Q3 2019 Earnings Call

Today's conference call just due to the controls.

Yeah.

Cool.

Thank you for your patience.

Ladies and gentlemen, thank you for standing by welcome to be.

<unk>.

Holdings fourth quarter 2019 Holdings conference call after Stein.

Listen only mode.

Your presentation, followed by a question answer session.

This conference call I'm just.

Thank you first.

<unk>.

I'd now like on the confidence over the first speaker today, which blocks to see please go ahead Sir.

Thank you really hello, everyone and thank you for joining us for the call today, Oh Fin Tech Holdings Limited Q3, 2019 earnings release was distributed earlier today.

On our IR website, I, our dot I Tiger Dot com as well as globe Newswire services.

The call today from Fintech, Mr Woo piano plot, chairman and Chief Executive Officer.

Mr., John Zone, Chief Financial Officer, Mr. walked away CEO of U.S. Tiger Securities and Mr., Kenny Zhao our financial controller.

Mr. Woo will give an overview of our business operations and discuss corporate highlights.

Mr Zone will then discuss our financial results. They will both be available to answer your questions. During the Q1 a session that followed their remarks.

Now let me cover the Safe Harbor today's discussion will contain forward looking statements. These forward looking statements involve inherent risks and uncertainties that may cause actual results to differ materially from our current expectations.

Potential risks and uncertainties include but are not limited to those outlined in our public filings with the FCC.

Any forward looking statements that we make on this call are based on assumptions as of today and we do not take any obligation to update these statements except as required under applicable law.

It is my pleasure to now introduce our chairman and Chief Executive Officer Mr. <unk>.

Mr Woo.

We'll make remarks in Chinese which will be followed by an English translation. Mr. Woo. Please go ahead with your remarks.

No.

It really nice it out in Chinese Union Essentials have all how quick.

Good evening, everyone and thank you for attending the Tiger brokers Q3, 2019 earnings conference call.

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In the past quarter Tigers business achieved several milestones despite the uncertain macro environment of the past few months.

In Q3, our revenue was 15.3 million U.S. dollars, a new all time high and an increase of 67% on the same period last year.

Our revenue streams also became more diverse as net interest income accounted for 40% of net revenue.

From just 20% in the same period last year.

The net loss was 1.28 million you ft, a 60% decline from the same period last year on a non-GAAP basis for the first time ever we reported a profit of 660000 U.S. dollars total client assets increased four.

87% year on year to 3.8 billion U.S. dollars.

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I would now like to take this opportunity to reiterate Tigers growth strategy.

Spanning our user base and increasing revenue per user we plan to stimulate customer acquisition through geographic expansion and differentiated product offering.

We recently opened our New York Office and in Q1 of next year will formally commits providing securities trading to clients in Singapore, we're confident that integrating different countries to our award winning platform will help us attract more users. We will also continue to it.

Basket Aesop wealth management and IPO underwriting.

The Aesop business maintains a high growth rate in Q3, we added 15, new corporate customers.

In the future the employees of our Aesop clients will gradually become tiger customers.

For wealth management, we recently launched cash plus a cash management product actively managed by Tiger.

Assets under management is still grow our goal is to accumulate fun management experience. So we may provide greater customization to the future needs of our customers with regards to our underwriting business in the third quarter, we participated in for U.S. Ipos since we.

We began our IPO distribution business, we haven't participated in 32 USA Ipos. We also recently obtained and underwriting license in the United States, which is a great advantage as we may serve U.S. space.

Institutional and individual investors, so far our IPO pipeline looks robust we're confident we will further solidify our number one position among other online brokers.

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To increase revenue per user our top priority is to become self clearing so we may lower clearing costs and increased revenues from margin financing and stock lending.

This was our strategic rationale for acquiring marsico.

We're currently in the process of integrating Moscow into our system and aim to become self clearing in U.S. cash equities by Q2 of next year.

Going forward, we plan to introduce more trading products for our customers to increase user stickiness.

Finally, we view the development of our retail brokerage underwriting business Aesop and corporate services as a comprehensive ecosystem that benefits from increasing synergies.

We will continue to invest in developing these respective businesses to enrich the value we provide to our customers.

Synching Civil John Gilliam about how we should yet.

Now I will hand, the call over to our CFO John to discuss financials.

[noise] since people on Cook, let me go or tie the third quarter financial performance or numbers a U.S. dollar.

Total revenue reached an all time high at one of 15.3 million increase of 67% year over year, and an increase of 13% quarter over quarter.

