UP Fintech Holding (TIGR) Q4 2021 Earnings Call Transcript

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UP Fintech Holding (TIGR)
Q4 2021 Earnings Call
Mar 18, 2022, 8:00 a.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Ladies and gentlemen, thank you for standing by and welcome to the Up FinTech Holding Ltd. Fourth quarter 2021 earnings conference call. [Operator instructions] I must advise you that this conference is being recorded today, Friday, March 18, 2022. I would now like to turn the conference over to your first speaker today, Mr.

Clark S. Soucy. Thank you. Please go ahead.

Clark Soucy

Thank you, operator. Hello, everyone, and thank you for joining us for the call today. Up FinTech Holding Ltd.'s fourth quarter 2021 earnings release was distributed earlier today, and is available on our IR website at ir.itiger.com as well as Globe Newswire services. On the call today from Up Fintech are Mr.

Tianhua Wu, chairman chief executive officer, Mr. John Zeng, chief financial officer, Mr. Huang Lei, CEO of US Tire Securities, and Mr. Kenny Jao, 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 our remarks.

Now let me cover the safe harbor. The statements we are about to make contain 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 furnished today, March 18, 2022 and our annual report on Form 20-F filed on April 28, 2021.

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 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. 

Wu Tianhua

Hello everyone, and thank you for joining the Tiger Brokers fourth quarter 2021 earnings conference call. Despite the difficult macroeconomic and market backdrop during the two previous two quarters, by focusing on executing on our international expansion, Tiger Brokers was able to achieve notable progress during the fourth quarter. In the fourth quarter, total revenue was $62.2 million, an increase of 31.7% over the same period last year. The company is committed to further leveraging internationalization to drive growth.

And in the fourth quarter, the company added 61,400 accounts, of which more than 90% from overseas markets. Total customer assets were $17.1 billion in the fourth quarter. Net customer asset inflows remained healthy and exceeded $2 billion in the quarter. However, since some of our institutional clients experienced losses on their holdings of Hong Kong listed equities and Chinese ADR during the fourth quarter, total client assets declined sequentially from the third quarter.

In 2021, Tiger Brokers in total added 415,000 funded accounts exceeding our 350,000 account annual guidance. The total number of funded accounts reached 673,000. Half are from Singapore or other overseas markets. Demonstrating the firm's internationalization strategy is yielding solid results for the full year 2021.

Total revenues were 26.264.5 million USD, an increase of 91% on the previous year. Non-GAAP net profit attributable to US FinTech Holding Ltd was $24.5 million for the year. In October 2021, we acquired a Hong Kong broker dealer license. Setting the stage for our firm to not only increase the future profitability of our Hong Kong securities business, but also to eventually onboard Hong Kong local residents.

Including Hong Kong, our firm now holds 50 licenses and qualifications that span the United States, Australia, Singapore, New Zealand and other jurisdictions. Holding such a rich range of licenses and qualifications sets the stage for the firm's long term international growth. I would now like to provide investors updates on two key business initiatives that our company internationalization is progressing well. As stated in the fourth quarter, over 90% of our accounts were derived from overseas markets, demonstrating the appeal of our next generation Fintech platform and its value proposition in competitive international markets.

In the past year, Singapore, by both, the total number of new accounts and the total number of accounts became our company's largest market. In 2022, we are confident that we can achieve similar success in other global markets, as we did in Singapore. In the first quarter of this year, we officially entered the Australian market. With the Australia, as having certain similar competitive dynamics in Singapore, namely that High Commission Traditional brokers have a substantial market share.

Even though we face competition from many respectable online brokers in Australia. We are confident that the distinctive features of our app, such as our interactive social media community, comprehensive financial and market data, as well as our rich range of securities trading features will distinguish us from the pack. Corporate and institutional services continue, perform well and attract new clients. ESUP continues to expand at a fast rate, and in the fourth quarter we added 51 new companies for a grand total of 313.

Investment banking also performed well, and we participated in 22 IPOs in Hong Kong and the US, of which we underwrote 18. It's important to note that our firm possesses extensive capabilities to serve both new issuers, as well as listed companies across multiple markets, following the acquisition of our Hong Kong broker dealer license. In the fourth quarter we underwrote the listings of a series of famous companies including NetEase Cloud Music, SenseTime and Beijing Airdoc. We do appreciate the trust of these issuers in our firm.

