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

Ladies and gentlemen, thank you for standing by, and welcome to UP FinTech Holdings Limited Second Quarter 2036 Earnings Conference Call. [Operator Instructions] I must advise you that this conference is being recorded today, August 26, 2026. I would now like to hand the conference over to your speaker today, Mr. Aron Lee, the Head of Investor Relations. Thank you. Please go ahead.

Thank you, operator. Hello, everyone, and thank you for joining us for the call today. UP Fintech Holding Limited Second Quarter 2026 earnings release was distributed earlier today, and this is available on our IR website at ir.itiger.com as well as GlobeNewswire services. On the call today from UP Fintech are Mr. Wu Tianhua, Chairman and CEO; Mr. John Zeng, our CFO, and Mr. Wang Lei, CEO of U.S. Tiger Securities. 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 and 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 and Litigation Reform Act of 1995. A number of factors could cause actual results to differ materially from those contained in any forward-looking statements. For more information, please refer Thank you Form 6-K furnished today and our annual report on Form 20-F on April 24, 2026. We undertake no obligation to update any forward-looking statements except as required under applicable law. It is my pleasure to now introduce our CEO and Chairman, Mr. Wu. Mr. Wu will make remarks in Chinese, which will be followed by English translation. Mr. Wu, please go ahead with your remarks.

[Interpreted] Hello, everyone. Thank you for joining the Tiger Brokers Second Quarter 2026 Earnings Conference Call. In the second quarter, we saw a meaningful improvement in both commission income and interest-related income compared with the previous quarter and the same period last year. Our total revenue for the quarter reached USD 182 million at all time high, representing a sequential increase of 17.7% and a year-over-year growth of 31.4%. Operating profit reached USD 56.8 million, an 18.5% quarter-over-quarter and 12.6% year-over-year. GAAP and non-GAAP net income attributable to UP Fintech reached USD 39.4 million and USD 42.8 million, respectively, returning to profitability from net loss in the previous quarter. Excluding the impact of approximately USD 59.7 million one-off penalty incurred in the first quarter. Second quarter GAAP and non-GAAP net income attributable UP Fintech both increased about 20% quarter-over-quarter. We added 32,600 new funding accounts this quarter, up 12.7% quarter-over-quarter, with the great majority coming from the Singapore and Hong Kong market. As of the end of the second quarter, our total funded accounts reached USD 1.32 million, a year-over-year increase of 10.3%. And in terms of plant assets, retail users in markets such as Singapore and Hong Kong continue to contribute solid net asset inflows, exceeding USD 1.5 billion this quarter. At the same time, fueled by mark-to-market gains, total client assets stood at USD 60.7 billion at the end of the second quarter, up 3.1% quarter-over-quarter and 16.7% year-over-year. We are glad to see that client assets grew over quarter across all the markets we operate in this quarter, indicating strong growth resilient and tremendous market potential. In the Hong Kong market, we rolled out more off-line promotion activities and expanded our brand exposure, driving local [indiscernible] up by nearly 30% quarter-over-quarter and extending the rapid sustained growth in client assets we have delivered since entering the Hong Kong retail market. Land assets in the Australia, New Zealand market and the U.S. market grew by more than 30% and nearly 50% quarter-over-quarter, respectively. This clearly demonstrates us as the global brokerage with internationalization as a core of our strategy and powered by the diversified development of our core business -- we continue to earn the trust and recognition of both new and existing users across all the markets, give us strong confidence in our growth perspectives ahead. In the second quarter, we continued to focus on localized functions and enhance the user experience while setting on our brand exposure to deepen user awareness. In the Singapore market, we further strengthened our local life trading capability by launching fractional share tree for Singapore listed stocks and rates, which effectively lowers the trading entry barriers, making local investment more accessible and friendly to beginners. In addition to simplify users' compliance costs and reduced complexity of tax declaration, we rolled out a dedicated tax reporting to Hong Kong, Singapore and New Zealand. The upgrade to optimize end-to-end tax filing experience enabling users to directly view and download annual tax reference documents through our app and official website, comprehensively covering key tax data, including trading profits and losses dividend income as well as interest and coupon earnings. In the Hong Kong market, we scaled up our brand investment and localized operations during the second quarter. Our flagship marketing campaign of the quarter was filed around State Act, amplifying our brand voice through an integrated mix of out-of-home advertising, social media, exclusive new user rewards and advertising placements at Hong Kong Airport. At the same time, we launched CPO index option trading in Hong Kong and hosted a dedicated launch event for Tiger X CBOE index option alongside a series of investor education initiatives. Further enriching the range of trading profit available to local investors. Our [indiscernible] business continued to strong momentum in the second quarter of 2026. On the investment banking side, in Hong Kong, we underwrote 14 [indiscernible] during the quarter, continue to cover key sectors such as AIS and Heartec, including major AI deals like Money Cor, DeZand, Bangui and participating in the offering of intelligent manufacturing and automotive semiconductor companies such as semi, robotphoneix and CF. Further consolidating our market influence in listing services, technology and innovation companies. Meanwhile, we continue to expand our AH listing business, participating in Hong Kong list of leading companies such as parking technology and senior technology, spanning key industries, including smart hardware, new energy materials and consumer electronics. On the U.S. side, we participated in the distribution of 4 U.S. IPOs, including DSC Holdings, a digital platform from China automotive industry and [indiscernible] Japan automotive software company. Our [indiscernible] business delivered steady growth during the quarter with 50 new class ideas. As as of June 30, 2026, our total -- reached 840. Now I'd like to invite our CFO, John, to go over our financials.

