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spk05: Hello, ladies and gentlemen. Welcome to Footy Holdings' first quarter 2021 conference call. At this time, all participants are in a listen-only mode. After management's 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 would now like to turn the conference over to your host for today's conference call, Mr. Daniel Yon, Chief of Staff, and head of IR at Futu.
spk03: Please go ahead, sir. Thanks, operator. And thank you for joining us today to discuss our first quarter 2021 earnings results. Joining me on the call today are Mr. Lief 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 of 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 with the SEC. including his registration statement. So with that, I will now turn the call over to Leif. Leif will make his comments in Chinese and I will translate.
spk02: Hello everyone, thank you for joining the earnings call today.
spk03: We are excited to announce that we started off the year with robust growth across our operating and financial matrices.
spk02: In this quarter, we have 27.3 million real estate clients, with over 790,000 real estate clients, with a growth of 231%. In the first three months of this year, we have achieved 39% of the annual growth of real estate clients. In the first quarter, Our net paying client addition was approximately 273,000, bringing the total number of paying clients to over 790,000.
spk03: representing 231% year-over-year growth. Three months into the year, we already achieved 39% of our full-year growth target. For the first quarter, over 70% of the net additions came from Hong Kong, Singapore, and other overseas markets. Organic growth continued to contribute over 50% of our net new paying clients. Despite rapid client base expansion, our quarterly playing client churn rate remained below 2%.
spk02: Singapore's business has grown significantly since its official launch on March 8 this year. Our outstanding business experience, the attention to customer service, online and offline advertising, and strong taste suggestions help us quickly take over the minds of Singapore's users. Singapore is rich in Chinese people, the capital market is mature, the financial service penetration rate is high, and the digitalization level is constantly rising, offering a huge market opportunity. In addition, Since our official debut in Singapore on March the 8th, we have experienced significant growth in client acquisition. Our superior product experience and laser focus on client servicing
spk03: coupled with our online and offline advertising and strong word of mouth referral, has helped us quickly capture the mind share of Singaporeans. Characterized by its large and affluent Chinese population, deep and mature capital markets, high penetration of financial services, and rising rate of digitalization, Singapore presents a huge market opportunity, let alone its strategic importance as an entry point into the broader ASEAN market. With a strong growth momentum trending into the second quarter, we are confident to unveil rapid growth in Singapore.
spk02: In terms of client assets,
spk03: Our average asset balance per paying client climbed to HK$585,000, a record high since 2016. As of quarter end, total client assets reached HK$462.2 billion, representing 368% growth on a year-over-year basis and 62% growth on a quarter-over-quarter basis. In the first quarter, our total customer turnover is HK$2.2 trillion, which is 278% of the total growth.
spk02: Total trading volume in the quarter was 2.2 trillion Hong Kong dollars, up 278% year-over-year. U.S. stock trading contributed about 63% of the total trading volume.
spk03: In the past quarter, we launched OSB Futures from the Japan Exchange Group and Singapore Stock Trading as part of our continued efforts to diversify trading offerings.
spk02: In the past quarter, we launched OSB Futures from the Japan Exchange Group and Singapore Stock Trading as part of our continued efforts to diversify trading offerings. with a growth rate of 189%. The wealth management asset size is 131 billion Hong Kong dollars, with a growth rate of 108%. With the ability to distribute the wealth of the rich and the poor, the company is becoming more and more popular. China's top company, Fuguo Fund, has decided to sell its Fuguo China Middle and Small Bank Growth Fund's Hong Kong yuan retail share exclusively to the rich and the poor. This product is one of the flagship products of Fuguo Fund.
spk03: Our wealth management business, MoneyPlus, established new partnerships with four reputable asset managers in the quarter, including Wells Fargo, Income Partners, Aberdeen Standard, and BNY Mellon. As of quarter end, Over 59,000 clients held total assets of 13.1 billion Hong Kong dollars in wealth management, up 189% and 108% year-over-year, respectively. As money plus its distribution capabilities get increasingly recognized by asset managers, Forgo entered into an exclusive agreement with us to distribute the Hong Kong dollar denominated retail share class of its China Small Mid Cap Growth Fund, one of its flagship products in the region. In the first quarter, we started to offer a flagship TMT hedge fund managed by a globally-renowned asset manager to our qualified investors.
