Hello, welcome to the Euronext Q1 results. Throughout the call, all participants will be in a listen-only mode. Afterwards there will be a question and answer session. Just to remind you, this call is being recorded. I will now hand you over to Stéphane Boujnah, CEO and Chairman of the Managing Board of Euronext. Please begin your meeting.
Good morning, everybody. Thank you for joining us this morning for the Euronext Q1 2018 results conference call and webcast. I am Stéphane Boujnah, CEO and Chairman of the Managing Board of Euronext. I will start with the highlights of the first quarter 2018. Giorgio Modica, Euronext CFO, will further develop the main financials and business drivers for the year, before I conclude with my financial remarks. We will both welcome your questions at the end of the presentation with Anthony Attia, Member of the Managing Board of Euronext. Let us start with slide five. The first quarter was marked by return of volatility, which translated into double-digit volumes growth in all asset classes, cash, derivatives, and spot forex. In addition, our market share remained very strong as well as our revenue capture across our key markets, contributing to the strong performance of the quarter.
Second, transition to MiFID II was another highlight of this first quarter. 5 months after its implementation, I would like to share thus with you a few key takeaways. First, Euronext was ready on day one without any major disruption. Second, the full impact of the new regulation is unfolding over time. For example, the cap on dark pool was postponed to twelfth March following the announcement, and names of stocks have been forbidden to be traded on dark pools. For the moment, we don't see massive transfers from OTC to lit venues. We rather observe a shift of OTC flows to systematic internalizers. Third, as far as M&A is concerned, we closed this quarter the acquisition of the Irish Stock Exchange, which was signed in November last year. The Irish Stock Exchange is now rebranded as Euronext Dublin. Integration is proceeding according to plans.
Deirdre Somers, the former CEO of the Irish Stock Exchange, will join the Managing Board of Euronext after regulatory and shareholders' approval, and leads the Euronext Center of Excellence for Debt and Funds Listings and ETFs. Euronext Dublin will start contributing to Euronext's P&L from the second quarter of 2018. Fourth, we added a new product to the corporate services suite with the acquisition of 80% of InsiderLog in January, a Swedish company specialized in insider list management. Finally, in April, we achieved another important milestone, securing the EUR 500 million long-term funding that will serve as a key pillar of our capital optimization strategy. The new financing extends the maturity of our financial liability to 2025. It reduces the cost and diversifies the financing mix of the group.
With an order book oversubscribed 4.4 times at EUR 2.2 billion, the success of our inaugural EUR 500 million bonds, seven-year A-rated by S&P, shows clearly the confidence of bond investors in the Euronext model. On this occasion, S&P has released the first rating of Euronext at single A, stable outlook, showing the confidence of this third party business model and strategy. Moving to slide six. Here are the main triggers of the quarter. First, revenue increased by EUR 20 million to EUR 146.7 million, driven by strong lead, strong market share, strong volumes in cash trading, the strong performance of market data and indices, and FastMatch, as well as contribution from Agility for Growth initiatives. Only listing revenue was slightly down due to a mixed environment, despite a strong IPO pipeline, but annual fees and corporate services remained strong.
Second, our cost efficiency improved our operating leverage. As a consequence, EBITDA increased by 25.1% to EUR 88.2 million, much faster than revenue. EBITDA margin reached 60.1% at the group level. The EBITDA margin performance remains very solid, even if there was a positive net EUR 1.5 million impact on costs this quarter. Third, on the core business and on the Agility for Growth perimeter, excluding clearing the May 2016 perimeter, the reported margin reached 63.5% this quarter, paving the way to reach our 61%-63% EBITDA margin target for 2019 for this perimeter. Agility for Growth initiatives generated EUR 0.5 million of EBITDA this quarter. Fourth, we recorded around EUR 16.2 million of cost savings, up by almost EUR 5 million compared to the end of December. As a consequence of all those good results and the lower impact of exceptional items, reported EPS increased by 30.5% to EUR 0.82 a share.
