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spk02: Hello, ladies and gentlemen. Welcome to Food Tooth Holdings' fourth quarter and full year 2021 conference call. At this time, all participants are in the 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. And I'd like to turn the conference over to your host for today's conference call, Daniel Yuan, Chief of Staff and Head of IR at Food2. Please go ahead, sir.
spk04: And thank you for joining us today to discuss our fourth quarter and four-year 2021 earnings results. Joining me on the call today are Mr. Leif Lei, 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 its 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.
spk06: This quarter, the number of real estate customers increased by 7.7 million, with an increase of about 90% from Hong Kong and other overseas markets. Although some media reports have brought a negative influence on the company, this quarter, the flow rate of real estate customers remains at about 97%. In 2022, we expect to have a competition of 200,000 real estate customers. At the end of 2022, Thank you all for joining our earnings call today.
spk04: 2021 marked another year of rapid client-based expansion as we exceeded our full year of paying client guidance by adding approximately 728,000 paying clients. This brings our total paying clients to over 1.2 million, translating to 141% growth year-over-year. We added 77,000 paying clients in Q4 with about 90% of new paying clients coming from Hong Kong and other overseas markets. Paying client retention remained around 97% despite the negative impact from the series of headline use. Looking into 2022, we're guiding for 200,000 net new paying clients, representing 16% of the over-year growth in total paying clients. We will dynamically adjust our growth target subject to market conditions. And among the net additions, we expect roughly one-third to come from the Greater China region, one-third from Singapore, and one-third from the US and Australia.
spk06: Our total customer assets are 4,080 billion Hong Kong dollars, with a growth of 43% and a decline of 4%. The decline in the market and a series of public opinion have had a negative impact on the total customer assets. However, the number of customers entering and entering the market remains the same, with a total of more than 1.1 billion Hong Kong dollars. It is worth mentioning that the number of customers entering and entering the market
spk04: Our client assets were HK$408 billion, up 43% year-over-year and down 4% quarter-over-quarter. While a tumbled equities market and some headline news weighed on total asset balance, asset inflows remained positive in each market, totaling more than HK$10 billion. In Singapore, strong asset inflows pushed every client asset up by 26% quarter-over-quarter, despite a negative mark-to-market impact on their holdings.
spk06: The current quarter trade volume is 1.2 trillion Hong Kong dollars, which is the same as the basic balance. Although the exchange rate has slightly increased by 3.1 times compared to the previous quarter, due to relatively less trade on the fourth quarter, the total trade volume decreased by 9%. The exchange rate of U.S. stocks is 77.7 billion Hong Kong dollars, which is 14% higher than before. This is mainly due to a significant increase in the exchange rate of some U.S. technology stocks. The exchange rate of U.S. stocks is 7% higher than before, and the exchange rate of U.S. stocks of Singapore customers is increasing. The exchange rate of Hong Kong stocks is 4,030 billion Hong Kong dollars, which is 33% lower than before. This is mainly due to the low mood of the overall exchange rate of the Hong Kong stock market, which has had an impact on the exchange rate of Chinese technology stocks.
spk04: Total trading volume was 1.2 trillion Hong Kong dollars, flattish year over year. Due to fewer trading dates in the fourth quarter, total trading volume slipped 9% sequentially, despite a higher turnover of 3.1 times. Trading volume for U.S. stocks was 777 billion Hong Kong dollars, up 14% quarter over quarter, driven by surging trading volume in some U.S. tech names, higher U.S. options trading volume, and higher trading volume from Singapore clients. Trading volume for Hong Kong stocks was HK$403 billion, down 33% quarter-over-quarter due to dampened market sentiments, especially around Chinese tech stocks.
spk06: We have launched an automatic storage function for public fund investment group products, and launched a multi-finance flagship hedge fund of a leading global fund company. With the launch of the product, the capital balance of the private fund has increased by 120%. We believe that in a time of market turmoil, another kind of asset is an indispensable part of the high-quality customer asset configuration. In the future, we also plan to introduce more private funds.
