flatexDEGIRO SE (FTK) Earnings Call Transcript & Summary

Dear ladies and gentlemen, welcome to the conference call of flatexDEGIRO AG. At our customers' request, this conference will be recorded. [Operator Instructions] After the presentation, there will be an opportunity to ask questions. [Operator Instructions] May I now hand you over to Muhamad Said Chahrour, CFO of flatexDEGIRO AG, who will lead you through this conference. Please go ahead.

Thank you very much. Good morning, everyone. Thanks for joining our today's conference call with, yes, quite a positive and interesting news. I hope you're all doing well in this current environment. Before we start the call, allow me to welcome 2 new sell-side analysts from Exane BNP Paribas and ODDO BHF. After Deutsche Bank took up the coverage in Q4 last year, I'm happy also to welcome these 2 new sell-side analysts in Q1. We are in total now actively covered by 9 national and international brokers, which we are really thankful for, and thanks again also for your work. Yes, before jumping into the numbers and going through facts and figures, let's wrap up for a second on the market environment in Q1 2022. The start of the year was already quite turbulent, I would say, coming out of 2021 with a macroeconomic environment determined by expected interest rate hikes that put a bit of pressure into the market. Over the last 3 months, we recorded record inflation, quite some disappointing reportings by U.S. tech companies, a sector rotation from tech into value or in general, from growth into value. That was obviously then, yes, pinnacled by the beginning of the war in Ukraine at the end of February and the ongoing war, unfortunately, until today. And all this is resulting in mainly low retail liquidity in the markets, especially, as I just mentioned, visible with the U.S. big tech numbers that were published, big drops, double-digit percentage drops with very low liquidity, and resulting, all in all, in relatively bearish markets, all of the key indices across Europe and the U.S. compared to the beginning of the year between minus 5% and minus 15% down. So all in all, the situation a challenge for capital market participants, whether brokers or clients. But despite all these macroeconomic backdrops, the team did a fabulous job. Thanks again here to our almost now 1,200 people in the company delivering really gratefully our Q1 target. And the reason for that great results is that we, as flatexDEGIRO in the past, have continuously focused on growing with the right clients. And we will come in a second into the numbers and discuss the numbers, but this has been our clear strategy for the last years. We are in the market to grow with strong clients, with experienced clients, especially with experienced clients that are still with inferior peers that are more expensive, that had -- that have a smaller product offering and/or even a weaker platform. And yes, the online brokerage penetration in Continental Europe, as you know, we described them usually as the underdeveloped G7, is still below 10%. And there will be an increasing of number of people penetrating the brokerage market over the next years, but this is nothing we will wait for. The clear strategy is to win new clients, but first and foremost, to be a pain in the neck for our peers and our incumbent competitors all over Europe. And don't forget, there are still 25 million to 30 million brokerage clients that are still with these peers, these inferior peers and incumbent peers that we will give over the next quarters and years a hard time by stealing their clients. In general, as I mentioned, the macroeconomic environment resulted in a situation where retail investors were pretty cautious. The volatility didn't really translate to higher activity compared to especially Q1 2021. I have discussed this a couple -- multiple times during the first quarter and many investor meetings that the volatility jumps that we saw in Q1 are different from those that we saw in Q1 2021, mainly because in 2021, the volatility was driven by, let me call it, positive environment, enthusiasm, a high involvement of retail clients in brokerage markets, whereas the peak in volatility in Q1 2022 was mainly driven by unfortunate events, war, inflation, uncertainty with respect to interest rate hikes with further growth potential with many company. And despite all these uncertainty and uncertain macroenvironment, our clients traded very well because we managed to win over the recent years, the right clients. So what are the highlights for Q1 2022? First and foremost, that it was our, literally the strongest quarter in our 15-year history, if we exclude the Meme Stock Mania quarter Q1 2021. We managed to continue our customer growth. We managed to continue with a stable trading active client portfolio. We managed something that we promised, an increase in our revenues per trade. And in the same time, we managed our profitability very well and resulted -- that resulted in an increased adjusted EBITDA compared to previous quarters. Let's start with the continuous customer growth and a bit of breakdown. If you consider Q1 2022, we grew by 185,000 gross clients. The average of the previous 3 quarters was around 142,000 clients. We guided for 640,000 to 840,000 client additions -- client account additions in 2022. And we indicated this already in Q3 and Q4 of last year 2021 that if we continue to grow with these average quarters in 2021, we will meet the 600,000. To exceed the 600,000, we have to top up a bit. This is literally what we did starting with Q1 with the 185,000. Nevertheless, the strategy did not change and we'll continue to be growing quality not in quantity. How -- what does the translation look like between customer