Good day, and welcome to the flatexDEGIRO analyst call for the preliminary half-year figures 2022 conference call. Today's call is being recorded. I would like to turn the conference over to Frank Niehage. Please go ahead, sir.
Yes, good morning, everyone. A warm welcome from my side here out of our office in Frankfurt, together with Achim Schreck, my colleague who's heading IR in the call, as well as my colleague, Muhamad Chahrour, the CFO, is joining us from the Sofia office. We are happy to share with you a bit more details on our half year figures. Like always, I will start with a rather brief and general introduction and then hand over to my colleague, Muhamad Chahrour, who will then run you through our presentation. Let me briefly start with the geopolitical situation, and I don't wanna spoil your day, but you all know we are in tough times with a war in Europe and with interest rate hikes and inflation going up and everyone fearing recession. Very, very challenging times.
However, we are very proud that we could show that our business model is a very robust one and that we have great clients. What does that mean? If we look at the first quarter, our clients only dropped with respect to the assets under custody with us 2%. Then within the second quarter, altogether year to date, the assets of our clients only dropped 13%. You all are aware that a lot of indices globally dropped more than 20%. Our, you know, tech industry shares dropped 30%-40%. What does that prove? That our clients are rather, as we always say, above average, well financially educated.
They are not the young kids on the block who's 20 years, but they are rather end of 30 and beginning of 40 and have seen crisis like that, and they are not doing that bad. Obviously, I don't have to explain much about book losses and realized losses. We see with respect to, you know, the trading activity of our clients, rather normalized times. When I talk about normalized times, then I'm referring to before COVID. If we look back in the history of our company, the last 10 years before COVID, our clients were trading in average in the range of 34- 35 trades in rather low volatility times. This is a bit what we've seen in the first and second quarter of this year.
However, I think our top line has decreased slightly, but we are very proud that the bottom line came up and that we were proud to present a half year profit, which already exceeds the full year profit of last year. I think that's a very strong message, and that distinguish us from a lot of other neobroker businesses who are still losing money and who are not profitable. We are, as you know, highly profitable. Having said that, let me briefly touch our marketing situation. We are very proud to have renewed this year our engagement with Borussia Mönchengladbach for Flatex in Germany. We also announced only recently that we're gonna do the same main sponsoring with Sevilla in Spain.
Obviously, in Sevilla, we're gonna advocate with our brand DEGIRO, which is relevant and responsible for international growth. In Germany, we continue to use Flatex for sponsoring reasons. Important to mention is that our activities in sports sponsoring are fully in line with our budget this year, and the total amount we spend this year for both Sevilla and Gladbach is not more than 20% of our total budget. Very healthy, fully in line, and to us, a great opportunity, especially if you take into account that since we started two years ago with Gladbach in Germany, the relevance and awareness of our brand, the brand awareness has increased by 300% already, and it's continuing to increase.
This morning, a great journalist mentioned that we do so well that flatexDEGIRO wins a new client every minute. I think to win a new client every minute to me is a great message and should give you comfort that we do allocate our marketing budget in the right direction. That goes to marketing. Let me move over to a bit of discussion and rumors and you know recent press articles about capital allocation and M&A. I think if you know that our cost per clients do not exceed 100 EUR per client, and if we do the math and win 1 million clients, then we are talking about EUR 100 million marketing budget.
You all know how some of our competitors do evaluate their clients, and only for calculation purpose, and I know it's early in the morning, if we will buy 1 million clients, probably the price per client is at least EUR 1,000, some even two, three, four, and five . For calculation purpose, let's use the 1,000. We would have to pay EUR 1 billion for buying that amount of clients. I think from a shareholder value point of view, we all agree that wouldn't make any sense.
We are not interested to overpay anything at this point in time, and, we're not growing by M&A at the moment, because organically we grow faster than three of our competitors together in Europe and, for such a low cost per client acquisition that we think that is the right direction to go ahead. Nevertheless, if there would be any opportunity to grow inorganically, we would definitely look into it, and, we have the right resolutions in place to increase capital up to 50%, if necessary. Again, we don't see any necessity, nor any opportunities right now. Moving on to our capital allocation situation. End of last year, we are already sitting on EUR 220 million.
If you add the net profit of this year, of the first half year, it's quite clear that by the end of the year we're gonna exceed EUR 300 million excess cash. We were asked many times now, what are we doing with that amount of money? The obvious is that we review whether we can start share buyback programs or dividend or a combination thereof. This is what we do in the second half of the year. Obviously, you're all aware of we would need a shareholder resolution for that, so that requires an extraordinary shareholder meeting. Obviously we would need approval of the regulator in a regulatory environment if we would buy our shares.
This is all under review and in process, and we will notify you accordingly once things are ready to be notified. We believe that's what you expect for management to do, and management is on top of things and is doing this. This is a bit a general introduction. As I said, I'm quite proud that our clients are not getting that nervous and that our clients know what they are doing. I'm also proud that our employees are working so hard. We are still hiring people. A lot of our competitors have to lay off people. Here again, we distinguish ourselves from the rest of the pack. Mo will now take over and shift gears and run you through the presentation. Thank you so far, and, over to you, Mo.
Thank you very much, Frank. Good morning, everyone. Thanks for joining today's analyst call for our preliminary half-year figures. Yeah, it's quite a challenging first half that we've passed, especially when we benchmark it against the last two years, which were the super hype years when it came to retail brokerage. I think we're all aware of that fact. Again and again, we tried to communicate to the market a very clear message that it's absolutely not our intention in this year to beat last year with respect to trades, given the hype that we had last year. Nevertheless, the intention is and will continue to be to grow our customer base, to keep the trading activity of our clients as healthy as possible.
