EQUITY RESEARCH flatex AG (FTK GR)

flatex Initiating Coverage The New European Brokerage Powerhouse. Initiate EUROPE | Brokers, Asset Mgrs & Exchanges with Buy RATING BUY 6 May 2020 PRICE €28.25^ MARKET CAP Key Takeaway €765.6M / $835.7M PRICE TARGET (PT) €43.00 We initiate coverage of flatex with a Buy rating and a PT of €43. Our deep dive UPSIDE SCENARIO PT €52.00 analysis of the European brokerage market, as well as the detailed merger model DOWNSIDE SCENARIO PT €20.00 for flatex and DeGiro suggest that structural growth trends and the high synergy potential of both businesses are not priced in yet. Shares trade at a 25% discount ^Prior trading day's closing price unless otherwise noted. to their historical P/E; we expect a clear re-rating upon reg approval of the DeGiro acquisition (expected in 2Q20). FY Dec EUR 2019E 2020E 2021E 2022E Joining forces to consolidate the European brokerage market: flatex is among the EPS 0.95 1.60 2.27 2.72 leading players in the online brokerage market in Germany and Austria. Through FY P/E 29.7x 17.6x 12.4x 10.4x an attractive proposition of a flat-rate transaction fee and one of the broadest product offerings (>75,000 flatex-select ETP products) the firm achieved an average Figure 1 - Over €30m synergies from customer growth of 22% over the last five years. In December, flatex announced the combined trading flow, IT infrastrucutre acquisition of its Dutch competitor DeGiro, one of the few pan-European low-cost and cross-selling opportunities Marketing brokers with presence in 18 countries; the reg approval is still pending but expected 11%

for 2Q20. Our deep dive analysis on the European brokerage market supports our Regulatory 10% view that the deal is highly accretive and will deliver double-digit earnings growth Trading Flow >EUR30m 46% through structural trends as well as a high synergy potential. synergies pa

Acceleration of earnings growth through complementary set-up: The acquisition IT Architecture 33% price of €250m values DeGiro at 25x 2019 P/E and 18x 2019 EV/EBITDA, which appears expensive at first, but after accounting for €30m annual synergies (i.e . combined trading flow, cross-selling, leveraging of flatex's banking licence and Source: Jefferies, company data harmonised IT infrastructure) the economics look a lot more supportive at merely Figure 2 - flatex & DeGiro's combined 6x EBITDA. Together with the high economies of scale (a doubling of the number mid-term ambition 350 of transactions would nearly halve CPT from currently €1.45 to €0.80) we forecast 300 300 +55%

an EBITDA margin expansion of 15ppt to 45% by FY22e, which is still below 250 193 200 +178% management's ambitious mid-term targets that suggest €300m revenues, €150m 150 150 EBITDA (50% margin), and EPS of €3.0 (implying a triplication of FY19e profits). 100 +186% 80 54 50 28

Gilding the black swan & outpacing a growing market: Due to the spike in volatility 0 resulting from the coronavirus spread, we expect 2020 to be a record year for Revenue (€m) EBITDA (€m) Net profit (€m) flatex ('19e) DeGiro ('19e) Pro forma ('19e) MT ambition flatex with 35% growth in brokerage revenues (on a stand-alone basis) and an even . Source: Jefferies, company data stronger trajectory for DeGiro (+51%). In 1Q20 both companies executed more than 17m transactions on a pro-forma basis (+130% YoY) and acquired over 170k new Figure 3 - FTK trades at a 25% discount to its 3-yr avg. fwd PE customer accounts (+324% YoY). Beyond 2020 our merger model suggests an 8% PE 3y Avg organic sales CAGR for the combined brokerage businesses, fuelled by structural 35 growth trends and continuous market share gains. 30 25 Synergy potential from DeGiro and structural growth trends not priced in yet: flatex 20 trades at a 25% discount to its 5-year average fwd P/E, despite a significantly 15 10

better earnings outlook now. In our view, the 12.6x P/E (FY21e) does not reflect the 5 exceptional customer growth YTD and broadly ignores the synergy potential from the 0 . 28/04/2017 28/10/2017 28/04/2018 28/10/2018 28/04/2019 28/10/2019 28/04/2020 DeGiro deal. Thus, we expect a clear re-rating once the reg approval comes through Source: Jefferies, Factset

This report is intended for Jefferies clients only. Unauthorized distribution prohibited. and management demonstrates the near-term synergy realisation.

Martin Comtesse, CFA * Equity Analyst +44 (0)20 7029 8772 [email protected]

Please see analyst certifications, important disclosure information, and information regarding the status of non-US analysts on pages 45 to 50 of this report. * Jefferies International Limited EQUITY RESEARCH flatex AG (FTK GR)

FLATEX (FTK GR) The Long View | Scenarios Estimates Base Case € 2019E 2020E 2021E 2022E Rev. (MM) 134.0 220.0 284.9 306.1 Our base case scenario assumes 32% top-line growth in the next three years, followed by an intermediate growth Previous rate of 5% and a terminal growth of 2%. Due to the EBITDA (MM) 40.2 88.0 119.5 137.2 high economies of scale and deal synergies, we model a margin uplift to 36% by FY22e but use a conservative Previous terminal margin estimate of 30%. Our fundamental DCF EBIT (MM) 30.6 68.2 93.8 109.7 yields a PT of €43, implying 19x/16x PE (FY21/22e). Previous Upside Scenario PBT (MM) 27.5 63.0 86.6 102.4 Our upside scenario assumes a stronger intermediate Previous growth rate of 8% and a sustainable EBIT margin of 36% EPS 0.95 1.60 2.27 2.72 for the terminal value. In this case our fundamental DCF Previous yields a PT of €52, implying 23x/19x PE (FY21/22e). Downside Scenario Valuation Our downside scenario assumes a stagnation of growth 2019E 2020E 2021E 2022E beyond 2022 and a terminal EBIT margin of only 25%. EV/Rev 5.2x 3.2x 2.4x 2.3x In this case our fundamental DCF yields a PT of €20, implying 9x/7x PE (FY21/22e). P/Rev 5.7x 3.5x 2.7x 2.5x EV/EBITDA 17.3x 7.9x 5.8x 5.1x | Investment Thesis / Where We Differ EV/EBIT 22.7x 10.2x 7.4x 6.3x flatex is among the leading players in the online FY P/E 29.7x 17.6x 12.4x 10.4x securities brokerage market in Germany and Austria. Through an attractive proposition of a flat-rate transaction fee (€5.90 per trade, regardless of volume) Market Data Financial Summary and one of the broadest product offerings (>75,000 flatex-select ETP products) the firm achieved an 52-Week Range: €31.65 - €16.28 Book Value (MM) €419.8 average customer growth of 22% over the last five Total Entprs. Value €693.5M Dividend Yield 0.0% years; accumulating to a total of roughly 370,000 active trading clients. In December flatex announced Avg. Daily Value MM (USD) 2.69 the acquisition of its Dutch competitor DeGiro, one of Float (%) 43.4% the few pan-European low-cost brokers with presence in 18 countries; the regulatory approval for the deal is still pending but expected for 2Q20. Due to the highly complementary set up of both players we expect an accelerated growth trajectory in the coming years and an active contribution to consolidation of the fragmented European brokerage markets.

| Catalysts Reg approval for DeGiro deal (expected in 2Q20) 31 May FY19 report 30 Sep 1H20 report This report is intended for Jefferies clients only. Unauthorized distribution prohibited.

6 May 2020 2 Please see important disclosure information on pages 45 - 50 of this report. EQUITY RESEARCH flatex AG (FTK GR)

Table of Contents

Key Financial Output...... 4 Investment Thesis in Pictures...... 5 Investment Thesis - Executive Summary...... 6 Valuation...... 9 Key Risks...... 12 flatex & DeGiro: Joining forces to consolidate the fragmented European brokerage market...... 14 The largest pan-European low-cost broker...... 14 A strategic fit that could stun competition: What both players bring to the table...... 15 A detailed look at core KPIs reveals the complementary strengths of flatex and DeGiro...... 17 1+1=4: Ample synergy potential make the deal economics work...... 19 Business Model...... 23 I. Brokerage business (FIN segment)...... 23 II. B2B business (TECH segment)...... 26 Operating Model and Detailed Forecast...... 27 The fragmented European brokerage market leaves plenty of room for consolidation...... 30 Key differences in business models separate the wheat from the chaff...... 30 Same but different: Regional specifics require customized market cultivation strategies...... 33 The European brokerage market is poised for growth, given strong structural trends...... 35 Company History...... 39 Management Overview...... 39 Shareholder Structure...... 40 This report is intended for Jefferies clients only. Unauthorized distribution prohibited.

6 May 2020 3 Please see important disclosure information on pages 45 - 50 of this report. EQUITY RESEARCH flatex AG (FTK GR)

Key Financial Output Table 1 - Key financial output Profit and loss account Cash flow statement (EURm) 2019E 2020E 2021E 2022E (EURm) 2019E 2020E 2021E 2022E Total Output 134 220 285 306 Cash Profit After Tax 19 43 62 74 Gross Profit 96 165 216 238 Depreciation 10 20 26 28 EBITDA adjusted 40 88 119 137 Other operating non-cash adjustments 0 0 0 0 EBITDA 40 88 119 137 Change in Working Capital (1) (9) (7) (2) Depreciation & amortisation (10) (20) (26) (28) Operating Cash Flow 27 54 80 99 EBIT adjusted 31 68 94 110 Investing Cash-flow (72) (211) (27) (29) Net Financial Result (3) (5) (7) (7) Free Cash Flow before Financing (45) (156) 53 70 EBT 27 63 87 102 Change in Cash (44) 34 53 70 Net Profit after Min. 19 43 62 74 Change in Net debt (44) 34 53 70 EPS 0.95 1.60 2.27 2.72 Net Cash 39 72 125 196 adj. EPS 0.95 1.60 2.27 2.72 Balance sheet Segments (EURm) 2019E 2020E 2021E 2022E Sales by division 2019E 2020E 2021E 2022E Goodwill 37 37 37 37 FIN 115 201 266 287 Intangibles excluding goodwill 48 47 45 44 TECH 36 36 36 36 Tangible Fixed Assets 9 11 14 17 Consolidation (17) (17) (17) (17) Financial Assets 61 251 251 251 Total 134 220 285 306 Fixed Assets 154 345 346 348

% growth 2019E 2020E 2021E 2022E Cash & Securities 611 645 698 768 FIN 7% 75% 32% 8% Inventory 0 0 0 0 TECH -9% 0% 0% 0% Trade receivables 17 27 35 38 Consolidation -22% 0% 0% 0% Other current assets 466 466 466 466 Total revenue 7% 64% 29% 7% Current Assets 1,094 1,138 1,200 1,272 Total Assets 1,247 1,483 1,546 1,620 EBITDA margin 2019E 2020E 2021E 2022E Trade payables 3 5 6 7 FIN 24.0% 37.5% 40.2% 43.4% Advance payments received 0 0 0 0 TECH 35.0% 35.0% 35.0% 35.0% Other current liabilities 12 12 12 12 Total 30.0% 40.0% 41.9% 44.8% Other long term liabilities 21 21 21 21

Key operating metrics Financial debt 1,025 1,025 1,025 1,025 Ratios 2019E 2020E 2021E 2022E ...of which short-term debt 57 57 57 57 Sales growth (%) 7% 64% 29% 7% ...of which long-term debt 968 968 968 968 EBITDA growth (%) -5% 119% 36% 15% Liabilities 1,061 1,063 1,064 1,065 EBITDA adjusted margin 30% 40% 42% 45% Share Capital 20 27 27 27 EBIT adjusted margin 23% 31% 33% 36% Capital reserve 101 284 284 284 EBT margin 20% 29% 30% 33% Retained Earnings 65 109 170 244 Capital Exp. / Sales 54% 96% 10% 10% Shareholders' funds 186 420 481 555 Equity/Total Liabilities 15% 28% 31% 34% Minority Interest 0 0 0 0 Net financial debt / EBITDA -0.8x -0.7x -1.0x -1.4x Total Equity 187 420 482 556 Total Liabilities 1,247 1,483 1,546 1,620

Key valuation metrics at current price level Key valuation metrics at current price level Ratios 2019E 2020E 2021E 2022E Enterprise Value calculations 2019E 2020E 2021E 2022E EV/sales 3.8x 3.2x 2.2x 1.9x Market Capitalisation 554 554 554 554 EV/EBITDA 12.8x 7.9x 5.4x 4.2x Net Cash 39 72 125 196 EV/EBIT 16.9x 10.2x 6.8x 5.2x Market Value of Minorities 0 0 0 0 PE 29.7x 17.6x 12.4x 10.4x Market Value of Participations 0 0 0 0 . Free Cash Flow Yield -8.1% -20.4% 7.0% 9.1% Enterprise Value (Year-end) 515 482 428 358 Source: Jefferies This report is intended for Jefferies clients only. Unauthorized distribution prohibited.

6 May 2020 4 Please see important disclosure information on pages 45 - 50 of this report. EQUITY RESEARCH flatex AG (FTK GR)

Investment Thesis in Pictures

Figure 4 - Combining flatex's profitability with DeGiro's Figure 5 - High double digit customer growth rates are expected geographic footprint lifts the group to new heights. to continue in the coming years

350 60% CAGR (2019-22) 306 Flatex 10% 6m DeGiro consolidation in FY20e 285 300 DeGiro 25% 1,434 Full consolidation as of FY21e 50% Total 19% 1,284 250 220 CAGR (2014-19) 1,134 40% Flatex 22% 200 DeGiro 73% 849 140 30% Total 39% 150 125 134 122 648 107 95 88 20% 500 100 75 352 258 32 42 40 10% 165 50 20 31 0 0% 2015 2016 2017 2018 2019E 2020E 2021E 2022E 2014 2015 2016 2017 2018 2019E 2020E 2021E 2022E

Flatex DeGiro Total . Revenue EBITDA Net profit EBITDA margin (rhs) . Source: Jefferies, company data Source: Jefferies, company data Figure 6 - The relatively low online banking penetration in some Figure 7 - flatex offers one of the broadest product portfolios in the key brokerage markets across Europe leave a lot of potential Germany and holds >15% share in the profitable ETP segment. for organic growth.

Shares & ETPs, bonds FX/Commoditie 37% s/CFDs 47%

ETFs 17%

. Source: Jefferies, company data

. Source: Jefferies, company reports, market studies, expert interviews Figure 8 - We expect over €30m synergies from the DeGiro Figure 9 - ...which confirms management's ambitious mid-term merger through combined trading flow, IT infrastrucutre and targets for flatex and DeGiro with earnings of €3.00 per share. cross-selling opportunities... 350 Marketing 300 11% 300 +55%

250 Regulatory 193 10% 200 +178% 150 Trading Flow 150 46% >EUR30m 100 +186% 80 synergies pa 54 50 28

IT Architecture 0 33% Revenue (€m) EBITDA (€m) Net profit (€m)

flatex ('19e) DeGiro ('19e) Pro forma ('19e) MT ambition . . Source: Jefferies, company data Source: Jefferies, company data This report is intended for Jefferies clients only. Unauthorized distribution prohibited.

6 May 2020 5 Please see important disclosure information on pages 45 - 50 of this report. EQUITY RESEARCH flatex AG (FTK GR)

Investment Thesis - Executive Summary We initiate coverage on flatex AG with a Buy rating and a €43 price target. flatex is among the leading players in the online securities brokerage market in Germany and Austria. In December the company announced the acquisition of its Dutch competitor DeGiro, one of the few pan-European low-cost brokers; the regulatory approval for the deal is still pending but expected for 2Q20. flatex offers financial services through its full-service banking licence (mainly B2C) and leverages its own technology by providing white-label banking services also to external customers (B2B). Online brokerage represents the most important business segment with nearly three-quarter of group sales and two- thirds of group EBITDA (pre DeGiro). While the stable and predictable B2B business will remain a vital part of its operations, the clear focus going forward will lie on the successful European expansion of its low-cost online brokerage offering via the two brands flatex and DeGiro. In 2019, flatex had more than 300,000 retail brokerage clients carrying out over 11.5m transactions and creating close to €100bn trading flow.

