Q4 2020 Futu Holdings Ltd Earnings Call
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Hello, ladies and gentlemen weighted.
For the holdings fourth quarter and full year 'twenty trade at the conference call. At this time, all participants are in listen only mode.
After managements prepared remarks, there will be question and answer session.
Today's conference call is being recorded if you have any objections you may disconnect at this time.
I would now like to turn the conference or what's the host for today's conference call.
Most of that in your view on that.
[noise] of staff and head of IR at Fuji. Please go ahead Sir.
Thanks, operator, and thank you for joining us today to debt, that's our fourth quarter and full year 2020 earnings for fall <unk>.
Joining me on the call today of Mr Leaf Li Chairman and Chief Executive Officer, Arthur Chen Chief Financial Officer, and Robin share Senior Vice President.
As a reminder, today's call may include forward looking statement true.
Represent the company's belief regarding future of that which by their nature are not certain and are outside of the company.
Forward looking statements and bottoms here and Beth and the uncertainty we can.
Caution you that a number of important factors could cause actual results to differ materially from those contained in any forward looking statements.
More information about the potential risks and uncertainties. Please refer to the company's filings with the SEC, including its registration statement.
With that I will now turn the call over to Li leaf will make his comments in Chinese and I will translate.
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Hello, everyone. Thank you for joining the earnings call. Today, we are excited to announce that the robust growth momentum of our operating and financial matrices continued into the fourth quarter of 2020, and we ended the year on a high net.
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We added over a 98000 paying clients on a net basis over a half a dozen where from Hong Kong and overseas.
We are pleased to see that a relentless commitment to use our experience continued to pay off as we again brought in over 50% of argue paying clients in the quarter through organic growth.
As of yearend paying clients reached over 516000, representing a 116, 5% year over year credit.
We exceeded our full year of paying client guidance by adding approximately 320000 paying claims in 2020.
At the same time, we continue to deliver a high paying client quarterly retention rate of 97, 9% in the quarter.
Looking into 2021, we are guiding for a 700000 net new paying clients.
<unk> to a 135% year over year of growth and total paying clients.
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At the end of fourth quarter average client asset balance was 552000, a vet your highest since our IPO, bringing our total client assets to 285 to $2 2 billion Hong Kong dollars, representing 227, 3% growth on a year over year basis, and 41, 9% growth.
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In Q4.
Total trading volume was one two trillion Hong Kong dollars in the quarter of 438, 1% year over year, a 19, 2% quarter over quarter U.
The U S stock trading with $783 6 billion, Hong Kong dollars or 65 percentage of our total trading volume underpinned by the robust U S equities market performance.
In Hong Kong, we continue to aggressively take market share in terms of both paying clients and trading volume.
The market share of our Hong Kong trading volume with over a two six percentage per quarter, which more than doubled from the year ago quarter.
In the fourth quarter, we further expanded our training product offerings by launching the CME futures and a 50 futures.
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Total equivalent of the semi and cohort sales.
Total revenue.
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By year end total client assets of money plus surpass the 10 billion Hong Kong dollars milestone of 68, 5% year over year.
We have established partnerships the 39 asset managers around the world, which altogether has to 39 live streaming on our platform in 2020 to conduct fund publicity and Investor education.
In the fourth quarter, we saw a growing number of clients capture of the market by investing in equity funds.
Non which funds with a focus on the technology sector and the greater China region gain for the most traction.
Over 42000 clients or eight 1% if our total paying client base helped net wealth management positions as of year end offering significant room for further penetration.
For this year for who the sodium for global bus sales.
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Through July of <unk> continues to be the go to enterprise service partner, we had a 105 IPO and IR plans as of year end and.
In the fourth quarter kind of Ips recorded over a $10 billion in subscription respectively on our platform, including the U S. Ipos of minutes of when the facts and the Hong Kong Ipos of pop mall and JD health.
We also added 33 aesop clients in the quarter, bringing our total is a plane number to a 159.
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We continue to invest in our technology infrastructure despite.
Despite heightened market volatility in 2020, we still achieved a full year of service availability rate of $99 96 per class and.
In January 2021, we further expanded our a throttle range for Hong Kong stock trading from two hundreds of 500, thereby allowing us to execute a 1000 concurrent Hong Kong stock orders per second.
Technological excellence is deeply entrenched in every aspect of our business and we will continue to invest in technology to widen our competitive moat.
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For Q2 2021 is the Europe internationalization, we officially launched our moving out in Singapore on March the eighth and has since then and strong growth momentum and received encouraging feedback we.
