UP Fintech - Earnings Call - Q1 2025
May 30, 2025
Transcript
Operator (participant)
Ladies and gentlemen, thank you for standing by and welcome to the UP Fintech Holding Limited first quarter 2025 earnings conference call. At this time, all participants are in listen-only mode. There will be a presentation followed by the question-and-answer session. I must advise you that this conference is being recorded today, May 30th, 2025. I would now like to hand the conference over to our first speaker today, Mr. Aaron Li, the Head of Investor Relations. Thank you. Please go ahead.
Aaron Li (Head of Investor Relations)
Thank you, Neria. Hello, everyone, and thank you for joining us for the call today. UP Fintech Holding Limited's first quarter 2025 earnings release was distributed earlier today and is available on our IR website at ir.itigerup.com, 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. The statements we are about to make contain forward-looking statements.
Within the meaning of the U.S. Private Securities Regulation 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, May 30th, 2025, and our annual report on Form 20-F filed on April 23rd, 2025. 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 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 CEO)
[Foreign language]
Aaron Li (Head of Investor Relations)
Hello, everyone, thank you for joining the Tiger Brokers' first quarter 2025 earnings conference call.
Tianhua Wu (Chairman and CEO)
[Foreign language]
Aaron Li (Head of Investor Relations)
In the first quarter, our total revenue reached $122.6 million, up 55.3% year-over-year. Despite heightened volatility in the Hong Kong and U.S. markets, trading activity remained strong. As a result, total trading volume reached $217 billion, driving commission income to a record high of $58.3 million, more than doubling year-over-year. In addition, margin financing and securities lending balance increased to $5.2 billion, increased 89.4% year-over-year. Net interest income reached $53.8 million, increased 22.7% year-over-year. Our bottom line, continued growth in our user base and rising RPU, driven by product diversification, have helped us further leverage fixed operation costs, leading to stronger, more sustainable profitability. Non-GAAP net income attributable to UP Fintech increased to $36 million, reflecting an 18.3% sequential increase and a 145% increase year-over-year.
GAAP net income attributable to UP Fintech reached $30.4 million, up 8.4% quarter-over-quarter and 146.7% year-over-year. Both net income and profit margin set record high, and this continued improvement in earnings quality gives us greater flexibility to pursue strategic initiatives and further accelerate long-term growth.
Tianhua Wu (Chairman and CEO)
[Foreign language]
Aaron Li (Head of Investor Relations)
In the first quarter, we added 60,900 new funded accounts, which accounts for over 40% of our full target of acquiring at least 150,000 new funded accounts in 2025, and representing a 2.9% increase quarter-over-quarter and a strong 111.2% growth year-over-year. The total number of funded accounts reached 1,152,900 as of the end of the first quarter, an increase of 23.5% year-over-year. In terms of client assets, net inflow remained strong, reaching $3.4 billion for the quarter, driven primarily by retail clients in Singapore and the Greater China region. Combined with approximately $780 million in mark-to-market gains, total client assets reached a record high of $45.9 billion, up 9.9% quarter-over-quarter and 39.5% year-over-year, marking our 10th consecutive quarter of growth.
In addition, client assets from the Greater China region increased by over 20% quarter-over-quarter. Also, we are encouraged to see the average net asset inflow of newly acquired clients from the Hong Kong market in the first quarter exceeded $30,000, demonstrating the growing trust and engagement they've built in the market during the two years after entering. Following the success in Singapore, Hong Kong has become a key strategic market where we are investing further to deepen our presence.
Tianhua Wu (Chairman and CEO)
[Foreign language]
Aaron Li (Head of Investor Relations)
In the first quarter, we continue to enhance our product offerings and improve user experience. On the AI front, we officially upgraded Tiger GPT to Tiger AI, marking a significant step forward in the personalization and intelligence. The upgrade expanded our AI capability from a single model to a dual model architecture and introduced new features that allow integration with users' watchlists and portfolio data. This allows Tiger AI to deliver more personalized and relevant investment insights. Following the upgrade, user satisfaction with Tiger AI exceeded 80%. As per crypto, following Tap One license uplift, Tiger Brokers Hong Kong has now received approval from the Hong Kong SFC to offer virtual asset trading, deposit, and withdrawal services to both retail and professional investors.
