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spk04: Ladies and gentlemen, thank you for standing by and welcome to Upson Tech Holding Limited Second Quarter 2022 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, September 7, 2022. I'd now like to hand the conference over to your first speaker today, Mr. Aaron Lee. is Asset Relations Director. Thank you. Please go ahead.
spk05: Thank you, Operator.
spk01: Hello, everyone, and thank you for joining us for the call today. Up FinTech Holding Limit Second Quarter 2022 Earnings Relief was distributed earlier today and is available on our IR website at ir.iTiger.com, as well as Globe News Service. On the call today from Up FinTech, I'm Mr. Wu Tianhua, Chairman and Chief Executive Officer Mr. Zhuang Zeng, Chief Financial Officer, 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 the remarks. Now let me cover the safe harbor. The statements we are about to make contain sportsbooking statements within the meaning of the U.S. Private Security Education 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 statement, please refer to our Form 6K furnished today, September 7, 2022, and our annual report on Form 20S filed on April 28, 2022. We undertake no obligation to update any forward-looking statement except as required under the 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: Hello, everyone. Thank you very much for participating in the second quarter of the Laowu International press conference in 2022.
spk01: Hello, everyone. Thank you for joining the Tiger Broker Second Quarter 2022 Earnings Conference Call. market backdrop remains challenging in the second quarter, particularly in the U.S. capital market. The weak U.S. market performance somewhat slowed down the trading activities and asset growth, given that our clients have more exposure in the U.S. market compared to Hong Kong. With growth in the 2B business and prudent capital deployment, the total revenue of the second quarter increased by 2% from the first quarter. to reach 53.5 million US dollars. Now that that income also turned profitable to 3.5 million US dollars demonstrates the resilience of our business model during market turbulence.
spk02: Today, in the first half of the year, we have added nearly 60,000 new users. We are full of confidence in the guidance of at least 100,000 new users throughout the year. In terms of customer overall assets, compared to the end of the first quarter, the market was affected by the market weakness of M2M2, which dropped by 2.3% to US$149 billion. However, the trend of customer asset inflows has not changed. In this quarter, the number of new customer asset inflows exceeded US$15 billion, and the flow rate of asset customers reached more than 99%.
spk01: They added 27,900 funded accounts this quarter, with over 70% coming from outside of China. Our total number of funded accounts also exceeded 730,000 by the end of the second quarter, an increase of 38.2% from the same quarter last year. And we are confident to deliver our annual guidance of acquiring at least 20,000 new funded accounts this year. In the second quarter, mark-to-market loss Q had an adverse impact on the total collect assets, which slightly decreased by 2.3% to 14.9 billion U.S. dollars compared to the end of the fourth quarter. But the trend of healthy asset inflow continues. Net asset inflows exceeded 1.5 billion U.S. dollars this quarter. Funded account retention rate exceeded 99% this quarter, demonstrating users' confidence and trust in our platform.
spk02: In the second quarter, the cost of raw materials was about 300 US dollars, which is 10% lower than in the first quarter. However, the quality of the users remained high. In Singapore, after the development over the past few years, Singapore's headquarters has become the largest area of international users and customer storage in the world. In this quarter, more than 60% of overseas users come from Singapore and are in the leading position in the industry. In the second quarter, We pay very close attention to client quality and payback period. In the second quarter, average CEC profited account was about US$300, a 10% decrease from the first quarter.
spk01: where we keep acquiring high quality clients. Taking Singapore as an example, that's been Singapore for two years and now Singapore already becomes our company's largest market in terms of both incremental and existing clients. More than 60% of our new funded accounts in the second quarter coming from Singapore, a testament to our industry leading user acquisition in the region. The average net asset inflows of our newly acquired clients in Singapore exceeded US$9,000 in the second quarter, further decreased from around US$8,000 in the first quarter, solidifying our leading position in both market share and client quality in Singapore.
spk02: We are determined to expand our investment in R&D to enhance the efficiency and user experience. In terms of capital calculation, this year, the overall capital calculation cost of the second quarter has been improved by the proportion of total income. We continue to invest in research and development to improve operational efficiency and to enhance user experience.
spk01: With self-clearing, the execution and clearing cost at a percentage of the trading commission further decreased compared with the previous quarter. To better help our users to navigate the market turmoil, we have launched the 8.0 version of our app with both light and pro models, which provides a more simplified interface and diversified products offering.