We believe that our product and service delivery, a differentiated value proposition and many more amount of markets outside of mainland, China and Hong Kong and we wanted to take advantage of the elevated retail stock market participation around the world.
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The next I'd like to invite our CFO Arthur to discuss our financial performance.
Thanks, Lee the Daniel Let me walk you through our financial performance all of the number of sites Hong Kong dollar unless otherwise noted.
In the fourth quarter of our total revenue was $1 2 billion an increase of 200 is a 2% from $311 million in the fourth quarter of 2019 to.
The breakdown focused commissioning on the handling charge income was 718 million a increase of 374% from the 152 million in the fourth quarter of 2019. The rise was mainly due to the scope for hundreds of circa 8% year over year growth of our total trading volume.
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Interest income was $337 million, an increase of 163% a year over year, we generate higher module funnel for interest income due to the sharp increase in data average module financing balance of the higher IPO financing interest income due to a very active Hong Kong IPO market.
Other income was a 100 for the 1 million net increase of 318% from sales of 1 billion in the fourth quarter of two some of the launching of the challenge was primarily due to an increase in our IPO subscription service charge income and the currency exchange service income.
On the cost side protocols.
For 242 million net increase of 179% from $87 million in the fourth quarter of 2019.
Brokerage commission on the handling charge expenses were 133 million the increase of 323% of a year over year. This growth was largely in line with our brokerage commission of the handling charge income growth.
The interest expenses was 64 million an increase of 100, 160%.
Year over year, the increase was primarily due to higher IPO financing interest expenses.
Processing of the service cost.
The increase of 17, 9% year over year. The growth was primarily due to increase in crowd of the service fees off of.
The result, total gross profit was 944 million an increase of 321% from 200 pounds, a $4 million in the fourth quarter of 2019.
<unk> margin increased from 72% in the fourth quarter of 2019 to close to 288% in the fourth quarter of 2020 due to higher operating leverage as a result of of our larger business scale.
Total operating expenses were $364 million, an increase of 100% year over year.
The broken down.
R&D expenses were $162 million, an increase of 118% from 74 million of in the fourth quarter of 2000, the Lion King the increase was primarily due to an increase in the head of <unk> to further expand our product offerings.
Selling and the marketing expenses was one hundreds of 13 million a increase of 119% from $51 million in the fourth quarter of 2019. The increase was primarily due to a higher branding and the marketing spending.
G&A expenses of 89 million the increase of 60% from 60.
The 56 million in the fourth quarter of 2019, the increase was primarily due to the increase in headcount for G&A personnel.
As a result of net income increased by 11 times two of 533 million.
Year over year, the increase was primarily due to robust revenue growth and the significant operating leverage.
At the same quarter, we complete our 216 million U S dollar pipe offering with a leading global investment from the operating what's in the form of prepay the worlds of Hudson reflect in our equity of items in our balance sheet.
Also we further enhanced our capital base, we are able to support a larger margin financing balance ramp up of our marketing efforts in the international markets and a further invest into our technology infrastructure.
That concludes our prepared remarks, we'd now like to open the call for questions. Operator. Please go ahead.
Secondly.
Ladies and gentlemen, we will now begin the question and answer session.
You ask a question. Please press star one on the telephone keypad wait for it.
They can be managed if you wish to cancel a rigorous.
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Chairman the just wondering in the field for a three to five years, how do you see for two different from now. The second question is about just now the guidance given on the paying clients just.
Now the guidance for paying client base of around 700. K addition for me.
For 2021 I was just wondering does the 700 K include the clients off of <unk>.
For a more always just for Twilio Neil Thank you very much.
Good day.
No. It is a Sunday of women women the competitive I don't give ourselves a range yet, but those are on the hesitated to sum things up with a busy getting younger muscles. The O&M obviously the.
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A three to five years, a little one in comparison to how we play or a business and I think our of our best simple involved in three out of that and number one you'll see two out of the more international platform and as we mentioned just now the internationalization is a key priority for us this year and in New Jersey, a come and number two I think will further go down or a.
Path of constructing a self reinforcing ecosystem and a platform that provides connectivity to users and Dr. <unk> media et cetera, and number three I think are free to money plus which is our wealth management business will contribute of.
A larger outside balance and also revenue share of total business.
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To your second question. The 700000 net new paying client addition, the tiara includes our aluminum paint clients. So we expect side and on the 700000 of new paying clients about 80% of them will come from mainland, China, and Hong Kong and the rest of will come from Singapore and the U S.
Thank you.
Goodbye for now.
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The CIC. Please go ahead.
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Hi management, Thanks for taking my question I'm sorry the.
The <unk> from the FTC.
