Futu Holdings Limited

Hello, ladies and gentlemen. Welcome to Food2Holding's fourth quarter and full year 2024 earnings conference call. At this time, all participants are in a listen-only mode. After management's prepared remarks, there will be a Q&A 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, Daniel Yuan, Chief of Staff to CEO, Head of Strategy and IR at Futu.

Please go ahead, sir. Thanks, operator.

And thank you for joining us today to discuss our fourth quarter and full year 2024 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 forward-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 the Sanny report. With that, I would now turn the call over to Leif.

We will make a comment in Chinese and I will translate. Thank you all for joining our earnings call today.

Client acquisition accelerated across all markets amid an eventful quarter. We exceeded our full year guidance by a wide margin, adding 215,000 paying clients in the fourth quarter alone. As of year end, total paying clients was over 2.4 million, a 41% year-over-year. Year-to-date, we've observed robust paying client growth across markets and are guiding for 800,000 venue paying clients in 2025.

In the fourth quarter, Hong Kong has contributed the most growth to its asset customers. We have established a targeted marketing strategy, grasped the market opportunity of different asset categories, successfully promoted the growth of the number of customers, and continued high-quality growth in Singapore. Competing with asset customers, not only the number of customers, The average asset level has also continued to increase. In Malaysia, we have further consolidated the leading position of a state-of-the-art investment platform. With the localization of Japanese products and the continuous improvement of brand influence, we have again achieved a strong profit growth. In Japan, thanks to the U.S. stock market, our outstanding U.S. stock trading experience has continued to gain market recognition. Competition between real estate customers has gradually gained double-digit growth.

In the fourth quarter, Hong Kong market was the top growth driver for new paying clients as we implemented targeted marketing initiatives to capitalize on the momentum of different asset classes. In Singapore, we maintained quality growth. With more paying clients added, there are also higher average assets. We further solidified our position as a leading one-stop investment platform in Malaysia and recorded another quarter of strong paying client growth with our increasingly localized product experience and strengthening brand equity. In Japan, new paying clients grew double-digit quarter-of-a-quarter, as our superior U.S. stock trading experience gained traction amid a bullish U.S. market backdrop.

In 2024, we completed 209 moving and desktop products, and added 7,762 new features, with 37% and 32% growth respectively. In the fourth quarter, we maintained a high-level product delivery pace, In Japan, we launched the U.S. Guarantee Exchange, and our customers responded positively. The penetration rate has steadily increased in the quarter. In the U.S., we have implemented a blockchain strategy construction tool on the multi-faceted side to help traders more efficiently master the multi-faceted blockchain trading strategy. With the constant optimization of blockchain trading products, the number of blockchain trading customers in the U.S. in the fourth quarter has doubled, and the blockchain contract trading volume has reached more than three times that of last year. In Hong Kong and Singapore, we launched a bond trading platform to assist customers in carrying out large-scale and complex bond trading. In Australia and Canada, we launched a local shareholding plan.

In 2024, we delivered 209 iterations of our mobile app and desktop clients and added 7,762 new features of 37% and 32% year-over-year respectively. Product velocity remained high in the fourth quarter, In Japan, we launched U.S. margin trading with an increasing adoption rate and improving throughout the quarter. In the U.S., we unveiled Option Strategy Builder on our desktop version to better help traders navigate various options trading strategies. As we continue to refine our options trading products, in the fourth quarter, the number of options traders in the U.S. more than doubled year over year, while the number of options contracts traded more than tripled compared to the year-ago quarter. In Hong Kong and Singapore, we established a bond trading desk to help our clients execute large and complex bond orders. For our clients in Australia and Canada, we launched recurring investment plans for local stocks.

Although after the fourth quarter, China's asset recovery has caused a certain pressure on the total customer's assets, the strong income from various markets has completely eliminated this impact. The total net profit of customers in China has reached 7,430 billion Hong Kong dollars, which is 53% of the total net profit. Compared to 7% of the total net profit, the overseas market has obtained the highest single-segment entry rate in history, which is close to the total entry rate of the entire year of the overseas market in 2023. In Singapore, U.S. stocks and monetary funds continue to attract customers' entry rates, pushing the total net profit of customers to 19% compared to the total net profit. Although the pullback of China equities from the second half of the quarter weighed on the valuation of our clients' assets,

It was more than offset by stellar net asset inflow across markets. Total client assets were HK$743 billion, a 43% year-over-year and 7% quarter-of-a-quarter. Overseas markets recorded the highest quarterly net asset inflow, almost equivalent to the full year of 2023 inflow. Total client assets in Singapore grew by 19% quarter-to-quarter, marking the 10th consecutive quarter of sequential growth, thanks to robust net asset inflow into U.S. equities and money market funds. U.S., Canada, and Australia markets also witnessed sequential growth in average client assets the four consecutive quarters. Other clients took on more leveraged positions, Margin financing and security planning balance increased by 25% sequentially to a record 51 billion Hong Kong dollars.

The total trading volume has increased by 202% compared to 52%, reaching HKD289 million. In the fourth quarter, the investment layout of customers has become more diversified, and the attention to encrypted currencies and AI-related stocks has been increased. This has led to a 36% increase in trading volume per share. to 2.08 trillion Hong Kong dollars, which is a new record. A few AI concept stocks that were previously less popular with customers showed a bright performance, and the market's enthusiasm for AI transformation rose to one of the most active US stocks in trading in 2024. At the same time, Hong Kong stock trading volume increased by a large margin of 117%, reaching 7,550 billion Hong Kong dollars. Since September, the market's enthusiasm for Hong Kong stocks has been clearly disturbed. The trading activity has greatly improved, and customers are interested in increasing their interest in multi-tech stocks, leverage ETFs, and other investment tools.