spk02: Now, we are going to be able to maintain a strong development trend. In the second quarter of this year, we will add 26 new customers. The total number of services has reached 364 and has increased by 68% in the same year. The E-SOL service provided by Laowu International has covered from project design to digital management, and has been a full-fledged service system. It has become one of the top service providers of many A-stores, Hong Kong stocks, US stocks, listed companies and development companies. On the other side of the net, Laowu International has participated in 11 US-Hong Kong stocks IPO projects. Among the three US-stores projects, it is the leading shareholder. According to the third-party WANDA information data, the U.S. IPO sales ranking in the first half of 2022, the U.S. IPO sales in the first half of this year, the amount of issuance and sales, are ranked third in the world. Only in the second quarter of this year, the U.S. IPO sales in the U.S. are ranked first in the world in the amount of issuance and sales. The investment ability and capital market experience are recognized by the U.S. local industry.
spk01: Our 2B business continues to grow. In the second quarter, we added 26 new companies to a total of 364 ESOP clients, a year-to-year growth rate of 68%. We provide a comprehensive ESOP services from client design to digital management and have become the go-to choice for many start-ups and public companies listed in PRC, Hong Kong, and US. In terms of the investment banking business, We underwrote 11 U.S. and Hong Kong IPOs in the second quarter, in which we were the lead bank in three U.S. IPOs. According to Wanda, Wint Data Consulting, we ranked number three in number of deals underwrote for the first half of this year, and number one globally for the second quarter. Now, I would like to invite our CFO, John, to go over our financials.
spk03: Let me go through our financial performance for the second quarter. All numbers are in U.S. dollar. Total revenue were $53.5 million this quarter, a decrease of 11% year-over-year as market backdrop, particularly the U.S. market, was still choppy, which slowed down trading and margin activities. On a sequential basis, we managed to offset the slowdown in commission with more corporate service revenues. such as underwriting and IRPR services, so total revenue grew 2% on a quarter-over-quarter basis. Cash equity take rate was 6.5 bps this quarter, slightly better than 6.3 bps of last quarter and 6 bps in the same quarter last year. Our pricing strategy has been consistent. The difference in take rate are primarily due to changing share price as for U.S. equities, We charge by number of shares, not trading volume. Now on the cost. Interest expense was $3.5 million, a decrease of 27% from the same quarter of last year, primarily due to more interest expense savings from U.S. self-clearing. Execution and clearing expense were $3.9 million, decreased 41% from same period last year. Since we started self-clearing, Clearing expense as a percentage of commission have come down from over 20% a year ago to under 5% this quarter for both U.S. cash equities and options. We expect further reduction in clearing expense when we start self-clear Hong Kong equities. As of right now, we are paying about 50% of our Hong Kong commission as clearing expense. Employee compensation increased 25% year-over-year to $25.6 million this quarter. as we added headcount during last year to support global expansion. In line with the headcount increase, occupancy expense increased 69% to $2.5 million, but general and administrative expense decreased 15% year-over-year to $4.3 million due to one-off professional service fee occurred last year. Marketing expenses were $8.4 million this quarter, decreased 65% year-over-year. We focus on quality of new years. Don't see current market condition is suitable for major marketing campaign as we keep a close eye on CAC and payback. We will dynamic and adjust our marketing strategy based on market environment. Communication and market data expense were 7.2 million, an increase of 40% from a year ago due to rapid user growth and expended market data coverage. Total operating costs were $51.1 million, decreased 17% from the same quarter of last year. As a result, we narrowed our gap loss to $0.9 million from a loss of $21.5 million in the same quarter last year. Non-GAAP-led income turned positive to $3.5 million versus the non-GAAP-led loss of $4.4 million last year. Now I have concluded our presentation. Operator, please open the line for Q&A. Thanks.
spk04: Thank you. To ask a question, please press star 1 1 on your telephone. Please stand by while we compile the question and answer roster. Once again, to ask a question, please press star 1 1 on your telephone. Our first question comes from Han Pru from CICC. Please ask your question.
spk08: Hello, Mr. Guan. Thank you for giving me the opportunity to ask a question. I am Puhan, an analyst from China. I have two questions about Singapore. The first is that we see that the competition in the Singapore market is continuing to increase. I would like to ask how we can maintain the market competitive advantage and continue to increase the market share of users. The second question is that we see that Singapore has become our largest stock and value market. What is the current cost of goods in this area? And what changes are expected to happen in the future? Because we see that the overall cost of goods is declining, so we want to see the specific situation of Singapore. I will translate it here. Thanks, Madeline, for taking my question. This is Han from CICC. I have two questions related to the Singapore market. First, how do we maintain and penetrate Singapore market with the increasingly competitive environment? Secondly, what is the customer acquisition cost in Singapore this quarter? And how do we see the trend continuously? Thanks.
