eToro Group Ltd. Q3 FY2025 Earnings Call

My name is Daniel Amir, Head of Investor Relations. This webcast is being recorded and will be available for replay in the Investors section of eToro's website. Our earnings press release, investor presentation, and October monthly spreadsheet is now available on our website at investors.etoro.com. Today, I'm joined by Yoni Assia, our CEO; and by Meron Shani, our CFO. Following the prepared remarks, we will conduct a Q&A session and answer questions from both institutional research analysts and a selection of the most upvoted questions previously submitted by eToro's retail shareholders. But before we begin, I want to note that today's discussion contains forward-looking statements including statements about goals, business outlook, industry trends, market opportunities, expectations for future financial performance, and similar items, all of which are subject to risks, uncertainties, and assumptions. You can find more information about these risks and uncertainties in the press release that we issued today and in the Risk Factors section of our filings at sec.gov. Actual results may differ, and we take no obligation to revise or update any forward-looking statements. Finally, during today's meeting, we will discuss non-GAAP financial measures. These non-GAAP financial measures are in addition to and not a substitute for or superior to measures of financial performance prepared in accordance with GAAP. Definitions and reconciliation of GAAP to non-GAAP measures are available in our press release, investor presentation, and on the sec.gov website as applicable. With that, I will pass the call to Yoni.

Thank you, Daniel, and thank you, everyone, for joining us today. Welcome to our third quarter's 2025 earnings call. After Meron and I conclude our prepared remarks, we'll open it up for questions. We're proud to share another strong quarter that reflects eToro's continued momentum and growing strength as a global leader in trading and investing. This performance with net contribution up 28% year-over-year to $215 million and adjusted EBITDA rising 43% to $78 million, delivering solid operating margins of 36% is a testament to the vision, resilience, and scalability of our diversified business. What excites us most is the remarkable pace of innovation unfolding across eToro, with AI accelerating our product development. We're not only enhancing the platform that our users know today, we're reshaping the future of investing. We're expanding into new frontiers in crypto, tokenization, and AI while also broadening our global reach to serve an ever-growing community of smart investors. This wave of innovation is delivering tangible results, record assets under administration, robust growth across all segments, and unprecedented engagement in Copy Trading. Together, these achievements underscore how our investment in technology is fueling growth, deepening client engagement, and bringing us ever closer to our mission, which is to empower everyone to trade and invest in a simple and transparent way. Our key performance indicators accelerated meaningfully this quarter. Funded accounts grew 16% year-over-year to $3.73 billion with organic funded accounts expanding at a double-digit rate. This growth demonstrates the growing appeal of eToro's differentiated platform, the trust we've built with our global community of investors, and the success of our disciplined and data-driven marketing approach. Assets under administration reached an all-time high of $20.8 billion, up 76% year-over-year, fueled by growth in new deposits and strong user investment returns in both crypto and equities this year. The positive momentum in our KPIs has continued into Q4, as shown in the October results released today. These results show our strategy in action. We're democratizing investing by making it simple, accessible, and social while combining multi-asset trading with smarter products like Copy Trading and smart portfolios to empower investors everywhere. As we execute on this vision, we're confident in our ability to deliver lasting value for our users and shareholders. To achieve the strong performance we delivered in Q3, we've remained focused on executing across our four strategic pillars of trading, investing, wealth management, and neo-banking while accelerating product innovation across the platform. Let me share a few highlights across each of these areas... (Content continues with detailed performance and strategic outlook)