Last but not least, to continue optimizing the monetization of our business model. I think we have here to summarize a couple of topics. Yes, we continued with the growth, not with the same growth that we had over the last quarters in terms of client acquisition. However, still a massive industry-leading growth. I'm again at a point where I would love to highlight that it does not make any sense to compare Q2 2022 to, for example, Q1 2021 or Q2 2021. Given the surroundings, given the environment, given the optimism that we had last year in the first half, absolutely the opposite fact that we see currently and over the last six months. Nevertheless, we managed to grow continuously and healthy. As I said, monetization, very important point.
We continue to increase or to stabilize our revenues. We managed to keep a relatively high profitability. I know there were a number of concerns with reduced number of trades, how the operational leverage will look like. We will come on that or discuss that in a second as well. The cash generation, Frank mentioned it, and obviously the continuous push for market shares, I will also have a couple of words to that. Let's start with the customer adds. In the first half, 282,000 clients. Just to put this a little bit into context, this is a massive number if you would compare it already to 2020, our first merger year and COVID year. We exceeded literally that number of the first half of 2020.
In 2021, as I said, is a very difficult benchmark. If you consider the numbers for the first half, Q1 and Q2, compared to the average that we used to have in Q2, Q3, and Q4 last year, we're absolutely in line. As you all know, Q2 is usually a relatively weak quarter, very similar to Q3. Nevertheless, almost 300,000 clients. We'll come in a second also to the quality of these clients, because this is a discussion point that we again and again will have together. What type of clients do we win? You know my credo for years that it's not only the number of clients, it's much more the quality of clients.
What we have seen with a lot of competitors and peers in the market that are rather focusing on lower quality clients, so to speak, in terms of age, in terms of assets under custody, in terms of activity, is that especially these clients used to withdraw now from markets. They literally fall down to zero trades, which fortunately didn't happen with our clients. How does the gross number of 282,000 translate into a net number of 226,000? First, we had an organic churn of 27,000 clients in the first half, which is an annualized number of roughly 54,000-55,000 clients.
If you put this into relation to the 2.3 million total clients that we have had at the end of this half year, you see we are talking about the churn of give or take 2.5%. Still a very, very high retention rate. A very, very strong customer loyalty and high customer loyalty that supports us, obviously in revenue generation and profitability generation. We continued with the off-boarding of B2B of a bit slightly above 20,000. Second part of this swing will happen in the second half of this year. Last but not least, by merging DEGIRO Austria to Flatex Austria, the two brands and the two businesses, we terminated another 9,000 clients because of insufficient documentation with respect to AML and KYC.
Long story short, we ended up with 226,000 net new clients, which is compared again to our three listed peers in Europe, Nordnet, Fineco and Avanza, 50% exceeding their net growth. This is what I would love to highlight again. Benchmarking is always a very crucial thing, but to benchmark against the right numbers is even more important. What we are delivering here month-on-month, quarter-on-quarter, half-year-for-half-year with our teams, with a brilliant marketing. We'll come to that as well with a brilliant marketing to exceed market growth of three peers.
We are doing all this not by living from investors' money, not by living from funding round to funding round, but literally by generating high profitability, irrespective of the fact that we spend 3x- 4x , actually, marketing of many peers outside. The strong customer win was across all markets. Mainly, however, in the first two markets or core markets, Netherlands, Germany and Austria, we managed again to add up slightly above 80,000 clients. Excuse me. Which is roughly 17% year-on-year growth in the core markets over the last 12 months. Now in growth markets, we had roughly a 40% growth over the last 12 months. If you would exclude, so to speak, the meme stock hype in the first half.
Nevertheless, a very substantial and sustainable growth with roughly 130,000 clients. The rest markets are the rest markets with 110,000 client adds since last year, June. New customer accounts in the first half only with 15,000 negligible. As we said earlier here, we are following also strategy of thinking about discontinuing certain countries to continue mental focus on core and growth markets. The profitability in these countries is always given. We never have to pay for countries, so all of them are breakeven. Nevertheless to focus the mental capacity on our growth and core markets, we are currently discussing to reduce here one or the other markets. Coming to the trading activity.
As expected, after the first quarter, the second quarter was determined by a lot of uncertainty, massively dropping retail activity in capital markets. The retail flow came literally to a bottom, and to a floor that we haven't seen over the last 10 years that much. Which is reflected also obviously in the number of trades with our clients. However, again, when you benchmark this with other peers, it's relatively stable. We had in the first half 38 million transactions. Second quarter went down to 16 million.
If you compare second quarter 2022 to Q3 2021, for example, with 18.2, you see also here, yes, there is a backdrop, but it was by no means in any way risky or threatening to us, much more expected to what we are seeing in the markets, to what is happening in the markets. This translates into an annualized trading activity in Q2 2022 of 30 trades. What we see here again is that this is literally a normalization effect across the whole market. A year ago we were discussing that and I was saying we expect over the next two, three years a mean reversion. I did not expect it to happen that quickly, to be honest.
What we see now is a continuous loyal customer base that is trading with us, irrespective of the fact that the markets are more or less having less and less liquidity. The supportive function is and will continue to be the quality of the clients that we win. Here we are still in a very, very good mode and very good quality with respect to the portfolio. I mentioned the normalization of trading activity. If you look actually since Q3 2021, so the last four quarters, that the trading activity on a monthly basis is somewhere between seven and a half and nine trades on a monthly basis.
Which is very comparable to what we saw in 2019, by the way, and what we saw in 2014. This is exactly the first time actually that we provide these numbers, but I think it's very helpful here to show also the certain level of where the new normal and the old normal used to be. What we see very clearly is that Q1 2020 until Q1 2021 were absolute outliers. This is something we have to respect from operational perspective, from strategic perspective that we will go back to a normalization effect. Yes, we had years like 2015 and 2016, which were determined by higher trading activity. Also keep in mind the context in 2014 and 2015, we had the sovereign crisis.
