Good morning and thank you for joining Flow Traders' second quarter 2025 results conference call. As you have no doubt already seen, we released our trading update first thing this morning, along with the leadership update. I am joined here on the call by Flow Traders' CEO Mike Kuehnel, as well as our Co-Chief Trading Officers, Alex Kieft and Marc Jansen, who will run through this results presentation. We will be happy to take any questions you may have after the presentation. Before we begin, let me draw your attention to the disclaimer on page two. Please be advised that if you continue to listen to this presentation, you are bound by this disclaimer. Also, please note that the results we will discuss in this presentation are unaudited. With the formalities out of the way, I would now like to hand over to Mike for his opening remarks.
Thank you very much, Eric. Good morning, everyone, and thank you for dialing in. The second quarter of 2025 as a whole saw elevated activity in the market trading environment, with volumes and volatility in traditional asset classes seeing a meaningful step up when compared to the same period a year ago. Flow Traders' ETP value traded increased by 42% in the quarter compared to last year and is largely in line with the market's 50% year-over-year increase. Total value traded increased by 14% year-over-year to close to EUR 1.7 trillion, the third highest quarter in company history. We achieved a net trading income of EUR 143.4 million in the quarter, our fourth straight quarter of triple-digit NTI, and the first time in the company's history. It was also the fifth triple-digit NTI in the last six quarters, a strong validation of our growth and diversification strategy.
The strength in the quarter was driven mostly by a sharp increase in activity in traditional asset classes across Europe and the Americas. The increase occurred mostly in the first half of April, following the Liberation Day tariff announcements from the new U.S. administration. The flurry of activity did not last very long, however, a pause in the implementation of the tariffs was announced only a few days after the initial announcement. Market activity declined gradually from the second half of April into May and June, with volatility in July running below historical averages. The higher-than-average market volatility in traditional asset classes in the early part of the quarter was offset by meaningfully lower volatility within digital assets. Similar to historical trends, crypto continues to exhibit countercyclical attributes when compared to traditional asset classes.
As a result, we saw meaningfully lower contributions from digital assets in the quarter when compared to the same quarter a year ago, and especially when compared to the first quarter. Total income came in at EUR 143.9 million for the second quarter, which included a EUR 0.5 million gain in other income. As a reminder, other income reflects the unrealized gains and losses of our investment portfolio, which also includes digital asset holdings and can fluctuate from quarter to quarter. Fixed operating expenses in the quarter were EUR 49.8 million, an increase of 15% year-over-year and a 2% decrease compared to the first quarter. We continue to plan for a meaningful step up in fixed OpEx this year to support select hiring of subject matter experts, as well as increase technology investments given our growth and diversification strategy.
We recorded a EUR 2.5 million reversal of impairments in intangible assets related to our digital assets trading book in the quarter. This is a partial reversal of the EUR 10.5 million impairment we recorded in the first quarter. As a reminder, these below-the-line positions are hedged, and the gains or losses of the offsetting trades are recorded in our NTI. Given our relatively fixed cost base and high operating leverage, we generated an EBITDA of EUR 68 million in the quarter, more than triple our results from a year ago, at a 47% margin compared to 29% a year ago. As a reminder, our variable employee compensation is set at 32.5% of operating results, which aligns employee incentives with those of our shareholders. Net profit for the quarter increased to EUR 51.3 million, almost quadruple the EUR 13 million from the same period a year ago, with a basic EPS of EUR 1.18.
Despite much of the elevated activity in early April having dissipated in May and June, and lower contribution from digital assets, the solid results of this quarter serve as continued validation of our growth and diversification strategy. I will now hand it over to Alex for the next few slides.
Thanks, Mike, and good morning, everyone. As shown at the top left-hand side of the slide, market ETP value traded increased by 50% in the second quarter compared to the same period a year ago, and by 14% compared to the first quarter. Implied volatility in the quarter, as represented by the VIX, increased by 67% year-over-year and by 20% compared to the first quarter. Total ETP assets under management increased by 7% in the first half and 22% year-over-year to almost EUR 15 trillion, giving continued record fund inflows into ETPs in the quarter and the strength of the overall market. ETP velocity increased in the second quarter compared to the first quarter to the highest level seen in more than two years. In summary, the secular industry trend across the ETP universe continues to be strong.
