flatexDEGIRO AG

Hello and welcome to the FLATx D0 Preliminary Results 2023 Analyst Call. My name is Laura and I will be your coordinator for today's event. Please note this call is being recorded and for the duration of the call your lines will be on listen only. However, you will have the opportunity to ask questions at the end of the call. This can be done by pressing star 1 on your telephone keypad to register your question. If you require assistance at any point, please press star zero and you will be connected to an operator. Today we have Frank Nihaga, CEO, and Dr. Benignanos, CFO, as our presenters. I will now hand you over to your host, Frank Nihaga, to begin today's conference. Thank you.

Yes, good morning, everyone. A warm welcome here from Frankfurt. Together with me is my colleague, Dr. Benon Janos, our CFO, Achim Schreck, our head of IR, and Dr. Thomas Lindner, our head of finance. I'm Frank Niehage, and I'm happy to present and start with the commercial highlights out of last year. before I then hand over to Benon to shift gears and give you a bit more details and color on the financial results. Needless to say that last year was a challenging year not only for us but for the whole industry given the geopolitical situation both in Europe as well as in the Middle East. Further interest hikes and high inflation caused irritation and challenges to the whole industry and obviously our clients. However, in such a challenging environment, we were happy to show further commercial growth, leading to the second best financial result in our history of the firm, which we are a bit proud of to share with you today. As I said, Binon will later give you a bit more details on that. However, it was not only a strong year in 23. We even kicked off a very strong start in the first two months of this year, showing over 10 million trades in the first two months. and seeing over 80,000 new clients coming onto our platform with over 1 billion fresh money gives us a good level of comfort and hopefully we will show the best record numbers this year. Coming back to our regulatory aspects, we are very proud that we did hard work together with BaFin and our special auditor and managed to finish almost 70% of the relevant issues. And very positive, I like to highlight that we have a general understanding, both with the regulator as well as with Mavaz, that the key findings, the most serious ones, will hopefully be resolved in summer this year. And even better, if that is the case, then there will be no need for a further after audit. So this is very good news. And thank you to all our employees who helped to get that done. And thank you very much again to the very helpful support, both of the regulators as well as our special auditor, Mazars, who helped us to get the homework done. So all in all, it's a wonderful basis. So after our figures, which are today only preliminary, are fully audited, we can show you a CET1 ratio exceeding 30%. And obviously, that will allow us then to continue with the announced capital allocation strategy, which we published end of last year. asking the general meeting this year to come up with two things, a minimum dividend and a share buyback program of 10% of our capital over the next years. So all in all, a positive outlook, and we are happy to continue like that. Let me move over to the commercial growth in a bit more detail. And if we look back from 20 over 21, 22 into 23, we show continuous growth in new clients, which proves to us that the platforms, both Lejeune and Flatex, are very attractive. And if we combine it to the peers, we are proud to show over two times growth in client growth, and obviously that's not normal. We managed that client growth, although we reduced marketing spend. And to highlight again, in 22, we spent almost $50 million on marketing. We managed, and well, to reduce that down to $34 million in last year. we will continue slowly to reduce it hopefully to 30 this year and We will continue to manage our cost in general very very careful Further to commercial growth I like to highlight that we saw over 4.5 billion fresh money coming in last year and that although we don't pay interest and that proves again that both the client growth as well as the fresh money coming in, the clients come to us because they want to invest and they don't want to save. We are not the saving platform, we are the investment platform. And even better, over 91% of the fresh money was then directly invested, again proving that we are finding the right clients and we are thankful to our clients that they use the platform for investing. That then even led to the fact that the client increased their wealth with us, highlighting a number below $40 billion back in 22 and over $51 billion almost 52 in 23. And the trend is further positive. And that's good that our clients are growing their wealth with us. And that proves that investment does make sense in capital markets in these times. As I mentioned earlier, we had a challenging 23 industry-wide, so there's no surprise that the trades per client per annum were lower than the years before. And if we compare us again with our listed peers, I would say we are in the mid, with an average of around 22 trades per client per annum. And obviously, that led to a reduction in trades. When they were in 22, 67 million, we only booked 57, so 10 million less than 23. However, our strategy to monitorize our income per transaction is still on, and we managed to increase average commission per trade from 406 in 22 to 4.13 in 23, and we will continue to improve it this year. Due to our balanced and mitigated business model and running a full-fledged banking setup, we were able to improve our interest income from $71.5 million in 2022 to $136.3 million in 2023, so improving that a lot and compensating the less trading activities. So especially in these times, it's helpful to run a business model like that. Let me move over to how clients perceive us and how about awards. I don't know whether it's a coincidence, but last year we could present seven awards in the German-speaking countries. And at the same time, we got seven awards in the international countries. So very respectful awards showing that the clients are happy with the platform. That doesn't mean that we can't improve and do better. We are constantly working on that and want to improve quality. But we also like to thank, at this point in time, all the clients who trust us and who participated in those awards. And thank you all for that. Moving over now to more details allows me to thank you all and to hand over to my colleague, the CFO, Dr. Binonyanos. Bin on the floor is yours. Thank you.