Thank you, Yoni. As Yoni mentioned, we are very pleased with our third quarter results. Third quarter net contribution grew 28% year-over-year to $215 million, and adjusted EBITDA grew 43% year-over-year to $78 million. In line with our focus on diversified, profitable revenue growth, our adjusted EBITDA margin was 36%, expanding 370 basis points from a year ago. These results are consistent with our view that our long-term adjusted EBITDA margins will increase from these levels. Our momentum has accelerated in the third quarter. Assets under administration for the quarter increased 76% year-over-year to a record of $20.8 billion, while our funded accounts grew 16% year-over-year to $3.73 million. The growth was driven by strong user acquisition and retention efforts and ongoing disciplined marketing. Let's take a closer look at our third quarter financials by business lines compared to a year ago. Our net trading contribution from crypto grew 229% year-over-year to $56 million, which was largely driven by higher invested amounts per trade and increased crypto activity, especially in the month of July and August. Our net trading contribution from capital markets, equities, commodities, and currencies declined 21% year-over-year to $73 million as investors shifted activity between crypto and capital markets. The 15% rise in the number of trades was driven by strong momentum across Copy Trading with record inflows into Copy, a clear reflection of growing customer engagement and platform strength. Net interest income contributed $62 million, up 44% year-over-year, largely driven by a 52% increase in higher interest-earning assets due to an increase in customers' cash deposits, customers' margin book, staking, and corporate cash. eToro Money contribution grew 50% year-over-year to $21 million, largely driven by an increase in total money transfers. In the third quarter, adjusted OpEx was $137 million, flat quarter-on-quarter. Our adjusted selling and marketing expense was $47 million or 22% of net contribution. Our business model provides us with flexibility in our selling and marketing expense, where approximately 70% of our expense is dynamic. Adjusted R&D and G&A and operating expenses were $36 million and $54 million, respectively. Our adjusted diluted EPS for the quarter was $0.60 compared to $0.51 in the third quarter of 2024. Moving to our balance sheet, we ended the quarter with $1.2 billion in cash, cash equivalents, and short-term investments and generated $57 million in free cash flow from operations. Now let me share a few comments on fourth quarter trends. As part of our quarterly results today, we also released our October monthly KPIs. Consistent with our commitment to greater transparency and enhanced disclosure, we will now begin publishing KPIs on a monthly basis. We've also made a detailed spreadsheet available on our website, which includes historical monthly data to help investors better track our performance over time. Our goal is to provide the investment community with the information and tools needed to more clearly understand, model, and evaluate our business. The month of October continues the strength that we saw in Q3. Our capital markets and crypto businesses saw significant year-over-year growth in both total number of trades and invested amount per trade. Assets under administration were $20.5 billion, up 72% year-over-year, and funded accounts were 3.76 million, up 17% year-over-year. To summarize, we are very pleased with our strong Q3 performance and positive momentum, and we believe we are well-positioned to capture new opportunities, drive sustainable growth, and further strengthen eToro's leadership in global investing.

Thank you, Meron. The first question here comes from a list of questions that have been pre-submitted by our retail investors. This question is for Yoni. So eToro announced its new subscription offering. Can you comment on why eToro decided to launch the program? And what is the opportunity?

Sure. We've built the eToro Club program to provide great premium benefits including unique features, better service as well as discounts to various aspects of eToro, as well as the card, the cashback, and now the crypto cashback. The club originally was based only on the tiers of how much assets customers had. We wanted to provide the same great benefits to people who want to subscribe to the new eToro subscription. This also consolidates the subscription models that we've had from acquisitions we've done in the past, and we're very excited to see how the uptake is already to the new subscription model.

Our first question will be coming from Dan Fannon of Jefferies.

I wanted to talk about account growth. And so obviously, it's been good or quite strong. I was hoping you could talk about if there are regions or new markets that are contributing more and maybe the breakdown of that account growth here, not just for the quarter, but also October, if there's any more granularity, that would be helpful.

Sure. Meron?

Thank you, Dan. Regarding our current growth, as we have discussed before, we have achieved double-digit growth. We are seeing excellent results from our group of clients, with an increase in deposits on the platform and heightened engagement levels. Overall, the results are very positive. While we are not providing a geographic breakdown, I can certainly say that we are observing encouraging signs from the new regions we launched recently and in the last few years, along with significant strength from our core markets.

And we have seen also a very good increase in the size of accounts coming into eToro. So it's both new funded accounts growth and their first-time deposit, which is a very good indicator of the future size of the accounts.

And our next question will be coming from Devin Ryan of Citizens.

A question on artificial intelligence implications here. So great to see 30% of club members engage with eToro. It'd be great to hear about anything you can share on kind of conversion uplift from doing research to actually trading and trade frequency. I know we're early days here, but I'm just trying to think about that. And then more broadly, taking a step back, just some of the other types of offerings you're planning to launch with artificial intelligence and just how you feel like that can maybe differentiate the eToro offering in the market?

