Q1 2022 Interactive Brokers Group Inc Earnings Call
[music].
Good day and thank you for standing by welcome to the interactive brokers group first quarter financial results.
Conference call at this time, all participants are in a listen only mode.
After the Speakers' presentation there'll be a question and answer session to ask a question. During this session you will need to press star one on your telephone. Please be advised this call is being recorded if you require any further assistance. Please press star zero I would now like to hand, the conference over to your host today, Nancy Stuebe director of IR. Please go.
Go ahead.
Good afternoon, and thank you for joining us for our first quarter 2022 earnings conference call once.
Once again Thomas is on the call, but asked me to present his comments on the business.
Also joining us today is Milan Galik our C E O.
After prepared remarks, we will have a Q&A.
As a reminder, today's call may include forward looking statements, which represent the company's belief regarding future events, which by their nature are not certain and are outside of the company's control.
Our actual results and financial condition may differ possibly materially from what is indicated in these forward looking statements. We ask that you refer to the disclaimers in our press release.
You should also review a description of risk factors contained in our financial reports filed with the SEC.
The first quarter was one in which the only thing predictable with how unpredictable it would be except for our continued growth.
And the first three months of this year the market's absorbed news on geopolitical issues that included the war in Europe , and its impacts both humanitarian and economic.
As well as continuing supply chain issues product shortages levels of inflation not seen since the 19 seventies and the first fed funds rate hikes since 2018, but the expectations of many more to come.
Persistent deficit spending in this country has limited the government's ability to respond to high inflation with high interest rates.
As for each 1% rise interest on U S debt increases by $300 billion as it gets refinanced so.
So inflation is likely to stay with us.
Few markets unaffected by these events and most market indices worldwide were down in the first quarter.
Despite this we are very pleased with how our business performed even with the headwinds we faced in the quarter.
We ended the quarter with a record 1.809 million accounts and that increase of over 480000 from last March.
We saw account growth in all client segments in all geographic regions, with particular strength, 40% and 48% in Europe and Asia.
Together represent three quarters of our accounts.
Yeah.
As our client base grows darts have have risen as well.
In the first quarter, our darts were over $2 5 million the second highest in our company's history.
Volumes were up, particularly this quarter in futures and options.
Products, which carry a higher commission, but wasn't the case the futures. They also carry a higher cost with 56% of futures commissions taken up by exchange clearing and regulatory fees likely.
Likely due to a lack of competition and the largest futures market in the U S.
Higher Darts led to commission revenues rising to $349 million also the second highest in company history behind only the unusually active trading period last year.
As I mentioned on our fourth quarter call options volumes continue to be strong.
In the first quarter in the U S listed options volume for the industry for average daily volume of over 42 million contracts a record.
And unpredictable environment vertical option spreads give traders the ability to take on a very specific and limited risk reward profile for a specific period of time.
This appeals to many traders looking to invest in companies, whose business and prospects they believe in.
At less cost than if they had to buy those shares outright.
While in 2022, the impact of the Coronavirus has stated.
The resulting reliance by the public on electronic communications.
Meeting from a distance and gathering and sharing ideas and larger asynchronous groups, including groups of investors remains.
The net effect of this trend as far as I B K R and the online brokerage industry is concerned.
Is that even millennial analysts technologically oriented people have become more friendly with online activities.
As you May know the average age of our customers is 42.
Unexpectedly this opens up a new segment of potential customers for us.
And above wealthier people.
Most of these people have their investments managed by advisors on the conventional wealth management platforms with the larger brokers.
Now that they are at ease with online activities many of them would like to be able to see their accounts live online and sometimes would even like to do a trade by themselves and see Atlantic in their accounts.
At interactive brokers. This is something they can do.
Our task is to let them know that so that they would ask their advisors to move their accounts to I B K R.
Interactive brokers has become better at enabling our customers to navigate through our numerous high quality features that ever greater efficiency, helping them to establish their own personalized work environments and tool.
