Hello, and welcome to the Euronext Q1 2025 results call. Please note this conference is being recorded, and for the duration of the call, your line should be on listen only. However, you will have the opportunity to ask questions at the end of the call. This can be done by pressing star one on your telephone keypad to register your question. If you require assistance at any point, please press star zero, and you will be connected to an operator. I will now hand you over to your host, Stéphane Boujnah, CEO and Chairman of the Managing Board, to begin today's conference. Please go ahead, sir.
Good morning, everybody, and thank you for joining us this morning for the Euronext first quarter 2025 results conference call and webcast. I am Stéphane Boujnah, CEO and Chairman of the Managing Board of Euronext, and I will start with the highlights of this first quarter of the year. Giorgio Modica, the Euronext CFO, will then develop the main business and financial highlights of the first quarter of 2025. As an introduction, I would like to highlight two key points. First, we continue to deliver double-digit top-line growth in Q1 2025, and this is the fourth quarter in a row of double-digit growth of the top line. Q1 2025 revenue grew by +14.1% compared to Q1 2024 to EUR 458.5 million.
This remarkable performance reflects strong growth in non-volume-related activities, and it also reflects exceptional volatility across trading and clearing activities, especially in cash equity, in fixed income, in forex, in power, electricity, and in commodities. Second, we have accomplished very significant steps with the delivery of our 2027 strategic priorities. In the first quarter of 2025, we have announced a series of measures to support the integration and the competitiveness of European capital markets. First, we have announced the consolidation of settlement in Euronext Securities for equities traded in Amsterdam, Paris, and Brussels from September 2026. This move represents a significant optimization of the European post-trade landscape, with Euronext Securities as the CSD of choice for Europe now. Also, we have announced last month that Euronext is committed to facilitate access to European capital markets with the launch of a simplified English-language European Commons Prospectus.
We are creating a sort of European S1 to facilitate the integration of capital markets when it comes to listing. Last week, we have announced a full suite of initiatives to support investments in companies that contribute to European strategic autonomy. This includes a series of new indices to capture exposure to critical investment themes in energy, in security, and in geostrategy, and also a set of tailored private market equity type of instruments and initiatives and debt financing solutions for aerospace and defense projects. Earlier this week, we have successfully completed the acquisition of Admincontrol. This acquisition, that completed yesterday, in fact, this acquisition doubles the size of our governance solutions and further expands our footprint in the Nordics with a high-growth business. We are looking forward to boosting the development of Admincontrol across our unique corporate solutions network in Europe.
Since the beginning of the year, we demonstrated our capacity to innovate ahead of the curve, to lead the way to a more innovative and a more competitive European capital market. Let me now give you a quick overview in slightly more level of details of Q1 2025 highlights on slide four. As a reminder, this is the first quarter in which we are using our new and simplified reporting framework. It will help you to clearly distinguish our non-volume-related revenues and to track the progress of our strategic priorities. Our non-volume-related revenues and income streams comprise three distinct segments. First, security services, which includes custody and settlement, as well as non-volume-related clearing revenue. Second, capital markets and data solutions, which encompasses primary markets, data services, and the solutions business. And net treasury income, which reflects the treasury income generated through our CCP initiatives at Euronext Clearing.
Our volume-related revenue streams are divided into two segments: fixed income, currency, and commodities markets, which include the trading and clearing revenue from fixed income, commodities, and foreign exchange; equity markets, which include revenue from trading and clearing of cash equity and financial derivatives. Giorgio will provide you with the details of each of the new lines of this new reporting framework in a few moments. First, I would like to take a few minutes to look at the big picture. The big picture is that Euronext delivered double-digit revenue growth in Q1 2025, as I said earlier, for the fourth quarter in a row. In Q1 2025, revenue grew by +14.1% year-on-year, up to EUR 458.5 million. Let's start with non-volume-related revenue because, as mentioned in previous conversations, we are implementing a double diversification strategy.
In the context of this double diversification strategy, we are growing our non-volume-related revenue. Non-volume-related revenue amounted to 57% of total revenue and income and posted a strong performance overall. Security services reported solid growth. Custody and settlement revenue grew by +11.6% year-on-year, to EUR 75.8 million, driven by higher assets under custody, driven by dynamic settlement activity, and also strong growth of value-added services. Capital markets and data solutions were also a strong contributor to our record performance in 2025. Advanced data solutions revenue grew by +8.1% to EUR 65.1 million, driven by growing demand for diversified data sets and also dynamic retail usage. Data solutions were also supported by the diversification of our offering with the acquisition of GRSS, a leading service provider to benchmark administrators. Corporate and investor solutions and technology services grew by +9.8% to EUR 45.9 million.
The strong growth in this segment is driven by the commercial expansion of our SaaS business, a growing client base in our colocation services, and also a double-digit growth in investor solutions supported by the acquisition of Substantive Research. Let's move now to our volume-related business. When I referred earlier to double diversification, I want to underline also the very wide and powerful diversification of the various segments traded within the Euronext volume-related business. Clearly, this volume-related business was fueled by exceptional volatility, especially in cash equity, in fixed income, in forex, and in power and agricultural commodities trading and clearing. Fixed markets revenue was up +25.1% compared to Q1 2024 at EUR 90.7 million. Equity markets were up +18% compared to Q1 2024 at EUR 108.4 million.
