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spk04: Ladies and gentlemen, thank you for standing by and welcome to the UpSynTech Holding Limited Fourth Quarter 2021 Earnings Conference Call. At this time, all participants are in a 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 18th, 2022. I would now like to hand the conference over to your first speaker today, Mr. Clark S. Susie. Thank you. Please go ahead.
spk01: Thank you, Operator. Hello, everyone, and thank you for joining us for the call today. UpFintech Holding Limited's fourth quarter 2021 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 are Mr. Wu Tianhua, Chairman and Chief Executive Officer, Mr. John Zung, Chief Financial Officer, Mr. Huang Lei, CEO of US Tiger Securities, and Mr. Kenny Zhao, our financial controller. Mr. Wu will give an overview of our business operations and discuss corporate highlights. Mr. Zeng 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 US 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 18, 2022, and our annual report on Form 20F, filed on April 28, 2021. 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.
spk02: In the fourth quarter of 2021, Laowu International still achieved an objective growth. The total income of the fourth quarter is 6,220 million US dollars. Compared to the same period last year, it increased by 31.7%. The number of new employees in the fourth quarter is 61,400, of which more than 90% are from non-China regions. At the end of the fourth quarter, the total customer assets are 17.1 billion US dollars, of which more than 2 billion US dollars are from customer assets. However, due to the fall of the stock market in the fourth quarter due to the fall of the stock market in the fourth quarter due to the fall of the stock market in the fourth quarter due to the fall of the stock market in the fourth quarter due to the fall of the stock market in the fourth quarter due to the fall of the stock market in the fourth quarter due to the fall of the stock market in the fourth quarter due to the fall of the stock market in the fourth quarter due to the fall of the stock market in the fourth quarter due to the fall of the stock market in the fourth quarter due to the fall of the stock market in the fourth quarter due to the fall of the stock market in the fourth quarter due to the fall of the stock market in the fourth quarter due to the fall of the stock market in the fourth quarter due to the fall of the stock market in the fourth quarter due to the fall of the stock market in the fourth quarter due to the fall of the stock market in the fourth quarter due to the fall of the stock market in the fourth quarter due to the fall of the Hello, everyone, and thank you for joining the Tiger Brokers' fourth quarter 2021 earnings conference call.
spk01: Despite the difficult macroeconomic and market backdrop during the previous two quarters, by focusing on executing on our international expansion, Tiger Brokers was able to achieve notable progress during the fourth quarter. In the fourth quarter, total revenue was $62.2 million, an increase of 31.7% over the same period last year. The company is committed to further leveraging internationalization to drive growth, and in the fourth quarter, the company added 61,400 accounts, of which more than 90% were from overseas markets. Total customer assets were $17.1 billion in the fourth quarter. Net customer asset inflows remained healthy and exceeded $2 billion in the quarter. However, since some of our institutional clients experienced losses on their holdings of Hong Kong listed equities and Chinese ADRs during the fourth quarter, total client assets declined sequentially from the third quarter. In 2021, Tiger Brokers in total added 415,000 funded accounts, exceeding our 350,000 account annual guidance. The total number of funded accounts reached 673,000. Half are from Singapore or other overseas markets, demonstrating the firm's internationalization strategy is yielding solid results. For the full year 2021, total revenues were $2,600. 264.5 million USD, an increase of 91% on the previous year. Non-GAAP net profit attributable to UpFintech Holding Limited was $24.5 million for the year.
spk02: We finally got the Hong Kong license in October 2021. Today, I would like to advise an important person, Chen Bei, to improve the profits of the Hong Kong stock trading business in order to get Hong Kong investors in the future. Until then, In October 2021, we acquired a Hong Kong broker dealer license, setting the stage for our firm to not only increase the future profitability of our Hong Kong securities business,
spk01: but also to eventually onboard Hong Kong local residents. Including Hong Kong, our firm now holds 50 licenses and qualifications that span the United States, Australia, Singapore, New Zealand, and other jurisdictions. Holding such a rich range of licenses and qualifications sets the stage for the firm's long-term international growth.