A lot of volatility because of the sovereign debt crisis, decision-making processes about Brexit, Trump election. There was a lot of things going on, that drove capital markets without any level of war fears and uncertainty and inflation and interest hikes. The activity of our customer base remains very healthy. In Q2 2022, we had again an activity of roughly 35% of all accounts. Roughly 750,000 accounts were active and traded, which gives, again, a very good feeling for what is happening despite this massive pressure on capital markets. What we see, the trades per active customer account also dropped.
It's not like that the activity only dropped with respect to that people stopped trading, but also even the active traders are trading less, given less opportunities, given less movements, and less short-term certainty. On the other hand side, the share of U.S. volume picked up slightly again against last quarter. What we see here is a little bit of, let's say, positive perspective on the U.S. capital markets after the very, very hard first quarter for U.S. shares. The last of our three variables, the revenues per trade. We promised when we started and when we took over DEGIRO and started this journey of flatexDEGIRO, we promised in many, many calls that we will manage over the next years to improve the monetization of the business model.
Given the fact that DEGIRO transactions were relatively cheaply sold to clients, let me put it that way. We did our price changes at the end of last year, which are now kicking in more and more, and would even kick more in the more trades we do. In the half year 2022, we had an average revenue of EUR 5.31 compared to EUR 4.27 half year last year. We literally increased the revenues per trade by 25%, which is a very, very strong message, while continuing customer growth, by the way, and while continuing having a very solid, robust and healthy trading activity. That in the end is the evidence for also the price power that you have as a market leader.
If you use it diligently and if you use it in the right way, that will definitely support also the growth in the financial growth, so to speak, over the next years. I think we can, and we always have promised that this is most probably not the last price step that we did. Let's see how this goes over the next half years in the next time. Our revenues in the second quarter, despite the drop in trading of roughly 30% compared to last year, developed very well and dropped by only 7%. Almost EUR 210 million in revenues generated in the first half of 2022.
What I find here also very interesting and I'm happy to highlight is if you compare Q2 2022 to Q2 2021, we actually outperformed two quarters of the last year's quarters. Q2 and Q3 were outperformed by the Q2 revenues, which goes back to the improved monetization, obviously. I think this is also a great achievement by the whole team to manage to outpace literally the drop in trading activity with an optimized monetization. Efficiency indicators are very much in line with what we expect for this year on annualized revenue of EUR 419.3 million.
The assets under custody at the end of the half year at EUR 38 billion, which is a drop compared to end of last year of 13%, compared to what Frank just mentioned, the indices that dropped by more than 20% and 30%. It shows the stability of our clients' assets and shows also the substantial and sustainable trust that our clients have in us and in the brokerage sector, given their high financial literacy, given their high interest in investing and trading. The revenues translate so to speak into 100 basis points of margin generation on the assets that we have, which is very much in line with what we had in 2019 before the COVID and then stock hype.
Coming to the profitability of the business, our EBITDA increased relatively well to EUR 89.1 million in the first half, which is very much what we also expected in the last months. Obviously, one parameter that is playing a big role is that we didn't build any provisions for long-term incentive plans anymore. We actually released a slight number of roughly EUR 7 million in the revenues because of the long-term incentive plans and given the share price development. All in all, for this year, even without the share price development, we're expecting to build maximum roughly around EUR 12 million-EUR 13 million in provisions, which did not happen obviously in the first quarter.
What we see also here in profitability, we just saw it with the revenues, how they outperformed Q2 and Q3 2021. With respect to EBITDA, we literally outperformed Q2, Q3, and Q4 of last year. Again, evidence for the very significant profitability and growth and profitability. The solid adjusted EBITDA, despite increased marketing spend, was still at EUR 81.8 million. When we adjust for the release of the provisions of roughly EUR 7 million, EUR 7.3 million, we still end up with EUR 81.8 million of operational EBITDA generation. As I said, despite the marketing spend that we had. We will continue with the marketing spend. We will continue in a diligent way. We will continue in terms of our budget that we started with in this year.
The reason for that is that we clearly believe and truly believe that what you see currently in the market is that while a lot of participants, traders, investors, savers, are withdrawing from the market because they are rather first-time users or second-time users. The people that are left, the retail clients that are left in the markets are the.
Pardon for the interruption. Speaker will be back shortly.
I think I'm back. Sorry, I dropped out of the line. Coming back to the point, we are going to continue with this very diligent and straightforward marketing efforts. We believe that this residual retail clients that are still in the market, that are still trading, are the hardcore traders and investors that we are looking for, that we are focused on the last 15 years of our history, and that we will go for with brand awareness campaigns, with the sponsoring. However, also with conversion marketing, and to ensure that we win here best quality clients in the brokerage sector. The adjusted EBITDA margin pre-marketing has been relatively stable in Q2 2022, with the 47.3%.
Here we managed also, if you would, normalize for marketing expenses and for the growth, to continue with a very solid EBITDA margin in the high 40s. This is what we always aim for. This is what we will continue to aim for. In the first half 2022, it's actually even at 55.7%. I mentioned expenses on marketing and especially on brand awareness and marketing. We are developing here a business that should last for decades and not for quarters. We are not here to believe in some fancy ideas or short term profitability. Our mission is very clear to utilize capital market access. This is what we will continue to do.
We'll continue to focus and to offer everyone in Europe, the 250 million non-brokered clients, an opportunity to join capital markets. Yes, it's tough times currently. This is part of the game. We had last two years, we had great times. This year is rather a weak year. But again, we will have a mean reversion. The mean reversion will go both ways. We'll have also a mean reversion after this year, hopefully. We have to continue to be visible, to create trust, to create brand awareness, to create loyalty with our clients. What we see very clearly is how well we have developed the brand awareness across literally all our core and growth markets.