Total trading volume jumped by 202% year-over-year and 52% quarter-to-quarter to HK$2.89 trillion. In the fourth quarter, our clients diversified their investing to include more crypto and AI names. As a result, U.S. stock trading volume grew by 36% sequentially to a historic high of 2.08 trillion Hong Kong dollars. Notably, several AI-focused companies, previously less familiar to our clients, emerged as top-trading U.S. stocks in 2024, driven by their remarkable outperformance and the rising narrative around AI's transformative potential. Hong Kong stock trading volume grew exponentially by 117% sequentially to HK$755 billion. The renewed enthusiasm in Hong Kong equities starting from September led to a substantial rebound in trading velocity. Clients showed a meaningful pick-up of interest in many technology names as well as leveraged and inverse ETFs, among other things.

Financial management of total assets increased by 93% and increased by 14%. to HK$1,111 billion. Although the revenue of the fourth quarter of the monetary fund has declined, its market demand remains strong, and it has promoted the relative growth of the total assets of wealth management customers. In Hong Kong and Singapore, we continue to expand the structural product range to better meet the investment needs of high-end customers. The total assets of wealth management customers account for 15% of the overall total assets of customers,

Total client assets and wealth management increased 93% year-over-year and 14% quarter-over-quarter to HK$111 billion. Money market funds continue to hold strong heels for our clients, even with moderately lower yields in the fourth quarter, and drove the bulk of the sequential growth in wealth management AUM. In Hong Kong and Singapore, we expanded our structured product offerings to better address the investment needs of our high net worth clients. Total client assets and wealth management accounted for 15% of total client assets, up from 12% in the same quarter last year.

Our IPO sales and IR customer numbers reached 482, which is 16% higher than before. The data shows that in 2024, we will sell a total of 40 Hong Kong IPOs and hold all of the stockholders' hands for three consecutive years. The Hong Kong Stock Exchange launched a new digitalized new stock settlement platform, Binning, which cancelled the multitasking and shortened the settlement cycle, and introduced a new pre-priced capital model, thereby reducing the amount of capital and effectively reducing the financing cost. We believe that the system not only optimized the IPO acquisition experience of retail investors, but also attracted more retail investors to participate. We have 482 IPO distribution in our clients, up 16% year-over-year.

In 2024, we underwrote 40 Hong Kong IPOs, ranking first among all brokers for the third consecutive year, according to WIND. The new digital IPO settlement platform, Feeding, introduced by the Hong Kong Stock Exchange, eliminates multi-account subscriptions, shortens the settlement period, reduces the amount of lock-up capital needed, and lowers funding costs through the new pre-funding model. We believe that this new system improves the retail IPO subscription experience, prompts more retail participation, and favors market consolidation. We swiftly adapted our subscription process based on the new framework and achieved notable gains in market share. Next, I'd like to invite our CFO, Arthur, to discuss our financial performance.

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. Total revenue was $4.4 billion, up 87% from $2.4 billion in the fourth quarter of 2023. We conclude a strong year with full-year revenue growing to $13.6 billion of 36% year-over-year. Brokerage commission handling charging income was $2.1 billion, an increase of 128% year-over-year and 35% Q-over-Q. The year-over-year and Q-over-Q increase was both driven by higher trading volume partially offset by the decline in blended commission rate. We adopt per contract and per share pricing model for U.S. options and the U.S. stock trading, respectively. As a result, Brokerage income will grow at a slow rate than trading volume, where our clients trade high price stocks and options. Interest income was $2 billion, up 52% year-over-year, and a 19% QVQ. Both were driven by higher interest income from our security borrowing and the lending business, and higher interest from banking deposits. Other income was $353 million, up 157% year-over-year, and a 69% QVQ. The year-over-year and the Q-by-Q increase was both primary attributes to higher funded distribution income and the currency exchange income. Our total cost was $776 million, an increase of 79% from $434 million in the fourth quarter of 2023. Brokerage commission and the handling charge expenses was $112 million, up 90% year-over-year and a 38% Q-by-Q. The Q over Q increase was roughly in line with the movement of our brokerage commission and the handling charge income. Interest expenses were 513 million of 90% year over year and 24% Q over Q. The year over year increase was driven by high interest expenses associated with our security borrowing and the lending business. The Q over Q increase was mainly due to higher margin financing interest expenses as a result of higher funding costs for Hong Kong dollars. Processing and servicing costs were $151 million, a 45% year-over-year and a 16% Q-over-Q. The increase was largely due to higher market information and the data fee for new products with higher system usage fees. As a result, total gross profit was $3.7 billion, an increase of 89% from $1.9 billion in the fourth quarter of 2023. Growth margin was 82.5% as compared to 81.7% in the fourth quarter of 2023. Operating expenses was 57% year-over-year and a 33% Q over Q to 1.4 billion. And the expenses was 399 million of 10% year-over-year and a 4% Q over Q. This increase was partially due to cost related to organizational restructuring in the fourth quarter of 2024. Selling and marketing expenses were $464 million of 154% year-over-year and 48% Q-over-Q. The year-over-year increase was due to a triple-digit year-over-year increase in net new paying clients, partially offset by lower client acquisition costs. The Q-over-Q increase was in line with the growth of our new paying clients. General administrative expenses was $576 million of 55% year-over-year and 51% Q-over-Q. The year-over-year increase was primarily due to increase in the general administrative headcount, and the Q-over-Q increase was mainly due to higher bonus accrued for general administrative personnel and to a less extent cost related to organizational restructuring. As a result, income from operation increased 117% year over year and a 28% Q over Q to 2.2 billion. Operating margin increased to 50% from 43.1% in the fourth quarter of 2023, mostly due to strong top line growth and operating leverage. Our net income increased by 113% year over year and 42% Q over Q to $1.9 billion. Net income margin expanded to 42.2% in the fourth quarter as compared to 36.9% in the same quarter last year. Our effective tax rate for the quarter was 16.1%. That concludes our prepared remarks. We'd now like to open the call to questions. Operator, please go ahead.

