老虎證券 (TIGR) 2022 Q3 法說會逐字稿

Ladies and gentlemen, thank you for standing by, and welcome to the UP Fintech Holding Limited Third Quarter 2022 Earnings Conference Call. (Operator Instructions). I must advise you that this conference is being recorded today, November 23, 2022. I would now like to hand the conference over to your first speaker today, Mr. Aaron Lee, the Head of IR. Thank you. Please go ahead.

Thank you, operator. Hello, everyone, and thank you for joining us on the call today. Up Fintech Holdings Limited Third Quarter 2022 earnings release was distributed earlier today and is available on our IR website at ir.itiger.com as well as global 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. Huang Lei, CEO of U.S. Tiger Securities; and Mr. Kenny Zhao, our Financial Controller. Mr. Wu will give an overview of our business operations and discuss corporate highlights. Mr. Zeng will then discuss our financial results. Both will 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 contains 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 statements. 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, November 23, 2022, and our annual report on Form 20-F filed on April 28, 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 your remarks.

Hello, everyone. Thank you for joining us to Tiger Brokers Third Quarter 2022 Earnings Conference Call. The macro environment showed no significant improvement over the third quarter by tightening and rate increase has slowed down market activity and transaction volume, which strict our trading commission and IPO generating income. The income from margin financing and security funding benefited due to the higher interest rates. The total revenue of the third quarter slightly increased by 3.6% from the previous quarter to reach USD 55.4 million. Non-GAAP net income was USD 6.6 million reached 91.3% quarter-over-quarter and 26.2% year-over-year. GAAP net income also turned profitable at USD 3.3 million compared to a net loss in the first half of this year, demonstrating the resilience of our business model and broader capital deployment. We added 22,700 pending accounts this quarter. Total number of funded accounts also accreted $750,000 at the end of the third quarter, an increase of 23.2% from the same quarter last year. We have acquired over 80,000 new funded accounts in the first 3 quarters. So we are confident to deliver our annual guidance of acquiring 100,000 new funding accounts this year. In the third quarter, market-to-market loss still had an adverse impact on the total client assets, which decreased by 12.8% to USD 13 billion compared to the end of the second quarter, but the trend of healthy asset flow continues. Net asset flows exceeded USD 7 million this quarter. Funded account retention rate exceeded 98% this quarter, demonstrating users confidence and trust in our platform. We pay very close attention to client quality. We will not jeopardize ROI mainly for the growth of funding accounts. In the third quarter, the overall average CEC was USD 326, a flat increase from last quarter due to several pricing campaigns, but remain one of the most efficient within our industry. We are very glad to see the quality of our newly acquired customers further improved in the third quarter. In Singapore, as an example, our company's largest market in terms of both incremental and existing clients, the average net asset inflows of our newly acquired clients in Singapore exceeded USD 11,000 in the third quarter. Further increased from over USD 9,000 in the second quarter, represents our high business model in balancing customer acquisition efficiency and client quality. We continue to invest in research and development to improve operational efficiency and to enhance user experience. With sales clearing, the execution and driving cost as a percentage of the trading commission down to 13% further decreased compared with the previous quarter. Specifically, the execution and clearing costs as a percentage of the trading commission for U.S. cash equity has come down to only 3%. As the leading online broker with comprehensive risk control and self-clearing capability, we have added fractional shares trading for U.S. equity this quarter, aiming to provide retail investors with easier access to high-quality names. In wealth management business, we keep optimizing cash management products to better serve our users. In Singapore, we launched Tiger World, our wealth management platform in the third quarter to help users diversify their portfolio and the combined cash management and other investment products. Our TB business continues to perform well. In the investment banking business, we underwrote 11 U.S. and Hong Kong IPOs in the third quarter, in which we will lead bank include U.S. patios. In terms of ESOP, in the third quarter, we added 29 new companies to a total of 393 clients, a year-to-year growth rate of 50%. To better grow the ESOP business, we had Hero, a reputable valuation specialist for... opinion and valuation and close angorafinancing strategic investors. In terms of Hong Kong business, we have improved the capability of our Hong Kong IPO underwriting, set clearing efficiency and completing the Hong Kong infrastructure's update. We are now very excited to announce that we are ready to onboard Hong Kong retail marketing in December of this year. Now I would like to invite our CFO, John, to go over our financials...

