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spk05: ladies and gentlemen thank you for standing by and welcome to the up fintech holding limited fourth 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 march 29th 2023 i would now like to hand the conference over to your first speaker today Mr. Aaron Lee, the head of IR, thank you. Please go ahead.
spk02: Thank you, operator. Hello, everyone, and thank you for joining us for the call today. Our FinTech Coding Limited fourth quarter and full year 2022 earnings relief was distributed earlier today and is available on our IR website at ir.itigerup.com, as well as Globe News Services. On the call today from Upstream Tech are Mr. Wu Tianhua, Chairman and Chief Executive Officer, Mr. Zhang Zeng, 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. 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. So now let me cover the safe harbor. The statements we're about to make contain forward-looking statements. This is the meaning of the U.S. Private Security Execution Reform Act of 1995. A number of factors could cause actual results to differ materially from those containing 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 burnished today, March 29, 2023. and our annual report on Form 28, filed on April 28, 2022. 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. Hello, everyone.
spk03: Hello, everyone. Thank you for joining the Tiger Brokers fourth quarter and full year 2022 earnings conference call. In this market environment, Lao Wai will make rapid changes and adjustments to ensure the effectiveness and internationalization of the stock market. In 2022, we will further consolidate our leading position in Singapore. We will open the second battlefield in Auxin and achieve good results. We will strengthen the foundation of Hong Kong stock market and officially start the Hong Kong retail market at the end of the year. At the same time, we will greatly increase the cost of self-calculation and reduce costs. In 2022, we will achieve a total annual income of US$2.25 billion. 2022 was a year with challenge.
spk02: Shared political conflicts, thoughts with high federal reserves to counter high inflation, meltdown in crypto sector all hampered investor confidence and slowed down market activities. Under this macro backdrop, we remain committed to international growth with an emphasis in cost and efficiency. In 2022, We further solidified our market-leading position in Singapore, entered Australia and New Zealand markets to expand our footprint. Officially launched retail brokerage in Hong Kong and keep improving our trading efficiency with upgraded self-clearing infrastructure. Total revenue for 2022 was $225 million. Non-GAAP net profit was $12.7 million for the full year. In the fourth quarter,
spk03: Interest-related income and sales income will be further improved in the third quarter. The overall income increased by 15.2% compared to the third quarter, and increased by 2.7% compared to the same period last year, reaching 6,390 million US dollars. At the profit end, the optimization of the German company's income structure and the economic operation in terms of cost and cost will continue to maintain a stable business status. The Gap and Non-Gap of the parent company are 120 million US dollars and 450 million US dollars respectively. In the fourth quarter, interest-related income and ideal underwriting income both increased compared to the third quarter. Total revenue was $63.9 million, increased 15.2% quarter-over-quarter and 2.7% year-over-year.
spk02: Gap and non-gap net profits attributable to upvintech was $1.2 million and $4.5 million. Both improved from the same quarter of last year. Demonstrating the resilience of our business model in volatile market conditions.
spk03: This quarter's new entry-level users are 27,300. The total number of entry-level users this year reached 108,100, exceeding our 100,000 entry-level users. In the end of 2022, the total number of new recruits was more than 780,000. Compared to the same period last year, the growth was 16.1%. Of the new recruits in this quarter, more than 90% came from the market outside of mainland China. In terms of the customer's total assets, the trend of customer assets entering and leaving has remained strong. In the fourth quarter, the income was more than US$1.4 billion. After the impact of the March to March window loss, the customer's total assets in this quarter rose by 8.1% compared to the third quarter, reaching US$1.4 billion. At the same time, we are also very happy to see the improvement of the new entry quality of the fourth quarter. With the largest number of customers and storage customers in the international market, Singapore is an example of this. The average entry quality of the new entry customers in the fourth quarter is about 12,000 US dollars. In the third quarter, there is an improvement of about 11,000 US dollars and in the second quarter, there is an improvement of about 9,000 US dollars. This proves that we have improved our business in this important market. In the fourth quarter, we added 27,300 new funded accounts, and the total number of funded accounts for the year reached 208,100, exceeding our annual guidance of 100,000 funded accounts.