Even commission revenue was down 13% year over year correlated with lower trading volume versus the same quarter last year. This shortfall is more than compensated by increasing interest me they didn't come and to be revenue.

Interest related income, which combines financing service fee and the interest income stood at 6.95 million increase of 270% from the same quarter last year.

The increase was due to increased the margin and the securities lending as well as more consolidated outcome customers versus the same quarter last year.

Other revenues, which includes our to be services were 2.1 million increase of 13 photos from third quarter of 2018.

The increase was primarily due to higher revenue from IPO distribution advertisement, but deposit interest and that you self administration fees.

Interconnects interest expense was 1.4 billion an increase from zero in the third quarter of 2018, as we have more consolidate outcomes.

Interest expense net revenue were 14 million this quarter.

52% increase year over year, and 11% increase quarter over quarter.

Net interest accounted for about a 40% the led revenue upfront 20 per se in the same period last year.

Commissions accounted for 45, Prosoft 11 deal.

Oh from 79% same quarter last year overall, we think this is Saudi corridor as we further diversify our revenue mix, while improving the top line.

Now on the cost.

Total operating costs and expenses were 16.5 from union and increase of 26% year over year, and the liveperson quarter over quarter.

The cost increase you seemed I was our revenue growth and business development.

Executing on answering expense were 0.7 million an increase of six fold year over year, primarily due to the increase in castilla their accounts.

Employee compensation and benefits expense were 9.3 million an increase of 56% found the sort of quarter of 2018.

Taking all share based compensation the increase was 46%.

This was primary due to headcount increased from 420 why employees in the same quarter of last year to 575 employee this quarter as we keep investing in R&D and the recruiting Poland's four pieces expansion.

[noise] occupancy depreciation amortization expense were 1.1 billion, an increase of 34% year over year due to increase the office space at a relevant visco improvements.

Communication in a market data expense were 1.6 million an increase of 50% year over year. This increase was due to after use of gross and expending the market data usage power users.

[noise] market you know the branding expense were 1.5 million a decrease of 52% saw this article for up 2018.

We also advised of cooperation with business partners, which led to lower cost we might incur higher marketing expense in the coming quarters as we begin to offer service in the U.S. and assuming in Singapore.

SGN eight were 2.3 million, an increase of 15% year over year primary due to professional fees, resulting from the acquisition will Moscow and a general expense due to business expansion.

Net loss net or 60% year over year to 1.3 million this quarter non-GAAP net income kinda positive for the first time at 660000, U.S. dollar, whereas this or that loss of 2.8 million in the same quarter last year.

At the end of third quarter, we have 137 billion cash on hand liquidity Wise company is 40 capitalized.

No. We finished our presentation, it's an open to questions.

Thank you Sir.

Ladies and gentlemen, even I'll begin the question answer session. If you wish to asking all your questions on the phone line. Please press star.

One.

Listen to keep that.

You know.

Wages.

Last question.

So you have all first question comes the line off.

View from HSBC. Please go ahead.

Oh management.

Two questions here. The first one is about the margin dollars do we haven't number because we see from the results disclosure that the receivable from customers is actually going down. So do we have a breakdown of balance sheet and off balance sheet Smoky Mountains and.

Do we have the targets for just salads and what's the cap of the margin malice backed by our own capital and those second question is because because we can see from the results that.

The difference between.

GAAP and non-GAAP is mainly from the employee compensation as well as the equity investment loss. So could you explain what is the equity investment.

[laughter] fit this item thank you.

Sure and maybe sense for the questions.

Let me take a step on the first one of the margin so the watching on balance and secured anything balance you asked me Discos is.

967 building as up this quarter, so an increase of 17% found last quarter and a slight decrease of five person.

From from previous quarter. So overall the marginal bonus you know our book up pretty stable, it's probably a 120 million U.S. The so the increase in our you know much in video primary due to you know.

Civil you know securities lending products without doing which drive up the.

Marching interest income I'd also like they extend some margin on to select for clients, which yields higher interest income.

As you know like so the marching on our books, so far as steel relative then bell compared to the total margin balance you know we have because.

Most of the margin balance is still at our clearing bulkers, but I think last week gradually becoming self clear hopefully in the second quarter of next year. The marginal dollars will be gradually moving onto our books.

[noise] [noise] so for the second question on the equity impairment.

Well, let you know how to answer this question.

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Yeah. So they equity no impairment was from a early investment with you the Bob I to College night back in 2018, So the company night, we own a minority minority stake in this company and as a company didn't work also well. So that's why we incurred a loss our balance sheet as any impairment.

