flatexDEGIRO AG
XETRA:FTK
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flatexDEGIRO AG
Earnings Call Analysis
Q1-2024 Analysis
flatexDEGIRO AG
In the first quarter of 2024, flatexDEGIRO reported impressive financial metrics, reflecting significant growth across key performance indicators. Revenues surged by 25% year-on-year, totaling €123 million, with strong contributions from both commission and interest income. Notably, the commission income rose to €75 million (up 10% year-on-year) and interest income reached a record €44 million, marking a remarkable 65% increase compared to the first quarter of the previous year.
The company successfully onboarded over 120,000 new clients in Q1 2024, showcasing an 8% year-on-year and 57% sequential increase. This growth was achieved while decreasing the cost of acquiring new clients (CAC) from €153 to €95, a substantial reduction of 33%. Client trading activity also witnessed a slight uptick, with approximately 31% of clients engaging in trades, reflecting an increase of 2-3 percentage points compared to the last three quarters.
Earnings before interest, taxes, depreciation, and amortization (EBITDA) climbed an astounding 177% to €54 million compared to Q1 2023. The net income of €30 million also marked a remarkable 340% increase year-on-year, though it remained flat sequentially. As they continue to manage costs effectively, this strong profitability positions flatexDEGIRO well for future growth.
Costs in Q1 were notably controlled, particularly with personnel expenses increasing due to inflation adjustment and new hires, totaling €24.9 million—an increase of €3.4 million. However, the firm effectively reduced its marketing expenses by 33%, highlighting their strategic shift towards targeted marketing. This efficiency is setting a strong foundation for sustaining margins moving forward.
The average revenue per trade increased to €4.64, demonstrating a 12% year-on-year rise. This surge is attributed to a stronger mix of U.S. trading volumes and benefits from shifting towards higher-margin trades. Such strategic positioning is expected to yield positive revenue impacts in the coming quarters.
Given the favorable trading environment and the current cash position exceeding initial expectations (now around €3.5-€3.6 billion, up from a previous estimate of €3 billion), management has indicated confidence in reaching the upper end of their annual guidance. They anticipate sustained revenue growth and profit margins, projecting significant upside potential, particularly if trading volumes pick up in subsequent quarters.
The company is navigating a transitional phase in management with the recent departure of long-term CEO Frank Niehage. His legacy of over 10 years has resulted in the creation of Europe’s largest online broker by market capitalization, with future strategies leaning towards profitable growth and operational efficiency. Moving forward, the management is expected to maintain a focus on enhancing customer acquisition and retention, particularly in the competitive landscape.
In a noteworthy development, flatexDEGIRO received an improved ESG rating, moving from BB to A by MSCI, indicating better corporate governance and risk management practices. This enhancement positions the company favorably within the investment community, signaling a strong commitment to sustainability and ethical business practices.
The company announced plans to execute a share buyback program, which will be subject to a voter approval mechanism in their upcoming annual general meeting. Alongside this, a new long-term incentive plan is in the pipeline, aimed at aligning employee interests with corporate growth objectives, reflecting a robust strategy for shareholder value enhancement.
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Hello and welcome to the flatexDEGIRO Analyst Call Q1 2024. Please note, this call is being recorded. [Operator Instructions]
I will now hand you over to your host, Mr. Achim Schrek, to begin this conference. Thank you.
Good morning, everyone. My name is Achim Schrek. I'm heading Investor Relations at flatexDEGIRO, and a warm welcome from our side as well to our analyst call rate to the Q1 numbers we published yesterday evening.
As usual, we would like to give you a short run through the numbers before we open for questions. I'm very happy that we have the whole management board team here with us today.
And for the introductory remark, I would very much like to hand over to our CEO, Frank Niehage. Frank, go ahead, please.
Yes. Thanks, Achim. Good morning, everyone. Welcome to the Q1 earnings call of our firm and my last call. Before I start, like always with the highlights of the quarter and hand over to the CFO thereafter, allow me a few personal words with mixed emotions. With my resignation, I hope to avoid further damage with respect to the reputation of our firm and to resolve the tension with the MIP Founder prior to the upcoming Annual General Meeting.