Slide seven describes the recent developments. Since last March, with Euronext Dublin, the group Euronext is now present in six core countries across Europe. As planned, Deirdre Somers has been appointed CEO of Euronext Dublin and is to join the managing board after regulatory and shareholder approval. She has responsibility for the group's Center of Excellence for Debt and Funds Listing and ETFs. The combined group is now a real global leader on many fields. Number one in debt listings with more than 37,000 listed bonds, number one in funds listings with 5,600 funds, a major player in ETFs with 1,050 listings. ETFs and debt are really core elements of the ambitions of our Agility for Growth strategy. We are convinced that Euronext Dublin will serve as an accelerator for projects like Finats and the new MTF for ETFs, called ETF Access.
From a P&L perspective, Euronext Dublin will be consolidated starting in Q2 2018, as the transaction was closed at the end of Q1. A few words, though, on Euronext Dublin standalone Q1 results. Revenue increased by around 15%, driven by good listing volumes in debt and funds and annual fees, despite volatility. Second, EBITDA margin was at 32%, down compared to last year, mainly due to the impact of significant one-off staff costs and acquisition costs related to the transaction with Euronext. Please also note that Q1 2017 margin was exceptionally high, marked by low IT and MiFID II costs. On the EBITDA margin of the Irish Stock Exchange, there is a base effect for Q1 2017. As a reminder, we plan to achieve EUR 6 million of cost synergies by 2021 on Euronext Dublin and progressively bridging the profitability gap with the rest of the Euronext Group.
Integration works are progressing very well according to plan, supported by the engaging energy of our new Irish colleagues. I now leave the floor to Giorgio Modica for the presentation of our Q1 financial results.
Thank you, Stéphane, and good morning, everyone. Let's start with slide nine. Euronext consolidated revenues increased EUR 20 million, or 15.9%, in the first quarter of 2018 to EUR 146.7 million, mainly thanks to stronger volumes in both cash and derivatives, the positive impact of our Agility for Growth initiative accounting in the quarter EUR 4.2 million, and the acquisition of FastMatch contributing EUR 5.2 million to the top line. The first quarter of 2018 saw a favorable trading environment with the return on volatility and a supportive macro environment in Europe. The only disappointment of an otherwise excellent quarter was listing revenues at EUR 18 million. This decrease of 4.3% versus the first quarter of 2017 was driven by a weaker performance on IPOs despite the pipeline, which remained very strong, and a decline in follow-on activity. Corporate services and annual fee partially mitigated those impacts and positively contributed to the result of the business.
Cash market share remained strong at 65.3%, and volume growth on both derivatives and cash contributed to the good performance of trading. In addition, the cash trading yield further strengthened at 0.52 basis points. I will come to that later on in the presentation. Our year-on-year top-line growth sees benefits from the base effect related to FastMatch acquisition in the third quarter of 2017, with spot FX trading generating EUR 5.2 million this quarter. Market data and indices performed extremely well, with revenues up 15.4% to EUR 29.7 million as a result of new market data agreements and the good performance of indices. In total, our Agility for Growth initiative generated EUR 4.2 million in revenues in the first quarter of 2018, thanks to corporate service, along with the first revenues from APA/ARM services.
The non-volume related revenues amounted to 42% of total group revenues, with the additional fixed corporate service revenues being offset by the consolidation of FastMatch trading revenues and the strong cash trading performance. The operating cost cover ratio reached 104% in the first quarter of 2018. Moving to the next slide. Let's discuss about listing. The mixed listing environment translated into a reduction of revenues of 4.3% to EUR 18 million. On the one hand, volatility pushed part of the IPO pipeline to next quarter, as last year, six new listings were completed with EUR 0.8 billion raised versus EUR 0.2 billion last year, including two large cap companies, NIBC and B&S Group. As a reminder, the first quarter of 2017 was marked by the Jumbo transaction, like the listing of FMC in our market. Euronext continues to attract tech SMEs from non-Euronext market.
