flatexDEGIRO AG

call with respect to our half year figures 2021 and not strategy day and this wasn't spelling effect it's great to have you on board I hope you're all doing well and we'd like to make use of the next 60 minutes to give you further insights to our press release and the preliminaries that we have published this morning After the presentation, you will have the chance, so the analysts will have the chance to raise questions and we are more than happy to answer them. Yeah, let's jump into the presentation and to the results of the first half year. It has been the best half year ever in our history. We are perfectly in line to deliver what we have promised for this year. We had record numbers for new customers reaching at the end of June 1.75 million customers. If you keep in mind, our guidance for this year was 2 to 2.2 million clients at the end of the year. So we are very well on track to meet this target. The transactions settled were close to 53 million, which is also absolutely in the range of the guidance that we as a management gave to the market reaching 90 to 110 million transactions and a significant increase in both the adjusted EBITDA margin as well as revenues, with revenues of 226 million euros and an adjusted EBITDA margin of 48%. We'll come to the financials in a second as well. We have managed to continue our outperformance of all major peers in the first half, as already we have achieved in the first quarter and a half performance of the three largest peers in Europe, Avanza, Nordnet and Fineco. We also managed again over the whole first half, so also in the second quarter, to reach a great performance. We grew in terms of clients as much as they three peers did together, which actually is evidence for our strategy, which is driven mainly obviously by our great European footprint. And having in mind that the first half year was characterized by still a lot of corporate actions on the group level with the merger of the FIRO, with the introduction of a new management with the FIRO, with the implementation of further synergies, we are absolutely satisfied and thankful to our people for this great work that resulted in these record figures in total. And with respect to the major events that we had, as I said, not only the finalization of the merger of Defero and Flatex Bank to Flatex Defero Bank AG, but also launches of various numbers of products and services, including first and foremost, the ETF and saving plans at zero fees. We have improved massively and are continuously improving with respect to ESG. We've been now just recently analyzed and rated and have managed to be rated on the top 10 of our peers with respect to our ESG setup. With respect to the further products and services, the main point is obviously to mention the introduction of early and late trading all over Europe that we have announced, which will, by the way, go live next Monday to all our 1.7 million clients. as well as the introduction of the European ETP partnerships, which are expected to go live in the third quarter. Another point that we would like to mention is the AGM that we have done successfully and that also supported us in the voting for the stock split that should also happen during this quarter. This as an intro, let's go into facts and figures. I mentioned a rapidly outgrowing structure and strategy. We've managed to grow in the first half year our client base by more than 40% to 1.75 million clients. We always said that this is for us with respect to our long-term vision and long-term mission, the first and most important metrics. It is customer growth, and it is transaction settled. We know that on the way there, there will be quarters that will be awesome. There will be quarters that might be weaker, and especially given the business model that we are all having, which depends very much on seasonality, and we will show you in a second also the seasonality structures. We truly believe that with an increasing number of clients and the sustainable trading activity over the next five years, we will manage to reach our long-term vision or mid-term vision, the vision 2026, and we'll manage to translate this commercial success in even stronger financial KPIs over the next years. If we have a look on our outgrowth over the last 18 months, you see that in each and every single month of the last 18, we managed to outperform our peers. And again, this is for us the pure evidence that we are going exactly the right direction, that we have implemented and are implementing exactly the right measures to continue this growth path. And what we also see is that obviously certain movements in the market will support us sustainably to outgrow our peers. Especially to mention is that this outperformance has nothing to do with fortune. It has also nothing to do with that we are doing things better or that we are smarter. It has to do with our clear strategy to be a pan-European player and a pan-European European player that has a unique European footprint. So that is the reason for our success. And rest assured, we are currently investing also into the future growth. We will continuously invest into our future growth. I've always highlighted that we will not judge our business on a financially quarterly basis. We are having a very clear ambition with respect to our growth story, and this is what we are absolutely going for. The seasonal patterns that I mentioned obviously impact short-term development, and in both in number of trades as well as in number of customer growth. Q2 has always been the weakest quarter. And I was quite surprised about the recent weeks when competitors and peers published figures. There was so much discussion about the weak Q2, where I have to say, this is a seasonal pattern that we are seeing for decades. Now, we have just gave you the numbers 216 to 290 that show very impressively how significantly weak usually Q2 is. And this is why we are absolutely not surprised about the fact that Q2 was weaker than Q1. Q1 is usually the strongest quarter together with Q4, especially or also given that we have in Q2, especially in Europe, a lot of bank holidays and vacations that result in slower