Canada markets closed
  • S&P/TSX

    20,383.77
    +39.70 (+0.20%)
     
  • S&P 500

    4,026.12
    -1.14 (-0.03%)
     
  • DOW

    34,347.03
    +152.97 (+0.45%)
     
  • CAD/USD

    0.7478
    -0.0021 (-0.28%)
     
  • CRUDE OIL

    76.28
    -1.66 (-2.13%)
     
  • BTC-CAD

    22,118.42
    -302.46 (-1.35%)
     
  • CMC Crypto 200

    386.97
    +4.32 (+1.13%)
     
  • GOLD FUTURES

    1,754.00
    +8.40 (+0.48%)
     
  • RUSSELL 2000

    1,869.19
    +5.67 (+0.30%)
     
  • 10-Yr Bond

    3.6910
    -0.0150 (-0.40%)
     
  • NASDAQ

    11,226.36
    -58.96 (-0.52%)
     
  • VOLATILITY

    20.50
    +0.08 (+0.39%)
     
  • FTSE

    7,486.67
    +20.07 (+0.27%)
     
  • NIKKEI 225

    28,283.03
    -100.06 (-0.35%)
     
  • CAD/EUR

    0.7186
    -0.0015 (-0.21%)
     

Edited Transcript of TIGR.OQ earnings conference call or presentation 7-Sep-22 12:00pm GMT