When it comes to cost, our underlying expenses, excluding DNA, were at EUR 164.5 million, up +9.1% compared to Q1 2024. This increase on our cost base compared to Q1 2024 reflects first growth on investment and the impact of three acquisitions performed in 2024. This growth of our cost base is totally in line with the ramp-up of growth investments we have announced as part of the underlying cost guidance of EUR 670 million for the full 2025 year. In parallel, we continue to deploy a very strong cost discipline across all our operations. Consequently, our Q1 2025 Adjusted EBITDA grew by +17% compared to Q1 2024 to EUR 294.1 million. Euronext Adjusted EBITDA margin increased by +1.6 percentage points to 64.1%, reflecting the strong top-line growth of the group. We reported net financing expenses of EUR 1.5 million in Q1 2025, impacted mainly by short-term price movement.
This compares to a net financing income of EUR 4.7 million in Q1 2024. Minority interests were also increased compared to last year, driven by the strong performance of MTS and NORPOL, where we have minority partners. Consequently, adjusted net income was at EUR 183.5 million, up +11.8%. We reached recorded adjusted earnings per share at EUR 1.8 per share. Q1 2025 reported net income was EUR 164.8 million, up +17.9%. Reported EPS grew by +20% compared to Q1 2024 to EUR 1.62 per share. This also reflects our lower share count due to the share repurchase program performed in 2023 and 2024. As you know, on 10 March 2025, we completed the EUR 300 million share repurchase program announced on the Investor Day at the launch of our strategic plan in November 2024.
Net debt to last 12 months EBITDA was at 1.4 times at the end of March 2025, which is totally in line with our target leverage ratio between 1 times and 2 times announced as part of Innovate for Growth 2027. Now, let me give the floor to Giorgio for the business and financial review of Q1 2025.
Thank you, Stéphane, and good morning, everyone. Let's now have a look at the strong performance of this first quarter of 2025. I'm now on slide six. As you can see, the slides show the new reporting format. We are convinced that this will sharpen and simplify our communication and better represent our business. Non-volume-related revenue and income comprise security service, capital markets, and data solutions, and net treasury income. The volume-related revenue consists of the fixed markets and equity markets. I will deep dive into the different segments on the following slides. On our investor relation website, you can find a reconciliation table detailing line by line all changes between the old and the new reporting format. This quarter, we reported a remarkable growth driven by exceptional market conditions and the progression of our strategic plan initiatives in our non-volume-related businesses.
Total revenue and income is up 14.1% compared to last year, reaching EUR 458.5 million, of which 57% is non-volume-related, covering 158% of our underlying operating expenses, excluding DNA. Let me dive into the drivers of this strong performance, starting with non-volume-related revenue and income on slide seven. Let's begin with the asset-driven revenue business. Security service revenue was at EUR 83.4 million, making a 6.8% increase. This segment comprises custody and settlement, as well as other post-trade revenue, accounting for all non-volume-related clearing revenue. Custody and settlement revenue reached EUR 75.8 million, an 11.6% increase compared to the first quarter of 2024. This growth was driven by record asset under custody above EUR 1.71 trillion, alongside dynamic settlement distraction driven by market volatility. Value-added service continued to grow organically, double-digit, and are further supported by the acquisition of Occupy.
Other post-trade revenue declined 25.3% to EUR 7.6 million, primarily due to the reclassification of treasury income related to Euronext derivative flows from revenues to net treasury income in September 2024, following the expansion of Euronext clearing activities to derivatives. Net treasury income was up 55.8% compared to the first quarter of 2024, and this represents the flip side of the reduction we just discussed in other post-trade revenues. As discussed, NTI benefits from the expansion of Euronext clearing and the internalization of treasury income from LCH SA following the derivative clearing migration in September 2024. It also reflects higher cash collateral posted to the CCP due to the elevated market volatility. Turning to capital markets and data solutions on slide eight, revenue reached EUR 157.3 million, with a 6.6% increase compared to the first quarter of 2024.
Primary market generated EUR 6.3 million of revenues, up 1.8% compared to the same quarter last year. This is an illustration of the resilience of our listing business despite extreme market volatility. Advanced data solution revenue grew to EUR 65.1 million, up 8.1%, driven by the acquisition of GRSS, the strong demand from retail, and growing monetization of our diversified data sets. Corporate and investor solution and technology services reported EUR 45.9 million in revenues for the first quarter of 2025. This reflects continued commercial expansion of the governance SaaS offering and the acquisition of Substantive Research, which supports investor solution revenue. It is also supported by the growing client base of our colocation and microwave connectivity services.
Following the completion of the acquisition of Admincontrol on 13 May 2025, Admincontrol revenue will be reported within the Euronext Corporate and Investor Solution and Technology Services revenue starting from the second quarter of 2025. Moving to our volume-related activity now, I am now on slide nine. Revenue from our fixed income market reached EUR 90.6 million, making a 25.1% increase compared to the first quarter of 2024. Fixed income trading and clearing revenue grew by an impressive 32.4% to EUR 51.8 million, driven by the continued favorable market conditions. MTS Cash average daily volume was up 64% year-on-year, at EUR 56.8 billion. MTS Repo term-adjusted average daily trading volume reached EUR 508.9 billion, up 3%. Commodity trading and clearing revenue increased 12.8% to EUR 29.6 million in the first quarter of 2025, supported by record intraday volumes at NORPOL and dynamic agricultural trading and clearing volumes.