The superior customer experience. Our platform offers has become better known worldwide spread by word of mouth as well as by our institutional sales team as we continue to add customers at a rate of over 30%.
In addition, our capital base has grown even stronger during this period with total equity, reaching $10 $5 billion. This quarter up 1 billion. Since this time last year.
This space funds, our business helps us to attract larger customers and reassures the increasing number of clients looking to participate in the markets.
We saw account growth once again in all five of the client types that we service.
Individual account growth was fastest at 45% followed by proprietary traders of 35% introducing brokers at 23%.
Advisors at 16% and hedge funds at 8%.
We are excited about the opportunities we see in 2022.
We continue to place the enhanced focus on our marketing efforts and we increased spending in this area over the past year and expect it to continue again this year.
We recently introduced global trader, a simple mobile trading app that allows investors to open an account in minutes and start trading on over 80 stock exchanges around the world in 23 different currencies, allowing for global diversification.
It is integrated with our global analysts scanner, which helps investors identify investment opportunities worldwide, allowing global trader users to quickly take advantage of them.
We also started traders insight radio a new podcast series featuring interviews with thought leaders across financial services and that is available for free on our trader workstation client portal and I became our mobile as well as via the popular podcasts services.
Our leading ESG efforts continue and now include carbon offsets are clients can select from a list of preset activities estimate their carbon footprint and purchased the carbon credits to offset them, which we source and retire all from their ITK our account.
We believe in 2022 with the potential for higher inflation.
That more people will come to the realization that holding on to their money is cash is a losing proposition.
They will turn to equities worldwide to earn a return and interactive brokers will serve them with our innovative platform and educational materials.
We aim to be the platform of choice for the best informed most successful investors.
With that I will turn the call over to our CFO , Paul Brody, who will go through the numbers for the quarter Paul.
Thank you Nancy and as usual thanks, everyone for joining the call.
I'll first review the first quarter operating results and then we'll open it up for questions.
With our revenue items on page three of the release were pleased with the strength of our results this quarter.
Our robust growth in customer accounts positions us well for both commission and interest revenues in the quarters ahead.
Commissions were strong reaching their second highest quarterly revenue ever at $349 million.
Options and futures volumes outpaced the first quarter of 2021, while stock volumes decline from last year, So called media stocks Spike.
Net interest income up $282 million.
It reflected higher margin loan interest on greater loan balances as well as higher interest earned on our segregated cash portfolio as U S rates have recently moved up from near Zero. These.
These gains were offset by lower securities lending revenue, which reflected fewer opportunities in the marketplace.
Other fees and services generated $53 million with market data fees of $20 million up 5% and.
And risk exposure fee revenue tripling to $15 million.
Exchange liquidity payments remained at $10 million.
On consistent options volume.
Declines in I P O fees and account activity fees, which we discontinued for the most account types in 2021 reduce the total in this line item.
Other income includes gains and losses on our investments.
Currency diversification strategy and principal transactions.
Note that many of these noncore items are excluded in our adjusted earnings and without these excluded items other income was $8 million for the quarter.
Turning to expenses execution clearing and distribution costs rose, 4% from last year led by futures volumes, which carry higher fees.
As a percentage as a percent of commission revenues.
Execution, and clearing costs, which are driven by a combination of trading volume exchange rebates and changing fee schedules.
16% this quarter.
Meaning that 84% of incremental commission revenue dropped to the bottom line.
While this cost ratio will fluctuate over time with product mix and trading volumes the.
The factors that drive it lower overtime remain in place with exchanges offering rebates on compete and competing on cost.
Which gives our smart router the opportunity to improve on execution quality for our BK or pro clients.
Compensation and benefits expense, while up in dollar terms for the quarter as we expanded hiring to support our strong growth.
<unk>, 16% of our adjusted net revenues consistent with its historical level.
Our head count at quarter end was 2000 and 683.
Yeah.
G&A expenses were down versus last year, driven by a non recurrence of $18 million and Brexit related costs and lower legal expenses.
This quarter also included a $1 million donation towards humanitarian aid in Ukraine.
