London Stock Exchange Group (LON:LSEG), the international markets infrastructure business, reported a robust financial performance for the third quarter of 2024, highlighted by a 9.5% increase in total income on a constant currency basis. This growth was significantly propelled by organic expansion and the strategic acquisition of Tradeweb, as well as promising developments in Post Trade, Data & Analytics, and FX and Equities. The company also detailed its plans for future innovations, including enhancements to its Workspace platform and a partnership with Microsoft (NASDAQ:MSFT).
Key Takeaways
- LSEG's total income grew by 9.5% on a constant currency basis in Q3 2024, with organic growth at 8.7%.
- Significant contributions came from the M&A activity, particularly the ICD acquisition of Tradeweb.
- Post Trade, Data & Analytics, and FX and Equities showed strong performance.
- The company plans to increase its stake in LCH Group to 94.2%.
- LSEG raised £575 million through debt instruments and will detail its 2025 capital allocation plan in February 2025.
- A modest price increase is expected for the next year if yields remain stable.
- Workspace platform enhancements are in progress, including integration with Microsoft Teams.
- The ASV growth forecast for the remainder of 2024 is around 6%, minimally impacted by Credit Suisse.
- The Microsoft partnership is anticipated to generate modest revenue growth in early 2025.
Company Outlook
- LSEG remains confident in its market growth projections established during the CMD in November 2022.
- Ongoing innovation and upcoming developments with the Microsoft partnership are expected to contribute to future growth.
Bearish Highlights
- The FTSE Russell contract termination by a specialist provider will result in an annualized revenue impact of £15 million to £20 million.
- Large bank customers are cautious about adopting AI-enabled products, delaying the piloting phase due to risk management concerns.
Bullish Highlights
- Tradeweb's performance, driven by favorable market conditions, contributed to the Capital Markets' growth of 22.4%.
- Positive feedback from pilot programs boosts confidence in the Microsoft partnership and the roll-out of new products.
- FTSE Russell experienced a 13% increase in subscriptions, indicating strong demand for its products.
Misses
- The company did not provide specific details on the impact of the Credit Suisse situation on its financials, aside from a 1% impact on ASV distributed across 2024 and 2025.
Q&A Highlights
- David Schwimmer discussed the DaaS initiative, with commercial results expected in 2025 and beyond.
- The Workspace migration is on track, with most migrations expected to complete by the end of 2023.
- The cost of sales is projected to remain stable at £280 million to £290 million per quarter.
- ETF contract cancellations are seen as isolated incidents, not indicative of broader issues with the FTSE Russell brand.
LSEG's strong performance in Q3 2024 demonstrates its resilience and adaptability in a dynamic market environment. The company is poised to continue its growth trajectory through strategic acquisitions, platform enhancements, and partnerships, despite facing some challenges with the adoption of new technologies by large bank customers. With a clear focus on innovation and customer engagement, LSEG is setting the stage for sustained success in the years ahead.
Full transcript - None (LDNXF) Q3 2024:
Operator: Good morning and welcome to the investor and analyst call for LSEG’s Third Quarter 2024 Trading Update. [Operator Instructions] I would like to remind all participants that this call is being recorded. I will now hand over to Peregrine Riviere, Group Head of Investor Relations, to open the presentation. Please go ahead.
Peregrine Riviere: Thank you. Good morning, everyone and welcome to LSEG’s third quarter update. I’m here with David and MAP. MAP will make some brief opening remarks on our Q3 performance and then we’ll open up to questions on the conference call line. So let me hand over to him right now.