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

John Zeng -- Chief Financial Officer

Thanks with that Clark. So let me go through our financial performance for the fourth quarter or longer sign in USD. Total revenue was $62.2 million, up 32% from the same quarter of last year. For the whole year, total revenue were $264.5 million, up 91% from last year.

In the fourth quarter, commission were $29.9 million increase 18% year over year, but down 11% from the third quarter. The quarter over quarter drop in commission was primarily due to lower trading volume where is less trading days in the first quarter and a weaker ADR in Hong Kong market. Also, our margin and securities lending balance was lower than the third quarter due to the weaker market backdrop. We were able to generate more interest income through our self clearing capabilities.

Interest related income which combines financing service fee and the interest income was $22.5 million in the first quarter, increased 70% year over year and a 12% quarter over quarter. Factoring interest expense, net interest income increased 110% year over year and 18% quarter over quarter. Other revenue increased 12% from the same period last year to $9.8 million. Now on to the cost, execution and clearing expense were $6.9 million increased 65% year over year due to rapid user growth in 2021, but a down 28% quarter over quarter as more trades were created through self clearing.

We are in the process to migrate Singapore clients to our own Singapore clearing and custodian platform, which should result in further reduction in clearing cost in the coming quarters. Employee compensation increased 82% year over year to $28.4 million as we keep adding headcount across region to support our global expansion. In the year headcount increase, occupancy expense increased 41% to $1.8 million, SG&A increased 76% to $8.5 million year over year. Marketing expense were $11.6 million in the first quarter, increased to 77% year over year and on par with the third quarter.

We have been reporting waste our marketing spending and will add a check to our marketing strategy based on market conditions. Communication and market data expense were $7.7 million, an increase of 97.5% from US, $3.9 million in the same quarter last year due to rapid user growth. Total operating costs were $64.9 million increase of 79% from the same quarter of last year. Loan CAP and net income, which excludes share based compensation, was $21 million this quarter.

Total non-GAAP net income for the year of 2021 was $24.5 million. Now I have completed presentation. Operator, please open line for Q&A. Thanks.

Questions & Answers:

Operator

Thank you. [Operator instructions] Our first question comes from Han Pu with CICC. Your line is open. 

Han Pu -- CICC -- Analyst

I want to thank the management for taking my question. This is the ICC and the Congress on strong performance during such a volatile market? I have two questions. Firstly, how to receive influence of the policy signals for a lot. There was this Up Fintech conference, so I would be and then you will see the talk include the last quarter over quarter, what is intended and behind that and how about the zero quantity in fourth quarter? And how do we see the chained up with their cost income concern? Thanks.

Wu Tianhua

So let me quickly discuss the first question. So first of all, the timing of the Financial Stability and Development Committee meeting is very crucial at the comments made by was premier, video shows senior policymakers aware of the risks on having capital markets and as they are ready to take action to reinstall market confidence. This is an encouraging first step. Hopefully there will be more favorable concrete policy now in the near future to stabilize the market and to stimulate growth.

At the meeting mentioned there was good progress on PCLB issue. Government will support qualified Chinese company to use offshore, so both will benefit Tiger's ESUP and investment banking business and the to future user and EUM course our focus at this stage is still internationalization. We already do headquartered in Singapore Simba Singapore clients already account for more than 50% of our user base. We look forward to expand to other region to replicate our success in Singapore.

I will go for a second, go and feel the social and how are you able to do it in the um we're always here infringing safety something defensively also action on juju and shop or someone who is on parole wanting to find you location. So, market sentiment was still relatively weak in the first quarter, which makes it harder to acquire users, we think uptick in CSC where you long wondered just kind of market sentiments. That being said, we have been very cautious with marketing spending since the third quarter of last year. We pay close attention to key metrics such as payback, build customer quality retention to make sure our marketing spending is efficient and cost effective.

So even since we had a soft decline in the fourth quarter, the quality of funded accounts actual was pretty good fortune, the whole retail kind of quality in the fourth quarter. The average initial deposit is close to 7,000 USD higher than the average initial deposit in the third quarter. For each cohort of Singapore clients acquired during a particular quarter. We see letter asking inflow every quarter since their acquisition.

Sure clients are wanting to allocate more assets to pay go careful with high user stickiness.

Han Pu -- CICC -- Analyst

Thanks. That's very helpful.

Wu Tianhua

Thank you.

