Flow Traders Investor Presentation 3Q 2016 results
Disclaimer This presentation is prepared by Flow Traders N.V. and is for information purposes only and the material contained in this document is provided as is. It is not a recommendation to engage in investment activities and you must not rely on the content of this document when making any investment decisions. The information in this document does not constitute legal, tax, or investment advice and is not to be regarded as investor marketing or marketing of any security or financial instrument, or as an offer to buy or sell, or as a solicitation of any offer to buy or sell, securities or financial instruments. The information and materials contained in this presentation are provided as is and Flow Traders N.V. or any of its affiliates ( Flow Traders ) do not warrant the accuracy, adequacy or completeness of the information and materials and expressly disclaim liability for any errors or omissions. This presentation is not intended to be, and shall not constitute in any way a binding or legal agreement, or impose any legal obligation on Flow Traders. All intellectual property rights, including trademarks, are those of their respective owners. All rights reserved. All proprietary rights and interest in or connected with this publication shall vest in Flow Traders. No part of it may be redistributed or reproduced without the prior written permission of Flow Traders. This presentation may include forward-looking statements, which are based on Flow Traders current expectations and projections about future events, and are not guarantees of future performance. Forward looking statements are statements that are not historical facts, including statements about our beliefs and expectations. Words such as may, will, would, should, expect, intend, estimate, anticipate, project, believe, could, hope, seek, plan, foresee, aim, objective, potential, goal strategy, target, continue and similar expressions or their negatives are used to identify these forward-looking statements. By their nature, forward-looking statements involve known and unknown risks, uncertainties, assumptions and other factors because they relate to events and depend on circumstances that will occur in the future whether or not outside the control of Flow Traders. Such factors may cause actual results, performance or developments to differ materially from those expressed or implied by such forward-looking statements. Accordingly, no undue reliance should be placed on any forward-looking statements. Forward-looking statements speak only as at the date at which they are made. Flow Traders expressly disclaims any obligation or undertaking to update, review or revise any forwardlooking statements contained in this presentation to reflect any change in its expectations or any change in events, conditions or circumstances on which such statements are based unless required to do so by applicable law. Financial objectives are internal objectives of Flow Traders to measure its operational performance and should not be read as indicating that Flow Traders is targeting such metrics for any particular fiscal year. Flow Traders ability to achieve these financial objectives is inherently subject to significant business, economic and competitive uncertainties and contingencies, many of which are beyond Flow Traders control, and upon assumptions with respect to future business decisions that are subject to change. As a result, Flow Traders actual results may vary from these financial objectives, and those variations may be material. Efficiencies are net, before tax and on a run-rate basis, i.e. taking into account the full- year impact of any measure to be undertaken before the end of the period mentioned. The expected operating efficiencies and cost savings were prepared on the basis of a number of assumptions, projections and estimates, many of which depend on factors that are beyond Flow Traders control. These assumptions, projections and estimates are inherently subject to significant uncertainties and actual results may differ, perhaps materially, from those projected. Flow Traders cannot provide any assurance that these assumptions are correct and that these projections and estimates will reflect Flow Traders actual results of operations. By accepting this document you agree to the terms set out above. If you do not agree with the terms set out above please notify legal.amsterdam@nl.flowtraders.com immediately and delete or destroy this document. Investor Presentation 2
An introduction Founded in January 2004 with offices in Amsterdam, New York and Singapore Flow Traders trades in all time zones Our core business is providing liquidity for ETPs 1 Around 100 traders providing continuous ETP liquidity on 97 trading venues worldwide We are listed on Euronext in Amsterdam since 10th of July 2015 (Ticker FLOW NA) Flow Traders is independent and not linked to any issuer or bank 1 ETPs (Exchange Traded Products) include ETFs (Exchange Traded Funds), ETCs (Exchange Traded Commodities) and ETNs (Exchange Traded Notes) A leading global technologyenabled liquidity provider specialized in ETPs Investor Presentation 3