spk02: At the end of the first quarter, FUTU IE has 152 ICOs and 200 ESOP customers. We participated in the second listing of all of the first quarter's Chinese stocks back to Hong Kong. In addition, we are also the only Hong Kong ICO association in Kaishou, Baidu, and Bilibili.
spk03: As the quarter ends, our enterprise business, Futu I&E, had 152 IPO and IR clients, as well as 200 ESOP solution clients. In the first quarter, we participated in all Chinese ADR secondary listings in Hong Kong, and we're the only online broker in the selling groups of the Hong Kong IPOs of Kuaishou, Kaidu, and Bilibili.
spk02: More and more listed companies are opening up businesses in the Futu community. to accurately reach more than 14 million investors who are interested in Hong Kong U.S. stocks. Since the end of the first quarter, more than 500 listed companies have opened business accounts, using the functions of business accounts to promote products and services, share business progress, and hold business meetings and live broadcasts. As of now, the number of fans of nine business accounts has exceeded one million. The listed company is an indispensable part of our community.
spk03: The enterprise account function in our social community gets increasingly adopted by listed companies to engage with over 14 million retail investors interested in Hong Kong and US stock trading. By the end of the first quarter, over 500 listed companies have set up enterprise accounts with us to promote their products and services provide business updates, and live stream earnings calls. As of today, nine enterprise accounts have amassed over 1 million followers. Listed companies are an indispensable stakeholder in our ecosystem, and their engagement has greatly diversified our content offerings, thereby increasing user stickiness and retention.
spk02: Next, let's have our first financial advisor introduce our financial performance.
spk03: Next, I'd like to invite our CFO, Arthur, to discuss our financial performance.
spk06: Thanks, Lee, and Daniel. Please allow me to walk you through our financial performance in the first quarter. All the numbers are in Hong Kong dollars unless otherwise noted. Our total revenue was $2.2 billion, an increase of 349% year-over-year and 86% queue-on-queue. Brokerage commission and handling charge income was $1.3 billion, an increase of 343% year-over-year and 84% Q-on-Q. The growth was mainly driven by 278% year-over-year of our total trading volume increase. Our blended commission rate and our clients' trading velocity remained resilient compared with last quarter. Interest income was $659 million, an increase of 356% year-over-year and 96% Q2. The increase in margin financing interest income was mainly driven by the strong growth in daily average margin financing balance, higher IPO financing interest income due to a very active Hong Kong IPO market in the first quarter, and increase in our security, borrowing, and lending business. Other income was $221 million, an increase of 370% year-over-year and a 69% QMQ. The strong growth was primarily driven by the increase in our IPO subscription service charge income and the current exchange service income. In terms of costs, our total cost was $443 million, an increase of 276% year-over-year and 83% QMQ. Brokerage commission and handling charge expenses was $214 million, an increase of 327% from $15 million in the first quarter of 2020. The increase was largely in line with the growth of our brokerage commission and the handling charge income. Interest expenses was $168 million, an increase of 406% from $33 million in the first quarter of 2020. The growth was primarily due to higher margin financing interest expenses and increase in our security borrowing and the lending business. Processing and servicing costs were 62 million, an increase of 78% from 35 million in the first quarter of 2020. We continue to increase crowd service expenses and add another 300 floating controllers connected to the trading system of the Hong Kong Stock Exchange to execute a large number of concurrent Hong Kong stock trades. As a result, our total gross profit was $1.8 billion, an increase of 373% year-over-year and 87% Q2. Gross profit margin increased from 76% in the first quarter of 2020 to near to 80% in the first quarter of this year, thanks to higher operating leverage as a result of our larger business scale. Our total operating expenses was $490 million, an increase of 149% from $197 million in the first quarter of 2020. To break it down, R&D expenses were $137 million, an increase of 63% from $84 million in the first quarter of 2020. We further invested in the R&D to support our new product offerings. Selling and marketing expenses were $275 million, an increase of 321% year-over-year and 144% QMQ. The increase was primarily due to higher branding and the marketing spending, especially in the international markets, to cultivate brand image and acquire new clients. If we compare client acquisition costs in the Hong Kong and the China areas alone, our CSE number this quarter is largely in line with that number in the last quarter. G&A expenses was $78 million, an increase of 65% year-over-year. The increase was primarily due to the increase in the headcount for GEN, As a result, our net income increased by 6.5 times to $1.2 billion from $155 million in the first quarter of 2020. In April, we also completed our follow-on offering with net proceeds of approximately $1.4 billion. The proceeds will be used to support a larger margin financing balance, our international market expansion, new licensing applications, potential investment and acquisition opportunities, and other general corporate purpose. That concludes our prepared remarks. We now like to open the call to questions. Operator, please go ahead.
