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UP Fintech Holding (TIGR) Q1 2020 Earnings Call Transcript

By Motley Fool Transcribers – Updated May 29, 2020 at 12:48PM

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TIGR earnings call for the period ending March 31, 2020.

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UP Fintech Holding (TIGR 0.30%)
Q1 2020 Earnings Call
May 28, 2020, 8:00 a.m. ET


  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:


Ladies and gentlemen, thank you for standing by and welcome to the UP Fintech Holding Limited First Quarter 2020 Earnings Conference Call. [Operator Instructions] There will be a presentation followed by a question-and-answer session. [Operator Instructions]

I would like to hand the conference over to your first speaker today, Mr. Clark Soucy. Thank you. Please go ahead.

Clark S. Soucy -- Investor Relations

Thank you, Karina. Hello, everyone, and thank you for joining us for the call today. UP Fintech Holding Limited's first quarter 2020 earnings release was distributed earlier today and is available on our IR website at, as well as GlobeNewswire Services.

On the call today from UP Fintech are Mr. Wu Tianhua, Chairman and Chief Executive Officer; Mr. John 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 their remarks.

Now let me cover the Safe Harbor. Today's discussion contains forward-looking statements within the meaning of the US 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 that could cause actual results to materially differ from those in the forward-looking statements, please refer to our Form 6-K published today, May 28th, 2020 and our Annual Report on Form 20-F filed on April 29th, 2020. 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 an English translation. Mr Wu, please go ahead with your remarks.

Tianhua Wu -- Chairman and Chief Executive Officer

[Foreign Speech]

Good evening, everyone, and thank you very much for attending the Tiger Brokers first quarter 2020 earnings conference call.

[Foreign Speech]

In the first quarter despite the severe global impact of the pandemic, we leveraged the strength of our online model and we're able to demonstrate solid progress on multiple initiatives. Our key business metrics showed notable improvement, compared to previous quarters. Total revenue was $23.2 million, a new high and represented an increase of 136.7% on the same period last year, plus the first quarter of 2020 had the fastest quarterly revenue growth since our firms IPO.

Furthermore, in the first quarter, we reported our first ever GAAP net income of $3 million versus a loss of $2.9 million in the same period last year and $600,000 the past quarter, achieving positive net income is a major milestone for our firm, as a result of our commitment to improve efficiency and drive growth from a diverse range of business segments.

[Foreign Speech]

We are also satisfied to report that as we continue to provide more differentiated products and services more and more clients are placing ever greater trust in our firm. In the first quarter, we added 20,900 new accounts with deposits, a 2.5 times increase over the same quarter last year in terms of quarterly new account additions. Total accounts with deposits also increased 53.1% over the same quarter of last year.

I would also like to highlight that in the first quarter when global markets and all asset classes evidenced extreme volatility. Our risk control policy was prudent and as of today there was no material adverse impact to our firm in terms of P&L. In the first quarter clients entrusted us with more of their assets. Total account balance reached a new high of $5.5 billion, an increase of 79.7% on the same period last year. Our clients, continued to diversify their trading away from US listed Chinese ADR companies. Chinese ADRs only accounted for 25% of our US equity trading volume.

[Foreign Speech]

Our US and Singapore offices are starting to on-board clients, I expect to see more offshore clients using our services.

[Foreign Speech]

Moving on to IPO underwriting, most of the deals on the street are somewhat delayed due to the pandemic, but our pipeline remains very strong. We migrated roadshows, online from offline by connecting issuers and investors using video conferencing and phone calls and achieved good results for the issuers. In the first quarter, we underwrote four US IPOs, including Quasar Holdings [Phonetic] and John Chao Inc [Phonetic].

[Foreign Speech]

Tigers ESOP business continues to grow with good momentum. In addition to new customers ranked in the top 10 of Chinese internet companies. We are also adding customers from traditional industries. We keep investing in our system architecture and customer service capabilities and are now able to manage complex ESOP plans for multinational firms in different jurisdictions. In the first quarter, in total we added eight customers, I am confident ESOP will continue to obtain growing numbers of customers.

[Foreign Speech]

I would like to conclude my remarks by giving an update on our wealth management business, near the end of the first quarter we officially launched our Fund Mall, a new feature of our platform that allows clients to seamlessly invest in global mutual funds. The Fund Mall presently offers over 50 funds from top-tier global asset managers, including Fidelity, BlackRock, Morgan Stanley, HSBC and other notable institutions. Funds offered in the Fund Mall, include fixed income funds and equity funds, that's been a wide range of currencies and global markets assisting our clients to increase their portfolio diversification.

In the second quarter, we plan to offer over 100 funds, as well as launch our internally developed rating system for clients to evaluate funds across a wide range of metrics, including fund income, risk, size and manager [Phonetic] quality, this system will assist our customers to increase their knowledge about mutual funds and thus their propensity to invest more of their assets in our Fund Mall.