Michel-Alain Proch: Thanks, Peregrine, and good morning, everyone. I’m happy to report that Q3 has continued the trend of H1 with strong organic growth across the group. Total income grew 9.5% on a constant currency basis. This includes 80 basis points of M&A benefit, mainly from the ICD acquisition within Tradeweb that closed at the start of August. Organic growth was 8.7%, and I will actually refer to this metric through the rest of my comments. So growth has accelerated in Q3 from Q2 and H1. The acceleration has come from Post Trade, D&A and our FX and Equities businesses. Tradeweb has sustained its particularly strong trend from H1. Overall, our performance reflects the strength of our proposition for our customers and continued good execution. Turning first to Data & Analytics. Organic growth was 4.6%. This represents a slight improvement in growth from H1 of 30 basis points. All three business lines accelerated from Q2. Our overall sales and retention performance continued to be solid. Workflows revenue was up 3.2% with particular strength in FX, Commodities and Banking users. We continued to enhance the Workspace platform and have now integrated news from Dow Jones publications after the partnership we announced in July. We have made further progress on the migration from Eikon, and we are on track to sunset Eikon in the first half of next year. In Data & Feeds, growth continued to be strong at 6.1%, driven by solid retention and a good pipeline of innovation. We recently launched one of our leading PRS products, DataScope, on Snowflake (NYSE:SNOW), making the full streaming data set available outside North America for the first time and significantly enhancing its flexibility for customers. And in Analytics, we achieved 5.2% growth with initial demand for our Analytics API being very encouraging. We have seen adoption from both existing and new customers with a good mix of uptake from broker-dealers, asset managers, hedge funds and regional banks. Our partnership with Microsoft continues to progress in line with the timetable we set out at our CMD last year. We expect Microsoft Meeting Prep, which use LSEG Workspace data, to enter general availability by year-end. Single sign-on and interoperability between Teams and Workspace will also be available by year-end, and Data as a Service entered external pilot in the quarter. Turning now to FTSE Russell, our index and benchmark business. FTSE Russell continued its strong subscription momentum, up 13.1%, and consistent with the growth reported in Q2. This reflects ongoing demand for flagship equity indices and benchmarks. Growth in asset-based revenue slowed, reflecting mix effects and the termination of an ETF contract at the end of H1. Risk Intelligence continued to grow double digits at 10.4%. World-Check, our leading screening platform, remains the main driver. Divisional growth is a little diluted by the due diligence business, which continues to face headwinds. Let me turn now to ASV growth, which encompasses all of the subscription business of the three divisions I just covered. ASV growth stood at 6.0% at the end of Q3. This is fully in line with our guidance that we would be around 6% through the balance of 2024. The slight decline from the 6.4% growth reported at the end of June reflects a small incremental impact from Credit Suisse and normal quarter-to-quarter variation that we’ve talked about before. And as previously mentioned, we expect to remain at around the 6% level at the end of this year. Moving on to Capital Markets. Growth was 22.4% with all three business units making a significant contribution to growth in the quarter. Tradeweb’s outstanding year continued, driven by strong execution and very good market conditions. We continued to grow market share in U.S. investment grade and high yield to around 18% and 8%, respectively. The ICD acquisition closed in early August, giving Tradeweb access to a fourth client channel, Corporate Treasury. Growth in our Equities business accelerated, up 8.5%, driven mainly by secondary markets. We saw higher market activity and drove around 2 percentage points of share gains year-on-year in September. July saw the launch of the new Main Market, ensuring the continued competitiveness of the UK market. FX also had a good quarter, growing 12.8% with FXall and Matching both growing well in a strong market. This reflected good growth in relationship trading and swaps in the dealer-to-client business, stronger volumes in Matching and some price increases in data. Post Trade had a very strong quarter considering the headwinds faced from the Euronext exit, which stepped up with the exit of commodities derivative in July and financial derivatives in September. Total income was up 4.8%. OTC Derivative was a standout performer, growing 18.4%. This reflects very high volume growth in the swaps market and the power of our business model. Furthermore, in September, we supported the launch of FMX with the clearing of SOFR futures in the U.S. market. Securities & Reporting was down 11.1% as Euronext exited in full during September. As expected, this also affected the net treasury income line, which was down 5.5%. However, collateral levels began to rise again during the quarter and we maintained a good level of yield on collateral balances. And just a reminder that the Euronext impact will be felt more strongly in Q4 with a continued drag of around £30 million in 2025 weighted to H1. And finally, a word on capital allocation and our balance sheet. We have recently reached agreement with a number of LCH minority shareholders to buy them out. We are purchasing a further 8.3% of LCH Group for a consideration of €433 million on the same terms as the transaction in Q1 of this year. This will take our ownership to 94.2%. We expect to complete the transaction shortly, and it will be obviously slightly accretive to 2025 EPS. We have also been active in the debt market. In September, we successfully raised circa £575 million across two debt instruments: a €600 million bond at 2.75% and a $100 million private placement at 4%, both with 3-year maturities. We will update you on our 2025 capital allocation plans at the full year results next February. So just to wrap up. It has been a particularly strong quarter with healthy growth in our subscription business and very strong performance in our high-quality volume-based businesses. We continue to innovate and bring new products to our customers with the first Microsoft partnership applications entering general availability soon. And we will still see significant scope to enhance our services and improve efficiency in the coming years. So now we are happy to take your questions. Peregrine?
Peregrine Riviere: Thank you, MAP. Operator, please, will you open the lines to questions?
Operator: Thank you. [Operator Instructions] And we will take our first question from the line of Arnaud Giblat from BNP Paribas (OTC:BNPQY) Exane. Please go ahead.