spk04: Certainly, sir. Ladies and gentlemen, we will now begin the question and answer session. If you wish to ask a question, please press star 1 on your telephone keypad and wait for your name to be announced. Once again, it is star 1 to ask a question. We have our first question coming from the line of Catherine Liu from Morgan Stanley. Please go ahead.
spk01: Thank you for giving me the opportunity to ask this question. I am Liu Xinhe from Morgan Stanley. First of all, congratulations to you for such a brilliant performance. I have two questions for you. First of all, I would like to ask if the management can introduce us to the second quarter to the present. For example, the exchange rate of customers or the speed at which customers get new customers. What is the trend? And then it is recommended that we have such a strong growth in the first quarter. Will we improve the expectations or guidance for the first quarter? And then the second one is to ask about our 27 million new customers in the first quarter. Thank you very much for giving me this opportunity to ask questions. This is Catherine from Morgan Stanley. So I have two questions to raise. First is like, can management please give some introduction or some briefing in terms of the second quarter this year trend in terms of trading velocity, client acquisitions, growth rate, etc. And also in light of the first quarter strong growth, will management raise guidance in terms of the four-year trend for example, growth in paying clients, et cetera? And second question is, could management please give some guidance or introduction in terms of the breakdown of clients by geography? And then we note that Singapore could potentially see very strong growth, and could management please give us some guidance in terms of the growth trend in the Singapore market? Thank you.
spk06: Sure, Catherine. Let me answer your second question first. I will show you our client's breakdown in the first quarter. I will leave the second quarter trend and also your questions about the guidance to Robin and the leads. Robin will also give you some colors in terms of our client positions and also the client profile in Singapore, this particular market. In the first quarters, on a collective basis, Singapore and the US accounts for 25% of our new paying clients acquired in the first quarter. The remaining 75% was almost evenly split within mainland China and also Hong Kong, I think slightly higher in Hong Kong part. I will leave Robin to give you a comment about your first question.
spk02: Okay. Regarding whether to adjust the management problem, although the first quarter, the competition of our paid customers is much ahead of time, but at present, we do not plan to adjust the management of the whole year. Our group has a very differentiated advantage overseas. From March to the market in Singapore, the entire customer base is very strong and the trend continues. But the economic business and market performance Although we have achieved 39% of our full-year paying client growth target in the first quarter, for the time being we will not adjust our full-year target.
spk03: Well, we definitely believe that our product has very differentiated value proposition over these markets. And in fact, since we entered the Singapore market officially in March, we have seen very strong client growth, and that momentum has continued into the second quarter. So we also reckon that the brokerage business is positively correlated with the market performance, with market sentiments, with the number of IPOs. And we understand that right now the market has disagreements over how the market performance will evolve for the rest of the year. So we'll not adjust our full year kind of inclined growth target for now. And we may give an updated guidance during our 2Q earnings call if needed.
spk06: Let me answer this question. We can see that since mid-February, the market has had a certain rebound, and the customer trading mood has been affected. We think this is normal. But the overall attention of the whole market is still relatively high. There are still good stocks in the share market. So the overall impact is controllable. From the perspective of customer assets, from March 1 to May 16, in addition to individual trading days, We have seen the market experience some level of pullback since mid-February, and we believe that our users' trading sentiment has been affected more or less, and we think that's perfectly normal.
