Webull Corporation

In the second quarter, interest rate income grew 14% year-over-year to $36.3 million, largely attributable to higher client cash balance, increased margin activity, and importantly, the successful adoption of Webull premium. Finally, let's turn to slide 11 for a closer look at operating expenses. Operating expenses increased both sequentially and year-over-year. The primary drivers were higher activity on the platform, including brokerage and transaction costs, as well as payment fees on customer deposits made through a debit card, a new feature we introduced in the second quarter. We also stepped up our marketing spend during this period. We saw some growth in technology and development expenses as well, mainly related to headcount and infrastructure investments. But this was offset by a reduction in general and administrative expenses. Overall, we remain disciplined in managing our expenses. At the same time, we're investing in innovation, customer growth, and wallet share expansion, ensuring we balance near-term discipline with long-term opportunity. Thank you, everyone. With that, I'll turn the call back to Anthony before we open the line for questions.

Thanks, HC, and thank you, everyone, for joining us today for our second quarter earnings conference call. This was Webull's best quarter ever in terms of revenues as we continue to focus on our core growth drivers, namely new product delivery, the addition of new asset classes, and geographic expansion. There's real energy behind what's coming next, and our team is hyper-focused on delivering on the product roadmap we have shared. I'm very happy with our trajectory and want to thank the Webull team for the hard work and innovation mindset they bring to work every day. This is an exciting time for our business. We'll be at a number of industry and investor conferences this fall and look forward to engaging with you. On that note, we welcome any questions you may have, either here on the call or one-on-one.

We will now begin the question and answer session. To ask a question, you may press star then one on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star then two. At this time, we will pause momentarily to assemble our roster. And your first question comes from Craig Siegendhaler with Bank of America. Please go ahead.

Eli Boode Hi. Thanks for taking the question. This is Eli Boode filling in for Craig. I was hoping you could dig a little bit deeper into your organic growth in the quarter. What were net new assets, and which geographies and demographic groups are you seeing outsized growth?

Anthony Acciavatti Hey, thanks for the question. This is Anthony. So, in terms of net deposits, Up 1.5 billion, right? That's net deposits of fresh cash coming in. That's up 37% year on year. We've seen a bunch of different drivers behind that. I think I would highlight the focus on premium customers or our Webull premium subscription customers delivering large amounts of capital into their Webull accounts after subscribing. I would also highlight brand confidence following our Q2 public listing. And I would also like to highlight a great market backdrop. So we continue to see tailwinds in terms of new customer AUM growth. And also the focus, like we mentioned on the script, was looking towards high quality customers and making sure that we can meet them to be long-term Webull investors. And we've been really successful in our promotion strategy of bringing over large asset transfers from traditional brokers over to Webull, which is a great new cohort of client that we traditionally never reached. So we're really happy with that outcome. And then the second part of your question was geographics? Yep. So we do operate in 14 different broker dealers currently. There are a lot of bright lights that are shining. To put a pin on some highlights, I would highlight we launched our Canadian broker dealer business back in January of 2024. We are now regularly considered one of the top trading platforms in Canada in that short amount of time. with AUM accelerating at a very, very fast rate, again, with promotions of brand recognition and asset transfers from the traditional brokers that existed up north. We're seeing a lot of momentum in our Latin American businesses. Not only do we operate in Brazil and Mexico City, there is a young demographic in those locations, and we're seeing a lot of interest in trading digital assets in those regions. And we've been really pleased with the momentum, even over the past, it's only been four weeks since we launched crypto in Brazil. We're very pleased with seeing the momentum of local Brazilians accessing crypto through the Webull LATAM app out of Sao Paulo.

Great. Thank you.

And your next question comes from Mike Grondel with Northland Securities. Please go ahead.

Hey, thanks, guys. And maybe just following up on the crypto trading that was started in Brazil, U.S., and Australia, Anthony, how is that going so far? And can you talk about the incremental opportunity you see there?

