flatexDEGIRO AG

Good afternoon. Welcome, everyone. Thank you for dialing in to our presentation of the preliminary results 2024, as well as our update on our strategic priorities. My name is Achim Schreck. I'm heading the IR function here at Flatex de Giro. And before we dive straight into the presentation, let me do a little bit of housekeeping first. Firstly, I'd like to welcome our speakers today. We have with me Oliver Behrens, our CEO since October, as well as Benon Janos, our CFO, who's been with us now for 10 years. Hi. When it comes to the agenda, our setup is as usual that we would like to guide you through our preliminary numbers first, explain a little bit more the context of our record results 2024, as well as some maybe single items worth highlighting in the P&L before we go into the outlook, which will both be presented by Benon. Oliver will then follow up with the strategic priorities which we have communicated yesterday evening as well as this morning and our roadmap for achieving our mid-term guidance in 2024. As today's presentation is open for all analysts and investors, we've opted for taking questions via the Q&A tool you see here in the webcast. And we highly encourage all of you to make active use of it already during the presentation. Following the presentation, we will take a short 15 minutes break before we then go into Q&A. And during the Q&A process, we will then also take the liberty to group similar questions into one in order to make sure that we get through most of the questions in the time available. For that reason, please accept that we will not be able to read out individual names to the questions. I will repeat the housekeeping for the Q&A once we get to it. But now, without any further ado, I would like to hand over to Oliver for some introductionary remarks, please.

Thanks a lot, Achim, and also a very warm welcome from my side. Thank you for joining us today. My name is Oliver Behrens, and as Achi mentioned, I joined FlatX Tijero as CEO in last October. While it is obviously a great pleasure to stand in front of you today and open my first appearance by pointing to a record year in revenues and earnings, it goes without saying that this is more than anything the success of my colleagues in the management board and more than 1,200 colleagues across the firm who have greatly delivered in times that were not always very easy. To some extent, we made our lives harder ourselves by not keeping up with regulatory requirements in the past. But we have largely rectified this by now. With the mandate of the Special Commissioner ending in September and BaFin reducing our SREP by 150 basis points in December, we are clearly on the right track. And following this right track, we have the capacities to again focus more on commercial topics, our customers' needs and how to better serve them. The launch of crypto trading has been a first step, but only one of more to come. This is why, and after some intense first month at the company, I'm very excited to also share our strategic priorities and vision for Flatex de Giro as we look ahead to 2027. These strategic priorities will guide us over the next three years, enabling us to continue to deliver value, especially to our customers. And when you do good or when we do good for our customers, I'm convinced that you are also doing good for your shareholders and employees as well. Our aspiration is to be Europe's leading investment platform to build wealth and our strategy to get there is to build on three core pillars. We will expand our existing business, diversify our product and service offering and increase operational efficiency. Please have a bit of patience. I will dive deeper into these three pillars later on. The opportunity we have with FlatEx De Chiro is highly attractive, and I'm a very realistic guy. From 40 years in the financial industry, I know that this is not a walk in the park. We'll have to work hard for it to materialize, and there might be some bumps along the way. But the ambition we have set ourselves for 2027 to grow revenue by more than a third and thereby to almost double our net income is what the whole management team is committed to delivering. Based on the individual initiatives, I will provide more detail on later. But for the moment, let me close my introductory remarks here and hand over to Benon first to present the preliminary 2024 results. Thank you.

