Q2 2021 UP Fintech Holding Ltd Earnings Call
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[music].
Ladies and gentlemen, thank you for standing by and welcome to the up Fintech holding limited second quarter 2021 earnings conference call. At this time all participants are in a listen only mode. There will be a presentation followed by a question and answer session. I must advice you that this conference is being recorded today.
Friday September 10th 2021, I would now like to hand, the conference over to your first speaker today, Mr. Clarke SUV.
Please go ahead Sir.
Thank you operator, Hello, everyone and thank you for joining us for the call today.
Fintech holding Ltd second quarter 2021 earnings release.
Distributed earlier today and is available on our IR website at IR, <unk> Tiger Dot com as well as globe Newswire services.
On the call today from ups and tests are Mr. Tien Huang Chairman and Chief Executive Officer, Mr. John Zeng, Chief Financial Officer, Mr. Huang Lei CEO.
The CEO of U S Tiger Securities and Mr. Kenny Zhao our financial controller, Mr will give an overview of our business operations and discuss corporate highlights. Mr. Song 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.
Statements were 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 6K furnished today September 10, 2021, and our annual report on form 20-F filed on April 28, 2021, we undertake no obligation to update any forward looking statements, except as required under applicable law. It is my pleasure to now introduce our chairman and Chief Executive Officer, Mr will Mr will make them.
Alex in Chinese, which will be followed by English translation. Mr. Woods. Please go ahead with your remarks.
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Hello, everyone and welcome to Tiger brokers 2021 second quarter earnings conference call.
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Although market sentiment was weaker in the second quarter, we still achieved substantial growth thanks to internationalization and the strength of our comprehensive product and service offerings.
Revenue in the second quarter with $62 million, representing 98, 7% growth year over year. This quarter. We also increased investment in user acquisition self clearing and talent recruitment.
We are confident such investments will bolster our market, leading position and fuel future expansion in our business.
Factor in the $20.0 million fair value change to convertible bonds, we issued earlier this year.
Non-GAAP loss is $4.4 million for this quarter.
Total customer accounts increased by 249000 in the second quarter to one $15.0 million, which is two times. The total number of accounts in the same period of last year.
We added 153000 funded accounts this quarter.
Four point.
Five times that of the quarterly addition, last year and a 34% increase quarter over quarter.
A number of total funded accounts rose to 529000.
Of the 153000, new additions this quarter.
Over 60% came from offshore exhibiting the growing momentum of our internationalization strategy.
Total newly funded accounts in the first half of 2021 reached 270000.
Surpassing the total number of funded accounts acquired since our platform went online in 2015 through 2020.
Even with a weaker market backdrop, we still see healthy asset inflows.
AUM reached $32.0 billion this quarter up nearly three times year over year, and 11, 8% quarter over quarter.
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I would now like to take this opportunity to provide investors an update on three key business initiatives at our company.
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Tiger brokers is continually expanding our global reach and our network of subsidiaries covers the U S Australia, Singapore and other countries are subsidiaries of licensed to conduct a wide range of security businesses, including investment banking asset management and brokerage our internationalization continues to accelerate more than.
60% of newly funded accounts this quarter came from offshore markets and as of June 30th 40% of our total funded accounts were from international users. We only started executing on our internationalization strategy just over a year ago.
But our progress thus far is a testament to the value proposition of our platform in foreign markets, we see that latent demand for our services across a wide range of countries and regions and expect that internationalization will not only slowed growth in new accounts, but also raise the ceiling for the future size.
Our client base.
As we expand to new countries and add products and markets to our trading platform affirmed games, new experience and knowledge for engaging with regulatory bodies, enabling us to further enhance the client experience.
I'm pleased to report that as of today.
We already have over 200000 funded accounts in Singapore.
Firmly believe internationalization and drive further growth.
Although the market has been weak since the second quarter, we are confident to achieve our guidance of 350000, new funded accounts this year.
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Today, our growth strategy envisions simultaneously developing our expertise in investment banking he stopped brokerage to augment our capabilities to meet our clients' global financial services needs.