Thank you. To ask a question, please press star 1 1 on your telephone and wait for your name to be announced. To answer your question, please press star 1 1 again.

Please stand by while we compile the Q&A queue.

We will now take the first question from the line of Emma Xu from Bank of America Securities. Please go ahead.

Thank you for giving me the first opportunity to ask a question. Congratulations on achieving a very strong performance again. I have two questions here. The first question is, this year, we only have 800,000 customers in 2025, which is more than 700,000 last year. But last year, there were two new markets, Malaysia and Japan. And this year, the previous company's guidance did not enter the new market plan. So I want to ask why give such a strong guidance. Is it that we have seen very strong customers in the first quarter? And then is it possible that it has reached 300,000 to 400,000? And then the second one is to ask about the cost of the customer. In the fourth quarter, in fact, compared to the third quarter, the CAC ratio has a small rise. But in fact, in the fourth quarter, uh uh So congratulations on the very strong result. I have two questions. The first question is about the new paying clients. You guided 800,000 new paying clients for this year, around 100,000 more than last year. But last year, you have two new markets, Malaysia and Japan. But this year, previously, you guided that you don't have new market plans. Just wondering why you are able to guide such a strong new paying client target. And the second question is about the CAC client acquisition cost. It increased moderately in the fourth quarter last year despite the very active market. In an active market, in general, CAC should be lower thanks to the natural flows. So just wondering, is it due to the change of the market, the mix of the new paying client market, or due to the change of the channels that lead to the increase of the CAC? And what's your target of a CAC for this year? Thanks.

Thanks, Emma. I will take these two questions. The first one is about the guidance we have given to customers throughout the year. Our guidance this year, as Liv just mentioned, is for 800,000 new paid customers. At present, this guidance does not consider the possibility of entering some new markets this year. The reason is that the goal given last year will be higher. First, I think some of the new markets that we entered last year, such as Malaysia or Japan, we think they still have a very strong potential for growth. Then some mature markets, such as Singapore and Hong Kong, we think the growth is still there. So this is the first question. The second question is about customers. uh, uh, Although these brand investments cannot directly attract some customers in the short term, we feel that it is of great help to our long-term customers' young and loyal customers. Currently, I think the average cost of our goods will be between 2,500 and 3,000 Hong Kong dollars. In terms of your first questions regarding our new guidance for 2025, These 80K new paying clients does not include any new markets we were entering or not in 2025. So this is all for these existing seven markets. The reason for this very strong guidance is number one is we think these two new markets such as Malaysia and Japan, which we add into last year, still provide a very meaningful, robust growth outlook in 2025. Not to mention these, you know, relatively mature markets such as Singapore and Hong Kong, we still see very good upside in client acquisitions thanks to partially due to the Chinese asset re-rating what we witnessed from, you know, early days of this year. And in terms of the second questions regarding the client acquisition costs, we roughly target $2,500 to $3,000 CAC for this year. From the end of last year and going forward, we will spend more money in some brand equities in order to enhance our long-term user loyalty in our platform. Thank you.

Thank you. Very clear. Thank you.

We will now take the next question. From the line of Cindy Wang from China Renaissance, please go ahead.

Okay, thank you, Manager Chen, for the opportunity to ask questions. Congratulations to Manager Chen for his outstanding performance in the fourth quarter. I have two questions for you. The first is that we saw that the overall trading volume of Hong Kong and U.S. stocks in the first quarter has increased significantly in the first quarter. What we want to know is that from the runway you see now, the trading volume in the first quarter, exchange rate, or customer entry and financing, 那第二个的话呢,想请教一下就是今年对于新产品的一个上线的一个pipeline 那我们知道就是公司这边每年都会有很多针对不同市场的安排 不管是在这个equity上或者是衍生性商品 那以及crypto在香港新加坡的一个产品是不是有这个上线的一个pipeline可以跟我们分享 Thanks for taking my question and congrats for a very strong result in Q4. And I have two questions here. First question, recently we noticed that US and the Hong Kong market overall market trading volume has very strong quarter over quarter performance in first quarter quarter today. So can management give us a little bit color based on current round rate? What's the trading volume, trading velocity, net asset inflow, and the margin financing, securities and lending guidance? The second question is related to the new product pipeline. So we know like Futu has a lot of like product pipeline every year. So can you give us roughly pipeline on the equity derivatives and crypto products. Thank you.

Hello, Cindy. I'm Daniel. Let me answer these two questions. First of all, regarding some of the main business data in the first quarter, we saw that there are still a lot of hot spots in the Hong Kong stock market this year. The investor's enthusiasm is still very high. Newly-increased clients, in terms of the current run rate, will still have a further increase compared to the previous quarter. At the same time, we see that the increase in income has been further increased compared to the previous quarter. The increase in China's assets has led to a significant increase in the size of the total customer assets compared to the previous quarter. In terms of the current run rate, we expect that the amount of transactions will be further increased compared to the previous quarter based on relatively high technology. This year, we see that the overall transaction mood and risk bias of clients is still at a relatively high level. Regarding the product online plan, we have a very rich product online pipeline in the overseas market this year, which can meet the needs of customers of different risk categories. For example, in the Japanese market, we will continue to supplement some of the related capabilities of Japanese stock trading and optimize the capability of US stock trading. In Malaysia, we will also use some of the characteristics of local customers to make some innovative and scalable products. In the US market, we expect to support crypto trading this year. So first of all, I'll give you some color on the quarter-to-date operating matrices. We've seen this year there was a lot of trading opportunities for both the Hong Kong and U.S. stock market. Retail investors continue to be very highly engaged. And year-to-date, based on the current run rate, we forecast higher net new paying clients as compared to the fourth quarter last year. We've also seen higher net asset inflow, which coupled with the appreciation of China equities, led to a very meaningful sequential increase in total client assets. And based on the current run rate, we also forecast our total trading volume to further increase on top of the high base last quarter. we've seen that the clients remain highly engaged and very high risk tolerance year to date. And regarding our product plan, so this year for all of our overseas markets, we have a very rich product pipeline in order to satisfy the client demands for different risk rewards. In Japan, for example, we'll continue to catch up with our product trading capabilities around Japanese equities, and at the same time continue to optimize and extend our leadership in U.S. trading. In Malaysia, we also will have a number of private innovations and iterations based on local clients' needs. In the U.S., we plan to roll out crypto trading in the next couple of months. And in terms of wealth management, we plan to continue to expand our wealth management offerings, including offering more structured nodes for our retail and high net worth clients.