Thanks, Tianhua. So let me go through our financial performance for the third quarter. All numbers are in U.S. dollar. Total revenue were $55.4 million this quarter, a decrease of 9% year-over-year due to a slowdown in market activities, which dragged down commission and IPO underwriting. On a quarter-over-quarter basis, total revenue increased to 4%, primarily due to a 69% jump in interest-related income versus last quarter. Cash equities take rate was about 6.7 bps this quarter, slightly better than 6.5bps of last quarter. Within commission revenue, about 60% come from cash equities, 30% from options and the rest from futures and other products. On cost side, interest expense was $4.3 million, a slight increase from the same quarter of last year as we still have some margin borrowed from Interactive Brokers. So the borrowing cost increased in line with the rate hike. Execution and clearing expense were $3.2 million, decreased to 66% from the same quarter of last year. We expect further reduction in clearing expense when we start self-clear our equities. Employee compensation increased 11% year-over-year to $24.2 million this quarter as we added headcount during last year to support our global expansion, in line with the headcount increase, occupancy expense increased 50% to $2.5 million. General and administrative expense decreased 30% year-over-year to $3.5 million due to some one-off professional service fee occurred last year. Marketing expense were $7.4 million this quarter decreased 34% year-over-year. Our marketing strategy has been the same for the past few quarters. We don't just chase for the number of new users in states where we focus on quality of new users and keep a close eye on CEC and payback. We will dynamically adjust our marketing strategy based on market environment. Communication and market data expense were USD 66.5 million, an increase of 23% from a year ago due to rapid user growth and expanded market data coverage. Total operating costs were 47.3 million decreased 13% from the same quarter of last year. As a result, GAAP net income turned positive to $3.3 million versus a GAAP net loss of $0.9 million last quarter. Non-GAAP net income further increased to $6.6 million from $3.5 million of last quarter. Now I have concluded our presentation. Operator, please open the line for Q&A. Thanks.

(Operator Instructions). Our first question comes from the line of... from CICC

(foreign language). Okay, I will translate my questions. This is Yoyo Jiang from CICC. I have 2 questions here. First one is that considering the interest rate cycle, how do you evaluate its impact on our income state and how do you unite any changes in business strategy to better adapt to the right type? Secondly, we have seen that a meaningful contribution of new paying clients in Australia and New Zealand in the past few quarters. At the same time, we still have well controlled test. Would you please introduce more on the strategies and initiation in the market? And if we have a target to further penetrate these markets.

(foreign language) So in terms of the first question regarding the impact from rate hike. So as you can see from our third quarter results, overall net impact from rate is positive growth whereas the interest rate income more than offset the decrease in trading company underwriting due to tightened liquidity. So in terms of business strategy, we will keep investing in our U.S. business, particularly in self-clearing infrastructure so we can better utilize our asset base during this rate hike cycle. We expect to see more interest-related income from Hong Kong as well once we become self-clearing and don't need to share interest income with our clearing partners in Hong Kong. It's a little bit hard to quantify the impact from Hong Kong yet as this will be determined by the growth of our Hong Kong operations. (foreign language)

(foreign language)

Okay, i'I'lltranslate. We have entered the Australian market for 2 quarters, so nearly 20% of our new funded accounts in the past 2 quarters were from Australia and New Zealand. And we saw a quarter-over-quarter decrease in CEC in Austria during the third quarter. That being said, our expansion there is still in early stage. We think the total addressable market is big. But to be honest, we haven't found the most effective marketing strategy yet. We will keep progressing with more user feedback and data analysis. So in terms of product offering, we have clear competitive advantages compared to local brokers. Our self-developed infrastructures allow us to be more flexible to meet local needs, such as 8.0 version app with both Pro and live version and our fractional share trading function. Thank you.