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The rapid expansion of our E Commerce business continues to exceed our expectations in the second quarter. We added 51, new Aesop clients for a grand total of 216 clients, we serve not only U S and Hong Kong with the company, but we also help Asia companies.
Manage their employee options.
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In the second quarter, we participated in 17, Ipos and follow on offerings in the U S market and also serve as an underwriter 14, including boss outweigh Charlotte.
International Ding-dong among others in light of the recent concerns over ADR Ipos I would like to highlight for our investors and stakeholders that we possess extensive capabilities to act as an underwriter in Hong Kong.
In the past year, we participated in many popular listings in Hong Kong, especially those of net E X Pone, Billy Billy Harbor, Biomed and and T. G.
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Finally, I would like to provide an update on our self clearing capability.
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In July of 2019, we acquired trade up Securities Inc.
Marsh co broker dealer with over 30 years experience in self clearing in its own self clearing license because we wanted to establish theme.
Technical operational and compliance capability to manage our own proprietary brokerage system.
I am pleased to report that as of the second quarter 2021, more than 50% of our clients were having your U S cash equities south cleared by trade up.
We project that by the end of this year, we will be self clearing.
Over 70% of our clients.
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Let me walk through our second quarter financial performance all numbers are in USD.
Total revenue was $62.0 million this quarter up 19, 9% year over year.
Commissioning were 31 million up 64% year over year, but down 41% from the first quarter of this year.
Dropping commission, what's due to weaker market sentiment in the second quarter as total trading volume dropped 18% quarter over quarter, plus the proportion of higher unit Columbia products. For example, cash equity dropped from 50 person off the trading volume in the first quarter to 40 personal trading volume in the second quarter.
The decrease in commission also resulted in a lower blended take rate of three peaks in the second quarter versus 43 bps in the first quarter of this year, but in reality the fee rate remains the same for both quarters.
Interest related income, which combines financing service fee and interest income was 19 million, an increase of 115% year over year and 7% quarter over quarter.
The increase was due to higher marching out of securities lending balance and gradual ramp up yourself clarity.
Other revenue was $12.0 million up 300% year over year, primarily due to more equity underwriting.
Our services and currency exchange services.
Now switching to cost.
Interest expense increased to 154% year over year to $12.0 million in this quarter and I wish all of our Europe grows as the increase in margin activities.
Execution and clearing expenses were $12.0 million this quarter increased to 131% year over year as we have more funded our current customers and a higher trading volume.
Employee compensation increased to 82% year over year to $26.0 million.
As we keep adding head count in RMB self clearing to support our global growth.
Along with headcount increase.
This quarter, our occupancy expense increased 32% year over year to $6.0 million.
SG&A increased to 84% year over year.
Year to $6.0 million.
Marketing expense had the most uptake with the opex increase to more than 700% year over year to 24 million.
We're fully committed to international.
And then in the second quarter wage inflation marketing offshore most being in Singapore through both online and offline channel to drive brand awareness and the user acquisition, but I strongly believe grabbing more market share right now will help develop deliver a better financial performance down the road.
As a result of our rapid user growth communication and data usage also increased 143% year over year to 5 million this quarter.
With the increased spending to drive growth and a fair value change of $20.0 million of convertible bonds. We issued earlier this year.
The loss for second quarter was 20, $26.0 million.
Taking all of the fair value change and other non-GAAP items, our non-GAAP loss for this quarter. It was $8.0 million.
While we have conclude our presentation operator, please open the night for Q&A. Thanks.
Certainly ladies and gentlemen, we will now begin the question and answer session. If you wish to ask a question. Please press star one on your telephone keypad and wait for your name to be announced if you wish to cancel your regrets because of Brexit.
Go ahead Keith.
It goes until we compile the Q&A roster. Once again it is star followed by one to ask the question.
Do you have the first question is coming from the line of having two from CIC. Please go ahead.
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I have two questions.
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In Q2 could you give more color on the number.
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Two other comments you want to move them.
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Yeah.
Thank you Brian.
So I will answer your two questions Firstly is on the.
The guidance for the second for the third quarter. So.
