Q4 2021 Futu Holdings Ltd Earnings Call
Hello, Ladies and gentlemen, welcome to food choose holdings fourth quarter and full year 2021 conference call.
At this time all participants are in a listen only mode.
After managements prepared remarks, there will be a question and answer session.
Today's conference call is being recorded if you have any objections you may disconnect. At this time I'd now like to turn the conference over to your host for today's conference call, Daniel Yung Chief of staff and head of IR at food too.
Please go ahead Sir.
And thank you for joining us today to discuss our fourth quarter and full year 'twenty 'twenty. One earnings results. Joining me on the call today are Mr leaf Li Chairman and Chief Executive Officer, Arthur Chen Chief Financial Officer, and Robin shoot Senior Vice President.
As a reminder, today's call may include forward looking statements, which represent the company's belief regarding future events, which by their nature right off certain and are outside the company's control.
Forward looking statements involve inherent risks and uncertainties. We caution you that a number of important factors could cause actual results to differ materially from those contained in any forward looking statements.
For 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 leaf leaf will make his comments in Chinese and I will translate.
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Thank you all for joining our earnings call today called 'twenty 'twenty. One marked another year of I think it might be the spansion athletes eat out full year, a paint line guidance by adding approximately 720000 feet.
This brings our total paying clients to over one 2 million translate into 141% growth yogurt yard.
We added 77000 in fourth Q with about 90% of new paying clients coming from Hong Kong and other overseas markets.
Paying client retention remained around 97%.
We're gonna have impact from theory that language.
Looking into 2022, we're guiding for 205000 clients representing a.
Year over year and total paying clients.
We will dynamically adjust her growth target subject to market conditions.
And the moment net additional we expect roughly one third to come from the greater China region, One third from Singapore, and a walk through from the U S and Australia.
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But as with all our cohorts Eugene.
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Okay.
Our client assets were 408 billion, Hong Kong dollars up 43% year over year, and down 4% quarter over quarter, while it tumbled equities market and some headline you wait until you have the balance I'll start getting players remain positive as in each market totaling more than 10 billion in Hong Kong dollars instead.
In Singapore thrown out that inflow pushed every cleanup that's up by 26% quarter over quarter, Despite a negative mark to market impact on their holding.
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Total trading volume was $1 two trillion Hong Kong dollars flattish year over year due to fewer trading days in the fourth quarter total trading volume slipped 9% sequentially. Despite a higher turnover of three one times.
Trading volume through your thoughts for 777 billion, Hong Kong dollars or 14% quarter over quarter, driven by surging trading volume and some U S Tech names higher U S options trading volume and higher trading volume from Singapore clients.
Trading volume for Hong Kong dogs, with 403 billion, Hong Kong dollars down 33% quarter over quarter due to Denver market sentiments, especially around Chinese tech stocks.
Hi, everybody.
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Our wealth management business maintained Brazilian growth with total client assets, reaching around 19 billion, Hong Kong dollars up 84% year over here and 6% quarter over quarter.
In Singapore, we have established partnerships with 20 fund houses and we will continue to expand our mutual fund product offerings and services in the quarters to come.
In Hong Kong, we established new partnerships with four prominent asset managers, including fidelity in exa.
As of quarter end, approximately 140000, or a loved 1% of our paying client health wealth management positions.
In the fourth quarter, we launched all of rebalancing function for our mutual fund portfolio product and distribute at its flagship multi out that hedge funds managed by a leading global alternative manager.
Private fund asset balance as a result grew substantially by 120% quarter over quarter.
We believe alternative assets are an integral source of diversification for about high net worth clients during market turmoil and we intend to onboard more private funds in coming quarters.
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How have your own <unk> had 236, IPO and our clients and 400, aesop clients of 125% and 152% year over year, respectively.
We acted as joint book managers for several high profile, Hong Kong, Ipos, including that expense time to which we contribute at over 20% of the retail subscribers and retail subscription.
As of quarter end over 800 companies, including more than 200 listed companies with market calculation above 10 billion, Hong Kong dollar health enterprise accounts, and our social community to interact with retail investors.