Arnaud Giblat: Yes, good morning. Just if I could start with SwapClear, it looks like the revenues went broadly – went up broadly in line with the volumes there, showing a bit lesser pricing compression than what we’re used to seeing. I know you don’t give the full disclosure, but normally there’s a bit less – a bit more pricing elasticity. I am just wondering if you could unpack that division a bit more for us to understand a bit more the dynamics around volume growth and revenue upside. And my second question...
David Schwimmer: Sorry, Arnaud, a quick question. We didn’t catch the beginning. Was that specifically – did you say on SwapClear or was that something else?
Arnaud Giblat: Yes, yes. So really strong revenue growth in SwapClear, which is linked to revenues. Historically, we’ve seen volume upside lead to some revenue upside, but not the beta that we’ve seen this time around. So it seems as though you’re capturing a bit more pricing. I’m just wondering if there is something going on there and if this is sustainable? My second question is on LCH, really attractive price there. I am just wondering, with 6% minority left, is there a mechanism or process in place to buy out the remaining? And my third question is on Workspace. I mean, I think normally you have pricing discussions in the summer with the agreements in place for pricing in 2025. Is there any color you can give us on how those went and what sort of pricing we should be expecting coming through in 2025?
David Schwimmer: Sure. So first, on your question around SwapClear and volume growth and the results there, it’s really about mix. And when there is shorter-dated product with lower risk, we have less revenue on that; and longer dated with more risk, we have more revenue on that. So that’s really what’s driving that. On the 6% or so minority that’s left. So the way this has played out, and this is probably the third or fourth buy-in that we have done over the last several years, the way these typically come up is that one of our shareholders that’s looking at the capital allocation on their balance sheet asks us if we are interested in buying out their stake. We then survey our broader shareholder group or members to see if others are interested, and that’s how we get to each of these. And as I said, we’ve done this now over the years at least 3 or 4 times. So with respect to the 6% minority, we’re not pressuring anyone to sell. If someone comes knocking and looking for us to take it off their hands in the future, we are the natural buyer. And then on your last question around the pricing discussions, so I would expect that we see a similar yield in terms of the pricing landing next year. And when I say similar, similar to what we saw last year, similar to what we saw the year below – the year before. Of course, inflation has come down over the past few years. So if we have a similar yield, in real terms, that will be a modestly higher price rise for us going into next year.
Arnaud Giblat: Similar yield, do you mean similar pricing increase?
David Schwimmer: Yes.
Arnaud Giblat: Thank you. That was great. Thanks.
Operator: Your next question is from the line of Ben Bathurst of RBC. Please go ahead.
Ben Bathurst: Thanks. I’ve got three questions, if I may. Starting with a couple on Data & Analytics, I wonder, can you comment on Q3 Workspace net sales relative to Q2? I think at the time, you said net sales were the strongest in that quarter for many years. Would you say they were at similar level in Q3 or perhaps did they increase further? And then could you update on which markets where you’re seeing the Workspace product gain the most traction? Is there a particular user group or geography where the proposition is resonating best currently? And then thirdly, just on market growth. You gave illustrative growth CAGRs for your markets at the CMD in November last year. I just wondered, are you still comfortable with those market growth assumptions out to 2025? Or might you be minded to move those around at all now for the benefit of the actual year’s information that you now have? Thank you.
David Schwimmer: Thanks, Ben. So on the first question on Workspace, another strong performance from Workspace and I can’t really say there’s a meaningful difference of Q3 over Q2. I recall the comment you’re making about our Q2 results and Q3 has continued that strong performance. So we, frankly, haven’t tracked if it’s the strongest ever, but it continues the strong performance. The second question, I think MAP mentioned this in his opening remarks, but we have seen in Workspace particular strength in Commodities, FX and then Banking. And we can see the benefits of the different product innovations that we are bringing. Whether that is some of the TORA functionality being integrated there, whether that is the inclusion of the Macabicus functionality, this is a product that a lot of the bankers like to use. We’ve improved some of the FX communication tools. So we’re really seeing the continued improvement in the receptivity to the product and those three areas, I would say, are the strongest. And maybe I’ll turn it over to MAP for your third question.
Michel-Alain Proch: Yes. No. Just – so Ben, for 2025, we are confident in continued growth for the group even with a more normalized contribution from Tradeweb. And what is reflected in the consensus today, we are confident in it.
Ben Bathurst: Thank you.
David Schwimmer: Thank you, Ben.
Operator: Your next question is from the line of Hubert Lam, Bank of America. Your line is open.
