flatexDEGIRO SE ($FTK)

Thank you for standing by. My name is Kate, and I will be your conference operator today. At this time, I would like to welcome everyone to the flatexDEGIRO Analyst Call Q1 2026. [Operator Instructions] I would now like to turn the call over to Achim Schreck. Please go ahead.

Good morning, everyone, and many thanks for dialing in. A warm welcome to our analyst call relating our Q1 2026 results, which we published yesterday evening post-market close. My name is Achim Schreck. I'm heading the IR team here at flatexDEGIRO. And with me today, as usual, we have our CEO, Oliver Behrens, as well as our CFO, Dr. Benon Janos who will lead us through today's presentation. We also have with us in the room, Dr. Thomas Lindner, our Global Head of Finance; as well as [indiscernible] IR colleague, Laura Hecker. As usual, we would like to provide a short run through the presentation before we open up for your questions. And without any further ado, I'm very pleased to now hand over to Oliver, please go ahead.

Thank you, Achim. Good morning, everyone, and welcome to the analyst call regarding our Q1 2026 results. Benon will run you through the details of our performance in the first quarter in the moment. I would just like to highlight a few key points. The market in the first quarter remained volatile. Venezuela, Greenland, Iran and Ukraine, the Strait of Hormuz, rocketing oil prices, ceaze fires, swing in interest rate expectations and AI peer trades. Given all these events, it is almost surprising that the markets have not been -- not reacted even more strongly. Our business benefits from customers see opportunities to trade and knowing that they can rely on our platform performing also in fast markets. This is why we saw a 17% increase in settle trades despite already meaningful comps from the previous year's quarter. Customers also continue to entrust us with significant amounts of fresh money. Over EUR 3 billion in the first quarter helping us to also grow our interest income despite the year-on-year decline of interest rates. The new products and services we put in place last year also helped our base to a significantly lesser extent given that we only got [indiscernible]. Crypto trading is now live in all relevant markets and this geographic expansion has driven up traded volumes fivefold year-over-year despite the global crypto market currently not doing all that well. First, revenues and earnings are also now coming in from our securities lending program, which we only started at the end of last year in the first markets. And finally, in March this year, we also welcomed Hamburg Commercial Bank as the first new -- an additional client for our deposit as a service business, where deposit volumes are now expected to build up and contribute to our pool of recurring revenues. In fact, we have seen a positive development in all relevant revenue-related KPIs, more customers, higher trading activity, higher commissions per trade, higher cash and margin loan levels, and new products and services delivering on top. As a result, we have been able to grow our top line by almost [indiscernible]. We also managed to reduce personnel expenses and keep admin expenses in Czech. Deliberately, we increased our marketing spend substantially in the first quarter particularly in the German and Spanish market. However, if you look at the EUR 21 million we spent and 123,000 new customers we won, the resulting ratio is clearly not satisfied. And we did expect more growth to come out of our marketing activities. In the first 3 months of the year, however, we have noticed that the general marketing spend across the industry has increased strongly, particularly in the German market in the wake of upcoming pension reports. The fact that we nevertheless achieved our highest-ever quarterly net income of EUR 54 million shows the strong scalability and potential of our platform. On this solid basis, we will continue to build our success by delivering for our customers and further enhancing our product and service offerings. We have started in the German and Austrian market, introducing stock savings plans at latex in February 2026. It allows our customers to invest continuously in a selection of up to 1,000 German, European and global stocks, including fractional shares. This way, our customers can build their own diversified basket of stocks and invest in monthly installments of as little as EUR 25. Our offering is priced attractively, but not coming completely free of commission fees like our ETF sales plan. With stock savings stands, we are charging a small fee of 1% on the transaction volume. Towards the end of the year, we will also start rolling out these savings plans at [indiscernible], including ETFs, funds and stocks. These forms of auto investment products are actually not as widespread in many of our international markets, giving us an additional edge to position ourselves as a leading platform for building wealth in Europe. Long-term wealth building is also the key driver behind the new pension and retirement accounts we will soon see in Germany. The first one will be the early start of retirement accounts or [indiscernible] where the German government will incentivize kids between the age of 6 and 18 with a monthly EUR 10 support so to start early on the capital market investments to build a financial cushion for retirement. The second one will be the state subsidized pension accounts for everyone. The current task provides for government subsidies of up to EUR 1,800 per year for investments. We expect the relevant legislation that we passed before the summer recess and take effect in January 2027. To be well prepared of both, we are not just working on the products themselves already, but have to fully digitized our onboarding process for minor accounts and now put full focus on refreshing the flatex app with a modern face lift and smoother user experience. So as you can see, we are not resting on our laurels. While the start of the year has really been strong, the most challenging comps are still ahead of us. Last April, saw a trading boost driven by Liberation Day and also the month of October had been outstandingly strong last year. For the time being, we would also expect the marketing pressure to stay across the industry. We feel very comfortable with the full year guidance we have given at the beginning of the year, but I'm mindful of these challenges and uncertainties as well. However, before I get into the outlook for 2026 and 2027, I would like to pass the word to our CFO, Dr. Benon Janos who will quickly run you through the details of our financial performance over the last quarter. Benon the floor is yours. Thank you.

