flatexDEGIRO AG

Thanks for joining our today's Q3 call. Let me start first by discussing our growth in the last quarter. We had a quite strong Q3, very satisfied Q3, very much in line with what we have expected and what we have communicated also in Q2. respecting back then a stronger Q3 than Q2 in terms of client growth, the acceleration in client growth, as well as in improving our margins on a holistic level. We managed in Q3 to grow to 1.9 million clients, which makes us coming very close to the lower end of our guidance of 2 million clients for full year 2021. So there's 100,000 more clients to win in the last quarter. And we started very well into the Q4 so that we expect in November to welcome our 2 million clients. The growth compared to last year, same quarter, is now at roughly 64%. So we grew our customer base by two-thirds. which shows also the steady growth of Latex de Giro and the successful growth path that we had over the recent 12 months. Also compared to Q2 2021, we achieved a customer growth of roughly 9% of 8.6% quarter on quarter. I think it's very important to put this into a bit of context to illustrate what this number literally means. because some could argue that it looks relatively low. But if we would continue exactly with this growth speed of 8.6% for the next quarters, it would literally mean that we will reach the upper end of our vision 2026, i.e. 8 million customers already at the end of 2025. I think this is a very great opportunity success that we achieved over the last three months by focusing very strongly on our strengths, by starting also a couple of marketing campaigns, by repositioning also our market communication and marketing communication with both brands, FlatEx and DeGiro. If we look into the settled transactions, we did in Q3 18.2 billion, which is 32% higher than last year's same quarter. I think it's important to note that the volatility last year's same quarter was much higher than this quarter. We see a further normalization of volatility, which we actually previewed in our Q2 call. And I highlighted it that we expect that the trading activity will go back to a normal environment where clients do an average between three to four transactions per month. So we're talking about 40 in average per year. This is exactly what we saw also in Q3. This is very much in line also with the seasonality that we have seen historically for Q3. For Q4, we absolutely um estimates a higher activity again q4 is usually given the seasonality and history the much more volatile quarter so that we can expect also again a slightly increasing trading activity of the client base what is important um despite the uh the the drop between q2 2021 and q3 2021 is what we always have said, that the key focus for us as management is to win clients, to win qualitatively high clients, not only about math, but also to define our own business and our own philosophy by quality, that our customer growth literally overcompensated fluctuation in trading activity. And that we always have assumed that trading activity will normalize, But as a management, the clear duty is to continue to grow with clients, which we did very well in Q3 and which we expect to continue very well in Q4. If we go from the commercials to the financials, have a closer look to the financials, our revenues are slightly below Q2 2021 with 88.1 million euros. which is very much in line with the drop in the settled transactions, or the decrease in settled transactions. However, revenues didn't decrease as much as settled transactions decreased, and the result is that we managed, and we will come to this in a second, we managed to increase the revenue per trade, given also previewed discussions and previewed topics that we discussed in Q2. The adjusted debit DA is up 39% versus last quarter. Sorry, yeah, same quarter last year, up from 33.5 to 38.5 million euros. It's quite interesting also here to see how well we managed to increase the margins and how well we managed also to leverage synergies over the last 12 months. by increasing also our margin levels. Compared even to Q2 2021, despite lower revenues, we managed to increase the adjusted EBITDA by 14.9, so almost 15%. Just to remind you, the adjustment on the EBITDA is literally only the adjustment for stock appreciation rights evaluation. and one-off expenses that we had with respect to the merger of Gjiro. All in all, a very successful Q3 2021. We are very thankful and very humble in a turbulent time that we also saw to keep up the pace and to keep up the growth that we started this year. I mean, we always grew by 650,000 clients since the beginning of the year. and are very keen and highly convicted and confirm again, obviously, the four-year guidances that we gave out. And yeah, I'm looking forward now for the last, from now on, only eight, nine weeks until year end. As I said, we started quite well into the Q4. And let's go into the next slides and see what we did in the past and what is ahead of us. As I said, if we look into our accelerated organic customer growth over the last two years, we see a steady, strong growth year on year. So over the last 12 months, we have achieved 