Our adjusted pretax margin was a robust 64%.
Automation remains our key means of maintaining high margins as well as continued expense control, while we hire talented people and invest in the future of our business.
$28 million of income taxes reflect the sum of the operating companies 11 million and the public companies $17 million.
Moving to our balance sheet on page five of the release.
Our total assets were 114 billion at the end of the quarter with growth over the last year driven by increases in our segregated cash and securities and margin lift.
Our consolidated equity capital was $10 $5 billion.
And we have no long term debt.
Turning to our operating data on pages six and seven.
Our contract volumes for all customers were especially strong reaching the second highest ever and options up 6% on the year and the highest ever and futures up 31% on a year.
Stock share volume was down significantly versus last year's active first quarter.
And the drop off is largely attributable to trading in pink sheet and other very low priced stocks.
On page seven you can see that our account growth remains robust with over 132000 net account adds in the quarter.
Total accounts, reaching $1 8 million.
Up 36% over the prior year.
We are now adding accounts at a quarterly pace that is greater than our annual pace prior to 2020.
Total customer darts were over $2 5 million trades per day second highest in company history surpassed only by last year's extreme first quarter activity, but up 4% from strong fourth quarter trends.
Our cleared IP cure pro customers.
Paid an average of $2.57 Commission for cleared conditional order up 11% from last year as our clients volume.
<unk>.
Included proportionately more futures than last year. These.
These products carry higher pass through fees charged by exchanges and clearinghouses.
Page eight presents our net interest margin numbers.
Total GAAP net interest income was 282 million for the quarter.
Down 8% on a year ago quarter.
Reflecting strength in margin lending offset by fewer opportunities in securities lending.
The federal reserve raised interest rates by 25 basis points with about two weeks left in the quarter, which had a minor positive impact and a 12 week quarter, but we will have a full positive impact in the next quarter.
Margin loan interest was up 27% to $149 million as average margin loan balances grew 18% over last year's first quarter.
The higher fed funds rate bodes well for our U S dollar denominated balances, which are roughly three quarters of the total.
Net interest on segregated cash turned positive this quarter and we earned $7 million on those balances due both to our opportunistic investment strategy as well as the mid March Federal reserve rate hike.
Securities lending net interest was $110 million.
One from $175 million and the unusually active year ago quarter.
You were hard to borrow names that investors sold short in the first couple of months of the quarter, particularly in January and early February .
We began to see more opportunities open up in March.
Interest from customer credit balances or the interest we pay our customers continues to be positive because in currencies where rates are negative we pass through some of the increased cost to customers. We earned $9 million on these balances.
Now for our estimates of the impact of increases in interest rates.
We expect the next 25 basis point rise in rates.
To produce an additional $124 million annually.
Note that our starting point for this estimate as March 31, when the first 25 basis point increase in fed funds has already occurred.
The $124 million estimate is for a second rate increase and is in addition to the $165 million increase for the first rate hike that we estimated last quarter.
As current market expectations include larger rate increases we note that a 50 basis point rise in rates would produce an additional $175 million annually.
It does not take into account any change in how we may adjust our interest our investment strategy to take advantage of newly higher rates or any change in our asset.
About 28% of our customer cash balances are not in U S dollars. So estimates of U S rate changes.
Rate change impact exclude those currencies.
In conclusion, the first quarter produced a solid start to the year, reflecting our continued ability to grow our customer base take advantage of opportunities as they arise while managing the business effectively with strong expense control and with that I will turn it over to the moderator and we will open up for questions.
Thank you as a reminder to ask a question Youll need to press star one on your telephone to withdraw your question press the penalty. Please standby, while we compile the Q&A roster and once again that is star one if you would like to ask a question and our first question comes from Rich Repetto from Piper.
Sandler.
Your line is now open.
Hi, Good evening, Thomas and good evening Paul.
Yes. The first question has to do with the truck just trying to understand.
Paul the interest rate sensitivity you just went through.
When you say the next 50 basis points.
We've had a rate hike one and then.
Second one would be $1 24.