Thank you, Oliver. And good morning, everyone, from my side as well. Thank you for joining us today. [indiscernible] the opportunity to review the presentation and materials we shared yesterday evening after market close. Therefore, I won't walk through every single slide in full detail today. Instead, I will focus on the key topics and the main drivers behind our Q1 2026 numbers. Let's turn to our commercial performance on Slide 9. Oliver has already elaborated on customer additions in the first quarter. Settled transactions grew by 17% year-over-year to EUR 22.7 million. This was driven by higher trading activity among our existing customer base benefiting from elevated market volatility during the first quarter. However, let me also reiterate again what Oliver just said. Last year, we experienced exceptionally strong trading activity in April, particularly around liberation days, which resulted in record transaction volumes for us. We also saw an unusually strong October 2025. These were exceptional months driven by specific external events and market volatility pipe that are beyond our control. As such, we have not assumed these conditions will repeat fully in 2026, which means we are facing some tougher year-over-year comps. Please note that this is fully reflected in our full year guidance, and we remain confident in delivering on those targets. Let's move to Slide 11 and net cash inflows. Net cash inflows in Q1 reached EUR 3.1 billion, up 2% year-on-year. While this may appear as modest growth on the surface, I would like to emphasize that we are building on very strong comparables from last year. PAUSE also noteworthy this quarter is the investment behavior of our clients. In the first quarter of this year, 98% of these net cash inflows were reinvested by our customers into securities. This is, again, more in line with our historic average of around 95%. And thus, significantly higher than what we saw in full year 2025, where only approximately 80% of net cash inflows were reinvested. Roughly 90% of the net cash inflows in Q1 of 2026 came from existing customers. This is also consistent with what we saw in Q1 of 2025. Our existing customers continue to deepen their relationships with us by entrusting us with more of the investment assets. Now turning to Slide 12. The growth in revenues of 19% year-over-year to EUR 174 million was driven by strong performance across both of our core revenue stream. Commission income increased by 18% to EUR 116 million. The first 3 months of 2026 were characterized by continued market volatility primarily driven by ongoing geopolitical conflicts, hence the resulting impact on global supply chains and economic conditions. Our firm benefited from this environment through a further slight increase in customer trading activity, combined with our customer base expanding by 12% year-over-year, the number of settled transactions grew by 17%. Additionally, average commissions per transaction increased slightly. I'll turn to that in a bit. Interest income rose by 14% to EUR 49 million. This is particularly noteworthy given the lower interest rate environment we are currently in. Let me break down the 3 key growth drivers here. First, customer cash under custody was substantially higher, averaging 41% above Q1 2025 levels throughout the quarter. The higher cash balances enhanced our interest earning capacity. Second, the utilization of margin loans increased by an average of 18% compared to Q1 of 2025. Third, we have intensified our treasury activities actively managing our liquidity to optimize returns. This includes the strategic deployment of excess liquidity into high-quality investment grade form, primarily [indiscernible]. Our treasury book now stands at EUR 1.2 billion, with an average yield of 2.3%. We leveraged higher customer cash balances as well as current rates that went up sharply across the year [indiscernible] also on the short end, allowing us to build up the portfolio a bit quicker than previously anticipated. Overall, these 3 positive effects more than compensated for the lower interest rate environment on a year-over-year basis. Remember, we are comparing against Q1 of 2025 when rates started at 3% and declined to 2.5% versus a flat 2% throughout the first quarter of this year. Commissions transaction came in at EUR 5.9, up slightly from EUR 5.02 in Q1 of 2025. As a reminder, Q1 typically benefits from connectivity fees, which contributes to the seasonal strength in this