This means not only can we support multi-asset classes within a single account, while also building greater synergy between traditional investors and digital asset holders, laying the groundwork for increased market participation and widespread activity. In addition, we recently launched the equity repo and delivery versus payment features, significantly improving the efficiency of our stock borrowing and lending operations and strengthening our service capability for institution and high-net-worth clients.
Tianhua Wu (Chairman and CEO)
[Foreign language]
Aaron Li (Head of Investor Relations)
In our corporate business, we underwrote four Hong Kong IPOs in the first quarter, including Chifeng Gold and Nanshan Aluminium and participated in Mixue Group's IPO, which set a new record for IPO subscription amount in the Hong Kong market, and total subscription amount for this IPO exceeded HKD 100 billion on our platform. In our ESOP business, we added 20 new clients in the first quarter, bringing the total number of ESOP clients served to 633 as of March 31, 2025, increased by 14% year-over-year.
Tianhua Wu (Chairman and CEO)
[Foreign language]
Aaron Li (Head of Investor Relations)
Now I'd like to invite our CFO John to go over our financials.
John Zeng (CFO)
Great. Thanks, Tianhua and Aaron. Let me go through our financial performance for the first quarter. All numbers are in U.S. dollars. Commission income was $58.3 million, increased 4% quarter-over-quarter and more than double year-over-year. Interest income was $53.8 million, increased 23% year-over-year, but slightly decreased 4% quarter-over-quarter. The slight decrease was due to the majority of our U.S. treasury holdings were matured in the fourth quarter. In this quarter, we had a one-time decrease of $1.5 million in interest income. Together, total revenue reached $122.6 million, up 55.3% year-over-year. Cash equities take rate was 6.7 bps this quarter, slightly decreased from 6.9 bps of last quarter. Within commission revenue, about 65% comes from cash equities, 30% from options, and the rest from futures and other products. Now on to cost.
Interest expense was $50 million, decreased 10% quarter-over-quarter, in line with the decrease in interest income, and slightly increased 2% compared to the same quarter of last year. Execution and clearing expense were $5.3 million, increased 139% from the same period last year, in line with the increase in commission and trading volume. Employee compensation and benefits expense were $33.8 million, an increase of 22% year-over-year, due to headcount increase to strengthen overseas growth and R&D. Occupancy depreciation and amortization expense were $2.1 million, remained flat year-over-year. Communication and market data expense were $9.8 million, an increase of 14% year-over-year, due to the increase in user base and IT-related service fees. Marketing expense were $10.9 million this quarter, increased 148% year-over-year, as market condition is more favorable versus a year ago for user acquisition.
General and administrative expense were $5.1 million, a decrease of 9% year-over-year due to a decrease in professional service fees. Total operating costs were $67.1 million, an increase of 32% from the same quarter of last year. As a result, bottom line increased on both GAAP and the non-GAAP basis. GAAP net income was $30.4 million, up 8.4% quarter-over-quarter and 146.7% year-over-year. Non-GAAP net income was $36 million, an 18.3% increase quarter-over-quarter and a 145% increase year-over-year. The non-GAAP net profit margin expanded from 25% in the previous quarter to nearly 30% this quarter. Now I have concluded our presentation. Operator, please open the line for Q&A. Thanks.
Operator (participant)
Thank you, dear participants. If you would like to ask a question, please press star one one on your telephone keypad and wait for your name to be announced. To withdraw a question, please press star one one again. Once again, if you would like to ask a question, please press star one one. Now we are going to take our first question. The question comes to the line of Cindy Wang from China Renaissance. Your line is open. Please ask your question.