[Foreign Speech]

Finally, I would like to comment on the progress of our share buyback program. From April 1st, 2020 to May 26th, 2020, we spent approximately $1.5 million to repurchase 508,000 ADS.

[Foreign Speech]

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

John Fei Zeng -- Chief Financial Officer

Thanks, Tianhua and Clark. A solid first quarter performance as we broke even on GAAP basis for the first time. Total revenue was $23.2 million, increased over 137% on a year-over-year basis. Our users were very activity in the first quarter given the volatile market backdrop.

Commission increased 125% to $14.3 million. Interest related income, which combines financing service fee and interest income increased 129% on the right person from the same quarter last year. Other revenue, primarily consist revenue from corporate services such as IPO underwriting grew 291% year-over-year to $2.5 million. Across the street IPO underwriting has slowed down, due to COVID-19.

Our deal pipeline remains very strong, we are optimistic more deals will get printed once markets still seize [Phonetic] to stabilize. Interest expense increased 357% year-over-year to $1 million in this quarter, after interest expense net revenue was $22.2 million, increased 132% from same quarter last year.

Now, switching to expense, clearing expense increased to 5 times to $1.8 million, due to increase the trading volume. Salary expense increased to 34% year-over-year to $10.5 million as our headcount grew 37% in the same period. In 2020, our headcount growth will moderate, by the way, we will keep adding key positions. Occupancy expense almost doubled to $1.2 million, due to increased headcount of the office space. Communication and market data expense also grew 54% year-over-year to $1.8 million, as we have more users.

In the first quarter given the more active market sentiment, we increased our marketing spending and the total marketing expense increased 45% to $2.8 million. SG&A expenses slightly increased 5% to $2.3 million, primarily due to business expansion and professional services.

Total expense for the first quarter was $20.3 million, an increase of 45% year-over-year. Income before tax was $4.7 million, net income was $3 million and non-GAAP net income was $4.2 million. Overall, we are satisfied with our progress in the first quarter. We are taking advantage of the short-term market volatility, higher user acquisition rate and starting to see operating average across our business units. That being said a [Indecipherable] volatile market caused by COVID-19 could have adverse impact on our business and financials. We are closely monitoring the situation and make adjustments when necessary.

This concludes our prepared remarks. Now we can open for question.

Questions and Answers:


Ladies and gentlemen, we will now begin the question-and-answer session. [Operator Instructions] Your first question comes from the line of Sherry Zhang from Citi. Please ask your question.

Sherry Zhang -- Citi -- Analyst

Hi, management. Thank you very much for giving me the chance to ask questions. I have two questions here, the first one is about our lending business. So may I know why the margin financing balance was down quarter-over-quarter in the first quarter? And is in mainly due to client on widening their positions? Or because like the company has tightened leverage ratio? And why the interest income is down more than the margin finance balance? Is there any pricing pressure?

And second question is about the software market. Could management share what is positive client AUM and fee structure, i.e., what is the [Indecipherable] shouldn't be and how much do you like -- that -- how much management fee are you able to share from the managers and what is the typical settlement period for the phones? And do you have any target on the AUM and revenue contribution for [Indecipherable]. Thank you.

John Fei Zeng -- Chief Financial Officer

Hey, Sherry, thanks. Let me answer your first question, in regards to margin and Tianhua will answer your second question. So the margin balance was down year-over-year, because -- during the market downturns people tends to, you know, hold on cash, OK? So it's not that many users are taking on margins, so that's why the total margin balance was down. So during the meantime, yes we did -- we do have already put in a risk control policies for certain stocks were to increase maintenance margins. So that's why you see some of those nine margin -- made the margin policy will get tighter.

When market starts to get back to normal with those -- we are seeing more people taking our margin to start trading the securities. So to answer your question, yes, the market -- the balance was down was due to most likely, the market downturn and we'll also have a tighter margin policies for certain stocks.

Tianhua Wu -- Chairman and Chief Executive Officer

[Foreign Speech]

Yes, just to answer your question. Let me translate, it's now we just started a far more by end of first quarter, so right now we don't have much data this year. In terms of your question on how we split the management fee with the fund companies. We don't really discuss on data, but we will give you some trends once we have more data this year. Thank you.


[Operator Instructions] There are no further questions at this time, I would like to hand the conference back to Mr. Clark Soucy, please continue.

Clark S. Soucy -- Investor Relations

I would like to thank everyone for joining our call today. I am now closing the call on behalf of the management team here at UP Fintech. 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.


[Operator Closing Remarks]

Duration: 22 minutes

Call participants:

Clark S. Soucy -- Investor Relations

Tianhua Wu -- Chairman and Chief Executive Officer

John Fei Zeng -- Chief Financial Officer

Sherry Zhang -- Citi -- Analyst

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