Hubert Lam: Hi, guys. Good morning. I’ve got three questions. Firstly, can you talk about the FTSE Russell contract loss? Can you discuss like more why it happened and any impact on earnings from this going forward? That’s the first question. Second one is on Workspace. Maybe I missed it in your – but when should we expect the introduction of Open Directory and Teams in Workspace? Is this more just by the year-end or is this something that’s expected to happen in the first half of next year? And lastly, just in terms of pricing. I know you’re saying that the yields won’t change for this year. But when should we expect the uptick in terms of pricing, which would, I guess, bridge the gap between where Workspace is today versus some of your other competitors? Should we expect a bigger pricing increase in ‘25? And then maybe it’s a bit too early to figure out – to know how much it’s going to be, but should we just expect it to be higher than what you expect for ‘24? Thank you.
David Schwimmer: Thanks, Hubert.
Hubert Lam: ‘26, ‘25.
David Schwimmer: You were. So, yes, we’ll answer each of those and if we haven’t quite nailed what you’re looking for, let us know, but I think we got it. So on the FTSE Russell contract termination, this was with a specialist provider, so this is not one of our main competitors. A specialist provider that the contract relationship was terminated, and the customer has chosen to go direct to the specialist provider. So I wouldn’t call it any broader sign of the competitive dynamics in the industry. In terms of the financial impact, I think it’s – on an annualized basis, it’s probably £15 million or so.
Michel-Alain Proch: Yes, £15 million to £20 million.
David Schwimmer: Yes. So – and then that’s at the top line basis. And it’s structured as a revenue share, so smaller than that as you work your way down.
Michel-Alain Proch: Yes. Half of it in EBITDA.
David Schwimmer: Yes. And then on your – maybe on the Workspace question, I’ll turn that over to MAP.
Michel-Alain Proch: Yes. Thank you. Yes, so on Workspace, a couple of comments in regards to the Microsoft partnership. So as we told you last earnings call, we are going to introduce Meeting Prep in general availability to the market before Christmas. The second thing is a single sign-on and interoperability between Teams and Workspace, the same thing. Same timing, so before the end of this year. And then for your question about Open Directory, Open Directory is a feature on which we are progressing well. And in line with what we told you last time, we’ll be – we are targeting an introduction in the second part of 2025.
David Schwimmer: And then just your question on pricing. We’ll see the pricing kick in – typically that kicks in Q1. So we inform the customers with notifications really in Q3 and then those pricing changes start at the beginning of next year. I believe that was your third question. But if there was something else you were asking, Hubert, let us know.
Hubert Lam: Yes. Yes, I guess for next year – I guess, in the beginning of next year, you – I think you said the pricing increase is similar to this year, which is, I think, about 3%, if you can confirm that. And I guess when...
David Schwimmer: Sorry, just a little bit more than that, about 3.5%. Yes.
Hubert Lam: 3.5%. Okay. And I guess, we should assume like a bigger price increase into year after as the Microsoft updates come through?
David Schwimmer: So probably premature to talk about the price increase.
Hubert Lam: Yes.
David Schwimmer: In the outer years, but we continue to invest in our product. We have a lot of confidence in the receptivity of our customers to that product. So we’ll evaluate that as we go forward. And of course, when we’re adding incremental value to our product, our customers value that and they also recognize that we need to get an appropriate return on our investment.
Hubert Lam: Great. Thank you.
David Schwimmer: Thank you.
Operator: Your next question is from Russell Quelch of Redburn Atlantic. Your line is open.
Russell Quelch: Hey, good morning. A couple of questions here. The first topic is around ASV growth, please. So of the 40 basis points sequential fall in ASV growth, how much of that was CS/UBS incremental impact in the quarter? I was wondering if there were any sales made in the quarter where you did again some discounting, which had a negative impact on growth or not, if there’s any change in the underlying sales environment. And maybe were there any sales made in this quarter where you’ve made the sale, but you’re unable to sort of install the product, so we’ve got to wait for that impact to come in ASP growth in future quarters? That’s my first question with three parts to it. And the second question is around Tradeweb, please. So you spoke previously of greater or increased integration with Tradeweb, working together on new product opportunities. Can you maybe provide an update on where you’re at with those – or with that process? Are there any new products we should be expecting, co-developed products in 2025? And maybe timing of any future rollout? Thanks.
Michel-Alain Proch: So maybe I take the first question on ASV?
David Schwimmer: Sure.
Michel-Alain Proch: Okay. So Russell, on ASV, as you remember, we’ve guided ASV growth to be around 6% through the rest of 2024. So our Q3 figure is fully in line with this guidance. As regard to the impact of Credit Suisse, it’s about 10-bps. You were asking how much is it between the [indiscernible] and the 10 bps from Credit Suisse. But again, have in mind that ASV growth is a point-in-time metric so it can have natural variation from quarter-to-quarter. And indeed, it depends on the timing of consolidation and installation. But to conclude on this, we remain confident on the circa 6% ASV for the remainder of the year.