Thank you very much, Frank, and good morning, everybody, from my side as well. As Frank mentioned, 2023 has been the second best year of our history, and I have the pleasure of now providing some more detailed financials as well as giving you our outlook for 2024. We did see some remarkable developments in the past year. For the first time in many years, interest levels continued to rise sharply. Most indices, however, climbed up the wall of worry. For most investors, 2023 marked a much-needed comeback when it comes to both stock and bond market performance after a brutal 2022. Big Tech and the artificial intelligence bandwagon in particular was largely fueling the S&P 500's positive performance in 2023. Yet, retail investor activity declined in the last year compared to 2022, which can be mostly attributed to two factors, low volatility and high interest rates. Firstly, general volatility in the stock market declined throughout the year. Using the CBOE volatility index VIX as a yardstick, the year started around a vol level of 20 and declined throughout the year to about 15. Secondly, let's take a quick look at one of the most important financial ratios, the price-earnings ratio. General overnight banks' deposits, or overnight federal debts to use other words, of the Eurozone trades at 4 to 4.5%. That relates to an inverse P-E ratio of 22 to 25 times. For the U.S. markets, U.S. deposits slash debt tread a P-E ratio of 18 to 19. While tech firms were in an isolated manner easily able to clear that hurdle, it was much harder for the broader stock market to rise. Our adjusted revenues in 2023 grew 6% to 391 million. For the fourth quarter standalone, we were able to show a revenue growth of 14% year on year, up to 100 million. There were no adjustments in the revenue number 2023. However, in 2022, adjustments of 34 million were non-operationally added to the revenue line from releasing provisions for the long-term incentive plan. I will come back to the point of adjustments later in the presentation. Commission income declined by 14% in 2023 to $235 million. However, we were able to grow commissions in the fourth quarter of 2023 by 5% to $55 million compared to Q4 of 2022. As mentioned in my introductory statement, the full-year decline was driven by lower trading activity of retail investors, which was 25% below last year's levels. That also means that a good 10 percentage point of the decline we've been able to compensate for by growing our customer base and improving the average commission per trade. The remaining reduction in commission income was overcompensated by interest income, which grew 91% to 136 million year-on-year and 77% to 55 million in the fourth quarter of 23 compared to the fourth quarter of 22. As in the past, FlatEx De Hero has maintained its strategy to not pay interest on cash deposits. The fact that we've been able to attract over €10 billion of net cash inflows onto our platform over the last two years, despite rising interest levels, shows our strength as an execution-only online broker with a focus on trading active clients. Let us take a look at the earnings before interest, taxes, depreciation, and amortization EBITDA. EBITDA declined 23% year-on-year to €140 million. The respective comparison for the fourth quarter shows a decline of 8%, which is largely due to the release of provision for the long-term incentive plan in 2022 that I already mentioned. If we adjust for the long-term incentive plan, adjusted EBITDA grew 7% to 154 million euros for the full year and was up 27% in the fourth quarter of 2023 compared to the fourth quarter of 2022. All those EBITDA numbers fully include non-cash markdowns in real estate investments that I have given more details on in the Q3 2023 earnings calls. They also include special effects such as generous one-time salary hikes due to general inflation pressures over the past two years and fines paid to the regulator, as well as the Italian Competition Authority, AGCM, which, as you know, we are challenging in court. Let me give you an update on the real estate investments. For the full year, the non-cash markdowns of those investments totaled 11 million, the vast majority of which were taken during the third quarter. There were only marginal changes in Q4 of 2023. Provided that the general interest rate level does not rise unexpectedly, we do not expect any meaningful effects in 2024 either. We were able to beat our 2023 adjusted revenue guidance of 38 million by generating 39 million in revenues. We were able to grow both our adjusted EBITDA and adjusted EBT margin slightly year-on-year, and we were effectively on target compared to the guidance issued early 2023. Technically, we were 50 basis points shy of 40% on the adjusted EBITDA line. Without the aforementioned non-cash real estate markdowns, defiance, and inflation compensation, the respective margins would have been several percentage points higher. For the past year, We have shown the IFRS segments Fin and Tech in our annual statement. When we release the annual report, you will find a new segment reporting which we are introducing to further enhance