Look at the two night all this data we see higher NIE UE.
Products like cash equity option.
Went up versus the second quarter. So they feel if market stays like this and we expect commission to have a moderate increase in the third quarter.
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Our underwriting is on hold due to the current policy from China and the U S. Regulators. So short term this could have a negative impact on our revenue, but the impact should be manageable as ADR underwriting only accounted for less than 10% off our revenue. So we think the AVR equity offering will resume loss regulators, it's more clarity and in the meantime as Pamela.
Scenario, where rate activity in Hong Kong IPO as international underwriter, and we already under OLED cell phone goes night popular ipos. So this could offset some short term you can pass on to harder in U S equity underwriting.
In terms of customer acquisition, so the big its opacity Seltzer marketing, we expect the third quarter market to our marketing expense to be in line or less in the second quarter as we don't offer any of offline events in Singapore.
Well be very opportunistic to acquire users when we see when we see fit.
In terms of you am per users.
So.
In July and August, we still see very healthy letting inflows.
For both months.
Due to market sentiments average AUM is down around 10% to 15% by the end of August versus industrial.
Industrial.
And in Europe first second question regarding the.
Hearing you know they are cutting expenses went up.
So the main reason of the increase in clearing expense is we have a lot more Singapore clients and we offer Singapore stock trading.
Based on local regulation, if the case is trading Singapore stock.
Assay it needs to be called the Atlas S T X clear remember.
Our Singapore subsidiary is not of SPX member yet so we pay third party custodian fee for each kayaks coconut accommodates us giving away our AUM.
Over 200000 ft, Singapore clients already we paid close to 2 million custodian fees, the second quarter, which kind of as a clearing expense.
As you might know our Singapore subsidiary has already received AIP from SPX to become a clear remember so once we have officially become the SPX. They remember we can greatly reduce the custodian fee.
I believe we can see some reduction in custody fees starting in the first quarter. Thanks.
That's very helpful.
Okay.
Thank you.
Once again, ladies and gentlemen, it is star followed by one to ask a question, even though there might be a slight pause actually collated the questions.
Do you have the next question is coming from the line of Judy Zhang from Citi. Please go ahead.
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Yes.
So so.
The.
Sunday, our clients our profile you know so we used the users acquired nausea, or say second quarter of 2020 as a cohort sample.
Initial deposit amount that group is around 6000 to 7000 USD one year later by the end of second quarter. This year.
Average client assets of around 30000 USD.
Since second quarter of last year each quarter. This cohort group has net asset inflow, which means they are keeping deposit money into their dot com and AUM growth is not only due to equity value appreciation.
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Okay.
Look at.
You know the old customer we acquired this quarter.
Second quarter of 2021.
Averaging nature of deposit is around 5000 in USD.
Below the initial deposit of the second quarter of 2025, we don't think that this is due to a deterioration of credit quality.
We feel it's more like a.
It's more due to the less attractive market backdrop, we feel you know similar to the kinds of work we acquired last year. After several quarters they were kids deposit money.
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So on customer acquisition cost and payback, we still use the second quarter of 2020 as a cohort sample.
Factor in customer acquisition cost was about $130 USD.
And back to the market was more active.
So if we only count on their commission and all excluding interest.
The payback was around two quarters for that cohort group.
Look at the areas quite a user in the second quarter of this year due.
Due to more competition the customer acquisition cost went up to around 160 U S dollar per person.
And they are commissioning also dropped due to a weaker market route.
Still we feel it's.
We're still gonna be attractive for us to acquire those those users even though the payback increased to four to six quarter because our users are relatively young as long as we can get them pay back in a relatively short period, there where it goes.
Well a lot of upside for us to monetize.
Thank you Judy.
Okay.
Do you have the next question. This is coming from the line of Eric <unk> from China Renaissance Pease go ahead.
Oh, Hello, Fantastic. So I'll go with you right now.
Yes, it does.
Eagle anti issue, what kind of hard to tell at Alex you shook my ability to shop on Saturday, but I can only see so how long do you really push ourselves because we're constantly talking about that whole union that they are going to shake out can wait out the assortment really at all argue to them and maybe you just don't know which will be at least where it sounds from what it sounds like it.