This 50 basis points can we consider that.
This year it looks like there's going to be at least the third confusion to forecasting eight additional so would that be.
Hi.
What do you call it three through rate could.
Can we apply that sort of sensitivity.
Alright, so we haven't mapped it all the way out but I can tell you that.
Is it the incremental numbers.
<unk>.
Stabilize after.
Right.
Maybe about three rate hikes, and that's because the rates are high enough that we're now paying customers credit interest on their credit balances.
And so we're earning our spread and the.
The incremental amount we earn as the rates go up.
Is on what we call fully interest rate sensitive balances in other words balances that.
On which customer customers are not earning.
And after about three rate hikes of 25 basis points.
That levels out at about $50 million incrementally per year for each 25 basis point angry.
Got it that we had 124 now we're looking at.
The incremental that I said 50 basis points.
<unk>.
Got.
About 175 million was.
Equivalent to.
The $124 million would be 425 basis points $175 million would be for 50 basis points, hence about $50 million extra for that next 25 basis points.
Got it.
The clarification is helpful.
Good evening, Thomas just wanted to get your view.
People are trying to understand and grabs grasp where the retail investors and.
It looks like.
I had two.
You could sort of guide us.
It looks like the more sophisticated trader is still pretty strong given the size of the trades, we're not in a little bit more tilted towards futures.
Could you size up retail engagement.
Who's trading these days is it sort of bifurcated between the sophisticated and sort of some of the newer investors we saw.
In the first quarter of last year.
So aside of the semi so it can be sticky.
The more sophisticated I think are just.
Our trading go away day day.
Basically.
We focus more and more of the options and we deem that they tend to do more and more vertical spreads.
And what.
What we like about vertical spreads of course.
<unk> strategy.
Just as much in down markets as it is going up markets. So we expect that.
The market got its going down.
We have not suffered too heavily.
Hello.
From Black book trading.
Okay, I've got follow up questions, but I will get back into queue. Thanks Thomas.
Yeah.
And thank you.
And our next question comes from Craig Siegenthaler from Bank of America.
Your line is now open.
Hey, good evening everyone.
Hi, good evening.
Good evening Thomas So in the prepared remarks, Paul you commented how much stronger the organic growth rate is today versus before 2020, and that's continuing here into a more challenging backdrop in <unk> overall, what do you attribute this to and Thomas I know you've had.
Target out there I believe around 40% going forward, but what gives you conviction and confidence that this strong organic growth trajectory will continue here.
I think my target was 30%.
I certainly don't believe that we will.
Get Tory Burch basketball, but extremely unlikely.
I'll be very happy with it.
The person that Colin girls.
And.
And even that is those new at cod.
As they keep growing over that fact that you at Collins, then could be somewhat slower smaller.
Although we do have.
Several.
Prospect.
The larger prospect.
The pipeline, but.
Could be.
Basically.
In the introducing broker base.
Great.
And they are likely to be more and more.
In other words.
When they join US Dave we did not show up in the India Con barrels.
So somebody could join us, we'd say 100 dogs in that bucket.
But it really just show up on that because it is going to be on all new classic.
That makes sense.
And then just turning to capital return you have $10 5 billion of equity capital now.
Is there a level, where you can accelerate the return of capital to shareholders and is one reason you have so much capital also because you are trying to win hedge fund prime business, where the size of the balance sheet is critical.
You are absolutely right, we are going to keep on accumulating capital and so that remains our credibility in the eyes of the investing public.
Thanks for taking my questions.
Thank you.
And our next question comes from Dan Fannon from Jefferies. Your line is now open.
Thanks.
I just wanted to clarify Paul one thing on the rate sensitivity. So in addition to what you said.
For the next two hikes, but every 25 basis point hike after what would be the first three it will be a.
$50 million benefit is that the way to think of it.
Roughly but of course, that's assuming no change in balances and if our balances grow over time those numbers will go up.
Right.
And given you haven't.
James Your investment philosophy, but obviously the backdrop for rates there is a lot different today than it was three months ago.
