XTB S A : CR no. 29/2023 – Preliminary financial and operating results for the III quarter of 2023

XTB S.A.

(joint stock company with its registered office in Warsaw and address at Prosta 67, 00-838 Warszawa, entered into the Register of Business Entities of the National Court Register under No. 0000217580)

DISCLAIMER

This document is an unofficial translation of the Polish version of Current Report No. 29 dated 26 October 2023 and does not constitute a current or periodical report as defined under the Regulation of the Minister of Finance on the current and periodical information provided by issuers of securities and the conditions for considering the information required by the provisions of law of the state not being a member state as equivalent thereto that was issued in accordance with the Polish Act on Public Offering, the Conditions Governing the Introduction of Financial Instruments to Organised Trading, and Public Companies dated 29 July 2005 (amended and restated: Journal of Laws of 2018, item 757).

This document is for informational purposes only. Neither the Company, its shareholders, nor any of their advisors are responsible for translation errors, if any, or for any discrepancies between the original report and this translation into English. If there are any discrepancies between the English translation and the Polish version, the latter shall prevail.

CURRENT REPORT NO. 29/2023

Warsaw, 26 October 2023

Preliminary financial and operating results for the III quarter of 2023

The Management Board of the XTB S.A (the "Issuer") hereby announces that on 26 October 2023 the aggregation process of financial data for the purpose of the preparation of the condensed consolidated financial statements of the Issuer's Group for the III quarter of 2023 was completed. Therefore the decision was made to publish the preliminary consolidated selected financial and operating data for the above period, which the Issuer submits as an attachment to the foregoing current report.

The Issuer informs also that the final financial and operating results for the III quarter of 2023 will be submitted in the extended consolidated report of the Issuer's Group for the III quarter of 2023, publication of which was planned for 8 November 2023.

Legal basis:

Article 17 paragraph 1 MAR - inside information.

Appendix to the current report

No. 29/2023 dated 26 October 2023

Preliminary financial and operating results for the III quarter 2023

XTB S.A.

XTB S.A.

APPENDIX TO CR NO 29/2023

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XTB S.A.

APPENDIX TO CR NO 29/2023

Selected consolidated financial data

	(in PLN'000)					THREE-MONTH PERIOD ENDED				NINE-MONTH PERIOD ENDED
			30.09.2023			30.09.2022			30.09.2023			30.09.2022
	Total operating income		275 721			391 289			1 094 573		1 227 503
	Total operating expenses		(164 966)			(132 546)		(506 562)		(400 332)
	Profit on operating activities (EBIT)		110 755			258 743			588 011		827 171
	Finance income		19 291			32 081			73 121		49 812
	Finance costs		14 484			(277)			(4 552)		(789)
	Profit before tax		144 530			290 547			656 580		876 194
	Income tax		(23 403)			(54 328)		(114 456)		(160 405)
	Net profit		121 127			236 219			542 124		715 789
	(in PLN'000)														AS AT
							30.09.2023			31.12.2022			30.09.2022
	Own cash							1 236 445		1 222 499	1 259 691
	Own cash + bonds							1 629 126		1 584 573	1 611 712
	Equity							1 477 085		1 506 069	1 462 363
Selected consolidated operating data (KPI)
						THREE-MONTH PERIOD ENDED			NINE-MONTH PERIOD ENDED
						30.09.2023			30.09.2022			30.09.2023			30.09.2022
	New clients1			67 505			44 796		234 704		145 826
	Clients in total		826 042			567 387		826 042		567 387
	Number of active clients2		223 080			151 685		330 357		224 339
	Average number of active clients3		223 080			151 685		214 332		150 444
	Net deposits (in PLN'000)4		828 062			796 899		2 629 330		2 746 487
	Average operating income per active client
				1,2			2,6			5,1		8,2
	(in PLN'000)5
	Transaction volume in CFD instruments
				2 011 452			1 594 606		5 626 997		4 645 262
	in lots6

Profitability per lot (in PLN)7

Transaction volume in CFD instruments in nominal value (in USD'000000)

Profitability for 1 million USD transaction volume in CFD instruments in nominal value (in USD)8

137	245	195	264
593 232	539 879	1 736 964	1 710 807
112	152	149	162

Turnover of shares in nominal value
1 077	678	3 203	2 615
(in USD'000000)

1The number of new Group's clients in the individual periods.

2) The number of clients who at least one transaction has been concluded over the individual periods.

3) The average quarterly number of clients who at least one transaction has been concluded over the last three months.

4) Net deposits comprise deposits placed by clients less amounts withdrawn by the clients in a given period.