They hold that could go up a portfolio.
No it wasn't a thin.
So thanks management for giving me the opportunity to ask questions. So my first question.
You saw the volume decrease quarter over quarter and second quarter.
The net interest income and margin kind of imbalance, both increase, especially the module for nothing better.
So task the rationale behind it.
So for the second question.
So they know take a number of new paying clients acquired from mainland China was more than our competitor.
CAC or what the current with our current customer acquisition strategy in mainland China and the cost of it.
Thanks.
Okay.
Okay.
Sure. Thanks, Eric So I would answer your two questions. So the first one was on the net interest income.
So the main reason of the net interest income increased while the trading volumes can die is high are we starting to.
To them probably herself carrying capability so firstly starting.
We have more and more my trading volume out of assay called they are unclear and phone we're starting to use some of our kinds of idle cash, which gives us a cheaper funding and it also gives us more.
More flexibility in terms that they've got the Cup weekend, then to each customers.
And also because the company yourself carrying you know.
Firm enable us to become a direct counterparty for securities lending business, which is pretty lucrative on the street. So we can generate more interest we saw chevron based auditing intermediaries. So that's the main reason you know our interest net interest income increased in the second quarter, while the trading volume came down and of course you know.
Margin balance if you look at our balance sheet also increased versus the first quarter.
But the one beauty of margin balance on our balance sheet includes Hong Kong IPO, So pick off an IPO, which is.
It's not that.
Possible for us for the high margin business, taking out that power our margin loan balance.
It's about a 450 million while in the first quarter was about 400 million. So those two other memory then slide net interest income went up in the second quarter.
And then in terms of customer acquisition.
For onshore customers so in the second quarter.
We have been you know.
Actually you know working with <unk>.
More channels saw intermediaries to target you know.
Now Chinese investors, who already have a sales sure that this is showing so far have shown good results and of course, you know our <unk> is also.
A pretty good you know user equities into fast to tap into those now.
Chinese users.
Terms of customer acquisition cost you know its pretty much in line.
Our previous customer acquisition cost for Chinese users.
The major increase so far.
Customer acquisition costs actually can function and therefore, as we mentioned earlier. Thank you.
Thank you do you have the next question is coming from the line of young thing from Th capital. Please go ahead.
Thank you for taking my question.
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Sure.
You were breaking up so you mean the.
Trading volume shifting to Hong Kong, and we see and I are more strong competition from the existing players.
Yeah.
Yeah.
Okay.
So in terms of you know so the thing is right now.
Sure.
If you if you look at all the Chinese ADR is coming back to Hong Kong I'm waiting. This you know will likely be a trend.
We mentioned earlier you know we have been very active in Hong Kong actually international underwriter for Chinese ADR secondary listing in Hong Kong. So we think that that part of you know we feel pretty confident then we can't keep you know getting more corporate clients and also use this opportunities to acquire more retail clients and then it comes from trading capabilities.
Traditionally you know our strengths was under in the U S market, but recently, we have a deep well of a lot more resource to develop our Hong Kong trading capabilities for.
For example, you know the Hong Kong able to update US I think we are one of the few firms to offer it for free and it you know the Hong Kong options, along with the first firm to offered to Hong Kong to investors. So we think they're trading no mandates from the primary market or the secondary market we are much more.
Capable versus where we were like one or two year cycle. So I think the training.
Although still benefit you know last.
We develop from a resource into the whole country, you can pick up the ITN R&D.
Okay.
Sure.
Yeah.
Thank you.
We have no further questions at this moment I would like to hand, the conference back to our host for any ending remarks.
I'd 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 more Investor Relations team. This concludes the call and thank you very much for your time.
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Yeah.
[music].
[music].
[music].
Ladies and gentlemen, thank you for standing by and welcome to the up Fintech holding limited second quarter 2021 earnings conference call. At this time, all participants are in a listen only mode.