64% of growth in the customer base. We have thus led our whole business to face where we became literally Europe's largest online broker. When we started last year, or actually when we started, when we took over DeFiro, we were literally somewhere around, I think, rank eight in Europe. And in less than two years since signing, and only less than one and a half years since closing, we managed to take the pole position online. in Europe with respect to number of customers as well as number of transactions. Let me use that moment to thank everyone in the company, all our employees, all our stakeholders and supporters, all our investors for the trust, but also for the hard work that was put in over the last 18 months and especially the efforts that our colleagues put in and in a very tough time surrounded by all the COVID stuff. and developing such a beautiful business model and such a successful business model, despite all the difficulties, despite all the challenges we had externally imposed. We did super well, are now at the pole position, and now it's about to lead the race and to continuously lead the race, to widening the mode, and to show everyone that it's well-deserved to be number one But as always, it's sometimes easier to become the number one than to stay the number one. So this is what we are now focusing on over the next years. As I said, much more important is that we continue to outgrow all our major peers, both in absolute numbers as much as in relative terms. We outgrew again in the nine months number two and number three in Europe. even together, which is again a very, very strong development. The market growth is obviously for some of these players limited because they are operating only domestically. Our community is Pan Europe. We are in 18 countries operationally active, which allows us also to penetrate totally different markets. Having a centralized system, IT system and own house IT system and this 100% more or less verticalized business model operating all these 18 countries out of literally three countries gives us a massive strategic advantage that we will continue to roll out over the next quarters and years. In 2021, we will even outgrow our own record of the COVID year 2020 already after nine months. So I can even say that in October, Literally, we met the 75 million plus trades. So as of today, we already have outgrew our last year trades. Again, keep in mind, despite the massive volatility that we had last year, so massive trading activity, which I think shows everyone what achievement that is. in 2021 with less volatility after less than 10 months to actually beat the trade size of last year. The gap is widening to our peers. So we will continue to widen this gap. As I said, we'll continue to widen the modes around our castle and our setup. And this is what we are now focusing on going forward. normalizing trading behavior i mentioned it we have previewed it in q2 already we said that the trading activity in q2 and q3 uh will go down will normalize back to levels of 40 trades on an annualized base on the quarter um this is literally what happens um again absolutely as expected But as I said as well, Q4 and Q1 are again, then the turbo quarters usually, um, in the brokerage business so that we can assume for Q4, um, a slightly higher activity and in Q1 as well. Um, we're well prepared, um, for, for these upcoming now five months, um, both in both terms and trading activity of our existing clients, as well as in a customer growth. Um, I think it's also obvious that we expect to beat the growth of Q3 versus Q2. Also, given that we have increased our initiatives, our product initiatives and our marketing initiatives, we will come in a moment to that and go a bit into detail what we have started and what we are going to start. We are well positioned with our pricing, with our super low fee pricing that we have. with DeGiro all over Europe and our key pricing that we have in our core markets, such as the Netherlands, Germany, and Austria that are for us, so to speak, the cash cows that allow us also to grow into these new growth markets like France, Italy, Spain, Portugal, and so on and so forth. The LTM revenues. almost doubled since Q3 2020. Yes, indeed, and obviously due to a higher number of transactions. But also very important to see is that we always said we want to try to keep and not to dilute too much our revenues to trade. We knew that we have started in the beginning of this year and last of end year, actually in Q4 2020. We started some marketing campaigning that were obvious to have a dilutive effect on our revenues, especially in the first and second quarter of this year. Most of you might remember at the H1 conference call that I said we will see again a pickup in revenues per trade. in Q3 because what we offered back then in Q4 2020 and Q1 2022, and until today actually, to offer especially flat X clients, which is by the way, the market with the highest revenue per trade, to offer these clients the first six months zero fee trading will have a dilutive effect on our total revenues per trade because you literally reduce your average revenue per trade from from six to seven