spk02: with 90% of new users from overseas. This shows that the next-generation technology platform has strong competitiveness in many international markets. After a year of development, our Singapore headquarters has become the largest area in the world, whether in quantity or in storage. In 2022, we are confident to achieve similar results in Singapore in more countries. In the first quarter of this year, the company officially entered the Australian market. In our eyes, I would now like to provide investors updates on two key business initiatives at our company.
spk01: internationalization is progressing well. As stated in the fourth quarter, over 90% of our accounts were derived from overseas markets, demonstrating the appeal of our next generation FinTech platform and its value proposition in competitive international markets. In the past year, Singapore, by both the total number of new accounts and the total number of accounts, became our company's largest market. In 2022, we are confident that we can achieve similar success in other global markets as we did in Singapore. In the first quarter of this year, we officially entered the Australian market. We view Australia as having certain similar competitive dynamics as Singapore, namely that high commission traditional brokers have a substantial market share. Even though we face competition from many respectable online brokers in Australia, we are confident that the distinctive features of our app, such as our interactive social media community, Comprehensive financial and market data, as well as our rich range of securities trading features, will distinguish us from the pack.
spk02: Second, in terms of business service, today, we are going to focus on the economic industry as the core, and invest in ESOP and the growth strategy of internationalization. ESOP, employee-oriented management business, development training. In the fourth quarter of 2021, ESOP added 51 companies, which serves 313 customers. In the fourth quarter, our investment industry and services have participated in a total of 22 Hong Kong and U.S. stocks. Out of the 18, we are a seller. We can not only sell Chinese and American stocks, but also sell Hong Kong stocks. In the fourth quarter, the Tiger Hong Kong brand fell to the ground. In the fourth quarter, we also sold a series of Hong Kong celebrity companies, such as NetEase Music, ShangTang Technology, Xintong Technology, etc.
spk01: Corporate and institutional services continue to perform well and attract new clients. ESOP continues to expand at a fast rate, and in the fourth quarter we added 51 new companies for a grand total of 313. Investment banking also performed well, and we participated in 22 IPOs in Hong Kong and the U.S., of which we underwrote 18. It's important to note that our firm possesses extensive capabilities, to serve both new issuers as well as listed companies across multiple markets. Following the acquisition of our Hong Kong broker-dealer license, in the fourth quarter, we underwrote the listings of a series of famous companies, including NetEase Cloud Music, SenseTime, and Beijing AirDoc. We do appreciate the trust of these issuers in our firm. I'd now like to invite our CFO, John, to go over our financials.
spk03: Thanks, Tianhua and Clark. So let me go through our financial performance for the fourth quarter. All numbers are in USD. Total revenue were $62.2 million, up 32% from the same quarter of last year. For the whole year, total revenue were $264.5 million, up 91% from last year. In the fourth quarter, commission were $29.9 million. increased 18% year over year, but down 11% from the third quarter. The quarter over quarter drop in commission was primarily due to lower trading volume with less trading days in the fourth quarter and weaker ADR and Hong Kong market. Although our margin and securities lending balance was lower than third quarter due to the weaker market backdrop, we were able to generate more interest income through our self-clearing capabilities. interest-related income, which combines financing service fee and interest income, was $22.5 million in the fourth quarter, increased 70% year-over-year and 12% quarter-over-quarter. Factoring interest expense, net interest income increased 110% year-over-year and 18% quarter-over-quarter. Other revenue increased 12% from the same period last year to $9.8 million. Now onto the cost. Execution and clearing expense were $6.9 million, increased 65% year-over-year due to rapid user growth in 2021, but down 28% quarter-over-quarter as more trades were cleared through self-clearing. We are in the process to migrate Singapore clients to our own Singapore clearing and custodian platform, which should result in further reduction in clearing costs in the coming quarters. Employee compensation increased 82% year-over-year to $28.4 million, as we keep adding HECON across regions to support our global expansion. In line with the HECON increase, Occupancy expense increased 41% to $1.8 million. SG&A increased 76% to $8.5 million year-over-year. Marketing expense were $11.6 million in the first quarter, increased 77% year-over-year, and on par with the third quarter. We have been very prudent with our marketing spending and will adjust our marketing strategy based on market conditions. Communication and market data expense were $7.7 million, an increase of 97.5% from US $3.9 million in the same quarter last year due to rapid user growth. Total operating costs were $64.9 million, increased 79% from the same quarter of last year. Long-gap lead income, which excludes share-based compensation, was $0.1 million this quarter, Total non-GAAP lead income for the year of 2021 was $24.5 million. Now I have concluded our presentation. Operator, please open the line for Q&A. Thanks.
