Q4 2021 UP Fintech Holding Ltd Earnings Call

Ladies and gentlemen, thank you for standing by and welcome to the up Fintech holding limited fourth quarter 2021 earnings Conference call. At this time, all participants are in a listen only mode. There.

There will be a presentation, followed by a question and answer session.

This conference is being recorded today Friday March 18th 2022.

I'd like to hand, the conference over to your first speaker today.

Mr. Clark ex Susie. Thank you. Please go ahead.

Thank you operator, Hello, everyone and thank you for joining us for the call today.

Fintech holding limited's fourth quarter 2021 earnings release was distributed earlier today and is available on our IR website at IR Dot I tighter dotcom as well as globe Newswire services on the call today from up Fintech are Mr. Luciano <unk>, Chairman and Chief Executive Officer, Mr. John Zeng.

Chief Financial Officer, Mr. Fong way C O 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. Zhong will then discuss our financial results. They will both be available to answer your questions. During the Q&A session that follows that remarks now.

Let me cover the Safe Harbor statements, we were about to make contain forward looking statements within the meaning of the U S. Private Securities Litigation Reform Act of 1995.

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 March 18th 2022, and our annual report on form 10.

<unk> filed on April 28th 2021 we undertake no obligation to update any forward looking statement, except as required under applicable law. It is my pleasure to now introduce our chairman and Chief Executive Officer. Mr. <unk>, Mr. <unk> will make remarks in Chinese which will be followed by English translation. Mr. Weil. Please go ahead with your remarks.

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Hello, everyone and thank you for joining the Tiger brokers fourth quarter 2021 earnings conference call. Despite the difficult macroeconomic and market backdrop during the two previous two quarters by focusing on executing on our international expansion Tiger brokers was able to achieve notable progress.

During the fourth quarter and the fourth quarter total revenue was $62 $2 million, an increase of 31, 7% over the same period last year. The company is committed to further leveraging internationalization to drive growth and in the fourth quarter. The company added 61.

400 accounts of which more than 90% were from overseas markets total customer assets were $17 1 billion.

Dollars in the fourth quarter net customer asset inflows remained healthy and exceeded $2 billion in the quarter. However, since some of our institutional clients experienced losses on their holdings of Hong Kong listed equities and Chinese 80 hours during the fourth quarter total client assets declined sequentially from the third.

Quarter in 2020 , one Tiger brokers in total added 415000 funded accounts exceeding our 350000 account annual guidance. The total number of funded accounts reached 673000 half hour from Singapore or other overseas market.

Demonstrating the firm's internationalization strategy is yielding solid results for the full year 2021 total revenues were 26 point $264 5 million USD and increase of 91% on the previous year non-GAAP net profit attributable to up Fintech holding limited was 24.

$4 $5 million for the year.

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In October of 2021, we acquired a Hong Kong broker dealer license setting the stage for our firm to not only increase the future profitability of our Hong Kong Securities business, but also to eventually onboard Hong Kong local residents, including Hong Kong. Our firm now holds 50 licenses and.

Patients that span, the United States, Australia, Singapore, and New Zealand and other jurisdictions holding such a rich range of licenses and qualifications sets the stage for the firm's long term international growth.

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I would now like to provide investors updates on two key business initiatives at our company internationalization is progressing well as stated in the fourth quarter over 90% of our accounts were derived from overseas markets demonstrating the appeal of our next generation Fintech platform and its value proposition and competitive.

International markets.

In the past year, Singapore by both the total number of new accounts and the total number of accounts became our company's largest market. In 2022, we are confident that we can achieve similar success in other global markets as we did in Singapore in the first quarter of this year, we officially entered the Australia market, we view us.

Trailer as having certain similar competitive dynamics as Singapore, namely that high Commission traditional brokers have a substantial market share.

Even though we face competition from many respectable online brokers in Australia. We are confident that the distinctive features of our app such as our interactive social media community comprehensive financial and market data as well as our rich range of Securities trading features will distinguish us from the pack.

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<unk> singles.

Yeah, Sean.

In conclusion with us.

Going to the Lockwood senior.

Corporate and institutional services continue to perform well and attract new clients Aesop continues to expand at a fast rate and in the fourth quarter. We added 51, new companies for a Grand total of 313 investment banking also performed well and we participated in 22 Ipos in Hong Kong.

In the U S of which we underwrote 18, it's important to note that our firm possesses extensive capabilities to serve both new issuers as well as listed companies across multiple markets. Following the acquisition of our Hong Kong broker dealer license in the fourth quarter, we underwrote the listings of our series a famous companies, including net these cloud music.

Since time in Beijing are dark we do appreciate the trust these issuers in our firm.