Thank you. Thank you. very clear. Thank you.

As a reminder, if you wish to ask a question, please press star 1 and 1. We will now take the next question from the line of Chi Yao Huang from Morgan Stanley. Please go ahead.

Okay, thank you. I'm Chi Yao from Morgan Stanley. I have two questions I would like to ask. The first one is that I would like to ask the management of uh uh Is there any new updates in the photo and product online? At the same time, what new plans do we have in terms of products and services, including how to continue to promote crypto-related investment education and penetration? What new plans do we have? At the same time, the management team believes that we are making crypto business compared to other platforms. What are the most advantageous aspects? Thank you. So basically two questions. One is, you know, basically what areas of the business that management think have the most potential to integrate, you know, AI models like DeepSeek and what kind of, you know, efficiency gains and how should that strengthen the product offerings and services. And the second question is on crypto offerings. And I just wonder, is there any update on the licensing process or, and what can be done to accelerate the client penetration or investor education and the marketing side on the crypto business in Hong Kong and Singapore. And then what will be the most differentiated offering from Futu's crypto office compared to peers? Thank you.

Thank you, Chih-Yao. Liv will answer your first question, and my colleague Robin will answer your second question regarding crypto. Thank you.

Thank you. I will talk about AI here. In the past few years, we have mainly combined the use of the scene to do some actual application exploration of AI. Currently, it is divided into two levels, internal and external. Part of it has already deployed AI capabilities, and has also been deployed locally by DeepSeq. Inside, the application of AI is mainly in the information operation, community review, including the design and production of some operation images, In these aspects, we can see that it has a very significant effect on the entire team. In terms of customer face-to-face, in Hong Kong, we have already uploaded all kinds of early and late-night reports, announcement screenshots, financial reports, data analysis, and so on, based on some functions of the AI model. All of these can help customers to quickly master the market dynamics and save time for investment decisions. Regarding the AI, We are still exploring and researching the potential applications of investment platforms, especially in the face of the future potential scenarios of retail investors. The accuracy of investment decisions and the accuracy of answers to information requirements is very high. An unexpected answer may instead increase the threshold and time cost of investors' decisions, which will lead to a lower investment experience for investors. We hope that through So in the past couple of years,

We've made a number of explorations in AI based on different usage scenarios, and we've incorporated AI capabilities both for internal operations and for client-facing capabilities, and we're also doing local deployment of DeepSeq. So internally, we've found that AI helps us to meaningfully lift our efficiency in terms of the market use and data generation, filtering of content in our social community and the designing and the graphics, et cetera. And in terms of client-facing user experiences, so in Hong Kong, we've launched a new synthesis function for individual stocks twice a day in the morning and at night. We also have an automatic interpretation of the corporate announcements and analysis of the financial results. These are all based on the AI model, which we believe help our clients to quickly understand market dynamics and reduce the time needed for them to make investment decisions. And we are also doing a lot of studying and research in terms of how better to incorporate AI to empower more applications for retail investors. And we believe that if we use AI to help with decision-making, that puts a much higher requirement in terms of the timeliness and the accuracy of the information generated. So the unpredictable quality of the responses will actually increase the investment thresholds for the retail investors and prolong the time needed for them to make effective investment decisions, thereby lowering their investment experiences. And we hope to make a lot of thorough preparations and to make sure that the information we generate through AI in different usage scenarios are highly accurate. And at the same time, we need to do very prudent assessment and very comprehensive testing to make sure that we strike the right balance between user experience, compliance, and technological innovation so as to maximize our investors' benefits and also to protect their needs.

Thank you. Thank you.

We will now take the next question from the line of Charles Tsu from UPS. Please go ahead.

Hello, I'm Zhou Cheng, an analyst from Ruying. I have two questions for you. 那第一呢,我们注意到公司讲就是希望发展这个财富管理业务在香港和新加坡。 我想先请教一下公司觉得我们这个整个这个市场的一个容量是多少, 就是我们公司能触达的一个total address or market size是怎么样的。 Secondly, in addition to FUTU, we also noticed that some other banks, private banks, and insurance companies are also talking about Hong Kong, especially Singapore's financial management. I want to ask FUTU, where is our competitive advantage or our core? And then from the product channel and so on, can we talk about our advantages? And then our business management thinks that it can be scalable and can be expanded quickly. This is the first question. The second question is that we have noticed that the number of transactions in the fourth quarter is indeed quite large. However, in the past month, the US market has actually had a relatively large rebound. If this trend continues, I would like to ask what kind of impact it will have on the number of transactions in the first quarter. If this trend continues, I believe that the AOM of the customer may also have a certain decline. Will we also be affected by the number of transactions throughout the year? Let me translate my question. So I've got two questions. The first one is, we understand the company plans to develop wealth management business in both Hong Kong and also Singapore. So what is your expectation for the total addressable market size? And also, how does the food tool differentiate from its competitors in other, you know, I mean, say, for example, private banks or insurance companies? And can you maybe talk about your competitive advantage from product perspective? you know, distribution and et cetera. And do you think the business will be scalable? My second question is following the strong trading volume in Q4 last year, U.S. stocks corrected sharply over the past month. How did it impact your trading volume in Q1? And if the sales momentum continue, you know, in the U.S. stock persist, the client AOM will decline. Will this also affect overall your trading volume in the rest of this year in 2025? Thank you.