How are you thinking about that potentially as the year progresses and the rate backdrop changes should we see a shift or should we anticipate the shift in investment strategy based upon the backdrop.
No no so look.
I very strongly believe that debt.
Further a car park you have to go much higher too.
Hello, Don inflation, let's basically these steel up.
Meg up ebay right.
So.
I think that just going up.
There are 3% then being negative.
So 5% is not going to be good enough. So.
I think that.
Rates could go as high as four 5%.
We are not going to.
Lend money for any further down or that value value short.
Okay.
Okay. Thank you.
And thank you.
And our next question comes from Kyle Voigt from K B W.
Your line is now open.
Yeah.
Hi, I just wanted to clarify I think Nancy you mentioned that Milan is joining the call for <unk>.
Is that correct.
M.
That's correct Heiko.
Hi, welcome to the call.
Thank you just because you haven't you haven't historically had.
Much exposure to BK are investors in this forum before just wondering if you could share a few maybe high level thoughts on the state of the business.
What opportunities you are spending the most time on operationally and then what segments or initiatives that kind of excite you. The most as you look out over the next three years or five years for the company.
So thanks for your question I feel like interactive brokers is firing on all cylinders, we have a lot of projects.
But we are currently working on we are still spending quite a bit of time on.
Increasing our scalability.
Our goal is to be able to service 10 million accounts.
10 million trades per day.
Getting close to be able to hit those numbers. So scalability continues to be part of our work.
We focus on the retail investors as you might have seen we have released the impact not that long ago.
We have put online D global trader, which we just started marketing.
So we are doing work that should appeal to the most retail clients if you will.
And there is substantial amount of effort, we are putting into servicing the financial advisors.
We are making it easier for them to onboard their clients, we're making it easier for them to service those clients were going to be gradually allowing financial advisors to do more work for declines than we previously allowed.
Our sales force is doing a great job in getting us institutional accounts for example, the brokered.
Brokered accounts into introducing brokers accounts. So we have a few in the pipeline that you are going to be onboarding. This year.
We are working on.
The phase III, if the Aurora mobile trader.
We are designing a brand new desktop trading platform.
And I could go on and we're going to be adding product since we usually do we're going to be adding new geographies for our international traders.
Yeah.
That's great color. Thank you for thanks for that and welcome again I.
I guess for a follow up question, maybe for Paul on the expense side.
I think fixed expenses in aggregate were $179 million in the first quarter, we compare that to the first quarter of last year, and even excluding that I think $119 million or so of onetime Brexit expenses last year.
Fixed expense growth rate was still only 8% or so year on year, which is lower than your historical growth rate.
Well as I think the guidance range, which is closer to that 15% type range perfect for fixed expenses. So just wondering how we should think about year on year growth in fixed expenses as they move through the remainder of this year.
So by design, we have been increasing staff to accommodate our growing business, especially in our.
Client services, but also we've ramped up compliance over the last several years. So that's by design and so when you see those numbers increase.
Increasing.
We're expecting that in fact, we're hitting our targets I think.
And really the rest.
Are fairly stable.
When you see the G&A go up and down its because theres items in there that come and go as we mentioned.
It was about $18 million that we spent last year related to Brexit and getting regulated in Europe .
It.
It didn't repeat this year, hence those numbers came way off.
So it's a little hard to pin down the overall growth rate.
But probably the largest contributor may continue to be the employee compensation and benefits.
Got it so it seems like this type of growth rate is.
Fairly good to assume for the remainder of the year is that.
Is that fair or is it the highest now high single digits or low double digits, just trying to get a sense of that.
The growth rate, we should be assuming.
And our models.
Saying that that low double digits or closer to the.
So the target then than high single digits. So we.
We obviously continue to we are continue to expand.
In our customer service and in the number of geographies, where we are.
<unk> subsidiaries, so I was saying that the $15.
The increase is.
Probably a good guess.
Great. Thanks Thomas.
Back in the queue. Thank you.