additions and net customer growth? We had 2 key measures in place in Q1 that reduced, so to speak, the net customer growth. We had, first and foremost, a very normal organic churn of [ 11,000 ], which equals around 0.5% of churn in the first quarter. But we had 2 big measures where we actively as flatexDEGIRO offboarded both B2B, as well as B2C clients. The offboarding of the B2B, so to speak, B2B2C clients has no effect on the trades. It's with respect to 1 B2B client, where we will, by the end of the year, terminate the relationship. We have indicated this in the last quarter already that we assume for Q1, roughly 20,000 offboardings. This is what happened. We offboarded slightly above 20,000. There are some more to come during the next quarters, focusing on our clear, simple and clean online brokerage strategy, we believe that this is the right way to get rid of obstacles and disturbing businesses irrespective of their profitability, by the way, it will not have any impact on the profitability. So you will see some more offboardings in the coming quarters, I assume another 20,000 to 25,000 clients -- client accounts that will be offboarded by the end of the year. On the DEGIRO Austria side, the offboarding is a result of the migration. As you know, we migrated DEGIRO Austria into flatex Austria. The reason is that flatex Austria was almost tenfold in size of DEGIRO Austria. It doesn't make sense to continue with 2 brands in such a market. So we decided to migrate. By this migration, we had a drop-off on DEGIRO side of 8,000 accounts that we terminated that we offboarded. Mainly, we are speaking here about clients that did not have any tradings or did not have any portfolios anymore with us where we decided that it doesn't make sense to keep them, and all the clients were obviously offered to move over to flatex Austria. The process is almost closed. I assume by half year, we should be done with the flatex Austria migration. One more point that I would touch on before we come to the net customer growth is that we will start now the migration of flatex Netherlands towards DEGIRO Netherlands, actually very similar ratios. DEGIRO Netherlands is more than tenfold in size compared to flatex Netherlands. So here the strategic decision was made to consolidate the flatex business into the DEGIRO business, where we also expect during the course of this year to offboard roughly, again, 20,000 to 25,000 flatex Netherlands clients and then finalize the cleanup in clients in 2022. If we look into our net customer growth of 145,000 clients, we can conclude that it is the strongest net growth is coming in growth countries. What we find very interesting is that our research and growth markets grew faster than our 3 biggest peers in Europe combined. If we add even the core markets, you will see that we outperformed the growth of our largest 3 peers combined by more than 50%. Our net customer growth increased between Q4 and Q1 by 21%. So we used to outperform our peers already in the past, now what we see is that the gap is literally widening. You know, we usually don't disclose numbers on specific countries, but we are always happy to give information whenever we reach in certain countries certain benchmarks or certain interesting goals. One of these highlights is for us DEGIRO Italy, as you can see, without giving a figure to DEGIRO Italy, it is almost the size of Fineco's net adds. So what we managed in Q1 is to grow almost as fast as the market-leading monopolist in Italy that should give you, I think also an impression and an idea of what we are going for and the strategy that we are focusing on. If we look into the split of our markets, core markets, growth markets, research markets, you see that actually, we had a very nice customer growth also in the core markets. We added 48,000 clients net. So if we actually -- this is something you should be aware of. Remember that the offboardings that we had on the previous slides, so the B2B offboardings and the DEGIRO Austria offboardings that equal roughly 30,000, all happened in core markets. So if we would normalize for this event, our net customer accounts, new net customer accounts in Q1 2022 were roughly 70,000, which equals a growth rate of roughly 6.5%. We discussed the growth markets, the speedy growth of Italy, although Italy was only on rank 3 of absolute growth in these growth markets, we managed very well to grow in Spain, in Portugal and in France. U.K., Ireland is still something that we are working on with respect to the licensing and license application. For us, a very, very interesting market in which we also managed to grow very well and will continue to push then in U.K., especially after having the setup ready, which should happen hopefully in the second half of this year depends on the approval process that might take a bit of time on the U.K. side. The research market, as you know, our research market by name, not only by name, but also literally by strategy. But nevertheless, even without almost any marketing campaigns in these countries, we managed to grow 12% in client accounts, and we're pretty stable with respect to trade. So that was the topic on customer adds. Trading activities, we closed Q1 2022 with 21.9 million transactions, which is the second highest trading quarter ever in our history. As I said, the only quarter that outperformed Q1 2022 was Q1 2021, the Meme Stock Mania quarter. A very, I would even say a really big success. And I mentioned it that I'm really thankful for the team that did a superb job. We are coming out of a merger year 2021. Still a lot of things to do also in our setup, in our organization, but then to manage that growth and to manage that stability in our systems and to manage that number of trades