transparency. The Fin and Tech segments effectively reflected the B2C and B2B business that the group has focused on historically. As we have shifted and evolved our business model to an online broker, we are replacing the old segments with the new segments, FlatX and Dehiro. One important note, though. While the names suggest that these segments represent precisely the brands FlatX and Dehiro, this can only be a rough approximation. The segment FlatX includes, for example, FlatX and V-Trade operations, all credit and treasury operations that do not fall explicitly under the Dehiro brand, and outsourcing solutions. IT services are allocated to the segments based on revenues. In any case, the new segments more properly reflect the way we run and manage our business and enable you to get a better and clearer view on our core business. The first transparency initiative was, by the way, at the beginning of 2023 when we introduced monthly KPI figures. The new segments now represent a second step. A third and fourth measure will now be introduced in a moment when we move to the outlook for 2024. We are aiming for the best year in our financial history in 2024. What now follows is a brief comment on adjusted earnings. In this presentation of the 2023 financial results, I have used the word adjusted or adjustments 11 times so far. Adjustments add complexity to financial statements that we would like to avoid in the future where it is possible. As more than 50% of the long-term incentive plan is executed, we will absorb those costs going forward as normal operating personal costs. We expect the future annual impact on the profit and loss statement to be smaller than in the past. We will continue to show the details on adjustments on a like-for-like basis to allow for comparison of 24 to 23. The adjustments will, however, be de-emphasized to allow for simpler and more transparent headline key figures. So no adjustments is the third transparency improvement. The fourth one is on the financial KPIs we focused on. We have used the EBITDA metric over the past years. The metric comes from a period some 10 years back when FlatEx De Giro's earnings power was substantially lower. The group had no integrated IT department and no banking license. It was simply a different company back then, and the metric has served well. Below EBITDA comes depreciation. Depreciation is a relevant line item for us, being a highly vertically integrated company. We are happy to have this high level of internalization and happy to invest. It gives us freedom and allows us to act quickly. The regulatory reapplication of credit mitigation techniques through automation within 10 months would not have been possible without full control of our IT. We also know that we would currently end up paying more for outside IT than in-house IT developments. Naturally, the growth of the path also increased the depreciation line, mainly due to the De Giro acquisition. We will now move forward and de-emphasize EBITDA in favor of net income, accompanied as needed by financial metrics below the EBITDA line, such as operating income, pre-tax income, or earnings per share. We therefore also provide our outlook for 2024 with a clear focus on top and bottom line as follows. We aim for revenue growth of five to 15%, i.e. a revenue range of 410 to approximately 450 million Euro for full year 2024. The goal is also for net income to grow between 25 and 50% for a range of 90 close to 110 million Euro. This is our top line and bottom line outlook for 2024. So to repeat, The net income line includes all costs and depreciation, effects from all long-term incentive plans, any markups or markdowns from investment activities, and no adjustments of any sort are made in the guidance numbers we are presenting. In the planning for 2024, we are also not relying on any tailwinds from the markets. While trading activity at the start of the year has been okay so far, as one would expect in the seasonally good first quarter, It's way too early to project a sustainable uptick in the trading activity of retail investors already. It might happen once interest rates come down, but as we said, it might. We do not want to get ahead of ourselves, so we currently plan with a similar retail trading activity in 2024 compared to 2023. With regards to such potentially lower interest rates, that would of course also have a countering effect on our interest income, which we are mindful of. We plan in general with very similar average weighted interest levels in 2024 compared to 2023. While 2023 started low and ended high, we expect the reverse for 2024. Please feel free to reach out to Achim in investor relations if you would like to discuss some of your assumptions. But as Frank already indicated, yes, January and also February has been favorably and above our assumptions. However, the year is long and there is another 10 months to go. Nevertheless, we are confident that we can continue to grow our customer base and grow in general our brokerage franchises. I would now like to hand back to Frank for a quick update on the successful resolution of BaFin findings.