The Q1 2018 saw the listing of a U.K.-based company, Acacia Pharma, and an Italian company, Media Lab, on Euronext Access. Follow-on revenues decreased 41.4% compared to a very high level in the first quarter of 2017. That quarter was marked by large transactions, such the one of EDF. On the other hand, annual fees increased 6.1% to EUR 8.3 million, and corporate service generated EUR 3.7 million of revenues, benefiting from the acquisition of iBabs and Company Webcast in the course of 2017. The revenue of corporate service this quarter is slightly down versus the Q4 2017, mainly due to some seasonality in the activity of Company Webcast. Commercial efforts continue to be strong, with more than 50 new clients signed this quarter. Moving to slide 11. Cash trading revenues increased nearly 20% to EUR 55.7 million on the back of strong revenue capture and market share in a volatile environment.
Euronext cash trading ADV increased nearly 22% to EUR 8.5 billion compared to the first quarter of 2017. We reached, on the 16th May 2018, nearly EUR 20 billion ADV, which is the second most active day since 2010. The average yield increased despite stronger volumes to 0.52 basis points. This is mainly thanks to new fee schemes reducing the sensitivity of the yield to volumes. The new market share remained pretty strong at 65.3%, up 3.9 points year-on-year, thanks to the success of those new fee schemes, such as the non-member Omega Pack and Best of Book, now used by all retail brokers. Euronext remains at the forefront of innovation. Euronext Fund Services, launched last May, onboarded 33 asset managers.
Euronext Block, our MTF block trading platform, connected the first wave of brokers, issued the technical document for Euronext ETF Access, our new ETF MTF to be launched at the end of the year. We are currently building the strong pipeline for Euronext Synapse, the MTF for corporate bonds, with many members already signed in Europe. Moving to the next slide. Let's look at derivatives. Revenues increased 4.5% to EUR 10.6 million. The yield is slightly down to 0.28 basis points on the back of a less favorable product mix. Derivative AADV is 14.9% up, mainly thanks to increased volatility and improved market position on the Dutch market, following the migration of option contract from the TOM platform in June 2017. The decrease in commodity volume was due to the poor condition in the physical market.
The new market participant program, designed to develop the non-physical market, now involves more than 450 trading firms, with more than four attracted by the new NMP program, which was launched in January this year. Finally, FastMatch generated EUR 5.2 million in revenues this quarter, driven by Spot FX ADV up 14.3% to $20.2 billion. Moving to the next slide. As I was commenting before, market data and indices performed well this quarter. It's up 15.4% to nearly EUR 30 million revenues due to the new market data agreement and the good performance of indices. The revenues from market solutions increased by 5.2% in the first quarter to nearly EUR 9 million. The business continues to benefit from new projects, and revenues are supported by the delivery of the first commercial releases of Optiq to international clients.
Clearing revenues increased 10.3% to EUR 13 million in the first quarter of 2018, reflecting stronger derivatives trading activity, as well as higher treasury income. Revenue from Interbolsa in Portugal increased by 9.3% to EUR 5.4 million in the first quarter of 2018, driven by an increase of public debt and equity under custody compared to the first quarter of 2017. Other post-trade revenues over EUR 0.1 million were recorded in the first quarter of 2018, accounting for the first revenues generated by the APA/ARM initiative, part of Agility for Growth. Moving to slide 14, the Euronext EBITDA 25.1% this quarter to EUR 88.2 million, with a margin of 60.1%, up 4.4 points versus the first quarter of 2017. The good operating leverage and cost efficiency are key to this performance. With the reduction of costs in the core business compensating the additional costs coming from the acquired companies.