So I've said this many times, the incremental opportunities are almost infinite at this point. Like we mentioned on the script, we are in a position in this industry of not only a huge shift in the products that we're able to deliver to retail customers, both in the US and internationally, that are based on Web3 technology. And we are, you know, we're all in when it comes to bringing able to innovate and bring those products directly to our clients. So when I think of our US launch, which is only Monday, so we're only four days in, when I think of our Brazilian launch, which is still very, very new, less than a month in, and Australia, which I believe we launched only two days ago, this is phase one. This is, you know, this is the low hanging fruit for us. This is where we say, Hey, we're back in crypto, which we, which we actually had a great crypto business earlier. We tried to go public in, um, earlier several years ago and different regulatory environments. So we moved away from crypto to appease the regulatory regime that was in place. But this is a different time for our business. Uh, the regulators are supportive. There's, very strong framework that's being built not only in the U.S., but globally. And we're utilizing that framework to deliver innovation to our clients on a global scale. In terms of the growth that we've seen, I think it's still a little early doors, but we have very high expectations because our customer demographic expects to trade crypto, expects to hold digital assets alongside equities, options, futures, fixed income. it's almost an afterthought. And it does pain me that over the years we haven't been able to because of regulatory pressure. So this is a huge opportunity, not only for Webull, but for the industry as a whole to lead from the front and create innovative products that I believe retail customers will really enjoy.

Got it. And, you know, the last couple of years, your marketing strategy has evolved, right? You know, a couple several years ago, it was open an account, get a share, fund an account, get a share. And now it's much more of kind of a matching kind of rewards-based strategy. Can you just kind of talk about that evolution and how it's going?

Yeah, so I think the AUM kind of speaks for the success strategy. of the evolution of that strategy. But I would like to point out that out of the 14 broker dealers we operate around the world, each broker dealer has their own individual strategy. And we still utilize a lot of the open an account, get free share promotions outside of the US. We have matured as a platform along with our clientele in the US. So it makes sense for us given market backdrop, given the the tailwind environment we're in as retail investors are excited about the market. And it's been working very, very well for us in the U.S. And we see great success in building a large account base outside of the U.S. that doesn't utilize the promotions that we use in the U.S. that reward balance transfers.

Got it. And then maybe just lastly, You know, some of the new products from earlier in the year, the Kalshi offering, premium, the BlackRock models, anything else to call out with those or anything else related to those?

So Kalshi and predictive markets, I think, presents an opportunity to touch a lot of different topics. a lot of different sectors of our economy. We've been very conservative with our strategy on the products that we offer through our partnership with Kaoshi on the predictive market space. We'll continue to, again, innovate and look for opportunities, listening for customer feedback and grow that business as the whole industry grows. It's still very new, by the way. In terms of adding New products, and yes, in the beginning of the year so far, we had a lot of great wins. I think we're going to see even more wins, and I'm going to hold my tongue in announcing anything here, but we have a lot of things still in the pipeline that we're very excited in rolling out. Again, this is a very new time for our industry where I think it's easy to ask for forgiveness instead of asking for permission in a lot of cases. And also the fact that we have this large geographic footprint also allows us to export these products everywhere around the world. The U.S. retail trading experience, in my opinion, is by far the most convenient, the most user-friendly, and the lower cost of barriers for entry anywhere in the world. And we are using our market share, our success in the U.S., to then export that experience everywhere else around the world. And so the products are going to keep rolling out. And I'm really excited about what the rest of the year brings.

Awesome. Thanks a lot.

And your next question comes from Chris Brenler with Rosenblatt Securities. Please go ahead.

Hi, thanks. Good afternoon, and thanks for your questions. Congrats on the results. I wanted to start with a follow-up on the crypto side. Any way to dimensionalize The impact there, I'm not looking for guidance, but just, you know, how big that business currently is or could be and any way to think about the impact on the outlook from crypto being relaunched in the U.S.

So, first off, I think our crypto business is perfectly positioned to – to be accretive to our top line very, very quickly. Many of our Webull customers in the US actually have previously traded crypto on our platform. They remain clients of ours even when we remove crypto. So the re-adoption and the re-implementation of digital asset trading right next to your securities, right next to our securities products, I think is going to be a very, very seamless and easy transition for our clients. I'm trying to be careful and not over-speculate, but it's hard for me to mute my excitement about bringing it back. When we took crypto off of the Webull financial platform in September of 2023, it was not an insignificant portion of our business. And we expect the acceleration of crypto accounts We expect the adoption of crypto AUM, and we believe that the trading revenue from the activity of clients coming to Webull to trade their digital assets is going to be something we're going to reap the benefits of quite quickly.

Yeah, I can tell it's pretty exciting stuff. I guess we'll have to wait and see how meaningful it is in this year and then obviously probably a lot bigger next year. That sounds great. Another question on the core business and the results. I was looking at darts per account or per funded account, and it's got up substantially, especially on a year-over-year basis. Can you give us any insight onto what's driving your increased traction with your existing customer base? I mean, I feel like it's probably you're turning over that customer base, as you mentioned, getting more active users on the platform. But any other color would be great on just how you're driving engagement.