metric. Total connectivity fees charge amounted to EUR 6 million in the first quarter. During Q1 of 2026, we saw a continuing shift from U.S. equities to European equities that started during Q1 of 2025. The share of U.S. exchanges and total trading volume, which has reached peaks of approximately 25% by end of 2024, moderated to around 20% by the end of Q4 and 15% by the end of this past Q1 quarter. However, the average ticket size of U.S. rates continued to rise steady. We also benefit from FX conversion on all cross currency trades. For example, when a Swiss, a Polish client with German equities in Europe [indiscernible] we capture FX conversion fees on that flow as well. This is, therefore, not limited to U.S. exchanges. So there may be now be room to the upside in USS trading. And just as a personal remark, it's probably a good sign for the equity culture in Europe when trading takes place mostly in their domestic share. Now let me walk you through our operating expenses in more detail. OpEx increased by 13% year-over-year to EUR 63 million. Marketing expenses were the primary driver of the increase. Oliver has already discussed that in his earlier remarks. While operating expenses showed an absolute increase in total, it's important to note that personnel and administrative expenses stayed flat or even came down year-on-year demonstrating the strong operational leverage in our business model. Let me break down these 2 components in some more details. Personnel expenses declined by 10% year-over-year to EUR 29 million, compared to EUR 32 million in Q1 of 2025. This reduction was driven by 2 factors. First, current personnel expenses decreased slightly from EUR 27 million to EUR 26 million as we continue to benefit from efficiency gains and disciplined head count management. However, they are up by 9% quarter-on-quarter given seasonal effect due to short-term incentive payments usually paid out in Q1 of 2026. Moreover, Bulgaria has [indiscernible] the euro as of the first of January 2026, which usually leads to some wage inflation. We do have around 300 colleagues based in total. Second and more significantly, expenses for long-term variable compensation dropped by 47% from about EUR 5 million to EUR 3 million year-on-year and more than 80% quarter-on-quarter. As we have shared during the fiscal year 2025 analyst call, we intend to mitigate the volatility in our long-term variable compensation expenses caused by the legacy stock appreciation rights or SARs program. We recognize the value of creating greater predictability in our cost structure and would like to remove this fluctuation caused by the start from our P&L. To address this, we are currently planning to offer beneficiaries with vested [indiscernible] and early buyback against the premium, and the program is expected to start in early May of 2026. As mentioned in February, we have already built a corresponding liability for such a premium, which was included in the Q4 2025 expenses for long-term value compensation with around EUR 1.2 million. We believe personal expenses for long-term variable compensation component of around EUR 3 million to EUR 4 million per quarter and now a reasonable estimate going forward. Other admin expenses remained relatively stable at EUR 13 million, compared to EUR 12 million in Q1 of 2025. This stability reflects our continuous focus on operational efficiency and cost discipline. This brings us to Slide 15 and the bottom line. Net income reached EUR 54 million, up 28% year-over-year, and for the first time in our company's history, exceeding EUR 50 million in a single quarter. This demonstrates the scalability of our business model. Despite significantly higher marketing investments, we were able to expand margins, thanks to strong operational leverage. Before I close my remarks, I would like to again emphasize the upcoming change in our financial reporting structure driven by the endorsement of IFRS 18. We will adopt these reporting changes voluntarily beginning with our H1 2026 results to provide enhanced transparency and comparability as an early adopter. We have given [indiscernible] in February, and we'll give you more information with the half year results. Moreover, in July, we will also post sell-side events on IFRS 18 for our analysts in London and Frankfurt to which you should already have received indications. Now I would like to hand back to Oliver, who will walk us to our '26 and '27 guidance. Oliver, over to you.

