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spk07: Ladies and gentlemen, thank you for standing by and welcome to the Art FinTech Holdings Limited third quarter 2023 earnings conference call. At this time, all participants are in a listen-only mode. There will be a presentation followed by question and answer session. I must advise you that this conference is being recorded today, November 27, 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.
spk06: Thank you, operator. Hello, everyone, and thank you for joining us for the call today. UpFintech Coding Limited Third Quarter 2023 Earnings Relief was distributed earlier today and is available on our IR website at ir.itigerup.com, as well as Globe News for our services. On the call today from UpFintech are Mr. Wu Tianhua, Chairman and Chief Executive Officer, Mr. Zhuang 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 Harvard highlights. Mr. Zeng will then discuss our financial results. They will both be available to answer questions during the Q&A session that follows the remarks. Now let me cover the same power. The statements we are about to make contain forward-looking statements, based on 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 could cause actual results to materially differ from those in forward-looking statements, please refer to our Form 6K, furnished today, November 27, 2023, and our annual report on Form 20S, filed on April 26, 2023. 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 English translation. Mr. Wu, please go ahead with your remarks.
spk03: 大家好,非常感谢各位参加老五国际2023年第三季度财报发布会。 Hello, everyone. Thank you for joining the Tiger Brokers' third quarter 2023 earnings conference call. 在第三季度 Germany's internationalized business continues to develop. Salaries and interest-related income have risen significantly. The overall income reached US$70 million, which rose by 6% and rose by 27%. On the other hand, Germany's company's capital-increased performance and sophisticated operation have maintained a relatively strong profit and loss in the last three seasons. The net profit of the parent company is US$13.2 million, which is about four times that of the same period last year. The net profit of the parent company, Nongam, is US$16 million, Compared to the previous quarter, it rose by 4.3%. Compared to the same period last year, it rose by 141%. We are very happy to see that the company's profit is rising in the first three quarters of this year. And this year, the number of non-GAM managers in the first three quarters has reached 41 million. It has exceeded the total number of non-GAM managers in 2021 and 2022. This shows that Laohu has the ability to make rapid adjustments according to different market environments and supervision requirements and achieve stable profit growth.
spk06: In the third quarter, we saw improvement in both commission and interest-related income. As a result, total revenue was $70 million, an increase of 6.2% quarter-over-quarter and 26.6% year-over-year. On the bottom line, as we started to see more operating leverage, Net income attributed to up fintech was $13.2 million, a slight increase from the previous quarter and approximately four times that of the same quarter of last year. Non-GAAP net income attributed to up fintech was $16 million, up 4.3% from second quarter of this year and an increase of 141% from the same quarter of last year. We are glad to see a consistent quarter-over-quarter growth in the company's bottom line for all three quarters this year. Total non-GAAP net income of the first three quarters of this year was 41 million U.S. dollars, already exceeding the combined full-year non-GAAP net income of 2021 and 2022. We are confident in our business model to be adaptable in different market environments and regulatory framework.
spk03: We'll be right back. to 18.9 billion US dollars. Of these, the entry fee for Singaporean market users remains stable and strong. In the third quarter, the average entry fee for Singaporean new entry users is about US$10,000. At the same time, we are also very happy to see that since the opening of LaoWu International in the Singapore market, the number of entry users in each quarter has remained relatively strong in the third quarter of this year. This shows that while we have high-quality new users in Singapore, In the third quarter, we added 24,604 new funded accounts, bringing the total number of new funded accounts in the first three quarters of this year to over 84,000. Total number of funded accounts at the end of the third quarter reached 865,000.
spk06: representing a growth of 15% compared to the same quarter of last year. In terms of total client assets, the trend of asset inflow remains strong, with net inflow over 1.5 billion US dollars in the third quarter. After neutralizing the impact from marked market loss, total client assets in this quarter increased by 9.3% quarter-over-quarter and 45.4% year-over-year, reaching 18.9 billion US dollars. Specifically, in the Singapore market, Net inflow from local users remains stable and strong. In Singapore, the average net asset inflows of our newly acquired clients in the third quarter were approximately $10,000, and we see similar trend in terms of net asset inflows from previous quarterly cohort groups. This demonstrates our ability to attract high-quality new users in Singapore and solidify our leading position in the local market.
spk03: We continue to increase the breakthrough and relay of product orders to improve user experience. This is the key to our long-term success. In the third quarter, the old tiger community online trading sharing function can be used to check the order dynamic of the shareholder, gain investment inspiration, and find trading opportunities. In addition, in the wealth management business side, since the first half of this year, the tiger has been continuously online currency fund and Hong Kong currency fund products, We continue to add new products on our platform to enhance user experience, which we believe is the key to our long-term success. In the third quarter,
spk06: The Tiger community introduced the Trading Sparks feature. Users can follow best-performing traders on our platform and leverage their trading ideas for investment opportunities. Additionally, on the wealth management business, following launch of U.S. dollar and Hong Kong dollar money market fund on Tiger Vault earlier this year, we recently added U.S. treasury to our wealth management platform in Singapore. We anticipate a launching of this new feature for Hong Kong users in December.