All right. Thanks, Tianhua and Aron. Let me go through our financial performance for the second quarter. All numbers are in U.S. dollar. Commission income was $78.3 million increased 21% year-over-year and 17% quarter-over-quarter. Interest income was $79.8 million, increased 36% year-over-year and 24% quarter-over-quarter. Together, total revenue reached $182 million, setting an all-time high up 31% year-over-year and 18% quarter-over-quarter. Cash equity take rate was 3.6 bps this quarter, down from 5.9 bps a quarter ago. The main driver was a quarter-over-quarter increase of roughly $15 billion in trading volume from Tiger Broker U.S. However, most of this uptick in trading volume didn't change into commission revenues. As in the U.S., we offer 0 commission to local users. Within commission revenue, about 71% comes from cash equities, 24% from options and the rest from futures and other products. Loan to cost. Interest expense was $21.5 million, increased 19% quarter-over-quarter and 24% year-over-year, in line with the increase in interest income. Execution and clearing expense were $6.8 million an increase of 25% from the same period last year, in line with the increase in commission income. Employee compensation and benefits expense were $50 million, an increase of 39% year-over-year primarily due to the severance costs associated with the group's rework of business units. Occupancy, depreciation and amortization expense were $2.8 million, a slight increase of 3% year-over-year. Communication and market data expense were $16.2 million, an increase of 56% year-over-year due to the increase in user base and IT-related service fees. Marketing expense were $18.4 million this quarter, increased 87% year-over-year as we focused on acquiring high-quality users and accelerate the expansion of our wealth management business. General and administrative expenses were $9.8 million, increased 45% year-over-year due to an increase in professional service fees. Total operating costs were $103.9 million, an increase of 47% from the same quarter of last year. As a result, our bottom line increased on both GAAP and non-GAAP basis quarter-over-quarter. GAAP net income was $39.4 million, and non-GAAP net income was $42.8 million versus a net loss in the previous quarter and up 20% quarter-over-quarter after excluding the impact of the one-off penalty in the first quarter. As of the close of the U.S. market yesterday, we have cumulatively repurchased approximately USD 5 million worth of ADS under our buyback plan announced on June 2, 2026. We may continue to execute repurchase from time to time under the $50 million share repurchase program on [Langston] June 2, 2026. Now I have concluded our presentation. Operator, please open the line for Q&A. Thanks.

[Operator Instructions] First question comes from the line of Han Pu of CICC.

This is [indiscernible] from CICC. I have 2 questions. Firstly, we have delivered a strong revenue growth and started operating profit expansion in Q2. But we noted that we also has a loss of over 2 million under the option [indiscernible] item. So what's the reason behind and how it would be going forward. And we also see that the income tax expense was a little bit high in Q2 with effective tax rate at now 28%. So what was the reason behind and what should we expect as the normalized effective tax rate going forward? . My second question -- can you share the run rate of our operating trends since Q3, including metrics like trading velocity, client assets and new funded accounts users. These 2 questions.

[Interpreted] First, on the roughly USD 2 million loss in the other line item this was mainly an FX loss driven by the continued appreciation of the RMB and the corresponding depreciation of the U.S. dollar during the second quarter. It's a long cash item. On income tax, first of all, we believe our normalized effective tax rate is in the 10% to 15% range. The second quarter tax expense was notably above that level for 2 reasons. Number 1 is there is a noncash deferred tax adjustment had to employ share-based compensation -- share-based award, we regret to employees, amortized quarterly on a gross basis as part of our compensation costs occurring both vested and unvested portions. . For tax purpose, however, only the amortization of the vested award is deductible. The expense from unvested award is nondeductible and gives rise to a deferred tax asset. When our share price dropped after May 22, the value of the unvested employee stock put declined, thus the previous recognized deferred tax asset came down accordingly. As a result, we wrote down about like USD 1 million of deferred tax asset this quarter which was recorded as income tax expense. This is a noncash item and if the share price recovers going forward, it will reverse and reduce tax expense in that period. The second reason is tied to the onetime penalty from May 22 rectification. We are still assessing this and for now purely out of prudence, we have treated the entire penalty as a nondeductible expense in the second quarter, which added about USD 6 million to income tax expense this quarter. For now, this is a noncash item. Looking ahead, we expect to keep optimizing our tax arrangement in line of the profitability across the group's various regions and were consistent with the rules, we will aim to gradually reverse this against the income tax expense in the second half.

[Interpreted] Okay. I will translate regarding the run rate of our third quarter. First, on client assets -- to-date, quarter to date both net inflow and mark-to-market gains have each contributed more than USD 1 billion. So an asset has kept up a heady growth. Quarter-to-date, we've seen a high single-digit quarter-over-quarter increase in current assets compared to the end of the second quarter. And second, on trading activity. Quarter-to-date trading volume and commissions are running slightly below the same point in Q2. This mainly reflects the high base from a strong second quarter when the market really cap trading activity elevated -- with some pullback in the market heading into Q3, activities has eased accordingly. And last, on new funded accounts, Hong Kong and Singapore remain our key contributors. We expect the number of new defended users to come in flat or increase versus Q2. As we stepped up our brand activity in both Hong Kong and Singapore in the second quarter and the result has looking good so far in Q3. On [indiscernible], it's worth noting that -- so far in Q3, the average net asset inflow for new funded user has risen further versus Q2 to around USD 25,000, which is in line with our quality-first approach to client acquisition. Thank you.

Our next question comes from the line of Cindy Wang of China Renaissance.

[Foreign Language] I have 2 questions. First, I would like to follow up the regulatory update after May 22. First, are there any other new policy changes. And then second is whether Mainland clients have stabilized, such as trading activity, customer turns and asset outflow. And currently, have you seen any significant changes in the percentage of customer assets and revenue from an retail clients? . The second question is on the company's overall blended take rate has remained relatively stable, but the cash equity take rate has decreased significantly compared to the previous quarter. Could you explain the reasons behind this? And what the trend looks like?