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spk01: Hello, ladies and gentlemen. Welcome to Future Holdings' fourth quarter and full year 2020 conference call. At this time, all participants are in listen-only mode. After management's prepared remarks, there will be question and answer session. Today's conference call is being recorded. If you have any objections, you may disconnect at this time. I would now like to turn the conference over to the host for today's conference call, Mr. Daniel Yuan. Chief of Staff and Head of IR at Futu. Please go ahead, Sheriff.
spk00: Thanks, Operator, and thank you for joining us today to discuss our fourth quarter and four-year 2020 earnings results. Joining me on the call today are Mr. Leif Lee, Chairman and Chief Executive Officer, Officer Chen, Chief Financial Officer, and Robin Xu, Senior Vice President. As a reminder, today's call may include four looking statements. which represent the company's belief regarding future events, which by their nature are not certain and are outside the company's control. Forward-looking statements involving hearing risks and uncertainties. We caution you that a number of important factors could cause actual results to differ materially from those containing any forward-looking statements. For more information about the potential risks and uncertainties, please refer to the company's filings to the SEC, including its registration statement. With that, I will now turn the call over to Lee. Lee will make his comments in Chinese and I will translate.
spk06: Hello, everyone. Thank you for joining the earnings call today. We are excited to announce that the robust growth momentum of our operating and financial matrices
spk00: continued into the fourth quarter of 2020 and we ended the year on a high note.
spk06: the same growth rate of 160.5%. In 2020, we had a total of about 320,000 real estate customers, exceeding the previous value. At the same time, our current customer retention rate continues to maintain its high position, reaching 97.9%. In 2021, we expect to have a total of 700,000 real estate customers. At the end of 2021, we expect the number of real estate customers to increase by 135%,
spk00: We added over 98,000 paying clients on a net basis. Over half of whom were from Hong Kong and overseas. We are pleased to see that our relentless commitment to user experience continued to pay off, as we again brought in over 50% of our new paying clients in the quarter through organic growth. As the year ends, paying clients reached over 516,000, representing 160.5% year-over-year growth. We exceeded our full-year paying client guidance by adding approximately 320,000 paying clients in 2020. At the same time, we continue to deliver a high paying client quarterly retention rate of 97.9% in the quarter. Looking into 2021, we're guiding for 700,000 net new paying clients, translating to 135% year-over-year growth in total paying clients.
spk06: By the end of fourth quarter, average client asset balance was 552,000, a record high since our IPO, bringing our total client assets to 285.2 billion Hong Kong dollars.
spk00: representing 227.3% growth on a year-over-year basis and 41.9% growth on a quarter-over-quarter basis.
spk06: This quarter's total trading volume is 1.2 trillion HKD, with a growth rate of 438.1% and a growth rate of 19.2%. Due to the strong performance of U.S. stocks, the trading volume of U.S. stocks is 7836 billion HKD, with a total trading volume of 65%. In the Hong Kong market, photo trading volume is HK$1.2 trillion in the quarter, a 438.1% year-over-year
spk00: in 19.2% quarter-over-quarter. U.S. stock trading was 783.6 billion Hong Kong dollars, or 65% of our total trading volume, underpinned by the robust U.S. equities market performance. In Hong Kong, we continue to aggressively take market share in terms of both paying clients and trading volume. The market share of our Hong Kong trading volume was over 2.6% in the quarter, which more than doubled from the year-ago quarter. In the fourth quarter, we further expanded our trading product offerings by launching CME Futures and A50 Futures.
spk06: In the fourth quarter, we expanded our trading product offerings by launching CME Futures and A50 Futures. In the fourth quarter, we expanded our trading product offerings by launching CME Futures and A50 Futures. More and more customers in the fourth quarter have seized the opportunity of the whole market through investment stock funds. Therefore, the most attractive fund for investors in the technology industry and the big Chinese region is the investment focus fund. At the end of the year, more than 42,000 customers hold FUTU financial management products with a total of 8.1% of asset customers and a huge penetration space.
spk00: By year end, total client assets and money plus surpassed the $10 billion Hong Kong dollars milestone, up 68.5% year over year. We have established partnerships with 39 asset managers around the world, which altogether hosted 39 live streaming on our platform in 2020 to conduct fund publicity and investor education. In the fourth quarter, we saw a growing number of clients capture the market boom by investing in equity funds. among which funds with a focus on the technology sector and the greater China region gained the most traction. Over 42,000 clients, or 8.1% of our total paying client base, held net wealth management positions out of year-end, offering significant room for further penetration.
