Q2 2022 UP Fintech Holding Ltd Earnings Call
to Upstate Tech holding limited second quarter 2022 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 advise you that this conference is being recorded today, September 7, 2022.
I would like to hand the conference over to your first speaker today, Mr. Aaron Lee, disaster relations director. Thank you. Please go ahead. That is a pilot.
Thank you, operator. Hello everyone and thank you for joining us for the call today. Our Fintech Hooting Limit second quarter 2022 earnings release was distributed earlier today and is available on our IR website at ir.itiger.com as well as Globe Newsware services.
On the call today from Upfintech, I'm Mr Wu Tianhua, Chairman and Chief Executive Officer. Mr. Zhuang Tsung, Chief Financial Officer.
and Mr. Kenny Jha, our financial controller.
Mr Wu will give an overview of our business operations and discuss corporate highlights. Mr Zeng will then discuss our financial results. They will both be available to answer your questions during the Q&A session of policy remarks.
Now let me cover the safe harbor. The statements we are about to make contain false looking statements, within the meaning of the US Private Security Education Reform Act of 1995. A number of factors could cause actual results to differ materially from those containing any false looking statements.
For more information about factors that could cause actual results to materially differ from those in the forward-looking statement, please refer to our Form 6K, furnished today, September 7, 2022, and our annual report on Form 20F filed on April 28, 2022.
We undertake no obligation to update any forward-looking segment except as required under the applicable law.
It is my pleasure to now introduce our Chairman and Chief Executive Officer Mr Wu. Mr Wu will make remarks in Chinese, which will be followed by an English translation.
Mr. Wu, please go ahead with the remarks.
Hello everyone, thank you for joining the Tiger Broker second quarter 2022 earnings conference call.
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Market backdrop remain challenging the second quarter, particularly in the US capital market. With US market performance, some would slow down the trading activities and asset growth, given that our clients have more exposure in the US market compared to Hong Kong.
With growth in the 2B business and product capital deployment, the total revenue of the second quarter increased by 2% from the fourth quarter to $53.5 million. Non-depth net income also turned per fiscal to 3-point median.
3.5 million US dollars demonstrates the resilience of our business model during market turbulence.
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We added 27,900 funded accounts this quarter, with over 70% coming from outside of China. Our total number of funded accounts also exceeded 730,000 by the end of the second quarter, an increase of 38.2% from the same quarter last year.
We are confident to deliver our annual guidance of acquiring at least 100,000 new funded accounts this year. In the second quarter, mark-to-market loss still had an adverse impact on the total collect assets, which slightly decreased by 2.3% to 14.9 billion USD compared to the end of the first quarter.
But the trend of healthy asset inflow continues. Net asset inflows exceeded $1.5 billion this quarter. Funded account retention rate exceeded 99% this quarter. Demonstrating users' confidence and trust in our platform.
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We pay very close attention to client quality and payback period. In the second quarter, average CEC profit account was about US$300, a 10% decrease from the first quarter, where we keep acquiring high-quality clients. Taking Singapore as an example, that's been Singapore for two years and now Singapore already becomes our company's largest market in terms of both incremental and existing clients.
More than 60% of our new funded accounts in the second quarter coming from Singapore, a testament to our industry-leading user acquisition in the region. The average net asset inflows of our newly acquired clients in Singapore exceeded USD 9,000 in the second quarter, further decreased from around USD 8,000 in the first quarter, solidifying our leading position in both market share and client quality in Singapore.
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We continue to invest in research and development to improve operational efficiency and to enhance user experience. With self-clearing, the execution and clearing costs at the percentage of the trading commission further decreased compared with the previous quarter. To better help our users to navigate the market turmoil, we have launched the 8.0 version of our app with both Lite and Pro models, which provides the most simplified interface and diversified products for all three.
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Our 2B business continues to grow. In the second quarter, we added 26 new companies to a total of 364 e-sub clients, a year-to-year growth rate of 68%. We provide a comprehensive e-sub services from client design to digital management, and have become the go-to choice for many start-ups and public companies listed in PRC, Hong Kong and US.
