Q4 2019 Earnings Call
Ladies and gentlemen, today's conference call is due to begin shortly until such time. Your line will remain on music cold lease contains a standby well. Thank you for your patience.
Once again today's conference call is due to begin shortly until such time. Your line will remain on musicals lease contagious standby with thank you for your patience.
[music].
Ladies and gentlemen, thank you for standing by and welcome to the up Syntactical Limited fourth quarter 2019 earnings conference call at the time all participants are in the listen only mode. There will be a presentation followed by a question answer session. I must advise you said this conference is being recorded day when.
So you just when you say 2020.
I'd like to Honda conference over to your first speaker today Mr. Clark So see thank you. Please go ahead.
Thank you Rachel Hello, everyone and thank you for joining us for the call today.
In fact.
Fourth quarter 40, 19, so what is really it's distributed earlier today.
Hi, all website.
Hi, Tiger Dotcom.
Globe Newswire services.
The call today from Fintech I missed a chance.
And Chief Executive Officer, Mr., John No [noise], Chief Financial Officer, Mr. Walkaway studio.
Cyber security and the for Kenny Joe also neutral control.
Mr. they'll give an overview about business operations and discuss corporate highly.
Mr don't they don't discuss our financial results. They will both be available to answer your questions. During the Q when they sessions that follows on the books now let me cover the Safe Harbor today's discussion will contain forward looking statements.
Forward looking statements involve inherent risks and uncertainties that may cause actual results to differ materially somehow current expectations potential risks and uncertainties include but are not limited to the outline public filings with the FCC.
Any forward looking statements that wouldn't make on this call all based on assumptions as of today.
We do not take any obligation.
These statements.
Seth as required.
Good day.
It is now my pleasure to introduce our chairman and Chief Executive Officer Mr.
Mr. Woo will make remarks, intellinx, which will be followed by English translation. Mr. Woo. Please go ahead.
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[laughter].
Good evening, everyone and thank you very much for attending the Tiger brokers 2019 fourth quarter and full year earnings conference call before I elaborate.
Is this results I would like to make a brief comment on the virus pandemic since we operate and online platform. There has not been a substantial impact on our business. However, the health and safety of our employees is Paramount affirm has taken extra precautions at our global offices.
For use of working in shifts or from home.
I will now continue with my prepared remarks.
The fourth quarter I go delivered impressive financial results total revenue was $20 million a new all time high nearly 110% increase over the same period last year in the fourth quarter 2019, we achieved the fastest year over year revenue.
Gross.
Any quarter last year. In addition, I wouldn't be to highlight we continue to optimize <unk>.
Interest related income interest income that's financing services exceeded commission income and accounted for 38%.
She will be revenue.
Includes.
Well that since IPO distribution.
GAAP administration services increased to 26% a total revenue.
This is compared to 2080.
74% about income derived from commissions in the fourth quarter.
Of course, Pfos ever non-GAAP operating income.
Yes.
$3 million, a significant improvement from a non-GAAP operating loss.
<unk> point $8 million in the same period of 2018.
$1.3 million.
In the third quarter of 29 team demonstrated the improvement in Tigers operating efficiency and earnings quality.
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[noise]. We're also pleased to report that our innovative platform and differentiated services continue to drive ever more investors to choose tiger to manage their assets in the fourth quarter. We added approximately 11700 no.
So that the pop.
<unk> increased 86% in the same quarter in 2018.
In addition, total client assets increased to $5.1 billion in nearly 140% increase from the same period in 2018.
<unk> increased $1.3 billion than the third quarter 2019.
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In aggregate, our 29 team financial results evidenced a solid improvement over 2018.
Total revenues in 2019 $58.7 million and 75% increase over 2018, we also achieved consecutive non-GAAP profit for the third and fourth quarter of 29 team.
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29 team was a monumental year in the history of our company in March and successes with one of them assets and embark on a <unk> journey.
But he's history.
29 team was full of challenges.
We remain focused and continue to emphasize transparency and made positive progress on our business.
I'd now like to highlight.
Four key components of our corporate strategy, we successfully implemented over the last year.
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First and foremost we are following our strategy of shifting from a line on clearing counterparties to developing our self clearing capability.