growth, both in terms of clients as well as in transactions. So again, we were absolutely not Surprised by by the fact and the results if we were we were positively surprised about the results of h1 given the recent Growth speed and additional expenses that we have over the recent months and quarters As I said the very important point is to translate and commercial success, commercial KPIs, also into financial success and financial KPIs. We have reached, in H1 2021, our all-time record in EBITDA margin with almost 48%. Coming from the recent quarters, somewhere around the high 40s, but we never made it to 48%. Yes, we were also here expecting a slightly higher margin, but we're very well aware of the fact that there are one-off and one-off expenses. As I said, we had a lot of corporate structural changes in the company over the first six months of the year that we have digested. And we were discussing to make an adjustment to EBITDA, but we always promised that the adjustment to EBITDA will be very straightforward, will always be only related to the long-term incentive plan, and any one-time one-off personnel expenses. This is why we have not adjusted any other items, but I'm happy to explain in detail what other costs were involved during H1 that we don't expect in the future. The first one, and one with the highest impact, was that we have grown the employee base with all in all roughly 100 more employees since or over the last six months. This has to do obviously with the growth, the massive growth that we have achieved. As you remember, I always said per 10,000 clients, we need something around one, two people, additional people. So we did in total more than 500,000. So 50 times the two people ends up with 100,000. additional employees. This is what we were expecting and what we were facing. And thus, these things, these type of costs were not adjusted for because they are sustainable and will continue, but will have a big effect, a big positive effect on the profitability going with the economies of scale. We're continuously also winning the right class. And you all know this discussion about, okay, it's important to win a large number of clients, but more important is to win the right quality. If you see what type of clients we have won over the last six months, you see that we are facing exactly and targeting exactly what we are preaching. The first and most interesting point is that we managed to increase winning more and more female savers and investors. So the share increased from 13% to 17%, which is a strong figure for us, especially because it's one of the most underserved demographic in the European market of female savers and investors. Given the fact that 50% of the population, even more, is female, this is something that the market lacks of. and where we will continue to focus on targeting these young professional ladies, young professional women in a mature profile that also become more and more financially independent and are finding themselves in a situation where they have to decide where to invest long-term to end up with us. But you see it also with the assets under custody. With 40 billion euros assets under custody, we have roughly 25,000 euros per client sitting with us in cash and in securities. If you compare this to many, many, many other brokers, especially the big, big discussions about NIO brokers, you will see that we are carrying three, four, five times of what these players are carrying. And this is a very, very important metric with respect to sustainability. The bigger the account sizes, the more sticky the clients are. And I usually said that new brokers are great for us because they create awareness for the market and tend to act as incubators for the more, let's say, affluent brokerage clients. And this is what you have seen also with many of the brokers. I think it was included also within the Robinhood IPO papers that most of the clients, most of the churn is churned with high accounts, with big accounts. And this is exactly what happens. People used to start maybe with these neo-brokers, end up to develop themselves, their accounts get bigger and bigger, And then they find themselves in a limited environment. So they have to do this additional step to go for further products or further services and end up then with brokers like FlexX DeFiro. So we are happy to continue our path to win clients in the right sector with the right demographic average. This is what you see on the right-hand side. As I said, AUCs of roughly 23,000 euros, annualized trades of 71. 70% of the population that we won was in the sweet spot that we have given to ourselves, 25 to 55. Almost 60% with previous experience in brokerage, as well as higher education. And this is also what you see, what we have amongst the most named professions. I touched this point, what expenses did we have that we did not adjust for, but that we actually have digested through the P&L. I started with the operational personnel expenses, yes, mostly coming from the consolidation. On top of that, we increased the FTE number by slightly above 100, given the strong growth that we had and that we expect over the future. and additional top hires as well to continue developing the stability, the compliance, the fast execution in our systems and in our growth. This ends also up that we grew in areas like marketing where we will continue to focus on given the fact that we are aiming for four, five, six core markets additional to our domestic markets that we have to play and that we will play over the next six months very, very significantly. However, the growth was very cost sensitive. So the average personnel expenses did not increase in general. It's still very moderate. at below 40,000 euros per FTE in average. So you see we are growing, but we are not growing with high expensive people. But as I always said, especially in the area of service and customer support levels where costs per se are usually lower than on the high end with IT people or risk people, where we have had only super moderate growth that is not really reflected in the figures themselves. On top of the personnel expenses, we had some one-off other admin costs, not