In terms of the investment banking business, we underwrote 11 US and Hong Kong IPO in the second quarter, in which we were the lead bank in three US IPO's. According to WanZuo, with Data Consulting, we ranked number three in number of deals underwrote for the fourth half of this year and number one globally for the second quarter.
Now I would like to invite our CSO John to go over our financials.
Let me go through our financial performance for the second quarter. All numbers are in US dollar.
Total revenue were 53.5 million this quarter, a decrease of 11% year over year as market backdrop, particularly the US market was still choppy, which is still down trading and margin activities. On a sequential basis, we managed to offset the slowdown in commission with more corporate service revenues, such as underwriting and IRPR services. So total revenue grew 2% on a quarter over quarter basis.
Cash equity take rate was 6.5 bps this quarter, slightly better than 6.3 bps of last quarter, and 6 bps in the same quarter last year. Our pricing strategy has been consistent. The difference in take rate are primarily due to changing share price. As for US equities, we charge by number of shares, not trading volumes. Now on the cost.
Interest expense was 3.5 million.
A decrease of 27% from the same quarter of last year, primarily due to more interest expense savings from US self-clearing. Execution and clearing expense were 3.9 million, decreased 41% from same period last year.
Since we started self-clearing, clearing expense as a percentage of commission have come down from over 20% a year ago to under 5% this quarter for both US cash, equities and options.
We expect further reduction in clearing expense when we start self-clear Hong Kong equities. As of right now, we are paying about 50% of our Hong Kong Commission as clearing expense.
Employee compensation increased 25% year-over-year to $25.6 million this quarter, as we added headcount during last year to support our global expansion.
In line with the headcount increase, occupancy expense increased 69% to $2.5 million, but general and administrative expense decreased 15% year-over-year to $4.3 million due to one of professional service fee occurred last year.
Marketing expenses were 8.4 million this quarter, decreased 65% year over year. We focus on quality of new users.
Don't see current market conditions is suitable for major marketing campaigns as we keep a close eye on CAC and payback.
We will dynamically adjust our marketing strategy based on marketing environment.
Communication and market data expense were 7.2 million, an increase of 40% from a year ago due to rapid user growth and expanded market data coverage.
Total operating costs were 51.1 million, decreased 17% from the same quarter of last year.
As a result, we narrowed our gap loss to 0.9 million from a loss of 21.5 million in the same quarter last year. Long gap lead income turned positive to 3.5 million versus a long gap lead loss of 4.4 million last year.
Now I have concluded our presentation. Operator, please open the line for Q&A. Thanks. Thank you.
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Our first question comes from Hanh Pu from CICC. Please ask your question.
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Okay, I'll translate. Well, yes, the landscape is getting more competitive in Singapore, because in addition to traditional brokers, there are also some online brokers, more online brokers coming to Singapore. We do embrace the healthy competition as long as it could bring better products and services to the local clients.
Well, for broker, customer acquisition cost control and acquiring clients with high quality are the imperative tasks.
to cope with during the competition.
And our purpose is to be the largest and the most trustworthy broker in Singapore. Our strategy is shooting for the long term development.
will not sacrifice the quality of clients or incur high CC just for short term growth.
We believe the research and development is the core competitiveness of TIGER.
So we do attach great importance to product quality. We continue to optimize our products and draw more functions to meet the investment needs of different types of investors, improve client engagement, the users thickness, as well as the Apple.
As we can see from our financials in the second quarter, we keep staying ahead in the Singapore market under the weak market backdrop and intensive competitive landscape. More than 60% of our total newly acquired clients in the second quarter coming from Singapore. And the average net asset inflows of our new funded clients in Singapore exceeded $9,000 US dollars, while the average CEC decreased sequentially. This solidifies our leading position in both market share and...