Operating expenses excluding D&A grew only 4.3%, mainly due to the impact of new acquisitions, mainly iBabs and FastMatch, savings on the core business and net positive one-offs as mentioned by Stéphane of around EUR 1.5 million. Cumulated core gross savings amounted to EUR 16.2 million this quarter, up compared to the end of December. I remind you that the objective for 2019 is EUR 15 million of saving net of inflation, EUR 22 million gross of inflation. Agility for Growth generated an EBITDA of EUR 0.5 million this quarter. If we look at the margin of the core business and Agility for Growth, excluding clearing, which is the perimeter used for our 61%-63% EBITDA target for 2019. In this quarter, we reached a margin of 63.5%, up 6.8 points compared to the same period last year.
We will continue our cost-saving effort in the remaining part of the year with a progressive rundown of IT costs in the course of the second half of 2018. We recorded EUR 1.5 million of PPA for FastMatch and iBabs this quarter, where we'll start accounting for Euronext Dublin PPA in the second quarter of 2018. The net income increased 30.6% in the first quarter of 2018 to EUR 57.3 million, mainly driven by EBITDA growth and less exceptional cost and financing expenses than last year. Net financial expenses for the first quarter of 2017 were EUR 0.4 million. Compared to net financial expenses of EUR 1.1 million in the first quarter of 2018, that was marked by one-off items related to the previous term loan, as well as the potential acquisition of LCH SA.
Please note as well that we consolidate for the first time our 11.1% stake in LCH SA, and we record EUR 1.5 million in the equity investment. As a reminder, we received last year, at the same period, EUR 0.7 million as a dividend from LCH Group. Income tax for the first quarter of 2018 was EUR 25.2 million, representing an effective tax rate for the quarter of 30.4%, stable versus last year. Adjusted EPS is up 28.1% year-over-year at EUR 0.85 compared to EUR 0.65 in the first quarter of 2017. Let's move to slide 15. Since the release of Agility for Growth, Euronext has changed significantly. The perimeter of activity has changed, new targets have been set. Therefore we decided to provide you with a table and simplifying the tracking of Euronext performance. I believe that the table is sufficiently self-explanatory and useful.
As you remember and as we discussed, the 61%-63% EBITDA margin included the core business, Agility for Growth, and excluding clearing. In the first quarter of 2018, based on that definition, Euronext reached a 63.5% EBITDA margin. I would just like to add a few consideration on that margin. First, that EBITDA margin benefit from roughly EUR 3.5 million of positive one-off, on cost, without which, the margin would be closer to the lower end of the range. The second is that this result strengthen our confidence in our ability to deliver the target of profitability of 2019. On the other side, that level of profitability cannot be simplistically extrapolated and applied to the next quarter of 2018.
On the other hand, what we call new perimeter, which is basically FastMatch and Euronext Dublin, recorded a very low margin at 6.2%, impacted by EUR 2 million of one-off costs related to the Dublin acquisition. Without that, the profitability of FastMatch remains extremely solid at around 45%. Should you have any question on this table, please let me know during the Q&A session. Moving to slide 16, I would like to start with a few words on our inaugural bond. In April, Euronext significantly restructured its liabilities through the launch of its EUR 500 million inaugural bond. With this strategy, we have secured four objectives. First, we will reduce the P&L cost of funds versus the previous term loan. The new cost of funding is going to be EURIBOR plus around 40 basis points.
Second, we have extended the maturity of our liability to seven years or 2025, which is a prerequisite for any capital optimization strategy. Third, we have diversified our financing mix outside of the banking channel, which provides additional financing flexibility. Fourth, we secured resources for growth. Within this framework, we used the proceeds from the bond to refinance our existing debt rates to acquire FastMatch, iBabs, and Euronext Dublin, that total EUR 338 million at the end of 2018. Moving now to cash flow, the net operating cash flow to EBITDA ratio increased to 85% in the first quarter of 2018, up from 81% same quarter last year, mainly thanks to the good performance of EBITDA this quarter.
Looking at the bottom right of the slide, you can see that our liquidity position remains healthy at EUR 365.3 million, thanks to our strong cash generation and despite the acquisition of Euronext Dublin last March. Let me now leave the floor to Stéphane Boujnah.