I will answer your second question first. The first question is about wealth management, including the question about crypto trading that was missed earlier. I will ask my colleague Robin to answer it. Regarding the trading volume, we can see that in the first quarter of this year, there were some obvious feedback from US stocks. But when the entire market was in feedback, uh uh In terms of the trading volumes, despite we saw some setback in the U.S. stock markets in the first quarter so far, but actually the market setbacks create more volatilities, which inspire more clients trading to bottom fish the markets in the U.S. stock market. And then in the meantime, the trading volumes in Hong Kong made a huge spike due to, you know, China assets re-rating and a lot of, you know, the deep-seek related theme. So on a collective basis, we, as Daniel mentioned before, in the first quarter so far, we see the overall trading volumes remain very robust.

Now I hand over to Robin.

I'd like to answer the last question about crypto. In the fourth quarter, the stock market has driven the entire customer's trading mood. We observed that in November and December, the monthly trading volume of cryptocurrency on the foreclosure platform has increased by nearly five times in October. The daily trading volume in the quarter has once again exceeded 35 million US dollars. The number of crypto traders has also increased in a similar trend. Since the first quarter, the price of coins has returned. The Hong Kong and U.S. stock markets have seen a lot of new hot spots and investment topics. Investors have seen a decline in their trading enthusiasm for crypto. However, the trading volume and number of people are still relatively high. We currently provide four types of currency pairs to ordinary retail investors in Hong Kong. We provide six types of currency pairs in Singapore. If there is a suitable opportunity in the future, and more mainstream currencies. We will strengthen the management of the liquidity and security of customer encrypted currency assets, reduce the cost of money transfer, and improve the smoothness of customer entry and entry transactions to further promote customer conversion and transaction penetration. Most of the retail investors in Hong Kong and Singapore are still in the early stages of the recognition of encrypted currency. We believe that in these two markets, there is still a lot of room for growth in the crypto market. We also hope that through more mature bidding content, we can have a more smooth entry-level trading experience to reduce customers' concerns about this new asset category. As the regulatory framework for the encrypted asset sector is getting clearer, we are one of the first to set up a real-estate retail chain in this field. In terms of the operation and user mentality, to have a certain forwarding advantage and this kind of large user technology advantage. This will make us in the process of mainstreaming encrypted assets in a relatively favorable position. This year, we are also planning to launch crypto and live transaction capabilities in the United States. We expect that after launching, we will be able to have a higher penetration rate in the stock market compared to Hong Kong and Singapore. Another issue is that we have recently received a batch of VAT photos from SFC in Hong Kong. We will continue to complete the entire system test to meet the regulatory requirements. We do not have a specific time to discuss this with you yet. This is a question about the debt. Another issue is about wealth management. In fact, this year has entered a period of decline, but we believe that the value of currency funds will remain attractive for a long time. And our automatic deepening function can maximize the efficiency of funding, helping customers to be flexible and grasp the investment opportunities in the stock market, and at the same time achieve potential increases. Generally speaking, fixed revenue funds and bonds will benefit from the decline in the period. In Hong Kong and Singapore, we have established a relatively good product system to help customers go through the period. Customers can switch between different products and investment goals based on their own risk bias and investment goals to achieve long-term asset growth. This year, we will continue to enrich our wealth management product category, including face-to-face retail and high-end customers' structural ticket products, We also have a relatively optimistic attitude towards the growth of cryptocurrency management assets.

Thank you. So I'll first translate about the crypto updates, and then Robin also touched on wealth management. So in the fourth quarter, the crypto market had a huge boom, which lifted our clients' trading interests and sentiments. We've seen that in November and December, the crypto trading volume on our platform grew exponentially, which is almost five times of what we saw in October. And our daily trading volume surpassed $35 million. And we've also seen a similar growth rate in terms of our number of crypto traders on our platform. So in the first quarter, we've seen that the crypto prices experienced some pullback. At the same time, there's a lot of trading opportunities in the Hong Kong and U.S. stock markets. So we've seen a subsiding interest in crypto trading on our platform, but the trading volume and the crypto traders are still at a relatively high level. Right now in Hong Kong, we offer four trading pairs to our retail investors, and we offer six trading pairs in Singapore. And in the future, we plan to allow more kind of mainstream trading pairs. And at the same time, I think we'll enhance our management of the capital efficiency and also the liquidity and the security, and also kind of lower the cost of our clients moving funds in and out, which we believe will help with client conversion and with further penetration of crypto trading. We believe in Hong Kong and Singapore, most of their retail investors are still in the very early stage of building up awareness of this asset class. And we think there's a lot of further room for penetration. And we hope to leverage more investor education materials, a seamless fund deposit experience to assuage a client's concerns towards this relatively new asset class. And as the regulatory framework gets more clear in these two markets, Futu as one of the earliest retail players in the space will enjoy the early mover advantage in building up a user mind share, especially in terms of compliant operations. which will help us gain advantage as the crypto asset class becomes more mainstream in these two markets. And as we mentioned earlier, we're also planning to roll out crypto trading in U.S. this year, and we are expecting a higher penetration of crypto among our U.S. client base compared to what we have seen in Hong Kong and Singapore so far. And as regards to our VATP license, so we got a conditional approval from SFC, and we are... Working on our product development, we don't have a very specific timeline for our official launch yet, and we look forward to giving more color down the road. And then about the wealth management. So this year we've entered into a rate cut cycle, but we still believe money market funds will continue to be attractive to our clients in the foreseeable future. And at the same time, we have provided very seamless automatic subscription and redemption functions for money market funds, which really maximize our clients' capital efficiency so as to help them to seize the trading opportunities in the market and at the same time earn deals on their IO cash. And typically we expect an outperform in fixed income related assets during a rate cut cycle and we have built a comprehensive set of products in this space in Hong Kong and Singapore which we believe will help our clients navigate these different investment cycles to achieve long-term capital appreciation. And at the same time, as mentioned earlier, we intend to further enrich our wealth management product offerings, including more structured notes for both our retail and high net worth clients. And we are optimistic about the AUM growth for our wealth management. And to add some additional color to what Robin just said about wealth management, I think some of our key competitive advantages in this space is number one, we really offer our clients a seamless experience to navigate across different asset classes on our platform, whether it's equities or wealth management or crypto, et cetera. So I think that is one of our key competitive advantages. We don't just lead our competitors in just one specific asset class, but it is a very seamless one-stop experience for clients to very easily switch between asset classes and to cross-navigate different cycles. And number two, I think we adopt a platform model, which is a key advantage for our high network clients wealth management business. For example, like in terms of structured products, we onboard structured offerings from a number of different private banks. And our clients can compare these returns and the performances and pick the best asset class on our platform, as opposed to maybe some other institutions will prefer to, you know, sell to their clients their own proprietary products. So this platform model really gives our clients access to a variety of different assets. and us as an intermediary is very neutral and just make sure that we will be able to provide our clients with the most attractive investment opportunity.

