flatexDEGIRO SE (FTK) Earnings Call Transcript & Summary

Good day, and welcome to the analyst conference call. Today's conference is being recorded. At this time, I would like to turn the conference over to the CFO of flatexDEGIRO, Muhamad Chahrour. Please go ahead, sir.

Yes. Good morning, everyone. First and foremost, sorry for delay. There were -- there is a high interest in this call, for which I have a full understanding. I thank you for joining today's call and to have you on this great day with us, to discuss with you our released new vision, which is a 5-year vision and aims to reach new milestones in the story of flatexDEGIRO by 2026. The reason behind the new vision is, for most of you, pretty clear, I would say. We are very well on track to reach our former 2025 vision, the 3 million clients and 100 million transactions most probably by the end of next year, by the end of 2022, so there was no reason at all to keep with the former guidance and to keep with the former vision. And this is mainly driven by a couple of points that I would love to highlight over in the next minutes. The new 2026 vision, up to 8 million clients and up to 350 million transactions with a cash generation of significantly above EUR 1 billion in accumulated cash is a big milestone for us, is a big gain for us. However, we feel more than confident to be equipped with the best possible setup, with the best possible people, with the best possible environment and to be positioned as the one and only pan-European online broker to reach these goals. These goals should be reached with purely organic growth and acquisitions have not been reflected in these numbers. And we are very confident that this organic growth that we expect over the next 5 years is based on relatively conservative assumptions that we have gained during the recent weeks and months. If you look first and foremost on the growth of the number of clients, you will see that we aim for, give or take, 1 million clients plus every year over the next 5 years on average. We are currently growing with 3,000-plus clients every single day. If you even look back to the first quarter, we grew by roughly 5,000 clients per day, which was most probably an exceptional quarter. By the way, Q1 is always exceptional. It is usually the quarter where you win most of your clients as an online broker. So going down from these 5,000 clients per day that we have seen in the first quarter to the 3,000 clients that we win today still without all the volatility, without all the discussions that were around back in Q1, give us a very, very good feeling for this new vision. With respect to trade, we have not adjusted the trading activity that much. If you would take the 250 million trades and 7 million clients as the lower benchmark, you would end up with slightly above 30 trades, something around 35 trades, which is still in line with our previous Vision 2025, but we also expected a mid -- trading activity in the mid-30s. This gives you also the clear understanding that this is the trading activity that we expect even in low volatile environments. That means should we experience over the next 4, 5 years, again, periods where volatility goes up for whatever reason, we will also see a high probability for beating this trading activity -- this estimated trading activity. With respect also to the number of clients, what gave us even more confidence in reaching these targets is that despite our European setup, we have so far not provided all countries with the swing that we want to deliver over the next years. Keep in mind that there are still countries in which we operate already, like, for example, Italy or Switzerland. There are countries that we haven't set up yet in full swing. And we were very keen to go during the next 12 months and to penetrate these markets, especially given the setup that they are dominated mainly by monopolies. We have proven as well to increase our growth rate of clients, whether it's in France, whether it's in Spain, whether it's in Portugal and have now reached over the recent weeks and months, clear market leadership in a couple of these countries. And we'll continue with a clear [indiscernible] to win and to declare, in most of these countries, market leadership. As I said, if we would respect -- if we would give respect for potential acquisitions, this vision could be even accelerated. Also, keep in mind that we have so far not disclosed and we are not currently in the process of finding any strategic steps, which could be joint partnerships or joint ventures that also could generate additional interest in brokerage. The brokerage environment coming to the market itself is currently, I would say, in Europe, the best that we have seen over the last 2, 3 decades. The pan-European continent is underdeveloped. You know about our G7, the underdeveloped G7. A lot of companies -- a lot of countries which are still on a penetration level that is below 10% compared to the Nordics or the U.K., where we are today at a penetration level online brokerage of 30%, 40%, 50%. And this has to do a lot with digitization. It has to do a lot with the level of penetration on online banking, which is also in the Nordic countries as well as in the U.K. much higher than in Continental Europe. And what we have seen also over the recent weeks and months, an increased interest by large institutional funds and money that is coming into Continental Europe, a high number of fundings and cash flows into many players in Europe that is perfect for our business model, which creates, first and foremost, awareness for brokerage. Every marketing money, every marketing euro that is spent also by peers and competitors is increasing the brokerage market for all of us. Keep in mind, there are still roughly 250 million Europeans in Continental Europe that are not brokered yet. And we are the only broker all over Europe that has the pan-European footprint in 18 countries, that has the technology in-house, that has settlement and clearing processes in-house to make use of this development as the quickest player of all. So we are very happy about this additional funding that is coming into the market for this type of business for this industry in which we operate, because it will, for sure, help also our growth. What we also should keep in mind is our profitability. And we have guided so far under the Vision 2025 to reach EBITDA levels of 50% plus. With the new Vision 2026, we aim for significantly higher margin levels. This has to do first with the economies of scale of our existing business model. With every additional trade, we can generate an incremental margin of 75% to 80%, but it has also to do with the fact that there is no broker out there that monetizes its customer base better than we do. So far, we are monetizing, first and foremost, our customer base on the brokerage side, but reaching these goals, these aims of 4 million, 5 million, 6 million, 7 million, 8 million clients over the next years will allow us to develop a financial supermarket. A financial platform that will allow our client base, by the way, the client base that is in the best age between 25 and 55. This is what I call high retail, low affluence. With clients that are self-directedly interested in investing and saving and taking financial decisions, we will be able to provide this client base a platform that will go beyond financial asset brokerage. So we'll go to insurance brokerage, this might go to mortgage brokerage. This might go to further other financial brokerage that we today do not have in place. So the amortization level of the clients, the profitability or the, call it, the revenue per client that we are aiming for is going to increase as well. This is why we feel so confident with respect also to the profitability to drive up margin levels to 60% and higher. I think those are the key points that we wanted to transport to you, that we wanted to communicate to you, especially with respect also of -- with respect to the finalized merger of DEGIRO and flatex Bank. We're operating now out of 1 entity. We operate now with global structures, with 1 marketing team for 2 brands, with 1 legal team for 2 brands, with 1 settlement team for 2 brands and we'll continue to play this card that we are the only fully verticalized broker that is the fastest-growing broker, that is the only one that joins -- enjoys a pan-European footprint and will allow us to benefit in a market that is growing organically, and being supported by a lot of high interest in this market and a lot of opportunities and secular trends that will make sure that this market will continue to grow over the next decade. That is for now from my side. I would love to give you the chance -- the analyst the chance to raise questions and to answer them. Thank you.