Cindy Wang (Director)
[Foreign language] Thanks for taking my question and congrats for the great first quarter result. I have two questions here. First, with markets remaining volatile in second quarter, how has this affected the company's run rate so far? And could you share any early trends around trading volume, client assets, and newly funded accounts? Second, company saw further improvement in profitability in first quarter. Looking ahead, how should we think about the cost, particularly like headcount and customer acquisition? Can you provide us some guidance on the outlook for customer acquisition cost? Thank you.
Tianhua Wu (Chairman and CEO)
[Foreign language]
Aaron Li (Head of Investor Relations)
Okay, I'll translate for this part. Overall, we are quite pleased with how things are shaping up in the second quarter so far. In terms of trading volume, we saw a significant pickup in market volatility in April, mainly driven by the concerns over the tariff. That actually pushed our monthly trading volume to a new record, crossing $100 billion for the first time in our history. So far in Q2, we've seen an improvement compared to the same period in Q1. It's hard to predict what headline news might emerge in June, but we will be closely monitoring market activity throughout the month. In terms of client assets, net asset inflow remained strong throughout April and May, continuing the solid pace we saw in the first quarter. Both institution and retail clients across all of our licensed markets contributed positively.
Starting from late April, the market rebound helped drive some meaningful mark-to-market gains as well. As of now, client assets already set another record high and increased by around double digits compared to the end of the first quarter. When it comes to the new funded accounts, during the increased market volatility in Q2, we made dynamic adjustments to our acquisition strategies. We expect the number of new funded users will decrease compared to the high base in Q1. The user quality remained healthy and net asset inflow continued to be robust. Therefore, we are confident to meet our annual guidance of acquiring at least 150,000 new funded users this year.
Tianhua Wu (Chairman and CEO)
Yes.
John Zeng (CFO)
Okay, [Foreign language] So in regards to labor cost, we will continue to invest in product and R&D to maintain our competitive edge as technology is the core of our platform. At the same time, we will be expanding our team in key markets like Hong Kong and the U.S., and of course functions from front office to back office. That being said, our overall headcount growth will remain disciplined. We expect compensation expense to grow about 10%-20% per year. We will invest more in customer acquisition to build a stronger brand and penetrate deeper into our core markets. The pace of our marketing spending will be based on market conditions, but we expect to spend more in the second half of this year. Our average CAC is between 150$-180$ through 2024 and the first quarter of 2025.
For the next few quarters, we expect the average CAC to rise to around $250-$300. There are two key reasons for this. First of all, we will beef up efforts in high-value markets like Hong Kong, where the quality of users is significantly higher. From a payback perspective, a higher CAC in those markets is acceptable. We're also ready to invest more in brand and user awareness. This type of investments might not yield immediate conversions, which can push up CAC in the short term, but they are important for our long-term growth and brand awareness. Thanks.
Aaron Li (Head of Investor Relations)
Thank you. Lydia, please go for the next question.
Operator (participant)
Thank you. Now we're going to take our next question. The next question comes to the line of Emma Xu from Bank of America. Your line is open. Please ask your question.
Emma Xu (Fintech Research Analyst)
[Foreign language] Congratulations on another quarter of strong growth. I have two questions. The first one is about net asset inflow. It was particularly strong in the first quarter, contributing to a double-digit increase in your total client assets. Could you elaborate on the breakdown of these inflows in terms of regions and account types? The second question is about your interest income. We can see that your margin financing and securities lending balance grew around 15% in the first quarter, yet the net interest income remained flattish sequentially. Was this primarily driven by the declining interest rate? If the Fed cuts interest rates twice this year, say by 25 bp each time, what would be the estimated impact on your P&L?
Tianhua Wu (Chairman and CEO)
[Foreign language]
Aaron Li (Head of Investor Relations)
In the first quarter, we recorded about $3.2 billion in net asset inflows. Around 60% of them came from the users in the Greater China Area, 30% from Singapore, and the remaining 10% from U.S. and Australia and New Zealand markets. Overall, roughly 60% of net asset inflow was contributed by retail clients.
