UP Fintech Holding Limited (TIGR) Earnings Call Transcript & Summary

Ladies and gentlemen, thank you for standing by. Welcome to the UP Fintech Holding Limited First Quarter 2023 Earnings Conference Call. [Operator Instructions] I must advise you that this conference is being recorded today, May 30th, 2023. I would now like to hand the conference over to your first speaker today, Mr. Aron Lee, the Head of IR. Thank you. Please go ahead.

Thank you, operator. Hello, everyone, and thank you for joining us on the call today. UP Fintech Holding Limited's First Quarter 2023 earnings Release was distributed earlier today and is available on our IR website at ir.itiger.com, as well as GlobeNewswire services. On the call today from UP Fintech are Mr. Tianhua Wu, Chairman and Chief Executive Officer; Mr. John 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 their remarks. Now let me cover the safe harbor. The statements we are about to make contain forward-looking statements within 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 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 refer to our Form 6-K furnished today, May 30, 2023, and our annual report on Form 20-F filed on April 26, 2023. We undertake no obligation to update any forward-looking statements 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.

[Foreign Language]

[Interpreted] Hello, everyone. Thank you for joining the Tiger Brokers First Quarter 2023 Earnings Conference Call.

[Foreign Language]

[Interpreted] In the first quarter, we saw a moderate rebound in the market condition. However, the high inflation expectation in the U.S. and continued price tightening still hampered investor confidence and market activities. Under this market backdrop, we remain committed to our internationalization strategy and optimizing our revenue mix and expense management. In the first quarter, commission income and interest-related income further improved sequentially, with total revenue increased by 3.9% quarter-over-quarter and 26% year-over-year, reaching $66.3 million. GAAP and non-GAAP net profit attributable to UP Fintech were $8 million and $10.3 million respectively, an increase of 541% and 129% compared to the previous quarter and a big turnaround compared to the net loss in the same quarter of last year. Non-GAAP bottom line in the first quarter was the highest into the past 2 years, demonstrating our execution strategy in rather challenging market conditions and regulatory headline news.

[Foreign Language]

[Interpreted] In the first quarter, we added 30,392 new funded accounts, increased 11.2% quarter-over-quarter. We have confidence to deliver our annual guidance of acquiring at least 100,000 new funded accounts in 2023. Total number of funded accounts at the fourth quarter reached 810,000, representing a growth of 15.4% compared to the same quarter of last year. In terms of total current assets, the trend of asset inflow remains strong with net inflows of nearly USD 1.2 billion in the first quarter, mainly contributed from Singapore and Mainland China. With the market recovery leading to mark-to-market gain, total current assets in the first quarter increased by 15.2% compared to the last quarter, reaching USD 16.1 billion. In addition, we are very glad that we can keep acquiring high-quality users while optimizing our customer acquisition cost. The overall average net asset inflow of newly acquired retail clients exceeded [ USD 17,000 ] for the first quarter. And average [indiscernible] in the first quarter was USD 171, a 37% drop quarter-over-quarter. This indicates our ongoing international expansion effort has been recognized by local investors in various regions and ROI remains at the industry-leading level, giving us flexibility to dynamically adjust our customer acquisition strategy while maintaining reasonable unit economics.

[Foreign Language]

[Interpreted] 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., our self-clearing efficiency has consistently maintained at a leading level in the industry. In the first quarter, the execution and clearing expenses as a percentage of the commission further decreased from 16.1% in the previous quarter to 9.6% as we started to self-clear more Hong Kong equities since February. In addition, we launched [indiscernible] of TigerGPT. This feature is based on the underlying model of ChatGPT, combined with financial industry information and market data accumulated by Tiger Brokers for the year. It allows experienced users to quickly extract and then analyze the investment-related data to help them with their investment research, also significantly reduces the learning curve for new users. In Wealth Management business, following the Singapore market, we launched Tiger Wealth, our wealth management product in Hong Kong in April, to help users diversify their portfolio and enhance synergy by combining cash management and other investment products.