Q2 2022 UP Fintech Holding Ltd Earnings Call Sep 8, 2022 (Thomson StreetEvents) -- Edited Transcript of UP Fintech Holding Ltd earnings conference call or presentation Wednesday, September 7, 2022 at 12:00:00pm GMT TEXT version of Transcript ================================================================================ Corporate Participants ================================================================================ * Fei Zeng UP Fintech Holding Limited - CFO * Tianhua Wu UP Fintech Holding Limited - Chairman & CEO * Aaron Li UP Fintech Holding Limited - Head of IR ================================================================================ Conference Call Participants ================================================================================ * Han Pu China International Capital Corporation Limited, Research Division - Analyst * Judy Zhang Citigroup Inc., Research Division - MD & Head of China Banks & Brokers Research * Cindy Wang China Renaissance Securities (US) Inc., Research Division - Research Analyst ================================================================================ Presentation -------------------------------------------------------------------------------- Operator [1] -------------------------------------------------------------------------------- Ladies and gentlemen, thank you for standing by, and welcome to UP Fintech Holding Limited Second Quarter 2022 Earnings Conference Call. (Operator Instructions). I must advise you that this conference is being recorded today, September 7, 2022. I'd now like to hand the conference over to your first speaker today, Mr. Aaron Li, Investor Relations Director. Thank you. Please go ahead. -------------------------------------------------------------------------------- Aaron Li, UP Fintech Holding Limited - Head of IR [2] -------------------------------------------------------------------------------- Thank you, Operator. Hello, everyone, and thank you for joining us for the call today. UP Fintech Holding Limited second quarter 2022 earnings release was distributed earlier today, and is available on our IR website at ir.itiger.com, as well as Globe Newswire services. On the call today from UP Fintech are Mr. Wu Tianhua, Chairman and Chief Executive Officer; Mr. John Zeng, Chief Financial Officer; and Mr. Kenny Zhao, our Financial Controller. Mr. Wu will give an overview of our business operations and discuss project highlights. Mr. Zeng will then discuss our financial results. They will both be available to answer your questions during the Q&A session that follows their remarks. Now let me cover the Safe Harbor. The statements we are about to make contain forward-looking statements within the meaning of the U.S. Private Securities Litigation Reform Act of 1995. A number of factors could cause actual results to differ materially from those contained in any forward−looking statement. For more information about factors that could cause actual results to materially differ from those in the forward-looking statements, please refer to our Form 6-K furnished today, September 7th, 2022, and our annual report on Form 20-F filed on April 28th, 2022. We undertake no obligation to update any forward-looking statement, except as required under applicable law. It is my pleasure to now introduce our Chairman and Chief Executive Officer, Mr. Wu. Mr. Wu will make remarks in Chinese, which will be followed by an English translation. Mr. Wu, please go ahead with the remarks. -------------------------------------------------------------------------------- Tianhua Wu, UP Fintech Holding Limited - Chairman & CEO [3] -------------------------------------------------------------------------------- (foreign language) -------------------------------------------------------------------------------- Aaron Li, UP Fintech Holding Limited - Head of IR [4] -------------------------------------------------------------------------------- Hello, everyone. Thank you for joining the Tiger Brokers Second Quarter 2022 Earnings Conference Call. -------------------------------------------------------------------------------- Tianhua Wu, UP Fintech Holding Limited - Chairman & CEO [5] -------------------------------------------------------------------------------- (foreign language) -------------------------------------------------------------------------------- Aaron Li, UP Fintech Holding Limited - Head of IR [6] -------------------------------------------------------------------------------- Market backdrop remained challenging in the second quarter, particularly in the U.S. capital markets. The weak U.S. market performance somewhat slowed down the trading activities and asset growth, given that our clients have more exposure in the U.S. market compared to Hong Kong. With growth in the to B business and prudent capital deployment, the total revenue of the second quarter increased by 2% from the first quarter to USD 53.5 million. Non-GAAP net income also turned profitable to USD 3.5 million, demonstrates the resilience of our business model during market turbulence. -------------------------------------------------------------------------------- Tianhua Wu, UP Fintech Holding Limited - Chairman & CEO [7] -------------------------------------------------------------------------------- (foreign language) -------------------------------------------------------------------------------- Aaron Li, UP Fintech Holding Limited - Head of IR [8] -------------------------------------------------------------------------------- We added 27,900 funded accounts this quarter, with over 70% coming from outside of China. Our total number of funded accounts also exceeded 730,000 by the end of the second quarter, an increase of 38.2% from the same quarter last year. And we are confident to deliver our annual guidance of acquiring at least 100,000 new funded accounts this year. In the second quarter, mark-to-market loss still had an adverse impact on the total client assets, which slightly decreased by 2.3% to USD 14.9 billion compared to the end of the first quarter. But the trend of healthy asset inflow continues. Net asset inflows exceeded USD 1.5 billion this quarter, funded account retention rate exceeded 99% this quarter, demonstrating user's confidence and trust in our