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 the 12th, 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. UpFintech Coding Limited's third quarter 2024 earnings release was distributed earlier today and is available on our IR website at ir.itriggerup.com, as well as Globe Newswire Services. On the call today from UpFintech, Mr. Wu Tianhua. Chairman and Chief Executive Officer, Mr. Zhang Zeng, Chief Financial Officer, Mr. Huang Lei, CEO of US Tiger Securities, and Mr. Kenny Zhao, our Financial Controller. Mr. Wu will give an overview of our business operations and discuss corporate highlights. Mr. Zeng will then discuss our financial results. They will both be available to answer your questions during the Q&A session that follows the remarks. Now let me cover the safe harbor. The statements were about to make content forward-looking statements within the meaning of the U.S. Private Securities and Education Reform Act of 1995. A number of factors could cause actual results to differ materially from those contained in the annual 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 6-K furnished today, November 12, 2024, and our annual report on Form 28 filed on April 22, 2024. We undertake no obligation to update any forwarding 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. I would like to thank all of you for attending the third quarter of Laohu International's

Hello, everyone. Thank you for this Integra Brokers Third Quarter 2024 Earnings Conference Call.

In the third quarter, with the growth of the company's number and client assets and the improvement of product richness and localization, as well as the continuous performance of each share, it has led to an overall improvement of the share return, which has led to a significant improvement in the share price of the company's third quarter, share price, share price, and stock price. The total exchange rate is 16.3 billion US dollars. The stock exchange rate is 4.14 billion US dollars. The share price rose by 5.4% and 24%. Therefore, the gross income reached 41.2 million US dollars. The share price rose by 21%. The share price rose by 78%. This is the highest share price in the company in the past three years. The improvement in market activity also led to an improvement in the face of business. Until the end of the third quarter, The company's face-to-face business is worth $450 million, which is 29% higher than before. The company's interest income is still 9% higher than before, reaching $4,796 million. The company's overall income in the third quarter is $100 million, which is 16% higher than before, and 44% higher than before, creating a new record. At the profit end, In the third quarter, driven by expanded client base, comprehensive product 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 quarter-for-quarter increase of 54% and 24% respectively. Commission income reached 41.2 million U.S. dollars, increased 21% quarter-for-quarter, and 78% year-over-year, the highest in the past three years. The uptake in market activity also contributed to a rise in margin financing and secure spending business, which increased 29% quarter-per-quarter and doubled year-over-year, reaching $4.5 billion at the end of the third quarter. Despite the ongoing rate cut cycle, interest income increased 9% quarter-per-quarter to $48 million. Our total revenue for the third quarter was an all-time high of $401 million, A quarter-over-quarter increase of 16% and a year-over-year increase of 44%. GAAP and non-GAAP net income attributable to fintech was $13.8 million and $20.1 million this quarter. Both exceeded the total amount for the first half of this year and increased 34% and 26% year-over-year, respectively. Also, we are glad to see our operating profit margin increase to 26% in the third quarter indicating ongoing improvement in the operating leverage of our business model.

In the end of the third quarter, the number of new users reached 1,030,000. Compared to the same period last year, it increased by 19%. In the previous three quarters, the number of new users reached 1,280,000. As of now, we have achieved 150,000 new users per year. In terms of total assets, the sales of users' assets in the past three seasons have fallen by about US$1 billion. The investment confidence has been improved. In addition, the value of supply and delivery has been increased to US$40.8 billion in this quarter. The re-creation rate is new and the return rate has risen by 7% and the share price rose by 116%. In the third quarter, we added 60,500 newly funded accounts, representing a 3% sequential increase

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

三季度,公司持续推出和升级产品功能来优化用户的使用体验。 首先我们在九月份正上线的港股期权和港股股空这点项基础功能, At the beginning of October, we cooperated with the Hong Kong Exchange to expand the shareholding of Hong Kong stocks from monthly shareholding to weekly shareholding of stocks. This is a better way to meet the needs of investors in trading and risk management. It allows investors to trade based on short-term or specific events. In addition, we also saw that the Tiger Boss credit card was widely liked by local users since it was launched in the Singapore market. Therefore, we also upgraded the product in September. We have further opened up the Tiger Boss credit card and our financial products, the Tiger wallet, and the T-CANIN automatic payment function, so that users can make five connections between daily consumption, financial management, and stock investment, and carry out financial management activities more conveniently and efficiently. In addition, in October, we also carried out the upgrade of night-time trading. The order in the night-time period has been upgraded to support all-time trading. It will not lead to the failure of the order due to the end of the night-time period and no return.

