UP Fintech Holding Limited

Ladies and gentlemen, thank you for standing by and welcome to the UP Fintech Holding Limited Third Quarter 2024 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, November 12, 2024. I would now like to hand the conference over to your first speaker today, Mr. Aaron Lee, the head of Investor Relations. Thank you. Please go ahead.

Thank you, Mel. Hello, everyone, and thank you for joining us for the call today. UP Fintech Holding Limited Third Quarter 2024 Earnings Release was distributed earlier today and is available on our website at .itigerup.com, as well as Globe Newswire Services. On the call today from UP Fintech are Mr. Wu Tianhua, Chairman and Chief Executive Officer, Mr. Zhang Zeng, Chief Financial Officer, Mr. Huang Lei, CEO of US Tagger 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 sessions that follow the remarks. Now let me cover the safe harbor. The statements we are about to make contain forward-looking statements. This is the meaning of the US Private Security and Education Reform Act of 1995. A number of factors could cause actual results to differ materially from those containing any forward-looking statements. For more information about factors that could cause actual results to materially differ from those in the forward-looking statements, please report to our Form 6K furnished today, November 12, 2024, and our annual report on Form 28 held on April 22, 2024. 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.

Hello, everyone.

Thank you for joining the Tiger Broker Third Quarter 2024 earnings conference call.

In the third quarter, as the company's growth in the number of customers and assets, as well as the increase in the richness of products and localization, and the continuous performance of the US stocks, the overall return has been improved. The third quarter, the share price, the equity and the exchange of the stock exchange have all been increased. The overall exchange of the stock exchange has been increased by 4.4 billion dollars, which is a significant increase in the third quarter. The company's overall revenue has been increased by 1 billion dollars, which is a significant increase in the third quarter. The company's overall revenue has been increased by 16 percent, which is a significant increase in the third quarter. The company's overall revenue has been increased by 44 percent, which is a significant increase in the third quarter. In terms of revenue, the three-season share price of the company's GAAP and Long Amp revenue are 17.8 million and 90.1 million dollars, which is more than the total revenue of the first half of this year. The same ratio has risen by 34 percent and 26 percent respectively. At the same time, we are also very happy to see that the three-season company's revenue has risen to 26 percent, and the company's profit efficiency is gradually improving.

In terms of offerings and active market backdrop in the U.S., total trading volume reached 163 billion U.S. dollars. Cash equity trading volume was 41.4 billion U.S. dollars, reflecting a -over-quarter increase of 54 percent and 24 percent respectively. Commission income reached 41.2 million U.S. dollars, increased 21 percent -over-quarter and 78 percent -over-year, the highest in the past three years. The upkeep in market activity also contributed to a rise in marketing, financing and security-sending business, which increased 29 percent -over-quarter and doubled -over-year, reaching 4.5 billion U.S. dollars at the end of the third quarter. Despite the ongoing rate card cycle, interest income increased 9 percent -over-quarter to 48 million U.S. dollars. Our total revenue for the third quarter was all-time high of 101 million U.S. dollars, a -over-quarter increase of 16 percent and -over-year increase of 44 percent. Gap and non-gap net income attributable to our spring tax was 13.8 million U.S. dollars and 20.1 million U.S. dollars this quarter. Both exceeded the total amount for the first half of this year and increased 34 percent and 26 percent -over-year respectively. Also, we are glad to see our operating profit margin increased to 26 percent in the third quarter, indicating ongoing improvement in the operating leverage of our business model.

We have been a major contribution market in Southeast Asia since the end of the third quarter, with a total of 103 million users. The same period of last year was 19 percent more than the previous one. The total income added to the third quarter of this year was 12.8 million. So far, we have achieved the total income added to the third quarter of this year, which is 150,000. In terms of our customer總資產, the total income added to the third quarter of this year was about 11 U.S. dollars. The investment confidence has improved, plus the operating value income, which has made our total income added to the third quarter of this year reach 40.8 billion U.S. dollars. The net income is now 7 percent higher than the previous quarter, and 116 percent higher than the previous quarter. We are glad to see that our company's customer assets have increased by 8 percent in the previous quarter and increased by 4 percent in the previous quarter. In the