With the sponsoring now in Spain is a very important market for us, the third-largest portfolio market of the group, the second-largest portfolio market of the DEGIRO, with almost a quarter of a million clients. The clear aim is to grow this market significantly over the next years and to continue with the push in Spain. We believe that the market is very mature and ripe to get penetrated. This is also the reason behind the Sevilla sponsoring. The idea here is to continue with the strong brand awareness to allow ourselves that if markets normalizes over the next 12-24 months, to be visible from day one and not to continue to operate as a hidden champion. I mentioned the sports sponsoring with Sevilla.
Very, very diligent decision making, again, over weeks and months, looking for the right club. Sevilla is playing, as you know, in the Spanish First League. They qualified for the Champions League. We will have the chance with the DEGIRO not only to be visible in 38 league games in Spain, in our second most important market in the DEGIRO portfolio, but also in at least six European Champions League games, which will help to carry also the DEGIRO across Europe, and across very, very different nations. We hope as well to use and to scale the Sevilla sponsoring by using synergies that we learned over the last two years with Borussia.
To have a much faster kick start with Sevilla, a very, very traditional club, very successful on European level, very down to earth, very solid, very comparable to Borussia Mönchengladbach. Happy to have this new partner on our side while developing the Spanish market. That's literally from my side or from our side. Thank you very much for attending today's conference call. I would like to hand over to the sell-side analysts for a Q&A session. Thank you.
Thank you, sir. Dear participant, if you'd like to ask a question, please signal by pressing star one on your telephone keypad. If you are using a speakerphone, please make sure your mute function is turned off to allow your signal to reach our equipment. We'll pause for just a moment to allow everyone an opportunity to signal for questions. We'll take our first question from Ian White. Your line is open. Please go ahead, sir.
Hi. Good morning. Thanks for doing the presentation. Thanks for taking my questions. I wonder if I could ask three, please. First of all, can you just maybe clarify for us what you're seeing in the data that makes you confident of a cyclical recovery in the second half of 2022 specifically? I guess if I look at the guidance that you put out a couple of weeks ago, it embeds a reasonably strong recovery in new client wins and total trades in the second half, and I'm just interested to understand kind of what gives you confidence in that cyclical recovery in the near term, please. Second question, just around dividend and capital return capacity.
Can you just talk us through the binding constraints there, which I suspect is to do with the bank's capital requirements. What is the binding regulatory constraint there, and how much regulatory headroom do you have as we sit today, for example? Just finally, a sort of detailed question. Can you just remind us what defines a churned client and a new client in your view, please? Is that somebody who, for example, has closed their account, withdrawn all of their assets, not traded for a certain period of time? Can you just clarify those definitions for us, please? Thank you.
Start in general and then hand over to Mo in order to shift gears and present with more details. Why are we so comfortable with respect to second half of the year? Obviously, we all don't know how the geopolitical situation will develop. Hopefully, the war in Ukraine will end. Hopefully, the ECB will take the right measures to fight inflation, and it's not rocket science what's necessary in order to fight inflation. You only have to increase interest rates. However, we are not ECB, we are not politicians. If I look back into how our clients have behaved the last 10 years before COVID, and you all agree those times were rather normal, low volatility times. Our clients have traded between 33x-35x per annum. You could also consider that a floor. If we apply that experience out of the last 10 years and you know look how clients have behaved in the first half year, then it's very, very similar to that.
If we believe they're gonna continue to behave like that and trade in the range of 33x-35x per annum, then you can multiply the revenues per trade in second half, and then you can calculate the result we foresee. That makes us feel comfortable with respect to our clients. Our clients do not panic. Our clients are rather experienced and calm. If you look at people who do saving plans, for instance. When they've saved using some indices when there were 2,500 beginning of the year and are now down to 2,000 or maybe 1,800, they just save on a lower rate. They continue to save every month. We don't see that activity will even slow down more. I think that makes us feel comfortable. If you look at our churn rate, that was always record low. W asn't it in the range of 2%, the churn?
For this year, yes. If you annualize the number, it would be 2.5%.
Yeah. Still quite low. Again, no surprise. We have very loyal clients, and, yeah, that gives us comfort. I hand over to Mo with respect to the other questions. Mo, would you wanna answer?
Yeah. Thanks. Yeah, thank you for your question. First, I think it's not about an overconfidence in cyclical recovery for the second half. Two things you should or we should all keep in mind. Second quarter is usually one of the weakest quarters, the second and the third. You could very much say the distribution of trading activity in a ceteris paribus world is more or less 50-50 between the first and the second half, because you usually have a very strong fourth quarter. Now, what we saw is that our clients did even in a very weak second quarter 30 trades on an annualized basis, which is 15 trades per client on a half-year basis.
If you multiply this with 2.3 million clients, we end up with roughly 32 million-33 million trades that should be done with this existing client base on a weak quarter basis. If we add this up to the 38 point-ish million, even if we would continue like in Q2, again, weak quarter in general, quarter with the lowest trading days, by the way, and the environment that we have, consider more or less to be some kind of relatively low case, would end up north of 72 million-75 million transactions. That is a bit the mathematical derivative that we think about. Dividend restriction and in general capital allocation.
Allow us please not to go too much into details because there are different regulatory approvals needed for these type of steps. We are currently, and this is the duty of us as a management, to rethink capital allocation and to think about what to do with the existing cash that we have already on the balance sheet, which is obviously also needed for CET1 and P1 requirements. We are, at this point in time, 100% CET1 financed. Our P1 equals CET1, no AT1 at all.