spk03: We feel like the market still gets a lot of attention right now and kind of under the rotation from growth to value stocks, there are still a number of stocks that are performing really, really well. And from the standpoint of our client assets, we have seen that from March the 1st to last Friday, which is May the 16th, almost on every single trading day, we see a positive net asset inflow except for a couple of trading days. So it's a very positive sign that our clients are continuously putting assets into our platform. And for us, paying client number, paying client retention, and client asset are our three KPIs. And we attach much more importance to these three metrics than some short-term volatilities in the client's trading volume. And let me just add a little bit to your question about Singapore clients' profile. So far, based on what we have seen, again, this is only based on about two and two and a half months of data that we have seen so far. So Singapore clients' average and median age is almost identical to that of mainland China and Hong Kong clients. And in terms of their client assets, it still lacks. And actually, there's a pretty big discrepancy between the average client assets of our Singapore clients and our mainland China clients. But we think that's normal. And based on our experience, when we enter a new market, it'll take some time for our clients' assets and clients' trading volume to catch up. And we'll probably give more details around our client profile in the next couple of quarters. Thank you.
spk04: Thank you. We have our next question. This is coming from the line of Jackie from China Renaissance. Please go ahead.
spk07: Thank you for giving me the opportunity to ask a question. Congratulations to the company for achieving a very good performance. I am Jackie from China Renaissance. I have two questions for you. The first one is about the competition in the market. For example, we also saw some competitors in Hong Kong increasing the sales of the whole market. We also heard some donors from A shares are planning to enter the Hong Kong and U.S. stock market. What do you think of the future market competition in the future, including the market competition in the mainland and Hong Kong? So congrats on the great results. I have two questions. Number one is about our competition. We actually saw some competitors, for example, in Hong Kong market increasing their marketing efforts. And we also hear some Asia brokers may enter the U.S. and Hong Kong stock trading business. So regarding the potential increasing competition for our markets and our customers from mainland and Hong Kong, Do we concern about our customer acquisition costs and the trading commission pricing pressure? And number two is about a housekeeping question. Could you provide us a rough breakdown of our interest income and also other revenues? Thank you.
spk06: Sure, Jackie. Let me answer your second question in terms of housekeeping financial numbers first. I will leave the first question to my colleagues, our CEO leads. In terms of the interest income breakdowns, roughly interest income arising from the margin financing accounts for 60% to 65% of total interest income. The remaining interest income actually derived from our clients' idle cash deposits. And also in terms of other incomes, actually these two major parts, one is IPO subscription service charge, i.e. normally we charge 50 to 100 Hong Kong dollars per person when each participant in the Hong Kong IPOs. The other significant part is the foreign exchange service charge. You know, many of our clients trade both in Hong Kong and the U.S. markets, so they do have the demand for the foreign exchange. These two parts, I think, roughly will contribute 70% to 75% of our total other income. The remaining part will belong to, you know, such as, you know, the distribution income from our wealth management products and other service offerings.
spk02: Thank you. I would like to answer the question about competition. In the first day of the war, Kudu was a very popular market in Hong Kong. At that time, the competition was not weaker than it is now. We also saw that there were some cases in the market, such as the so-called zero cash. But you have to know that in Hong Kong, there is a transaction tax. You will find that in fact, your transaction cost is the most in terms of transaction tax. So when you get to a certain position in cash, if you do some documents on cash again, in fact, the interest rate it brings is very small. Let me translate it for you.
spk03: So from our inception, you know, we operated in a very crowded market. And we don't think the market is going to get less competitive going forward. And we indeed have seen some players offering zero commissions. But we don't think the change in the competitive landscape will have a downward pressure on our commission rate. Because, you know, in Hong Kong, there's the stamp duty, which is 10 bids. And for us, you know, we offer three bids for Hong Kong trading. And the marginal benefits for our clients for lowering our commission rate beyond that three bids is really low.
spk02: And for some of the A-share brokers, they already have
spk03: Hong Kong licensed entities. And besides, we've also seen some other online brokers that want to enter the Hong Kong local market.
spk02: So maybe I'll talk a little bit more about the online brokers due to the similarities in the business model.
spk03: First of all, we definitely welcome online brokers to enter the Hong Kong market. With more of these players entering the Hong Kong market, we can educate the market together and help the online brokerage industry as a whole gain more industry recognition.
spk02: Now, there are two major types of online brokers that provide Hong Kong stock trading services. And the first type are the Hong Kong brokers
spk03: that are licensed by SFC and hold SFC licenses and are regulated by the SFC, and FUTU is an example of this first type. And the second type are the online brokers that hold licenses of the third domicile and is not regulated by the Hong Kong SFC. For example, a license from New Zealand, and this is the second type, using a third-party domicile license to provide trading in Hong Kong.