[Operator Instructions] We'll take the first question from Roberta De-Luca from Goldman Sachs.

A few questions. Operating cash flow as of today considering your PBT minus depreciation was already cumulative of around EUR 1 billion for the next 5 years. So can you maybe elaborate a bit on that point? You did clarify it above EUR 1 billion, but clearly would have to be way above EUR 1 billion to be a meaningful kind of difference from guidance.

Yes, absolutely. I mean what we have now stated, let me put it that way. Before that, the EUR 1 billion were the upper benchmark for all our expectations. We have turned it down to the lowest possible benchmark that we see in our business model. And the acceleration will, for sure, generate higher operating cash flow than EUR 1 billion. And especially this guidance will significantly generate higher operating cash flows than EUR 1 billion. But before it was the sum of the best case, and now it's the floor of -- yes, the worst possible case, let's put it that way, the most conservative case.

On the assumptions of the new guidance, have you -- I mean, clearly, you've stated that the underlying market, you believe, is growing at a faster pace than before. Have you also made changes to your assumptions on market share within that -- within those markets, or is it just a matter of underlying market expanding?

Both, absolutely both. And this has been always our clear strategy. We are not entering this game to just grow purely with the market. That will be borrowing. This is not us.

But your previous assumptions were based on a 4% market, has that assumption now changed?

