Gielda Papierów Wartosciowych w Warszawie S A : GPW Group Q3 2022 Results Under Pressure of Difficult Market Environment

PRESS RELEASE

• GPW Group's revenue at PLN 88.4 million in Q3 2022 (-2.4% YoY) and PLN 297.8 million in 9M 2022 (-0.8% YoY)
• EBITDA at PLN 29.1 million (-40.1% YoY) in Q3 2022 and PLN 126.6 million (-20.9% YoY) in 9M 2022
• Operating profit at PLN 20.5 million (-48.7% YoY) in Q3 2022 and PLN 98.7 million (-26.3% YoY) in 9M 2022
• Operating expenses at PLN 59.3 million (+20.1% YoY) in Q3 2022 and PLN 190.7 million (+14.7% YoY) in 9M 2022
• Net profit at PLN 31.1 million (-13.5% YoY) in Q3 2022 and PLN 107.3 million (-10.6% YoY) in 9M 2022

The Warsaw Stock Exchange Group (GPW Group) generated PLN 297.8 million of sales revenue in 9M 2022, its EBITDA was PLN 126.6 million, operating profit PLN 98.7 million, and net profit PLN 107.3 million. The GPW Group's consolidated revenue was stable year on year in 9M 2022 (down by 0.8%) as a result of an increase of revenue on the financial market (+1.1%) combined with a decrease of revenue on the commodity market (-4.4%). The 10.6% YoY decrease of net profit was driven by an increase of operating expenses by 14.7%, in particular external service charges (+PLN 12.9 million i.e. +32.5%) and an impairment allowance on the goodwill from the acquisition of BondSpot at PLN 6.7 million.

In Q3 2022 alone, the GPW Group generated PLN 88.4 million of sales revenue, EBITDA of PLN 29.1 million, operating profit of PLN 20.5 million, and net profit of PLN 31.1 million. Consolidated revenue decreased by 2.4% year on year despite an increase in revenue in the GPW Group's biggest business segment, the financial market, to PLN 58.0 million from PLN 54.4 million. Revenue on the commodity market decreased to PLN 29.8 million from PLN 35.8 million.

The year-on-year increase of revenue on the financial market by PLN 3.6 million in Q3 2022 was mainly driven by an increase of trading revenue by PLN 2.7 million (up by 7.5% to PLN 38.2 million), in particular revenue from trading in derivatives: driven by high turnover, the revenue from trading in derivatives was PLN 6.0 million and more than doubled year on year. The revenue from trading in equities decreased by PLN 1.5 million year on year in Q3 2022 and stood at PLN 26.4 million. Information services on the financial market generated revenue of PLN 14.3 million, an increase of 6.8% year on year.

The revenue on the commodity market in Q3 2022 decreased by 16.8% year on year and stood at PLN 29.8 million, mainly due to lower trading volumes in electricity and gas on TGE. Trading revenue decreased to PLN 15.8 million (-14.0% YoY) while revenue from clearing decreased to PLN 8.3 million (-32.8% YoY). On the other hand, revenue from trading in property rights to certificates of origin increased (+18.1% YoY), as did revenue from other fees paid by market participants (+47.6% YoY).

In Q3 2022, the GPW Group continued to implement development projects under the strategy #GPW2022 and commenced the drafting of a new development strategy for 2023-2027.

As the year 2022 draws to a close, we are starting to draft our strategy for 2023-2027. We are facing adverse regulatory changes across all our core business lines. We want to address them by developing our core business offer in areas least at risk from adverse regulatory developments. On top of this, we plan to diversify our offering beyond markets exposed to regulatory and supervisory burdens. In the process of building our strategy, we are working very closely with an international consultancy which has showed us how stock exchanges in the European Union have developed new business lines beyond organising the trading of financial instruments," said Marek Dietl, President of the GPW Management Board.

"The coming years will see a range of initiatives aiming to attract new revenue streams which will grow our revenues and profits, combined with the development of proprietary technological products. We focus on these key factors under the last strategy of the GPW Group and we intend to continue their development in the coming years," said Mr Dietl.

Operating expenses increased by 20.1% year in year and decreased by 5.1% quarter on quarter and stood at PLN 59.3 million in Q3 2022. The year-on-year increase was driven by an increase of salaries and external service charges relating among others to the implementation of the GPW Group's strategic initiatives. The cost/income ratio (C/I) was 64.0% in 9M 2022 vs. 55.4% in 9M 2021.

Presentation of the financial results of the GPW Group for Q3 2022

Net profit

The net profit of the GPW Group was PLN 31.1 million in Q3 2022, representing a decrease of 13.5% year on year and a decrease of 18.2% quarter on quarter. The decrease of the net profit was driven by an increase of operating expenses to PLN 59.3 million, i.e., by 20.1%. The increase of operating expenses was due to an increase of external service charges by PLN 5.0 million i.e. 36.8%, driven among others by higher costs of IT infrastructure maintenance services (+PLN 2.2 million i.e. +39.1% YoY). The Group recognised an impairment allowance on the goodwill of BondSpot at PLN 6.7 million (recognised in other expenses). The Group's financial income increased substantially to PLN 8.8 million vs. only PLN 6,000 in Q3 2021. The GPW Group's net profit in Q3 2022 was supported by a higher share of profit of entities measured by the equity method at PLN 8.3 million vs. PLN 5.9 million in Q3 2021.