John Zeng (CFO)
[Foreign language] Okay, so the growth in margin financing and security lending balance was mainly driven by more active market backdrop. Our net interest income from margin financing alone actually increased quarter-over-quarter despite the rate cut implication. The reason our total net interest income remained flat this quarter is because a larger portion of our U.S. Treasury investment matured at the end of last year, which had a quarter-over-quarter impact of about $1.5 million. As for the impact of future rate cuts, we estimate that for every 25 bps cut by the Federal Reserve, our quarterly net interest income would be negative impact by about $1 million-$1.5 million, which is about roughly 1% of our quarterly revenue. Thanks.
Aaron Li (Head of Investor Relations)
Thanks, Emma. Operator, please proceed to the next question.
Operator (participant)
Thank you. Now we're going to take our next question. The question comes to the line of Yu Fan from CICC. Your line is open. Please ask your question.
FAN Yu (Professor and Ph.D. Supervisor)
[Foreign language]Thanks management for taking my questions. This is Yu Fan from CICC. I have two questions here. The first one is that we see the strong new customer acquisition this quarter. Could you please provide a regional breakdown of the newly funded accounts in Q1? The second question, could you please update on your progress in the Hong Kong market during Q1 and how you view the market opportunity and strategic focus going forward, considering the recent Ant Group's merger with Bright Smart Securities? Will this intensify the local competition? Thank you.
Tianhua Wu (Chairman and CEO)
[Foreign language]
Aaron Li (Head of Investor Relations)
In the first quarter, about 45% of newly funded clients came from Singapore and Southeast Asia. Around 35% were from the Greater China region, and Australia, New Zealand, and U.S. market each accounted for about 10%.
Tianhua Wu (Chairman and CEO)
[Foreign language]
Aaron Li (Head of Investor Relations)
Okay, Hong Kong has always been a highly competitive market, and the recent merge between Ant Group and Bright Smart Securities, in our view, further validates the attractiveness of this market. Whether we look at its status as a global financial hub or the high quality of its user base, Hong Kong remains a very compelling market. With more players entering, it simply highlights the long-term potential of this market. From our perspective, increased competition is a good thing for local users. It raises the bar for the entire industry and encourages all of us to keep improving. As a tech-driven brokerage, Tiger has already built strong barriers across different key areas.
This includes our clearing efficiency for Hong Kong and U.S. equities, a robust product set, especially in the U.S. derivatives, virtual asset trading capabilities, and the deep integration of AI in the investment process, all of which set us apart. We've also introduced some product differentiation to better serve local users. For example, our trading commissions are generally lower than most platforms in this market, and our money market fund yields are comparatively attractive. This is just a few ways we are delivering real value to users. Looking ahead, we plan to continue to invest in both talent and marketing in Hong Kong with the goal of delivering a superior product experience. We are confident that with time, continued optimization, and consistent execution, we will be able to secure a meaningful share of the Hong Kong market.
Here are some highlights about the Q1 operation highlights about the Hong Kong market. Firstly, thanks to the high average client asset and strong trading velocity, our pool from our Hong Kong users remains the highest among all the markets we entered. In the first quarter, new funded clients in Hong Kong brought in an average net asset inflow of over $30,000. Secondly, client assets in Hong Kong continued to grow at a strong pace, up more than 20% quarter-over-quarter and over four times year-over-year, marking it our third largest market in terms of asset under custody. In March, we officially rolled out the upgraded Tiger AI for Hong Kong users. Now it's available with unlimited free access.
Powered by world-class leading language AI models and our market data, Tiger AI is designed to help users analyze investments more efficiently and make smarter decisions. Thank you. Operator, next question, please.
Operator (participant)
Thank you for today. I would now like to hand the conference over to Aaron Li for any closing remarks.
Aaron Li (Head of Investor Relations)
Thank you. 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.
Operator (participant)
This concludes today's conference call. Thank you for participating. You may now disconnect. Have a nice day.