Continuous market share gains thanks to a unique trading proposition

flatex positions itself through the trinity of (1) a low and transparent pricing point (2) a broad product portfolio with market-leading ETP offering (>75,000 flatex-select products) and (3) a lean trading platform designed for active traders. Having the entire value chain, including a German banking licence, under one roof is an important competitive advantage and creates some of the lowest direct settlement costs in the market with less than €1.50 per trade (versus €5-10 for direct banks). This allows flatex to offer among the lowest trading prices and to operate as the only major player, with a flat rate transaction fee of max. €5.90 per trade, regardless of asset type (stocks, bonds, ETPs, ETFs etc.) and transaction volume.

The trading platform is focused on transparency and execution and contrary to many other online brokers it does not offer any research, recommendations or intelligence, thereby minimising regulatory administration and content costs. Typical flatex clients are well-educated and merely seek an execution platform with minimal costs and a comprehensive product offering. The average amount of trades per flatex client lies at 45 per year (compared to less than 10 in the overall market) making them some of the most attractive target groups with payback periods of less than six months. This unique proposition led to an average customer growth of 22% over the last five years (2014-19e CAGR); accumulating to a total of roughly 370,000 active trading clients (incl. c.50k B2B customers).

Joining forces to consolidate the European brokerage market

After successfully completing the restructuring of the whole group in 2018, flatex is now looking to expand its business model outside its German-speaking home markets and has therefore announced to join forces with DeGiro, another rapidly growing low-cost broker that is already present in 18 European countries. The acquisition price of €250m values DeGiro at 25x 2019 P/E and 18x 2019 EV/EBITDA, which appears expensive at first, but we think the high synergy potential between the two businesses make the economics of the deal work. This report is intended for Jefferies clients only. Unauthorized distribution prohibited.

6 May 2020 6 Please see important disclosure information on pages 45 - 50 of this report. EQUITY RESEARCH flatex AG (FTK GR)

DeGiro’s biggest shortcoming is the lack of its own banking license and the resulting regulatory issues, third-party settlement costs as well as limited monetization options. On the other hand, flatex would have faced substantial investments for their European expansion and can now more than double its customer base overnight and gains access to an asset with a well-established presence across Europe and an even stronger growth trajectory in recent years. Through the unique fit of both platforms, management aims to realise at least €30m worth of synergies within the first year after the acquisition; this would put the implied purchase price to merely 6x EBITDA.

Combined transaction volumes have grown by a CAGR of 32% in the last five years but are dependent on general volatility levels (which were particularly low in 2019 and spiked in the first months of 2020). We forecast that both companies will add close to 300k new customers in 2020 and then return to a run rate of 150,000 in the years after (compared to an average of 166,000 in the last three years). This translates into an average transaction growth of 17% until FY22e.

High operating leverage and better monetization of DeGiro trades to trigger strong margin expansion

flatex operates a highly scalable business model and benefits from synergies between its B2C and B2B divisions. With a utilisation rate in its self-developed security ordering/ settlement infrastructure of around 40% (c.40,000 trades per day) marginal costs for new transactions are negligible for the foreseeable future and imply significant economies of scale. Management indicates that a doubling of the number of transactions would nearly halve CPT from currently €1.45 to €0.80. At the same time, flatex has managed to keep the average revenue per customer broadly stable at around €350 since 2016, despite decreasing activity levels of its expanded client base. This was possible through a continuous increase of revenues per transaction (through the build-up of its own credit book, partnerships with product issuers and increased trading fees) from previously €6.80 to now €9.30. In our view, these innovative monetization strategies will be a strong lever on DeGiro that only generates €3.10 per transaction and c.€140 per customer.

Management guides for combined revenues of €300m and EBITDA of €150m (50% margin) in their mid-term ambition for the first three years after the business combination. We forecast an organic revenue CAGR of 18% in the B2C business reaching group sales of €306m by FY22e but model a slightly more conservative margin expansion of c.15ppt for the group, reaching 45% in FY22e.

2020 volatility boost still underappreciated

Given the high correlation between market volatility and client activity, a volatility spike as we have witnessed in the course of the coronavirus outbreak is a key driver for transactions and revenue. Especially in light of the historically low volatility levels throughout 2019, which represent easy comps, we expect 2020 to be a record year for flatex with 35% growth in brokerage revenue (on a stand-alone basis) and an even stronger trajectory for DeGiro (>50%). In fact, flatex released a press statement on 6 April indicating that on a pro forma basis more than 17m transactions were executed by flatex and DeGiro in 1Q20 (+130% YoY) with over 170k new customer accounts (+324% YoY). Our FY20e numbers suggest c.45m transactions for the entire year, which we think is still conservative considering it only implies an average of 9m trades for each of the

This report is intended for Jefferies clients only. Unauthorized distribution prohibited. remaining quarters (versus c.8m in 2019) despite a significantly higher customer base. To put the number of trades in relation to profit: according to the press release, the 1Q20 pre-tax profits of flatex Bank AG exceeded significantly those of the entire year 2019.

6 May 2020 7 Please see important disclosure information on pages 45 - 50 of this report. EQUITY RESEARCH flatex AG (FTK GR)

Valuation does not reflect synergy potential

In our view, at a fwd P/E of 18x (25% below its 5-year average) the extremely positive development YTD and the potential synergies of the merger with DeGiro are not priced into the stock yet. We think investors are currently waiting for the final approval of the Dutch regulator and are yet hesitant to buy into the story (particularly after the failed deal with Austrian Post in 2018). If management is able to realise the indicated economies of scale and generate the targeted €3.00 EPS we expect a substantial near-term re-rating. We value flatex on a fundamental DCF model, yielding a price target of €43 per share.

Key risks

The key risks to our investment thesis are the outstanding reg approval (expected in 2Q20) and integration risk stemming from the DeGiro acquisition, the fast-changing competitive environment in domestic brokerage markets, and to a limited extent changing regulatory requirements around retail customers and individual trading behaviour that typically changes in correlation to market volatility. This report is intended for Jefferies clients only. Unauthorized distribution prohibited.

6 May 2020 8 Please see important disclosure information on pages 45 - 50 of this report. EQUITY RESEARCH flatex AG (FTK GR)

Figure 10 - Company snapshot flatex AG

Market Cap (FF) EUR 600m (69%)

Sales EBITDA

TECH (B2B) 27% TECH (B2B) Segment split 33% FIN (brokerage) FIN (brokerage) 67% 73%

Key Competitors comdirect, Consorsbank, ING, Avanza, Bourse Direct, Fineco Bank,

350 306 60% DeGiro consolidation 285 300 50% in FY20-21 250 220 40% 200 30% 125 134 137 150 107 119 95 88 20% Key Financials 100 75 42 40 50 20 31 32 10% 0 0% 2015 2016 2017 2018 2019E 2020E 2021E 2022E

Revenue EBITDA Net profit EBITDA margin (rhs)

New customers 200 Total customers 849 (in '000) (in '000) 648 148 148 124 500 482 107 112 93 94 Customer 352 358 77 development 258 246 50 59 165 140 42 35 42 36 81 (Flatex & DeGiro) 31

2014 2015 2016 2017 2018 2019E 2015 2016 2017 2018 2019E

Flatex DeGiro Total Flatex DeGiro Total

350 287 300 Pro forma figures 266 (incl. DeGiro) 246 250 175 200 162 Transaction & 150 130 97 brokerage fees 100 45 49 51 50 20 26 30 31 0 2016 2017 2018 2019E 2020E 2021E 2022E Transactions (m) Brokerage revenues (EURm)

This report is intended for Jefferies clients only. Unauthorized distribution prohibited. . Source: Jefferies, company data

6 May 2020 9 Please see important disclosure information on pages 45 - 50 of this report. EQUITY RESEARCH flatex AG (FTK GR)

Valuation We value flatex on a fundamental DCF model, yielding a price target of €43 per share, which we cross-check with peer group multiples.

Discounted cash flow We use a three-stage model where we forecast explicit cash flows until 2022e, followed by a mid-term and a terminal growth rate. Our intermediate growth rate is 5.0%, driven by a structural trend towards online banking, a more active portfolio management of private households due to the prolonged low-interest environment as well as the firms active consolidation strategy in the fragmented European brokerage market. Our terminal growth rate is 2.0% including a terminal EBIT margin of 30%, which is more conservative than our mid-term expectations of c.36%, given the steep margin expansion plans for the coming years (and the execution risk attached to it). We further assume that the DeGiro acquisition will be approved in 2Q20, leading to a 27.7% capital increase for contribution in kind and a first-time full consolidation of the firm in 2021. We have accounted for both the dilutive effect in the share count and positive synergy effects from the combined platforms. Our detailed cash flow and WACC assumptions are listed in the tables below.

Table 2 - DCF assumptions FCF Model 2020E 2021E 2022E 2023E Key assumptions EBIT adjusted 68 94 110 115 Intermediate growth 5.0% EBIT/Sales 31.0% 32.9% 35.8% 35.8% Y10 sustainable EBIT margin 30.0% Taxes -21 -27 -31 -31 Terminal growth rate 2.0% Depreciation to P&L EBITDA 20 26 28 29 Benchmark 10 Year Bond Yield (YTM) 1.5% Capex -21 -27 -29 -30 Company risk factor (beta) 1.30 Change in Working Capital -9 -7 -2 -2 Equity market risk premium 7.0% Unleveraged Free Cash Flow 37 59 75 82 Cost of equity & equivalents 10.6% Cost of interest bearing debt 5.0% . Discounted Unleveraged FCF 37 55 65 64 WACC 9.2% Source: Jefferies Table 3 - DCF output & sensitivity analysis NPV Overview Sensitivity to value per share PV yr2-yr4 184.6 Terminal Growth Rate PV yr5-yr9 279.6 1.0% 1.5% 2.0% 2.5% 3.0% PV terminal (yr9) 637.3 WACC 8.2% 43 45 47 50 53 PV SUM 1101.6 8.7% 42 43 45 47 50 Net liability adj. yr1 72.1 9.2% 40 42 43 45 47 MV 1173.7 9.7% 39 40 42 43 45 .Value per share 43.3 10.2% 38 39 40 42 44 Source: Jefferies Peer group analysis

Given that the online brokerage business will be by far the dominant segment and the driver of growth and the equity story going forward, we focus on peers in this division and ignore technology outsourcing companies that would be a better fit for flatex’s smaller tech division.

In this peer set we look at a broad range of direct banks, online brokers and fin-tech companies with volume-based business models, B2C exposure and or a strong online or technology focus. We, therefore, focus on listed competitors with the same risk exposure and avoid looking at companies like Plus500 and CMC Markets that operate with a significantly higher risk profile given their position as a market maker. For most of the peers that operate with a banking licence, Factset shows a negative enterprise value since the net debt position is not adjusted for customer cash deposits. The same error can be found in most consensus estimates for flatex. Consequently, EV-multiples are not meaningful and therefore ignored in our analysis. In our view, P/E is the most adequate valuation metric for comparable measures.

We want to emphasise that this is just an indicative peer set with many of these This report is intended for Jefferies clients only. Unauthorized distribution prohibited. business models – especially direct banks – not being directly comparable because online brokerage is just a small part of their overall business. We deem Avanza, a Swedish online broker with high ETP exposure, as the closest peer to flatex. Despite flatex’s superior earnings growth expectations, the stock currently trades at a discount

6 May 2020 10 Please see important disclosure information on pages 45 - 50 of this report. EQUITY RESEARCH flatex AG (FTK GR)

to its broader set of peers, which to us is a sign that the merger potential from DeGiro and the volatility boost seen in 2020 so far is not reflected in the valuation.

Figure 11 - Overview peer group Reporting Price MKT Cap EV P/E Ratio PB Ratio Sales growth EPS growth EBIT margin Currency LCY €m €m 2019 2020 2021 2019 2020 2021 2019 2020 2021 2019 2020 2021 2019 2020 2021 flatex - JEFe EUR 29.2 574 475 30.8 18.3 12.9 3.8 2.1 1.8 7% 64% 29% -18% 68% 41% 23% 31% 33%

Avanza Bank Holding AB SEK 120.1 1,724 1,682 40.8 24.4 29.8 9.6 8.1 7.8 14% 37% -6% -60% 68% -18% 44% 49% 45% comdirect bank AG EUR 13.0 1,842 - 4,766 9.6 21.0 21.5 2.4 2.3 2.1 17% 2% 1% 301% -54% -2% 34% 32% 28% Charles Schwab Corporation USD 38.8 46,007 - 39,695 14.5 18.8 21.4 2.5 2.1 2.0 6% -8% -3% 9% -23% -12% 46% 40% 40% E*TRADE Financial Corporation USD 41.9 8,531 4,282 11.4 15.1 16.8 1.5 1.4 1.3 0% -12% -5% -2% -25% -10% 46% 36% 35% FinecoBank SpA EUR 10.0 6,120 5,513 22.2 21.4 21.3 5.1 4.7 4.5 5% 8% 2% 13% 4% 1% 51% 53% 54% Interactive Brokers Group, Inc. Class A USD 41.7 2,945 - 34,217 19.3 23.6 25.4 n.a n.a n.a 2% -7% -5% 3% -18% -7% 65% 49% 41% Swissquote Group Holding Ltd. CHF 63.2 917 - 2,022 21.8 18.1 15.7 2.5 2.3 2.2 8% 7% 6% -2% 20% 15% 22% 21% 22% Bourse Direct SA EUR 1.5 83 76 n.a n.a n.a n.a n.a n.a n.a n.a n.a n.a n.a n.a n.a n.a n.a Renta 4 Banco, S.A. EUR 6.0 244 - 357 n.a n.a n.a n.a n.a n.a n.a n.a n.a n.a n.a n.a n.a n.a n.a ING Groep NV EUR 5.2 20,411 190,871 4.3 7.1 5.7 0.4 0.4 0.4 1% -3% 2% -11% -40% 26% 43% 42% 43% Bankinter SA EUR 3.9 3,461 14,089 6.7 13.4 12.0 0.7 0.7 0.7 6% -9% -1% 1% -50% 12% 45% 45% 46% Sino AG EUR 11.6 27 29 n.a n.a n.a n.a n.a n.a n.a n.a n.a n.a n.a n.a n.a n.a n.a Average 16.7 18.1 18.8 3.1 2.8 2.6 7% 2% -1% 28% -13% 1% 44% 41% 39% . Premium (Discount) 112% -3% -39% 57% -5% -14% Source: Jefferies, Factset Despite the significant volatility boost in the first months of 2020 and the announcement of the DeGiro acquisition in December 2019, the stock does not reflect the Street's strong earnings forecast. In fact, shares trade below their three- and five-year average forward P/E. In our view, investors currently wait to see the DeGiro deal being approved before buying into the story. We think, this offers a good entry point into a long-term structural growth story but are aware of the existing completion risk.

Figure 12 - Fwd P/E (5 years average) Figure 13 - Forward P/E (3 year average)

PE 5y Avg PE 3y Avg 60 35

50 30 25 40 20 30 15 20 10

10 5

0 0 . 07/05/2015 07/05/2016 07/05/2017 07/05/2018 07/05/2019 . 28/04/2017 28/10/2017 28/04/2018 28/10/2018 28/04/2019 28/10/2019 28/04/2020 Source: Jefferies, Factset Source: Jefferies, Factset Figure 14 - Normalised share price development (5 years) Figure 15 - Normalised share price development (3 years)

350 300

300 250 250 200 200 150 150 100 100

50 50

0 0 30/04/2015 30/04/2016 30/04/2017 30/04/2018 30/04/2019 24/04/2017 24/10/2017 24/04/2018 24/10/2018 24/04/2019 24/10/2019 24/04/2020 flatex AG Germany TECDAX (TR) flatex AG Germany TECDAX (TR) . . Source: Jefferies, Factset Source: Jefferies, Factset This report is intended for Jefferies clients only. Unauthorized distribution prohibited.