Lastly, FX trading revenue reached a new record of EUR 9.2 million this quarter, up 30.4% compared to the first quarter of 2024. This reflects favorable market volatility and a positive volume mix effect with more anonymous trading. Continuing with our volume-related revenue on slide 10, equity markets revenue saw an 18% increase compared to the first quarter of 2024 and reached EUR 108.4 million. Cash equity trading and clearing revenue grew by 22.5%, reaching EUR 94 million. This growth reflects a 31.8% increase in average daily volumes, driven by market volatility and an average revenue capture of 0.5 basis points due to the increase in volume, stronger intraday volatility, and larger average order size. This reflects the usual inverse correlation between the level of volumes and the average fee.
Financial derivative trading and clearing revenue was EUR 14.4 million in the first quarter of 2025, a 4.8% decline compared to the same quarter last year. This decrease is mostly linked to the decrease of the average clearing fee, as following the clearing migration, certain clearing fees are now reported in the line other post-trade revenues, and as such, are not fully comparable with the first quarter of 2024. Moving on with the EBITDA bridge, I'm now on slide 12. Euronext reported EBITDA for the quarter was up 21.3% to EUR 294.2 million, mainly thanks to EUR 51.9 million of additional revenues at constant perimeter. The reduction of our non-underlying cost of EUR 8.8 million linked to the termination of the derivative clearing arrangement with LCH SA was offset by EUR 10.8 million of additional cost at constant perimeter and EUR 3.2 million of additional cost from change of scope.
Euronext Adjusted EBITDA for the quarter was up 17% to EUR 294.1 million, with an adjusted margin of 64.1% this quarter, up 1.6 percentage points compared to the first quarter of 2024. The underlying operating expenses, excluding depreciation and amortization, increased 9.1% compared to the first quarter of 2024, reflecting the investment in our strategic growth project and the impact of the acquisition performed in 2024 for EUR 3.2 million, as already discussed. On a like-for-like basis, underlying operating expenses, excluding D&A, increased 7.2%. Moving to net income on slide 13, adjusted net income in the first quarter of 2025 reached EUR 183.5 million, which represents an increase of 11.8% compared to the first quarter of 2024. This reflects mainly the strong EBITDA growth in the first quarter of 2025. Depreciation and amortization accounted for EUR 48.3 million, + 9.8% compared to the first quarter of 2024.
PPA related to the acquired business accounted this quarter EUR 20.4 million. Euronext reported a net financing expense of EUR 1.5 million this quarter compared to an income of EUR 4.7 million in the first quarter of 2024. This variation mainly reflects short-term FX movement and the decreasing interest rates. In the next few quarters, we expect net financing expenses to be around EUR 6 million, excluding any impact from FX and capital gain or losses on financial instruments. As of today, our cash position was impacted by EUR 500 million bond redemption and the acquisition for EUR 400 million of Admincontrol. We will be impacted in the next weeks and months by EUR 290 million dividend payment and the acquisition of the power derivative business from Nasdaq. In addition, going forward, raising debt for Euronext will have a cost which is higher than the cost of the debt today.
Depending on the maturity and on the instrument, the cost is going to be between 3-4%. The return on our cash that, as you know, is invested in a very short term, max three months maturity, will be impacted by the fluctuation of the interest rate, and today is yielding around 2%. Income tax for the first quarter of 2024 was EUR 67.8 million. This translated into an effective tax rate of 27.7% for the quarter compared to 26.9% in the first quarter of 2024. I want to highlight that the higher tax rate this quarter is mostly related to prior year adjustments. In the full year 2025, we expect the tax rate to remain at around 27%. The share of non-controlling interest increased to EUR 11.9 million, and as the fund said, this reflects the strong performance of MTS and NORPOL.
As a result, the reported net income, share of parent company, shareholder increased by 17.9% compared to the first quarter of 2024 and reached EUR 164.8 million. Adjusted EPS was up 13.9% this quarter at EUR 1.8 per share compared to EUR 1.58 per share in the first quarter of 2024. This increase reflects higher profits and lower number of outstanding shares over the first quarter of 2025 compared to the same quarter last year. Reported EPS increased by an impressive 20% year-on-year to EUR 1.62 per share. To conclude, I'm now on slide 14 for the cash flow generation and leverage. In the first quarter, 2025, Euronext reported a net cash flow from operating activities of EUR 190.6 million compared to EUR 184.6 million in the first quarter of 2024.
This reflects higher cash flow from operating activity offset by negative changes in working capital from short-term movement in outstanding power sale customer and supplier invoices related to NORPOL CCP activity and higher income tax. Excluding the impact on working capital from Euronext Clearing and NORPOL CCP activities, net cash flow from operating activities accounted for 88.1% of EBITDA in the first quarter of 2025. Net debt to EBITDA ratio was at 1.4 times at the end of the quarter. On 22 April 2025, Euronext successfully redeemed the EUR 500 million bond issued in connection with the acquisition of Euronext Dublin in April 2018. As a reminder, subject to the approval today of the dividend, we will pay a total dividend of EUR 292.8 million or EUR 2.9 per share. This represents an increase of 16.9% compared to the dividend per share of EUR 2.48 paid in 2024. This concludes my presentation.
Now I give back the floor to Stéphane.