Clearly not only reduce our expenses and drive increased interest income. He will also impact to revenue from commission volatility. This for that reason for acquiring bars in July.
System integration is on track, we expect to gradually so.
Yes, cash equities for the and the second quarter at 20 point.
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[noise] [noise] Beckett, our strategy to increase our international Leach progressed nicely in 2019.
Aside what he's doing office, we now have a presence in the United States in Singapore, we are confident.
Sure expansion will increase our customer base and give us access to more business development opportunities.
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Third our Aesop business IPO underwriting delivered strong growth in 2019.
2019th we participated eight to U.S. ipos in 12 of which we sold underwriter.
With that number one IPO underwriter in terms of deal number for Chinese issuers in 29 team by a wide margin then the scale of our IPO business greatly exceeded that any other Chinese broker.
Outside the contribution to our revenues, we view the development of our investment banking services as beneficial to our reputation and accretive to user stickiness.
Aesop business also grew rapidly in 29 team.
We developed a large client base interest one years time and it started to yield results I am pleased to report that in the fourth quarter over 20% of need funded accounts change from our aesop customers.
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In addition, we are investing in our asset management business hybrid actively managed asset product has delivered good investment returns for our users since launch. We also recently launched our fund the mall, where users may choose for over 30.
He investment funds.
Okay and asset management as complementary as I'd grown range of services increases user stickiness.
Over the long term this strategy comprehensively developed mission interest income and asset management fees, diversifying our revenue and increasing customer lifetime value.
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Finally.
After discussion and agreement by the board of Directors, we have decided to implement share buyback program.
Over the next 12 months, we will allocate a maximum of yes $20 million to 80 F. buybacks.
Conclusion looked forward to continue to implement before affirmation points above corporate strategy and growing our business.
[laughter] CFO John can go.
If you do.
[noise] I would now like by our CFO John.
Discuss our key financial results.
[noise], just how a sense Clark Hello, everyone.
Oh, no worries strong fourth quarter for Tiger total revenue was 20 million you estee grew about 100% year over year and 30% quarter over quarter.
I'm using our seven point Threemillion increased 4% from last year and 17% from previous quarter cash equity blended a commission was <unk> this quarter versus five people Sim quarter last year.
Finacea service fee increased 18% year over year or two to Muni and this quarter interest income grew more than 100 times year over year to 5.5 Muni at this quarter as we have more consolidated outcome customers versus last year.
The gross for financing service Fianna interest income also boasts benefited from increased marching into securities lending activity this quarter.
Other revenue primarily consists revenue from corporate services, such as IPO underwriting glucose to 700% year over year to 5.1 million.
We're worried activity young IPO underwriting loss here in terms of steel cans far exceed the any off our of competitors. It's also effective customer acquisition to develop a retail and institutional business.
Comparing a revenue.
Composition with fourth quarter last year, we're happy to see revenue mix is getting more healthy interest related income this quarter accounted for 38% of total revenue coffee services accounted for 26% while in the fourth quarter NAASCO commissioning accounted for 74% of the total revenue.
Interest expense grew to 1.5 million this quarter due to more consolidated outcome customers. After interest expense net revenue was 18 point.
Yes.
I see increased from same quarter last year.
Now switching to expense.
Clearly expense increased from 8.1 Muni the fourth quarter enough. Your 2.9 million. This quarter, you Niweek Oracle self console the accounts [noise].
Salary expense increased to 61% to 10.6 million, primarily due to a 49% headcount increase year over year. You 2020, we will keep adding key positions, but our head come close rate will moderate.
Okay pacing.
Oh occupancy expense increased 72% to 1.1 million as we open the offices in New York Singapore.
Communication market data expense also grew 100% year over year to 1.9 billion as more users are using our services.
Marketing expense decreased to 25% year over year to 1.7 million this quarter as we optimize dollar marketing strategies with committed to higher efficiency.
General and administrative expense increased to 14% to Torpoint, Amy Onea, primarily due to business expansion and professional services.
Total expense.
Fourth quarter was 19.1 million, an increase of 46% year over year.
Operating loss was <unk> point, Sevenmillion, this quarter and improvement of 80% year over year.