6 May 2020 11 Please see important disclosure information on pages 45 - 50 of this report. EQUITY RESEARCH flatex AG (FTK GR)

Key Risks Outstanding reg approval & integration risk

Although we try to analyse the potential impact of a DeGiro acquisition in this report, there is still the risk that the Dutch authorities will not approve the deal. Given the high fragmentation of the European brokerage market, however, we do not see a material risk that consent will not be granted. Our model currently assumes closure of the deal in 2Q20 accompanied by the issuing of 7.5m new shares (27.7% of total shares outstanding) against contribution in kind as well as six months consolidation in flatex's FY20 results and a first-time full consolidation of DeGiro in FY21. If the deal goes through as intended, this still leaves integration risk mainly around the extent and timeliness of which synergies can be realised; we deem this an essential part of our investment case in order to make the transaction accretive.

Competitive environment

The brokerage business is highly competitive with new players and business models constantly entering the market. The entry of new, lower-priced, brokers or price increases at flatex are two factors that could have a direct impact on customer churn. New market entries in the low-cost segment (eg Trade Republic or Just Trade in Germany), regardless of regulation, could result in price-sensitive customers shifting towards the cheaper offering. Similarly, if there was a further increase in prices at flatex, customers could switch platforms to a different provider. Both events pose a risk to the further expansion of flatex’s user base. Furthermore, we think that in addition to being one of the cheapest providers, flatex has gained a strong reputation for customer satisfaction by providing one of the widest product ranges and tailoring products to its clientele of trading-active customers. As such, we believe it is not as vulnerable to new low-price competition compared to other established players. In the past, management has also demonstrated to be the innovation leader themselves with unique pricing models and product features.

Regulatory risk

BaFin, the German financial supervisory authority, issued restrictions on the marketing and sale of CFDs (contracts for difference) to retail investors in 2018, which impose severe limitations for spread-based business models, such as Plus500, IG Group or CMC Markets. However, as flatex follows a commission-only income model and does not act as a market-maker for CFDs, these regulations do not affect flatex’s operations. The regulatory environment has made it tough for the global brokerage providers with a focus on CFD trading to enter the German market. Although we consider this an unlikely scenario, a loosening of these regulations could lower the barriers to entry for larger multinational players. This could lead to increased competition in prices and hamper customer growth on the flatex platform.

Further, the company operates with a banking licence and is therefore subject to a range of capital requirements. A breach of these requirements carries severe penalties that could impede growth and harm confidence in the group. For its current operating mode, however, flatex is sufficiently capitalised, with €83m of Tier 1 capital. This report is intended for Jefferies clients only. Unauthorized distribution prohibited.

6 May 2020 12 Please see important disclosure information on pages 45 - 50 of this report. EQUITY RESEARCH flatex AG (FTK GR)

Individual trading behaviour

flatex commission-based business model is heavily dependent on the trading behaviour of its customers. This trading behaviour tends to correlate strongly with general market volatility. In the current scenario of the COVID-19 crisis, volatility has seen a record spike, which in turn lead to significantly elevated transaction numbers as clients try to take advantage of the high daily swings in asset prices. However, before the start of the COVID-19 spread, we saw very low volatility levels for a prolonged period due to a very accommodative monetary policy across Europe. flatex has very few measures to stimulate its client’s trading behaviour and is therefore dependent on general market trends and from acquiring the right (active) customers in the first place.

IT security

flatex also provides IT services for a large number of banks and fin-tech companies. The group’s technology capabilities include clearing and settlement, payment processing, data storage and data management services. A security breach or IT system failure could have a significant impact on FTG given the scope of its technology offering and the degree to which its clients depend on these solutions. This, in turn, might result in the loss of future customers or cash outflows to current customers. flatex hosts its core banking system at its own data centres in Germany that have only recently been brought to the newest standard in light of the imminent expansion plans (two data centres were renewed in 2019 and provide highest standard of disaster recovery facilities in). By hosting its own data centres, the company is able to limit the amount of third-party involvement, mitigating the risk of a security breach. This report is intended for Jefferies clients only. Unauthorized distribution prohibited.

6 May 2020 13 Please see important disclosure information on pages 45 - 50 of this report. EQUITY RESEARCH flatex AG (FTK GR)

flatex & DeGiro: Joining forces to consolidate the fragmented European brokerage market In December 2019 flatex announced the acquisition of its Dutch low-cost competitor DeGiro for a total purchase price of €250m in order to create the largest pan-European discount broker. This was the result of a strategic review process together with Lazard, which was initiated in the summer of 2019 and included the evaluation of various strategic options, such as new partnerships, acquisitions, as well as a partial or complete sale of the company. The largest pan-European low-cost broker In a first step, flatex directly acquired 9.4% in DeGiro upon signing the sale and purchase agreement. The acquisition of the remaining 90.6% is subject to the approval of the responsible authorities. The closing of the entire transaction is expected for 2Q20. The transaction is fully supported by DeGiro management.

To finance the purchase price for 100% of the shares in DeGiro, flatex AG is carrying out a capital increase against contribution in kind at completion of the deal. In this context, up to 7.5m new flatex shares will be issued at reference price of €25.33 per share (c. €190m in total) to the current DeGiro shareholders, precluding the subscription rights of existing flatex shareholders. In addition, flatex pays €60m in cash, which can be paid without any major additional financing measures given the solid operating cash flow (c. €50-100m in FY20-22e) and a cash rich B/S (c.€70m net cash position).

Figure 16 - DeGiro deal at a glance 2019E 2019E 306k clients 470k clients 11.5m transactions 18.6m transactions 3 countries 18 countries >500 employees >200 employees

▪ Founded in 2005 in Germany ▪ Founded in 2007 in Netherlands as fund management ▪ Exchange listed in Germany (ISDN DE000FTG1111 company ▪ Since 2006: flatex retail brokerage ▪ Private, non-listed Dutch company ▪ Since 2014: new management team ▪ Since 2011: DeGiro brokerage to professional clients ▪ 2014: Acquisition of IT provider and bank ▪ Since 2013: DeGiro retail brokerage ▪ German bank with EU passport ▪ Asset-light model, no banking license . ▪ Proprietary IT bank system, highly vertically integrated ▪ Proprietary IT and trading engine Source: Jefferies, company data If the deal goes through as expected, this creates Europe’s largest online retail broker with operations in 18 countries with over 775k customers and an annual trading volume of over 30m transactions (as of 2019). While both companies focus on price-sensitive heavy traders which they acquire through a discount pricing strategy and a lean platform execution, DeGiro’s price point was even more aggressive than flatex’s in the past. The company generated relatively low revenues per trade of €3.10 vs €9.30 at flatex, while the number of trades per account is relatively comparable: 45 trades per account at DeGiro vs 37 trades at flatex. Besides the lower pricing point, there are a couple of other factors that are responsible for DeGiro’s lower profitability level to date. In the following paragraphs we analyse these differences and the complementary set-ups and how we think about possible synergies in the future. This report is intended for Jefferies clients only. Unauthorized distribution prohibited.

6 May 2020 14 Please see important disclosure information on pages 45 - 50 of this report. EQUITY RESEARCH flatex AG (FTK GR)

Table 4 - Pro-forma KPIs of Flatex & DeGiro incl. mid-term targets 2019e pro forma Mid-term ambition flatex DeGiro combined Target %change Revenue (€m) 133 60 193 300 +55% EBITDA (€m) 40 14 54 150 +178% Net profit (€m) 18 10 28 80 +186% Equity (€m) 186 26 212 Brokerage clients (k) 306 470 776 1,000 +29% . Transactions (m) 11.5 18.6 30.1 35.0 +16% Source: Jefferies, company data A strategic fit that could stun competition: What both players bring to the table Both firms target well-educated and highly active traders in Europe, who tend to be less volatile in terms of activity in market downswings, which proves to be a natural fit and can be considered a main reason why acquiring DeGiro would be the most logical step to fast-forward flatex’s regional expansion outside of Germany and Austria.

Figure 17 - Market positioning (Germany)

Offering

Low

Medium

Fees chargedFees High

Low Medium High . Breadth and depth of product offering Source: Jefferies, company data flatex has long-standing regulatory experience and use their own German banking license with EU passport to facilitate trades and adjacent services. In our view, this is one of the key features to lift future synergies and upsell DeGiro’s trading flow, which we explain in a later section.

Furthermore, flatex’s core strength in the combined entity is clearly its expertise around its proprietary IT banking system, which the firm also offers to other B2B clients in a standalone business segment. Since the acquisition of Xcom, its previous external IT provider, in 2014, flatex is independent of any external IT service providers, allowing them to quickly adapt product offerings and trading features according to customer demand. And given that the engineers sit on their own payroll, they only face marginal costs rather than market rates to do so.

flatex’s proprietary settlement infrastructure and lean cost base enables the company to operate cheaply, facilitating its low pricing in the market. Direct costs per trade are c.€1.5 and indirect costs are c.€1.7. This brings total transaction costs to around €3.3 for flatex relative to an estimated €5.0-10.0 for most direct banks. Large bulge-bracket banks even operate with a cost per trade of around €30-50, which is far higher than the more nimble B2C brokers. Notably, flatex is a platform focused on execution and

This report is intended for Jefferies clients only. Unauthorized distribution prohibited. price information as opposed to a full suite with news, analysis and research as well. These additional services contribute to higher overhead costs for competitors such as Comdirect or Consorbank. By not including these services, flatex is able to keep overhead costs per trade low. Further, flatex has built its operation from scratch without

6 May 2020 15 Please see important disclosure information on pages 45 - 50 of this report. EQUITY RESEARCH flatex AG (FTK GR)

legacy staff or IT systems from a larger bank. This has allowed the company to develop a lean platform.

Last but not least, flatex has one of the largest product offerings in the markets and benefits from innovative partnerships with some of the leading ETP issuers. Going forward this offering will be complemented by DeGiro’s options and futures product lines.

Figure 18 - Indicative product and service offering of the main players in the German brokerage market

Stocks ✓ ✓ ✓ ✓ ✓ OTC trading stocks ✓ x ✓ ✓ ✓ Bonds ✓ ✓ ✓ ✓ ✓ ETFs ✓ ✓ ✓ ✓ ✓ ETF savings plans ✓ x ✓ ✓ ✓ (Mutual) funds ✓ ✓ ✓ ✓ ✓ CFDs ✓ ✓ ✓ ✓ x FX ✓ x x x x ETPs Product offering Product ✓ ✓ ✓ ✓ ✓ OTC trading ETPs ✓ x ✓ ✓ ✓ No OTC with Premium partners ETPs partner banks Short selling of stocks x x x x x Future (Eurex) x ✓ x ✓ x Market information Robo-advisory x x ✓ ✓ ✓

Other Personal advisory x x ✓ ✓ x . Legend Strong Weak Source: Jefferies, company websites, broker comparison On the other hand, the focus of DeGiro's management has been on client growth rather than short-term profit optimization in the past. This way the company generated an impressive average annual client growth of close to 50% over the last three years and is now present in 18 European countries with one central infrastructure and market intelligence and access to nearly 50 foreign exchanges. DeGiro also use their proprietary trading engine to execute, clear and settle their trades. Further, they utilise a low-cost service centre in Sofia to keep their cost base competitive despite one of the lowest price points in the market.

DeGiro’s biggest shortcoming is the lack of a European banking license and the resulting regulatory scrutiny when it comes to monetizing customer deposits and trading flow. This will be overcome by passporting flatex’s German banking license going forward, which opens a whole range of cross-selling in the future. So far, DeGiro relies on third- party providers for its credit business (via ABN AMRO) and to manage its customer deposits (via the money market fund of Morgan Stanley). Both revenue streams are very lucrative by-products contributing to flatex’s higher profitability and can help lift up DeGiro’s margins once internalized in course of the merger.

On the other hand, flatex would have required substantial investments in its European expansion plans as the brand is only really established in its core markets, Germany and Austria. By leveraging DeGiro’s brokerage activities across 18 different countries, customer acquisition costs (CAC) for future expansion should be a fraction of its organic roll out.

After a successful merger, the company intends to pursue a two-brand strategy with the flatex brand predominantly focussing on the two German-speaking countries and DeGiro being the main driver behind their European expansion. As such, they will retain two discount broker brands in Germany, Austria and the Netherlands, complemented by 15 countries where DeGiro is already active. This report is intended for Jefferies clients only. Unauthorized distribution prohibited.

6 May 2020 16 Please see important disclosure information on pages 45 - 50 of this report. EQUITY RESEARCH flatex AG (FTK GR)

A detailed look at core KPIs reveals the complementary strengths of flatex and DeGiro

Customer development

Over the last five years, flatex has acquired roughly 40k new customers per year with average customer acquisition costs (CAC) of roughly €100-150. DeGiro has quickly rolled out its platform into 18 European countries and has thereby acquired on average around 80k customers in the last five years and well over 100k in each of the last three years. Since we do not have a detailed P&L break-down for DeGiro we do not know the exact CAC but understand that they are in a similar range as flatex.

Figure 19 - Exceptional customer growth in recent years Key findings

900 '000 849 Both players have significantly gained market share in 800 CAGR (2014-19) • Flatex 22% the last 5 years with combined customer growth of 39% 700 DeGiro 73% 648 600 Total 39% DeGiro has more aggressively focussed on expansion 500 482 • 500 but also had significant catch up potential as they only 400 352 358 started their operations in 2013. 258 300 246 The relative growth trajectory is slowing down due to a 200 165 140 • 81 higher base effect but the absolute customer growth is 100 31 even accelerating and is expected to reach a new record 0 2014 2015 2016 2017 2018 2019E in 2020 (see our detailed forecast section further down)

Flatex DeGiro Total Our assumption of 150k new customers per year in the . • forecast period is conservative when considering growth Source: Jefferies, company data achievements in most recent years.

. Figure 20 - Customer growth (in % yoy) is fading due to the Figure 21 - Roughly 120k new customers per year with an increased base but still achieves high double-digit rates improving trajectory bode well for future growth

90% yoy Avg. # of new customers (2014-19) 200 76% 80% 72% 200 '000 Flatex 40k DeGiro 79k 70% Total 119k 148 148 60% 150 124 45% 50% 42% 107 112 36% 35% 93 94 100 40% 30% 77 30% 31% 59 20% 20% 50 42 14% 50 35 42 36 20% 26% 10% 0% 0 2016 2017 2018 2019E 2015 2016 2017 2018 2019E

Flatex DeGiro Total Flatex DeGiro Total . . Source: Jefferies, company data Source: Jefferies, company data Transaction development

Over the last five years, flatex has achieved an average transaction growth of 15% per year whereas DeGiro was able to increase trade volumes by a 59% CAGR. While trading volumes highly correlate with general volatility levels (which were particularly low in 2019) it is a natural development that over time low-cost broker acquire an increasing share of less active customers that cause transaction growth to lag behind customer

This report is intended for Jefferies clients only. Unauthorized distribution prohibited. growth.

