For many companies 2020 was a time of struggle for survival – for XTB it was a time of building capacity and dominance to be an even better and stronger company in the future. High volatility on financial and commodity markets as well as interest rate cuts made trading on financial instruments very attractive for many investors. As a consequence, the Group noted a record-breaking number of new clients, i.e. 112 thousand compared to less than 37 thousand a year earlier (an increase of 206,5% y/y). Transaction volume in CFD instruments in lots almost doubled – an increase from 1,6 million to 3,2 million lots, i.e. by 98,8% y/y.

The dynamic operating growth of XTB under favorable market conditions brought record financial results in 2020. Consolidated net profit amounted PLN 402,1 million compared to PLN 57,7 million a year earlier. Consolidated revenue amounted to PLN 797,8 million (2019: PLN 239,3 million) with operating costs at the level of PLN 282,0 million (2019: PLN 173,9 million).

Revenues

In 2020 XTB noted a record increase of revenues by 233,4% y/y i.e. PLN 558 446 thousand from PLN 239 304 thousand to PLN 797 750 thousand. The significant factors determining the level of revenues were high volatility on financial and commodity markets caused by among others coronavirus COVID-19 global pandemic and a constantly growing client base combined with their high transaction activity noted in the number of concluded transactions in lots. As a consequence the transaction volume in CFD instruments amounted to 3 175,2 thousand lots (2019: 1 597,2 thousand lots) and a profitability per lot increased by 67,7% y/y i.e. from PLN 149,8 in 2019 to PLN 251,2 in 2020.

XTB has a solid foundation in the form of constantly growing client base and the number of active clients. In 2020 the Group reported another record in this area by acquiring 112 025 new clients compared to 36 555 a year earlier. This is the effect of continuing the optimized sales and marketing strategy, bigger penetration of already existed markets, successive introduction of new products to the offer and expansion into a new geographic markets. Similarly to the number of new clients, the number of active client was also record high. The number of active client increased from 45 837 to 107 287, i.e. by 134,1% y/y.

The priority of the Management Board is to further increase the client base, leading to strengthen the market position of XTB in the world. These activities will be supported by a number of initiatives, including introduced on 5th October 2020 a new offer for shares and ETFs (Exchange-Traded Funds) “0% commission” for monthly volumes up to EUR 100 000. This offer was received with great enthusiasm by current and new XTB clients. The company aims to be the first choice and comprehensive solution for every investor. Over the past few years, XTB has done a great deal of work – from expanding the offer by around 3 000 financial instruments (from 1 500 to 4 500 currently), to the continuous improvement of the web and mobile version of the award-winning xStation platform. Now with a free offer, XTB has opened the door wide to anyone interested in investing in both real stocks and ETFs. XTB currently allows client to invest in over 2 000 real stocks from 16 of the world’s largest stock exchanges, including New York Stock Exchange, London Stock Exchange, Spanish Bolsa de Madrid, German Börse Frankfurt and of course Warsaw Stock Exchange. Besides stocks, XTB offers over 200 ETFs, including commodities, real estate and bonds.

The „0% commission” offer is supported by a marketing and advertising campaign with the participation of the new XTB brand ambassador – one of the best football manager on the world, José Mourinho. The new XTB ambassador is the coach who not only won championships in a record number of countries (Portugal, England, Italy and Spain), but is also one of only three coaches who have won the UEFA Champions League twice with two clubs. The Portuguese will be the XTB’s global ambassador for the next two years.

The announcement of José Mourinho collaboration with XTB also marked the launch of the new global marketing campaign “Be like José”. Its creative concept is based on the similarities between the challenges faced by investors and trainers on a daily basis. A well-considered strategy, the will to win and the ability to learn from mistakes are the main factors of success in both football and finance.

