flatexDEGIRO AG

Good morning, everyone, and a warm welcome to our preliminary earnings call 21. Today, I'm very proud to show you very impressive KPIs. Not only that revenues were up 60% last year, both EBITDA and client growth were up 55%, but the most impressive KPI last year was that We increased the revenues per trade, especially in Q4, and that amounted to 5,22. Why is that so important to highlight? I think it proves that the zero goes zero. Our very massive initiative, which we started last quarter, last year, proved to be right. For those of you who might not recall exactly what we did, we lowered the fee in 18 markets to zero. and we increased at the same time the FX margin by 15% and that proves now that profitability per trade is going to increase. But I don't want to talk too much about the KPIs because I leave this to Mo and he will show you much more details in the following presentation and today we try to increase a bit the possible transparency However, I want to take the opportunity to talk about two very important strategic projects. But before I do that, please allow me to just mention the situation and the impact of the war in Ukraine to our company. First of all, we employ 40 different nationalities among our employees and obviously people from Ukraine. We are very happy that there's only a few people from Ukraine who have indirectly been impacted. None of our employees have directly been impacted, whatever their family and roots in the Ukraine. And we've started several initiatives to help our employees. We've donated money. We have given a budget to the voluntary committee of employees who help at the border. And we try to support refugees and offer shelter and help wherever it's possible. Needless to say that we condemn this war and obviously hope that it's going to come to an end as soon as possible. Business-wise, we can be lucky that there is no serious impact on our business. Why is that? There's only very few Russian clients. There's only very few trades and products relatively speaking so to comply obviously with the sanction and execute the sanction does not have a serious impact on our business so this is the good news however you all know the war leads to volatility and obviously volatility does benefit our business model however We hope that this war comes to an end as soon as possible. And no negative impact so far to our business. Again, we're going to monitor it closely and we hope it's going to end soon. Now let's move on for a moment to the very important strategic projects. Needless to say, we've last year focused on the merger of DeGiro. and the good news is we've harvested 80% of the low-hanging fruits. However, there's 20% left, and this will keep us busy the next couple of quarters in this year, and we find that right. However, we are working also on two new strategic projects. One is robo-advice, and the other is cryptocurrency. And here, there's always a discussion about make or buy, And obviously we are focusing on entering into partnerships in order to do not lose time to market and to speed up things and to make sure we don't increase the risk level. So I'm very confident that we will publish news to those two projects in the next quarter. Please keep cross fingers that everything goes right and we can give you more details on that. So beyond organic growth and the 20% left low-hanging fruits with respect to the digital merger, Oboe Advice and cryptocurrencies are the new two projects. So that's so far from my side. Now I'm happy to hand over to Mo. He will shift gears and run you through very comprehensive and detailed and transparent presentation. Please enjoy the presentation. Mo, the floor is yours.