Yes, I mean, absolutely. I mean, keep in mind always, our previous assumption was based back to 2019. I mean please give this a bit of respect. This was a totally different market. No one saw an accelerated development in this market. We were just acquiring DEGIRO. We are now 2 years later and the market has changed significantly. And we see what potential we have with the DEGIRO that is even higher than maybe expected and believed in the beginning. I mean we were super confident by this. Otherwise, we wouldn't have bought the DEGIRO for EUR 0.25 billion that contributed most probably up to EUR 2 billion to our market cap. But we have a clear aim to continue to steal market share. We believe that today, there is roughly 30 million online brokered people in Continental Europe. And thereof, we have today a market share of, give or take, 6%, 7%, right? And the clear aim is to take this market share to 10% plus based on the 30 million that we see today in the market, or plus also another 60 million, 70 million clients that might come up to the market over the next 5 years. So this is the clear assumption, this is the clear strategy and absolutely to go for both ways, continue to steal market shares like we do. In France, for example, let's take France as the best example for this. We made sure that we won most of our market shares by stealing market share from competitors. And as I said before, in France and in Italy, both countries absolutely dominated by monopolies, by [ Fineco ] and [indiscernible], we have not started yet. We are there. We are visible. We are available for clients, but we have not started in terms of marketing and penetrating the market in full swing. And those are the things that we will focus on in the future, to continue building up our positioning in our existing marketing places, but also to extend our marketing positioning in those territories where we are existing, but haven't so far played the full swing.

Perfect. And what sort of costs should we expect to attach to this growth? I mean, clearly, you've mentioned now a couple of times that you need to accelerate marketing in some of those countries. So I guess both costs from the marketing side, but also, I remember from previous calls, you've mentioned that your platform could basically -- could sustain double the trades without any incremental investing -- investment. Obviously, this guidance is now more than double of your trade. So what sort of costs should we expect also on your IT platform?

Expecting to generate over the next 5 years, at least every year, on average, more than EUR 200 million in operating cash flow. First, I have to say there is more than enough cash to invest. Second, however, I have to say that we are super conservative with respect to OpEx investment, but super aggressive in a positive way when it comes to CapEx. Today, over the recent weeks and months, we have seen that we can manage and handle 1 million trades per day. The peak was at roughly, I think, 900,000-ish trades that we did on a single day. So if you would extrapolate this, this would end up in 250 million, 300 million transactions. However, as we are prudent people, especially with respect to our IT and our system, we need certain buffers. So playing the 900,000 trades at 80% capacity utilization, but having a strategy where we usually say we would like to have a capacity utilization of 50% to 60% would mean we have to invest. But this is absolutely included in our expectation. I always have said, every new client costs us between EUR 2 to EUR 3 in CapEx every year. So if we win another 1 million clients, we will have to invest EUR 3 million in our CapEx. That will mean that over the next 5 years, if we continue with that growth, we'd have most probably to invest EUR 15 million, maybe EUR 20 million over 5 years, by the way, into our IT infrastructure, which is, for me, it's a no-brainer, and it's absolutely not affecting our profitability or our cash generation power. On the pricing side, however -- sorry, yes?

No, no, of course. I didn't mean that there was going to be an issue on the CapEx side. I was just looking for some guidance to correct -- to model correctly.

Absolutely. But you understand [indiscernible]

We're far from having it.

Every one -- no, no. Once again, all the others also be understanding, it's important as well. And second, obviously, our marketing expenses. And here, those of you who are following us for many years know how we spend marketing. We always said we will never become the revenue contributor for Google. This is absolutely not our business. We are here with a clear and super focused marketing strategy to first approach the market as a whole. Second, with a dedicated target group of income-generating high retail, low affluent clients. The strategy so far went super well. Our client acquisition cost has been below EUR 50 year-to-date, below EUR 50. And I understand that other peers, they would love to grow with millions and millions of clients spending client acquisition costs of EUR 200, EUR 300. This has never been our strategy. However, we will continue with our marketing spend. So again, here, an additional 1 million every year would mean in an average case, EUR 40 million to EUR 50 million, or, let's say, EUR 40 million to EUR 60 million because it depends then again on the market. So newer markets are maybe more expensive than existing markets, EUR 40 million to EUR 60 million of annual investments into marketing. And again here, with a strict strategy to win the right clients. And not clients that churn after 1 year or that trade 3 times a year or that are just registered. I think there are some peers, this is all public knowledge, you can read it. There are peers who were having 10% of the registered clients with funded accounts. That's absolutely not our aim.