Dentation followed by a question and answer session I must advice you that this conference is being recorded today Friday September 10, 2021, I would now like to hand, the conference over to your first speaker today, Mr. Clark S. Judy. Thank you. Please go ahead Sir.
Thank you operator, Hello, everyone and thank you for joining us for the call today.
Fintech holding Ltd second quarter 2021 earnings release.
Distributed earlier today and is available on our IR website at IR, <unk> Tiger Dot com as well as globe Newswire services.
On the call today from up Fintech are Mr. <unk>, Chairman and Chief Executive Officer, Mr. John Zeng, Chief Financial Officer, Mr. Huang Lei CEO.
As CEO of U S Tiger Securities and Mr. Kenny Zhao our finance controller, Mr will give an overview of our business operations and discuss corporate highlights. Mr. Song 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.
Statements were 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 6K furnished today September 10, 2021, and our annual report on form 20-F filed on April 28, 2021, we undertake no obligation to update any forward looking statements, except as required under applicable law. It is my pleasure to now introduce our chairman and Chief Executive Officer, Mr. Wang Mr will make them.
In Chinese which will be followed by English translation. Mr. Woods. Please go ahead with your remarks.
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Hello, everyone and welcome to Tiger brokers 2021 second quarter earnings Conference call.
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Although market sentiment was weaker in the second quarter, we still achieved substantial growth thanks to internationalization and the strength of our comprehensive product and service offerings.
Revenue in the second quarter with $62 million, representing 98, 7% growth year over year. This quarter. We also increased investment in user acquisition self clearing and talent recruitment.
We are confident that such investments will bolster our market, leading position and fuel future expansion in our business.
Factor in the $20.0 million fair value change to convertible bonds, we issued earlier this year.
Non-GAAP loss is $8.0 million for this quarter.
Total customer accounts increased by 249000 in the second quarter to one $15.0 million, which is two times. The total number of accounts in the same period of last year.
We added 153000 and funded accounts this quarter.
4.5 times that of the quarterly additions last year, and a 34% increase quarter over quarter.
The number of total funded accounts rose to 529000.
Of the 153000, new additions this quarter.
Over 60% came from offshore exhibiting the growing momentum of our internationalization strategy.
Total newly funded accounts in the first half of 2021 reached 270000.
Passing the total number of funded accounts acquired since our platform went online in 2015 through 2020.
Even with a weaker market backdrop, we still see healthy asset and for us.
AUM reached $32.0 billion this quarter up nearly three times year over year, and 11, 8% quarter over quarter.
Could I ask them, what kind of Sandler O'neill.
Youll find that inflation can call.
I would now like to take this opportunity to provide investors with an update on three key business initiatives at our company.
Yeah.
Hey, Sean.
You have wholesale.
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Commentary, let's meet up with you on EMEA.
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Late quarter.
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So as you go into a quick holdings and Georgetown.
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We're giving guidance because of that.
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Thanks, so much.
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The bigger one continue in your tool chest in the tenure.
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Tiger brokers is continually expanding our global reach and our network of subsidiaries covers the U S. Australia, Singapore and other countries are subsidiaries were licensed to conduct a wide range of security businesses, including investment banking asset management and brokerage our internationalization continues.
To accelerate more than 60% of newly funded accounts. This quarter came from offshore markets and as of June 30th 40% of our total funded accounts were from international users. We only started executing on our internationalization strategy just over a year ago.
Our progress thus far is a testament to the value proposition of our platform in foreign markets.
We see that.
Latent demand for our services across a wide range of countries and regions and expect the internationalization will not only slow growth in new accounts, but also raise the ceiling for the future size of our client base.
As we expand to new countries and AG products and markets to our trading platform.
Firm gained new experience and knowledge for engage with regulatory bodies, enabling us to further enhance the client experience I am pleased to report that as of today.
Already have over 200000 funded accounts in Singapore, we firmly believe internationalization and drive further growth.
Although the market has been weak since the second quarter, we are confident to achieve our guidance of 350000, new funded accounts this year.
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To be services today, our growth strategy and vision simultaneously.
Eloping our expertise in investment banking he stopped brokerage to augment our capabilities to meet our clients' global financial services needs.