spk04: Thank you. To ask a question, you will need to press star 1 on your telephone. To withdraw your question, press the pound key. Please stand by while we compile the Q&A roster. Our first question comes from Han Pu with CICC. Your line is open.
spk07: The second one is that we see that the cost of goods in the fourth quarter has increased. I would like to ask the main reason, how is the quality of new customers, and how do we look at the trend of goods cost in the future? I will translate my question here. Thanks, management, for taking my question. This is Han from CICC, and congrats on strong performance during such a voluntary market. I have two questions. Firstly, how do we see the influence of the policy signals from last Wednesday's FSDC conference? Secondly, we say the COG increased a lot quarter over quarter. What is the main reason behind that? And how about the user quality in first quarter? And how do we see the trend of the user cost in coming quarters? Thanks.
spk02: It shows that the high-level Chinese government is very concerned about many capital market events in recent years. This is very important for stabilizing economic growth and repeating the confidence that the market has in China. We have also noticed that China's famous ambassador Qin Gang has recently published a letter to Russia and the U.S. about the situation and the relationship between China and the U.S. to convey the signal of improving geopolitical policy. We look forward to more positive policies in China and abroad, and the market environment will gradually return to normal. China, the United States, China, the United States, China The second question...
spk03: So let me quickly translate the first question. So first of all, the timing of the Financial Stability and Development Committee meeting is very crucial. At the comments made by Vice Premier Liu shows senior policymakers are aware of the recent self in capital markets and they are ready to take action to reinstall market confidence. This is an encouraging first step. Hopefully there will be more favorable concrete policy rolling out in the near future. to stabilize the market and stimulate growth. At the meeting mentioned, there was good progress on PCAOB issue. Government will support qualified Chinese company to NISO offshore. So both will benefit Tiger's ESOP and investment banking business and drive further future user and AUM growth. Our focus at this stage is still internationalization. We are already headquartered in Singapore. Singapore clients already account for more than 50% of our user base. We look forward to expanding to other regions to replicate our success in Singapore. 第二个问题, 4G路的时候市场环境不太好, 用户主动入京的意愿会弱一些, 因此人均CAC相对第三季度有所提升, 我们觉得这很正常,货客跟大盘会相关。
spk02: The total investment of the company is relatively conservative from the beginning of the third quarter. We continue to pay attention to the return period, the new income, the quality of the client, and the standard of saving, but we spend our money on the blade. Although the CSE has risen in the fourth quarter, the overall quality of the single user is still very good. For Singapore retail users, the average first income of new users in the fourth quarter is close to US$7,000, which is higher than the average first income level in the third quarter. Since Tiger's exhibition in Singapore in 2020, So market sentiment was still relatively weak in the first quarter, which makes it harder to acquire users.
spk03: We think an uptick in CAC is very normal under this kind of market sentiments. That being said, we have been very cautious with marketing spending since third quarter of last year. We pay close attention to key metrics such as payback, new customer quality, retention, to make sure our marketing spending is efficient and cost effective. So even CAC had some uptick in the fourth quarter. The quality of funded accounts actually was pretty good. For Singapore retail clients acquired in the fourth quarter, their average initial deposit is close to 7,000 USD, higher than the average initial deposit in the third quarter. For each cohort of Singapore clients acquired during a particular quarter, we see lead asset inflow every quarter since their acquisition. Shows clients are willing to allocate more assets to Tiger platform with high user stimulus.
