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spk06: Ladies and gentlemen, thank you for standing by and welcome to UpFintech Hiring Limited fourth quarter 2020 earnings conference call. Well, at this time, all participants are in the listen-only mode. There will be a presentation followed by a question and answer session. I must advise you that this conference is being recorded today, Friday, March 26, 2021. And I'd like to hand the conference over to your first Speaker Jay, Mr. Clark, SOC. Thank you. Please go ahead.
spk09: Thank you, Operator. Hello, everyone, and thank you for joining us for the call today. UpFintech Holding Limited's fourth quarter 2020 earnings release was distributed earlier today and is available on our IR website at ir.itiger.com as well as Globe Newswire Services. On the call today from UpFintech on Mr. Wu Tianhua.
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spk09: Chairman and Chief Executive Officer, Mr. John Zung, Chief Financial Officer, Mr. Huang Lei, CEO of U.S. Tiger Securities, and Mr. Kenny Zhao, our Financial Controller. Mr. Wu will give an overview of our business operations and discuss corporate highlights. Mr. Zung will then discuss our financial results. They will both be available to answer your questions during the Q&A session that follows their remarks. Now let me cover the safe harbor. The statements we are about to make contain forward-looking statements within the meaning of the U.S. Private Securities Litigation Reform Act of 1995. A number of factors could cause actual results to differ materially from those contained in any forward-looking statement. For more information about factors that could cause actual results to materially differ from those in the forward-looking statements, please refer to our Form 6K, furnished today, March 26, 2021, and our annual report on Form 20F, filed on April 29, 2020. We undertake no obligation to update any forward-looking statement, except as required under applicable law. It is my pleasure to now introduce our Chairman and Chief Executive Officer, Mr. Wu. Mr. Wu will make remarks in Chinese, which will be followed by an English translation. Mr. Wu, please go ahead with your remarks.
spk07: Good day, everyone, and I appreciate your attendance in Tiger Brokers' fourth quarter 2020 earnings conference call. This is due to the growth of new users, and the continuous strengthening of products and services. The fourth quarter of the company, regardless of operating data or financial data, has had a great growth. The total income of the fourth quarter is $47.2 million, which was $2.4 million in the same period last year, creating a new high. The operating efficiency and operating capacity of the tiger are also gradually improving. The non-gam profit of this quarter is $1,030 million, which is 30 times that of the same period last year. This quarter's new income is about 44,000 people. With Fundrise, you can invest here from there or there from here. Our platform gives you access to premium real estate that was previously only available to institutions. So you can take your portfolio from here
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spk07: The first annual profit of Non-Gam was $2,230 million. Compared to 2019, Non-Gam lost $1,800,000. There was a big improvement.
spk09: In the fourth quarter, our operating and financial metrics exhibited solid improvement due to a surge in new clients as well as enhancements to our platform and services. In the fourth quarter, total revenue was 47.2 million US dollars, 2.4 times compared to that of the same period last year and a new all-time high. Tiger's operating efficiency and profitability continue to improve. Non-GAAP net income was $10.3 million in the fourth quarter, nearly 30 times the non-GAAP net income in the same quarter last year. In addition, I'm pleased to report that we added 44,000 new funded accounts this quarter, nearly quadruple the number from the same period last year. Total funded accounts reached 259,000 by the end of 2020, more than double that of 2019. Growth in client assets was outstanding. Total account balance reached $16 billion, more than triple that of the fourth quarter of 2019 and 46.2% higher than the third quarter of 2020 overall. For 2020, total revenue was $138 million, more than double versus 2019. We were profitable for the first time on a yearly basis. Non-GAAP net income was $22.3 million in 2020, a big improvement from a non-GAAP loss of $1.8 million in 2019. 这次机会和大家同步三个女神辈的发展。 I would now like to take this opportunity to comment on three notable milestones in our development. First and foremost, our internationalization strategy continues to progress nicely.
spk07: Tiger Brokers now has subsidiaries and offices in the U.S., Australia, Singapore, and New Zealand.