spk06: 富足安逸,仍是企业客户的首选合作伙伴。 截至2020年底,我们拥有105家IPO和投资者关系客户。 第四季度, Fujilini continues to be the go-to enterprise service partner. We had 105 IPO and IR plans out of year end. In the fourth quarter,
spk00: Ten IPOs recorded over 10 billion Hong Kong dollars in subscription, respectively, on our platform, including the U.S. IPOs of Minnesota and Lufax and the Hong Kong IPOs of PopMart and JD Health. We also added 33 ESOP clients in the quarter, bringing our total ESOP client number to 159.
spk06: We will continue to invest in the technology system. Although the market fluctuated in 2020, we still achieved We continue to invest in our technology infrastructure.
spk00: Despite heightened market volatilities in 2020, we still achieved a full year service availability rate of 99.96%. In January 2021, we further expanded our throttle rate for Hong Kong stock trading from 200 to 500, thereby allowing us to execute 1,000 concurrent Hong Kong stock orders per second. Technological excellence is deeply entrenched in every aspect of our business, and we will continue to invest in technology to widen our competitive moat.
spk06: 2021 is the first year of FUTU's internationalization. Our internationalized app, Moomoo, officially launched in Singapore on March 8th. After the launch, the growth of various data has been strong, and we have gained a good user reputation. We believe that FUTU's products and services in many domestic and foreign markets in China and Hong Kong can all provide decentralized value. In the global scope, the investor's stock penetration, the improvement of stock penetration, we also strive to remit.
spk00: For FUTU, 2021 is the year of internationalization. We officially launched our MUMU app in Singapore on March the 8th and have since then seen strong growth momentum and received encouraging feedback. We believe that our product and service deliver differentiated value propositions in many more markets outside of mainland China and Hong Kong. and we wanted to take advantage of the elevated retail stock market participation around the world. Next, I'd like to invite our CFO Arthur to discuss our financial performance.
spk08: Thanks, Leif and Daniel. Let me walk you through our financial performance. All the numbers are in Hong Kong dollar unless otherwise noted. In the fourth quarter, our total revenue was $1.2 billion, an increase of 282% from $311 million in the first quarter of 2019. To break it down, brokerage commission and handling charge income was $718 million, an increase of 374% from $152 million in the fourth quarter of 2019. The rise was mainly due to the 438% year-over-year growth of our total trading volume. Interest income was $337 million, an increase of 163% year-over-year. We generate higher margin financing interest income due to the sharp increase in daily average margin financing balance and a higher IPO financing interest income due to a very active Hong Kong IPO market. Early income was $131 million, an increase of 318% from $31 million in the fourth quarter of 2019. The jump was primarily due to an increase in our IPO subscription service charge income and the currency exchange service income. On the cost side, total cost was $242 million, an increase of 179% from $87 million in the fourth quarter of 2019. Brokerage commission and the handling charge expenses were $133 million, an increase of 323% year-over-year. This growth was largely in line with our brokerage commission and the handling charge income growth. Interest expenses were $64 million, an increase of 160% year-over-year. The increase was primarily due to higher IPO financing interest expenses. Processing and the service costs were $45 million, an increase of 79% year-over-year. The growth was primarily due to increase in crowd service fees. As a result, total growth pocket was $944 million, an increase of 321% from $224 million in the fourth quarter of 2019. GDP margin increased from 72% in the fourth quarter of 2019 to close to 80% in the fourth quarter of 2020 due to higher operating leverage as a result of our larger business scale. Total operating expenses were $364 million, an increase of 100% year-over-year. To break it down, R&D expenses was $162 million, an increase of 118% from $74 million in the fourth quarter of 2019. The increase was primarily due to an increase in R&D headcount to further expand our product offerings. Selling and marketing expenses was $113 million, an increase of 119% from $51 million in the fourth quarter of 2019. The increase was primarily due to higher branding and marketing spending. G&E expenses was $89 million, an increase of 60% from $56 million in the fourth quarter of 2019. The increase was primarily due to the increase in headcount for GNA personnel. As a result, our net income increased by 11 times to $533 million year-over-year. The increase was primarily due to robust revenue growth and the significant operating leverage. At the same quarter, we completed our $260 million US dollar pipe offering with our leading global investment firm. The offering was in the form of prepaid warrants that has been reflected in our equity items in our balance sheet. After we further enhanced our capital base, we are able to support a larger margin financing balance, ramp up our marketing efforts in international markets, and further invest into our technology infrastructure. That concludes our prepared remarks. We now like to open the call to questions. Operator, please go ahead.