In the third quarter, we continued 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 Options 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, TigerVault'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 TigerVault, 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, A few next session orders will be automatically passed on to the pre-market and regular trading session to ensure user experience and execution quality.

老虎国际的2B业务保持不错的发展势头。 投行业务侧,三季度我们承销了13个港美股IPO项目,包括新晋威武和声通科技等。 其中,作为智冲科技和新晋威武美股IPO的独家主持交商,并成功上市。 预送业务方面, Our 2B business continues to perform well.

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

Hey, thanks. 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% quarter-over-quarter and 78% year-over-year. Interest-related income were $48 million this quarter, increased 9% quarter-over-quarter and 25% year-over-year. As a result, total revenue increased 16% quarter-over-quarter and 44% year-over-year to reach an all-time high at $101 million. Cash equities take rate was 6.4 bps this quarter, slightly decreased from 6.7 bps of last quarter. Within commission revenue, about 63% comes from cash equities, 30% from options, but the rest from futures and other products.

Now onto 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 3.6% this quarter, and remains one of the lowest in the industry. Employee compensation and benefits were $228.8 million, an increase of 11% year-over-year due to headcount increase to strengthen our CF 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% year-over-year due to the increase in user base and IT-related services. Marketing expense increased 59% year-over-year to 8.2 million this quarter. with the market backdrop was supportive for more customer acquisition and branding campaigns while maintaining ROI targets. General and administrative expenses were $6.9 million, an increase of 27% year over year due to more professional service fees and the general expense 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 quarter-over-quarter and year-over-year on a gap and a non-gap basis. Gap-led income were $17.8 million, increased 585% quarter-over-quarter, and 34% year-over-year, while non-gap-led income were $20.1 million, increased 287% quarter-over-quarter, and 26% year-over-year. Now I have concluded our presentation. Operator, please open the night 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, Manager Chen, for giving me this opportunity to ask a question. And I also congratulate Manager Chen on his outstanding performance in the third quarter. I have two questions for Manager Chen. The first one is, can you help us classify the new customers in the third quarter from each region? And the second one is, I would like to ask, Because I see that our cash income ratio is actually rising significantly. But in terms of blended take rate and cash equity take rate, the ratio has dropped a bit. Can you tell us the main reason why? And then, because everyone here is doing a shareholding action, is there a positive help for our cash equity take rate? And then, can you tell us about the trend of take rate in the fourth quarter? Thanks for taking my questions. And I have two questions here. First one is, please give us a breakdown of the regional mix of newly funded accounts. And the second question is, the commission income up quarter of quarter nicely in third quarter. The blended take rate and cash equity take rate both down sequentially. What is the reason behind it? Does NVIDIA's stock spread have a positive impact to your take rate? And what is the Q4 trend? Thank you.

Thank you. I will answer the first question and Zhouen will answer the second one. In the third quarter, about 60% of the new entrants came from Singapore and Southeast Asia.

In the third quarter, about 60% of our newly funded users came from Singapore and Southeast Asia, about 15% each from Australia and New Zealand region and Hong Kong market. More than 5% were from the US market. Thank you.