spk02: Hong Kong's demand for supervision is significantly higher than that of the third party. It will be much better for the development. Therefore, for the second type of Internet users, if they want to market in Hong Kong, I think they need to solve the problem of supervision. From the perspective of supervision, it will not allow there to be supervision. This also means that once they market in Hong Kong, their previous old customers and their previous business will be required And as we all know, the SFC has more stringent regulatory requirements than some other markets.
spk03: and are more prudent when giving out licenses. So for the second type of online brokers that we just mentioned, if they are to get a license in Hong Kong, they must solve the issue of regulatory incongruity in advance. And from the regulatory standpoint, SFC will not allow these online brokers to operate under a more relaxed regulatory framework. This means that once the online brokers hold licenses, they'll need to migrate their existing clients and their existing businesses into the new entity that is regulated by the SFC. And if this issue cannot be solved very well, it is highly unlikely that they'll get a license in Hong Kong. And I think that's probably why another online brokerage peer of ours have been talking about getting the license in Hong Kong soon for the past three years but still have not managed to get one. Because based on our understanding, under normal circumstances, there's no way that it would take so long to apply for a new Hong Kong brokerage license.
spk02: Right. Secondly, we believe that if a business enters the Hong Kong market, it will not be affected by the stock market. There are several reasons for this. First, finance is a very important and decisive business. If a client invests his or her money into a brand, he or she will have a psychological barrier. We have a lot of high-quality stocks, such as Pingxing, And secondly, we don't think that the potential entry of other online brokerage companies will have a negative impact
spk03: on Futu's market share in Hong Kong? Well, the first reason is that, you know, financial services, it really takes a big position for our clients to choose a financial services platform. And there is this psychological barrier for clients to actually trust their assets with a financial services platform. And for Futu, we have a very outstanding shareholder base. We have shareholders like Tencent that really instill trust into our brand And on top of that, we have spent the past eight years cultivating our brand image in Hong Kong, gaining user recognition, and capturing the mindshare of the Hong Kong local users. And for a financial services company that is new to Hong Kong, it will take a lot of time for them to get the same level of trust that we've been able to garner in the past eight years.
spk02: Only the cross-examination route can have competitiveness, otherwise it is difficult to replace the existing platform with similar product experience. FUTU has built a three-dimensional competitive model with time. In the opening, trading, information, social, and other sections, there are very deep accumulations, because the product capability has also reached a relatively top-level level in the industry. There is a need to spend a lot of time chasing. On this basis,
spk03: And secondly, for the newcomers, and they can only be competitive if they can offer very differentiated value proposition. Otherwise, it will be very difficult for them to replace the existing platforms. And Futura has built a very comprehensive business that has huge entry barriers. And we've invested significantly into our account opening, into our trading infrastructure, marketing information and services, and social community, etc. And many of our product offerings really set industry standards. And the other online brokerage peers need to spend a lot of time to catch up to where we are today, let alone offering differentiated products and services. And on top of that, we have never stopped innovating.
spk02: The third point is the issue of regulatory sustainability mentioned earlier. As mentioned earlier, some companies have already closed their business without the Hong Kong license. After they get the Hong Kong license, they will have to make sure that the stock of Hong Kong customers will be able to meet the requirements of the SFC regulation of KYT and AML. This will be a very complicated process, and there will be a certain flow rate. And the third point is the regulatory congruity issue that we just mentioned. And as we discussed earlier, some of the online peers have already started acquiring Hong Kong local clients without a Hong Kong license.
spk03: And after they acquire the license, they probably will spend a lot of time migrating their existing Hong Kong clients to this new entity that is heavily regulated by the SFC and has really stringent AYC and AML procedures. And this will be a very cumbersome process, definitely with some sort of attrition. And for the other parties that have not operated in Hong Kong so far, after they get the license, they still need to kind of kickstart a very stringent account opening KYC procedure under the supervision of SFC. And this will take time for them to adjust to and take time for them to get familiarized with.