spk09: that possess a wide range of licenses that span brokerage, investment banking and asset management, among others. In the fourth quarter, I am pleased to report that our expansion in the aforementioned overseas markets accelerated. International clients represented 40% of newly funded accounts. We expect that in 2021, we will add more than 350,000 funded accounts. International clients will comprise more than 50% of the new funded accounts.
spk07: Moving on, our investment banking and ESOP services continue to lead the markets.
spk09: we are committed to our growth strategy of leveraging Tiger's core brokerage business to generate synergy among ESOP, investment banking, and internationalization.
spk07: 2020年,我们一共已经参与了26家中代公司赴美上市。第四季度新增的8家,比如一起教育,完美日记,华人教育等。最近我们还承销了BiniBini, In fact, they are waiting to be listed in Hong Kong. We are very grateful to these listed companies for their trust in us. In the first two years of our investment, we have ranked first in the world in the number of listed companies to help the largest number of mid-sized and medium-sized companies listed in the US. E-SOM is a development training for employee-oriented management. In the past year, mid-sized and medium-sized companies listed in the US, more than half of them chose Tiger as their E-SOM supplier, such as Ideal Motors, Xinshan Yun, and Wanmei UC. In the fourth quarter, In 2020, in total, we participated in 26 Chinese ADR IPOs in the U.S. And in Q4, we participated in eight listings, such as Seventeen Technology, iHuman Inc., and Yatsen Holding Limited. Recently,
spk09: We also underwrote the secondary listings of Bilibili and Auto Home in Hong Kong. I would like to express my appreciation to all of these companies for their trust at such an important time. Reflecting on the development of our investment banking business, in just two years, we have become the number one underwriter globally in terms of deal counts for Chinese ADR issuance. ESOP, our system for managing employee stock options, continues to grow at a rapid pace. In the past year, of the Chinese ADR issuers that listed in the U.S., over half chose to adopt our ESOP system, including popular issuers like Lee Auto, Kingsoft Cloud, and Yatsen Holding Limited, among others. The growth in adoption of our ESOP system accelerated as we added 35 clients in the fourth quarter for a cumulative total of 124 clients. We expect our ESOP system to maintain its leading position and foresee further increases in market share. Finally, we continue to invest in developing our self-clearing capabilities.
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spk07: In July 2019, we bought a self-sufficiency voucher from a 30-year-old American self-sufficiency voucher shop in Moscow. This is a very important self-sufficiency voucher. It really realizes the self-development from the front to the back of the car. It has a deeper technical background and higher requirements for compliance, operation, and technology.
spk09: In July of 2019, when we acquired Marsco, a U.S. broker dealer with over 30 years of self-clearing experience, we also acquired their clearing licenses. Our investment to transition to self-clearing remains a key milestone in our firm's development. We now have the technological and operational prowess to control every aspect of our brokerage system from the front end to the back end. Self-clearing has also created a competitive barrier for our firm due to its extensive technical compliance and operational requirements. The percentage of clients having their U.S. cash equities trades self-cleared by Marsco continues to increase. And at the end of the fourth quarter, reached over 20 percent. In addition, MarsCo is conducting clearing for all new clients onboarding in the U.S. As I conclude my prepared remarks, I would like to thank the investors who participated in our convertible bond issuance for their support of our firm. In February 2021, we in total issued $65 million of convertible bonds. This capital will accelerate our international expansion as well as support further investments in our research and development capabilities.
spk07: I would now like to invite CFO John to summarize our financial performance.
