Plus500 continues “monster” 2020 with Q3 Revenues of $216 million
CFDs broker Plus500 issued a Trading Update (see full text below) for Q3-2020, with the company continuing to perform strongly across all areas.
On the top line, Plus500 brought in $216.4 million of Revenue in Q3 – down 12.6% from Q2, but still very strong and almost double last year’s Q3 result of $110 million. Importantly, the company continued on the strong momentum it saw during the first half of the year through the usually-slow summer months, and capitalized on record new-client signups Plus500 enjoyed during Q1 and Q2.
EBITDA in Q3 was $134.2 million, again almost double Q3-2019’s $70 million.
Plus500 shares (LON:PLUS), which had traded up in recent days by about 10% in anticipation of the Trading Update, opened up Tuesday in early London Stock Exchange trading down by about 4% in response to the news.
Plus500 signed up 46,238 new customers in Q3, bringing its 9-month total so far this year to a staggering 244,414. The company saw 197,976 active customers in Q3.
More competitive conditions, however, increased the company’s average user acquisition cost during Q3 to $1,066, versus just $634 in the first half of this year.
Average revenue per user in Q3 was $1,093, up from $936 in Q2.
During Q3 Plus500 received designation in Israel by the Israeli Tax Authority as a “Preferred Technological Enterprise”. Consequently, Plus500’s parent corporate tax rate for the financial years 2017, 2018 and 2019 was reduced retroactively to 12% in each of these years. The expected repayments and cash savings as a result of this accreditation are now expected to be over $150 million.
Regarding last week’s announcement by Australia regulator ASIC that it was basically going to match UK and EU regulators by imposing a CFD leverage cap of 30x in the country (to begin in March 2021), Plus500 noted that it fully supports these changes, and that it believes that any impact from the changes is already incorporated in the compiled analysts’ consensus forecasts for Plus500 for FY 2021.
Regarding Q4, Plus500 said that the “gradual reduction” in Revenue from peak levels (see chart above) has continued into Q4 2020, with the board expecting Revenue and EBITDA for FY 2020 to be “in line with current analysts’ consensus forecasts”. The compiled consensus forecasts for full-year 2020 are Revenue of $829.2 million and EBITDA of $520.5 million – meaning that Plus500 is signaling expectations of Q4 Revenue of just $49 million and EBITDA of $24.5 million. Those figures look ultra conservative to us, given the aforementioned company description of a continued “gradual reduction”, which in Q3 meant a 12.6% decline, as noted above.
Plus500’s full Q3 Trading Update text follows:
27 October 2020
Plus500 Ltd.
Q3 2020 Trading Update
Plus500, a leading technology platform for trading Contracts for Difference (“CFDs”) internationally, today issues the following trading update for the three months ended 30 September 2020.
Financial Highlights (unaudited):
|
Q3 2020 |
Q3 2019 |
Change % |
YTD 2020 |
YTD 2019 |
Change % |
Revenue |
$216.4m |
$110.6m |
96% |
$780.6m |
$258.6m |
202% |
EBITDA |
$134.2m |
$70.1m |
91% |
$496.0m |
$135.7m |
266% |
EBITDA Margin % |
62% |
63% |
(2%) |
64% |
52% |
23% |
Operational Highlights (unaudited):
|
Q3 2020 |
Q3 2019 |
Change % |
YTD 2020 |
YTD 2019 |
Change % |
Number of New Customers |
46,238 |
24,359 |
90% |
244,414 |
71,899 |
240% |
Number of Active Customers |
197,976 |
110,939 |
78% |
378,862 |
175,526 |
116% |
ARPU |
$1,093 |
$997 |
10% |
$2,061 |
$1,473 |
40% |
AUAC |
$1,066 |
$921 |
16% |
$716 |
$1,026 |
(30%) |
Key Headlines:
· Significant year on year growth in Group Revenue and EBITDA – with Plus500’s market-leading technology ensuring the Group is able to continue to benefit from heightened platform usage during unprecedented levels of market volatility
· Exceptional performance across key customer-related metrics driven by continued ability to recruit high levels of New and Active Customers at attractive levels of ARPU and robust levels of client deposits
· Share buyback programme continues, with around 1 million shares acquired in Q3 2020 – over 10 million shares acquired by the Company since 2017, representing approximately 10% of the Company’s current shares in issue
· Board remains very confident about the outlook for Plus500 – FY 2020 Group Revenue and EBITDA expected to be in line with current analysts’ consensus forecasts
Overview of trading during Q3 2020
Group Revenue increased by 96% in Q3 2020 to $216.4m (Q3 2019: $110.6m) driven by unprecedented market conditions continuing to provide trading opportunities for customers, and due to the high quality, resilience and capability of Plus500’s technology in managing the consequent elevated platform usage.
Group EBITDA increased by 91% in Q3 2020 to $134.2m (Q3 2019: $70.1m) with Group EBITDA margin of 62%.
Customer Income increased by 124% in the quarter to $240.0m (Q3 2019: $107.1m) highlighting the strong underlying performance of the business. Customer Trading Performance was ($23.6m) in Q3 2020 (Q3 2019: $3.5m) and remained at relatively modest levels for the year to date.
This overall performance was achieved with extreme monthly trading movements within the quarter, consistent with the level of market volatility experienced during the course of 2020 and particular trading conditions during Q3 2020.