spk07: Thanks. That's very helpful.
spk03: Thank you.
spk04: Our next question comes from Julia Chung with Citigroup Global Markets. Your line is open.
spk06: Hi, Ms. Chen. This is Julia from Huati. I would like to thank Ms. Chen for giving me the opportunity to ask a question. I have two questions. First of all, we see that the total market share of the 4th quarter has dropped significantly. I would like to know what is the situation with the entry of customers and the amount of transactions. Thank you. The second question is that in the Australian market, will we take this kind of approach? And can you tell us about the local competition pattern? I would quickly do a translation for my question. So first of all, thank you, management, for giving me this opportunity to ask questions. Just two questions for me. First, we noticed that client assets, the client queue on queue, can management give us some guidance in terms of the first quarter, quarter to date operational data in terms of the client assets, trading volume, velocity, as well as the customer growth? And the second question is that we noticed Tiger has just entered the Australian market. Just wondering if management can share your thoughts on the room for growth and competitive landscape in Australia and what type of key growth strategy there. Thank you.
spk02: Thank you. As we mentioned earlier, we have more than $2 billion in assets in the fourth quarter, which is very good in terms of revenue. The drop in the total assets is mainly due to the ADR held by institutional users. including Hong Kong stocks, caused market-to-market losses. This also affected the volume of the stock market. The margin of the fourth quarter fell below that of the third quarter. This is mainly due to the decline of corporate market and the loss of liquidity. Since this year, due to the influence of geopolitics and Sino-US relations, the situation has become more difficult compared to the fourth quarter last year. The exchange rate and the total asset size have fallen sharply. We are also more cautious in terms of investment and goods. The number of investors in the first quarter will be less than that of the fourth quarter, but the quality of the customers and the flow are still very healthy. On average, the first investment amount is similar to that of the fourth quarter. The trend of the customers putting more assets on the tiger side has not changed.
spk03: So as we mentioned earlier, in the fourth quarter, we had lead assay inflow over $2 billion. The quarter over quarter drop in total AUM is primarily due to mark-to-market loss of some of our institutional users. The mark-to-market loss also leads to a quarter over quarter drop in margin balance, as some clients need to deliberate. So market is hot here today. We saw a small dip in trading volume and the total AUM in sideways border index. We have been put in with marketing spending. We likely will see smaller number of funded accounts in the first quarter versus the fourth quarter. But the average initial deposit, let us say inflow, will be similar to fourth quarter.
spk02: The second question is about the Australian market. The Australian market is also one of the major markets of the tiger internationalization strategy. Last month, we officially entered the Australian market to provide Australian users with a war-like online stock investment service. Although Australia already has some local competitors, our app can help users invest in Australian stocks, US stocks, and Hong Kong stocks. We are also one of the few exchanges that can provide US stocks in full. I believe that our products have the advantage of being decentralized, and the functions are relatively more powerful. We also have rich content information and an investment community for users to communicate with. Investors can not only enjoy a smooth trading experience and can also communicate with other investors. The data shows that our Australian products have been on the market for nearly a week. The Google Play ranking has risen from more than 100 to the ninth place. Download, install, and grow rapidly. Users will not refuse a good product. We also have a rhythm to do some related activities in Australia to promote, including some commission activities. I believe our platform We entered the Australian market last month. Also, there are already several online brokers in Australia.
spk03: We feel Tiger's comprehensive offering will set us apart from competition. Based on latest data, only one week after we launched in Australia, our ranking in terms of Google Play download has jumped to a nice place from below 100. We look forward to onboard Australian clients and provide them with unparalleled trading experience. We feel very confident we can replicate our success in Singapore to other regions like Australia. Thanks.
spk04: Thank you. Our next question is followed from Hanfu with CICC. Your line is open.