Our next question comes from the line of Brandy Wang from Citi.

[Foreign Languagge] I'll translate my questions. My first question is about overall average customer acquisition cost as we see that increase in third quarter? And would like management to elaborate a bit reason behind. And also, how do we expect to cap trend in future? The second question is the regional breakdown of the new funded accounts in third quarter? And how do management expect the breakdown of total funded accounts by end of 2022. Thank you.

(foreign language)

(foreign language)

Well the average CEC was around USD 326, a slight increase from last quarter. The increase was primarily due to our sponsorship of the ... football competition, which will take place in December. The agreement will be Tiger Brokers first ever partnership with Southeast Asia flagship international football competition, and we will see the form become the tournament of official online trading platform for stock options, funds and futures to help us better reach out to potential users in the region of Southeast Asia. If we deduct this branding expense, the average CEC was around USD 175 decreased 12.5% compared to about USD 200 in the second quarter. In the next few quarters, CEC might go up a treat to onboarding Hong Kong. It's very normal to incur more branding experience after entering a new market, but our long-term strategy of balancing user quality and capital deployment will remain the same.

(foreign language)

Okay. So regarding the question about the regional breakdown of our new funding accounts, our internationalization is progressing well. In the third quarter, about 20% of funded accounts came from Mainland China. -- more than 60% came from Singapore and nearly 20% were from Australia and New Zealand. We expect the trend of regional breakdown will remain fairly consistent in the fourth quarter, and we will expect to see more users from Hong Kong region next year. Thank you...

Our next question comes from the line of Cindy Wang from China Renaissance.

(foreign language). So congratulation on completing the infrastructure update in Hong Kong and ready to onboard Hong Kong retail investors in December. So my question is, since your bottom line has shown a positive trend over the past 2 quarters, so how do you balance customer acquisition cost in Hong Kong and the company's profit margin in the next few quarters? The second question is related to your product upgrade. So could you just provide more color on fractional shares for U.S. stock and Tiger World management platform in Singapore. Thank you..

(foreign language) So in terms of Hong Kong, so Hong Kong, of course, is a very important market for us. So I think a lot of people already know it before we have the Hong Kong license, we couldn't onboard Hong Kong clients, which slow down our user growth. It also hurt our profitability because we had to be on third-party for execution in of Hong Kong securities. So once we start offering our retail service in Hong Kong, we look forward to improve on both ends starting next year. So our customer acquisition strategy in Hong Kong is the same with our strategy in other regions. So we focus on user quality, ROI and payback, and we are confident we can entrust of Hong Kong users with comprehensive product offerings when the user experience in high-quality trade execution. We understand Hong Kong is very competitive. So in the near term, with more marketing spending or banking campaigns, you may see some fluctuation in CEC, but we will stick to our core marketing strategy and avocis accordingly with market condition and the user feedback. Thanks. (foreign language)

(foreign language)

In the third quarter, we led our U.S. fractional share trading function. This fractional share trading, will make high-quality names, such as Amazon and Tesla more affordable for retail investors. Taking invest in these names with $5 instead of paying few hundreds for the share. Using our in-house fractional share execution and clearing infrastructure, we can be innovative in proven offering to better serve global retail users.

(foreign language)

In Singapore, we also upgraded our cash management products to Tiger World, a more comprehensive platform combines currency management with different trading products with... still on the horizon, we will roll out more wealth management products for users with different risk appetite to help them diversify for pure equity investment. Thank you.

There seems to be no further questions at this time. I would like to hand back to Aaron Lee for closing remarks.

Thank you, operator. I would like to thank everyone for joining our call today. I'm now closing this 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.

This concludes today's conference call. Thank you all for participating. You may now disconnect.