spk02: The fourth point is that the scale of the financing business has a very strong relationship with the company's capital. In addition, the funding for the financing needs to be accumulated through long-term cooperation with the banks. In Hong Kong, the upper limit for financing is five times the capital of the securities company. Some companies also need to invest a lot of capital to replenish the capital of the securities company in Hong Kong. In addition, it is necessary to cooperate with the Hong Kong banks to drive the capital growth. Hong Kong business banks are generally conservative. only through long-term communication and cooperation can we gradually increase the number of customers. In the short term, it is difficult to get a lot of new support quickly. This will significantly restrict the development of IT and data science and the daily marketing business. We understand that some of our partners will move their clients' accounts from the third party IB to their own account. If their account system is under the supervision of FFB,
spk03: And fourthly, the margin financing business is highly contingent on the company's capital base, and the margin financing capital needs to be gradually accumulated through the long-term collaboration with the commercial banks in Hong Kong. In Hong Kong, based on SSE's regulation, the margin financing balance that a broker can support is limited to five times of its capital base. So first of all, they need to inject a lot of capital into their licensed entity in Hong Kong to bolster their net assets. And on top of that, they need to secure additional financing from the commercial banks in Hong Kong. And from our experience, the Hong Kong commercial banks are generally very conservative and they're only willing to offer additional credit lines after kind of a long-term communication and long-term collaboration. So it's impractical for these newcomers to garner a lot of capital in a short period of time. And this will definitely put constraints on the margin financing business, especially the IPO margin financing business. And we realize that some of the other peers are trying to migrate their clients from the interactive broker accounts to their own account system. And if their own account system is under the supervision of SSC, the margin financing capital issue that we just mentioned will be further enhanced.
spk02: The fifth point is that our trading system and decision-making system need to invest a lot of money and time to develop. It took us eight years to build a highly efficient and highly developed system. The system's usability reached 99.96%. Such a high-performance trading system and decision-making system It has a very strong technical and time threshold. After the friendship entered Hong Kong, their Hong Kong stock trading and settlement system should be dependent on the third party supply chain system in the short term, which means that the stability and usability of the system is not so controllable for a long time. The fifth point is that the Hong Kong execution and clearing system need a lot of capital and time
spk03: to invest and the R&D is a very lengthy process. And Futu spent eight years to construct a highly stable and scalable execution and clearing system with a 99.96% service availability rate. And this very advanced trading system has high entry barriers and when the other brokers enter the Hong Kong market, In the short period of time, they probably need to rely on a third-party vendor to provide this execution system, which means that the stability of this system will be outside of their control for a considerable amount of time. So this may lead to trade congestion issues when there is extreme market volatility or when hot IPOs take place. So in the short term, it will be very difficult for them to match the client service and quality that Futu can provide. And the last point I want to make is that we have never stopped innovating and progressing, and we still keep that nascent mentality when we entered into the Hong Kong market. And we believe the additional competition in the Hong Kong market will push us to do better. Thank you.
spk04: Thank you. Thank you. We have a question coming from the line of from CICCP. Go ahead.
spk08: Thank you, Manager Chen. Thanks, Benjamin. This is Deyu from CICC. First of all, congrats to our exciting results. I see our existing business are well on track. and I was wondering if there is any possibility that we will apply for new brokerage licenses to serve more customers in other areas or launch more trading products like Bitcoin or other digital currency. Thanks.
spk06: Okay, thank you. Let me answer your first question. I will leave the second question to my colleagues, our senior vice presidents. for more service and products in our pipelines. For the new license, actually, I think you are right. We are doing some preliminary studies in other international markets, in particular in the ASEAN countries. Therefore, as Lee mentioned in the opening remarks, we do think Singapore is a very important gateway for we to enter into the ASEAN market as a whole. But now, it's doing a very preliminary stage. Also, we are doing some feasibility studies in other English-language speaking countries as well. ZHANG ZHANG ZHANG ZHANG ZHANG
spk03: So we're planning to launch crypto trading to our international clients in the second half of this year and also we'll plan to roll out more futures under the CME futures. Thank you.
spk04: Thank you. Thank you. We have the next question. This is coming from the line of Zoe Song from Jefferies. Please go ahead.