Thank you, Frank. Good morning, everyone. Great to have you on this conference call on our preliminary results 2021. Yes, we have taken your feedback serious, and mainly I'd just like to highlight in the beginning that we tried to increase now also transparency with respect to many KPIs. I think some of you will be very happy about reading more details about certain things, which we will start as of now. I think also this is what I and we always promise to you, that we will work on these things, that it takes some time. at some time, especially after the reorganization and transformation with the Jiro merger. I would suggest let's jump into the KPIs, into the numbers and the slides to get here the explanation for 2021. It is very important to highlight, it was a tough year. mainly driven by COVID the first 12 months or the whole year actually, despite every now and then some light at the end of the tunnel that very quickly flipped into lockdowns and again issues. Nevertheless, despite having a transformational year, we managed to outperform on all key metrics, We have published the customer accounts growth and we have published the transaction growth. What we are publishing now is one important metric, the assets under custody that increased by almost 38% to 44 billion euro assets under custody. Obviously driven by two things. On the one hand side, the customer growth per se that provided us and contributed more assets under custody. But on the other hand side, what we also saw is that during 2021 and the trade pickup, more money inflow was recognized during the year. More trades, more assets under custody result also in higher revenues for 2021. We've achieved $417.6 million in total revenues, which is an increase by 60% compared to 2021. I think we always have to remind ourselves that 2020 was already a highly volatile year, a very profitable year for us, but we are very thankful and very proud for the work that has been put throughout the year 2021 by our colleagues into the business to take the further step and to increase our revenues by 60%. The marketing expenses ended up to be at 46.1 million euros. I've indicated that in the call when we have published the commercial KPIs that we have spent more than 45 million euros in 2021. ended up to be 46.1 million euros. The increase in marketing is obviously determined by the client growth of the customer accounts growth. That's one part of the marketing story. The other part is that, and this effect kicked in mainly in Q4 2021, are the expenses that we had for production of documentary, for the production of the documentary that we have broadcasted all over Europe together with Discovery and are now streaming it also via Discovery+. It's been a very, very important project for us, and we will also enjoy the footage of this documentary for all future marketing campaigns. So in total, the documentation costs plus The ad space that we booked mainly in December 2021, also for Q1 2022, amounted to 5 million euros. So there is a special effect that kicked in in Q4, so second half of the year, with respect to marketing expenses. Nevertheless, if you would take the whole 46.1 million euros and to divide them by the customer account growth, which was gross 750,000 clients you will see that we managed to continue a client acquisition cost in average of slightly above 60 euros as we always said the benchmark long term is 50 euros plus minus 20 percent depending on how we spent the money and where we spent the money a second effect on the marketing expenses as well to notice is that in the second half we have increased um to win clients in uh in germany and austria so with the brand flatx compared to the first half uh in the first half the flatx uh growth uh contributed 14.8 percent to the total growth um whereas in the second half it was 22 so winning more clients in germany and austria also means higher client acquisition costs. You all know this, that these two markets are relatively expensive compared to all other European markets, but they also contribute a highest ARPUs over time. So higher investment costs in Q4 for Germany and Austria, Q3, Q4, which should result also in higher ARPUs going forward. This results all in all in adjusted EBITDA pre-marketing of 223 million euros and slightly 177 million adjusted EBITDA, both picked up by significant numbers, the adjusted EBITDA pre-marketing up by more than 60%. So all in all, we can summarize that it was a very successful year, despite the transformations that we had given the DeGiro merger. We managed to get our commercials right and our financials right. We managed to continue our profitable growth path, again, which makes us very proud. And we are really, really thankful to all our employees that have contributed during tough times. a lot of work and a lot of support given the situation. Yeah, coming to the growth, the significant growth, I think a KPI that also surprised us after all our competitors have disclosed also their numbers. And I think it's also important to highlight these things. We managed to grow with FlatX DeGiro faster then number three, four, five, and six in Europe together. And very often, we ourselves don't really realize what speed and what velocity we are putting in to all our growth, but this is a fabulous result of the implemented measures and the implemented products and projects during the last one and a half years that we own Digiro. And that shows that this growth path is the right way to continue with. And we are looking forward to not being only Europe's largest broker, but also to continue to be the fastest growing broker in Europe. One new slide that most of you have not seen in this way is that we, for the first time, split up our supercapitalized business and the margin generation on our assets. Our total assets under custody, which amounted at the year end, as I said, almost to 44 billion euros. are split into two parts, 93% of the assets are securities, which amounts to 41 billion euros, and 7%, 2.8 billion euros are deposits. And for the first time, we brought this into a context to show what the margin generation on these both assets under custody is. On commission, we managed to generate 340 million euros, in commission income, which equals 96 basis points on every single euro in securities. The 7% deposits, this 2.8 billion, are split into two parts. They're of 1.5 billion euros in a liquidity portfolio, which is mainly held through ECB and Deutsche Bundesbank. I don't have to tell you what this generates, but it creates massive future potential for us. If interest rates will increase throughout the future, we would see a shift up of 100 basis points in the ECB rates. This would result in 15, 15 million euros more EBT and gives you a good feeling for the elasticity of this today. Yeah, more or less zero or even negative yielding liquidity portfolio. 1.3 billion euros are sitting in the credit portfolio, where off the vast majority is literally in margin lending products to our clients. We are continuing to maintain a very conservative approach when it comes to margin lending. The average loan to value is at around 33%, 34%. We only provide maximum 60% to blue chip stocks. So very restricted and highly collateralized, generating 300 to 500 basis points on this portfolio. It depends on the country and the brands. 16% are in secured, almost fully secured alternative investments that generate two to 300 basis points, which results in total to an interest income of 59 million euros or 242 basis points on our deposits. To give you a closer look, it's exactly what I've now told you. Again, shown a bit in a clear split and between 2020 and 2021. you see that the credit portfolio beautifully increased and mainly the margin loans that increased. Actually the secured alternative investments decreased. This is a clear strategy by the management that we have entered last year and the second half to say we will decrease the so-called byproduct of investments and we'll focus mainly on the margin loans and having this byproduct mainly in fully secured real estate assets. That is the strategy going forward. But the key focus is to continue to grow the margin loan product, which is a beautiful product, highly collateralized. And if you look into the credit losses, you will see why we love this product so much. In 2021, the total losses were at seven basis points. So one million of credit losses generating 60 million of interest income. We have included a couple of efficiency indicators to show also, again, the revenue by income type, the assets under custody by product, and the revenue margins by product. Again, here it's a deeper detail level to see how well we have managed to grow our revenues. Yes, that's absolutely obvious. But what we managed is