Yeah, as I mentioned earlier, we already managed to free up our regulatory capital last year with improving the credit risk mitigations. We are further focusing on the most severe and relevant F4 findings. which, as I said earlier, are scheduled to be resolved in summer. We agreed with both BaFin and the special auditor from Masaas that once that has been resolved, no after audit is necessary. And again, that's a very good result. So that's our focus. And the rest of the other findings are by 70% resolved. So all in all, this is quite positive. May I allow myself one more comment? As we already said, we started strong in January and February, but we like to stay under promise and over delivery in general, as we all don't know how fast the geopolitical situation both in Middle East and in Europe might be resolved, and we all keep cross fingers and pray for this. We obviously believe there's going to be a decrease in interest rates this year, but we all don't know when this is going to happen. I would say rather in the second half of the year, but we don't know. And we see a decrease in inflation rate, which is positive, but we don't know whether it's going to stay low and how low it's going to stay. So this all in all leads us to the assumption rather stay focused and cautious and under-promise and over-deliver. And we hope that you understand that with respect to our guidance as well.

Two quick final slides from my side. At the end of September, when BaFin approved the reapplication of the credit risk mitigation techniques again, we provided you an update on our capital structure and requirements. Since then, thankfully, not much has changed, but the outlook has become clearer. We would like to quickly use this opportunity to confirm and reiterate that we are on track to expect the common equity T1 ratio to rise well above 30% once the full year 2023 net income has been recognized in our regulatory capital base. This comfortable position allows us to follow through with our capital allocation strategy as announced in December. We intend to ask the next annual general meeting in June for the authorization to buy back up to 10% of our share capital. This authorization would be valid for technically five years. Initial size and timing of the share buyback program, once approved by the annual general meeting and by the regulator as well, will then depend on inorganic growth opportunities, market conditions, and ultimately, of course, on our share price level. However, from today's perspective, there is a clear management view to make it a sizable element of the capital allocation, much more, of course, than the minimum dividend that we will additionally ask the general meeting to approve. I thank you for your attention and we would now be happy to answer any questions you might have.

Thank you. Ladies and gentlemen, if you would like to ask a question, please press star one on your telephone keypad. Thank you. We'll pause for just a moment while waiting for them to queue for questions. We'll now take our first question from Andrew Lowe with Citi. Your line is open. Please go ahead.