Market activity in the second quarter was the highest in more than two years, but remained well below levels seen in 2022 and 2020. I will now move on to the dynamics within the fixed income and crypto markets. As shown on the top left of the slide, trading volumes in the investment-grade and high-yield bond markets increased in the second quarter compared to last year, but investment-grade volumes decreased compared to the first quarter. Volatility, as measured by the MOVE index, increased slightly both compared to last year and last quarter. Trading volumes in cryptocurrencies increased in the quarter compared to last year, but declined meaningfully compared to the first quarter. Global crypto ETP market value traded also increased compared to last year, but declined compared to the first quarter. Moving on to the next slide.
On slide six, we present an overview of some of the key performance indicators for the quarter on a regional basis. As mentioned earlier, market ETP value traded increased substantially in the quarter when compared to the same period a year ago. However, market ETP value traded declined in Europe and Asia in the second quarter when compared to the first. The robust and comprehensive trading capabilities that we have developed over the years across different regions and asset classes put us in a great position to capture opportunities that arise in different parts of the market through different market environments. In Europe, we maintained our position as a leading liquidity provider in ETPs amidst increased market activity and volatility in the quarter. We were able to benefit from the sudden but short-lived spike in volatility in April, on top of the continued record fund inflows into ETPs.
In the Americas, Liberation Day tariff announcements drove significant increases in market trading volumes and volatility in April, alongside continued record fund inflows into ETPs. However, market activity subsided in May and June, given the quick pause in the implementation of the tariffs. In Asia, trading volumes remained elevated in Hong Kong and China in the quarter when compared to the same period last year, but were lower quarter on quarter given the initial tariffs that were already announced in the first quarter. Trading volumes in China have doubled versus a year ago and are now two to three times that of Europe. Volumes in other regions increased.
Volumes in other regions increased both year-on-year and quarter on quarter as a result of the new tariff announcements. As a result, this was the company's best second quarter result in Asia, following a record year last year. In digital assets, volumes in crypto increased compared to the same period last year, but declined compared to the first quarter. Volatility declined meaningfully both year-on-year and quarter on quarter. As a result, we saw much lower contributions from digital assets this quarter when compared to both last year and last quarter. Let's move on to the next slide. Fixed operating expenses in the quarter increased by 15% when compared to last year to EUR 49.8 million, due mostly to increased employee and other expenses, but decreased by 2% quarter-over-quarter.
We delivered a strong 49% EBITDA margin in the quarter compared to 29% in the same period a year ago, given the high operating leverage inherent in our business. We ended the second quarter with 607 FTEs, a decrease from the 619 FTEs at the end of the first quarter. We continue to expect fixed operating expenses for the year to be in the range of EUR 190- EUR 210 million, given additional technology investments and targeted additions of subject matter experts in growth areas, partially offset by expected operational efficiency gains. On slide eight, we take a look at the historical performance of the company in the context of market volatility. The chart on the left shows our company's steady NTI growth since our IPO. This growth is due to investments we've made in trading across regions and asset classes.
Our strategy of growth and diversification allows us to seize opportunities wherever possible. As a result, we can deliver strong results even when market activity is low and gain significantly during volatile periods. The chart on the right highlights our consistently strong average EBITDA margins of over 40%. This success comes from the high operating leverage in our business, helped by our flexible compensation approach. Our mix of fixed and variable compensation links employee pay to company profitability. This ensures our employees' interests align with those of our shareholders. On slide nine, we highlight that trading capital is essential for any trading firm, and increasing it is a key priority for us. Due to strong past returns on trading capital, we decided last year to expand our trading capital base further. We did this by suspending the dividend and seeking external debt.
Thanks to this decision and strong profits, we have grown our trading capital to record levels, increasing it by 33% year-on-year and 4% since the first quarter, reaching EUR 831 million. Our shareholders' equity also reached record levels, growing by 29% year-on-year to EUR 821 million by the end of the second quarter. This growth matches the increase in trading capital. With increased market activity, we achieved strong returns for the first half of the year, 75% on average trading capital and 26% on equity. These strong second quarter results confirm the success of our trading capital expansion plan and our diverse trading strategies. We believe that with more capital, we can continue to achieve significant returns and strengthen our position as a leading global trading firm, providing liquidity and efficiency in many financial markets. Moving to the next slide, I will discuss market trends and our strategy.