Yes.

Several job because that's how we should yeah I'd now like to invite our CFO John to go over our financials.

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[noise] essentially Ohio Cook, So let me go through our financial performance for the fourth quarter.

All numbers are in USD.

Total revenue was $62 2 million up 32% from the same quarter of last year for the whole year of total revenue were $264 5 million up 91% from last year.

In the fourth quarter.

Commissioning were $29 9 million.

Increased 18% year over year, but down 11% from the third quarter.

Quarter over quarter drop in commission was primary due to lower trading volume way waste less trading days in the fourth quarter, and a week or a D R and Hong Kong market.

Also I'll remind you you're out of securities lending balance was lower than third quarter due to the weaker market backdrop.

We were able to generate more interest income through our self clearing capabilities interest related income, which come buys financing service fee and interest income was $22 5 million in the fourth quarter increased 70% year over year and 12% quarter over quarter.

Factoring interest expense net of interest income increased 110% year over year, and 18% quarter over quarter.

Yes.

Other revenue increased 12% from the same period last year to $9 8 million.

Now onto the cost.

Execution and clearing expenses were $6 9 million increased 65% year over year due to rapid user growth in 'twenty or 'twenty, one, but down 28% quarter over quarter as more trades were clear through a self clearing.

We are in the process to migrating up whole clients to our own Singapore theory, and custodian platform, which should result in further reduction in clearing costs in the coming quarters.

Employee compensation increased to 82% year over year to $28 4 million.

As we keep adding head count cost region to support our global expansion.

And I was the head count increase occupancy expense increased 41% to $1 8 million.

SG&A increased to 76% to $8 5 million year over year.

Marketing expenses were $11 6 million in the fourth quarter increased to 77% year over year and on par with the third quarter.

We have been very prudent with our marketing spending.

We'll add adjust our marketing strategy based on market conditions.

Communication and market data expense were a 7.7 million.

An increase of seven 5% from U S $3 9 million in the same quarter last year due to rapid user growth.

Total operating costs were 6.4.

$64 9 million increased 79% from the same quarter of last year.

non-GAAP net income, which excludes share based compensation.

That's point 1 million this quarter total non-GAAP net income.

So the old 20th only one was $24 5 million.

No I have conclude our presentation and operator, please open up for Q&A. Thanks.

Yeah.

To ask a question you will need to press star one on your telephone.

So a draw your question press the pound key.

We stand by while we compile the Q&A roster.

Our first question comes from.

Your line is open.

Thank you ladies and gentlemen, thank you Sir.

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Hi, Thanks management for taking my question. This is a horizontal.

Congrats on the strong performance very thoughtful about it.

I have two questions.

How do we see the influence of the policy.

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So all of it.

Taking them away.

And quite a lot quarter over quarter, what do you think that they then.

Behind that and how about the quantity of the fourth quarter and how do we see the choppy with a coffee in coming quarters.

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Yeah.

Yeah.

So let me let me quickly chest. They are the first question. So first of all the.

The timing of the financial stability and development Committee meeting is very crucial.

At the comments made by West Premier dealer shows senior policymakers.

We're off the races itself in capital markets and as they are ready to take action to reinstall market confidence. This is an encouraging first step hopefully there will be more favorable concrete policy voting all in the near future to stabilize the market and stimulate growth.

At the BT mentioned, there was a good progress on <unk> issue government will support qualify the Chinese company to these offshore so those were a bit of a tigers yourself in the investment banking business and drive further future user and <unk> course.

Our focus at this stage, it's still internationalization, we already do headquartered in Singapore C about Singapore clients already account for more than 50% of our user base, we look forward to expanding to other region to replicate our success in Singapore a.

And well go to the second one.

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Yeah.

So Luckily cinema was still relatively weak in the fourth quarter, which makes it harder to acquire users. We think an uptick in CSC CACI is where you're a little more under this kind of market sentiment that being said, we have been very cautious with marketing spending since third quarter of last year.

We pay close attention to key matrix, such as payback, Neil customer quality retention to make sure our marketing spending is efficient and cost effective.

So <unk> had this article in the fourth quarter.

Quality of funded our comps actually was pretty good.

14 of our retail clients acquired in the fourth quarter.

Average initial deposit is close to 7000 USD higher than the average initial deposit in the third quarter.

For each cohort Singapore clients acquired during a particular quarter, we see that as inflows every quarter since the acquisition.

Shows clients are willing to allocate more assets to Tiger Castle with high user stickiness.

Yeah.

Thanks, that's very helpful.

Thank you.

Our next question.

Citigroup Global markets. Your line is open.

What have you.

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I'm Michael Bilerman.

Yeah.