And thank you and our next question comes from Chris Allen from Compass Point. Your line is now open.
Evening, everyone. Thanks for taking my questions I wanted to ask about.
The yields on margin balances, so a nice increase sequentially and year over year.
Had some pricing changes in there I was just wondering if you could parse out what was driven by pricing changes and also what was driven by the recent fed hike.
So.
But they used to do it.
Quite a long time ago was that.
Our margin rates were between a half.
I have to point and one and a half.
All lines over fed funds.
We have increased the bottom of that show that we are between 75 basis points and whether that point.
150 basis points over fed funds, that's the only change we have made.
Understood and is there any impact from the full quarter.
Sorry.
Was that impact felt for this full first quarter.
Oh, yes, yes, yes, yes.
Okay. Thank you.
And then maybe a quick one just on execution and clearing costs.
In addition to higher futures activity the loss of the CCP wave, we're going weigh that.
Pat.
Was that also a factor just in higher execution and clearing costs relative to where they had been running.
I'm, sorry can you repeat that correct.
Chris Yes.
I'm, just trying to figure out with who the execution and clearing costs, obviously ramped higher from where it had been running you attributed some of the futures activity, but the OCC fee waiver, which had been effects for the tail end of 2021 that went away. So I'm just trying to figure out the difference between the two what's the driving factor there.
Yes, most of it was driven by the futures.
There was an impact from the OCC fee holiday at the end of the year coming back it didn't come back at the full rate that they started last year at last year. They started at a higher rate dropped it towards the middle of the year and then put a fee holiday on for part of the end of the year.
Dave reinstated at around somewhere in the middle.
Which is probably reasonable for them because they are doing such higher volume now.
That impact was something like $3 million to $4 million in the quarter.
The prior quarter.
Understood. Thanks, everybody. Thank you.
Okay.
Thank you and we have a follow up question from Rich Repetto from Piper Sandler Your line is now open.
Yes, Hello, again now that we know we haven't Milan on the call as well.
Wanted to get a question for him as well.
So Tom.
Thomas is placed I guess, the highest priority the highest standard.
Tech technology driving <unk>.
Interactive brokers success and I guess.
From your standpoint, which of the areas in technology really differentiate you.
Can you talk about your platform, how you see the platform.
And how it sets you apart from.
Some of your peers.
Hi, rich thanks for the question.
I think what sets us apart is the fact that I view, our company as a technology company that implies it skill set to.
The financial industry. So.
So we have a lot of program or is a lot of technologies.
Working for the company as you May know.
Interactive brokers started as an options market, making firm.
And what we were doing was building computer systems for trading options at the various exchanges. So our mindset is technology that is how we approach the problems, where we look at workflows that task flows that our clients have to execute on the platform.
We ask ourselves the question.
How can we automate the process that they are executing how can we make the process. The most intuitive and seamless for them. So that is our nature. We obviously have a very strong sales force, but at the core we are at that company and I believe that's what sets us apart the high <unk>.
Evel of automation, which you can clearly see in the 65 plus percent profit margin that we are running as a company.
And that will never change.
That is what we are counting on going forward building new features for our clients.
Reviving the the older ones.
Are you seeing the stability and scalability of our systems that is what we are into that is what we will continue to do.
Understood very helpful and I got one last one for Tom it's getting back to the retail investor comments. So we did see some deleveraging or margin balances contracting a bit.
A couple of months I believe and just trying to understand we saw futures go up.
We've seen the Russia Ukraine.
Events sort of.
Stall I guess, so so it appears.
There was a lot of training maybe in February .
Yeah.
With derivatives, but it seems like it's more stalled now.
Just trying to understand again, who is trading as we get into this period if market conditions pretty much stayed the same.
For the next couple of quarters.
So look I mean.
Yes.
<unk> for our customers, particularly in the other three so.
Something like 52% of the customers do.
Three or less trades a year.
Yeah.
Now said that up against the remaining 48%.
Yeah.
The average cost in everyday $100000 of assets in these accounts 230 times a year.
And from there on.
Or every 60% increase.