There are different scenarios, different possibilities that we will now examine, think through, and as soon as we have the robust and fundamental information that we need to share with the market, we will share it with the market. What is a churn client? A churn client is very simply a client that does not have any legal client relationship to us. A client that terminates his account. This is also why we provide the activity levels of accounts to make clear how much the activity of our client base is. A churn client is literally a client that is not with us anymore. I hope that answers your questions.
Thanks. Can I just follow up on the capital or distributable reserves point, please? I think I'm right in saying that if I look at the leverage ratio at the end of 2021 was sort of 4.4%, somewhere in that sort of ballpark. Which on my math, if I look at the sort of total asset base of the company at 2021, you know, it would imply something in the sort of EUR 30-EUR 40 million of distributable reserves as at 2021. Obviously we have some retained profits in 2022 to come. Is that the right sort of thinking for understanding what t he actual size of any capital return might be as opposed to the sort of EUR 300 million or so of net cash that the group currently has. Am I thinking about it in the right way?
Absolutely. You're absolutely right. That is the right way to think about. You know very well that there are certain measures and certain instruments how you could even increase this number. As I mentioned, we are fully CET1 financed. We don't carry any AT1 on our balance sheet to maintain leverage ratios and CET1 ratios. The regulator allows you also to take in certain AT1 instruments. This is why I'm saying the way how you think about it is absolutely right, the mathematical way.
I think let us do our homework, let us get a good understanding of our profits, our requirements. We have a relatively high requirement on the CET1 and, you know, the countercyclical buffer is being added up again after the COVID period. The leverage ratio is definitely another topic that we have to look at. Out of doing this big operational examination, we will come up at a point, if we come to the conclusion and the decision-making and having the approvals to do so to inform the market, what the potential firepower would be. It's absolutely the right way to think about it in a way to say, how can we free up future profits and profitability? How can we maybe find a strategic way to redistribute excess cash resulting out of a high profitability.
Yeah. Thanks for the details.
Yeah. Sorry. One more comment. Can you hear me? I've got it, yeah. One more comment. Obviously, needless to say, whatever we do will be fully compliant with the laws and regulations and all the respective requirements. Obviously, we will seek approval of the German regulator prior to do anything. Whatever we will do will be compliant, fully approved, and in accordance with our business model. That's a given.
Thanks so much. Thanks for those. Thanks for the details.
Can we go to the next question, please, moderator?
We'll take our next question. Your line is open. Please go ahead.
Janos, that's you. Sorry.
Hey, morning. Thanks for taking my questions. I have two questions. Just a follow-up on the revenues and then bridge to the full year revenue guidance. I mean, as you mentioned, Q2 trades were relatively weaker than historical average. Just despite all the macro drivers, do you see the newer customers on average being less active than the pre-pandemic customer cohorts? It appears that revenues in Q3 and Q4 need to be stronger than Q2 by at least 13% on average, if you were to exclude the one-off reversal in Q2 to hit the lower end of the guidance. Given the potentially weaker activity over summer months and the further squeeze on disposable incomes, I mean, how confident are you that activity will improve in Q3 and Q4? Secondly, on the adjusted EBITDA margin and costs, do you see any flexibility in the cost base, in the second half of the year? That's all from me. Thank you.
Mo, do you want to answer that one?
Thanks, Janos. Thank you. I'm just getting the questions down. Coming to your point, the activity of clients, whether newer clients are less active than the existing client base. We have, I think, a very nice chart that shows the activity of clients cohorts over their lifetime. What you see is that in general, we have a relatively similar return on our CAC that we spend across all cohorts. Which means nothing else than the more you spend for a cohort, the more active this specific cohort is in the end. Yes, indeed, the 2020 and 2021 cohorts are relatively less active than a 2014 or 2015 cohort, where we spend also much higher for. Plus, there is obviously a diluted element to it.
When you grow very, very much in hype markets, so in positive environments, you also grow obviously, or you dilute obviously the averages. That is a given. Nevertheless, and this is the most important thing, we still generate, after 12 months of lifetime of a client, 100% return on our investment. After years, I mean, taking the 2014 cohort, just out of my mind, we generated with the 2014 cohort over their lifetime, and they are still with us and still trading already by the end of 2021, a 2,800% return. This is exactly the point where we say we are not following up on a quarter by quarter on each cohort, but we think about the lifetime value of this cohort.
Each and every cohort that we have with us has, except for the last one, because they only had half a year time, a triple-digit percentage in return or even a four-digit percentage in return. Still feel very comfortable with the clients that we won over the last two years, and we will update that slide, and then we will have also more data on that point. Revenues. Revenues must be higher in Q3 and Q4 to come up and to end up with our guidance compared to Q2. Allow me that sentence again. Please, let's stop benchmarking Q2 for the whole year.
You're taking historically the weakest quarter of all time with all brokers in the world to try to derive a full year perspective, which doesn't make sense from our perspective. Q2, again, is the quarter with the lowest trading days, the number of trading days, because you have most bank holidays globally in this quarter, which per se reduces the activity. Q3, as I said, is also relatively similar to Q2. It's a weak quarter. Q4 has always been historically a very strong quarter. Let me put it in a positive note. If we manage in the second half the same revenue as in the first half, we will be exactly at the midpoint of our guidance. This is what we, as of today, are 100% confident about. The adjusted EBITDA flexibility in the cost base, again, adjusted EBITDA has with us zero meaning with cost adjustments.
The only thing that we adjust for is provisions built or released for long-term incentive plans. The flexibility in the cost base comes primarily, obviously, from marketing. Personnel expenses also, but we have no reason why we should reduce our workforce. We are actually hiring people and want to continue to grow in people because we believe in our long-term strategy. The same applies with marketing. We do not do marketing out of a pure conversion perspective. We're building here a company for 15 years, and we'll continue for the next 15 or maybe 20 and maybe 30 and maybe 50 years to develop Europe's leading online broker. When we look into the U.S., it took Charles Schwab 70 years. It took Interactive Brokers 50 years to position themselves as this market leader in the U.S.