Hi, guys. Thanks for taking my question. My first one is just on the assumptions behind the NII guide. It's helpful levels of detail. It seems to imply to me that you're looking for about 135 million with your assumptions of flat rates and the balances that you've given. If you assume 50 million of other income, then that implies 260 to 300 million of commission income. So just checking those numbers are sort of broadly consistent with your thinking. And if you then take the commission income at the midpoint of that, say 280, then as per your guidance on the activities and customer numbers, that implies 4 euros and 35 cents per trade versus... or 14 in 2023. So is that sort of correct in your thinking and what gives you confidence that you can drive the increase in the commission per trade for next year? The second question is, do you think it's fair to assume that your cash balances are likely to be stickier than some of your other peers, given you've got smaller average balances and heavier trading, which perhaps means that they've got a greater liquidity requirement.

Thanks so much. Maybe I can start with a general comment on why we believe that we can still improve monetization per income per trade. We are working on product and services initiatives such as US option trading, late and early U.S. trading at Digiro, securities lending, and further services. And those hopefully will contribute in the second half of this year and are not yet reflected in the numbers. So that will definitely have a positive impact. But with respect to your details, I hand over to Benon, who will help you to understand how the figures work.

Quick question first, or quick answer to your second point. Do we think that the cash balances are stickier? We think they are stickier and we feel okay with them. We have never gone wild. We have never used an interest rate fee or an interest rate as a mechanism to attract new clients. So clients are used that they are not receiving any interest on their deposits. And the number has been slowly but steadily going up. We think that the problem will also be smaller once the ECB starts to cut rates. So we feel quite okay with our strategy to basically hang on and focus on our trading element of the equation. On your first question on the precise mathematics, I think I would add that probably overall the interest line is a bit on the low side that you mentioned, the 135, whereas the average commission per trade is maybe a bit on the high side. So there's this slightly different view or slightly adjusted view that we might have. But like always, it depends on so many things over the next 10 months. Ultimately, the total number of the clients' deposits in our bank are one of the leading factors, and they are just extremely difficult to predict.

Thanks so much.

Thank you. And we'll now move on to our next question from Pernas, LNS with Morgan Stanley. Your line is open. Please go ahead.

Hi, thank you for taking my question. So, my question is around the average trades per customer guided for similar to 2023. Just wondering what's the basis there, what's the mix you're assuming in terms of markets and how shall we think of the 12% customer growth and any potential dilution in the average trades per customer given new customers take time to pick up versus reactivation of existing clients. So, how shall we think about the mix? That's my first question. My second one is on the gross profit margin. It has been fluctuating a bit quarter on quarter, so I'm just wondering what's the sustainable level going forward. So these are my two questions. Thank you.

The first question on the transaction per customer. So when we look at the year, we make the first assumption that the average trade per customer will remain the same. And then, however, of course, we account for the average growth that will come in in terms of new customers. So not a bad representation of our thinking is effectively taking the 22 and then adding a small factor that comes on top due to new clients. And you mentioned 12%. Whether it's 9 or 12 or 10, that's, of course, a bit too much of a precision. But the general thinking is exactly the one that we're having. And on the gross profit margin, the gross profit margin is driven effectively by three elements. It's by the cost that trades have, so the high-cost trades. Then there are trades which are less expensive. That's two elements. And actually, there are also a few one-offs, so some of the markdowns that we have had in investments are also reflected in that line, not all of them, but some of them, which make the line in general a tad more volatile than you would maybe take away when you look at our normal operating business. Mix of commission to interest income is also a very important last point. The more interest you make, the smaller your cost of goods sold, because that's typically a very high margin business. And for this year, looking at the rate that we have seen in 2020T or slightly below is probably not a bad idea or not a bad assumption.

Thank you. And we'll now move on to our next question from Mengxuan with Deutsche Bank. Your line is open, please go ahead.