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The rapid expansion of our E business continues to exceed our expectations in the second quarter. We added 51, new Aesop clients for a grand total of 216 clients, we serve not only U S and Hong Kong with the company, but we also help Asia companies.
They understand employee options.
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In the second quarter, we participated in 17, IPO and follow on offerings in the U S market and also serve as an underwriter.
14, including Bosch outweigh show.
International Ding-dong among others in light of the recent concerns over ADR IPO I would like to highlight for our investors and stakeholders that we possess extensive capabilities to act as an underwriter in Hong Kong.
In the past year, we participated in many popular listings in Hong Kong, especially those of net he's ex pone, Billy Billy Harbor, Biomed and MTG.
Others.
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Finally, I would like to provide an update on our self clearing capability.
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In July of 2019, we acquired trade up Securities Inc.
Formed in Moscow, a broker dealer with over 30 years experience in self clearing and its own self clearing license because we wanted to establish these.
Technical operational and compliance capability to manage our own proprietary brokerage system.
I am pleased to report that as of the second quarter 2021, more than 50% of our clients were having your U S cash equities south cleared by trade up.
We project that by the end of this year it will be self clearing.
Over 70% of our client.
Yes.
Santana CFO Jong doesn't go ahead please.
I wish you good.
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Yeah.
Hello, it's actually campfire clock.
Let me walk through our second quarter financial performance all numbers are in USD.
Total revenue was $62.0 million this quarter up 19, 9% year over year.
Commissioning were 31 million up 64% year over year, but down 41% from the first quarter of this year.
Dropping commission, what's due to weaker market sentiment in the second quarter as total trading volume dropped 18% quarter over quarter, plus the proportion of higher unit economy products. For example, cash equity drop from $50 off the trading volume in the first quarter to 40 person of trading volume in the second quarter.
The decrease in commission also resulted in a lower blended take rate of three peaks in the second quarter versus fourth <unk> seen in the first quarter of this year, but in reality the fee rate remains the same for both quarters.
Interest related income, which combines financing service fee and interest income was $19 million, an increase of 115% year over year and 7% quarter over quarter.
The increase was due to higher margin and securities lending balance and gradual ramp up yourself clearing.
Other revenue was $12.0 million up 300% year over year, primarily due to more equity underwriting.
Our services and currency exchange services.
Now switching to cost.
Interest expense increased to 154% year over year to $12.0 million in this quarter in line with our Europe grows as increasing margin activities.
Execution and clearing expense were $12.0 million this quarter increased to 131% year over year as we have more funded our current customers and higher trading volume.
Employee compensation increased to 82% year over year to $26.0 million.
As we keep adding head count in RMB self clearing to support our global growth.
Along with headcount increase this quarter, our occupancy expense increased 32% year over year to one 5 million.
SG&A increased by 84% year over year.
Year to $6.0 million.
Marketing expense had the most uptake with the Opex increase of more than 700% year over year to 24 million.
We're fully committed to international.
Are you seeing and are in the second quarter wage inflation marketing offshore most of the Singapore through both online and offline channel to drive brand awareness and the user acquisition. So I strongly believe grabbing more market share right now will help develop deliver a better financial performance Thunderbolt.
As a result of our rapid user growth communications data usage also increased 143% year over year to $5 million this quarter.
We're still increased spending to drive growth and a fair value change of $20.0 million of convertible bonds. We issued earlier this year.
The loss for second quarter was 20, $26.0 million.
Taking all of the fair value change and other non-GAAP items, our non-GAAP loss for this quarter. It was $8.0 million.
While we have conclude our presentation.
Operator, please open the knife for Q&A. Thanks.
Certainly ladies and gentlemen, we will now begin the question and answer, especially if you wish to ask a question. Please press star one on your telephone keypad and wait for your name to be announced if you wish to cancel any regrets the founder of Husky.
Hold on until we compile the Q&A roster. Once again it is star followed by one to ask the question.
We have the first question was just going to the line of <unk> from CIBC. Please go ahead.
Okay.
Okay.
Okay.
Sure.
Okay.
Yeah.