This is why I don't believe in any new players entering the market believing that they can conquer the European market in three years. It's impossible. It's about wealth. It's about trust. People to give you your money, to trade it with you, to put it into your custody. We are, as I sometimes say, with all due respect, we are not a food delivery service. If the pizza is not good, you go for another restaurant or for another food delivery service. We are a service where it's about the wealth of our clients.
The flexibility that we have, which is marketing, is a flexibility that we will not use just for the sake of optimizing the profitability by 2% or 3%. Despite the most challenging half year in our history of our company, we managed to generate EBITDA margins of above 40%. We managed to grow our customer base. We managed to grow our revenues portrayed on an annual perspective, which is three big tick boxes in our long-term strategy.
Thank you.
You're welcome.
Next question, please. We'll take our next question from Marius Fuhrberg. Please go ahead.
Hi, three from my side as well. First one on the loan book. How, especially in the recent decline of the markets, how did your loan book develop? Did you experience any issues there, given the severe losses in some portfolios, were some clients falling below the threshold that they needed to provide? Or is anything good there? Second one, considering the adjusted margin, EBITDA margin that you guided for 2022 to be on 2021 level. In H1 now you're slightly below 40%, I think it is. I mean, considering or assuming that we will see a revival of the trading activity to some extent, that should be enough to or enough operating leverage to reach your guidance now.
Given that would not be the case, would you consider stepping on the cost brake to still achieve your guidance? Coming from your last comment, I would assume that you would rather still invest in marketing and gain clients instead of reaching your guidance there. The third question from my side is on your plans to introduce crypto trading in Q3. Anything new there, or is everything running as planned and to be introduced in Q3?
Yeah, Marius, this is Frank. I will start with the first question on the loan book and the last one, and then I hand over to Mo. With respect to the loan book, you're aware that we apply very conservative LTVs and very low LTVs, so everything is in line and in order. No issues at all. Historically, you know, our write-off quarter of the loan book was 0.07%, so almost nothing continues like that. As long as we don't see situations like Wirecard again, where stock goes down to zero, we don't see any issues, and we have not heard of that. That's all good and in line as expected. With respect to crypto, we've announced that we've signed a MOU with Börse Stuttgart, and we are now exploring further details.
Obviously, crypto is at the moment rather enjoying cold days and cold times. Some call it the winter of crypto. Why is that? I mean, if you look at Bitcoin came down from EUR 60,000 to below EUR 20,000. Obviously, if you are aware how much energy is required to create new cryptos, I think if you ask anyone in the population, and not only in Germany, is there a great need for new crypto, or are people rather concerned about how to manage to get over the winter times and avoid to freeze, as well as making sure that there's enough power for the industry to continue to produce and avoid any layoff of every second or third employee. I think no one needs cryptos at the moment.
For us, that I would say strategically, priority number one is normal course of business is that after we've signed the MOU and that now we work together with Börse Stuttgart on the details on how to do that, but we are not in a hurry. At the same time, you know, there is that regulation in draft version called MiCA, Markets in Crypto Assets. As long as that is not really clear, we are not in a rush either. I would say our project with respect to that is normal course of business and we're gonna inform when there's any news or when we're gonna be ready to start. I think at the moment, clients are not in desperately need for cryptos. Then I hand over to Mo.
Thanks, Frank. Marius, thanks for your question with respect to the adjusted EBITDA margin. I think you see here the adjusted EBITDA margin was at 40.4%, so slightly above 40%. You have to keep in mind that when you do the adjusted EBITDA, you take the adjusted EBITDA divided by revenues, but you have to reduce obviously in the revenues as well, the release of the provisions of EUR 7.3 million. You divide the 81.8 divided by 203 million, then you end up with 40.4%. It is already in a very stable level. Our guidance was very clear.
We expect the adjusted EBITDA margin to be somewhere in line with last year's margin. We believe in a long-term story, and we're performing for 15 years, and we will continue to perform with our teams, under best effort and to provide the best service, best products, at the best price to our clients. For short-term profitability and P&L, we will not step on the brake that hurts us on the longer term and on the long-term development of our business. We expect or accept the margin to be in line with last year's margin, but we will not save EUR 2 or EUR 3 million in marketing to, at the end of the year, optimize our margin by 0.5 or 0.8 percentage points.
Okay, that's very clear. Thank you.
You're welcome.
Next question, please.
We'll take our next question from Christoph Greulich. Your line is open. Please go ahead.
Morning, Frank. Good morning, Mo. Thanks a lot for taking my questions. Three questions from my side, please. Firstly, when we look at the revenue per trade, so this has come down slightly in Q2 compared to the first quarter. So could you let us know what were the underlying drivers of that evolution? Then secondly, a quick follow-up on the margin guidance for the full year. So do you think the guidance can be achieved throughout the revenue guidance range, or does that rather correspond to a specific point in the revenue guidance range, let's say the midpoint? Lastly, the customer growth guidance for 600-700 thousand gross customer adds, what would that mean on a net basis? Thank you.
Mo, please.
Chris, thanks for your questions. First question, revenue per trade and why it decreased compared to Q1. Let me quickly jump to that slide. There we go. From EUR 5.39-EUR 5.20. The reason for that is very simple, actually. The reduction in trading activities usually touches and mainly touches equity and ETP trades, right? So the effect on those, the reduced transaction activity is higher on the high price and high revenue products compared to ETFs, where people have savings needs, and they just continue in their savings needs. As you know, our savings needs are super low profitable products that we provide to clients.
