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Smartbroker Holding AG Shareholder letter

Issue September 2022

Dear Shareholders,

In the past few weeks, important decisions have been made to lay the groundwork for the further growth of Smartbroker. The Company’s founder and Chairman of the Supervisory Board, André Kolbinger, has once again taken the helm and joined the Executive Board as CEO. On the level of the Smartbroker operating company Smartbroker AG, Uwe Lüders joined to take on the role as Chief Risk Officer. Furthermore, the name change to Smartbroker Holding AG was formally concluded, reflecting the strategic importance of the transaction business for the Group. In addition, we appointed a new auditor, BDO AG Wirtschaftsprüfungsgesellschaft, at the extraordinary general meeting held on 29 August.

Even though we recently announced notable postponements in the Smartbroker 2.0 project - the creation of our own trading platform for private investors and savers - let us assure you: The entire team is working tirelessly to get Smartbroker 2.0 up and running as quickly as possible. Our management is clear on this: whilst the project’s timeline has been pushed back, it has by no means failed and will not get abandoned.

We have received many enquiries on the postponement. We understand the disappointment and the high expectations. We intend to deliver a great user experience with Smartbroker 2.0 from the get-go. That is why we are taking the utmost care in product development and invest the necessary time and resources. We are confident that we will be able to maintain the revised schedule and expect the new product to be launched in mid-2023.

We will continue to keep you and the capital markets up to date. For the remainder of the year, several roadshows, conference participations and the H1 2022 earnings call are planned. On 19 September, we will take part in the "German Corporate Conference" organised by Berenberg and Goldman Sachs in Munich, and from 28-30 November we will attend the Eigenkapitalforum in Frankfurt. Here we will present our growth plans to a large number of investors.

Yours sincerely

The Investor Relations Team of Smartbroker Holding AG


CEO Change

On 12 August, we announced that the Company’s founder and chairman of the Supervisory Board André Kolbinger will take over the role of CEO from Matthias Hach. The change was effected mainly due to different approaches to the implementation of the defined corporate strategy, especially with regard to the completion and market launch of Smartbroker 2.0. Below we have linked a recent interview with the new CEO André Kolbinger, in which, among other things, this personnel matter is discussed in detail.

Company name change and capital increase

As mentioned at the beginning of this article, the change of the Company name, which was approved by the recent general meeting, has meanwhile been formally completed. The Smartbroker operating company is now called "Smartbroker AG" (formerly wallstreet:online capital AG). wallstreet:online AG, the sole shareholder of the Smartbroker operator, has been renamed "Smartbroker Holding AG". This step facilitates the external communication and underlines the greatly increased importance of the Company's own digital broker and our commitment to the corporate vision.

In addition, a cash capital increase was carried out on 13 July to enable and accelerate the envisioned growth strategy. The additional funds will be used primarily for the further development of Smartbroker 2.0 and its customer growth. For this purpose, 580,000 bearer shares were issued, increasing the Company's share capital by just under 4% to €15.6 million. The placement price per new share was €17.30. The new shares were placed with institutional investors as well as with members of the Company's Executive and Supervisory Board, generating gross proceeds of around €10 million.

CEO André Kolbinger and Supervisory Board member René Krüger also made further purchases following the recent share price decline - another declaration of confidence in the Group's vision.

H1 2022 financial results defy weak stock market trend

Smartbroker Holding AG closed the first half of 2022 in line with expectations despite the challenging market environment. The Group achieved revenues of €27.6 million at a preliminary operating EBITDA before customer acquisition costs of €7.9 million in the first half of 2022. Nevertheless, investor uncertainty due to the Ukraine war, rising inflation and volatile markets led to a decline in transactions per account to around 20 p.a. (extrapolation based on the preliminary results for the first half of 2022), compared to the approximately 30 transactions planned for 2022 and recorded in 2021. In addition, the number of page impressions on the Group's four media portals (wallstreet-online.de, finanznachrichten.de, boersennews.de and ariva.de) decreased, which had a negative impact on advertising revenues. Although a renewed increase in the number of transactions, page impressions as well as in advertising revenues has been observed recently, we adjusted our revenue guidance for the full year 2022. Meanwhile, the planned EBITDA target after customer acquisition costs for the Smartbroker remains in place.

With that, the Company now expects group-level revenue between €54 million and €57 million (previously €62 million and €67 million) but continues to expect consolidated EBITDA between €10 million and €12 million. The planned costs for the acquisition of new customers for the Smartbroker are reduced to €4 million (previously €6 million), so that the operating EBITDA before customer acquisition costs should come in between €14 million and €16 million.

These results prove that Smartbroker Holding is highly profitable despite all adversities. Stable revenues and profits in the core media business enable us to continue to invest into Smartbroker.

Recent Market Developments: One Step Closer to State-backed Equity Pension Funds

The German government continues its work on an equity pension program. Finance Minister Christian Lindner and Justice Minister Marco Buschmann strive to make equity investments and the capital markets more attractive for private investors in Germany. "We want to strengthen the shareholder culture in Germany," said Lindner when presenting the key points of a modernisation program of the capital markets. "Securities are not something for millionaires, securities are something for the millions." Various initiatives have the potential to improve the attractiveness of such investments, for example, a higher tax-free amount applicable to profits from the sale of shares and funds.

Christian Lindner also stated: "Shares are not without risk, but they are also a great opportunity if the investment is spread onto different titles." He is convinced: "We have to make pensions safe. This is currently a major challenge, with demographic change likely to take full effect. That is why we will support the pay-as-you-go financing of pensions with a capital markets based component - the statutory equity pension. This will be one of the biggest pension reforms, perhaps the biggest pension reform since Bismarck.” Lindner explained that asset accumulation and old-age provision are already possible with small monthly amounts and are therefore very attractive for small and medium-income earners. Thus, an allowance for profits from the sale of shares and funds is to be introduced.

"The higher tax-free allowance is not something that day traders or professional investors would benefit from - it is an instrument that explicitly strengthens small investors." Lindner aims to make investing in shares as simple and unbureaucratic as possible. “Various loss offset mechanisms complicate what is actually a simple system of the final withholding tax." (Source: https://www.fdp.de/mit-der-aktienrente-sicher-den-ruhestand) This development is a great opportunity for the local fintech industry. Low-cost brokers will play a key role for such models.

Latest video interview with CEO André Kolbinger

Click here for the video (in German language only)

Payment for Order Flow Ban Apparently Off the Table

The payment for order flow debate that arose last year has calmed down somewhat in the meantime. There are signs of a compromise at EU level. Instead of a ban, regulation is now expected.

(Source: https://finanzbusiness.de/article14281359.ece)