After 10 years of tenure as CEO of our firm, it's time to say goodbye. First, I would like to thank you, the analysts and shareholders, for your trust, support and it was a pleasure working with you. And you challenged me, which was very helpful. So please continue to support the firm and the new management like that. I will obviously continue to stay as a key shareholder of the firm, and I will enjoy observing the amazing profitable growth story of this firm in the future and hope to stay in touch with you once in a while. As the school of life taught us that we always meet twice.
Second, I would like to thank all our employees once again. I did that already in an internal mail. But again, thank you all for the great support, achievements and hard work. And allow me to thank one person especially. It's our Chairman, Martin Korbmacher, whom I started together and who's one of the most professional bankers I've ever worked with and a great guide, too. Some used to call him in the old days, Gorski of investment banking. And without the professional relationship between Chairman and CEO, the success story of our firm would not have been possible. If you don't believe me, you can read about that in a study published by the Reinhard Moon Institute, which I always like to cite, which has investigated the performance of listed companies, highlighting how important the professional relationship between the 2 roles of Chairman and CEO by having influenced the performance of the company, and last but not least, of the stock price.
If you don't recall the performance over the last years of our stock price, I'm happy to share with you the number, which equals over 550% until today. And by the way, this outperformed the DUCs during the same period. Or if you want to look at it from another perspective, the market cap appreciation of the same period equals 11x.
Allow me now a few seconds to take you back into the past. When we were convinced 10 years ago to rescue the distressed fintech group by another shareholder with the name of Christiana, flatex was a loss-making German-focused-only niche broker from Columbus with 120,000 clients roughly. The founder and the Supervisory Board member at that time, it start a dispute with the key partners and managed the firm into a dead end with EUR 8 million losses in EBITDA. We agreed on a new strategy together of independency from the founder, asked him to step down as Supervisory Board member, relocated the head office from Kumba to Frankfurt, agreed on a dilution through capital increases and improving corporate governance.
2 major acquisitions: The ExCom BW Group deal in 2014; and obviously, the acquisition in 2019, Intelie, a game changer. I could go on and on, but with respect to timing, I prefer to look at the situation today. We've created Europe's largest online broker listed in the SDAX, headquartered in Frankfurt. We are heading towards the service of 3 million clients this year with 1,300 employees out of 30 nationalities, doing business in 16 countries across Europe. We built a true open champion. I am very proud of having served as CEO for so long.
The firm is very well managed, very robust and highly profitable. But is it not strange that now exactly the same founder tries to come back as a Supervisory Board member through the back door, claiming to know better what's good for the firm? I leave the answer to you all. I trust that the new management will continue to follow the strategy of profitable growth. And allow me one more last request. Please register yourself for the upcoming annual meeting and exercise your voting power. It is like in democracies. If you don't vote, you support minorities. What's most important about the agenda of the upcoming Annual General Meeting and everything, obviously, is important, but let me highlight the share buyback and the new long-term incentive plan for the employees.
And last but not least, please support our Chairman, Martin Korbmacher, who will guarantee professionalism, good corporate governance and the sustainable profitable growth strategy, which brings me back to the purpose of today's call. Let's talk about how profitable the first quarter was now. Here are the highlights.
We continue to manage our costs very well, and we did win over 120,000 new clients in the first quarter. And this we did by bringing down the CAC below EUR 100 to EUR 95, which is an amazing job of the marketing department. We continue further with the monetarization and increase the revenue per trade again.
Let's look into the detailed numbers. Our revenues, they went up by 25%. The EBITDA even went up by 177%. And last but not least, the income went up by 341%. That's what I call strong numbers. And last but not least, net cash inflows amounted to EUR 1.8 billion. And again, like I always mentioned in the last couple of calls, without paying interest, proving that we find the right clients who come to us for trading and not for saving.
No surprise that we expect the guidance to reach the upper end of the given guidance. And obviously, if interest decline in summer and trading activities will pick up, you all know what's going to happen with the guidance. But obviously, I leave it now to the new management to decide over that in the future.