spk04: our wealth management business maintained resilient growth with total client assets reaching around 19 billion Hong Kong dollars of 84% year-over-year and 6% quarter-over-quarter. In Singapore, we have established partnerships with 20 fund houses, and we will continue to expand our mutual fund product offerings and services in the quarters to come. In Hong Kong, we established new partnerships with four prominent asset managers, including Fidelity and AXA. At the quarter end, approximately 140,000, or 11% of our paying clients, held wealth management positions. In the fourth quarter, we launched auto rebalancing function for our mutual fund portfolio product and distributed a flagship multi-asset hedge fund managed by a leading global alternative manager. Private fund asset balance, as a result, grew substantially by 120% quarter over quarter. We believe alternative assets are an integral source of diversification for our high net worth clients during market turmoil, and we intend to onboard more private funds in coming quarters.
spk06: 截至2021年底,富途安逸擁有236家IPO 分銷和投資者關係客戶以及400家ESOP客戶, 同比分別增長了125%和152%。 在第四季度, As a joint account manager, we participated in many large-scale Hong Kong IPOs, including Shantung Technology. Our customers accounted for more than 20% of the retail acquirers in the Shantung Technology IPO. At the same time, we contributed more than 20% of the retail acquirers. As of the end of the year, more than 800 companies have created business accounts on our community platform to interact with retail investors. which includes more than 200 listed companies worth more than HK$1 billion.
spk04: As of year-end, Food2INE had 236 IPO and IR clients and 400 ESOP clients of 125% and 152% year-over-year respectively. We acted as joint book managers for several high-profile Hong Kong IPOs, including that of SenseTime, to which we contributed over 20% of the retail subscribers and retail subscription. As of quarter-end, over 800 companies, including more than 200 listed companies with market capitalization above HK$10 billion, help enterprise accounts in our social community to interact with retail investors.
spk06: 接下来,有请我们的首席财务官阿泽介绍我们的财务表现。 Thanks, Lee. I'd like to invite our CFO Arthur to discuss our financial performance.
spk05: Thanks, Liv and Daniel. Please allow me to walk you through our financial performance in the fourth quarter. All the numbers are in Hong Kong dollar, unless otherwise noted. Our total revenue was $1.6 billion, up 35% from $1.18 billion in the fourth quarter of 2020, ending a strong year as full year 2021 revenue grew 115% to over $7 billion. Brokerage commission and handling charge income was $857 million, an increase of 19% year-over-year and a decrease of 8% Q-over-Q. The increase was driven by a higher blended commission rate of 7 basis points. The blended commission rate expands as commission rate for U.S. equity rose year-over-year and the direct trading contributed a higher proportion of brokerage commissions. The Q-over-Q decrease was mainly due to lower trading volume for Hong Kong stocks. Interest income was $618 million, an increase of 83% year-over-year and a decrease of 2% Q-over-Q. The year-over-year increase was driven by higher margin financing income as a result of higher daily average margin financing balance. Other income was $128 million, down 2% year-over-year and a 23% Q-over-Q. The year-over-year and the Q-over-Q decrease was both primary due to lower IPO financing service charge income. Our total cost was $217 million, a decrease of 10% from $242 million in the fourth quarter of 2020. Brokerage commission and handling charge expenses were $88 million, down 34% year-over-year and 30% Q-over-Q. The expenses didn't move in line with our brokerage commission and handling charge income due to our upgraded service package with our U.S. clearinghouse and the lower ICO subscription fees. Interest expenses were 56 million down 14% year-over-year and a 25% Q-over-Q. The year-over-year decrease was due to lower IPO financing interest expenses, partially offset by higher interest expenses associated with our security borrowing and the lending business. Interest expenses declined Q-over-Q primarily due to lower lender's funding cost. Processing and servicing costs were 74 million up 65% year-over-year and a 9% Q-over-Q. The increase was primarily due to higher crowd service fees to support overseas market expansion and to process a larger number of concurrent trades. As a result, total gross profit was $1.39 billion, an increase of 47% from $944 million in the fourth quarter of 2020. Gross margin was 87% as compared to 80% in the fourth quarter of 2020. Operating expenses was up 127% year-over-year, and that's 8% Q over Q, to $826 million. To break it down, R&D expenses were $271 million, up 64% year-over-year, and a 21% Q over Q. The increase was mainly due to increase in R&D headcount as we continue to support new product offerings, invest in the U.S. self-clearing capabilities, and the customized products for international markets. Selling and marketing expenses were $337 million, an increase of 200% year-over-year and a decrease of 16% Q-over-Q. The year-over-year increase was due to higher marketing and branding spending, especially in international markets. The expenses declined Q-over-Q as performance marketing spending came down amidst dampened market sentiments. G&A expenses were $218 million, up 145% year-over-year, and 59% Q-over-Q. The rise was primarily due to increase in headcount for G&A personnel with the opening of more international office. As a result, our net income decreased by 6% year-over-year and a 19% Q-by-Q to $499 million. Our effect tax rate for the quarter was 12.9% and the net income margin was 31%. In addition to $300 million U.S. dollar share repurchase program previously announced on November 3, 2021, which we have completed in open market transactions, Our board has authorized a new share repurchase program, enable us to purchase up to 500 million worth of our ADS until December 31st, 2023. We plan to fund this repurchase from our current working capital. That concludes our prepared remarks. We now like to open the call to questions. Operator, please go ahead.
spk02: Thank you. Ladies and gentlemen, if you wish to ask a question, please press star 1 on your telephone and light for your name to be announced. If you wish to withdraw your request, please press the pound or hash key. Please stand by while we compile the question and answer roster. But once again, if you wish to ask a question, please press star 1 on your telephone keypad and please ask one question at a time. Office, Quaston, Catherine, Catherine, Lear, Graham, Morgan, Stanley, please ask a question.
spk09: 感谢管理层给我这个提问的机会。 我是摩根士丹的刘欣和Catherine。 我这边有两个问题想请教一下。 第一个的话就是刚才Leaf总已经给我们给出了大概2022年全年的这么一个指引。 想请问一下可不可以就是在年初到现在的话这个经营的情况, give us some guidance, such as new customers, such as district distribution, customer assets, exchange rate, and so on. Secondly, this is about the overseas market. I would like to ask if you can please introduce the new Australian market, what kind of development plans or goals do you have, and how to compare the speed of development of the Australian market and the Singapore market, or the situation of such a customer. In addition, do we have any I will translate for myself. Hi, management. Thank you very much, management, for giving me this opportunity to ask a question. I'm Catherine Liu from Morgan Stanley. So I have two questions. First, can management give us some guidance in terms of the year-to-date operation results in terms of, for example, like new client addition, geographical breakdown of client assets, and also turnover rate? And second, this is about the overseas market. Can management give us some guidance in terms of their plan and target for the Australian market and how they compare the Australian market with Singapore market? And also, is there any update in terms of U.S. self-clearing progress and also the expectations on profit-making? Thank you.
spk05: Thank you, Catherine. This is Arthur. Maybe I can answer your last question first. Then I will leave the first two questions to Lee himself. In terms of self-clearing, so far we have already migrated dollar value around 40% of our U.S. stock holdings from our U.S. upstream business partners to our own clearinghouse in Dallas and our target is we try to complete this migration toward the end of the third quarters because we want to ensure the stability and the systems scalability during these transitions. So Yesterday, we have already seen positive impact from this self-clearing, which have generated revenues alongside a lot of essentially zero-cost funding to our operations outside of the U.S. And as we mentioned in our previous earning calls, we do have some very rough calculations after this self-clearing completion. For 2022, we do expect there will be around 160 million Hong Kong dollars operating revenues incrementally from this self-clearing migration, and the majority part will be translated into the pre-tax profit. Thank you.