is really excellent performance by the people. And despite all the backdrop that we discussed in the beginning and the macroeconomic backdrop that we all saw that led by the way to most of our peers. And some of them have already reported, the other will report over the next days that led to massive declining numbers, whether it's the growth in clients, whether it's the growth in a number of trades, I think this is today, we are providing to the market the evidence of the sustainability of our business that is based on quality growth, that is based on quality products, and that is based on superior pricing in the market and superior profitability. If we look into the trading activity by our client base, you see that we managed to stay pretty stable in Q1 2022 to Q3 and Q4. It's a stable line being at 41 transactions per client on an annualized base. If we look into the number of clients on average in Q1 and the number of transactions. Why is that? Why don't we see here the drop in trades? Although I think a lot of questions were asked in the previous quarter, what happens if we have a macroeconomic backdrop? It is -- I'm repeating myself, it is the pure quality of our client base. I indicated this a couple of times over the recent quarters, 2/3, almost 2/3 of our client adds are clients with previous brokerage experience and this is what we will continue to focus on. Clients with previous brokerage experience that don't fear, that don't hesitate to trade also in environments like these that we have that offers them a potential for capital gains. During a lot of Q1 investor meetings, we discussed volatility. We discussed the comparable situation in Q1 2021 to Q1 2022. I indicated a couple of minutes ago that Q1 2021 was a volatility that was mainly driven by positive enthusiasm by increasing markets in value and less by macroeconomic uncertainty and geopolitical uncertainty. What was quite interesting to see in our trading behavior of our clients was that we had a shift towards European equity. And so the distribution between U.S. trades and European-based equity trading was slightly towards European portfolios. The reason is that you can see here pretty well, actually, the first half of the first quarter, we had a very, very narrow spread between U.S. and European VIX. With the beginning of this terrible war in Ukraine, we see a massive widening of the VIX spreads between the U.S. markets and the European markets. Thus the liquidity in Europe or the trading activity in Europe with our client base was relatively higher than in the U.S., which explains also why the trading volume in U.S. equities and ETFs was lower than in previous quarter. If we look into the activity in detail, so to what results did this volatility spread lead? I think a quite important figure is that one here. So the number of trading customer accounts was, I think even slightly higher than what we saw in Q1 2021. Again, an evidence for growing with the right type of clients. Q1 2021, I think we all remember the boom quarter. We had obviously a lot of trading clients that were coming also to trade in this environment, whereas now with the backdrops that we saw, you could say, okay, it's really the hard core of our client base that is trading. So what we're managing to do is to increase the number of clients and customers in this hard core of our business, which is in the end the base for recurring revenues and for stability in our business model. So happy to see this result, despite the fact that the share of active customer accounts is on a Q3 level 2021. The trades per active customer account have picked slightly up between Q3 and Q4. So slightly -- in relative terms, slightly less customers that are trading in relative terms, in absolute terms, it's more. But these clients that are trading are, as I said, high-quality clients that make use of the environment and thus contribute also more trades on a per active customer base. The share of U.S. volume dropped, as I said earlier, mainly due to the drop, also the massive drop in volatility and uncertainty in the U.S. It's difficult to give a forecast for the next quarters. I assume that we will see a normalization here irrespective of how the U.S. trading flow will develop. It's much more about that I assume that the spread of volatility will narrow down and thus, the share of U.S. volume should then increase again. So that's with respect to trading activity. Let's come into the increased revenues per trade. The revenues in total and ARPU, EUR 118 million in revenues. Very, very, very strong number, as I said, the second best quarter in the history were actually the best one after Q1 2021, that led also to an increase in ARPU, which is also very important. So just to grow in both -- on both ends with the number of customer account, as well as in revenues that shifted up our ARPU. So we see also here that we are not growing revenues with no growth on the customer base side nor the other way around. I think a very interesting point is the share of revenues related to inducement from trading venues, so to speak, PFOF in Q1 has been reduced to 0.7%. Last year, we were at slightly above 3%. So you can see also here, we promised that we will get independent more or less by the end of the year of 2022 from PFOF, and we are actually on the way to get there. The revenues per trade, obviously benefited from DEGIRO Goes Zero. In Q1 2022, we had a revenue per trade of almost EUR 5.40, EUR 5.39 to be precise. The LTM has been now or top now, the EUR 5 level. And it's important to highlight that not only DEGIRO Goes Zero that contributed to this increase. I think 2 interesting points, 2 interesting data points that I would like to share with you. The implemented or the introduction