only coming from the consolidation, but especially from the corporate structural changes that we had in the first half. So all in all, we were at roughly around 3 million euros in other administrative expenses. resulting from mainly the consulting for the merger process that we have between DeGiro and FlatEx Bank, as well as to a certain extent provisions for potential claims coming from the federal court decision with respect to historic changes in pricing, et cetera, which is Yeah, relatively low. All in all, all these one-offs were roughly 3 million euros. On top of that, we spent almost 10 million euros more in marketing with massive client acquisition costs. We brought it down to less than 35 euros, which I would say show how great our marketing team is operating. and that the marketing strategy is absolutely the right way to continue with and that will support us in the massive growth during the future quarters and half years. Coming down from more than 100 euro client acquisition, so savings of more than 60, 70% down to 35 euros is exactly where we want to go to. Our internal guidance was always below 50 euros. First half was below 35 euros. Shows what excellent job the colleagues are doing and where we are heading to. And yes, we will continue this growth, as I said, especially by implementing additional services and products during the next month, as well as increasing marketing campaigns with an ongoing... low CAC view in all European countries, especially with the Tradegate introduction now, we will start a big European campaign that will support the growth during the second half. And despite all the high growth investments, we managed to increase the profitability. I think this is something that we have all together keep in mind. We are an absolute growth company. So if we would rest on our laurels and would say, okay, we don't want to spend any more that big marketing, saving 17 million Euro in marketing would result in a 70 cent EPS growth, which is absurd because we have a growth case and not a value case. So those are the things why, again, we will not continue to focus on quarter by quarter financials. We have a very clear long-term vision. The long-term vision is driven by customer growth and by customer activity, both on a very moderate and very reasonable expectation. And on that way, there will be in some quarters higher marketing spends and other quarters lower marketing spends. So again, the long-term vision on the EBITDA margin is a 50% plus on the shorter end. On the longer end, it's a 60%. plus EBITDA margin expectation. Last but not least, between EBITDA and the EBT, we had as well increasing depreciation and amortization. This results from, here again, one-off write-offs on intangibles that we don't use anymore and other adjustments that we digested via the P&L, often total two and a half. million euros that are sitting in the DNA that we will not see over the future anymore. Per se, the DNA increased. Obviously, it increased because we have the first-time adaption of amortization on identified intangibles out of the deferral purchase price allocation that kicked in now the first time for full six months, and thus has also an impact on the P&L results. With respect to the LTI, the long-term incentive provisions that are mainly determining the adjustment of the EBITDA, the LTIP that is based on a stock appreciation rights program, as you know, is based on stock price development, 50%, and 50% on the EPS guidance and EPS growth, the expected one that we apply in our evaluation models. The growth in this item results obviously out of the growth in the stock price coming from 62 euros end of the year that was used to value the model up to 117 as of June 30th or June 29th. This stock price growth is reflected in the higher provisions obviously as well as The change consensus for 2023, when the plan starts to become exercisable, and since the plan is depending 50% on the EPS growth, you can see that we have provisions to build the model based on relatively high EPS expectation, since we are convinced that we are going exactly that way with respect to the EPS. All in all, roughly two-thirds of the provisions have already been built based on the fair value as of June 30th, as I said, based on a stock price of roughly €117 and to condense with EPS for 2023 of more than €6. We are continuously highly convicted to reach our full-year guidance. If we would just continue as we did in the first half, we would end up with respect to number of clients in our guidance at the upper top of the guidance even. And we are very convinced that we will continue the strong growth that will ensure that we will meet both the guidance and number of clients as well as the guidance in number of transactions. We see absolutely no reason why we should change that. It's actually the other way around, given the fact, as I said in the beginning, that Q2 is the weakest quarter, assuming for Q3 and Q4 growth quarter by quarter. We are very convicted and highly convicted that we will continue very successfully in the next half year and reach also all management guidances. Yeah. As I said, P&L is always a question of what else did we have, for what did we adjust, what did we adjust, what did we digest via the P&L? For us, one of the most important figures is that we generated in half a year more than 80 million euro of operating cash flow, which is two times what we have achieved in the first half 2020. Our net cash position increased to 180 million euros, and I think this is also something that a lot of people forget, that we are operationally debt-free. We don't have any debts, any long-term debts, nor any liabilities against banks coming from non-operational debt. So that we are also very convinced to continue this operating cash flow growth for the next years and next half years. And again here, if we would double this, we would end up with something around $170 million. $170 million in one year of operating cash flow. If you would multiply this with five, we would, so assuming that we would have no growth at all, we'd end up over the next five years with almost 850, 900 million of operating cash flow accumulated. You