spk06: Let me first talk about the business situation from this year to this year. From the data, is greatly affected by the market impact on the market and the IPO market. The entire supply and demand speed has been slowed down. However, as of now, the flow of Q4, which started in October, has basically been eliminated. In terms of the market, the Chinese region is relatively stable. Although we have seen new friends coming in, But our market position is still very stable. In the case where the market and some regulators are not clear, we will adopt a relatively stable growth strategy. Currently, the customer entry situation in the Singapore region is still very good. It is quite similar to the decline in the market, which is a sign of local customer assets. From the growth rate of new customers, it is still delayed due to the influence of the market. The overall exchange rate of the current customers has not changed much. Compared to Q4, the price has clearly recovered. However, the total value of the customer has been affected by the market and has decreased further. As for the product range, we have prioritized the U.S. stock and Australian stock ETF transactions. In the later stages, various types of products will continue to be supplemented. So in terms of business updates, our client edition kind of slowed down a little bit this year due to the negative kind of equities market performance in a less active IPO market.
spk04: But what's positive around that is that we don't see any lingering impact from the headline use on our client attrition and retention. And to break down among different markets, I think our client acquisition in the greater China region was largely stable. Although we saw new competitors entering into the market, we still have a very leading market position. And when there is uncertainties around the market performance and regulations, we'll employ a more steady growth strategy. And in terms of Singapore, we have seen very healthy net asset inflow, which offsets the negative mark-to-market impact from the equities market downturn. But our client acquisition in Singapore also slowed down due to negative market performance. And in terms of trading turnover, it was largely stable. And in terms of net asset inflow, it has rebounded from the 4Q numbers But the overall client assets still trended down a little bit due to the negative market-to-market impact. And in terms of product offerings, in Australia, we've launched the US stock trading, Australian stock trading, as well as EPF trading. And going forward, we'll continue to enrich our product offerings. And as Arthur already mentioned, so for our self-clearing business, we've migrated about over 40%, close to 50% of our U.S. stock holdings to our self-clearing business, and we already see zero-cost funding that's brought about by our clearing business.
spk06: 另外关于我们在澳大利亚的一些情况, 我也想做个分享, 关于这里的一些竞争和我们的打法。 澳洲,就券商行业来说, 主要玩家是包括ComSec和AMZ等, One thing they have in common is that trading accounts and bank accounts are connected, and it's very convenient to deposit money. But one of their shortcomings is that the commission is very high, and the accounts are free of charge. Newly-entered Internet brokers include Self, Wealth, and Stake. Their advantage is that low fees and trading interfaces are easy to use. Relatively speaking, I think they lack some advanced trading functions, technical analysis tools, and active communities. At present, their overall customer size is relatively small. Basically, they are in the range of a few hundred thousand. We have some advantages in terms of products and technology. However, it is still too early to enter the market, so it is not easy to determine the overall situation.
spk04: And I'd like to talk a little bit about the competitive dynamics in Australia. So on one hand, you see those in common players like ComSac and ANZ. Their commonality is that their trading account is seamlessly integrated with the bank account. And the bank to broker transfer is thus very smooth and seamless. But the disadvantage is that they typically charge pretty high commission rates. and charge a fee for the IDO account. And on the other hand, you see those online brokers like Self Wealth and Stake. Their advantage is they have pretty low commission rates. They have very straightforward trading interfaces, but they generally lack more sophisticated trading functions, technical analysis, other analytical tools, and also a very vibrant community. So these online brokers, they still kind of have a smaller kind of client base right now, roughly around like a couple hundred thousand. And as for us, we think that we have advantages in terms of our product offerings and in terms of our tech capabilities. But since we've just entered into the market, it's difficult to gauge market potential. And we'll come to share more results about our Australia operations next quarter.
spk09: 明白了,非常清楚。 Thank you very much.
spk02: Thank you. Next question from Leon Chee from Daiwa Capital. Please ask your question.
