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Smartbroker Holding AG Shareholder letter

Issue March 2023

Dear Shareholders,

We would like to take this opportunity to thank all our shareholders for their continuing trust and support in these challenging times. Our team continues to work at full speed towards our key objective of launching Smartbroker 2.0 in the summer of 2023. Week by week, we are making progress in this regard, and as of today, we can say that we are on schedule.

Preliminary financial figures for the full year 2022

The product launch for Smartbroker 2.0 was originally planned for the end of 2022. Much of the development work had been outsourced to external service providers. To our disappointment, not all service providers met the agreed schedules and quality standards. For this reason, major changes to the originally planned setup became necessary. In order to achieve our launch objective as well as the eventual migration of our customers to the new platform, the development of the frontends was internalised at the end of 2022, and a cooperation agreement was concluded with Baader Bank in December 2022. The agreement entails custody and account management, brokerage, transaction processing and other backend functions. The recently presented figures account for these changes. As a consequence, we had to write off sunk costs for IT development in the amount of approximately €13m, which were mainly incurred externally in 2022.

On the other hand, the figures show that our portal business remains robust and highly profitable even in a difficult market – characterised among other aspects by inflation, rising interest rates, uncertainty on the capital markets and the effects of the Ukraine war. Based on preliminary calculations, we achieved revenues of €53m at group level in 2022. The transaction business accounted for around €19m and the media business for slightly more than €34m. Despite a decrease in visitor numbers to our media websites and apps, the segment achieved an EBITDA of around €15m. While the development work of Smartbroker 2.0 remained a significant cost factor and the number of trades per customer did not recover in the second half of 2022, this enabled a group EBTIDA of around €9m.

Smartbroker 2.0 - Transition year 2023

We strongly believe in the positive outlook for Smartbroker 2.0. After the product launch and the subsequent migration of existing customers, we will once again focus on marketing and customer acquisition.

The enhanced customer experience should form a major selling point in this respect, as it complements the already established proposition of combining a comprehensive brokerage product at highly favourable conditions and our media offering. Our main goal remains to offer our clients the best price in securities trading on all domestic and many foreign trading venues, while at the same time providing them with extensive information.

The current banking crisis has led to considerable uncertainty among investors. Volatility has increased significantly in the last two weeks, leading to rising trading activity. No matter the market, we see ourselves as partners to our clients. We want to offer all investors and traders a platform with the best user experience, with which they can realise their investment goals. We will continue to work on this with the highest priority and with the product launch of Smartbroker 2.0, the progress achieved by our colleagues in the last few months will be visible to our customers for the first time.


Yours sincerely
The Investor Relations Team of Smartbroker Holding AG




2023 will be the transition year to the next growth phase

CEO André Kolbinger commented on the recent presentation of the preliminary financials: "We see 2023 as the final transition year before Smartbroker 2.0 will contribute to full-year revenue growth and also significantly to the Group's profitability from 2024 onwards. Currently, we continue to maintain two infrastructures - on the one hand, the current Smartbroker platform and, on the other hand, Smartbroker 2.0, which is under development, including its apps and product enhancements. These parallel efforts and the extensive investments have temporarily led to an increased cost base as well as to a negative cash flow in 2022 and for the last time in 2023. However, we firmly expect a timely relaunch and a subsequent normalization of our cost structure. It is important for me to emphasize that the Group, and its Smartbroker 2.0 project, are fully funded. We are very confident about the development of the coming months and are very much looking forward to presenting the new product to our customers in the summer."

The Smartbroker customer acquisition cost amounted to around €4m last year, resulting in an EBITDA after customer acquisition cost of around €9m. The figures show that our focus last year was not on customer growth, but on the internal and external development work for Smartbroker 2.0.

The new version of Smartbroker offers us both a reduction in the risk profile and an increase in long-term profitability through the expansion of revenue sources. In the last earnings call, we stated that the EBITDA-breakeven of this segment - already including the marketing costs for the opening of 75,000 new customer accounts - is expected in the 2024 financial year. We also presented the profitability per segment (Media, Transaction) for the first time and will continue this presentation in the future in order to further increase transparency for our investors.

Our competitive edge evolved around the combination of user experience, pricing and media reach

We are convinced that with the launch of Smartbroker 2.0 in summer 2023, we will be able to present a new unique user experience, while maintaining our attractive pricing model.

When choosing an online broker, customers consider various factors. According to an investor survey by the international strategy consultancy Oliver Wyman, five key criteria can be identified:

  • Fees
  • Broker is also the house bank
  • Brand, reputation and trust
  • User-friendliness, interface, user experience, app
  • Breadth of product portfolio

In terms of fees, we are already positioned as the only broker that offers securities trading on a multitude of exchanges at extremely low prices. We intend to address the gap of having no trading app and the limited product selection (no crypto trading) with the launch of Smartbroker 2.0 in the summer, complemented by regular subsequent product enhancements.

The marketing opportunities are extensive once the product is live. Our own media portals represent a considerable competitive advantage, which we plan to expand on in the coming years.

Participation in interest-like income and securities lending

The rising interest rates were a key market development in 2022. Smartbroker is set to benefit from the trend with the release of Smartbroker 2.0. Customer assets under custody increased to €9.2bn at the end of 2022, which corresponds to a securities account volume of around €34k per customer. With a cash ratio in the high single-digit percentage range, this offers a further source of income via interest-like income as part of the cooperation with Baader Bank. Increasing number of customers and possibly further rising interest rates might benefit the revenue mix further.

Media business continues to yield high EBITDA margin

The challenging market environment also affected our media business. However, the decline in page visitors had a disproportionately low effect on advertising revenues. As the second largest financial portal operator in German-speaking Europe, we were able to keep revenues in this segment almost stable due to the precise targeting of attractive consumer groups.

The segment profitability also remained at a high level. EBITDA for the media business amounted to around €15 million in 2022 (EBITDA margin of 43%). A similar margin level is expected for the current financial year 2023. New product initiatives, such as the introduction of paid premium content, have been positively received by customers and are expected to deliver increasing contributions to earnings in the coming years.

Latest analyst coverage of Smartbroker Holding AG

GBC with target price of €17.70 (27.3.2023)
MMWarburg with target price of €10 (23.3.2023)
Montega with target price of €14 (16.3.2023)


Smartbroker Holding AG in the media

Interview with our CFO Roland Nicklaus (Börsenradio, 15.2.2023)
Interview with our CEO André Kolbinger (Moneyboxer Talk, 25.1.2023)