third quarter, we added 50,500 newly funded accounts, representing a 3 percent sequential increase and a 105 percent increase year over year. Singapore and Southeast Asia region were the primary contributors. The number of funded accounts at the end of the third quarter reached ,300,000, increasing 19 percent year over year. In the first three quarters of this year, we added a total of 128,000 newly funded accounts. By now, we have already achieved our annual guidance of acquiring 150,000 newly funded accounts. In terms of total client assets, retail clients' net asset inflow remains strong at 1 billion U.S. dollars for this quarter. Total client assets increased by 7 percent quarter over quarter and 116 percent year over year to 40.8 billion U.S. dollars, setting another historic high. We are glad to see that our client assets have now risen for 8 consecutive quarters and kept setting new records for the past four consecutive quarters. Notably, in addition to steady growth in client assets from Singapore market, we've seen over 25 percent quarter over quarter increase in client assets from new markets like Hong Kong, Australia, New Zealand and the U

.S.

We are also pleased to see that we have been able to upgrade our product offerings on our platform to enhance user experience. In September, we officially launched Hong Kong stock options and Hong Kong short selling features on our platform. And in early November, we collaborated with Hong Kong exchange to upgrade the Hong Kong stock option feature by offering weekly contracts in addition to monthly contracts to better meet investors' trading and risk management needs, allowing them to trade based on short-term events. Additionally, Tiger Vault's debit card is gaining more popularity since its launch in Singapore, so we upgraded the product to include T plus zero automatic subscription and redemption feature for Tiger Vault, our wealth management product. The integration allows users to manage their investment portfolios more conveniently, seamlessly bridging daily spending, wealth management and stock investment. Moreover, in October, we enhanced our overnight trading capabilities. Our field night session orders will be automatically passed on to the pre-market and regular trading sessions to ensure user experience and execution quality.

Our

QB business continues to perform well. In investment banking, we handled 13 US and Hong Kong ITOs in the third quarter, including NIP Group and VoiceComm Group. And we serve as the exclusive lead bank for NIP Group and X-Charge US ITO. In our ESOP business, we added 18 new clients in the third quarter, bringing the total number of ESOP clients served to 597 by the end of the third quarter of 2024, increased by 18% -over-year. Now I would like to invite our CFO John to go over our financials.

Thanks Tianhua and Aaron. Let me go through our financial performance for the third quarter. All numbers are in US dollar. Thanks to our expanded user base and robust market activities, we saw healthy growth in all top nine items this quarter. Commission income were $41.2 million, increased 21% -over-quarter and 78% -over-year. Interest-related income were $48 million this quarter, increased 9% -over-quarter and 25% -over-year. As a result, total revenue increased 16% -over-quarter and 44% -over-year to reach an all-time high at $101 million. Cash equity's take-away was 6.4 bps this quarter, slightly decreased from 6.7 bps of last quarter. Within commission revenue, about 63% comes from cash equity, 30% from options, and the rest from futures and other products.

Now on to cost.

Interest expense was $15.7 million, increased 29% from the same quarter of last year, in line with the growth of margin and securities lending balance. Execution and clearing expense were $3.5 million, increased 48% from the same period of last year, primarily due to an increase in our trading volume, and we keep improving our clearing efficiency. Cash equity clearing expense as a percentage of cash equity commissions is about .6% this quarter, and remains one of the lowest in the industry. Employee compensation and benefits were $28.8 million, an increase of 11% -over-year, due to a headcount increase to strengthen OECD growth and R&D. Occupancy depreciation and amortization expense slightly decreased 3% to $2.2 million. Communication and market data expense were $9.7 million, an increase of 28% -over-year, due to the increase in user base and IT-related services. Marketing expense increased 59% -over-year to $8.2 million this quarter. WeC Market backdrop was supportive for more customer acquisition and branding campaigns while maintaining R&D targets. General and administrative expenses were $6.9 million, an increase of 27% -over-year, due to more professional service fees and general expenses incurred alongside with our business expansion. Total operating costs were $59.3 million, an increase of 22% from the same quarter of last year. Our bottom line increased -over-quarter and -over-year on a -a-long gap basis. Gap-led income was $17.8 million, an increase of 585% -over-quarter and 34% -over-year, while long gap-led income was $20.1 million, an increase of 287% -over-quarter and 26% -over-year. Now I have concluded our presentation. Operator, please open the line for Q&A. Thanks.

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.