spk09: Thank you for accepting my question. I'm Jefferies from Zoe. First of all, congratulations to the company for achieving such a good performance. And then I would like to ask about the issue of the currency. Because we noticed yesterday that the central bank has issued an announcement to the three major associations that it will ban the opening of virtual currency-related businesses in financial institutions and residential institutions. Hi, management. Thanks for taking my question. This is Zoe from Jefferies. Congratulations on the strong first quarter results, and I have a follow-up question on the digital currency. So regarding digital currency, like Bitcoin, we have noticed that the Association of China have announced that to ban financial institutions and payment companies from providing services related to crypto currency transactions. I'm wondering what about FUTO's plan on digital currency this year, and will China's relations on FUTO currently have any impact on FUTO if we launch a digital currency trading model?
spk06: Thank you, Qilin. Regarding the digital currency, we strictly follow the regulation We are very much aware of the different regulatory frameworks under different jurisdictions, and actually we're in the process of applying for digital currency-related licenses in the U.S.,
spk03: Singapore and Hong Kong, but what we know for sure is that we will not offer digital currency trading services to mainland China users. Thank you.
spk04: The next one comes from the line of Emma Xu from DOFA Securities. Please go ahead.
spk00: Thank you for the opportunity to ask me this question. First of all, congratulations to the company for achieving very strong performance. I have two questions here. The first question is about margin financing business. After we invested in April, we also greatly increased our capital strength. I don't know if we have any strategies to improve the ratio of customers using financing. Because we saw that 我们提到说有50%的客户是来自于这个organic growth 那不知道剩下的50%的渠道是来自于哪里 尤其是我非常关注来自于esop的这个客户的获取 因为我们知道一季度的时候也有一些非常high profile的这种IPO的deal 然后不知道这些deal是不是给我们也贡献了非常多的客户 就比如说以快手为例 假设 So congratulations on the very strong results. I have two questions. The first question is about the margin financing business. After the capital After the follow-on offering in April, Putu further strengthened its capital base. So will you try to increase the ratio of margin financing and security loan balance as percentage of total client assets? And the second question is about client acquisition. You mentioned that 50% of the new clients is for organic growth. Then how about the other half? What's the acquisition channel for the other half of clients? Specifically, I pay more attention about the ESOP client. How much does it contribute to the new client? And how do you record it in those ESOP clients? Will you record them as a new paying client when the stock is listed, or you will wait until their stock is vested? Thank you.
spk06: Thank you very much. I will answer the first question. I will leave the second question to my colleagues, Robin and Daniel. Number one, I think we value our paying clients. from a DCF value perspective, i.e., we more care about their lifetime values rather than the near-term P&L they can contribute in terms of our top lines or bottom lines. Therefore, I think we will not very aggressively encourage our clients to use the margin because margin financing involves very high risks. Therefore, I think in our mentality, investment education, how to let our investors know the risk is far more important than our near-term monetization. If you look at our margin balance, financing balance versus our total client assets ratio, this ratio historically is in the range of 5% to 7%. I think definitely after we finish our follow-on placement, we do have more sufficient of capitals to support our margin financing business. And in particular, our IPO subscription service in Hong Kong. But we will not intentionally to push up our clients' margin usage unless they know the risks. Thank you.
spk03: Hi Emma, this is Daniel. I'll take your second question on client acquisition. So about 50% of our new paying clients are from organic growth. Then about 15% are from ESOP and group account opening. And the rest, 35%, is roughly evenly split between online and offline advertising, as well as the third-party channel partners. So definitely we think that the high-profile IPOs are conducive to our client acquisition, but it's very difficult for us to attribute certain client base to maybe one or two single IPOs. But we generally kind of observe an increase, an uptake in our client acquisition before these IPOs take place. But it's very difficult to ascertain which clients come specifically for the IPOs. And for Kuaishou's case, like you mentioned, so for Kuaishou's employees that have stock options right now, they're not counted as our paying client. Thank you.
spk00: Thank you.
spk04: Thank you. As we do not have any further questions, I would like to hand the conference back to our host, Mr. Daniel Young. Please take over.
spk03: Thank you, Operator, and thank you all for joining the earnings call today. On behalf of the Futu management team, I'd like to thank you for joining our earnings call, and if you have any additional questions, please do not hesitate to ask me or any of our investor relations representatives. Thank you, and good night.
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