platform. -------------------------------------------------------------------------------- Tianhua Wu, UP Fintech Holding Limited - Chairman & CEO [9] -------------------------------------------------------------------------------- (foreign language) -------------------------------------------------------------------------------- Aaron Li, UP Fintech Holding Limited - Head of IR [10] -------------------------------------------------------------------------------- We pay very close attention to client quality and payback period. In the second quarter, average CAC for funded account was about USD 300, a 10% decrease from the first quarter, while we keep acquiring high-quality clients. Taking Singapore as an example, we have been in Singapore for 2 years, and now Singapore already becomes our company's largest market, in terms of both incremental and existing clients. More than 60% of our new funded accounts in the second quarter coming from Singapore, a testament to our industry-leading user acquisition in the region. The average net asset inflows of our newly-acquired clients in Singapore exceeded USD 9,000 in the second quarter, further decreased from around USD 8,000 in the first quarter, solidifying our leading position in both market share and client quality in Singapore. -------------------------------------------------------------------------------- Tianhua Wu, UP Fintech Holding Limited - Chairman & CEO [11] -------------------------------------------------------------------------------- (foreign language) -------------------------------------------------------------------------------- Aaron Li, UP Fintech Holding Limited - Head of IR [12] -------------------------------------------------------------------------------- [Interpreted] We continue to invest in research and development to improve operational efficiency and to enhance user experience. With self-clearing, the execution and clearing costs as a percentage of the trading commission, further decreased compared with the previous quarter. To better help our users to navigate the market turmoil, we have launched the 8.0 version of our app with both lite and pro models, which provides a more simplified interface and diversified product offering. -------------------------------------------------------------------------------- Tianhua Wu, UP Fintech Holding Limited - Chairman & CEO [13] -------------------------------------------------------------------------------- (foreign language) -------------------------------------------------------------------------------- Aaron Li, UP Fintech Holding Limited - Head of IR [14] -------------------------------------------------------------------------------- Our to B business continues to grow. In the second quarter, we added 26 new companies to a total of 364 ESOP clients, a year-to-year growth rate of 68%. We provide a comprehensive ESOP services, from plan design to digital management, and have become the go-to choice for many startup and public companies listed in PRC, Hong Kong and U.S. In terms of the investment banking business, we underwrote 11 U.S. and Hong Kong IPOs in the second quarter, in which we were the lead bank in 3 U.S. IPOs. According to WIND Data Consulting, we ranked #3 in number of deals underwrote for the first half of this year, and #1 globally for the second quarter. -------------------------------------------------------------------------------- Tianhua Wu, UP Fintech Holding Limited - Chairman & CEO [15] -------------------------------------------------------------------------------- (foreign language) -------------------------------------------------------------------------------- Aaron Li, UP Fintech Holding Limited - Head of IR [16] -------------------------------------------------------------------------------- Now, I would like to invite our CFO, John, to go over our financials. -------------------------------------------------------------------------------- Fei Zeng, UP Fintech Holding Limited - CFO [17] -------------------------------------------------------------------------------- Thanks, Tianhua and [Aaron]. Let me go through our financial performance for the second quarter. All numbers are in U.S. dollar. Total revenue were USD 53.5 million this quarter, a decrease of 11% year-over-year, as market backdrop, particularly the U.S. market, was still choppy, which has slowed down trading and margin activities. On a sequential basis, we managed to offset the slowdown in commission with more corporate service revenues, such as underwriting and IR/PR services. So total revenue grew 2% on a quarter-over-quarter basis. Cash equity take rate was 6.5 bps this quarter, slightly better than 6.3 bps of last quarter and a 6 bps in the same quarter last year. Our pricing strategy has been consistent. The difference in take rate is primarily due to change in share price. As for U.S. equities, we charged by number of shares, not trading volume. Now, on the cost. Interest expense was USD 3.5 million, a decrease of 27% from the same quarter of last year, primarily due to more interest expense savings from U.S. self-clearing. Execution and clearing expense were USD 3.9 million, decreased 41% from same period last year. Since we started self-clearing, clearing expense as a percentage of commission have come down from over 20% a year ago to under 5% this quarter for both U.S. cash equities and options. We expect further reduction in clearing expense when we start self-clear Hong Kong equities. As of right now, we are paying about 50% of our Hong Kong commission as clearing expense. Employee compensation increased 25% year-over-year to USD 25.6 million this quarter, as we added headcount during last year to support our global expansion. In line with the headcount increase, occupancy expense increased 69% to USD 2.5 million, but general and administrative expense decreased 15% year-over-year to USD 4.3 million, due to one-off professional service fee occurred in last year. Marketing expense were USD 8.4 million this quarter, decreased 65% year-over-year. We focus on quality of new users and don't see current market condition is suitable for major marketing campaign as we keep a close eye on CAC and payback. We will dynamically adjust our marketing strategy based on market environment. Communication and market data expense were USD 7.2 million, an increase of 40% from