Finally, I will hand over now, like always, to the CFO. He will shift gears and tell you more about the details. And I thank you all again, and please take care. Benon, the floor is yours.
Thank you very much, Frank, and good morning to all of you. As CFO of flatexDEGIRO, it is my pleasure to also welcome you to this Q1 2024 financial call. However, before I start with the financial metrics, which should not hold any real surprises for you, I would like to express my great thanks to Frank. I met Frank in 2013, more than 11 years ago. And without Frank's vision and support, I would not be where I am today. I have never met a person more inspirational and passionate than Frank. I've also learned a lot from him in the past decade. Thank you for being a great leader and visionary. We will miss you. Good luck with all your future endeavors, Frank, and thank you very much. And you should be proud, indeed.
Today, Frank Niehage, Stephan Simmang, Christiane Strubel and I represent the Management Board. And I'd like to take the opportunity to also welcome Stephan and Christiane, who sit next to me today. Upon Frank's departure, Stephan and I will make a step forward to co-head the business with an interim mandate. The Supervisory Board has been in a structured process and in close contact with us over the past weeks, and we feel very well informed about the search process for a suitable successor. We are happy to support the new candidate once he is introduced to us. Once again, we thank Frank personally for the command of the flatex the leadership for a decade.
Stephan and I, on the other hand, have been working together on a professional level and in a constructive way, including our roles at our previous employees since 2001. You can rest assured we will continue to do so.
One more topic before we get into the numbers. We are particularly proud to have been rewarded a substantially higher ESG rating by MSCI recently. In April, MSCI raised our rating by 2 notches from BB to A. To give you a perspective on the rating, within the peer group investment banking and brokerage within the MSCI All Country World Index, there are only 15% of companies ranked higher than flatexDEGIRO. Morningstar Sustainalytics confirmed our ESG rating in the low-risk category. We have, however, improved our score and now rank in the risk rating ranking as #4 out of a total of 147 in the investment banking and brokerage category where a low rank is better and represents lower risk.
Now on to commercial performance. Gross customer additions amounted to 121,000, an increase of 8% year-on-year and 57% sequentially. 25% of these new customer accounts, i.e. about 30,000, were won at the flatex brand in Germany and Austria. Assets under custody reached a record EUR 58 billion and are up 29% year-on-year and 12% quarter-on-quarter. We settled 16.1 million transactions, almost flat year-on-year despite less trading days and up 19% sequentially.
Client trading activity remains relatively stable over the past quarters with a mild uptick in Q1 of 2024 compared to Q4 of 2023. It puts us in the middle of some of the competitors. However, Q1 of 2023 did see still higher trading activity.
The development of assets under custody is a relatively straightforward message. Client cash deposits of about EUR 3.6 billion in the [ first ] quarter are essentially flat sequentially and grew by about 10% over the past 5 quarters. Securities under custody grew to EUR 54.4 billion driven by higher index levels and fresh clients' purchase. It is a very positive signal to be able to grow the cash position over the past quarters despite elements of an aggressive and expensive rush for client deposits elsewhere in the market.
Cash inflows of EUR 3.8 billion compared to cash outflows of negative EUR 2 billion, leaving us with a net inflow number of EUR 1.8 billion. The size of our margin loan book expanded slightly, leading to net investments of EUR 1.9 billion on our platform in the first quarter of 2024. The cash under custody position remains basically unchanged.
Commission income of EUR 75 million and interest income of EUR 44 million, alongside other income of approximately EUR 4 million at up to EUR 123 million. Hence, revenues are up 25% year-on-year and 23% sequentially. Commission income is up 10% year-on-year and up 36% sequentially. Income -- interest income in the first quarter rose to a record EUR 44 million, up 65% compared to the first quarter of 2023 and up 13% compared to the last quarter of 2023.
Let us come to trade monetization. We were able to generate an average of EUR 4.64 per transaction in the first quarter of 2024. This number is up 12% year-on-year and up 13% sequentially. While we typically enjoy an uplift every year in the first quarter based on selected fees that are mostly paid in the first quarter, some additional explanations may be helpful.