Customer Income during the quarter was the second highest quarterly level of Customer Income in Plus500’s history, although reduced from the record peak levels achieved in Q2 2020. This gradual reduction from peak levels has continued into Q4 2020.
The Company on-boarded a total of 46,238 New Customers in the quarter, up 90% on the prior period (Q3 2019: 24,359), as a result of the Company’s continued significant investment in its marketing technological capabilities, enabling it to respond rapidly to market events and continue to evolve the Company’s market-leading mobile and tablet offering. There was particularly strong growth in the number of New Customers on-boarded in several key strategic territories.
The number of Active Customers in the quarter increased to 197,976, an increase of 78% on the prior period (Q3 2019: 110,939) and has been broadly sustained at the high levels achieved during previous quarters in 2020. ARPU increased by 10% to $1,093 in Q3 2020 (Q3 2019: $997).
Consequently, and as previously guided, given the gradual shift in customer profile to higher value customers, AUAC increased by 16% to $1,066 in Q3 2020 (Q3 2019: $921).
Customer Churn increased to 43% in Q3 2020 (Q3 2019: 20%) as a consequence of the record number of Active Customers using the Plus500 platform during Q2 2020.
Reflecting customers’ continued confidence in the Plus500 platform and product, and supported by the on-going success of the Company’s customer attraction and retention activities, client deposits remained strong at $634.6m in Q3 2020 (Q3 2019: $280.8m) and at around $2.3 billion for the year to date (YTD 2019: $747.8m).
Cash balances as at 30 September 2020 were approximately $722.9m (30 June 2020: $587.8m), reflecting continued strong cash generation during the quarter, partially offset by $18.1m of shares acquired under the current share buyback programme, and the dividend payment of $40.6m on 13 July 2020.
Update on cash savings and repayments related to “Preferred Technological Enterprise” accreditation
In August 2020, Plus500 announced it has been recognised by the Israeli Tax Authority and Israeli Innovation Authority as a “Preferred Technological Enterprise”. Consequently, Plus500 Ltd’s Corporation Tax rate for the financial years 2017, 2018 and 2019 was reduced to 12% in each of these years. As a result, it was anticipated that over $100 million of initial repayments and cash savings would be delivered, including a c.$47 million rebate received in July 2020.
The expected repayments and cash savings as a result of this accreditation are now expected to be over $150 million, relating to financial years outlined above and the financial year for 2020, to 30 September 2020. These savings will be recognised in the Company’s results for FY 2020 and during the course of FY 2021. Additionally, as already disclosed, subject to the Company complying with the statutory R&D spending thresholds, the Company’s Corporation Tax rate for the financial years 2020 and 2021 is expected to remain at 12%.
Share buyback
Further to the announcement of a new share buyback programme of $67.3m at the Company’s H1 2020 results in August 2020, the Company repurchased 928,609 shares in the quarter for a total consideration of $18.1m.
Following the continuation of this share buyback programme so far during Q4 2020, the Company has now acquired over 10 million shares, equivalent to around 10% of the Company’s current shares in issue, since its initial share buyback programme commenced in 2017.
The achievement of this important landmark represents a clear validation of the Board’s confidence in the Company’s business model and future prospects. It also provides on-going evidence of the Board’s diversified approach to capital returns with which to reward the Company’s shareholders for their continued support.
Proposed regulatory changes in Australia
Last week, as anticipated, the Australian Securities & Investment Commission, (“ASIC”) outlined its proposed regulatory changes for the CFD industry in Australia, to be applied from 29 March 2021. As previously noted, Plus500 fully supports these changes, in the interests of raising standards in the industry, enhancing the CFD trading landscape and providing important additional protections for consumers. The Company already operates in compliance with most of the regulatory changes being introduced by ASIC and will further adapt its business model where additional changes are required in due course.
As outlined in the Company’s announcement earlier this month, the Board will continue to assess the potential impact on future years, but believes that such impact is already incorporated in the compiled analysts’ consensus forecasts for Plus500 for FY 2021.
Outlook
While market conditions remain uncertain, the Board continues to be very confident about the outlook for the business, with Plus500 remaining well placed for the future, given its proprietary trading platform, its flexible and scalable business model, its robust financial position and a track record of delivery against key performance metrics.
The future development of the business will continue to be primarily delivered through organic means, focused on product extensions, technology enhancements, and in particular through introducing new product lines, and supplemented through continued development of Plus500’s presence in new and existing geographies, which the Group will also look to access through potential targeted acquisitions.
As the past five financial years have demonstrated, and with these factors in mind, the Group aims to deliver sustainable revenue growth and consistent levels of cash generation over the medium to long term.
In the short term, as outlined above, Customer Income during Q3 2020 was the second highest quarterly level of Customer Income in Plus500’s history, although reduced from the record peak levels achieved in Q2 2020. This gradual reduction from peak levels has continued into Q4 2020, with the Board expecting Group Revenue and EBITDA for FY 2020 to be in line with current analysts’ consensus forecasts.
David Zruia, Chief Executive Officer, commented:
“Plus500 has delivered an excellent performance during Q3 2020, building on the positive momentum already achieved in the first half of the year. This performance has been driven by the quality and differentiation of our proprietary technology, which has enabled our business to consistently support our customers in these unprecedented market conditions.
“Given Plus500’s exceptional performance this year to date, and with macroeconomic and sector-specific news flow continuing to provide significant trading opportunities for our customers, we remain very confident about the outlook for the business.”