Congratulation on this one of.
The exciting.
I have two questions here the first of all of its a balance of the revenue breakdown. We feed the other income has experienced a strong gross and I Wonder would you. Please keep asking for information on the breakdown and the second question is bound to the kinds of assets.
Batch of the average cost of the banks.
The assets tenants has increased significantly.
On a quarterly basis I remembered as accident of average ethics and fairness to all of our overseas currencies much nowhere is the index of our.
And then customers. So would you please SKU Ms Li.
More information after the difference between different regions. Thank you.
Thank you.
Also your two questions I think number one in terms of the breakdown income the.
The most of the part of our of the income still come from the our IPO subscription service charge and also the.
The currency exchange service charge the.
Since you mentioned such as the Esol.
The business revenue and also the wealth of mainly from a revenue is still not very very meaningful we will give you the detailed breakdown in our forthcoming annual report which may be due.
In the later in the later dates of this of this month and the secondary for the.
The average of class assets Youre right, if we compare our mainland class.
Assets and also the Hong Kong class assets.
Roughly our average our average a class a for Hong Kong market will be along the quantity of 25% lower.
The average numbers of the mainland numbers, we have not.
Conduct our class acquisition in Singapore.
In the last Q4, so actually we do not have such data on hand, yet.
And also we have a lot of include our net.
<unk> numbers in fourth quarter as well, we will give you more information in the forthcoming Q1 Q1 Q1.
So I mean.
Thank you.
Thank you Arthur.
Thank you.
Next question comes from the line of.
Jackie show for them.
Sure.
Please go ahead.
Hey, guys I'm going to agree with you one of the two quite honestly I think the benefit of <unk>.
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Thanks management for a.
Taking my questions two questions number one is about our guidance.
I think the same thing.
You paint claims guidance excuse me the most.
Market expectations such a.
Just want to check all of a piece of the current.
The rates of our paint new paying clients.
As in the first quarter and will.
Will do.
It is our expectation for the speed.
Speed of a person.
The acquisition between regions over the years.
And second question is about our U S south clothing.
Progress so what will be the launch time.
For the U S south of acquiring and according to our lots of earnings call We mentioned.
There's probably a a U S dollar a 50 maybe.
Pre tax benefit from.
Second the list of querying, so when we see the the impact on the financial results. Thank you.
Okay. Thank you Jackie.
Leaf Li.
Leaf to answer your first question in terms of I'll give you some qualitative updates about year to day situations frankly speaking we cannot share in a quantitative numbers about yesterday run rate, which I think will will give you more color per hour.
First quarter earnings call.
For a second question and I will also a first in terms of cell, killing each other we feel free to stop our initial migrations recently just the low two two to overcome the first stop but we do think this migration will take time.
We'll see a meaningful progress in terms of the operation numbers.
For the client assets of the dump the number of the planned for.
Our counterparty in the <unk>.
The us quality of wholesaling half this year, but I think the in terms of the financial savings it will not.
The tuning for in terms of 2020 contribution.
Definitely you will see the benefits for them.
From the second half of next year.
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The bigger than the level of a little bit on Daniela.
So first of all adding leaf for commented on the second question on a self clearing he mentioned that two weeks ago. He used his own personal accounts of that's a trade pie to ask the Q five training, which are processed through our own a clearance of Sterne and the trade for a profit a profit very successfully as Arthur mentioned, we will start to.
Start with the migration process, starting in the second quarter and I will take your first question on our guidance and our run rate. So year to date. The numbers have been really strong the paying client growth has been strong and a J that gave us ample confidence to give out the guidance of three.
300000, net new paying client addition that I think we are well on track and as we mentioned earlier a number of 700000, new paying clients about 80% of it.
The number will come from mainland, China, and Hong Kong, and 20% will come from the U S and Singapore I think although too early to give out a more detailed breakdown for.
Other downward I, just mentioned, but I think in terms of run rate, maybe I can talk a little bit about our business updates.
Year to date, a you know as we mentioned in Singapore, We soft launched in February and we officially lap started the test on March the <unk> again.
If you look at some of the rankings on the high low I'll ask afterwards in Singapore, you will see that we have really strong downloads and our business has been growing really strong and kind of exceeding our expectations. So we're very confident about our gross profit back to Singapore and also a strong.
A lot of momentum is also observed in the U S market as well and in mainland China and Hong Kong I think the gross momentum is strong as always and we see that there is a very strong IPO pipeline for secure and if I remember correctly in the first two months of this year. The total proceeds raised through a Hong Kong Ipos total a low over.