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The second quarter, the average CEC in Singapore was around $215. If we lost the operating expense, the average CEC will go down to $156.
Meanwhile, we launched our services in Australia in the first quarter, right? So when we enter a new market, similar to what we've done in Singapore, we will spend more branding costs to promote our company. Therefore, the average CEC in Australia and New Zealand is still relatively high, which brings the total average CEC to about $300 in the second quarter, decreased about 10% on a quarter-over-quarter basis.
Well, the market sentiment was weak during the first half year and investors prefer to stay on the sideline. Under this kind of circumstance, we are very prudent with the marketing spending. We keep a very close eye on CEC and payback period to make sure we can have a very healthy business model and we will just be very dynamic to adjust our marketing strategy.
Thanks, Benjamin. That's very helpful.
Thank you for your question.
Our next question comes from the line of Cindy Wang from China Renaissance. Cindy, please ask your question.
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Our next question comes from the line of Judy John from City. Judy, please ask your
Kila ship addresses.
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Thank you.
Thank you for giving me this opportunity to ask questions. This is Judy Zhang from Citi.
I have two questions. The first question is, we saw Tiger has acquired a Hong Kong brokerage license for almost like a year. What is the latest status and the development plan to develop business in Hong Kong? And second question is, in light of a Fed accelerating rate hike cycle, what is the impact to the company's business and what is the potential response from the company? Thank you.
upgrading the trading infrastructures. For example, getting more direct lines, expand our server, doing testing with the exchange, and backtest all the bookend records using our own system. So far, I think everything is on the right track, and hopefully we can have a soft launch in the near future. Also, recently we have obtained the Type 4 and 5 contents from SFC, which allows us to create more contents for users and our online community.
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Okay, so second question about the rate hike. You see the broker dealer industry has a very strong beta effect. We think the fact tightening will have mixed impacts on our business and the whole industry. So on the bright side, we can of course generate more interest income from the increased risk cycle, especially with our increased client base and the self-clearing efficiency. Well, on the other side, to a certain extent, the liquidity tightening will have negative impacts on the capital market activity.
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All right, thank you. Our next question comes from the line of Cindy Wang from China Renaissance. Please ask your question Cindy.
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Could you provide a business update for Australia and New Zealand markets in second quarter of 2022? And what's the marketing strategy you will adopt and any new products will be launched in these two markets in the second half of this year? Second question is regarding to the new paying client. Could you provide a breakdown by geographies and how do you expect the distribution of the new paying client in the second half of this year? Thank you.
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Okay, so I'll translate. In general, in the second quarter, more than 10% of our new funded accounts are coming from Australia and New Zealand.
We still make all our efforts, such as sponsoring the local sports team, just to localize our products and services by adding more features that will give the local investors more control over the investment.
So in the meantime, still keeping the user experience simple and efficient.
In addition, the ranking of the Tiger Treat app rose to number 31 by the end of the second quarter, which is highest among the online brokers in Australia.
As a result, our newly registered users increased more than 80% and the trading volume also doubled on a sequential basis in Australia. We keep fine-tuning our local marketing strategy and localization and we are confident that there will be more local users coming on board of Tiger platform. Thank you very much.
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Thank you for your attention.
Okay, so second question about our new clients acquired. Okay, so basically our internationalization is progressing very well. In the second culture, over 70% of newly funded users were acquired from overseas markets.
in which about 20% of funded accounts came from mainland China, more than 60% came from Singapore, and for the rest 10-20% were from Australia and New Zealand.
We do expect the proportion of new clients acquired in Australia and Singapore will increase in the second half year of 2022, alongside with our local development and expansion. Thank you Cindy.
Thank you very much.
Thank you. There are no further questions at this time. I'll now turn the conference back to Mr. Aaron Lee for closing remarks.
Okay, thank you operators. 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 Tiber. We do appreciate your participation in today's call. If you have any further questions, please switch out to our investor relations team. This concludes the call and thank you very much for your time.
Thank you.
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