You'll see all of them. There's always just how about also just that's how we'll go with it.
Thanks, Lisa and Daniel I'd like to invite our CFO Arthur to discuss our financial performance.
Thanks, Lisa Danielle. Please allow me to walk you through our financial performance in the fourth quarter or the number of buying whole dollar unless.
Unless otherwise noted all total revenue was $1 6 billion up 35% from 118 billion in the fourth quarter of 2020.
Ending a strong year as full year 2021 revenue grew 115% to over 7 billion.
Okay.
Charging hub was 857 million, an increase of 19% year over year and a decrease of 8% Q over Q. The increase was driven by higher blended commission rates of seven basis points. The blended commission rate extend our commission rate for you that's equity growth year over year and that they broke trading contribute a higher proportion.
Brokerage Commission.
But Q O Q decrease was mainly due to lower trading volume for Hong Kong fault.
Interest income.
618, with an increase of 3% year over year, and a decrease of 2% Q over Q.
The year over year increase was driven by higher margin financing income as a result of higher daily average margin financing balance.
Net income was 128 million down 2% year over year in the 23% Q O Q, but you'll be able to see over Q decrease was both primarily due to lower ico financing service charge income.
Our total cost was 217 billion a decrease of 10% from 240 to me that in the fourth quarter of 2020.
Brokerage Commission and handling charge expenses were 88 million down 34% year over year in the 30% Q over Q.
Expenses didn't move in line with our brokerage commission and handling charge income due to our equation service package with all of our U S clearinghouse and the lower <unk>.
Trust fees.
Interest expenses was 15 6 million down 14% year over year in the 25% Q over Q.
The decrease was due to lower IPO financing interest expenses, partially offset by higher interest expenses associated with our securities at borrowing in the lending business.
Interest expenses declined Q over Q primary due to lower the funding cost.
Protecting our servicing costs was 74 million up 65% year over year in the 9% Q over Q.
The increase was primarily due to higher crowd the service fees to support overseas market expansion and the process a larger number of concurrent trades.
As a result total gross profit was one point 39 billion an increase of 14, 7% from 944 million in the fourth quarter of 2020 gross margin was 87% as compared to 80% in the fourth quarter of Tucson, The Tennessee.
Operating expenses were 127% year over year, that's 8% Q over Q2 826 million to break it down our R&D expenses were 271 million up 64% year over year in the 21% Q over Q. The increase was mainly due to increasing R&D had a car.
As we continue to support new product offerings.
In the U S self clearing capability and the customized products for international markets.
Selling and marketing expenses were 337 million, an increase of 270 year over year, and a decrease of 16% Q over Q.
Year over year increase was due to higher marketing and branding spending, especially in international markets. The expenses declined two acute homeless marketing spending came dol amidst dampened market sentiments.
G&A expenses were $218 million up 145% year over year ended up 50%, 59% Q over Q.
The rise was primarily due to increase in head count for DNA personnel with the opening of more international office.
As a result, our net income decreased by 6% year over year in the 19%, Cuba Q2, 419, 9 billion Oh effect tax rate for the quarter was 12, 9%.
The net income margin was 31%.
In addition to the 300 million U S dollar share repurchase program previously announced on November So the 2021, which we have complete in open market transactions. Our board has authorized a new share repurchase program enable us to purchase up to.
500 million worth of our Ats until December 31st 2023, we plan to fund this repurchase well I'll cover the working capital.
Conclude our prepared remarks, we'd now like to open the call to questions. Operator. Please go ahead.
Thank you.
Ladies and gentlemen, if you wish you asked a question. Please press star one on your telephone out like for your name to be announced if you wish to withdraw your returns. Please press the pound husky.
Please stand by while we compile the question and answer roster.
So once again, if you wish to ask a question.
Please press star one.
On your telephone keypad and please ask one question at a time.
Our first question comes from Katherine Lee aircraft smoking Stanley. Please ask your question.
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Hello Catherine.