Thank you, Giorgio. As you have understood, Q1 2018 was a very strong quarter, driven by strong volatility impact on volumes, strong revenue capture, and strong operating leverage. A few words on the initial trends we are seeing so far. First, clearly volatility has been softening those last weeks, and volumes have been less dynamic than the very strong first quarter we experienced on all our businesses. While one must noted that April 2017 was marked by high volatility related to political elections in some of our markets. There is clearly a base effect in the comparison between Q2 '17 and Q2 '18.
We will continue to be very active in our yield management to ensure the robustness of this business. The second listing pipeline remains strong, and we expect some IPOs at the end of Q2 and Q3 2018, depending obviously on volatility development and investor appetite. We should continue to benefit from the good dynamic of annual fees and development of corporate services, which represent an increasing part of our listings business. Our commercial efforts will continue on corporate services, but also on various initiatives towards potential issuers. Third, from a technological standpoint, after the migration to the market data gateway for cash and derivatives last year, we achieved another significant milestone with the migration of bond-regulated markets trading to Optiq Order Entry Gateway and matching engine.
This first step on the trading platform allows us to fix many usual bugs, and we continue our active preparation for the migration of other cash trading markets in June on the Optiq platform. Fourth, our AGM will take place in a few minutes, and we will propose the dividends of EUR 1.73 per share to be paid after approval on the 24th of May. Our next presentation will take place on the 3rd of August for the Q2 results. Anthony Attia, Giorgio Modica, and I are now available for your questions. Thank you.
Thank you. Ladies and gentlemen, if you do wish to ask a question, please press 01 on your telephone keypad. If you would like to cancel your question, you may do so by pressing 02 to cancel. There will now be a brief pause whilst questions are being registered. Our first question comes from the line of Martin Price from Credit Suisse. Please go ahead, Martin. Your line is open.
This question was just on the cost base. Apologies if I missed this, but I think you indicated there was a one-off cost benefit of EUR 3.5 million in the first quarter. Could you just provide a little bit more detail on that, please? Secondly, I was just wondering if you could provide some indication as to how much expense you incurred for MiFID II and the Optiq implementation costs in the first quarter. Just beginning to understand how the expense base could then change as those projects draw to a close. Thank you.
Okay. When it comes to the exceptional items, really, there are a number of those which are mainly related to release of provisions for many matters, including releases for bonus provision and all that through work. The amounts are small, but the number of item is significant, and they total up to around EUR 3.5 million. When it comes to the exact breakdown of Optiq costs, we actually do not provide that. However, what we usually indicate is looking at two lines, which are communication and professional services. Those are actually the two P&L lines where most of those costs are recorded. If you look in terms of trend, the evolution, you might have seen an increase of this cost throughout 2017 and 2016 as well. Those are the two lines that we hope are going to reduce throughout 2018.
The other data point that I believe is useful is to look at the target in terms of savings. We are at around EUR 16 million, which means that to achieve the target now, we will need pretty much to beat inflation, taking into consideration that the objective for 2019 is EUR 15 million net of inflation.
That's very helpful. Thanks Giorgio.
Thank you. Our next question comes from the line of Rosine van Welken from ING Bank. Please go ahead. Your line is open.
Let's start with the softer guidance for the second quarter volumes. Could you give us an update on the FastMatch, market-specific , and what developments do you see there compared to last year? Maybe as follow-up question on your statements of the IPO pipeline is building up, what is your view on the outlook for the rest of capital raising? In follow-on activities and bond raise revenues.
Sorry, go ahead.
If I may, a third one. The rest of yield was down to 0.28 basis points due to the product mix. Do you expect to reverse this if the volatility remains at current levels? Thanks.
Giorgio will answer your first and third question, Anthony Attia, who is our Group Head of Listing, will answer your specific questions about outlook for the rest of the year on listing.