Thank you, Giorgio. As you've seen, we have started 2025 on a totally exceptionally strong note. We have seen very strong volatility in the first quarter of the year, and April 2025 was yet another record month for volume-related activities. This puts us in an ideal position for the delivery of our ambitious Innovate for Growth 2027 strategic plan. Since the beginning of the year, you've seen that we have demonstrated that we are able to innovate at an unprecedented speed to capture evolving market trends. Thank you for your attention. We are now ready to take your questions together with Giorgio and also with Anthony Attia, the Global Head of Derivatives and Post-Trade, and Nicola Rivard, the Global Head of Cash Equity and Data Services.
Thank you, sir.
If you would like to ask a question, please press star one on your telephone keypad. To withdraw your question, please press star two. We'll take our first questions from Benjamin Goy from Deutsche Bank. Your line is open. Please go ahead.
Yes, hi, good morning. Two questions, please. First, on the savings and investment union, there seems to be more progress. Maybe, Stéphane, you can share a bit of your view, what are you most excited about and near-term catalysts that should support Euronext's business, and also maybe why this time is different because the capital markets union has been around for quite some time. The second question is, Giorgio, you mentioned net financing income to EUR 6 million. Maybe you can just clarify whether that is for the rest of the year, whether it's an income or an expense, or whether it's per quarter. Thank you.
Under saving and investment union, we are definitely proceeding at a different pace. The commission in charge, Maria Luísa Albuquerque, is the former minister of finance of Portugal during the great financial crisis. She has an ambitious roadmap that she wants to roll out. Clearly, the commitment is unprecedented. The willingness to proceed on some critical issues like delivering a single supervision for capital markets is there. It is very likely that we will proceed towards a single supervision. Clearly, there is a willingness among the member states to capture the catalyst of the saving and investment union process to accelerate transformation of local incentives in order to drive and to channel more household savings towards long-term equity investment. The debate on pension funds is everywhere in Europe.
It's probably extremely advanced in Germany with the agreement that is reflected by the coalition contract on this very ambitious project on this front. It is also with discussions in France and in other countries about how to channel massive household savings in Europe. As you know, we have an average saving between 13% and 18% of disposable income of available income of households in saving. This is there. It will happen because there is a commitment, because there are local discussions at the national level on driving more flows to long-term investment, and that will contribute to a totally new reset reboot of equity markets in Europe in the coming years.
Yes. With respect to the leverage, a few clarifications. At the end of last quarter, leverage ratio was at 1.4 times.
Now, following the acquisition of Admincontrol and the payment of the dividend, these numbers should go closer to the upper side of our leverage band between 0% and 2%. We should be around 1.8%, 1.9%, and then progressively that should quickly reduce in the next quarter as we will pile up cash from our operating activities. As a result of that, what we would have is higher financing costs. The number I mentioned of around EUR 6 million is what we expect to have on average in the next couple of quarters. This does not include, again, any positive or negative FX impact, which actually last quarter made the whole difference.
The reduction from the EUR 4.7 million positive to minus EUR 1.5 million, there is a portion of that which is linked to changes of interest, but mostly is linked to some positive effect that we had in the first quarter of 2024 that we did not have anymore this quarter. The EUR 6 million can, in actual terms, change depending on FX movement, but we cannot predict that element. To answer your question again, the increase is linked to increase of leverage, and the EUR 6 million, it is a ballpark number that should be valid for the next couple of quarters, assuming that the level of interest rate will not change massively.
Understood. Thank you.
Thank you. We will take our next questions from Mike Werner from UBS. Your line is open. Please go ahead.
Thank you, guys, for the presentation.
We saw another really good quarter from Custody and Settlement, and you made the announcement this quarter that you're going to bring settlement in-house in 2026, in September, I believe. Can you just provide a little bit of color about how confident you're going to be able to bring in that settlement activity within those three markets? I believe it's France, Brussels, and Amsterdam. Whether you see any opportunities outside of your core exchange markets, again, as part of this consolidation of the European infrastructure. Thank you.
We are focused on delivering these movements of integration, consolidation of settlements and custody from Paris, Brussels, and Amsterdam because these are two of the top markets in terms of equities and in terms of issuers that are listed on Euronext, traded on Euronext, cleared on Euronext, and will benefit from an integrated and consolidated value chain for settlement and custody.
We are deploying the program. It's a very large project. The go-live is for September 26. It is being deployed with all the relevant deployments, all the relevant developments to scale up what needs to be scaled up and to build a consistent, cohesive program with the issuers, with the relevant intermediaries to make it happen in a smooth way, but in a very massive way. This is work in progress. We've just announced the deployment, but we have a very strong and intimate level of dialogue with all the relevant parties to make it happen by September 26.
Thank you.
Thank you. We will take our next questions from Enrico Bolzoni from JP Morgan. Your line is open. Please go ahead.
Yes. Thank you. Good morning. Thanks for taking my questions.
Going back for one second on the migration of settlement and the opportunity there, I was wondering whether you could help us quantify the revenue opportunity. If I look at the number of trades across these three venues that you want to migrate, I think they represent actually more than 50% of the trades. I'm talking about equity for now, but at the group level. Would it be fair for us to assume that specific to the settlement line, we could see in a blue sky scenario doubling of those revenues when the migration is completed? Alongside that, I guess there is an opportunity also for custody. Will the migration increase the chances of also attracting more custody? Do you have any projection there and what sort of impact on revenue we can expect? That's my first question.