We gave up on some low-earning trades while at the same time enjoying the full benefit of price increases made in mid-May 2023 under the Xero platform. We've also seen generally high U.S. trading volumes on which we benefit when it comes to FX conversion. Also, the trip mix in Q1 favored slightly trades with a higher commission per transaction.
EBITDA, which we continue to highlight for comparison purposes, is up 177% to EUR 54 million year-on-year and up [ 1% ] sequentially. Net income of EUR 30 million is essentially flat sequentially and up approximately 340% compared to Q1 of 2023.
A few highlights on cost developments in the first quarter compared to the first quarter of last year. Current personnel expenses are up EUR 3.4 million to EUR 24.9 million driven by a general 8% inflation-driven salary increase in early 2023 and new hires related to the BaFin audit. We expect both effects to be significantly less pronounced in the last 3 quarters of 2024 due to base effects.
We were able to reduce marketing expenses by 33% from EUR 17.2 million to EUR 11.5 million, and hence, to reduce client acquisition costs from EUR 153 to EUR 95. Other operating expenses are essentially flat.
We will now give you an overview of the financial topics in relation to our Annual General Meeting on June 4, 2024. The agenda and related documents will be published on our website today.
The share buyback will be split into 2 votes to properly reflect and protect the rights of all shareholders. There is a vote on the share buyback without the possibility of excluding any subscription and tender rights, and this item requires a 50% quorum for approval. Then there is also a vote on the share buyback with the possibility of excluding any subscription and tender rights. This vote requires a 75% quorum for approval and gives more flexibility to the company. So in effect, with a 50%-plus but less than 75% vote, the company can still buy back shares but has more limitations compared to the 75%-plus vote. In any case, the individual and combined size of the share buyback is limited to 10% over 5 years.
We will also put up for both a new long-term incentive program that will run over a time span of 6 years. It is a stock option plan consisting of approximately 5.5 million shares, this is EUR 0.05 of the shares outstanding, with a 4-year vesting period and a 2-year execution period. It includes the share price-related factor with a 30% hurdle rate as well as risk-adjusting factors.
As mentioned already, the documents are at this stage not yet uploaded to our web page. This will happen during the course of the day. Hence, we will not be able to answer detailed questions about the AGM during this call today and would kindly ask to direct any inquiries starting Monday in the usual manner to our Investor Relations department at Achim Schreck.
The final slide on our Pillar 3 Transparency Report that we also published last night. Our risk-weighted assets decreased from EUR 1.3 billion at the end of 2022 to EUR 908 million at year-end 2023. This is mainly related to the reapplication of credit risk mitigation techniques as communicated to the market in September of 2023.
Our common equity Tier 1 ratio on group level reached approximately 27% at year-end 2023, up from about 20% at the end of 2022. Again, the largest factor in the big improvement is the reapplication of credit risk mitigation techniques.
Regarding the use of our 2023 annual profit for our core Tier 1 capital, no application was made in accordance with Article 26, Section 2 of the Capital Requirements Regulation, or CRR in short, to use those profits as regulatory-owned funds within our group. It can be stated that theoretically, the CET1 ratio could have risen to a level well above 32%, if we would have applied for this treatment or an according future decision at the AGM without any further plans. Again, this was only a theoretical remark. Our CET1 ratio for the end of 2023 stands at 27%. This non-application was done against the background of the AGM proposal for dividend and share buyback for which a significant portion of the 2023 profits are earmarked. We are currently in the process of calculating the exact number.
We are also finalizing the calculations on the impact from the introduction of the third iteration of the Capital Requirements Regulation, CRR3, which will become effective for all EU banks at the beginning of 2025. The CRR3 generally can lead to higher capital requirements and more complex processes. Once we have completed all work, we will communicate to the market accordingly. We would, therefore, kindly ask you to stay patient and not ask specific questions about the share buyback amount for 2024 right now. Thank you for your understanding.
With that, we would like to conclude the financial presentation, and it is my pleasure to hand back to Achim.