Our

first question

comes from the line of Cindy Wang from China Renaissance. Please go ahead, your line is open.

Okay, thank you for giving me this opportunity to ask questions. Congratulations on your performance in the third quarter. I have two questions for you. First, can you tell us about the third quarter's new customers from all over the region? Second, I would like to ask a question. I see that our capital income is increasing, but the cash equity and branded tech rates are declining. Can you tell us the main reasons?

Thank you. Okay, I will answer the first question and you will answer the second one. In the third quarter's new customers, about 60% of them are from Singapore and Southeast Asia. The growth rate of the Auxin and Hong Kong markets is about 15%. The growth rate of the US market is about 52%.

Thank you. Okay,

Cindy, I will answer your second question. To put it simply, the decline in tech rates is due to the increase in trading volume. First, the decline in the blended tech rate is due to the increase in the stock exchange volume. The stock exchange volume is based on the capital income to enter the trading volume. This is why the blended tech rate has increased by 24% and the overall stock exchange volume has increased by 54%. At the same time, the decline in the blended tech rate has been affected by several other reasons. One is that Nasdaq's growth in Q3 is increasing overall. This leads to an increase in the average stock price, which leads to a rise in the trading volume. In addition, the performance of China's stocks is relatively flat except for the last week of Q3. China's stock price has dropped to about 10% in the overall trading volume of the US stock. The percentage of the Magnificent Seven, the US's local big stocks, is increasing, which leads to an increase in the average stock exchange volume. Although the Hong Kong stock market has been growing in the last few weeks, our trading volume has also increased. However, Hong Kong stocks are currently free of platform fees, which does not help tech rates. We should consider the price of Hong Kong stocks from the perspective of customers and users. The average price of Hong Kong stocks is about $120, so the return is only three times more than the price. Another reason is the tax rate. Before the Inveda shares are disbanded, due to the high stock price, many users will trade the Inveda through tax rates. The tax rate is 1% of the trading volume, which will raise the tech rate of the stock to a certain extent. After the disbanding, the trading volume of the trading volume of the shares will decrease. The reason for this is that the Inveda shares are only doubled in comparison with the Q3 tech rate and Q2. Even after the disbanding, the Inveda is still a high-priced stock. According to the US stock price, the Inveda tech rate after the disbanding is only about 2%. The overall stock tech rate is 6% to 7%, so it will not have a significant impact. Let me briefly explain. First of all, the decline in blended tech rates is largely due to an increase in future trading volume. Since futures are based on nominal value instead of contract value, the trading volume will amplify in the third quarter. That's why we saw a 24% increase in stock trading volume, while the total trading volume jumped to 54%. There are several reasons for the drop in cash equity tech rate. Number one is that NASDAQ had a general upward trend in Q3, which pushed average stock price higher, so lowered the tech rate. Also, the second reason is that the ADR in the third quarter accounted for only 10% of the trading volume, while the major US stock, especially the MAC-7, increased a lot, which further raised the average trading price and lowered the tech rate. And also, even though in Hong Kong our trading volume has gone up a lot during the end of the third quarter, in Hong Kong we offer zero commission, zero platform fee, so the Hong Kong trading volume increase didn't really help much on the tech rate. In regards to Nvidia stocks, it does help the tech rate a little bit, but the impact isn't that huge. There are several reasons. First of all, Nvidia completed stocks in early June, and the trading volume for Nvidia in June was much higher than in April and May. By second quarter, the average trading price was already below $400 on our platform, not the $1,000 level. In Q3, the average price was about $120, so in terms of price, the impact is only a bit over three times. Another factor is fractional share. Before the split, a lot of users trade Nvidia through fractional shares. We charge 1% on trading volume for fractional shares. So this helped the tech rate. After the split, the trading volume through fractional shares dropped. So putting all this together, Nvidia tech rate in Q3 was only about double what it was in Q2. It's still a high price name even after split. If we look at our US stock pricing, the post-sperry tech rate for Nvidia is only about two bips, while our overall cash equity tech rate is between six to seven bips. So it's not going to have

a major impact on our overall cash equity tech rate. Thanks. May I please move on to the next question,

please? Our next question comes from the line of Emma Zhu from Bank of America Securities. Please go ahead. Your line is open. Thank

you for giving me this opportunity to ask a question. First of all, congratulations on your company's full-year and the market is pretty good in October. So I'd like to ask you to share with us your recent business situation. For example, customer assets, transaction volume, income, profit. Secondly, the company's income is higher than profit. If you don't consider the second quarter's low-cost situation, how should we think about the economic growth and the economic growth? So congratulations on achieving the guidance ahead of schedule. The market conditions have been favorable since October. So could you please share the brand rate for AUM, trading volume, revenue and profit, etc. since October? And on a -over-quarter basis, the gross rate of your revenue exceeds that of profit without regard to the impairment losses of around $13.2 million in the second quarter. So how do you view the improvement in the operating efficiency and leverage?