Thanks so much, Benon. Looking at our guidance for 2026, I can make it quick as we haven't changed it. Our expectation was and is to see an increase in revenues of 5% to 10% this year and a 5% to 15% growth of net income. This would result in an annual revenues of around EUR 600 million and a net income of around EUR 175 million. In my opening remarks, I already mentioned some caution we will remain on the trading side, driven by current market uncertainties and the high comps of last year. I would also like to point out that we have not changed our assumptions for interest rates at this point. From today's perspective, we believe that also 2027 will be another growth year of Latex 0, with revenues reaching around EUR 650 million, and the net income rises to around EUR 200 million. I would also like to remind everyone that our new product lines, crypto and securities lending will be shown in the P&L on a net basis. For crypto, this will likely be some 30 to 35 basis points on the trade volume and for securities lending, some 20 basis points on the lending volume, which we believe has the midterm potential to grow to around EUR 10 billion of assets held on the [indiscernible] platform. But to achieve this, we first have to push forward the geographic expansion into all relevant markets and ensure a high adoption rate among our most significant customers. Let me stop here and open the floor for your questions on the quarter. Maybe Achim, can you take over again and run us through the process for the Q&A now. Thank you.

Thank you, Oliver. Yes, we are now happy to take your questions. I can see the first 2 ones already in the queue. And may I ask you to please remind everyone of how to close the question and then start opening the line. Thank you.

[Operator Instructions] Your first question comes from the line of Amit Jagadeesh with UBS.

I've got 2 questions. So firstly, could you just give us any color into the trading sentiment since the end of March? Are there any signs of trading fatigue from the retail customers? Or is it still holding up relatively well to the March levels? And then secondly, could you help dissect the marketing expense this quarter in more detail. So how much was related to sort of normal marketing customer acquisition costs versus specific targeted marketing in Germany, Spain and then also versus the start of the year campaign, that would be helpful.

Maybe I'll start with the trading activity, and then I can hand over to Oliver on the marketing side. So trading in April is a bit slower than what we had seen last year during the [indiscernible]. So not surprisingly, this is pretty much what we expected. So unless something happens in the last week of April, the numbers will be down compared to last year. And I wouldn't go as far as saying that rate fatigue. We will have had lower quarters, probably lower months in the past. So April is a solid month, but it's, again, another week to go. So we'll see whether the final numbers will end up.

On the marketing side, I think we said already last year, we increased marketing spend by EUR 10 million. I think it's also fair to say that it looks like that the entire market has increased their marketing spend. So the attention levels you get with more spend are lower than if everybody else would have spent less, that's for sure. And that's why we have already lowered our expense basis in recent weeks. The EUR 10 million were intended to be spent in Germany and Spain or in Spain and Germany as focused markets, especially for Germany to reinitiate the recognition of the flatex brands, which we have a little bit ignored for a while during the period of the Baffin findings where it would have not been worthwhile spending the money, and that's why we're initiating especially brand spending in Germany in preparation for the retirement savings accounts. But we always said we will make some of the expense basis more variable, which is 2 ways, variable compensation for our people and variable expenses, especially marketing expenses. Hopefully, that helps.

Your next question comes from the line of Andrew Lowe with Citi.

Also on the marketing spend. What 2 things has been driving? I know you've done a lot in Q1 and the cost of customer acquisition has gone higher, and that you had a lower number of customer adds in the first quarter of this year than you did in the prior year. Do you think that spend is structural. So going forward, as we think about outer years modeling your marketing costs should be higher than the EUR 75 million to EUR 100 per new customer that you previously guided to? So yes, so that's the main question. And then I guess, I noticed that you haven't committed to customer numbers going up year-on-year, whereas you previously had that target in your full year results. So could you maybe comment on sort of expectation of customer growth in the remaining 3 quarters of the year and then going into next year as well? And then the second question, can we just get a little bit more color please on what the revenue contributions in the other income line are sort of how much security you end, how much third-party deposits and how that's expected to grow in the coming quarters?