What's your Daniel Oh.
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What do you think you'll need to keep our I would translate for myself.
Oh, Hi management. Thank you for thank you very much management and forgive me this opportunity to ask a question I'm Catherine deal from Morgan Stanley . So I have two questions first a as a quick can management give us some guidance in terms of the year to date operation results in terms of for example, like New client addition, geographical break.
Now fund assets and its also turnover rate and said Hey, this is about the overseas markets can management give us some guidance in terms of their plan and target for the Australia market.
They compare the Australia market with Singapore market and also is there any update in terms of U S. Self clearing progress and also the expectations on revenue and profit making.
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Thank you Catherine. This is also maybe I can't answer. Your last question. First then I will leave the first two questions who leads himself in terms of self clearing football we have already migrate.
All about at around 40% of our U S. Gulf Holdings promo at our U S upstream business hundreds to our Oh clearinghouse in Dallas and our target is we tried to come see this migration toward the end of this so the cultures.
Because we want to ensure the stability.
And the systems scalability is humongous during these transitions.
So yesterday, we have already see positive impact from the self clearing which have generated revenues alongside a lot of Oh.
Essentially zero cost funding to our operations.
Outside of the U S.
And we we mentioned that our previous earning calls we do have some very rough calculations. After you know just self clearing completions.
For 2022, we do expect there will be around the $116 million operating revenues incrementally from their self clearing migration and the majority part will be translated into the pre tax profit. Thank you.
Right.
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Philadelphia, Pennsylvania, and John you also.
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Well profitable was Harlem neighborhood you find this is a change maybe what youre, saying and types of vehicles that are deemed somebody get to the gym.
And in terms of business.
Our claim that they're shutting kind of slowed down a little bit this year due to the negative kind of equity market performance in a less active IPO market.
What's positive around that aside we don't see any lingering impact from the headline news on our client attrition and retention and to break down what about different markets I think our client acquisition in the greater China region was largely stable, although we saw new competitors entering to the market, we still have a very leading market position.
And when there is uncertainties around the market performance and regulations will employ a more steady growth strategy and in terms of Singapore, we have seen very healthy net outside inflow, which offset the negative mark to market impact from the equities market downturn.
Client acquisition in Singapore also slowed down due to negative market performance.
And in terms of training and turnover and it was it was largely stable and in terms of net asset inflow as rebounded from that for Q4.
But the overall client assets still trying to down a little bit due to the negative mark to market impact and in terms of our product offerings in Australia, we flashed the U S stock trading, Australia and stock trading as well as ETF trading and going forward, we will continue to enrich our product offerings.
And as already mentioned so far are quite self clearing business, we've migrated about 50 and over 40% close to 50% of our regular stock holding to our self clearing business and we already see zero cost funding that's brought about by our clearing business.
So anyway granulomas.
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Joe.
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Coming to the Oklahoma.
Joe you talked about looking at homes on Oahu.
Could you please help onvia seven that should it should be.
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Sundar.
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But what would you say you may June versus honestly I'd be honest I'll see if I would have thought your opinion on something that's important.
So what.
What is your since you have all of them and sell it in the US you talk with some of the people.
And I like to talk a little bit about the competitive dynamics in Australia. So on one hand, you see those incumbent players like Comstock and ANZ there commonality of thought their trading account is seamlessly integrated with a bank account in the bank to brokerage transfer your thoughts very smooth and seamless.
Disadvantage aside they typically charged pretty high commission rates and charge a fee for the Idaho accounts and on the other hand do you see the online brokers like self wealth at stake are there advantages they have pretty low commission rates. They have very straightforward trading interfaces at the beach.
Generally a lot more sophisticated trading function technical analysis of analytical tools and also a very vibrant community. So these are all like brokerage they still kind of how those smaller kind of client base right now roughly around like couple of hundred thousand and that's for US we think that we have there.
Just in terms of our product offerings and in terms of our attack capabilities.
Since we are we've just entered into the market, it's difficult to gauge market potential and where I will come to sharing more results about our Australia operations, our next quarter.