spk08: Hello, everyone. So let me go through our financial performance for the fourth quarter. All numbers are in USD. Total revenue were $47.2 million. this quarter increased 137% from the same quarter of last year. The increase was due to bigger user base as more people entrust us with their assets and a more active market backdrop. Within the total revenue, commission increased 245% from last year to reach $25.2 million. Interest-related income, which combines financing service fee and interest income, was $13.3 an increase of 53% from last year. Other revenue, mostly revenue from our investment banking business, increased 119% from last year to $8.7 million. Interest expense increased to $4.3 million from $1.5 million last year as we have more consolidated account customers. Net revenue after interest expense was $43 million. an increase of 135% from the same quarter last year. Now on the cost. Execution and carrying expense were $4.2 million, increased 363% year over year due to increase in user base and more engaged treating activities. The increase in user base also increased communication and market data expense by 103% to $3.9 million. Employee compensation increased 47% to $15.5 million as we keep adding headcounts, especially in R&D and product to support our global expansion. As a result of headcount increase, our occupancy expense increased 12% to $1.3 million. SG&A also increased 70% to $4.8 million year-over-year. Marketing expenses were $6.5 million this quarter an increase of 277% from the same quarter last year. We will keep spending in branding and customer acquisition to accompany our internationalization. Total operating costs were $36.3 million, an increase of 90% from the same quarter last year. As a result, our net income was $8.5 million this quarter, non-GAAP net income which excludes share-based compensation. was $10.3 million this quarter, 30 times the long gap net income in the same quarter of last year. Now I have concluded our presentation. Operator, please open the mic for Q&A. Thanks.
spk06: Thank you. Ladies and gentlemen, we will now begin the question and answer session. If you wish to ask a question now, please press star 1 on your telephone and light for your name to be announced. If you wish to cancel your request, please press the pound or hash key. Once again, ladies and gentlemen, let's start one for questions. Our first question comes from from China Renaissance. Please ask a question.
spk10: Hi, management. Thanks for taking my questions. I have two questions. Number one is about our guidance. I heard we expect 350,000 new paying users for this year. Just want to understand the drivers behind this guidance. What is trend in the first quarter this year? And we also mentioned 50% of it will come from overseas markets. So can you give us more details in terms of breakdown of like Singapore, U.S., and other countries. And second question is about our Singapore business. I saw that Futu actually entered Singapore in March. Do we expect some impact from this in terms of our growth? And how do we deal with, you know, intensifying competition in Singapore? Thank you.
spk07: Okay, thank you. The first question, we have seen some fluctuations in the market recently, so our forecast for a growth of more than 350,000 is that we have made an assumption that we will return to the fourth quarter of 2019 in a very tragic situation. Let's take a look at the growth in China at that time. In the fourth quarter of 2019, we had a quarter of a quarter of a quarter of a quarter of a quarter of a quarter of a quarter of a quarter of a quarter of a quarter of a quarter of a quarter of a quarter of a quarter of a quarter of a quarter In this year, overseas, including Singapore, Australia, and the United States, three countries, we think that a quarter, based on our Chinese Q4 data in 2019, for example, a quarter has a total of about 100,000 open accounts. Overseas open accounts, the transfer rate is much higher than the mainland. Calculated at 60%, overseas, we think that a quarter can have more than 60,000 transfers. In addition, mainland China, ESOL, So let me quickly translate, you know, Tianhua's answer for your first question. So let me put it this way. So traditionally, Tiger's users mostly are onshore Chinese.
spk08: So starting from last year, we started to onboard Singapore clients. So far, it's showing good results. So this year, we will expand the U.S. and Australia. So on a high level, more geographic expansion and our experience in Singapore give us the confidence to acquire more users this year. So we understand investors are getting nervous recently about the market this year. So the $350,000 guidance is not based on our high growth in 2020. Instead, we used 2019 data when market activity was much lower as our base case. So in 2019, each quarter we added about 42,000 customer accounts. So assuming US and Australia will gradually reach that number this year, combining with Singapore, we feel pretty comfortable each quarter we will have at least 100,000 new customer accounts from offshore investors. And based on our experience, Offshore clients have much higher customer account to funded account conversion, typically a loss of 60%. So this translates to around 60,000 funded account each quarter from offshore. And we are confident onshore clients and ESOP can also add a lot of 20 to 30,000 funded account each quarter. So combining that, we feel pretty confident we can, you know, reach our guidance of 350,000 funded account this year.