Thank you very much for taking my questions. So several questions from my side as well. First one is on the customer deposit. So you are expecting for 3 billion customer deposit on average for 2024. And this is much lower compared to your year end balance. So what is, I'm just trying to understand, what is the reason for your conservatism on that end balance? If possible, can you tell us where the customer deposit stands by the end of February? The second question is regarding to the monetization rate. If we look at the Q4 numbers, the Commission income per trade declined to slightly above €4. In this quarter, what was the reason for that? And what is your assumption for the Commission per trade for next year? And the last question is, can you walk through with us again with the cost projection again? So how much increase do you expect for the personnel and marketing? You said in the last conference call it should be around €35 million again. And what is the expectation for the other expenses? Thank you very much.

Okay. Should I start with marketing? Please. Actually, we gave us a budget range between $25 and $35 million for marketing of this year, aiming for $30 million, which would lead to a reduction of $4 million versus last year. And then with respect to the financial questions, I hand over to Bena.

With respect to customer deposits, your first question. Yes, we are higher than what we have issued. That's indeed the case. And we are certainly cautious here. We stand at the end of February around 3.5 billion euros. That's something that we will communicate in our monthly statement. And we have had now two months with a meaningfully higher base than expected. However, during the period last year when interest rates or the period of the last 18 months when interest rates rose, we've seen a small fluctuation in the deposit space and we simply did not want to extrapolate too much going forward. So far, it looks very healthy and we have certain comfort that that number is probably too low, but only two out of 10 months are done so far. So, yes, you certainly can attribute that to conservative planning. With respect to the marketing projections, as Frank already elaborated, the range has been set a while ago. We did our financial planning, and now that the activities in the first quarter have been spent and marketed and planned, There is, as Frank alluded to also, already a certain element of conservatism as we are likely to spend rather, you know, 30 than last year's number. And on the monetization, it's really hard to look at monthly numbers with respect to trades per customer or even quarterly numbers. Some of the invoices they receive are annual invoices, and while you can split some of them down to monthly levels. It's hard to do for everything. So I think a real proper representation is to look at half-year figures or annual figures. We intend to grow the monetization rate. We have seen price increases at the hero that were put into effect in the middle of last year. So on a full-year basis, this will have effect But I would probably suggest to look at longer timeframes and not smaller timeframes when it comes to those numbers. We feel okay and we see no surprises in our business.

Thank you very much. And regarding to the cost, what do you expect for personal costs and fees for 2024 and the other operating expenses? Thank you.

So, we plan for these costs not to grow. I would like to take a second to answer the question. We have had over the last three years a jump in revenues, of course, and a jump in client base, a jump in revenues, but also a jump in costs. there are a few elements which are worthwhile highlighting. Number one is the fact that inflation, of course, kicked in, and we tried to keep our employees happy, and we were more generous maybe than the average bank by raising salary levels as a one-off adjustment to their salary base at the beginning of this year. In fact, we raised salaries by 8%. What we have also done is we added a lot of people due to the Buffin findings in regulatory positions. However, what's also quite clear, we want to finish the calendar year 24 with fewer people on board than we had at the beginning of the year. And that should easily overcompensate for any small hikes that we will have in salary things. So we will be way more focused to manage our operating cost line this year compared to last year. Last year we could not do that to the extent we wanted, given that requirements that were put on us mainly by the regulator. As we are slowly shifting gears from talking too much about regulation and hopefully talking more again about commercial focus, that will also allow us to be a bit more disciplined on the cost side.

Will you also mention something about cost-income ratio?

I'm happy to do that, Frank. So the cost income ratio for the year stands at around 51 to 52%. That number is expected to go meaningfully down during fiscal year 2024. And if you take the projections that we made, one can calculate back, but it will have a substantial drop to well below 50%.

Thank you very much. That's very clear.

Thank you. And we'll now move on to our next question from Simon Keller with Håkon of Hossa. Your line is open. Please go ahead.

Good morning. Thanks for taking my questions. So the first one is, why was reported EBITDA higher than adjusted EBITDA in Q4? Then the second one is, what would have to happen for you to reach only the lower end of the net income guidance? I'm asking because there were several one-offs in 2023, and without those, there should already be at least a 30% year-over-year growth, at least in my view, in my calculation. And then the last question, the third one, is on CapEx plans for 2024. Can you shed some color on that, please? Thank you.