of Tradegate with DEGIRO had a positive effect. Just to give you some numbers, the contribution of Tradegate trade to the total equity trades at DEGIRO was in September '21, 1.9%, at the end of Q4, 2.7%, and at the end of Q1, it was 3.3%. So we doubled almost in the first 6 months. We doubled almost the contribution of Tradegate to total equity trades. And we totally believe that this is the right way to do. With the introduction of Tradegate at DEGIRO, we allow clients to trade now between 8 in the morning and 10 in the evening, which is one product and the key product to retailize capital market access. A lot of people are working during market opening hours and are excluded from the opportunity to trade with the introduction of Tradegate, we've allowed them to access capital markets also pre and after prime markets opening and closing. The same applies very well to the ETP trades with DEGIRO. At the end of Q1, we were above 6% of the total trades. So the ETP trades make now more than 6% of the total DEGIRO trades. Also here, a steep and strong pickup that proves also the rightfully introduced products, the DEGIRO clients or the replacement of the old products with a much better offering, with a much better and user-friendly offering having BNP Paribas and Societe Generale, the 2 market leaders in Europe issuing these products next to us and offering these products, today, [ 2 ], 3 markets, Germany, Austria -- sorry, Germany, Netherlands and France. We are currently progressing to offer these products also in further product in further countries, including Switzerland and Spain and Italy. In Italy, there was a beneficial change in regulation with respect to the fact that it makes it much easier to offer ETPs now in Italy as well. Efficiency indicators, yes, the revenues, I think are self-explaining. The Q1 annualized level is above EUR 470 million. The assets under custody quite interesting. Although, we had quite big slumping market valuation and indices that dropped by, yes, 10% and more, the AuCs of our clients declined only from EUR 43.9 billion to EUR 43.1 billion. So we're talking about EUR 800 million in drop, which is, if I'm not mistaken, 2%, whereas the market indices dropped by between 10% and 15%. It shows also here that, first, our clients are -- the clients that are coming to us that we have added on are our good clients that are bringing portfolios with them, that are bringing cash with them on the one hand side. On the other hand side, it also indicates that our clients are not hit by the drops in the indices, given again, the quality of the clients, the experience of the clients to know when to go in and when to go out. It results in a revenue margin of 117 basis points, which is above 2019 and above 2021, if you would annualize the revenue above the assets under custody. So that is, as we always say, the formula of success, the number of clients times the number of trades per clients times the revenue per trade. How did all this translated into profitability? And before we start to speak about profitability, I think it's important to highlight to you one key expense item, which is marketing. In Q1, we spent EUR 18.4 million in marketing, which is, by the way, the highest spend that we ever had in our business model. And this spend was mainly driven, as you can see, by almost 70% by brand awareness and offline campaigns. That is an important item to understand. When we want to grow in a lot of markets where we are maybe today not the super known player, but rather still a Tier 2 broker for the local population, it's important to create trust, it's important to create a brand, it's important to create a level of security and safety for the clients to understand what we are literally providing them with. And this means that you have to create the brand awareness because we truly believe that brand awareness and an increased brand awareness is highly correlated with the probability to win clients. Thus, the big documentary that we had in the first quarter does a lot of TV campaigns that we had in Q1. If you take the EUR 18.4 million and you would just divide them by the gross adds, you would end up with a CAC of EUR 100, which is absolutely fine. Going on for this year, I actually expect the CACs to be at the higher end of our range, EUR 60 to EUR 80. And the main reason for that is that we truly believe that we are winning right clients. We're literally winning the right clients with this marketing. So there's nothing better than to spend EUR 100 in CAC and, as you have seen before, to generate an ARPU of EUR 220. So we're literally generating with EUR 100, 120% of return in the first year. That is something that we'll continue to focus on, very dedicated. I mentioned before Italy, Italy is, for example, a market -- France is a market where we will extend these brand awareness campaigns to make the population aware of our products in Italy and France that are dominated today, you know my clear perspective on these markets, by inferior incumbent monopolists. Now what was the result of this spend? So if I tell you about my hypothesis that I believe that brand awareness spend by my marketing team will increase the brand awareness and will increase the probability for clients to convert. What we are doing is to now track quarterly our brand awareness and the interest of clients in the brand, DEGIRO. And this is the result. Between Q4, so end of the year 2021 and Q1 2022 end of March, our brand tracker, this is how we call it. What you see is in one quarter how we increased the added brand awareness in literally all our core markets, Austria, Netherlands, and Germany, and in our growth markets, in the key markets of our growth markets, Portugal, Spain, Italy, and France. And