spk01: 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, wait for your name to be announced. If you wish to cancel your request, please press pound or hash key, with star followed by one to ask your question. Thank you. We have the first question from the line of Katrina Liu from Morgan Stanley. Please go ahead.
spk04: Thank you for giving me the opportunity to ask this question. I'm Morgan Stanley's Liu Xinhe, Catherine Liu. I have two questions I would like to ask. The first one is to ask Mr. Li. I would like to ask, in the next three to five years, what will be the obvious difference or difference between now and the next three to five years? I will translate for myself first. The question is for Chairman Li. Just wondering in the future three to five years, how do you see Futu different from now? And second question is about just now the guidance given on the paying clients. Just now the guidance for paying clients is around $700,000 addition for 2021. I'm just wondering, does $700,000 include the clients on Futu Momo or it's just on Futu Niu Niu? Thank you very much.
spk06: Compared to our digital development, I think it's a little bit far. But we can still imagine what it will look like. First of all, I think it will be a more international FUTU. Another one is the kind of connected ecosystem we want to build. We will also see it becoming more and more formal. Because I believe that our entire business here in financial management should be FUTU.
spk00: I think three to five years, a little long in comparison to how we plan our business. And I think our business will evolve in three aspects. And number one, you'll see Futu as a more international platform. And as we mentioned just now, internationalization is a key priority for us this year and in the years to come. And number two, I think we'll further go down our path of constructing a self-reinforcing ecosystem in our platform. that provides connectivity to users, investors, KOLs, media, et cetera. And number three, I think our FUTU MoneyPlus, which is our wealth management business, will contribute a larger asset balance and also revenue to our total business.
spk06: Then the second question, I would like to ask Robin to answer it.
spk09: Okay. What I just said is that we expect a $700,000 That's your second question. The $700,000 net new paying client addition this year includes our Moomoo paying clients.
spk00: So we expect that among these 700,000 new pain claims, about 80% of them will come from mainland China and Hong Kong, and the rest will come from Singapore and the U.S.
spk07: Thank you.
spk04: Okay, we move to the next question.
spk01: Yes, please. The next question comes from the line of Ziyou from CITC. Please go ahead.
spk05: Thank you for giving me the opportunity to ask a question. Congratulations, we have achieved a very strong growth in the industry. I am Yao Zeyu, the business manager of Zhonglin. We see that the income of our company, other income, continues to grow very strongly. I don't know if the management can give us a further insight into the ratio of wealth management, ESOP, and other corporate services. Then the second question is that we see that the growth rate of human resources in this quarter is about 15%, which is a very rapid growth. Then I understand that the human resources of our overseas customers may be inferior to that of our mainland customers. So can I ask, in the process of increasing the number of users, is there a difference in human resources production in mainland China, Hong Kong, Singapore, and various American markets? Hi, management. Thanks for taking my question. I'm from CITC. Congratulations on the exciting results. I have two questions here. The first one is about the revenue breakdown. We see the other income has experienced strong growth. I wonder would you please give us more information on the breakdown? And the second question is about the client assets. I noticed that the average client asset balance has increased significantly on a quarterly basis. I remember that the average asset balance of our overseas client is much lower than that of our mainland customers. So would you please give me more information about the difference between different regions? Thank you.
spk08: Thank you. I will answer your two questions. I think number one, in terms of breakdown income, the most part of our other income still comes from our IPO subscription service charge. and also the currency exchange service charge. The things you mentioned, such as the ESOP business revenue and also the wealth management revenue is still not very, very meaningful. We will give you the detailed breakdowns in our forthcoming annual report, which may be due in the later days of this month. And secondly, for the average client assets, you are right. If we compare our mainland client assets and also the Hong Kong client assets, roughly our average client assets for Hong Kong market will be around 20-25% lower. than the average numbers of the mainland numbers. We have not conducted our client acquisition in Singapore in the last Q4, so actually we do not have such data on hand yet. And also we have not included our US client numbers in fourth quarter as well. We will give you more information in the forthcoming Q1 earning call. Thank you.