70 billion of Hong Kong dollars any of the first quarter of last year in total for the IPO proceeds for the low over a $10 billion. So the IPO market is very active the.
Sentiment is very positive anywhere a continuously expanding our Hong Kong stock trading market share and in February this year I think our D. A U surpassed 1 million for the first time and Thats also one of a major accomplishment in establishing a social community and just creating the.
This ecosystem. Thank you.
That's clear thank you.
Thank you.
Our next question from the line of.
A show.
Sure Sean from Jefferies. Please go ahead.
Your line is open.
First of all of that once the Jefferies.
So I will not go into the functionality.
You mentioned some coupons now concludes the people.
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What's the kind of moving for us.
The consolation component.
Hi management. Thanks for taking my question. This is free from Jeffrey I think to your question.
Could you. Please provide some kind of a monster brokerage commission and headlines net income from a you know.
And for.
The net respectively, and how should the reason for possibly trend in the commission fee rate and the difference.
Market.
My second question is how should we think about the provision Henry income distributions from the Singapore market and our students.
For the overseas countries.
Okay. Thank you for it.
Let me also your two questions I think the number one in terms of the trading volume.
Just to give you some breakdown in terms of our fourth quarter of trading volume.
The us market roughly accounts for 65% of our total trading volume the.
The remaining 34% came from the Hong Kong local market and we have a very tiny portion from the Hong Kong China.
Scott.
If you look at our blend of commission rate.
On the fuel was a very very stable if we take out some fluctuation due to the IPO and also the us trading.
Trading because our use of stock the commissions actually some of our trading commissions based on the number of the share rather than a blended.
As a percentage of.
Calculations.
So on a like for like the basis of our commission rate keeps a stable and I do think of them such that the facility will continue toward a <unk>.
This year.
And also in terms of a commercial contribution from the single non market. This year I think the proportion of wise the will not be that meaningful because there are a few.
Our gross learning curve in the in.
The Singapore market and also in order to penetrate the market more quickly and a more aggressively each other.
Adopt a lot of your of the commission free strategies, because we think in the current stage market share is far more important.
Monetization from the trading Commission.
No for now.
Thank you.
Thank you.
The next question from the line if you're a Jiang from credit Suisse. Please go ahead.
Thank you for any time youre going to be counting of hey, let's say they seem to think this is certainly a line, which I'm going to a range that is the one I E.
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700 came net new paying clients.
Thank you for a new one.
Yes, the 80% of.
From the Hong Kong and mainland whats the expected contribution from mainland China.
Hong Kong low.
On Singapore, specifically, what's the marketing strategy for that market and how should we think about the a customer acquisition cost.
Going forward. Thank you.
Okay.
Let me help answer to it.
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In your opinion.
The first question on breakdown as we mentioned the 80%.
Or a new clients will be from mainland, China, and Hong Kong and the amount of those 80%.
We think that about 60% will be from Hong Kong and the rest of our mainland China and true.
For a second question on the Singapore market.
Based on our own observation.
Positive landscape in Singapore is very similar to that in Hong Kong.
There is a relatively large retail industrial base that is relatively wealthy and the market as a whole dominated by the incumbent players that have been a lackluster trading technology capabilities and have a less of an optimal user experience and for a few too I think our client acquisition channel.
Will be very similar to the channel and Hong Kong.
Including online and offline marketing working with third party channel partners working with Kols and also the organic growth.
The oil.
The personnel critical goods for a minute you.
You mentioned of the Hershey.
To achieve the you could see the Guardian will do the shutdown of hybrids, whether you agree with the surgeon now so he can at a U.
So today, you've got who works for them that you guys just started out share income Vittorio.
So we don't want some gross just I'll cover the teach them tickets for the show kind of a recession.
We expect our per paying client acquisition cost in Singapore to the a to be around 2000, the Hong Kong dollar.
So thats our estimate based on one month of experience of actually actually launching in the Singapore market and we believe that as a REIT user growth takes a lot.
The per paying client acquisition cost has ample room to go down.
Thank you.
Okay clear thank you.
Yeah.
Thank you.
If you wish to ask a question for Rob.
The force cheaper cause the breaks your name to be announced.
She would potentially of a critical piece to respond to the task.
The star followed by walking off to a great. Thank you.
As there are no further credit please I would like to hand, the call back to Daniel.
Well the future.
Thank you that concludes our call today on behalf of the future management team I would like to thank you for joining us today.
Any further questions. Please do not hesitate to contact me or any of our Investor Relations representative.
And goodbye.
Thank you.
Ladies and gentlemen that does conclude the countries for today. Thank you for participating gave me a disconnect. Thank you.
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