Financial results of XTB for 2022
The year 2022 was a further period of dynamic business development and building a client base for XTB. High volatility in the financial and commodity markets as well as the environment of negative real interest rates have made trading on financial instruments very attractive for many investors. As a result, the Group acquired a record 196,9 thousand new clients and the number of active clients increased by 35,9% y/y from 190,5 thousand to 258,8 thousand. This translated into a significant increase in the volume of clients’ trading on CFD instruments expressed in lots – an increase from 4,1 million to 6,4 million lots, i.e. by 55,1% y/y.
XTB’s dynamic operational growth, coupled with favourable market conditions, translated into record-breaking financial results in 2022. Consolidated net profit amounted to PLN 766 096 thousand compared to PLN 237 830 thousand a year earlier. Consolidated revenues amounted to PLN 1 444 249 thousand (2021: PLN 625 595 thousand) with operating expenses of PLN 558 567 thousand (2021: 348 772 thousand).
Revenues
In 2022, XTB reported record increase in revenue from PLN 625 595 thousand to PLN 1 444 249 thousand, i.e. by 130,9% y/y. Significant factors determining their level were high volatility in the financial and commodity markets and the constantly growing number of active clients (increase by 35,9% y/y), connected with their high transaction activity expressed in the number of CFD contracts concluded in lots (increase by 55,1% y/y). As a consequence the transaction volume in CFD instruments amounted to 6 365,6 thousand lots (2021: 4 104,6 thousand lots), and a profitability per lot amounted to PLN 227 (2021: PLN 152).
XTB has a solid foundation in the form of constantly growing client base and the number of active clients. In 2022 the Group reported another record in this area, acquiring 196 864 new clients compared to 189 187 a year earlier, which means an increase of 4,1%. Similarly to the number of new clients, the number of active clients was also record high. It increased from 190 452 to 258 799, i.e. by 35,9% y/y.
The priority of the Management Board is to further increase the client base leading to the strengthening of XTB’s market position in the world by reaching the mass client with its product offer. These activities are and will be supported by a number of initiatives, including the introduction of new products or promotional campaigns. The ambition of the Management Board in 2023 is to acquire, on average, at least 40-60 thousand new clients quarterly. In January 2023, the Group acquired a total of 42,3 thousand new clients, while in February 2023, it was 36,5 thousand of new one.
For example, on January 9, 2023, XTB launched a new promotion “Free share for a good start” consisting in receiving a free share worth up to USD 30 for opening an account with XTB and making a deposit of any amount.
In order to strengthen its market position and worldwide recognition, XTB cooperates with titled athletes who are the ambassadors of the XTB brand. In February 2022, an advertising campaign was launched with the participation of the titled martial arts competitor, the first Polish woman in the UFC organization and the champion of this organization, as well as the three-time world champion in Thai boxing – Joanna Jędrzejczyk.
In September 2022, promotional activities were launched with the participation of Conor McGregor, another XTB brand ambassador – an Irish mixed martial arts (MMA) and the UFC fighter. Conor McGregor is the biggest martial arts star in the world and the best rewarded athlete according to Forbes list. Conor is not only a fighter, but also a successful person in business as an investor in many interesting projects.
The face of the XTB brand is also Jiří Procházka, a Czech fighter, one of the leading MMA fighters, UFC champion. Thanks to this cooperation, XTB plans to continue its intense promotional activities.
The team of XTB ambassadors was also joined in 2022 by Iker Casillas, a former Real Madrid footballer, considered one of the best goalkeepers of all time. He is currently the Deputy Director General of the Real Madrid Foundation.
Thanks to the cooperation with such personalities as Joanna Jędrzejczyk, Conor McGregor, Jiří Procházka or Iker Casillas, XTB started promoting the offered investment solutions, in particular, convincing that investing in various types of assets is available to everyone, using the tools provided that facilitate entry into the world of investments: through daily market analysis, as well as numerous educational materials.
Looking at XTB’s revenues in terms of the classes of instruments responsible for their creation, it can be seen that in 2022 CFDs based on index were in the lead. Their share in the structure of revenues on financial instruments reached 46,4% compared 32,8% year earlier. This is a consequence of high profitability on CFD instruments based on the US 100 index, the German DAX index (DE30) or the US 500 index. The second most profitable asset class was CFD based on commodities. Their share in the revenue structure in 2022 was 33,8% (2021: 49,3%). This is a consequence of high profitability on CFD instruments based on quotations of natural gas, gold and oil prices. Revenues on CFDs based on currencies accounted for 17,0% of all revenues, compared 12,5% year earlier, where the most profitable financial instruments in this class were CFD based on currency pairs EURUSD and GBPUSD.
XTB places great importance on the geographical diversification of revenues, consistently implementing the strategy of building a global brand. The country from which the Group derives more than 20% of revenues each time is Poland, with a share of 41,4% (2021: 33,5%). Due to the overall share in the Group’s revenues, Poland was separated for presentation purposes as the largest market in terms of revenues in the Group. The Group breaks down its revenues by geographic area according to the country of the XTB office in which the client was acquired. The exception is the Middle East region, which also presents revenues from clients from this market acquired by the subsidiary XTB International Ltd. based in Belize.
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
The operating costs in 2022 amounted to PLN 558 567 thousand and were PLN 209 795 thousand higher than in the previous year (2021: PLN 348 772 thousand). The most important changes occurred in:
• marketing costs, an increase by PLN 102 268 thousand resulting mainly from higher expenditure on online and offline marketing campaigns;
• costs of remuneration and employee benefits, an increase by PLN 60 765 thousand, mainly due to an increase in employment and higher provisions for variable remuneration components (bonuses);
• commission costs, an increase by PLN 18 178 thousand resulting from higher amounts paid to payment service providers through which clients deposit their funds in transaction accounts;
• other external services, an increase by PLN 11 533 thousand as a result of mainly higher expenditure on: (i) support database systems (increase by PLN 4 166 thousand y/y); (ii) market data delivery services (increase by PLN 2 807 thousand y/y); (iii) legal and advisory services (increase by PLN 2 762 thousand y/y) and (iv) recruitment costs (increase by PLN 1 967 thousand y/y).