Sure. So during our Pro Investor Summit about two weeks ago, we've actually announced our new tools, an AI studio for Pro investors to actually vibe code tools. Those tools include both new types of analysis that can actually look at their portfolio using AIs, look at other people's portfolio using AIs, read the entire feed, and create automated strategies. I think the biggest driver eventually of AI, and I started, I think I did my first automated trading strategy when I was about 16 or 17, is the transition from just click to trade through the UX to eventually running automated strategies, quantitative strategies of our users. What we've built is the ability for our Pro investors to actually build those apps, those strategies. It includes dashboards and analysis of how they generate their trades and then actually provide an app store, so all of our customers can access that. We've seen some really amazing apps developed already by our Pro investors. Just as a quick example, we've had one of our Pro investors actually creating the persona of Warren Buffett, Benjamin Graham, and I think it was Cathie Wood basically ranking his stocks in his portfolio and suggesting how to rebalance the portfolio. I do believe AI is an amazing tool for people who are not necessarily technical to bring in sort of their ideas on how to automate their strategies, how to make their strategies more professional on top of the eToro platform. Over time, that drives both high returns, so making our customers more successful and actually higher velocity of trades in eToro.

And our next question will be coming from Craig Siegenthaler of Bank of America.

Our question is on your strategic focus by geography. Please correct me if I'm wrong, but I see a company that is very focused on growth in the U.S., in Asia, and maybe widening geographically into new markets. eToro has leading share in Europe with some scale. This market also looks a lot less competitive than the U.S. and Asia. My question is, why not focus on your first-mover advantage in Europe, and continue to deepen our investor base there, especially given that there are fewer regulatory restrictions on your CopyTrader model in Europe than in the U.S.?

Sure. When we consider our growth strategy, we prioritize long-term growth and aim to establish a significant presence in the U.S. and Asia. In our daily operations, particularly in our marketing efforts, which rely heavily on data-driven performance marketing, we consistently analyze the ratio between customer acquisition cost and lifetime value. When we identify strong markets, such as Europe and other regions like the UAE and Australia, we intensify our efforts for growth in those areas. Our focus is on expanding the business through a data-driven methodology, ensuring that we invest more in locations where we experience the highest return on investment. We are committed to retaining our leadership position in Europe within the retail brokerage sector.

And our next question will be coming from James Yaro of Goldman Sachs.

Could you help us think about the account growth algorithm here? What do you see as achievable for account growth going forward? Is it high single digits or double-digit account growth on a yearly basis? And then in the press release, you talked about net new accounts in the first three quarters being stronger than all of 2024, but maybe any ability to comment more narrowly on the 3Q '25 trends?

Sure. First of all, strategically, we are aiming towards double-digit growth of funded accounts. We believe, again, the total available market of new generations coming into the market, the market itself will grow in double digits, and we believe we can outpace the market growth in all of our both existing strong regions in Europe and beyond as well as obviously new regions such as the U.S. The comment in the press release, I do believe, was regarding the U.S., which post-IPO, we actually started basically revamping both our product strategy in the U.S., bringing all of eToro's global products into the U.S., including now more than 100 crypto assets and staking that was launched in the U.S. as well as very excited about launching CopyTrading now in the U.S. We do expect double-digit growth in funded accounts moving forward strategically across all regions.

And our next question will be coming from Brett Knoblauch of Cantor Fitzgerald.

Maybe two, one on the crypto side, it was a really strong quarter in terms of crypto volumes. I think you guys marginally outpaced global spot volumes by kind of two to one, if not more. Can you point to how much of that was maybe from what you did in the U.S. and had new tradable assets in the U.S. plus maybe outside of the U.S.? And then as a follow-up, I think ECC came in a bit below where we were expecting. Can you just talk about the dynamics at play within the ECC during this quarter as well?

Sure. I'll cover high level and then I'll let Meron talk a bit about the numbers in the quarter. But first of all, when you look at our numbers in the last eight quarters, and you see that in the investor presentation, what we've seen over time is very clear. When one asset class is very strong, we see a shift towards that asset class from other asset classes. So every time crypto has very strong momentum, we actually see the non-crypto revenues or capital markets revenue actually going down a bit. As crypto goes down, we see capital markets significantly shift higher as well. This dynamic was seen in Q3. In addition to that, within capital markets, there are two segments. There's currencies, commodities, and indices basically future-based, and there's stocks. We did see more stock trading volumes increase in Q3, which led to the lower take rate as take rate on stock trading is lower than on commodities, indices, and FX. Regarding the crypto market, of course, we've seen a couple of all-time highs during Q3 that always supports our crypto revenues and trading activities. In general, we do expect to continue and see a strong crypto market with a very, very positive U.S. administration towards the crypto industry and a lot of new product rollouts for eToro within the crypto industry.

Sure. We can see definitely a sequential growth from Q2 at a very high pace, both on the number of trades as well as the invested amount. We saw elevated activity coming in July and August as we released our KPIs also early September about the summer. Very good traction came out of the crypto activities of customers in the summer. We did see a slight reduction in that in September but remains on the same level also in October. We're very happy about what we see in the industry. In general, as it goes to become more and more mainstream, we'll see the number of trades and the number of customers tapping into crypto growing, and together with that, our revenues as well.