David Schwimmer: And Russell, on your question on Tradeweb and the partnership there, it continues to go well. We continue to have discussions across Tradeweb and the broader LSEG in terms of different areas where we are either actively collaborating today or whether there’s opportunity to do more in the future. We mentioned – MAP, mentioned in his remarks earlier the closing of ICD, which is a really nice add in terms of corporate treasury as a customer segment for Tradeweb. And one or two areas there that we are looking at relates to giving the Corporate Treasury customer base there more access to, for example, our Risk Intelligence products or our FX execution products. So – but there are a number of other areas that we are also talking about as well, probably it doesn’t make sense for me to get into anything specifically today. But we are really pleased with how that collaboration is going.
Russell Quelch: Thanks. And MAP, just to clarify, so there was no incremental impact from additional discounting or no change in the underlying sales environment for that impact?
Michel-Alain Proch: Yes. No. Yes, yes, Sorry, Russell, I didn’t answer this part of your question, so confirming there is no – none of them.
Russell Quelch: Okay, good stuff. Thank you.
Michel-Alain Proch: Alright.
Operator: Your next question is from the line of Benjamin Goy of Deutsche Bank. Please go ahead.
Benjamin Goy: Yes. Good morning. Two questions from my side as well, please. First, staying with ASV. Essentially unchanged expectations for the final quarter of 2024. Just trying to understand whether you assume a more pronounced impact of Credit Suisse in the quarter or more spread out over the next three quarters of the remaining impact. And then on Workspace and the Microsoft cooperation, if you can help us to understand the single sign-on end of this year and Open Directory from second half, if you think about revenue growth and the potential it has with MS-Teams integration? How do you think the phasing is then following the second half ‘25? How quickly can it go? Should we first expect churn to fall and then net sales to increase? Any thoughts around that would help. Thank you.
David Schwimmer: So MAP will take your question on ASV, I’m happy to talk about the Workspace-Microsoft partnership in 2025. So go ahead, MAP.
Michel-Alain Proch: Yes. So there is no change – no particular change in the way we’re looking at ASV in Q4 2024. As Credit Suisse is concerned, maybe you remember, Benjamin, that if I go back a bit, to give you the full picture, we said that it will have an impact of about 1% – a bit less than 1% of the former D&A scope, so including FTSE NII. So 1%, and this 1%, we were halfway through in H1, so say about 50-bps. We have another 10-bps that I was just mentioning to Russell in Q3. And then the remaining will come in Q4 and in 2025. It’s hard for us to predict precisely because it’s clearly not in our hands, but in the hands of the client. But we know that we still have the remainder of this in the next 12 months.
David Schwimmer: And then on your question on sort of more detail on the phasing in 2025. We’re not in a position to give you specifics on any of that. I think what we’ve said in the past still applies, which is that you should expect pretty modest incremental revenue in early ‘25 as these products start rolling out, and then that should grow over time. And I think we continue to see good feedback on the – in the pilot programs. So we are looking forward to getting those out to general availability. MAP mentioned on Open Directory, that’s a little bit of a different time frame. Maybe let me dig in on that just so you understand what we mean by that. Whereas on some of the other products, we can make them available, generally available, a wider release, Open Directory is really, in many ways, about creating communities. And so if you give Open Directory to one customer and others don’t have it, you don’t have that kind of network effect. So that will be rolling out more community by community, and thus, on a slightly different time frame instead of the sort of year-end general availability. So, I hope that helps.
Benjamin Goy: Look it up. Thank you.
Operator: And your next question comes from the line of Julian Dobrovolschi from ABN AMRO (AS:ABNd). Your line is open.
Julian Dobrovolschi: Hi, good morning, gentlemen and thanks for taking my questions. I have two. Just to start with the first, a quick one on the Microsoft as well. Before going probably like in too much of detail, can you just probably highlight-2 of the commercial successes you already had on the couple of pilots that you’re probably already doing with some of your customers? And then the second one is on the Data as a Service initiative. So this is your initiative to penetrate the unvended data and analytics market. So it seems that you’ve already made quite some steps into this direction in Q3. So running a bit of a pilot with a few customers and potentially we can expect more as of Q4 going forward. Now can you please talk a bit about your opportunity set in Data as a Service broadly? And what sort of economics do you expect to generate from this initiative in the short term?