what you see is that with an increasing added brand awareness, the preference is increasing as well. How is preference defined? By a very simple question, where would you most likely open a brokerage account in the next 3 months. So the higher my brand awareness, the higher the preference of potential clients. This is why we'll continue to work on increasing our aided brand awareness. And in Austria, in the Netherlands, in Portugal, in Germany, and in Spain, we see quite a very positive development of the aided brand awareness as well as [ of the preference ]. France and Italy are markets that we started only last year with big brand awareness campaigns, but we will continue to do so and believe that we can shift these countries into an area that should somewhere sit in this quarter here, somewhere around 25% in brand awareness and 10% to 15% in preference. It's the first time that we provide you with this data. I think, however, it's important to understand when we spend marketing and brand awareness, where this marketing ends up first; and second, what results it has. So the spend that we did in November, December, January, February, March, in TV advertisement is clearly here a significantly positive on both the aided brand awareness and the preference of clients to join us. However, it's not enough. We will continue to do so with all prudent perspective on marketing expenses. Don't worry, no one is going here in any way crazy with marketing expenses. But we have understood, and we have learned that it is worth to spend EUR 80, EUR 90, EUR 100 for a client if this client generates in the first 12 months of his lifetime EUR 220 and, in general, has a lifetime with us of, yes, 5, 10 years plus. Despite record marketing expenses in Q1 2022. We have achieved the highest adjusted EBITDA ever in our lifetime of this company with EUR 54.5 million. That equals a margin of 46.1%, which is higher than Q4, Q3 and Q2, the last 3 quarters. The adjusted EBITDA pre-marketing was at roughly EUR 73 million and equals 61.7% margin. The clean EBITDA in Q1 2022 was at EUR 51.7 million. The difference is, as always, just the delta in provisions for long-term incentive plan, which was in Q1 relatively moderate, but this is actually due to the planned development. This is also what we told you in the past. So in the Q1, we had only additional provision building of EUR 2.8 million. To make it very simple for you, it's quite interesting, the EBITDA -- the accounted EBITDA in Q1 2022 was almost as high as the Q2, Q3 and Q4 accounted EBITDA in 2021. So that's it with respect to Q1 2022. Again, a big thank you to our 1,200 employees that really did a great job to allow us to deliver the superior results. Allow me a couple of remarks to IR activity because, as you all know, May is usually quite a busy month. I'm giggling a bit because my calendar looks really, really messy, a lot of traveling, a lot of conferences, which I'm really looking forward to, to see most of you again also in person since this is now allowed and possible, we'll be -- and this is to give you an indication of it, but also to give you also the insights where we are. If you're not on any list, if you have not been approached, but would like to meet us, please reach out to Achim or to the organizers, London, Madrid, Paris, New York, then again, London and Frankfurt. So quite a busy schedule in May. But as I said, really looking forward to meeting you in person. On the 17th of May, we are hosting our virtual Annual General Meeting to which I all invite you to come and see and listen. It's going to be, allow me to put it in these words, it's going to be a quite standard AGM. There's -- there are no big decisions to be made apart from one, I have to say. We are very happy to propose to the AGM to call Aygul Ozkan into our Supervisory Board of the flatexDEGIRO AG. Aygul Ozkan is actually already a Supervisory Board member of the flatexDEGIRO Bank AG since the 1st of January 2022, so since this year. In her main role, she is the Managing Director of the German Property Federation Association, the ZIA. She is going also to introduce herself, but this gives you here a bit of understanding of her professional career. She has been, I think one of the most interesting parts. She has been a Minister for Social Affairs, Women, Family, Health, Construction and Integration in Lower Saxony, and was one of the very, very, very first female Ministers with a migration background in Lower Saxony. I know this very well because I lived a couple of years in Lower Saxony. And has been however also with the banking and finance industry, she was a Managing Director with a subsidiary of Deutsche Bank, the Deutsche Bank Kredit Service GmbH, as well as Deutsche Bank PCC Services GmbH. A very, very reputable person with the right professional background with respect to our business model, knows about banking, knows about regulation also in her role -- in her past role as a politician. Yes, we would highly appreciate if you support this proposed proposal to have her with us in the Supervisory Board member of the flatexDEGIRO AG, which is a further step, by the way, as you know, a further step in our institutionalization of our corporate to increase the Supervisory Board and to increase it also with the right person that fulfills the requirements that we also have as a corporate -- both the Supervisory Board but also the Management Board. So I'm really looking forward to having your vote to see Aygul Ozkan, not only with the Supervisory Board of the flatexDEGIRO Bank, but also with the Supervisory Board of the flatexDEGIRO AG. That's it from my side. I'd like to thank you very much and would like to open up for the Q&A session with our sell-side analysts. Thank you very much.