The marketing spend at work line. I mean first of all is, as I described in I think most of the calls, the spend is the most in Q1. So the client acquisition cost is the highest in Q1. And that expense line basically slowed down during the course of the year and normalizes the customer spend. To also very clear, if we are spending EUR 46 million on marketing. Trade Republic is probably spending [ EUR 300 million ] and Revolut is spending [ EUR 1 billion. ] So you always have to put these things into perspective. And awareness level you can create with the spend. So we have to spend our money very wisely to get to these levels. And there could be a benefit if you are not listed because our number is directly visible in the bottom line and has an impact. And as I mentioned, we are reducing -- have been reducing some of the spend already in recent weeks. We always said we expect customer growth also to be around 10%. I don't know where you took the idea that we are not committing to customer growth. We are committing to customer growth. But it's also the truth that others are spending more money in marketing and that the competition is increasing because there are more and more banks, neos and others have identified this sector for growth. But the reality is also that Europe is still at a low base with penetration rates of between 14% in equity ownerships in Germany, and in the direction of 10-ish percent across the European countries, which has significant growth opportunities overall. And in the long term, relative to more established markets like the U.S. On other income line, I think we have not changed or maybe as an introductory market and being on the takeover, we said in 2017, we expect 5% to 10% in this category. And I think we kicked it off with 5%, and that is still the plan. Over to you, Benon.

Yes, on the breakdown. And the IT-related part is a bit high of EUR 4 million. The banking-related BPO outsourcing part is EUR 1.5 million roughly. And we also had a release of provisions from last year of around EUR 2 million.

Great. That's really helpful. Can I just clarify that the point on the customer growth. So your full year presentation, you said that the customer growth, which was 13.1% last year, you're expecting that growth rates be higher in 2026, and that line no longer appears in the guidance slide. So that's where that number came from. So is that just a reflection of customer growth in Q1 was maybe lower than you were initially anticipating. Hence, the sort of drop of that commitment? Or do you still expect customer growth to be above the [indiscernible] you did last year?

Andrew, Achim peaking here. As you correctly summarized here, of course, we still do expect further customer growth. We still expect it to be at least 10% on an annual basis. But given that we have now seen in the first quarter, which is typically the strongest one seasonally also for customer growth that we were slightly below what we had achieved in 2025. We just believe there will be a bit too bold to guide for an overall increase now over last year, are you fully catching this up. Please also note that we are not including in that assumption, any potential pension accounts that might be opened already ahead of the start of the pension plan or pension reform in Germany in January 2027. So of course, we are aiming for opening up these types of accounts already in the fourth quarter, allowing people to already create these accounts and become customers of ours. But I think in all [indiscernible] customers, at least for the beginning will be very different from the usual customers [indiscernible] when it comes to trading activity and monetization. So that's not included in that number here.

Your next question comes from the line of Christoph Greulich with Berenberg.

It's 3 from my side, please, if I may. Firstly, on the interest income. I was just wondering if there has been any meaningful intra monthly moves in the cash deposits number that we couldn't see in the month and KPI that might have affected the interest income generation for the quarter? And then also on the treasury portfolio, do you have a specific target size that you want to reach, relative to the overall amount of excess liquidity, minus the margin loans. I think you mentioned at the full year results presentation, you want to exceed EUR 1 billion. Now you mentioned you're already at EUR 1.2 billion. Just wondering if there is a clear target where that should go? And then secondly, on the other operating income line, just a follow-up with regard to the BPO income. I think you mentioned in the press release that you have been compensated for some start-up costs with regards to your -- the launch with the new first -- your first new customer. Can you just clarify on the revenue model there? Is that purely basis point fee? Or are there also some kind of effort or cost based income -- some income, which just means that when you launch with a new customer, there might be a temporary boost to that income? And then lastly, I was wondering on the regulatory side. If we kind of -- there's a lot of focus on Germany at the moment is the tender reform, but there are also things happening in other European countries. I think Poland, Ireland and Spain. There are some debates now about potential regulatory changes similar to the one in Germany. So just wondering if you could give me some comments where you see other interesting opportunities happening in Europe that you might increasingly focus on the coming year?