to grow mainly our business in the very asset light area of commissions and even on the interest side, which you see here very nicely, we grew the interest income mainly on asset light credits and loans. especially on the margin loans that are carrying a much lower equity reserve building than classic mortgages or consumer loans or any other type of high solvency assets. So that helps us to continue to grow profitably and with significant margins without the requirement for millions and tons of millions of capital reserves. What we see as well is that the revenue margin by product grew over the last four years very nicely. We had a pickup obviously in 2020. This is due to the fact that the growth didn't kick in as much as in 2021, while the revenues were relatively high given the high volatility in 2020. As you remember, it has been in the history the year with the highest trading activity that we ever had. Yeah, since I'm speaking about trading activity, as you know, trading activity adds to the long-term growth but doesn't determine it. And also here again, we try to highlight a bit the discussion that we have again and again and again about what we expect where the trading activity will be. Obviously, no one can really say where we will have the trading activity over the next five years since it's a KPI that is highly correlated with macroeconomic development whether it's geopolitical situation, whether it's the interest in situation, whether it's the inflation situation. But I'm again here very, very, or I would love to be very, very clear on this. We expect and we benchmark and we forecast a very conservative trading activity of our client base. The orange line that you see indicates 40 trades per customer account per year. This is what we are planning with. Our vision 2026 actually indicates even at the lower end trading activity of less than 35 trades. And the blue area shows what I call windfall profits. This is the hidden reserve that we generate with our business model if volatility is higher than expected. What you see here very nicely is that given in 2020 and 2021, the high volatilities, we saw also here a shift up above our benchmark curve. For 2022, we almost assume that this will go over. Let's see the current market situation and circumstances obviously contribute also to volatility and trading activity. The revenues per trade. I remember when we had together the call in the first half and we discussed a lot about the revenue per trades and the drop in revenue per trades back then. The reason for the drop is, and we tried to highlight this in a lot of meetings and in a lot of calls, had a lot to do with obviously how you win clients. And if you remember right, One key reason was that we offered in Germany the first six months for new clients in Germany and Austria, sorry, for the first six months, zero commission trading. And I started with it when I described the marketing expenses. Clients in Germany and Austria, yes, are higher and more expensive to win, but they generate also higher ARPUs. So if you allow these clients to trade for free, you obviously are giving away a massive number of revenues and especially on the trade. What we have shown here is beautiful growth and a steady growth throughout the last four quarters. And the benchmark has always been for us in the Vision 2026, and we reiterated on that again and again, four euros. If we look into the last four quarters, we have managed to outgrow our own benchmark that we set back then of four euros significantly. reaching 5.22 in Q4 2021. And the main reason is, obviously, because all the clients that we won in Q4 2020, in Q1 2021, and in Q2 2021, started to pay for trades in Q4. And as the Flatex brand, in average, generates higher revenues per trade than the Jiro brand, this kicks, obviously, in. to our average revenue per trade across the whole group. What other upside potential do we have? Frank touched on this, the zero goes zero offering that we started only in December 2021 has not fully kicked in to the 522, but will have an effect onto the Q1 revenues per trade. Second, the ETP partnerships that we introduced only in December had also no time in 2021 to kick in, but will kick in in 2022. And the introduced early and late trading only in August 2021 had an impact already in the Q4 2021, which is also visible not only here on the big numbers, but also if you go into details that it picked up and supported the revenue per trades, but will continue also to support the revenue per trades. Long story short, we assume that the revenues per trade on the midterm will continue to be at levels that we saw, let's say, during the last two quarters in Q3 and Q4. Depending on the success, which we believe will be very clear and very significant of the zero goes zero, we will even see maybe here or there a pickup on the revenue per trade. All this growth and The pickup also in revenue per trade is mainly explained and characterized and the success of this business is characterized by its favors and investors, by its clients and client base. And we have seen a lot of brokerage companies across the globe that started with a brokerage idea and have turned out to be whatever they are, whatever business they conduct. Our clear strategy and focus is to be the place in Europe for savers and investors to shape their own financial future and to give them access to classic capital markets. And this is what you see here. The AUC share by product, 92% of all our AUCs are cash products, stocks and ETFs. And this is what we feel good with, and this is what our clients are feeling good with. And this is what generates sustainable revenues here. on the business. When you look into the revenue share for stocks, AUC split or AUC share equals almost the revenue share. It's also 68% of our revenues are generated with equity cash transactions. 23% are coming from ETPs. And if you look into the other, which include things like options, futures, CFDs, All these things that are having or are being highly scrutinized during the recent quarters and years are contributing less and less of our revenues and are held less and less by our clients. So a very sustainable setup for our clients, for our savers and investors that should also generate going forward very sustainable returns. Yeah, getting more into the quality of our customer base, and I think those are also slides that are, yeah, for most of you, or actually for all of you, rather new. Let's start with the cohort analysis that you know from our previous DACs. What we see here is the revenues contributed by the different cohorts. And we always had this big question, especially about the 2020 cohort. How sustainable is that cohort? Will this cohort not drop away because 2020 included so many clients that only jumped on because they had time and they wanted to trade maybe around, but they will go away after a year or two. I'm absolutely happy that our belief in our client base and the way how we win clients and the quality of clients that we win has been proven with these numbers. The 2020 cohort contributed massively to the 2021 revenues and shows how sustainable the cohorts are that we are winning across all the years in the past. And this is something that we also saw with the 2021 cohort that contributed quite well to the 2021 revenues. Again, here, let's see how they contribute to the 2022 revenues. What we see is that our clients are stably and significantly and sustainably trading with us and generating revenues. When we consider the activity of our clients, what we see is that throughout the last three years, so despite winning a lot of clients, the activity rates have increased. When we look into the share of medium active clients, so clients doing between 100, sorry, between 10 and 100 transactions, that client share increased from 40% in 2018 to 45% in 2021. which indicates again that we are winning the right clients. The clients that we are winning are not doing only one trade or two trades or three trades per year and then give up or they tried it out or are maybe betting on the wrong horse and losing all their money and jumping away. No, while the share of low trading clients from one to 10 has decreased by five percentage, four percentage points, the medium active client base grew by five percentage points. That is, in the end, also the focus going forward to try to win and steal market share in continental Europe from incumbents and to grow with clients who have a certain brokerage experience but are looking for the best possible product and pricing structure all over Europe. That is exactly the medium-active customer base that we are focusing on. When we look into the revenue generation across AUC cohorts, we've been discussing also here around especially