Slide ten highlights four key megatrends that support our strategy, and they remain strong. These trends shape our market environment, providing many opportunities for us. Importantly, these trends complement and strengthen each other. A key trend for our business is the growing acceptance of exchange-traded products and passive investing. In the second quarter of this year alone, total industry assets under management in ETPs grew by EUR 1.8 trillion. This figure is expected to rise from EUR 17 trillion today to EUR 25 trillion by 2030, showing the strength and importance of the ecosystem we are a key part of. Electronification of trading is crucial for our activities, especially in the fixed income asset class. It's a major trend in corporate credit and emerging market sovereign bonds. Increased use of electronic trading fits well with our tech-driven strength.
Fixed income ETF assets are expected to grow from EUR 2.5 trillion now to EUR 6 trillion by 2030. This growth is partially because of the increased electronification. With the recent regulatory developments on digital assets, there's more institutional interest globally. We expect continued growth in investor demand for this asset class, which is a long-term growth opportunity for our company. The technology behind it could boost the tokenization of real assets from EUR 260 billion today to EUR 30 trillion by 2030. Finally, regulations benefit our business by ensuring fair execution and transparency, creating a level playing field for all. More oversight in digital assets provides industry safeguards, and it removes barriers for investors. We are collaborating with global regulators to enhance transparency, efficiency, and liquidity across all markets and asset classes. Let's move on to the last slide.
On this slide, I will recap the firm's four key strategic pillars to grow, strengthen, and accelerate the business. First, we are optimizing our core and increasing our capital. We aim to create a strong and efficient business model by improving our trading base. At the same time, we are growing our capital to enhance the value of our trading strategies across different asset classes and regions. The trading capital expansion plan from last year provides the necessary funds for us to continue expanding and diversifying. Second, we are expanding and improving our trading skills by using our in-house infrastructure, capabilities, and expertise. We are exploring new products and improving our existing trading strategies. Our investment in digital assets trading over the past eight years shows our commitment to this strategy. Third, we focus on technology and innovation.
We plan to use new technologies and data insights to improve our pricing and enhance efficiencies in trading. Finally, we are diversifying our business and revenue streams. We invest in new business ideas and partnerships for connectivity, platforms, data, and tokens. By partnering with others, we aim to boost innovation in financial markets and grow our revenue. We are very excited about the launch of AllUnity, our Euro-based stablecoin with DWS and Galaxy Digital. It's an instrument that we expect to help bridge the world of traditional finance and digital assets, revolutionizing and bringing new possibilities to traditional finance as we know it. In conclusion, by focusing on our four main strategic goals, we believe that success, like we've seen this quarter, will become standard as we continue to deliver on each of these strategic priorities. I will now hand the call back to Mike for final remarks.
Thanks, Marc. I'm immensely proud of what we have collectively achieved during my tenure here at the company, which has culminated in the company's first four consecutive quarters of triple-digit NTI and the fifth in the last six quarters. Equally, I take pride in the development and growth of our global leadership team. Cultivating and attracting talent has been a pivotal focus during my four years, and I'm thrilled about the current standing of this team. I would like to extend my warmest welcome to my successor, Thomas Spitz, as he takes over the mandate to grow and expand the company. I have full confidence in Flow Traders' future and the leadership team in place, as well as its ability to grow and become an even more significant force in promoting transparency, efficiency, and resilience within global financial markets.
I will now hand the call over to Eric for the Q&A.
Thanks, Mike. This concludes the formal part of our presentation. We would now like to open up the floor for any questions you may have. Operator?
Ladies and gentlemen, we are now ready to take your questions. If you wish to ask a question, please press pound five on your telephone keypad. You can also submit a question below the player. Our first question comes from Julian Dobrowolski from ABN AMRO ODDO. Please go ahead.
Okay. Hi, good morning. Can you hear me?
Yeah, we can hear you.
Yes.
Perfect.