Yeah.
Okay. Thank.
Thank you very much.
Thank you. Our next question from Leon Qi from Daiwa capital. Please ask your question.
Oh, hi, Thanks for allowing me to ask a few questions Bianchi from well I have two questions today on our first one is about your use of mix that you have you all perfectly.
That's a management just mentioned very clear guidance I'll use acquisition targets in 2022 and that specific regional breakdowns on it.
If we just take a longer time horizon, our strategy for the next three years.
So the overseas market I'm, referring in particular for the market.
Okay.
Except for China.
While the overseas, obviously contributes to a much larger proportion of their users and.
I appreciate it.
Just give us a very high level color, Oh, gosh over a longer timeframe.
Second question is about your user acquisition costs.
Sounds you'll use the acquisition has been very successful over the past few years.
But given the dramatic change in the market conditions over the past few months, well actually a lot of our customers and potential customers.
They call me.
Cautious, which would be keep spending your user acquisition dollars and in a way that's a bad thing.
Similar over the past few years, all you will be considering some changes in the tactics that you are doing.
It's a market that is a less exciting at least for the moment Oh I won't go out.
Sometimes you do that you're going to do quite well.
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I Hope you all the best you should apply here.
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Good to hear.
First of all the financial goals.
But what else do you called out a couple of technical cool I'll go without asking for a phone or a number of times anyway.
A small part of English language Johan here.
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Thank you for the question maybe I take the second question first I will also leave the first question to lead in terms of the marketing expenses you are right.
It is highly correlated to the market conditions are so everybody can understand.
For 2022 or 2022.
We do expect our cat for each new paying clients will be in the range of around the 2500 hospitals.
Sussex.
And in total that we will have different parameters to evaluate the effectiveness of the client positions not only just you know the tax numbers for each new pain, but also we will more focusing all the payback period for these kind of.
I E. The clients effectively a pool versus cap ratios.
It depends on different market for these more mature markets such as great. China. This payback will be controlled in the range of six months to nine months is always before the some new markets.
Such as Singapore, Australia, and the U S et cetera, we are more generous.
This ratio because we think in the early stages. The user engagement is still the most importantly are the things we need to consider besides.
This ratio we will also look at the other ratio that is the new client acquisition costs I E. How much money, we just paid for they migrate incremental new assets into our platform.
Oh, Apple to Apple basis, if we do not consider the market fluctuations year to date, all which may continue in the next couple of quarters, we do expect.
Our new car acquisition a month this client net new inflow will be increased by 20% to 25% versus the number at the end of last year.
Thank you.
But he's done it and I kind of.
We'll Miss you answer follow Cingal. So that's my best entity today, you'll see kind of who would be D. C U E.
You'd be done via mail phone, sometimes when one does what I kind of Oh.
Okay.
Using our B W.
I think in three Years' time, we expect the ratio of our paying clients from mainland China, Hong Kong and other overseas markets to be around one to three to six and from a client perspective, it's ratio will look more like two to three to five.
Thank you.
Thank you very much.
Okay.
Alright, thank you.
Sometimes they say so.
Hey, guys have plenty of times, yes, I want if you want I'll Watch me she will not miss that once you kind of keep telling you something you can do.
For a woman who won't be giant food or something else you cant have actually something on the mainline, especially a woman it sounds like from what you were talking about the warehouse with home court.
What are the what are you paying.
Oh, Thanks management for taking my questions I have two questions. My first question is that when we launch our digital currency trading somebody sees and then my second question is that amount our paying clients how much more are quite yet.
Okay.
Sure I would take these two questions for the for the second question actually the new paying clients contributed by the useful channel just account for less low single digits for the fourth quarter of course, you can understand.
Appeal situations the Marcus.
It was not very strong in the fourth quarter and also yesterday as well for the portal business. We are still doing the feasibility studies and also certain.
The license application therefore, we have not come from.
We do not have a confirmed the time schedule yet.
Thank you.
Thank you Paul.
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Okay.
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When you know you're all doing well.