Okay. Just a final question, I'm sorry. In your growth assumption, do you make any assumption on changing pricing per transaction, or do you expect it to remain around EUR 4?

That's now a difficult question because -- I mean, no. We are -- let me -- difficult because it's...

A number of moving parts.

Yes, exactly. So are we expecting to increase prices with this growth? No. For the short term, absolutely not. Is the revenue per trade continuing to be at EUR 4? I don't know because I truly believe that the level of monetization that we can create could be increased due to additional products, due to additional services without increasing the ticket fee itself.

The next question comes from Christoph Greulich from Berenberg.

To be honest, a lot has already been answered, but just a few follow-ups. So basically on the growth trajectory, do I understand you correctly that you are seeing something like a linear type of growth here, so about 1 million per year? Or do you see the chance that the growth might be more skewed towards the nearer-term or maybe towards the out-years?

Expecting a growing market over time, it will be absurd to expect the linear growth. This is why I'm always saying in average. And so we assume that the growth over time will accelerate, which is absolutely logic because if we start, for example, end of this year to penetrate Italy and Switzerland in a more aggressive way as we have done in the past, or for example, keep in mind, the introduction of the PEA accounts in France, all these things will also accelerate our growth over the next years. So to be fair, so far, we have an expectation that the growth over the years will grow in absolute terms. But on average, it's 1 million. In the end, I'd be more than happy, again, here to be after 3 years, super in line with the guidance to adjust it again. So let's see where we are in 2024.

Yes, that makes sense. The next point you mentioned is that you expect the margin to be significantly above what you have in the old targets, the 50% EBITDA level. Are you able to give any numerical guidance around that where margins could go over the medium term?

I mean, as I said, I would say with an increasing profitability and an increasing top line, this is the beauty of our business model. This is what I'm preaching now for years, right? An increase in top line will result in an increase in bottom line. This is fact, not only in absolute terms but also in relative terms. So the faster I'm growing top line, the higher my profitability in percentage in the bottom line. So yes, I feel also comfortable to say that it will go into the direction rather of 60%. So whether it's in the end 58% or 62% or 65% maybe, it depends on so many different parts, right? For example, what additional products can we provide? What additional services can we provide? So all these things could contribute even more to such a profitability. But given the pure trading expectations, for sure, there will be an uplift to the 50%. Take Q1, by the way, I always say Q1 is a perfect proxy, where we had roughly 33, 35 -- 34 million transactions with an EBITDA margin of, I think, 52%, 53%. So if we would extrapolate this, it would mean with 130 million transactions, 135 million transactions, we could generate 50-plus percent in EBITDA margin. What happens if we go from 130 million to 200 million or 250 million or 300 million? That's absolutely another discussion. Knowing, however, that our incremental margin per trade is somewhere around 75% to 80%.

Okay. Yes, that's clear. I also would like to follow-up on the operating cash flow point. And I mean, I hear your statement that it is kind of the floor level, the absolute worst case. But I struggle how you get to this worst case and basically looking at where the old numbers stand. So before this new target, if I look at [ content ], if I look at my model, I'm already at or above the EUR 1 billion. So can you give me any idea how you're getting to that floor level? Like what kind of assumptions go into the worst-case scenario?