[Operator Instructions] And the first question is from Marius Fuhrberg, M.M. Warburg.

Congrats on a good Q1. I have a couple of questions, if I may. The first one would be any news on PEA plan introduction in France? The second one, you announced that potentially crypto trading will be introduced in Q2. Could you give us a bit more color on this one, how pricing will look like and what you plan there? The third one is with regards to the revenue per trade. That was quite impressive in Q1 now. And as we see your customers shifting their trading behavior towards European equities and with regards to the zero pricing, which prices European equity a little bit lower than U.S., should we expect revenues per trade to come down to more like EUR 5 again, or would you expect it to remain at this level? And finally, the profitability, do you expect the profitability to remain on the Q1 level under the assumption that we see similar or even increasing transaction numbers in Q2, Q3, so EBITDA margins moving more in the high-40s or even to the 50s?

Marius, let me start with your first question, PEA France. PEA France has been discussed internally quite diligently. It's not a simple product at all. It's actually a very complicated product. Plus, we have learned from quite a number of our customers that it is not something that we will decide, the market will. So we have stepped away at this point in time from the PEA accounts, given the difficulty in the French taxation system. However, what we will focus on is the ISA accounts in the U.K. with our branch opening, and we'll have a product live as soon as the U.K. business goes live under the branch license of the FCA because it's a much, much easier product and much more simple-to-handle product. So this is still on our agenda to provide locally the right products for clients but always with a diligent perspective on whether if it makes sense, whether we believe that this additional product contributes to the growth of our business within the right high-quality customer profiles. Second, your question towards crypto. To avoid misunderstandings, we never ever stated that in Q2 2022 we will offer cryptos. Let me please make this very clear. We said that in Q2 2022, we plan, hopefully, to announce a partnership that will allow us to introduce these products. It's nothing that we will introduce in Q2 2022, and no one disclosed ever that we will do it in Q2 2022. I just wanted to manage your expectations so no one should be disappointed why at the end of June, we don't have any crypto offering. The crypto offering, as we said in the past, is something that we are looking into very -- with a lot of patience, with a lot of diligence. It is not easy. We need to have a setup that is right. We need to have a setup that is right for our clients and for the safety of our clients. We are very keen to report to the market a good relationship, a great relationship with a highly reputable partner, but we are still working on it. So whenever there is something to announce, I'll promise you, we will announce immediately. And then we are happy to elaborate on what the revenue structure might look like or what the setup of this partnership might look like. But I think it's not fair also with respect to our partner to not -- or to disclose now details that we haven't brought under done-and-dusted agreements. Revenue per trade, a very simple and straightforward answer. I said in Q4 already that the short-term benchmark is EUR 5, full stop. Yes, it's been now much higher than the EUR 5. But as you said, there are multiple effects that are determining the revenues per trade. And we will not give a guidance -- a hard guidance on the pennies what for the next quarter the revenue per trade will be. What I said, if you remember right, in Q4 is that we said we believe that our revenue per trade on a short term over our next 5-year vision we'll most probably be around EUR 5, here and there, above 5 years. We are introducing the right products. We are introducing the right price measures to keep this level relatively high, but the EUR 5 should be the benchmark for revenue per trade. With respect to profitability, all in all, as you know, quarterly profitability is second of importance. The key driver is always to maintain a high-40s EBITDA margin -- adjusted EBITDA margin over a certain lifetime, which is a year at least. So there might be different aspects why next quarter we might see a higher EBITDA margin or a lower one. But what we can promise is that we will continuously work to see EBITDA margins in the 40s, especially when it comes to a 12-month perspective or last 12 months' perspective to achieve continuously EBITDA margins above 40%, while we are spending substantial and significant amounts in marketing because the spend in marketing determines in the end the adjusted EBITDA margin. And this is something where we, at this moment, would say we are keen to continue to spend right marketing to grow our customer base the right way and to generate future cash flow with a very simple investments today, which is marketing. I hope that answers your questions.