6 May 2020 17 Please see important disclosure information on pages 45 - 50 of this report. EQUITY RESEARCH flatex AG (FTK GR)

Figure 22 - Active customer growth translates into increasing Key findings transaction volumes Both firms target highly active customers, that contribute 45 m • 40 CAGR (2014-19) to increasing transaction volumes from the beginning Flatex 15% 35 31.4 and therefore have a shorter payback period than the DeGiro 59% 29.9 30 Total 32% 26.0 average retail brokerage client 25 20.3 19.1 Combined transaction volumes have grown by a CAGR of 20 17.4 • 16.0 14.7 32% in the last five years but are still heavily dependent 15 9.8 7.9 on general volatility levels (which were particularly low in 10 5.9 5 1.9 2019) 0 • Naturally along the maturity curve of a low-cost broker's 2014 2015 2016 2017 2018 2019E business model they tend to also acquire an increasing Flatex DeGiro Total number of less active customers, which dilutes the . Source: Jefferies, company data average number of transactions per customer and subdues transaction growth compared to customer growth.

. Figure 23 - DeGiro stands out with annual transaction growth of Figure 24 - The combined companies added roughly 1m c.10% transactions last year

9.0 m Avg. # of new transactions (2014-19) yoy Flatex DeGiro Total 8.1 66% 8.0 Flatex 1.1m 70% 7.0 DeGiro 3.2m 5.7 60% 6.0 Total 4.3m 50% 4.9 5.0 50% 4.1 4.0 3.9 4.2 3.9 4.0 40% 2.7 3.0 30% 26% 28% 1.7 2.0 1.2 1.5 18% 0.8 20% 1.0 0.3 15% 10% 10% 0.0 11% 5% -1.0 -0.2 0% 8% 3% 2015 2016 2017 2018 2019E -10% -1% 2016 2017 2018 2019E Flatex DeGiro Total . . Source: Jefferies, company data Source: Jefferies, company data . Development of the monetization per customer & per transaction

Despite the decreasing number of average trades per customer, flatex has managed to keep the average revenue per customer broadly stable at roughly €350 since 2016. This was possible through a continuous increase of revenues per transaction from previously €6.80 to now €9.30. In our view, the innovative monetization strategies of flatex are the clear competitive edge that they can leverage after the acquisition. DeGiro only generates €3.10 per transaction, which has only partially to do with lower direct trading fees (c.€2.00-3.00 difference for plain Xetra trades). This report is intended for Jefferies clients only. Unauthorized distribution prohibited.

6 May 2020 18 Please see important disclosure information on pages 45 - 50 of this report. EQUITY RESEARCH flatex AG (FTK GR)

Figure 25 - Number of transactions per customer per year Key findings naturally decreases as active traders tend to follow low-cost offers first • While DeGiro has experienced significantly stronger 110 Absolute change (2014-19) growth rates in recent years, flatex has mastered the Flatex -11 monetization of customers and trades through product 90 DeGiro -22 76 Total -11 partnerships, interest income, slightly higher fees per 65 67 70 61 trade and by utilising its own banking license. 53 54 52 46 48 46 flatex has consistently increased revenue per trade to 50 100 106 42 • 89 37 76 €9.30 versus €3.10 at DeGiro. Here lies one of the biggest 30 58 45 synergies of combined efforts in the future. 10 • Revenue per customer lies at €234 for the combined firm, which equals a payback period of roughly 6 months, when -10 2014 2015 2016 2017 2018 2019E assuming average CAC of €100-150. Flatex DeGiro Total . Source: Jefferies, company data . Figure 26 - Revenue per transaction: flatex stands out to Figure 27 - Revenue per customer is well above €200 p.a for the innovative monetization strategies combined entity

11.0 EUR Absolute change in EUR (2016-19) 550 EUR Absolute change in EUR (2016-19) Flatex -14 Flatex 2.6; DeGiro 0.4 9.3 DeGiro -97 9.0 Total 0.8 8.6 450 Total -85 7.9 383 394 364 6.8 350 7.0 350 319 306 5.4 5.6 282 4.8 5.0 240 234 5.0 250 213 181 3.1 3.1 2.7 2.8 143 3.0 150

1.0 50

-1.0 2016 2017 2018 2019E -50 2016 2017 2018 2019E

Flatex DeGiro Total Flatex DeGiro Total . . Source: Jefferies, company data Source: Jefferies, company data 1+1=4: Ample synergy potential make the deal economics work The acquisition price of €250m values DeGiro at 25x 2019 P/E and 18x 2019 EV/EBITDA, which appears expensive at first glance, especially when considering the lower margin business: DeGiro generated c.23% EBITDA margin in FY19 vs flatex with 30%. While flatex had average CAC of €100-150 in recent years they spent c.€530 for every new DeGiro client (c.470k brokerage customers in 2019).

However, the deal more than doubles flatex’s base of active trading clients over-night and gives the firm instant access to 18 European countries; we estimate that this would have taken at least five years if replicated organically and required significantly higher marketing expenses as well. Additionally, we think the unique fit of both companies offers material synergies on the combined cost base and ample cross-selling potential going forward. In the following paragraphs we outline our view on the deal specifics and conclude that it will be EPS accretive almost immediately with further upside in the outer years.

Management anticipated annual synergies of at least €30m, which will fully contribute to 2021 results for the first time. Assuming deal completion in the second quarter of

This report is intended for Jefferies clients only. Unauthorized distribution prohibited. 2020 around 30%-40% of the synergies could already come through in the current fiscal year.

6 May 2020 19 Please see important disclosure information on pages 45 - 50 of this report. EQUITY RESEARCH flatex AG (FTK GR)

After consideration of the total 30m synergies the actual purchase price of merely 6x EBITDA does not look expensive at all anymore. From several talks with industry specialists we learned that there was a lot of interest from PE companies in the bidding process for DeGiro. In our view, the substantial synergy potential from merging both platforms was the key reason why flatex was able to seal the deal.

Figure 28 - Over €30m synergies from combined trading flow, IT infrastrucutre and cross-selling opportunities

Marketing 11%

Regulatory 10%

Trading Flow >EUR30m 46% synergies pa

IT Architecture 33%

. Source: Jefferies, company data Optimisation of the combined Trading flow (c.€15-20m)

The main cost items directly associated with trading flow are expenses for custody, settlement and clearing of transactions. These are some of the highest fix cost positions in a brokerage business model and thus offer the most substantial cost savings potential. Licensing fees for exchanges, for example, were paid twice per exchange in the past, and can now be halved, and through the significantly higher trading volumes economies of scale will drastically reduce the direct costs associated per transaction settled. In 2019, flatex executed approximately 11.5m transactions worth close to €100bn in trading flow; this caused a double-digit €m amount of third-party fees, mainly for Clearstream, a post-trade service provider owned by Deutsche Börse, that provides settlement and custody for securities across all asset classes. A combined annual trading flow of over €200m will give flatex a better position to negotiate favourable procurement terms with Clearstream and other providers. If the deal goes through according to plan, management expects over 35m transactions to be settled by the combined entity in 2020 already.

In addition to that, flatex runs a rather unique but very successful monetization strategy for the various ETP and ETF issuers that can offer their products for zero fees on the flatex platform but in turn, share their own P&L with flatex. This highly lucrative monetization approach is part of the reason why flatex’s average revenue per trade of €9.30 is significantly higher than DeGiro’s €3.10. In 2019, DeGiro merely facilitated around 1.5-2.0m ETP trades (c.10% of total trades), without having any particular product partnerships in place. Going forward, flatex intends to move this flow to their own premium partners, which would bring another c.€5.0 of incremental revenue per ETP transaction (up to €10m in total). This report is intended for Jefferies clients only. Unauthorized distribution prohibited.

6 May 2020 20 Please see important disclosure information on pages 45 - 50 of this report. EQUITY RESEARCH flatex AG (FTK GR)

Figure 29 - flatex's ETP premium partner model... Figure 30 - ...boosts monetization per trade by sharing the P&L of the ETP issuer. 00 Goldman Sachs EUR PREMIUM PREMIUM 0 flatex flatex $ Platin-Produkte select select Platinum PRODUCTS PRODUCTS BANKS… …ISSUE ETPs… …OFFERED AT FLATEX… …TRADED BY CLIENTS

Market Revenue generation for Morgan Stanley 90 : 10 issuing bank through: 90 standard in  → 1 EUR Commerzbank split ▪ Inherent interest UBS the past: Gold Gold-Produkte component Partnerships  50 : 50 → ▪ Bid-ask spread today: split . REVENUE POOL 90 Vontobel EUR BNP Paribas Source: Jefferies, company data 3 HSBC Silver Silber-Produkte . Source: Jefferies, company data Due to the significant step-up in clients and transaction flow, management is confident that the increased customer base will give them a stronger negotiating position with their ETP partners to achieve even better monetization terms; and this even leaves aside any further upside from increasing DeGiro’s ETP ratio and pricing in the future.

Since there are no long-term contractual agreements in place and no technical barriers exist, those synergies can be realised rather instantaneously once the deal is closed. Therefore, we model €8m cost savings through the optimisation of the combined trading flow in FY20 and €15m with the first full year contribution in FY21.

Shared IT architecture (c.€10-15m)

A further €10-15m synergies come from join IT systems and overhead reduction. As both firms use the same modern programming languages (i.e Java and C++) for their proprietary trading engines, we expect synergies in future development efforts and a rather seamless matching of both infrastructures, which will continue to coexist going forward. Further IT cost savings arise from shared data centre usage. While flatex operates its own servers and data centres, that have only recently been brought to the newest standard in light of the imminent expansion plans, and now offer enough capacity for the combined trading volumes. [Two data centres were renewed in 2019 and provide highest standard of disaster recovery facilities in Germany without any further capex requirements]. At the same time, DeGiro is using external providers for its server capacities and data centres. Consequently, all of DeGiro’s database can be centrally stored on flatex’s existing infrastructure free of external charges.

Leveraging flatex’s regulatory expertise and banking license (c.€3-5m)

As mentioned, DeGiro’s biggest shortcoming is the lack of a European banking license and the resulting regulatory scrutiny when it comes to monetizing customer deposits and trading flow. Up until now, DeGiro operated under a brokerage licence while flatex was taking advantage of its fully-fledged German banking license. In the future, DeGiro can leverage on this banking license through European passporting. This means that customer’s cash deposits will have a statutory insurance which protects up €100,000 per account in comparison to the previous €20,000 coverage. This report is intended for Jefferies clients only. Unauthorized distribution prohibited.

6 May 2020 21 Please see important disclosure information on pages 45 - 50 of this report. EQUITY RESEARCH flatex AG (FTK GR)

But the key benefits from passporting flatex’s German banking license are the cross- selling and utilization opportunities. So far DeGiro relied on third-party providers for its credit business (via ABN AMRO) and to manage its customer deposits (via the money market fund of Morgan Stanley). This costly infrastructure will be moved under the flatex umbrella: the intermediary margin for DeGiro’s c.€250m credit book will be internalised and all current account services will be offered directly by flatex bank. In total, we model cost savings of €3.0m p.a as of 2021.

Combined marketing budget (c.€3-5m)

Last but not least, management expects €3-5m worth of synergies from an aligned marketing and pricing strategy, since (a) there will be one direct competitor less in the market and (b) because the flatex brand ceases any expansion efforts in European markets outside the German-speaking core markets as was the intention before the merger. In 2019, flatex spent around €6.5m on marketing campaigns in The Netherlands while DeGiro spent c.€2.5m to acquire new customers in Germany.

Mid-term ambition offers more than doubling of combined pro-forma EPS

As a result of the various synergy effects and complementary settings, management published an ambitious mid-term guidance, which should be reached within the next three years.

The goal is to lift combined group revenues to more than €300m with an EBITDA margin of >50%. They further guide a targeted EPS of €3.0 per share, which implies a triplication of our FY19e estimate of €0.98. Provided the deal will be approved by the Dutch authorities as planned, we expect flatex to reach these targets by FY23/24e.

Figure 31 - flatex & DeGiro's combined mid-term ambition

350 300 300 +55%

250 193 200 +178% 150 150

100 +186% 80 54 50 28

0 Revenue (€m) EBITDA (€m) Net profit (€m)

flatex ('19e) DeGiro ('19e) Pro forma ('19e) MT ambition . Source: Jefferies, company data

This report is intended for Jefferies clients only. Unauthorized distribution prohibited.

6 May 2020 22 Please see important disclosure information on pages 45 - 50 of this report. EQUITY RESEARCH flatex AG (FTK GR)

Business Model flatex offers financial services through its full-service banking licence (mainly B2C) and leverages its own technology by providing white-label banking services also to external customers (B2B). Online brokerage represents the most important business segment with nearly three-quarters of group sales and two-thirds of group EBITDA (pre- DeGiro). While the stable and predictable B2B business will remain a valid part of its operations the clear focus going forward – in particular after the acquisition of DeGiro – will lie on the successful expansion of its low-cost online brokerage offering via the two brands, flatex and DeGiro. In 2019, flatex had more than 300,000 retail brokerage clients carrying out over 11.5m transactions creating close to €100bn trading flow. Having the entire value chain under one roof is an important competitive advantage; flatex is one of the last remaining major bank-independent broker firms in Germany. After successfully completing the restructuring of the whole group in 2018, flatex is now looking to expand its business model outside its German-speaking home markets and has therefore announced to join forces with DeGiro, another rapidly growing pan- European low-cost broker brand.

Figure 32 - flatex sales split (FY18) Figure 33 - flatex EBITDA split (FY18)

Sales split EBITDA split

TECH (B2B) TECH (B2B) 27% 33% FIN (brokerage) 67% FIN (brokerage) 73%

. . Source: Jefferies, company data Source: Jefferies, company data I. Brokerage business (FIN segment) flatex's competitive edge in a fragmented competition arises from the trinity of (1) a low and transparent pricing point (2) a broad product portfolio with market-leading ETP offering (3) a no-frills trading platform designed for traders. The entity uses flatex's own custodian bank to settle trades using an in-house developed IT infrastructure.

1) Price

flatex does not act as a market-maker or derive revenue from dealing spreads and overnight premiums on customer positions. Thus, flatex does not take any balance sheet equity risk. Rather, it follows a commission-only-based income model where third- parties (e.g Commerzbank, Deutsche Bank, Goldman Sachs) bear the risk exposure. Plus500, IG Group, CMC Markets or FXCM, for example, have a clear focus on retail FX, CFD and spread-betting activities, meaning they inherit exposure to a wide range of asset classes from client trades and hence must effectively manage this trading risk.

flatex tailors its entire offering around the target group of well-educated and highly active traders, who tend to be less volatile in terms of activity during market downswings (as witnessed in the first four months of 2020). Given their relatively high number of This report is intended for Jefferies clients only. Unauthorized distribution prohibited. trades per year, this group of retail investors is particularly price-sensitive, provided there is a comprehensive product offering in place. flatex offers among the lowest trading prices in the German online broker market and operates as the only major player, with a flat-rate transaction fee of max. €5.90 per trade, regardless of asset type (stocks, bonds,

6 May 2020 23 Please see important disclosure information on pages 45 - 50 of this report. EQUITY RESEARCH flatex AG (FTK GR)

ETPs, ETFs etc.) and transaction amount. This unique proposition led to an average customer growth of 22% over the last five years (2014-19e CAGR); leading to a total of roughly 370,000 active trading clients (incl. c.50k B2B customers).

The figures below show an overview of fees that incur when trading DAX-listed stocks via Xetra through different (German) online broker. Fees ignore any special offerings or marketing campaigns and are excluding third-party fees. This clearly illustrates that flatex's fee structure of €5.90 per trade is highly competitive and becomes increasingly attractive with higher trading volumes.