Long cap Orca encounter in a positive flows first time at this point threemillion compared to a long appropriate operating loss of 2.8 million last year.
Let us I try to no loss for Fintech was point 6 million in the fourth quarter of 2019.
Compared to a loss of 2 million during the first quarter of 2018.
Our loss of point Sixmillion. This quarter was primarily due to a 1.9 million for ex foreign currency exchange loss, we let it all as other expenses.
Let me elaborate elaborate more on this FX loss.
I was up low weight book majority of our revenue and a Cai assets in newsy not entity under New Zealand regulation financial reporting needs to be local currency, which is musina daughter.
Well most of our revenue out of assay inflows acetyl, the U.S. steel hung out or about 80 basis.
So on our new you'll see that entity prepare us local financial reporting on the must be a quarterly basis.
There will be difference due to different exchange rate when revenue and OLED assay, a book and the when reporting is down so into fourth quarter using a dollar has been gradually raising <unk> Knight has been gradually rising against the U.S. Kowtowing daughter, So what book this difference as a FX loss. So a slow FX transaction took face envelope.
Cashless, it's just a pure accounting she meant to become so the difference between our consolidated book and local book.
And our long GAAP net income was point 3 million this quarter as compared to a a U.S. 1.2 million non-GAAP net loss a into first quarter of 2018.
So to summarize we are satisfied with our progress in the fourth quarter revenue mix. These more balanced meal occasions with deposits showed us cetera growth quarter over quarter and year over year and the total client assets also grew at a fast pace. We are confident as tight as we execute the strategies they value tell us earlier remarks, we can PD.
Hi, good gross for 2020.
This concludes our prepared remarks law, we can open for questions.
Ladies and gentlemen, we will now begin to question and answer session. If you wish to asked the question. Please press star one on your telephone and Weve training to be announced if you wish to cancel your request. Please press the pound or hashed <unk>.
Once again, if you wish to ask a question you May press star one on your telephone keypad.
Your first question comes from the line of leaving is from HSBC. Please ask your question.
Oh, Thanks management.
Good question today first one is that why.
I'm sure, but commission income up.
Q and second question is about liquidity and risk management.
Could management share with is.
Liquidity situations and also the margin caused oh situations recently.
Especially doing this month.
And third question is about.
How does a advantage so what's the competition strategy.
For us as we have seen that a lot of.
Its not brokers for us overseas Securities trading recently have spread enough in China and also.
Oh I invested by some internet companies quite a lot of apps.
Our joined a there's competition. So what do you think it's a competitive advantage compared to all the competitors when Keith.
Yes.
Since maybe I will answer your question number one and number two.
Camp I will answer your question numbers three okay. So they meet let me ask your second question first lets the liquidity sure how they manage the risk. So you know what I take or what how we're really I will say, where they put the margin policies. So we do have a timo for you know risk managers to monitor you know capability.
Since the especially during this volatile time so to answer your question is almost no margin call or low any principal losses, we have experienced so far.
We will keep the exercising or put in strategies going forward you know to make sure you know a wish the volatile market backdrop, we're not going to suffer any losses a in those spaces.
To answer your first pushing the trading volume different set of commission.
The blended commission so I really like we do have a lot of people are treating futures and also allowed people are treating equities. So you could just those to use the overall you know trading volume to cultivate our blended commission I think sometime it's getting more volatile. It's not really good you know indicate if and I can be seen Uh huh.
All three our business. So we would give you the pure cash equity commissions, which means it's more stable so.
Ray say you know increased from five gigs in 24, 24th quarter 2018 too.
Beefs Inc. fourth quarter 2019 is because in the U.S., we charge by shares and he first quarter Clinton 19.
People Treaty more you know low dollar I'm not sure, which means you know even though the total value looks low about actually there are more shares to be treated so thats why our cash equity Commission has gone up from 2018 fourth quarter.
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Okay. Let me let me just quick any translate so.
So.
The next step of brokers, you know I actually broker brokerage business has been being around for long time SMS. The reason we started our visit six years Scully switching is there a lot of play.