Thank you. Good morning, and thanks for taking my questions. I have three, if I may. The first one is on the U.S. If you could give us some color on your strong performance in the U.S., I'm just wondering from where does that come from? Also, if you look at the revenue capture, this also increased. Usually, I think if you look kind of in the past performances, then this is driven by your crypto trading activity, which you also stated was kind of weak in Q2. I was just kind of wondering from where this booster to the NTI in Americas comes from. I have two follow-ups for you.
Yeah, thanks, Julian. Happy to take the question. What we normally see in our U.S. is that when volatility and market activity increases meaningfully, that presents opportunities to us. We've seen that historically as well in volatile times. The size and depth of the market combined with larger relative opportunities improves our profitability there, just as we saw in, let's say, 2022 or 2020. As to crypto, what we also typically see is that in times of heightened volatility in equities and fixed income, people tend to worry more about that part of their portfolio rather than on crypto. We saw just muted trading activity in general in crypto. We see the bit as countercyclical and really as diversified away from the rest of our business. We were able to allocate more capital towards equities and fixed income, given the limited amount of opportunities we saw in the crypto markets.
Understood. Thanks. Thanks for that. Two on the stablecoins, obviously AllUnity. I think this is quite an important project for you. So far, it doesn't really, it's not really reflected in the share price. Generally speaking, if you take a step back, can you speak about, kind of remind us again about the whole intention with the project and maybe also speak about, you know, what kind of economics do you expect to drive with it, customer deposits, AUM growth, distribution, etc.?
Yeah, thanks, Julian. I can take that question. AllUnity is a tokenization platform that will be launching a MiCA compliant Euro stablecoin called EuroAU. The launch of that is today, actually, on a platform called Bullish. AllUnity is backed by Flow Traders , DWS, and Galaxy Digital. Flow Traders Ltd is a market maker to the EuroAU stablecoin. Galaxy Digital is supporting with the infrastructure build-out, and DWS is the asset manager partner to AllUnity. The economics of the stablecoin are similar to those of other stablecoins on the market. The difference between AllUnity and other stablecoins is that AllUnity is BaFin regulated and is MiCA compliant.
On the distribution, if I just say at one point.
Yeah, please go ahead.
All the bits and pieces Marc shared are very much in the center of our discussions back then. I think it's also important, just a bit of reflecting on the discussion we had in the past. The sheer utility function of a stablecoin has become very known globally as to the ability to connect traditional financial markets with digital assets markets. We stated in the past and can state it again, we have a quite agnostic perspective but very much want to embrace the interoperability between both traditional finance and digital assets.
If more and more demand comes to the market for digital assets, and this might be in the form of parking liquidity in AllUnity, parking liquidity or investing in tokens in the cryptocurrency remit, but down the road also with real-world assets that are tokenized, then the utility of a stablecoin is very much important in order to increase efficiency across financial markets. I think with the stablecoin initiative now, we are very much setting the stage for a European version of a liquidity bridge between TradFi and digital assets. I think that is a very important strategic step we are taking here in order to facilitate that innovation curve.
Yeah, understood. Thanks, Mike, for the flavor. Also, an extension of this, I was just wondering, because you spoke about the fact that Flow Traders will be the prime liquidity provider of the stablecoin. I guess we just have to wait and see now what's going to be the uptick of it, but hopefully it's going to be a decent one. When you start trading the coin, obviously you'll generate, let's say, spread revenue in a way, so you'll generate money out of it. I guess you also don't know exactly to which extent, but I was also wondering if you look at the customer deposits of AllUnity, can you actually use that in some sort of a trading buffer for your trading capital? I.e., can you leverage somehow those deposits with the prime brokers to trade other products as well?
Thanks for the question, Julian. As AllUnity is BaFin regulated, the deposits are held one-to-one, so we are not able to use that. No, that's not a possibility as EuroAU is fully backed one-to-one towards the Euro. We cannot use those funds for trading.
Understood. All right, thank you so much. For those that go on a holiday, enjoy the summer break.
Same to you. Thanks, Julian.
Thank you. We will now go to the written questions. The first one comes from Diogo Perneta. He says, "Hello, can you provide a bit more color on capital allocation through 2025?