know very clearly what our ambition is over the next five years. And given the growth that we expect, again here, we feel highly convicted to reach our operating cash flow, the accumulated operating cash flow target over five years that we gave out of 1.5 billion plus. Seeing that this goes absolutely into the right direction, It gives us a high confidence in the steps that we entered during the last quarters. Important milestones, yeah, we touched on that, the early and late trading, the introduction and rollout of the European EPP partnerships, and new marketing campaigns with Defero and FlatEx. So these things, they will kick in now in Q3 and will generate obviously also profitability and growth in the second half and going forward. Keep in mind that we are starting now in the second half with two major synergies. The one flow synergy from which we expect the high profitability contribution will only kick in in Q3. It took a bit longer. This had to do with the merger, with the hero that we wanted to finalize first, the merger before we implemented. So four weeks later than expected, TradeGate is starting. A bit later than expected, the ETP partnerships will start. But they will both start very soon and will start to contribute additional profitability and additional growth. And this is a further point why we are absolutely convinced that Q2 was rather an exception than the rule. With H2, so in the second half rather than Q4, we will start the next trading app, Next 3.0. And as we have indicated as market leader and as an online broker, we absolutely have not only the responsibility, but also the job to educate more and more people in Europe. First, we will have a very high class documentary across Europe that we will use as well. for marketing purposes to prepare people, to give them a better understanding of the financial markets and financial investments, and to educate less experienced potential customers. Yeah, we spoke about TradeGate, the early and late trading. You see what impact it might have. This is what you see here. share of early and late trading and FlatX equity trades. So with the FlatX brand only because with DeFiro we haven't had it before. And you see like what number of trades, especially in the late trading and the early trading, we can expect in the future. This applied to more than one point-ish million clients with DeFiro gives us a very, very strong upside potential on the transaction base. that we expect to kick in then starting in the second half and then in a full year swing as of 2022. The marketing push has also been discussed and starting now also the football season again as of mid-August with Borussia Mönchengladbach and the shoots and commercial ads etc. We expect here a growing a growing number of clients compared to Q2, as well as an increasing interaction between clients and broker, so higher trades. All in all, again, we feel very, very comfortable with the next quarters, so that we can continue also with the products Flatex Next 3.0 from push to pull should exactly fit into this marketing campaign and marketing strategy of winning more and more clients, of educating more and more clients. We know that our platform so far is very robust, very stable, very good, but we still see potential to reduce the complexity of these apps and to allow clients much faster, much more direct to go into long-term savings and long-term investments, combined with the zero-fee ETF schemes, combined with TradeGate, we're absolutely on the right track. The high-cost documentary, The True Stories of Investing Powered by DeFiro, will be launched at the end of Q3, beginning of Q4, and will, as I said, be broadcasted all over Europe, mainly in our growth markets and the underdeveloped G7, So that we will have a 360 campaigning in all big countries to continue supporting us, conquering market leadership after we have reached it in France, to continue with Spain, Portugal, and Italy. Yeah, the outlook for 2026 has not changed at all. Seven to eight million transaction, sorry, seven to eight million customers, 250 to 350 transactions. Revenues of up to $1.5 billion in accumulated operating cash flow of more than $1.5 billion with adjusted EBA margins of 60% plus. Again, nothing has changed on that. Nothing has changed on the short-term guidance for this year of 2.2 million clients and 90 to 110 million transactions. Yeah, that's it from my side, giving you an overview of the latest results. I'd like to make use of the next 30 minutes to allow for questions and to deep dive maybe into one or the other question.

Dear ladies and gentlemen, we will now begin our question and answer session. If you have a question for all speakers, please dial 0 and 1 on the telephone keypad now to enter the queue. Once your name has been announced, you can ask a question. If you find your question has been answered before it's your turn to speak, you can dial 0 and 2 to cancel your question. If you are using speaker equipment today, please lift the handset before making your selection. One moment, please, for the first question. We have a first question. It's from Robert DeLuca, Goldman Sachs. The line is now open for you.

Hi, morning. Thank you for the presentation. I have a couple of questions. One is actually on a number of your reports, the revenue per transaction. Can you give us a bit of an overview of how that's developing and, I mean, if we back calculate the numbers from what you've reported today, it's below the four euro target. So we kind of want to understand how it's developing and when you think you can reach that level. And then the second question is, I hear your point on second quarter being a slower quarter every year. Can you give us a bit of a sense of what your expectations, first of all, historically, how that gap has been on a quarterly basis? And if this second quarter is significantly different from previous years, given, I guess, the high volatility of the first quarter, and then kind of a bit of a reiteration of what your expectations are for the second quarter, obviously, sorry, third quarter, obviously, having summer months, if you expect any kind of further slowdown there. Thank you.