Revenue from the financial market

The sales revenue from the financial market stood at PLN 58.0 million in Q3 2022, an increase of 6.6% year on year and a decrease of 1.1% quarter on quarter. The revenue from the financial market contributed 65.5% of the total sales revenue of the GPW Group. The revenue from the financial market includes trading revenue, listing revenue, and revenue from information services.

Trading revenue on the financial market

The trading revenue on the financial market stood at PLN 38.2 million in Q3 2022 vs. PLN 35.5 million in Q3 2021, representing an increase of 7.5% year on year and a decrease of 0.5% quarter on quarter. The year-on-year increase in the revenue was mainly driven by an increase in revenue from trading in derivatives.

Listing revenue

The GPW Group's listing revenue on the financial market was PLN 5.5 million in Q3 2022 and remained stable year on year. The listing revenue was PLN 5.6 million in Q2 2022. Revenue from listing fees stood at PLN 4.7 million (+10.9% YoY and +0.3% QoQ). The main drivers of listing revenue are the number of issuers listed on the GPW markets as well as their capitalisation at the end of the previous year. The revenue from listing fees and other fees stood at PLN 0.8 million. The key drivers of revenue in this business line include the number of IPOs on the GPW markets as well as the value of shares and bonds introduced to trading. There were four IPOs on the Main Market (transfers from NewConnect) and one IPO on NewConnect in Q3 2022 vs. three IPOs on the Main Market and eight IPOs on NewConnect in Q3 2021.

Information services

The revenue from information services on the financial market stood at PLN 14.3 million in Q3 2022, representing an increase of 6.8% year on year and a decrease of 2.5% quarter on quarter. The year-on-year increase was driven by the acquisition of new clients of GPW Group data (non-display users and added value service users).

Revenue from the commodity market

The sales revenue on the commodity market was PLN 29.8 million in Q3 2022, a decrease of 16.8% year on year and a decrease of 24.4% quarter on quarter. It contributed 33.7% of the Group's total revenues in Q3 2022. The revenue from the commodity market includes trading revenue, revenue from operation of the register of certificates of origin, revenue from clearing, and revenue from information services.

Trading revenue on the commodity market

The trading revenue on the commodity market decreased by 14.0% year on year and by 19.3% quarter on quarter and stood at PLN 15.8 million in Q3 2022. The revenue from trade in electricity decreased by 36.5% YoY and the revenue from trade in gas decreased by 60.6% YoY in Q3 2022 due to a decrease of turnover, mainly on the forward market. The revenue from trade in property rights increased by 18.1% year on year in Q3 2022 due to a higher turnover in green certificates. The quarter-on-quarter decrease was due to seasonality of trading caused by the deadlines for the obligation to cancel certificates. The Group's revenue from other fees paid by commodity market participants increased by 47.6% YoY in Q3 2022 to PLN 5.5 million. The amount of other fees paid by market participants largely depends on the number and activity of IRGiT Members, in particular the number of their transactions.

Operation of the Register of Certificates of Origin

The revenue from the operation of the Register of Certificates of Origin was PLN 5.4 million in Q3 2022, representing an increase of 10.4% year on year, driven mainly by higher volumes of issued RES certificates and higher volumes of operations in the Register of Guarantees of Origin.

Clearing

The Group earns revenue from clearing operated by IRGiT, which is TGE's subsidiary. The revenue from clearing was PLN 8.3 million in Q3 2022, representing a decrease of 32.8% year on year and a decrease of 24.5% quarter on quarter. The decrease was driven mainly by lower turnover in gas and electricity.

Information services

Revenue from information services on the commodity market stood at PLN 322,000 in Q3 2022 vs. PLN 245,000 in Q3 2021 and PLN 332,000 in Q2 2022.

Operating expenses

Operating expenses stood at PLN 59.3 million in Q3 2022, representing a decrease of 5.1% quarter on quarter and an increase of 20.1% year on year.

The increase in operating expenses was mainly driven by an increase of external service charges by 36.8% year on year to PLN 18.5 million and an increase of salaries by 19.1% to PLN 28.6 million. The increase in salaries was driven by a higher headcount necessary to implement the development strategy #GPW2022. The increase in external service charges was mainly due to higher IT costs (+25.5% YoY), advisory costs (+21.8% YoY), and the cost of promotion, education and market development (+33.4%).

Depreciation and amortisation charges remained stable year on year at PLN 8.6 million in Q3 2022 while maintenance fees stood at PLN 1.4 million, an increase of 12.4% year on year.

Share of profit of entities measured by the equity method

The GPW Group's share of profit of entities measured by the equity method stood at PLN 8.3 million in Q3 2022, representing an increase of 40.6% year on year. The year-on-year increase was driven by higher profits of the KDPW Group. The KDPW Group's financial results were driven by an increase of revenue from:

• settlement and safe-keeping of securities for which KDPW is the home depository, driven by a higher capitalisation of such securities as well as new issues;
• services for issuers - higher revenue from the registration of securities following the entry into force of the obligation to register shares of non-public companies; higher revenue from the processing of payments of cash benefits attached to securities;
• clearing - an increase in the turnover and the number of transactions concluded on GPW, including both the cash and the derivative market, and clearing of transactions from TBSP.

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The Warsaw Stock Exchange Group (GPW Group) operates trading platforms for shares, Treasury and corporate bonds, derivatives, electricity and gas, and provides indices and benchmarks including WIBOR and WIBID. The index agent FTSE Russell classifies the Polish capital market as a Developed Market since 2018. The markets operated by the GPW Group are the biggest in Central and Eastern Europe. For more information, visit www.gpw.pl.