smaller accounts, and the discussion always went into a point where we talked about that almost half of our clients has 2,500 euros and less on their accounts, by the way, which is 10 times more than what we see with most of the new brokers in the industry. The median there is usually around 200 to 300 euros. Our median is around 2,000 euros. What we see is, and more important than where the median is, that also the smaller accounts are contributing to the profitability of the Flatex De Chiro business. So to give you a reading example, 7% of our customer base has 200 to 500 euros AUCs in securities and cash. But this cohort that has 200 to 500 euros on their accounts still generates an ARPU of 44 euros. If you compare this to the average client acquisition cost that we had, what you would say is that clients below 2,500 euro in assets in their accounts or literally break even after a year. Which shows again, that also when we win clients with smaller accounts, we are managing these clients to trade with us, to have their ETF savings schemes with us. That's very often a reason why the ARPU is less, because they are not very trading active with stock picking, but rather have their ETF savings schemes that are more or less super cheap or even costless for these clients, and thus the dilutive effect on the ARPU. But it's important for us to see that these clients are active with us. This is a new chart that we have included also to give you an understanding of what type of clients are we winning versus what the AUC split is across ages. And what we see is mainly with increasing age, we see also increasing AUC developments. So clients are with us. We have a churn rate that is super, super low and thus explains the high loyalty and stickiness of our clients throughout many years. And we see how the portfolio sizes of these clients are increasing over years on the one hand side. On the other hand side, what we see is that the share of new customers in 2020 and 2021 is very, very similar to the share of total customers per age group. So we don't see here a big shift away from the average with respect to the last two years, which were, let's say, very much determined and characterized by a big move of very young trading clients. Again, here we see this move has not been seen with us. Yes, we see a little tick and uptick, a shift to a younger client base when you look into the peak of the yellow line, which is roughly at 26, 27 years compared to the average where the peak is rather at 29, 30 years. We see that it moved one, two years, but the peak was not at 18 years as with other, again, competitors and peers in the market. Given the fact that we will continue In the future and in the past, we always have focused on winning clients, as I said, that have a certain experience in brokerage and are from more or less day one accretive to our business. When we look into the revenue contribution across age, we see here as well that the older the clients get, the more revenue they contribute. And also, this is a fact why we are focusing steadily on rather clients in the age of 25 to 65 and less 18 to 25, because the revenue generation starts literally when you look into this chart at around 30 years. This is where the ARPU becomes 100 euros per client in average, whereas if you look into the 18 years old, you're at roughly 20 euros. So the add up is roughly 80 euros by just shifting your age focus by 10 years. And this is the clear strategy going forward to win clients that become very quickly trading active and revenue contributing to our business. And when you look now into the share of new customers, you see that we are managing to keep the curve at exactly that point where it should be, roughly 28 to 30 years where the revenue contribution, the ARPU, has a payback period of literally less than eight months. This is with respect to growth. With respect to the overall portfolio of our client base, we have added up some charts and some information to the customer activity. One important point to highlight is that the activity, so the share of active customers across the last three years, so since Q1 2019 until Q4 2021, has increased. over time. In Q1 2019, we had roughly 35% of the client base being active in Q1 2019, whereas in Q4 2021, we were at around 40%. When you look into the share of customer accounts with at least one trade per annum, so how active was our client base, you see that it grew by 10 percentage points between 2019 and 2021. which also indicates that you very often have situations where clients are in a certain year, not active at all, but reactivate in a year later. Long story short, having activity ratios of, in general, more than 60% is a massive benchmark, and again, describes very well the quality of our asset base. The number of trading customer accounts has literally increased from 250,000 to almost 800,000 clients. This is in absolute terms speaking. The trades per active customer account per quarter is quite significant. It's been over the last three years always about 20 trades per customer. So when clients are trading, when they are active, They do in general more than 80 trades per year. If you just take the activity rates of active traders and not the whole base. We added on top of that also the share of US volume. What we also see here very nicely is a shift up, a continuous shift up. If you would eliminate the outlier Q1 2021, which was the mean stock gain stop hype that we had last year, you would see a very nice growing curve touching now 20% of total volume going into the U.S. volume. As you know, we indicated always a trading volume of roughly 250 to 300 billion. If you take 20%, we are talking about 50 billion plus. This is what we indicated when we have disclosed the zero goes zero. that we do and estimate $50 billion of U.S. equity flow. I touched on this while I was speaking, retaining the right clients and losing the right clients. In 2021, we had a low churn literally on all metrics. We lost, in terms of customer accounts, 2.5% of our client base. In terms of churned trades, which is more important than only to look at what client or how many clients you lose, is to look into what type of clients are you losing. We churned 1.3% of our trades in the last 12 months, which is only half of the number of accounts. So what you see is that we are losing literally low trading active clients. And when we go into the annualized revenues, LTMs, of these churned clients and trades, you see it's only 1.1% of our total revenues. Again, the summary here is that when we are losing clients, we are losing literally the right clients and not clients that are super trading active or super profitable to our business so that it could end up in a harm for our structural development and growth. Yeah, that's literally it in information, data points, and KPIs. Before we get into the Q&A, I mentioned it with respect to our marketing efforts, especially in the Q4, the documentary. that has been a big success. We broadcasted it across Europe with great success. The success was so big that Discovery decided to take this documentary into the Discovery Plus streaming service. For us, it's a very important project to contribute to the education of the retail markets in continental Europe to attract more and more clients into the capital markets, especially given the situation around the discussions about inflation. One way to avoid inflation or to mitigate inflation is obviously to invest into assets and in the capital markets. So it's been a great success. I'm really thankful for the whole team that has contributed massively to the development of this documentary. We will make use of the documentary, obviously, in all our future market campaigns. So yes, a one-off investment that we did, but we will be able to enjoy a lot of out of the documentary going forward through 2022 and 2023 with respect to our marketing. And we truly believe as a market leader, we also have to contribute to the education, to the development of this market, and not just sit around and wait for waves to bring us clients. So, whoever haven't seen it yet, take your time. It's a four times 12 minutes documentary. It's on Discovery+, but it's also on our website, both on flatx.de, as well as on all the hero websites in If I'm not mistaken, six or seven languages. So Spanish, French, Italian, German, English, and Dutch, and a couple more Portuguese, a couple more. So feel free to enjoy a short and nice documentary about the true stories of investing. Yeah, that's literally it from our side. The financial calendar is available to you and here on that slide, but also on the website. End of March, we will publish the full annual report. End of April, we will come out with the Q1 results of 2022 and so on.