Thank you. Thank you.

We will now take the next question from the line of Yu Fan from CICC. Please go ahead.

Thank you very much. Congratulations to the company for achieving such a brilliant performance. I am Fan You, an analyst at Zhongjing. I also have two questions for you. The first one is about the breakdown of our client assets. I would like to ask about the increase in client assets in the fourth quarter. how much is from the customer's income, and how much is from the market-to-market impact. In addition, from the regional branch, how is the situation in the entire AUM market among the customers? The second question is also to ask, because we have seen that the IPO of Hong Kong shares has been relatively active recently, so we may want to ask about the impact on our company, especially the impact on the profit table. This is Yoyo Fan from CICC and the two classrooms. The first one is regarding the AUM breakdown in 4Q. So how much is from the client net asset inflow and how much from market to market impact? And what's the regional breakdown of the client assets? And the second question, we see the active Hong Kong IPO subscription recently. So what's the impact on our income statement and what's the contribution to our new paying clients and the net asset inflow?

Okay, thank you. Let me answer these two questions. The first question is about the customer income. As Daniel and Liv mentioned earlier, the market-to-market of the entire fourth quarter is a negative impact on our customer assets. So the amount of customer income is actually more than uh, uh, uh, Regarding the second issue of the IPO update, I think that directly related to the IPO update, it accounts for the total revenue of our entire company. Compared to four or five years ago, when the IPO was relatively active in the Hong Kong market, this ratio has actually dropped. Basically, it is a direct contribution of about a low unit number. The reason is that just now during the opening remark, Liv and Daniel have also mentioned that the entire reform of the IPO mechanism in Hong Kong, including the new Fini mechanism, has led to a time of settlement of the entire client's deep purchase and need for financing. Compared to before, there was a relatively obvious shortcut. This, of course, has a negative impact on our income. But when more of the IPO companies come to Hong Kong, and the liquidity of the entire market, including the activity of the capital market, has been significantly improved. At the same time, some of the better IPOs that you mentioned have also increased the interest of retail investors to open accounts, including cash and transactions. Now, in terms of the net asset inflow breakdowns in the fourth quarter, as we mentioned before, the market-to-market implications in the fourth quarter actually was a negative number. So the client asset inflow, the number is much larger than the movement of the balance between two quarters. And among them, 24% of the asset inflow actually come from the Great China areas. This number one year ago was just a 20%. We see it is a very good indicator for our overseas markets continuous engagement for clients. Then the second question, the direct revenues from Hong Kong IPO is just contribute low single digits of our total revenue, given that we are further diversify our revenue stream in the past four to five years. And also due to the new mechanisms in Hong Kong, such as Fini, the settlement duration, the leverage financing duration were both shortened. So on one side, it is a negative to all the brokers, direct the commission and the interest income. But on the other hand, it further engaged the clients to the markets. to enhance the market liquidity, and there's more interest in terms of the retail clients participate in this market. So on a net-net basis, it is still very positive to our business.

Thank you. Thank you. We will now take the next question.

From the line of JP Morgan, please, Peter Tsang, please go ahead from JP Morgan.

Okay, thank you for the opportunity to ask me a question. Congratulations to Futu for achieving a very good performance. I also have two questions here. The first question is about expense. We have noticed that if we look at the expense of Futu in the fourth quarter, GNA expense has increased by 55%, but R&D has only increased by 4%. We would like to ask, what are the reasons behind the growth trend? For the year 2025, how do we look at HECON and R&D G&A Expand? This is the first question. The second question is, we have noticed that the second quarter of other income has also recorded a very high rate of growth, with a rate of growth of 69% to 3.5 billion, which is also the highest volume of other income in a quarter. We would like to ask what the main driving factor behind this is. Many thanks for giving me the opportunity to ask questions. This is Peter Zhang from JPMorgan, and I have two questions. First is about the operating expense, and we noticed that from a sequential perspective, the G&A expense increased by over 50% Q on Q in fourth quarter, while R&D expense only moderately pick up by 4%. So we wish to understand what's the drivers behind this diverging chain for the two different operating expense in fourth quarter. And what will be your outlook for 2025 in terms of your tech con girls and your R&D and GMP? a expense growth into 2025. And my second question is about other income. We noticed that other income grow by 69% Q on Q to a record quarterly high in fourth quarter. We wish to understand what's the drivers behind this increase and what's the outlook into 2025.