spk07: Hi, Mr. Guan. I have a follow-up question on our self-commuting progress in U.S. markets. Thanks.
spk02: Okay, thank you. At the end of the fourth quarter, more than 80% of our U.S. stock has been processed through capital calculations. With more assets being taken over by the US subsidiary company, our capital utilization rate is also constantly increasing. As I just shared with you, the four-quarter margin has been reduced by three quarters, but through capital calculations, our interest income has been increased. Everyone may be concerned about how long we can achieve 100% of the self-calculation of each stock. We believe that this year there will still be a small part of the stock trading through IB calculation. The main reason is that some accounts have both the stock and the corresponding期权 combination at the same time, such as Covered Call. This requires the ability to calculate both the stock and the期权 at the same time. We already have the期权's self-calculation license. Thanks for the question. So in terms of self-clearing, over 80% of U.S. cash equity are self-cleared by end of fourth quarter.
spk03: So self-clearing also improved our capital utilization as we were able to generate more interest income quarter over quarter with lower margin balance. So this year, we will still use IB to clear a small portion of trades as some customer has positions like cover call, which requires both option and cash equity clearing. Tiger, we already has option clearing license in the US and started to self-clear options So during the transition period, we will use both Tiger and IB for customers with different options strategies.
spk07: Thank you, Mr. Guan. May I ask what our expectations are for new users in 2022? Can I ask the new paying clients guidance in 2022? Sure.
spk02: Yes, so as Tianhua mentioned, so right now the market has been very volatile. Okay, so it's really hard for us to give accurate estimates given the market backdrop is not stabilized.
spk03: And in addition, we just entered a new market, so we want to, you know, let it run for a couple months so we get a feel like how we can give a better guidance to the investors.
spk07: Thanks. 了解,非常感谢。 Thanks.
spk04: Our next question comes from Cindy Wang with China Renaissance. Your line is open.
spk05: 在去年十月的時候已經拿到了香港的牌照。 那目前在香港的佈局以及今年的一些策略上面可以跟我們做一個分享。 我這邊翻譯一下我的問題。 So, since you have already obtained the broker-dealer license in Hong Kong in October last year, what is the current progress and what is the strategy you are going to adopt this year in Hong Kong? Thank you. 好,謝謝。
spk02: Our strategy in Hong Kong is divided into three steps. The Hong Kong project is also an important step for Tiger. We are still looking forward to it. The first step is to sell Hong Kong IPO. We are already selling a lot of Hong Kong projects. Currently, there are a lot of projects in stock. Currently, the market is a bit weak. Some projects in Hong Kong have been delayed. The second step is We are also working hard to build a system related to Hong Kong stock trading and settlement. The third step is the promotion of Hong Kong retail. Currently, due to the impact of the epidemic, we are hiring people in Hong Kong to develop and regulate the system. Okay, so as Tianhua mentioned, Hong Kong has been really important for us.
spk03: Traditionally, we didn't have a Hong Kong license, so our UE port user was somewhat lag behind our competitors in local Hong Kong. So right now, since we got the license back in October last year, there are three steps we plan to enter Hong Kong. First of all is to be more active on Hong Kong IPO. As we mentioned earlier, we have been very active in Hong Kong IPO in the fourth quarter for lots of Chinese ADR secondary listing and Hong Kong local listings. But for second and third step, which is to replace IB to clear Hong Kong trades and also to roll out Hong Kong retail customer acquisition. So we are building the infrastructure and system, but unfortunately due to the COVID situation in Hong Kong, our hiring system development and testing all have been somewhat delayed. So we hope the COVID situation will get better soon so we can work on the system integration for our Plan 2 and Plan 3, which is self-clear Hong Kong equity trades and also our Hong Kong marketing. Thanks.
spk05: Thank you. Very clear.
spk04: Thank you. This concludes question and answer session. I would now like to turn the call back over to Clark Ducey for closing remarks. Thank you. This concludes today's conference call. Thank you for participating. You may now disconnect.
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