Areas, we can improve as a lotta up my optimism leasing we can't do so compared to other internet brokers, especially those Neal startups.
First off or you know Tegra has.
A lot of licenses for example in the U.S. seeing Australia, Singapore, Newsy, Anna and I took a while we'll take awhile for those newcomers to get albeit a relevant license and his knowledge and know how to run those night broker dealer business. So thats one differentiator we have the second differentiator is most of those on my brokers, especially.
Hi around my brokers, they don't have U.S. self clearing license as he cannot clear trades by themselves. That's the reason we acquire Moscow you know, we hope we can be able to self clearing the U.S. once we become self tear it can create huge.
Barrier of entry because you know we are really either building the infrastructure of brokers as you know from bottom up at this will take a long time and then you know for for the newcomers to catch up a 13 is on the Prada offering is.
Wait what we want to do is nice to you know you can see user experience with a different type of product offering. So a tighter apparently that pioneered IPO nice subscription for Chinese 80, ours and you know typically you know the retail investors. They most active okay. The most out location front Tiger you know doing.
The past years, we participate in those high feels like PVD as June.
And also give us a competitive edge in terms of how we offer a different differentiated product two to two retail investors and also you know we have those funds towards their cash costs, those and I was management product. It's also a lot away for us to try to have a comprehensive part the offering to enhance user experience so come by those through three points.
Together I think you know there is there will always be competition, but I think you know decide that differentiating factors can set us apart.
Thanks both.
Your next question comes from the line of Daphne tune of Citi. Please ask your question.
Management.
I think.
And so well see action from my side Refreshments Aarding.
Other revenue so there's something.
I understand that.
Yeah I appeals.
But can you just outlets.
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On the back office.
And when do you see that Sean.
Be sustainable going forward.
And the second question is regarding the and Ah cycles have you done anything that's it.
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On your.
Hi, Thanks.
Marking a smile.
Last question this fall Oh, we got into Lisa.
Situation, especially one knowing that whether that has.
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Oh turnover, because we understand that from some of your peers also.
Oh onshore Chinese I said that the trading activity.
Uh huh.
Oh during this time yourself. So I just wanted that says Oh.
Yeah.
<unk>.
Alright, Thanks, Stephanie so.
Let me I answer your Cushing to first and then can't answer pushing three and for lumber what you'll find I will split because I think that's to Cushing seeing actually in quick question number one.
So in terms of to you the rate cuts than I think your question is how is that going to affect our business right. So.
The rate and the liability side, because we don't have much.
Or alone so he doesn't help us to reduce any funding cost.
Going for wave I look at opportunities to put on dead because right. Now you know if the liquidity is cheap you know as not as we can generate decent return spread on that that's something we will consider.
And I ask this site for the first quarter I think is still okay interesting huh.
For the third starting from second quarter, we will we see because right now a lot of banks they lowered the interest rate to zero and also our partners and I are accruing brokers punters. They also lowered the interest rate to zero. So if you just kind of second quarter. It could have an impact on our Oh my interest generating income.
How big is the impact is yet to see because we just started to zero interest recycle, but still we still have something competitors offer a interest rates above zero. So we will efficiently allocate our cash or our client asset to make sure we can't generate returns out of the idle cash.
To your first question.
Other revenue section I will say IPO related is more than 80% I was 80.5% of the composition.
The rest of the 10% to 15% is from interest income of the bank deposits and then I will let him answer your question how sustainable is the other revenue and also your third question about the Crosslab Iris how does the impact and I are trading volumes.
Hello.
Cut on your day told me and our meal trigger I'm nine you mentioned your Pandora. So you could shoot tune cool so you're going to the would only I'm quite sure. The Shish Daniel talked me on that because I'm comfortable with Dol seamless the T. Rowe dollar you go to high purity that you thought that's why you don't see though of course out you've seen probably don't show you sound <unk>.
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Onto dollar you'd see yet to see someone doesn't do it goes home mutual how am I looking to undertake a tickets I shouldn't that your weight you can see how that holds up to your question TR symbolic essentially from paper Gee its own ankle Jay ago, possibly Jay could you someone's going to capture.
No no don't Jacob.
All right, let me let me translate.