spk02: Okay, thank you. In the past year or so, Singapore's competition has been very intense. In addition to local traditional business owners, there are also many Internet business owners in Singapore in the past year. In general, we are welcome to compete. More products are also a good thing for local users. For us, controlling the cost of goods and maintaining the quality of the users is a problem that we need to pay attention to in this competition. Our goal in Singapore is to become the largest and most trusted broker in the country. We are long-term-oriented. We will not over-pursue the cost of goods and sacrifice the quality of the users. We think that product and research are the core competitiveness of us as a technology brokerage company. So we value the quality of the product very much. We continue to optimize our experience and launch more functions to meet the investment needs of different types of investors, improve the experience, improve user connectivity and up value. We can see from the second step of the report that even in such a competitive environment, in a bad environment, We have always been leading in Singapore. In the second quarter, we have more than 60% of our customers are from Singapore. In the second quarter, we have more than US$9,000 of new users. It is better than the first quarter. At the same time, the cost of goods has decreased. This shows that our market share and user quality have improved compared to the previous quarter.
spk05: Okay, I'll translate.
spk01: Well, yes, the landscape is getting more competitive in Singapore because in addition to traditional brokers, there are also some online brokers, more online brokers coming to Singapore. We do embrace the healthy competition as long as it could bring better products and service to the local clients. Well, for broker, customer acquisition cost control and acquiring clients with high quality are the imperative tasks to cope with during the competition. And our purpose is to be the largest and the most trustworthy broker in Singapore. Our strategy is shooting for the long-term development, so we will not sacrifice the quality of clients or incur high CEC just for short-term growth. We believe the research and development is the core competitiveness of Tiger. So we do attach great importance to product quality. We continue to optimize our products and draw out more functions to meet the investment needs of different types of investors, thus to improve client engagement, the user's thickness, as well as the output. As we can see from our financials in the second quarter, we keep staying ahead in the Singapore market under the wage market backdrop and intensive competitive landscape. More than 60% of our total newly acquired clients in the second quarter are coming from Singapore. and the average net asset inflows of our new vintage clients in Singapore exceeded US$9,000, while the average CEC decreased sequentially, solidifying our leading position in both market share and client quality.
spk02: Regarding the second question, the average CEC in Singapore in the second quarter was about US$215. After deducting the brand fee, Singapore's local CAC is about 156 US dollars. As Auxin is still in the early stage of the industry, the pre-pandemic marketing cost will be higher than the current one. So, the total cost of the CAC in the second quarter is about 300 US dollars. The first quarter of the year, the price of the CAC has dropped. In the first half of this year, the global financial market has had a relatively large wave. Customers have been affected by this. In this case, we have also made a relatively cautious investment in marketing fees. In the future, we will also adjust the relevant marketing fees according to the market environment, and use our industry capabilities to try to get high-quality users in a reasonable or cost area, similar to our In the second quarter, the average CEC in Singapore was around US$215.
spk01: If we lessen the branding expense, the average CEC will go down to US$156. Meanwhile, we launched our services in Australia in the first quarter. So when we enter a new market, similar to what we've done in Singapore, we will spend more branding costs to promote our company. Therefore, the average CEC in Australia and New Zealand is still relatively high, which brings the total average CEC to about $300 in the second quarter, decreased about 10% on a quarter-over-quarter basis. Well, the market sentiment was weak during the first half year, and investors prefer to stay on the sideline. Under this kind of circumstance, we are very prudent with the marketing spending. We keep a very close eye on CEC and payback period to make sure we can have a very healthy business model, and we will just be very dynamic to adjust our marketing strategy.
spk04: Thanks, Benjamin. That's very helpful. Thank you for your question. Our next question comes from the line of Cindy Wong from China Renaissance. Cindy, please ask your question. Cindy line has disconnected. Once again, if you wish to ask a question, please press star 1 1.
spk06: Our next question comes from the line of Judy Zhang from Citi. Judy, please ask your question. Can you hear me?
spk03: Yes, Judy, you can hear me. You can hear me, right, Judy?
spk09: I'm Judy from Citi. Thanks management for giving me this opportunity to ask questions. This is Judy Zhang from Citi. I have two questions. The first question is, we saw Tiger has acquired Hong Kong brokerage lessons for almost a year. What is the latest status and the development plan to develop business in Hong Kong? And second question is, in light of Fed accelerating rate hike cycle, what is the impact to the company's business? And what is the potential response from the company? Thank you.
spk03: Okay, so in regards to our progress in Hong Kong, so we have some delays earlier this year, this COVID. Now I think everything is progressing, you know, on the track. So far, we are upgrading the trading infrastructures, for example, getting more direct lines, expanding our server, doing testing with the exchange, and backtest all the bookend records using our own system. So far, I think everything is on the right track, and hopefully we can have a soft launch in the near future. Also, recently, we have obtained the Type 4 and 5 license from SFC. which allows us to create more content for users and our online communities. So we will apply for more license down the road so we can provide more value added service to our Hong Kong users. Okay, Tianhua.