spk03: Our to-be business continues to perform well. In investment banking, we underwrote four U.S. and Hong Kong IPOs in the third quarter, including Early Works and Keep.
spk06: In our ESOP business, we added 27 new clients in the third quarter, bringing the total number of ESOP clients served to 505 for the end of the third quarter of 2023, increased by 29% year-over-year. Now I would like to invite our CFO, John, to go over our financials.
spk02: Hello, everyone. Thanks, Tianhua and Aaron. Let me go through our financial performance for the third quarter. All numbers are in US dollar. Total revenue was $70.1 million this quarter, increased 6.2% quarter-over-quarter and 26.6% year-over-year. Both commission income and interest-related income saw a sequential increase this quarter. Cash equity take rate was 6.1 bps this quarter. slightly decreased from last quarter. Within commission revenue, about 60% comes from cash equities, 30% from options, and the rest comes from futures and other products. Now on cost. Interest expense was $12.1 million, increased 182% from the same quarter of last year, in line with the rate hike. Execution and clearing expense were $2.4 million, decreased 26% from the same period of last year, primarily due to more self-clearing in U.S. and Hong Kong securities. Employee compensation and benefits expense were $26 million, an increase of 8% year over year due to an increase in global headcounts. Depreciation expense decreased 10% to $2.2 million as the depreciation of the headquarters office decoration expense has been completed. Communication and market data expense were $7.6 million, an increase of 16% year over year due to the increase in user base. Marketing expense were $5.2 million this quarter, decreased 30% year over year as we remain prudent with our marketing approach in the third quarter. General and administrative expense were $5.4 million, an increase of 55% year-over-year due to increase in professional service fees. Total operating expense were $48.8 million, slightly increased 3.1% from the same quarter of last year. As a result, both GAAP and non-GAAP bottom line increased quarter over quarter and year over year. GAAP-led income was $13.2 million, slightly increased 1% from the previous quarter and about four times that of the same quarter of last year. Non-GAAP-led income was $16 million, up 4% from the previous quarter and increased 141% versus the same quarter of last year. Now we have concluded our presentation. Operator, please open the night for Q&A. Thanks. Thank you.
spk07: We will now begin the question and answer session. To ask a question on the phone, please press star 1-1 and wait for a name to be announced. If you'd like to cancel requests, please press star 1-1 again. One moment for the first question. First question comes from the line of Han Pu from CICC. Please go ahead.
spk05: Hello, Manager Chen. Thank you for giving me the opportunity to ask this question. I am Puhan, an analyst at Zongjing. I have two questions to ask. The first question is, please, Manager Chen, please explain to us the distribution of the area of the new and new users in the third quarter. The second question is, we have seen that the performance of the profit side has improved significantly over the past year. If we look at the strategy for next year, how do we balance the stability and growth of the profit? Have we entered the plan to expand into the new region? Let me translate it for you. Thank you, management, for taking my question. I have two questions. Firstly, could you please give us the regional breakdown of the new funded accounts in Q3? And secondly, we have seen the obvious improvement in the bottom line this year. Strategically, how do you balance the growth and the probability in 2024? Do we have any plans for new markets? Thank you.
spk03: Okay, so for the first question,
spk06: Among the new funding accounts in the third quarter, approximately 55% came from Singapore, while contributions from Hong Kong, Australia, New Zealand region, and the United States accounted for around 15% each.
spk03: Up to now, the number of new users has reached the goal of 100,000 new users a year. Our business assets have increased by 9.3% in the past three seasons, and increased by 45.4% in the same period, reaching $1.89 billion. So, from the data, while the company is improving its business size, it has also greatly improved our profitability. I think from a long-term perspective, The growth of user size and user assets and the growth of profit and loss must be the same. Only through the control of the cost end, especially variable costs, such as the low-level situation where the net cost is already at the top of the industry, it is difficult to maintain profit and continue to grow. So the point is to get more high-quality users and more decommissioned assets to increase income and open up the space for us to profit. This is also a question that we have been thinking about. How can we increase the cost of goods and services, such as the cost of goods and services, to get a higher income return? This is also the reason why we put the RY and the return cycle as the main assessment goals for each country. At present, within the next year, we will still focus on the current market's NACIN and transaction speed, We've seen quarterly growth on the bottom line throughout the first three quarters of this year.