Operator

Our next question comes from Cristina Chang with Citigroup Global Markets. Your line is open. 

Cristina Chang -- Citigroup Global Markets -- Analyst

So first of all, thank you management for giving me this opportunity to ask question. Just two questions for me. First, we noticed that the client asked the good client, if you want to come out and give us some guidance in terms of the first quarter, quarter to date operational data, in terms of the client asset trading volume velocity as well as customer growth. And the second question is that we noticed Parker had just entered the Australian market.

Just wondering if management can share your thoughts on the room for growth and competitive landscape in Australia and what type of key work strategy there? Thank you.

Wu Tianhua

As we mentioned earlier, in the first quarter we had inflow over 2 billion USD. The quarter over quarter drop in total SG&A is primarily due to mark to market loss of some of our institutional users, the mark to market loss also these to a quarter over quarter drop in margin balance as some clients neutral paid off work. So as we talk year to date, we saw small in trading volume and the total EUM is border index. We have been prudently marketing spending.

We likely will see smaller number of funded account in the first quarter versus the fourth quarter. But the average initial deposit, that asset inflow will be similar to fourth quarter. So we entered Australian market not sparse, although there are already several on my property in Australia. We feel Tiger's comprehensive offering will set us apart from competition.

Based on the latest data, only one week after we launched in Australia, our ranking in terms of Google Play Download has jumped to a nice place from below 100. We look forward to more Australian clients and the more open with unparalleled trading experience. We feel very confident we can replicate our success in Singapore to other regions like Australia. Thanks.

Operator

Thank you. Our next question, a follow up from Han Pu with CICC. Your line is open. 

Han Pu -- CICC -- Analyst

I have a follow up question on our self-care and progress in the US market. Thanks.

Wu Tianhua

Thanks for question, Han. So in terms of self care in over 80% of of US cash equity ourself to repay first quarter up in the first quarter. So South Korean also improve our capital utilization as we were able to generate more interest income quarter over quarter, we saw margin balance. So this year, we will still use IP to clear a small portion of trades as our customer has positions like our call, which requires both auction of cash equity very tighter.

We already has option clearing basis in the US and started to self clear options. So during the transition period we will use both Tiger and IP for of different options strategies.

Han Pu -- CICC -- Analyst

Can the new paying clients guidance intended to need to?

Wu Tianhua

Right now, the market has been very volatile. So it's moving higher plus to give accurate estimates, given the market backdrop is now stabilized. And in addition, we just enter a new market. So we want to, you know, let it run for a couple of months.

So we get a feel and I hope we can give a better guidance to the investors next.

Han Pu -- CICC -- Analyst

Fantastic. Thanks. 

Operator

Our next question comes from Xinwei Wang with China Renaissance. Your line is open. 

Xinwei Wang -- China Renaissance -- Analyst

I was in a financial trouble once. So I think you have already obtained a broker dealer license in Hong Kong in October last year. What is the current process and the strategy you are going to adopt that we see in Hong Kong? Thank you.

Wu Tianhua

So as I mentioned in Hong Kong has been really important for us traditionally. And if you have a Hong Kong license. So our unit per user was some lack behind our competitors in local Hong Kong so in our nations without a license back in October last year, there are three steps we plan to enter Hong Kong. First of all, is to be more active in Hong Kong IPO.

As we mentioned earlier, we have been very active in Hong Kong IPO in the first quarter for lots of Chinese ADR, secondary listing at Hong Kong local listings. For second and third step, which is to replace IP to clear Hong Kong streets and also to go all Hong Kong retail in our customer acquisition. So we have building in the infrastructure and system, but we unfortunately, due to the COVID situation in Hong Kong, are hiring system development and testing all have been somewhat delayed. So we hope the COVID situation will get better soon so we can work on the system integration for our plan 2 and plan 3 which is clearing, self care Hong Kong equity trading channels of all our Hong Kong marketing.

Thanks.

Xinwei Wang -- China Renaissance -- Analyst

Thank you. Very clear. 

Operator

Thank you. [Operator instructions] I would now like to turn the call back over to Clark Soucy for closing remarks. 

[Operator signoff]

Duration: 36 minutes

Call participants:

Clark Soucy

Wu Tianhua

John Zeng -- Chief Financial Officer

Han Pu -- CICC -- Analyst

Cristina Chang -- Citigroup Global Markets -- Analyst

Xinwei Wang -- China Renaissance -- Analyst

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