Thank you, Oliver. Good afternoon, everyone, also from my side. Many thanks for dialing into today's presentation, and I also very warmly welcome you. I am very pleased to present over the next few minutes our strong preliminary results for the fiscal year 2024 to you. Please do note that these figures are still preliminary. The full and audited annual report 2024 will be published on March 26th. We have clustered the presentation of our 2024 preliminary results in six buckets, namely customer growth, commission income, interest income, revenues, costs and earnings, and the outcome of our 2024 guidance and of course what to expect for 2025. Please note that in the interest of time and focus, we will not go through all slides that were uploaded in the presentation this morning in full depth. That's also particularly true for the Q4 performance slides, which you'll find in the appendix and will not be part of my presentation today. we will revert to the usual financial results format with our Q1 2025 quarterly figures, but this time the focus is on our three-year outlook in addition to a record fiscal year 2024. First, let's take a closer look at our customer growth metrics for 2024 on slide eight and slide nine. I am pleased to report that our monthly customer growth in 2024 consistently outpaced 2023, with a significant acceleration observed in the fourth quarter. While the peak in Q4 surely was supported by more market activity around the US election, the general trend clearly underscores the effectiveness of our strategies and the growing demand of our offerings across Europe. For the full year, we achieved a remarkable growth of 421,000 new customers, representing a 24% increase over 2023. Moreover, we have made substantial progress in optimizing our customer acquisition costs. In 2024, our acquisition cost per customer was 75 euros, which is a 24% reduction compared to 2023. This improvement reflects our ongoing efforts to enhance efficiency and maximize the return on our marketing investments. As you might have seen earlier, we have reached a significant milestone with our customer base now exceeding 3 million. Our customer base has grown by 1 million over the past three years. This consistent growth reflects annual rates ranging from 13 to 16%, showcasing our consistent ability to attract and retain customers year over year, despite a more demanding base effect. Also, With these results, we were able to continue our industry-leading customer growth with a compound annual growth rate of 14% over the past three years. It's worth noting that probably only one non-listed peer has demonstrated stronger growth during this period. However, this peer's growth is mostly driven by its pivot from neo-brokerage to neo-banking. Despite all challenges over the last three years, as you can see on this chart, we have consistently performed top of the industry in relative terms and, given that we meanwhile have achieved the largest customer base, even more so on absolute numbers. Of the peers you see on this graph, we are the only player not bound by one or a small number of countries operating in, but rather taking on Europe as a whole. Let's turn our attention to our active customer base. In Q4 of 2024, we achieved the largest active customer base in our history, with close to 1 million customers actively trading. Please note that we define an active customer here as a customer that is performing at least one trade per quarter. The share of active customers per quarter has also shown a positive trend, slightly increasing to 31% in Q4 of 2024. And while the share has been pretty stable over the last two and a half years at around 30%, we clearly do see some room for improvement, to which we will also come back later in our strategic priorities. Now let's move on to the development of our commission income. First, as you can see on slide 13, we have maintained a stable range of 20 to 25 trades per customer per year on average over the last two and a half years. Why am I referring to two and a half years here, like on the customer activity chart before? Because the first quarter of 2022, and to a much lesser degree the second quarter of 2022, has still been unaffected by negative external factors such as the strong increase in inflation and the central bank's reaction to it by hiking interest rates. As one would expect, trading activity has been higher at FlatEx, though we observe very similar trends across both of our brands. Our customer base at FlatEx is a bit older and therefore, in general, wealthier and trading-savvier, which explains the difference to the hero. Let's now examine the growth in the number of settled transactions across our brands. Our growing customer base has been a key driver for our 11% increase in settled transactions. Notably, our performance in 2024 has outpaced 2023 with accelerated growth particularly evident in the second half of the year. The growth in transactions was also supported by external factors, such as, for example, the increase in volatility in financial markets around the US election in November of 2024. Moving on to the next slide, we saw a notable increase in our average commission per transaction, driven by several key factors. Firstly, the price adjustments implemented in May of 2023 at the Giro have positively impacted our revenue from the third quarter of 2023 onwards. Additionally, a favourable product mix and a higher share of US trades have contributed to this growth, the latter being particularly visible in our high Q4 numbers. It's also important to note that the first quarter traditionally shows higher commission per transaction due to seasonal effects. This is driven by the booking of certain annual fees that are typically charged in January or February each year. In summary, all these factors combined have led to a substantial growth of 20% year over year, reinforcing our strong financial performance and positioning us well for future success. Now let's move on and focus on interest income, our second most important revenue stream after commission income. In 2024 again, we have seen impressive net cash inflows onto our platform, amounting to a total of 6.6 billion euros, a 47% increase compared to 2023. We saw positive net cash inflows of more than 500 million euros per month on average in 2024. 