spk06: accumulating over 41 million U.S. dollars. As of now, the number of new-funded clients has already exceeded our annual guidance of 150,000, and total client assets by the end of the third quarter have increased by 9.3% quarter-over-quarter and 45.4% year-over-year, reaching 18.9 billion U.S. dollars. So we have improved our profitability while growing user base and assets under custody. I believe the growth of user base and client assets goes hand in hand with the profit growth in the long run. There is a cap on how much cost saving can have profitability, especially when some variable costs, for example our clearing expenses, are already one of the lowest in the industry. So the key is still to acquire more high quality users, get more assets on our platform to increase total revenue and net income. It's a great question that you asked, and it's also a question we keep asking ourselves, how to achieve better operating leverage if we incur more costs like CC. That's why we use ROI and payback period as important metrics to evaluate our different subsidiaries. As of now, our focus will continue to be on driving sustained profit growth in the existing market with manageable investment. So we can build buffer for companies' future expansion We will carefully evaluate all aspects of companies' resources before determining the pace and direction of new markets we want to enter. Thank you.
spk07: The questions, one moment for the next question. Next up, we have the lines from Cindy Wang from China Renaissance. Please ask your question.
spk04: Thank you for giving me the opportunity to ask this question. I have two questions I would like to ask. The first question is about, because the current market has predicted that the holiday period for the new year is coming to an end, then maybe the mid-year period will begin to enter the fall period. In the face of this possible change, how will the company's strategy and operations make adjustments to maintain the current or even higher profit margin? My second question is, So thanks management taking my question. So I have two questions. First question is market expects the Fed rate hike cycle is coming to the end and they start to cut interest rate in the mid 2024. So based on this scenario, how would you adjust strategy and operations to maintain the current or even higher profit margin? The second question is, the blended take rate in third quarter was down sequentially. So what's the reasoning behind it? Thank you.
spk03: The third question is about the supply and demand effect. We think the trade and demand effect is a good place to start. the fluctuation of interest rates has a contrasting effect. Based on the data from the past few years, we can see that the interest income and interest-related income sometimes change in the opposite direction. In a low-interest environment, the performance of trade income is relatively strong. As interest rates rise, trade return will slow down, but interest-related income will increase. In addition, most of our interest income comes from and face-to-face business. In these businesses, what we mainly earn is interest. Therefore, the degree to which our interest is affected is relatively limited. Of course, we will also adjust the strategy of products and operations according to different market environments. For example, in the past year, under a high interest rate environment, we have continuously launched financial management products for US dollars, Hong Kong dollars, currency funds, and investment in U.S. national debt. Also, through cash management, Thank you.
spk06: Okay, I'll translate and answer her first question. We think a good thing about the broker-dealer business model is trading velocity in general a natural hedge with interest rate. When rates go up, velocity and trading commission tend to go down and vice versa. In our business, a big chunk of interest income comes from margin financing and securities lending, where we earn a relatively stable interest spread. Therefore, the impact of interest rate cuts on our interest income will be fairly limited. And of course, we will also adjust our product and operational strategy based on different market backdrop. For example, in the past year with the rate hikes, we introduced more yield products such as U.S. dollar and Hong Kong dollar market funds and features for investments in U.S. treasury. We also generated more interest income through treasury management and margin financing securities lending business. But in the future, as market activity improves with interest rate cuts, more client assets will likely to shift from fixed income investment to equity investment. We will roll out more tailored investor education and promotions based on market condition. So overall, we still consider future interest rate cuts as a positive signal, given increased market activity is more likely to generate beta effect growth on our top line.
spk02: Okay, Cindy, let me answer your second question, which is about the decline in the blinded take rate compared to the second quarter. The decline in the blinded take rate is mainly due to the fluctuation of the take rate of stock market transactions per share. The market activity in the third quarter compared to the second quarter has improved, so the number of trading shares per stock market and the exchange rate have increased. The increase in the exchange rate is even more significant, because in our trading The share of high-price stocks such as Tesla and Inuita is relatively high. Therefore, in the third quarter, when users trade these stocks, their share price increase is higher than the increase of the trading ratio. And we charge each stock according to the share price of each stock. Therefore, the share price of the real estate broker, which is the share price, will be lower than the take rate. Let me translate it briefly. So the slight decrease in blended take rate was due to high price names like Tesla and the NVIDIA accounted for a big portion of our trading volume in the third quarter. So the increase in share price of those names outpaced the increase in number of shares traded. Since we charge commission by number of shares, the blended take rate came down slightly versus last quarter. Even our pricing remained the same. Thanks.
spk07: Thank you for the questions. One moment for the next questions. The next question comes from the line of Alan Kuang from Citibank. Please go ahead.