Again here, look, what we try to understand for us and for our business model, keeping in mind our increased marketing spend, keeping in mind a [ different cluster ] and a different [indiscernible] certain markets, we are going for investments as well. And despite all this, we will reach, for sure, EUR 1 billion. And I mean you say you're now above EUR 1 billion. Yes, that might be the case, we were also roughly at EUR 1 billion in our own estimates. OpEx 5 years in our previous vision. And now we are adjusting the vision. So if we would generate over the next 5 years on average EUR 400 million, that would be EUR 2 billion, absolutely possible. I'm not saying that it's not possible. But again, I think we gave you so much stuff and so much information to provide evidence why we can achieve an absolutely outperforming cash flow. And for now the statement, it will be maybe EUR 1.2 billion, EUR 1.3 billion, EUR 1.4 billion, EUR 1.5 billion. But this is nothing that I can say today. This is something we have to see with respect to our future growth. What we can see is it's going to be significantly [ about ] EUR 1 billion.

Okay. And then a last question with regard to the new products, your services that you mentioned. Is it fair to assume this will be a staggered approach in terms of the rollout that you first will roll out those new businesses under the flatex brand in the later stage of this year? Or how are you thinking about that?

Again, here, there is no -- flatex is not the, let's say, it's not the laboratory for DEGIRO. We will make sure that we will -- whatever we roll out, always roll out in the best possible way for our clients. And we have already rolled out a couple of products that we so far have not rolled out to DEGIRO. If you think, for example, about flatex-next. So in the future, it might also happen that we will roll out things on the same time, but there will be also topics that we first roll out with flatex and then roll out DEGIRO. Keep in mind, flatex is only in Germany and Austria. There is no, I mean, no task to grow the business organically into other geographies, which we have on the DEGIRO side. So this is why it allows us also to use flatex, let's call it, as a blueprint for different things, just because also of the resources that we have with flatex and a different strategy than with DEGIRO, absolutely.

We'll now take the next question from Benjamin Kohnke from KBW.

Lots of questions have already been answered, but let me leave it to 2 then at this point. First one, Mo, could you please elaborate a little bit around the timing of yesterday's announcement? I mean was there anything in particular that happened that made you decide, okay, now it's time to come out with this new midterm -- with this midterm guidance? Anything sort of KPI-wise that happened over Q2 or anything that I might be missing? Secondly, just something that came up the other day, and I was wondering to what extent you put this into your sort of midterm guidance or midterm thoughts, so to speak, regulation and you potentially looking into the business model of zero-fee traders. Now I know you're not a zero-fee trader. But to what extent -- what's your current view on regulation? And to what extent is that baked into your midterm targets?

Let me first answer your first question, whether any, let's call it, surprises or any intelligence that made us decide yesterday, not really. Obviously, we got more and more confidence with respect to our numbers, our client growth over the recent weeks. So if we would forget for Q1 what happened during Q2 and the longer Q2 lasts, the better we get a feeling for that. But the main intention why we disclosed now the new vision is because I promised it to you all and to the market. That I said, we are -- I mean, let's be fair. We posted also in the previous releases. We are reviewing our guidance and our vision. We are getting a better and better understanding for it. We have finalized it over the weekends. We have discussed it. And obviously, as you do these things in your bodies and have decided yesterday for [indiscernible] in our management board meeting to disclose this new vision. So this is the whole background. Nothing happened around it. And as I said, we promised it, I think, 2, 3 weeks ago when we had our press release. I think it was with respect to the merger, where we stated that we are currently reviewing it and that we will come out with an updated vision. This is now the time for the updated vision. So there was nothing extraordinary to make us deciding this way. Your second question -- sorry, just give me a word again?

Sure. Regulation, you potentially evaluating -- yes.