5) The Group's operating income in a given period divided by the average quarterly number of clients who at least one transaction has been concluded over the last three months.

6) A lot is a unit of trading in financial instruments; in the case of foreign currency transactions, a lot corresponds to 100,000 units of the underlying currency; in the case of instruments other than CFDs based on currencies, the amount is specified in the instruments table and varies for various instruments. Presented value does not include CFD turnover on shares and ETFs, where 1 lot equals 1 share.

7) Total operating income divided by the transaction volume in CFDs in lots.

8) Total operating income converted into USD by the arithmetic average of exchange rates published by the National Bank of Poland on the last day of each month of the reporting period, divided by turnover of CFD in nominal value (in USD'000000).

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XTB S.A.

APPENDIX TO CR NO 29/2023

Management Board's commentary on the preliminary results

In the third quarter of 2023 XTB reported a consolidated net profit of PLN 121,1 million compared to PLN 236,2 million a year earlier. Consolidated revenue amounted to PLN 275,7 million (Q3 2023: PLN 391,3 million) and operating expenses amounted to PLN 165,0 million (Q3 2022: 132,5 million). During the period, the Group acquired 67,5 thousand new clients, while the number of active clients amounted to 223,1 thousand compared to 151,7 thousand a year earlier, which is an increase of 47,1% y/y.

Revenues

In the third quarter of 2023, the Group's revenues decrease by 29,5% y/y, i.e. from PLN 391,3 million to PLN 275,7 million. This decrease was contributed by a lower profitability per lot of PLN 108, amounting to PLN 137 (Q3 2022: PLN 245). Significant factors determining their level were lower volatility in the financial and commodity markets in the third quarter of 2023, understood as the presence of long and clear trends, compensated in part by an increase in the number of active clients (increase of 47,1% y/y), combined with their high trading activity represented by the number of CFD contracts concluded in lots. As a consequence the transaction volume in CFD instruments amounted to 2 011,5 thousand lots (Q3 2022: 1 594,6 thousand lots).

THREE-MONTH PERIOD ENDED

30.09.2023 30.06.2023 31.03.2023 31.12.2022 30.09.2022 30.06.2022 31.03.2022 31.12.2021

Total operating income (in PLN'000)

Transaction volume in CFD instruments in lots1

Profitability per lot (in PLN)2

Transaction volume in CFD instruments in nominal value (in USD'000000)

Profitability for 1 million USD transaction volume in CFD instruments in nominal value (in USD)3

	275 721		287 245	531 607	216 746	391 289	396 410	439 804	183 567
			1 770 385	1 845 160	1 720 381	1 594 606	1 489 917	1 560 739	1 073 549
2 011 452
			162	288	126	245	266	282	171
	137
			547 088	596 645	548 781	539 879	539 673	631 255	482 097
593 232

112

126

204

87

152

168

167

94

1) A lot is a unit of trading in financial instruments; in the case of foreign currency transactions, a lot corresponds to 100,000 units of the underlying currency; in the case of instruments other than CFDs based on currencies, the amount is specified in the instruments table and varies for various instruments. Presented value does not include CFD turnover on shares and ETFs, where 1 lot equals 1 share.

2) Total operating income divided by the transaction volume in CFDs in lots.

3) Total operating income converted into USD by the arithmetic average of exchange rates published by the National Bank of Poland on the last day of each month of the reporting period, divided by turnover of CFD in nominal value (in USD'000000).

XTB has a solid foundation in the form of constantly growing client base and the number of active clients. From the beginning of the year, the Group recorded a further record in this area, acquiring 234 704 new clients compared to 145 826 a year earlier, an increase of 60,9%. Similar to the number of new clients, the number of active clients was also a record, increasing by 47,3% y/y, from 224 339 thousand to 330 357.

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XTB S.A.

APPENDIX TO CR NO 29/2023

PERIOD ENDED

	30.09.2023	30.06.2023	31.03.2023	31.12.2022	30.09.2022	30.06.2022	31.03.2022	31.12.2021
New clients1	67 505	62 994	104 206	51 038	44 796	45 697	55 333	42 760
Clients in total2	826 042	762 624	703 928	614 934	567 387	525 287	481 931	429 157
Number of active clients3	330 357	274 450	215 703	258 799	224 339	190 088	149 726	190 452
Average number of active clients4	214 332	209 958	215 703	153 082	150 444	149 824	149 726	112 015

1) The number of new Group's clients in the individual periods.

2) Number of clients at the end of individual quarters.