Figure 34 - Xetra trading volume EUR1,000 Figure 35 - Xetra trading volume EUR5,000

Branch banking 15.00 Branch banking 37.50 Consorsbank 9.95 S broker 17.49 ViTrade 9.95 Consorsbank 17.45 comdirect 9.90 comdirect 17.40 NIBC 9.90 NIBC 17.40 S broker 8.99 maxblue 12.50 maxblue 8.90 ViTrade 9.95 onvista 7.00 onvista 7.00 flatex 5.90 Agora-Direct 6.00 IG 5.00 flatex 5.90 Cap Trader 4.00 IG 5.00 Agora-Direct 3.85 Cap Trader 5.00 DeGiro 2.18 DeGiro 2.90

EUR 0.0 2.0 4.0 6.0 8.0 10.0 12.0 14.0 16.0 EUR 0.0 5.0 10.0 15.0 20.0 25.0 30.0 35.0 40.0 . . Source: Jefferies, broker-test fee calculator (as of 1 May 2020) Source: Jefferies, broker-test fee calculator (as of 1 May 2020) Figure 36 - Xetra trading volume EUR10,000 Figure 37 - Xetra trading volume EUR100,000

Branch banking 75.00 Branch banking 450.00 S broker 29.99 Agora-Direct 99.00 Consorsbank 29.95 Cap Trader 99.00 comdirect 29.90 Consorsbank 69.00 NIBC 29.90 comdirect 59.90 maxblue 25.00 S broker 54.99 ViTrade 15.00 maxblue 54.99 Agora-Direct 12.00 ViTrade 50.00 Cap Trader 10.00 NIBC 49.90 onvista 7.00 IG 50.00 flatex 5.90 DeGiro 20.00 IG 5.00 onvista 7.00 DeGiro 3.80 flatex 5.90

EUR 0.0 10.0 20.0 30.0 40.0 50.0 60.0 70.0 80.0 EUR 0.0 50.0 100.0 150.0 200.0 250.0 300.0 350.0 400.0 450.0 500.0 . . Source: Jefferies, broker-test fee calculator (as of 1 May 2020) Source: Jefferies, broker-test fee calculator (as of 1 May 2020) 2) Product

flatex is specialised in securities transactions for which no advice is required. It provides services to active, well-informed traders and investors who act on their own account. It covers all major security types, such as stocks and bonds, as well as OTC products at all domestic (German and Austrian) and many international stock exchanges. It further distributes CFDs and FX trades from third-party issuers such as Commerzbank, Deutsche Bank and Morgan Stanley. The company has one of the largest product offerings in the market and benefits from innovative partnerships with some of the leading ETP issuers. Going forward, this offering will be complemented by DeGiro’s options and futures product lines.

This report is intended for Jefferies clients only. Unauthorized distribution prohibited.

6 May 2020 24 Please see important disclosure information on pages 45 - 50 of this report. EQUITY RESEARCH flatex AG (FTK GR)

Figure 38 - Indicative product and service offering of the main players in the German brokerage market

Stocks ✓ ✓ ✓ ✓ ✓ OTC trading stocks ✓ x ✓ ✓ ✓ Bonds ✓ ✓ ✓ ✓ ✓ ETFs ✓ ✓ ✓ ✓ ✓ ETF savings plans ✓ x ✓ ✓ ✓ (Mutual) funds ✓ ✓ ✓ ✓ ✓ CFDs ✓ ✓ ✓ ✓ x FX ✓ x x x x ETPs Product offering Product ✓ ✓ ✓ ✓ ✓ OTC trading ETPs ✓ x ✓ ✓ ✓ No OTC with Premium partners ETPs partner banks Short selling of stocks x x x x x Future (Eurex) x ✓ x ✓ x Market information Robo-advisory x x ✓ ✓ ✓

Other Personal advisory x x ✓ ✓ x . Legend Strong Weak Source: Jefferies, company websites, broker comparison In 2016, flatex launched a partnership with Morgan Stanley to offer their structured products for zero fee, and in turn, share the issuer's P&L on these products. While in the past product issuing banks kept 90% of the revenue pool and merely 10% went to the product distributor this ratio is changed to 50/50 under the new contractual agreements. Consequently, the majority of flatex's ETP flow was routed to Morgan Stanley. After the expiration of this partnership, two years later Goldman Sachs became the new preferred partner of flatex. Now more than 75,000 so-called 'flatex-select' products issued by Goldman Sachs are available on the flatex platform.

Under the deal, Goldman Sachs takes care of financial engineering and issuance while flatex handles distribution. The agreement offers significant revenue potential for the company. flatex was able to leverage its market position, and its status as a bank independent broker, to negotiate commission-sharing on an equal basis. Through this monetisation strategy the revenue generated through ETP trades is significantly higher than from normal shares or bonds and ranges between €8-10 on average.

Figure 39 - flatex's split of total trades (by asset class) Figure 40 - flatex's ETP premium partner model.

00 Goldman Sachs 0 EUR Platinum Platin-Produkte

90 Morgan Stanley Shares & 1 EUR Commerzbank UBS ETPs, Gold-Produkte bonds Gold FX/Commoditie 37% s/CFDs 90 Vontobel 47% EUR BNP Paribas 3 HSBC Silver Silber-Produkte ETFs . 17% Source: Jefferies, company data

. Source: Jefferies, company data Like most other direct banks and online brokers, flatex offers lombard loans, which further contribute to the monetization of retail customers. At the end of 2019 the firm had a fully collateralised credit book of roughly €450m that yielded an average of 4.5%. This is a lucrative way to monetize the c.€900m cash deposits that customers hold on their trading accounts. This report is intended for Jefferies clients only. Unauthorized distribution prohibited.

6 May 2020 25 Please see important disclosure information on pages 45 - 50 of this report. EQUITY RESEARCH flatex AG (FTK GR)

3) Platform

The trading platform is designed 'by traders for traders' and offers a lean design that is focused on transparency and execution. Contrary to many other online brokers it does not offer any research, recommendations or other intelligence. This minimises regulatory administration and saves costs for content. Typical flatex clients know what they want to trade and are merely seek an execution platform that helps them to do so for minimal costs and a comprehensive product offering.

The company uses targeted marketing campaigns to find the right customers (not just any customers) as the key to a commission-based business model is having more clients trading more frequently. As a result, its development of an effective marketing model has been key to driving the historical levels of revenue growth and will remain an essential tool in the future. flatex's primary focus is online marketing, for which it uses targeted search engine technology that allows the group to effectively bid on key words across the internet and customise its activities towards its target group. In 2013, marketing efforts were cut to a minimum and were only resumed again when new management took over in 2015. This resulted in a noticeable slowdown of customer growth, but nevertheless a c.6% CAGR was achieved in 2013-15. We believe that flatex, together with DeGiro, are well-positioned to take further advantage of the increased use of mobile and tablet devices for trading, given the ease of use of both trading interfaces, and the enhancements they continue to introduce. II. B2B business (TECH segment) In 2017, flatex acquired the remaining shares of its former IT service provider XCOM and integrated it as a fully owned subsidiary that would act as the technological backbone of the company. XCOM has been a renowned IT infrastructure service provider for the financial services industry for more than 25 years. Since the restructuring, the new technology entity (which incorporates XCOM) now has more than 250 experienced IT experts, half of whom are software engineers, providing sophisticated technical services for clients. This relatively new division utilises the existing (B2C) platform and provides banks and other fin-tech start-ups with a fully modular core banking platform with individual software components that offer transaction processing, payments solutions, regulatory support and other IT services.

flatex markets its own e-banking suite via its Tristan (multi-channel transaction server), WebFiliale (banking front-end application) and Tradix (order management system). Since security and data protection are of the essence for most of the clients, the company hosts its core banking system in its own data centres in Germany, allowing for some of the highest data security standards worldwide.

Figure 41 - flatex's self-developed core banking platform with fully modular set up Layers within the FTX:CBS banking platform Technology Sales HTML OADO Online Branch Entax-BO-Client Platform Objektive -c (iOS) Java (Android) Mobile App CRM/Sales Trading FE REST/SOAP HA Production APIs Platform Account/Depot Srv. Securities Payment Service Cards Wildfly Java, Go

Deposit Transaction Service Credit Facilitation Master Data C++ SAP ASE

Regulatory & Wildfly Steering Accounting Controlling Tax Compliance Java Platform Regulat. Reporting Mgmt. Reporting DWH/BI Risk/Liq. Mgmt C++ (Abacus) SAP ASE

This report is intended for Jefferies clients only. Unauthorized distribution prohibited. APIs Support PostgreSQL Ticketing Batchdata Service Portal Platform Oracle ASCII, XLS/SFTP Infozone/WM Shared Services Archive . FIX/EBICS/SWIFT Source: Jefferies, company data

6 May 2020 26 Please see important disclosure information on pages 45 - 50 of this report. EQUITY RESEARCH flatex AG (FTK GR)

flatex serves approximately 30 key clients, including small to medium-sized banks as well as specialised financial services companies. The revenues generated in this unit are highly predictable as the average contract duration is around five to seven years and is usually extended for a further period after it expires. New mandates generate between €0.75m-1.5m per year (or €5m-10m over their entire lifetime), depending on the scope and complexity of the services provided.

Going forward, we do not anticipate any management focus or significant asset allocation for the further expansion of the B2B business, as the future of the group clearly lies on the more profitable and scalable B2C online brokerage business. We, therefore, model flat revenue contribution of c.€36m in the years to come.

Figure 42 - B2B client base (excerpt) Key partner Notable clients and partners

flatex AG developed, flatex AG provides its high maintains and runs LOX, the ETP frequency payment platform to OTC system for Deutsche Bank Deutsche Post Rentenservice AG and Commerzbank AG – 3bn which takes care of 26m pension price feeds and 50k transactions payment transactions every - per day. month.

flatex AG was chosen to set-up flatex AG is the central IT service the technological infrastructure provider for the Federal for digital online retail banks in Association of German Banks, Germany and Austria including providing key technology providing several respective platform to run the German regulatory banking processes. Deposit Guarantee Scheme. . Source: Jefferies, company data Operating Model and Detailed Forecast Based on our analysis we expect future top line growth to come exclusively from the B2C brokerage business and adjacent products, such as the flatex flex credit. We have modelled customer and revenue growth for both flatex and DeGiro on a standalone basis and assume six months consolidation in FY20 and full consolidation as of FY21.

Figure 43 - Combining flatex's profitability with DeGiro's geographic footprint would lift the group to new heights.

350 60% 306 6m DeGiro consolidation in FY20e 300 285 Full consolidation as of FY21e 50% 250 220 40% 200 140 30% 150 125 134 122 107 95 88 20% 100 75 32 42 40 10% 50 20 31 0 0% 2015 2016 2017 2018 2019E 2020E 2021E 2022E

. Revenue EBITDA Net profit EBITDA margin (rhs) Source: Jefferies, company data The core thesis for future growth is that both companies together will continue to add approximately 150,000 new customers every year (compared to an average of 166,000 in the last three years). Furthermore, we assume a normalisation of trades per customer per year after a steep uptick in 2020 and expect that after the merger DeGiro will able to improve the monetisation per transaction through the above-mentioned synergies from This report is intended for Jefferies clients only. Unauthorized distribution prohibited. currently c.€3.10 to €3.70 by FY22e.

6 May 2020 27 Please see important disclosure information on pages 45 - 50 of this report. EQUITY RESEARCH flatex AG (FTK GR)

Figure 44 - Development of customer base for flatex & DeGiro Figure 45 - Development of transaction volumes and brokerage (combined) revenues for flatex & DeGiro (combined)

1600 70 350 7.0 1434 1400 1284 287 6.5 60 300 266 1200 1134 246 6.0 50 250 849 1000 5.5 40 200 175 162 800 648 5.0 30 150 130 600 500 97 4.5 352 20 100 400 285 4.0 49 51 148 148 200 150 150 45 Brokerage customers (k) 31 200 94 10 Avg. trades per customer 50 20 26 30 3.5

0 0 0 3.0 2016 2017 2018 2019E 2020E 2021E 2022E 2016 2017 2018 2019E 2020E 2021E 2022E

Brokerage customers (k) New customers (k) Transactions per customer Transactions (m) Brokerage revenues (EURm) Rev per transaction (rhs) . . Source: Jefferies, company data Source: Jefferies, company data Figure 46 - Detailed model forecast for flatex and DeGiro Flatex 2015 2016 2017 2018 2019E 2020E 2021E 2022E Brokerage customers (k) 177 212 254 290 367 432 462 492 New customers (k) 42 35 42 36 77 65 30 30 New customers (%) 31% 20% 20% 14% 26% 18% 7% 6% Transactions per customer 65 54 48 46 37 41 37 36 Transactions (m) 10.1 10.5 11.3 12.5 12.3 16.4 16.5 17.2 New transactions (%) 68% 3% 8% 11% -1% 33% 1% 4% Revenue per trade (EUR) 4.5 6.8 7.9 8.6 9.3 9.5 9.5 9.5 Brokerage revenues (EURm) 45 71 89 107 115 156 157 163

DeGiro 2015 2016 2017 2018 2019E 2020E 2021E 2022E Brokerage customers (k) 81 140 246 358 482 702 822 942 New customers (k) 50 59 107 112 124 220 120 120 New customers (%) 164% 72% 76% 45% 35% 46% 17% 15% Transactions per customer 106 89 76 58 45 48 42 38 Transactions (m) 5.9 9.8 14.7 17.4 19.1 28.4 32.0 33.5 New transactions (%) 211% 66% 50% 18% 10% 49% 13% 5% Revenue per trade (EUR) 2.7 2.8 3.1 3.1 3.2 3.4 3.7 Brokerage revenues (EURm) 26 41 55 60 91 109 124

Combined 2015 2016 2017 2018 2019E 2020E 2021E 2022E Brokerage customers (k) 258 352 500 648 849 1,134 1,284 1,434 New customers (k) 93 94 148 148 200 285 150 150 New customers (%) 56% 36% 42% 30% 31% 34% 13% 12% Transactions per customer 76 67 61 52 42 45 40 37 Transactions (m) 16.0 20.3 26.0 29.9 31.4 44.8 48.5 50.7 New transactions (%) 102% 26% 28% 15% 5% 43% 8% 4% Revenue per trade (EUR) 4.8 5.0 5.4 5.6 5.5 5.5 5.7 . Brokerage revenues (EURm) 97 130 162 175 246 266 287 Source: Jefferies, company data Management guides for combined revenues of €300m and EBITDA of €150m in their mid-term ambitions for the first three years after the business combination. While we think that the top line target could be achieved by FY22e we are somewhat more conservative on our margin forecast, assuming 45% for the group rather than 50%. This report is intended for Jefferies clients only. Unauthorized distribution prohibited.

6 May 2020 28 Please see important disclosure information on pages 45 - 50 of this report. EQUITY RESEARCH flatex AG (FTK GR)

Figure 47 - Brokerage margins are expected to expand significantly through ample synergy potential in both businesses Sales by division 2015 2016 2017 2018 2019E 2020E 2021E 2022E FIN 45 71 89 107 115 201 266 287 % change 0% 57% 26% 20% 7% 75% 32% 8% % of total 60% 74% 83% 86% 86% 91% 93% 94% TECH 28 19 31 40 36 36 36 36 % change 0% -32% 58% 30% -9% 0% 0% 0% % of total 38% 20% 29% 32% 27% 16% 13% 12% Consolidation 1 5 -13 -22 -17 -17 -17 -17 % change 0% 268% -361% 71% -22% 0% 0% 0% % of total 2% 5% -12% -17% -13% -8% -6% -6% Total 75 95 107 125 134 220 285 306 % change 0% 0% 13% 17% 7% 64% 29% 7%

EBITDA by division 2015 2016 2017 2018 2019E 2020E 2021E 2022E FIN Total net revenues 45 71 89 107 115 201 266 287 Raw materials & consumables -14 -23 -29 -45 Personnel expenses -15 -9 -15 -17 Other admin expenses -8 -10 -25 -17 EBITDA 8 28 20 28 28 75 107 125 EBITDA margin 19% 40% 22% 26% 24% 38% 40% 43%

TECH 2015 2016 2017 2018 2019E 2020E 2021E 2022E Total net revenues 28 19 31 40 36 36 36 36 Raw materials & consumables -1 -1 -4 -5 Personnel expenses -2 -2 -3 -9 Other admin expenses -6 -5 -3 -11 EBITDA 20 12 21 14 13 13 13 13 EBITDA margin 69% 61% 68% 35% 35% 35% 35% 35%

Consolidation 2015 2016 2017 2018 2019E 2020E 2021E 2022E Total net revenues 1 5 -13 -22 -17 -17 -17 -17 Raw materials & consumables 1 -2 2 13 Personnel expenses -7 -8 -5 5 Other admin expenses -4 -4 7 4 EBITDA -8 -10 -9 0 0 0 0 0 EBITDA margin 0% 0% 0% 0% 0% 0% 0% 0%

Total EBITDA 20 31 32 42 40 88 119 137 . EBITDA margin 26% 32% 30% 34% 30% 40% 42% 45% Source: Jefferies, company data This report is intended for Jefferies clients only. Unauthorized distribution prohibited.