Yes, thank you, Mo. Before we're going to open up for Q&A, maybe one more important information. We like this documentary really a lot, and we are proud that over a million people in Europe have already taken the time to watch it. So you will be in good company if you take some time to watch it, and we are happy for any feedback. So let's open up for Q&A now.

The first question is coming from Marius Fuhrberg at Warbox.

Yeah, I'm Mo. First of all, thanks for providing such deep transparency and information on your customers and activities. The first question would be, what is your expectation on the revenue per trade for 2022? I mean, we saw the different effects, some accelerating, but also some diluting effects over the next year. So am I wrong when I assume that you expect the revenue per trade at roughly the same level for 2022 that we saw also in Q4. Second question would be on the trading activity so far in 2022. I mean, the horrible war, of course, drove the capital market volatility, but we also saw capital market volatility in Q4 last year. but customers were rather not so active as we would have expected. So how has this developed in Q1 so far? And one last question is on the 38% of accounts without activity in 2021, how many assets under custom are allocated to those accounts? And when would you consider such low activity account as that account and maybe cancel the customer relationship?

Yeah, thank you, Marius. Thanks for the questions, happy to answer. So the first question with respect to the expectation in revenue per trade for 2022, I think we've shown in Q4 significant uptake in the revenues per trade. On top of that, we have implemented a number of product and pricing measures, as you know, so that we can expect, as I have indicated during the presentation, that the revenues per trade will be around what we have seen in Q3 and Q4. With kicking in structures like the U.S. equity, FX changes, you could even expect that this revenue per trade base might even increase more. How does it develop throughout the whole year? It depends very much again on the trading product mix and which clients are trading in which countries and what assets. But the five euros, I think, have indicated a certain watermark that is very sustainable. I hope that answers the first question. The second question with respect to training activity in Q1 2022, as you know, we don't comment on numbers until we publish them. I think everyone is currently following the capital markets, the volatility in the capital markets is given. It's obviously not similar to what we have seen in Q1 2021. That is, I think, very clear and very obvious. But the development so far is something that we feel quite satisfied with. Yeah, that's I think it's what I can say to trading activity in Q1 2022. And obviously the current situation is, yeah, unfortunately I have to say contributing to the activity level. So it's good to have the activity, the source of this activity is super unfortunate. Your third question with respect to the activity level of the 38% non-active clients in 2021, I again here, let me rephrase that please for a second. 68% of our clients were active. This is a massive number for a financial services company that more than 2 3rd of all your clients have acted and have conducted business with you. But the 32% is nevertheless an asset base that is super important for us. And Frank mentioned it in the introductory, One reason why we believe that an asset management product slash robo-advisory product could be also a creative to our business is to give also these type of clients a certain access to the capital markets and a certain access that is maybe different from what you see in general with classic brokers. to, in the end, revitalize also this client base and to invite this client base for whatever reason why they are not trading, maybe because they have no trading idea, maybe because they have no money because they're in a circumstance that doesn't allow them to invest. or they bought a house and needed the money for something else. So there are a lot of reasons why this might be the reason, but with this additional product, especially on the asset management side slash global advisory side, we hope to reactivate also a significant part of this client base. So sorry, I said 68, it's 62% for us, not 68, which is almost 2%.