Uh huh.
I'll go check on Cobra.
Please go ahead.
Thank you Keith one thing I'm behind.
Okay.
Okay.
Thank you.
I have two questions.
Okay.
It was a chocolate.
Q2 could you give one more comment.
Right.
Okay.
And the conference.
A couple of points here.
Question on deposits.
Yeah.
Okay.
Two other comments you want to move into Q2.
Okay.
Got it.
Yes.
So I will answer your two questions Firstly is on better.
The guidance for the second for the third quarter. So.
Look at the two night harvest data, we see higher NIE UE.
Products net cash equity option.
Went up versus the second quarter. So they feel if market stays like this and we expect commission to have a moderate increase in the third quarter.
Uh huh.
Our underwriting is on hold due to the current policy from China and the U S. Regulators. So short term this could have a negative impact on our revenue, but the impact should be manageable as ADR underwriting only account for less than 10% off our revenue. So we think the AVR equity offering will resume once regulators gives more clarity and in the meantime as Campbell.
I mentioned earlier, we're already actively Hong Kong IPO as international Underwriter, and we're already under OLED cell phone goes my popular Icl's. So this could offset some short term impacts on the harder in the U S equity underwriting.
In terms of cut.
Customer acquisition, so its a big its old pass these sales and marketing we expect the third.
Third quarter market to our marketing expense to be in line or less than the second quarter as we don't offer any of offline events in Singapore by the way will be very opportunistic to acquire users when we see when we see fit.
In terms of AUM.
Users.
So.
In July and August, we still see very healthy letting inflows for.
For both months.
Due to market sentiments average AUM.
Is that around 10% to 15% by end of August versus Ly and.
Industrial.
And in Europe first second question regarding the.
Caring.
Turning expense went up.
So the main reason of the increase in clearing expense as we have a lot more Singapore clients and we offer a single course stock trading.
Based on local regulation, if the case is trading in Singapore stock.
This assay and used to be called the address.
SPX clear remember.
Our Singapore subsidiary is not of SPX member yet so we pay third party custodian fee for each <unk> copano comedies us.
We have over 200000 ft, Singapore clients already we paid close to 2 million custodian fees, the second quarter, which kind of as a cleaner in expense.
As you might know our agenda for subsidiaries already received AIP from SPX to become a clear remember so once we have officially become the SPX clear remember we can greatly reduce the custodian fee.
I believe we can see some reduction in custodial fees starting in the first quarter.
That's very helpful.
Okay.
Thank you.
Once again, ladies and gentlemen, it is star followed by one to ask a question, even though there might be a slight sports actually collated the questions.
Do you have the next question is coming from the line of Judy Zhang from Citi. Please go ahead.
Alright, Thanks, a lot.
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Okay. Okay.
Yes.
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So.
Cai from their clients a profile.
We used the users acquired last year say second quarter of 2020 as a cohort sample.
Initial deposit amount that group is around 6000 to 7000 USD one year later by the end of second quarter. This year average kind of assay is around 30000 in USD.
Since the comparator of last year each quarter. This cohort group has net asset inflow, which means they are keeping deposit money into their our comp and AUM growth is not only due to equity value appreciation.
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Okay.
If you look at.
You know your customer we acquired this quarter second quarter of 2021.
Average initial deposit is around 5000 in USD.
Below the initial deposit of the second quarter of 2020 clients. We don't think that this is due to a deterioration of credit quality.
We feel it's more like a.
It's more due to the less attractive market backdrop, we feel you know similar to the kinds of work we acquired last year after several quarters, they will keep deposit money.
Two to trade down type of platform.
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So on customer acquisition cost and payback, we still use the second quarter of 2020 as a cohort sample.
Baxter in customer acquisition cost was about $130 USD.
And back to the market was more active.
So if we only collect commission and all excluding interest.
The payback was around two quarters for that cohort group.
Look at we already have quite a user in the second quarter of this year.
Due to more competition the customer acquisition cost went up to around 160 U S dollar per person.
And their commission also dropped due to a weaker market route.
Still we feel it's.
