you.
Our next question is from Tom Mills at Jefferies. Please go ahead.
Hi. Good morning, guys. Sorry, just to ask another question on the migration side of things. I appreciate you said you can't be sure on the D&E migrations in Q4. I think you previously suggested that there's a certain amount of signed and dated new business into 2H. Is it possible to give us an idea what proportion of the kind of remaining visible migrations this year would relate to the core platform service? And then just secondly, on the EBITDA margin kind of target and sensitivity analysis you helpfully provided at 1H, is it fair to say that, you know, you're still feeling pretty good about the 70%+ target for this year? That's great. Thanks very much.
Thank you, Tom. Okay, let me take the migrations question, and I will ask Álvaro to jump in, regarding the EBITDA margin forecast. Really, I mean, unfortunately, I cannot really add anything else really, Tom, you know, regarding what I have already said. I mean, because we're talking about, you know, a Q4, you know, and then, which means, you know, that it's next three months and it can happen, you know, that some of these Dealing & Execution migrations, you know, that we're expecting to have, potentially they could, you know, fall into next year, you know.
On average, I think that, as I have already disclosed, you know, that I'm expecting to see further migrations in Dealing & Execution in Q4, okay, apart from the EUR 8 billion, I don't know. Let's say that, we could expect, overall to see that, out of, the overall migrations that we are expecting to close, this year, which is going to be around EUR 55-EUR 60 billion, I'm talking about 2022, I don't know, probably 15%, 20% of that overall migration 2022 could fall or could come from Dealing & Execution. Yeah, probably. bear in mind that as I said, okay, the margin is not the current margin, okay? It's a better margin, okay, in any case.
As I said before, this is an exceptional client, a strategic client for the company. I'm super excited and happy, you know, to bring this type of exceptions, you know, to the platform. This is regarding migrations. Álvaro, probably regarding the.
Yeah. Sure.
EBITDA margin. Thank you.
Sure. Hi, Tom. Look, it's difficult to predict where the market's going to. You know, how they're going to evolve. Given this business is all about scale, it adds another layer of complexity to really talk about that EBITDA margin. Having said so, we continue with the cost discipline that we've had throughout the year. We've, as we said, internalized some third-party services that were outsourced. We're streamlining the third-party providers. We're renegotiating terms and so on, and we're very strict in our hiring policy. And going back to the guidance that the scenarios that we provided back in H1, we still think that 70%+ EBITDA margin for the full year 2022 is achievable.
It's been challenging, as you can imagine. We will definitely work towards that target. Of course, we are very conscious of the very difficult environment in which we operate. We will make sure that the costs remain under control if the outlook does not improve, as you can imagine.
Thanks very much, Juan and Álvaro. That's really helpful color. I appreciate all the uncertainties. That's great. Thank you.
Thank you.
The next question comes from Gregory Simpson at BNP Paribas. Please go ahead.
Hi. Morning, guys. Just to go back on the migrations point. In the future, thinking next year and beyond, should we expect new clients to remain spread across both the platforms, so the full platform service and the Dealing & Execution service, or the higher share of this in kind of H2 of Dealing & Execution more kind of a one-off? Second question for the distributors and fund houses you're onboarding this year, what kind of proportion are taking the most premium versions of Connect in terms of monetization? I think it used to be about half of onboarding were paying for Connect premium, but, you know, how is that trending?
Thirdly, with the existing client outflow in the period, are there any particular trends by country you'd flag, or is the weakness quite broad-based across all your end markets? Thank you.
Thank you. Thank you very much. Very good questions. Well, regarding next year and beyond, migrations. Now, look, I think we're saying now that we have been able to onboard about around 50 clients now already, now this year. Out of which, 49 are platform services, so traditional clients, you know. And just one is Dealing & Execution. The only thing is that Dealing & Execution, in this case, the client is really significant, as I said, and so it's something exceptional. I mean, what you should expect next year and beyond is that, you know, we will keep on promoting and selling our traditional one-stop and, I think, unique, you know, business model that has been so successful, you know, in the last two decades.
However, again, as I said, you know, if we find in any specific country where we have a significant interest, you know, and we find the opportunity to migrate a big book of assets, starting with just Dealing & Execution, well, we will sit down, discuss it internally, and take a decision, you know. Okay. Yes, it's, I think you mentioned the word one-off. If you want to see it like a one-off, but you can also see it like a one-off. Yeah. Okay. This is regarding migrations. I think the other one is regarding fund houses, you know? If we are able.
Well, I tell you, yeah, I mean, now fund houses that are onboarding, I mean, we have, I think it's 1,400 asset management companies with global distribution agreements. Which means that it's very difficult now that we find, like, a new asset a big, you know, global, asset management company that doesn't work today with Allfunds. Which means that all these new fund houses or the majority of these new fund houses are predominantly, you know, US boutiques, you know? Or a specific local asset management companies, you know, when we open a business in a new country.
Therefore, yes, they definitely need, you know, our services, especially data and analytics services, in order to, again, not to waste their time visiting the 800 clients that we have around the world, you know, but to make, you know, their way to target Allfunds clients and Allfunds distributors in a much more intelligent way, you know? That's the way we sell, you know, for instance, these data and analytics tools, you know? Helping these asset management companies to target the clients that they really have appetite, you know, for the assets in what they have good products. Let's say, you know?
Yes, I'm expecting to see definitely an increase in the number of fund houses, new fund houses paying for our digital capabilities. Apart from that, today we have announced, as you know now, the launch of these two companies, Allfunds Tech Solutions, you know, and Allfunds Data and Analytics. In which we are reinforcing the teams, you know, the features, the tools, the services, the products, in order to be, again, even more, I mean, to enhance our value proposition for these fund houses, and also for distributors, of course. You can definitely expect Allfunds, you know, being able to grow significantly in what we internally call non-asset-driven revenues that are mainly subscription fees.
I think, Álvaro, there was a question regarding. Yeah.
Yeah. Sure.
Thank you.
Hi, Greg. Your question around the trends in organic outflows. We have seen a stabilization of the outflows or redemptions coming from the managers over the course of Q3. Remember that in both Q1 and Q2 they redeemed heavily, well, fixed income products. That has continued in Q3, but it has stabilized and softened. As of today, I think that trend has, I mean, normalized a lot. What we've seen in Q3 different to previous quarters is something which of course we knew could happen, which is outflows on the equity space and in particular on the private bank side.
It's not so much linked to the country, or not so country-specific, but more linked to the typology of the distributors or the clients that sell those funds. As I was saying, following the market turmoil or market underperformance, we've seen some outflows on the equity space, which again also explain some of the, let's say, margin compression that I mentioned earlier in my previous response.
Thank you.
You're welcome.
We have no further questions, so I will now hand the floor back to the Allfunds team for closing remarks.
Thank you very much. Well, again, thanks a lot, you know, for your time, for your interest, in our company and we look forward, you know, to keep on, you know, talking to you and discussing with you, Allfunds, present and future. Thank you very much.