David Schwimmer: Thanks, Julian. So on the pilots, probably – you asked for commercial successes around the pilots. Probably a better way to answer your question is what’s the feedback that we are getting on the pilots. These are pilots with existing customers who already use a lot of our products. So, we are getting really granular feedback from them on the different products. And just to give you example or two of what kind of feedback we are talking about here. Some of it relates to asking for more data. So, for example, in Meeting Prep, the default option gives you seven days of news when you are using the Meeting Prep functionality. And some of the feedback we have gotten, people want to have either a longer timeframe going back to get news into their Meeting Prep memos. And then others wanted to just be able to toggle that time period, whether they want to go shorter or longer. There is also feedback around customization. And again, this gives you a real sense of some of the granularity that our customers are giving us, but it also gives you a sense of how deeply embedded we are in their workflows. So, for example, some customer feedback was people wanted to be able to toggle between the mean and the median in some of the data. So, it’s that kind of stuff. In terms of – maybe one point I will say on commercial successes is that while our customers are seeing this and seeing the pilots that we are sharing with them, they are really excited about it. And we have had some – there is one in particular, I will give you an example that was going to launch an RFP for a competitive process. And then they saw what we were rolling out with our product and they decided not to do the RFP, so really good signs there. On your second question about DaaS and the initiative there. Again, just to be clear, early days for us. So, we are in the pilot mode right now with one data set and that’s our ESG data set, and we will be rolling out more over time. But again, to your question around kind of commercial results from that at this point, too early, and we expect to start seeing that in 2025 and beyond. So, again, I hope I got to your question, but if there is anything I missed there, let us know.
Julian Dobrovolschi: No, that was great. Just maybe a follow-up on the Microsoft stuff, so given the feedback that you have got from the clients, I was just wondering, did you already also discussed with them, let’s say, the pricing of potential product, or are you still more or less in the discovery phase on this end?
David Schwimmer: So, it really depends. And given the broad range of products that we are rolling out and given the really broad range of functionality that we are improving, in some cases, it will be included in existing product and we will realize the economics there through the higher price year-over-year. In other areas where we are creating new product, then we will have separate pricing and separate set of price realization or product sales on those new areas. So, it’s going to depend.
Julian Dobrovolschi: Great. Many thanks.
David Schwimmer: Thank you.
Operator: Your next question is from the line of Ian White of Autonomous Research. Please go ahead.
Ian White: Hi. Thanks for taking my questions. Just a couple of follow-ups from me, please. Firstly, just on the ETF contract cancellation. I think I am right that this looks like quite a rare example of a large U.S. product manufacturer opting to sort of switch to a smaller niche index provider and seemingly being content to lose the Russell brand from its products. I think historically that’s been very unusual for FTSE Russell specifically and the index industry more broadly, that the brand power is generally quite strong versus the sort of smaller competitors. So, I guess just in that context, why shouldn’t we read into this that there might be some weakening of that sort of competitive advantage that FTSE Russell has had? Can you just provide any more detail around the decision that the client has made there that helps us to understand sort of why we should be sort of relatively sanguine about that and viewing it as a one-off? That’s question one, please. And then secondly, just on the Workspace migration. Can you just clarify, are you seeing the same appetite to migrate from Eikon to Workspace and indeed the sort of positive feedback that you have noted to us previously across the whole user base? I am particularly interested, are front office or full service Eikon customers migrating as quickly as the middle and back office users, please, in terms of how that’s progressed so far? Thanks.
David Schwimmer: Thanks Ian. So, on the ETF termination, this is really, I will say, a one-off and we don’t view it as any kind of deterioration in the FTSE or Russell brands, if anything. And you can see from the very strong subscription revenue growth, these businesses are doing extremely well. So, not really – I wouldn’t read much more into it than that in terms of a niche provider basically having a direct – going to a direct relationship with the customer here. On the Workspace migration, continues to go well, continues to go very well, very much on track. We have seen a strong positive reception to the new product. And we are not seeing any difference in terms of that receptivity in terms of front office or middle or back office. So, we look forward to getting through most of the migration by the end of this year. And then as we have said, we look forward to sunsetting in the first half of next year.
Ian White: Okay. Thanks very much.
David Schwimmer: Thank you.
Operator: Your next question is from the line of Johannes Thormann of HSBC. Your line is open.
Johannes Thormann: Good morning everybody. Some questions from my side as well, please. First of all, on the post trade participations, you are moving in different directions for LCH and Euroclear. Could you comment on the strategic rationale for selling the stake in Euroclear, which has been announced by or has been in the press? And probably also in this respect, just on participations or major stakes, any plans to increase your stake in Tradeweb? Secondly, on the Workspace migration, coming back, can you share how many customers in percentage terms, relatively rough numbers at least, have been migrated so far? And then it seems that the migration is taking a bit longer because earlier you said you will sunset Eikon early 2025. Now, we talk about H1. And is this – are there some delays? And last but not least, just on the cost of sales. They reflect the FTSE Russell impact also in another way. Is this current level now a good run rate for the next quarters, or should we rather look at the previous quarter level? Thank you.