a year ago, due to rapid user growth and expanded market data coverage. Total operating costs were USD 51. (sic) [51.9] million, decrease of 17% from the same quarter of last year. As a result, we narrowed our GAAP loss to USD 0.9 million from a loss of USD 21.5 million in the same quarter last year. Non-GAAP net income turned positive to USD 3.5 million versus a non-GAAP net loss of USD 4.4 million last year. Now I have concluded our presentation. Operator, please open the line for Q&A. Thanks. ================================================================================ Questions and Answers -------------------------------------------------------------------------------- Operator [1] -------------------------------------------------------------------------------- (Operator Instructions) Our first question comes from Han Pu from CICC. -------------------------------------------------------------------------------- Han Pu, China International Capital Corporation Limited, Research Division - Analyst [2] -------------------------------------------------------------------------------- (foreign language) This is Han from CICC. I have 2 questions related to the Singapore market. Firstly, how do we maintain and penetrate Singapore market with increasingly competitive environment? Secondly, what is the customer acquisition cost in Singapore this quarter? And how do we see the trend continue? -------------------------------------------------------------------------------- Fei Zeng, UP Fintech Holding Limited - CFO [3] -------------------------------------------------------------------------------- (foreign language) -------------------------------------------------------------------------------- Aaron Li, UP Fintech Holding Limited - Head of IR [4] -------------------------------------------------------------------------------- Okay. I will translate. [Interpreted] Well, yes, the landscape is getting more competitive in Singapore because in addition to traditional brokers, there are also some online brokers, more online brokers coming to Singapore. We do embrace the healthy competition as long as it could bring better products and service to the local clients. Well, for brokers, customer acquisition cost control and acquiring clients with high quality are the imperative tasks to cope with during the competition. And our purpose is to be the largest and the most trustworthy broker in Singapore. Our strategy is shooting for the long-term development, so we will not sacrifice the quality of clients or incur high CAC just for short-term growth. We believe the research and development is the core competitiveness of Tiger, so we do attach great importance to product quality. We continue to optimize our products and roll out more functions to meet the investment needs of different types of investors, thus to improve client engagement, the user stickiness as well as the ARPU. As we can see from our financials in the second quarter, we keep staying ahead in the Singapore market under the weak market backdrop and intensive competitive landscape. More than 60% of our total newly-acquired clients in the second quarter coming from Singapore, and the average net asset inflows of our new funded clients in Singapore exceeded USD 9,000, while the average CAC decreased sequentially, solidifies our leading position in both market share and client quality. -------------------------------------------------------------------------------- Tianhua Wu, UP Fintech Holding Limited - Chairman & CEO [5] -------------------------------------------------------------------------------- (foreign language) -------------------------------------------------------------------------------- Aaron Li, UP Fintech Holding Limited - Head of IR [6] -------------------------------------------------------------------------------- [Interpreted] Okay. So in the second quarter, the average CAC in Singapore was around USD 215. And if we less the branding expense, the average CAC will just go down to USD 156. Meanwhile, we launched our services in Australia in the fourth quarter, So when we enter a new market, similar to what we've done in Singapore, we will spend more branding costs to promote our company. Therefore, the average CAC in Australia and New Zealand is still relatively high, which brings the total average CAC to about USD 300 in the second quarter, but still decreased about 10% on a quarter-over-quarter basis. The market sentiment was weak during the first half year and investors preferred to stay on the sideline, under this kind of circumstance, we are very prudent with the marketing spending. We keep a very close eye on CAC and payback period to make sure we can have a very healthy business model, and we will just be very dynamic to address our marketing strategy. -------------------------------------------------------------------------------- Operator [7] -------------------------------------------------------------------------------- Thank you for your question. Our next question comes from the line of Judy Zhang from Citi. -------------------------------------------------------------------------------- Judy Zhang, Citigroup Inc., Research Division - MD & Head of China Banks & Brokers Research [8] -------------------------------------------------------------------------------- This is Judy Zhang from Citi. I have 2 questions. The first question is, we saw Tiger has acquired a Hong Kong brokerage license for almost a year. What is the [reason for that is],and the development plan for, like, to develop business in Hong Kong? And second question is in light of the Fed accelerating rate hike cycle, what is the impact to the company's business, and what is the potential response from the company? -------------------------------------------------------------------------------- Fei Zeng, UP Fintech Holding Limited - CFO [9] -------------------------------------------------------------------------------- Okay, so in regards to our progress in Hong Kong. So we have some delays earlier this year due to COVID. Now, I think everything is progressing on the track. So, so far, we are upgrading the trading infrastructures, for example getting more direct lines, expand our server, doing testing with the Exchange and back test order book and records using our own system. So, so far, I