3 Number of active clients respectively in the 9, 6 and 3 months of 2023 and 12, 9, 6 and 3 months of 2022 and 12 months of 2021. An active client is a client who carried out at least one transaction in a period.

4) The average quarterly number of clients respectively for 9, 6 and 3 months of 2023 and 12, 9, 6 and 3 months of 2022 and 12 months of 2021.

The priority of the Management Board is to further increase the client base leading to the strengthening of XTB's global position by reaching the mass client with its product offerings. The ambition of the Management Board in 2023 is to acquire, on average, at least 40-60 thousand new clients per quarter. These activities are supported by a number of initiatives, including the first passive investment product introduced in September 2023, which allows clients to build up to 10 strategies based on ETFs. Each strategy can consist of up to 9 ETFs. Investors have a choice of over 350 exchange traded funds currently available on the xStation 5 platform. The client determines the percentage of each ETF included in the plan. The product is currently launched in 6 markets: Czech Republic, Slovakia, Germany, Portugal, Romania and Italy. It will also be launched in Spain and Poland in the fourth quarter of this year. According to the company, the product is attracting considerable interest despite the lack of significant marketing activity around it.

In addition, from April 2023, XTB will allow you to invest in selected European and non-European markets in company shares and ETFs at a fraction of their price. Fractional shares offer greater flexibility and control over investments. This makes it easier for clients to tailor their investment portfolio to their individual financial goals and risk tolerance.

Following the realized activities, the Group acquired a total of 104,2 thousand new clients in the first quarter of 2023, in the second quarter of this year 63,0 thousand new clients, and more than 67,5 thousand new clients in the third quarter of this year. On the other hand, in the first 25 days of October 2023, 21,4 thousand new clients were acquired.

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XTB S.A.

APPENDIX TO CR NO 29/2023

In order to strengthen its market position and global recognition, XTB cooperates with titled athletes who are XTB brand ambassadors. In February 2022, an advertising campaign was introduced featuring titled combat sports athlete, the first Polish woman in the UFC organization and a champion in the organization, as well as three- time world champion in Thai boxing - Joanna Jędrzejczyk.

In September 2022, promotional activities were launched featuring Conor McGregor, another XTB brand ambassador - the Irish mixed martial arts (MMA) and UFC fighter. Conor McGregor is the biggest combat sports star in the world and the highest paid athlete according to a list compiled by Forbes. In addition to being a fighter, Conor is also a successful business person as an investor in number of interesting projects.

Jiří Procházka, a Czech fighter, one of the one of the top MMA fighters, UFC champion, also became the face of XTB brand. This cooperation ended in May 2023.

Iker Casillas, former Real Madrid footballer, considered one of the best goalkeepers of all time, also joined the XTB ambassador team in 2022. He currently serves as deputy general manager of the Real Madrid Foundation.

XTB, thanks to its cooperation with such celebrities as Joanna Jędrzejczyk, Conor McGregor, Jiří Procházka or Iker Casillas, has started to promote the investment solutions it offers, in particular convincing that investing in different types of assets is accessible to everyone, with tools that make it easier to enter the world of investment into the world of investment: through daily market analyses, as well as numerous educational materials.

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XTB S.A.

APPENDIX TO CR NO 29/2023

Looking at XTB's revenues in terms of the classes of instruments responsible for their creation, it can be seen that commodity-based CFDs led the way in the third quarter of 2023. Their share in the structure of revenues on financial instruments reached 47,7%. This is a consequence of high profitability on CFD instruments based on oil, gold and wheat quotes. The second most profitable asset class was CFD instruments based on indices. Their share in the revenue structure in the third quarter of 2023 was 25,4%. The most profitable instruments in this class were CFDs based on the US 100 and the US 500 index. Revenue on CFD instruments based on currencies accounted for 22,2% of total revenue, where the most profitable instruments in this class were CFDs based on the EURUSD, USDJPY and GBPUSD currency pairs.

Revenue structure by asset class (in %)

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XTB S.A.