The company expects on the effectiveness of the new offer for shares and ETFs as well as the campaign with José Mourinho. In particular, the ambition of the Management Board is to acquire in 2021 at least 120 thousand new clients, that is an average 30 thousand new clients quarterly. As a result of the implemented actions, in January 2021 the Group acquired 21,8 thousand new clients in total, while in February 23,6 thousand new clients.

Looking at revenues in terms of the classes of instruments responsible for their creation, it can be seen that CFDs based on index dominated in 2020. Their share in the structure of revenues on financial instruments in 2020 reached 53,2% against 74,8% a year earlier. This is a consequence of the high interest of XTB clients in CFD instruments based on the German DAX stock index (DE30) and US indices US100 and US500 and contract based on volatility index listed on the U.S. organized market. The second most profitable class of assets were CFD based on commodities. Their share in the structure of revenues on financial instruments in 2020 reached 33,0% (2019: 5,2%). The most profitable instruments among this asset class were CFD instruments based on oil prices, gold and natural gas contracts. Revenues of CFD based on currency reached 11,5% of all revenues, compared to 18,2% a year earlier.

XTB places great importance on the geographical diversification of revenues. The countries from which the Group derives more than 15% of revenues are Poland and Spain with the share of 37,0% (2019 r.: 39,9%) and 16,0% (2019 r.: 19,9%) respectively. The share of other countries in the geographical structure of revenues does not exceed in any case 15%.

XTB also puts strong emphasis on diversification of segment revenues. Therefore the Group develops, besides retail segment, institutional activities (X Open Hub), under which it provides liquidity and technology to other financial institutions, including brokerage houses. Revenues from this segment are subject to significant fluctuations from quarter to quarter, analogically to the retail segment, which is typical for the business model adopted by the Group.

XTB’s business model includes high volatility of revenues depending on the period. Operating results are mainly affected by: (i) volatility on financial and commodity markets; (ii) the number of active clients; (iii) volume of concluded transactions on financial instruments; (iv) general market, geopolitical and economic conditions; (v) competition on the FX/CFD market and (vi) regulatory environment.

As a rule, the Group’s revenues are positively affected by higher activity of financial markets due to the fact that in such periods, a higher level of turnover is realized by the Group’s clients and higher profitability per lot. The periods of clear and long market trends are favourable for the Company and it is at such times that it achieves the highest revenues. Therefore, high activity of financial markets and commodities generally leads to an increased volume of trading on the Group’s trading platforms. On the other hand, the decrease in this activity and the related decrease in the transaction activity of the Group’s clients leads, as a rule, to a decrease in the Group’s operating income. Due to the above, operating income and the Group’s profitability may decrease in periods of low activity of financial and commodity markets. In addition, there may be a more predictable trend in which the market moves within a limited price range. This leads to market trends that can be predicted with a higher probability than in the case of larger directional movements on the markets, which creates favourable conditions for transactions concluded in a narrow range trading. In this case, a greater number of transactions that bring profits to clients is observed, which leads to a decrease in the Group’s result on market making.

The volatility and activity of markets results from a number of external factors, some of which are characteristic for the market, and some may be related to general macroeconomic conditions. It can significantly affect the revenues generated by the Group in the subsequent quarters. This is characteristic of the Group’s business model.

Operating expenses

In 2020 operating expenses amounted to PLN 282,0 million and were higher by PLN 108,1 million in relation to the same period a year earlier (2019: PLN 173,9 million). The most significant changes occurred in:

• marketing costs, an increase of PLN 50,0 million mainly due to higher expenditures on marketing online campaigns;

• costs of salaries and employee benefits, an increase of PLN 33,1 million mainly due to provisions for variable remuneration

components (bonuses) and an increase in employment;

• commission expenses, an increase of PLN 14,2 million as a result of larger amounts paid to payment service providers through

which clients deposit their funds on transaction accounts;

• other external costs, an increase of PLN 4,8 million as a result of higher expenditures on: (i) IT systems and licenses

(an increase of PLN 2,6 million y/y); (ii) IT support services (an increase of PLN 1,0 million y/y).