So on your first question, reported EBDA was – one second, please. In Q4, we had, due to the share price development and also EPGS projections, we have basically a small release of provisions back into the EBT line. So it's one of those famous adjustments which I personally do not like. And as I alluded previously, you know, we basically would like going forward not to speak about adjustments anymore to avoid, you know, questions like this one. So it's one of the transparency measures that, that we planned. And on your second question, I can see your point and yeah, the low end of the guidance is of course conservative, clearly. But we also do not know whether ECB will surprise us in any way going forward. My colleague Frank already alluded to the fact that the geopolitical situation continues to be strained And that's simply a prudent lower end that we put in there just to be on the safe side. So please take that as a reflection of, you know, an outlook which we don't plan for as it is the low end. And one second on the CAPEX. One moment, please. So For 2023, our capex approval or our capex budget was in the order of 17 to 18 million euros, new fresh capex. That's probably a number that's going to be very similar this year.

Okay, thanks. And one follow-up on the release of provisions in the future. I know you will not adjust for them, but will they be part of revenue or also directly part of, I guess, personal expenses? Thanks.

On the cost side, they will be part of operating expenses, part of personnel costs. And if we were to adjust and release further provisions, then they will have a small contribution to the revenue line, which we will make visible, but it should not turn the needle.

All right. Thank you.

Thank you. And we'll now move on to our next question from Ian White with Autonomous Research. Your line is open. Please go ahead.

Hi. Thanks for taking my questions. Just a few from my side, please. Just first up on the net cash inflow progression, it looks like net cash inflows during the fourth quarter have slowed quite substantially. I wonder if you could just provide some color around that, please. Am I right to think that, in aggregate, you saw outflows from the existing customers in the fourth quarter, but this was kind of more than offset by the new customers that you brought on? That's question one. um maybe just um again on the guidance maybe can you just help me understand the range of outcomes you've explored in your net profit guidance. Basically, what would we need to believe for you to reach the 25% and 50% respectively? Could the 50% be reached with cash balances at €3 billion, for example, or is the sensitivity by and large the customer trading rates and cash balances, the sort of three unknowns? And just finally, on the cost guidance, can you just help a bit with depreciation and amortization for 2024? Are we going to see some amortization of the higher development expenditure that's been accrued on the balance sheet since 2021? Or is that going to be broadly unchanged, please? Thanks.

Okay, Ian, thank you for the question. So on your first question on the net cash in outflow, so well spotted and that indeed we had in the month of December one special situation in our core market in the Netherlands where we saw for the first time really in two years some client outflows that were related to a local tax rule. simply speaking, clients had a benefit of pulling cash out of our platform. So we did see that. However, it fully reversed at the beginning of the year. So it's a trend that we saw as an isolated event at the end of the year, in December in particular, and have not since seen. So that's something that we feel okay right now and don't see too much readings into that, basically. When it comes to the range of guidance. I mean, clearly, when you do financial planning and you look at different outcomes, it's always a combination of many different input variables, ultimately. It's a question of, you know, how much clients trade being the most important one. But if client activity stays at precisely 22, and if deposits would stay at exactly 3 billion, then it would be probably a bit harder to reach the 50%. However, adding new clients and having a small pickup in trading activity that we have actually seen at the beginning of the year. At the beginning of the year was actually also very robust in February, effectively. So it's not just the January effect. Then again, we feel that we are geared much more towards sort of you know, the upper end of that range that we have given. We are fully aware that the range is some 10, 12 million on the midpoint below your assumptions. You know, a different way to look at that, there are two analysts, I believe, that publish or that account for SARS and in the net income line, and the adjustments are in the order of 8 to 10 million euros. And that's maybe not a too bad number to look at to make projections for the year. So... That may be two-thirds of the delta between our midpoint and your midpoint, and the rest may be the conservative view simply on the deposit base. Also, on the interest rate, our weighted average interest rate that we saw on our deposit, so it's not the average ECB interest rate, but the average rate that we saw was around 3.5% last year, and that's very much the same number we plan on for this year. But we are, you know, thankfully carrying slightly higher balances. And your last question was on the cost guidance and depreciation line. We do not expect any big changes this year compared to last year. We are in the final stages of the growth rate that the absolute depreciation line picks up. We will give more details on that a bit later, probably in a year's time, where we present the exact mechanics and give a feeling as to when we reach a peak, so to speak, and when maybe the total assets to be depreciated fall a little bit. But that's not happening this year. That's most likely to happen 2025.