David Schwimmer: Thanks Johannes. I will take the first two and MAP will take the third. So, on post trade, no comment on any particular speculation about Euroclear. But a very clear distinction I can make is that in Euroclear, we have a sub-5% ownership stake in that business. No ownership or no kind of control, no strategic position, etcetera. Whereas with LCH, of course, majority owner and running that business and very excited about how LCH continues to perform. Also nothing to add on Tradeweb, we are very pleased with Tradeweb. We have majority in terms of our equity position. We have a super majority in terms of our voting position. We think the team there is doing a great job. And so no need to change the status quo there with Tradeweb. On your question on Workspace, I don’t think we have put any percentages out there throughout this migration, and so I am not going to give you any specific percentages at this point. We have said that we expect to be done with most by the end of this year. There are some customers going into next year and a couple have asked for a little more time. But there has been no change. I think when we said early ‘25, first half ‘25, I don’t think we are making any magical distinction there. So, please don’t read too much into that. And the migration continues to go very well. So, I will turn it over to MAP for the third question on FTSE.
Michel-Alain Proch: Yes. And I think it was on cost of sales, yes. So, cost of sales, as you may have seen, Johannes, has been relatively stable when you look at the first two quarters and the three quarters, including Q3, it’s varied between £280 million and £290 million a quarter. I think it’s a good proxy for Q4. To tell you the truth, I can’t be precise at £1 million because it’s a mix between – as you know, we have in the cost of sales, the cost of our Thomson Reuters (NYSE:TRI) agreement, which is fixed. So, that’s a fixed amount. So, we can grow and that remains fixed. At the same time, we have the profit share of SwapClear. So, it depends the up and down and the volume that we are closing on SwapClear. But all-in-all, yes, to answer your question, I think it’s a good proxy, £280 million to £290 million.
Johannes Thormann: Okay. Thank you.
David Schwimmer: Thank you.
Operator: Your next question is from the line of Michael Werner from UBS. Please go ahead.
Michael Werner: Thanks very much guys. Two questions from me, please. First, we have seen really strong revenue growth from the overall group business this year and it’s been accelerating throughout the quarters. And I think in the first nine months, it’s around 7.7%. Previously, you have guided to accelerating revenue growth in 2025 versus 2024. So, I just want to confirm that, that’s still the case given the nearly 8% growth that we have seen to-date. And then second, maybe just diving a little bit closer into FTSE Russell on the subscription side. Again, a very good quarter in terms of growth at 13% on a constant currency basis, can you just give us a little bit of color what’s driving some of that growth? Is it fixed income? Is it certain regions, certain types of customers, maybe the collaboration with Tradeweb? Any color there would be really helpful. Thank you.
David Schwimmer: So, thanks, Michael. MAP will answer your first question. I will take the second one.
Michel-Alain Proch: Yes. So, maybe to give a bit the – some color about the trajectory Q3, Q4 2025, so Q3 has been, as you see a particularly strong quarter. And given the continued exceptional Tradeweb growth, consensus for 2024 organic growth is now just a little above 7% from, if I remember well, 6.5% at the beginning of the year or something like this. So, looking into Q4, obviously, we will let Billy and Sara comment next week on their expectation for Tradeweb. And looking at 2025, as I was mentioning, we are confident of continued growth for the group even with a more normalized contribution from Tradeweb and I think it’s reflected in the consensus today. So, long and short, what we see, even after Tradeweb exceptional growth this year, we expect similar level of growth for the group in 2025.
David Schwimmer: And Michael, on your question on what’s driving the strong subscription growth in FTSE, as you mentioned, 13% or so. It’s really the increasing usage that we are seeing, the increasing attractiveness of our flagship equity index and benchmark products, so a lot of the brand products there. Our global equity index here is doing very, very well. And then we have also seen strong demand for our multi-asset class offering across the board. So, it’s – I wouldn’t pick out one particular product, but it’s a bunch of the strong products that we have in our franchise.
Michael Werner: Thanks. Appreciate it.
David Schwimmer: You bet.
Operator: Your next question is from the line of Bruce Hamilton of Morgan Stanley. Please go ahead.
Bruce Hamilton: Hi. Good morning. Thanks for taking my questions. I am just digging a bit further on Microsoft as you have given quite a lot of color on the sort of rollout in terms of sort of enhancements to Workspace effectively. But taking a step back, I think when you have looked at the sort of growth path, has Data as a Service always struck you as the bigger incremental revenue opportunity? And is that something in terms of feedback with clients that would be the case, or is it sort of similar when we compare that to the initial product rollout? And then linked to that, in terms of the migration of data sets to the cloud, what’s the sort of – obviously, that started. But what sort of timeframe for getting that done? And then final question, just given the dynamism in product evolution, any sort of emerging use cases that you can mention that you are perhaps excited about, but haven’t said too much about thus far with Microsoft? Thank you.