euros down to literally zero this will have an overall impact this is exactly also what we saw in revenues per transaction um that we have achieved in q3 2021 ltm the highest revenues per trade and we will continue to achieve high revenues per trade especially given the mix yes we are going to grow in markets with very very low fees That means that it will dilute also the revenues per trade over time. But again, here we have a very clear strategy with respect to our pricing. We see a high level of profitability, especially given the beautiful leverage and scale that we have with our system and with our platform. So we can afford to dilute somehow to a certain level our revenues while increasing our margins with customer growth and trade growth. I think a very interesting KPI is the ARPU. You see very clearly that we managed over the last 12 months to keep it relatively stable. For sure, in Q3 2021, you see a slight drop. This has to do with the fact that in Q2 and Q3, we had obviously a massive number of clients that came out of Q1 while trading activity was going down, so that you have a smaller numerator, but an increasing denominator, which results then also in fact in lower ARPUs, but still achieving 280 euros of annualized revenue per client is one of the market leading ARPUs that you would find in online retail brokerage. The phasing out, as I said, of the zero fee campaign Q4 2020 and Q1 2021 is the key driver for the higher monetization. In the same time, I'd like to highlight also that our retention rates, the high retention rate, still maintained. Even after nine months, the retention rate of our clients is at 98% plus, so the churn is absolutely low. We are winning the right clients. we are losing the right clients. Let me put this also very clear. Most, I think most of our churn in terms of clients is less than 2%. In terms of revenues, we are talking of less than 0.5%. So clients that leave us are usually inactive clients, clients that stop trading for whatever reason, or maybe go somewhere else. Yes, for sure. The key point is not to lose your good and your great clients. This is exactly what we have achieved. With respect to the ARPU, again, I don't want to compare it. I think you all can do the comparison to many, many benchmarks and peers all over Europe or even globally. If I'm not mistaken, we're generating today in ARPU, which is in the last 12 months, which is four to five times higher of some big names that are going around in online brokerage. Purely and mainly out of classic retail brokerage without any crypto revenues. If we look into the profitability of our business, we had in the full year 2020, 114 million adjusted Avid DA. are already far above that adjusted EBITDA level after nine months, to be precise, by 32 million, achieving still very, very high margins. Again, the high margins for us are important to show the profitability of our business. Despite lower trading activity, despite increasing marketing spend, And despite many one-off effects in connection with the DeGiro merger, mainly in Q2 2021, we are outperforming our own benchmark. And this again goes back to a high scalability of our system, to high economies of scale that obviously start also to come in place more and more. And very often we all forget that the DeGiro transaction was only closed 14 months ago. And as I said, we are very humble and thankful for the development we had over the last one and a half years, especially if you look into the value creation in the company. But let's not forget it's only 14 months ago. It needs some time. It was a big merger for us. We doubled the number of employees. We had to bring cultures together. We had to bring systems together. We had to bring products together. We have to handle and to manage two different brands. We have to handle now 18 markets. So absolutely, I can speak for myself and for Frank, my CEO. I can absolutely say we are absolutely proud to what the team is actually bringing every day to the table and going through stormy weather over the last one and a half years. So profitable and so strong. So, yeah, I was saying about the milestone that we have achieved over the last 14, 15 months since we closed the transaction. And again, we only merged six months ago. It's literally exactly six months ago. We have introduced with DeGiro the early and late trading across Europe, which is a very, very strong step. We already have every month a high six-digit number of trades going to TradeGate all over Europe. So it was absolutely the right decision to bring this product live to the market and to clients to retailize the capital market access, to allow people to trade before nine in the morning and after 5.30 in the evening. A very important step in our strategy and in our mission or to reach our mission. We introduced only four weeks ago Next 3.0 from pull to push the new FlexX app. By the way, also something I'm very proud of, especially proud of the team that they have put up a product that on the app stores enjoys one of the absolutely highest ratings of all financial services products, even higher than many of the competitors and peers and neobrokers that usually understand