Euronext // 2021 Universal Registration Document

Operating and Financial Review

Overview

Salaries and Employee Benefits Salaries and employee benefits expenses include employee salaries, incentive compensation (including stock-based compensation) and related benefits expenses, including pension and medical charges. Depreciation and Amortisation Depreciation and amortisation expenses consist of costs from depreciating fixed assets (including computer hardware and capitalised software) and amortising intangible assets over their estimated useful lives. Systems and Communications Systems and communications expenses include costs for development, operation and maintenance of trading, regulatory and administrative systems; investments in system capacity, reliability and security; and cost of network connectivity between customers and data centres, as well as connectivity to various other market centres. Systems and communications expenses also include fees paid to third-party providers of networks and information technology resources, including fees for consulting, research and development services, software rental costs and licences, hardware rental and related fees paid to third-party maintenance providers. Professional Services Professional services expenses include consulting charges related to various technological and operational initiatives as well as legal and audit fees. Accommodation Accommodation expenses include costs of leasing the properties used by the Group, as well as utilities, maintenance and security costs to maintain the properties used by the Group. Other Expenses Other expenses include marketing, taxes, insurance, travel, professional membership fees and other expenses. A Transitional Service Agreement (“TSA”) was established for services rendered to or received from LSEG to facilitate the transition of ownership following the acquisition of Borsa Italiana Group. Each individual service is priced separately, generally on a fixed fee basis, based on actual usage or mutually agreed service level. The agreement was established on arm’s length basis. Expenses for services received from LSEG under this agreement are recognised in other operational expenses (see Section 8 Note 11).

Regulatory services provided to investment firms under Euronext’s licence as an Authorized Publication Authority (“APA”) and Authorized Reporting Mechanism (“ARM”) within the EU and UK. Fees are charged monthly to investment firm’s according to the number of reports submitted to the service Fees for software customisation and deployment services are recognised either on a time and materials basis or under the percentage completion method, depending upon the nature of the contract with the client. The percentage of completion is calculated based on the number of person-days incurred to date as a percentage of the total estimated number of person-days to complete the work. Licence fees, maintenance fees, setup fees and annual support fees are recognised pro-rata over the life of the service contract. Connectivity and infrastructure hosting fees are recognised pro-rata over the life of the client commitment. Other Other revenue primarily accounts for Nord Pool solutions and services not directly linked to power trading activities. Nord Pool revenues also stem from transaction shipping services, as Nord Pool provides technical solutions for power interconnectors, enabling their participation in European power market coupling arrangements. As part of the European (EU Commission) driven market coupling projects SDAC (Single Day-Ahead Coupling) and SIDC (Single Intraday Coupling), Nord Pool participates in a regulatory framework and a cost recovery regime. These projects yield cost recovery from Transmission System Operators and National Regulators to varying degrees, which is recognised as operating income. Additional revenue comes from the provision by Nord Pool of compliance services, consultancy and training. Transitional income Transitional income primarily consists of income from services provided by Borsa Italiana Group to London Stock Exchange Group (“LSEG”) to facilitate the transition of ownership following the acquisition of Borsa Italiana Group. A Transitional Service Agreement (“TSA”) was established, providing for temporary services rendered to or received from LSEG. Each individual service is priced separately, generally on a fixed fee basis, based on actual usage or mutually agreed service level. The agreement was established on arm’s length basis. Services rendered to LSEG primarily include technology and various ancillary services. All such services are transitional and, accordingly, the related income is not expected to be recurring beyond fiscal year 2023. COMPONENTS OF EXPENSES Euronext’s operating expenses include salaries and employee benefits, depreciation and amortisation, and other operational expenses, which include systems and communications, professional services, accommodation and other expenses. 7.1.4

7

7.1.5

KEY FACTORS AFFECTING BUSINESSES AND RESULTS OF OPERATIONS

The economic and business environment in which Euronext operates directly affects Euronext’s results of operations. The results have been and will continue to be affected by many factors, including the factors set out below. Euronext continues to focus its strategy to broaden and diversify its revenue streams, aswell as on its company-wide expense reduction initiatives in order to mitigate these uncertainties.

181

2021 UNIVERSAL REGISTRATION DOCUMENT