Yes, regulation. Absolutely, we always add regulation into our ideas. But first and foremost, I don't know about what regulation now you speak. Yes, there was most probably -- you mentioned 0 commissions. Yes, the European Union is currently discussing and scrutinizing zero-fee trading. Ben, we're working long enough together and all the other analysts, that I'm saying for years, there is no zero-fee trading. It's absolutely impossible to provide clients with zero-fee trading because either you don't earn money or you have costs embedded in your structure that are literally ripping off clients, full stop. Today, we generate, for example, from revenue share-based compensations less than 1/4 of our total revenues. Zero-fee brokers do it 100%. And this is something that we keep obviously in mind. This is why we are so happy to have pricing in place for all our trades, for example, with respect to equities, the only zero-fee products that we provide are the ETPs, but even there, keep in mind, it's only for 1 partner where it's zero fee. For 6 out of 7 partners, we charge fees. And even here, we have a structure that is absolutely transparent, and we will continue with this philosophy that we will charge clients per trade, but offer them the best possible execution and the best possible decision-making between venues, between order charts, between products. So regulation is included and considered, but it's not really in any way a risk to achieving our goals and aims.

Marius Fuhrberg from Warburg.

Mo, basically just 2 remaining questions for me. First one is on your assumption on the underlying market, could you give us a bit more color on what your expectations in like 2 or 3 years are? So I personally think that we are totally in a very, very supportive market environment for the brokerage, of course, and that we will continue to see a supportive environment the next like 3 to 5 years. But with a year, at least a certain slowdown in the growth speed, I would say. Would you agree with that?

Look, speed of growth was never something that derived for us assumptions or from which we derived assumptions for our business. It's always about what we are providing the clients. We're providing a business model and broker that focuses on sustainability and long living investments. And with respect to the market growth, we have exactly the same philosophy. I don't mind whether speed -- speed went up in 2020, for sure, it went up. It went up also in Q1 2021, for sure, it did. But what we are relying on our expectations on is exactly not this little bit of news that comes around and goes around every 2, 3 weeks, like many other peers do, right? They find it super because they're a bit of whatever, things going on. No, we are basing all our assumptions on a market that is up absolutely underpenetrated, not with a bit of, it's massively underpenetrated. You know that the engagement for self or in self-directed investing is in the Nordics, is in the U.K., 5x to 6x higher than in Continental Europe. You know that almost half of the Continental European population does not own an online banking account. I'm not talking about brokerage, I'm talking about banking. Half of the people in Continental Europe are still walking into a branch to get their stuff done. And this describes very well what the culture looks today like or have looked like, and what it's going to look like over the next 5 years or 10 years. Branches will be closed by banks. We are -- I mean, we are here in Germany, the most over-banked country in the world with 80 million people and almost 2,000 banks. Banks will cut down their branches. And especially after COVID and COVID was horrible. In social terms, it was horrible. In business terms, it was great because it showed like how many million people don't need a branch anymore. And this level of digitization that we saw in online banking will definitely, over the next years, continue to increase. We will have online banking penetration levels, which are comparable to our Northern European countries. This increase in online banking, which is the key conditions for online brokerage will also result in a fact that we will see more online brokerage activities and especially generation, as I always say, that is today in their 20s and 30s that has not suffered from financial crisis, that has not suffered from dot-com bubbles, is -- and by the way, being cash creating in an environment where there is no interest anymore, they are forced to do something, and they are willing to do something on a digital, self-directed way. And this is what we are best positioned for as the only pan-European player. And this is why, yes, I agree with you. That might happen that the growth speed will not be like what we saw last year, it will be on a like-for-like basis, the basis that we will see or would see for the next 5 years. But given these secular trends, I truly believe that we will even see an acceleration of growth during the next 5 years. I'm not basing -- again, we are not basing our assumptions on what we have seen over the recent 18 months. That was, let's call it, a one-time every decade effect. We're basing our assumptions and our growth perspectives on what is happening to the market. And the market will grow organically, and we will participate from this growth. This is the basis for our vision.

Okay. That's clear. And the second one, given the recent turbulences in the crypto market, does this alter or affect your plans of introducing crypto products to your platform? Or does it change your view on the whole equipment market in general? Yes, maybe another one on the additional products. So what should we think of the time horizon here? And would these be partnerships with other product providers? Or do you plan to develop and offer those products by yourself?