Flow Traders at a glance AMERICAS (since 2009) EUROPE (since 2004) ASIA (since 2007) ETP AuM( bn) 2,228 ETP AuM( bn) 511 ETP AuM( bn) 278 FLOW ETP Value Traded( bn)* 129 FTE 49 FLOW ETP Value Traded ( bn) * 289 FTE 226 FLOW ETP Value Traded( bn) * 23 FTE 50 ETP AUM as at 30 September 2016, ETP Value Traded for the nine months period ended 30 September 2016 and FTE for the quarter ended 30 September 2016 Investor Presentation 4
Our corporate culture supports our leading market position High-growth underlying market driven by secular shifts in the asset management industry Critical component of the ETP Ecosystem ETP Pricing Excellence Leading global technology-enabled ETP-focused liquidity provider Highly collaborative, integrated and resilient business model with strong barriers to entry Cutting-Edge Proprietary Technology Platform Strong Team-Driven Culture Risk management Focus Strong growth, high margins and attractive dividend pay-out ratio Investor Presentation 5
Critical component of the ETP Ecosystem ETP creation / redemption Primary Market >25 ETP issuers ETPs vs basket of assets / cash Ability to create and redeem daily Providing liquidity to the global ETP market, fostering primary issuance and secondary trading Facilitating primary issuance through Authorized Participant (AP) agreements Global risk transfer between market participants Secondary Market ETPs vs cash On-exchange liquidity provision 97 Exchanges and other Trading Venues ETPs vs cash Institutional / off-exchange liquidity provision >475 Institutional Counterparties Asset managers, private banks, insurance companies etc. Aggregating flow from all market participants Increasing secondary market efficiency through global interconnectivity and efficient pricing Investor Presentation 6
3Q results overview Investor Presentation 7
Executive summary 3Q performance We have increased our market share in the third quarter as we grew in ETP Value Traded, confirming our position as leading global ETP liquidity provider Slow market trading activity, with VIX close to all time lows, impacted our Net Trading Income (NTI) and Revenue Capture We still see a lot of growth opportunities in the US and Asia We continue to invest in our people and technology to benefit from future growth and facilitate our growing presence We are on track to deliver the second best year since inception Investor Presentation 8
ETP market continued to grow in 3Q16 ETP Assets under Management grew by 5.8% quarter-on-quarter Net inflows trend remains skewed towards Fixed Income & Equity products Quarterly increase in ETP listings driven by the Americas and APAC regions bn bn number 3,500 3,000 2,500 2,000 1,500 1,744 1,918 2,079 2,642 2,667 2,851 3,016 130 110 90 70 50 66 50 107 85 46 76 109 23 83 111 12,000 10,000 8,000 6,000 8,024 8,262 8,556 8,891 9,117 9,542 9,644 1,000 30 24 4,000 500-31 Dec 2013 30 Jun 2014 31 Dec 2014 30 Jun 2015 31 Dec 2015 30 Jun 2016 30-Sep-16 10 (10) 2,000-1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 Equity Fixed Income Commodities Other (30) 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 Equity Fixed Income Commodities Other EMEA Americas APAC Second consecutive quarter of decreasing on-exchange ETP Value Traded Drop in Market Velocity demonstrates the continuing slowdown through 2016 Combined with lower VIX this impacts margins, despite short term Brexit event bn 7,000 6,000 5,000 4,000 3,000 2,000 5,109 4,901 5,974 5,317 6,065 5,053 4,708 3.1 2.9 2.7 2.5 2.3 2.1 1.9 % 60 50 40 30 20 1,000 1.7 10-1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 1.5 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 0 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 Quarterly Intraday High Quarterly Intraday Low Quarterly Average close level * Source: Blackrock, Flow Traders, Bloomberg Market Velocity is the Market ETP Value Traded divided by the Market ETP Assets under Management Investor Presentation 9
Resilient performance in a challenging environment KPIs Flow Traders YTD YTD In bn unless otherwise stated 3Q16 2Q16 Sept16 Sept15 Market ETP Value Traded 4,708 5,053 (7%) 15,826 15,984 (1%) Europe 216 241 (10%) 723 735 (2%) Americas 4,103 4,333 (5%) 13,693 13,280 3% APAC 390 479 (19%) 1,410 1,969 (28%) Flow Traders ETP Value Traded 149 141 5% 441 462 (5%) Europe 98 94 4% 289 292 (1%) Americas 45 39 13% 129 125 3% APAC 6 8 (19%) 23 45 (50%) Flow Traders NTI ( m) 48.8 67.9 (28%) 181.3 240.2 (25%) Europe 29.6 43.6 (32%) 113.1 149.1 (24%) Americas 14.6 19.9 (26%) 50.5 38.4 32% APAC 4.6 4.4 3% 17.7 52.7 (66%) Flow Traders RevCap (bps) 3.3 4.8 (1.5) 4.1 5.2 (1.1) Europe 3.0 4.6 (1.6) 3.9 5.1 (1.2) Americas 3.3 5.0 (1.8) 3.9 3.1 0.9 APAC 7.5 5.9 1.6 7.8 11.7 (3.9) 350.0 300.0 250.0 200.0 150.0 100.0 50.0 - Flow Traders NTI (in m) 304.7 64.5 172.7 92.8 181.3 48.8 73.2 70.5 67.9 38.1 24.9 36.5 76.9 64.6 2014 2015 2016 YTD 1Q 2Q 3Q 4Q External Developments Flow Traders Performance 3Q16 was dominated by the Brexit aftermath, Central