spk07: The second question is about Singapore. First of all, we will have some competition in any country. But we judge that there is not much impact on the entry of business partners. It is because our competition with business partners is not actually a stock competition. Singapore is also in the early stage of a process of technology vouchers replacing traditional vouchers. We have a very large space in the supply market. Some young users in Singapore We see a lot of opportunities in the stock market. We refer to Singapore's GDP data. There are about 1.3 million such household users. We estimate that in Singapore, there is a lot of room for stock and stock. At the same time, in every country, we compete for such a product and service. Thanks to our early access to the Singapore region and our understanding of local users, we have certain advantages in terms of our products, including more trading varieties, and we support such as TFTLC, etc. Our gold supermarkets are also on the line in the Singapore region. At the same time, we have always been committed to developing the advantages of our low-end and medium-high-end platforms. Currently, our Singapore self-calculation is doing well, and we are in the leading position in the virtual network business field. Thank you.
spk08: Okay. So regarding Singapore, there will be some competition, but we don't think it's a zero-sum game because we feel the time in Singapore is still very big for us to grab. So if you look at Singapore's existing market, based on CDP data, there are about 1.3 million accounts that trade Singapore local stocks, and most of them still prefer to place order by phone. And this is a market we haven't really penetrated yet. So currently, Tiger, our focus is on the incremental market, the younger generation, the younger Singaporeans, similar to our Chinese users, who is more interested in U.S. or Hong Kong stock, and this incremental market is showing good momentum. So we will tap into the existing market by adding more local products on our platform, such as BLC, Funmore. and getting Singapore, you know, SGX self-clearing license so we can provide better service and acquire more users from both market segments. Thanks.
spk10: Thank you. Thank you.
spk06: Thank you. Our next question comes from Zeyu Yao from CICC. Please ask your question.
spk10: Thank you, Mr. Wu, Mr. Zeng, Mr. Huang. I'm Yao Zeyu, an analyst at Shenzhen. Congratulations to our map, which is a report on the performance of the industry. I have two questions here that I would like to ask you. The first one is that if we start from the second map, if the entire middle and high-end market starts to move towards a slightly bearish market, then what active measures can we take to continue to promote the activity of a user? The second one is that we see that in the past four maps, the speed of our e-stop has exceeded the speed of the same industry. Hi, management. Thanks for taking my questions. I'm De Yuyao from CRTC. Firstly, congratulate on the exciting results we have achieved. And I have two questions here. The first one is about our growing customers. We see a total of 44,000 funded accounts added in this quarter, and the total paying of customers has reached nearly 260,000 by 2020. But we also see the volatile market environment. I'm wondering if it will be bear market since the second quarter, then what measures will we take on customer acquisition and how to increase the customer And the second question is regarding our corporate business. In this quarter, we see a rapid growth of new e-soft clients with 35 new addicts and exceeding that of most of our major competitors. Would the management share more with us that why we have grown so rapidly on the e-soft business in the recent years and which are our unique advantages? Thank you.
spk07: Thank you. In the past few years of our industry, we have been experiencing market fluctuations, including bear market tests. So we have also had a good experience. First of all, our industry characteristics have a very high margin. Our quarter margin is 98%. In the past six months, we have been able to operate and invest in a more detailed way. The value of the aging community has begun to be reflected better. We found that the number of users who have consumed or produced community content will be about 20% higher than those who have not consumed it. Consumption content helps users make some trading decisions, and the rate of trading will increase. The number of transactions after community consumption can be increased by 117% overall compared to users who have not seen the community. And we also found that overseas users have a higher return on tax. You can see more and more English comments in Lao Wu's video. Compared to the first quarter of 2020, we found that the market was relatively high at that time, but the return of users is still very high. In fact, for a brokerage company, there is a certain fluctuation. No matter what the fluctuation direction is, OK.