You automatically dilute your average because you drop. When you drop, you drop mainly in high revenue products and much less in low revenue products. That's the reason for that. The margin guidance is a margin guidance that we will reach with the bracket that we have guided of EUR 400 million-EUR 440 million. It will be reached, from my perspective, at both ends. I don't see a specific point in the range where we will reach the EBITDA guidance. By the way, we didn't give any adjusted EBITDA guidance specifically. We said it will be somewhere around the last year's guidance.
That gives also the flexibility of 1 percentage point up or down, and this is something we have to accept going for long-term perspective. Customer growth adds and how much will this translate into the net basis. We assume for this year all in all, roughly a natural organic churn of give or take 50,000- 55,000 clients if we annualize the half year figure. And another roughly 50,000- 60,000 terminated B2B to C clients out of discontinued B2B offerings, as well as out of merging further businesses.
What we are currently doing is after finalizing the Austria merge between Flatex and DEGIRO is now the merge of Flatex and the DEGIRO Netherlands, because we used to have a business, as you know, in the Netherlands with the Flatex brand. We assume here also give or take 60,000 of additional discontinued client relationships. All in all, which is that roughly 120,000 of the gross add that will translate them into a net add.
That's all clear. Thank you.
You're welcome.
Next question, please.
We'll take our next question from Benjamin [Konk]. Please go ahead, sir.
Good morning, guys. Thanks for taking my questions. Apologies that I have to come back to the sort of, you know, marketing, complex, if you will. Maybe starting with, Frank, apologies, I joined a little later, but did I get you correctly that you said 20% of the total marketing budget is around football and sponsorship? Just asking this because I'd be curious to understand if you feel comfortable with your overall level of investment in, let me call it branding initiatives, which is usually something that you know where you see the benefits only, you know, a little later. You said you measure sort of the success in customer awareness, which, you know, is understandable.
I'm just wondering which measures you are applying, and if you could give a little bit of a trajectory, maybe since you started Borussia, that'd be great. Would obviously be great if you continued to provide those figures as we go along with, you know, Sevilla now being added. Second question on that topic. Mo, I mean, correct me if I'm wrong, but it sounded a little bit like you are willing to step up the game in terms of marketing around performance marketing. If I understand you correctly, that you think the customers that you're winning in a difficult market environment are actually very good customers.
In this context, I was just wondering if you still feel the EUR 80 per customer, sort of the high end of the CAC guidance, or sort of guidance currently you've given, you still feel comfortable with that overall? Allow me one last question. You mentioned a couple of times the big success in sort of ETP trading or your ETP offering, and I was just wondering if there's any way to further improve on that front, improve on adding new partners, so to speak, potentially even raising your, let's call it prices or distribution fee on that. So any insight there would be helpful. Thank you.
Yeah. Let me start with the first two questions. First of all, yes, you are right. I said, sports sponsoring equals 20% of our budget, and I find that quite healthy. We believe in a nice market mix of affiliates and sponsoring and whatever is required. Obviously, we always said, cost per client acquisition should not exceed overall annualized EUR 100 , and we will stick to that. If I'm not mistaken, relatively speaking to our peers, that's record low. We will continue with that. We started a zero measurement before we started Borussia. Since then, every quarter we are checking that, and our brand awareness since then went up 300%.
That's quite successful, but obviously does not really surprise me because that was expected. Even more important is now after the awareness has increased significantly, that we're gonna transform people who have now awareness of us into new clients, and that's the challenge for the second part, so to speak, but you always need to do the first step first before you can go to the second. I hand over to Mo with respect to the other question.
Thanks, Frank. Thank you for your questions. Given the current environment, actually, yes, we can assume that the CAC it was in the first half around EUR 100, and we accept it. I think this will be also for this year, give or take the guidance that we see, which is very much in line, by the way, with some other years that we had in the past. There were cohorts where we had EUR 115 of CAC. Given on the one hand side that we intensify our brand awareness marketing, that drives obviously CAC up because with taking CAC as a metric, we just divide the marketing by the number of new clients, which is a very simple mathematical function and does not distinguish about efforts like the 20% of our budget that goes into brand awareness.
This is something that we feel very confident and comfortable with, and we'll continue with roughly, or give or take, EUR 100 for this year. Plus, keep in mind, all the tailwind customer adds have dropped away. I think this is something that very often is also forgotten, when we think about it compared to the last two years. In the last two years, we had a lot of windfall client adds that came to DEGIRO, came to Flatex, given the high awareness of capital markets, the high interest in capital markets. This year, all this tailwind is gone. It's now hard work to literally win clients. They don't come just because of talking during a barbecue about stocks, right?
Now, people talk during barbecue about inflation, about interest, which makes it more difficult to have this zero-cost customer acquisition and thus increases the CAC. With respect to your last question, ETPs. The ETP offering is a very solid offering for our business. We have reduced, however, the dependency on ETPs over the last four or five years from 50% to roughly 20% of our total revenues. We've initiated the ETPs in France and the Netherlands and Germany on the DEGIRO side only six months ago. Yes, we will continue to think about further markets and further products, but again, in a very sensible way.
There are markets where we don't have them yet, like Italy and Switzerland, for example, where we are, however, active with our client base and where we are discussing with our product partners how to roll out such products. Again, here, this is something that has to happen diligently, step by step. We are not in rush. We'll find the right way to do it. If we have the right way, we will do it. Italy, for example, just recently changed the regulation on ETPs that allows you today to offer OTC ETPs without paying horrible taxes. You know? This was in the past, not possible. These things open up also more and more flexibility in offering these products in further countries.