Bank decisions across the globe and the upcoming US elections and Italian referendum Market circumstances kept investors side-lined as volatility declined further to levels last seen in summer 2014 Product mix traded in the market remains skewed towards highly liquid products, as flagged in previous quarters ETP Value Traded improved 5% compared to the previous quarter whilst the market ETP Value Traded declined 7% over the same comparative period NTI declined 28% q-o-q due to tightening market spreads, following lower market volumes as investors were assessing impact Brexit and the upcoming US elections and Italian referendum Revenue Capture reached 3.3 bps as lower volatility affected market spreads and product mix, especially in Europe Note 1: Market Value Traded is restated based on Flow Traders Market reference data. Note 2: Flow Traders Value Traded is restated to correct for creations and redemptions, NTI is not impacted. Refer to appendix for more details. Investor Presentation 10
Maintaining cost discipline to preserve operating margins Impact of decline in Net Trading Income compensated by reduction in variable component of operating expenses 3Q 2Q 3Q16 vs YTD YTD Adj. YTD YTD16 vs Consolidated (in m) 2016 2016 2Q16 Sep 16 Sep 15 Sep 15 adj. YTD-15 Net Trading Income 48.8 67.9 (28%) 181.3 240.2 240.2 (25%) Employee expenses (fixed) (6.8) (6.6) (19.4) (15.1) (15.1) 29% Employee expenses (variable) (9.8) (17.3) (42.4) (72.2) (105.4) (41%) Technology expenses (8.3) (8.6) (25.4) (19.5) (19.5) 30% Other expenses (3.5) (2.4) (8.5) (7.9) (9.8) 7% Operational Expenses (28.4) (35.0) (19%) (95.7) (114.8) (149.8) (17%) EBITDA 20.5 32.9 (38%) 85.6 125.4 90.4 (32%) Depreciation / Amortisation (1.5) (1.5) (4.7) (5.0) (5.0) Write offs tangible assets (0.1) (0.5) (2.7) (0.0) (0.0) Result subsidiaries (0.0) 0.0 0.0 - - Profit Before Tax 18.9 30.9 (39%) 78.2 120.5 85.4 (35%) Tax (3.8) (2.2) (11.3) (21.9) (17.9) Net Profit 15.0 28.7 (48%) 66.9 98.5 67.5 (32%) EPS (in ) 0.32 0.62 1.44 2.12 1.45 EBITDA margin (in %) 42% 48% 47% 52% 38% Flow Traders EBITDA Increase in fixed employee expenses in line with expectation and driven by recruitment in September, increase in headcount Technological developments continued to improve performance, with a special focus on the US and Asian offices Technology expenses declined marginally versus 2Q due to mainly lower connectivity costs Variable employee expenses reduced on the back of profit for the quarter Other expenses grew, containing cost items like housing, fixed exchange costs. Housing showed a peak following increase in headcount in September Flow Traders is on track to realize second best year to date Investor Presentation 11
Preserved balance sheet strength Capital management resulted in stable trading capital, despite payment of interim dividend Condensed consolidated Financial Position Development of regulatory capital Condensed Balance Sheet (In m) 30 Sept 16 Assets 30 Sep 16 31 Dec 15 vs. 31 Dec 15 Trading Capital 300 340 (40) Property, Equipment and Intangible Assets 22 24 (2) Other Assets 24 19 5 Total Assets 346 383 (37) Equity & Liabilities Other Liabilities 98 122 (23) Tax Liabilities 7 14 (7) Total Liabilities 105 136 (31) Total Equity 240 247 (6) 400 350 300 250 200 150 100 50 0 340.0 298.9 300.0 280.3 204.3 268.0 252.2 217.1 180.5 123.5 84.3 94.0 240.2 136.7 132.7 31 Dec 2014 30 Jun 2015 31 Dec 2015 30 Jun 2016 30-Sep-16 Regulatory Capital Regulatory Capital Required Total Trading Capital Trading Capital & Dividend Trading capital at the end of 3Q was 300m, reflecting a stable position versus the previous quarter Interim dividend payment of 0.55 per share in September 2016 Regulatory Required Capital remained stable at 132.7m from 136.7m end 2Q16 Our list of Prime Brokers continued to grow in 3Q Focus continues to be on maximizing profitability and returns to shareholders and remaining committed to paying at least 50% of our Net Profit in dividends Investor Presentation 12
Long term historic growth trend continuous Despite varying levels of volatility through the years, Flow Traders NTI growth trend has consistently outperformed the market AuM growth trend Flow Traders NTI (in m), Market s AUM ($Bn) and VIX annual average (%) since 2010 NTI ( m) 350 300 250 200 150 1,390 100 NTI AUM 1,435 105 1,838 91 2,262 143 2,640 173 2,904 305 3,262 181 AUM ($bn) 350.0 3,500 300.0 3,000 250.0 2,500 200.0 2,000 150.0 1,500 100.0 1,000 50 48 50.0 500 0 VIX (%) 35 2010 2011 2012 2013 2014 2015 9M 2016 Stable growth with upside potential in periods of higher volatility 0.00 25 15 5 2010 2010 2011 2011 2012 2012 2013 2013 2014 2014 2015 2015 20169M 2016 Investor Presentation 13
Recognition of our expertise and market leading position Nine consecutive years running ETF MARKET MAKER Europe 2007 2008 2009 2010 2011 2012 2013 2014 2015 Four times winner ETF MARKET MAKER Asia-Pacific 2011 2012 2013 2015 Four consecutive years running ETF EXPRESS Award Winner 2013 2014 2015 2016 Three times winner ETF RISK Best Trading House 2013 2014 2015 Investor Presentation 14