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You're going to get you don't know of course, you would actually Dan did you make with each of them with into hydro portfolio alone.
The only thing that we cannot make what did your thinking if it's actually a good thing so.
The Eagle Ford with the tenure, but due to a Chicago, New York, and which ones do you think you'll make a mobile.
What's your point of view on the irony of ASEAN totaling I'm transferring in tissues.
Are you in Guangxi.
Yeah.
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Hi management. Thanks for taking my question at least is still young from D. C and congrats to our it's going to result in a stronger market I'd like to ask two questions. The first one regarding our opinion in the U S. I'd like to know what's the new about what's the what's new about our.
Customer acquisition.
In the U S market and what our next move will be enough to growth in the mid to long term.
Secondly, our business expansion in 2022 a week.
Do you expect to see a rapid growth in employment related expenses. After we had a reading things that increase not the year. Thanks.
Thanks, Phil.
Maybe I can share some colors or our initial thoughts for the headcount increase for 2022 than my colleagues robbing she can give you some.
More colors, all U S operation in the U S marketing strategy going forward for the all kind of call. It in 2022, we do look for another 20% a year over year growth.
Does this growth, we're providing we're providing very be deploy that into the our R&D functions and also the international market development.
The reasons behind the four putting more staff into the R&D, yes, we want to do.
Very significant system migrations.
I E from our current.
Infrastructure building all languages C plus plus to Langley Gulch, and also we will adopt a more proud of the laser technology infrastructure, we authenticate to assign a special task force to develop these two areas.
Although we can expect this migration will be complete towards the end of this year after.
After this completion, we do it.
<unk>, Oh, I efficiency will be in house by 20% to 30% down the road and the search migration will ensure our system's stability and the scalability and the next three to five years at the same time, it will significantly enhance the system flexibility and the lower <unk> spending.
The IEC and also with the silver <unk> annual <unk> spending savings will exceed 100, maybe I'm a homebuilder starting fall into some the plentiful.
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This is Sean.
Yeah.
At our client acquisition picked up in the fourth quarter I think on one hand, that's because we continue to invest to improve our product experience and we want to improve the conversion rate from the op gallows two registration for registration to account opening and time from account opening to outside deposits and another reason aside.
Our our spending in the U S market increases our brand recognition has also a bad thing in the past couple of quarters that the result, but I think we need more time to continue to improve our client acquisition efficiency I think it was thank you.
Yeah.
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Okay.
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Oh yeah.
So I have a question regarding the newly announced U S saw there a very hungry E. D. N. A reproach has probably L E.
He accounted for a lot of the 85% of the cash outstanding by fourth quarter of 2021.
So is it because you didn't see much much cash needed how much working capital needed for our future.
Future investment or do you see that you can continue to generate enough to cash to fund investment in the future.
Sure Singapore pest from.
This is lance I'll call. So this question since our IPO, we have comes up to three rounds of equity financing so alongside with these fundings from the share placement.
Together with our use of a you know returning generates every year at the end of last year, you can see our total net assets.
Over $2 7 billion in U S dollars and we do think you know our capability to continue to generate profit and free cash flow will remain robust in the next one or two years. So considering our current market conditions and the you know the the funding needs for the organic growth.
If we do things.
Now we have some idle cash which can be deployed and utilized to you know.
Reward our long term shareholders.
Having said that we will continue to closely monitor the potential and a merger and acquisition situation, if our peers and also the valuation be attractive.
So it will be you know.
<unk> <unk> a share repurchase program covering the next almost 18 months. So it will be very dependent on the market conditions and also the opportunities whether we can come of course thank.
Thank you.
Alright, thank you.
Have reached the end of the question and answer session I'll turn the call back to Daniel for closing remarks.
Okay.
Thank you operator that concludes our call today on behalf of the future management team I would like to thank you for joining US today. If you have any further questions. Please do not hesitate to contact me or any of our Investor Relations representative Thank you and goodbye.
Thank you ladies and gentlemen.
Oh conference for today.
For participating.
Okay.
Hum.
[music].