95% of these inflows were invested in securities, up from 91% in 2023. Additionally, we have observed an increase in cash per customer in 2024, coinciding with falling interest rates. This trend has led to a 17% increase in cash under custody at year end. As a result, we now have over 4 billion euros of cash assets our customers entrust us with, on which we are not paying interest ourselves. A consequent strategy that has been in place since inception of Flatex almost 20 years ago. Let me quickly remind everyone how we use these 4 billion euros of cash under custody to generate interest income. We currently redeploy around a quarter of the cash volumes back onto our platforms to provide fully collateralized margin loans to our customers. Our margin loan book had a volume of 1.2 billion euros at the end of 2024 and has significantly benefited from our expanding customer base and the additional access provided to the HIRO customers. The average interest rate for these loans has also increased in 2024. Of the remaining cash under custody, we keep most of the funds overnight with the German Bundesbank. Although interest rates fell during the year, they were still 9% higher on average than in 2023. To sum up, We have seen growing volumes in our interest income as well as rates in all relevant areas, resulting in a 32% increase in interest income to €180 million in fiscal year 2024. Obviously, there will be some real headwind with regard to the rates in 2025. But I'll come to that in some more detail when I'll present our outlook for this current year. Let's first finalize the full revenue picture before we discuss costs and earnings for 2024. In total, we generated the highest revenues in the history of FlatEx De Giro in 2024. Revenues of 480 million euros exceeded previous year's numbers by 23% and are a good 15% higher than even the previous record seen during the COVID meme stock hype year of 2021, where we posted 415 million euros in revenues. The share of interest income in revenues has risen continuously in recent years, but this trend is not likely to continue this year. Other operating income is mostly related to IT services and typically a smaller position for us. In 2022, it was artificially boosted by the non-operating reversal of provisions for long-term variable compensation. Although the underlying business included in other operating income has played a minor role over the past years, this should change in the future. Oliver will further elaborate on this when detailing our strategic priorities. After a detailed review of our top line, let's move on to costs and then earnings. On this slide, we have portrayed our different cost items and their development over the past years. Let me dive a bit deeper into the different drivers for each cost item. It is clear to see that our operating expenses have gone up quite considerably over the year, especially personnel expenses and admin expenses, a trend we plan to reverse in 2025. Personnel expenses increased by 19% year-on-year to 116 million euros. Salary increases, as well as the hiring of additional employees over the course of 2023 actually, in the context of remedying regulatory findings, led to this increase in personal expenses. Please do note that our personal expenses already include 5 million euros of provisions for measures planned in 2025. We have also capitalized some 2 million euros less of development costs this year. In 2024, we fulfilled our commitment to keep the number of employees at year-end below the level we started with in January. We ended the year with 1,253 employees, some 4% less compared to the 1,301 we had on December 31 in 2023. For 2025, our commitment is now to go a bit further and keep the personal expense line in the profit and loss statement at or below previous year's level. These provisions are one important element to get there. On marketing, we have spent some 7% less despite an acceleration of customer growth. With a total marketing spend of 32 million euros, our average costs for customer acquisition fell significantly to 75 euros compared to 100 euros in 2023. Other administrative expenses increased to 61 million euros in 2024 compared to 49 million in 2023. The increase is mainly attributable to higher IT costs as well as higher professional services, legal and consulting costs. They were partly related to projects in connection with regulatory requirements and helped us to successfully close the last severe BaFin findings, which led to the termination of the special commissioners mandate at the end of September last year. In sum, and I said that at our Q3 call already back in October, our admin expenses are up to 10 million euros too high. We plan on reducing them with a focus on lowering expenses for professional services, legal and consultancy fees. As a side note, being a regulated bank requires various fees to be paid that are levied on the actual size of the bank, whether it is on balance sheet or customer deposits. So we do have a natural tendency to a higher admin costs line as we successfully grow. So we have to work twice as hard to bring these costs down. Let's move to our profitability. For the first time, Folie EBITDA crossed the 200 million euro line, up 44 year on year. In all quarters, EBITDA margins were between 40 and 45%. In addition to the already mentioned one-off items in the personal expenses, i.e. the €5 million provision for personal measures in 2025 and the €2 million lower capitalization of development costs, we also booked an additional 2.5 million euros depreciation from streamlining IT developments this year. So combined, that's a 9.5 million euros pre-tax effect or approximately 6.5 million euros post-tax. In other words, Our record net income of 112 million euros could have been noticeably higher. However, this more prudent and long-term oriented approach served and will continue to serve as well. Before we close the chapter for our preliminary 2024 results, let's see how we have performed versus our 2024 guidance. We started the year with a guidance of revenue growth between 5 and 15 percent and net income growth of 25 to 50 percent. We have raised both to the upper end of these ranges after a good and solid first quarter. We increased the revenue guidance further after the Q3 figures to slightly above the upper end. With the now presented numbers, we have exceeded both. driven by a fourth quarter that was clearly better than anticipated due to the lasting effect of the US elections. Revenues grew by 23% year-on-year and net income increased by a strong 55% year-over-year. With these results, top line was slightly ahead of most recent market expectations, while net income was a tad below. but I guess this can be mostly explained by the one of items I just described in detail to you. With this, I will now close our look back on the past business year and have a quick look at our expectations for 2025. We expect an overall mixed picture with growth in commissions income compensating for a decline in interest income. At the same time, we will focus on bringing down costs as mentioned previously already. This means that we expect the top line in a range of ±5%, with some more optimism on the bottom line where the range goes up to ±10%. While our guidance is based on revenues and net income only, you also find on this chart some key assumptions we have taken in order to get to these numbers. Some of these assumptions might be considered conservative by some, such as keeping trading activity and levels of cash under custody only stable despite recent numbers. As mentioned before, staying prudent and conservative has served us well, and we would like to keep it that way. Markets can turn quickly, things can change. We have a meaningful amount of interest income headwind to compensate. Now, I'm very pleased to hand back to Oliver, who will walk you through our strategic priorities for the next three years. Over to you, Oliver.