With respect to your first question, I mean to be fair, the turbulences are happening now for years, and everyone who has invested in the crypto market knows about these turbulences and this volatility. So it's, again, another question of whether you provide a strategic product to clients, or whether you provide strategically, sorry, the plans or versus tactical movement. I mean tactical movements can always happen also with stock markets. The point was never for us that we thought the market is too volatile so we don't operate our clients, absolutely not. This is something that clients have to take. Volatility is clients' risk they get the return for. Our reason why we have not implemented yet this product in the past was always that we had concerns about mainly the custody of the wallet. That was the reason why we have not implemented crypto currency trading. Over the recent 12 months, this issue has been solved to a wide range because we have now custodians in the market that are well reputated, that are even appointed by regulators to take custody of seized assets, et cetera, et cetera. So this environment has changed dramatically. Given that fact, we are currently reviewing and revising a couple of things, but our decision-making process has not changed because of volatility, absolutely not. I mean you wouldn't even have to put it the other way around, you would have to ask, "hey, guys, are you going to accelerate now the rollout of cryptocurrencies to enjoy the market environment?" Yes, most probably, we should do so. But again, it's a strategic product that we strategically would like to offer our clients because there is interest in this product and irrespective of what the volatility looks around. With respect to the strategic partnerships, again, also here, it's nothing new. We've been for years very active in sourcing strategic partnerships, in sourcing potential acquisitions, in sourcing potential joint ventures. Obviously, the interest also in flatexDEGIRO as a platform by third-party partners is increasing with size. If I have 3 million, 4 million, 5 million, 6 million, 7 million clients that I can offer you as a strategic partner for your product, be it insurance, be it mortgages, be it -- I don't know what it might be. This is, obviously, for you as a partner, also much more attractive than only having 200,000 of these clients. And by the way, keep in mind, again, I'm repeating myself, but it's important to highlight. I have clients that are in the best age for insurances, that are in the best age for mortgages. I have clients that are situated in the best way for insurances and for mortgages. So the interest in our client pool is obviously pretty high, and we truly believe that we could provide our clients this centralized platform for all their financial challenges, let's put it that way, and financial desires.

Now the next question is from Frederik Jarchow from Hauck & Aufhäuser.

Mo, can you hear me?

Who's that? Sorry, I didn't catch the intro.

Yes. Mo, this is Frederik from Hauck. Can you hear me?

Yes, yes. I can hear you.

Okay. So since most of my questions are already answered, maybe just 1 quick follow-up on the M&A activity. So you have authorized capital of more than 80%, a lot of cash and nearly no debt, and you are willing to grow also inorganically. So maybe you can provide us with some insights regarding potential M&A targets here. So are you already in discussions with target companies? And do you have a time line for the M&A? And yes, how could a potential target in general look like?

I'm happy to answer the last, I think, 6 words of your question, what a potential target look like? It could look like -- but for sure, I will not tell you whether we are in discussions with anyone and at what stages we would be with anyone. But apart from that and without creating here any misunderstandings. So M&A is always -- I mean, we are paid as a management for capital allocation. This is what we receive our salary every month from the company. So it's first and foremost duty to look how we can employ the capital of the company in the best way. One strategy is to make use of it organically and the other strategy is to make use of it inorganically. And we are continuously screening markets. But as soon as there is something that we will have to notify the market about, we will notify the market about. What would these targets look like? Wow, that's a very broad question. It could be brokerage-oriented. It could be another broker, like DEGIRO. However, I have to say and to admit, there aren't so many great brokers out there, where I would say, "Oh, that is very difficult to eat them up organically. So let's pay for them 30, 40x what we spent in client acquisition costs." I would never pay for a French or Italian broker, EUR 1,000 per client, if I know that I can win these clients with EUR 50. So -- but there might be sometimes little surprises that come up, where we are always prepared with our firepower to enter these transactions. The second opportunity could be -- to be -- to look for diversified financial players. There could be, for example, players that provide products that we don't have in place as of today. Think about, for example, just as an example, AUM players where you have fund platforms or social trading platforms or whatever it might be that comes around into markets or ETF platforms. Last but not least, it could be diversified, really diversified financial players that do -- that don't have to do anything with brokerage, with financial asset brokerage in the key sense. It could be technological players that could provide us with additional intelligence to make our platform better. It could be also, as I said earlier, with the partnerships, players that are operating, for example, in mortgage brokerage or operating an insurance brokerage, et cetera, et cetera. However, we are also very keen to focus on targets that are carrying somehow a sensible valuation. And again, we acquired DEGIRO for EUR 250 million net cash and debt free. And we turned it into, I would say, at least a EUR 2 billion contributing item to our asset in less than 18 months. We know that you don't have many of these deals, but we also know that we have -- that Frank and I, we have a very, very good feeling for these type of assets. I remember when we bought [indiscernible] 6 years ago for EUR 80 million and made it to one of our key components of our business model today worth most probably EUR 1 billion. So looking for these and identifying these perfect assets is much more important than doing acquisitions just for the sake of acquisitions. We are not doing acquisitions [ for our ego ], let me put it that way.