Thank you, Benon, for the run-through through the numbers. We are now very happy to take your questions on the Q1 financials.
[Operator Instructions] The first question comes from the line of Benjamin Kohnke calling from KBW.
A few questions from my side, please. Can I start maybe on marketing? And if I'm not mistaken, you've given a budget in the last call of EUR 30 million to EUR 35 million for the year. Now maybe against the backdrop of what seems like a pickup in retail trading activity. Are you starting to see more and better opportunities, I guess, to win customers in this sort of new environment? And would you consider a step-up in marketing efforts?
And maybe sticking with the trading environment. Now this morning, there were a few reports about trading volumes from some of your new broker peers, arguably only of indirect nature. And if true, they seem very strong for the first quarter, right? And I guess the question here is twofold. Why do you think flatex is not growing as much or in an inferior way here -- significantly inferior way? And are you kind of worried that the likes of Trade Republic are increasingly eating into your target customer base? That would be it for me.
Thank you very much and good morning. Let me start with the marketing question. So indeed, the range is about EUR 30 million to EUR 35 million. And today, we have no real plans to change that. What we do see is that when we started to shift a bit away from brand marketing to targeted marketing, we are able to continue to generate new clients with substantially lower client acquisition costs.
Should we have the need to increase the marketing budget because clients inflow increases meaningfully, we will react and probably do so. For now, everything is in line and on track, and we feel comfortable with our current plans. That would be my comment on the first question.
On the second question, I would hand over to Achim Schreck.
Thanks, Benon. Ben, yes, so relating to, I think the article was about trading volumes at [ one ] exchange. So the indirect version, so to speak, of what's happening in the market. First of all, as we've mentioned a couple of times, we're talking about a different group of customers here. So we obviously do not know anything about their trading activity, the size, the profitability, et cetera, and would therefore also like to not further comment and speculate on that basis. There are for sure, as you all know, in Germany, a couple of more players in the market compared also to our international business. But I think as the numbers now in the first quarter have also shown that out of the [ 122,000 ] new customers we have won, roughly 1/4 is coming from the flatex brand in Germany so -- sorry, for Germany and Austria. So we're pretty happy with our performance and our development. So I think that's all we would like to state at this point here.
All right. And maybe just one quick follow-up, if I may, and that's personnel cost. I was a little surprised to see this sort of steep increase year-over-year, especially given that you booked this around about EUR 3 million of inflation bonus in the first quarter last year. And just to confirm, Benon, I think what you indicated in the last call was a sort of broadly flat year-over-year development in personnel costs. I just wanted to check if this was excluding or including the SaaS component.
So first of all, we plan to finish 2024 with fewer people on our payroll compared to the beginning of the year. We have had a traditional Q1 salary increase around, which has been -- which had been way more benign than last year. But clearly, we added up a cost base on the personnel side due to the additions that we hired, mostly last year, and some of them who came on to our platform at the end of the year.
We will see how the year continues to play out, but we certainly plan to not to grow our employment base period. And should we need to make any salary adjustments for whatever reasons over the year in order to make our people happy, then we would decide to do so. So we may see a mild increase in personnel costs but not in head count.
Okay. But that's including or excluding both metrics?
So for 2024, all numbers are including NISA expenses. And for 2023, we clearly had both adjusted and non-adjusted numbers.
The next question comes from the line of Marius Fuhrberg calling from Warburg Research.
A couple from me as well. First one, with regard to the revenues per trade, which were quite significantly up also quarter-over-quarter. Did you perform any price increase at DEGIRO in Q1? Or what was the specific driver of that?
Second question is with regards to the competition fine that you received in Italy that you received last year in Q2. Any progress with regards to that and that you're fighting it? And any visible time line when it comes to court dates or when to expect any sort of repayment or confirmation of the fine?
And the last question from my side is your -- last year, in some calls, you mentioned that you plan to enlarge the credit book at DEGIRO. And any comments towards that? What are your actions in order to do so? And how are you looking at it right now?