spk03: Hi, thanks for allowing me to ask a few questions. This is Leon Chee from Daiwa. I have two questions today. First one is about your user mix and AUM mix geographically. I appreciate that management just mentioned a very clear guidance on our user acquisition targets in 2022. and the specific regional breakdowns on it. But if we just take a longer time horizon strategically for the next three years, would you expect the overseas markets, I'm referring in particular for the markets except for mainland China, do you expect the overseas markets to contribute to a much larger proportion of the users and AUMs I appreciate it. Many folks give us a very high-level color on that over a longer timeframe. The second question is about your user acquisition cost. I understand your user acquisition has been very successful over the past few years, but given the dramatic change in the market conditions over the past few months, well, naturally, a lot of customers and potential customers are becoming more cautious, would you be keep spending your user acquisition dollars in a way that has been similar over the past few years, or you will be considering some changes in the tactics that you are doing in a market that is less exciting at least for the moment? 非常感谢管理层给我这个提搬的机会,我是来自大河证券的Leon, I have two questions for Guan Lichen today. The first question is about the long-term development of our customers and AUM. Thank you very much, Guan Lichen. You just mentioned that the number of new customers in 2022 and the distribution of the region have already been given guidance. I just want to know more about the long-term development. For example, do we have a general strategy for three years? Especially regarding China and non-China, I don't know if there is such a target. What is the split between China and non-China customers and AOM? The second question is about the cost of our customers. In the past few years, we have spent a lot of money on the cost of our customers. We spent a lot of money on the cost of our customers. These customers bring us more income. In the past few months, the market environment, especially in China and other countries, has undergone major changes. In terms of the cost of customer marketing and merchandise, will we take some changes in the strategy to better spend the money? Or should we spend less money? How do we consider the marketing cost and marketing strategy? Thank you very much, Director.
spk05: Thank you for the question. Maybe I take the second question first. I will also leave the first question to Liz. In terms of the marketing expenses, you're right. It is highly correlated to the market conditions, as everybody can understand. For 2022, we do expect our cap for each new paying client will be in the range of around the HK$2,500 something. And internally, we will have different parameters to evaluate the effectiveness of the client positions. Not only just, you know, the CAG numbers for each new paying client, but also we will more focusing on the payback period for this CAG, i.e., the client's effective output versus CAG ratios. Depends on different markets. For these more mature markets, such as Great China, this payback period will be controlled in the range of six months to nine months, as always. But for some new markets, such as Singapore, Australia, and the U.S., et cetera, we are more generous in this ratio, because we think in the early stage, the user engagement is still the most important thing, the things we need to consider. Besides this ratio, we will also look at the other ratio, that is the new client asset acquisition cost, i.e. how much money we need to pay for they migrate incremental new assets into our platform. On an apple-to-apple basis, if we do not consider the market fluctuations year-to-date, or which may continue in the next couple of quarters, we do expect, you know, our new client acquisition amount, this client net SNU inflow, will be increased by 20% to 25% versus the number at the end of last year. Thank you.
spk06: I think in three years' time, we expect the ratio of our paying clients from mainland China, Hong Kong, and other overseas markets to be around 1 to 3 to 6.
spk04: And from a client asset perspective, its ratio will look more like 2 to 3 to 5. Thank you. Thank you very much.
spk03: Thank you very much for your answer.
spk11: All right. Thank you. Our next question comes from Zoe Cheng from Jefferies. Please, go ahead.
spk10: Thank you for accepting my question. 我这边也是有两个小问题想请教一下。 一个是我们数字货币交易服务的上线时间大概是怎么样的? 另外一个是我们现在的付费用户中有多少是通过ESOP获得的? 谢谢,我自己翻译一下。 Thanks management for taking my questions. I have two questions. My first question is that when will we launch our digital currency trading services? And my second question is that among our paying clients, how much will be acquired via ESOP? Thank you.
spk05: Sure, I will take these two questions. For the second question, actually the new paying clients contributed by the ESOP channel just account for no single digits for the fourth quarter. Of course, you can understand the IPO situations, the markets. was not very strong in the fourth quarter and also yesterday as well. For the crypto business, we are still doing the feasibility studies and also certain license application. Therefore, we do not have a confirmed time schedule yet.
spk10: Thank you.
spk11: Thank you. Next question comes from . Thank you, Guan Lipeng.