APPENDIX TO CR NO 29/2023

	(in PLN'000)		THREE-MONTH PERIOD ENDED			NINE-MONTH PERIOD ENDED
		30.09.2023		30.09.2022			30.09.2023			30.09.2022
	Commodity CFDs	137 259		111 421		460 881		408 911
	Index CFDs	73 133		150 892		509 412		568 788
	Currency CFDs	63 968		124 222		129 044		238 690
	Stock CFDs and ETFs	12 219		12 550		21 584		35 699
	Bond CFDs	480		1 778		1 173		548

Total CFDs	287 059		400 863		1 122 094		1 252 636
Shares and ETFs	961		441		7 506		2 592
Gross gain on transactions in financial							1 255 228
288 020		401 304		1 129 600
instruments
Bonuses and discounts paid to clients		(1 175)		(1 497)		(7 118)		(4 166)
Commission paid to cooperating brokers		(13 902)		(10 239)		(36 856)		(28 378)
Net gain on transactions in financial		272 943		389 568		1 085 626		1 222 684
instruments

The business model used by XTB combines features of the agency model and the market maker model, in which the Company is a party to transactions concluded and initiated by clients. XTB does not engage, in proprietary trading for its own account in anticipation of changes in the price or value of the underlying instruments (so-calledproprietary trading).

The hybrid business model used by XTB also uses an agency model. For example, on the majority of trading in CFD instruments based on cryptocurrencies, XTB hedges these transactions with third-party partners,, virtually ceasing to be the other party to the transaction (legally, of course, it is still XTB). The Company's fully automated risk management process limits exposure to market changes and forces it to hedge positions in order to maintain appropriate levels of capital requirements. In addition, XTB executes directly on regulated markets or alternative trading venues all transactions in shares and ETFs and CFDs instruments based on these assets. XTB is not a market maker for this class of instruments.

It is inherent in XTB's business model that revenues are highly volatile from period to period. Operating results are affected primarily by: (i) volatility on financial and commodity markets; (ii) the number of active clients; (iii) the volume of their transactions in financial instruments; (iv) general market, geopolitical and economic; (v) competition in the FX/CFD market and (vi) the regulatory environment.

As a general rule, the Group's revenues are positively affected by higher activity in the financial and commodity markets due to the fact that in such periods see higher levels of trading by the Group's clients and higher profitability per lot. Periods of clear and long market trends are favourable for the Company and it is at such times it achieves the highest revenues. Therefore, the high activity of the financial and commodities markets generally leads to increased trading volume on the Group's trading platforms. Conversely, a decrease in this activity and the related decrease in trading activity of the Group's clients generally leads to a decrease in the Group's operating income. Accordingly, the Group's operating income and profitability may decline during periods of low activity in the financial and commodity markets. In addition, a more predictable trend may emerge in which the market moves in a limited price range. This leads to market trends that can be predicted with a higher probability than in the case of larger directional movements in the

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XTB S.A.

APPENDIX TO CR NO 29/2023

markets, which creates favourable conditions for trading within a narrow market range (range trading). In this case, a higher number of profitable trades are observed for clients, leading to a reduction in the Group's market making result.

Volatility and market activity is driven by a number of external factors, some of which are market specific and some of which may be linked to general macroeconomic conditions. It can significantly affect the Group's revenues in subsequent quarters. This is characteristic of the Group's business model.

Expenses

In the third quarter of 2023 operating expenses amounted to PLN 165,0 million and were higher PLN 32,4 million to the same period a year earlier (Q3 2022 r.: PLN 132,5 million). The most significant changes occurred in:

• costs of salaries and employee benefits, an increase of PLN 14,7 million mainly due to the increase in employment;
• marketing costs, an increase of PLN 10,0 million mainly due to higher expenditures on marketing online and offline campaigns;
• other external services, an increase by PLN 2,8 million as a result of mainly higher expenditure on:
  (i) legal and advisory services (increase by PLN 1,6 million y/y); (ii) IT systems and licenses (increase by PLN 1,0 million y/y).

	(in PLN'000)			THREE-MONTH PERIOD ENDED			NINE-MONTH PERIOD ENDED
			30.09.2023			30.09.2022			30.09.2023			30.09.2022
	Salaries and employee benefits		63 767			49 036		188 547		142 014
	Marketing		58 585			48 579		194 843		153 891
	Other external services		15 489			12 737		45 496		35 102
	Commission expenses		14 576			12 995		43 561		40 585
	Amortization and depreciation		4 196			3 080		11 926		8 735
	Other costs		3 208			1 262		7 380		6 437
	Taxes and fees		2 947			2 899		8 836		7 645
	Costs of maintenance and lease of buildings		2 198			1 958		5 973		5 923
	Total operating expenses		164 966			132 546		506 562		400 332

In q/q terms, operating costs increased by PLN 7,6 million mainly due to PLN 3,8 million higher offline marketing expenses and PLN 2,3 million higher salary and employee benefits expenses, mainly resulting from an increase in employment, as well as 0,7 million higher commission expenses resulting from higher amounts paid to payment service providers through which clients deposit their funds on transaction accounts.

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