Okay, Cindy, let me answer your second question. To put it simply, the decrease in take rate is mainly due to the increase in trading volume. First of all, the decrease in blended take rate is due to the increase in stock trading volume. Because the stock trading volume is used to record trading volume with a private fund, it will enlarge the influence of blended take rate. This is why our stock trading volume has increased by 24%, but the overall trading volume has increased by 54%. At the same time, the downfall of the stock take rate has been affected by several other reasons. One is that Nasdaq's overall trend in Q3 is rising. So it leads to an increase in the average stock price, which leads to a certain volume rise, so the take rate goes down. In addition, in the third quarter, except for the last week, the performance of the Chinese stock market is relatively mild. Then the Chinese stock market's overall trading volume in the U.S. stock market dropped to about 10%. Then Magnificent Seven, these local US stocks, The ratio of big stocks is increasing, which leads to an increase in average trading. Although Hong Kong stocks have increased in the last few weeks of the last three seasons, our trading volume has also increased. However, Hong Kong stocks are currently free of platform fees. Therefore, it is not very helpful to take rate. It is more to consider the price of Hong Kong stocks from the perspective of customer and user experience. There is a positive impact on our take rate for the disbandment of Invida. But it's not a big deal. It's definitely not 10 times the help after disbanding 10 shares. The main reason is that Invida was disbanded in June. At that time, Invida's trading volume was much higher than in April and May. So in the second quarter, the average trading price of the stock was below 400 US dollars, not around 1000 US dollars. Then the average trading price of the third quarter was around 120 US dollars. So in terms of price, the return is only more than three times the impact. Another reason is the tax rate. Because the stock price is relatively high before the divestment of Invida, many users will trade Invida through tax. Our tax revenue is one percent, one percent of the trading volume, so it will raise the take rate of the stock to a certain extent. After the divestment, the trading volume traded through tax will be reduced. Therefore, for the above reasons, the share price of Inveda is only doubled compared to Q3's take rate and Q2's take rate. Even after disbursal, Inveda is still a high-priced stock. According to the price of each stock, the take rate after disbursal of Inveda is only about 1.2%, while our overall stock take rate is 6-7%, so it will not have a greater impact. I will simply translate it. So, first of all, the decline in blended take rate is largely due to an increase in future trading volume. Since futures are counted based on nominal value instead of contract value, so the trading volume will amplify in the third quarter. That's why we saw a 24% increase in stock trading volume, while total trading volume jumped for 54%. There are several reasons for the drop in cash equity take rate. The Nasdaq had a general upward trend in Q3, which pushed average stock price higher, so lowered the take rate. And also, the second reason is the ADR in the third quarter accounted for only 10% of the trading volume, while the major U.S. stock, especially the MAG-57, increased a lot, which further raised the average trading price and lowered the take rate. And also, even though in Hong Kong, our trading volume has gone up a lot during the end of third quarter, but in Hong Kong, we offer zero commission, zero platform fee. So the Hong Kong trading volume increase didn't really help much on the take rate. In regards to NVIDIA Stock Suite, it does help the take rate a little bit, but the impact isn't that huge. Several reasons. First of all, NVIDIA completed Stock Suite 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 traded NVIDIA to fractional shares. We charge 1% on trading volume for fractional shares. So this helps the take rate. After the split, the trading volume through fractional shares dropped. So putting all this together, NVIDIA take 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 split take rate for NVIDIA is only about two pips. Well, our overall cash equity take rate is between 60 to 70.

So it's not going to have a major impact on our overall cash equity take rate. Thanks. Mel, 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.

谢谢给我这个提问的机会。 首先恭喜公司提前达成了全年的旨意。 In October, the market was doing well, so I would like to ask the company to share the business situation in October and the recent business situation, such as customer assets, transaction volume, income, and profits. The second question I would like to ask is, in comparison, the increase in the company's income is greater than the increase in the profit, if we do not consider the reduction of the second quarter. 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, et cetera, since October? And on a quarter-over-quarter basis, the growth rate of your revenue exceeds that of profits 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 first. In terms of customer service, the entire company is still in a financial state in October, mainly from the financial contribution of retail investors. The new number of new users has also continued to increase rapidly in the third quarter, making it one of the new users that we have completed in advance of 150,000 in the year. In terms of financial statements, the entire 10-month trading volume and commission performance are relatively strong. This is the highest single month in the company's history, and it is also more than the average monthly trading volume and commission income of the first half of this year. Since November has just passed less than half, we cannot see the financial data accurately, but the current trading volume in November is still very good. For example, on October 6th, the average order volume on our platform increased by about 50% compared to October. The exchange rate of each stock rose more significantly. The remaining half of the first quarter of the second quarter was affected by the U.S. election, as well as the U.S. Fed's interest decision. There is uncertainty. But in general, we are very satisfied with the performance of the fourth quarter so far.