Thank you for the questions, Marius. Let me start with your first question on the revenues per trade. Like always, in financial markets, there is this good old rule: never extrapolate January and never extrapolate Q1. We have seen a nice combination of effects, which led to this really nice commercial trade number. And very clearly, we expect that number to go down in Q2 and the full 2024 number to be, of course, below the Q1 number.
There were a couple of effects. So indeed, we had price increases under DEGIRO platform around May of last year. which contributed in consequence only partially to 2023 numbers but fully into 2024 numbers. But we've also seen a pretty highly skewed trading mix towards U.S. trade, where we do benefit through the FX conversion. And we have seen also a slightly positively skewed mix towards more ETP trades. And that's something that led to the number that we posted for Q1. Please expect that number to go down in Q2.
On the competition fine in Italy, there is no news that we can report. There is no real time line. And once we will receive any formal updates, we will certainly mention it on one of the upcoming calls.
On the credit book at DEGIRO, well, it did grow. It is going up. It's not doubling clearly. We extended the product offering to all of the DEGIRO clients. But it's a process where most clients who wanted it beforehand already had the option to get it by changing their client status. So the effect that we have seen is mild, but nevertheless, contributes to the expansion of the margin loan book.
The next question comes from the line of Panos Ellinas calling from Morgan Stanley.
Good luck to Frank. Maybe if I start my first one, can you maybe share the -- what level of U.S. trading have you seen in the quarter in terms of the share of total trades? And also if you can share what level of FX commissions you had in the quarter and how it compares to last year, last -- in Q1 last year? That's my first question.
Panos, Achim speaking here. These are actually details we wouldn't like to give out now. But just to give you a feel for, let's say, the magnitude of things. If you just compare quarter-on-quarter, so we had basically the same number of trades, 200,000 trades less actually than the first quarter last year. That delta is basically a reduction of CFD trades. So not a very profitable trade and not part of our core business.
So if you then look at the -- basically on the same number of trades, the delta in the provision income, which is then roughly EUR 7 million, the largest part is coming from the price changes we have done on the DEGIRO side. And the other section is then coming from more U.S. trading. And when we're talking about more U.S. trading, it's not the number of trades. It's the higher volume of trades we have seen. And obviously, our FX benefit is based on the volume given that it's 25 basis points if customers ask us to do the FX conversion for them. So it's a volume effect more than a number of trade effect when it comes to do that.
Sure. And then my other question is around the flatex trading activity was up year-on-year, but the euro is still down year-on-year despite stronger customer growth. Maybe can you give us bit more color on the activity and the some you have seen so far in DEGIRO?
And then just to complete in terms of the guidance that you are targeting towards upper end, maybe can you share more on the drivers and what makes you more confident on hitting the upper end of the guidance? Do you see sort of potential upside to previously guided customer growth or trades per customer? Or is it mainly driven by better monetization for the remaining of the year and likely higher NII than you initially expected because of the cash balances?
And then just to -- one more, if I may. Obviously, positive development in net profit growth, but the margin still remains low, about 24%, compared to the other listed European platforms. So just taking into account that interest income likely is turning into a headwind as we approach the rate cuts. Do you see scope for further improvement in the net profit margin in the next couple of years? So that's all for me.
Let me maybe start with your question about the trading activity of DEGIRO versus flatex. If you account for the fact that we had less trading days, I think the trading -- or the number of trade that DEGIRO would also have been flat or slightly up. Germany has indeed performed better, Austria as well. So what we have seen is rather kind of an outperformance. And I think that also goes back a little bit to the question Ben had at the beginning about what we're currently seeing in the German market, that there has been a rather positive development. But there aren't any real specifics now about individual DEGIRO markets where trading activity would materially differ.
On your second question, as to what is maybe slightly different to the beginning of the year, I would probably highlight 2 things. The first thing is visible in the presentation, and it's the commission per transaction, which we would not have expected at these levels, and we went through the details a few minutes ago. So that's a positive for us.
And also, given the situation, the war for deposits, so to speak, we do not participate. And yet despite that, we were able to grow our cash deposit base. And that number is now also at a level that is actually a bit higher than what we would have thought. So those are probably the effects that surprised us the most, so to speak.