The second question, I wanted to ask you again about the saving and investment union. I appreciate that all the measures that can incentivize retail participation clearly are going to be positive. There is also a part of the proposal that has to do with the removal of friction between exchanges, between post-trade solutions within the European Union. You clearly are a big entity and you can do a lot within the group, but can you elaborate a bit on what sort of proposal you would like to see that can actually remove friction, not just within clearly Euronext as a group, but also between Euronext and, for example, other market infrastructure players in Europe? Thank you.
Let me answer your two questions. We are not providing any specific guidance for this segment.
The CSD European Expansion Program is a significant contributor to the objectives we have set at the Investor Day in November 2024. I remind everyone that our target or guidance is to deliver above 5% CAGR growth by 2027 in terms of top line and above 5% CAGR growth in terms of EBITDA. We have a large number of projects that are going to contribute to that ambition. The CSD expansion is one of them. We do not provide specific guidance. Second, it is a work in progress. It is a progress where we have a clear deadline, which is September 2026.
It's a progress, and that's the link between this question and the other question that is being deployed in a context of a convergence program to make the CSD platforms across Europe that are operated by Euronext closer and closer with the same mindset as the one that did drive the consolidation of trading platforms. It will never be as integrated as a single matching engine, but it will be much more integrated than any other set of CSD platforms in Europe. We are positioning Euronext as the most consolidating, integrating, converging platform for settlement and custody. As you are rightly pointing out, we believe that the cutting-edge platform we are building for settlement and custody can be a home sweet home for custody of other assets from other origins.
When it comes to the way we believe consolidation should go forward, we are doing consolidation in a bottom-up way through consolidation of platforms. We believe that this is the most straightforward way to make things happen for real. We believe that there are all sorts of existing tools that make possible for the clients the selection of whatever they want in terms of clearing and in terms of settlement and custody platforms. We believe that our duty is to develop an offering which, from a technological point of view, from a business model point of view, from a client service point of view, is more compelling and attractive than any other platforms that are available to the market.
That is what we are working hard on, to focus on making European integrated platforms for settlement and custody much, much more competitive and innovative than they may have been in the past when they were just local, pure, quasi-back office platforms of exchanges. There is a European integrated ambition behind our convergence project that is all about providing clients with consolidated options. I do not know whether, Anthony, you want to add anything on that front.
Thank you, Stéphane. Very quickly in complement, the removing frictions in Europe will be obtained through different approaches depending on the asset class. If you look at what we are doing on Euronext Securities side by offering true European services on our CSDs and by leveraging heavily on Target II securities, we, in effect, contribute to the lowering of the overall portfolio cost by removing frictions.
On other asset classes such as listed derivatives, removing friction depends on our ability to compete from end to end, from trading and clearing in a healthy way. Integrating trading, clearing, and providing European offering creates healthy competition, reduces costs, and contributes to the building of the capital market union in Europe. Thank you.
Thank you. We will take our next questions from Hubert Lam from Bank of America. Please go ahead.
Hi. Good morning. I've got three questions. Firstly, on the cost guidance, I think, Giorgio, you were confirming the EUR 670 million for this year. I just want to know how confident you are to achieve this just given that you have the additional costs coming from the Admincontrol deal as well as strong revenues. Confidence around EUR 670 million for this year.
Second question, again, sorry, just wanted to ask again on the finance income or cost line. Just wanted to confirm, is it EUR 6 million or EUR 6 million of expenses per quarter you're expecting over the next three quarters? Also, what is your outlook for this line into next year? Lastly, just wondering, Stéphane, your thoughts around M&A opportunities now, just given possibly more pressure from private equity firms that need to exit, which may raise some opportunities for acquisitions. Also, now with your higher share price, does it mean there's more potential to do deals? Thank you.
Yeah. First question, the EUR 670 million is clearly a constant perimeter. That does not include the new acquisition. It includes the one which we had performed at the time in which we did set the target of EUR 670 million. For example, Admincontrol is not part of that.
With respect to your second question, just to be clear, what I make reference to is the sum of the following elements: the interest income from investing our cash minus the cost of our funding, plus or minus the impact of FX and capital gain and losses on financial instruments. Assuming that the latter two, FX and gain and losses, are zero, we expect EUR 6 million as a net impact of the cash that we will get from investing our cash and the cost of our financing. The EUR 6 million is valid for the next couple of quarters, and we will keep updating because, as you can understand, there are a number of moving factors, including leverage investment and many other elements. Until the end of the year, we expect around EUR 12 million.
You could break it down in six and six, more or less. Once we will have more updates coming into next year, we will provide you with further details.
On the M&A side, to be clear, M&A is a tool if it's not an objective. The objectives are, first, accelerate growth; second, secure profitability; and third, diversify revenue streams to secure resilience of our top line. Whenever we can achieve accelerated growth, increased profitability, and diversification through organic growth, we do it. Whenever we can achieve accelerated growth, secured profitability, diversification of revenue streams to secure the resilience of the group through M&A, we do it as long as M&A opportunities can deliver return on capital employed above the WACC of the company between year three and five post-synergies.
With a very strong cost discipline, a very strong capital deployment discipline, as we have evidenced it over the past eight years or so. Yes, the fact that more key players might be eager or more eager than in the past to dispose of some assets is changing the environment. It's not happening as massively as many people are commenting on it because many larger key players have plenty of time and resources to hold for a number of years until the cycle recovers. It's true that, to a certain extent, what you are saying is reflected in the attitude of a certain number of PEs. Let's see.