We're still gonna be attractive for us to acquire those users even though the payback increased to four to six quarter because our users are relatively young as long as we can get them payback in a relatively short period.
Well a lot of upside for us to monetize.
Thank you Judy.
Yeah.
We have the next question. This is coming from the line of Eric <unk> from China Renaissance. Please go ahead.
Oh, Hello fan so I'll go with you right now.
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No.
So thanks management for giving me the opportunity to ask questions. So my first question.
You saw the volume decrease quarter over quarter and second caller.
Net interest income and margin kind of imbalance, both increase, especially the model for anything better.
So our task the rationale behind it.
So for the second question.
So they know Pete our number of new paying clients acquired from China with more than our competitor.
Cask of what the current with our current customer acquisition strategy in mainland China and the cost of it.
Thanks.
Sure. Thanks, Eric.
I will answer your two questions. So the first one was on the net interest income. So the main reason of the net interest income increased while with the trading volume can die as high <unk>.
Turning to.
I'm proud of our self clearing capability, so firstly starting.
Given we have more and more my trading volume out of assay called out on current form we are starting to use some of our kinds of idle cash, which gives us a cheaper funding and it also gives us.
More flexibility in terms of the.
We can then to each customers.
And also become becoming a self clearing.
Firm he enable us to become a direct counterparty for securities lending business, which is pretty lucrative on the street. So we can generate more interest we saw chevron based utter intermediaries. So that's the main reason.
Our interest net interest income increased in the second quarter, while the trading volume came down and of course you know.
Martin balanced if you look at our balance sheet also increased versus the first quarter.
One building margin balance on our balance sheet includes Hong Kong IPO, So pick a Hong Kong IPO, which.
It's not that.
Profit level for us for the IPO margin.
Margin basis, taking out that part of our margin loan balances.
About 450 million while in the first quarter was about 400 million. So those two other memory then slide net interest income went up in the second quarter.
And then in terms of customer acquisition.
For onshore customers so in the second quarter.
Being you know.
Absolutely.
Looking at this.
More channels saw intermediaries to target you know.
Chinese investors, who already have a sales sure that this is showing so far are showing good results and of course, you know our <unk> is also.
Pretty good.
Use of equities into foster tapping into those Chinese users in terms of customer acquisition cost, it's pretty much in line with.
Our previous customer acquisition cost for Chinese users.
The major increase so far.
Acquisition costs actually it can function and therefore as we mentioned in the earlier. Thank you.
Thank you do you have the next question is coming from the line of Yeah, Zhang from Th capital. Please go ahead.
Thank you for taking my question.
All of lung cancer.
I have one question.
I won't call can management share some light on changing that.
Davidson.
Keeping the savings.
Zandi major Chinese Adi in terms of.
So my transactions, who can deal.
Do you see any ship to.
Hong Kong Cantonese.
And so anything you.
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That's my question.
Sure.
You were breaking up so you mean, the trading volume shifting to Hong Kong and we see in a more strong competition from the existing players.
Yes exactly.
Okay.
So in terms of so the thing is right now.
Sure.
If you look at all the Chinese ADR is coming back to Hong Kong listing this.
We will likely be a trim as we mentioned earlier you know we have been very active in Hong Kong IPO International Underwriter for Chinese ADR secondary listing in Hong Kong. So we think that that part we feel pretty confident then we can't keep getting more corporate clients and also use this opportunities to acquire more retail clients.
In terms of a trading capabilities traditionally you know our strengths was under in the U S market, but recently, we have devoted a lot of more resource to develop our Hong Kong trading capabilities fixed.
For example, you know the Hong Kong able to update US I think we are one of the few firms to offer it for free.
Hong Kong auctions, we along with the first firm to offer to Hong Kong to new investors. So we think they're trading no matter its from the primary market or the secondary market, we are much more capable versus.
We're not one or two year cycle, So I think the training.
We'll still benefit.
Must wait develop from our resources into the home country capability and R&D.
Okay.
Yeah.
Okay.
Okay.
Thank you.
Have no further questions at this moment I would like to hand, the conference back to our host for any ending remarks.
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.