Thank you. I'll answer the first question now. The entire company's income is still in the state of financial investment in October. The main income contribution from the retail is still continuing to increase rapidly in the third quarter. So far, we have completed the annual income of 150,000 users. In terms of financial performance, the entire exchange volume and capital in October is relatively strong. This is the highest single month in the history of the company. And it has also exceeded the average monthly exchange volume and capital revenue of the first half of this year. Since November has just passed half, we can't see the financial data accurately. But the current exchange volume in October is still very good. For example, on October 6, the average order volume on our platform is about 50% higher than that of October. The exchange volume in the US stock has also increased significantly. The impact of the first quarter's remaining half month on the US election and the US dollar interest decision are not clear. But in general, we are very satisfied with the performance so far in the fourth quarter.

Looking at our financials, October was a standout month for us. With trading volume and commission performance reaching the highest level in our history, both trading volume and commission for October more than doubled the average monthly performance for the first half of this year. Although we are not yet half through November, the trading volume is looking solid so far. For instance, on November 6, which was the US election day, the order volume on our platform increased by about 50% compared to the October daily average, particularly for US stocks which saw even more significant growth. Looking ahead to the remainder of Q4, there are some uncertainties related to the post-election initiatives and Federal Reserve interest decisions. But overall, we are quite satisfied with how the Q4 has been shaped up so far.

Thanks. Emma, let me answer your second question. It is about the revenue growth rate greater than the profit. In fact, the US dollar has been depreciated due to the decline in the US dollar. Not all companies use US dollars as their currency in their accounts, such as Singapore, the United States and the mainland. The US dollar in their accounts has been depreciated due to the decline in the US dollar. This has led to a loss of about $5.1 million in the US dollar in Q3. This is of course a non-cash and non-operating impact. If we look at the operating profit, Q3 is about $26 million. In Q2, the loss of $13 million was almost $18 million. So, from an operating perspective, Q4 is about 45% growth. This is much faster than the growth of Q4, which is 16% of our revenue. This shows that our overall operating average has improved. In addition to our business model, Q4 has been managed at a more prudent level. The human resources and management costs have been stable. Although the cost of computing and the cost of the stock exchange has increased, the cost of computing and the cost of the CAC are still at a lower level. In Q3, Fed rate cuts led to a depreciation of the US dollar. As a result, our subsidiaries don't use US dollar as their base currencies, like Singapore, New Zealand, and mainland China. So, the dollar-denominated asset loses value, which resulted in foreign exchange losses. For the entire group, the foreign exchange loss in Q3 was around $5.1 million. Of course, those effects lost was non-cash and non-operating impact. If we look at our operating profit, it was roughly $26 million in the third quarter. In the second quarter, after excluding $13.2 million one-off impairment, the operating income was about $18 million. This means we saw about 45% growth -over-quarter, which is significantly higher than the 16% growth we saw in the top line. This indicates our overall operating average has improved. The reason we were able to achieve this, aside from our business model, is that we have been very prudent with our fixed costs. Both labor and GNA expense have remained relatively stable, while variable costs like clearing and customer acquisition costs may rise with increased market activities. But both of our clearing fee and average CAC remains at industry-needing

low levels. Thanks. Thanks, operator. Let's move on to the next question, please.

Thank you. Our next question comes from the line of Yufan from CICC.

Please go ahead, your line is open.