The other revenue, whereas system offers so what's your whole mention is.
Still right now the pipeline is very strong you must solve those night potential users or delays or timetable due to the worse by their intention to get list. A score is trying to we are working with a lot of them to help them was preparation because well fintech companies. So we do right now it will not on I NDR and road show for those guys to help.
Them to managed or IPO timetable. So we think you know a that the the pipelines race try and away stewarding the pieces going for a Ken can generate decent returns.
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We'll hear that simply don't go without Oh sure I don't I can see sure I'll tell you what does it go coach incurred to your tone I showed you can make who do you are nice wawrinka Freetown sheltering the Italian Joel and Jason make with it took a potent oh dear to them they were down to eager cell tumor targeting John Hi, sure sure you go down.
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She is don't wish them in such a 20 million tickets show your total.
Okay.
So just briefly recap what you're mentioning is the right now the color worse.
Cost a lot of volatility in the market, especially in the U.S. market. So the volatility first of all give us a gift giving people you know gotten more people up and I was interested and got their attention to you mentioned the U.S. market and few people you know the two way you know opportunities you can sure and is it cannot so give.
When Tigers reputation in the snake.
You asked market he actually does help us to generate more accounts with deposits at also helped us to generate more customer you know trading volume. So im sure. It does help our you know treating patterson ways, our brokerage business.
That's very helpful.
Thank you.
Your next question comes from the line of hand to up the ITC. Please ask your question.
Hi management. Thanks for taking my question. So congratulations on strong culture I have two question first think about the fund more crude to introduce more on the new business and the ones. We do we plan to charge thing that's true.
I just found.
He did a possible TV compared to peers and satellite deposit customer acquisition, we have a 11 something new customers with popped it up in the fourth quarter and how many of them where from demand in China and the Adam for movies TV chains.
Has any guidance on the pattern will quite Asian, they come here as well as they reach more locations as we try to two more international opinion and thanks.
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She inside Jayco auditing entering a highlight though as you go Yahoo tickets and John just always Standalone Lanjigarh trimboard tickets and downy mildew patent machine shop.
Okay. So to answer your first question for Huh regarding the formal so the rational we are doing phone waste night traditionally tiger has another customer.
I'd like to treat by themselves, but we also have a lot of customer who don't really know what to buy so we want to have far more those nice mutual fund products our platform to give people more choice and we also diversifying our product offering from active trading to passionate trading so we can capture or the needs of our customers. So hum.
I don't make money as we go into you know.
Big at work with our partners on selling and also on fund administration fees.
In terms of customer acquisition, so going for once we are operating is fully.
The growing in Singapore, U.S., Australia, we target to have a quoted at night over a year by by end of this year and I and these 10% of our by new accounts that come from international New clients and also one thing I to mention so I hope our Aesop also kind of accounts for ballet.
20% of the new clients, you know you already basis.
And now has a fool around question I'm the in our test class to come to me.
Right.
Okay, sorry has passed.
You Ambarella is still relatively small is following the 25 million U.S. de at this moment.
Well pads recent needs has been growing pretty decent because at the some of this return you know given the volatility has pest has been pretty attractive daily.
That's a that's that's not that's a mega one part of managed by our in House My asset management team.
Go ahead.
<unk>.
Your next question comes on Levy Lin from HSBC. Please ask your question.
Hi.
Question on cash.
It's it's now the extremely low rate.
We see any.
Margin pressure, but for this product and also just wondering latest update of Hong Kong license.
What's the obstacles that we are facing for a plate applying for that.
Thanks.
So to answer your first question on the cash for us or we don't have any margin pressure because as we first of all you know it's not Levered I'd also like we were seeing very liquid product snake TPS and other fixed income.
So so so so so far we don't have any margin pressure and your question regarding the nicest. We don't we don't really come under license, but I think you can follow our you know release was we have something to publish.
Yes.
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They know more further question at this time I would now like to have the conference back to today's presenters.
Please continue.
Along with his Clark I would like to thank everyone for joining our call today I am now closing call on behalf of the management team here at 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 conclude the call and thank you very much for your time.
Ladies and gentlemen, this concludes our conference for today. Thank you for participating you may now disconnect.
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