spk02: The total number of funded accounts at the end of 2022 exceeded 780,000, representing a growth of 16.1% compared to the end of the last year. Among the new funded accounts this quarter, over 90% were from markets outside mainland China. In terms of total client assets, the trend of asset inflow remains strong, with net inflow exceeding 1.4 billion U.S. dollars in the fourth quarter. After neutralizing the impact from mark-to-market loss, total client assets in this quarter increased by 8.1% compared to the third quarter, reaching $14 billion. We are very glad to see the quality of our newly acquired customers further improve in the fourth quarter. Taking Singapore as an example, where we have most client base, the average net asset inflows of newly acquired clients in Singapore was around US$12,000 in the fourth quarter, further increased from over US$11,000 in the third quarter and US$9,000 in the second quarter, demonstrating our growth presence in this key market and unwavering commitment to provide our clients with exceptional services. In addition, the overall average CEC was US$271 in the fourth quarter, decreased 17% quarter-over-quarter, demonstrating we keep acquiring high-quality clients while being prudent with marketing and branding expenses.
spk03: We continue to expand our investment in R&D to enhance the efficiency and user experience. Thanks to our long-standing U.S. stock and computing capabilities, computing cost accounts for total revenue from 21% in 2021 fell to 14% in 2022. With the expansion of the Hong Kong retail market, Hong Kong stock capitalization capability will also show up in 2023, further improving the overall capitalization efficiency. In addition, based on capitalization base capability and tax function, the U.S. stock market and ETF positioning functions launched in the fourth quarter better serve investors with long-term investment and fixed capital wealth habits. In Hong Kong, since the expansion of the retail market in December, We have continuously launched Hong Kong U.S. stock, Wall Street Stock Exchange, ETF, equity and financing, IPO, and other services. In April this year, we will launch financial management products in Hong Kong, tiger money bag. Currently facing users in Hong Kong, we strive for the most competitive price and high-quality product experience to fulfill our business and commitment to local users.
spk02: We continue to invest in research and development to improve operational efficiency and to enhance user experience. Benefiting from self-clearing capability in the U.S., the execution and currency as a percentage of growth commissions significantly decreased from 21% in 2021 to 14% in 2022. And now we expect further reduction in clearing expenses as we are in progress of self-clearing Hong Kong equities in 2023. We also launched the recurring investment function for U.S. stock and ETFs in the fourth quarter, making it more convenient for long-term investors to invest periodically. In addition, since our official launch in Hong Kong was last December, we have kept adding products to serve local investors with the most competitive price package in the industry. Now we offer Hong Kong and U.S. equities, warrants, auctions, margins, We will add Tiger Vault, our wealth management products, in April.
spk03: We will add Tiger Vault, our wealth management products, in April. We will add Tiger Vault, our wealth management products, in April. We will add Tiger Vault, our wealth management products, in April. Our to-be business continues to perform well.
spk02: In the investment banking business, with the IPO market rebound, we underwrote 17 U.S. and Hong Kong IPOs in the fourth quarter, including Ator, Lexa, Holding Limited, and Chifu Technology, bringing the total number of U.S. and Hong Kong IPOs underwritten for the year to 48. According to WIND data, Tiger Brokers ranked third globally and fourth globally in terms of the deal counts and values for U.S. IPOs underwritten in 2022. Additionally, in our ESOP business, We added 26 new clients in the fourth quarter, bringing the total number of ESOP clients served to 419 by the end of 2022, increased by 34% year-over-year. Now I would like to invite our CFO, John, to go over our financials. Great.
spk04: Thanks, Tianhua and Aaron. Let me go through our financial performance for the fourth quarter. All numbers are in US dollar. Total revenue were 63.9 million this quarter, an increase of 2.7% year-over-year. For the whole year, total revenue were 225.4 million, a decrease of 14.8% from last year due to a slowdown in market activities, which dragged down commission and IPO underwriting. Our quarter-over-quarter basis. Total revenue increased 15.2%, primarily due to a 23% jump in interest-related income and a 46% increase in other revenue versus prior quarter. Cash equity take rate was 6.9 bps this quarter, slightly better than 6.7 bps of last quarter. With income-mission revenue, about 60% comes from cash equities, close to 30% from options and the rest from futures and other products. Now on to cost. Interest expense was $7.2 million, increased 80% from the same quarter last year, as interest expense and securities lending expense both increased in line with the rate hike. Execution and clearing expense were $4 million, decreased 42% from the same period of last year. We expect further reduction in clearing expense as we are in progress of self-clearing Hong Kong equities. Employee compensation decreased 14% year-over-year to $24.5 million this quarter, as we adjusted headcounts in response to challenges arising from the market backdrop. In other words, the employee compensation, GNIA expense, which was $6 million, decreased 31% from the same quarter of last year due to one of professional service fees occurred last year. Occupancy, depreciation, and amortization expense increased 12% to $2 million, between an increase in the office space and a relative improvement. Marketing expense was $7.4 million this quarter, decreased 36% year-over-year. We focused on quality of new users, don't see current market conditions suitable for major marketing, as we keep a close eye on CAC and payback. Overall CSC dropped 17% quarter-over-quarter to US dollar 271. We will adjust our marketing strategy based on the market environment. Communication and market data expense were US dollar 7.1 million, a decrease of 9% from a year ago. Total operating costs were 51 million, decreased 22% from the same quarter of last year. As a result, bottom line increased on both GAAP and non-GAAP basis year-over-year. Gap-led income turned positive to $1.2 million versus a gap-led loss of $5.4 million last year. Non-gap-led income further increased to $4.5 million from a non-gap break-even in the same quarter of last year. Total non-gap-led income for the whole year of 2022 was $12.7 million. Now I have concluded our presentation. Operator, please open the night for Q&A. Thanks.