UI and UX as their USP. Our team, literally our people, are setting up products that are performing and rated much, much better than many, many, many others. We have now, and we are currently in the introduction of crypto trackers that will become available on Flatex and the Dehero platform. We are currently rolling out the products and are setting up the scene to inform our 2 million clients that they can trade now crypto ETFs and ETNs, both on Flatex and Tejiro, which is the first step in our crypto strategy. As we said, we don't consider it as a market driver, as a growth driver per se. It's going to be a first step of our virtualization. Our key and core focus will continue to be on the classic retail brokerage, so European and US stocks, ETFs, mutual funds and our etp products but we see a high demand by clients for these products all over europe we see the availability um by the the given and listed um trackers so uh this is the first step to allow our client base to trade um cryptos and crypt sorry crypto trackers uh without opening an own wallet without opening an account with with any third party crypto brokers and to participate immediately on the development of, if I'm not mistaken, two or three different cryptocurrencies, which is Bitcoin, Ethereum, and there's a third one. Yeah, a corporate structure measure was the stock split that was executed to further increase the liquidity, which was also an important step for us to make as a broker with the philosophy and the mission to retailize capital markets to make our own stock more investable and to further increase the liquidity. This is going very well so far. Coming to the upcoming initiatives, we are launching this month the ETPs on a European scale with DeGiro. We will launch the ETPs offered and issued by BNP Paribas. and Societe Generale, the two European leaders of ETP products to our client base in Europe. A big step for us. It's the second product that we literally cross-sell from FlatEx then to DeGiro after the TradeGate offering to have then now the ETP offering. We'll continue to build on our educational marketing approach by having a high-class documentary currently being finalized to be broadcasted all over Europe and sponsored by Dechiro and Flatex to continuously educate the 280 million non-brokered clients to explain to them what brokerage is really about. It's not about to trade 500 euros in GameStop in and out, but about much more to prepare for their own retirement, for their own pension, for their own dreams, To put more in focus, we have an environment that is heavily driven by negative interest rates. We all are experiencing that. Alternative assets like real estate are becoming more and more expansive. We see still the capital market as one of, actually as the most fungible market for long-term investment. And this is something that we will highlight in our documentary, as I said, that will be broadcasted very soon. Last but not least, we are now, as I said, in the Q4, preparing also for Q1. So these two quarters will be strong quarters in terms of marketing initiatives, marketing campaigns in all our major countries. We are preparing a lot of ideas, a lot of stories that we are going to tell to our clients and to hopefully potential clients to make them more and more attracted to capital markets and by allowing them unique access to capital markets that many, many, many others cannot. I again and again would like to reiterate, we offer mainly top tier exchanges for our clients, no weird market makers, no intransparent pricing, no this and that. It's about clear structures, clear products, clear exchanges, allow clients to trade at tier one exchanges, NYSE, NASDAQ, Cetra, Euronext for as little fee as possible. And this is absolutely the strategy that we'll continue with going forward. I think we're coming to the end of my presentation. Again, a big thank you for listening. A big thank you to the team in the name of Frank and myself for the great achievement. We're looking forward to continuing this growth, this potential. And as I said, now it's about, before we were the followers, the chasers, now we are the pacemakers. I feel super comfortable with this position. I'm looking forward to having the thousand colleagues with us to provide the best possible results going forward that we can. Thanks a lot. I'm happy to hand over for any questions.

Our first question is from Manson from Deutsche Bank. Please go ahead.

Hi, thank you very much for taking my questions. So two questions from my side. The first one is the customer growth base. So you mentioned that you expect to achieve the 2 million customers in November. So would you mind to share with us the first side of October and November development in terms of customer growth? And when exactly do you expect to achieve the 2 million customers in November? So at the beginning of the month or mid or end of November? And the second question is on the crypto tracker. So do you mind to elaborate a little more on the monetization opportunity for these products? So are these charged as the same way as the equity products, or are there any additional charge on that? Thank you very much.