[Foreign Language]

[Interpreted] corporate business continues to perform well. In Investment Banking, we underwrote 8 U.S. and Hong Kong IPOs in the first quarter, including [ contacting ] Group Limited and YH Entertainment Group. In our ESOP business, we added 29 new clients in the first quarter, bringing the total number of ESOP clients to 448 by the end of the first quarter of 2023, improved by 33% year-over-year.

[Foreign Language]

Now I would like to invite our CFO, John, to go over our financials.

Okay. Thanks, Tianhua and Aron. Let me go through our financial performance for the first quarter. All numbers are in U.S. dollar. Total revenue were $66.3 million this quarter, an increase of 26% year-over-year and 3.9% quarter-over-quarter, primarily due to a 13% jump in interest-related income versus last quarter. Cash equity take rate was 6.3 bps this quarter, slightly decreased from 6.9 bps from last quarter. Within commission revenue of about 60% comes from cash equities, 30% from options and the rest from futures and other products. Now on to cost. Interest expense was $8.4 million, increased by 130% from the same quarter of last year as interest expense and securities lending expense both increased in line with the rate hike. Execution and recurring expenses were $2.4 million, a decrease of 46% from the same period of last year, primarily due to more efficiency in sales clearing for U.S. and Hong Kong securities. Given we only started to move Hong Kong equities [ positions ] to Tiger Brokers Hong Kong [indiscernible], we expect cash equity clearing expense as a percentage of commission [indiscernible] down. Employee compensation and benefits were $24.4 million, a decrease of 11.2% year-over-year as we adjusted our headcount in response to challenging market conditions. Occupancy, depreciation and amortization expense increased 19% to $2.4 million due to an increase in oversea office space and relevant leasehold improvements. Communication and market data expense were $7 million, an increase of 9.2% year-over-year due to the increase in user base. Marketing expense were $5.2 million this quarter decreased to 48% year-over-year. Average CAC dropped 37% quarter-over-quarter from $271 to $171. We focused on quality of new users, don't think current market condition is suitable for major marketing campaign. So we scaled back marketing spending. That being said, we will look [ ahead ] and adjust our marketing strategy based on the market sentiment in different regions. CAC could go [ up ] [indiscernible], if the paybacks from newly acquired users is still attractive. General and administrative expense were $4.5 million, flat year-over-year. Total operating costs were $46 million, decreased by 16% from the same quarter of last year. As a result, bottom line increased on both GAAP and on non-GAAP basis. GAAP net income turned positive to $8 million versus a GAAP net loss of $5.9 million in the same quarter of last year. Non-GAAP net income also turned positive to $10.3 million from a non-GAAP net loss of $1.9 million in the same quarter of last year. Now I have concluded our presentation. Operator, please open the line for Q&A.

[Operator Instructions] The questions come from the line of You Fan from CICC.

[Foreign Language] Okay, I will translate. Thanks management and congratulations on the results achieved this quarter. This is You Fan from CICC. And I have 3 questions. The first one is on the regional breakdown of the newly added funded account in this quarter. And the second one is about the client in Singapore. We know that Tiger has been in leading position since entering the market. So how is the current net asset inflows and the average asset balance of the clients in Singapore? And after ramping up for over 3 years, how is the asset balance of the clients that we acquired early when we first entered the market? And the third question is on the progressing on the Hong Kong retail market. Would the management give us more color on this? These are my questions.

[Foreign Language]

[Interpreted] In the first quarter, around 60% of newly funded accounts came from Singapore, about 15% from Australia and New Zealand, about 20% from the United States and nearly 5% from Hong Kong.

[Foreign Language]

[Interpreted] To the second question, for Singapore, where we have the most existing and new users, we [indiscernible] importance to the user experience and solidify our market position. Of the USD 1.2 billion net asset inflow in the first quarter, about 2/3 came from Singapore. At the end of the first quarter, the average client asset of all funded accounts in this region was about USD 15,000. We officially entered the Singapore retail market in the [ fourth ] quarter of 2020. And we see that the average client assets of the first quarter -- in the first half of 2020 reached nearly $25,000 for the end of the first quarter of 2023, which was a 3 to 4x increase compared to the first funded quarter.

[Foreign Language]