In funds in.
In the con the trading volume doubles.
I need to Prizing Lee is yet baggy straight line.
Okay. So.
You're a sophisticated traders are semi sophisticated traders the ones with more assets.
Our more active.
Alright.
Okay.
That was it.
Alright, Thanks that was helpful.
Thank you.
Thank you and if you have a question that is star one again, if you'd like to ask a question that is star one and we have a follow up question from Craig Siegenthaler from Bank of America.
Your line is now open.
Thanks for taking the follow up.
Had a question on the mix of new account growth with the 133 million accounts.
By geography, any commentary on what it looked like on the way in and I was in particularly.
<unk> Asia, and Eastern Europe , and also any commentary on.
Clients closing accounts or redemptions on the other side of that.
Sure.
We didn't really have redemptions out there then.
Food too and Tiger broker going go away right.
<unk>.
And there were some European introducing brokers who were.
We're extremely active.
In last year and they have.
Hi.
Data activity has drastically diminished.
D C.
Uh huh.
So.
Tell me again, what is it that.
You would definitely try to find out.
I just wanted to understand what the inflow look like by geography. If there is any regions that were out hitting their weight.
In flow by geography, well.
Okay.
It's basically due to the so.
Looking at the annual numbers.
And due to the.
I have said, they're going to go away.
Food Glenn Tiger.
Our inflow from Hei basically unchanged for the year.
Ah Indeed.
In the for the Americas.
Married cause eats up 11%.
From Europe , it's up 17%.
So thats all for me.
Those are the numbers.
Thank you Thomas and I had a file a followup to Kyle's question on expenses.
Last year, the operating margin was high at 67%. It was a good commission backdrop this quarter. It dipped to 64% you talked about expense growth I think in a low double digit zone, but also how should we think about operating leverage should we really think about the margin really kept kind of in the high.
<unk> and it really as ceiling, where we are here.
Okay.
We find it very difficult to go.
Hey, Bill.
We keep thinking that.
All of these days.
The growth rate adjust.
Exceed the.
Continuous hunger to do to build new things.
And the growth on the on the backbone that we have built up to that point is going to exceed the <unk>.
Continuing spending newly investment, but we haven't seen that happen yet. So we just keep thinking that may yet, but in the future, but it hasn't so far.
And it certainly is not likely to happen. This year, maybe maybe later on.
Thank you Thomas.
Thank you.
And we have a follow up from Kyle Voigt from <unk>. Your line is now open.
Hi.
Excuse me. Thank you for taking my follow up.
I guess a follow up question for Milan, you spoke about how <unk> has been and always will be a technology first firm.
But the company has also been putting a lot more focus on marketing and the prepared remarks, you spoke about growing the marketing spend.
Just wondering if you could talk a little bit more about the marketing strategy.
The shift.
And that strategy over the past couple of years. It seems like there is certainly more emphasis on that now and then the trajectory I guess in terms of the.
That marketing.
And as we as we look ahead.
Beyond this year over the medium term thank you.
So marketing is obviously extremely important it doesn't matter what kind of technology rebuild for our clients.
How low cost provider, we are if we don't tell anybody about it.
We have to explain ourselves very well and make ourselves attractive to the to the investors. So marketing is extremely important we haven't been increasing our marketing spend but we haven't been doing it gradually and responsibly at all times, we pay a lot of attention.
At what type of return we receive from the various marketing channels and the ones that work for us well we.
Put more money into and the ones that can.
Do not pan out do.
Do not.
Work well enough.
We take our spending back.
And this will gradually continue.
Understood. Thank you.
And thank you.
And I am showing no further questions I would now like to turn the call back over to Nancy Stuebe for closing remarks.
Thank you everyone for participating today as a reminder, this call will be available for replay on our website and we will also be posting a clean version of our transcript on the site tomorrow.
Thank you again, and we will talk to you next quarter end.
Thank you. This concludes today's conference call. Thank you for participating you may now disconnect.
Okay.
Okay.
Yeah.
Yes.
Hum.