That's very clear.

The next question is from Christoph Greulich at Berenberg.

Yes, 4 questions from my side, please. I would like to follow up on the profitability aspect. If I look at the costs above the adjusted EBITDA and excluding the marketing, it seems like they have come down by about EUR 10 million in Q1 compared to the previous quarter, Q4 last year. Could you break down those EUR 10 million in cost savings into the biggest components? And do you think that those savings will be sustainable?

Christoph, as you know, we don't disclose on a quarterly basis P&L. You will see it in detail in half year 1. However, I'm happy to elaborate a bit on the reduced cost side. Reduced cost side is resulting mainly from 2, 3 things. The first thing is if we all go back to the Q4 call and listen to the Q4 call, we highlighted that we had in Q4 multiple one-off items resulting especially in licensing costs, resulting from the depository system costs that we have had and that are resulting also from provisions that we build for certain penalties by the AFM that are backed by the SPA. But we have to build them, obviously, because we would be the paying entity. So those are items are contributing the EUR 3 million, EUR 4 million at least -- actually EUR 4 million or EUR 5 million, sorry, EUR 4 million, EUR 5 million at least of this cost saving that is not anymore given in Q1 2022. Second, we had a COGS effect in Q1. What was the COGS effect? The cost of goods sold. So we're speaking of the cost before net revenue line. Given that the markets slumped down, our AUCs at the end of the quarter were quite well, again, back to where they were in Q1 -- end of Q4 2022. But during the quarter, they dropped down and picked up again. You remember the indices dropped down, the DAX was almost at 13,000 points, so we were 20% down from year-end levels, which resulted also in lower, for example, custody costs with Clearstream and with our custody structures in the Netherlands. Those effects might happen as well. So you could say, yes, we would wish for more trading activity at lower market valuation, which would reduce obviously the custody costs and increase the revenues. So there are different items that have -- actually, by the way, also a single-digit million effect. So these items, these changes in our OpEx structure has also contributed into profitability. But again, we indicated this, I think, a couple of times in the second half. Third, by the way, not to forget, if you remember right, last year was a merger year. So we had almost EUR 6 million that we build in provisions for merger costs. All these costs have been gone. So we don't see them anymore. So all these effects have obviously an impact -- a positive impact on our P&L. And yes, I consider these effects to be wiped out, to be cleaned out. However, I said that in Q4 as well, if I'm not mistaken, you never know what things might happen over the next quarters also on different other cost items. It is a certain moving target here and there. But again, as long as it is over the total on an average base of 5% or less than 5% of OpEx move, this is something we have to live with given multiple variables that are determining our OpEx structure, especially things like COGS, exchange fees, custody fees and so on and so forth.

That's very clear. Secondly, I was wondering if you could provide some additional color on the monthly evolution of customer wins and trading activity in Q1. Have you seen any important differences between the 3 months in the first quarter?

Christoph, I hope you understand that I'm not going to elaborate on monthly movements.

Okay. And then maybe -- I mean, if we usually look at your business, we have a quite clear seasonality, Q1 typically being the strongest quarter both for trading activity and I think also for customer growth. Just wondering, do you think that will be also the case in 2022, or could it be a year with a slightly different seasonality?

No, I think 2022 is actually a year that is -- there is a relatively normalized year, I mean, normalized with respect to our developments in customer growth and trade, everything, but normal, unfortunately, with respect to the environmental and geopolitical situation. Now I think we might see a very stable year. However, let me also highlight this now to avoid the misunderstandings in the next quarter. Remember, Q2 has a number of bank holidays. The trading days in Q2 are lower than in Q1. So those things obviously have an influence and have seasonality effects. But the seasonality effect should not look like -- look different from what we saw in the past 10 years. But let's see, in general, how the market environment develops over the next months and quarters. I think given the geopolitical situation and the macroeconomic situation, especially the uncertainty with respect to potential interest rate hikes in the Eurozone, is something that makes capital markets literally unpredictable. I'm happy to see that with -- or given or despite all this market uncertainty, our trading activity of our client base is still super stable, and that gives me a lot of confidence that with respect to seasonality we should see a relatively normalized development.

And then lastly, from my side, you already mentioned the outlook for interest rate hikes. Could you maybe remind us of the potential additional income that you would see from, let's say, a 1 percentage point increase in interest rates? And also, if that will come basically immediately or if there would be some time lag until you see that additional interest income? And then maybe also on that point, what is the current proportion of the customer base that is paying negative interest on cash deposits?