Let me start with FastMatch. When it comes to growth, our ambition to growth are linked to a number of new initiatives that we will put into place. First, clearly, we are thinking to launch new products. Second is new data analytics to improve the use of the platform, and third potential is geographical expansion. Those are the three key areas that we would like to capitalize to further expand the franchise of FastMatch. When it comes to the question on the derivative yield, this is simply a mechanical effect of the fact that the contribution of volumes coming from TOM comes mainly on the auction products, which are margin-dilutive in terms of yield. Which means that if the mix remains similar to what it is today, you should not expect significant changes.
However, clearly, we are always looking ways to optimize our fee schemes, and clearly we will think of what is the best way to improve the performance of that business line.
Good morning. Anthony Attia speaking. On the equity listing question, as we said before, the pipeline for Q2 is good for our IPOs. Companies are engaged in the process. However, market environment prompts us to remain cautious. On the follow-on activity, we also expect some significant operations in Q2. Nevertheless, we will remain cautious in the general trend, as the capital increase operations are less important compared to last year. On the bond side, we are cautious on Euronext domestic countries. Nevertheless, we expect some dynamism coming from Dublin.
Thank you. Our next question comes from the line of Arnaud de Blan from AXA. Please go ahead. Your line is open.
Yeah. Good morning. I've got three questions, please. First off, now that the Dublin acquisition has closed, I was wondering if you were looking at potentially re-domiciling some of the profits to Ireland. Secondly, in terms of M&A, there are a number of cash equity businesses out there potentially for sale in Europe. Could you remind us what sort of framework you think about when considering these acquisitions? Do they have to be part of the Eurozone or the valuation, the key consideration, what is the key framework? Particularly, how do you think that in conjunction with other potential deals that could be down the line, like LCH SA in time, over time? Maybe if you could help us frame your state of mind on M&A in cash equities, that could be helpful.
Thirdly, Agility for Growth seems to have made some improvement over the quarter with costs coming down. Is the current level of profitability in Agility for Growth sustainable? Thank you.
Okay, Arnaud, thank you for your questions. I'll answer the first one and the second one, then Giorgio will answer the Agility for Growth margin question. The first question, we have no intention whatsoever to reallocate profits to other locations. We pay taxes where we make revenues and profits. There will be no tax impact at group level of the acquisition of the Irish Stock Exchange. Second, on M&A, the framework remains the same. We believe that organic growth is important, we believe that capturing some growth opportunities is critical for the development of the group, we will continue to explore two avenues. One is the diversification of our top line to enter into new asset classes or into non-volume related businesses, hence the acquisition of FastMatch, hence the dialogues we have on possible other targets.
Hence, to a certain extent, the acquisition of the Irish Stock Exchange, which has a significant listing business which is not volume-related. That will remain a significant part of our growth strategy, of our external growth strategy. The other avenue is to extend our credible model, if and when opportunities arise in Europe to consolidate the European infrastructure wealth, and to make it when two conditions are met. Number 1, when those independent exchanges are willing to consider consolidation. As of today, there is no such dialogue and there is no such situation because all the independent exchanges in Europe are very satisfied and happy with their current total independence. They don't see the need to consolidate.
That condition was different in the case of the Irish Stock Exchange, where the Irish Stock Exchange decided to start to explore alternative strategy following the reading they had on Brexit. The other condition is that, if and when those situations arise, we must make sure that it creates value for the shareholders of Euronext. All these exchanges are different, and some of those situations will create value, others would not create value. We are very happy with the acquisition of the Irish Stock Exchange
Both for strategic reasons, also because we believe that we can bring the current 32% EBITDA margin to the level of the core businesses of Euronext. Situations might be different for other exchanges. This is the framework of our external growth strategy. Giorgio, would you-
Yeah. I wanted to complement the answer of Stéphane on taxes. We have a mechanism whereby all the regulated exchanges within Euronext are equalized in terms of profitability. The profitability of each of the exchanges of Euronext have the same margin, and we have an agreement with tax authorities whereby we pay taxes pretty much on the basis of the business, which is revenue, so the tax rate of the group, Euronext, is the weighted average tax rate of the Euronext country, weighted by revenues, which is perfectly in line with what Stéphane said. When it comes to Agility for Growth, yes, we are very confident. We can also improve that level of profitability. Other thing I wanted to highlight is two for them.