spk05: Thank you. To ask a question, you will need to press star 1 and 1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 1 and 1 again. Please stand by while we compile the Q&A queue.
spk06: Our first question comes from the line of Cindy Wang from China Renaissance.
spk05: Please go ahead. Your line is open.
spk08: In the fourth quarter, we saw that there are 27,000 new account accounts. Compared to the third quarter, there is an increase in the number of accounts. Can you help us explain how the new account accounts are placed in the fourth quarter? The second question is that the tiger token has also entered the Hong Kong retail market. It has been a quarter. Now, can you share with us your current professional progress and your customer strategy in Hong Kong? I will quickly translate my question. So, thanks, Nathan, for taking my questions. So, this is Cindy from China Renaissance. So, I have two questions. First question is regarding to the new funded account. So in fourth quarter, Tiger Brokers added 27,000 new funding accounts and it actually increased sequentially. So could you provide a regional breakdown of new funding accounts in fourth quarter? The second question is related to the Hong Kong retail market. Since you enter into the Hong Kong retail market, it's been a quarter. So can you share us the current business progress and the customer acquisition strategies in Hong Kong? Thank you.
spk03: Okay, thank you. First of all, in terms of 4G access, about 90% are from non-Chinese countries, of which 55% are from Singapore, nearly 20% are from Australia and New Zealand, and about 15% are from the U.S. Okay, regarding the first question, in the fourth quarter, around 90% of newly funded accounts were from outside of mainland China, with around 55% coming from Singapore, nearly 20% from Australia and New Zealand, and 16% from the United States.
spk02: Let's already stop accepting new onshore clients based on CSRC notice on December 30th. Currently, only serve existing onshore clients and will follow the regulatory guidance when more detailed policies are in place.
spk03: Regarding the second question, Hong Kong's beef market is still a new market for us. In the first quarter of this year, we have been implementing different marketing strategies. To be more specific, we have sponsored Chinese New Year's Eve brand ads on local mainstream newspapers, and we have held online discussions with the general public to seek feedback. On the online side, we have also provided a variety of resale sets for local new customers. In general, Hong Kong's marketing strategy is consistent with our global customer strategy, which is to balance CAC and ROI. We will continue to adjust the Hong Kong customer strategy to achieve this goal. In terms of products, In addition to Hong Kong, Meigu, Zhenggu, Qiquan, Oolong, and ETFs, we are going to increase our wealth management products in the second quarter of this year. Our goal is to provide a variety of products for users and enjoy the most competitive price and friendly use experience. I think our pricing is very competitive in the Hong Kong market. Currently, we do not charge any commission and platform fees for transactions such as Zhenggu and Oolong. Okay, regarding a second question about Hong Kong launching progress. Given Hong Kong retail is a new market for us that's been testing different marketing strategies in the fourth quarter,
spk02: For example, for offline marketing, we bought branding advertisements on traditional newspapers. We did Chinese New Year greeting advertisements. We held discussion panels with seed users to solicit feedback. For online marketing, we have several promotion packages for new users. So overall, Hong Kong marketing strategy is in line with our global strategy, which is balance CEC with ROI. We will keep fine-tuning our Hong Kong marketing strategy to meet these objectives. On the product side, in addition to cash equity, auctions, warrants, we will add TigerVault, which is our wealth management product in the second quarter. Our goal is to provide users with diversified products while enjoying the most competitive price and friendly user experience. I think our price is very competitive for Hong Kong investors. Currently, we charge zero commission and zero platform fee to trade Hong Kong equities and warrants. Although we only launch for one quarter, Local investors took notice and we were awarded the best equity trading platform by local newspapers. We expect the number of Hong Kong-funded accounts will gradually increase this year. Thank you.