I can tell you that we are more welcome to, and we are more invited to contribute in processes by sell-side advisors in the past few months than we have been in the past few years, and that we are perceived as being more legitimate owners or more legitimate buyers of assets than in an environment where the cost of debt was low and the PEs were rich and valuations were rocketing. We are in an environment where interest rates are higher than they have been in the past, and we are in an environment where PEs are more struggling, in average, to raise money. We are in an environment where the length, the maturity of many funds is getting close to a moment where returning some form of capital gains to investors becomes a priority. That's true that the environment has changed.
Our approach remains extremely disciplined, and we are monitoring all the situations around. You should not expect that because of some buzz around the private equity being "under pressure to sell," we would become all of a sudden an overexcited buyer. We remain as disciplined today as we have been in the past.
Thank you.
Thank you. We are now taking our next questions from Bruce Hamilton from Morgan Stanley. Please go ahead.
Hi. Morning, guys, and thank you for taking my questions. Maybe just to start, you've spoken a bit about the CSD plans, which sound pretty encouraging. Could I just get an update on where you are in terms of your kind of fixed income plans, in terms of plans to sort of internationalize there, in terms of perhaps broadening out Bond Vision, just how excited we should be about that part of the business?
And then, sorry, to lay the point on the net financing income or cost, that 12 million over the remainder of the year, is that an income number, or is that a negative number, just to be completely clear? Thank you.
Because I deliver, as always, a long reply to the M&A question, we forgot to cover the question on the—oh, you did cover it. Okay. I'll give the floor to Giorgio to clarify the financing cost, and maybe you can comment on the fixed income ambition.
Yes. Sure. Let me start. To clarify, 6 is a negative number.
As leverage will increase and as the average cost of debt will increase, and as we will invest more of our cash into business, having acquired Admincontrol, there are going to be two effects: the net financing cost is going to increase, and EUR 6 million is a cost. Really, the flip side of that is that we will have acquired a business that will generate revenues, EBITDA, and margin, etc. This is with respect to your first question. With respect to your second question, the developments in fixed income are proceeding well. The volumes of Bond Vision that you see as a part of the overall volumes are increasing, and the activity on the platform is getting nice traction. It is fair to say that, given the overall very substantial growth of volume on the MTF platform, these more strategic developments are less visible in our P&L.
Having said that, from a business standpoint, we are where we wanted to be. It's a bit that, from your perspective, it's a bit diluted from a 60% increase in volumes year-on-year. We are where we wanted to be on the different fronts, which is getting more activity on Bond Vision, on the different asset class, not only government bonds but as well credits and other products. The efforts to expand the MTF model across Europe are still continuing strong. All positive signals from our fixed income franchise.
Got it. Very helpful. Thank you.
Thank you. We're now taking our next questions from Iulian Dobrovolschi from ABN AMRO. Please.
Good morning, gentlemen, and thanks for taking my questions. I have two. First one is on the NTI. This one came out much better than expected.
Just wondering if you could comment on how do you think this will develop over the next quarters into 2025. That kind of relates to what Giorgio said. I think Giorgio said that Q1 high cash collateral was mainly due to elevated market volatility, which we understand. I was just wondering how stable normally is the pool of cash collateral from your clearing members throughout a cycle, i.e., if the volatility declines a couple of points quarter over quarter, how might it track the collateral levels that has for you? The other one is on the NORPOL and MTFs, higher minority lines, and well explained why that happened because of strong performance at these two trading platforms. I was just wondering if you actually consider acquiring perhaps the rest of minorities and obviously keeping all the future profits to yourself.
We'd appreciate if you could comment on the strategic view that you have on these two platforms. Thank you.
I let Giorgio answer the NTI question on the minority interest. These minority interests are not yet there by chance or by legacy of the past. They are there because critical partners to the development of NORPOL, the former owners, critical partners in the development of MTFs, large users, are supporting very actively initiatives to co-design new offerings, to create critical mass, to launch new services. We have no intention to proactively buy back those minority interests.
No. On your second question, a few clarifications. The first one is that it's clear that volatility brings more collateral on our platform, but the overall level of NTI is pretty much where we expect it to be. Maybe a little bit better, but not massively better.
This is the level that we more or less anticipate for the next quarter. Having said that, making a longer-term projection is complicated because, as you know, we have a very intense pipeline of developments within Euronext Clearing, and this will affect the collateral, the pricing, and many other elements and new products that we will bring on the platform. Once those developments are going to be actually executed, we will guide you. For the time being, the level of NTI that you see on our P&L, this is what we expect to maintain in the next quarter. Maybe it's a little bit more elevated, but it's difficult to predict when the current level of volatility will change direction.
Understood. Thank you.
Thank you. We will take our next questions from Tobias Lukesch from Kepler Cheuvreux. Your line is open. Please go ahead.
Yes. Good morning.
Also, three questions from my side, please. First, on costs. How should we think about the underlying cost versus the total cost reported as these were basically quite similar in Q1? Do you expect a big difference in the coming quarters here? Secondly, on the MTS performance, how would you describe the year-to-date performance in terms of secular growth versus cyclical growth? Do you think that the secular growth has further accelerated basically in 2025? And thirdly, sorry for that, maybe touching back on the net financing expenses. I understand you had EUR 1.5 million of expenses in Q1. Is the EUR 6 million the year-end number for 2025? Meaning a kind of EUR 1.5 million negative quarterly run rate number. Thank you.