The first one is that at the moment, we have no business in the portfolio of Euronext, which is not capable to generate a profitability in excess of 50%. The second one is that today, the profitability of corporate services is pretty much funding the development of other initiatives which are not yet generating revenues.
Can I just follow up on that? Excluding any further acquisitions in Agility for Growth, is it the case that any marginal revenue has no marginal cost attached?
On what segment? Agility for Growth?
Yes.
Agility for Growth, it really depends on the business. When it comes to corporate services, it's really business by business. There are companies that operate software or platforms like iBabs, in which it's fair to assume that the increase of revenues will not translate one-to-one to additional costs. There are others in which variable costs are more significant, like Company Webcast. What I would say is that the only non-platform business of Euronext is into the corporate service space. When we look at other initiatives like Synapse, for example, these are clearly all the benefit, in terms of operating leverage as the other business of Euronext.
Okay, thank you. Can I just have a last follow-up? Sorry. On market data, just a last one, a very quick one. Is the step-up in run rate revenues sustainable? It sounded like you've repriced some contracts, so that might be the case.
Let me be clear on that one. There are several elements you need to consider. The first one, you have seen in previous quarters that there was a contribution from audit findings. This quarter, this contribution is zero, practically, which means that this is not, on the one side, a fully loaded quarter. On the other side, with MiFID II, we have new products that allow further disaggregation of the market data we sell, and this concept embeds the possibility for clients to optimize their data consumption. Which means that over time, clients can take benefit from that opportunity and progressively reduce their spend. On the other side, what we have seen so far is that the proactiveness of clients to manage this new product has been limited, and therefore, you have seen the result in our P&L. Which means that longer term, there might be some optimization.
Far, the revenues continue to be strong.
Thank you.
Thank you. Our next question comes from the line of Anil Sharma from Morgan Stanley. Please go ahead, your line is open.
Oh, hey, guys. I just had actually one question. On slide 15, the Agility for Growth initiatives. I mean, the Q1 number, I appreciate it is obviously dangerous to extrapolate, but if I time that and annualize that, you're running quite a bit below the 2019 target. In terms of, obviously it takes time to do deals, they don't just happen quickly, I'm just trying to think how you're going to sort of bridge that gap in the next sort of 18 months.
Sorry, the gap in terms of what?
You've got a EUR 55 million target of revenues versus the EUR 4.2 million you've done in Q1. I'm just thinking, take the EUR 4.2 and annualize it, let's say you're at EUR 17 million-EUR 18 million. There's a big gap versus the EUR 55 million. I appreciate you can't do M&A necessarily very quickly because it takes time to source deals, to close deals. I'm just trying to understand how you're going to bridge that gap to EUR 55 million within the next 18 months.
Yeah. It is twofold. On the one side, the way you should look at that is that the corporate service, which is already delivering around EUR 13 million-EUR 15 million on a run rate basis is increasing at a very fast rate, which means that we are comfortable that part of the business is going to deliver in line or close to the original target set at May 2016. On the other side, we are working and we are pretty much ready on two platforms. The key big ones are actually three. One is the new MTF for ETF. The second one is Synapse, and the third one is the partnership with Morningstar. Those are a platform that needs to collect liquidity. We believe that we are close to that point, and we believe that each of those initiatives will be able to contribute for the gap.
It is less linear than the normal corporate service business. What we believe is those platforms have the capability to bridge that gap.
Okay, got it. The second question was just around now that the ISE acquisition is closed, is there any potential to release some capital as you have rebranded it, obviously, Dublin, you have moved into the federal structure. Is there any sort of balance sheet optimization that can be done?
Clearly, balance sheet optimization is one of our priorities. It is really too early to tell. We will start a number of discussions with regulators, we will see over time what are the possibility to further improve the capital structure.
Okay, thank you.