spk05: Thank you. We'll now move on to our next question.
spk06: Please stand by.
spk05: Our next question comes from the line of Han Pu from CICC. Please go ahead. Your line is open.
spk07: I have two questions for you. The first one is about some of the risks related to the deposit of new startup companies. I would like to ask if the tiger has been affected and if there are some financial security measures that we need to take into account. The second one is to ask the management to update us on the examination and progress of our entire business after the 1230 China International Commission's explanation of cross-border economic business last year. I would also like to ask about my question. This is Han from CICC. Thanks for taking my question. I have two questions. First one is regarding the fund safety concerns raised by the SVB issue. Is there any current influence on Tiger and our future precautions? Secondly, could you please give us some updates on the regulatory environment and our business operations since the CSRC announcement by the end of last year? Thank you.
spk03: Thank you. The first question is that there has been a lot of interest in the Guiwu Bank case recently. I would like to make a statement here. Lao Wu International has not opened any accounts nor any funds in the Guiwu Bank, so the Guiwu Bank case has not affected us at all. In Lao Wu International, we are the main brokerage partner overseas, and we have chosen some very conservative large-scale banks as our brokerages. For example, our Hong Kong currency is mainly in China and Asia. and some major banks such as Singapore, Xinzhai Bank and Huaxi. In addition, we also continuously monitor the operating data of the company since the incident occurred. From the outbreak of the Gui Gu Bank incident on March 9 to March 24, the total assets of our international customers remain stable and have a small rise. Overall, it is still a trend to enter the gold. We will also use the incident to assess the existing cooperation bank risks
spk02: Okay, so regarding the recent high-profile incident involving Silicon Valley Bank, firstly, I want to assure you that Tiger Brokers has no account of funds with SBB, and therefore this incident has no impact on our operations. Besides, we are operating as licensed brokers overseas and collaborating with large overseas banks. as our custodian and settlement banks, such as SDBC Asia, DBS, and Citibank, etc. Since the incident occurred, we've been closely monitoring our operational data. During the two weeks from March 9th to March 24th, our client total assets remained stable with a slight increase. And overall, we still see the trend of net asset inflows. We take our responsibility as brokers seriously and we'll be evaluating the risks of our current partner banks carefully in light of the recent events. We will go to great lengths to fulfill our responsibility and obligations as brokers and to ensure the safety of our client-side.
spk03: The second question. For a long time, the company has paid great attention to the global compliance and management requirements. In the announcement of the China Stock Exchange in December 30 last year, it made it clear that the company will continue to the rules of cross-border securities. In general, although the announcement brought a short-term drop in the stock price, but as entrepreneurs, we think this is a milestone for cross-border securities supervision, which is conducive to the long-term development of the industry, and to avoid falling short of interest rates. Regarding the fall of interest rates in this supervision, Lao Guo Ji and I are also fully supportive and cooperative. We have stopped all China's financial services from operating on December 31, In fact, in the past year, about 90% of the company's new users are from non-China. Therefore, this policy will not have a significant impact on our business. In addition, we have completed a live investigation with the Beijing Provincial Supervisory Bureau. We are still waiting for the news of the improvement of supervision. We also noticed that on February 15, the spokesman of the press conference answered the reporter's question. The relevant securities companies and foreign companies can fully understand to fully understand the requirements of supervision, to comply with the law, and to do a good cover-up, to prohibit the investment of gold and silver, and to continue the exchange of gold and silver through the existing foreign accounts. Before the Chinese Consumption of Gold and Silver users in mainland China gain access to the supervision system of opening up their accounts, the old country will still follow the most prudent principle of assessing the use of gold and silver in mainland China, to prevent mainland China from adding new accounts, and to establish the right to serve good gold and silver customers.
spk02: Okay, regarding your second question, Tiger Brokers has always had a high emphasis on complying with global regulations and requirements. Recently, on December 30th of last year, the CSRC released the announcement that further clarified our regulations for China domestic investors to participate in cross-border securities activities. Well, this announcement resulted in a short-term decline in stock price. As entrepreneurs, We take this as a milestone in cross-border security speculation that will facilitate industry development in an orderly manner and prevent bad money dressed as good. In response to this update, Tiger Brokers have asked decisively to fully cooperate with CSRC. They have stopped accepting new clients from Mainland China immediately at midnight of December 30. As a matter of fact, in 2022, around 90% of our new client came from the overseas market, so this policy update will not have material impact on our business. In addition, we have completed on-site inspection in collaboration with the Beijing Security Regulatory Bureau and are currently awaiting further guidance from the regulator. On February 15th, in a press conference, The CSRC mentioned that the relevant brokers have fully and accurately understand the regulatory requirements and comply rapidly. And we stated the key requirement is to prohibit the increment of domestic investors while allowing existing investors to continue trading through their original overseas accounts. We will stick to this policy until further guidance from the regulators. Thank you.