David Schwimmer: Thanks Bruce. So, on your first question on Data as a Service and sort of the relative opportunity, look, we haven’t broken that down specifically in terms of where we see the most opportunity. I would say if you look at the businesses today, we have a big business in workflow. We have got a big business in Data & Feeds. And we see significant opportunity as we develop these new products in each of those areas. We also see a really interesting opportunity in the analytics work stream as well. And analytics, as you know, is a much smaller part of our Data & Analytics overall business today. But that’s another area where we see really interesting opportunities. So, I can’t give you a breakdown of X percent, Y percent, Z percent where we expect a lot of the upside. But you will see – as we go into ‘25 and beyond, you will see how we are driving the incremental growth in each of these areas. On the migration of the data sets, I believe at our half year results we put a rough timeline and a rough list of the data sets or a broad – high-level list of the data sets that we are continuing to migrate, so no real change in that. And then use cases, we continue to engage with our partners at Microsoft and continue to have lots of interesting ideas and working sessions. No big announcements today. But I would say there is no shortage either of ideas or ambition or opportunity. So, maybe I will leave it at that.
Bruce Hamilton: Got it. Thank you.
David Schwimmer: Thank you.
Operator: And your next question is from the line of Oliver Carruthers from Goldman Sachs. Your line is open.
Oliver Carruthers: I am Oliver Carruthers from Goldman Sachs. Just one question for me on Meeting Prep, I guess this is just one product or add-on, but it’s obviously an interesting and tangible AI use case for financial services. And it seems like the debate on AI has become a little bit more nuanced in the last six months or so. So, it would be kind of great, David, to hear your perspective on how your customers are thinking about these kind of AI-enabled cases for their workflows in terms of driving efficiency, particularly as you work through the pilot phases here and near commercialization with this one product. Thank you.
David Schwimmer: Thanks Oliver. So, it’s a really interesting topic and one thing, I think I talked about this a little bit at the half year, but one thing that we have seen particularly as we have been going through the piloting phase is that for a number of, in particular, our big bank customers, there is a greater sense of conservatism around the usage of AI. And it has actually been a little bit slower than we had initially planned with those customers in terms of the piloting, because they would go through their internal processes, their various risk committees, new product committees. And you can understand – just to give you an example of some of the concerns that they had. If you are banker creating a Meeting Prep memo and it’s pulling confidential information out of your files, your own proprietary e-mails, CRM system or other documents, then I think it’s very legitimate for the bank to then have a concern about how controlled is that memo and the confidential information in that memo. Does that banker then distribute that memo around to a working group, including people outside the bank, things like that, and so the – I think we have seen our customers in that area focused on making sure that they have the right controls in place to manage that kind of risk. As we have been going through the piloting, we have actually seen, I will say, sort of more receptivity on an accelerated basis by some different kinds of customers. Some of them are smaller, some of them are – have different kinds of risk management approach, can be a little bit more nimble in terms of how they think about these things. So, that – and we have responded to that in terms of sharing the pilot product with some of those smaller customers. Maybe the last thing I will say just relates to the audit-ability of the data. And so everyone is familiar with the notion of hallucinations, etcetera. The way we are building our product is to enable our customers to effectively double click or click on a footnote to find out where a certain element of information is coming from. So, if you have a question about something, if you are worried is this a hallucination, let me check what the source of that information actually is. And that is a feature or functionality that we have, for example, in Meeting Prep, where you can click through to see where the actual data is coming from in the memo. So, hopefully, that gives you a little bit of a sense of how we are navigating that and working with our customers to make sure they, one, they have access to the information they need, and two, they are in a position to manage the risks, the legitimate risks, that are associated with AI appropriately.
Oliver Carruthers: That’s very clear. Thanks David. So, it sounds like the appetite to collaborate and participate in this is there. But the kind of complexity and delivery is, I guess a kind of very important topic as you navigate this, which obviously has kind of barrier to entry implications as well.
David Schwimmer: Yes, I think that’s exactly right.
Operator: There are no further questions on the conference line. I will now hand the presentation back to David Schwimmer, CEO of LSEG, for closing remarks.
David Schwimmer: Well, great. Thank you all for your interest, for your questions. And if anyone has any further follow-ups, please get in touch with Peregrine and the team, and we look forward to talking to you again soon.
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