spk01: Thank you, Arthur. Thank you. The next question comes from the line of Jackie Zhou from Channel One Shams. Please go ahead.
spk07: Thank you for giving me the opportunity to ask a question. I'm Jackie from China. I have two questions for Jackie. The first is about our guidance. I see that the guidance for the whole year of 700,000 should exceed most of the market's expectations. I would like to ask, what is the current rate of new customers in the first quarter? And how do we look at the situation of the market in the second half of the year? Including the distribution from the region, how do we look at the speed of new customers in each region? The second question is about I would like to ask Mr. Guo, when will it be time for this to really fall? Because last time we also talked about it, it is expected that this will give us an increase of about 50 million US dollars in pre-tax earnings. I would also like to ask, when will the financial effect of this be reflected? Thanks, Benjamin, for taking my questions. I have two questions. Number one is about our guidance. So I think the 700,000 new pain clients guidance exceeded most market expectations. So just want to check what is the current fund rates of our new pain clients. as in the first quarter and what is our expectation for the speed of customer acquisition in different regions over the year? And second question is about our U.S. self-clearing progress. So what will be the launch time for the U.S. self-clearing? And according to our last earnings call, we mentioned is probably a US dollar 15 million pre-tax benefit from USF clearing. So when will we see the impact on the financial results? Thank you.
spk08: OK. Thank you, Jackie. I will leave to answer your first questions in terms of giving you some qualitative updates about year-to-date situations. Frankly speaking, we cannot share any quantitative numbers about yesterday run rate, which I think will give you more colors during our first quarter earning call. For your second question, I will answer it first. In terms of sale clearing, actually we just stopped our initial migrations recently just to overcome the first stop. But we do think this migration will take time. You will see meaningful progress in terms of operation numbers, i.e., the client's assets and the number of the clients. from our counterparty in the U.S. to our self-owned clearinghouse this year. But I think that in terms of financial savings, it will not be too meaningful in terms of 2020 contributions. But definitely you will see the benefits from the second half of next year.
spk06: I would like to add something here. So first of all, I think Lee's supplemented on your second question on self-clearing. He mentioned that two weeks ago, he used his own personal account to execute five trades, which are processed through our own clearing system.
spk00: And the trades were processed very successfully. And as Arthur mentioned, we'll start this migration process starting the second quarter. And I will take your first question on our guidance and our run rate. So year to date, the numbers have been really strong. The paying client growth has been strong. And it gave us ample confidence to give out this guidance of 300,000 net new paying client addition this year. I think we are well on track. And as we mentioned earlier, and now with 700,000 new paying clients, about 80% of that number will come from mainland China and Hong Kong, and 20% will come from the US and Singapore. I think it's a little too early to give out a more detailed breakdown further down what I just mentioned. But I think, you know, in terms of run rates, maybe I can talk a little bit about our business updates. year to date. As we mentioned in Singapore, we soft launched in February and we officially launched our business on March the 8th. And if you look at some of the rankings on the iOS afterwards in Singapore, you'll see that we have really strong downloads and our business has been growing really strong and kind of exceeding our expectations. So we are very confident about our growth prospects in Singapore. And also, you know, the strong growth momentum is also observed in the U.S. market as well. And in mainland China and Hong Kong, I think the growth momentum is strong as always. And we see that there is a very strong IPO pipeline this year. And if I remember correctly, in the first two months of this year, the total proceeds raised through Hong Kong IPOs totaled a little over $70 billion Hong Kong dollars. And in the first quarter of last year in total, the IPO proceeds was a little over $10 billion Hong Kong dollars. So the IPO market is very active. The market sentiment is very positive, and we are continuously expanding our Hong Kong stock trading market share. And in February this year, I think our DAU surpassed 1 million for the first time, and that's also one of our major accomplishments in establishing our social community and just creating this ecosystem.
spk07: Thank you.
spk01: That's clear.
spk07: Thank you.
spk01: Thank you. We have our next question from the line of from Jefferies. Please go ahead.