spk05: Thank you. We'll now move on to our next question. Please stand by. Our next question comes from the line of Brandy Wang from Citi. Please go ahead. Your line is open.
spk01: Thank you, management, for taking my question. I have two questions here. First, we saw an income tax in fourth quarter increased a lot by around 38% quarter of quarter. which is driving the effective tax rate over 65%. Any reason behind this? And my second question is regarding the business outlook. As the market sentiment was weak in 2022, what's management's preview and guidance for 2023, and do we observe any business recovery lately? Thank you.
spk04: Okay, so let me answer the first question regarding tax rate. Okay, so 我先讲中文吧,然后我简单的翻译一下。 So 税的问题呢,是因为老虎在全球有很多的主体,然后每个主体呢,都需要按照当地监管的要求呢,去缴纳local tax。 因此我们合并报表上的税呢,实际上是老虎全球各个主体得所的税的总和。 然后去年呢,由于美联储的加息美元走强, Therefore, at the local level, for example, in Singapore and New Zealand, when the local currency is converted into US dollars to make a merger report, it causes a non-cash FX loss. The local tax law does not treat these FX losses as a tax expense. Therefore, when we are talking about local tax, we need to add these FX losses back, which causes an increase in interest rates. Of the 2.3 million taxes, about 2 million are produced in this way. When the US dollar falls, these taxes will be reversed. Okay, so in terms of the tax rate, the large portion of the $2.3 million, which is about $2 million, was due to unrealized foreign exchange losses. This was caused by the continued operation of the US dollar in 2022, which resulted in non-cash foreign exchange loss for our subsidiaries in Singapore and New Zealand. According to local tax regulation, those losses cannot be deducted as expense before tax. we have to add them back as a tax basis, which raises all the current income tax of about $2 million in the consolidated P&L in the fourth quarter. Of course, those expenses are allowed to be reversed with the depreciation of the U.S. dollar in the future and vice versa. Thank you. I can't find you. Go for the next question.
spk03: In 2022, the market is full of challenges and uncertainties. We have done our best to gain profit. US$1,270 million, more than 100,000 new users, and more than US$700 million of entry fees. These all represent our continued trust in users around the world, the profitability of our business model, and the effect we have gained in the field of economic innovation. We are all aware that the Internet blockchain business is a very strong beta-efficiency industry. At the same time, the time for us to enter Australia, New Zealand, and Hong Kong is relatively short. Okay, so we've got our second question about the preview and guidance of the coming year.
spk02: With the challenging and uncertain market of 2022, we've still achieved a non-gap profit of $12.7 million for the year, gained over 100,000 new financial accounts, and saw net asset inflows exceed 7 billion US dollars. These results demonstrate the trust we have earned from users globally, the profitability of our business model, and the effectiveness of our fine-tuned operations. As we all know that the online brokerage industry has a very strong beta effect, and it gave a relatively recent entry into the market of Australia, New Zealand, and Hong Kong. With these uncertainties being set, Our target is to acquire at least 100,000 new friendly accounts this year in 2023.
spk03: In 2023, we will continue to deepen our international strategy and actively strengthen and deepen the existing market. After entering the Singapore market, we have used less than a year to achieve Singapore's single profit. But in the future, if we rely only on the increase brought by Singapore, it will often be an unhealthy business model. So whether it is Auxin or Hong Kong, In 2023,
spk02: Tiger Brokers will continue to deepen our internationalization strategy and focus on improving the operating efficiency of our existing markets. After launching in Singapore, they've achieved profitability in less than two years. However, relying solely on Singapore for growth is an unhealthy business model in the long run. Therefore, whether it's Australia, New Zealand, or Hong Kong, we will further enhance the user experience, product diversity, and self-clearing efficiency. hoping that it will become another successful market system like Singapore. This will enable us to better leverage our fixed costs and better navigate the market turbulence, allowing the company to continue to develop while maintaining stable profitability. Thank you.
spk05: Thank you. That was the last question. As there are no further questions at this time, I'll hand the call back to you for closing remarks.
spk02: I would like to thank everyone for joining the call today. I'm now closing the call on behalf of the management team here at TIDA. 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. Thank you.
spk05: This concludes today's conference call. Thank you for participating. You may now disconnect.
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