Thank you. Uh, uh, The second is that in the fourth quarter of last year, we had a lot of professional service costs. Some of the professional service costs are related to some of our new market previews, including some of the new signs, such as the VATP sign that Robin just mentioned. The third is that there are also some once-in-a-lifetime costs caused by the adjustment of the personnel organization structure. China. China. China. In other income, I mentioned in the opening remarks that the return on income growth in this area is mainly in two aspects. One is our further income from our financial management business, including our fund-raising, as well as more diversified structural voting and other financial management. I don't think so. I don't think so. For two questions, number one is regarding the GNA QMQ expenses increase, mainly due to three reasons. Number one is our year-end bonus accruement, especially for the overseas markets management. Second delay is due to some one-off professional expenses relating to some new license applications and the new market feasibility studies. And the third delay is due to some one-off organizational restructuring. Looking forward to 2025, we expect the number of our headcount will continue to increase in low to middle single digits versus the situations in 2024. Then for second question regarding the breakdown of the key drivers of the other income, mainly comes from two facts. Number one is revenues derived from the wealth management, including the funds distribution and also more fees from the structure products, like structure notes and the TBOs, et cetera. The other is relating to foreign FX exchange fees. This is partially due to very divergent market performance between the US market and the Hong Kong market in fourth quarter. So we saw more clients is trying to switch their assets between these two markets.

Thank you. Thank you. We will now take the next question.

From the line of Zoe Song from Jefferies, please go ahead.

Thank you for accepting my question. First of all, congratulations to the company for achieving such a strong performance. But I also have two questions here that I want to ask. The first is that because the exchange rate of our fourth quarter has dropped in the same ratio and in the same ratio, but the exchange rate of our fourth quarter's Hong Kong stock has increased. What is the reason for the drop in the overall exchange rate without the structural effect? And then my second question is about the shareholder return. We had a $500 million return plan before. It's until December 2025. How much money do you think is left? What are your thoughts on the return this year? And also, do you have any thoughts on the wind and red policy? Thank you. I'll translate it for you. Thanks, management, for taking my questions. And congratulations on your strong results. And I have two questions. First, we have seen the blended trading commission rate decline both year over year and sequentially in Q4. However, the trading volume contribution from HK stocks actually increased in Q4. So excluding the structural impact, what's the reason for the commission rate decline? And my second question is about capital return. We ever had 500 million USD share buyback program, which is effective here December this year. May I ask how much is the remaining quarter and what's your capital return plan this year? Also, do we have any consideration of regular dividends? Thank you.

Thank you, Zoe. Let me answer these two questions. The first one is about the commission rate. The main commission rate in the fourth quarter compared to the third quarter, the reason why our blended take rate dropped is a change in the product mix. Mainly in the fourth quarter last year, there were more of our customers trading some relatively high-end products. some US stocks and some US securities. So our take rate has decreased compared to the third quarter. The overall take rate we saw in the first quarter is in a more stable state. We didn't take advantage of this impact because of some competitive pressure, so we took the initiative to adjust some of the commission fees. The second issue is related to shareholding and repurchase. At the moment, we haven't used such a recovery plan until the end of 2025. Looking back, we think that the entire new market, including the development of new businesses, is still in a very rapid stage of growth. There is still a lot of potential in the future. In the long term, if resources are prioritized for the expansion of these new markets, including some operations in the stock market, it will significantly increase the competitiveness of the company and the profitability of the company in the long term. However, as we have mentioned in the previous three weeks of the conference, we understand some of the shareholders' concern about the division of cash. I think this concern is very reasonable. In terms of the blended commission rate, the Q of Q decrease was mainly due to the product exchange In the fourth quarter, more clients trading these high nominal values US stocks and also high nominal values US options, which made the blender take rates have some QMQ decrease. And in the first quarter so far, we saw our take rates remain very stable. Then the second question regarding the shareholder returns, so far we have not utilized our share repurchase program, which will expire at the end of 2025. We still think these new market, new business lines were still in a fast-growth stage. There will be a huge room for us to deploy the capital for these new business and the new markets, which we think in the long run will encompass our competitive edge in the markets and also our profitability. Having said that, as we mentioned in our third quarters, we do concur part of our shareholders is very focusing or care about cash dividends. And we will revisit and evaluate our dividend payout policies. when 2025 year, full year, complete. And we'll consider the relative measures to provide the reward to thanks our long-term shareholders. Thank you.

That's very clear. Thank you. Thank you.

We will now take the next question. From the line of Hanyang Wang from 86 Research, please go ahead.

Thank you, Mr. Guan, for giving me this opportunity to ask a question. I'm Han Yang from Barrier Research. I have a simple question for you. I'd like to know how much does our 4G extension product account for our total trading volume? And considering the increase in market volatility, has the company seen an improvement in the extension product trade ratio in the first quarter? I'll translate it for you. Thanks, management, for taking my questions. This is Han Yang from AK6 Research. I have one simple question regarding the derivatives trading. So what is approximately the percentage of the derivatives in the total trading volume in the first quarter? And considering the increase in market volatility recently, do you see an increase in the proportion of derivatives trading on your platform in Q1? Thank you.

In terms of the derivative commissions, it roughly accounts for one-third of our total trading commissions in the fourth quarters. slightly down to our historical high in the past. And in the first quarter so far, we do not witness any material change for this ratio.

Thank you. Thank you. We will now take the next question from the line of Alan Chen from CT.