Yes. Let's start with your first question with respect to cost.
As you know, non-underlying costs are costs that are linked to specific projects or are linked to double run of platform or are linked to exceptional expenses. As such, they are going to be zero as long as we will not add those items in our P&L. As a category, non-underlying costs will remain. It depends on how much exceptional costs we will have going forward. I believe that the good news is that you can see that following the delivery of the Borsa Italiana integration, those exceptional costs now become zero. We have plenty of projects going on, so that line item might increase in the next quarters. With respect to your other question, just again, another clarification.
This quarter, in the first quarter of 2025, we had a net financing expense of EUR 1.5 million, which is a negative number in the P&L. What is happening as we speak is that already EUR 500 million of our cash is not there anymore because we have repaid the bonds. What is going to happen in the next days, to be specific on the 28th, is that we will pay EUR 293 million of dividends, and this will further reduce the cash we have. We will finance the acquisition of Admincontrol. Two things will happen. We will have less cash to invest. This cash is today invested at a rate which is lower than the one at which we used to invest in the previous quarter because, as I said, cash and cash equivalent can have a maturity not exceeding three months.
Therefore, the interest we get is very much related to the interest that evolves in the market. The combination of having less cash at a lower rate and having the same level of debt at a higher interest triggers the fact that we expect, excluding one-off movement in effects and gain and losses, a cost for the next couple of quarters, a cost of EUR 6 million per quarter. Very interesting. Gaining EUR 6 million is equal to the average cash on our balance sheet multiplied by the rate that we will be able to extract. At the moment, we have around or a little bit less than 2%. The cost of debt, so the outstanding debt times the average cost of debt.
For the new debt, raising debt in this very moment, as I said, depending on the instrument and the maturity, is a cost which is in between 3-4% for Euronext. Now you have really all the elements of the equation.
Thank you. We are taking our next question.
Sorry. I missed a part. With respect to the secular growth of MTS, this is something that we have highlighted during the investment plan. One element or one KPI that you could track and we evaluated is the fact that the net refinancing needs of government bonds are structurally geared outwards. Therefore, we were expecting and we are expecting an increase, structural increase of volumes as European states will need to refinance more and more. I remind you that that number was close to zero pre-pandemic and when ECB was buying European government bonds.
Now it has become a number which is closer to EUR 800 billion per year. Now, having said that, there is a secular trend of growth in that market. On top of the secular growth, there is as well an element of volatility and change of interest rate in the different maturity of the curve. To split exactly how much comes from what is very complex. However, what I can say is that in the volumes you see today of MTS, there is for sure a part of growth which is secular, but on top of that, there is as well a very exceptional market condition that triggers a very high level of volumes. Unfortunately, it is very difficult. It is impossible to split how much comes from what.
Thank you.
Thank you. We are now taking our next questions from Javier Druvet from CIC Market Solutions.
Your line is open. Please go ahead.
Yes. Good morning. Thank you for taking my questions. A couple of them. The first one is in the, I mean, do you expect to have some integration costs coming from the recent acquisition of Admincontrol to be booked in second quarter? Will it be significant or not in your view? And will those costs be rather front-loaded if they exist or will be along the way? That will be my first question. My second question will be on the change of working capital, which has reduced the growth of your net operating cash flow growth. I understand a lot of that was related to the change of working capital of Euronext Clearing, but also in Nordics activities.
I was wondering, can you give us a bit of what you expect the trend to be in change of working capital looking forward? If you include the change of working capital for Clearing and NORPOL, what ratio do you expect on average for the year to be the cash conversion on EBITDA? I guess on Q1, it was close to 64%. I was wondering if you can give us a bit of an idea where we could stand. Finally, just on the financing, the financial derivatives trading and Clearing, I mean, it looks like, as you mentioned, despite a growth of 4% of the volume, the revenue were a bit in decline, a bit under pressure.
I was wondering, is it a structural pressure from competition that have an impact on those fees, or do you believe it's just a blip and there will be some recovery on those fees later on? Thank you.
Okay. With respect to your question, yes, we will have integration costs. No, they are not going to be massive. We are going to book them relatively in a front-loaded fashion, but that is going to take quarters. It is not something that we will book in a quarter and then it is going to be done. With respect to your second question, just to clarify, the overall change in working capital is zero throughout the cycle. What it means is that you will find a quarter where it contributes, I do not know, EUR 30 million in a quarter when you absorb EUR 30 million.
The issue is not an issue, but the point, as you know, the energy market is always open. Depending on the day in which the quarter closes, we might have a negative or a positive element. Having said that, it does not really neither absorb nor generate cash in working capital. You should really consider a more normalized level with the working capital equal to zero. As we have guided, more or less, the cash conversion that you should expect in a year is around post-tax is around two-thirds. Two-thirds of EBITDA would translate into operating cash flow post-tax. With respect to your final question on financial derivatives. On financial derivatives, this is what I have tried to explain during the call. You need to understand that there are certain clearing revenues that after the migration, we booked in different lines.