spk08: So thanks for your question. To answer your first one, you know, so since our inception like seven years ago, we have experienced quite a few market volatility. So we have experience on that. So in general, you know, for our business, you know, especially for the online broker business, we tend to have higher retention. So quarterly retention rate is around 98% through our operating industry. Like how do we, you know, increase user activities and keep the retention. So for the past year, we actually have been spending quite a resource to optimize our online community operation. So far, we have seen positive results. For example, our content consumer or content creators, in general, their retention rate will be 20% higher than the rest of the users. Good content can also help users to make decisions and increase trading activities. On average, content users, their trading activity will more than double. If you log on to Tiger Community, you can see right now our offshore clients, they are actually more engaging in our community. We have seen more and more English posts in our community, which is a good progress. We think we will keep investing. And also for brokers, business volatility in certain extent is good for us. So for example, in first quarter last year, even doing big corrections, user engagements were still pretty high. We think throughout this year, given the media coverage and also the transparency of the information, we think the market volatility will continue. In the worst case scenario, say if it's a bear market, We also have more works management product for our users. For example, we added mutual fund automatic investment plan. We also have, you know, cash management product like cash class. So we think, you know, those works management product will help our users to manage their investment during bear market.
spk07: I will answer the second question. Regarding the issuance of this currency. First of all, we believe that e-commerce business has a very high cost-effectiveness. In order to be able to do e-commerce business, first of all, you have to become an international stockbroker. In our customer service, there are some international companies, such as Xiaomi. It has employees from dozens of countries. To be able to serve a dozen countries like Xiaomi, it involves the financial, tax, legal, and regulatory issues of many countries. In the past, De Yu was a photo studio in the United States, Australia, and Canada. So De Yu's international development allows us to serve these international companies. This is the first point. The second point is that De Yu is friendly with the investment industry. We often deliver services and sell together. to provide a complete strategic plan. This makes it easier for us to get the company's choice and trust. Third, in the direction of ESOP, we continuously invest in production and other resources, including human resources, finance, tax, The five directions of law and law are fully integrated into the professional field. Many times, a problem in ESOP or a very difficult question, you may not get a complete answer if you ask any professional in any field. But if you ask us, we can answer more efficiently. So it makes us more effective in project consultation, landing and operation. Okay, so regarding ESOP, we think, you know, the model actually, you know, it's pretty high. You need a lot of know-how to be able to be a good ESOP provider. So first of all, you know, given a lot of, you know,
spk08: use of clients they are international company now they have subsidiaries or employees from different you know countries different regions so I think as a service provider ourself needs to be a global you know company to have the global platform to service their you know different reaching employees so Tiger we have licensing Singapore US Australia so we feel we are more capable to to be customized and tailored to the different needs of our ESOP clients. So that's the first point. The second, I would say, the second growth strategy for our ESOP business is, as you can see from our past reports, so far we have been generating good synergy between ESOP and our investment banking business. So we not only help companies to get invested, to raise funds, we also help them from the very beginning to help them to manage the plan to satisfy all the local regulations and also to help them go through the IPO process and to manage their plans when the stock options are vested. So the combination or I would say the bundle of service between our ESOP and IPO has been showing really good results and the way we are confident going forward this strategy will keep working and provide the best service for our clients. Lastly, ESOP is a pretty, I would say, complex business and we are investing heavily in research and development and also acquire, you know, recruit talents to build a one-stop solution provider combining HR, tax, legal, compliance and accounting expertise to make the ESOP management more efficient and user-friendly for our corporate users. Thank you.
spk10: Thank you.
spk06: Thank you. As a reminder, ladies and gentlemen, if you wish to ask a question, please press star 1 on your telephone keypad. Our next question comes from Han Yang Wang from 86 Research. Please ask a question.
spk10: Good evening, Mr. Guan. Thank you for the opportunity to ask me this question. I have three questions. The first question is about taking pictures in Hong Kong. I hope Mr. Guan can share with us the progress of our application for the Hong Kong economy to take pictures. The second question is about our international business. We mentioned that the increase in our marketing expenses has something to do with the expansion overseas. Can you tell us about the cost of overseas users and the cost of users in China and Hong Kong? And how should we look at the overall revenue contribution of overseas users after three to five years? The third question is about the commission rate. The commission rate of this quarter seems to be rising more than ever. What is the main reason? Thank you. Let me ask you a question. So let me turn to my questions. I have two questions. The first one is regarding the Hong Kong license. You mentioned you shared the progress of our Hong Kong brokerage license application. The second question is about our international business. So we mentioned the increase of the marketing expense was primarily due to global expansion. Could you share the capital mobilization cost per paying client in China, Hong Kong, overseas market, and how we should look at the brokerage revenue contribution from the overseas market after And my third question is on the commission rate. In my calculation, our commission would increase sequentially during the quarter, and I kind of thought that would be helpful. Thank you.