Thank you, operator, for giving me the opportunity to ask this question. Congratulations on your performance in the third quarter. I have two questions to ask. First, we have seen that the company has been making a lot of progress since October. So, we would like to ask you about the overall sales and sales performance What is the progress in this line of Hong Kong stocks? What are the current sales and sales performance in Hong Kong stocks, including the stock exchange, and the exchange volume? Second, we would like to ask you about the financial management business. Could you please share with us the financial management business and the financial management business? What are the current financial management business and the financial management business including the exchange volume, the exchange volume, and the exchange volume? And the financial management business? I have two questions here. The first one is about the Hong Kong market. We see the market velocity have rebounded since October. So, would you please share more data on our current business progress in Hong Kong market? What is the impact on our customer acquisition and trading volume in Hong Kong market? And the second question is about the wealth management business. How is it going on and can you share more data such as AUM and the number of the wealth management clients? Thank you.

I am quite satisfied with the results. The sentiment of Hong Kong market since September is quite obvious from our business numbers. To be specific, the company has completed the whole year's 15,000 entry guide. Among the 15,000 entry users, there are about 20,000 people from Hong Kong with nearly 15% of the total. Compared to the first year we entered Hong Kong, we have made a great improvement. At the same time, the quality of our clients in Hong Kong is high. We also pay great attention to the quality of our clients. The current customer capital of Hong Kong retail users has exceeded the Singapore area and has become the highest area outside of mainland China. The average entry of new entry users in the third quarter has reached 20,000 US dollars. The average value of AUC in Hong Kong, the size of the asset, Q3, has also increased by more than 30%. At the same time, many of our clients are high-value users. The R pool of third quarter retail users is the highest in the group. It is also nearly doubled the number of Singapore users. At the same time, the trading volume of Hong Kong stocks in October has also been significantly improved. From the absolute value, the trading volume of Hong Kong stocks in October has exceeded the trading volume of Hong Kong stocks in the third quarter. This is the trading volume on our platform. At the same time, we have further improved the trading function of Hong Kong stocks in Hong Kong. Hong Kong has officially launched Hong Kong Stocks Seven Sets and Hong Kong Stocks Seven Sets. At the same time, in November, we have also increased the number of Hong Kong stocks seven sets based on the month seven sets. This further satisfies the demand for trading for Hong Kong users. Let me briefly explain. We are quite satisfied with our ongoing development in Hong Kong. Since the end of September, we have seen a large improvement in market sentiment based on our operating data. Number one is, currently, we have already made our annual guidance of 150,000 funded users, which is about 15% of over 20,000 people from Hong Kong. This is a significant increase compared to our first year in the Hong Kong market. Also, the quality of our Hong Kong customers is very high. The average client asset in Hong Kong has now surpassed Singapore, making it the highest among, reaching among international markets we entered. In the third quarter, the average net asset inflow for newly acquired users in Hong Kong is about like 20,000 US dollars, and the total client asset in the Hong Kong market increased by over 30% quarter over quarter. Thanks to the high average client asset and high velocity, the approval for retail users in Hong Kong was the highest across all regions in the third quarter. This is a double-data of the retail user in Singapore. In October, we saw a significant increase in Hong Kong trading volume. The trading volume for October already exceeded the total trading volume of the third quarter. And also, to enhance our trading capability in Hong Kong, we officially launched the Hong Kong stock option and short selling in the third quarter. Additionally, in November, we upgraded the Hong Kong stock option feature by offering weekly contracts

in addition to monthly contracts. Thanks.

Thank you. Okay,

so regarding the second question about the wealth management, overall we are quite satisfied with the growth pace of our wealth management. management business and the current diversity of our product offerings. We offer stable year products like money market funds and US treasury bonds for investors who manage their adult cash, as well as fixed coupon notes and services like the EAM platform and DPM discretionary accounts for the advanced users, institutions and family office, etc. In the future, we will continue to develop our wealth management business and enhance the synergy with our current brokerage business. If we look at the numbers in Q3, our wealth management AUM increased over 40% quota per quarter and doubled year over year, exceeding $1 billion. Among newly funded users in the Q3, around 30% of them started using our wealth management services. Additionally, in the Hong Kong market, the wealth management business saw even more significant growth, with the number of clients increasing by nearly 50% quota per quarter and AUM doubled quota per quarter. Thank you. Operator, please move on to the next question.

Thank you. There are no further questions at this time, so I'll hand the call back to Aaron for closing remarks.

Thanks, Mel. I'd 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. Bye-bye. This

concludes today's conference call. Thank you for participating. You may now disconnect. Speakers, please stand by.