6 May 2020 29 Please see important disclosure information on pages 45 - 50 of this report. EQUITY RESEARCH flatex AG (FTK GR)

The fragmented European brokerage market leaves plenty of room for consolidation The dominant income model of brokerage firms in the Eurozone is based on trade commissions without active monetization of bid/ask spreads and trading flow. This risk- averse model has mainly to do with regulatory scrutiny and customers that demand a high cost transparency. Like flatex or DeGiro, online brokers tend to charge their customers a specific fee per trade; this can either be a flat price as in the case of flatex, a function of the traded asset volume or a mixture of both. Key differences in business models separate the wheat from the chaff Players in the online brokerage market can generally be grouped into outlets of direct banks, pure online brokers and specialists. Each group attracts different types of customers with widely differing usage behaviour, trading pattern and customer acquisition costs (CAC). Depending on the trading behaviour of the respective target customers, the breadth and nature of the respective product offering varies strongly between the various market participants. Due to the different core businesses of these brokerage providers they also tend to have greatly differing costs of settlement. On the following pages we will carry out a detailed analysis of different players, products offerings and maturity levels across continental European brokerage markets, with a focus on the largest brokerage markets that we think will be of highest priority for flatex' future expansion plans. Numbers are generally based on 2018 data, unless stated differently.

Table 5 - General segmentation of the online brokerage market Overview Characteristics online brokerage

▪ Basic banking offering to online- ▪ Focus on serving a broad type of investors and oriented consumers traders; high degree of inactive accounts Direct Banks ▪ Brokerage as add-on product ▪ Traditional products (stocks, bonds and ETFs) dominate ▪ Compared to traditional banks lower pricing

▪ Dedicated brokerage offering for ▪ Focus on regular/active traders with 16-100 trades Online Brokers educated retail investors per year; medium degree of inactive accounts ▪ Only selected add-on banking services ▪ Broad ETP product offering from multiple providers ▪ Competitive pricing (flat-fee models)

▪ Specialized/niche providers for (semi-) ▪ Focus on super traders (>100 trades); low ratio of professional investors inactive accounts Specialists ▪ Limited customer base (<10,000 ▪ Product offering concentrated on leveraged products customers) ▪ Competitive pricing including volume discounts . Source: Jefferies flatex and DeGiro operate as pure online brokers with a dedicated brokerage offering for educated retail investors and only selected add-on banking services. Through lean operating structures and a clear focus on active traders that make on average 30-100 trades per year both players exhibit significantly lower customer acquisition costs and in turn much lower payback periods compared to direct banks.

However, in Germany, for example, direct banks with an online brokerage offering, such as Comdirect or Consorsbank, still have the highest market share in terms of facilitated transactions. They typically serve a much broader investor base with a high degree of unprofitable inactive trading accounts, often resulting in less than 10 trades per account per year on average. Due to their more holistic view on customers, their brokerage offering is considered merely an add-on product to a basic banking offering to online- oriented customers. Although their pricing point for brokerage services is typically below This report is intended for Jefferies clients only. Unauthorized distribution prohibited. that of traditional brick and mortar banks it lies significantly above that of pure online brokers, mainly due to higher costs associated with the transaction settlement and overhead functions.

6 May 2020 30 Please see important disclosure information on pages 45 - 50 of this report. EQUITY RESEARCH flatex AG (FTK GR)

In addition to these two mainstream operators there are few specialists, such as Interactive Brokers or flatex’s own solution called Vitrade, which focus on semi- professional investors with a very high trading activity (>100 trades per year). They tailor their services to a narrow customer base by offering a large product portfolio with a particular focus on leveraged products, such as ETPs and CFDs, and exhibit highly competitive pricing including volume discounts.

Figure 48 - Exemplary segmentation of German brokerage providers

Avg. trades per customer p.a. Approximated share of accounts >100 <1%

30 – 100 5–7%

10 – 30 50–55%

<10 35–40% . Source: Jefferies estimates, company reports, expert interviews Further segmentation is typically defined by trader activity. In Germany, for example, we estimate that around 15% of all online brokerage accounts are responsible for c.70% of all trades. Highly active traders tend to focus on leveraged products, such as ETPs and CFDs, while regular and occasional traders concentrate on stocks, ETFs and saving plans.

In Europe, there are a number of international brokerage providers which operate with different business models. They tend to have no regional anchoring and often only offer exposure to the financial markets through derivatives such as CFDs without offering their customers the option of physical asset ownership. Social trading providers, a fast- developing sub-segment of the market, further differentiate their product by offering an additional social network element to trading and investing. Broadly, these multinational brokers generate their revenues through a mix of bid-ask spreads and commissions per trade. • The “Anglo-Saxon revenue model”, employed by brokers such as CMC Markets, Plus500, IG Group and FXCM, generates a substantial portion of income through differences in bid-ask spreads. The wider the spread on their products, the greater the revenue per trade. Further, providers such as CMC Markets and Plus500 only offer derivative products (in Europe), without the option of owning the asset underlying the CFD or spread-betting contract. IG Group and Saxobank are two providers that offer trading in underlying assets such as shares in addition to derivative contracts. The focus on derivative trading and spread-based revenue generation means these providers are subject to market risk. Also, given the leverage provided to CFD customers, and the importance of derivatives in their product mix, many of these players are affected by regulatory developments pertaining to retail investors. • Social trading, the concept by which one can follow, discuss, and re-produce/

This report is intended for Jefferies clients only. Unauthorized distribution prohibited. copy the investment strategies or portfolios of members in a social network, has grown significantly over the past 10 years. The focus on a social network is, in our view, the main differentiating factor for these providers relative to other brokers. In broad terms, the social trading providers operate with three

6 May 2020 31 Please see important disclosure information on pages 45 - 50 of this report. EQUITY RESEARCH flatex AG (FTK GR)

different business models: (1) broker only networks – a social network built around a proprietary brokerage platform, generating revenues through spreads; (2) network-only operators – pure-play social network providers which charge brokers a fee for introducing clients to their network based on a portion of the trading-spread or sign-on bonus fees; (3) hybrid operators who make money on the full spread for trades executed with their in-house broker and a percentage of the spread on trades made with an affiliated broker. eToro and ZuluTrade are examples of two social trading providers.

Three general observations stand out when looking at the broader European brokerage market. (1) A bid-ask based business model entails a different set of business risks compared to flatex’s commission-based model. (2) Offering retail derivatives (such as CFDs) as a main product means regulation becomes stricter. (3) Social trading providers have carved out their own niche in the market, and appeal to a certain type of customer.

Revenue generation through bid-ask spreads expose brokers to movements in the underlying market. An example of the risks associated with market exposure includes the 2015 decision of the Swiss National Bank to remove its cap on the Swiss franc against the euro. FXCM, the FX broker, was forced to arrange a US$300m emergency loan in order to meet regulatory capital requirements due to the unexpected volatility. However, if brokers are able to cleverly manage these risks, increased volatility can be lucrative. As an example, GAIN capital, another retail brokerage, reported that it was able to profit from the same market shock.

Regulation also plays an important role for providers of CFDs and other retail financial products. In June 2018, the European Securities and Markets Authority (ESMA) adopted its final product intervention measures on CFDs and binary options due to the riskiness of the speculative products they provide to retail customers. These measures include leverage limits upon opening a derivatives position to between 30:1 and 5:1, restrictions on benefits incentivised trading, prohibiting the sale of binary options, marketing restrictions on CFDs and margin close-out rules, to name a few. The conclusion of this review strongly affected brokers business models as consumers shift behaviour in response to leverage limits. The competitive environment is also likely to evolve as brokers adapt to marketing restrictions. Further, restrictions imposed by BaFin have made markets such as the German one less attractive to multinational CFD providers. As a result, higher scrutiny could hit some of flatex’s international peers but strengthen its own commission-based income model.

The social trading providers, which offer the option to copy other traders on their platform, appeal to a certain type of customer, in our view. The replication option creates a sense of community via the use of chat and forum functionalities. Further, this offering limits the need to generate independent trade ideas for followers in the community. We believe this lowers the barriers to entry for customers who might otherwise feel deterred by the perceived complexity of the financial markets. The result is a customer mix that comprises a small number of experienced investors and a large number of less experienced followers. While flatex and DeGiro clearly address experienced traders, we do not see a material conflict with the target group of social trading providers. This report is intended for Jefferies clients only. Unauthorized distribution prohibited.

6 May 2020 32 Please see important disclosure information on pages 45 - 50 of this report. EQUITY RESEARCH flatex AG (FTK GR)

Same but different: Regional specifics require customized market cultivation strategies While flatex has focused on servicing its core markets in Germany and Austria and had only started its European expansion with the entry into the Dutch market last year, DeGiro is already a pan-European online broker with operations in 18 different countries. We think that flatex’s broad product offering, and a particular stronghold in ETPs, paired with DeGiro’s established European brand and domestic customer expertise will set the stage for a successful consolidation effort in a highly fragmented competitive landscape. In the following paragraphs we highlight the key observations and analyse the respective competition in some of the larger European brokerage markets where we see the main potential for future growth.

Figure 49 - Estimated size (in number of transactions) and maturity of key European brokerage markets (JEFe)

. Source: Jefferies, company reports, market studies, expert interviews Netherlands (NL)

The Netherlands – just like Sweden – stand out as one of the most mature European trading markets with a total of c.30m trades per year or approximately 2 trades per inhabitant, this is more than double compared to less mature markets like Germany or Italy. DeGiro who started out in NL in 2013 has quickly managed to become the market leader with over 10m transactions. Together with BinckBank, a direct bank that was acquired by Saxo Bank in 2019, both hold a staggering 60% market share. In June 2019, flatex launched their own presence in NL and have since then won c.30k local customers. Despite the high trading affinity, we find a limited local ETP offering, which, in our view, is an opportunity to further gain market share from an extended product offering of DeGiro going forward. Once flatex and DeGiro merge their operations they will use the flatex brand exclusively for the German-speaking core markets and leverage the market position of DeGiro in NL by switching existing flatex accounts to the DeGiro platform.

Spain

We estimate the market size to roughly 25m trades per year, of which ING facilitates c.12% as the market leader. This shows that Spain is one of the most fragmented markets in Europe with many small, domestic online banks competing for rather inactive retail clients (c.0.5 trades per inhabitant). Although DeGiro is already present in Spain,

This report is intended for Jefferies clients only. Unauthorized distribution prohibited. their market share is still negligible but offers the potential to actively consolidate the field through a comprehensive and international low fee offering.

6 May 2020 33 Please see important disclosure information on pages 45 - 50 of this report. EQUITY RESEARCH flatex AG (FTK GR)

France

Although France has a well-established trading culture (especially for stocks and ETPs) with some of the best-educated retail clients in Europe, the actual brokerage market is still far from being mature. We estimate a market size of roughly 30m trades in 2018 where the top 5 players accounted for c.60% of the overall market. The two largest online brokers, Boursorama and Bourse Direct, still have significantly higher price levels compared to European peer markets. With merely 0.4 trades per inhabitant, France has the lowest trading activity of the largest countries in the Eurozone. A unique feature of the French market and partially the reason why domestic players still dominate is the specific product requirement for so-called PEAs, which are tax-preferred stock savings plans, and life insurances.

Italy

After Sweden and Germany, we estimate that Italy is the third-largest brokerage market in the Eurozone with an estimated 45m trades per year. It has a strong number one player with Fineco Bank that holds around one-third of the domestic market. Directa is the only local pure online broker and there are only few international players, such as DeGiro, ING and BinckBank, which currently have a negligible share. Italy’s trading activity of 0.8 trades per inhabitant is in-line with Germany and leaves a lot of room for growth with further growing online penetration.

Sweden

With roughly 80m trades a year and 8 trades per inhabitant Sweden is by far the most mature brokerage market in Europe, exhibiting 10x the trading activity of Germany or Italy. However, Avanza and nordnet hold approximately 60% of the market and in particular Avanza has served as a blueprint for the ETP partnership model that flatex pursues in Germany and Austria. The Swedish market is generally geared towards more sophisticated products like ETPs and international stocks. Stocks and funds are very popular for private pension savings. The pricing point is highly competitive, comparable to the Dutch market but despite the high level of development we expect continued strong mid-single-digit growth rates going forward.

Figure 50 - Indicative competitive environment for key brokerage markets in the Eurozone

100% ~55m ~30m ~25m ~30m ~45m ~80m Others

Others Others Others Others Others

50%

Germany Netherlands Spain France Italy Sweden

. Bank-owned Non bank-owned Flatex core markets Source: Jefferies, company reports, market studies, expert interviews This report is intended for Jefferies clients only. Unauthorized distribution prohibited.

6 May 2020 34 Please see important disclosure information on pages 45 - 50 of this report. EQUITY RESEARCH flatex AG (FTK GR)

The European brokerage market is poised for growth, given strong structural trends In the past five years, structural growth drivers have supported mid-to-high single- digit growth rates across European brokerage markets, with pure plays like flatex and DeGiro aggressively gaining market share from traditional brick and mortar as well as direct banks. At the same time, we have seen a range of M&A activities across the board (Onvista, BinckBank, DAB Bank, E-Trade etc.) where particularly larger banks incorporated online brokers in order to substitute their conventional banking services.

Given the still immature market set-ups and strong structural growth drivers in all main markets, we expect a continuation of mid-to-high single-digit growth rates in the coming years. We have identified three main trends that support our thesis and should continue to serve as tailwind with the overall brokerage market and pure online brokers like flatex in particular.

1) Unbroken trend towards online banking is far from over Figure 51 - Penetration of online banking across the EU continues to rise and has not even reached 60% yet...

70

60 7% CAGR (2007-19) 50

40

30

20

10 EU EU Internet banking usage (%)

0 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 . Source: Eurostat, Jefferies

This report is intended for Jefferies clients only. Unauthorized distribution prohibited.

6 May 2020 35 Please see important disclosure information on pages 45 - 50 of this report. EQUITY RESEARCH flatex AG (FTK GR)

Table 6 - ...but reveals a strong disparity between individual countries.