Okay, I'll translate. In terms of our client assets, we continue to see net inflow in October, primarily driven by the contribution from our retail investors. The number of newly funded accounts has also maintained the rapid growth trend, as we saw in the third quarter, allowing us to hit our annual guidance so far of 150,000 newly funded users by now. Looking at our financials, October was a safe standout month for us, With trading volume and commission performance reaching the highest level in our history, both trading volume and commissions for October more than doubled the average monthly performance for the first half of this year. Although we are not yet half through November yet, the trading volume is looking solid so far. For instance, on November 6, which was the US election day, order volume on our platform increased by about 50% compared to the October daily average. particularly for U.S. 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's interest with 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. This is about... uh uh around 5.1 million US dollars. Of course, this is an impact of long cash and long operating. So, if we look at operating profit, Q3 was around 26 million US dollars. Then, in the second quarter, after removing the 13 million loss, it was around 18 million US dollars. So, from the perspective of operating, quarter-to-quarter growth is around 45 percent. This is a lot faster than the growth of 16% of our turnover. This shows that our overall operating average has improved. And the reason we can do this is not only because of our business model, but also because we have a more stable management on fixed costs. The manpower cost and management costs are relatively stable. And the cost of calculation and goods and services will follow the market. So in the third quarter, Fed rate cuts led to a depreciation of the U.S. dollar. As a result, our subsidiaries that don't use U.S. dollar as their base currencies, like Singapore, New Zealand, and mainland China, so their dollar-denominated asset loses value, which resulted in foreign exchange losses. For the entire group, the foreign exchange loss in the third quarter was around 5.1 million. But of course, those FX loss was non-cash and a 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 a 13.2 million one-off impairment, the operating income was about 18 million. This means we saw about a 45% growth quarter-over-quarter, which is significantly higher than the 16% growth we saw in the top line. This indicates our overall operating leverage 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 GMA 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 fees and the average CAC remains at industry-leading 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.

Okay. Thank you, Manager, for giving me this opportunity to ask a question. The company has achieved a very outstanding performance in the third quarter. I have two questions I would like to ask. The first one is that we have seen that since October, the overall transaction rate of the Hong Kong stock market has been relatively high. So I'd like to ask how the retail business is doing in the Hong Kong market, including this round of the Hong Kong stock market. What are the current trends in the Hong Kong stock market, including goods and trading volume? Secondly, I'd like to ask about the financial management business. I'd also like to ask if the management can help to share some recent developments in the financial management business. I have two questions here. The first one is about the Hong Kong market. We see the market velocity has rebounded since October. So would you please share more data on our current business progress in Hong Kong market? What's 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 the AUM and the number of the wealth management clients? Thank you.

Thank you, Fan You. Let me answer your first question about Hong Kong. We have a lot of The development and strategy are still satisfactory. Since the end of September, the sentiment in the Hong Kong stock market, from our operating figures, has also been relatively obvious. To be more specific, the company has completed the guidance of the 150,000 entry this year. Among the 150,000 entry users, there are about 20,000 people from Hong Kong, nearly 15%. Compared to the first year we entered Hong Kong, there has been a great improvement. At the same time, the quality of customers in Hong Kong is high, and we also pay great attention to the quality of customers. The customer base of Hong Kong retail users has surpassed that of Singapore. It is the highest in the mainland. The average entry fee of new users in the third quarter is $20,000. The AOC of Hong Kong's asset size, Q3, has increased by more than 30%. At the same time, many of these customers are users with high assets and high return rate. The R pool of 3G users is the highest in all the areas of the Group. It is nearly twice as high as the users in Singapore. At the same time, the trading volume of Hong Kong stocks in October has also significantly increased. In terms of absolute value, the trading volume of Hong Kong stocks in October has exceeded the trading volume of the entire 3G stock, which is on our platform. At the same time, we have further improved the trading function of Hong Kong stocks in Hong Kong. Hong Kong officially launched Hong Kong stock期旋 and Hong Kong stock做空 in the 3G. 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 already met our annual guidance of 150,000 funded users, of which about 15% over 20,000 came from Hong Kong. This is a significant increase compared to our first year in the Hong Kong market last year. And also, the quality of our Hong Kong customer is very high. The average client asset in Hong Kong has now surpassed Singapore, making it the highest region among international markets we entered. In the third quarter, the average net asset inflow for newly acquired users in Hong Kong is about $20,000, and the total client asset in Hong Kong market increased by over 30% quarter over quarter. Thanks to the high average client asset and high velocity, the output for retail users in Hong Kong was the highest across all regions in the third quarter, double that of the retail users in Singapore. In October, we saw a significant increase in Hong Kong trading value. The trading value 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.

Thanks. including some free products, such as FCN, as well as E&M platform, DPM full-time commission, warehouse service, and other related functions. The clients of Finance are also constantly growing in terms of the depth of the transaction of assets. In the future, we will also continue to develop the business blocks of Finance, to improve the interoperability between business and brokerage. In terms of speed, AUM of Finance business has increased by more than 40% in the third quarter. Okay, so regarding the second question about the wealth management, overall we are quite satisfied with the growth pace of our wealth 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, et cetera. 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 numbers in Q3, our wealth management AUM increased over 40% quarter-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% quarter-per-quarter and AUM doubled quarter-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. Thank you.

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