Yeah, I mean, the easiest answer for that is going to be great market volatility, great market volatility and a very friendly retail investor market right now. I think the longer term drivers of that growth is the adoption of Webull Premium. Webull Premium has some of the lowest margin financing rates on the street. So we're seeing active traders. either moving more money over to Webull and trading more on our platform or only using Webull as a result of those best-in-class margin financing rates. And then thirdly, this huge influx of new AUM that we brought on in Q2 and like we mentioned on the script, continues to roll in. Right now, we're over $18 billion in AUMs. So when you have substantial AUM growth of more than 70% year over year, you're going to have a lot more trading activity. So we see no indication of that slowing.

Great. And then another follow-up actually for me would be on the marketing side. I just wanted to appreciate the change in strategy there. the market expenses were a little higher second quarter versus first quarter, but still down year over year. So how do I think about the effectiveness of your new marketing and is this $30 million level a good run rate or do you expect to continue to lead into the opportunity from here?

I mean, we're planning on leaning into this opportunity. We are taking a significant amount of AUM. Yes, our marketing costs were higher this quarter when they were in Q1, but that's simply because of the uptake of clients utilizing these promotions to move assets from a lot of our traditional broker-dealer counterparts. Now that we have obviously access to capital and we've raised quite a bit capital with the Bullsie Warrants, we've raised some capital with the SEPA program, we are extremely well capitalized to continue to take AUM and continue to grow our market share in the U.S.

Awesome. Thanks so much and congrats again.

And your next question comes from Edward Engel with CompassPoint. Please go ahead.

Hi, everyone. Thanks for taking my question, and congrats on all the updates. A couple questions on the crypto side. You talk about the strategy outside the U.S. I recognize that you just launched it in the U.S. and recently in Brazil, but curious if you see the product getting launched into most of the jurisdictions you're in. And I guess on top of that, Um, quite a big cash to balance sheet, especially after some of the recent actions in second quarter. Curious how you guys are thinking about M and a, whether it's for international expansion or product expansion. Thanks.

Yeah, no great questions. Um, so in terms of, uh, crypto, uh, crypto take up outside of the U S we are dedicated. to making sure that we have the ability for clients at every Webull platform around the world to be able to get access to digital products. That is a standing statement where different regulatory regimes in different countries have different qualifications, different requirements and different time horizons to get approval. And we are working with every regulatory body where we have a current broker dealer making sure that we do so legally and responsibly. But absolutely, we'll be looking to add crypto and digital asset trading to our outside of U.S. broker-dealers. We had Brazil as the first release. U.S. came in a close second and Australia right thereafter. We will be having more announcements as we go through the year.

And on your second question about the cash balance sheet and the potential M&A opportunities, I just wanted to mention that, you know, we are operational in 14 different markets. And actually, you know, our markets outside of the U.S. have only just began operations in the last two to three years. There are still significant organic opportunities for us to continue to grow customers. and AUM both in the US as well as outside of the US. So for the near term, we'll continue to focus on acquiring customers, acquiring assets organically. But having said that, there are good inorganic opportunities that come along. We'll always be opportunistic, and we'll always evaluate the risk-reward of such acquisitions.

Great. Thanks, guys.

And your next question comes from Bill Katz with TD Callen. Please go ahead.

Good afternoon. This is Robin Holbein for Bill Katz. We were wondering if you could maybe expand a little bit on the crypto offering in terms of number of crypto assets that you'll be offering when the offering does go live, and will you allow staking and any other key differentiators on the crypto strategy over the near to medium term? Thank you.

Crypto is a popular question today. I appreciate it. So every region is going to have its own due diligence on what digital assets constitute or do not constitute a security. In Brazil, we launched 240 coins in the U.S. on the U.S. launch just earlier this week on Monday. We began with 50 digital asset coins that are available to trade. That number will grow. You ask about other products like staking, I'm assuming also coin in, coin out, and there's a whole bunch of other opportunities for our customers to enjoy. And the easy answer is absolutely. We are leaning in to digital assets in a very big way here at Weevil. This is, and the launch that we did on Monday in the US is phase one of what are gonna be multiple phases of having the best crypto trading experience in the world. That is our goal. And I think we are well positioned as a platform. I think our customer base is the ideal customer base to not only have an ideal platform to invest in crypto long-term, but also to trade crypto by utilizing some of the tightest spreads that are available on the market as we start attracting more active crypto trading customers, which we've done with the success of our Webull premium product, which we will be expanding upon.

Thank you.

This concludes our question and answer session and today's conference call. Thank you for attending today's presentation. You may now disconnect.