Thank you very much. One follow-up on this. That's what I was pointing to. I want to know how many Esplanade custody are in those less or not active accounts. So to get a feeling for whether or not there's potential to reactivate those clients as to the point that they were already active or are those like zero euro accounts where nothing ever happened?

Again, let me go back to that slide where we showed very nicely. There we go. I hope you see it all. That slide indicated that even clients with less than 200 euros on their account generated 44 euros in ARPU. So again, this connection that clients with low, super low accounts don't generate ARPUs is wrong, is literally wrong. And this is exactly where we say this is something that we should or that we can, with additional products, even increase. So we can create an additional ARPU to this 44 euros by maybe introducing additional products that are today not used by these clients. So it doesn't make a difference for us whether a client has 100 euro or 50 euro or 10 euros on his account because we see that these clients are active in a certain way, but we believe that we can increase the activity rate with additional products that we will contribute and provide during this year. Okay, that's good.

Thank you.

You're welcome. The next question is coming from Christoph Kreulich at Bernberg. Your line is now open.

Yeah, good morning, Frank. Good morning, Mo. Thanks for taking my questions. I would like to start with questions on the two new projects that you were mentioning with regard to crypto and robo-advisory. So did I understand it correctly that the decision if that will be made organically or through acquisitions, this decision has not been made yet?

Yeah, maybe I can answer this. We've decided to rather enter into partnerships with existing businesses versus build it up ourselves. But we will not enter into an acquisition, but rather into a partnership. And we will make sure, especially when it comes to crypto asset trading, that we will not increase our risk profile. You all might be aware of what's going on with MICA markets and crypto assets. There's a directive in a draft version available on the European Commission level. And this still provides for unlimited liability in the draft version for those who offer those services. So this still gives us a bit of a headache. And we think we found a solution how we can enter into a cooperation with a partner where the partner keeps liability and risk. And we provide for our clients access to their partner, a very reputable and good partner. Like our clients can always expect us if we introduce new products or partners that they belong to the best and have a track record and high quality and so forth. So that goes to the crypto asset trading project. And with respect to the asset under management dash OVO advice project, again, we believe that we have screened the market very prudently and that we come up with a partner with a long track record, very established portfolio strategy. And again, where this business will not negatively impact or poison our business with respect to the fact that we focus on self-directed clients and self-directed clients are treated from a regulatory point of view very different than clients you provide advice with or for. So we don't want a situation that the whole regulatory scheme which is applicable for advising clients will be imposed over us So again, here we look for a partnership where we offer access to a partner who is then liable for the advice and who's providing the advice and it's not us so that is complied with. I hope that makes sense and answer the question a bit.

Yeah, that's very clear. Thank you for that. Then I was wondering regarding the revenue per trade we've seen in Q4. Could you just clarify to me the, when we talk about the pricing overhaul at DeGiro in November last year, so the key, let's say, accretive part of that was the increase of the FX conversion fee. So what was the timing of that becoming effective?

No. The FX change of DeGiro did not impact the 522. It became effective, the FX change became effective on December the 20th. So it literally didn't have enough time over the last 10 days where off six days, five, six days were bank holidays to become effective on the revenue per trade base. The revenue per trade base was mainly influenced and significantly influenced during a Q4 as I mentioned, mainly also by clients that we won in Q1 and Q2 in Germany and Austria that started to pay for their transactions. And you know that with FlatX, the average revenue per trade is actually usually seven euros plus, especially on equities and ETPs, which clients were able to trade, as I said, the first six months of their lifetime with us for free. So this contributed massively to the revenue per trade basis. It's not the AutoFX that only became effective in December the 20th. We introduced it literally in November. Absolutely right. The clients actually were allowed for four weeks to trade literally for zero U.S. equities because the increase in AutoFX only applied after the 20th of December.

Yeah, that's clear. Thank you for that. And then just a last one from my side. Maybe if you could say a few words on how you think your cost base, if we go apart from where you spend on marketing, I mean, you talked about that, but just the other part of the cost base, how you see that evolving going forward.

Yeah, thanks, Chris, for that question. Apart from marketing, the personnel expenses were very much in line with what we expected. We didn't have a big pickup, although we have obviously increased also the workforce, given the massive growth, mainly on the customer service side and the customer risk side. Our admin costs jumped more than linear, if you would just generate linear growth. That had two reasons. The first reason is that we had a gross booking on one effect that increased our admin costs as well as the other operating income, each by almost three and a half, four million euros. So it's a P&L or EBITDA zero effect, but it increased the P&L, so to speak, because we had to book it from accounting perspective in a gross way. And the second effect that we saw as well is that our banking license fees increased. This had two reasons. The first one is we are growing. More deposits means also that the BaFin Bundesbank are charging you more fees on the one hand side. On the other hand side, there was a special payment that all banks unfortunately had to do given the downfall of a German bank, which was not Wirecard in this case, but Greensill. that added up as well, unexpected costs, which is more or less a one-off item to the depository scheme. So apart from these one-off items that amounted to, let's say five million euros altogether, five, five and a half million euros, we expect the personal expense side as well as, so the operational personal expense side, so without the long-term incentive plan, as well as the general admin expenses to be and to continue to be at a level that we have seen now in 2021, despite the growth.