spk07: Thank you. I think we will see a rapid increase in the number of new immigrants in the United States, Australia, Singapore and even more countries and regions in the future. This can be seen from our recent growth and our guidance for this year. That also makes us closer to our vision of becoming the world's best technology broker, like our investors, IB Learning. We see that IB has actually gained more than 70% of its users outside of the U.S., including current users, including sales and other aspects. So I believe that internationalization has greatly improved the entire tiger's ceiling, So to answer your question on internationalization, so we are very committed and optimistic about our global expansion strategy.
spk08: Because first of all, we see the global expansion strategy is a good way for us to increase the customer account to funded account conversion. Like we mentioned earlier, a lot of those regions, the conversion rate can be more than 50%, sometimes 60%, 70%. So in this way, this will give us a big tailwind once we generate good customers offshore and build a good momentum. you can help us to reach over a million Funded.com customers in the near future. So our goal is to become a one-stop investment platform for global investors, no matter where they are based. So we are very committed to internationalization. And in addition to the operating data growth by internationalization, we feel by acquiring more investors offshore, will also help us to generate better financial results for the company and for the shareholders. So that's your question on internationalization. So on marketing, the customer acquisition, so if you look at our 2020 data, our customer acquisition cost is about 100 USD per person. So this actually has came down from earlier and I say 2019 when our customer acquisition cost was about $200 to $300. So the reason of the decrease is due to of course we have a better branding now and there are more natural traffic and also we are providing more comprehensive services to the users so there are more users coming to our platform. Going forward we will expand offshore. we think the customer acquisition cost will go up because first of all, there might be other players who will be competing for the users. Second thing is if we go to a new market, it will take us some time to build up our brand. So at the very beginning, we will spend more to do more branding to increase our brand awareness. But through our past experience, we think all those marketing expenses are well worth it because if you look at our customer payback period, it actually came down to just maybe one quarter. So if we go to low market, we will just mimic the same strategy to keep spending to acquire users. So in the short term, I think operating data will build a bigger user base it's more important for us. So we will keep spending once we get into the new markets. And for your take rates, yes. So the commission rate, if you calculate blended commission rates, go up a little bit versus last quarter on a quarter-over-quarter basis. But eventually, we haven't done any pricing change. So our pricing stayed the same. For US, it's about $0.01 per share, minimum $2.99. Therefore, Hong Kong has 2.9 bps for Hong Kong securities trading. To answer your question on the Hong Kong license, we have resubmitted our application to acquire a Hong Kong stock broker earlier last month. We believe the application contains all the information required by SFC. As a result of the discussion, we initiated with them to confirm what was required. So the regulators may require further information from us, although we believe we have given them a very comprehensive material. So, so far, you know, they have not asked for any follow-up information. They may do so in due course, but so far they haven't done that yet. So typically, you know, the application will take 6 to 12 weeks to process. Obviously, we cannot guarantee the outcome or timing, but we are as confident as we can be that we have filed everything the regulator reasonably needs to consider the application. Thanks.
spk10: I have a question on the tax benefits. What caused the tax benefits during the quarter?
spk08: Oh, yeah. So, you know, like, we just break even for this year, right? So, you know, as every startup, when they break even, before they were breaking even, they have huge losses before. So we have accumulated a lot of tax benefits. So once we started to break even, you know, we'd be able to, you know, utilize those tax benefits for this quarter.
spk10: Thank you.
spk06: Thank you. We have reached the end of the question and answer session. I'll now turn the call back to presenters for closing remarks.
spk09: I would like to thank everyone for joining our call today. I'm now closing the call on behalf of the management team here at UpFintech. We do appreciate your participation in today's call. If you have any further questions, please reach out to our investor relations team. This concludes the call, and thank you very much for your time.
spk06: Thank you. Ladies and gentlemen, that does conclude our conference for today. Thank you for participating. You may all disconnect.
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