spk02: Currency is an industry with a beta effect. In the beginning of every year, JCCC is a double-edged sword in the business of currency. From a financial point of view, as the company's user volume and confidence ratio gradually increase, JCCC can allow us to get more interest income. But on the other hand, we can also see that the flow rate is shrinking, and it is expected that the return on the market, and IPO launch may have a negative impact. In the future, we will put more effort into product optimization and user education to help our users choose more reasonable investment strategies to overcome market fluctuations and strengthen user connection. At the same time, we will also use this period of time to improve Hong Kong's trading infrastructure as soon as possible, so that when the market is in turmoil in the future, we can provide better services to our users.
spk01: Thank you. Okay, so a second question about the rate hike. You see, the broker-dealer industry has a very strong beta effect. We think the fat tightening will have mixed impacts on our business and the whole industry. So on the bright side, we can, of course, generate more interest income from the increased rate cycle, especially with our increased client base and the self-clearing efficiency. But on the other side, to a certain extent, The liquidity tightening will have negative impacts on the capital market activity and the transaction volume as well as the IPO issuance. So to neutralize the downside of strategic speaking, we will keep concentrating on investor education and product optimization and consequently to have our clients to better navigate market turmoil and enhance client engagement. In addition, we will keep upgrading the infrastructure in Hong Kong so that we can provide better services to our clients when the market recovers. Thank you.
spk04: All right, thank you. Our next question comes from the line of Cindy Wang from China Renaissance. Please ask your question, Cindy.
spk07: Thank you for the opportunity to ask this question. I'm sorry, I just cut you off. I have two questions for you. First, can you share with us the current business performance in the Auxin market? What will you do in the second half of this year in terms of goods and products? The second question I would like to ask is, can you help us with a breakdown of the new入金用户 this quarter? As I mentioned earlier, the Singapore market accounted for almost 60%. Thanks for management to give me the opportunity to ask questions. So I have two questions here. First question is, could you provide a business update for Australia and New Zealand markets in second quarter of 2022? And what's the marketing strategy you will adopt and any new products will be launched in these two markets in second half of this year? Second question is regarding to the new paying client. Could you provide a breakdown by geographies and how do you expect the distribution of the new paying clients in the second half of this year. Thank you.
spk02: Okay, thank you. More than 10% of our new users in the second quarter are from the Auxin region. We are actively promoting the localization of our products. With the multi-functional investment analysis function and smooth trading experience, our TypeTrader app ranks 31st in the local Apple app market. ZENFU has become the first team in the local technology industry. We also sponsored the local basketball team to enter the local market. In the second quarter, the number of new registered users in Laohu Alamia has increased by more than 80%, and the volume has doubled. The market's new users have also been further improved. We look forward to more new users coming to Laohu through the next few quarters to achieve better international results.
spk01: Thank you. Okay, so I'll translate. In general, in the second quarter, more than 10% of our new funded accounts are coming from Australia and New Zealand. We still make all our efforts, such as sponsoring the local sports team, just to localize our products and services by adding more features that will give the local investors more control over the investment. So in the meantime, still keeping the user experience simple and efficient. In addition, the ranking of the TigerTrade app rose to number 31 at the end of the second quarter, which is high among the online brokers in Australia. As a result, our newly registered users increased more than 80%, and the trading volume also doubled on a sequential basis in Australia. We keep fine-tuning our local marketing strategy and localize. Sorry, localization and we are confident that there will be more local users coming on board of Tiger platform.
spk02: Regarding the second question, this quarter, the company continues to promote our internationalized business. More than 70% of our new users are from overseas. The breakdown is like this. More than 60% are from Singapore. more than 10% from Australia and New Zealand, and more than 20% from mainland China. We expect that the number of new users in the second half of this year will still be mainly overseas. As the market continues to expand in the Auxin region, we expect that the number of new users in the Auxin region will gradually increase in the second half of this year. Thank you.
spk01: Okay, so second question about our new clients acquired. Okay, so basically our internationalization is progressing very well. In the second quarter, over 70% of newly funded users were acquired from overseas markets, in which about 20% of funded accounts came from mainland China, more than 6% came from Singapore, and for the rest, 10% to 20% were from Australia and New Zealand. We do expect the proportion of new clients acquired in Australia and Singapore will increase in the second half year of 2022, alongside with our local development and expansion. Thank you, Cindy.
spk04: Thank you. Very clear. Thank you. There are no further questions at this time. I'll now turn the conference back to Mr. Aaron Lee for closing remarks.
spk01: Okay. Thank you, operator. 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 Tiger. 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. Thank you.
spk04: Thank you. This concludes today's conference call. Thank you for participating. You may now disconnect.
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