think everything is on the right track, and hopefully we can have a soft launch in the near future. And also, recently we have obtained the Type 4 and 5 license from SFC, which allows us to create more content for users in our online communities. So we will apply for more license down the road, so we can provide more value-added service to our Hong Kong users. -------------------------------------------------------------------------------- Tianhua Wu, UP Fintech Holding Limited - Chairman & CEO [10] -------------------------------------------------------------------------------- (foreign language) -------------------------------------------------------------------------------- Aaron Li, UP Fintech Holding Limited - Head of IR [11] -------------------------------------------------------------------------------- Okay, the second question about the rate hike. You see the broker-dealer industry has very strong BETA effect. We think the Fed tightening will have mixed impact on our business and the whole industry. So on the bright side, we can, of course, generate more interest income from the increased risk cycle, especially with our increased client base and self-clearing efficiency. While on the other side, to a certain extent, the liquidity tightening will have negative impacts on the capital market activity and the transaction volume as well as the IPO issuance. So to neutralize the downside, strategically speaking, we will keep concentrating on investor education and product optimization, and consequently, to help our clients to better navigate market turmoil and enhance client engagement. So in addition, we will keep upgrading the infrastructure in Hong Kong so that we can provide better services to our clients once the market recovers. Thank you. -------------------------------------------------------------------------------- Operator [12] -------------------------------------------------------------------------------- All right. Thank you. Our next question comes from the line of Cindy Wang from China Renaissance. -------------------------------------------------------------------------------- Cindy Wang, China Renaissance Securities (US) Inc., Research Division - Research Analyst [13] -------------------------------------------------------------------------------- (foreign language) So I have 2 questions here. First question is, could you provide a business update for Australia and New Zealand market in second quarter of 2022? And what's the marketing strategy you will adopt, and any new products will be launched in these 2 markets in second half of this year? Second question is regarding to the new paying clients. Could you provide a breakdown by geographies, and how do you expect the distribution of the new paying clients in the second half of this year? -------------------------------------------------------------------------------- Tianhua Wu, UP Fintech Holding Limited - Chairman & CEO [14] -------------------------------------------------------------------------------- (foreign language) -------------------------------------------------------------------------------- Aaron Li, UP Fintech Holding Limited - Head of IR [15] -------------------------------------------------------------------------------- Okay. So I'll translate. In general, in the second quarter, more than 10% of our new funded accounts coming from Australia and New Zealand. We still make all-out efforts, such as sponsoring the local sports team, just to localize our products and services by adding more features that will give the local investors more control over the investment. So in the meantime, still keeping the user experience simple and efficient. In addition, the ranking of the Tiger trade app rose to #31 by the end of the second quarter, which is the highest among the online brokers in Australia. As a result, our newly-registered users increased more than 80%, and the trading volume also doubled on a sequential basis in Australia. We keep fine-tuning our local marketing strategy and localization, and we are confident that there will be more local users coming on board of Tiger platform. -------------------------------------------------------------------------------- Tianhua Wu, UP Fintech Holding Limited - Chairman & CEO [16] -------------------------------------------------------------------------------- (foreign language) -------------------------------------------------------------------------------- Aaron Li, UP Fintech Holding Limited - Head of IR [17] -------------------------------------------------------------------------------- Okay. So second question about our new clients acquired. Okay. So basically, our internationalization is progressing very well. In the second quarter, over 70% of newly funded users were acquired from overseas markets, in which above 20% of funded accounts came from Mainland China, more than 60% came from Singapore. And for the rest, 10% to 20% were from Australia and New Zealand. We do expect the proportion of new clients acquired in Australia and Singapore will increase in the second half year of 2022 alongside with our local development and expansion. Thank you, Cindy. -------------------------------------------------------------------------------- Operator [18] -------------------------------------------------------------------------------- Thank you. There are no further questions at this time. I'll now turn the conference back to Mr. Aaron Li for closing remarks. -------------------------------------------------------------------------------- Aaron Li, UP Fintech Holding Limited - Head of IR [19] -------------------------------------------------------------------------------- Okay. Thank you, operator. I would like to thank everyone for joining our call today. I am now closing the call on behalf of the management team here at Tiger. We do appreciate your participation in today's call. If you have any further questions, please reach out to our Investor Relations team. This concludes the call, and thank you very much for your time. Thank you. -------------------------------------------------------------------------------- Operator [20] -------------------------------------------------------------------------------- Thank you. This concludes today's conference call. Thank you for participating. You may now disconnect.