Internet banking usage (%) 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 European Union 25 29 32 36 36 40 42 44 46 49 51 54 58 Belgium 35 39 46 51 54 56 58 61 62 64 67 69 71 Bulgaria 2 2 2 2 3 4 5 5 5 4 5 7 9 Czechia 12 14 18 23 30 35 41 46 48 51 57 62 68 Denmark 57 61 66 71 75 79 82 84 85 88 90 89 91 Germany 35 38 41 43 45 45 47 49 51 53 56 59 61 Estonia 53 55 62 65 68 68 72 77 81 79 79 80 81 Ireland 25 28 30 34 33 43 46 48 51 52 58 58 67 Greece 4 5 5 6 9 9 11 13 14 19 25 27 31 Spain 16 19 23 26 27 31 33 37 39 43 46 49 55 France 34 40 43 50 51 54 58 58 58 59 62 63 66 Croatia 9 13 16 20 20 21 23 19 33 38 33 41 46 Italy 12 13 16 18 20 21 22 26 28 29 31 34 36 Cyprus 12 11 15 17 20 21 23 24 20 28 28 33 41 Latvia 28 39 42 47 53 47 55 57 64 62 61 66 72 Lithuania 21 27 32 37 40 43 46 54 50 54 56 61 65 Luxembourg 46 48 54 56 59 63 63 67 65 71 76 68 71 Hungary 11 13 16 19 21 26 27 31 34 35 38 41 47 Malta 22 25 32 38 42 41 43 45 47 47 50 51 54 Netherlands 65 69 73 77 79 80 82 83 85 85 89 89 91 Austria 30 34 35 38 44 45 49 48 51 53 57 58 63 Poland 13 17 21 25 27 32 32 33 31 39 40 44 47 Portugal 12 14 17 19 22 25 23 25 28 29 31 39 42 Romania 2 2 2 3 4 3 4 4 5 5 7 7 8 Slovenia 19 21 24 29 31 28 32 32 34 35 39 42 47 Slovakia 15 24 26 33 34 40 39 41 37 45 51 50 55 Finland 66 72 72 76 79 82 84 86 86 86 87 89 91 Sweden 57 65 71 75 78 79 82 82 80 83 86 84 84 . United Kingdom 32 38 45 45 49 52 54 57 58 64 68 74 78 Source: Eurostat, Jefferies Over half (58%) of adult Europeans use internet banking. This share is constantly increasing and has more than doubled since 2007, when it stood at 25%. Internet banking is particularly popular among 25 to 34-year-olds, with 68% using this facility. The use of internet banking tends to increase in line with the education level of the user. While only 24% of those with low education use e-banking, 77% of those with high education use this service.

Among EU Member States, internet banking is most common in Denmark (where 91% of people aged 16 to 74 said they were using it) and the Netherlands (91%), followed by the other Nordic countries, Finland (91%) and Sweden (84%). The lowest shares were registered in Romania (8%) and Bulgaria (9%). Only around one-third of those between the ages of 16 and 74 use internet banking in Greece (31%) and Italy (36%).

Figure 52 - Despite strong growth over the last decade, there is still ample catch up potential for countries like Germany, France or Italy.

100 91 90 2009 2019

80

70 61 58 60

50

40 32 30

20 Internet Internet banking usage(%) 8 10

-

EU

UK Italy

This report is intended for Jefferies clients only. Unauthorized distribution prohibited.

Spain

Malta

Latvia

France

Cyprus

Ireland

Poland

Greece

Austria

Croatia

Estonia

Finland

Czechia

Sweden

Bulgaria

Slovakia

Belgium

Slovenia

Portugal

Hungary

Romania

Germany

Denmark

Lithuania

Netherlands Luxembourg . Source: Eurostat, Jefferies

6 May 2020 36 Please see important disclosure information on pages 45 - 50 of this report. EQUITY RESEARCH flatex AG (FTK GR)

In Germany, flatex’s core market, the use of internet banking (61%) still lags substantially behind the more advanced countries in Scandinavia and BeNeLux but ranges broadly in-line with the EU average. However, one trend holds true for every single state, the use of online banking has significantly increased over the last decade and given the wide disparity between individual countries we still see a lot of catch up potential for countries like Germany, Spain, Italy and even France. Over the last five years, approximately 1m new online banking accounts have been registered in Germany every year, which shows that this catch-up process is taking place and might even accelerate through the rise of new popular mobile banks, like n26.

2) Changing investor behaviour favours active investment decisions

In many European countries we are witnessing a slow but steady adjustment to the new paradigms of financial markets and in turn their investment behaviour. Germans, for example, are enthusiastic savers but reluctant shareholders. As a cohort, they demonstrate a counter-productive preference for fixed-income products. However, with bank deposits bearing little or even negative interest, conventional ETFs are becoming more attractive as a passive investment strategy for traditional savers: Contributing regular savings to and/or holding ETFs on large market indices presents the prospect of long-term valuation gains at comparatively low cost and risk. A growing selection of ETFs tracking narrow sub-markets, topics or strategies further helps private investors to actively manage their own investment strategies at relatively low costs. As a result, investment behaviour is slowly but steadily changing towards more active investments and an increasing share of stocks and funds. When taking a closer look at the portfolio distribution of households, it becomes clear that the catch-up potential of shares, ETFs and mutual funds is huge.

Figure 53 - Split of financial assets in German households Figure 54 - Number of ETF saving plans in German households (2018) (2018e)

Stock funds Bonds 900 '000 838 3.3% 2.0% Other equity 800 The number of ETF saving 5.2% plans in Germany grew 700 Stocks almost 10 fold in 5 years 604 5.4% 600

500 Cash and deposits Other funds 400 6.5% 39.7% 330 300 214 200 Insurances 143 86 37.3% 100

0 2013 2014 2015 2016 2017 2018 . . Source: Jefferies, Bundesbank Source: Jefferies, ETF retail market report Especially ETFs have gained considerable popularity as an investment option among private investors. Retail customers have expanded their investments in ETFs multiple times in recent years to approximately €35bn. The ETF business with private households is conducted largely online through direct banks, where approximately €27bn of retail ETF assets are held. Over the past five years, the direct banks have seen almost uninterrupted net inflows. In addition, an estimated €4-6bn is invested in ETFs through other banks. Despite this impressive development, ETFs remain a niche product considering that the total investments by German private households in mutual funds amount to €622bn. This report is intended for Jefferies clients only. Unauthorized distribution prohibited. Private investors are also increasingly investing in ETFs via savings plans. The number of savings plans has grown to 1.1m, with the average monthly savings contribution climbing to €162 in September 2019. To date, private customers have invested roughly

6 May 2020 37 Please see important disclosure information on pages 45 - 50 of this report. EQUITY RESEARCH flatex AG (FTK GR)

€4.5bn in ETFs through this channel. There is a large and varied range of savings plans on offer, with features such as a choice of ETF or flexibility in savings contribution as well as fee models.

3) A growing base of financial assets supports trading volumes

In Europe, we have seen a substantial build/up in wealth over the last decade on the back of a strong economic recovery. And as alternative investment options, such as real estate feature high price levels, an increasing portion of the financial assets is allocated to the capital markets.

Since 2010 the average financial assets of German households have increased by nearly €32,000, with the average holdings of stocks increasing by 50% over the same time from €29,100 to €43,700.

Figure 55 - Average financial assets of German households by asset class (EUR)

112,200 115,900

84,000 29,400 27,600

22,500 39,800 37,500 29,000

38,700 43,700 29,100

2010 2013 2017

Stocks Mutual funds Saving accounts Check accounts Total . Source: Bundesbank, CS Global Wealth Factbook, Jefferies We expect an unchanged growth path of the European brokerage market

Based on our analysis, we expect the European brokerage market to continue to grow at mid-to-high single-digit rates over the next five years with variations in different countries. In Germany, we expect the number of new online accounts to continue to grow by c.1m per year, triggering a c.5%-7% CAGR for transactions until 2023. This report is intended for Jefferies clients only. Unauthorized distribution prohibited.

6 May 2020 38 Please see important disclosure information on pages 45 - 50 of this report. EQUITY RESEARCH flatex AG (FTK GR)

Company History

Figure 56 - flatex company history Year Milestonses

1988 XCOM is founded in Langen, Germany. 2005 Bank für Investments und Wertpapiere (biw) is formed and receives a banking license from the supervisory authorities (BaFin). 2006 Online brokerage platform flatex goes live. 2008 flatex starts offering CFD trading on the trading platform. 2009 Flatex AG’s IPO is launched in Frankfurt at EUR3.90 a share. 2010 XCOM makes an investment in ViTrade. 2012 biw becomes a fully integrated part of XCOM. flatex AG changes its name to flatex Holding AG. 2013 biw and ViTrade develop the proprietary online banking service Brokerport while part of XCOM. Aktionärsbank GmbH, part of flatex Holding, obtains a banking licence. 2014 Flatex Holding AG changes its name to Fintech Group AG and introduces new management. 2015 The company acquires a 51% stake in XCOM. Divestment of Aktionärsbank. FTK enters into a strategic partnership with Morgan Stanley to offer its structured products through the flatex platform. The 2016 partnership will focus on ETPs initially. The company purchases a further stake in XCOM, and now controls 98% of the company. FTK launches “flatex flex-credit”, a collateralised overdraft facility, to flatex customers. Remaining XCOM shareholders are squeezed out; the group now owns 100% of XCOM. The company restructures its business, integrating XCOM into Fintech Group AG and rebrands the banking entity Fintech Group Bank. 2017 Cash capital increase of EUR18.2m; Morgan Stanley subscribes to all (700,000) new shares, corresponding to 4% of total shares outstanding. 2018 FTK launches its new corporate structure, featuring one technology and one financial entity flatex launches its product offering the Netherlands (as first not German-speaking region) FinTech Group AG is renamed flatex AG 2019 FinTech Group Bank AG is renamed flatex Bank AG Announcement of DeGiro acquisition upon regulatory approval . Acquisition of 9.4% of all outstanding DeGiro shares Source: Jefferies, company data Management Overview

Figure 57 - flatex management board Management Board Function Name CV Frank Niehage was appointed CEO of flatex in September 2014. Prior to this, he held positions as managing director at Goldman Sachs and as CEO of J Safra Sarasin’s German operations. Further, he has held positions at UBS, Credit Suisse and Commerzbank. Outside of financial services, he worked at CEO Frank Niehage, LL.M. Beiten Burkhardt, a law company, where he helped build its Singapore branch from scratch. Frank Niehage is 51 years old and is a trained lawyer. He holds a Masters degree from the University of Houston Law Center majoring in international economics.

Muhamad Chahrour joined flatex’s management board as head of finance in 2015 and was subsequently appointed to CFO on 1 January 2017. He started his career in the corporate finance CFO Muhamad Chahrour departments of UBS and PwC before joining Rocket Internet in 2014. At Rocket Internet, he worked as This report is intended for Jefferies clients only. Unauthorized distribution prohibited. global head of finance/CFO for the Lamudi property platform in Asia and Latin America. Muhamad . Chahrour is 35 years old and holds a Masters degree in finance from the University of Bath. Source: Jefferies, company data

6 May 2020 39 Please see important disclosure information on pages 45 - 50 of this report. EQUITY RESEARCH flatex AG (FTK GR)

Management highly incentivized via stock-based compensation

flatex operates a stock-option-based incentive scheme for its management. Two schemes have been launched, the first in 2014 and another one in 2015. Options issued under the two plans have a lifetime of six years from the option issue date. In addition, the options may only be exercised within pre-defined time slots after a four-year vesting period. There are currently approximately 450,000 management options exercisable over the next three years. There are a few idiosyncrasies that separate the two option plans, as follows.

Plan one: The first subscription rights under the 2014 option plan were awarded in 2015. The options can be exercised, subject to the vesting restrictions, if the shares exceed the subscription price by at least 100% on any given trading day within two years of the issue date.

Plan two: Options under the second plan are available for exercise subject to the shares increasing 50% above the subscription price. Given flatex’s strong share price performance since the initiation of this plan; all of the options issued under the second plan are available for exercise once vesting restrictions cease. Shareholder Structure

Figure 58 - Shareholder structure (pre deal) Figure 59 - Shareholder structure (post deal)

GFBK (flatex founder)… GFBK (flatex founder) 17.1% DeGiro founders Heliad and team** 6.0% 27.7% Heliad flatex management* 7.2% 3.7% 27.1m shares 19.6m shares flatex management* 3.1%

Free float Free float 69.3% 45.0% * excl. c450k management options **incl. 15 beneficiaries * excl. c450k management options exerciseable over next 3 years (newly issues shares) exerciseable over next 3 years . . Source: Jefferies, company data Source: Jefferies, company data This report is intended for Jefferies clients only. Unauthorized distribution prohibited.

6 May 2020 40 Please see important disclosure information on pages 45 - 50 of this report. EQUITY RESEARCH flatex AG (FTK GR)

Table 7 - Financials & valuation overview Financial Overview 2015 2016 2017 2018 2019E 2020E 2021E 2022E Total Output 75.0 95.0 107.0 125.1 134.0 220.0 284.9 306.1 EBITDA 19.7 30.6 32.1 42.4 40.2 88.0 119.5 137.2 EBITDA adjusted 19.7 30.6 32.1 42.4 40.2 88.0 119.5 137.2 EBIT 17.2 25.5 26.5 34.2 30.6 68.2 93.8 109.7 EBIT adjusted 17.2 25.5 26.5 34.2 30.6 68.2 93.8 109.7 Net Profit after Min. -1.7 8.4 16.8 21.7 18.7 43.5 61.5 73.8 Net profit after min. adj. 14.0 16.4 17.0 21.0 18.7 43.5 61.5 73.8

Per Share EPS (€) -0.10 0.50 0.96 1.16 0.95 1.60 2.27 2.72 EPS adjusted (€) 0.83 0.97 0.97 1.12 0.95 1.60 2.27 2.72 Dividend per ordinary share (€) 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 NAV per share (€) 4.4 4.5 6.4 8.9 9.5 15.5 17.8 20.5 NAV/share ex Goodwill (€) 2.6 2.8 4.8 6.9 7.6 14.1 16.4 19.1

Growth Total Output 26.7% 12.6% 16.9% 7.1% 64.2% 29.5% 7.4% EBITDA adjusted 55.2% 4.7% 32.1% -5.1% 118.9% 35.8% 14.8% EBIT adjusted 47.7% 4.0% 29.1% -10.6% 123.2% 37.6% 16.8%

Margin Gross Profit 81.9% 73.2% 71.0% 70.5% 72.0% 75.0% 75.9% 77.8% EBITDA adjusted 26.3% 32.2% 30.0% 33.9% 30.0% 40.0% 41.9% 44.8% EBIT adjusted 23.0% 26.8% 24.7% 27.3% 22.8% 31.0% 32.9% 35.8%

Return EBIT adj./ Capital Employed 3% 2% 4% 6% 5% 12% 16% 18% ROCE incl. Goodwill 2% 2% 3% 4% 4% 8% 11% 13% ROCE excl. Goodwill 3% 2% 3% 4% 4% 9% 12% 14%

Net financial debt / EBITDA - 0.9 - 0.9 - 1.3 - 1.8 - 0.8 - 0.7 - 1.0 - 1.4

Valuation Overview 2015 2016 2017 2018 2019E 2020E 2021E 2022E EV/sales 6.2 5.8 4.1 3.6 3.8 3.2 2.2 1.9 EV/EBITDA 23.5 18.1 13.8 10.5 12.8 7.9 5.4 4.2 EV/EBITDA adjusted 23.5 18.1 13.8 10.5 12.8 7.9 5.4 4.2 EV/EBIT 26.9 21.7 16.7 13.1 16.9 10.2 6.8 5.2 EV/EBIT adjusted 26.9 21.7 16.7 13.1 16.9 10.2 6.8 5.2 PE -271.8 56.4 29.4 24.4 29.7 17.6 12.4 10.4 PE adj 33.9 29.0 29.1 25.2 29.7 17.6 12.4 10.4

EV/Capital Employed 0.71 0.49 0.63 0.78 0.90 1.19 1.09 0.96 Free Cash Flow Yield -25.3% -33.9% -2.5% 42.9% -8.1% -20.4% 7.0% 9.1% . Dividend yield ordinaries 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% Source: Jefferies, company data This report is intended for Jefferies clients only. Unauthorized distribution prohibited.