Yes, thanks for the question. We typically can redeploy capital quite on a day-to-day basis where we see opportunities. The market opportunities as presented throughout 2025 were predominantly within the equities and fixed income markets, and regionally more in Q1 in Asia and then Q2 just globally. More was deployed towards equities trading and fixed income and less so towards crypto, given the volatility in the market and the opportunities that are presented.
All right, we'll go to the next question from Rick Lucas. He says, "Is there a difference in opportunities and challenges between the European, American, and Asia-Pacific segments? If so, how do you capitalize on these differences?
In Europe, we are a market leader in trading ETPs and our product coverage. We cover pretty much any ETF in Europe. We are trying to maintain that position and provide liquidity to our counterparties and partner with the issuers. In the Americas, given the size of the market there, what we see is that when volatility increases, we also see a meaningful contribution to our NTI. It still, as the largest capital market, represents a meaningful growth opportunity for us. It is a much more competitive market, and you need to excel on many fronts in order to really be a key player there. On the RFQ front, we are one of the leaders there. We're in the top five, typically on providing liquidity on an RFQ basis. On exchange, our market share is still lower. In Asia, that is also a meaningful growth opportunity for us.
The Chinese ETF market alone is now two to three times the size of Europe, and it's opening up to foreign investment firms and to market makers. That presents a meaningful opportunity for us. In general, it's a bit more fragmented, the markets, and each market has its own nuances. Many more markets in Asia represent an opportunity for us. We've established ourselves as a global ETF market maker, and we try to be present in every market and provide liquidity to enhance the markets there and also for our own revenue capture.
All right, thank you. The next question comes from Nuno Rosa. He asks, "Can you provide more clarity on what drove the Q operational cost increase of 40%? Also, what does the EUR 8 million impairment of intangibles refer to?
Yes, thank you for the question. Most of the difference in the operational cost increase can be explained by an increase in variable comp. The fixed increases over cost can be explained by additional hires due to our strategy. On the EUR 8 million impairment of intangibles, I believe that is the difference between our Q1 and Q2 posted impairment of intangibles. As many of you can recollect, in Q1, we posted a - EUR 10 million on impairment. This quarter, we posted a reversal of EUR 2 million. In total, you get to EUR 8 million of impairment of intangibles.
To add, this is part of our trading book. There's a corresponding positive recorded in NTI. That's because of how some of these positions have to be recognized under IFRS accounting. Therefore, this line item came below the line as an impairment. Again, we generally apply hedges, and there's a corresponding positive in the NTI.
All right. Thank you. The next question is, "There's a difference in net profits in addition to the trading capital of about $23 million. Can you elaborate on that?
Yes, our trading capital did not increase as much as our net profits due to cash flows we had to pay out in the second quarter. Some of these cash flows are, for example, our annual tax bills.
All right. The next question, again from Rick Lucas, he asks, "What qualities will Thomas Spitz as CEO bring to the table in your preliminary judgment, and how will he be different from Mike? Will he steer Flow Traders in the new direction, and if so, which one?
Yeah, I can take this question. Thomas will join the firm with diverse backgrounds across trading, sales, and research in a very international setting and has demonstrated throughout his career a drive to identify opportunities to innovate. In the short term, addressing the question on changes to the strategy, Thomas will continue the execution of the firm's growth and diversification strategy that was laid out at the Capital Markets Update in 2022 and the Trading Capital Expansion Plan as announced in July last year. What Thomas will do is to bring his wealth of experiences just outlined to the table in order to enhance these strategies and drive increased investments in certain areas where he sees the biggest opportunities for the firm.
I think the capabilities and his experience will help us to find tangible opportunities to accelerate where possible, building up on the strengths and the profile we have built over the last few years.
All right, thank you for that. Right now, there are currently no questions sent to the operator. Questions that are not answered currently might be answered at a later stage. I would now like to hand over the call back to Eric Pan for any closing remarks.
Thank you, operator. We would like to thank all the analysts for participating in today's call, as well as the questions that were submitted online. Please note that we will host our next analyst call when we release our third quarter trading update in October. Details and timing for this call will follow in due course. This now ends the call. Thanks again, and have a great day.