Okay, that's very clear. Thank you.

You're welcome. As a reminder, if you have a question for our speakers, please dial 01 now to enter the queue. The next question is coming from Benjamin Conker at KWB.

Good morning, guys. I hope you can hear me.

Yes, hi, Ben.

Hey, Mo. Good morning, Frank. Good morning. A couple of questions, please. First one, back to the strategic projects and a very simple one. Is this part of your initial 2022 guidance in terms of new customers and number of trades?

We always guide prudently and with a certain forecast of projects that we will have in the business. So, yes. But nevertheless, if things change, we will make the market aware of the fact that this might change.

Thank you. The second one, I guess, around that topic. I mean, we all know you sit on quite a bit of excess cash on the balance sheet. And Frank, you made very clear you're going for partnerships rather than any sort of M&A. So let's assume that excess cash remains and will even grow um so mo any any sort of update uh on let's say your your current thoughts on on on the use of you know use of cash i mean you continue to print money like crazy um assuming your your guidance holds and then therefore i think that question becomes ever more imminent yeah maybe i can start and then move so first of all um

when we have a chance to enter into a very smart partnership where we don't have to bring equity to the table, then we rather go for it instead of investing. Second, we still believe that it's good to have that excess cash and that capital available for future situations. Imagine the payment for order then comes into force and then a lot of new brokers get into trouble, we then think it might be the right time to go for acquisition and take some of those over wherever it makes sense. On the other hand, with respect to our growth and the speed, it's good to have enough regulatory capital to finance that growth. So that's a bit of a strategic view towards that, but maybe more you want to complete from the financial point of view.

No, absolutely. I mean, with all respect and all humbleness with respect to our cash flow generation, Frank mentioned that with respect to AUM and crypto, we don't consider acquisitions. But it doesn't mean that we don't consider acquisitions at all. It means we don't consider it with respect to these two products, given the risk profile and the risk situation and the regulatory situation around these products. But if there are opportunities in the market that make sense for our development, we will always have a look into them for a second. You also know I'm a big friend of cash. And I remember when we acquired DeGiro, we had this beautiful situation. not to ask anyone out there for a single penny to finance that transaction. And this is why here I'm very classic and very conservative. I love to have one-time EBITDA and cash on my accounts, which allows me at any opportunistic moment to take together with Frank and the supervisory board decisions and not relying then on capital access that, as you know, might take a lot of time And given that situation, also maybe in a capital market situation where prices are low, I'm really, really reluctant to giving away our share at low prices. So that is all in all why we believe it's good to have the cushion. And then let's look into the next years. If we end up in two, three years having all this cash but still no opportunities, There are some plans, obviously, and some strategic ideas that we discussed left and right of that decision.

Well, that's very clear. Thank you. And my last question centers on customer acquisition costs. And if I understood you right, Mo, there was this sort of special impact in Q4 around the TV campaign of around 5 million, right? but still significantly above your sort of long-term target of around 50 euros per new customer. So just maybe a bit of an outlook into 2022. I mean, the TV campaign continues in the first half and will bear costs. And so is it fair to assume customer acquisition costs in 2022 anywhere between 50 and 100 euros?

Let me clarify this because the hypothesis is wrong. We have 46 million euros in marketing costs, where off roughly 5 million went into the production costs of the documentary and the advertisement. So if you would clean up for this, you will end up with 41 million euros, if I'm not mistaken. If you divide 41 million by 800,000 gross clients that we wanted was 798,000. So let's round it up to 800. It's €51.25 of client acquisition costs. As I said, we always indicated €50 plus minus 10% depending on the market environment, depending on where you grow. And we will hold on this. I'm not assuming to see CACs going towards €100. Absolutely not. But yes, maybe it will not stay at 50. Maybe it ends up at 60, but definitely not at 100, which brings us back to the point. So 50 euros plus minus a certain variance, depending on in which markets you grow faster. As I said, Germany, just to give you an example here, the CAX in Germany are rather between 150 to 200 euros. Whereas, for example, in Italy, the CAX are below 30 euros. And the speed of growth in different markets determines also the client acquisition costs. But overall, holistically, as a group, we will continue to focus on the 50 to 60 euros in client acquisition costs.

Great. Thank you very much.

You're welcome.

The next question is coming from Christoph Bliffert at Exxon BNP Paribas. Your line is now open. Good morning.

Good morning. I have a couple of questions and would like to go through one by one. First of all, how would you describe the competitive behavior of Trade Republic at the moment, given that Digiro and Trade Republic enter similar markets? And related to that, what would you consider as your key competitive advantage?