On the net profit margin, I think we are going through a year where profitability is really changing meaningfully from last year to this year. There is also a reason as to why we have given a range for the consolidated net income. I think once we finish 2024, we will have a pretty good benchmark as to what our general net profit margin or net profit margin range could be going forward.
Panos, does that answer your question?
Yes, that's very clear. Again, good luck to Frank.
The next question comes from the line of Ian White calling from Autonomous Research.
Just few follow-ups from my side, please. Just on the costs, can you just talk us through the sensitivity of costs with respect to revenues? Basically, would the cost vary with revenue? Is it just transaction-related costs? Or are there other elements within staff or even investments you might make if revenues would come in, say, above your guidance? Or would that just drop mostly to EBITDA, please? That's question one.
Just secondly, I was interested to understand, is there anything else sort of notable to call out or understand in terms of client trading activity aside from just the trades per client? Do you see more clients being active, for example, in the first quarter, more clients logging into their accounts? Just wondering, is there any broader indicators of client trading interest in the first quarter?
And maybe just a slight follow-up on the previous comments. What have you sort of tweaked specifically in your thinking regarding the guidance for 2024? Is the sort of base case now for cash to be somewhere higher than $3 billion on average for the year? Is it commission per trade? I don't know, [ 4 40 ] or something like that? What you tweaked in your model to say things at the upper end of the range, please?
Thank you, Ian. I will start. And on your first question, most of the costs that are related to trades are clearly in the COGS line. So indeed, once you account for that, from then on, there is a pretty straight drop-through into EBITDA. There is no special effects that we would need to do in order to generate more revenues through trades other than pay the typical market data providers, exchanges, custodians and all the others who get a fraction of the trade revenue when we settle a single trade.
With interest income, the COGS line is obviously even lower, and it falls through more straightly. But that's also the reason as to why the entire line is lower than it has been in the past. And we do not expect effectively any huge changes. If trades go up meaningfully in the second half, so to speak, then the cost of goods sold line will go up a little bit because interest income will be in the mix smaller compared to commission income.
On the client activity trends, I would hand over to Achim.
Yes. Thanks, Benon. So when it comes to client activity, i.e. the number of customers that have done at least one trade, which is how we would define an active client, yes, we've seen an increase in the first quarter. We've seen that more people have been active. On the one hand side, it's the usual uptake you have. Given that also for seasonal reasons that the first quarter is always good, it has been maybe slightly ahead of that. But we're still talking order of magnitude of around, on a quarterly basis, 30%, 31% of clients having done a trade. So yes, it has increased a little bit. But by no means, obviously, it's back to what we've seen in the high phases or anything like this, but a good 2, 3 percentage points higher than the last 3 quarters.
And with respect to the tweaked guidance reasons, I think the largest sector indeed has the cash positions we hold within our bank on behalf of our clients because we certainly expected a lower number when we started the year.
But it really seems that the mix is also turning nicely in our favor. And I hope at some point on the call or one of the future calls, I will be able to comment on a more profound pickup in client activity. But for today, it is what it is. Sequentially, there is a nice trend, which seems to be in line with some of the competitors that publish numbers. But let's make no mistake, we are still down on a year-on-year basis, and that's something that we would like to address going forward.
The next question comes from the line of Christoph Greulich calling from Berenberg.
Two from my side, please. First one, on the buyback. And I fully appreciate you can't give detailed numbers here, but just a bit more broadly on the plan for execution. If you could let us know what's your thinking there. Will that be in let's say, roughly a linear way? Or are you trying to do that in a more opportunistic manner? And yes, really depending on where the shares are at the moment, basically buying more or less shares back.
Then the second one, if you could give us a quick update on the situation with the special commission of the BaFin. If there's anything to report regarding the time line, if there's any update. And then thirdly, maybe also a bit of just an update on what is the pipeline with regard to commercial initiatives. What are the things you're working on what can we expect in the coming months and quarters?
On the buyback, we -- as alluded to in my speech, we cannot pinpoint a number today. We have to finish some of the considerations that I introduced in my speech. However, what we, of course, would like to share is that it's not about dividing 10% of the shares outstanding by 5 years as allowed by the German security sector. That's not the point. But as soon as we have finished it, we will let you know.