[Operator Instructions] We will now take the next question from Christoph Blieffert from Commerzbank.

Two follow-up questions, please. The first is on new products. Are there any plans to make use of your balance sheet and to increase risk-weighted assets over time? And secondly, on your dividend policy, what are your plans to give cash back to shareholders?

So with respect to your first question, absolutely, no. Again, we are, first and foremost, an online broker. And we will continue to be a financial platform that allows our clients to invest into different products, and we are more than happy to extend this product offering. And maybe you're referring your question to other European brokers that just recently stated that they will start now to invest in non-European sovereign bonds to generate interest income. We're not getting paid to generate interest income. This is what I always have said. And the predecessor of Marius with Warburg, Lucas Boventer, he remembers that I always said interest income is for us at flatexDEGIRO a by-product, and this will continue to be a by-product. We will not start to go wild with our credit book just for the sake of generating interest income, absolutely not. I'm not jeopardizing a beautiful, great, growing business for short-term greed with this -- with respect to our [ interest book ]. Second, how do we use our cash? I mean, again, first and foremost, we will make use of it organically. We grow our business, we'll continue to invest into our systems, into our people. We are going now for a vision that says literally nothing else than we will double or even triple our business model in terms of revenues. It says nothing else that we will most probably quadruple or quintuple our profit. So all this is, for us, key aim. Yes, if there is cash that we cannot make use of in the best possible way, which would be invested organically as priority #1, invested inorganically, priority number 2. We will start to rethink what capital allocation strategy we should have. And the third one could be most probably to have share buybacks. And again, we never know what time brings us. I don't know if we go crazy again like last year in April and markets dropped by 40%, 50%, we still continue to earn money like hell. However, the market has also its influences on us and drops down the share price by 30%, 40%. Remember, April 2020, when our stock price dropped down to, I think, roughly EUR 23, EUR 24, maybe that's a perfect environment to have share buybacks. Now we have the cash power to go for this thing. And if all these things don't happen over the next 5 years, we might think about whether it's the right timing and the right way to distribute our dividend, whereas, as I just stated by priorities, it's the lowest priority that we have because of technicalities and because of, obviously, double taxation, et cetera, et cetera.

There are no further questions. I would like to hand the call back over to Mr. Chahrour for any closing remarks.

Thanks a lot. Again, we are very much looking forward to working hard and to fighting hard with our people and with our assets to conquer the European market. Again, we are the best situated and best set up online brokerage business, not only from our perspective, but with respect to our footprint to enjoy a massively growing market over the next years. With all the potential that we have not reflected yet in our P&L out of cross-selling opportunities, out of monetization opportunities, we are really, really looking forward to the next years. And I'm more than happy to have you guys at our side and especially a big thanks to not only the analysts, but also to the investor base that is going with us this journey for many years, and we are welcoming obviously every new investor who's looking forward to going with us this journey for the next years. Thanks a lot, and all the best, a great week for you guys. Speak to you soon. Thank you. Bye-bye.

Thank you. That will conclude this conference call. Thank you for your participation, ladies and gentlemen. You may now disconnect.