spk02: This is Zoe from Jefferies. I have two questions. First, could you please provide some color about the brokerage commission and handling charge income from U.S. stock, Hong Kong stock, and Stock Connect, respectively, and how should we think about the trend in the commission fee rate in different markets? My second question is how should we think about the commission and handling income contribution from the Singapore market and our strategy in other overseas countries? Thank you.
spk08: Okay. Thank you, Zoe. Let me answer your two questions. I think number one, in terms of the trading volume, just to give you some breakdowns in terms of our fourth quarter trading volume, U.S. markets roughly account for 65% of our total trading volume. The remaining 34% came from the Hong Kong local market, and we have a very tiny portion from the Hong Kong-China stock net as well. If you look at our blended commission rate, QMQ-wise it keeps very, very stable. If we take out some fluctuation due to the IPO and also the U.S. trading because our U.S. stock commissions actually some of our U.S. trading commissions based on the number of the shares rather than a blended percentage calculation. So, on a like-for-like basis, our commission rate keeps very stable, and I do think, you know, such stability will continue toward this year. And also, in terms of the commission contribution from the single-node market this year, I think the proportion-wise, it will not be very meaningful, because there are still, you know, a growth learning curve in the Singapore market. and also in order to penetrate the market more quickly and more aggressively, actually we adopt a lot of commission-free strategies because we think in the current stage market share is far more important than the modernizations from the trading commission.
spk03: That's very helpful. Thank you.
spk08: Thank you.
spk01: Thank you. We have our next question from the line of Yuan Zhang from Q&A. Please go ahead.
spk03: Thank you, Manager Chen. Congratulations on your performance. I'm Zhang Yu Ran, an analyst at WeChat. I would like to ask about our customer guidance for 2021. In the 80% that Manager Zhang just mentioned, what is the ratio of customers in Hong Kong and mainland China? In addition, The first is following up on your paying client guidance of 700K in that new paying client. for 2021, of the 80% from Hong Kong and mainland, what's the expected contribution from mainland China versus Hong Kong local? On Singapore specifically, what's the marketing strategy for that market, and how should we think about the customer acquisition costs going forward? Thank you.
spk09: Hello, thank you for the question. This year, we expect to have 700,000 more paid customers. As we just mentioned, mainland China and Hong Kong account for about 80% of the total. If we look at the mainland China and Hong Kong account, Hong Kong accounts for about 60% and mainland China accounts for about 40% of the total. Another question is, Singapore's trading strategy. The market situation in Singapore is similar to the competitive situation in Hong Kong. There is a larger group of investors, but after the development of the business services, technical capabilities, and user experience, our entire trading path mainly includes natural flow, online and offline advertising, channels, and KOL cooperation in the financial field. This is our main trading method.
spk00: To your first question on breakdown, as we mentioned, 80% of our new clients will be from mainland China and Hong Kong. And among those 80%, we think that about 60% will be from Hong Kong and the rest from mainland China. And to our second question on the Singapore market, based on our own observations, competitive landscape in Singapore is very similar to that in Hong Kong. There is a relatively large retail investor base that is relatively wealthy, and the market is also dominated by the incumbent players that have, you know, lackluster trading technology capabilities and have less than optimal user experience. And for KUTU, I think our client acquisition channels will be very similar to the channels in Hong Kong. including online and offline marketing, working with third-party channel partners, working with KOLs, and also organic growth.
spk09: In addition, in Hong Kong, the cost of goods in Singapore, because it is still an early stage, we have just entered the market, and we still have less than a month. So the expected early cost of goods should be around 2,000 Hong Kong dollars. Of course, with the increase of our entire market share, this figure is likely to go down.
spk00: We expect our per paying client acquisition cost in Singapore to be around 2,000 Hong Kong dollars. So that's our estimates based on, you know, one month of experience of actually launching in the Singapore market. And we believe that as our user growth picks up, this per paying client acquisition cost has ample room to go down. Thank you.
spk03: That's very clear. Thank you.
spk01: Thank you. Once again, if you wish to ask a question, please press star 1 on your telephone keypad and wait for your name to be announced. If you wish to cancel a request, please press pound or hash key. It's star followed by 1 to ask a question. Thank you. If there are no further questions, I would like to hand the call back to Daniel.
spk00: Thank you. That concludes our call today. On behalf of the Food Tube 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 industrial relations representatives. Thank you and goodbye.
spk01: Thank you. Ladies and gentlemen, that concludes the conference for today. Thank you for participating.
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