Please go ahead. I would like to ask if we can help with this issue. Can you tell us how much is the margin financing and how much is the idle cash? And especially, how much is the average profit margin of our self-sufficient capital? After September last year, the profit margin of the U.S. dollar has dropped to more than 100 points. I don't know how much the profit margin of the U.S. dollar has been affected by the loss of our customer's self-sufficient capital. And how many of you have not responded yet? And then I'll quickly respond. Thanks, management, for giving me the chance to ask a question. This is Alan from Citibank. Can management give us some breakdown of the interest income in terms of idle cash interest income versus margin financing, the crazy lending income? And if management could share what's the prevailing interest rate on Fortune's clients' idle cash, what was the idle cash yield in 4Q24? And since September last year, we have already seen the Fed cutting the Fed rate by 100 basis points. I'm wondering how much of that 100 basis points Fed rate cut has already been reflected into the client's idle cash interest rate. Thanks.

Thank you, Alan. Let me answer this question. About 40% to 45% of our interest income comes from the Idle Cash yield. The remaining part comes from the interest income of our two-layer financing. Now, you're going to go, uh, but you can see the, the, the, the, the, the, the, the, the, the, the, the, the, the, In the third quarter of 2024, the estimate will be a little bigger. The main reason is that our entire customer asset scale has increased further in the fourth quarter, resulting in a scale of customer assets that are affected by our interest rates. Compared to the third quarter, there is an expansion. In terms of the breakdown of the interest income, roughly 40% to 45% interest income was derived from the idle cash deposits, and the remaining belongs to the margin financing and the security lending, et cetera. And the impasse for the rate cut, if we use the fourth quarter end client assets numbers to make our projections, every 25 basis cut by the federal rate, our pre-tax profit, monthly pre-tax profit will be negatively impacted by 8 to 10 million Hong Kong dollars. Thank you.

Thank you. We will now take the last question from the line of Zihan Wang from Goldman Sachs. Please go ahead.

Hello. Thank you for giving me this opportunity. I am Wang Zihan, an analyst at Kaohsiung. I would like to ask if there is a regional breakdown for our four-year-old new paid customers. And for our 800,000 employees in 2025, how much do we expect to come from the new market and how much from the mature market? This is the first question. And the second question, I would like to ask if we have a medium-speed guidance for the year-round assets in 2025. I ask this question because we are worried about whether the growth rate of our paid customers will be very fast, and most of them may be diluted by the relatively low KJAM market. Then, from a long-term perspective, what level do we think our KJAM assets can do in each area? Thank you, Manager. Let me translate my question. My first question is, do we have a regional breakdown of the new paying client growth in 4Q? And for 2025, what proportion of 800,000 new paying client is expected to be from new markets? And what proportion from mature markets? And my second question is, Do we have a guidance for AUM per client growth in 2025? Will it be diluted as paying client growth is very fast and the majority of them may be from a new market? And in the long run, what levels do we expect the AUM per client to reach in each region? Thank you.

Okay, thank you, Zihan. Let me answer the first question. Regarding the 4th quarter of last year, we had a relatively mature market. For example, Hong Kong and Singapore contributed about 40% to 45% in total. In other Asian markets, as well as Australia, we also contributed about the same amount. The remaining part is from the North American market, including Canada and the US. In terms of the breakdown of the new client acquisition geographic locations, for these mature markets like Hong Kong and Singapore, which on a collective basis contribute roughly 40% to 45% of our total new paying clients acquired in the fourth quarter, and the remaining countries in Asia alongside Australia contribute roughly 40% as well, then the remaining 20% belongs to the North America. Thank you.

Hi, I'm Daniel, and I'm going to answer the question about customer assets. First of all, I'd like to introduce the situation of entry-level assets. In 2024, we can see that the entry-level assets of the entire client have a very large increase compared to 2023. In 2025, we think that the entry-level assets can still maintain a very high level. Going back to customer assets, this is very much dependent on the growth of our clients in different markets this year. So in fact, It's hard to predict now, and one of the major factors that affect AUM is the market-to-market impact. So what we can control is the total investment of the client. We think that in 2025, we can still maintain a very strong number. Let's go back to the second question, which is about the A1 situation in the customer market and how it will change in the future. I will answer this question in a positive way. There are some markets that I think can be very well understood. Maybe the structural difference in the environment of the market itself has caused the customer's customer assets or Kodos assets in the market to be higher. So, for example, the market in Hong Kong and Singapore, we expect that their customer assets will be higher than the market in the other two new markets. But we have seen a very good phenomenon in the fourth quarter. In fact, the customer base of each market is growing very well. We believe that if we look back, the customer base of each market still has a lot of room for continuous growth. On the one hand, it comes from the continuous entry of our old customers through the new products on the line. In addition, with the more mature brand, that is, the perfection of the product, we can also attract some customers with higher quality or higher quality. Let me briefly translate. So, first of all, I just want to comment on net asset inflow. In 2024, we saw a very meaningful step up in net asset inflow in comparison to 2023. And we foresee a similar very robust net asset inflow in 2025 as well. And as you understand, average client assets are, first of all, impacted by our new client mix between different markets and also impacted by mark-to-market trends. And both of these factors are less within our control than net asset inflows. So it's very hard to predict how average client assets is going to trend for 2045. And in terms of average client assets in different markets, well, some markets will structurally have, you know, high average client assets. For example, Hong Kong and Singapore, like these clients will have higher investable income and therefore will have more capital that they can deploy on FUTU's platform. But at the same time, what we found super encouraging is that in the fourth quarter, all of our markets experienced very meaningful Q1Q growth in average client assets. And we expect this trend to continue because as we onboard more products, I think there's a lot of cross-selling opportunity, and we think there's ample opportunity for our existing clients to put more assets onto our platform. At the same time, as our product capabilities get enhanced and as our brand equity gets enhanced, we're able to attract more high-quality clients, including high net worth clients, in many of these markets.

Thank you. Thank you.

I would now like to turn the conference back to Daniel Yuan for closing remarks.

Well, that concludes our earnings call. 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.

This concludes today's conference call. Thank you for participating. You may now disconnect.