When they were part of the retrocession we got from LCH SA, we were accounting them as clearing revenues, and now not anymore. The decrease of 4.8% that you see in our P&L for derivatives is mainly linked to the fact that certain clearing fees are now booked in the line other post-trade revenues and not anymore in the line which is derivative trading and clearing. If you combine these two elements, actually, the line is quite flattish. Those are the impact for changing the P&L structure, but from a business standpoint, this is not a real decrease.
Thanks. That's a big change. I just want to complement from a volume standpoint on equity derivatives, so equity options and index futures. Just to piggyback on what Giorgio said, we are developing the product range and expanding our franchise.
The competition is strong, but we are in a growing path.
Okay. Thank you.
Thank you. We are now taking our next questions from Oliver Carruthers from Goldman Sachs. Your line is open. Please go ahead.
Hi, there. Oliver Carruthers from Goldman Sachs. Thanks for taking my questions. I've just got one left. On the savings and investment union, we had the market structure consultation document published a few weeks ago by the European Commission. As you were saying, this touched your business in a number of different ways with a number of possible tailwinds and changes. One area the Commission is looking into is the difference in fees charged to market participants in the closing auction relative to continuous trading.
Just to understand how material this is or how material this could be of your cash equity revenues, how much of this comes from the closing auction and how much of this is continuous trading, and how much does the revenue capture differ between the two? Thank you.
This consultation has just been launched. We do not comment on this process, which is extremely early stage, extremely diversified in terms of topics to be covered. I think the best recipe to be precisely wrong rather than perfectly correct is to embark into a micro-analysis of a very preliminary broad document.
Okay. Thank you.
Thank you. We are now taking our next questions from Johannes Thormann from HSBC. Your line is open. Please go ahead. Morning, everybody. Just some follow-up questions from me.
First of all, on the cash trading, historically, we had a run rate of 0.53 basis points in the previous quarters. Now, it's 0.5 basis points according to your presentation. Is this the new run rate according to the changes in reporting, or have there been other elements as well? Secondly, on the net financial result, just to clarify the outlook, it was positive in the last year. Should we now model a negative amount in the next years? And last but not least, on your retail derivatives fixed income retail derivatives initiative, there is a lot of talk about capital markets union, but the biggest headwind for retail investors in Europe is currently different taxation rules with double taxation treatments. Do you plan to offer incentives to your partners that they lower their own fees so those double taxation impact can be lowered, or is there no plans? Thank you.
First, Jorge, then Nicolas, and then Anthony.
With respect, yes, again, to be clear, we had an income because we had an average cost of debt slightly higher than 1%. There were moments where the interest rates on our cash was in excess of 3% and 3.5%. With EUR 1 billion of cash, we made more money than with EUR 3 billion of debt. Now, as the interest rate on cash is reducing and we are deploying our cash in investments, that number changes. To answer your question, yes, in the next quarters, we will move from an income to a cost. The cost for the next couple of quarters is estimated at around EUR 6 million, excluding fluctuation—again, I repeat—excluding fluctuation of effects or capital gain and losses on financial instruments.
With regard to the yield for cash equities, the yield deviation in Q1 2025 is mechanical. Our fee structure encourages higher trading volumes, and Q1 2025 volume were up 22% versus Q1 2024, reaching so number of clients reach lower marginal trading fees, which on average decrease the yield. It is a mechanical impact of the increase in volume and the setup of the fee structure.
Very quickly on the retail trend on financial derivatives, as you know, Euronext is very well positioned to capture that trend in Europe thanks to our very strong retail market in the Netherlands and in Italy. We just launched some mini options on European names, and as you know, we will launch mini bond futures on European government bonds. This is again to respond to market needs.
What we are doing is we are working with the market intermediaries, the market participants, the retail brokers in particular, to promote retail education and to make sure that every retail population has the possibility to access without friction to our offering on our Optiq platform.
Yes. Maybe one comment to clarify. What is happening, I mean, as there are a lot of questions on net financing, income, or expense, what is happening is that we have less cash because we are buying companies. Power Nordics, we are buying Admincontrol. We will have more costs, but then the flip side of that is that we are going to have more revenues, more EBITDA, and more other elements. You should not factor one without factoring the other. The two things are two sides of the same coin.
We have less cash invested at the bank, but we are more business that we run, and it is consolidated in our P&L, just to make sure we do not get misunderstandings.
Thank you. We are now taking our final questions from Bruce Hamilton from Morgan Stanley. Your line is open. Please go ahead.
Hi there. Yeah. Just on the Admincontrol deal, I guess that at the time of acquisition, I think you indicated that was about, for last year, about EUR 40 million revenue and EUR 20 million or just below EBITDA business. Can I get an update on whether is there a lot of growth in that business as we think about the 2025 impacts, just obviously as an offset to the financing cost point you made earlier?
No, absolutely. We are expecting synergies of cost and revenues.
This is a growing business, and we expect double-digit growth for the next three years as the rest of the service activity of Euronext.
Brilliant. Very helpful. Thank you.
Thank you. It appears there are no further questions, so I will hand over back to Stéphane for any additional or closing remarks. Please go ahead, sir.
Thank you very much, all of you. As always, the investor relations team here, Judith, Aurélie, everyone in the team is available to support you and to help you and to provide you with any additional data, facts, or perspectives that you may need to produce your own analysis. Thanks a lot and have a good day.
This concludes today's call. Thank you for your participation. You may now disconnect.