Out quick translation part of my question. So first of all Thank you management for taking this opportunity to ask question I guess two.

Two questions for me, but we noticed that the client decline Q on Q can management give us some guidance in terms of the first quarter quarter to date operational data in terms of the client asset trading volume velocity as well.

And the second question is that we're not as Tiger has just entered the Australia market. Just wondering if management can share your thoughts on the room for growth and competitive landscape in Australia, and what Tiger keep web strategy.

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Yes.

So as we mentioned earlier in the fourth quarter, we had we hadn't led assay inflow over 2 billion in U S. Dollar.

Motorola quarter, dropping total AUM is primarily due to mark to market loss of some of our institutional users.

Mark to market loss also these two a quarter over quarter dropping margin balance as some clients need to deleverage.

So luggage hockey year to date, we saw a small shift in trading volume and the total AUM.

And I always border index.

We have been prudently as marketing spending we likely will see smaller number of funded icon in the fourth quarter versus the first quarter versus the fourth quarter, but the average initial deposit that assay inflow will be similar to first quarter.

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One corridor at least now but that shouldn't go to chip.

So we entered Australia market last months, although there are already several on that brokers in Australia, we feel Tigers comprehensive offering and will set us apart from competition.

Based on the latest data only one week after we launched in Australia, our ranking in terms of Google play download has jumped to a nice place from below 100.

We look forward to on.

For Australia, and clients and provide them with unparalleled trading experience, we feel very confident we can replicate our success in Singapore to other regions like Australia next.

Yeah.

Thank you. Our next question a follow up from <unk> with CIBC. Your line is open.

According to what you guys are doing the link.

That's it.

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So it's you don't know what T J and doesn't go to the talent pool and I'm glad you asked.

Susanne on highway Congo, Ivy Hill off when you go to ethanol accuracy.

Is it.

Yeah.

Thanks for the question so in terms of Ah self clearing.

Over 80% of the U S cash equity ourselves clear by first quarter at the end of fourth quarter, So South Korea, and also improve our capital utilization.

We were able to generate more interest income quarter over quarter at least nor margin balance.

So this year.

We will still use the IP to clear a small portion of trades as some customer has positioned like Coca Cola, which requires suppose optional cash equity theory.

Tiger, we'd already has auction clearing license in the U S and started to self clear options. So during the transition period, we will use both tiger and IP for customer base different option strategies.

Okay. Okay.

Okay, great that she values not just for women.

So what that means.

The new paying clients.

Turning to me too.

Oh, two readouts, we didn't tell them to go to delve a little bit about me accumulation cyclical without issue. So you can then tie very nice decade true 10 year maturity.

Yes, so as Tampa mentioning children all the market has been very volatile. Okay. So it's really hard for us to give a accurate estimates given the market backdrop is now stabilized and in addition, we just entered new markets. So we want to let them run for a couple months. So we get a feel and I hope we can give them.

Better guidance to our to the investors.

Thanks.

Our next question comes from Cindy Wang with China Renaissance Your line is open.

Okay.

I'll go back to normal.

Thank you Sheila.

No.

Yeah.

Yes.

Got it.

John .

Oh gosh.

Sure.

And telephone.

Oh.

So I think you have already got a broker dealer.

Matthew yet or what is the current progress.

What is the strategy going forward.

Thank you.

Oh lets see here.

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<unk> Chen.

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We also have thunk, what should I assume that what you've seen them go taller than deep than Gulf way Dol can call. The challenge, though you Cogent Honda Tomcat.

Okay. So.

So as Taylor mentioned in Hong Kong has been really important plus a traditionally and I you know no we.

We didn't have the Hong Kong license, so our U E per user.

Some are you know are lagging behind our competitors in Oklahoma. So right now since we got the license back in October last year. There are three steps we plan to enter Hong Kong first of all is to be more active Hong Kong IPO as I mentioned earlier, we have been very active in Hungary in the fourth quarter for lots of Chinese ADR secondary these.

At Hong Kong local these themes.

But for second half door step, which is to replace the IP to a clear home countries and also to roll all of Hong Kong retail you know customer acquisition. So we have built in the.

The infrastructure and systems.

Unfortunately, due to the Colby situation in Hong Kong, our hiring cell system development and testing all helping somewhat delayed so we hope the situation will get better soon so we can work on the system integration for all of our planned two and three which is appearing South Korea, Hong Kong equity trades and also raw hunk of marketing.

Thanks.

Thank you very clear.

Thank you. This concludes question and answer session.

I would now like to turn the call back over to Clark Susie for closing remarks.

Thank you. This concludes today's conference call. Thank you for participating you may now disconnect.

Yeah.

Okay.

[music].