6 May 2020 41 Please see important disclosure information on pages 45 - 50 of this report. EQUITY RESEARCH flatex AG (FTK GR)

Table 8 - P&L Profit & Loss Account 2015 2016 2017 2018 2019E 2020E 2021E 2022E Total Output 75 95 107 125 134 220 285 306 % change 27% 13% 17% 7% 64% 29% 7% Raw materials & consumables -14 -25 -31 -37 -38 -55 -69 -68 Gross Profit 61 70 76 88 96 165 216 238 General & Administrative Expenses -18 -19 -21 -24 -31 -40 -50 -54 Other Result 0 0 0 0 0 0 0 0 Employee cost -24 -19 -23 -22 -25 -37 -47 -47 EBITDA adjusted 20 31 32 42 40 88 119 137 EBITDA 20 31 32 42 40 88 119 137

Depreciation & amortisation -2 -5 -6 -8 -10 -20 -26 -28 ...of which tangible depreciation -1 -2 -2 -3 -3 -4 -5 -6 ...of which goodwill amortisation 0 0 0 0 0 0 0 0 ...of which intangible amortisation -2 -3 -4 -5 -7 -16 -21 -22 EBIT 17 25 26 34 31 68 94 110 EBIT adjusted 17 25 26 34 31 68 94 110

Net Financial Result -3 -1 -1 -2 -3 -5 -7 -7 ...of which associate income 0 0 0 0 0 0 0 0 EBT -1 16 25 33 27 63 87 102 Exceptional Items -16 -8 0 1 0 0 0 0 EBT after Exc. Items 15 24 25 32 27 63 87 102

Tax -1 -4 -8 -11 -9 -20 -25 -29 Net income before MI -2 12 17 22 19 43 62 74 Min. Interest 0 -4 0 0 0 0 0 0 Net Profit after Min. -2 8 17 22 19 43 62 74 Net profit after min. adj. 14 16 17 21 19 43 62 74

EPS (€) -0.10 0.50 0.96 1.16 0.95 1.60 2.27 2.72 EPS adjusted (€) 0.83 0.97 0.97 1.12 0.95 1.60 2.27 2.72 Net profit after Min./ Fully diluted Shares 0.83 0.97 0.97 1.12 0.95 1.60 2.27 2.72

% Sales Gross Profit 81.9% 73.2% 71.0% 70.5% 72.0% 75.0% 75.9% 77.8% General & Administrative Expenses -23.9% -20.4% -19.4% -19.2% -23.0% -18.0% -17.5% -17.5% Employee cost -31.7% -20.5% -21.6% -17.5% -19.0% -17.0% -16.5% -15.5% EBITDA adjusted 26.3% 32.2% 30.0% 33.9% 30.0% 40.0% 41.9% 44.8% EBITDA 26.3% 32.2% 30.0% 33.9% 30.0% 40.0% 41.9% 44.8% Depreciation & amortisation -3.3% -5.4% -5.2% -6.5% -7.2% -9.0% -9.0% -9.0% EBIT adjusted 23.0% 26.8% 24.7% 27.3% 22.8% 31.0% 32.9% 35.8% . EBIT 23.0% 26.8% 24.7% 27.3% 22.8% 31.0% 32.9% 35.8% Source: Jefferies, company data This report is intended for Jefferies clients only. Unauthorized distribution prohibited.

6 May 2020 42 Please see important disclosure information on pages 45 - 50 of this report. EQUITY RESEARCH flatex AG (FTK GR)

Table 9 - Cash flow statement Cash Flow Statement 2015 2016 2017 2018 2019E 2020E 2021E 2022E Reported Profit After Tax -2 12 17 22 19 43 62 74 Cash Profit After Tax -2 12 17 22 19 43 62 74 Depreciation 2 5 6 8 10 20 26 28 Other operating non-cash adjustments 0 -13 -5 1 0 0 0 0 Change in Working Capital -9 3 6 -12 -1 -9 -7 -2 Operating Cash Flow (before banking) -9 8 24 19 27 54 80 99

Change in customer receivables -54 -77 -71 -54 Change in receivables due to local authorities -381 -20 164 216 Change in receivables from credit institutions -2 -11 0 -28 Change in liabilities to customers 947 346 -455 70 Change in liabilities to credit institutions 52 -3 1 -4 Other non-cash measurements -611 -385 338 36 Operating Cash Flow (banking operations) -48 -150 -23 236 0 0 0 0

Operating Cash Flow -73 -152 0 255 27 54 80 99 -57 -143 0 255

Intangibles investments -2 -6 -11 -13 -8 -15 -19 -20 Tangible investments -2 -2 -3 -3 -4 -6 -8 -9 Financial assets investments 0 0 0 0 -60 -190 0 0 Residual from acquisitions, disposals, forex -44 -1 1 -11 0 0 0 0 Investing Cash-flow -47 -9 -13 -28 -72 -211 -27 -29

Free Cash Flow before Financing -120 -161 -13 227 -45 -156 53 70

Proceeds from capital raising 66 0 19 35 1 190 0 0 Dividends (previous year) 0 0 0 0 0 0 0 0 Dividends to minorities 0 0 0 0 0 0 0 0 Equity Financing 66 0 19 35 1 190 0 0 Free Cash Flow after Equity Financing -54 -161 6 262 -44 34 53 70

Others (Currency etc.) 77 172 10 -230 0 0 0 0 Change in Cash 1,109 340 -422 86 -44 34 53 70 Change in Financial debt 1,082 326 -438 55 0 0 0 0 Change in Pension Provision 4 3 0 -1 0 0 0 0 Change in Other Financial Liabilities 0 0 0 0 0 0 0 0 Debt Financing 1,086 329 -439 54 0 0 0 0 Change in Net debt 23 11 16 32 -44 34 53 70 . Net Cash 23 34 50 82 39 72 125 196 This report is intended for Jefferies clients only. Unauthorized distribution prohibited.

6 May 2020 43 Please see important disclosure information on pages 45 - 50 of this report. EQUITY RESEARCH flatex AG (FTK GR)

Table 10 - Balance sheet Balance sheet 2015 2016 2017 2018 2019E 2020E 2021E 2022E Goodwill 29 29 29 37 37 37 37 37 Intangibles excluding goodwill 25 29 34 46 48 47 45 44 Tangible Fixed Assets 5 6 7 8 9 11 14 17 Financial Assets 0 1 1 1 61 251 251 251 Fixed Assets 60 64 71 91 154 345 346 348

Cash & Securities 541 389 397 655 611 645 698 768 Inventory 1 0 0 0 0 0 0 0 Trade receivables 30 9 8 16 17 27 35 38 Other current assets 576 1,072 632 466 466 466 466 466 Current Assets 1,148 1,470 1,037 1,136 1,094 1,138 1,200 1,272

Total Assets 1,208 1,534 1,107 1,228 1,247 1,483 1,546 1,620

Trade payables 13 6 1 3 3 5 6 7 Advance payments received 0 0 0 0 0 0 0 0 Other current liabilities 18 19 11 12 12 12 12 12 Other long term liabilities 9 11 13 21 21 21 21 21 ...of which deferred tax liabilities 0 0 0 0 0 0 0 0 ...of which provisions 4 8 7 6 6 6 6 6 ...of which other long-term liabilities 5 3 6 14 14 14 14 14 Financial debt 1,082 1,408 970 1,025 1,025 1,025 1,025 1,025 ...of which short-term debt 64 60 61 57 57 57 57 57 ...of which long-term debt 1,018 1,348 909 968 968 968 968 968 Liabilities 1,122 1,443 995 1,061 1,061 1,063 1,064 1,065

Share Capital 17 17 18 19 20 27 27 27 Capital reserve 49 50 68 101 101 284 284 284 Retained Earnings 7 9 28 47 65 109 170 244 Shareholders' funds 73 76 113 167 186 420 481 555 Minority Interest 13 15 0 0 0 0 0 0 Total Equity 86 91 113 167 187 420 482 556

Total Liabilities 1,208 1,534 1,107 1,228 1,247 1,483 1,546 1,620

Credit Statistics EBITDA / Interest Expense 7.4 19.1 19.3 16.9 13.0 17.1 16.6 19.0 Adj. EBITDA / Interest Expense 7.4 19.1 19.3 16.9 13.0 17.1 16.6 19.0 Net financial debt / EBITDA -0.9 -0.9 -1.3 -1.8 -0.8 -0.7 -1.0 -1.4 Net financial liabilities / EBITDA -1.2 -1.1 -1.6 -1.9 -1.0 -0.8 -1.1 -1.4 Equity/Total Liabilities 7% 6% 10% 14% 15% 28% 31% 34% . (Equity-Goodwill)/Total Liabilities 5% 4% 8% 11% 12% 27% 29% 33% Source: Jefferies, company data This report is intended for Jefferies clients only. Unauthorized distribution prohibited.

6 May 2020 44 Please see important disclosure information on pages 45 - 50 of this report. EQUITY RESEARCH flatex AG (FTK GR)

Company Description flatex flatex is one of the leading online retail brokers in Germany and Austria, offering low cost brokerage, securities and credit servicing.

Company Valuation/Risks flatex We value flatex based on a fundamental DCF and cross-check with peer multiples. The key risks to our investment thesis are the outstanding reg approval and integration risk regarding the acquisition of DeGiro, the fast-changing competitive environment in domestic brokerage markets, and individual trading behaviour of clients.

Analyst Certification: I, Martin Comtesse, CFA, certify that all of the views expressed in this research report accurately reflect my personal views about the subject security(ies) and subject company(ies). I also certify that no part of my compensation was, is, or will be, directly or indirectly, related to the specific recommendations or views expressed in this research report. Registration of non-US analysts: Martin Comtesse, CFA is employed by Jefferies International Limited, a non-US affiliate of Jefferies LLC and is not registered/qualified as a research analyst with FINRA. This analyst(s) may not be an associated person of Jefferies LLC, a FINRA member firm, and therefore may not be subject to the FINRA Rule 2241 and restrictions on communications with a subject company, public appearances and trading securities held by a research analyst. As is the case with all Jefferies employees, the analyst(s) responsible for the coverage of the financial instruments discussed in this report receives compensation based in part on the overall performance of the firm, including investment banking income. We seek to update our research as appropriate, but various regulations may prevent us from doing so. Aside from certain industry reports published on a periodic basis, the large majority of reports are published at irregular intervals as appropriate in the analyst's judgement. Investment Recommendation Record (Article 3(1)e and Article 7 of MAR) Recommendation Published May 5, 2020 , 13:40 ET. Recommendation Distributed May 5, 2020 , 19:05 ET.

Explanation of Jefferies Ratings Buy - Describes securities that we expect to provide a total return (price appreciation plus yield) of 15% or more within a 12-month period. Hold - Describes securities that we expect to provide a total return (price appreciation plus yield) of plus 15% or minus 10% within a 12-month period. Underperform - Describes securities that we expect to provide a total return (price appreciation plus yield) of minus 10% or less within a 12-month period. The expected total return (price appreciation plus yield) for Buy rated securities with an average security price consistently below $10 is 20% or more within a 12-month period as these companies are typically more volatile than the overall stock market. For Hold rated securities with an average security price consistently below $10, the expected total return (price appreciation plus yield) is plus or minus 20% within a 12-month period. For Underperform rated securities with an average security price consistently below $10, the expected total return (price appreciation plus yield) is minus 20% or less within a 12-month period. NR - The investment rating and price target have been temporarily suspended. Such suspensions are in compliance with applicable regulations and/or Jefferies policies. CS - Coverage Suspended. Jefferies has suspended coverage of this company. NC - Not covered. Jefferies does not cover this company. Restricted - Describes issuers where, in conjunction with Jefferies engagement in certain transactions, company policy or applicable securities regulations prohibit certain types of communications, including investment recommendations.

This report is intended for Jefferies clients only. Unauthorized distribution prohibited. Monitor - Describes securities whose company fundamentals and financials are being monitored, and for which no financial projections or opinions on the investment merits of the company are provided. Valuation Methodology Jefferies' methodology for assigning ratings may include the following: market capitalization, maturity, growth/value, volatility and expected total return over the next 12 months. The price targets are based on several methodologies, which may include, but are

6 May 2020 45 Please see important disclosure information on pages 45 - 50 of this report. EQUITY RESEARCH flatex AG (FTK GR)

not restricted to, analyses of market risk, growth rate, revenue stream, discounted cash flow (DCF), EBITDA, EPS, cash flow (CF), free cash flow (FCF), EV/EBITDA, P/E, PE/growth, P/CF, P/FCF, premium (discount)/average group EV/EBITDA, premium (discount)/ average group P/E, sum of the parts, net asset value, dividend returns, and return on equity (ROE) over the next 12 months.

Jefferies Franchise Picks Jefferies Franchise Picks include stock selections from among the best stock ideas from our equity analysts over a 12 month period. Stock selection is based on fundamental analysis and may take into account other factors such as analyst conviction, differentiated analysis, a favorable risk/reward ratio and investment themes that Jefferies analysts are recommending. Jefferies Franchise Picks will include only Buy rated stocks and the number can vary depending on analyst recommendations for inclusion. Stocks will be added as new opportunities arise and removed when the reason for inclusion changes, the stock has met its desired return, if it is no longer rated Buy and/or if it triggers a stop loss. Stocks having 120 day volatility in the bottom quartile of S&P stocks will continue to have a 15% stop loss, and the remainder will have a 20% stop. Franchise Picks are not intended to represent a recommended portfolio of stocks and is not sector based, but we may note where we believe a Pick falls within an investment style such as growth or value.

Risks which may impede the achievement of our Price Target This report was prepared for general circulation and does not provide investment recommendations specific to individual investors. As such, the financial instruments discussed in this report may not be suitable for all investors and investors must make their own investment decisions based upon their specific investment objectives and financial situation utilizing their own financial advisors as they deem necessary. Past performance of the financial instruments recommended in this report should not be taken as an indication or guarantee of future results. The price, value of, and income from, any of the financial instruments mentioned in this report can rise as well as fall and may be affected by changes in economic, financial and political factors. If a financial instrument is denominated in a currency other than the investor's home currency, a change in exchange rates may adversely affect the price of, value of, or income derived from the financial instrument described in this report. In addition, investors in securities such as ADRs, whose values are affected by the currency of the underlying security, effectively assume currency risk.

Rating and Price Target History for: Flatex AG (FTK GR) as of 05-04-2020

40

35

30

25

20

15

10 Q2 Q3 2018 Q1 Q2 Q3 2019 Q1 Q2 Q3 2020 Q1

Notes: Each box in the Rating and Price Target History chart above represents actions over the past three years in which an analyst initiated on a company, made a change to a rating or price target of a company or discontinued coverage of a company. Legend:

I: Initiating Coverage

D: Dropped Coverage

B: Buy

H: Hold This report is intended for Jefferies clients only. Unauthorized distribution prohibited.

UP: Underperform

6 May 2020 46 Please see important disclosure information on pages 45 - 50 of this report. EQUITY RESEARCH flatex AG (FTK GR)

Distribution of Ratings Distribution of Ratings

IB Serv./Past12 Mos. JIL Mkt Serv./Past12 Mos.

Count Percent Count Percent Count Percent

BUY 1313 54.28% 111 8.45% 12 0.91%

HOLD 948 39.19% 32 3.38% 2 0.21%

UNDERPERFORM 158 6.53% 2 1.27% 1 0.63% This report is intended for Jefferies clients only. Unauthorized distribution prohibited.

6 May 2020 47 Please see important disclosure information on pages 45 - 50 of this report. EQUITY RESEARCH flatex AG (FTK GR)

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6 May 2020 48 Please see important disclosure information on pages 45 - 50 of this report. EQUITY RESEARCH flatex AG (FTK GR)

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6 May 2020 49 Please see important disclosure information on pages 45 - 50 of this report. EQUITY RESEARCH flatex AG (FTK GR)

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6 May 2020 50 Please see important disclosure information on pages 45 - 50 of this report.