Thank you and I also have a question about the zero Comed Commission campaign at U.S. does it have any impact type business or Oh business in the future.

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Okay. Let me let me just a quick trends based on what Tim let just say there. So when we were observing though to train the U.S. not on a poker are starting to offer a zero accomplishing.

Does actually you know something which has only offer zero commission for cash equities, because other commissioning against generational options futures those kind of stuff I'd also like even though it sounds sounds those spoke to offer zero commissions you still can't make some of the money back by selling the order for like solder on my brokers who is doing.

The U.S.

From Tigers perspective, we don't think you know for silver I know, it's going to impact our user base because most of the zero Commission strategy offered to the U.S. investors you know U.S. domestically investors and we think you know Tigers Pata you know already you know pretty value at it and also it's now.

A real already night, a very competitive pricing. So I don't think named the near term there will be a zero pricing you know accomplishing pressure on us, but well have more closely monitoring the situation and we will make kind of adjustment when necessary.

Thank you.

Thank you.

Something move.

Yeah.

Right.

The next question from the line off that.

From Citibank. Please go ahead.

[noise] [laughter] on high management, then so taking my question. So two questions on my side. So first one is regarding the commission income so.

Look is that the commission rate on that basis is done <unk> E on a quarter over quarter basis to opinion expiring on the reasons behind that or whether it's driven by.

Maybe to the different mix.

Oh, so to achieve this quarter.

And second question is about <unk>. Okay. So first is a we notice the marketing spends a standard Oh this quarters. So I'm wondering what would be what was the drivers behind in terms of the Oh patch.

So I guess you also mentioned that you as Sam on the marketing side, because youre multiple overseas business initiatives and I would be Oh. So once you like to chat on the Idaho, such as he had can Oh I D R&D expense or whether you also.

Spend more on that front, a associated with lisp or overseas business and if possible can you give us and Oh I imagine.

Thank you.

Definitely let me answer your first question. Okay. So the commission rate actually you know, it's it's pretty stable I think when you look at a financial statements.

So like <unk> my actually the the reports on the fully disclose I'll, let let a basis, but if we just look at the gross basis.

Overall at the gross commission rate has been pretty stable you know if you take everything opening together, it's about a 3.5 basis points. Okay. So it's on par was the last quarter. So the commissioning came down primarily due to you know the trading volume came though I think that's the major reason behind the compressing dropping commission revenue.

In terms of the marketing expense. So there is on way you know spend less this quarter is first of all we think the.

Market backdrop is not that favorable so we'd rather you know keep the cash on hand to spend when we think the days up better chance, we count acquired user and also given Tigers already listed a we've got a chance to you know optimize a lot of existing relationship with our business partners. So we can't spend less on those and I.

Like you know a piece this cooperations going forward you know for for this quarter. You know we are trying to spend a little bit more in the U.S., but the number will be relatively small I think of about half million because we want to try that all based on the current strategy we have.

And for the next quarter, you know I would say you know starting 2020 , we'll be able to spend more money on marketing based on the results we generated from this quarter.

So I didn't get your last question Stephanie what was your question Dan.

Yeah. So.

In addition, and the other than the marketing expense, how quality I don't know pads Nike Uh huh.

He calls or would that also increase in association with eat overseas a business.

Right I think first of all for office you know those night occupancy I think should be relatively stable a gig because the our office in New York is already opened and the Singapore already.

Identified the you know the office, so I think for that should be relatively stable.

Hi, guys I think you know for a Singapore and the U.S., we pretty much to the house you know majority of people in place now I think the only people were going to increase will be the R&D people you know those our core group of competency. So we'll keep adding those people, but the gross way I don't think we'll be starting from next year will be.

As high as this year.

You can see you know costs year over year, our headcount cost increase about 50% I think next year, I think quarter or year over year should be around 30% to 30% something around there.

That means say you know, we identify better strategy or better location to get into we will try to you know spend more to build our pieces right there, but so far I think the heck on costs should be moderator, starting twentyth Wendy.

Okay. That's it thank you.

[noise].

Thank you.

You need.

Can you just stop.

Washington, Chris.

Okay.

Now I'd like to have the conference back to our speakers for any closing remarks. Please go ahead.

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 our Fintech. We do appreciate your participation in today's call. If you have any further questions or concerns. Please reach out to our Investor Relations team. This concludes.

Oh and thank you very much for your time.

Thank you. Thank you.

Thank you, Sir ladies and gentlemen that does can you talk on drugs for today. Thank you all for your participation you may disconnect.