spk08: I'm Yao Zeyu from China. Congratulations to us for achieving such a stable and outstanding performance in such a weak market. I have two questions for you. One is that in the past, the growth of users in the US region has been good. We would like to ask you how effective is the HOOK strategy that we have adopted in the US region recently and what is the goal of the business in the long term for this market? Hi, management. Thanks for taking my question. This is De Yuyao from CITC. Congrats to our solid results in the financial market. I'd like to ask two questions. The first one is regarding our business in the US. I'd like to know what's new about our customer acquisition strategy in the US market and what's our next move for business growth in the mid to long term. And secondly, during our business expansion in 2022, are we still expected to see a rapid growth in employment-related expenses as we had already seen such increase last year. Thanks.
spk05: Thanks, Zeyu. Maybe I can share some colors or our initial thoughts for the headcount increase for 2022. Then my colleagues Robin Xu can give you some, you know, small colors on our U.S. operation and the U.S. marketing strategy going forward. For the overall headcount in 2022, we do look for another 20% year-over-year growth. This growth will primarily be deployed into our R&D functions and also the international market development. The reason behind for putting more stuff into the R&D is we want to do a very significant system migration, i.e. from our current infrastructure building on language C++ to language Go, and also we will adopt a more cloud-native technology in our infrastructure. We are dedicated to assign a special task force to develop these two areas. And we do expect this migration will be complete toward the end of this year. After this completion, we do expect our I&E efficiency will be enhanced by 20 to 30% down the road, and such migration will ensure our system stability and scalability in the next three to five years. At the same time, it will significantly enhance the system's flexibilities and lower the IT spending in the IDC and also the server. This annual IT spending saving will exceed HK$100 million starting from 2024. Thank you. Great. Thank you.
spk11: I'm sorry.
spk07: I'm sorry.
spk11: Let me answer some questions.
spk07: The first question is about the U.S. supply of Q4 goods. There are two points to share. The first point is that we have continued to make improvements to the U.S. product, called Moomoo, to the experience level. In addition, we are also working hard to improve from downloading to registration, registration to opening, opening to entry, As our client acquisition picked up in the fourth quarter, I think on one hand
spk04: That's because we continue to invest to improve our product experience, and we want to improve the conversion rate from the app downloads to registration, from registration to account opening, and then from account opening to asset deposits. And another reason is that as our app spending in the U.S. market increases, our brand recognition has also risen in the past couple of quarters as a result. But I think we need more time to continue to improve our client acquisition efficiency in the U.S. Thank you.
spk08: Thank you, Manager Chen. Thank you.
spk11: Thank you. Next question comes from Emma. She's from Bank of America Security. Please ask a question.
spk01: Thank you, Manager Chen, for giving me this opportunity to ask a question. I want to ask, we just announced today that we are going to make a $5 billion refund. This amount of money is about 85% of our 4Q cash. I would like to ask, how do you consider the scope of the resale? We believe that there are no good opportunities for investment in other areas. So I have a question regarding the newly announced U.S. daughter 500 million repurchase program. It accounted for roughly 85% of the cash outstanding by fourth quarter 2021. So is it because you didn't see much cash needed or much working capital needed for future investment, or do you see that you can continue to generate enough cash to fund investment in the future?
spk05: Sure. Thank you for your question. I can answer this question. Since our IPO, we have conducted three rounds of equity financing. So, alongside with these fundings from the share placement, together with our user's return in generate every year. At the end of last year, you can see our total net assets reached over 2.7 billion US dollars. And we do think our capability to continue to generate profit and free cash flow will remain robust in the next one or two years. So considering our current market conditions and, you know, the funding needs for the organic growth, we do think, you know, now we have some idle cash which can be deployed and utilized to, you know, reward our long-term shareholders. Having said that, we will continue to closely monitor the potential NA merger and acquisition situation if appeared and also the valuation be attractive. So it will be a share repurchase program covering the next almost 18 months. So it will be very dependent on the market conditions and also the opportunities whether we can come across. Thank you.
spk02: Thank you. We have reached the end of the question and answer session. I'll turn the call back to Daniel for closing remarks.
spk04: Thank you, operator. That concludes our call today. On behalf of the FUTU 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 investor relations representatives. Thank you and goodbye.
spk02: Thank you, ladies and gentlemen. That does conclude our conference for
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