Thank you. Our next question comes from the line of Ron Heijdenrijk from ABN AMRO. Please go ahead. Your line is open.
Good morning, gentlemen. I have a few questions, starting off with, could you briefly talk through your market share developments in April and May? What have you seen there, and what are the main drivers? Secondly, your cash yield, you set yet some new fee schemes reducing the yield sensitivity to higher volumes. Would that therefore mean that the 0.52 basis points is more or less sustainable going forward? And finally, you were talking about the ISE PPA starting from the second quarter onwards. Could you guide us on the quarterly run rate there? Thank you.
Let me start. The first question was related to the evolution of the market share. The evolution of the market share is linked to further optimization in our fee structure. This is mainly due to the new program that we introduced at the end of last year, the non-member Pack Omega and the Best of Book, which proved to be extremely successful. When it comes to the impact on fees, it is not really that a part of these new schemes that I just mentioned, we did not change any other major component. The fact is that we have, to a certain extent, moved existing clients for a more dilutive fee structure to a less dilutive fee structure and less sensitive to volumes.
Another way to explain it is that we have fewer volumes running today through our SLP scheme and more volumes coming these new liquidity pools. Sorry, your final question was PPA. We're working with auditors, so it's really too soon to tell. This is an analysis that we will finalize within the second quarter, so I don't have the element to guide you.
Thank you very much.
Thank you. Our next question comes from the line of Syed Akbar from Kempen. Please go ahead. Your line is open.
Hi, good morning. Just one question on the volumes. You saw significant increase in your market share of 65%. How sustainable do you see this going forward, especially considering that there's others, like systematic internalizers and other parties that are going to be entering the market? Do you see any pressures on this part, or do you not see it in the near time future? Just that. Thank you very much.
Yeah. Clearly, there are a lot of moving parts, and what you mentioned is right, but what we see today is that the systematic internalizer impact is not having a strong impact on the lit market, but rather on the OTC part of it. We see our 65% market share as sustainable. Clearly, we will need to see what are the developments, but that level does not seem to us as unsustainable at the moment.
Okay. If I may, just a follow-up on the ETF side. Other parties have reported that the volumes on MTFs have gone up versus the lit exchanges. Have you seen something like this also happening on yours?
No, we didn't.
Okay. All right. Thank you.
Thank you. Ladies and gentlemen, if you do wish to ask a question, please press 01 on your telephone keypad now. Our next question comes from the line of Kyle Voigt from KBW. Please go ahead, Kyle, your line is open.
Hi, good morning. Really as a follow-up for Giorgio on the revenue capture side, I think there's a question maybe a few participants ago just on the sustainability of the revenue capture from here at the 52 basis points level. Maybe I missed the response, but I understand that there was dynamics in the quarter that just in terms of the pricing changes that you're going to put through. As we're looking out and the sustainability, I guess, of the 52 basis points for the rest of the year, if you could just provide some more color as to what you're seeing into the second quarter so far and if that is sustainable going forward. Just looking back historically, there haven't been many periods on a year-over-year basis where we've seen this much volume growth, then we haven't seen compression in the yield.
I guess going forward, should we not expect as much compression in the yield if we do model volume growth in our models? Thank you.
Yeah. Let me try to be more specific. Clearly, there are different price schemes and a different pricing. What has changed is that we introduced the Omega Pack, and we introduced the Best of Book. What has actually changed is that existing clients have moved within the price schemes that Euronext is offering. That move of clients, those moves have been towards schemes which are more profitable for us. Therefore, we believe that those are, at the moment, they remain strong. We don't have elements to predict a significant drop of the yield component. Yes, going forward, if clients remains in using the same tariff plans they are using today, you should predict in your model a reduced relationship between volumes and yield, which still exists but is less direct than it was in the previous quarters.
All right. Very clear. Thank you.
Thank you. As there are no further questions, I'll hand back the conference to our speakers.
Thank you very much, and have a good day.
This now concludes our conference call. Thank you all for dialing in. You may now disconnect your lines.