Okay, got it. Thank you.

Thank you. Once again, ladies and gentlemen, as a reminder, if you would like to ask a question, please press star one on your telephone keypad. Thank you. And we'll now take our next question from Benjamin Conkey with KBW. Your line is open. Please go ahead.

Good morning, gentlemen. Thanks for taking my question as well. Benon, can I maybe start by just picking your brain a little bit around the current margin loan business? I mean, There have been significant price increases you pushed through. You're now able to open it to the entire DeGiro customer base, yet you're just, you know, at least indicating a margin loan book of around about a billion, which, you know, would be broadly unchanged. So wondering if you could share some thoughts around that thinking. Is it maybe even price sensitivity you're sort of factoring in, i.e., lower volumes vis-a-vis higher prices, higher interest rates? Another one maybe somewhat related to that. I mean, I know it's always difficult to comment on competition, but I mean, we saw Trade Republic coming up with, I think, pretty impressive numbers. There have been some talks in the press that they are considering now to launch margin loans as well. So is the competitive environment maybe also part of your thinking around the margin loan guidance? And maybe a last one coming back to gross margins. I was honestly a little surprised by the number we've seen in Q4 and with that into Q4, given that you, you know, at least if I do the math correctly, I think you sort of confirmed that in Q3 doing the adjustments, it was at around about 90%. And the mix, at least in Q4, should not have been any any worse, and now for the full year, 24, you indicated it should be a little higher than the 82% for the full year. So, you know, just coming back to that, if you can maybe pick up on that cross-margin sort of composition again and why it's not higher going forward. Thank you.

Okay, so let's start with the margin loan business. The margin loan business has two components, the volume and the interest rate. On the volume element, the number has been reasonably sticky and it fluctuated between 900 and a billion over the last many, many quarters. We are currently towards the end of that. The introduction of the product to a broader base has allowed effectively to grow it mildly. And while raising rates significantly and partially doubling rates, the book has not gone down. So that is a positive element that will lead to a meaningful contribution, again, of the interest line that we will see on the back of the margin loan. But it's not like it's growing 30% annually. So while we expect the book to grow, it's not growing rapidly, but the economic benefits of the loan grow, of course. On the Trade Republic margin loans, all I read is what's in the newspapers. They have a banking license. They indicated that they will do that, so I'm sure they will. I don't know any details on that. I think a general comment is that we see them in Germany. We see them less in the other 15 countries we operate. That's one comment I would potentially like to make. And on the gross margin, sorry if I may have been not clear when I answered the question a bit earlier, but we expect it to be a bit lower than the 18% rather than higher.

Okay, and yeah, but the 92, I think around about 80% or whatever, the 90% in Q3 down to 80% in Q4, I still don't fully understand that significant decline, to be honest.

We would like to get back to you on that, okay? We want to answer that precisely. Sure. Thanks, Benno.

Thank you. There are no further questions in queue. I will now hand it back to Frank Niaga for closing remarks. Thank you.

Yeah, thank you very much for taking the time. In the name of all of us, we wish you a wonderful rest of the day, and thanks for your support and trust. All the best. Thank you very much.

Thank you, ladies and gentlemen. This concludes today's call. Thank you for your participation. Stay safe. You may now disconnect.