So if you have -- 1% interest hike would mean literally we have roughly EUR 1.8 billion today in literally overnight money in deposits. And if you would just apply a 1% interest hike on EUR 1.8 billion, we are talking about annualized EUR 18 million more EBT. Not speaking about credit book, not speaking about bond investments, not speaking -- we're just purely speaking about the EUR 1.8 billion cash that we are sitting on in our ECB structures and in our treasury deposits. So that would have an immediate impact. Second, obviously, an increase in interest rates would also increase the returns on bonds. We are carrying a number of bonds with us, sovereign bonds, mainly German sovereign bonds and will continue also to invest in German sovereign bonds mainly also to provide these bond structures as collateral to our counterparties. So I would assume that a 1% shift in interest rate would have an impact of, give or take, EUR 20 million -- positive impact of EUR 20 million on our EBIT line. With respect to negative interest rates, I think the negative interest rates that we charge is -- applies to -- not to all clients, applies to -- but to the vast majority of clients. However, you always have to keep in mind that the deposits per client are relatively low. With a few, we have even a slightly different structure given the legacy with negative interest rates, so you pay DEGIRO negative interest rates only if you're above EUR 2,500 on cash deposits, which is very, very seldom the case on the DEGIRO side. So the vast majority of our client base in absolute numbers, given that DEGIRO contributes the vast majority of the clients is actually not paying negative interest rates. So the kicker would be relatively significant to our business model.

The next question is from Benjamin Kohnke at KWB.

Actually KBW. A couple of smaller ones, if I may. First one, I noticed a decreasing number of trades in growth markets, disproportionate decline in annualized trades per customer. If you could outline what the main reasons have been there? Then just a quick follow-up on what you said, [ Muhamad ]. So 3% of revenues were payment for order flow in -- was that in Q1 2021 or full year 2021? And last one for now. Just on your credit book activities, any sort of anomalies or any sort of special effects you wanted to point out around that business? Or is it just steady as it goes at the moment?

Ben, thanks for your questions and thanks for the -- for highlighting 2, 3 points. So the slight decline, I think, 1% growth markets is mainly described by the following fact. Clients in our growth markets have a large exposure towards U.S. equity trading. So given the drop in U.S. equity trading, what you see the effect on these clients in the growth market is in relative terms bigger than, for example, in the core markets. So where core markets, especially German, Austrian, and Dutch clients trade a lot of local stocks, you see a lot of U.S. trading in France, Spain, Italy, and so on and so forth. Just given also the smaller markets that these countries partially have, so the smaller local markets, and this is the effect. So actually, the drop in U.S. flow was mainly considerable in these growth markets and thus the stable or very, very, very small negative trading number on the growth markets. PFOF, the 3% is with respect to the 9 months in -- sorry, in financial year 2021. But actually, if you would take even full year 2021, it's slightly, I think, above 3% or it was slightly above 3%. So this is to the whole year. But we started, so to speak, to divest the PFOF structure only end of Q4, but it kicked in literally only now in beginning 2022. So the effect of decreasing the PFOF returns and revenues has been implemented beginning of this year. Credit product anomalies, no anomalies at all so far, but thank you for a reminder. I had on one of the pages, but it seems like I skipped it, but you reminded me, Ben. I think it's important to highlight the following topic that we have sold our factoring business or divested our factoring business. We touched on this actually in the full year report 2021 to reduce here also risk and risk structure and risk profile. We will continuously focus on brokerage, on brokerage-related credit products that go very, very well. We will again have default rates in the basis point range this year. I think year-to-date, we didn't see any default by now, if I'm not mistaken. But the clear strategy is also here to divest certain products, certain projects that are not brokerage related. That means, on the one hand side, the B2B factoring portfolio that we now sold out and divested and the second portfolio that we will now divest and sell out is the football financing that by the end of the year will also run out of our books. And to continue with a super-derisked balance sheet with respect to these treasury investments. They were fine. They were good, especially under an area and period of negative interest to generate additional treasury income, but the clear strategy is going forward to focus and to derisk.

There are no further questions. I would like to hand back to you, gentlemen.

Yes. Thank you very much. Thanks to everyone who listened to our call. It's been a great pleasure. Take care of yourself. Have a wonderful Q2 and hope to see many of you soon. All the best. Bye-bye.

Ladies and gentlemen, thank you for your attendance. This conference has been concluded. You may disconnect.