Our next question will be coming from Chris Allen of Citi.

Maybe you could talk about capital allocation priorities here. You announced the buyback this morning, make some sense with a lot of exploration now, but you've also talked in the past about looking at inorganic growth opportunities, particularly in the U.S. to build that out. So help us think about the different levers here from a capital allocation perspective?

Sure. First of all, we've added a significant amount of cash flow already this year. Our balance sheet grew from $1 billion to $1.8 billion in total, with $1.2 billion in cash and short-term investments. We have a very strong balance sheet to look both at buyback. Again, at these levels, we do believe the price is undervalued, which is why we're buying as well. Of course, this leaves a significant amount of dry powder also to look at acquisitions. We have been talking to various potential targets. We're always excited to meet great teams of great founders with products that we believe add value to our customers and that our products will add value to their customers, and we're actively exploring these opportunities across different regions. As we announce them, you'll know what the actual targets are.

And our next question will be coming from Bill Katz of TD Cowen.

Just a question coming back to your commentary about the longer-term opportunity for the prediction and the event market. I was wondering if you could maybe lay out your pathway of like how you get there. Is this an organic opportunity? Is it inorganic? And then within that, I was wondering if you could share your thoughts on just philosophically how you think about the sports or gambling opportunity within that?

Sure. We're looking at both organic and inorganic routes for prediction markets. First of all, we've launched futures in Europe, and the future rails that we've launched in Europe are the same rails that eventually enable prediction markets in the U.S. as well. In addition, we are launching our crypto wallet, which will enable our customers to engage with on-chain prediction markets such as Polymarket and others. We believe that prediction markets on financial events, on geopolitics, and on economic events create significant value for people thinking about their trading strategies or hedging their strategies. This will initially be our focus to help our customers find those financial opportunities that are related to their portfolios.

Our next question will be coming from Alex Kramm of UBS.

Just on CopyTrader in the U.S., I know it's super early, but maybe you can talk a little bit about how you're looking to scale it in terms of marketing you're leaning in. I think you have 300,000 roughly accounts in the U.S. I think you said earlier, CopyTrader globally has one-third or so of your clients having uptake there. So just how should we be thinking about the opportunity and how quickly you can scale and if the third is kind of like a good target for the U.S. as well?

Our view holistically is always, as we enter new markets, to roll out all of the products that we offer globally in that market. We look at the U.S. as a huge opportunity with now crypto back, staking back, and CopyTrader launched alongside stocks and options trading as well. The way we think about each product that we release is in terms of customer engagement with CopyTrader. What we see over time is an increase in both the size of wallets and share of wallet as well as over time, LTV increases significantly. We continue to promote the CopyTrader feature within the app, increase the attachment rate of Copy Trading, and build gradually more and more great investors that people can copy in the U.S. Over time, we'll see that increasing LTV, enabling us to increase our CAC and marketing budget to bring in more users to the eToro platform. So it's all about bringing all of the products to our U.S. product strategy, creating those attachment rates that increase the lifetime value and share of wallet of our customers here in the U.S., which will lead us to scale our marketing strategy in a profitable way.

And our next question will be coming from Jamie Friedman of Susquehanna International Group.

I wanted to ask first about the funded accounts as well.

Let's move to the next question, and then I'll come back if we can get a better connection with him.

Our next question will be coming from John Todaro of Needham.

Congrats on the achievement. I just wanted to clarify something. Will you be exploring economic partnerships in prediction markets like Kalshi or Polymarket? Also, I have a second question regarding what appears to be some intra-quarter cannibalization among your trading products, where an increase in crypto might lead to decreases in other markets. How do you plan to address that to ensure that all markets perform well simultaneously in the same quarter?

Sure. We're talking to Kalshi and Polymarket, obviously, the market leaders in prediction markets. We're excited about exploring the potential for our users to trade prediction markets on financial events. Regarding cannibalization, I'm not sure whether that's the right term to describe when customers inter-quarter trade different products. Overall, when you look at the growth of net contribution of trading, both in crypto and capital markets, you see them growing over time. We think it's a great opportunity for people to reshuffle or rebalance their portfolios. We've seen this happen between U.S. stocks and European stocks earlier this year. The fact that customers are trading between different assets is a strength, and we've seen significant value in eToro because we cover 22 different global exchanges, enabling customers to trade multiple products alongside both on-exchange and off-exchange derivatives like futures and options. Our customers' ability to trade between various assets enhances their overall trading experience.