Thank you, Christoph. I'll start with the first question. Interest income and intra-month moves on the deposits that now, we didn't really see anything. It's a pretty normal increment development with normal seasonality kicking in after [indiscernible] and there's not a whole lot to say other than the reinvestment levels into securities are different to last year. I mentioned that when I made the introduction. So this year looks like more normal compared to the previous years. Last year was a bit of an outlier. On the treasury portfolio, maybe I'll hand over to Oliver.

Yes. Look, as Benon mentioned, the cash has gone up last year at 45% or so, yes. And it remains an elevated level, which is around, what, 6%, 6.5% of total assets on the platform if you include the cash. And you have to minus the margin loans, which stands around EUR 1.4 billion or so, which makes it a net of EUR 5 billion and the -- we indicated this EUR 1 billion, but this number looks at the moment, at least pretty stable. The bonds are between 1 and 3 years duration of high-quality, AAA and around that in our -- from our major markets like Germany, the Netherlands and Austria, or the other way around and limited other high-quality names, which could then lead to what, 20% to 30% of a range, but we haven't published any raise target. Let's not forget the yield curve was pricing in at the beginning of the year a yield cut from the ECB by 25 basis points in May. People tend to have forgotten this. Now the yield curve is pricing in 2 to 3 rate hikes. We are trying to smoothen the volatility of our interest rate revenues. And this number of EUR 6 billion looks pretty stable at the moment, because it's on average a small amount, which for most clients is not worthwhile moving to other platforms also. They are buying with bigger cash positions than overnight money market funds and which we offer. On the business process outsourcing, there is in terms of revenue -- revenue model. There has been a set-up fee, which is in the -- which basically covers the cost, as Benon indicated in his speech. And we converted those revenues into basis points model. The basis point model is an inverted price curve. You put more money on the platform, you pay a higher price. You put a lot of volume for the last euro, so to speak, on the platform, you pay less. So there is an alignment of interest in terms of encouragement of those business process outsourcing partners to put more on the platform at a lower price to also move money on our platform from other platforms and so on. And we are intending to build this out. This is the third client then. We are also changing the pricing with the existing clients from unit pricing to basis point pricing. And we are committed to this meaningful number of 5 plus percent of revenues in '27. But let's not forget, somebody starts new in February or March, the volume needs to build up over time. So on the European opportunity, there is a positive and negative. We have to participate in the local retirement schemes, which might be comparable to the German others [indiscernible] which we need to deal with our speaking approach from the Netherlands to [indiscernible] platform. That will take us into 2017. At the same time, as indicated for the end of '26 , we are planning to offer stock savings plans and mutual fund savings plans across the countries, which will not have an earnings impact in '26, but should contribute to significant rise of transaction volume in '27. But should also contribute to a lower revenue per trade because these transactions might be lower volume as a current equity transaction volumes. But nevertheless, this plays exactly into the retail investment strategy, which came from [indiscernible] to encourage all European countries to offer these savings plans. And we believe that our offer will be attractive and will be priced at a very low level, which will be interesting for investors to participate with small amounts and monthly installments to save on our platform. Will that makes sense. Hopefully, that has answered your 4 or 5 questions.

[Operator Instructions] I would now like to turn the call over to Achim Schreck for closing remarks.

Thank you very much. Thank you all for participating in today's call and your good questions. As always, if you have any follow-up questions, Laura and I are available to answer anything you might still want to add on it. With that, thank you very much for today's participation. Have a great day. Goodbye.

Thank you.

Ladies and gentlemen, that concludes today's call. Thank you for joining. You may now disconnect.