Net Revenue: Increased by 6% to EUR1.5 billion. Net Revenue (Excluding Treasury): Increased by 10%. Annual Recurring Revenue (ARR): Increased by 15% year-on-year to EUR618 million. Operating Costs: Increased by 6%, with underlying costs growing by 3%. EBITDA (Excluding Treasury): Increased by 11%. Share Buyback Program: EUR78 million repurchased, EUR422 million remaining. Trading and Clearing Net Revenue: Increased by 12% without treasury results. Fund Services Net Revenue Growth: Custody 23%, Settlement 30%, Distribution 20%. Securities Services Net Revenue: Increased by 19%. Assets Under Custody: Reached EUR16.1 trillion. Settlement Transactions: Reached a record of EUR9.5 million in March. Interest Income (Securities and Fund Services): Declined by 11% to EUR172 million. Full Year Guidance: Net revenue around EUR5.2 billion, EBITDA around EUR2.7 billion, both excluding treasury. Treasury Result Forecast: Around EUR850 million for 2025.

Warning! GuruFocus has detected 7 Warning Sign with DBOEF.

Release Date: April 29, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

Deutsche Boerse AG (DBOEF) reported a strong 10% increase in net revenue without the treasury side, driven by double-digit growth in cash equities, fund services, and FX. Annual recurring revenue (ARR) increased by 15% year-on-year, reaching a record level of EUR618 million, indicating strong client momentum. The company achieved a 12% increase in net revenues in Trading and Clearing, with significant growth in cash equities and FX due to increased market volatility. Fund Services and Securities Services reached new all-time highs in custody and settlement, resulting in double-digit net revenue growth. Deutsche Boerse AG (DBOEF) has identified significant medium- to long-term growth opportunities from European equities inflows, defense and infrastructure investments, and the EU's Savings and Investment Union initiative.

Negative Points

Investment Management Solutions experienced stable net revenue performance due to high comparables from 2024, leading to lower upfront license revenues. Operating costs increased by 6% due to higher provisions for share-based compensation and a stronger US dollar, although underlying costs grew by 3%. The treasury result declined by 12% in the first quarter, impacting overall net revenue growth. There was a 25% decline in repo business revenue, attributed to strong prior year comparisons and sufficient market liquidity. The transition from on-premise to SaaS in Software Solutions led to a 32% decline in on-premise revenues, affecting overall revenue perception despite strong ARR growth.

Story Continues

Q & A Highlights

Q: Can you provide details on the impact of FX exposure on your revenues and costs? A: Stephan Leithner, CEO, explained that the business is robust and largely euro-based, minimizing FX impact. Gregor Pottmeyer, CFO, added that FX provided a 1% tailwind on revenues and a 1% headwind on costs in Q1. The Investment Management Solutions (IMS) segment is most affected by FX, but the impact remains minimal.

Q: Why did interest rate futures volumes increase by 18% but only a 7% increase in interest rate trading revenues? A: Gregor Pottmeyer, CFO, clarified that the 18% increase in interest rate derivatives revenue matched the volume growth. The overall 7% revenue growth was due to flat OTC clearing revenues and a 25% decline in repo business revenues, despite onboarding 200 new clients.

Q: How is the transition from on-premise to SaaS affecting Investment Management Solutions revenues? A: Stephan Leithner, CEO, noted that while SaaS revenues grew by 18%, the on-premise business remains important for certain clients. The transition is ongoing, with SaaS expected to dominate by 2027. Gregor Pottmeyer, CFO, emphasized that ARR growth of 15% indicates strong client momentum, despite quarterly revenue fluctuations.

Q: Can you explain the decline in ARR growth from 17% last quarter to 15%? A: Stephan Leithner, CEO, stated that the 15% ARR growth reflects stable and strong client momentum. The previous quarter's 17% was at the upper end of expectations, and the current growth rate remains robust.

Q: What is the outlook for cash balances in Securities Services, and how long will fee holidays in short-term interest rates continue? A: Gregor Pottmeyer, CFO, expects cash balances to remain high at EUR19 billion, with a seasonal dip in Q3. Fee holidays in ESTR trading will likely continue until year-end to build liquidity pools and enhance netting efficiencies.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

This article first appeared on GuruFocus.

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