And our next question will come from Brian Bedell of Deutsche Bank.

Maybe just to go back to CopyTrading, the mechanics of that in the U.S., in particular. I know there was some different regulatory regime in terms of being able to offer it with, I guess, the advisory component being a critical component of being able to be paid. Can you just go through the mechanics of how this is operating in the U.S. versus outside the U.S.? And if it's the same now or when you expect to have that aligned with how it works outside the U.S.? And any commentary on initial take-up. I know it's very early, of course.

Sure. First of all, it's early to look at take rates and engagement, but we have seen already people being copied and people are copying top investors here on the U.S. platform, which is great to see. Second on the mechanics, they are quite similar. When you copy an investor, it copies their entire portfolio into your portfolio in the amount you choose. If you copy somebody with $1,000, it fractionalizes their entire account across stocks and crypto and opens those trades in your account. Every time they trade, it will trade in your account at the same time, the same price, and the same proportion. The mechanics of copying work the same here in the U.S. and outside the U.S. Currently, we're revamping our Pro Investor Program, which is how Pro investors get paid here. As we move towards next year, we will be building that out.

And our next question will be coming from Dan Dolev of MIZ.

Congrats, guys. Great quarter, great October. I have a question on banking. A lot of fintech companies view banking as the Holy Grail, kind of, that's what everyone wants to do. So Yoni, Meron, like how do you guys view sort of like banking services globally in the U.S., etc., in terms of the long-term opportunity for eToro?

Sure. I generally say everybody is looking at the concept of the super app, right? So we believe our core is actually helping our customers find beta in alpha in their portfolio to generate returns over time and compound wealth. Our view comes more from our core expertise in trading and investing. What we've seen is an expansion of the business into savings and various pension schemes around the world where we have already launched in the U.K., Australia, and France recently, including the new launch of Cash ISAs in the U.K. Lastly, of course, we focus on neo-banking. We aim to provide our customers with a virtual bank account on eToro, offering interest rates in their local currency and the ability to convert easily between currencies to trade U.S. capital markets. This way, we enhance the user experience by removing the need for customers to have a traditional bank account. Our Visa debit card offers a 4% stock back incentive, encouraging customers to spend while also investing in capital markets.

Great. Makes a lot of sense. Congrats again on a great quarter.

And our next question will come from Jamie Friedman of Susquehanna International Group.

Yoni, the press release indicates that the 16% growth in funded accounts was driven both by user acquisition, but also retention. I was hoping at a high level, you could unpack those dimensions. Then if I could just sneak in another one, Meron. Can you remind us about the typical seasonality in the business as we build out our models?

Sure. We currently don't break down win backs, churn, and retention, but we've engaged significantly in going back into our database of funded accounts across time and making sure that they are kept up to date on all the new product releases, for instance, the debit card in Europe, futures trading, or the new crypto wallet. As we do that, we bring back also old customers into eToro, including those that churned and are now joining back for our new products.

Yes, regarding seasonality, I would say historically, we see strong Q1s and Q4s, mostly related to market conditions. Over the last three years, Q1s and Q4s have been stronger in both crypto and capital markets. However, we don't control the seasonality.

Next question will be coming from Alex Kramm of UBS.

I have a couple of follow-up questions. I hope I didn't miss this earlier. Regarding expenses, you mentioned earlier that they would be flat for the rest of the year. Is that still the case for the fourth quarter? Also, about interest income, I'm aware there are many factors at play, but it seems that interest rates went up quarter-over-quarter when looking at the interest-earning assets. Could you elaborate on what you're observing regarding interest income?

I'll start on the first one. Yes, as we mentioned last quarter, we're aiming to keep our cost base the same quarter-on-quarter, and we're roughly looking at staying within those lines for Q4 as well.

We have seen a decrease in interest rates due to two cuts; however, customer balances across different asset classes have actually grown. Even with a potential decrease in interest income, we anticipate that an influx of balances could help sustain revenue growth, particularly as customers tend to shift into riskier portfolios that could yield higher returns.

We have no further questions. And for closing remarks, we'll bring it back to Daniel.

Thank you for attending our earnings call today. We're looking forward to seeing you at our upcoming investor conference during the quarter. These conferences are on our website that you can go see in the Investor Relations section. Thank you, and have a great day.

Thank you very much.

Thank you.