Okay, Benjamin. One more general comment from my side. First of all, management is and will be always on top of things. What does that mean? If we would find out that things go wrong, and if we would have to cut costs, we are flexible and able to do that. What does that mean? We obviously don't share any details with respect to our sponsoring partners, and we keep and honor contractual obligations, obviously. We clearly announced that we do this year Sevilla because Gladbach is not represented internationally this next season. Sevilla is, and it's a great team, and we feel honored and privileged to be the new sponsor. We also announced that we have option to extend. At the moment, we are only the sponsor for the next season.
If we would find out that anything and everything we expect that goes into the wrong direction, we don't need to be longer than 12 months as a sponsor. Maybe that helps you to understand what the level of flexibility is, if necessary. However, we don't start something in order to stop it after 12 months, but we have the flexibility and the right to do it, if necessary. Obviously, we rather wanna continue and explore the successful brand awareness of DEGIRO, not only in Spain, which is our strongest growth market, with over 250,000 clients already. We wanna enjoy the international presence of Sevilla, but we are flexible in this respect.
Then with respect to Borussia, we've expanded and extended our contractual situation for the next five years, but only the next two years we are main sponsor. We are flexible here as well. Obviously, there's a big difference between what one would pay for being main sponsor and then only co-sponsor or digital sponsor. You can be rest assured that we have negotiated our position in a way that we are flexible, and that's to the advantage of the firm. All in all, we feel very, very comfortable with those situations, and if necessary, we can act flexible. This is what you would expect from management.
Yeah. As Mo said, and I clearly share that view, we don't see any reason to cut costs now or stop doing marketing because we are growing profitable and we are growing in the right direction, and we feel comfortable with what we've started. However, the EUR 50 million budget, we also feel comfortable with and is not excessive in our opinion, especially again, if we compare how much money our peers do spend on marketing, especially the Neobrokers. Again, we find it's right and we feel comfortable with it. If we would have to change it, we could change it.
That's very helpful.
Does that make sense?
Thank you. Yeah. Thank you very much, Frank. Mo, thank you.
You're welcome.
We'll take our next question from Mengxian Sun.
Yes. Hi, thank you very much for taking my questions, and thank you for the detailed explanations on the guidance. Just two questions from my side, and the first one is your marketing expense or the CAC. Originally, you always said that you target EUR 50-EUR 60 for the new acquisition of the customers, and then in the last quarter, you raised it to EUR 80. Now you increase it again to EUR 100. My question is just what the upper limits of your marketing spends for the customer acquisition and when do we expect to see the marketing expense to go back to the historical level or the long-term targets that you're saying, EUR 50-EUR 60? The second question is, can you give us a breakdown of the EUR 38 billion asset under management? How much of it is deposit and how much is invested in security? Thank you very much.
I will start with the last question and then leave the first one with Mo. The EUR 38 million is securities only, in my opinion.
No, no, sorry.
No, no. The 30.
Sorry.
No. I can go after.
Go ahead, please.
Okay.
EUR 30 billion-EUR 35 billion is securities and another EUR 3 billion is. Okay. You have to deduct the cash. Yeah. We could say the majority is securities. The cash is always in the range of EUR 3 billion and obviously is breathing, but the majority is securities. Yeah.
With respect to that question. To your question, with respect to the CAC. The long-term CAC was never defined as EUR 50-EUR 60. We started this year and in our guidance to expect something around EUR 50-EUR 60 coming out of the last year, not expecting what is happening and what is going to happen in these six months. I think none of us was expecting that current environment and that challenging environment.
That is also the reason why we added up just a couple of weeks ago in our portfolio in our corporate presentation deck the historic numbers with respect to CAC. What you see very clearly is that the historic numbers always were roughly between, let's say EUR 70-EUR 110 . The average was in an upperEUR 80 CAC over the last 10 years. If you would exclude the last two years. As I mentioned before with respect to Ben [Konk's] question this year we are back to a level where there is zero tailwind in customer acquisition.
Each and every customer has to be acquired actively and not anymore by fortune that people joining DEGIRO or Flatex because they had a great talk with their friends or with their family at the barbecue. Obviously what this means is that the budget stays as it is, but the number of new clients of the customer gross adds is decreased, and that brings CAC up. This is why CAC is more a type of obviously in the end endogenous variable. We focus on the budget. We have a budget in mind. We have a budget that we put in place that we try to maximize with to grow clients.
On top of that, we are topping up more and more brand awareness that we also didn't have that much in the last years, except now for the last two years with Borussia, but now also with Sevilla, with the documentary, with a lot of investments into financial literacy, believing into our long-term strategy. What is the upper limit with respect to CAC? Historically, I can tell you that we had one year that was at EUR 115, and that year is one of the cohorts that belong to the best cohorts that we won ever in our history. Are we willing to spend also EUR 105 or EUR 110 for a cohort? I would say yes, absolutely. I don't feel. We don't feel, so to speak, reluctant to having sensible and long-term perspective on marketing expenses as long as they turn out to create the right return on investment.
As long as this is given, we can tolerate also EUR 100 of client acquisition costs. We will for sure not go to EUR 150 or EUR 200. I doubt this. This was never our strategy and will never be our strategy. We see it now in line with historically what we had. Not what we had in the last two years, not what we fair to say expected for this year at the beginning of the year, not knowing about how this year will turn out in the first six months.
Thank you very much. Very clear.
You're welcome.
There are no further questions on the line, sir. Please go ahead.
Yeah. We leave it to thank you all for taking the time and asking those questions. Very helpful. Thank you so much. Let's hope and keep fingers crossed that this war comes to an end sooner than later. That hopefully things go to normal as soon as possible. We wish you all a nice day and stay healthy and bye-bye.
Thank you, everyone. Have a great day. Bye-bye.
This concludes today's call. Thank you for your participation. You may now disconnect.