Hi, Chris. Let me clarify this. We are not entering any new markets. I would rather say Trade Republic is entering markets in which we have been now for five years plus. Number one. Number two is we're growing these markets very successfully, whether it's France, whether it's Spain, whether it's Italy. And Netherlands is a domestic market of the hero, which also I think allows us to continue to feel very good. Plus on top of that, we have entered the zero-go-zero exactly in these core markets and core growth markets. How is the competitive movement of Trade Republic? I don't know. I know as much as you know, and we all know that they don't disclose very much about what they do and how they do. The only thing that we read is the press release that they want to go into these countries, but I have neither numbers nor do I know what they do or how successful they are. Our competitive edge has not changed over the last years. It's still the triple P strategy. It's still the price, it's still the product, it's still the platform. And starting with price, as I said, we offer zero commission trading on all regulated exchanges, charging only 50 cent handling fee. Since you mentioned Trade Republic, if I'm not mistaken, They have zero commission trading plus one euro handling fee and they only allow you to trade via the market maker lunch bar It's not like with us across all across the whole world Exchanges we've showed it in our presentation very well how important it is to offer also a a product portfolio, an exchange portfolio. That is what differentiates us from NEO brokers in general. We're not going for 18, 19, 20-year-old clients who want just to try out the bit of Tesla buy and sell, although most of them cannot afford most probably the Tesla stock. So look into the assets under custody and average versus the Tesla stock price. So all those things are things that we are considering to be important for us. And going forward, I think I said that a couple of times, we should not be considered as a neo-broker in this market. We should be considered as the best retailized form of interactive brokers, which is here for the European markets, winning the right clients, winning active clients, winning from day one, contributing and profitability contributing clients. Plus, the other point is, Frank touched on this as well, the PFOF discussion, we will end this year most probably with I would say on the exchange side, definitely zero PFOF. The PFOF discussion with other brokers is also limiting them with their growth in these countries. So, yeah, long story short, I think we are on our track. We are not focusing what is happening left and right as long as we cannot analyze it. But what we see is that we are doing it the right way. So far, we see there is competition. And don't get me wrong, we are evaluating this competition very, very diligently and prudently. But so far, we see ourselves in a situation that will allow us to continue that growth irrespective of further market entries by peers or competitors.

Thank you. As a second question, how would you describe the ideal trading environment for your client base? Is it rather a rising market with low volatility or a volatile market we are seeing at the moment? What is the ideal world for you?

The ideal world follows very much the idea of volatility on the one hand side paired with market awareness. Because, I mean, in the end, like, what is ideal to us? Ideal for us is if the first KPI of our formula of success increases, the number of clients. How is number of clients increasing mainly? Obviously due to brand awareness and marketing, but in general, the awareness for capital markets. So the more awareness we have in the society for capital markets, which usually happens with, very volatile markets because then every newspaper is publishing every day 20 articles about the capital markets. That increases the attractiveness of capital markets for clients. So that is per se an interesting environment on the one hand side. And with respect to trading activity, volatile markets are always attractive and are contributing, as we've seen in our slide, with the hidden reserve, so to speak. Here we go. that these markets are contributing additional windfall profits to our business. That would be the ideal dream, to have everyday volatility days with a lot of capital market awareness. Unfortunately, Chris, you know as much as we know, it's... Life is not a wishing place, so we have to deal with the environment we have and to try to make the best out of it. What we see is that, however, and this is the most important point for us, irrespective of the current market environment, our clients are loyal, they're sticky, and they are sustainably active. This is the important part.

Okay. The chart on page 16 showing the share of U.S. volume, is this for FlatX D0 or for D0 only?

That's the group. We always show group figures. We don't. And if it's only one brand, which we would never do, we would disclose it's only for one brand.

Is it fair to assume that the share for D0 is probably higher given that FlatX clients in Germany could trade on TradeGate? U.S. stocks in Euros?

And Xetra? Yes, they are.

Okay. Absolutely.

And that's a lot. Germans, right. Germans tend to trade U.S. stocks Euro-denominated at local exchanges, which is an abnormality in the European environment. I think it's only Xetra, literally, that allows for that, plus, obviously, Tradegate to trade stocks Euro-denominated exactly.

And as a last question, it would be helpful if you could disclose your CDT-1 ratio at the end of 2021, please.

We are happy to discuss this when the final figures are disclosed, Chris, because it obviously depends not on the MDA, but on the net profit. But both are, so in the bank, it's super profitable, super high, so 20% plus. And in the group, after the audited accounts we assume it to be at least 15% plus.

Okay, thanks a lot.

You're welcome.

There are no more questions coming in right now. For closing remarks, I'll give back to the speakers.

Yeah, thank you very much for attending today's call. Thanks a lot for your support. I hope we have allowed you to get more transparency about certain data and facts and are here also supportive to your wishes. We wish you all, yeah, calm days, hopefully with the geopolitical situation that comes also down as soon as possible. All the best, stay healthy and hope to speak to you soon. If you need something, please let us know.

Yeah, the same from my side. Thank you all very much and good luck to you and Please stay healthy. Keep cross fingers that this war comes to an end as soon as possible and that we will have peace in Europe again. So have a nice day. Thank you.