spk01: Hello, Mr. Guan. Thank you very much for the opportunity. I have two small questions to ask. The first one is about Singapore. We are concerned that we have a business that has been growing well in Singapore in recent months. And the local market share is also gradually increasing. As Singapore is the core overseas market of our tiger vouchers, I would like to ask how the management is looking at the changes in the competition pattern in the local market. Looking back, do we have any new strategic plans for the expansion of the Singapore market? And the second question is about the cryptocurrency. I saw the news report saying that our tiger vouchers are interested in applying for cryptocurrency in Hong Kong. I would like to ask if there is any new progress in this regard. Thank you. I'm about to find my question. Thanks, management, for taking my question. This is Alan from City Research. I have two questions today. The first one is about the Singapore markets. Recently, we have seen one of our Tiger competitors building up growth momentum in Singapore with decent paying customer growth and market share gain during the third quarter. As Singapore is Tiger's core market, wondering if management have any comments on the latest local market share trends and on a forward-looking basis, Could management give us some color or updates on the latest growth strategy for the Singapore market? And the second question is about crypto trading license. I'm wondering if management have any updates on the license application. Thanks.
spk03: 第一个问题关于新加坡市场。 那新加坡市场一直作为老虎我们重要的利润单元。 德育人均CSC在前三个季度均保持在年卖美金以内的低水平。 In the first three quarters of this year, Singapore's entry rate has also continued to achieve a double growth rate. In addition, due to the success of the Singapore market, it has also improved the popularity of the tiger in the entire Southeast Asian market. This has provided a good foundation and brand advantage for us to enter other Southeast Asian countries in the future. In the third quarter, the overall entry rate of the Group remains in a strong trend, with an entry rate of about $1.5 billion. Singapore has also made significant contributions. The average income of new income users in this quarter is around US$10,000. More importantly, the new income users who received new income users in each quarter in the past quarter are now in the state of new income users in the third quarter. Singapore has 99% of its assets. The share price of the stock market rose by about 10% in the third quarter. The share price of the stock market is the first in the whole of Singapore. So your first question regarding our business in Singapore,
spk06: The Singapore market has been a key profit driver for Tiger. Thanks to our low average CEC, which is staying below 200 US dollars in the first three quarters, we've seen a double-digit compound growth on the bottom line throughout the first three quarters of this year. Also, the success in Singapore has boosted Tiger's reputation in the entire Southeast Asian market, brings a solid foundation and brand advantage for future entry into those Southeast Asian markets. In the third quarter, the overall net asset inflow continued its strong momentum with around 1.5 billion U.S. dollars. Singapore played a big part in it, with average net asset inflows of our newly acquired clients in the third quarter reaching around 10,000 U.S. dollars, and more importantly, our existing users from Singapore market showed a similar trend in terms of net asset inflows. The retention rate of our local users' assets remained at 99%, And the cash equity trading volume saw a quarter-over-quarter increase of about 10%, and we rank at number one among all online brokers in Singapore in terms of Singapore shares trading volume. So whether we are looking at our strategic position, profitability, net inflows of client assets, or retention rates, we are comfortable with where we stand in Singapore. Our success locally is closely tied to our focus on user quality and our commitment to balancing ROI. So looking ahead, we will continue this strategy, ensuring profitability while attracting high-quality users. Thank you.
spk02: Okay. Hello, Alan. Let me answer your question about crypto. Cryptocurrencies are becoming more and more popular around the world. We think that crypto has become a very important asset. And recently, we have seen that in the past two years, the acceptance and supervision of virtual currency transactions in Singapore, Hong Kong and the United States has also been perfected in Japan. Mainline investment institutions, such as BlackRock, are also entering this industry. As for Tiger, based on the gene of the technological circle itself, the know-how of the production team, and the good communication with the supervision bank for many years, it will definitely enter the business field in the future, and further enrich our products to provide users with more investment options. From the status of the photo application, we are applying for photos in many places around the world. For example, in the United States, we are taking photos of MSBs in each state. And in Singapore, we have already submitted the PSA application. After the SFC Crypto Consultation came out in June this year, we also submitted the application for photos at the first time. So we look forward to some results next year. So in our view, crypto is becoming a very important asset class. It's a natural extension of business as a broker-dealer to add a new asset class. And the Web3 technology is also integrated with Tiger's fintech background and know-how. So we are applying for multiple licenses across regions. For example, in the U.S., we are applying for MSB license in each state. In Singapore, we are applying for PSA license. In Hong Kong, we already submitted our VATP application following SFC's consultation back in June. So hopefully by next year, we will get approval and offer crypto trading to investors. Thank you.
spk07: Other questions? Now I would like to hand the call back to Manish Hun for closing remarks, please.
spk06: 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.
spk07: Ladies and gentlemen, that concludes the conference call for today. You may now disconnect your lines.
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