On the special commissioner, there is luckily no updates, no changes. No News is good news. And we continue to be on track to finish the final tasks to allow the special commissioner to review and wrap up his mandate. And we today expect that to happen in the summer as we have communicated over the past quarter. So thankfully, no new updates there.
And on the pipelines of potential commercial products, Stephan, I and the management team will take some time to make sure that we have a full grip on the potential time lines. So we are today a bit hesitant to present data on that. We will come back to you at some point over the coming months, but we are clearly seeing 2024 as a transitionary year in the way that the regulatory issues are thankfully largely solved, not all of them, but most of them. And the commercial angle can slowly creep into our company, which we are looking very much forward to.
Yes. That's all very clear. If I could just have one quick follow-up on the marketing budget. So based on what you've been saying regarding the budget for the year it sounds -- yes, it will be more or less flat compared to 2023. If I look at the Q1 number, that was down quite meaningfully. So do I understand correctly that the marketing spending will have a somewhat different seasonality compared to what we've seen in the previous years with this strong skew towards Q1?
Not necessarily. I think the biggest change is that we started last year to shift away from brand marketing. Brand marketing was an important element in our corporate strategy that we initiated 5 years ago, when our name was not broadly recognized in the general demographic of the respective countries.
We have reached levels where we last year decided to back -- to step back from that. And those were very costly endeavors. We have exited our sponsorship in Spain with the soccer club, Sevilla. And we announced that we will terminate the main sponsorship with the German soccer club in the middle of the year. Those are marketing euros which will be available for other means, if needed. So we will rely more on targeted marketing, affiliate marketing and other methods for 2024 compared to last year.
So we think it may have 2 elements. On one, we can reduce our clients' acquisition costs, a trend that is clearly visible in Q1. And either that trend continues or we will be able to simply find more clients that we are willing to pay EUR 100 for, and then the number of clients that come on to our platform will be higher. So what we will not do is that if client growth should come, we will not limit ourselves to a fixed budget and marketing. But as of today, I think what you just said is pretty much what we expect.
Good luck to Frank.
Thank you.
[Operator Instructions] The next question comes from the line of Andrew Lowe.
Two quick ones from me. Firstly, are you willing to share your assumptions about the public balances the rest of the year? And then secondly, you've previously backed out in the guidance in February that you could be talking to sort of commissions trade of 4 35. But on the conference call, you seem to suggest that, that was a bit too high. Is that still the case for the rest of the year? Do you expect commissions to the trade to come in below that 4 35 figure?
Thanks, Andy. Actually, I would -- once I've given you the answer to the second question, I'll ask you to repeat the first one, which didn't come through clearly. So when it comes to the revenues per trade or the commissions per trade we've seen in the first quarter have clearly been quite positive. One element, as mentioned is, of course, the higher share of U.S. volume within. So if you were to assume that we would continue to see similar-ish volume increases in U.S. trading in the following quarters, then I think a number like 4 35 might be reasonable. But of course, it still depends on that variable as well.
And then please, could you repeat your first question, please?
Sure. Sorry about that. Hopefully, this is better. I just wondered if you're willing to share your assumptions about the deposit balances for the rest of the year. You obviously previously guided to EUR 3 billion, which seemed quite low, and it's coming a lot higher. So any guidance on what your guidance assumes would be great.
Yes. We started the year with an assumption of approximately EUR 3 billion. And we are now at the end of April, and the number continues to hold steady at EUR 3.5 billion, EUR 3.6 billion. So we clearly have to look into our eyes and bring that up a little bit. And that's also the main reason as to why we moved in our guidance range from the lower to the upper half.
There are no further questions, so I will hand you back to your host to conclude today's conference. Thank you.
Thank you very much, and thank you all for your participation. And obviously, if you have any further questions, I'm happy to help. And thank you also from the name of the management team here. So thanks again and have a great Friday. Speak soon. Bye.
Bye-bye.
Bye.
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